AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF EMERGENCY MEDICAL SERVICES L.P

Exhibit 3.7

AMENDED AND RESTATED

AGREEMENT OF LIMITED PARTNERSHIP

OF

EMERGENCY MEDICAL SERVICES L.P.

This Amended and Restated Agreement of Limited Partnership is entered into as of December 20, 2005, effective at the Effective Time, by and among Emergency Medical Services Corporation, a Delaware corporation as the general partner (the “GENERAL PARTNER”), and the Persons listed on Schedule A attached hereto as limited partners.

NOW, THEREFORE, in consideration of the premises, the parties do hereby agree as follows:

1. Certain Definitions.

1.1 DEFINITIONS. As used herein, the following terms shall have the following respective meanings:

“ACT” means the Delaware Revised Uniform Limited Partnership Act.

“ADJUSTED CAPITAL ACCOUNT” means, with respect to any Partner such Partner’s Capital Account, increased for the amount such Partner is deemed obligated to restore pursuant to (a) the penultimate sentences of Regulations Section 1.704-2(g)(l) and 1.704-2(i)(5) and (b) Regulations Sections 1.704-1(b)(2)(ii)(c), as of the end of the Company’s Fiscal Year or other applicable period, and reduced for the items described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).

“AFFILIATE” means, with respect to any Person, any Person directly or indirectly controlled by or under common control with such Person. For purposes of this definition, “CONTROL”, when used with respect to any Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise. “CONTROLLED” has the meaning correlative to the foregoing. For purposes of this Agreement, no member of the Initial Investor Group shall be deemed to be an “AFFILIATE” of the Company.

“AGREEMENT” means this Amended and Restated Agreement of Limited Partnership, as it may be amended, supplemented or restated from time to time.

“BOARD OF DIRECTORS” means the board of directors of the Company.

“CAPITAL ACCOUNTS” has the meaning set forth in Section 4.2.

“CAPITAL CONTRIBUTIONS” means the money and property contributed by the Partners to the Partnership pursuant to the provisions of Article 3 of this Agreement.

“CERTIFICATE” means the Certificate of Limited Partnership of the Partnership, as amended from time to time. Unless the context requires otherwise, any reference to the “CERTIFICATE” shall be to the Certificate as the same shall be in effect at the time to which such reference relates.

“CODE” means the Internal Revenue Code of 1986, as amended from time to time, including the corresponding or analogous provisions of any successor law.

“COMPANY” means Emergency Medical Services Corporation and its successors.

“DEPRECIATION” means, for each Fiscal Year or other period, an amount equal to the depreciation, amortization or other cost recovery deduction allowed or allowable for federal income tax purposes with respect to an asset for such Fiscal Year; provided, however, that, except as otherwise provided in Regulations Section 1.704-2, if the Gross Asset Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such Fiscal Year or other period, Depreciation shall be an amount which bears the same ratio to such beginning Gross Asset Value as the federal income tax depreciation, amortization or other cost recovery deduction for such Fiscal Year or other period bears to such beginning adjusted tax basis; provided, further, that, if the adjusted basis for federal income tax purposes of an asset at the beginning of such Fiscal Year or other period is zero, Depreciation shall be determined with reference to such beginning Gross Asset Value using any reasonable method selected by the General Partner; and provided further, that, with respect to any asset to which the remedial allocation method is applied pursuant to Section 6.6, Depreciation with respect to such asset shall be calculated in accordance with Regulations Section 1.704-3(d)(2).

“DIVIDEND TAX RATE” means the highest marginal combined federal and state income tax rate imposed on dividends of corporations resident in the state in which the Company’s principal office is located, calculated taking into account any available dividends received deduction under Section 243 of the Code and the deductibility of state and local income taxes for federal income tax purposes.

“EFFECTIVE TIME” means the time immediately prior to the time that the Company issues and sells its Class A Common Stock pursuant to the underwriting agreement for its initial public offering.

“EXCHANGEABLE UNIT PROVISIONS” means the rights, privileges, restrictions and conditions of the LP Exchangeable Units set forth in Exhibit I to this Agreement.

“FEDERAL”, unless otherwise specified, refers to the United States.

“FISCAL YEAR” means (a) the period commencing on the date of the formation of the Partnership and ending on December 31, 2005 and (b) any subsequent 12-month period commencing on January 1.

“GAINS TAX RATE” means the highest marginal combined federal and state income tax rate imposed on long-term capital gains of corporations resident in the state in which the Company’s principal office is located, calculated taking into account the deductibility of state and local income taxes for federal income tax purposes.

“GENERAL PARTNER” means the Company in its capacity as the general partner of the Partnership, or its successor as general partner of the Partnership.

“GENERAL PARTNER INTEREST” means the Partnership Interest held by the General Partner, in its capacity as General Partner. The General Partner Interest may be expressed as a number of Units.

“GP DIVIDEND ALLOCATION” means a fraction of which the numerator is the GP Percentage and the denominator is the excess of (a) the sum of (i) one and (ii) the product of (A) the Dividend Tax Rate and (B) the GP Percentage over (b) the Dividend Tax Rate.

“GP GAINS ALLOCATION” means a fraction of which the numerator is the GP Percentage and the denominator is the excess of (a) the sum of (i) one and (ii) the product of (A) the Gains Tax Rate and (B) the GP Percentage over (b) the Gains Tax Rate.

“GP INCOME ALLOCATION” means a fraction of which the numerator is the GP Percentage and the denominator is the excess of (a) the sum of (i) one and (ii) the product of (A) the Income Tax Rate and (B) the GP Percentage over (b) the Income Tax Rate.

“GP PERCENTAGE” means the percentage of total Units that are GP Units or GPL Units.

 

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“GP UNITS” has the meaning given to that term in Section 3.2.

“GPL UNITS” has the meaning given to that term in Section 4.3(a).

“GROSS ASSET VALUE” means, with respect to any asset of the Partnership, such asset’s adjusted basis for federal income tax purposes, except as follows:

(a) the initial Gross Asset Value of any asset contributed by a Partner to the Partnership shall be the gross fair market value of such asset (computed without taking Section 7701(g) of the Code into account), without reduction for liabilities, as determined by the contributing Partner and the Partnership;

(b) if the General Partner reasonably determines that an adjustment is necessary or appropriate to reflect the relative economic interests of the Partners, the Gross Asset Values of all Partnership assets shall be adjusted in accordance with Regulations Sections 1.704-1(b)(2)(iv)(f) and (g) to equal their respective gross fair market values, without reduction for liabilities, as reasonably determined by the General Partner, as of the following times:

(i) a Capital Contribution (other than a de minimis Capital Contribution) to the Partnership by a new or existing Partner as consideration for Units; or

(ii) the distribution by the Partnership to a Partner of more than a de minimis amount of Partnership assets as consideration for the redemption of an interest in the Partnership; or

(iii) the liquidation of the Partnership within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g); or

(iv) the grant of more than a de minimis number of Units as consideration for the provision of services to or for the benefit of the Partnership;

(c) the Gross Asset Values of Partnership assets distributed to any Partner shall be the gross fair market values of such assets (computed without taking Section 7701(g) of the Code into account) without reduction for liabilities, as reasonably determined by the General Partner as of the date of distribution; and

(d) the Gross Asset Values of Partnership assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Sections 734(b) or 743(b) of the Code, but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Section 1.704-1(b)(2)(iv)(m) of the Regulations; provided, however, that Gross Asset Values shall not be adjusted pursuant to this paragraph (iv) to the extent that the General Partner reasonably determines that an adjustment pursuant to paragraph (ii) above is necessary or appropriate in connection with a transaction that would otherwise result in an adjustment pursuant to this paragraph (d).

At all times, Gross Asset Values shall be adjusted by any Depreciation taken into account with respect to the Partnership’s assets for purposes of computing Net Profits and Net Losses.

“INCOME TAX RATE” means the highest marginal combined federal and state income tax rate imposed on income (other than capital gains and

 

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dividends) of corporations resident in the state in which the Company’s principal office is located, calculated taking into account the deductibility of state and local income taxes for federal income tax purposes.

“INITIAL INVESTOR GROUP” has the meaning set forth in the Company’s Certificate of Incorporation, as in effect at the Effective Time.

“LIMITED PARTNERS” means (a) those Persons listed on Schedule A attached hereto and (b) any transferee thereof or other Person admitted as a limited partner pursuant to the terms of this Agreement. For the avoidance of doubt, the General Partner may also be a Limited Partner.

“LIMITED PARTNER INTEREST” means a Partnership Interest of a Limited Partner in the Partnership representing a fractional part of the Partnership Interests of all Partners and includes any and all benefits to which the holder of such a Partnership Interest may be entitled, as provided in this Agreement, together with all obligations of such Person to comply with the terms and provisions of this Agreement. A Limited Partner Interest may be expressed as a number of Units.

“LP DIVIDEND ALLOCATION” means one minus the GP Dividend Allocation.

“LP EXCHANGEABLE UNITS” means all Units of the Partnership other than GP Units and GPL Units. For the avoidance of doubt, the LP Exchangeable Units are the Units designated Class A Units immediately prior to the Effective Time and for all purposes represent the same continuing Partnership Interests before and after the Effective Time.

“LPE PARTNERS” means the holders of LP Exchangeable Units. For the avoidance of doubt, the General Partner, in its capacity as a Limited Partner, is not an LPE Partner.

“LP GAINS ALLOCATION” means one minus the GP Gains Allocation.

“LP INCOME ALLOCATION” means one minus the GP Income Allocation.

“MERGER” has the meaning set forth in Section 14.7(a).

“NET PROFITS” AND “NET LOSSES” mean, for each Fiscal Year of the Partnership or other applicable period, an amount equal to the Partnership’s taxable income or loss for such year or period, as determined for federal income tax purposes, and computed in accordance with Section 703(a) of the Code (for this purpose, all items of income, gain, loss or deduction required to be separately stated pursuant to Section 703(a)(1) of the Code shall be included in taxable income or loss) with the following adjustments:

(a) any income of the Partnership that is exempt from federal income tax and not otherwise taken into account in computing Net Profits or Net Losses pursuant to this definition shall be treated as an item of gross income in determining taxable income or loss;

(b) in the event an adjustment to the Gross Asset Value of a property which requires that the Capital Accounts be adjusted pursuant to Regulations Sections 1.704-1(b)(2)(iv)(e), (f), (g) and (m),

 

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the amount of such adjustment shall be taken into account as gain or loss from the disposition of the property for purposes of computing Net Profits or Net Losses;

(c) gain or loss resulting from the disposition of a property shall be computed by reference to the Gross Asset Value of the property, notwithstanding that the adjusted tax basis of the property differs from its Gross Asset Value;

(d) in lieu of the depreciation, amortization and other cost recovery deductions, there shall be taken into account Depreciation in computing such taxable income or loss;

(e) to the extent an adjustment to the adjusted tax basis of any Partnership asset pursuant to Code Section 734(b) or Code Section 743(b) is required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining Capital Accounts as a result of a distribution other than in complete liquidation of a Partner’s interest in the Partnership, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases the basis of the asset) from the disposition of the asset and shall be taken into account for purposes of computing Net Profits or Net Losses;

(f) by treating as a deductible expense any expenditure of the Partnership described in Section 705(a)(2)(B) of the Code (or which is treated as a Section 705(a)(2)(B) expenditure pursuant to Regulations Section 1.704-1(b)(2)(iv)(i)) and not otherwise taken into account in computing Net Profits or Net Losses, including amounts paid or incurred to organize the Partnership (unless an election is made pursuant to Section 709(b) of the Code) or to promote the sale of interests in the Partnership) and by treating deductions for any losses incurred in connection with the sale or exchange of Partnership property disallowed pursuant to Section 267(a)(1) or 707(b) of the Code as expenditures described in Section 705(a)(2)(B) of the Code; and

(g) notwithstanding any other provision of this definition, any items which are specially allocated pursuant to Article 6 shall not be taken into account in computing Net Profits or Net Losses.

“ORIGINAL PARTNERSHIP AGREEMENT” means the Agreement of Limited Partnership of the Partnership effective as of February 10, 2005, as amended from time to time and in effect at the Effective Time.

“OFFER” has the meaning set forth in Section 14.6(a).

“PARTNERS” shall mean the General Partner and the Limited Partners, collectively, and “PARTNER” means a General Partner or a Limited Partner as the context shall require.

“PARTNERSHIP” means the limited partnership formed under the Act and pursuant to the Original Agreement, as it may be amended, supplemented and/or restated, including the amendment and restatement effected by this Agreement, and any successor thereto.

 

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“PARTNERSHIP INTEREST” means an ownership interest in the Partnership representing a Capital Contribution by either a Limited Partner or the General Partner and includes any and all benefits to which the holder of such a Partnership Interest may be entitled as provided in this Agreement, together with all obligations of such Person to comply with the terms and provisions of this Agreement. A Partnership Interest may be expressed as a number of Units.

“PERCENTAGE INTERESTS” has the meaning set forth in Section 4.1.

“PERSON” means any natural person, corporation, partnership, joint venture, trust, association or other business or legal entity.

“REGULATIONS” means the Treasury Regulations promulgated under the Code, as amended from time to time, including the corresponding provisions of any successor regulations.

“SECTION 368 TRANSACTION” has the meaning set forth in Section 14.7(c).

“SUCCESSOR” has the meaning set forth in Article 10 of Exhibit I.

“TRANSFER” has the meaning set forth in Section 10.1.

“UNIT” means a fractional, undivided share of the Partnership Interests of all Partners issued pursuant to this Agreement. The number of Units outstanding and the Percentage Interest in the Partnership represented by such Units are set forth in Schedule A attached hereto, as such Schedule may be amended from time to time. The Units are uncertificated securities, but the General Partner may determine at any time that the ownership of Units shall be evidenced by such form of certificate for Units as the General Partner adopts from time to time. Unless otherwise indicated, a reference to Units shall be to GP Units, GPL Units and LP Exchangeable Units.

1.2 EXHIBIT I. Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in Exhibit I. Exhibit I is an integral part of this Agreement.

2. FORMATION, PURPOSE, TERM.

2.1 FORMATION. The parties hereby confirm the formation of the Partnership under the name Emergency Medical Services L.P., in accordance with the Act and the filing of the Certificate with the Secretary of State of the State of Delaware on December 29, 2004.

2.2 PURPOSE. The purpose of the Partnership is to engage in any activities permitted under the Act, including, without limitation, to own and invest in real estate and marketable securities.

2.3 PRINCIPAL OFFICE. The principal office of the Partnership shall be located at such place as the General Partner may determine. The General Partner shall give notice to the Limited Partners promptly of the location of the principal office of the Partnership and of any change thereof.

 

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2.4 REGISTERED AGENT. The registered agent of the Partnership in Delaware shall be Corporation Service Company.

2.5 NAMES. The name of the Partnership is Emergency Medical Services L.P. The Partnership’s business may be conducted under any other name or names deemed advisable by the General Partner, including the name of the General Partner, the Company or any of their Affiliates. The words “Limited Partnership,” “L.P.,” “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 in its sole discretion 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.

2.6 POWER OF ATTORNEY.

(a) Each Limited Partner hereby constitutes and appoints the General Partner and its authorized officers and attorneys-in-fact and each of those acting singly, in each case with full power of substitution, as its true and lawful agent and attorney-in-fact, with full power and authority in its 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, without limitation, this Agreement and the Certificate of Limited Partnership and all amendments or restatements thereof) that the General Partner deems appropriate or necessary 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 or plans to conduct business or own property; (B) all instruments that the General Partner deems appropriate or necessary to reflect any amendment, change, modification or restatement of this Agreement in accordance with its terms; (C) all conveyances and other instruments or documents that the General Partner deems appropriate or necessary to reflect the dissolution and liquidation of the Partnership pursuant to the terms of this Agreement, including, without limitation, a certificate of cancellation; (D) all instruments relating to the admission, withdrawal, removal or substitution of any Partner pursuant to this Agreement; and (E) all certificates, documents and other instruments relating to the determination of the rights, preferences and privileges of Partnership Interests; and

(ii) execute, swear to, seal, acknowledge and file all ballots, consents, approvals, waivers, certificates and other instruments appropriate or necessary, in the sole discretion of the General Partner to make, evidence, give, confirm or ratify any vote, consent, approval, agreement or other action which is made or given by the Partners hereunder or is consistent with the terms of this Agreement or appropriate or necessary, in the sole discretion of the General Partner, to effectuate the terms or intent of this Agreement.

 

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Nothing contained herein shall be construed as authorizing the General Partner to amend this Agreement except in accordance with Article 13 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, in recognition of the fact that each of the Partners will be relying upon the power of the General Partner to act as contemplated by this Agreement in any filing or other action by it on behalf of the Partnership, and it shall survive and not be affected by the subsequent incapacity of any Limited Partner and the transfer of all or any portion of such Limited Partner’s Units and shall extend to such Limited Partner’s heirs, successors, assigns and personal representative.

2.7 TERM. The Partnership commenced on the date of the filing of the original Certificate of Limited Partnership with the office of the Secretary of State of Delaware and shall terminate as herein provided.

3. CONTRIBUTIONS.

3.1 INITIAL CONTRIBUTIONS AND OWNERSHIP GIVING EFFECT TO INITIAL PUBLIC OFFERING.

(a) Prior to the date hereof, the Partners have made the contributions to the Partnership set forth on Schedule A to the Original Agreement.

(b) Schedule A attached hereto sets forth the number of Units outstanding as of the Effective Time, and then giving effect to the Company’s issuance and sale of Class A Common Stock in its initial public offering and the contribution of the net proceeds thereof to the Partnership.

3.2 GENERAL PARTNER INTEREST. The 20 Units held by the General Partner immediately prior to the Effective Time (including any Units issued with respect thereto in connection with any stock split effected by the Company) shall be deemed to be the “GP UNITS” and shall be the General Partnership Interest. All other Units held by the Company shall be deemed to be Limited Partner Interests and shall be held by the General Partner in its capacity as a Limited Partner in the Partnership.

3.3 ISSUANCES OF ADDITIONAL INTERESTS.

(a) In connection with the General Partner’s contribution of property to the Partnership or in accordance with the provisions of Exhibit I, the General Partner is hereby authorized to cause the Partnership from time to time to issue to the Partners (including the General Partner and its Affiliates) additional Units or other Partnership Interests in one or more classes, or one or more series of any such classes, with such designations, preferences and relative, participating, optional or other special rights, powers and duties, including rights, powers and duties senior to the Limited Partner

 

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Interests outstanding at the Effective Time, all as shall be determined by the General Partner in its business judgment, including, without limitation, (i) the allocations of items of Partnership income, gain, loss, deduction and credit to each such class or series of Partnership Interests; (ii) the right of each such class or series of Partnership Interests to share in Partnership distributions; and (iii) the rights of each such class or series of Partnership Interests upon dissolution and liquidation of the Partnership; provided, that no such additional Units or other Partnership Interests shall be issued to the General Partner unless either:

(i) (A)(1) the additional Partnership Interests are issued in connection with the issuance only of Common Stock, and only GPL Units are issued to the General Partner in a number equal to the number of shares of Common Stock issued by the Company, or (2) the additional Partnership Interests are issued in connection with the grant, award of issuance of Preferred Stock or other equity interests by the Company, which Preferred Stock or other equity interests have designations, preferences and other rights such that the economic interests attributable to such Preferred Stock or other equity interests are equivalent to the designations, preferences and other rights of the additional Partnership Interests issued to the General Partner in accordance with this Section 3.2(a), and (B) the Company shall make a Capital Contribution to the Partnership in an amount equal to the proceeds raised in connection with such issuance, or

(ii) the additional Partnership Interests are issued to all Partners in proportion to their respective Percentage Interests.

In the event that the Partnership issues Partnership Interests pursuant to this Section 3.3(a), the General Partner shall make such revisions to this Agreement (without any requirement of receiving approval of the Limited Partners) including but not limited to the revisions described in Section 5.4, as it deems necessary to reflect the issuance of such additional Partnership Interests and the special rights, powers and duties associated therewith. Unless specifically set forth otherwise by the General Partner, any Partnership Interest issued after the Effective Time shall have the same rights, powers and duties as the Partnership Interests issued on the Effective Time.

(b) From and after the Effective Time, the Company shall not issue any additional Common Stock (other than Common Stock issued to Limited Partners pursuant to Exhibit I), or rights, options, warrants or convertible or exchangeable securities containing the right to subscribe for or purchase Common Stock (collectively, “NEW SECURITIES”), other than to all holders of Common Stock under circumstances in which the provisions of Exhibit I are applicable to the LP Exchangeable Units, unless:

(i) the General Partner shall cause the Partnership to issue to the Company Partnership Interests or rights, options, warrants or convertible or exchangeable securities of the Partnership having designations, preferences and other rights, all such that the economic interests are equivalent to those of the New Securities; and

 

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(ii) the Company contributes to the Partnership the proceeds from the issuance of such New Securities and from the exercise of rights contained in such New Securities.

Without limiting the foregoing, the Company is expressly authorized to issue New Securities for no tangible value or for less than fair market value, and the General Partner is expressly authorized to cause the Partnership to issue to the Company corresponding Partnership Interests, so long as (A) the General Partner concludes in good faith that such issuance is in the interests of the Company and Partnership (for example, and not by way of limitation, the issuance of Common Stock and corresponding GPL Units pursuant to an employee stock purchase plan providing for employee grants or purchases of Common Stock or employee stock options that have an exercise price that is less than the fair market value of the Common Stock, either at the time of issuance or at the time of exercise); and (B) the Company contributes all proceeds, if any, from such issuance and exercise to the Partnership.

For the avoidance of doubt, a GPL Unit is deemed to have such designations, preferences and other rights such that the economic interests of a GPL Unit are equivalent to a share of Common Stock, and for each New Security issued by the Company that consists of a share of Common Stock the General Partner shall cause the Partnership to issue to the Company one GPL Unit, provided, that the Company has made the contributions to the Partnership contemplated by clause (ii).

(c) The issuance by the Company of Preferred Stock, Common Stock or other equity interests shall in all events be subject to the provisions of Article 14 and Exhibit I.

3.4 CONTRIBUTION OF PROCEEDS OF ISSUANCE OF CAPITAL STOCK. In connection with the initial public offering of Common Stock by the Company and any other issuance of New Securities pursuant to Section 3.3, the Company shall contribute to the Partnership any proceeds (or a portion thereof) raised in connection with such issuance, provided, that if the proceeds actually received by the Company are less than the gross proceeds of such issuance as a result of any underwriter’s discount or other expenses paid or incurred in connection with such issuance, then the Company shall be deemed to have made a Capital Contribution to the Partnership in the amount equal to the sum of the net proceeds of such issuance plus the amount of such underwriter’s discount and other expenses paid by the Company (which discount and expense shall be treated as an expense for the benefit of the Partnership for purposes of Section 8.3). In the case of employee acquisitions of New Securities at a discount from fair market value or for no value in connection with a grant of New Securities, the amount of such discount representing compensation to the employee, as determined by the General Partner, shall be treated as an expense of the issuance of such New Securities.

3.5 ADDITIONAL CONTRIBUTIONS. Except as provided in Section 3.4, no Partner shall be required to make any additional contributions to the capital of the Partnership. Nothing contained in this Section 3.5 shall be deemed to limit the obligations of the General Partner in respect of liabilities

 

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of the Partnership under this Agreement or under the Act. With the consent of the General Partner, any Partner may make an additional contribution to the Partnership.

4. PERCENTAGE INTERESTS; CAPITAL ACCOUNTS; UNITS.

4.1 PERCENTAGE INTERESTS. The Percentage Interest of each Partner means its interest in the Partnership as determined by dividing the number of Units owned by such Partner by the total number of Units then outstanding.

4.2 CAPITAL ACCOUNTS. The Partnership shall determine and maintain a “Capital Account” for each Partner throughout the full term of the Partnership in accordance with the provisions of Regulations Section 1.704-1(b)(2)(iv), as such regulation may be amended from time to time. Without limiting the foregoing, the following provisions shall apply:

(a) The Capital Account of each Partner shall be increased by (i) the amount of such Partner’s cash contributions and the initial Gross Asset Value of property contributed to the Partnership by such Partner (net of liabilities securing such contributed property that the Partnership is considered to assume or take subject to under Section 752 of the Code), (ii) such Partner’s share of the Partnership’s Net Profits, and (iii) the amount of any Partnership liabilities that are assumed by such Partner other than liabilities described in Section 4.2(a)(i).

(b) The Capital Account of each Partner shall be decreased by (i) the amount of cash distributions to such Partner and the Gross Asset Value of property distributed to such Partner (net of liabilities assumed by such Partner and liabilities to which such distributed property is subject), (ii) such Partner’s share of the Partnership’s Net Losses, and (iii) the amount of any liabilities of such Partner that are assumed by the Partnership other than liabilities described in Section 4.2(b)(i).

(c) A Partner who has more than one interest in the Partnership shall have a single Capital Account that reflects all of such interests, regardless of the class of interests owned by such Partner (e.g., general or limited) and regardless of the time or manner in which such interests are acquired.

(d) Upon the transfer by a Partner of Units (i) if such transfer does not cause a termination of the Partnership within the meaning of Section 708(b)(1)(B) of the Code, the Capital Account of the transferor Partner that is attributable to the transferred interest will be carried over to the transferee Partner and, if the Partnership has a Section 754 election in effect, the Capital Account will not be adjusted to reflect any adjustment under Section 743 of the Code; or (ii) if such transfer causes a termination of the Partnership within the meaning of Code Section 708(b)(1)(B), the income tax consequences of such termination shall be governed by the relevant provisions of Subchapter K of Chapter 1 of the Code and the Regulations promulgated thereunder, and the initial Capital Accounts of the Partners in the Partnership resulting

 

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from such termination (which for all other purposes continues to be the Partnership) shall be determined in accordance with Regulation Sections 1.704-1(b)(2)(iv)(d), (e), (f), (g) and (l) under Section 704(b) of the Code and thereafter in accordance with this Section 4.2.

4.3 UNITS.

(a) The interests of the Limited Partners in the Partnership shall be in the form of Units issued by the Partnership, which Units shall represent an individual undivided interest in the rights of all Partners in capital, profits, losses and distributions of or from the Partnership. Unless otherwise designated, all Units issued to the General Partner and representing General Partner Interests shall be “GP Units,” all Units issued to the General Partner or its Affiliates and representing Limited Partnership Interests shall be “GPL Units” and all other Units shall be LP Exchangeable Units.

For the avoidance of doubt, any Units formerly designated Class B Units or LP Exchangeable Units acquired by the Company, the General Partner or their respective Affiliates, in connection with the Company’s initial public offering, as contemplated by Exhibit I or otherwise, shall be deemed to have been re-designated as GPL Units immediately upon such acquisition, and none of such Persons shall hold LP Exchangeable Units.

(b) The Units shall have the rights to distributions and allocations as set forth in Articles 5 and 6 and the LP Exchangeable Units shall have the additional rights, privileges, restrictions and conditions as set forth in Exhibit I to this Agreement.

5. DISTRIBUTIONS.

5.1 DISTRIBUTIONS. Distributions by the Partnership to the Partners shall be made at the times and in the aggregate amounts determined by the General Partner in its sole discretion and shall be made as follows:

(a) A portion equal to the LP Dividend Allocation multiplied by amounts that are treated, for federal income tax purposes, as dividends received by the Partnership shall be distributed to the LPE Partners in proportion to their respective Percentage Interests and a portion equal to the GP Dividend Allocation multiplied by such amount shall be distributed to the General Partner.

(b) A portion equal to the LP Gains Allocation multiplied by amounts that are treated, for federal income tax purposes, as long-term capital gains received by the Partnership shall be distributed to the LPE Partners in proportion to their respective Percentage Interests and a portion equal to the GP Gains Allocation multiplied by such amount shall be distributed to the General Partner.

(c) Subject to the provisions of Section 5.1(e), any amounts that are treated, for federal income tax purposes, as a return of capital and not as income or gain shall be distributed to the Partners in proportion to their respective Percentage Interests.

 

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(d) A portion equal to the LP Income Allocation multiplied by amounts that, other than those described in Section 5.1(a), 5.1(b) and 5.1(c), are to be distributed to the Partners shall be distributed to the LPE Partners in proportion to their respective Percentage Interests and a portion equal to the GP Income Allocation multiplied by such amount shall be distributed to the General Partner.

(e) In the event of the liquidation (subject to Section 5.2), dissolution or winding-up of the Partnership, the Partnership shall distribute to the LPE Partners only the Liquidation Amount as provided in Section 4.1 of Exhibit I.

5.2 CAPITAL ACCOUNT LIMITATION; LIQUIDATION. Upon the liquidation of the Partnership or of any Partner’s interest in the Partnership (as both are defined in Section 5.3), liquidation proceeds, if any, shall be distributed to the extent of and in proportion to each Partner’s positive Capital Account balance within the meaning of Regulations Section 1.704-1(b)(2)(ii)(b), after giving effect to all allocations to such Partner under Article 6, and the allocation of deemed gain or loss described in clause (b) of the definition of “Net Profits” and “Net Losses” set forth in Article 1.

5.3 CERTAIN DEFINITIONS. For purposes of this Agreement, (a) the term “liquidation of the Partnership” shall mean either (i) a termination of the Partnership, which shall be deemed to occur on the date upon which the Partnership ceases to be a going concern and is continued in existence solely to wind up its affairs, or (ii) a termination of the Partnership pursuant to Section 708(b)(1) of the Code; and (b) the term “liquidation of a Partner’s interest in the Partnership” shall mean the termination of the Partner’s entire interest in the Partnership effected by a distribution, or a series of distributions, by the Partnership to the Partner in redemption or cancellation of such Partner’s Units or, in the case of the General Partner, interest in the Partnership.

5.4 REVISIONS TO REFLECT ISSUANCE OF ADDITIONAL PARTNERSHIP INTERESTS. In the event that the Partnership issues additional Partnership Interests to the General Partner or any Additional Limited Partner pursuant to Article 4, or if any GPL Units are held by a Person other than the General Partner, the General Partner shall make such revisions to this Article 5 (and corresponding revisions to Article 6) as it deems necessary to reflect the issuance of such additional Partnership Interests and any special rights, duties or powers with respect thereto or to reflect distributions and allocations attributable to GPL Units to Persons other than the General Partner.

5.5 NEW TAX GUIDANCE. Notwithstanding anything to the contrary contained in this Agreement, the General Partner is hereby authorized to amend this Agreement, in its sole discretion, to ensure that this Agreement complies with (a) any rulings, regulations, notices, announcements or other guidance regarding compensatory partnership interests issued after the Effective Time (“NEW TAX GUIDANCE”) and (b) any elections the General Partner determines to be necessary or advisable in respect of any such New Tax Guidance. Any such amendment may include, without limitation, (i) a provision authorizing the

 

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General Partner, in its sole discretion, to make any election under the New Tax Guidance, (ii) an agreement by the Partnership and all of the Partners agree to comply with the requirements of the New Tax Guidance and any election made by the General Partner with respect thereto, and (c) an amendment to the allocation provisions contained in Article 6 so that such provisions comply with the New Tax Guidance and any election made by the General Partner with respect thereto, including, without limitation, a provision requiring “forfeiture allocations” as appropriate. Any such amendments to this Agreement shall be binding upon all Partners.

6. ALLOCATIONS.

6.1 GENERAL ALLOCATIONS. Except as provided in Sections 6.2, 6.3 and 6.4, Net Profits, Net Losses and credits shall be allocated among the Partners as follows:

(a) A portion of such Net Profits equal to the LP Dividend Allocation multiplied by amounts that are treated, for federal income tax purposes, as dividends received by the Partnership shall be allocated to the LPE Partners in proportion to their respective Percentage Interests and a portion equal to the GP Dividend Allocation multiplied by such amount shall be allocated to the General Partner.

(b) A portion of such Net Profits or Net Losses equal to the LP Gains Allocation multiplied by amounts that are treated, for federal income tax purposes, as long-term capital gains or losses, as the case may be, realized by the Partnership shall be allocated to the LPE Partners in proportion to their respective Percentage Interests and a portion equal to the GP Gains Allocation multiplied by such amount shall be allocated to the General Partner.

(c) A portion of such Net Profits, Net Losses or credits equal to the LP Income Allocation multiplied by amounts that, other than those described in Sections 5.1(a) and 5.1(b), shall be allocated to the LPE Partners in proportion to their respective Percentage Interests and a portion equal to the GP Income Allocation multiplied by such amount shall be allocated to the General Partner.

6.2 ALLOCATION OF GAINS.

(a) Gain realized upon the sale or other disposition of property by the Partnership, including deemed sales described in clause (b) of the definition of “Net Profits” and “Net Losses” set forth in Article 1, shall be allocated in the following order:

(i) There shall first be allocated to those Partners, if any, who have deficit balances in their Capital Accounts immediately prior to such sale or other disposition an amount of such gain equal to the aggregate amount of such deficit balances, which amount shall be allocated in the same proportion as such deficit balances; and

(ii) There shall next be allocated to each of the Partners gain in such amounts and proportions as are necessary so that the

 

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positive Capital Account balances of the Partners reflect, as closely as possible, the amounts to which they would be entitled if all of the assets of the Partnership were distributed to the Partners pursuant to Section 5.1.

(b) If the Partnership shall realize, upon a sale or other disposition, gain which does not constitute long-term capital gain and to which the provisions of Section 1231 of the Code do not apply, the foregoing provisions of this Section 6.2 shall be successively applied to (i) such gain, (ii) gain which is subject to the provisions of Section 1231 of the Code and (iii) long-term capital gain.

6.3 ALLOCATION OF LOSSES. Losses realized upon the sale or other disposition of property by the Partnership, including deemed sales described in clause (b) of the definition of “Net Profits” and “Net Losses” set forth in Article 1, shall be allocated in the following order:

(a) There shall first be allocated to those Partners, if any, who have positive Adjusted Capital Accounts balances an amount of such loss necessary to reduce such positive Adjusted Capital Accounts balances to zero, in proportion to such positive Adjusted Capital Account balances.

(b) The balance of such loss shall be allocated to the General Partner.

6.4 SPECIAL ALLOCATIONS. Notwithstanding anything in this Agreement to the contrary:

(a) All nonrecourse deductions (as defined in Regulations Section 1.704-2(b)(1)) shall be charged to the Capital Accounts of the Partners in proportion to their respective Percentage Interests.

(b) No Partner shall be allocated any item of loss or deduction to the extent said allocation will cause or increase any deficit in said Partner’s Adjusted Capital Account. If any Partner with a deficit in its Adjusted Capital Account unexpectedly receives any adjustment, allocation or distribution described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), then Partnership items of income and gain shall be specifically allocated to such Partner in an amount and manner sufficient to eliminate the deficit in said Partner’s Adjusted Capital Account created by such adjustment, allocation or distribution as quickly as possible. The Partners intend that the provisions set forth in this clause will constitute a “Qualified Income Offset” as described in Regulations Section 1.704-1(b)(2)(ii)(d).

(c) The following provisions shall be applicable beginning in the first taxable year in which the Partnership has “nonrecourse deductions” as defined in Regulations Section 1.704-2(b)(1):

(i) For purposes of this Section 6.4, “Minimum Gain” means the total gain which the Partnership would realize if it sold, in a taxable disposition, each of its assets that were subject to nonrecourse liabilities in full satisfaction of the liabilities.

 

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In computing such gain, only the portion of the assets’ tax bases allocated to nonrecourse liabilities of the Partnership shall be taken into account.

(ii) If in any Fiscal Year of the Partnership there is a net decrease in Minimum Gain, then each Partner with a share of Minimum Gain (as determined in accordance with Regulations Section 1.704-2(g)(1)) as of the beginning of such year shall be allocated items of income and gain for such year (and, if necessary, for succeeding years), equal to that Partner’s share of the net decrease in Minimum Gain (determined in accordance with Regulations Section 1.704-2(g)(2)). In allocating the income and gain pursuant to the previous sentence, gains recognized from the disposition of Partnership assets subject to nonrecourse liabilities of the Partnership shall be allocated first to the extent of the decrease in Minimum Gain attributable to the disposition of said asset. Thereafter, any income and gain to be allocated shall consist of a pro rata amount of other Partnership income and gain for that year. The Partners intend that this clause (ii) will constitute a “Minimum Gain Chargeback” as set forth in Regulations Section 1.704-2(f).

(iii) If any Partner bears the “economic risk of loss” (within the meaning of Regulations Section 1.752-2) with respect to any nonrecourse loan of the Partnership, then (A) the losses, deductions or Section 705(a)(2)(B) expenditures that are attributable to such nonrecourse loan for any Fiscal Year or other period shall be allocated to the Partners who bear the burden of such economic risk of loss in accordance with Regulations Section 1.704-2(i), and (B) if in any taxable year there is a net decrease in Partner Nonrecourse Debt Minimum Gain (as determined in accordance with Regulations Section 1.704-2(i)(4)) attributable to such nonrecourse loan, each Partner with a share of Partner Nonrecourse Debt Minimum Gain (as defined in Regulations Section 1.704-2(i)(2)) attributable to such nonrecourse loan (as determined in accordance with Regulations Section 1.704-2(i)(5)) as of the beginning of the year shall be allocated items of income and gain for the year (and, if necessary, for succeeding years), equal to that Partner’s share of the net decrease in the Partner Nonrecourse Debt Minimum Gain (as determined in accordance with Regulations Section 1.704-2(i)(4)).

6.5 REGULATORY PROVISIONS. The provisions of Section 6.4 (collectively, the “REGULATORY PROVISIONS”) are intended to comply with certain requirements of the Regulations. It is the intent of the Partners that, to the extent possible, all allocations pursuant to the Regulatory Provisions shall be offset either with other allocations pursuant to the Regulatory Provisions or, if necessary, with curative allocations of other items of income, gain, loss or deduction pursuant to this Section 6.5. Therefore, notwithstanding any other provision of this Agreement, other than the Regulatory Provisions, allocations pursuant to the Regulatory Provisions shall be taken into account in allocating other items of income, gain, expense or loss among the Partners so that, to the extent possible, the net amount of such allocations of other items and the allocations pursuant to the Regulatory

 

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Provisions to each Partner are equal to the net amount that would have been allocated to such Partner if the Regulatory Provisions were not part of this Agreement. In applying this Section 6.5, there shall be taken into account (a) future allocations under Section 6.4(c)(ii) that, although not yet made, are likely to offset other allocations previously made under Section 6.4(a), and (b) future allocations under Section 6.4(c)(iii)(B) that, although not yet made, are likely to offset other allocations previously made under Section 6.4(c)(iii)(A).

6.6 CODE SECTION 704(c) ALLOCATIONS.

(a) Notwithstanding any other provision in this Article 6, in accordance with Section 704(c) of the Code and the Regulations promulgated thereunder, income, gain, loss and deduction with respect to any property contributed to the capital of the Partnership shall, solely for tax purposes, be allocated among the Partners so as to take account of any variation between the adjusted basis of such property to the Partnership for federal income tax purposes and its Gross Asset Value on the date of contribution.

(b) If, under Regulations Section 1.704-1(b)(2)(iv)(f), Partnership property that has been revalued is properly reflected in the Capital Accounts and on the books of the Partnership at a Gross Asset Value that differs from the adjusted tax basis of such property, then depreciation, depletion, amortization and gain or loss with respect to such property shall be shared among the Partners in a manner that takes account of the variation between the adjusted tax basis of such property and its Gross Asset Value in the same manner as variations between the adjusted tax basis and Gross Asset Value of property contributed to the Partnership are taken into account (as provided in the preceding paragraph) in determining the Partners’ shares of tax items under Section 704(c) of the Code.

6.7 ALLOCATIONS FOR TAX PURPOSES ONLY. Allocations pursuant to Section 6.6 are solely for purposes of federal, state and local taxes. As such, they shall not affect or in any way be taken into account in computing a Partner’s Capital Account or share of profits, losses or other items of distributions pursuant to any provision of this Agreement.

6.8 OTHER ALLOCATION RULES. Except as may otherwise be provided herein, whenever a proportionate part of Net Profits or Net Losses of the Partnership is credited or charged to a Partner’s Capital Account for any Fiscal Year, every item of income gain, loss or deduction entering into the computation thereof shall be considered either credited or charged, as the case may be, on every item of credit or tax preference related thereto and applicable to such Fiscal Year shall be allocated to, such Capital Account in the same proportion. Upon any change in the relative interests of the Partners in the Partnership, whether by reason of the admission or withdrawal of a Partner, the transfer by any Partner of all or any part of its interest, or otherwise, the Partners’ shares of all Partnership items shall be determined by reference to any method acceptable under the Regulations under Section 706 of the Code, as determined by the General Partner.

6.9 ALLOCATIONS IN ACCORDANCE WITH CAPITAL ACCOUNTS. The income, gains, losses, deductions and expenses of the Partnership shall be

 

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allocated, for federal, state and local income tax purposes, among the Partners in accordance with the allocation of corresponding items of income, gains, losses, deductions and expenses among