LIMITED PARTNERSHIP AGREEMENT
OF
ICM CASCADIA CO-INVEST, LP
a Delaware limited partnership
Execution Version
July 29, 2022
This Limited Partnership Agreement (this "Agreement") of ICM Cascadia Co-Invest, LP, a Delaware limited partnership (the "Partnership"), is entered into as of July 29, 2022, by and among Meridian Infrastructure GP IV LLC, a Delaware limited liability company, as general partner (the "General Partner" or "GP"), and Ironside Capital Management LP, a Delaware limited partnership, as limited partner (the "Limited Partner" or "LP"). The General Partner and the Limited Partner are sometimes referred to herein individually as a "Partner" and collectively as the "Partners."
TABLE OF CONTENTS
Right-click to update Table of Contents
RECITALS
WHEREAS, the General Partner and the Limited Partner desire to form a limited partnership under the Delaware Revised Uniform Limited Partnership Act, 6 Del. C. §§ 17-101, et seq. (the "Act"), for the purpose set forth herein;
WHEREAS, a Certificate of Limited Partnership (the "Certificate") was filed with the Secretary of State of the State of Delaware on July 22, 2022 (DE SOS File Number 7439218), thereby forming the Partnership as a Delaware limited partnership;
WHEREAS, the Partnership has been organized for the sole purpose of co-investing alongside Meridian Infrastructure Partners Fund IV, LP ("Fund IV"), a Delaware limited partnership, in the acquisition (the "Acquisition") of 100% of the equity interests of Cascadia Renewables Holdings, Inc., an Oregon corporation (the "Target" or "Cascadia"), through Cascadia Acquisition Corp., a Delaware corporation ("AcquisitionCo"), which shall be jointly owned by the Partnership and Fund IV;
WHEREAS, the aggregate enterprise value of the Target has been agreed at $1,950,000,000 and the total equity required for the Acquisition is $1,050,000,000, of which the Partnership's share is $300,000,000 (representing approximately 28.57% of total equity) and Fund IV's share is $750,000,000 (representing approximately 71.43% of total equity);
WHEREAS, the General Partner is also the general partner of Fund IV and manages the investment activities of the Partnership in connection with the Acquisition;
WHEREAS, the terms of the co-investment between the Partnership and Fund IV are governed by a Co-Investment Allocation Agreement of even date herewith (the "Co-Investment Allocation Agreement");
NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:
ARTICLE I — DEFINITIONS
Section 1.01. Defined Terms.
As used in this Agreement, the following terms shall have the meanings set forth below:
"Acquisition" means the acquisition of 100% of the equity interests of Cascadia Renewables Holdings, Inc. through AcquisitionCo, as contemplated by the Equity Purchase Agreement and the other transaction documents related thereto.
"AcquisitionCo" means Cascadia Acquisition Corp., a Delaware corporation formed for the purpose of effectuating the Acquisition, which shall be jointly owned by the Partnership and Fund IV.
"Act" means the Delaware Revised Uniform Limited Partnership Act, 6 Del. C. §§ 17-101, et seq., as amended from time to time.
"Affiliate" means, with respect to any Person, any other Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. For purposes of this definition, "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract, or otherwise. Without limiting the generality of the foregoing, the term "Affiliate" shall include, with respect to the General Partner, Meridian Infrastructure Partners LP and each fund, vehicle, and account managed by the General Partner or any of its Affiliates, including Fund IV.
"Agreement" means this Limited Partnership Agreement, as it may be amended, modified, restated, or supplemented from time to time in accordance with the terms hereof.
"Business Day" means any day other than a Saturday, Sunday, or a day on which banking institutions in New York, New York are authorized or obligated by law or executive order to close.
"Capital Account" means the account maintained for each Partner in accordance with Section 4.04.
"Capital Call" or "Capital Call Notice" means a written notice delivered by the General Partner to the Limited Partner requiring a Capital Contribution in accordance with Section 4.01, substantially in the form attached hereto as Exhibit A.
"Capital Commitment" means, with respect to each Partner, the aggregate amount of capital such Partner has committed to contribute to the Partnership, as set forth on Schedule A attached hereto.
"Capital Contribution" means, with respect to each Partner, the aggregate amount of cash actually contributed by such Partner to the Partnership pursuant to this Agreement.
"Carried Interest" means the performance-based allocation to the General Partner described in Section 5.02(b).
"Carried Interest Percentage" means ten percent (10%).
"Certificate" means the Certificate of Limited Partnership of the Partnership filed with the Secretary of State of the State of Delaware on July 22, 2022 (DE SOS File Number 7439218), as such certificate may be amended, restated, or supplemented from time to time.
"Code" means the Internal Revenue Code of 1986, as amended from time to time. All references to specific sections of the Code shall include any corresponding provisions of any successor statute.
"Co-Investment Allocation Agreement" means the Co-Investment Allocation Agreement, dated as of the date hereof, between Fund IV and the Partnership, as such agreement may be amended, modified, or supplemented from time to time.
"Defaulting Partner" has the meaning set forth in Section 4.02(a).
"Dissolution Event" has the meaning set forth in Section 10.01.
"EPA" or "Equity Purchase Agreement" means the Equity Purchase Agreement to be entered into among the Selling Shareholders, the Target, and AcquisitionCo in connection with the Acquisition, together with all schedules, exhibits, annexes, and ancillary documents attached thereto or delivered in connection therewith, as such agreement may be amended, modified, or supplemented from time to time.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. All references to specific sections of ERISA shall include any corresponding provisions of any successor statute.
"Fiscal Year" means the calendar year; provided, that the first Fiscal Year of the Partnership shall commence on the date of formation of the Partnership and end on December 31, 2022, and the last Fiscal Year of the Partnership shall end on the date on which the Partnership is dissolved and its affairs wound up.
"Fund IV" means Meridian Infrastructure Partners Fund IV, LP, a Delaware limited partnership, the general partner of which is the General Partner.
"Funding Date" means the date on which a Capital Contribution is due from the Partners as specified in the applicable Capital Call Notice.
"General Partner" means Meridian Infrastructure GP IV LLC, a Delaware limited liability company, in its capacity as the general partner of the Partnership, or any successor general partner admitted to the Partnership in accordance with the terms of this Agreement and the Act.
"GP Catch-Up" has the meaning set forth in Section 6.02(c).
"GP Commitment" means $30,000, representing 0.01% of Total Committed Capital, being the Capital Commitment of the General Partner as set forth on Schedule A.
"Indemnified Person" has the meaning set forth in Section 7.02(b).
"Investment" means the Partnership's investment in AcquisitionCo (and, indirectly, in the Target) in connection with the Acquisition, including all equity, debt, and other interests held by the Partnership in AcquisitionCo and all proceeds, distributions, and other amounts received by the Partnership in respect thereof.
"Limited Partner" means Ironside Capital Management LP, a Delaware limited partnership, in its capacity as the limited partner of the Partnership, or any successor or substituted limited partner admitted to the Partnership in accordance with the terms of this Agreement.
"LP Commitment" means $299,970,000, representing 99.99% of Total Committed Capital, being the Capital Commitment of the Limited Partner as set forth on Schedule A.
"Material Adverse Effect" has the meaning ascribed to such term in the EPA.
"Material Impediment Event" has the meaning set forth in Section 7.04(a).
"Net Profits" and "Net Losses" mean, for each Fiscal Year or other applicable period, the taxable income or taxable loss of the Partnership for such period, determined in accordance with Section 703(a) of the Code (for this purpose, all items of income, gain, loss, or deduction required to be separately stated pursuant to Section 703(a)(1) of the Code shall be included in taxable income or taxable loss), with the following adjustments: (i) any income of the Partnership that is exempt from federal income tax and not otherwise taken into account in computing Net Profits or Net Losses shall be added to such taxable income or taxable loss; (ii) any expenditures of the Partnership described in Section 705(a)(2)(B) of the Code or treated as Section 705(a)(2)(B) expenditures pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Net Profits or Net Losses, shall be subtracted from such taxable income or taxable loss; (iii) in the event the Gross Asset Value of any Partnership asset is adjusted pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(e) or (f), the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the Gross Asset Value of the asset) or an item of loss (if the adjustment decreases the Gross Asset Value of the asset) from the disposition of such asset and shall be taken into account for purposes of computing Net Profits or Net Losses; (iv) gain or loss resulting from any disposition of Partnership property with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Gross Asset Value of the property disposed of, notwithstanding that the adjusted tax basis of such property differs from its Gross Asset Value; and (v) items of income, gain, loss, and deduction allocated pursuant to Section 5.03 shall not be taken into account in computing Net Profits or Net Losses.
"Organizational Expenses" means all expenses incurred in connection with the organization, formation, and initial structuring of the Partnership, including legal fees, accounting fees, filing fees, and other formation costs.
"Partner" means the General Partner or the Limited Partner, as the context requires, and "Partners" means collectively the General Partner and the Limited Partner.
"Partnership" means ICM Cascadia Co-Invest, LP, a Delaware limited partnership (EIN: 88-3921457).
"Partnership Expenses" means any and all costs, fees, and expenses incurred by or on behalf of the Partnership in connection with the conduct of its business and affairs, including expenses relating to the Acquisition, the Investment, tax compliance, accounting, auditing, fund administration, insurance, regulatory filings, and legal counsel.
"Partnership Interest" means a Partner's interest in the Partnership, including such Partner's right to allocations of Net Profits and Net Losses, the right to receive distributions, and any other rights, benefits, and obligations of such Partner under this Agreement and applicable law.
"Percentage Interest" means, with respect to each Partner, such Partner's proportionate interest in the Partnership as set forth on Schedule A, which shall be as follows: General Partner — 0.01%; Limited Partner — 99.99%.
"Person" means an individual, corporation, partnership, limited liability company, trust, joint venture, association, governmental authority, or any other entity.
"Preferred Return" means, with respect to each Partner, a cumulative, non-compounding (except as provided below) preferred return equal to eight percent (8%) per annum, compounded quarterly, on the aggregate unreturned Capital Contributions of such Partner, as more fully described in Section 5.02(a).
"Preferred Return Rate" means eight percent (8%) per annum.
"Reactivation Notice" has the meaning set forth in Section 7.04(d).
"R&W Policy" means the representations and warranties insurance policy obtained in connection with the Acquisition, as more fully described in Section 7.10.
"Selling Shareholders" means, collectively, Timberline Growth Equity Fund III, LP, Weir Family Trust, and the Management Rollover Pool, each as defined in the EPA.
"Side Letter" means the Side Letter between the Limited Partner and the General Partner dated as of the date hereof, as such Side Letter may be amended, modified, or supplemented from time to time.
"Suspension Notice" has the meaning set forth in Section 7.04(b).
"Target" means Cascadia Renewables Holdings, Inc., an Oregon corporation.
"Tax Distribution" has the meaning set forth in Section 6.03.
"Total Committed Capital" means $300,000,000, being the aggregate Capital Commitments of all Partners.
"Transfer" has the meaning set forth in Section 9.01(b).
"Treasury Regulations" means the income tax regulations promulgated under the Code, as such regulations may be amended from time to time. All references to specific sections of the Treasury Regulations shall include any corresponding provisions of succeeding, similar, substitute, proposed, or final Treasury Regulations.
"Unfunded Commitment" means, with respect to each Partner, the positive difference, if any, between such Partner's Capital Commitment and the aggregate Capital Contributions made by such Partner as of the applicable date of determination.
"Wind-Down" has the meaning set forth in Section 7.04(c).
"Wind-Down Election Notice" has the meaning set forth in Section 7.04(c).
"Wind-Down Trigger Date" has the meaning set forth in Section 7.04(c).
Section 1.02. Rules of Construction.
Unless the context otherwise requires: (a) the terms "herein," "hereof," "hereto," "hereunder," and words of similar import refer to this Agreement as a whole, including all Schedules and Exhibits hereto, and not to any particular Article, Section, or provision; (b) references to Articles, Sections, Schedules, and Exhibits are references to Articles, Sections, Schedules, and Exhibits of this Agreement; (c) the headings and captions contained in this Agreement are inserted for convenience of reference only and shall not be deemed to be a part of, or to affect the meaning or interpretation of, this Agreement; (d) the term "including" (and with correlative meaning, "include" and "includes") means "including, without limitation"; (e) words importing the singular shall include the plural and vice versa, and words importing a gender shall include all genders; (f) all references to "$" or "dollars" mean United States dollars; (g) references to any statute, rule, or regulation shall include any amendments, modifications, or successor provisions thereto, and any rules and regulations promulgated thereunder, unless the context otherwise requires; (h) references to any agreement or contract shall mean such agreement or contract as amended, modified, restated, or supplemented from time to time in accordance with its terms; and (i) any reference to a "day" or "days" shall mean a calendar day or calendar days, unless "Business Day" or "Business Days" is expressly specified.
ARTICLE II — ORGANIZATION
Section 2.01. Formation.
The Partnership was formed as a Delaware limited partnership on July 22, 2022, upon the filing of the Certificate of Limited Partnership with the Secretary of State of the State of Delaware (DE SOS File Number 7439218). The rights and liabilities of the Partners shall be determined pursuant to the Act and this Agreement. To the extent that the rights or obligations of any Partner are different by reason of any provision of this Agreement than they would be under the Act in the absence of such provision, this Agreement shall, to the extent permitted by the Act, control. The General Partner shall take all actions necessary or appropriate under the Act to perfect and maintain the status of the Partnership as a limited partnership under the laws of the State of Delaware and shall cause the Partnership to comply with all requirements for the qualification and continued existence of the Partnership as a limited partnership under the laws of the State of Delaware and any other jurisdiction in which the Partnership conducts business.
Section 2.02. Name.
The name of the Partnership is "ICM Cascadia Co-Invest, LP." The business of the Partnership shall be conducted under such name or such other name or names as the General Partner may determine from time to time. The General Partner shall promptly notify the Limited Partner in writing of any change in the name of the Partnership and shall promptly amend the Certificate and make such other filings as may be required by applicable law in connection with any such name change.
Section 2.03. Purpose.
The sole purpose of the Partnership is to: (i) co-invest alongside Fund IV in the Acquisition of the Target through AcquisitionCo; (ii) hold, manage, monitor, and dispose of the Investment; and (iii) engage in any and all activities incidental, ancillary, or related to the foregoing, including the execution and delivery of agreements, instruments, and documents, the borrowing of money, the granting of liens and security interests, the making of filings with governmental authorities, and the taking of all other actions necessary or desirable in furtherance of the foregoing. The Partnership shall not engage in any business or activity other than as described in this Section 2.03, and shall not acquire any assets or make any investment other than the Investment, without the prior written consent of both the General Partner and the Limited Partner.
Section 2.04. Registered Office and Registered Agent.
The registered office of the Partnership in the State of Delaware is located at c/o Cascade Systems, 160 Greentree Drive, Suite 101, Dover, Delaware 19904, and the registered agent for service of process on the Partnership at such address is Cascade Systems The General Partner may change the registered office or registered agent of the Partnership from time to time in accordance with the Act, and shall promptly notify the Limited Partner in writing of any such change.
Section 2.05. Principal Office.
The principal office of the Partnership shall be located at the offices of the General Partner at 200 Clarendon Street, Suite 4200, Boston, Massachusetts 02116, or at such other place or places as the General Partner may designate from time to time by written notice to the Limited Partner. The Partnership may maintain such other offices at such other locations as the General Partner may deem necessary or appropriate.
Section 2.06. Term.
The Partnership shall continue in existence until dissolved in accordance with Article X of this Agreement. The Partnership has no fixed termination date, but is expected to terminate upon the earlier of (a) the completion, disposition, or other realization of the Investment and the distribution of all proceeds therefrom, or (b) the winding up and liquidation of the Partnership following the occurrence of a Dissolution Event. The existence of the Partnership as a separate legal entity shall continue until the filing of a Certificate of Cancellation with the Secretary of State of the State of Delaware in accordance with Section 10.04.
Section 2.07. Partnership Interests.
The General Partner holds a 0.01% Partnership Interest in the Partnership, and the Limited Partner holds a 99.99% Partnership Interest in the Partnership. The Partnership Interests of the Partners, together with each Partner's Capital Commitment and Percentage Interest, are set forth on Schedule A attached hereto and made a part hereof. No certificates shall be issued to evidence Partnership Interests.
Section 2.08. No State-Law Partnership.
The Partners intend that the Partnership shall be treated as a partnership for federal and, where applicable, state and local income tax purposes, and each Partner and the Partnership shall file all tax returns and shall otherwise take all tax and financial reporting positions in a manner consistent with such treatment. The Partnership is not intended to be, and shall not be deemed to be, a general partnership, a joint venture, a corporation, an association, or any other type of entity for purposes of any law other than the Act and applicable tax law. No Partner shall be deemed to be a partner, joint venturer, agent, or representative of any other Partner by reason of this Agreement, and no Partner shall have the right, power, or authority to bind or obligate any other Partner except as expressly provided herein.
ARTICLE III — PARTNERS
Section 3.01. General Partner.
The General Partner of the Partnership is Meridian Infrastructure GP IV LLC, a Delaware limited liability company, having its principal office at 200 Clarendon Street, Suite 4200, Boston, Massachusetts 02116. The managers of the General Partner are David R. Hargreaves (Managing Partner), Lillian Fong (Partner, Portfolio), and Graham Whitfield (Partner, Operations). The General Partner shall have exclusive management authority over the business and affairs of the Partnership, subject to the terms and conditions of this Agreement and the Side Letter. The General Partner shall devote such time and attention to the affairs of the Partnership as it reasonably deems necessary or appropriate for the proper conduct of the Partnership's business, it being understood that the General Partner and its Affiliates are not required to devote their full time and attention to the Partnership and may engage in other business activities as provided in Section 7.05.
Section 3.02. Limited Partner.
The Limited Partner of the Partnership is Ironside Capital Management LP, a Delaware limited partnership, having its principal office at 590 Madison Avenue, 38th Floor, New York, New York 10022. The Limited Partner shall have no right to participate in the management or control of the Partnership's business, and shall not transact any business on behalf of or in the name of the Partnership, except as expressly provided in this Agreement or required by the Act. The Limited Partner shall not have any authority to bind the Partnership or to act as an agent of the Partnership. No action taken by the Limited Partner in accordance with the rights expressly granted to the Limited Partner under this Agreement (including, without limitation, the right to deliver a Wind-Down Election Notice pursuant to Section 7.04(c), the right to consent to Transfers pursuant to Article IX, and the right to approve amendments pursuant to Section 11.01) shall be deemed to constitute participation in the management or control of the Partnership's business for purposes of the Act.
Section 3.03. Admission of Additional Partners.
No additional limited partners, general partners, or other Persons shall be admitted as partners of the Partnership without the prior written consent of both the General Partner and the Limited Partner. The admission of any additional partner shall be effected by an amendment to this Agreement in accordance with Article XI.
Section 3.04. Representations and Warranties of the Limited Partner.
The Limited Partner hereby represents and warrants to the Partnership and the General Partner as of the date hereof as follows:
(a) Accredited Investor; Qualified Purchaser. The Limited Partner is an "accredited investor" as defined in Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended (the "Securities Act"), and a "qualified purchaser" within the meaning of Section 2(a)(51) of the Investment Company Act of 1940, as amended (the "Investment Company Act").
(b) Investment Intent. The Limited Partner is acquiring its Partnership Interest for investment purposes only and not with a view to any distribution or resale thereof in violation of the Securities Act or any other applicable securities laws. The Limited Partner understands that the Partnership Interest has not been, and will not be, registered under the Securities Act or under any state or other securities laws, and that such Partnership Interest may not be transferred, assigned, pledged, or otherwise disposed of except in compliance with such laws and the provisions of this Agreement.
(c) No ERISA Plan Assets. The Limited Partner was not formed, and does not operate, for the purpose of investing in the Partnership in a manner that would cause the assets of the Partnership to constitute "plan assets" within the meaning of ERISA Section 3(42) and the regulations promulgated by the U.S. Department of Labor at 29 C.F.R. Section 2510.3-101, as modified by Section 3(42) of ERISA. Benefit plan investors (within the meaning of ERISA and the regulations thereunder) hold less than twenty-five percent (25%) of the value of each class of equity interests issued by the Limited Partner (determined in accordance with applicable ERISA regulations).
(d) Authority and Enforceability. The Limited Partner is a limited partnership duly organized, validly existing, and in good standing under the laws of the State of Delaware. The Limited Partner has all requisite power and authority to execute, deliver, and perform its obligations under this Agreement. The execution, delivery, and performance of this Agreement by the Limited Partner have been duly authorized by all necessary action on the part of the Limited Partner and do not conflict with, or result in a breach or violation of, any agreement, instrument, order, judgment, decree, law, rule, or regulation to which the Limited Partner is a party or by which it is bound. This Agreement constitutes the legal, valid, and binding obligation of the Limited Partner, enforceable against the Limited Partner in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, and similar laws affecting creditors' rights and remedies generally and to general principles of equity.
(e) Anti-Money Laundering. The Limited Partner is in compliance with all applicable anti-money laundering laws and regulations, including the USA PATRIOT Act of 2001 and the Bank Secrecy Act, and all applicable sanctions laws and regulations administered by the U.S. Department of the Treasury's Office of Foreign Assets Control ("OFAC"). Neither the Limited Partner nor any of its partners, members, officers, directors, or Affiliates is a Person whose name appears on the list of Specially Designated Nationals and blocked Persons published by OFAC, or is otherwise a target of OFAC sanctions.
Section 3.05. Representations and Warranties of the General Partner.
The General Partner hereby represents and warrants to the Partnership and the Limited Partner as of the date hereof as follows:
(a) Organization and Good Standing. The General Partner is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of Delaware.
(b) Authority and Enforceability. The General Partner has all requisite power and authority to execute, deliver, and perform its obligations under this Agreement and to act as the general partner of the Partnership. The execution, delivery, and performance of this Agreement by the General Partner have been duly authorized by all necessary action on the part of the General Partner. This Agreement constitutes the legal, valid, and binding obligation of the General Partner, enforceable against the General Partner in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, and similar laws affecting creditors' rights and remedies generally and to general principles of equity.
(c) No Conflicts. The execution, delivery, and performance of this Agreement by the General Partner do not and will not (i) conflict with, or result in a breach or violation of, the certificate of formation or operating agreement of the General Partner, (ii) conflict with, or result in a breach or violation of, any agreement, instrument, order, judgment, decree, law, rule, or regulation to which the General Partner is a party or by which it is bound, or (iii) require any consent, approval, authorization, or filing that has not been obtained or made.
(d) Investment Adviser Status. The General Partner (or its controlling Affiliate, Meridian Infrastructure Partners LP) is either registered as an investment adviser under the Investment Advisers Act of 1940, as amended, or is exempt from such registration pursuant to an applicable exemption, and is in compliance in all material respects with all applicable requirements of such Act and the rules and regulations promulgated thereunder.
ARTICLE IV — CAPITAL CONTRIBUTIONS
Section 4.01. Capital Calls.
(a) The General Partner shall have the authority to make Capital Calls from time to time during the term of the Partnership for the purposes set forth in Section 4.01(d). The General Partner shall deliver a Capital Call Notice to the Limited Partner not less than ten (10) Business Days prior to the Funding Date on which the Capital Contribution is due (the "Funding Date"). Each Capital Call Notice shall be substantially in the form attached hereto as Exhibit A and shall be delivered in accordance with Section 12.03. The General Partner shall concurrently fund its pro rata share of each Capital Call on the applicable Funding Date.
(b) Each Capital Call Notice shall specify: (i) the aggregate amount of the Capital Call; (ii) the pro rata amount due from each Partner based on its Percentage Interest; (iii) the Funding Date; (iv) the purpose for which the Capital Contribution will be used, described in reasonable detail; and (v) wire transfer instructions for the Partnership's bank account at Atlas National Bank, N.A. (as set forth on Schedule C attached hereto, or as otherwise updated by the General Partner from time to time).
(c) Capital Calls shall be made pro rata based on each Partner's Percentage Interest in proportion to each Partner's Unfunded Commitment. If a Partner's Unfunded Commitment is less than such Partner's pro rata share of a Capital Call, such Partner's obligation under such Capital Call shall be limited to such Partner's Unfunded Commitment.
(d) Capital Contributions shall be used solely for the following purposes: (i) funding the Investment (including equity contributions to AcquisitionCo); (ii) payment of Organizational Expenses; (iii) payment of Partnership Expenses; (iv) funding reserves as the General Partner may determine in its reasonable discretion; and (v) any other purpose approved by the General Partner in its reasonable discretion, subject to the purpose limitations set forth in Section 2.03. Capital Contributions shall not be used for any purpose inconsistent with the Partnership's sole purpose as described in Section 2.03.
(e) Total Capital Calls shall not exceed a Partner's Capital Commitment without such Partner's prior written consent. In no event shall the aggregate Capital Contributions required of any Partner exceed such Partner's Capital Commitment as set forth on Schedule A, unless such Partner has expressly agreed in writing to an increase in its Capital Commitment.
(f) The Partners acknowledge and agree that Capital Call #1, in an aggregate amount of $22,500,000 (representing 7.5% of Total Committed Capital), was issued on August 15, 2022, with a Funding Date of August 30, 2022. The proceeds of Capital Call #1 were applied as follows:
(i) Organizational expenses: $285,000;
(ii) Placement-agent fee: $1,050,000;
(iii) R&W insurance deposit: $4,875,000;
(iv) Due-diligence costs and deposits: $12,790,000; and
(v) Working-capital reserve: $3,500,000.
The General Partner's pro rata share of Capital Call #1 was $2,250 (0.01% of $22,500,000), and the Limited Partner's pro rata share was $22,497,750 (99.99% of $22,500,000).
Section 4.02. Default on Capital Call.
(a) If any Partner fails to make all or any portion of a required Capital Contribution within five (5) Business Days after the applicable Funding Date (such failure, a "Default," and such Partner, a "Defaulting Partner"), the General Partner (or, if the General Partner is the Defaulting Partner, the Limited Partner) shall deliver written notice to the Defaulting Partner specifying the amount of the deficiency and demanding immediate payment thereof.
(b) Upon the occurrence and during the continuation of a Default, the non-defaulting Partner shall be entitled, in addition to all other rights and remedies available at law or in equity, to exercise one or more of the following remedies:
(i) Interest. The Defaulting Partner shall pay interest on the unpaid amount of its Capital Contribution at the rate of twelve percent (12%) per annum (or, if less, the maximum rate permitted by applicable law), calculated from the applicable Funding Date until the date of payment in full;
(ii) Suspension of Distribution Rights. All rights of the Defaulting Partner to receive distributions from the Partnership under Article VI shall be suspended until the Default is cured in full (including the payment of all accrued interest);
(iii) Forfeiture. The Defaulting Partner shall forfeit up to fifty percent (50%) of such Partner's existing Capital Account balance as of the date of the Default, as determined by the General Partner in its reasonable discretion, which forfeited amount shall be reallocated to the non-defaulting Partner;
(iv) Forced Sale. The non-defaulting Partner shall have the right to acquire the Defaulting Partner's Partnership Interest at a price equal to seventy-five percent (75%) of the fair market value of such Partnership Interest as determined by the General Partner in good faith; and
(v) Shortfall Funding. The non-defaulting Partner shall have the right (but not the obligation) to fund the shortfall amount, in which case the non-defaulting Partner shall receive additional Capital Account credit equal to the amount funded plus an additional amount equal to interest at twelve percent (12%) per annum from the applicable Funding Date to the date of such funding by the non-defaulting Partner.
(c) The remedies set forth in this Section 4.02 are cumulative and not exclusive, and shall be in addition to any other rights and remedies available to the non-defaulting Partner at law, in equity, or under any other agreement. No exercise of any remedy shall constitute a waiver of any other remedy or a waiver of the Defaulting Partner's obligation to cure the Default in full.
Section 4.03. Return of Capital Contributions.
No Partner shall have the right to withdraw from the Partnership or to demand or receive the return of all or any portion of its Capital Contributions, except as expressly provided in Article VI (Distributions) or Article X (Dissolution and Winding Up). Under circumstances requiring a return of Capital Contributions, no Partner shall have the right to receive property other than cash, except as otherwise determined by the General Partner with the consent of the Limited Partner.
Section 4.04. Capital Accounts.
(a) A separate Capital Account shall be maintained for each Partner in accordance with Treasury Regulation Section 1.704-1(b)(2)(iv). Each Partner's Capital Account shall be maintained in accordance with the following provisions:
(i) Each Partner's Capital Account shall be credited with (A) the amount of cash contributed by such Partner to the Partnership, (B) the fair market value of any property contributed by such Partner to the Partnership (net of any liabilities secured by such contributed property that the Partnership is considered to assume or take subject to under Section 752 of the Code), (C) allocations of Net Profits and items of income and gain allocated to such Partner pursuant to Article V, and (D) any other amounts required to be credited to such Capital Account under the Treasury Regulations.
(ii) Each Partner's Capital Account shall be debited with (A) the amount of cash distributed to such Partner by the Partnership, (B) the fair market value of any property distributed to such Partner by the Partnership (net of any liabilities secured by such distributed property that such Partner is considered to assume or take subject to under Section 752 of the Code), (C) allocations of Net Losses and items of deduction and loss allocated to such Partner pursuant to Article V, and (D) any other amounts required to be debited to such Capital Account under the Treasury Regulations.
(b) In the event that all or any portion of a Partnership Interest is Transferred in accordance with the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent it relates to the Transferred Partnership Interest, and no adjustment shall be made to the Capital Account balance except as otherwise required by the Treasury Regulations.
(c) The manner in which Capital Accounts are to be maintained pursuant to this Section 4.04 is intended to comply with the requirements of Treasury Regulation Section 1.704-1(b)(2)(iv). If the General Partner determines that it is prudent to modify the manner in which the Capital Accounts, or any debits or credits thereto (including debits or credits relating to liabilities that are secured by contributed or distributed property or that are assumed by the Partnership or any Partner), are computed in order to comply with such regulation, the General Partner may make such modification, provided that it is not likely to have a material effect on the amounts distributable to any Partner pursuant to Article X upon the dissolution of the Partnership.
Section 4.05. No Interest on Capital.
No Partner shall be entitled to receive interest on its Capital Contributions or on the balance of its Capital Account, except as otherwise expressly provided in Section 4.02 (with respect to Default interest) or Article V (with respect to the Preferred Return).
Section 4.06. Capital Commitments.
The Capital Commitments of the Partners are set forth on Schedule A attached hereto and made a part hereof, and are as follows:
Each Partner acknowledges and agrees that it is irrevocably committed to make Capital Contributions to the Partnership, as and when called by the General Partner in accordance with Section 4.01, up to the full amount of such Partner's Capital Commitment, subject to the terms and conditions of this Agreement.
ARTICLE V — ALLOCATIONS
Section 5.01. Allocation of Net Profits and Net Losses.
(a) Net Profits and Net Losses for each Fiscal Year (or applicable portion thereof) shall be allocated among the Partners in accordance with this Article V. The determination of Net Profits and Net Losses shall be made by the General Partner (or its designee) on a basis consistent with the provisions of this Agreement and the applicable provisions of the Code and Treasury Regulations.
(b) Net Losses. Except as otherwise provided in Section 5.03, Net Losses for each Fiscal Year (or applicable portion thereof) shall be allocated to the Partners pro rata in proportion to their respective Percentage Interests; provided, however, that no allocation of Net Losses shall be made to any Partner to the extent that such allocation would create or increase a deficit balance in such Partner's Capital Account (after taking into account all adjustments required under the Treasury Regulations, including the adjustments provided in Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (5), and (6)), and any Net Losses that cannot be allocated to a Partner by reason of the foregoing proviso shall be allocated to the other Partner.
(c) Net Profits. Except as otherwise provided in Section 5.03, Net Profits for each Fiscal Year (or applicable portion thereof) shall be allocated in the following order of priority:
(i) First, to the Partners pro rata in proportion to, and to the extent of, the excess, if any, of (A) the cumulative Net Losses previously allocated to such Partner under Section 5.01(b) over (B) the cumulative Net Profits previously allocated to such Partner under this Section 5.01(c)(i), until the cumulative Net Profits allocated to each Partner under this Section 5.01(c)(i) equal the cumulative Net Losses previously allocated to such Partner under Section 5.01(b) (i.e., a loss recoupment layer);
(ii) Second, to the Partners pro rata in proportion to their respective Percentage Interests, until each Partner has been allocated cumulative Net Profits (after giving effect to allocations under Section 5.01(c)(i)) equal to the Preferred Return on such Partner's aggregate Capital Contributions, computed from the date of each Capital Contribution to the date of the applicable allocation;
(iii) Third, ninety percent (90%) to the Limited Partner and ten percent (10%) to the General Partner (reflecting the Carried Interest allocation described in Section 5.02(b)).
Section 5.02. Preferred Return and Carried Interest.
(a) Preferred Return. Each Partner shall be entitled to a preferred return (the "Preferred Return") equal to eight percent (8%) per annum, compounded quarterly, on the aggregate unreturned Capital Contributions of such Partner. The Preferred Return shall accrue from the date on which each Capital Contribution is made by such Partner and shall be computed on the basis of a 365-day year (or 366-day year in the case of a leap year) for the actual number of days elapsed. For purposes of this Section 5.02(a), "unreturned Capital Contributions" means, as of any date of determination, the excess, if any, of (i) the aggregate Capital Contributions made by such Partner as of such date over (ii) the aggregate distributions made to such Partner under Section 6.02(a) (return of capital) as of such date.
(b) Carried Interest. After the full return of all Capital Contributions and the payment of the Preferred Return to both Partners in accordance with Section 6.02(a) and Section 6.02(b), the General Partner shall be entitled to a performance-based allocation (the "Carried Interest") equal to ten percent (10%) of cumulative net profits above the Preferred Return threshold. The remaining ninety percent (90%) of such cumulative net profits above the Preferred Return threshold shall be allocated to the Partners pro rata in proportion to their respective Percentage Interests.
(c) Catch-Up. The Carried Interest is subject to a "catch-up" allocation such that, once the Preferred Return has been fully satisfied with respect to both Partners, one hundred percent (100%) of additional profits shall be allocated to the General Partner until the General Partner has received cumulative allocations equal to ten percent (10%) of all cumulative net profits of the Partnership (inclusive of the Preferred Return amounts previously allocated). The catch-up mechanism is intended to ensure that, upon completion of the catch-up, the General Partner's cumulative allocations of net profits equal the Carried Interest Percentage (10%) of total cumulative net profits, with the balance allocated to the Partners in accordance with their Percentage Interests.
(d) Comparison to Fund IV. The Partners acknowledge and agree that the Carried Interest Percentage under this Agreement (10%) is reduced from the twenty percent (20%) carried interest percentage applicable under the limited partnership agreement of Fund IV. The reduction in the Carried Interest Percentage was negotiated in connection with the co-investment opportunity and reflects the direct co-investment relationship between the General Partner and the Limited Partner with respect to the Investment.
(e) No Management Fee. No management fee shall be payable by the Partnership to the General Partner or any Affiliate thereof. The General Partner acknowledges that the Limited Partner's willingness to co-invest alongside Fund IV is based, in part, on the absence of a management fee. This provision is supplemented by the terms of the Side Letter.
Section 5.03. Special Allocations.
Notwithstanding any other provision of this Article V, the following special allocations shall be made in the following order of priority:
(a) Minimum Gain Chargeback. If there is a net decrease in Partnership minimum gain during any Fiscal Year, each Partner shall be specially allocated items of Partnership income and gain for such Fiscal Year (and, if necessary, for subsequent Fiscal Years) in an amount equal to such Partner's share of the net decrease in Partnership minimum gain, determined in accordance with Treasury Regulation Section 1.704-2(g). This provision is intended to comply with the minimum gain chargeback requirement of Treasury Regulation Section 1.704-2(f) and shall be interpreted consistently therewith.
(b) Partner Nonrecourse Debt Minimum Gain Chargeback. If there is a net decrease in partner nonrecourse debt minimum gain attributable to a partner nonrecourse debt during any Fiscal Year, each Partner who has a share of the partner nonrecourse debt minimum gain attributable to such partner nonrecourse debt (determined in accordance with Treasury Regulation Section 1.704-2(i)(5)) shall be specially allocated items of Partnership income and gain for such Fiscal Year (and, if necessary, for subsequent Fiscal Years) in an amount equal to such Partner's share of the net decrease in partner nonrecourse debt minimum gain. This provision is intended to comply with the minimum gain chargeback requirement of Treasury Regulation Section 1.704-2(i)(4) and shall be interpreted consistently therewith.
(c) Qualified Income Offset. If any Partner unexpectedly receives any adjustments, allocations, or distributions described in Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (5), or (6), items of Partnership income and gain shall be specially allocated to such Partner in an amount and manner sufficient to eliminate, to the extent required by the Treasury Regulations, the adjusted capital account deficit of such Partner as quickly as possible, provided that an allocation pursuant to this Section 5.03(c) shall be made only if and to the extent that such Partner would have an adjusted capital account deficit after all other allocations provided for in this Article V have been tentatively made as if this Section 5.03(c) were not in the Agreement.
(d) Curative Allocations. The special allocations set forth in Sections 5.03(a) through 5.03(c) (the "Regulatory Allocations") are intended to comply with certain requirements of the Treasury Regulations. It is the intent of the Partners that, to the extent possible, all Regulatory Allocations shall be offset either with other Regulatory Allocations or with special allocations of other items of Partnership income, gain, loss, or deduction pursuant to this Section 5.03(d). Therefore, notwithstanding any other provision of this Article V (other than the Regulatory Allocations), the General Partner shall make such offsetting special allocations of Partnership income, gain, loss, or deduction in whatever manner it determines appropriate so that, after such offsetting allocations are made, each Partner's Capital Account balance is, to the extent possible, equal to the Capital Account balance such Partner would have had if the Regulatory Allocations were not part of this Agreement.
(e) Section 704(c) Allocations. In accordance with Section 704(c) of the Code and the Treasury Regulations thereunder, income, gain, loss, and deduction with respect to any property contributed to the Partnership shall, solely for tax purposes, be allocated among the Partners so as to take account of any variation between the adjusted basis of such property to the Partnership for federal income tax purposes and its initial Gross Asset Value (computed in the manner set forth in Treasury Regulation Section 1.704-1(b)(2)(iv)(d)). Any elections or other decisions relating to such allocations shall be made by the General Partner in any manner that reasonably reflects the purpose and intention of this Agreement.
The provisions of this Section 5.03 are intended to comply with Treasury Regulation Sections 1.704-1(b) and 1.704-2 and shall be interpreted and applied in a manner consistent therewith.
Section 5.04. Tax Allocations.
For federal, state, and local income tax purposes, each item of income, gain, loss, deduction, and credit of the Partnership shall be allocated among the Partners in a manner consistent with the allocations set forth in this Article V, subject to the provisions of Section 704(c) of the Code and the Treasury Regulations promulgated thereunder. If any allocation of income, gain, loss, deduction, or credit for tax purposes is not consistent with the corresponding allocation for Capital Account purposes, the General Partner shall make such adjustments as are necessary to ensure compliance with Section 704(c) of the Code and the Treasury Regulations.
Section 5.05. Allocation Period.
Unless otherwise determined by the General Partner, all allocations of Net Profits, Net Losses, and other items of income, gain, loss, deduction, and credit shall be made as of the end of each Fiscal Year, or as of such other dates as the General Partner determines to be appropriate, including the date of any event that requires the revaluation of Partnership assets for Capital Account purposes under the Treasury Regulations.
ARTICLE VI — DISTRIBUTIONS
Section 6.01. Distributions Generally.
(a) Distributions shall be made at such times and in such amounts as the General Partner shall determine in its sole discretion, subject to applicable law, the provisions of this Agreement, the terms of the Co-Investment Allocation Agreement, and the retention of reasonable reserves for anticipated expenses, liabilities, and contingencies of the Partnership. The General Partner shall use reasonable efforts to cause the Partnership to make distributions to the Partners promptly following the receipt by the Partnership of cash proceeds from the Investment (whether by way of dividends, interest, redemptions, dispositions, or otherwise), after setting aside such reserves as the General Partner reasonably determines to be necessary or appropriate.
(b) All distributions shall be made in cash, in U.S. dollars, unless otherwise agreed in writing by all Partners. The General Partner shall not distribute any non-cash assets to the Partners without the prior written consent of the Limited Partner.
Section 6.02. Order of Distributions (Waterfall).
Subject to Section 6.05, distributions of available cash and proceeds shall be made to the Partners in the following order of priority:
(a) First — Return of Capital. To the Partners pro rata in proportion to their respective Percentage Interests, until each Partner has received aggregate distributions under this Section 6.02(a) equal to such Partner's aggregate Capital Contributions (i.e., the full return of capital to each Partner).
(b) Second — Preferred Return. To the Partners pro rata in proportion to their respective Percentage Interests, until each Partner has received aggregate distributions under this Section 6.02(b) equal to the Preferred Return (eight percent (8%) per annum, compounded quarterly) on such Partner's aggregate unreturned Capital Contributions, calculated from the date of each Capital Contribution through the date of distribution, reduced by the return of capital distributions under Section 6.02(a) as they are made.
(c) Third — GP Catch-Up. One hundred percent (100%) to the General Partner, until the General Partner has received cumulative distributions under this Section 6.02(c) and Section 6.02(d) equal to ten percent (10%) of the sum of cumulative distributions under Sections 6.02(b), 6.02(c), and 6.02(d) (the "GP Catch-Up").
(d) Fourth — Carried Interest Split. Ninety percent (90%) to the Limited Partner and ten percent (10%) to the General Partner.
For the avoidance of doubt, the distribution waterfall set forth in this Section 6.02 shall apply on a cumulative basis over the life of the Partnership (i.e., a "whole fund" waterfall), and each Partner's entitlement to distributions under each tier shall be determined based on the aggregate distributions received by such Partner since the formation of the Partnership.
Section 6.03. Tax Distributions.
The General Partner shall use reasonable efforts to cause the Partnership to distribute to each Partner, prior to the due date (including extensions) for the filing of such Partner's federal income tax return for the applicable taxable year, an amount sufficient to cover such Partner's estimated federal, state, and local income tax liability attributable to allocations of income and gain from the Partnership for such taxable year (a "Tax Distribution"). For purposes of computing Tax Distributions, the General Partner shall assume a combined federal, state, and local income tax rate equal to the highest marginal rate of tax applicable to individuals or corporations (whichever is higher) resident in New York, New York. Tax Distributions shall be treated as advances against, and shall reduce the amount of, subsequent distributions to which such Partner would otherwise be entitled under Section 6.02.
Section 6.04. Withholding.
The Partnership shall comply with all applicable federal, state, local, and foreign withholding requirements with respect to amounts distributable or allocable to any Partner. Any amounts withheld by the Partnership with respect to any Partner pursuant to any applicable federal, state, local, or foreign law shall be treated as amounts distributed to such Partner for all purposes of this Agreement. If the Partnership is required to withhold any amounts with respect to any Partner, and the amount of the withholding exceeds the distributions otherwise payable to such Partner, the excess shall be treated as a loan from the Partnership to such Partner, bearing interest at the applicable federal rate, and shall be repaid by such Partner to the Partnership upon demand.
Section 6.05. Limitation on Distributions.
No distribution shall be made to any Partner if, after giving effect to such distribution: (a) the Partnership would violate the Act or any other applicable law; (b) the Partnership would be rendered insolvent (i.e., unable to pay its debts as they become due in the ordinary course of business); (c) such distribution would breach any obligation of the Partnership under the Co-Investment Allocation Agreement, the EPA, any financing agreement, or any other material agreement to which the Partnership is a party; or (d) the General Partner reasonably determines that such distribution would be imprudent in light of the Partnership's anticipated expenses, liabilities, or contingencies.
ARTICLE VII — MANAGEMENT AND OPERATIONS
Section 7.01. Authority of the General Partner.
(a) The General Partner shall have full, exclusive, and complete authority, power, and discretion to manage, control, and direct the business and affairs of the Partnership, subject to the terms and conditions of this Agreement and the Side Letter. The General Partner is hereby authorized to take any and all actions that it determines to be necessary, appropriate, or desirable in furtherance of the purposes of the Partnership, and no Person dealing with the Partnership shall be required to inquire into the authority of the General Partner to take any action or enter into any agreement on behalf of the Partnership.
(b) Without limiting the generality of the foregoing, the General Partner shall have the authority, on behalf of and in the name of the Partnership, to:
(i) make, hold, monitor, manage, and dispose of the Investment, including making capital contributions to AcquisitionCo, exercising voting and governance rights with respect to the equity interests of AcquisitionCo held by the Partnership, and taking all actions in connection with the realization or disposition of the Investment;
(ii) negotiate, execute, deliver, amend, modify, supplement, and terminate the EPA and all other transaction documents related to the Acquisition, on behalf of the Partnership;
(iii) issue Capital Call Notices and collect Capital Contributions in accordance with Article IV;