FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF TERRA NITROGEN COMPANY, L.P.

Exhibit 3.1

 

 

F IRST A MENDED AND R ESTATED

 

A GREEMENT OF L IMITED P ARTNERSHIP

 

OF

 

T ERRA N ITROGEN C OMPANY , L.P.

 

TABLE OF CONTENTS

 

 

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FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF

TERRA NITROGEN COMPANY, L.P.

 

This FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF TERRA NITROGEN COMPANY, L.P., dated as of September 1, 2005, is entered into by and among Terra Nitrogen Corporation, a Delaware corporation (“TNC”), as the General Partner, together with any other Persons who are or become Partners in the Partnership as provided herein. In consideration of the covenants, conditions and agreements contained herein, the parties hereto hereby agree as follows:

 

RECITALS:

 

WHEREAS, TNC and the Organizational Limited Partner organized the Partnership as a Delaware limited partnership pursuant to an Agreement of Limited Partnership dated as of December 4, 1991 (the “Original Agreement”); and

 

WHEREAS, the Partnership, the Operating Partnership and the General Partner have entered into a Reorganization Agreement, dated as of the date hereof (the “Reorganization Agreement”), providing for the change of the General Partner’s general partner interests in the Operating Partnership and the Partnership into (i) a cumulative 0.05% general partner interest in such entities, (ii) an additional 0.975% limited partner interest in the Operating Partnership and (iii) an additional 0.975/99ths limited partner interest in the Partnership; and

 

WHEREAS, in order to effect the transactions contemplated by the Reorganization Agreement, it is necessary to amend this Agreement as provided herein; and

 

WHEREAS, the General Partner has the authority to adopt certain amendments to this Agreement without the approval of any Limited Partner or Assignee to reflect, among other things: (i) subject to the terms of Section 4.4, any change that is necessary or desirable in connection with the authorization for issuance of any class or series of Partnership Securities pursuant to Section 4.4 and (ii) a change that, in the sole discretion of the General Partner, does not adversely affect the Limited Partners in any material respect.

 

NOW, THEREFORE, the Original Agreement is hereby amended and, as so amended, is restated in its entirety as follows:

 

ARTICLE I

 

ORGANIZATIONAL MATTERS

 

Section 1.1

Formation and Continuation

 

The General Partner and the Organizational Limited Partner previously formed this Partnership as a limited partnership pursuant to the provisions of the Delaware Act. The General

Partner and the Limited Partners hereby amend and restate the Original Agreement in its entirety to continue the Partnership as a limited partnership pursuant to the provisions of the Delaware Act and to set forth the rights and obligations of the Partners and certain matters related thereto. This amendment and restatement shall become effective on the date of this Agreement. Except as expressly provided to the contrary in this Agreement, the rights and obligations of the Partners and the administration, dissolution and termination of the Partnership shall be governed by the Delaware Act. The Partnership Interest of each Partner shall be personal property for all purposes.

 

Section 1.2

Name

 

The name of the Partnership is “Terra Nitrogen Company, L.P.” The Partnership’s business may be conducted under any other name or names deemed necessary or appropriate by the General Partner, including, without limitation, the name of the General Partner or any Affiliate thereof. The words “Limited Partnership,” “L.P.,” “Ltd.” or similar words or letters shall be included in the Partnership’s name where necessary for the purposes 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 Limited Partners.

 

Section 1.3

Registered Office; Principal Office

 

Unless and until changed by the General Partner, the registered office of the Partnership in the State of Delaware shall be located at The Corporation Trust Center, 1209 Orange Street, New Castle County, 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 and the address of the General Partner shall be Terra Centre, 600 Fourth Street, Sioux City, Iowa, 51102, 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 advisable.

 

Section 1.4

Power of Attorney

 

(a) Each Limited Partner and each Assignee hereby constitutes and appoints each of the General Partner and, if a Liquidator shall have been selected pursuant to Section 14.3, 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, 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, without limitation, this Agreement and the Certificate of Limited Partnership and all amendments or restatements thereof) that the General Partner or the Liquidator deems necessary or appropriate to form, qualify or continue the existence or qualification of the Partnership

 

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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 deems 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, without limitation, conveyances and a certificate of cancellation) that the General Partner or the Liquidator deems 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 XI, XII, XIII or XIV or the Capital Contribution of any Partner; (E) all certificates, documents and other instruments relating to the determination of the rights, preferences and privileges of any class or series of Units or other securities issued pursuant to Section 4.3; and (F) all certificates, documents and other instruments (including, without limitation, agreements and a certificate of merger) relating to a merger or consolidation of the Partnership pursuant to Article XVI; and

 

(ii) execute, swear to, acknowledge, deliver, file and record all ballots, consents, approvals, waivers, certificates and other instruments necessary or appropriate, in the sole discretion of the General Partner or the Liquidator, to 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 is necessary or appropriate, in the sole discretion of the General Partner or the Liquidator, to effectuate the terms or intent of this Agreement; provided that when required by Section 15.3 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 or the Liquidator may exercise the power of attorney made in this Section 1.4(a)(ii) only after the necessary vote, consent or approval of the Limited Partners or of the Limited Partners of such class or series.

 

Nothing contained in this Section 1.4 shall be construed as authorizing the General Partner to amend this Agreement except in accordance with Article XV, 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 not be affected by the subsequent death, incompetency, disability, incapacity, dissolution, bankruptcy or termination of any Limited Partner or Assignee and the transfer of all or any portion of such Limited Partner’s or Assignee’s Partnership Interest and shall extend to such Limited Partner’s or Assignee’s heirs, successors, assigns and personal representatives. Each such Limited Partner or Assignee 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 or Assignee 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 or Assignee shall execute and deliver to the General Partner or the Liquidator,

 

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within fifteen days after receipt of the General Partner’s or the Liquidator’s request therefor, such further designation, powers of attorney and other instruments as the General Partner or the Liquidator deems necessary to effectuate this Agreement and the purposes of the Partnership.

 

Section 1.5

Term

 

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 close of Partnership business on December 31, 2041, or until the earlier termination of the Partnership in accordance with the provisions of Article XIV.

 

Section 1.6

Possible Restrictions on Transfer

 

Notwithstanding anything to the contrary contained in this Agreement, in the event of (i) the enactment (or imminent enactment) of any legislation, (ii) the publication of any temporary or final regulation by the Treasury Department (“Treasury Regulation”), (iii) any ruling by the Internal Revenue Service or (iv) any judicial decision, that, in any such case, in the Opinion of Counsel, would result in the taxation of the Partnership for federal income tax purposes as a corporation, then, either (a) the General Partner may impose such restrictions on the transfer of Units or Partnership Interests as may be required, in the Opinion of Counsel, to prevent the Partnership from being taxed as a corporation or otherwise as an association taxable as a corporation for federal income tax purposes, including, without limitation, making any amendments to this Agreement as the General Partner in its sole discretion may determine to be necessary or appropriate to impose such restrictions; provided that any such amendment to this Agreement that would result in the delisting or suspension of trading of any class of Units on any National Securities Exchange on which such class of Units is then traded must be approved by the Record Holders of at least a majority of interest of the Outstanding Units of such class of Units or (b) upon the recommendation of the General Partner and the approval of the Record Holders of a majority of interest of the Outstanding Units of such class of Units, the Partnership may be converted into and reconstituted as a trust or any other type of legal entity (the “New Entity”) in the manner and on other terms so recommended and approved. In such event, the business of the Partnership shall be continued by the New Entity and the Units shall be converted into equity interests of the New Entity in the manner and on the terms so recommended and approved. Notwithstanding the foregoing, no such reconstitution shall take place unless the Partnership shall have received an Opinion of Counsel to the effect that the liability of the Limited Partners for the debts and obligations of the New Entity shall not, unless such Limited Partners take part in the control of the business of the New Entity, exceed that which otherwise had been applicable to such Limited Partners as limited partners of the Partnership under the Delaware Act.

 

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ARTICLE II

 

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 Limited Partner ” means a Person admitted to the Partnership as a Limited Partner pursuant to Section 12.4 and who is shown as such on the books and records of the Partnership.

 

“ Adjusted Capital Account ” means the Capital Account maintained for each Partner as of the end of each taxable 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 1.704-1T(b)(4)(iv)(f) and 1.704-1T(b)(4)(iv)(h)(5)), and (b) decreased by (i) the amount of all losses and deductions that, as of the end of such taxable 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 taxable 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 5.1(d)(i) or 5.1(d)(ii) hereof). The foregoing definition of Adjusted Capital Account is intended to comply with the provisions of Treasury Regulation Section 1.704-(b)(2)(ii)(d) and shall be interpreted consistently therewith. The “Adjusted Capital Account” in respect of a Common Unit, Class B Common Unit, General Partner Unit or any other specified interest in the Partnership shall be the amount which such Adjusted Capital Account would be if such Common Unit, Class B Common Unit, General Partner Unit or other interest in the Partnership were the only interest in the Partnership held by a Partner.

 

“ Adjusted Property ” means any property the Carrying Value of which has been adjusted pursuant to Section 4.7(d)(i) or 4.7(d)(ii) hereof.

 

“ Affiliate ” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by or is under common control with, the Person in question.

 

“ 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 5.1 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 using such reasonable method of valuation as it may adopt; provided, however , that the Agreed Value of any property deemed contributed to the Partnership for federal income tax purposes upon termination and reconstitution thereof pursuant to Section 708 of the Code shall be determined in accordance with Section 4.7(c). Subject to Section 4.7(c), the General Partner shall, in its sole discretion, use such method as it deems reasonable and appropriate to allocate the aggregate Agreed Value of Contributed Properties conveyed 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.

 

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

 

“ Assignee ” means a Non-citizen Assignee or a Person to whom one or more Units have been transferred in a manner permitted under this Agreement and who has executed and delivered a Transfer Application as required by this Agreement, but who has not become a Substitute Limited Partner.

 

“ Available Cash ” means, with respect to any calendar quarter, (i) the sum of (A) all cash receipts of the Partnership during such quarter from all sources (including distributions of cash received from the Operating Partnership) and (B) any reduction in reserves established in prior quarters, (ii) less the sum of (AA) all cash disbursements of the Partnership during such quarter (excluding cash distributions to Partners, but including, for example, disbursements for taxes of the Partnership as an entity, debt service and capital expenditures) and (BB) any reserves established in such quarter in such amounts as the General Partner determines to be necessary or appropriate in its reasonable discretion (x) to provide for the proper conduct of the business of the Partnership or the Operating Partnership (including reserves for future capital expenditures) or (y) to provide funds for distributions with respect to any of the next four calendar quarters and (CC) any other reserves established in such quarter in such amounts as the General Partner determines in its reasonable discretion to be necessary because the distribution of such amounts would be prohibited by applicable law or by any loan agreement, security agreement, mortgage, debt instrument or other agreement or obligation to which the Partnership or the Operating Partnership is a party or by which it is bound or its assets are subject. Taxes paid by the Partnership on behalf of, or amounts withheld with respect to, all or less than all of the Partners shall not be considered cash disbursements of the Partnership which reduce “Available Cash,” but the payment or withholding thereof shall be deemed to be a distribution of Available Cash to such Partners. Alternatively, in the discretion of the General Partner, such taxes (if pertaining to all Partners) may be considered to be cash disbursements of the Partnership which reduce “Available Cash,” but the payment or withholding thereof shall not be deemed to be a distribution of Available Cash to such Partners. Notwithstanding the foregoing, “Available Cash” shall not include any cash receipts or reductions in reserves or take into account any disbursements made or reserves established after commencement of the dissolution and liquidation of the Partnership.

 

“ 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 4.7 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.

 

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“ Business Day ” means Monday through Friday of each week, except that a legal holiday recognized as such by the government of the United States or the States of Oklahoma or New York shall not be regarded as a Business Day.

 

“ Capital Account ” means the capital account maintained for a Partner or Assignee pursuant to Section 4.7.

 

“ Capital Contribution ” means any cash, cash equivalents or the Net Agreed Value of Contributed Property that a Partner contributes to the Partnership pursuant to Sections 4.1, 4.2, 4.3, 4.7(c) or 13.3(c).

 

“ 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’ and Assignees’ Capital Accounts, 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 4.7(d)(i) and 4.7(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.

 

“ Cash from Interim Capital Transactions ” means, at any date, such amounts of Available Cash as are deemed to be Cash from Interim Capital Transactions pursuant to Section 5.3.

 

“ Cash from Operations ” means, at any date but prior to commencement of the dissolution and liquidation of the Partnership, on a cumulative basis, (i) the sum of (A) the cash balance of the Partnership and the Operating Partnership at the time of the closing of the Initial Offering plus (B) any amount received upon exercise of the Underwriters’ over-allotment option pursuant to the Underwriting Agreement, plus all cash receipts of the Partnership and the Operating Partnership from their operations (excluding any cash proceeds from any Interim Capital Transactions or Termination Capital Transactions) during the period since the Partnership Inception through such date, (ii) less the sum of (AA) all cash operating expenditures of the Partnership and the Operating Partnership during such period, including, without limitation, taxes imposed on the Partnership or the Operating Partnership as an entity, (BB) all cash debt service payments of the Partnership and the Operating Partnership during such period (other than payments or prepayments of principal and premium required by reason of loan agreements (including covenants and default provisions therein) or by lenders, in each case in connection with sales or other dispositions of assets or made in connection with refinancings or refundings of indebtedness; provided that any payment or prepayment of principal, whether or not then due, shall be determined at the election and in the discretion of the General Partner, to be refunded or refinanced by any indebtedness incurred or to be incurred by the Partnership or the Operating Partnership simultaneously with or within 180 days prior to or after such payment or prepayment to the extent of the principal amount of such indebtedness so incurred), (CC) all cash capital expenditures of the Partnership and the Operating Partnership during such period (other than (X) all cash capital expenditures made solely for the purpose of increasing the production capacity of any of the Partnership’s nitrogen fertilizer production facilities (Verdigris ammonia, Blytheville ammonia, Verdigris UAN or Blytheville urea) by 15% or more (assuming

 

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normal operating conditions, including downtime and maintenance), and not in connection with scheduled maintenance activities, from the production capacity of any of such facilities existing immediately prior to such capital expenditure, and (Y) cash expenditures made in payment of transaction expenses relating to Interim Capital Transactions), (DD) any reserves outstanding as of such date which the General Partner determines in its reasonable discretion to be necessary or appropriate to provide for the future cash payment of items of the type referred to in clauses (AA) through (CC) of this sentence and (EE) any reserves outstanding as of such date that the General Partner determines to be necessary or appropriate in its reasonable discretion to provide funds for distributions with respect to any one or more of the next four calendar quarters, all as determined on a consolidated basis and after elimination of intercompany items and the General Partner’s general partner interest in the Operating Partnership. Taxes paid by the Partnership on behalf of, or amounts withheld with respect to, all or less than all of the Partners shall not be considered cash operating expenditures of the Partnership which reduce “Cash from Operations,” but the payment or withholding thereof shall be deemed to be a distribution of Available Cash to such Partners. Alternatively, in the discretion of the General Partner, such taxes (if pertaining to all Partners) may be considered to be cash disbursements of the Partnership which reduce “Cash from Operations,” but the payment or withholding thereof shall not be deemed to be a distribution of Available Cash to such Partners.

 

“ Certificate of Limited Partnership ” means the Certificate of Limited Partnership filed with the Secretary of State of the State of Delaware as referenced in Section 6.2 hereof, as such Certificate may be amended and/or restated from time to time.

 

“ Citizenship Certification ” means a properly completed certificate in such form as may be specified by the General Partner by which an Assignee or 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.

 

“ Class B Common Unit ” means one of that certain class of Units with those special rights and obligations specified in this Agreement as being appurtenant to a “Class B Common Unit.”

 

“ Closing Date ” means the date on which the “First Closing Date” occurs as such term is defined in the Underwriting Agreement.

 

“ Closing Price ” has the meaning assigned to such term in Section 17.1.

 

“ Code ” means the Internal Revenue Code of 1986, as amended and in effect from time to time, as interpreted by the applicable regulations thereunder. Any reference herein to a specific section or sections of the Code shall be deemed to include a reference to any corresponding provision of future law.

 

“ Combined Interest ” has the meaning assigned to such term in Section 13.3(a).

 

“ Common Unit ” means one of that certain class of Units with those special rights and obligations specified in this Agreement as being appurtenant to a “Common Unit.”

 

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“ Common Unit Deficiency ” means, with respect to any Common Unit and as to any calendar quarter, the excess, if any, of (a) the Minimum Quarterly Distribution then in effect over (b) the sum of all Available Cash distributed in such calendar quarter with respect to such Common Unit pursuant to paragraph “First” of Section 5.4.

 

“ 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 (or deemed contributed to the Partnership on termination and reconstitution thereof pursuant to Section 708 of the Code). Once the Carrying Value of a Contributed Property is adjusted pursuant to Section 4.7(d)(i), such property shall no longer constitute a Contributed Property, but shall be deemed an Adjusted Property.

 

“ Contributing Partner ” means each Partner contributing (or deemed to have contributed on termination and reconstitution of the Partnership pursuant to Section 708 of the Code or otherwise) a Contributed Property.

 

“ Conveyance Agreement ” means the Conveyance Agreement dated as of December 4, 1991, among Agricultural Minerals Corporation (predecessor to TNC), the Partnership and the Operating Partnership.

 

“ Cumulative Common Unit Deficiency ” means, with respect to any Common Unit and as to any calendar quarter, the excess, if any, of (a) the sum resulting from adding together the Common Unit Deficiency as to a Common Unit for each of the quarters ending prior to such quarter over (b) the sum of any distributions theretofore made with respect to a Common Unit pursuant to paragraph “Second” of Section 5.4.

 

“ Curative Allocation ” means any allocation of an item of income, gain, deduction, loss or credit pursuant to the provisions of Section 5.1(d)(x).

 

“ Current Market Price ” has the meaning assigned to such term in Section 17.1.

 

“ 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 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 13.1 or Section 13.2.

 

“ Deposit Account ” means the account established by the Depositary pursuant to the Deposit Agreement.

 

“ Deposit Agreement ” means the Deposit Agreement among the General Partner in its capacity both as General Partner and as attorney-in-fact for the Limited Partners, the Partnership and the Depositary, as it may be amended or restated from time to time.

 

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“ Depositary ” means the bank or other institution appointed by the General Partner in its sole discretion to act as depositary for the Depositary Units pursuant to the Deposit Agreement, or any successor to it as depositary.

 

“ Depositary Receipt ” means a depositary receipt, issued by the Depositary or agents appointed by the Depositary in accordance with the Deposit Agreement, evidencing ownership of one or more Depositary Units.

 

“ Depositary Unit ” means a depositary unit representing a Unit on deposit with the Depositary pursuant to the Deposit Agreement.

 

“ Distribution Date ” means, with respect to any quarter during the term of this Partnership, the date on which the distribution for such quarter is paid.

 

“ 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 the Partnership or the Operating Partnership does business or proposes to do business from time to time, and whose status as a Limited Partner or Assignee does not or would not subject the Partnership or the Operating Partnership to a substantial 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 13.1(a).

 

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, supplemented or restated from time to time, and any successor to such statute.

 

“ First Liquidation Target Amount ” means, an amount, determined with respect to any Unit, which equals, as of the date of its determination, the sum of (a) the Unrecovered Capital, if any, attributable to such Unit, plus (b) (i) in the case of a Common Unit, the Cumulative Common Unit Deficiency or (ii) in the case of a Class B Common Unit, the Cumulative Class B Common Unit Deficiency plus (c) $0.715.

 

“ First Target Distribution ” means $0.715 per Unit per calendar quarter, subject to adjustment in accordance with Sections 5.6 and 9.6.

 

“ General Partner ” means Terra Nitrogen Corporation, a Delaware corporation and its successors as general partner and manager of the Partnership.

 

“ General Partner Equity Value ” means, as of any date of determination, the fair market value of the General Partner’s Partnership Interest (including any Limited Partner Interest owned by the General Partner), as determined by the General Partner using whatever reasonable method of valuation it may adopt.

 

“ General Partner Interest ” means the ownership interest of the General Partner in the Partnership (in its capacity as a general partner without reference to any Limited Partner Interest

 

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held by it) which is evidenced by General Partner Units and includes any and all benefits to which the General Partner is entitled as provided in this Agreement, together with all obligations of the General Partner to comply with the terms and provisions of this Agreement.

 

“ General Partner Unit ” means a Unit representing a fractional part of the General Partner Interest and having the rights and obligations specified with respect to the General Partner Interest. 4,712 General Partner Units are to be initially issued by the Partnership to the General Partner pursuant to the Reorganization Agreement.

 

“ Indebtedness ” has the meaning assigned to such term in Section 13.1(a).

 

“ Indemnitee ” means the General Partner, any Departing Partner, any Person who is or was an Affiliate of the General Partner or any Departing Partner, any Person who is or was an officer, director, member, fiduciary, trustee, employee, partner or agent of the General Partner or any Departing Partner or any such Affiliate, or any Person who is or was serving at the request of the General Partner or any Departing Partner or any such Affiliate as a director, fiduciary, trustee, officer, employee, partner, member or agent of another corporation, partnership, joint venture, trust, committee or other enterprise; provided, that a Person shall not be an Indemnitee by reason of providing, on a fee-for-services basis, trustee, fiduciary or custodial services.

 

“ Initial Limited Partners ” means the Organizational Limited Partner, the General Partner, the initial holder of the Units acquired by the General Partner pursuant to the Conveyance Agreement, and the Underwriters, unless the context shall otherwise require.

 

“ Initial Offering ” means the Initial offering of Senior Preference Units to the public, as described in the Registration Statement.

 

“ Initial Unit Price ” means with respect to Common Units, $21.50 and, with respect to any other class or series of Units, the price per Unit at which such class or series of Units is initially sold by the Partnership, as determined by the General Partner.

 

“ Interim Capital Transactions ” means (i) borrowings, refinancings or refundings of indebtedness and sales of debt securities (other than for working capital purposes and for items purchased on open account in the ordinary course of business) by the Partnership or the Operating Partnership, (ii) sales of equity interests by the Partnership or the Operating Partnership and (iii) sales or other voluntary or involuntary dispositions of any assets of the Partnership or the Operating Partnership (other than (x) sales or other dispositions of inventory in the ordinary course of business, (y) sales or other dispositions of other current assets including accounts receivable or (z) sales or other dispositions of assets as a part of normal retirements or replacements), in each case prior to the commencement of the dissolution and liquidation of the Partnership. The General Partner shall have the right to determine in its reasonable discretion whether any inventory reductions due to sales or other dispositions in connection with a sale or other disposition of other assets of the Partnership shall be considered to be in the ordinary course of business or such a normal retirement.

 

“ Issue Price ” means the price at which a Unit is purchased from the Partnership, less any sales commission or underwriting discount charged to the Partnership.

 

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“ Junior Preference Unit ” means one of that certain class of Units with those special rights and obligations specified in the Original Agreement as being appurtenant to a “Junior Preference Unit.” 6,000,000 Junior Preference Units were initially issued by the Partnership pursuant to the Conveyance Agreement, and were designated the “11.26% Series.”

 

“ Limited Partner ” means each Initial Limited Partner, each Substitute Limited Partner, each Additional Limited Partner, the holders of Class B Common Units and any Departing Partner upon the change of its status from General Partner to Limited Partner pursuant to Section 13.3 and, solely for purposes of Articles IV, V and VI and Sections 14.3 and 14.4, shall include an Assignee.

 

“ Limited Partner Equity Value ” means, as of any date of determination, the amount equal to the product obtained by multiplying (a) the total number of Units Outstanding (immediately prior to an issuance of Units or distribution of cash or Partnership property), other than Units held by the General Partner by (b) (i) in the case of a valuation required by Section 4.7(d)(i) (other than valuations caused by sales of a de minimis quantity of Units), the Issue Price of the additional Units referred to in Section 4.7(d)(i) or (ii) in the case of a valuation required by Section 4.7(d)(ii) (or a valuation required by Section 4.7(d)(i) caused by sales of a de minimis quantity of Units), the Closing Price.

 

“ Limited Partner Interest ” means the ownership interest of a Partner in the Partnership which is evidenced by Common Units, Class B Common Units or other Partnership Securities other than General Partner Units and includes any and all benefits to which a Limited Partner is entitled as provided in this Agreement, together with all obligations of a Limited Partner to comply with the terms and provisions of this Agreement.

 

“ Liquidator ” means the General Partner or other Person approved pursuant to Section 14.3 who performs the functions described therein.

 

“ Merger Agreement ” has the meaning assigned to such term in Section 16.1.

 

“ Minimum Quarterly Distribution ” means, with respect to the Common Units and Class B Common Units, $0.605 per calendar quarter, subject to adjustment in accordance with Sections 5.6 and 9.6 and with respect to any other class or series of Partnership Interest such amount as may be designated as the Minimum Quarterly Distribution by the General Partner in accordance with Section 4.3.

 

“ National Securities Exchange ” means an exchange registered with the Securities and Exchange Commission under Section 6(a) of the Exchange Act.

 

“ 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 or Assignee by the Partnership, the Partnership’s Carrying Value of such property (as adjusted pursuant to Section 4.7(d)(ii)) at the time such property is distributed, reduced by any indebtedness either assumed by such Partner or Assignee upon such

 

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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 period, the excess, if any, of the Partnership’s items of income and gain (other than those items attributable to dispositions constituting Termination Capital Transactions) for such taxable period over the Partnership’s items of loss and deduction (other than those items attributable to dispositions constituting Termination Capital Transactions) for such taxable period. The items included in the calculation of Net Income shall be determined in accordance with Section 4.7(b) and shall not include any items allocated under Section 5.1(d). Once an item of income, gain, loss or deduction that has been included in the initial computation of Net Income is subjected to a Required Allocation or a Curative Allocation, the applicable Net Income or Net Loss shall be recomputed without regard to such item.

 

“ Net Loss ” means, for any taxable period, the excess, if any, of the Partnership’s items of loss and deduction (other than those items attributable to dispositions constituting Termination Capital Transactions) for such taxable period over the Partnership’s items of income and gain (other than those items attributable to dispositions constituting Termination Capital Transactions) for such taxable period. The items included in the calculation of Net Loss shall be determined in accordance with Section 4.7(b) and shall not include any items allocated under Section 5.1(d). Once an item of income, gain, loss or deduction that has been included in the initial computation of Net Loss is subjected to a Required Allocation or a Curative Allocation, the applicable Net Income or Net Loss shall be recomputed without regard to such item.

 

“ Net Termination Gain ” means, for any taxable period, the sum, if positive, of all items of income, gain or loss recognized by the Partnership (including, without limitation, such amounts recognized through the Operating Partnership) from Termination Capital Transactions occurring in such taxable period. The items included in the determination of Net Termination Gain shall be determined in accordance with Section 4.7(b) and shall not include any items of income, gain or loss allocated under Section 5.1(d). Once an item of income, gain or loss that has been included in the initial computation of Net Termination Gain is subjected to a Required Allocation or a Curative Allocation, the applicable Net Termination Gain or Net Termination Loss shall be recomputed without regard to such item.

 

“ Net Termination Loss ” means, for any taxable period, the sum, if negative, of all items of income, gain or loss recognized by the Partnership (including, without limitation, such amounts recognized through the Operating Partnership) from Termination Capital Transactions occurring in such taxable period. The items included in the determination of Net Termination Loss shall be determined in accordance with Section 4.7(b) and shall not include any items of income, gain or loss allocated under Section 5.1(d). Once an item of gain or loss that has been included in the initial computation of Net Termination Loss is subjected to a Required Allocation or a Curative Allocation, the applicable Net Termination Gain or Net Termination Loss shall be recomputed without regard to such item.

 

“ New Entity ” has the meaning assigned to such term in Section 1.6.

 

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“ Non-citizen Assignee ” means a Person who the General Partner has determined in its sole discretion does not constitute an Eligible Citizen and as to whose Partnership Interest the General Partner has become the Substitute Limited Partner, pursuant to Section 11.5.

 

“ Nonrecourse Built-in Gain ” means with respect to any Contributed Properties or Adjusted Properties that are subject to a mortgage or negative pledge securing a Nonrecourse Liability, the amount of any taxable gain that would be allocated to the Partners pursuant to Sections 5.2(b)(i)(A), 5.2(b)(ii)(A) or 5.2(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 (described in Section 705(a)(2)(B) of the Code) that, in accordance with the principles of Treasury Regulation Section 1.704-1T(b)(4)(iv)(b), are attributable to a Nonrecourse Liability.

 

“ Nonrecourse Liability ” has the meaning set forth in Treasury Regulation Section 1.704-1T(b)(4)(iv)(k)(3).

 

“ Notice of Election to Purchase ” has the meaning assigned to such term in Section 17.2.

 

“ Operating Partnership ” means Terra Nitrogen, Limited Partnership, a Delaware limited partnership established pursuant to the Operating Partnership Agreement.

 

“ Operating Partnership Agreement ” means the Agreement of Limited Partnership of Terra Nitrogen, Limited Partnership, as it may be amended, supplemented or restated from time to time.

 

“ Opinion of Counsel ” means a written opinion of counsel (who may be regular counsel to the Partnership or the General Partner) acceptable to the General Partner.

 

“ Organizational Limited Partner ” means AMC Holdings Inc., a Delaware corporation, in its capacity as the organizational limited partner of the Partnership pursuant to the Original Agreement.

 

“ Original Agreement ” has the meaning assigned to such term in the Recitals to this Agreement.

 

“ Outstanding ” means, with respect to the Units or other Partnership Securities, as the case may be, all Units or other Partnership Securities, as the case may be, that are issued by the Partnership and reflected as outstanding on the Partnership’s books and records as of the date of determination and includes Units or other Partnership Securities held by the General Partner and its Affiliates; provided, however, that Class B Common Units and General Partner Units shall be deemed Outstanding only for the purposes of Article V.

 

“ Partner ” means a General Partner or a Limited Partner and, solely for purposes of Articles IV, V and VI and Sections 14.3 and 14.4, shall include an Assignee.

 

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“ 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 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.

 

“ Partnership ” means Terra Nitrogen Company, L.P., a Delaware limited partnership, and any successor thereto.

 

“ Partnership Assets ” means all assets of the Partnership whether tangible or intangible and whether real, personal or mixed.

 

“ Partnership Inception ” means the Closing Date.

 

“ Partnership Interest ” means the interest of a Partner in the Partnership, which shall include General Partner Interests and Limited Partner Interests.

 

“ Partnership Minimum Gain ” means the amount determined in accordance with the principles of Treasury Regulation Section 1.704-2(d).

 

“ Partnership Securities ” has the meaning assigned to such term in Section 4.4(a).

 

“ Partnership Year ” means the taxable year of the Partnership, which shall be the calendar year.

 

“ Per Unit Capital Amount ” means, as of any date of determination, the Capital Account, stated on a per Unit basis, underlying any Unit held by a Unitholder.

 

“ Percentage Interest ” means as of the date of such determination (a) as to any Partner or Assignee holding Units, the product of (i) 100% less the percentage applicable to paragraph (b) multiplied by (ii) the quotient of (x) the number of Units held by such Partner or Assignee divided by (y) the total number of all Units then Outstanding, and (b) as to the holders of additional Partnership Securities issued by the Partnership in accordance with Section 4.4 hereof, the percentage established as a part of such issuance.

 

“ Person ” means an individual or a corporation, limited liability company, partnership, joint venture, trust, unincorporated organization, association or other entity.

 

“ Pro Rata ” means (a) when modifying Units or any class thereof, apportioned equally among all designated Units in accordance with their respective Percentage Interests, and (b) when modifying Partners and Assignees, apportioned among all Partners and Assignees in accordance with their respective Percentage Interests.

 

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“ Purchase Date ” means the date determined by the General Partner as the date for purchase of all Outstanding Common Units (other than Common Units owned by the General Partner and its Affiliates) pursuant to Article XVII.

 

“ Recapture Income ” means any gain recognized by the Partnership (computed without regard to any adjustment required by Section 734 or 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 for determining (a) the identity of Limited Partners (or Assignees if applicable) entitled to notice of, or to vote at, any meeting of Limited Partners or entitled to vote by ballot 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.

 

“ Record Holder ” means the Person in whose name a Common Unit is registered on the books of the Transfer Agent as of the close of business on a particular Business Day, or with respect to a holder of a Class B Common Unit or General Partner Unit or other Partnership Security, the Person in whose name such Class B Common Unit or General Partner Unit or other Partnership Security is registered on the books of the General Partner as of the close of business on such Business Day.

 

“ Redeemable Units ” means any Units for which a redemption notice has been given, and has not been withdrawn, under Section 11.6.

 

“ Registration Statement ” means the Registration Statement on Form S-1 (Registration No. 33-43007), as it has been and as it may be amended or supplemented from time to time, filed by the Partnership with the Securities and Exchange Commission under the Securities Act to register the offering and sale of the Senior Preference Units in the Initial Offering.

 

“ Reorganization Agreement ” has the meaning assigned to such term in the Recitals to this Agreement.

 

“ Required Allocations ” means any allocation (or limitation imposed on any allocation) of an item of income, gain, deduction or loss pursuant to (a) the proviso-clause of Sections 5.1(b) and 5.1(c)(ii) or (b) Sections 5.1(d)(i), 5.1(d)(ii), 5.1(d)(iii), 5.1(d)(v), 5.1(d)(vi), 5.1(d)(vii), 5.1(d)(viii) and 5.1(d)(ix), such allocations (or limitations thereon) being directly or indirectly required by the Treasury Regulations promulgated under Section 704(b) of the Code.

 

“ 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 5.2(b)(i)(A) or 5.2(b)(ii)(A), respectively, to eliminate Book-Tax Disparities.

 

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“ Second Liquidation Target Amount ” means an amount determined with respect to any Unit which equals, as of the date of its determination, the sum of (a) the First Liquidation Target Amount plus (b) $0.11.

 

“ Second Target Distribution ” means $0.825 per Unit, subject to adjustment in accordance with Sections 5.5 and 5.6.

 

“ Securities Act ” means the Securities Act of 1933, as amended, supplemented or restated from time to time, and any successor to such statute.

 

“ Senior Preference Unit ” means one of that certain class of Units with those special Rights and obligations specified in the Original Agreement as being appurtenant to a “Senior Preference Unit.” The Senior Preference Units were initially issued pursuant to the Underwriting Agreement and were designated the “11.26% Series.”

 

“ Substitute Limited Partner ” means a Person who is admitted as a Limited Partner to the Partnership pursuant to Section 12.2 in place of and with all the rights of a Limited Partner and who is shown as a Limited Partner on the books and records of the Partnership.

 

“ Surviving Business Entity ” has the meaning assigned to such term in Section 16.2(b).

 

“ Termination Capital Transaction ” means any sale, transfer or other disposition of assets of the Partnership or the Operating Partnership following commencement of the dissolution and liquidation of the Partnership or the Operating Partnership.

 

“ Third Liquidation Target Amount ” means an amount, determined with respect to any Unit, which equals, as of the date of its determination, the sum of (a) the Second Liquidation Target Amount plus (b) $0.22.

 

“ Third Target Distribution ” means $1.045 per Unit, subject to adjustment in accordance with Sections 5.6 and 9.6.

 

“ Trading Day ” has the meaning assigned to such term in Section 17.1.

 

“ Transfer Agent ” means the Depositary or any other bank, trust company or other Person (including, without limitation, 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 and as may be appointed from time to time by the General Partner to act as registrar and transfer agent for any other Partnership Securities; provided that if no Transfer Agent is specifically designated for any such other Partnership Securities, the General Partner shall act in such capacity.

 

“ Transfer Application ” means an application and agreement for transfer of Units in the form set forth on the back of a Unit Certificate or a Depositary Receipt or in a form substantially to the same effect in a separate instrument.

 

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“ Underwriter ” means each Person named as an underwriter in the Underwriting Agreement who purchased Senior Preference Units pursuant thereto.

 

“ Underwriting Agreement ” means the Underwriting Agreement dated November 26, 1991 among the Underwriters, the Partnership and the General Partner providing for the purchase of Senior Preference Units by such Underwriters.

 

“ Unit ” means a Partnership Interest of a Partner or Assignee in the Partnership representing a fractional part of the Partnership Interests of all Partners and Assignees and shall include Common Units, General Partner Units, Class B Common Units and such other units of limited partner interest as may be issued from time to time by the Partnership.

 

“ Unit Certificate ” means a certificate or certificates in such form as may be hereafter adopted by the General Partner in its sole discretion issued by the Partnership evidencing ownership of one or more Units.

 

“ Unitholder ” means a Person who holds Units.

 

“ 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 4.7(d)) over (b) the Carrying Value of such property as of such date (prior to any adjustment to be made pursuant to Section 4.7(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 4.7(d) as of such date) over (b) the fair market value of such property as of such date (as determined under Section 4.7(d)).

 

“ Unrecovered Capital ” means, at any time, with respect to a Unit, the Unrecovered Initial Unit Price.

 

“ Unrecovered Initial Unit Price ” means, at any time, with respect to a Unit of any class or series, the Initial Unit Price, less the sum of all distributions theretofore made in respect of such Unit constituting, and which for purposes of determining the priority of such distribution is treated as constituting, Cash from Interim Capital Transactions and of any distributions of cash (or the Net Agreed Value of any distributions in kind) in connection with the dissolution and liquidation of the Partnership theretofore made in respect of a Unit that was sold in the initial offering of such class or series of Units.

 

ARTICLE III

 

PURPOSE

 

Section 3.1

Purpose and Business

 

The purpose and nature of the business to be conducted by the Partnership shall be (i) to serve as a partner in the Operating Partnership and, in connection therewith, to exercise all of the

 

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rights and powers conferred upon the Partnership as a partner in the Operating Partnership pursuant to the Operating Partnership Agreement or otherwise, (ii) to engage directly in, or to enter into any partnership, joint venture or similar arrangement to engage in, the production and distribution of nitrogen fertilizers and any activities necessarily incidental or ancillary thereto 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 (iii) to do anything necessary or appropriate to the foregoing (including, without limitation, the making of capital contributions or loans to the Operating Partnership or in connection with its involvement in the activities referred to in clause (ii) of this sentence).

 

Section 3.2

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 3.1 and for the protection and benefit of the Partnership.

 

ARTICLE IV

 

CAPITAL CONTRIBUTIONS

 

Section 4.1

Organizational Contributions and Return

 

(a) To form the Partnership under the Delaware Act, the General Partner made an initial Capital Contribution to the Partnership and was admitted as the general partner of the Partnership, and the Organizational Limited Partner made an initial Capital Contribution to the Partnership and was admitted as a limited partner of the Partnership.

 

(b) As of the Closing Date, after giving effect to (i) the transactions contemplated by Section 4.2 and (ii) the admission to the Partnership of the Initial Limited Partners in accordance with this Agreement, the interest in the Partnership of the Organizational Limited Partner was terminated, the Capital Contribution by the General Partner and the Capital Contribution by the Organizational Limited Partner as initial Capital Contributions were refunded and the Organizational Limited Partner withdrew as a limited partner of the Partnership. 98/99ths of any interest or other profit that may have resulted from the investment or other use of such initial Capital Contributions was allocated and distributed to the Organizational Limited Partner, and the balance thereof was allocated and distributed to the General Partner.

 

Section 4.2

Contributions by the General Partner and the Initial Limited Partners

 

(a) On the Closing Date, the General Partner, as more fully provided in the Conveyance Agreement, conveyed, contributed and delivered to the Partnership, as a Capital Contribution, its limited partner interest in the Operating Partnership in exchange for a Partnership Interest as general partner in the Partnership representing a 1/99th Partnership Interest, 6,000,000 Junior Preference Units which were convertible into Senior Preference Units on a one-for-one basis as provided herein and 5,172,414 Common Units.

 

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(b) On the Closing Date, each Underwriter contributed and delivered to the Partnership cash in an amount equal to the Issue Price per Unit, multiplied by the number of Senior Preference Units specified in the Underwriting Agreement to be purchased by such Underwriter at the “First Closing Date” as such term is used in the Underwriting Agreement. In exchange for such Capital Contribution, the Partnership issued Senior Preference Units to each Underwriter on whose behalf such Capital Contribution was made in an amount equal to the quotient obtained by dividing (x) the cash contribution to the Partnership by or on behalf of such Underwriter by (y) the Issue Price per Unit. Upon receipt of such Capital Contribution, each Underwriter was admitted to the Partnership as an Initial Limited Partner in respect of the Senior Preference Units so issued to it.

 

Section 4.3

GP Reorganization

 

Pursuant to the Reorganization Agreement the 1/99ths interest of the General Partner in the Partnership was changed to, and became, (i) a 0.025/99ths, General Partner Interest (represented by 4,720 General Partner Units) and (ii) a 0.975/99ths Limited Partner Interest (represented by 184,072 Class B Common Units). Simultaneously, the 1% interest of the General Partner in the Operating Partnership was changed to, and became, (1) a 0.025% general partner interest in the Operating Partnership and (2) a 0.975% limited partner interest in the Operating Partnership.

 

Section 4.4

Issuances of Additional Units and Other Securities

 

(a) Subject to Section 4.4(c), the General Partner is hereby authorized to cause the Partnership to issue, in addition to the Senior Preference Units, Junior Preference Units and Common Units issued pursuant to Section 4.2, such additional Units, or classes or series thereof, or options, rights, warrants or appreciation rights relating thereto, or any other type of equity security that the Partnership may lawfully issue, any unsecured or secured debt obligations of the Partnership or debt obligations of the Partnership convertible into any class or series of equity securities of the Partnership (collectively, “Partnership Securities”), for any Partnership purpose, at any time or from time to time, to the Partners or to other Persons for such consideration and on such terms and conditions as shall be established by the General Partner in its sole discretion, all without the approval of any Limited Partners. The General Partner shall have sole discretion, subject to the guidelines set forth in this Section 4.4 and the requirements of the Delaware Act, in determining the consideration and terms and conditions with respect to any future issuance of Partnership Securities.

 

(b) Notwithstanding any provision of this Agreement to the contrary, additional Partnership Securities to be issued by the Partnership pursuant to this Section 4.4 shall be issuable from time to in one or more classes, or one or more series of any of such classes, with such designations, preferences and relative, participating, optional or other special rights, powers and duties, including, without limitation, rights, powers and duties senior to existing classes and series of Partnership Securities, all as shall be fixed by the General Partner in the exercise of its sole and complete discretion, subject to Delaware Law, including, without limitation, (i) the allocations of items of Partnership income, gain, loss, deduction and credit to each such class or series of Partnership Securities; (ii) the right of each such class or series of Partnership Securities to share in Partnership distributions; (iii) the rights of each such class or series of Partnership

 

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Securities upon dissolution and liquidation of the Partnership; (iv) whether such class or series of additional Partnership Securities is redeemable or callable by the Partnership and, if so, the price at which, and the terms and conditions upon which, such class or series of additional Partnership Securities may be redeemed or called by the Partnership; (v) whether such class or series of additional Partnership Securities is issued with the privilege of conversion and, if so, the rate at which, and the terms and conditions upon which, such class or series of Partnership Securities may be converted into any other class or series of Partnership Securities; (vi) the terms and conditions upon which each such class or series of Partnership Securities will be issued, evidenced by Unit Certificates and assigned or transferred; and (vii) the right, if any, of each such class or series of Partnership Securities to vote on Partnership matters, including, without limitation, matters relating to the relative rights, preferences and privileges of each such class or series.

 

(c) Upon the issuance of any Units by the Partnership, the General Partner shall be required to make additional Capital Contributions to the Partnership in exchange for additional General Partner Units and Class B Common Units such that the balance in its Capital Account (a) in respect of the General Partner Units shall equal 0.025/99ths of the total positive Capital Account balances of all Partners and (b) in respect of the Class B Common Units shall equal 0.975/99ths of the total positive Capital Account balances of all Partners.

 

(d) The General Partner is hereby authorized and directed to take all actions that it deems necessary or appropriate in connection with each issuance of Partnership Securities pursuant to Section 4.4(a) and to amend this Agreement in any manner that it deems necessary or appropriate to provide for each such issuance, to admit Additional Limited Partners in connection therewith and to specify the relative rights, powers and duties of the holders of the Units or other Partnership Securities being so issued.

 

(e) The General Partner is authorized to cause the issuance of Partnership Securities pursuant to any employee benefit plan for the benefit of employees responsible for the operations of the Partnership or the Operating Partnership maintained or sponsored by the General Partner, the Partnership, the Operating Partnership or any Affiliate of any of them.

 

(f) The General Partner shall do all things necessary to comply with the Delaware Act and is authorized and directed to do all things it determines to be necessary or advisable in connection with any future issuance of Partnership Securities, including, without limitation, compliance with any statute, rule, regulation or guideline of any federal, state or other governmental agency or any National Securities Exchange on which the Units or other Partnership Securities are listed for trading.

 

Section 4.5

Establishment of Class B Common Units and General Partner Units

 

(a) The General Partner hereby designates and creates a series of Units to be designated as “Class B Common Units” and consisting of a total of 184,072 Class B Common Units and fixes the designations, preferences and relative, participating, optional or other special rights, powers and duties of holders of the Class B Common Units as set forth in this Section 4.5 and elsewhere in this Agreement.

 

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(b) Except as otherwise provided in this Agreement, each Class B Common Unit shall be identical to a Common Unit, and the holder of a Class B Common Unit shall have the rights of a holder of a Common Unit with respect to, without limitation, Partnership distributions and allocations of income, gain, loss or deductions.

 

(c) The Class B Common Units shall have no voting rights on any matter.

 

(d) The General Partner hereby designates and creates a series of Units to be designated as “General Partner Units” and consisting of a total of 4,720 General Partner Units and fixes the designations, preferences and relative, participating, optional or other special rights, powers and duties of holders of the General Partner Units as set forth in this Section 4.5 and elsewhere in this Agreement.

 

Section 4.6

Limited Preemptive Rights

 

Except as provided in Section 4.4(c), no Person shall have any preemptive, preferential or other similar right with respect to (a) additional Capital Contributions; (b) issuance or sale of any class or series of Units or other Partnership Securities, whether unissued, held in the treasury or hereafter created; (c) issuance of any obligations, evidences of indebtedness or other securities of the Partnership convertible into or exchangeable for, or carrying or accompanied by any rights to receive, purchase or subscribe to, any such Units or other Partnership Securities; (d) issuance of any right of subscription to or right to receive, or any warrant or option for the purchase of, any such Units or other Partnership Securities; or (e) issuance or sale of any other securities that may be issued or sold by the Partnership.

 

Section 4.7

Capital Accounts

 

(a) The Partnership shall maintain for each Partner (or a beneficial owner of Units 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 in its sole discretion) owning Units a separate Capital Account with respect to such Units, 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 Units pursuant to this Agreement and (ii) all items of Partnership income and gain (including, without limitation, income and gain exempt from tax) computed in accordance with Section 4.7(b) and allocated with respect to such Units, pursuant to Section 5.1 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 Units, pursuant to this Agreement and (y) all items of Partnership deduction and loss computed in accordance with Section 4.7(b) and allocated with respect to such Units pursuant to Section 5.1.

 

The Partnership shall maintain for the General Partner a separate Capital Account with respect to its General Partner 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 General Partner Interest pursuant to this Agreement and (ii) all items of Partnership income and gain (including, without

 

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limitation, income and gain exempt from tax) computed in accordance with Section 4.7(b) and allocated with respect to such Partnership Interest pursuant to Section 5.1, and decreased by (x) the cash amount or the 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 4.7(b) and allocated with respect to such Partnership Interest pursuant to Section 5.1.

 

(b) For purposes of computing the amount of any item of income, gain, loss or deduction 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, without limitation, any method of depreciation, cost recovery or amortization used for that purpose); provided that:

 

(i) Solely for purposes of this Section 4.7, the Partnership shall be treated as owning directly its proportionate share (as determined by the General Partner based upon the provisions of the Operating Partnership Agreement) of all property owned by the Operating Partnership.

 

(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 5.1.

 

(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.

 

(iv) Any income, gain or loss 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 4.7(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 rate of

 

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depreciation, cost recovery or amortization derived from the same method and useful life (or, if applicable, the remaining useful life) as is applied for federal income tax purposes; provided, however , that, if the asset has a zero adjusted basis for federal income tax purposes, depreciation, cost recovery or amortization deductions shall be determined using any reasonable method that the General Partner may adopt.

 

(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; provided , however , that, if the transfer causes a termination of the Partnership under Section 708(b)(1)(B) of the Code, the Partnership’s properties shall be deemed to have been distributed in liquidation of the Partnership to the Partners (including any transferee of a Partnership Interest that is a party to the transfer causing such termination) pursuant to Sections 14.3 and 14.4 and recontributed by such Partners in reconstitution of the Partnership. In such event, the Carrying Values of the Partnership properties shall be adjusted immediately prior to such deemed distribution pursuant to Section 4.7(d)(ii) and such Carrying Values shall then constitute the Agreed Values of such properties upon such deemed contribution to the reconstituted Partnership. The Capital Accounts of such reconstituted Partnership shall be maintained in accordance with the principles of this Section 4.7.

 

(d) (i) Consistent with the provisions of Treasury Regulation Section 1.704-1(b)(2)(iv)(f), on an issuance of additional Units for cash or Contributed Property or the conversion of the General Partner’s Combined Interest to Common Units pursuant to Section 13.3(b), the Capital Accounts of all Partners and the Carrying Value of 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 5.1. 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 the issuance of Partnership Interests shall be determined by the General Partner using such reasonable method of valuation as it may adopt; provided, however , the General Partner, in arriving at such valuation, must take into account the Limited Partner Equity Value and the General Partner Equity Value at such time. The General Partner shall allocate such aggregate value among the assets of the Partnership (in such manner as it determines in its sole discretion to be reasonable) 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 each 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 5.1. Any Unrealized Gain or

 

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Unrealized Loss attributable to such property shall be allocated in the same manner as Net Termination Gain or Net Termination Loss pursuant to Section 5.1(c); provided, however , that, in making any such allocation, Net Termination Gain or Net Termination Loss actually realized shall be allocated first. 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 a deemed distribution occurring as a result of a termination of the Partnership pursuant to Section 708 of the Code, be determined and allocated in the same manner as that provided in Section 4.7(d)(i) or (B) in the case of a liquidating distribution pursuant to Sections 14.3 or 14.4, be determined and allocated by the Liquidator using such reasonable methods of valuation as it may adopt.

 

Section 4.8

Interest

 

No interest shall be paid by the Partnership on Capital Contributions or on balances in Partners’ Capital Accounts.

 

Section 4.9

No Withdrawal

 

No Partner shall be entitled to withdraw any part of its Capital Contributions or its Capital Account or to receive any distribution from the Partnership, except as provided herein.

 

Section 4.10

Loans from Partners

 

Loans by a Partner to the Partnership shall not constitute Capital Contributions. If any Partner shall advance funds to the Partnership in excess of the amounts required hereunder to be contributed by it to the capital of the Partnership, the making of such excess advances shall not result in any increase in the amount of the Capital Account of such Partner. The amount of any such excess advances shall be a debt obligation of the Partnership to such Partner and shall be payable or collectible only out of the Partnership Assets in accordance with the terms and conditions upon which such advances are made.

 

Section 4.11

No Fractional Units

 

No fractional Units shall be issued by the Partnership.

 

Section 4.12

Splits and Combinations

 

(a) Subject to Section 4.12(d), the General Partner may make a pro rata distribution of Units or other Partnership Securities to all then current Record Holders of such class or series of Units or other Partnership Securities distributed or may effect a subdivision or combination of Units or other Partnership Securities; provided , however , that after any such distribution, subdivision or combination, each Partner shall have the same Percentage Interest in the Partnership as before such distribution, subdivision or combination. The General Partner shall make such corresponding adjustments as it deems necessary and appropriate to the ratio of conversion with respect to such Units or Partnership Securities, if applicable, and to the price at which such Units may be redeemed or purchased pursuant to Article XVII.

 

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(b) Whenever such a distribution, subdivision or combination of Units or other Partnership Securities is declared, the General Partner shall select a Record Date as of which the distribution, subdivision or combination shall be effective and shall send notice of the distribution, subdivision or combination at least twenty days prior to such Record Date to each Record Holder as of the date not less than ten days prior to the date of such notice. The General Partner also may cause a firm of independent public accountants selected by it to calculate the number of Units to be held by each Record Holder after giving effect to such distribution, subdivision or combination. The General Partner shall be entitled to rely on any certificate provided by such firm as conclusive evidence of the accuracy of such calculation.

 

(c) Promptly following any such distribution, subdivision or combination, the General Partner may cause Unit Certificates or Depositary Receipts, as the case may be, to be issued to the Record Holders of Units as of the applicable Record Date representing the new number of Units held by such Record Holders, or the General Partner may adopt such other procedures as it may deem appropriate to reflect such distribution, subdivision or combination; provided, however , if any such distribution, subdivision or combination results in a smaller total number of Units Outstanding, the General Partner shall require, as a condition to the delivery to a Record Holder of such new Unit Certificate or Depositary Receipt, the surrender of any Unit Certificate or Depositary Receipt, as the case may be, held by such Record Holder immediately prior to such Record Date.

 

(d) The Partnership shall not issue fractional Units upon any distribution, subdivision or combination of Units. If a distribution, subdivision or combination of Units would result in the issuance of fractional Units but for the provision of Section 4.11 and this Section 4.12(d), each fractional Unit shall be rounded to the nearest whole Unit (and a 0.5 Unit shall be rounded to the next higher Unit).

 

ARTICLE V

 

ALLOCATIONS AND DISTRIBUTIONS

 

Section 5.1

Allocations for Capital Account Purposes

 

For purposes of maintaining the Capital Accounts and in determining the rights of the Partners among themselves, the Partnership’s items of income, gain, loss and deduction (computed in accordance with Section 4.7(b)) shall be allocated among the Partners in each taxable year (or portion thereof) as provided herein below.

 

(a) Net income . After giving effect to the allocations set forth in Section 5.1(d), Net Income for each taxable period and all items of income, gain, loss and deduction taken into account in computing Net Income for such taxable period shall be allocated as follows:

 

(i) First , 100% to the General Partner until the aggregate Net Income allocated to the General Partner pursuant to this Section 5.1(a)(i) for the current taxable year and all previous taxable years is equal to the aggregate Net Losses allocated to the General Partner pursuant to Section 5.1(b)(iii) for all previous taxable years;

 

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(ii) Second , 100% to all Partners, in accordance with their respective Percentage Interests, until the aggregate Net Income allocated to such Partners pursuant to this Section 5.1(a)(ii) for the current taxable year and all previous taxable years is equal to the aggregate Net Losses allocated to such Limited Partners and the General Partner pursuant to Section 5.1(b)(ii) for all previous taxable years; and

 

(iii) Third , the balance, if any, shall be allocated between the General Partner, in its capacity as general partner, and the Limited Partners in each taxable year in the same proportion as Available Cash for such taxable year (including, for this purpose, distributions of Available Cash made in a subsequent taxable year with respect to the last quarter of the Partnership year for which the item of income, gain, loss, deduction or credit as the case may be, is being allocated, but excluding any portion of any distribution of Available Cash with respect to which a priority allocation has been made pursuant to Section 5.1(d)(iv)) was distributed to the General Partner and the Limited Partners. If the Partnership does not distribute any Available Cash in respect of a taxable year, the balance, if any, shall be allocated among the Partners in accordance with their respective Percentage Interests. Except as otherwise provided in this Section 5.1, each item of income, gain, loss, deduction or credit (computed in accordance with Section 4.7(b)) allocated to the Limited Partners, in the aggregate, shall be allocated to each Limited Partner pro rata in accordance with the number of Units held by such Limited Partner.

 

(b) Net Losses . After giving effect to the allocations set forth in Section 5.1(d), Net Losses for each taxable period and all items of income, gain, loss and deduction taken into account in computing Net Losses for such taxable period shall be allocated as follows:

 

(i) First , 100% to all Partners until the aggregate Net Losses allocated pursuant to this Section 5.1(b)(i) for the current taxable year and all previous taxable years is equal to the aggregate Net Income allocated to such Partners pursuant to Section 5.1(a)(iii) for all previous taxable years. For purposes of this Section 5.1(b)(i), Net Losses for any taxable year shall be allocated to the Partners in the same proportion as any Net Income was allocated to such Partners pursuant to Section 5.1(a)(iii) in any previous taxable years (beginning with the first such taxable year in which Net Income was allocated to the Partners pursuant to Section 5.1(a)(iii) up to an amount equal to the amount of Net Income allocated to the Partners in any such taxable year);

 

(ii) Second , 100% to all Partners holding Units, Pro Rata; provided that Net Losses shall not be allocated pursuant to this Section 5.1(b)(ii) to the extent that such allocation would cause any Limited Partner to have a deficit balance in its Adjusted Capital Account at the end of such taxable year (or increase any existing deficit balance in its Adjusted Capital Account);

 

(iii) Third , the balance, if any, 100% to the General Partner.

 

(c) Net Termination Gains and Losses . After giving effect to the allocations set forth in Section 5.1(d), all items of gain and loss taken into account in computing Net Termination Gain or Net Termination Loss for such taxable period shall be allocated in the same manner as

 

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such Net Termination Gain or Net Termination Loss is allocated hereunder. All allocations under this Section 5.1(c) shall be made after Capital Account balances have been adjusted by all other allocations provided under this Section 5.1 and after all distributions of Available Cash provided under Sections 5.4 and 5.5 have been made with respect to the taxable period ending on the date of the Partnership’s liquidation pursuant to Section 14.3. References in this Section to the Minimum Quarterly Distribution and the Target Distributions are to such items as adjusted from time to time.

 

(i) If a Net Termination Gain is recognized (or deemed recognized pursuant to Section 4.7(d)) from Termination Capital Transactions, such Net Termination Gain shall be allocated between the General Partner and the Limited Partners in the following manner (and the Capital Accounts of the Partners shall be increased by the amount so allocated in each of the following subclauses, in the order listed, before an allocation is made pursuant to the next succeeding subclause):

 

(A) First , to each Partner having a deficit balance in such Partner’s Capital Account to the extent of and in proportion to such deficit balance;

 

(B) Second , 100% to the Common Units, Class B Common Units and General Partner Units, Pro Rata, until each Partner’s Capital Account in respect of each Common Unit (determined on a per Unit basis) is equal to the sum of (1) its Unrecovered Capital in respect of such Unit plus (2) any then existing Cumulative Common Unit Deficiency;

 

(C) Third , 100% to all Outstanding Units, Pro Rata until each Partner’s Capital Account in respect of each Unit (determined on a per Unit basis) is equal to the First Liquidation Target Amount;

 

(D) Fourth , (i) 85/99ths to all Outstanding Common Units, Pro Rata, (ii) 1/99 to the General Partner Units and Class B Common Units, Pro Rata and (iii) 13/99ths to the General Partner, until each Partner’s Capital Account in respect of each Unit (determined on a per Unit basis) is equal to the Second Liquidation Target Amount;

 

(E) Fifth , (i) 75/99ths to all Outstanding Common Units, Pro Rata, (ii) 1/99ths to the General Partner Units and Class B Common Units, Pro Rata and (iii) 23/99ths to the General Partner, until each Partner’s Capital Account in respect of each Unit (determined on a per Unit basis) is equal to the Third Liquidation Target Amount; and

 

(F) Thereafter , (i) 50/99ths to all Outstanding Common Units, Pro Rata, (ii) 1/99ths to the General Partner Units and Class B Common Units, Pro Rata and (iii) 48/99ths to the General Partner.

 

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(ii) If a Net Termination Loss is recognized (or deemed recognized pursuant to Section 4.7(d)) from Termination Capital Transactions, such Net Termination Loss shall be allocated to the Partners in the following manner:

 

(A) First , 100% to the Partners holding General Partner Units, Class B Common Units or Common Units in proportion to, and to the extent of, the positive balances in their respective Capital Accounts until all such balances are reduced to zero; and

 

(B) Second , the balance, if any, 100% to the General Partner.

 

(d) Special Allocations . Notwithstanding any other provision of this Section 5.1, the following allocations shall be made for such taxable period:

 

(i) Partnership Minimum Gain Chargeback . Notwithstanding any other provision of this Section 5.1, if there is a net decrease in Partnership Minimum Gain during any Partnership taxable period, each Partner shall be allocated items of Partnership income and gain for such period (and, if necessary, subsequent periods) in the manner and amounts provided in Treasury Regulation Sections 1.704-2(f)(b), 1.704-2(g)(2) and 1.704-2(j)(2)(i), or any successor provision. For purposes of this Section 5.1(d), each Partner’s Adjusted Capital Account balance shall be determined, and the allocation of income or gain required hereunder shall be effected, prior to the application of any other allocations pursuant to this Section 5.1(d) with respect to such taxable period. This Section 5.1(d)(i) is intended to comply with the Partnership Minimum Gain chargeback requirement in Treasury Regulation Section 1.704-2(f) and shall be interpreted consistently therewith.

 

(ii) Chargeback of Partner Nonrecourse Debt Minimum Gain . Notwithstanding the other provisions of this Section 5.1 (other than Section 5.1(d)(i)), if there is a net decrease in Partner Nonrecourse Debt Minimum Gain during any Partnership taxable period, any Partner with a share of Partner Nonrecourse Debt Minimum Gain at the beginning of such taxable period shall be allocated items of Partnership income and gain for such period (and, if necessary, subsequent periods) in the manner and amounts provided in Treasury Regulation Sections 1.704-2(i)(4) and 1.704-2(j)(2)(ii), or any successor provision. For purposes of this Section 5.1(d), each Partner’s Adjusted Capital Account balance shall be determined, and the allocation of income or gain required hereunder shall be effected, prior to the application of any other allocations pursuant to this Section 5.1(d), other than Section 5.1(d)(i), with respect to such taxable period. This Section 5.1(d)(ii) is intended to comply with the chargeback of items of income and gain requirement in Treasury Regulation Section 1.704-2(i)(4) and shall be interpreted consistently therewith.

 

(iii) Qualified Income Offset . Except as provided in Sections 5.1(d)(i) and 5.1(d)(ii), in the event any Partner unexpectedly receives any adjustments, allocations or distributions described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), items of Partnership income and gain shall be allocated to such Partner in an amount and manner sufficient to eliminate, to the extent required by the Treasury Regulations, the deficit balance, if any, in its Adjusted Capital Account created by such adjustments, allocations or distributions as quickly as possible; provided that an allocation pursuant to this Section 5.1(d)(iii) shall be made only if and to

 

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the extent that such Partner would have a deficit balance in its Adjusted Capital Account after all other allocations provided in this Section 5.1 have been tentatively made as if this Section 5.1(d)(iii) were not in this Agreement.

 

(iv) Priority Allocation . If the amount of cash distributed (except cash distributed pursuant to Section 14.3) with respect to a class or series of Units is disproportionately greater (on a per Unit basis), than the amount of cash distributed with respect to any other class or series of Units (on a per Unit basis), then before the allocation of Net Income or Net Loss, as the case may be, pursuant to the other provisions of this Section 5.1, (A) first, each Limited Partner holding Units with respect to which such disproportionately greater cash distribution was made shall be allocated gross income in an amount equal to the product of (X) the amount by which the distribution with respect to such class or series of Units exceeds (on a per Unit basis) the distribution (on a per Unit basis), if any, on the class or series of Units receiving the smallest distribution and (Y) the number of Units of such class or series held by such Limited Partner receiving the disproportionately greater distribution, (B) the General Partner shall be allocated gross income in an amount equal to the product obtained by multiplying (X) the quotient determined by dividing (aa) the General Partner’s Percentage Interest at the time in which the greater cash distribution occurs by (bb) the sum of 100 less the General Partner’s Percentage Interest at the time in which the greater cash distribution occurs times (Y) the sum of the gross income allocated pursuant to the immediately preceding clause (A) and (C) the Net Income or Net Loss otherwise allocable to the Partners under the other provisions of this Agreement shall be recomputed by excluding the gross income allocated pursuant to the immediately preceding clauses (A) and (B).

 

(v) Gross Income Allocations . In the event any Partner has a deficit balance in its Capital Account at the end of any Partnership taxable period that is in excess of the sum of (A) the amount such Partner is obligated to restore pursuant to any provision of this Agreement and (B) the amount such Partner is deemed to be obligated to restore pursuant to Treasury Regulation Sections 1.704-2(g) and 1.704-2(i)(5), such Partner shall be allocated items of Partnership gross income and gain in the amount of such excess as quickly as possible; provided that an allocation pursuant to this Section 5.1(d)(v) shall be made only if and to the extent that such Partner would have a deficit Capital Account in excess of such sum after all other allocations provided for in this Section 5.1 have been tentatively made as if Section 5.1(d)(iii) and this Section 5.1(d)(v) were not in this Agreement.

 

(vi) Nonrecourse Deductions . Nonrecourse Deductions for any taxable period shall be allocated to the Partners in the same ratios that Net Income or Net Losses, as the case may be, is allocated for the taxable year. If the General Partner determines in its good faith discretion that the Partnership’s Nonrecourse Deductions must be allocated in a different ratio to satisfy the safe harbor requirements of the Treasury Regulations promulgated under Section 704(b) of the Code, the General Partner is authorized, upon notice to the Limited Partners, to revise the prescribed ratio to the numerically closest ratio that does satisfy such requirements.

 

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(vii) Partner Nonrecourse Deductions . Partner Nonrecourse Deductions for any taxable period shall be allocated 100% to the Partner that bears the Economic Risk of Loss with respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable in accordance with Treasury Regulation Section 1.704-2(i). If more than one Partner bears the Economic Risk of Loss with respect to a Partner Nonrecourse Debt, such Partner Nonrecourse Deductions attributable thereto shall be allocated between or among such Partners in accordance with the ratios in which they share such Economic Risk of Loss.

 

(viii) Nonrecourse Liabilities . For purposes of Treasury Regulation Section 1.752-3(a)(3), the Partners agree that Nonrecourse Liabilities of the Partnership in excess of the sum of (A) the amount of Partnership Minimum Gain and (B) the total amount of Nonrecourse Built-in Gain shall be allocated among the Partners in accordance with their respective Percentage Interests.

 

(ix) Code Section 754 Adjustments . 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 to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis), and such item of gain or loss shall be allocated to the Partners in a manner consistent with the manner in which their Capital Accounts are required to be adjusted pursuant to such Section of the Treasury Regulations.

 

(x) Curative Allocation .

 

(A) Notwithstanding any other provision of this Section 5.1, other than the Required Allocations provisions, the Required Allocations shall be taken into account in making the Agreed Allocations so that, to the extent possible, the net amount of items of income, gain, loss and deduction allocated to each Partner pursuant to the Required Allocations and the Agreed Allocations, together, shall be equal to the net amount of such items that would have been allocated to each such Partner under the Agreed Allocations had the Required Allocations and this Curative Allocation not otherwise been provided in this Section 5.1. Notwithstanding the preceding sentence, Required Allocations relating to (1) Nonrecourse Deductions shall not be taken into account except to the extent that there has been a decrease in Partnership Minimum Gain and (2) Partner Nonrecourse Deductions shall not be taken into account except to the extent that there has been a decrease in Partner Nonrecourse Debt Minimum Gain. Allocations pursuant to this Section 5.1(d)(x)(A) shall only be made with respect to Required Allocations to the extent the General Partner reasonably determines that such allocations will otherwise be inconsistent with the economic agreement among the Partners. Further, allocations pursuant to this Section 5.1(d)(x)(A) shall be deferred with respect to allocations pursuant to clauses (1) and (2) hereof

 

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to the extent the General Partner reasonably determines that such allocations are likely to be offset by subsequent Required Allocations.

 

(B) The General Partner shall have reasonable discretion, with respect to each taxable period, to (1) apply the provisions of Section 5.1(d)(x)(A) in whatever order is most likely to minimize the economic distortions that might otherwise result from the Required Allocations, and (2) divide all allocations pursuant to Section 5.1(d)(x)(A) among the Partners in a manner that is likely to minimize such economic distortions.

 

Section 5.2

Allocations for Tax Purposes

 

(a) Except as otherwise provided herein, for federal income tax purposes, each item of income, gain, loss and deduction shall be allocated among the Partners in the same manner as its correlative item of “book” income, gain, loss or deduction is allocated pursuant to Section 5.1.

 

(b) In an attempt to eliminate Book-Tax Disparities attributable to a Contributed Property or Adjusted Property, items of income, gain, loss, depreciation, amortization and cost recovery deductions shall be allocated for federal income tax purposes among the Partners as follows:

 

(i) (A) In the case of a Contributed Property, such items attributable thereto shall be allocated among the Partners in the manner provided under Section 704(c) of the Code that takes into account the variation between the Agreed Value of such property and its adjusted tax basis at the time of contribution; and (B) except as otherwise provided in Section 5.2(b)(iii), any item of Residual Gain or Residual Loss attributable to a Contributed Property shall be allocated among the Partners in the same manner as its correlative item of “book” gain or loss is allocated pursuant to Section 5.1.

 

(ii) (A) In the case of an Adjusted Property, such items shall (1) first , be allocated among the Partners in a manner consistent with the principles of Section 704(c) of the Code to take into account the Unrealized Gain or Unrealized Loss attributable to such property and the allocations thereof pursuant to Sections 4.7(d)(i) or 4.7(d)(ii), and (2) second , in the event such property was originally a Contributed Property, be allocated among the Partners in a manner consistent with Section 5.2(b)(i)(A); and (B) except as otherwise provided in Section 5.2(b)(iii), any item of Residual Gain or Residual Loss attributable to an Adjusted Property shall be allocated among the Partners in the same manner as its correlative item of “book” gain or loss is allocated pursuant to Section 5.1.

 

(iii) Any items of income, gain, loss or deduction otherwise allocable under Sections 5.2(b)(i)(B) or 5.2(b)(ii)(B) shall be subject to allocation by th