AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
HILAND HOLDINGS GP, LP
THIS AMENDED AND
RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF HILAND HOLDINGS GP, LP
dated as of September 25, 2006 is entered into by and among Hiland
Partners GP Holdings, LLC, a Delaware limited liability company, as
the General Partner, together with any other Persons who become
Partners in the Partnership or parties hereto as provided
herein. In consideration of the covenants, conditions and
agreements contained herein, the parties hereto hereby agree as
follows:
ARTICLE I
DEFINITIONS
Section
1.1
Definitions .
The following
definitions shall be for all purposes, unless otherwise clearly
indicated to the contrary, applied to the terms used in this
Agreement.
“
Additional Book Basis ” means the portion of any
remaining Carrying Value of an Adjusted Property that is
attributable to positive adjustments made to such Carrying Value as
a result of Book-Up Events. For purposes of determining the
extent that Carrying Value constitutes Additional Book
Basis:
(i)
Any negative adjustment made to the Carrying Value of an Adjusted
Property as a result of either a Book-Down Event or a Book-Up Event
shall first be deemed to offset or decrease that portion of the
Carrying Value of such Adjusted Property that is attributable to
any prior positive adjustments made thereto pursuant to a Book-Up
Event or Book-Down Event.
(ii)
If Carrying Value that constitutes Additional Book Basis is reduced
as a result of a Book-Down Event and the Carrying Value of other
property is increased as a result of such Book-Down Event, an
allocable portion of any such increase in Carrying Value shall be
treated as Additional Book Basis; provided , that the amount
treated as Additional Book Basis pursuant hereto as a result of
such Book-Down Event shall not exceed the amount by which the
Aggregate Remaining Net Positive Adjustments after such Book-Down
Event exceeds the remaining Additional Book Basis attributable to
all of the Partnership’s Adjusted Property after such
Book-Down Event (determined without regard to the application of
this clause (ii) to such Book-Down Event).
“
Additional Book Basis Derivative Items ” means any
Book Basis Derivative Items that are computed with reference to
Additional Book Basis. To the extent that the Additional Book
Basis attributable to all of the Partnership’s Adjusted
Property as of the beginning of any taxable
1
period exceeds the
Aggregate Remaining Net Positive Adjustments as of the beginning of
such period (the “ Excess Additional Book Basis
”), the Additional Book Basis Derivative Items for such
period shall be reduced by the amount that bears the same ratio to
the amount of Additional Book Basis Derivative Items determined
without regard to this sentence as the Excess Additional Book Basis
bears to the Additional Book Basis as of the beginning of such
period.
“
Adjusted Capital Account ” means the Capital Account
maintained for each Partner as of the end of each fiscal year of
the Partnership, (a) increased by any amounts that such Partner is
obligated to restore under the standards set by Treasury Regulation
Section 1.704-1(b)(2)(ii)(c) (or is deemed obligated to restore
under Treasury Regulation Sections 1.704-2(g) and 1.704-2(i)(5))
and (b) decreased by (i) the amount of all losses and deductions
that, as of the end of such fiscal year, are reasonably expected to
be allocated to such Partner in subsequent years under Sections
704(e)(2) and 706(d) of the Code and Treasury Regulation Section
1.751-1(b)(2)(ii), and (ii) the amount of all distributions that,
as of the end of such fiscal year, are reasonably expected to be
made to such Partner in subsequent years in accordance with the
terms of this Agreement or otherwise to the extent they exceed
offsetting increases to such Partner’s Capital Account that
are reasonably expected to occur during (or prior to) the year in
which such distributions are reasonably expected to be made (other
than increases as a result of a minimum gain chargeback pursuant to
Section 6.1(d)(i) or 6.1(d)(ii)). The foregoing definition of
Adjusted Capital Account is intended to comply with the provisions
of Treasury Regulation Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith. The “ Adjusted
Capital Account ” of a Partner in respect of a General
Partner Interest, a Common Unit, a Class B Unit or any other
Partnership Interest shall be the amount that such Adjusted Capital
Account would be if such General Partner Interest, Common Unit,
Class B Unit or other Partnership Interest were the only interest
in the Partnership held by a Partner from and after the date on
which such General Partner Interest, Common Unit, Class B Unit or
other Partnership Interest was first issued.
“
Adjusted Property ” means any property the Carrying
Value of which has been adjusted pursuant to Section 5.5(d)(i) or
5.5(d)(ii).
“
Affiliate ” means, with respect to any Person, any
other Person that directly or indirectly through one or more
intermediaries controls, is controlled by or is under common
control with, the Person in question. As used herein, the
term “ control ” means the possession, direct or
indirect, of the power to direct or cause the direction of the
management and policies of a Person, whether through ownership of
voting securities, by contract or otherwise.
“
Aggregate Remaining Net Positive Adjustments ” means,
as of the end of any taxable period, the sum of the Remaining Net
Positive Adjustments of all the Partners.
“ Agreed
Allocation ” means any allocation, other than a Required
Allocation, of an item of income, gain, loss or deduction pursuant
to the provisions of Section 6.1, including, without limitation, a
Curative Allocation (if appropriate to the context in which the
term “Agreed Allocation” is used).
“ Agreed
Value ” of any Contributed Property means the fair market
value of such property or other consideration at the time of
contribution as determined by the General Partner. The
General Partner shall use such method as it determines to be
appropriate to allocate the
2
aggregate Agreed
Value of Contributed Properties contributed to the Partnership in a
single or integrated transaction among each separate property on a
basis proportional to the fair market value of each Contributed
Property.
“
Agreement ” means this Amended and Restated Agreement
of Limited Partnership of Hiland Holdings GP, LP, as it may be
amended, supplemented or restated from time to time.
“
Associate ” means, when used to indicate a
relationship with any Person, (a) any corporation or organization
of which such Person is a director, officer or partner or is,
directly or indirectly, the owner of 20% or more of any class of
voting stock or other voting interest; (b) any trust or other
estate in which such Person has at least a 20% beneficial interest
or as to which such Person serves as trustee or in a similar
fiduciary capacity; and (c) any relative or spouse of such Person,
or any relative of such spouse, who has the same principal
residence as such Person.
“
Available Cash ” means, with respect to any Quarter
ending prior to the Liquidation Date,
(a)
the sum of all cash and cash equivalents of the Partnership Group
on hand on the date of determination of Available Cash with respect
to such Quarter, less
(b)
the amount of any cash reserves established by the General Partner
to (i) provide for the proper conduct of the business of the
Partnership Group (including reserves for future capital
expenditures and for anticipated future credit needs of the
Partnership Group) subsequent to such Quarter, (ii) comply with
applicable law or any loan agreement, security agreement, mortgage,
debt instrument or other agreement or obligation to which any Group
Member is a party or by which it is bound or its assets are
subject, (iii) permit the MLP General Partner to make capital
contributions to the MLP to maintain its then current general
partner interest in the MLP upon the issuance of additional
partnership securities by the MLP or (iv) provide funds for
distributions under Section 6.3 in respect of any one or more of
the next four Quarters; provided, however , that
disbursements made by a Group Member or cash reserves established,
increased or reduced after the end of such Quarter but on or before
the date of determination of Available Cash with respect to such
Quarter shall be deemed to have been made, established, increased
or reduced, for purposes of determining Available Cash, within such
Quarter if the General Partner so determines.
Notwithstanding the foregoing, “
Available Cash ” with respect to the Quarter in which
the Liquidation Date occurs and any subsequent Quarter shall equal
zero.
“ Board
of Directors ” means, with respect to the Board of
Directors of the General Partner, its board of directors or
managers, as applicable, if a corporation or limited liability
company, or if a limited partnership, the board of directors or
board of managers of the general partner of the General
Partner.
“ Book
Basis Derivative Items ” means any item of income,
deduction, gain or loss included in the determination of Net Income
or Net Loss that is computed with reference to the
3
Carrying Value of
an Adjusted Property ( e.g. , depreciation, depletion, or
gain or loss with respect to an Adjusted Property).
“
Book-Down Event ” means an event that triggers a
negative adjustment to the Capital Accounts of the Partners
pursuant to Section 5.5(d).
“
Book-Tax Disparity ” means with respect to any item of
Contributed Property or Adjusted Property, as of the date of any
determination, the difference between the Carrying Value of such
Contributed Property or Adjusted Property and the adjusted basis
thereof for federal income tax purposes as of such date. A
Partner’s share of the Partnership’s Book-Tax
Disparities in all of its Contributed Property and Adjusted
Property will be reflected by the difference between such
Partner’s Capital Account balance as maintained pursuant to
Section 5.5 and the hypothetical balance of such Partner’s
Capital Account computed as if it had been maintained strictly in
accordance with federal income tax accounting
principles.
“ Book-Up
Event ” means an event that triggers a positive
adjustment to the Capital Accounts of the Partners pursuant to
Section 5.5(d).
“
Business Day ” means Monday through Friday of each
week, except that a legal holiday recognized as such by the
government of the United States of America or the State of Oklahoma
shall not be regarded as a Business Day.
“ Capital
Account ” means the capital account maintained for a
Partner pursuant to Section 5.5. The “ Capital
Account ” of a Partner in respect of a General Partner
Interest, a Common Unit, Class B Unit or any other Partnership
Interest shall be the amount that such Capital Account would be if
such General Partner Interest, Common Unit, Class B Unit or other
Partnership Interest were the only interest in the Partnership held
by a Partner from and after the date on which such General Partner
Interest, Common Unit, Class B Unit or other Partnership Interest
was first issued.
“ Capital
Contribution ” means any cash, cash equivalents or the
Net Agreed Value of Contributed Property that a Partner contributes
to the Partnership.
“
Carrying Value ” means (a) with respect to a
Contributed Property, the Agreed Value of such property reduced
(but not below zero) by all depreciation, amortization and cost
recovery deductions charged to the Partners’ Capital Accounts
in respect of such Contributed Property, and (b) with respect to
any other Partnership property, the adjusted basis of such property
for federal income tax purposes, all as of the time of
determination. The Carrying Value of any property shall be
adjusted from time to time in accordance with Sections 5.5(d)(i)
and 5.5(d)(ii) and to reflect changes, additions or other
adjustments to the Carrying Value for dispositions and acquisitions
of Partnership properties, as deemed appropriate by the General
Partner.
“
Cause ” means a court of competent jurisdiction has
entered a final, non-appealable judgment finding the General
Partner liable for actual fraud or willful misconduct in its
capacity as a general partner of the Partnership.
“
Certificate ” means a certificate (i) substantially in
the form of (A) Exhibit A to this Agreement with respect to the
Common Units, and (B) Exhibit B to this Agreement with
respect
4
to the Class B
Units, (ii) issued in (A) global form in accordance with the rules
and regulations of the Depositary or (B) such other form as may be
adopted by the General Partner, issued by the Partnership
evidencing ownership of one or more Units, or a certificate, in
such form as may be adopted by the General Partner, issued by the
Partnership evidencing ownership of one or more other Partnership
Securities.
“
Certificate of Limited Partnership ” means the
Certificate of Limited Partnership of the Partnership filed with
the Secretary of State of the State of Delaware as referenced in
Section 2.1, as such Certificate of Limited Partnership may be
amended, supplemented or restated from time to time.
“ Change
of Control ” for purposes of Section 5.6 means, and shall
be deemed to have occurred upon the occurrence of one or more of
the following events: (i) any sale, lease, exchange or other
transfer or disposition (in one transaction or a series of related
transactions) of all or substantially all of the assets of the
Partnership or the General Partner to any Person and/or its
Affiliates, other than to the Hamm Parties, the Partnership, the
General Partner and/or any of their Affiliates; (ii) the
consolidation, reorganization, merger or other transaction
involving the General Partner, or a transfer of membership
interests in the General Partner by the Hamm Parties, in either
case pursuant to which (a) less than 35% of the outstanding
membership interests in the General Partner, on a fully diluted
basis, are beneficially owned (as beneficial ownership is defined
in Rule 13d-3 of the Securities Exchange Act of 1934, as amended
(the “ Exchange Act ”)) by the Hamm Parties or
any of their Affiliates or (b) any “person” or
“group,” within the meaning of Section 13(d) or
14(d)(2) of the Exchange Act, (other than the Hamm Parties or any
of their Affiliates) becomes the ultimate beneficial owner (as
beneficial ownership is defined in Rule 13d 3 under the Exchange
Act) of more of the outstanding membership interests in the General
Partner than are beneficially owned by the Hamm Parties or any of
their Affiliates; or (iii) the General Partner (or an Affiliate
thereof) ceases to be the general partner of the
Partnership.
“
Citizenship Certification ” means a properly completed
certificate in such form as may be specified by the General Partner
by which a Limited Partner certifies that he (and if he is a
nominee holding for the account of another Person, that to the best
of his knowledge such other Person) is an Eligible
Citizen.
“
Claim ” has the meaning assigned to such term in
Section 7.12(d).
“ Class B
Unit ” means a Partnership Interest representing a
fractional part of the Partnership Interests of all Limited
Partners, and having the rights and obligations specified with
respect to Class B Units in this Agreement.
“ Closing
Date ” means the first date on which Common Units are
sold by the Partnership to the Underwriters pursuant to the
provisions of the Underwriting Agreement.
“ Closing
Price ” has the meaning assigned to such term in Section
15.1(a).
“
Code ” means the Internal Revenue Code of 1986, as
amended and in effect from time to time. Any reference herein
to a specific section or sections of the Code shall be deemed to
include a reference to any corresponding provision of any successor
law.
5
“
Combined Interest ” has the meaning assigned to such
term in Section 11.3(a).
“
Commission ” means the United States Securities and
Exchange Commission.
“ Common
Unit ” means a Partnership Interest representing a
fractional part of the Partnership Interests of all Limited
Partners, and having the rights and obligations specified with
respect to Common Units in this Agreement.
“
Conflicts Committee ” means a committee of the Board
of Directors of the General Partner composed entirely of two or
more directors (a) who are not (1) security holders, officers or
employees of the General Partner, (2) officers, directors or
employees of any Affiliate of the General Partner, including the
MLP General Partner, or (3) holders of any ownership interest in
the Partnership Group other than Common Units, or holders of any
ownership interest in the MLP Group, other than common units
representing limited partner interests in the MLP and (b) who also
meet the independence standards required of directors who serve on
an audit committee of a board of directors established by the
Securities Exchange Act and the rules and regulations of the
Commission thereunder and by the National Securities Exchange on
which the Common Units are listed or admitted for
trading.
“
Contributed Property ” means each property or other
asset, in such form as may be permitted by the Delaware Act, but
excluding cash, contributed to the Partnership. Once the
Carrying Value of a Contributed Property is adjusted pursuant to
Section 5.5(d), such property shall no longer constitute a
Contributed Property, but shall be deemed an Adjusted
Property.
“
Contributing Parties ” means Continental Gas Holdings,
Inc., Harold Hamm DST Trust, Harold Hamm HJ Trust, Equity Financial
Services, Inc., Randy Moeder and Ken Maples and their respective
successors or assigns.
“
Contribution Agreement ” means the Contribution
Agreement by and among the Partnership, the General Partner, Hiland
Partners GP, Inc., HH GP Holding, LLC, and the Contributing Parties
dated as of May 24, 2006, as amended.
“
Conversion Notice ” has the meaning assigned to such
term in Section 5.6(a).
“
Curative Allocation ” means any allocation of an item
of income, gain, deduction, loss or credit pursuant to the
provisions of Section 6.1(d)(x).
“ Current
Market Price ” has the meaning assigned to such term in
Section 15.1(a).
“
Delaware Act ” means the Delaware Revised Uniform
Limited Partnership Act, 6 Del C. § 17-101, et seq. ,
as amended, supplemented or restated from time to time, and any
successor to such statute.
“
Departing General Partner ” means a former General
Partner from and after the effective date of any withdrawal or
removal of such former General Partner pursuant to Section 11.1 or
11.2.
6
“
Depositary ” means, with respect to any Units issued
in global form, The Depository Trust Company and its successors and
permitted assigns.
“
Economic Risk of Loss ” has the meaning set forth in
Treasury Regulation Section 1.752 2(a).
“
Eligible Citizen ” means a Person qualified to own
interests in real property in jurisdictions in which any Group
Member does business or proposes to do business from time to time,
and whose status as a Limited Partner does not or would not subject
such Group Member to a significant risk of cancellation or
forfeiture of any of its properties or any interest
therein.
“ Event
of Withdrawal ” has the meaning assigned to such term in
Section 11.1(a).
“ General
Partner ” means Hiland Partners GP Holdings, LLC, a
Delaware limited liability company and its successors and permitted
assigns that are admitted to the Partnership as general partner of
the Partnership.
“ General
Partner Interest ” means the management and ownership
interest, if any, of the General Partner in the Partnership (in its
capacity as a general partner without reference to any Limited
Partner Interest held by it), and includes any and all benefits to
which a General Partner is entitled as provided in this Agreement,
together with all obligations of a General Partner to comply with
the terms and provisions of this Agreement.
“
Group ” means a Person that, with or through any of
its Affiliates or Associates, has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting (except
voting pursuant to a revocable proxy or consent given to such
Person in response to a proxy or consent solicitation made to 10 or
more Persons), exercising investment power or disposing of any
Partnership Securities with any other Person that beneficially
owns, or whose Affiliates or Associates beneficially own, directly
or indirectly, Partnership Securities.
“ Group
Member ” means a member of the Partnership Group and, for
purposes of Section 7.6 only, has the meaning assigned to such term
in Section 7.6(a).
“ Hamm
Parties ” means Harold Hamm, Harold Hamm DST Trust,
Harold Hamm HJ Trust, HH GP Holding, LLC and Continental Gas
Holdings, Inc.
“
Holder ” as used in Section 7.12 has the meaning
assigned to such term in Section 7.12(a).
“
Indemnified Persons ” has the meaning assigned to such
term in Section 7.12(c).
“
Indemnitee ” means (a) the General Partner, (b) any
Departing General Partner, (c) any Person who is or was an
Affiliate of the General Partner or any Departing General Partner,
(d) any Person who is or was a member, partner, officer, director,
fiduciary or trustee of any Group Member, the General Partner or
any Departing General Partner or any Affiliate of any Group Member,
the General Partner or any Departing General Partner, (e) any
Person who is or was serving at the request of the General Partner
or any Departing General Partner or any Affiliate of the General
Partner or any Departing General Partner as an officer, director,
member, partner,
7
fiduciary or
trustee of another Person; provided , that a Person shall
not be an Indemnitee by reason of providing, on a fee-for-services
basis, trustee, fiduciary or custodial services and (f) any Person
the General Partner designates as an “ Indemnitee
” for purposes of this Agreement.
“ Initial
Class B Holders ” means Randy Moeder and Ken
Maples.
“ Initial
Common Unit ” means the Common Units sold in the Initial
Offering.
“ Initial
Limited Partners ” means the Persons listed on Schedule 1
hereto, in each case upon being admitted to the Partnership in
accordance with Section 10.1.
“ Initial
Offering ” means the initial offering and sale of Common
Units to the public, as described in the Registration
Statement.
“ Issue
Price ” means the price at which a Unit is purchased from
the Partnership, after taking into account any sales commission or
underwriting discount charged to the Partnership.
“ Limited
Partner ” means, unless the context otherwise requires,
each Initial Limited Partner, each Initial Class B Holder, each
additional Person that becomes a Limited Partner pursuant to the
terms of this Agreement and any Departing General Partner upon the
change of its status from General Partner to Limited Partner
pursuant to Section 11.3, in each case, in such Person’s
capacity as a limited partner of the Partnership.
“ Limited
Partner Interest ” means the ownership interest of a
Limited Partner in the Partnership, which may be evidenced by
Common Units, Class B Units or other Partnership Securities or a
combination thereof or interest therein, and includes any and all
benefits to which such Limited Partner is entitled as provided in
this Agreement, together with all obligations of such Limited
Partner to comply with the terms and provisions of this
Agreement.
“
Liquidation Date ” means (a) in the case of an event
giving rise to the dissolution of the Partnership of the type
described in clauses (a) and (b) of the first sentence of Section
12.2, the date on which the applicable time period during which the
holders of Outstanding Units have the right to elect to continue
the business of the Partnership has expired without such an
election being made, and (b) in the case of any other event giving
rise to the dissolution of the Partnership, the date on which such
event occurs.
“
Liquidator ” means one or more Persons selected by the
General Partner to perform the functions described in Section 12.3
as liquidating trustee of the Partnership within the meaning of the
Delaware Act.
“ Merger
Agreement ” has the meaning assigned to such term in
Section 14.1.
“ MLP
” means Hiland Partners, LP, a Delaware limited partnership,
and any successors thereto.
“ MLP
Agreement ” means the First Amended and Restated
Agreement of Limited Partnership of Hiland Partners, LP, as it may
be amended, supplemented or restated from time to time.
8
“ MLP
General Partner ” means Hiland Partners GP, LLC, a
Delaware limited liability company and the general partner of the
MLP, and any successor thereto.
“ MLP
Group ” means the MLP and its Subsidiaries.
“
National Securities Exchange ” means an exchange
registered with the Commission under Section 6(a) of the Securities
Exchange Act, and any successor to such statute.
“ Net
Agreed Value ” means, (a) in the case of any Contributed
Property, the Agreed Value of such property reduced by any
liabilities either assumed by the Partnership upon such
contribution or to which such property is subject when contributed,
and (b) in the case of any property distributed to a Partner by the
Partnership, the Partnership’s Carrying Value of such
property (as adjusted pursuant to Section 5.5(d)(ii)) at the time
such property is distributed, reduced by any indebtedness either
assumed by such Partner upon such distribution or to which such
property is subject at the time of distribution, in either case, as
determined under Section 752 of the Code.
“ Net
Income ” means, for any taxable year, the excess, if any,
of the Partnership’s items of income and gain (other than
those items taken into account in the computation of Net
Termination Gain or Net Termination Loss) for such taxable year
over the Partnership’s items of loss and deduction (other
than those items taken into account in the computation of Net
Termination Gain or Net Termination Loss) for such taxable
year. The items included in the calculation of Net Income
shall be determined in accordance with Section 5.5(b) and shall not
include any items specially allocated under Section 6.1(d);
provided , that the determination of the items that have
been specially allocated under Section 6.1(d) shall be made as if
Section 6.1(d)(xi) were not in this Agreement.
“ Net
Loss ” means, for any taxable year, the excess, if any,
of the Partnership’s items of loss and deduction (other than
those items taken into account in the computation of Net
Termination Gain or Net Termination Loss) for such taxable year
over the Partnership’s items of income and gain (other than
those items taken into account in the computation of Net
Termination Gain or Net Termination Loss) for such taxable
year. The items included in the calculation of Net Loss shall
be determined in accordance with Section 5.5(b) and shall not
include any items specially allocated under Section 6.1(d);
provided , that the determination of the items that have
been specially allocated under Section 6.1(d) shall be made as if
Section 6.1(d)(xi) were not in this Agreement.
“ Net
Positive Adjustments ” means, with respect to any
Partner, the excess, if any, of the total positive adjustments over
the total negative adjustments made to the Capital Account of such
Partner pursuant to Book-Up Events and Book-Down Events.
“ Net
Termination Gain ” means, for any taxable year, the sum,
if positive, of all items of income, gain, loss or deduction
recognized by the Partnership after the Liquidation Date. The
items included in the determination of Net Termination Gain shall
be determined in accordance with Section 5.5(b) and shall not
include any items of income, gain, loss or deduction specially
allocated under Section 6.1(d).
9
“ Net
Termination Loss ” means, for any taxable year, the sum,
if negative, of all items of income, gain, loss or deduction
recognized by the Partnership after the Liquidation Date. The
items included in the determination of Net Termination Loss shall
be determined in accordance with Section 5.5(b) and shall not
include any items of income, gain, loss or deduction specially
allocated under Section 6.1(d).
“
Non-citizen Assignee ” means a Person whom the General
Partner has determined does not constitute an Eligible Citizen and
as to whose Partnership Interest the General Partner has become the
Limited Partner, pursuant to Section 4.8.
“
Non-Competition Agreement ” means the Non-Competition
Agreement dated the date hereof among the Partnership, the General
Partner, the MLP, and the MLP General Partner, as it may be
amended, supplemented or restated from time to time.
“
Nonrecourse Built-in Gain ” means with respect to any
Contributed Properties or Adjusted Properties that are subject to a
mortgage or pledge securing a Nonrecourse Liability, the amount of
any taxable gain that would be allocated to the Partners pursuant
to Sections 6.2(b)(i)(A), 6.2(b)(ii)(A) and 6.2(b)(iii) if
such properties were disposed of in a taxable transaction in full
satisfaction of such liabilities and for no other
consideration.
“
Nonrecourse Deductions ” means any and all items of
loss, deduction or expenditure (including, without limitation, any
expenditure described in Section 705(a)(2)(B) of the Code) that, in
accordance with the principles of Treasury Regulation Section
1.704-2(b), are attributable to a Nonrecourse Liability.
“
Nonrecourse Liability ” has the meaning set forth in
Treasury Regulation Section 1.752-1(a)(2).
“ Notice
of Election to Purchase ” has the meaning assigned to
such term in Section 15.1(b).
“ Omnibus
Agreement ” means that certain Omnibus Agreement dated
February 15, 2005, among Continental Resources, Inc., Hiland
Partners, LLC, Harold Hamm, the MLP General Partner and the
MLP.
“ Opinion
of Counsel ” means a written opinion of counsel (who may
be regular counsel to the Partnership or the General Partner or any
of its Affiliates) in a form acceptable to the General
Partner.
“ Option
Closing Date ” means the date or dates on which any
Common Units are sold by the Partnership to the Underwriters upon
exercise of the Over-Allotment Option.
“
Organizational Limited Partner ” means Continental Gas
Holdings, Inc. in its capacity as the organizational limited
partner of the Partnership pursuant to this Agreement.
“
Outstanding ” means, with respect to Partnership
Securities, all Partnership Securities that are issued by the
Partnership and reflected as outstanding on the Partnership’s
books and records as of the date of determination; provided,
however , that if at any time any Person or
10
Group (other than
the General Partner, its Affiliates or the Contributing Parties)
beneficially owns 20% or more of the Outstanding Partnership
Securities of any class then Outstanding, all Partnership
Securities owned by such Person or Group shall not be voted on any
matter and shall not be considered to be Outstanding when sending
notices of a meeting of Limited Partners to vote on any matter
(unless otherwise required by law), calculating required votes,
determining the presence of a quorum or for other similar purposes
under this Agreement, except that Common Units so owned shall be
considered to be Outstanding for purposes of
Section 11.1(b)(iv) (such Common Units shall not, however, be
treated as a separate class of Partnership Securities for purposes
of this Agreement); provided, further , that the foregoing
limitation shall not apply (i) to any Person or Group who acquired
20% or more of any Outstanding Partnership Securities of any class
then Outstanding directly from the General Partner or its
Affiliates, (ii) to any Person or Group who acquired 20% or more of
the Outstanding Partnership Securities of any class then
Outstanding directly or indirectly from a Person or Group described
in clause (i) provided , that the General Partner shall have
notified such Person or Group in writing that such limitation shall
not apply or (iii) to any Person or Group who acquired 20% or more
of the Partnership Securities issued by the Partnership with the
prior approval of the Board of Directors.
“
Over-Allotment Option ” means the over-allotment
option granted to the Underwriters by the Partnership pursuant to
the Underwriting Agreement.
“ Partner
Nonrecourse Debt ” has the meaning set forth in Treasury
Regulation Section 1.704-2(b)(4).
“ Partner
Nonrecourse Debt Minimum Gain ” has the meaning set forth
in Treasury Regulation Section 1.704-2(i)(2).
“ Partner
Nonrecourse Deductions ” means any and all items of loss,
deduction or expenditure (including, without limitation, any
expenditure described in Section 705(a)(2)(B) of the Code) that, in
accordance with the principles of Treasury Regulation Section
1.704-2(i), are attributable to a Partner Nonrecourse
Debt.
“
Partners ” means the General Partner and the Limited
Partners.
“
Partnership ” means Hiland Holdings GP, LP, a Delaware
limited partnership, and any successors thereto.
“
Partnership Group ” means the Partnership and its
Subsidiaries treated as a single consolidated entity, but excluding
the MLP Group.
“
Partnership Interest ” means an interest in the
Partnership, which shall include the General Partner Interest and
Limited Partner Interests.
“
Partnership Minimum Gain ” means that amount
determined in accordance with the principles of Treasury Regulation
Section 1.704-2(d).
11
“
Partnership Security ” means any class or series of
equity interest in the Partnership (but excluding any options,
rights, warrants and appreciation rights relating to an equity
interest in the Partnership), including without limitation, Common
Units and Class B Units.
“ Per
Unit Capital Amount ” means, as of any determination, the
Capital Account, stated on a per Unit basis, underlying any Unit
held by a Person other than any Affiliate of the General
Partner.
“
Percentage Interest ” means, as of any date of
determination, (a) as to any Unitholder holding Units, the product
obtained by multiplying (i) 100% less the percentage applicable to
clause (b) by (ii) the quotient obtained by dividing (A) the number
of Units held by such Unitholder by (B) the total number of all
Outstanding Units, and (b) as to the holders of additional
Partnership Securities issued by the Partnership in accordance with
Section 5.7, the percentage established as a part of such
issuance. Except as provided in Section 5.1, the
Percentage Interest of the General Partner shall at all times be
zero.
“
Person ” means an individual or a corporation, limited
liability company, partnership, joint venture, trust,
unincorporated organization, association, government agency or
political subdivision thereof or other entity.
“ Pro
Rata ” means (a) when used with respect to Units or any
class thereof, apportioned equally among all designated Units in
accordance with their relative Percentage Interests, and (b) when
used with respect to Partners or Record Holders, apportioned among
all Partners or Record Holders in accordance with their relative
Percentage Interests.
“
Purchase Date ” means the date determined by the
General Partner as the date for purchase of all Outstanding Units
of a certain class (other than Units owned by the General Partner
and its Affiliates) pursuant to Article XV.
“
Quarter ” means, unless the context requires
otherwise, a fiscal quarter of the Partnership, or with respect to
the first fiscal quarter of the Partnership after the Closing Date
the portion of such fiscal quarter after the Closing
Date.
“
Recapture Income ” means any gain recognized by the
Partnership (computed without regard to any adjustment required by
Section 734 or Section 743 of the Code) upon the disposition of any
property or asset of the Partnership, which gain is characterized
as ordinary income because it represents the recapture of
deductions previously taken with respect to such property or
asset.
“ Record
Date ” means the date established by the General Partner
or otherwise in accordance with this Agreement for determining (a)
the identity of the Record Holders entitled to notice of, or to
vote at, any meeting of Limited Partners or entitled to vote by
ballot or give approval of Partnership action in writing without a
meeting or entitled to exercise rights in respect of any lawful
action of Limited Partners or (b) the identity of Record Holders
entitled to receive any report or distribution or to participate in
any offer.
“ Record
Holder ” means the Person in whose name a Common Unit is
registered on the books of the Transfer Agent as of the opening of
business on a particular Business Day, or with
12
respect to other
Partnership Securities, the Person in whose name any such other
Partnership Security is registered on the books that the General
Partner has caused to be kept as of the opening of business on such
Business Day.
“
Redeemable Interests ” means any Partnership Interests
for which a redemption notice has been given, and has not been
withdrawn, pursuant to Section 4.9.
“
Registration Statement ” means the Registration
Statement on Form S-1 (Registration No. 333-134491) as it has been
or as it may be amended or supplemented from time to time, filed by
the Partnership with the Commission under the Securities Act to
register the offering and sale of the Common Units in the Initial
Offering.
“
Remaining Net Positive Adjustments ” means as of the
end of any taxable period, with respect to the Unitholders holding
Common Units or Class B Units, the excess of (a) the Net Positive
Adjustments of the Unitholders holding Common Units or Class B
Units, as of the end of such period over (b) the sum of those
Partners’ Share of Additional Book Basis Derivative Items for
each prior taxable period.
“
Required Allocations ” means (a) any limitation
imposed on any allocation of Net Losses or Net Termination Losses
under Section 6.1(b) or 6.1(c)(ii) and (b) any allocation of an
item of income, gain, loss or deduction pursuant to Sections
6.1(d)(i), 6.1(d)(ii), 6.1(d)(iii), 6.1(d)(iv), 6.1(d)(v),
6.1(d)(vi) or 6.1(d)(viii).
“
Residual Gain ” or “ Residual Loss
” means any item of gain or loss, as the case may be, of the
Partnership recognized for federal income tax purposes resulting
from a sale, exchange or other disposition of a Contributed
Property or Adjusted Property, to the extent such item of gain or
loss is not allocated pursuant to Sections 6.2(b)(i)(A) or
6.2(b)(ii)(A), respectively, to eliminate Book-Tax
Disparities.
“
Securities Act ” means the Securities Act of 1933, as
amended, supplemented or restated from time to time and any
successor to such statute.
“
Securities Exchange Act ” means the Securities
Exchange Act of 1934, as amended, supplemented or restated from
time to time and any successor to such statute.
“ Share
of Additional Book Basis Derivative Items ” means in
connection with any allocation of Additional Book Basis Derivative
Items for any taxable period, with respect to the Unitholders
holding Common Units or Class B Units, the amount that bears the
same ratio to such Additional Book Basis Derivative Items as the
Unitholders’ Remaining Net Positive Adjustments as of the end
of such period bears to the Aggregate Remaining Net Positive
Adjustments as of that time.
“ Special
Approval ” means approval by a majority of the members of
the Conflicts Committee acting in good faith.
“
Subsidiary ” means, with respect to any Person, (a) a
corporation of which more than 50% of the voting power of shares
entitled (without regard to the occurrence of any contingency) to
vote in the election of directors or other governing body of such
corporation is owned, directly
13
or indirectly, at
the date of determination, by such Person, by one or more
Subsidiaries of such Person or a combination thereof, (b) a
partnership (whether general or limited) in which such Person or a
Subsidiary of such Person is, at the date of determination, a
general or limited partner of such partnership, but only if more
than 50% of the partnership interests of such partnership
(considering all of the partnership interests of the partnership as
a single class) is owned, directly or indirectly, at the date of
determination, by such Person, by one or more Subsidiaries of such
Person, or a combination thereof, or (c) any other Person (other
than a corporation or a partnership) in which such Person, one or
more Subsidiaries of such Person, or a combination thereof,
directly or indirectly, at the date of determination, has (i) at
least a majority ownership interest or (ii) the power to elect or
direct the election of a majority of the directors or other
governing body of such Person.
“
Surviving Business Entity ” has the meaning assigned
to such term in Section 14.2(b).
“
Termination Event ” means, with respect to any Initial
Class B Holder any of the following: (i) the termination of
such Initial Class B Holder’s employment by reason of a
disability that entitled such Initial Class B Holder to benefits
under the General Partner’s long-term disability plan; (ii)
the death of such Initial Class B Holder while in the employ of the
General Partner; or (iii) the termination of such Initial Class B
Holder’s employment by the General Partner for any reason
other than for cause (as determined by the General Partner in
accordance with its employment policies).
“ Trading
Day ” has the meaning assigned to such term in Section
15.1(a).
“
transfer ” has the meaning assigned to such term in
Section 4.4(a).
“
Transfer Agent ” means such bank, trust company or
other Person (including the General Partner or one of its
Affiliates) as shall be appointed from time to time by the
Partnership to act as registrar and transfer agent for the Common
Units; provided , that if no Transfer Agent is specifically
designated for any other Partnership Securities, the General
Partner shall act in such capacity.
“
Underwriter ” means each Person named as an
underwriter in Schedule I to the Underwriting Agreement who
purchases Common Units pursuant thereto.
“
Underwriting Agreement ” means the Underwriting
Agreement entered into in connection with the Initial Offering
dated September 19, 2006 among the Underwriters, the Partnership
and the General Partner, providing for the purchase of Common Units
by such Underwriters.
“
Unit ” means a Partnership Security that is designated
as a “ Unit ” and shall include Common Units and
Class B Units.
“ Unit
Majority ” means at least a majority of the Outstanding
Common Units and Outstanding Class B Units, if applicable, voting
together as a single class.
“
Unitholders ” means the holders of Units.
14
“
Unrealized Gain ” attributable to any item of
Partnership property means, as of any date of determination, the
excess, if any, of (a) the fair market value of such property as of
such date (as determined under Section 5.5(d)) over (b) the
Carrying Value of such property as of such date (prior to any
adjustment to be made pursuant to Section 5.5(d) as of such
date).
“
Unrealized Loss ” attributable to any item of
Partnership property means, as of any date of determination, the
excess, if any, of (a) the Carrying Value of such property as of
such date (prior to any adjustment to be made pursuant to Section
5.5(d) as of such date) over (b) the fair market value of such
property as of such date (as determined under Section
5.5(d)).
“ U.S.
GAAP ” means United States generally accepted accounting
principles consistently applied.
“
Withdrawal Opinion of Counsel ” has the meaning
assigned to such term in Section 11.1(b).
Section
1.2
Construction .
Unless the context
requires otherwise: (a) any pronoun used in this Agreement
shall include the corresponding masculine, feminine or neuter
forms, and the singular form of nouns, pronouns and verbs shall
include the plural and vice versa; (b) references to Articles and
Sections refer to Articles and Sections of this Agreement; (c) the
terms “ include ,” “ includes
” or “ including ” or words of like import
shall be deemed to be followed by the words “ without
limitation ;” and (d) the terms “ hereof
,” “ herein ” or “ hereunder
” refer to this Agreement as a whole and not to any
particular provision of this Agreement. The table of contents
and headings contained in this Agreement are for reference purposes
only, and shall not affect in any way the meaning or interpretation
of this Agreement.
ARTICLE II
ORGANIZATION
Section
2.1
Formation .
The Partnership
was formed on May 10, 2006 pursuant to the Certificate of Limited
Partnership as filed with the Secretary of State of the State of
Delaware pursuant to the provisions of the Delaware Act.
Except as expressly provided to the contrary in this Agreement, the
rights, duties (including fiduciary duties), liabilities and
obligations of the Partners and the administration, dissolution and
termination of the Partnership shall be governed by the Delaware
Act. All Partnership Interests shall constitute personal
property of the owner thereof for all purposes.
Section
2.2
Name .
The name of the
Partnership shall be “ Hiland Holdings GP, LP
.” The Partnership’s business may be conducted
under any other name or names as determined by the General Partner,
including the name of the General Partner. The words “
Limited Partnership ,” “ LP ,”
“ Ltd .” or similar words or letters shall be
included in the Partnership’s name where necessary for the
purpose of complying with the laws of any jurisdiction that so
requires. The General Partner
15
may change the
name of the Partnership at any time and from time to time and shall
notify the Limited Partners of such change in the next regular
communication to the Limited Partners.
Section
2.3
Registered Office; Registered Agent; Principal Office; Other
Offices .
Unless and until
changed by the General Partner, the registered office of the
Partnership in the State of Delaware shall be located at 1209
Orange Street, Suite 400, Wilmington, Delaware 19801, and the
registered agent for service of process on the Partnership in the
State of Delaware at such registered office shall be The
Corporation Trust Company. The principal office of the
Partnership shall be located at 205 West Maple, Suite 1100, Enid,
Oklahoma 73701 or such other place as the General Partner may from
time to time designate by notice to the Limited Partners. The
Partnership may maintain offices at such other place or places
within or outside the State of Delaware as the General Partner
deems necessary or appropriate. The address of the General
Partner shall be 205 West Maple, Suite 1100, Enid, Oklahoma 73701
or such other place as the General Partner may from time to time
designate by notice to the Limited Partners.
Section
2.4
Purpose and Business .
The purpose and
nature of the business to be conducted by the Partnership shall be
to (a) engage directly in, or enter into or form any corporation,
partnership, joint venture, limited liability company or other
arrangement to engage indirectly in, any business activity that is
approved by the General Partner and that lawfully may be conducted
by a limited partnership organized pursuant to the Delaware Act
and, in connection therewith, to exercise all of the rights and
powers conferred upon the Partnership pursuant to the agreements
relating to such business activity; and (b) do anything necessary
or appropriate to the foregoing, including the making of capital
contributions or loans to a Group Member or a member of the MLP
Group, provided, however , that the General Partner shall
not cause the Partnership to engage, directly or indirectly, in any
business activity that the General Partner determines would cause
the Partnership to be treated as an association taxable as a
corporation or otherwise taxable as an entity for federal income
tax purposes. The General Partner shall have no duty or
obligation to propose or approve, and may decline to propose or
approve, the conduct by the Partnership of any business, free of
any fiduciary duty or obligation whatsoever to the Partnership or
any Limited Partner and, in declining to so propose or approve,
shall not be required to act in good faith or pursuant to any other
standard imposed by this Agreement, any other agreement
contemplated hereby or under the Delaware Act or any other law,
rule or regulation or at equity.
Section
2.5
Powers .
The Partnership
shall be empowered to do any and all acts and things necessary,
appropriate, proper, advisable, incidental to or convenient for the
furtherance and accomplishment of the purposes and business
described in Section 2.4 and for the protection and benefit of the
Partnership.
Section
2.6
Power of Attorney .
(a)
Each Limited Partner hereby constitutes and appoints the General
Partner and, if a Liquidator (other than the General Partner) shall
have been selected pursuant to
16
Section 12.3, the
Liquidator, severally (and any successor to either thereof by
merger, transfer, assignment, election or otherwise) and each of
their authorized officers and attorneys-in-fact, as the case may
be, with full power of substitution, as his true and lawful agent
and attorney-in-fact, with full power and authority in his name,
place and stead, to:
(i)
execute, swear to, acknowledge, deliver, file and record in the
appropriate public offices (A) all certificates, documents and
other instruments (including this Agreement and the Certificate of
Limited Partnership and all amendments or restatements hereof or
thereof) that the General Partner or the Liquidator determines to
be necessary or appropriate to form, qualify or continue the
existence or qualification of the Partnership as a limited
partnership (or a partnership in which the limited partners have
limited liability) in the State of Delaware and in all other
jurisdictions in which the Partnership may conduct business or own
property; (B) all certificates, documents and other instruments
that the General Partner or the Liquidator determines to be
necessary or appropriate to reflect, in accordance with its terms,
any amendment, change, modification or restatement of this
Agreement; (C) all certificates, documents and other instruments
(including conveyances and a certificate of cancellation) that the
General Partner or the Liquidator determines to be necessary or
appropriate to reflect the dissolution and liquidation of the
Partnership pursuant to the terms of this Agreement; (D) all
certificates, documents and other instruments relating to the
admission, withdrawal, removal or substitution of any Partner
pursuant to, or other events described in, Articles IV, X, XI or
XII; (E) all certificates, documents and other instruments relating
to the determination of the rights, preferences and privileges of
any class or series of Partnership Securities issued pursuant to
Section 5.7; and (F) all certificates, documents and other
instruments (including agreements and a certificate of merger)
relating to a merger, consolidation or conversion of the
Partnership pursuant to Article XIV; and
(ii)
execute, swear to, acknowledge, deliver, file and record all
ballots, consents, approvals, waivers, certificates, documents and
other instruments that the General Partner or the Liquidator
determines to be necessary or appropriate to (A) make, evidence,
give, confirm or ratify any vote, consent, approval, agreement or
other action that is made or given by the Partners hereunder or is
consistent with the terms of this Agreement or (B) effectuate the
terms or intent of this Agreement; provided , that when
required by Section 13.3 or any other provision of this Agreement
that establishes a percentage of the Limited Partners or of the
Limited Partners of any class or series required to take any
action, the General Partner and the Liquidator may exercise the
power of attorney made in this Section 2.6(a)(ii) only after the
necessary vote, consent or approval of the Limited Partners or of
the Limited Partners of such class or series, as
applicable.
Nothing contained
in this Section 2.6(a) shall be construed as authorizing the
General Partner to amend this Agreement except in accordance with
Article XIII or as may be otherwise expressly provided for in this
Agreement.
(b)
The foregoing power of attorney is hereby declared to be
irrevocable and a power coupled with an interest, and it shall
survive and, to the maximum extent permitted by law, not be
affected by the subsequent death, incompetency, disability,
incapacity, dissolution,
17
bankruptcy or
termination of any Limited Partner and the transfer of all or any
portion of such Limited Partner’s Partnership Interest and
shall extend to such Limited Partner’s heirs, successors,
assigns and personal representatives. Each such Limited
Partner hereby agrees to be bound by any representation made by the
General Partner or the Liquidator acting in good faith pursuant to
such power of attorney; and each such Limited Partner, to the
maximum extent permitted by law, hereby waives any and all defenses
that may be available to contest, negate or disaffirm the action of
the General Partner or the Liquidator taken in good faith under
such power of attorney. Each Limited Partner shall execute
and deliver to the General Partner or the Liquidator, within 15
days after receipt of the request therefor, such further
designation, powers of attorney and other instruments as the
General Partner or the Liquidator may request in order to
effectuate this Agreement and the purposes of the
Partnership.
Section
2.7
Term .
The term of the
Partnership commenced upon the filing of the Certificate of Limited
Partnership in accordance with the Delaware Act and shall continue
in existence until the dissolution of the Partnership in accordance
with the provisions of Article XII. The existence of the
Partnership as a separate legal entity shall continue until the
cancellation of the Certificate of Limited Partnership as provided
in the Delaware Act.
Section
2.8
Title to Partnership Assets .
Title to
Partnership assets, whether real, personal or mixed and whether
tangible or intangible, shall be deemed to be owned by the
Partnership as an entity, and no Partner, individually or
collectively, shall have any ownership interest in such Partnership
assets or any portion thereof. Title to any or all of the
Partnership assets may be held in the name of the Partnership, the
General Partner, one or more of its Affiliates or one or more
nominees, as the General Partner may determine. The General
Partner hereby declares and warrants that any Partnership assets
for which record title is held in the name of the General Partner
or one or more of its Affiliates or one or more nominees shall be
held by the General Partner or such Affiliate or nominee for the
use and benefit of the Partnership in accordance with the
provisions of this Agreement; provided, however , that the
General Partner shall use reasonable efforts to cause record title
to such assets (other than those assets in respect of which the
General Partner determines that the expense and difficulty of
conveyancing makes transfer of record title to the Partnership
impracticable) to be vested in the Partnership as soon as
reasonably practicable; provided, further , that, prior to
the withdrawal or removal of the General Partner or as soon
thereafter as practicable, the General Partner shall use reasonable
efforts to effect the transfer to the Partnership of record title
to all Partnership assets held by the General Partner or its
Affiliates and, prior to any such transfer, will provide for the
use of such assets in a manner satisfactory to the General
Partner. All Partnership assets shall be recorded as the
property of the Partnership in its books and records, irrespective
of the name in which record title to such Partnership assets is
held.
18
Section
2.9
Certain Undertakings Relating to the Separateness of the
Partnership .
(a)
Separateness Generally . The Partnership shall conduct
its business and operations separate and apart from those of any
other Person (other than the General Partner) in accordance with
this Section 2.9.
(b)
Separate Records . The Partnership shall maintain (i)
its books and records, (ii) its accounts, and (iii) its financial
statements, separate from those of any other Person, except its
consolidated Subsidiaries.
(c)
Separate Assets . The Partnership shall not commingle
or pool its funds or other assets with those of any other Person,
except its consolidated Subsidiaries, and shall maintain its assets
in a manner that is not costly or difficult to segregate, ascertain
or otherwise identify as separate from those of any other
Person.
(d)
Separate Name . The Partnership shall (i) conduct its
business in its own name, (ii) use separate stationery, invoices,
and checks, (iii) correct any known misunderstanding regarding its
separate identity, and (iv) generally hold itself out as a separate
entity.
(e)
Separate Credit . The Partnership shall not (i) pay
its own liabilities from a source other than its own funds, (ii)
guarantee or become obligated for the debts of any other Person,
except its Subsidiaries or the MLP Group, (iii) hold out its credit
as being available to satisfy the obligations of any other Person,
except its Subsidiaries or the MLP Group, (iv) acquire obligations
or debt securities of the General Partner or its Affiliates (other
than the Partnership or its Subsidiaries or the MLP Group), or (v)
pledge its assets for the benefit of any Person or make loans or
advances to any Person, except its Subsidiaries or the MLP Group;
provided , that the Partnership may engage in any
transaction described in clauses (ii)—(v) of this Section
2.9(e) if prior Special Approval has been obtained for such
transaction and either (A) the Conflicts Committee has determined,
or has obtained reasonable written assurance from a nationally
recognized firm of independent public accountants or a nationally
recognized investment banking or valuation firm, that the borrower
or recipient of the credit extension is not then insolvent and will
not be rendered insolvent as a result of such transaction or (B) in
the case of transactions described in clause (iv), such transaction
is completed through a public auction or a National Securities
Exchange.
(f)
Separate Formalities . The Partnership shall (i)
observe all partnership formalities and other formalities required
by its organizational documents, the laws of the jurisdiction of
its formation, or other laws, rules, regulations and orders of
governmental authorities exercising jurisdiction over it, (ii)
engage in transactions with the General Partner and its Affiliates
(other than another Group Member) in conformity with the
requirements of Section 7.9, and (iii) promptly pay, from its
own funds, and on a current basis, its allocable share of general
and administrative expenses, capital expenditures, and costs for
shared services performed by Affiliates of the General Partner
(other than another Group Member). Each material contract
between the Partnership or another Group Member, on the one hand,
and the Affiliates of the General Partner (other than a Group
Member), on the other hand, shall be in writing.
19
(g)
No Effect . Failure by the General Partner or the
Partnership to comply with any of the obligations set forth above
shall not affect the status of the Partnership as a separate legal
entity, with its separate assets and separate
liabilities.
ARTICLE III
RIGHTS OF LIMITED PARTNERS
Section
3.1
Limitation of Liability .
The Limited
Partners shall have no liability under this Agreement except as
expressly provided in this Agreement or the Delaware
Act.
Section
3.2
Management of Business .
No Limited
Partner, in its capacity as such, shall participate in the
operation, management or control (within the meaning of the
Delaware Act) of the Partnership’s business, transact any
business in the Partnership’s name or have the power to sign
documents for or otherwise bind the Partnership. Any action
taken by any Affiliate of the General Partner or any officer,
director, employee, manager, member, general partner, agent or
trustee of the General Partner or any of its Affiliates, or any
officer, director, employee, manager, member, general partner,
agent or trustee of a Group Member or a member of the MLP Group, in
its capacity as such, shall not be deemed to be participating in
the control of the business of the Partnership by a limited partner
of the Partnership (within the meaning of Section 17-303(a) of the
Delaware Act) and shall not affect, impair or eliminate the
limitations on the liability of the Limited Partners under this
Agreement.
Section
3.3
Outside Activities of the Limited Partners .
Subject to the
provisions of Section 7.5, the Omnibus Agreement and the
Non-Competition Agreement, which shall continue to be applicable to
the Persons referred to therein, regardless of whether such Persons
shall also be Limited Partners, any Limited Partner shall be
entitled to and may have business interests and engage in business
activities in addition to those relating to the Partnership,
including business interests and activities in direct competition
with the Partnership Group or the MLP Group. Neither the
Partnership nor any of the other Partners shall have any rights by
virtue of this Agreement in any business ventures of any Limited
Partner.
Section
3.4
Rights of Limited Partners .
(a)
In addition to other rights provided by this Agreement or by
applicable law, and except as limited by Section 3.4(b), each
Limited Partner shall have the right, for a purpose reasonably
related to such Limited Partner’s interest as a Limited
Partner in the Partnership, upon reasonable written demand stating
the purpose of such demand and at such Limited Partner’s own
expense:
(i)
to obtain true and full information regarding the status of the
business and financial condition of the Partnership;
20
(ii)
promptly after its becoming available, to obtain a copy of the
Partnership’s federal, state and local income tax returns for
each year;
(iii)
to obtain a current list of the name and last known business,
residence or mailing address of each Partner;
(iv)
to obtain a copy of this Agreement and the Certificate of Limited
Partnership and all amendments thereto, together with a copy of the
executed copies of all powers of attorney pursuant to which this
Agreement, the Certificate of Limited Partnership and all
amendments thereto have been executed;
(v)
to obtain true and full information regarding the amount of cash
and a description and statement of the Net Agreed Value of any
other Capital Contribution by each Partner and that each Partner
has agreed to contribute in the future, and the date on which each
became a Partner; and
(vi)
to obtain such other information regarding the affairs of the
Partnership as is just and reasonable.
(b)
Notwithstanding any other provision of this Agreement, the General
Partner may keep confidential from the Limited Partners, for such
period of time as the General Partner determines, (i) any
information that the General Partner reasonably believes to be in
the nature of trade secrets or (ii) other information the
disclosure of which the General Partner believes (A) is not in the
best interests of the Partnership Group, (B) could damage the
Partnership Group or its consolidated business or (C) that any
Group Member is required by law or by agreement with any third
party to keep confidential (other than agreements with Affiliates
of the Partnership the primary purpose of which is to circumvent
the obligations set forth in this Section 3.4).
ARTICLE IV
CERTIFICATES; RECORD HOLDERS; TRANSFER OF PARTNERSHIP
INTERESTS;
REDEMPTION OF PARTNERSHIP INTERESTS
Section
4.1
Certificates .
Prior to the
Closing Date, the Partnership Interests will not be evidenced by a
Certificate. Effective on the Closing Date, upon the
Partnership’s issuance of Common Units or Class B Units to
any Person, the Partnership shall issue, upon the request of such
Person, one or more Certificates in the name of such Person
evidencing the number of such Units being so issued. In
addition, upon the request of any Person owning other Partnership
Securities, the Partnership shall issue to such Person one or more
Certificates evidencing such other Partnership Securities.
Certificates shall be executed on behalf of the Partnership by the
Chairman of the Board, President or any Vice President and the
Secretary or any Assistant Secretary of the General Partner.
No Common Unit Certificate shall be valid for any purpose until it
has been countersigned by the Transfer Agent; provided,
however , that if the General Partner elects to issue Common
Units in global form, the Common Unit Certificates shall be valid
upon receipt of a certificate from the Transfer Agent certifying
that the Common Units have been duly registered in accordance with
the directions of the Partnership. Subject to the
requirements of Section 6.4(b),
21
the Partners
holding Certificates evidencing Class B Units may exchange such
Certificates for Certificates evidencing Common Units on or after
the date on which such Class B Units are converted into Common
Units pursuant to the terms of Section 5.6.
Section
4.2
Mutilated, Destroyed, Lost or Stolen Certificates
.
(a)
If Certificates are issued and any mutilated Certificate is
surrendered to the Transfer Agent (for Common Units) or the General
Partner (for Partnership Securities other than Common Units), the
appropriate officers of the General Partner on behalf of the
Partnership shall execute, and the Transfer Agent (for Common
Units) or the General Partner (for Partnership Securities other
than Common Units) shall countersign and deliver in exchange
therefor, a new Certificate evidencing the same number and type of
Partnership Securities as the Certificate so
surrendered.
(b)
The appropriate officers of the General Partner on behalf of the
Partnership shall execute and deliver, and the Transfer Agent (for
Common Units) or the General Partner (for Partnership Securities
other than Common Units) shall countersign a new Certificate in
place of any Certificate previously issued if the Record Holder of
the Certificate:
(i)
makes proof by affidavit, in form and substance satisfactory to the
General Partner, that a previously issued Certificate has been
lost, destroyed or stolen;
(ii)
requests the issuance of a new Certificate before the General
Partner has notice that the Certificate has been acquired by a
purchaser for value in good faith and without notice of an adverse
claim;
(iii)
if requested by the General Partner, delivers to the General
Partner a bond, in form and substance satisfactory to the General
Partner, with surety or sureties and with fixed or open penalty as
the General Partner may direct to indemnify the Partnership, the
Partners, the General Partner and the Transfer Agent against any
claim that may be made on account of the alleged loss, destruction
or theft of the Certificate; and
(iv)
satisfies any other reasonable requirements imposed by the General
Partner.
(c)
If a Limited Partner fails to notify the General Partner within a
reasonable period of time after he has notice of the loss,
destruction or theft of a Certificate, and a transfer of the
Limited Partner Interests represented by the Certificate is
registered before the Partnership, the General Partner or the
Transfer Agent receives such notification, the Limited Partner
shall be precluded from making any claim against the Partnership,
the General Partner or the Transfer Agent for such transfer or for
a new Certificate.
(d)
As a condition to the issuance of any new Certificate under this
Section 4.2, the General Partner may require the payment of a sum
sufficient to cover any tax or other governmental charge that may
be imposed in relation thereto and any other expenses (including
the fees and expenses of the Transfer Agent) reasonably connected
therewith.
22
Section
4.3
Record Holders .
The Partnership
shall be entitled to recognize the Record Holder as the Limited
Partner with respect to any Partnership Interest and, accordingly,
shall not be bound to recognize any equitable or other claim to or
interest in such Partnership Interest on the part of any other
Person, regardless of whether the Partnership shall have actual or
other notice thereof, except as otherwise provided by law or any
applicable rule, regulation, guideline or requirement of any
National Securities Exchange on which such Partnership Interests
are listed or admitted for trading. Without limiting the foregoing,
when a Person (such as a broker, dealer, bank, trust company or
clearing corporation or an agent of any of the foregoing) is acting
as nominee, agent or in some other representative capacity for
another Person in acquiring and/or holding Partnership Interests,
as between the Partnership on the one hand, and such other Persons
on the other, such representative Person shall be the Record Holder
of such Partnership Interest.
Section
4.4
Transfer Generally .
(a)
The term “ transfer ,” when used in this
Agreement with respect to a Partnership Interest, shall be deemed
to refer to a transaction (i) by which the General Partner assigns
its General Partner Interest to another Person who becomes the
General Partner, and includes a sale, assignment, gift, pledge,
encumbrance, hypothecation, mortgage, exchange, or any other
disposition by law or otherwise or (ii) by which the holder of a
Limited Partner Interest assigns such Limited Partner Interest to
another Person who is or becomes a Limited Partner, and includes a
sale, assignment, gift, exchange or any other disposition by law or
otherwise, including any transfer upon foreclosure of any pledge,
encumbrance, hypothecation or mortgage.
(b)
No Partnership Interest shall be transferred, in whole or in part,
except in accordance with the terms and conditions set forth in
this Article IV. Any transfer or purported transfer of a
Partnership Interest not made in accordance with this Article IV
shall be null and void.
(c)
Nothing contained in this Agreement shall be construed to prevent a
disposition by any stockholder, member, partner or other owner of
the General Partner of any or all of the issued and outstanding
equity interests or other ownership interests in the General
Partner, including through a merger or consolidation of the General
Partner.
Section
4.5
Registration and Transfer of Limited Partner Interests
.
(a)
The General Partner shall keep or cause to be kept on behalf of the
Partnership a register in which, subject to such reasonable
regulations as it may prescribe and subject to the provisions of
Section 4.5(b), the Partnership will provide for the registration
and transfer of Limited Partner Interests. The Transfer Agent
is hereby appointed registrar and transfer agent for the purpose of
registering Common Units and transfers of such Common Units as
herein provided. The Partnership shall not recognize
transfers of Certificates evidencing Limited Partner Interests
unless such transfers are effected in the manner described in this
Section 4.5. Upon surrender of a Certificate for registration of
transfer of any Limited Partner Interests evidenced by a
Certificate, and subject to the provisions of Section 4.5(b), the
appropriate officers of the General Partner on behalf of the
Partnership shall execute and deliver,
23
and in the case of
Common Units, the Transfer Agent shall countersign and deliver, in
the name of the holder or the designated transferee or transferees,
as required pursuant to the holder’s instructions, one or
more new Certificates evidencing the same aggregate number and type
of Limited Partner Interests as was evidenced by the Certificate so
surrendered.
(b)
Except as otherwise provided in Section 4.8, the Partnership shall
not recognize any transfer of Limited Partner Interests until the
Certificates evidencing such Limited Partner Interests are
surrendered for registration of transfer. No charge shall be
imposed by the General Partner for such transfer; provided ,
that as a condition to the issuance of any new Certificate under
this Section 4.5, the General Partner may require the payment of a
sum sufficient to cover any tax or other governmental charge that
may be imposed with respect thereto.
(c)
By acceptance of the transfer of any Limited Partner Interests in
accordance with this Section 4.5 and except as provided in Section
4.9, each transferee of a Limited Partner Interest (including any
nominee holder or an agent or representative acquiring such Limited
Partner Interests for the account of another Person) (i) shall be
admitted to the Partnership as a Limited Partner with respect to
the Limited Partner Interests so transferred to such Person when
any such transfer or admission is reflected in the books and
records of the Partnership, with or without execution of this
Agreement, (ii) shall be deemed to agree to be bound by the terms
of, and shall be deemed to have executed, this Agreement, (iii)
shall become the Record Holder of the Limited Partner Interests so
transferred, (iv) represents that the transferee has the capacity,
power and authority to enter into this Agreement, (v) grants the
powers of attorney set forth in this Agreement and (vi) makes the
consents and waivers contained in this Agreement. The
transfer of any Limited Partner interests and the admission of any
new Limited Partner shall not constitute an amendment to this
Agreement.
(d)
Prior to the conversion of Class B Units into Common Units pursuant
to the terms of Section 5.6, Limited Partners owning Class B Units
may only transfer such Class B Units in accordance with the
repurchase provisions of Section 5.3(b) in connection with the
exercise of the Over-Allotment Option, upon the death of such
Limited Partner to one or more Persons in accordance with state
intestacy laws or as otherwise approved by the General
Partner.
(e)
Subject to (i) the foregoing provisions of this Section 4.5, (ii)
Section 4.3, (iii) Section 4.7, (iv) with respect to any series of
Limited Partner Interests, the provisions of any statement of
designations or amendment to this Agreement establishing such
series, (v) any contractual provisions binding on any Limited
Partner and (vi) provisions of applicable law including the
Securities Act, Limited Partnership Interests shall be freely
transferable.
Section
4.6
Transfer of the General Partner Interest .
(a)
Subject to Section 4.6(c) below, prior to September 30, 2016,
the General Partner shall not transfer all or any part of its
General Partner Interest to a Person unless such transfer (i) has
been approved by the prior written consent or vote of the holders
of at least a majority of the Outstanding Common Units (excluding
Common Units held by the General Partner and its Affiliates) or
(ii) is of all, but not less than all, of its General Partner
Interest to (A) an Affiliate of the General Partner (other than an
individual) or (B) another Person (other
24
than an individual) in
connection with the merger or consolidation of the General Partner
with or into another Person (other than an individual) or the
transfer by the General Partner of all or substantially all of its
assets to another Person (other than an individual).
(b)
Subject to Section 4.6(c) below, on or after September 30,
2016, the General Partner may transfer all or any of its General
Partner Interest without Unitholder approval.
(c)
Notwithstanding anything herein to the contrary, no transfer by the
General Partner of all or any part of its General Partner Interest
to another Person shall be permitted unless (i) the transferee
agrees to assume the rights and duties of the General Partner under
this Agreement and to be bound by the provisions of this Agreement
and (ii) the Partnership receives an Opinion of Counsel that such
transfer would not result in the loss of limited liability of any
Limited Partner or cause the Partnership to be treated as an
association taxable as a corporation or otherwise to be taxed as an
entity for federal income tax purposes (to the extent not already
so treated or taxed). In the case of a transfer pursuant to
and in compliance with this Section 4.6, the transferee or
successor (as the case may be) shall, subject to compliance with
the terms of Section 10.2, be admitted to the Partnership as the
General Partner immediately prior to the transfer of the General
Partner Interest, and the business of the Partnership shall
continue without dissolution.
Section
4.7
Restrictions on Transfers .
(a)
Except as provided in Section 4.7(b) below, but notwithstanding the
other provisions of this Article IV, no transfer of any Partnership
Interests shall be made if such transfer would (i) violate the then
applicable federal or state securities laws or rules and
regulations of the Commission, any state securities commission or
any other governmental authority with jurisdiction over such
transfer, (ii) terminate the existence or qualification of the
Partnership under the laws of the jurisdiction of its formation, or
(iii) cause the Partnership to be treated as an association taxable
as a corporation or otherwise to be taxed as an entity for federal
income tax purposes (to the extent not already so treated or
taxed).
(b)
The General Partner may impose restrictions on the transfer of
Partnership Interests if it receives an Opinion of Counsel that
such restrictions are necessary to avoid a significant risk of the
Partnership becoming taxable as a corporation or otherwise becoming
taxable as an entity for federal income tax purposes. The
General Partner may impose such restrictions by amending this
Agreement; provided, however , that any amendment that would
result in the delisting or suspension of trading of any class of
Limited Partner Interests on the principal National Securities
Exchange on which such class of Limited Partner Interests is then
listed or admitted for trading must be approved, prior to such
amendment being effected, by the holders of at least a majority of
the Outstanding Limited Partner Interests of such class.
(c)
The transfer of a Class B Unit that has converted into a Common
Unit shall be subject to the restrictions imposed by Sections
4.5(d) and 6.4(b).
(d)
Nothing contained in this Article IV, or elsewhere in this
Agreement, shall preclude the settlement of any transactions
involving Partnership Interests entered into through
25
the facilities of any
National Securities Exchange on which such Partnership Interests
are listed or admitted for trading.
(e)
In the event any Partnership Interest is evidenced in certificated
form, each certificate evidencing Partnership Interests shall bear
a conspicuous legend in substantially the following
form:
THE HOLDER OF THIS
SECURITY ACKNOWLEDGES FOR THE BENEFIT OF HILAND HOLDINGS GP, LP
THAT THIS SECURITY MAY NOT BE SOLD, OFFERED, RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED IF SUCH TRANSFER WOULD (A) TERMINATE THE
EXISTENCE OR QUALIFICATION OF HILAND HOLDINGS GP, LP UNDER THE LAWS
OF THE STATE OF DELAWARE, OR (B) CAUSE HILAND HOLDINGS GP, LP TO BE
TREATED AS AN ASSOCIATION TAXABLE AS A CORPORATION OR OTHERWISE TO
BE TAXED AS AN ENTITY FOR FEDERAL INCOME TAX PURPOSES (TO THE
EXTENT NOT ALREADY SO TREATED OR TAXED). HILAND PARTNERS GP
HOLDINGS, LLC, THE GENERAL PARTNER OF HILAND HOLDINGS GP, LP, MAY
IMPOSE ADDITIONAL RESTRICTIONS ON THE TRANSFER OF THIS SECURITY IF
IT RECEIVES AN OPINION OF COUNSEL THAT SUCH RESTRICTIONS ARE
NECESSARY TO AVOID A SIGNIFICANT RISK OF HILAND HOLDINGS GP, LP
BECOMING TAXABLE AS A CORPORATION OR OTHERWISE BECOMING TAXABLE AS
AN ENTITY FOR FEDERAL INCOME TAX PURPOSES. THE RESTRICTIONS SET
FORTH ABOVE SHALL NOT PRECLUDE THE SETTLEMENT OF ANY TRANSACTIONS
INVOLVING THIS SECURITY ENTERED INTO THROUGH THE FACILITIES OF ANY
NATIONAL SECURITIES EXCHANGE ON WHICH THIS SECURITY IS LISTED OR
ADMITTED TO TRADING.
Section
4.8
Citizenship Certificates; Non-citizen Assignees .
(a)
If any Group Member is or becomes subject to any federal, state or
local law or regulation that the General Partner determines would
create a substantial risk of cancellation or forfeiture of any
property in which the Group Member has an interest based on the
nationality, citizenship or other related status of a Limited
Partner, the General Partner may request any Limited Partner to
furnish to the General Partner, within 30 days after receipt of
such request, an executed Citizenship Certification or such other
information concerning his nationality, citizenship or other
related status (or, if the Limited Partner is a nominee holding for
the account of another Person, the nationality, citizenship or
other related status of such Person) as the General Partner may
request. If a Limited Partner fails to furnish to the General
Partner within the aforementioned 30-day period such Citizenship
Certification or other requested information or if upon receipt of
such Citizenship Certification or other requested information the
General Partner determines that a Limited Partner is not an
Eligible Citizen, the Partnership Interests owned by such Limited
Partner shall be subject to redemption in accordance with the
provisions of Section 4.9. In addition, the General Partner
may require that the status of any such Limited Partner be changed
to that of a Non-citizen Assignee and, thereupon, the General
Partner shall be substituted for such Non-citizen Assignee as the
Limited Partner in respect of his Limited Partner
Interests.
26
(b)
The General Partner shall, in exercising voting rights in respect
of Limited Partner Interests held by it on behalf of Non-citizen
Assignees, distribute the votes in the same ratios as the votes of
Partners (including the General Partner) in respect of Limited
Partner Interests other than those of Non-citizen Assignees are
cast, either for, against or abstaining as to the
matter.
(c)
Upon dissolution of the Partnership, a Non-citizen Assignee shall
have no right to receive a distribution in kind pursuant to Section
12.4 but shall be entitled to the cash equivalent thereof, and the
Partnership shall provide cash in exchange for an assignment of the
Non-citizen Assignee’s share of any distribution in
kind. Such payment and assignment shall be treated for
Partnership purposes as a purchase by the Partnership from the
Non-citizen Assignee of his Limited Partner Interest (representing
his right to receive his share of such distribution in
kind).
(d)
At any time after he can and does certify that he has become an
Eligible Citizen, a Non-citizen Assignee may, upon application to
the General Partner, request that with respect to any Limited
Partner Interests of such Non-citizen Assignee not redeemed
pursuant to Section 4.9, such Non-citizen Assignee be admitted as a
Limited Partner, and upon approval of the General Partner, such
Non-citizen Assignee shall be admitted as a Limited Partner and
shall no longer constitute a Non-citizen Assignee and the General
Partner shall cease to be deemed to be the Limited Partner in
respect of the Non-citizen Assignee’s Limited Partner
Interests.
Section
4.9
Redemption of Partnership Interests of Non-citizen Assignees
.
(a)
If at any time a Limited Partner fails to furnish a Citizenship
Certification or other information requested within the 30-day
period specified in Section 4.8(a), or if upon receipt of such
Citizenship Certification or other information the General Partner
determines, with the advice of counsel, that a Limited Partner is
not an Eligible Citizen, the Partnership may, unless the Limited
Partner establishes to the satisfaction of the General Partner that
such Limited Partner is an Eligible Citizen or has transferred his
Partnership Interests to a Person who is an Eligible Citizen and
who furnishes a Citizenship Certification to the General Partner
prior to the date fixed for redemption as provided below, redeem
the Limited Partner Interest of such Limited Partner as
follows:
(i)
The General Partner shall, not later than the 30th day before the
date fixed for redemption, give notice of redemption to the Limited
Partner, at his last address designated on the records of the
Partnership or the Transfer Agent, by registered or certified mail,
postage prepaid. The notice shall be deemed to have been
given when so mailed. The notice shall specify the Redeemable
Interests, the date fixed for redemption, the place of payment,
that payment of the redemption price will be made upon surrender of
the Certificate evidencing the Redeemable Interests and that on and
after the date fixed for redemption no further allocations or
distributions to which the Limited Partner would otherwise be
entitled in respect of the Redeemable Interests will accrue or be
made.
(ii)
The aggregate redemption price for Redeemable Interests shall be an
amount equal to the Current Market Price (the date of determination
of which shall be the date fixed for redemption) of Limited Partner
Interests of the class to be so redeemed
27
multiplied by the
number of Limited Partner Interests of each such class included
among the Redeemable Interests. The redemption price shall be
paid as determined by the General Partner, in cash or by delivery
of a promissory note of the Partnership in the principal amount of
the redemption price, bearing interest at the rate of 5% annually
and payable in three equal annual installments of principal
together with accrued interest, commencing one year after the
redemption date.
(iii)
Upon surrender by or on behalf of the Limited Partner, at the place
specified in the notice of redemption, of the Certificate
evidencing the Redeemable Interests, duly endorsed in blank or
accompanied by an assignment duly executed in blank, the Limited
Partner or his duly authorized representative shall be entitled to
receive the payment therefor.
(iv)
After the redemption date, Redeemable Interests shall no longer
constitute issued and Outstanding Limited Partner
Interests.
(b)
The provisions of this Section 4.9 shall also be applicable to
Limited Partner Interests held by a Limited Partner as nominee of a
Person determined to be other than an Eligible Citizen.
(c)
Nothing in this Section 4.9 shall prevent the recipient of a notice
of redemption from transferring his Limited Partner Interest before
the redemption date if such transfer is otherwise permitted under
this Agreement. Upon receipt of notice of such a transfer,
the General Partner shall withdraw the notice of redemption,
provided the transferee of such Limited Partner Interest certifies
to the satisfaction of the General Partner in a Citizenship
Certification that he is an Eligible Citizen. If the transferee
fails to make such certification, such redemption shall be effected
from the transferee on the original redemption date.
ARTICLE V
CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP
INTERESTS
Section
5.1
Organizational Contributions.
In connection with
the formation of the Partnership under the Delaware Act, the
General Partner made an initial Capital Contribution to the
Partnership in the amount of $0.01, for a 0.001% General Partner
Interest in the Partnership and has been admitted as the General
Partner of the Partnership, and the Organizational Limited Partner
made an initial Capital Contribution to the Partnership in the
amount of $999.99 for a 99.999% Limited Partner Interest in the
Partnership and has been admitted as a Limited Partner of the
Partnership. As of the Closing Date, the interest of the
Organizational Limited Partner shall be redeemed and the Percentage
Interest of the General Partner shall be reduced to zero; and the
initial Capital Contribution of the Organizational Limited Partner
shall thereupon be refunded. 99.999% of any interest or other
profit that may have resulted from the investment or other use of
such initial Capital Contributions shall be allocated and
distributed to the Organizational Limited Partner, and the balance
thereof shall be allocated and distributed to the General
Partner.
28
Section
5.2
Contributions by the General Partner and the Contributing
Parties.
On the Closing
Date and pursuant to the Contribution Agreement: (i) the
Contributing Parties shall contribute to the Partnership, as a
Capital Contribution, (A) the Class B limited liability company
interests in the MLP General Partner, (B) common units representing
limited partner interests in the MLP, (C) subordinated units
representing limited partner interests in the MLP, and (D) all of
the capital stock of Hiland Partners, Inc., as applicable, to the
Partnership in exchange for the right to receive at Closing a
distribution from the Partnership of an amount of $85,400,925 less
the expenses of the Initial Public Offering and related
transactions and an aggregate of 14,349,968 Common Units (and, in
the case of the Initial Class B Holders, an aggregate of 250,032
Class B Units); and (ii) the General Partner shall contribute to
the Partnership, as a Capital Contribution, all of the Class A
limited liability company interests in the MLP General
Partner.
Section
5.3
Contributions by the Underwriters .
(a)
On the Closing Date and pursuant to the Underwriting Agreement,
each Underwriter shall contribute to the Partnership cash in an
amount equal to the Issue Price per Initial Common Unit multiplied
by the number of Common Units specified in the Underwriting
Agreement to be purchased by such Underwriter at the Closing
Date. In exchange for such Capital Contributions by the
Underwriters, the Partnership shall issue Common Units to each
Underwriter on whose behalf such Capital Contribution is made in an
amount equal to the quotient obtained by dividing (i) the cash
contribution to the Partnership by or on behalf of such Underwriter
by (ii) the Issue Price per Initial Common Unit.
(b)
Upon the exercise of the Over-Allotment Option, each Underwriter
shall contribute to the Partnership cash in an amount equal to the
Issue Price per Initial Common Unit, multiplied by the number of
Common Units to be purchased by such Underwriter at the Option
Closing Date. In exchange for such Capital Contributions by
the Underwriters, the Partnership shall issue Common Units to each
Underwriter on whose behalf such Capital Contribution is made in an
amount equal to the quotient obtained by dividing (i) the cash
contributions to the Partnership by or on behalf of such
Underwriter by (ii) the Issue Price per Initial Common Unit.
The Partnership shall use the proceeds from such Capital
Contributions to repurchase pro rata based on their ownership of
Common Units and Class B Units from the Initial Limited Partners
that number of Common Units and Class B Units equal to the number
of Common Units sold to the Underwriters in connection with the
exercise of the Over-Allotment Option.
(c)
Subject to Section 5.1, no Limited Partner Interests will be issued
or issuable as of or at the Closing Date other than (i) the Common
Units issuable pursuant to subparagraph (a) hereof in aggregate
number equal to 7,000,000 Units, (ii) the “ Option
Units ” as such term is used in the Underwriting
Agreement issuable upon exercise of the Over-Allotment Option
pursuant to subparagraph (b) hereof in an aggregate number of up to
1,050,000 additional Units, (iii) the 14,349,968 Common Units
issued to the Initial Limited Partners pursuant to Section 2.1(e)
of the Contribution Agreement, (iv) the 250,032 Class B Units
issued to the Initial Class B Holders pursuant to Section 2.1(e) of
the Contribution Agreement and (v) the 12,000 Common Units issued
to non-employee directors of the General Partner pursuant to the
Long-Term Incentive Plan of the Partnership.
29
Section
5.4
Interest and Withdrawal .
No interest on
Capital Contributions shall be paid by the Partnership. No
Partner shall be entitled to the withdrawal or return of its
Capital Contribution, except to the extent, if any, that
distributions made pursuant to this Agreement or upon termination
of the Partnership may be considered as such by law and then only
to the extent provided for in this Agreement. Except to the
extent expressly provided in this Agreement, no Partner shall have
priority over any other Partner either as to the return of Capital
Contributions or as to profits, losses or distributions. Any
such return shall be a compromise to which all Partners agree
within the meaning of Section 17-502(b) of the Delaware
Act.
Section
5.5
Capital Accounts .
(a)
The Partnership shall maintain for each Partner (or a beneficial
owner of Partnership Interests held by a nominee in any case in
which the nominee has furnished the identity of such owner to the
Partnership in accordance with Section 6031(c) of the Code or any
other method acceptable to the General Partner) owning a
Partnership Interest a separate Capital Account with respect to
such Partnership Interest in accordance with the rules of Treasury
Regulation Section 1.704-1(b)(2)(iv). Such Capital Account
shall be increased by (i) the amount of all Capital Contributions
made to the Partnership with respect to such Partnership Interest
pursuant to this Agreement and (ii) all items of Partnership income
and gain (including income and gain exempt from tax) computed in
accordance with Section 5.5(b) and allocated with respect to such
Partnership Interest pursuant to Section 6.1, and decreased by (x)
the amount of cash or Net Agreed Value of all actual and deemed
distributions of cash or property made with respect to such
Partnership Interest pursuant to this Agreement and (y) all items
of Partnership deduction and loss computed in accordance with
Section 5.5(b) and allocated with respect to such Partnership
Interest pursuant to Section 6.1.
(b)
For purposes of computing the amount of any item of income, gain,
loss or deduction which is to be allocated pursuant to Article VI
and is to be reflected in the Partners’ Capital Accounts, the
determination, recognition and classification of any such item
shall be the same as its determination, recognition and
classification for federal income tax purposes (including any
method of depreciation, cost recovery or amortization used for that
purpose), provided , that:
(i)
Solely for purposes of this Section 5.5, the Partnership shall be
treated as owning directly its proportionate share (as determined
by the General Partner based upon the provisions of the MLP
Agreement) of all property owned by the MLP or any other Subsidiary
that is classified as a partnership for federal income tax
purposes.
(ii)
All fees and other expenses incurred by the Partnership to promote
the sale of (or to sell) a Partnership Interest that can neither be
deducted nor amortized under Section 709 of the Code, if any,
shall, for purposes of Capital Account maintenance, be treated as
an item of deduction at the time such fees and other expenses are
incurred and shall be allocated among the Partners pursuant to
Section 6.1.
30
(iii)
Except as otherwise provided in Treasury Regulation Section
1.704-1(b)(2)(iv)(m), the computation of all items of income, gain,
loss and deduction shall be made without regard to any election
under Section 754 of the Code which may be made by the Partnership
and, as to those items described in Section 705(a)(1)(B) or
705(a)(2)(B) of the Code, without regard to the fact that such
items are not includable in gross income or are neither currently
deductible nor capitalized for federal income tax purposes.
To the extent an adjustment to the adjusted tax basis of any
Partnership asset pursuant to Section 734(b) or 743(b) of the Code
is required, pursuant to Treasury Regulation Section
1.704-1(b)(2)(iv)(m), to be taken into account in determining
Capital Accounts, the amount of such adjustment in the Capital
Accounts shall be treated as an item of gain or loss.
(iv)
Any income, gain, loss or deduction attributable to the taxable
disposition of any Partnership property shall be determined as if
the adjusted basis of such property as of such date of disposition
were equal in amount to the Partnership’s Carrying Value with
respect to such property as of such date.
(v)
In accordance with the requirements of Section 704(b) of the Code,
any deductions for depreciation, cost recovery or amortization
attributable to any Contributed Property shall be determined as if
the adjusted basis of such property on the date it was acquired by
the Partnership were equal to the Agreed Value of such
property. Upon an adjustment pursuant to Section 5.5(d) to
the Carrying Value of any Partnership property subject to
depreciation, cost recovery or amortization, any further deductions
for such depreciation, cost recovery or amortization attributable
to such property shall be determined (A) as if the adjusted basis
of such property were equal to the Carrying Value of such property
immediately following such adjustment and (B) using a method of
depreciation, cost recovery or amortization that the General
Partner may adopt.
(vi)
If the Partnership’s adjusted basis in a depreciable or cost
recovery property is reduced for federal income tax purposes
pursuant to Section 48(q)(1) or 48(q)(3) of the Code, the amount of
such reduction shall, solely for purposes hereof, be deemed to be
an additional depreciation or cost recovery deduction in the year
such property is placed in service and shall be allocated among the
Partners pursuant to Section 6.1. Any restoration of such
basis pursuant to Section 48(q)(2) of the Code shall, to the extent
possible, be allocated in the same manner to the Partners to whom
such deemed deduction was allocated.
(c)
A transferee of a Partnership Interest shall succeed to a pro rata
portion of the Capital Account of the transferor relating to the
Partnership Interest so transferred.
(d)
(i)
In accordance with Treasury Regulation Section
1.704-1(b)(2)(iv)(f), on an issuance of additional Partnership
Interests for cash or Contributed Property, the issuance of
Partnership Interests as consideration for the provision of
services, or the conversion of the General Partner’s Combined
Interest to Common Units pursuant to Section 11.3(b), the Capital
Account of all Partners and the Carrying Value of
31
each Partnership
property immediately prior to such issuance shall be adjusted
upward or downward to reflect any Unrealized Gain or Unrealized
Loss attributable to such Partnership property, as if such
Unrealized Gain or Unrealized Loss had been recognized on an actual
sale of each such property immediately prior to such issuance and
had been allocated to the Partners at such time pursuant to Section
6.1 in the same manner as any item of gain or loss actually
recognized during such period would have been allocated. In
determining such Unrealized Gain or Unrealized Loss, the aggregate
cash amount and fair market value of all Partnership assets
(including cash or cash equivalents) immediately prior to the
issuance of additional Partnership Interests shall be determined by
the General Partner using such method of valuation as it may adopt;
provided, however , that the General Partner, in arriving at
such valuation, must take fully into account the fair market value
of the Partnership Interests of all Partners at such time.
The General Partner shall allocate such aggregate value among the
assets of the Partnership (in such manner as it determines) to
arrive at a fair market value for individual properties.
(ii)
In accordance with Treasury Regulation Section
1.704-1(b)(2)(iv)(f), immediately prior to any actual or deemed
distribution to a Partner of any Partnership property (other than a
distribution of cash that is not in redemption or retirement of a
Partnership Interest), the Capital Accounts of all Partners and the
Carrying Value of all Partnership property shall be adjusted upward
or downward to reflect any Unrealized Gain or Unrealized Loss
attributable to such Partnership property, as if such Unrealized
Gain or Unrealized Loss had been recognized in a sale of such
property immediately prior to such distribution for an amount equal
to its fair market value, and had been allocated to the Partners,
at such time, pursuant to Section 6.1 in the same manner as any
item of gain or loss actually recognized during such period would
have been allocated. In determining such Unrealized Gain or
Unrealized Loss the aggregate cash amount and fair market value of
all Partnership assets (including, without limitation, cash or cash
equivalents) immediately prior to a distribution shall (A) in the
case of an actual distribution that is not made pursuant to Section
12.4 or in the case of a deemed distribution, be determined and
allocated in the same manner as that provided in Section 5.5(d)(i)
or (B) in the case of a liquidating distribution pursuant to
Section 12.4, be determined and allocated by the Liquidator using
such method of valuation as it may adopt.
Section
5.6
Conversion of the Class B Units.
(a)
Upon written notice to the General Partner (a “ Conversion
Notice ”), the Initial Class B Holders will have the
right to require the Partnership to convert:
(i)
up to one-half of the Class B Units held by each such Initial Class
B Holder on or after February 15, 2007;
(ii)
all or any portion of the Class B Units held by each such Initial
Class B Holder on or after February 15, 2008;
32
(iii)
upon the occurrence of a Termination Event in respect of any
Initial Class B Holder, all or any portion of the Class B Units
held by such Initial Class B Holder; and
(iv)
upon a Change of Control, all or any portion of the Class B Units
held by any Initial Class B Holder who has remained continuously
employed by the General Partner or its Affiliates,
into Common Units on a
one-for-one basis.
(b)
Upon election by any Initial Class B Holder to cause the conversion
of Class B Units in accordance with this Section 5.6, each
converting holder shall deliver the Conversion Notice and the
Certificates representing such Class B Units to the General Partner
in proper transfer form. Upon receipt of such Conversion
Notice and Certificate, the General Partner shall issue a
Certificate representing the Common Units issuable upon
conversion. Each Class B Unit shall be cancelled by the
General Partner upon its conversion.
(c)
A Class B Unit that has converted into a Common Unit pursuant to
this Section 5.6 shall be subject to the provisions of Section
6.4(b).
(d)
The issuance or delivery of Certificates for Common Units upon the
conversion of Class B Units will be made without charge to the
converting holder of Class B Units for such Certificates and such
Certificates shall be issued or delivered in the respective names
of, or in such names as may be directed by, the holders of the
Class B Units converted; provided, however , that the
Partnership shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and
delivery of any such Certificate in a name other than that of the
holder of the Class B Units converted, and the Partnership shall
not be required to issue or deliver such Certificates unless or
until the Persons requesting the issuance or delivery thereof shall
have paid to the Partnership the amount of such tax or shall have
established to the reasonable satisfaction of the Partnership that
such tax has been paid.
(e)
If an Initial Class B Holder
