EXHIBIT 10.1
LIMITED LIABILITY
LIMITED PARTNERSHIP AGREEMENT
OF
SLATER
DOME GATHERING, LLLP
A Colorado Limited Liability Limited Partnership
THIS LIMITED
LIABILITY LIMITED PARTNERSHIP AGREEMENT is executed on the
date or dates indicated below, by and
between Natural Resource Group Gathering,
LLC, a Colorado limited liability company
(hereinafter the "General Partner" or
"NRGG"), as General Partner, and the
undersigned entities and individuals, as
Limited Partners.
RECITALS
A. The Partners
have determined to enter into a limited liability limited
partnership under the laws of the State of
Colorado for the purpose of
constructing and operating a natural gas
pipeline ("Pipeline") on the
Wyoming/Colorado border, and for the
purpose of acquiring, maintaining,
developing, constructing, managing,
operating, selling, exchanging, holding for
future appreciation, disposing of, leasing
and otherwise investing in such
property or any interest therein or
components thereof and in carrying on any
lawful business related thereto.
B. The Partners
have determined to join together in the undertaking
contemplated in Recital A under the terms
and conditions, and subject to the
provisions, set forth in this
Agreement.
AGREEMENT
NOW, THEREFORE, the Partners
hereby make and declare this Limited Liability
Limited Partnership Agreement to reflect
and effectuate the foregoing, and to
cause the affairs of the Limited
Partnership and the terms and provisions of
this Agreement, as follows:
1. Creation and
Objects of Limited Liability Limited Partnership. The
Partners hereby form the Limited
Partnership under and pursuant to the Act, to
engage in (a) the construction and
operation of a natural gas gathering system
on the Wyoming/Colorado border all with a
view to the production of a profit;
(b) the carrying on of all lawful business
for a profit; and (c) the carrying on
of any and all activities relating to the
foregoing purposes. A duly executed
and acknowledged Certificate of Limited
Partnership and Registration of Limited
Liability Limited Partnership setting forth
the information required under the
Act and the information required by C.R.S.
ss. 7-64-1002 was filed in the office
of the Secretary of State of the State of
Colorado on September 1, 2004. Neither
the Partnership nor the General Partner
shall be required to deliver copies of
the filed Certificate and Registration or
any amendment thereto to any Limited
Partner.
2. Name,
Principal Place of Business, Registered Office and Registered
Agent. The name of this Limited Partnership
shall be SLATER DOME GATHERING,
LLLP, a Colorado limited liability limited
partnership, and the principal place
of business of the Partnership shall be
located at 5632 S. Spotswood Street,
Littleton, Colorado 80120. The registered
office of the
<PAGE>
Partnership shall be located at 5632 S.
Spotswood Street, Littleton, Colorado
80120 and Natural Resource Group Gathering,
LLC shall act as agent for service
of process on the Partnership. The
registered office may be changed by the
General Partner upon notice to the other
Partners, provided such change is
reflected in a duly executed, acknowledged
and filed Amended Certificate.
3. Term of
Partnership. The Partnership shall commence on the date of
filing the Certificate of Limited
Partnership and Registration of Limited
Liability Limited Partnership. The business
of the Partnership shall continue
uninterrupted from such date until
terminated under the terms and provisions of
Article 15.
4. Maintenance
of Books, Records, Reports and Accounts, Tax Returns; Bank
Account.
4.1 Books of
Account. At all times the General Partner shall maintain or
cause to be maintained true and proper
books, records, reports, and accounts in
accordance with the Partnership's
accounting methods consistently applied, in
which shall be entered fully and accurately
all transactions of the Partnership.
The Partnership shall maintain its records
on the accrual method of accounting
in accordance with GAAP.
4.2 Location of
Books. The General Partner shall keep at the registered
office the books and records of the
Partnership, including (a) a current list of
the full name and last known mailing
address of each Partner set forth in
alphabetical order; (b) a copy of the
Certificate of Limited Partnership and
Registration of Limited Liability Limited
Partnership and all amendments
thereto, together with executed copies of
any powers of attorney pursuant to
which any Certificate and Registration or
amendment has been executed; (c)
copies of the Partnership's federal, state,
and local income tax returns and
reports, if any, for the three (3) most
recent Partnership Accounting Years; (d)
copies of the Agreement and any amendments
thereto; (e) the accounting books and
records, and copies of the financial
statements of the Partnership, for the
three (3) most recent Partnership
Accounting Years; and (f) all documents and
records pertaining to the Partnership and
other aspects of the Partnership
business.
4.3 Inspection
of Records. All books, records, reports, and accounts shall
be open to inspection by any Partner or
their duly authorized representative
upon at least five days written notice, and
upon a showing that the request is
made in good faith and for a purpose which
is reasonably related to the
Partner's Partnership Interest, as provided
in the Act, at any reasonable time
during business hours; and said Partner or
representative shall have the further
right to make copies or excerpts therefrom,
so long as such inspection or
duplication does not materially interfere
with the duties of any Partnership
employee or agent and the cost thereof is
borne by such Partner. Further, each
Limited Partner shall have the right to
obtain from the General Partner from
time to time upon reasonable demand:
(a) Business and Financial Information. True and full
information
regarding the
state of the business and financial condition of the
Partnership and
any other information regarding the affairs of the
Partnership;
and
2
<PAGE>
(b) Income Tax Returns. Promptly after becoming available, a copy
of
the
Partnership's federal, state and local income tax returns for
each
year. Further,
each Limited Partner has the right to have a formal
accounting of
partnership affairs whenever circumstances render it just and
reasonable.
4.4 Reports.
(a) Preparation of Reports. The Partnership's accounting books
shall
be closed
quarterly and annually, and financial statements shall be
prepared by the
Partnership. The financial statements shall include a
balance sheet, a
statement of Partnership profit and loss, a statement of
each Partner's
Capital Account and such other supporting, statements as the
General Partner
may deem appropriate. The financial statements shall be
prepared in
accordance with GAAP and the Partnership's accounting methods
consistently
applied and shall be certified by the General Partner. Neither
the Partnership
nor the General Partner shall be obligated to cause any
financial
statements of the Partnership to be audited by any party.
However, any
Partner may request that the financial statements for a
particular year
be audited and, if approved by a majority of the Percentage
Interests owned
by Class A Limited Partners, the costs of such audit shall
be borne by the
requesting Partner, unless the General Partner agrees that
such costs shall
be a Partnership expense.
(2) Reports to Partners or Transferees. No later than March 31
of
every year, the
General Partner shall mail to each Person who was a Partner
or a Transferee
at any time during the prior Partnership Accounting Year
(i) all tax
information relating to the Partnership which is necessary for
the preparation
of such Person's federal, state and local income tax
returns and (ii)
any other information regarding the Partnership and its
operations
during the prior Partnership Accounting Year which, in the
General
Partner's determination, is material or significant to such
Person.
4.5 Tax Returns.
The General Partner shall cause to be prepared, signed and
filed all federal, state and local tax
returns required to be filed by the
Partnership.
4.6 Custody of
Partnership Funds; Bank Accounts.
(a) Safekeeping. The General Partner shall have responsibility for
the
safekeeping and
use of all funds and assets of the Partnership. The funds
of the Partnership
shall be used exclusively with respect to the
Partnership. The
funds of the Partnership shall not be commingled with the
funds of any
other Person, and the General Partner shall not employ, or
permit any other
Person to employ, such funds in any manner except for the
benefit of the
Partnership.
(b) Deposits. All funds of the Partnership not otherwise
invested
shall be
deposited in one or more funds, certificates of deposit,
accounts
or other media
of investment in the name of the Partnership as the General
Partner shall
determine in his, her or its sole discretion, and withdrawals
shall be made
only in the regular course of the Partnership business on
such signature
or signatures as the General Partner may, from time to time,
determine, in
his or her sole discretion.
3
<PAGE>
5. Partnership
Capital.
5.1 Initial
Capital Contribution. Simultaneously with the execution of this
Agreement, the Partners shall make Initial
Capital Contributions in exchange for
their Percentage Interests, as follows:
(a) Initial Capital Contributions of General Partner. The
General
Partner shall
make an Initial Capital Contribution of cash and property as
follows:
(i) an assignment of all of its right, title and interest in
and
to all right of way agreements required to provide a contiguous
right
of way to construct the proposed Pipeline in accordance with
the
proposed Pipeline map attached hereto as Exhibit A;
(ii) an assignment of all of its right, title and interest in
and
to the initial design and transportation agreements entered into
with
third parties to construct and operate the Pipeline, all of which
are
described on Exhibit B attached hereto (the "Pipeline
Agreements");
and
(iii) an assignment of all of its right, title and interest in
and to all permits, consents and other approvals related to the
Pipeline. In exchange for such contribution of cash and property,
the
General Partner shall receive a credit to its Capital Account in
an
amount calculated as follows:
Aggregate Limited Partner Commitments
.75
Such
contribution to capital represents the agreed fair value of
such
Initial Capital Contribution of cash and
property by the General Partner in its
capacity as the General Partner.
(b) Initial Capital Contributions of Limited Partners. The
Limited
Partners shall
make Initial Capital Contributions as follows: Class A
Limited Partners
will be required to contribute at least $50,000 for each
Class A Limited
Partnership Interest and Class B Limited Partners will be
required to
contribute at least $5,000 for each Class B Limited Partnership
Interest (each a
"Commitment" or collectively the "Commitments").
Contributions by
the Limited Partners will be solicited pursuant to a
private
placement memorandum with related subscription documents (the
"Subscription
Agreement") prepared by the General Partner. Upon executing
the Subscription
Agreement, each Limited Partner shall be required to pay
100% of its
Limited Partner Commitment as an Initial Capital Contribution
or if the
Limited Partner is owed money by the Partnership, the Limited
Partner may
elect to convert the debt owed to him, her or it in increments
of $50,000 into
Class A Partnership Interests instead of paying cash Upon
executing the
Subscription Agreement, the subscribing Limited Partner will
also be required
to sign this Agreement (or a counterpart signature page
hereto) and pay
the required funds to the Partnership in immediately
available funds
by certified check or wire transfer to an interest-bearing
escrow account
at Colorado Business Bank designated by the Partnership. If
the Limited
Partner is converting debt in exchange for his, her or its
Class A
Partnership Interests, the Limited Partner shall acknowledge in
writing that he,
she or it is converting the debt into Class A Partnership
Interests.
Partnership Interests that are issued as a result of debt
conversion shall
be
4
<PAGE>
included in the
calculation of the Minimum for purposes of determining if
the Minimum
investment has been reached and the funds in escrow can be
released to the Partnership. If
sufficient funds or notices of debt
conversions are
not obtained by the Commitment Date with which to purchase
the Pipeline and
complete construction thereof, all funds (plus applicable
interest) shall
be returned to the Limited Partners and the notices of debt
conversion shall
be returned to the Limited Partners who issued them.
Each Limited
Partner shall receive a credit to his, her, or its Capital
Account equal to the amount of cash
contributed.
5.2 Additional
Capital Contributions.
(a) In General.
No Partner shall be obligated or required to make any
Additional Capital Contributions to the
Partnership except as expressly provided
for herein. A Partner may make voluntary
Additional Capital Contributions to the
Partnership at any time, with the consent
of the General Partner.
(b) Event of
Default. The failure by any Partner, to make, when due or
within five (5) business days thereafter,
any portion of the Additional Capital
Contribution required to be contributed by
such Partner pursuant to this
Agreement, or any other payment required to
be made by it to the Partnership,
shall constitute an Event of Default by
such Partner. Upon the occurrence of an
Event of Default, such Partner may be
deemed a Defaulting Partner and the
following provisions of Section 11 shall
apply.
(c) Excess
Contribution Needs. If the General Partner determines that the
Partnership needs additional funds in
excess of its currently available funds,
the General Partner shall notify all
Partners and identify the amounts requested
and the reasons for such request. The
General Partners shall establish the
timing and procedure for such Additional
Capital Contributions, provided,
however, the date on which such
contributions are required shall not be earlier
than 15 days after receipt of the notice
sent by the General Partner requesting
such contribution. If all Partners are
willing to contribute their pro rata
share of such requested Additional Capital
Contribution, no adjustments shall be
made to the Percentage Interests of the
Partners. If not all Partners are
willing to contribute their pro rata share
of such requested Additional Capital
Contributions, the General Partner shall be
free to obtain such funds from all
Partners by a contribution of capital
contributions and/or loans. If the General
Partner obtains the requested Additional
Capital Contributions from some, but
not all of the Partners, the General
Partner may accept such contributions and
the Percentage Interests of the Partners
shall be adjusted in accordance with
Section 11.2(d) hereof, with the Partners
not making such Additional Capital
Contributions being treated as Defaulting
Partners solely for the purpose of the
dilution formula set forth in Section
11.2(d). To the extent the General Partner
is unable to entirely fund the needs of the
Partnership with such Additional
voluntary capital contributions, the
General Partner may cause the Partnership
to borrow such funds from any person,
including any Partner or Partners, upon
such terms and conditions as may be agreed
to at the time. No such loan to the
Partnership from a Partner shall be deemed
to constitute a Capital Contribution
to the Partnership and shall not increase
the Capital Account of the Partner
making the loan.
5
<PAGE>
5.3 Business by
Partners with the Partnership. With the consent of the
General Partner, any Partner or Transferee
may loan money to, act as surety for,
or transact other business with the
Partnership and, subject to other applicable
law, shall have the same rights and
obligations with respect thereto as a person
who is not a Partner or Transferee, but no
such transaction shall be deemed to
constitute a Capital Contribution to the
Partnership and shall not increase the
Capital Account of any person engaging in
any such transaction. If any Partner
or Affiliate of a Partner desires to
provide services or materials to the
Partnership regarding the Pipeline, such
Partner shall be authorized to provide
such services and/or materials provided:
(i) he, she or it discloses such
relationship to the Partnership in advance
and obtains the approval of the
General Partner; and (ii) he, she or it
charges market rates for such services
and materials.
5.4 No Interest
on Capital Accounts. No Partner shall be entitled to
receive interest on his or her Capital
Account, and none shall be paid.
5.5 Assumption
of Ongoing Obligations. The Partnership agrees to assume all
obligations incurred by the General Partner
with respect to the Pipeline and the
ongoing purpose of the Partnership to the
extent such obligations have not
otherwise been reimbursed as Out of Pocket
Costs.
6.
Distributions.
6.1
Distributions of Net Cash Flow, Net Financing Cash, Net Sales Cash,
or
Net Insurance or Condemnation Cash.
(a) Allocation
of Distributions. Net Cash Flow, Net Financing Cash, Net
Sales Cash, or Net Insurance or
Condemnation Cash of the Partnership shall be
distributed among all of the Partners and
Transferees as follows:
(i) First, to the General Partner in the amount of the Out of
Pocket
Costs to
reimburse the General Partner for such costs;
(ii) Second, 90% shall be distributed to the Limited Partners
(pro
rata in
accordance with their respective Percentage Interests) and 10%
shall be
distributed to the General Partner until such time as the
Unreturned
Capital of all of the Limited Partners is reduced to zero; and
(iii) Thereafter, 75% to the Limited Partners (pro rata in
accordance
with their
respective Percentage Interests) and 25% to the General
Partner.
6.2 General
Rule.
(a) Time of
Distribution. Net Cash Flow, Net Financing Cash, Net Sales
Cash, or Net Insurance or Condemnation Cash
shall be distributed at such time or
times as the General Partner shall
determine in its sole discretion.
(b)
Accumulations of Income. In the sole and absolute discretion of
the
General Partner, Net Cash Flow, Net
Financing Cash, Net Sales Cash, and/or Net
Insurance
6
<PAGE>
or Condemnation Cash for a Partnership
Accounting Year may be accumulated, in
whole or in part, rather than being
distributed among all of the Partners and
Transferees.
(c) Adjustments. All
distributions of Net Cash Flow, Net Financing Cash,
Net Sales Cash or Net Insurance or
Condemnation Cash for a Partnership
Accounting Year shall be subject to
adjustment to conform to the financial
statements for the Partnership Accounting
Year. If any additional amount is
distributed by reason of such financial
statements, the additional amount shall
be deemed a distribution for that
Partnership Accounting Year, and if the
financial statements show that any excess
amount was distributed for a
Partnership Accounting Year, subsequent
distributions shall be reduced to take
into account such excess amount.
6.3
Distributions in Liquidation. All distributions of Liquidation
Proceeds
to Partners and Transferees shall be made
after the allocation among the
Partners and Transferees pursuant to
Article 7 of Partnership profits or losses
for the Partnership Accounting Year in
which the liquidation occurs (including
any gain or loss deemed to have been
realized as the result of a distribution in
kind, pursuant to Section 6.4), and shall
be made in accordance with the
positive balances remaining in the
Partners' and Transferees' Capital Accounts.
6.4
Distributions in Kind.
(a) Right to
Make Distributions in Kind. No Partner or Transferee shall
have any right to demand or receive any
distributions from the Partnership in
any form other than cash, but the General
Partner (or the Liquidating Partner,
in the case of distributions in
liquidation) may, in his, her, or its
discretion, make distributions in kind and
may compel any Partner or Transferee
to accept a distribution in kind, including
the distribution of a percentage of
an asset, which percentage is different
than the Partner's or Transferee's
Percentage Interest.
(b) Deemed Sale
Adjustment. Any asset distributed in kind to a Partner or
Transferee shall be valued and treated as
though the asset had been sold for its
fair market value on the date of the
distribution. Any gain or loss that would
have been recognized by the Partnership had
the asset been so sold shall be
allocated among the Partners and
Transferees as provided in Article 7, and the
distribution shall be treated as though the
Partnership had distributed cash
equal to the fair market value of the asset
to the Partner or Transferee
receiving the distribution in kind.
7. Allocation of
Profits and Losses.
7.1 Allocation
of Profits or Losses from Operations and Credits. Subject to
the provisions of this Article, all
Partnership Net Profits from Operations, all
Partnership Net Losses from Operations, and
all Partnership Credits shall be
allocated among the Partners and
Transferees and shall be credited or debited to
the Partners' and Transferees' Capital
Accounts (except that items of
Partnership Credit shall not be credited or
debited to Capital Accounts), as
follows:
(a) Allocation
of Net Profits from Operations and Credits. All Partnership
Net Profits from Operations, and all
Partnership Credits, if any, shall be
allocated among all of the Partners and
Transferees as follows: (i) until such
time as all Unreturned
7
<PAGE>
Capital of all the Limited Partners is
reduced to zero, 90% to the Limited
Partners (pro rata in accordance with their
respective Percentage Interests) and
10% to the General Partner; and (ii)
thereafter, 75% to the Limited Partners
(pro rata in accordance with their
respective Percentage Interests) and 25% to
the General Partner.
(b) Allocation
of Net Losses from Operations. All Partnership Net Losses
from Operations, if any, shall be allocated
among all of the Partners and
Transferees as follows: (i) until such time
as all Unreturned Capital of all the
Limited Partners is reduced to zero, 90% to
the Limited Partners (pro rata in
accordance with their respective Percentage
Interests) and 10% to the General
Partner; and (ii) thereafter, 75% to the
Limited Partners (pro rata in
accordance with their respective Percentage
Interests) and 25% to the General
Partner.
7.2 Allocation
of Gains and Losses Not in the Ordinary Course of
Operations. Subject to the provisions of
this Article, all Partnership Gains Not
in the Ordinary Course of Operations and
all Partnership Losses Not in the
Ordinary Course of Operations shall be
allocated among the Partners and
Transferees and shall be credited or
debited to the Partners' and Transferees'
Capital Accounts, as follows:
(a) Allocation
of Gains Not in the Ordinary Course of Operations. All
Partnership Gains Not in the Ordinary
Course of Operations shall be allocated as
follows:
(i) First, to those Partners with a negative Capital Account
balance,
pro rata in
accordance with such negative Capital Account balances, until
such negative
balance reaches zero;
(ii) Second, to all Partners (pro rata in accordance with their
respective
Percentage Interests) in an amount required to cause the
balance
in their
respective Capital Accounts (in addition to amounts credited
under
(i) above) to
equal the amount of their respective Unreturned Capital;
(iii) Third, 100% to the General Partner until such time as there
has
been allocated
to the General Partner an amount equal to 15% of the
aggregate gain
allocated to all Partners under Section 7.1(a)(i) hereof;
and
(iv) Thereafter, among the Partners and Transferees in accordance
with
their Percentage
Interests.
(b) Allocation
of Losses Not in the Ordinary Course of Operations. All
Partnership Losses Not in the Ordinary
Course of Operations shall be allocated
among all of the Partners and Transferees
as follows:
(i) First, to the Partners (pro rata in accordance with their
respective
positive Capital Account balances, until the aggregate Capital
Accounts of each
of the Partners is equal to zero; and
(ii) Thereafter, any remaining Losses, will be allocated to the
Partners in
proportion to their Percentages.
8
<PAGE>
7.3 Section
704(c) Allocation. Notwithstanding any other provision of this
Article, any income, gain, loss, or
deduction with respect to any property
contributed to the Partnership by a Partner
shall be allocated among the
Partners and Transferees so as to take into
account the variation between the
adjusted basis of the property to the
Partnership and the fair market value of
the property at the time of the
contribution, for which the Partner is credited
in determining his or her Capital Account.
Such allocation shall be computed by
the Partnership's Accountants in accordance
with Section 704(c) of the Code and
the Regulations promulgated thereunder.
Said allocation shall apply to any
property contributed to the Partnership by
any Partner. No increase or decrease
to the Capital Account of the Partner
contributing such property shall result
from such allocation, to the extent the
increase or decrease is credited at the
time of the contribution.
7.4 Transfer of
Partnership Interests. Subject to Section 706 of the Code,
if a Partnership Interest is transferred
during a Partnership accounting year,
that part of the Partnership's net profits
and losses (including, for income tax
purposes, all items of income, gain, loss
and deduction) and items of
Partnership credit, allocated pursuant to
this Article 7 with respect to the
interest so transferred shall be allocated
between the Transferor and the person
who acquires such interest in proportion to
the number of days in such year
during which each owned such interest, as
disclosed by the Partnership's
records. Subject to Section 706 of the
Code, the allocation required by this
Section shall be made without regard to the
results of Partnership operations
during particular periods of such
Partnership accounting year or to the
Partnership distributions made to the
Transferor or the Person who acquired such
interest. Notwithstanding the foregoing,
but subject to Section 706 of the Code,
items of Partnership gain or loss earned or
incurred on the sale, exchange or
other disposition of any Partnership asset
other than in the ordinary course of
the Partnership's business, and items of
Partnership credit, shall be allocated
to the Partner owning the Partnership
interest at the time of the closing of
said sale, exchange or other disposition of
such Partnership asset other than in
the ordinary course of the Partnership's
business, or at the time the property
with respect to which a credit is allowed
is placed in service.
7.3 Qualified
Income Offset. No Partner shall be allocated losses or
specially allocated items of loss or
deduction if the allocation would cause the
Partner to have a Capital Account, deficit
at the end of a taxable year. If a
Partner receives (1) an allocation of loss,
(2) a special allocation pursuant to
Article 7 of an item of loss or deduction
or (3) any distribution, which
unexpectedly causes the Partner to have a
Capital Account deficit at the end of
any taxable year, then all items of income
and gain of the Partnership
(consisting of a pro rata portion of each
item of Partnership income, including
gross income and gain) for that taxable
year shall be allocated to that Partner,
before any other allocation is made of
Partnership items for that taxable year,
in the amount and in proportions required
to eliminate the excess as quickly as
possible. This Section 7.5 is intended to
comply with, and shall be interpreted
consistently with, the "qualified income
offset" provisions of the Regulations
promulgated under Code Section 704(b).
8. Limited
Liability of Partners. Notwithstanding the provisions hereof
for
the allocation of the Partnership's losses
and for the distribution of cash to
the Partners by the Partnership, except as
set forth under the Act, the Partners
shall not be required to make any
contributions to the capital of the
Partnership for the payment of any such
losses or for any other purposes nor
shall any Partner be responsible or
obligated to any third parties for any debts
9
<PAGE>
or liabilities of the Partnership in excess
of the sum of his unrecovered
contributions to the capital of the
Partnership and his share of any
undistributed profits of the
Partnership.
9.
Administrative Provisions.
9.1 Management
by General Partner. The business of the Partnership shall be
conducted under the exclusive management of
the General Partner. The Managers of
the General Partner are Paul G. Laird and
Chet Petrow, each of whom shall be
fully authorized to act on behalf of the
General Partner. The Limited Partners
shall have no power to engage in the
management of the affairs of the
Partnership.
9.2 Compensation
for Services.
(a) Project Management Fee. The Partnership shall pay to the
General
Partner a
one-time project management fee of $200,000 equal to
approximately 7%
of the total cost of the Pipeline for work the General
Partner has and
will provide in managing the construction of the Pipeline.
If the
Partnership does not receive $3,175,000 in cash or the conversion
of
debt from its
initial private offering, the $200,000 Project Management Fee
will be accrued
by the Partnership and paid to the General Partner from the
Partnership's
cash flow prior to the first distributions made by the
Partnership.
(b) Operating Management Fee. Beginning with the month in which
through-put of
gas is commenced through the Pipeline on an operational
basis, the
Partnership shall pay to the General Partner in the first year
that the
Pipeline is operational an operating fee equal to 1% of the
invested
capital. Invested capital means the total investment in Slater
Dome Gathering
LLLP, not including the General Partner's capital
contribution.
After the first year, the General Partner shall be paid a
monthly
operating management fee equal to 2% of Gross Receipts per
month
(or pro rata
portion thereof for a partial month) which fee shall continue
for so long as
the Pipeline is operational.
(c) Pipeline Expansion Fee. If the Pipeline reaches its capacity
and
the General
Partner decides to expand Partnership operations by
constructing a
pipeline parallel to the Pipeline, the General Partner shall
be paid an
additional project management fee equal to 7% of the cost of
developing and
constructing the parallel pipeline.
(d) Reimbursement of Expenses. In addition, the General Partner
shall
be reimbursed
for all reasonable out-of-pocket costs incurred by the
General Partner
in managing the Partnership. The General Partner shall not
be reimbursed
for its overhead costs.
9.3 Matters
Requiring Consent of Class A Limited Partners. The following
matters shall not be within the sole
authority of the General Partner and shall
(except where otherwise indicated) require
the consent of a majority of the
Percentage Interests of the Class A Limited
Partners:
(a) Change in Method of Accounting. Any change in the method of
accounting
employed by the Partnership;
10
<PAGE>
(b) Transfer of Assets. Except for a Permitted Sale (as
hereinafter
defined with
respect to which the General Partner shall be unilaterally
entitled to
undertake and complete without the consent of any other
Partner), the
sale, exchange, transfer or other disposition of any asset of
the Partnership.
For this purpose, a Permitted Sale shall be defined as
either: (i) the
sale, transfer and disposition of Partnership personal
property that
has become obsolete or is otherwise in need of replacement in
the ordinary
course of business; or (ii) the sale of substantially all of
the assets of
the Partnership if such sale would generate a cash on cash
annualized rate
of return on investment for the Limited Partners of not
less than
20%.
(c) Debts of Partnership. The assignment, transfer or pledge of
any
debts due the
Partnership, or the release of any debts due, except on
payment in
full;
(d) Compromise of Claims. The compromise of any claim due the
Partnership or
the submission to arbitration of any dispute or controversy
involving the
Partnership in excess of $25,000;
(e) Removal of General Partner. The Limited Partners shall have
the
power to remove
the General Partner as General Partner, but only for cause.
Cause shall
exist if the General Partner has been guilty of (i) gross
negligence or
willful misconduct in managing the affairs of the Partnership
or dealing with
the Partnership or (ii) a material breach of its duty of
loyalty to the
Partnership or the Partners, in each case which has a
material adverse
effect upon the Partnership or the Limited Partners. No
mistake in
judgment that would be protected by a business judgment rule if
made by a
director of a Colorado corporation shall be cause for removal
of
the General
Partner under any of the standards described above. Any removal
of the General
Partner shall become effective upon receipt by the General
Partner of
notice from the Limited Partners of such vote, subject to the
right of the
General Partner to contest the existence of cause. Any
proceeding
initiated by the General Partner to contest the existence of
cause for his
removal shall be conducted in accordance with the Commercial
Arbitration
Rules of the American Arbitration Association. Upon such
removal, the
Limited Partners, or the successor general partner selected by
the Limited
Partners shall purchase the removed General Partner's
Partnership
Interest in the manner provided in Section 14.2(e) of this
Agreement;
and
(f) General Partner Compensation. Any increase in compensation
payable
to the General
Partner under Section 9.2 hereof.
9.4 Partners'
Other Activities and Conflicts of Interest. The parties
understand that the General Partner and
Limited Partners may have other business
activities which take the major portion of
their time devoted to business
matters. Accordingly, the General Partner
is required to expend on behalf of the
Partnership only such efforts as it shall,
in its discretion, determine to be
appropriate for the proper conduct of
Partnership affairs. Further, it is
acknowledged that any General Partner or
Limited Partner, or any Affiliate
thereof, may engage in or possess an
interest in any other business ventures of
every nature and description, independently
or with others, including but not
limited to the ownership, financing,
leasing, operation, management,
syndication, brokerage, or development of
real properties, personal property or
equipment, some of which may compete with
the business of the Partnership, and
neither the Partnership nor any of its
Partners shall have any right in or to
any such independent ventures or to the
income or profits derived therefrom. For
the purpose of avoidance of costly
11
<PAGE>
and prolonged litigation, which may result
in undue damage to all Partners, any
claims based on any such activities or
conflicts of interest presented to any
Partner thereby are hereby expressly waived
by the Partners.
9.5 Powers of
General Partner. Subject to the rights and powers vested in
the other Partners by law and to such
limitations and restrictions as are herein
set forth, the General Partner shall have
the power for and on behalf of the
Partnership:
(a) Deal with
Partnership Property. To deal in real and personal property
of the Partnership, including but not
limited to the right to sell, lease,
exchange, or convey any part of such
property (either alone or with other
Persons); to create and/or contribute
property of the Partnership to any other
entity or business organization, including
but not limited to, corporations,
joint ventures, limited liability
companies, and other partnerships (either
general or limited), and to receive and
hold interests in such other entities or
organizations, and to have and exercise all
of the rights and obligations of an
owner of such interests; to pay from the
Partnership funds any and all expenses
and fees; to obtain financing or
refinancing of any property of the Partnership
by deeds of trust, or other security
instruments encumbering property of the
Partnership, and to pay, prepay or repay
the same in whole or in part; to
increase, modify, refinance, consolidate,
or extend any deed of trust, or other
security instruments encumbering the
property of the Partnership; to obtain and
maintain insurance coverage concerning the
property of the Partnership; and to
employ as may be necessary or convenient
brokers, managing agents, accountants,
legal counsel, and other personnel.
Employment of such persons shall be on such
terms and for such compensation as the
General Partner shall determine and the
costs and expenses thereof shall be paid
for as a Partnership expense.
(b) Borrow Funds
on Behalf of the Partnership. The General Partner is
authorized and empowered at any time and
from time to time in the name and on
behalf of the Partnership to borrow money
on behalf of the Partnership without
the approval of the Limited Partners,
provided, however, that the General
Partner may not, without the consent of the
Class A Limited Partners, borrow
money for the purpose of making
distributions to the Limited Partners, and
further may mortgage, pledge, assign,
hypothecate, or grant a security interest
in any or all of the assets or properties
of the Partnership now owned or
hereafter acquired to secure a loan or any
extensions and renewals thereof, and
that in connection therewith, the General
Partner is authorized and empowered at
any time and from time to time in the name
of and on behalf of the Partnership
to execute, acknowledge, seal, and deliver
to the lender any instruments and
agreements including, without limitation,
promissory notes, loan agreements,
guaranty agreements, and other obligations,
instruments, mortgages, deeds of
trust, pledges, assignments, and security
agreements, containing such terms,
conditions, covenants, and agreements of
the Partnership as may be agreed upon
by the lender and the General Partner, the
execution, sealing, acknowledgment,
and delivery of any such promissory notes,
loan agreements, guaranty agreements,
and other obligations, instruments,
mortgages, deeds of trust, pledges,
assignments, and security agreements by the
General Partner to be conclusive
evidence of such agreement.
(c)
Self-Dealing. To deal with or through any Partner, General or
Limited,
or any Affiliate thereof, and the fact that
a Partner is employed by the
Partnership or is an Affiliate of any
Person employed by the Partnership to
render or perform a service, or from which
the Partnership may purchase any
property, shall not prohibit the General
Partner from
12
<PAGE>
employing such Partner or Affiliate, or
from otherwise dealing with him, her or
it, and neither the Partnership nor any of
the Partners herein shall have any
right in and to the income or profits
derived therefrom as a consequence of the
Partnership relationship herein
created.
(d) Other
Powers. To exercise all of the powers and rights of a general
partner in a limited partnership formed
under the Act.
9.6 Execution
and Filing of Instruments. The Partners hereby irrevocably
constitute and appoint the General Partner,
with power of substitution, and any
successor General Partner, their true and
lawful attorney and agent with full
power and authority in their name, place,
and stead to make, execute,
acknowledge, deliver, file, and record in
any appropriate public office the
following:
(a) Certificate of Limited Partnership and Registration of
Limited
Liability
Limited Partnership. A Certificate of Limited Partnership and
Registration of
Limited Liability Limited Partnership pursuant to the laws
of the State of
Colorado, a Trade Name Affidavit, where appropriate, and
such other
certificates or instruments as may be required to be filed by
the Partnership
under the laws of any jurisdiction or under this Agreement
(including, but not
limited to, any documents required under Section 11
hereof); and
(b) Amendments. Any and all amendments of the instruments described
in
the preceding
paragraph, provided that they are consistent with the terms
of this Agreement and
have been authorized by the Partners.
The foregoing
power of attorney shall survive the delivery of any
assignment by any Partner or Transferee of
the whole or any portion of its
Partnership Interest and any Transferee or
Substituted Partner hereby
constitutes and appoints the General
Partner or any successor General Partner,
as his, her or its true and lawful attorney
in the same manner and for the same
purposes as the Transferor or Partner. This
power of attorney is a special power
of attorney coupled with an interest and is
irrevocable.
9.7
Indemnification of General Partner.
(a) Indemnification. The General Partner shall be fully
indemnified,
defended and
held harmless, absolutely, irrevocably and forever, by the
Partnership from
and against any and all claims, demands, liabilities,
costs, damages
and causes of action, of any nature whatsoever, except to
the extent any
such action relates to distributions to Partners and
Transferees,
arising out of or incidental to the General Partner's
management of
the Partnership affairs, except where the claim at issue is
based upon the
fraud, gross negligence or willful misconduct of such
General Partner,
or the breach by such General Partner of any provision of
this Agreement,
the result of which is adverse to the Partnership or to any
Partner.
Further, except to the extent any such action relates to
distributions to
Partners and Transferees, no Partner or the Partnership
shall be
entitled to recover from a General Partner any damages relating
to
any action taken
or not taken by the General Partner under the authority
granted to the
General Partner hereunder, unless such action or inaction
was grossly
negligent or fraudulent.
(b) Scope of Indemnification. The indemnification authorized by
this
Section shall
include, but not be limited to, payment of (i) reasonable
attorneys' fees
or other
13
<PAGE>
expenses
incurred in connection with settlement or in any finally
adjudicated
legal proceeding; and (ii) the removal of any liens affecting
any property of
the indemnitee.
(c) Indemnification Cumulative. The indemnification rights
contained
in this Section
shall be cumulative of, and in addition to, any and all
rights, remedies
and recourse to which the General Partners shall be
entitled,
whether pursuant to the provisions of this Agreement, at law or
in equity.
(d) Limitation. Indemnification shall be made solely and entirely
from
assets of the
Partnership (excluding, for these purposes, all assets of a
Partner other
than those of, and attributable to, such Partner's
Partnership
Interest), and no Limited Partner or other General Partner
shall be
personally liable to the indemnitee under this Section.
9.8 Tax Matters
Partner.
(a) Designation. The General Partner is hereby designated the
Tax
Matters
Partner.
(b) Limitations on Extending Statute of Limitations. Without
the
consent of the
General Partner, the Tax Matters Partner shall have no right
to extend the
statute of limitations for assessing or computing any tax
liability
against the Partnership or the amount of any Partnership tax
item.
(c) Filing Petitions in Tax Court. If the Tax Matters Partner
elects
to file a
petition for readjustment of any Partnership tax item (in
accordance with
Section 6226(a) of the Code), such petition shall, unless
the General
Partner and the other General Partners agree otherwise, be
filed in the
United States Tax Court.
(d) Communications. The Tax Matters Partner shall, within five days
of
receipt thereof,
forward to each Partner a photocopy of any correspondence
relating to the
Partnership received from the Internal Revenue Service. The
Tax Matters
Partner shall, within five days thereof, advise each Partner in
writing of the
substance of any conversation held with any representative
of the Internal
Revenue Service.
(e) Accountants and Lawyers. Any reasonable costs incurred by the
Tax
Matters Partner
for retaining accountants and/or lawyers on behalf of the
Partnership in
connection with any Internal Revenue Service audit of the
Partnership
shall be expenses of the Partnership.
9.9 Partnership
Meetings; Manner of Acting.
The General
Partner shall hold meetings at locations selected by the
General Partner at least once each calendar
year to discuss the business affairs
and financial position of the Partnership.
At le
