UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): January 29, 2015

InfraREIT, Inc.
(Exact name of registrant as specified in its charter)

 
					
Maryland	 	001-36822	 	75-2952822	
(State or Other Jurisdiction
of Incorporation or Organization)	 	(Commission
File Number)	 	(I.R.S. Employer
Identification No.)	
		
1807 Ross Avenue, 4 th Floor
Dallas, Texas	 	75201	
(Address of Principal Executive Offices)	 	(Zip Code)	
Registrant’s telephone number, including area code: (214) 855-6700
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):
 
 	¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)	
 
 	¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)	
 
 	¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))	
 
 	¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))	

 

Explanatory Note
On February 4, 2015, InfraREIT, Inc. (the “ Registrant ” and, together with its subsidiaries following the Reorganization (as defined below), the “ Company ”) completed its initial public offering (the “ Offering ”) of 23,000,000 shares of its common stock, par value $0.01 per share (“ Common Stock ”), including 3,000,000 shares pursuant to the underwriters’ exercise of their option to purchase additional shares of Common Stock from the Registrant, at a price to the public of $23.00 per share (the “ IPO Price ”), pursuant to a Registration Statement on Form S-11, as amended (File No. 333-201106) (the “ Registration Statement ”), initially filed by the Registrant with the Securities and Exchange Commission (the “ Commission ”) pursuant to the Securities Act of 1933, as amended (the “ Securities Act ”), on December 19, 2014, including a prospectus (the “ Prospectus ”) filed with the Commission on February 2, 2015 pursuant to Rule 424(b) promulgated under the Securities Act. Immediately following the closing of the Offering, the Registrant consummated certain reorganization transactions (collectively, the “ Reorganization ”) as a result of which, among other things, the Registrant became the general partner of InfraREIT Partners, LP (the “ Operating Partnership ”). All of the Company’s assets are held by, and all of the Company’s business activities, including all activities pertaining to the acquisition or disposition of properties, are conducted through the Operating Partnership, either directly or through its subsidiaries, including Sharyland Distribution & Transmission Services, L.L.C. (“ SDTS ”).
 
Item 1.01.	Entry into a Material Definitive Agreement.	
Merger Agreement
In connection with the Offering, on January 29, 2015, the Registrant entered into a merger and transaction agreement, dated as of January 29, 2015 (the “ Merger Agreement ”), with the Operating Partnership and InfraREIT, L.L.C. (the “ LLC ”). Pursuant to the Merger Agreement, immediately following the closing of the Offering, the LLC merged with and into the Registrant (the “ Merger ”) and (1) holders of 8,000,000 common shares of the LLC received cash consideration of $21.551 (representing the IPO Price net of underwriting discounts and fees) for each such common share, (2) holders of the remaining 19,617,755 of the LLC’s common shares received one share of Class A common stock of the Registrant, par value $0.01 per share (“ Class A Common Stock ”), for each such common share and (3) holders of the 25,145 Class C shares of the LLC received one share of Class C common stock of the Registrant, par value $0.01 per share (“ Class C Common Stock ” and, together with the Class A Common Stock, the “ Classified Stock ”), for each such Class C common share. In addition, the Registrant and certain other parties consummated the other steps of the Reorganization set forth in the Merger Agreement, as more specifically described below and in the section of the Prospectus entitled “Description of Our Capital Stock—Reorganization,” which section is incorporated herein by reference.
The foregoing description of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the Merger Agreement, a copy of which is filed as Exhibit 2.1 to this Current Report on Form 8-K (this “ Current Report ”) and is incorporated herein by reference.
 
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Structuring Fee Agreement
In connection with the Offering, on January 29, 2015, the Registrant entered into a structuring fee agreement (the “ Structuring Fee Agreement ”) with Hunt-InfraREIT, L.L.C. (“ Hunt-InfraREIT ”). Pursuant to the Structuring Fee Agreement, the Registrant issued 1,700,000 shares of Common Stock to Hunt-InfraREIT as a one-time reorganization advisory fee immediately prior to the effectiveness of the Registration Statement in consideration for Hunt’s restructuring assistance in connection with the Reorganization and the Offering.
The foregoing description of the Structuring Fee Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the Structuring Fee Agreement, a copy of which is filed as Exhibit 10.1 to this Current Report and is incorporated herein by reference.
Hunt Redemption Agreement
In connection with the Offering, on January 29, 2015, the Registrant entered into a redemption agreement (the “ Hunt Redemption Agreement ”) with Hunt-InfraREIT, pursuant to which the Registrant agreed to satisfy Hunt-InfraREIT’s election to redeem 1,551,878 Class A units representing partnership interests in the Operating Partnership (“ Class A OP Units ”) in exchange for the issuance of 1,551,878 shares of Common Stock (the “ Redemption Shares ”). Pursuant to the Merger Agreement and the Hunt Redemption Agreement, the Registrant issued the Redemption Shares to Hunt-InfraREIT immediately following the consummation of the Offering.
The foregoing description of the Hunt Redemption Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the Hunt Redemption Agreement, a copy of which is filed as Exhibit 10.2 to this Current Report and is incorporated herein by reference.
Trust Purchase Agreement
In connection with the Offering, on January 29, 2015, the Registrant entered into a share purchase agreement (the “ Trust Purchase Agreement ”) with Westwood Trust, as trustee of a trust for the benefit of a charitable beneficiary (“ Westwood Trust ”). Pursuant to the Trust Purchase Agreement, concurrently with the Merger, the Registrant purchased the 6,242,999 common shares in the LLC held by Westwood Trust in consideration for the issuance of a promissory note in the principal amount of $66,517,480 (the “ ES Note ”). Westwood Trust then immediately transferred the ES Note to Marubeni Corporation (“ Marubeni ”) in compliance with the LLC’s governing documents.
The foregoing description of the Trust Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the Trust Purchase Agreement, a copy of which is filed as Exhibit 10.3 to this Current Report and is incorporated herein by reference.
 
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Unit Subscription Agreement
In connection with the Offering, on January 29, 2015, the Registrant and the Operating Partnership entered into a unit subscription agreement (the “ Unit Subscription Agreement ”) with MC Transmission Holdings, Inc. (“ MC Transmission ”), an affiliate of Marubeni. Pursuant to the Unit Subscription Agreement, MC Transmission purchased 3,325,874 common units representing partnership interests in the Operating Partnership (“ Common Units ”) from the Operating Partnership immediately following the consummation of the Merger in exchange for the assignment of the ES Note to the Operating Partnership.
The foregoing description of the Unit Subscription Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the Unit Subscription Agreement, a copy of which is filed as Exhibit 10.4 to this Current Report and is incorporated herein by reference.
InfraREIT Redemption Agreement
In connection with the Offering, on January 29, 2015, the Registrant entered into a redemption agreement (the “ InfraREIT Redemption Agreement ”) with the Operating Partnership, pursuant to which the Registrant agreed to transfer to the Operating Partnership for redemption 6,242,999 Class A OP Units (the “ Redeemed Units ”) in exchange for the ES Note to the Registrant. The Class A OP Units were redeemed immediately upon the Operating Partnership’s acquisition of the ES Note, and the ES Note was then immediately cancelled.
The foregoing description of the InfraREIT Redemption Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the InfraREIT Redemption Agreement, a copy of which is filed as Exhibit 10.5 to this Current Report and is incorporated herein by reference.
Release Agreement
In connection with the Offering, on January 29, 2015, the Registrant, the Operating Partnership and the LLC entered into a general release agreement (the “ Release Agreement ”) with Hunt Developer (as defined below), Marubeni, John Hancock Life Insurance Company (U.S.A.), OpTrust Infrastructure N.A. Inc., OPTrust N.A. Holdings Trust and Teachers Insurance and Annuity Association of America (collectively, the “ Founding Investors ”), pursuant to which, effective upon the consummation of the Merger, each party to the release agreement agreed to release certain claims against certain other parties and their affiliates arising out of the events giving rise to the transfer of common shares of the LLC previously held by Marubeni to a trust for the benefit of a charitable beneficiary.
The foregoing description of the Release Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the Release Agreement, a copy of which is filed as Exhibit 10.6 to this Current Report and is incorporated herein by reference.
 
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Development Agreement
In connection with the Offering, on January 29, 2015, the Registrant and the Operating Partnership entered into a development agreement (the “ Development Agreement ”) with Hunt-InfraREIT and Hunt Transmission Services, L.L.C. (“ Hunt Developer ”), which became effective as of the closing of the Offering and the Reorganization (collectively, the “ Closing ”). As more fully described in the section of the Prospectus entitled “Certain Relationships and Related Transactions—Arrangements with Hunt—Development Agreement,” which section is incorporated herein by reference, pursuant to the Development Agreement, the Company has the exclusive right to continue to fund the construction of Footprint Projects, which are defined under the Development Agreement as transmission or distribution projects primarily situated within the Company’s distribution service territory, or that physically hang from the Company’s existing transmission assets, such as the addition of another circuit to the Company’s existing transmission lines, or that are physically located within one of the Company’s substations. ROFO Projects are defined under the Development Agreement to consist of identified projects that are being developed by Hunt Developer, Sharyland Utilities and other affiliates of Hunt Consolidated, Inc. (“ Hunt ”).
The foregoing description of the Development Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the Development Agreement, a copy of which is filed as Exhibit 10.7 to this Current Report and is incorporated herein by reference.
Management Agreement
In connection with the Offering, on January 29, 2015, the Registrant and the Operating Partnership entered into a management agreement (the “ Management Agreement ”) with Hunt-InfraREIT and Hunt Utility Services, L.L.C. (“ Hunt Manager ”), which became effective as of the Closing. As more fully described in the section of the Prospectus entitled “Our Manager and Management Agreement—Management Agreement,” which section is incorporated herein by reference, pursuant to the Management Agreement, Hunt Manager will manage the day-to-day operations of the Company and will be responsible for presenting to the Company and managing its investment opportunities, conducting its investor relations, implementing its financial policies and practices and generally administering its day-to-day operations.
The foregoing description of the Management Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the Management Agreement, a copy of which is filed as Exhibit 10.8 to this Current Report and is incorporated herein by reference.
Registration Rights Agreement
In connection with the Offering, on January 29, 2015, the Registrant entered into an amended and restated registration rights and lock-up agreement (the “ Registration Rights Agreement ”) with each of the persons listed on Schedule A thereto, including the Founding Investors, W. Kirk Baker, the chairman of the Registrant’s board of directors (the “ Board ”), and
 
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Benjamin D. Nelson, senior vice president and general counsel of the Registrant. As more fully described in the section of the Prospectus entitled “Description of Our Capital Stock—Registration Rights,” which section is incorporated herein by reference, pursuant to the Registration Rights Agreement, the Registrant has agreed to use its commercially reasonable efforts to register the shares held by the parties to the Registration Rights Agreement, as well as permitted assignees and transferees of such shares, on the first anniversary of the completion of the Offering or as soon as possible thereafter. The Registrant has also agreed to effect up to four underwritten offerings upon notice by parties holding at least 10% of the securities subject to the Registration Rights Agreement, subject to certain limitations. In addition, if the Registrant proposes to register shares of Common Stock in a manner that would permit registration of the shares covered by the Registration Rights Agreement, each holder of such shares will have the right, subject to certain limitations, to register all or part of the shares covered by the Registration Rights Agreement held by such holder.
The foregoing description of the Registration Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the Registration Rights Agreement, a copy of which is filed as Exhibit 10.9 to this Current Report and is incorporated herein by reference.
Lock-Up Agreement
In connection with the Offering, on January 29, 2015, the Registrant and the Operating Partnership entered into a lock-up agreement (the “ Lock-Up Agreement ”) with Hunt-InfraREIT and Hunt, which became effective as of the Closing. As more fully described in the section of the Prospectus entitled “Certain Relationships and Related Transactions—Arrangements with Hunt—Lock-Up Agreement with InfraREIT, Inc.,” which section is incorporated herein by reference, pursuant to the Lock-Up Agreement, Hunt has agreed that, subject to limited exceptions, it will not transfer or sell the equity interests it holds in the Registrant and the Operating Partnership (including shares of Common Stock issued by the Registrant upon redemption of such equity interests) for an agreed upon period following the Offering. The Lock-Up Agreement will terminate upon the termination or non-renewal of the Management Agreement and the Development Agreement.
The foregoing description of the Lock-Up Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the Lock-Up Agreement, a copy of which is filed as Exhibit 10.10 to this Current Report and is incorporated herein by reference.
Third Amended and Restated Company Agreement of SDTS and Delegation Agreement
In connection with the Offering and the Reorganization, on January 29, 2015, Transmission and Distribution Company, L.L.C., which is a wholly-owned subsidiary of the Operating Partnership, and Sharyland Utilities, L.P. (“ Sharyland Utilities ”) entered into the Third Amended and Restated Company Agreement of SDTS (the “ SDTS Company Agreement ”), which became effective as of the Closing. Concurrently with the execution of the SDTS Company Agreement, the Registrant and Sharyland Utilities entered into a delegation
 
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agreement (the “ Delegation Agreement ”) pursuant to which Sharyland Utilities delegated certain authority that Sharyland Utilities holds as managing member of SDTS to the Registrant. A summary of the SDTS Company Agreement and the Delegation Agreement is included in the section of the Prospectus entitled “SDTS Company Agreement and Delegation Agreement,” which section is incorporated herein by reference.
The foregoing descriptions of the SDTS Company Agreement and the Delegation Agreement do not purport to be complete and are qualified in their entirety by reference to the complete text of the SDTS Company Agreement and the Delegation Agreement, copies of which are filed as Exhibits 10.11 and 10.12 to this Current Report and are incorporated herein by reference.
Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership
In connection with the Offering and the Reorganization, on February 4, 2015, the Registrant and the LLC entered into the Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership (the “ Partnership Agreement ”) with Hunt-InfraREIT and the other persons whose names are set forth on the partner registry as limited partners, which became effective as of the Closing. A summary of the Partnership Agreement is included in the section of the Prospectus entitled “The Operating Partnership and the Partnership Agreement,” which section is incorporated herein by reference.
The foregoing description of the Partnership Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the Partnership Agreement, a copy of which is filed as Exhibit 10.13 to this Current Report and is incorporated herein by reference.
Relationships
As more fully described in the section of the Prospectus entitled “Certain Relationships and Related Transactions,” which section is incorporated herein by reference, Hunt indirectly owns Hunt Manager, Hunt Developer and Hunt-InfraREIT, which is deemed to be a beneficial owner of more than 5% of the Registrant’s Common Stock as a result of its ownership of units representing partnership interests in the Operating Partnership. Ray L. Hunt and Hunter L. Hunt may each also be deemed to be a beneficial owner of more than 5% of the Registrant’s Common Stock through their indirect control of Hunt. Additionally, Sharyland, the Company’s sole tenant, is privately-owned by Hunter L. Hunt and other members of the family of Ray L. Hunt and is controlled by Hunter L. Hunt. Finally, each of the Founding Investors is a beneficial owner of more than 5% of the Registrant’s Common Stock.
 
Item 2.01.	Completion of Acquisition or Disposition of Assets.	
The information set forth in Item 1.01 of this Current Report under the heading “Merger Agreement” regarding the Merger is incorporated herein by reference.
 
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Item 3.02.	Unregistered Sales of Equity Securities.	
The information set forth in Item 1.01 of this Current Report under the headings “Merger Agreement,” “Structuring Fee Agreement,” “Hunt Redemption Agreement” and “Unit Subscription Agreement” regarding the issuance and sale of (i) shares of Classified Stock to the LLC’s shareholders (the “ Existing Investors ”) pursuant to the Merger, (ii) shares of Common Stock and Common Units to Hunt-InfraREIT pursuant to the Structuring Fee Agreement and Hunt Redemption Agreement, respectively, and (iii) Common Units to MC Transmission pursuant to the Unit Subscription Agreement is incorporated herein by reference. In addition, upon completion of the Offering, the Operating Partnership granted an aggregate of 28,000 profit interest units in the Operating Partnership to each director of the Registrant other than David Campbell and Hunter Hunt pursuant to the Registrant’s equity incentive plan. Certain of the foregoing transactions were undertaken in reliance upon the exemption from the registration requirements of the Securities Act by Section 4(a)(2) thereof. The Registrant believes that exemptions other than the foregoing exemption may exist for these transactions.
 
Item 4.01.	Changes in Registrant’s Certifying Accountant.	
As described above, upon the Merger, the Registrant succeeded the LLC as the general partner of the Operating Partnership, and the business of the LLC and its subsidiaries became the business of the Registrant. Accordingly, prior to the consummation of the Offering, the Board approved, effective upon the Merger, on February 4, 2015, the engagement of Ernst & Young LLP (“ EY ”) as the Registrant’s independent registered accounting firm for the year ending December 31, 2015 and will dismiss KPMG LLP (“ KPMG ”), which is currently serving as the Registrant’s independent auditors, upon completion of their audit of the Registrant’s financial statements as of and for the year ended December 31, 2014 and the issuance of their report thereon.
During the two fiscal years ended December 31, 2013 and 2012, and through February 4, 2015, the Registrant has not consulted with EY regarding the application of accounting principles to any proposed transaction or the rendering of any audit opinion on the Registrant’s consolidated financial statements.
The audit reports of KPMG on the Registrant’s consolidated financial statements for the past two years ended December 31, 2013 and 2012 did not contain any adverse opinion or a disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles.
During the Registrant’s two most recent fiscal years ended December 31, 2013 and 2012, and through February 4, 2015, there were (i) no “disagreements,” as that term is defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of Regulation S-K between the Registrant and KPMG on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to the satisfaction of KPMG, would have caused KPMG to make reference thereto in its reports for such years; and (ii) no “reportable events,” as that term is defined in Item 304(a)(1)(v) of Regulation S-K.
 
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The Registrant has provided KPMG with a copy of the foregoing disclosures, and KPMG has furnished the Registrant with a letter addressed to the Commission. A copy of such letter is attached as Exhibit 16.1 to this Current Report and is incorporated herein by reference.
 
Item 5.01.	Changes in Control of Registrant.	
Prior to the Offering, the Registrant was an indirect wholly-owned subsidiary of Hunt. As a result of the Offering and the Reorganization, the Registrant is a publicly traded company with shares listed on the New York Stock Exchange and, as more fully described in the section of the Prospectus entitled “Description of Our Capital Stock—Reorganization,” which section is incorporated herein by reference, the Existing Investors also acquired shares of Common Stock and/or Classified Stock of the Registrant. As a result, the Existing Investors own approximately 43.0% of outstanding capital stock of the Registrant, Hunt-InfraREIT owns approximately 6.9% of the outstanding capital stock of the Registrant and public stockholders own approximately 50.1% of the outstanding capital stock of the Registrant. On a fully-diluted basis, assuming all of the units representing partnership interests in the Operating Partnership were exchanged for shares of the Registrant’s Common Stock on a one-for-one basis, the Existing Investors and other pre-Offering holders of units representing partnership interests in the Operating Partnership continue to own approximately 38.1% of the Company, Hunt-InfraREIT continues to own approximately 23.9% of the Company and public stockholders own approximately 38.0% of the Company.
 
Item 5.02.	Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.	
At the time the Registration Statement was declared effective by the Commission, the Board consisted of W. Kirk Baker, David Campbell and Hunter L. Hunt. Effective as of January 29, 2015, by resolution of the Board, the size of the Board was increased to nine members and John Gates, Storrow M. Gordon, Trudy A. Harper, Harold (Hal) R. Logan, Jr., Harvey Rosenblum and Ellen C. Wolf (collectively, the “ Independent Directors ”) were elected to fill the resulting vacancies. Also effective as of January 29, 2015, the Board established three standing committees of the Board, the Audit Committee, the Compensation, Nominating and Corporate Governance Committee and the Conflicts Committee, and appointed the directors to serve on each such committee. As a result of the foregoing, and following the classification of the Board pursuant to Articles of Amendment and Restatement filed on February 3, 2015, the Board is comprised as follows:

Director	 	Class	 	Committees	
W. Kirk Baker‡	 	Class III (expiring 2018)	 	—	
David Campbell	 	Class I (expiring 2016)	 	—	
John Gates	 	Class III (expiring 2018)	 	Audit; Conflicts	
Storrow M. Gordon	 	Class I (expiring 2016)	 	Compensation, Nominating and Corporate Governance; Conflicts*	
Trudy A. Harper	 	Class I (expiring 2016)	 	Compensation, Nominating and Corporate Governance; Conflicts	
Hunter L. Hunt	 	Class II (expiring 2017)	 	—	
Harold (Hal) R. Logan, Jr.†	 	Class III (expiring 2018)	 	Audit; Compensation, Nominating and Corporate Governance*; Conflicts	
Harvey Rosenblum	 	Class II (expiring 2017)	 	Audit; Conflicts	
Ellen C. Wolf	 	Class II (expiring 2017)	 	Audit*; Conflicts	

‡	Denotes Chairman of the Board.	
†	Denotes Lead Director of the Board.	
*	Denotes committee chair.	
 
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Biographical information of each of the Independent Directors can be found in the section of the Prospectus entitled “Management—Executive Officers, Directors and Director Nominees,” which section is incorporated herein by reference. There are no arrangements or understandings between any of the Independent Directors and any other person pursuant to which the Independent Directors were elected to the Board. The Registrant intends to pay director compensation to each of its directors other than Messrs. Campbell and Hunt, including each Independent Director, as set forth in the section of the Prospectus entitled “Management—Director Compensation,” which section is incorporated herein by reference, and has entered into indemnification agreements with each of its directors, including the Independent Directors, as described in the section of the Prospectus entitled “Management—Indemnification,” which section is incorporated herein by reference. There are no transactions or relationships between any of the Independent Directors and the Registrant that are reportable under Item 404(a) of Regulation S-K.
 
Item 7.01.	Regulation FD Disclosure.	
On January 29, 2015, the Registrant issued a press release announcing the pricing of the shares of Common Stock to be issued and sold pursuant to the Offering. On February 2, 2015, the Registrant issued a press release announcing the underwriters’ exercise of their option to purchase additional shares of Common Stock from the Registrant. Copies of the press releases are furnished as Exhibits 99.1 and 99.2 to this Current Report.
In accordance with General Instruction B.2 of Form 8-K, the information set forth in this Item 7.01 and in Exhibits 99.1 and 99.2 is deemed to be furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”).
 
Item 9.01.	Financial Statements and Exhibits.	
 
 	(d)	Exhibits.	
In accordance with General Instruction B.2 of Form 8-K, the information set forth in Exhibits 99.1 and 99.2 is deemed to be furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act.

EXHIBIT
NUMBER	  	 	  	DESCRIPTION	
			
  2.1	  	    —    	  	Merger and Transaction Agreement, dated as of January 29, 2015, by and among InfraREIT, L.L.C., InfraREIT, Inc. and InfraREIT Partners, LP	
 
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10.1		    —    		Structuring Fee Agreement, dated as of January 29, 2015, by and between InfraREIT, Inc. and Hunt-InfraREIT, L.L.C.	
			
10.2		    —    		Redemption Agreement, dated as of January 29, 2015, by and among Hunt-InfraREIT, L.L.C., InfraREIT, Inc. and InfraREIT Partners, LP	
			
10.3		    —    		Share Purchase Agreement, dated as of January 29, 2015, by and between InfraREIT, Inc. and Westwood Trust, as Trustee	
			
10.4		    —    		Unit Subscription Agreement, dated as of January 29, 2015, by and between InfraREIT Partners, LP and MC Transmission Holdings, Inc.	
			
10.5		    —    		Redemption Agreement, dated as of January 29, 2015, by and between InfraREIT, Inc. and InfraREIT Partners, LP	
			
10.6		    —    		General Release Agreement, dated as of January 29, 2015, by and among Hunt Transmission Services, L.L.C., InfraREIT, L.L.C., InfraREIT Partners, LP, InfraREIT, Inc., John Hancock Life Insurance Company (U.S.A.), Marubeni Corporation, OpTrust Infrastructure N.A. Inc., OPTrust N.A. Holdings Trust and Teachers Insurance and Annuity Association of America	
			
10.7		    —    		Development Agreement, dated as of January 29, 2015, by and among Hunt Transmission Services, L.L.C., Sharyland Utilities, L.P., InfraREIT Partners, LP and InfraREIT, Inc.	
			
10.8		    —    		Management Agreement, dated as of January 29, 2015, by and among Hunt Utility Services, L.L.C., InfraREIT Partners, LP and InfraREIT, Inc.	
			
10.9		    —    		InfraREIT, Inc. Amended and Restated Registration Rights Agreement, dated as of January 29, 2015, by and among InfraREIT, Inc. and each of the persons listed on Schedule A thereto	
			
10.10		    —    		Lock-Up Agreement, dated as of January 29, 2015, by and among InfraREIT, Inc., InfraREIT Partners, LP, Hunt-InfraREIT, L.L.C. and Hunt Consolidated, Inc.	
			
10.11		    —    		Third Amended and Restated Company Agreement of Sharyland Distribution & Transmission Services, L.L.C., dated as of January 29, 2015, by and between Sharyland Utilities, L.P. and Transmission and Distribution Company, L.L.C.	
			
10.12		    —    		Delegation Agreement, dated as of January 29, 2015, by and between Sharyland Utilities, L.P. and InfraREIT, Inc.	
			
10.13		    —    		Second Amended and Restated Agreement of Limited Partnership of InfraREIT Partners, LP, dated as of January 29, 2015, by and among InfraREIT, Inc., InfraREIT, L.L.C., Hunt-InfraREIT, L.L.C. and the other persons whose names are set forth on the partner registry as limited partners	
			
16.1		    —    		Letter from KPMG LLP to the Securities and Exchange Commission, dated February 4, 2015	
			
99.1		    —    		Press release, dated January 29, 2015	
			
99.2		    —    		Press release, dated February 2, 2015	
 
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	 	InfraREIT, Inc.	
			
Date: February 4, 2015	 	By:	 	/s/ Benjamin D. Nelson	
	 		 	     Benjamin D. Nelson	
	 		 	     Senior Vice President and	
	 		 	     General Counsel	
 
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INDEX TO EXHIBITS

EXHIBIT
NUMBER	  	 	  	DESCRIPTION	
			
  2.1	  	    —    	  	Merger and Transaction Agreement, dated as of January 29, 2015, by and among InfraREIT, L.L.C., InfraREIT, Inc. and InfraREIT Partners, LP	
			
10.1	  	    —    	  	Structuring Fee Agreement, dated as of January 29, 2015, by and between InfraREIT, Inc. and Hunt-InfraREIT, L.L.C.	
			
10.2	  	    —    	  	Redemption Agreement, dated as of January 29, 2015, by and among Hunt-InfraREIT, L.L.C., InfraREIT, Inc. and InfraREIT Partners, LP	
			
10.3	  	    —    	  	Share Purchase Agreement, dated as of January 29, 2015, by and between InfraREIT, Inc. and Westwood Trust, as Trustee	
			
10.4	  	    —    	  	Unit Subscription Agreement, dated as of January 29, 2015, by and between InfraREIT Partners, LP and MC Transmission Holdings, Inc.	
			
10.5	  	    —    	  	Redemption Agreement, dated as of January 29, 2015, by and between InfraREIT, Inc. and InfraREIT Partners, LP	
			
10.6	  	    —    	  	General Release Agreement, dated as of January 29, 2015, by and among Hunt Transmission Services, L.L.C., InfraREIT, L.L.C., InfraREIT Partners, LP, InfraREIT, Inc., John Hancock Life Insurance Company (U.S.A.), Marubeni Corporation, OpTrust Infrastructure N.A. Inc., OPTrust N.A. Holdings Trust and Teachers Insurance and Annuity Association of America	
			
10.7	  	    —    	  	Development Agreement, dated as of January 29, 2015, by and among Hunt Transmission Services, L.L.C., Sharyland Utilities, L.P., InfraREIT Partners, LP and InfraREIT, Inc.	
			
10.8	  	    —    	  	Management Agreement, dated as of January 29, 2015, by and among Hunt Utility Services, L.L.C., InfraREIT Partners, LP and InfraREIT, Inc.	
			
10.9	  	    —    	  	InfraREIT, Inc. Amended and Restated Registration Rights Agreement, dated as of January 29, 2015, by and among InfraREIT, Inc. and each of the persons listed on Schedule A thereto	
			
10.10	  	    —    	  	Lock-Up Agreement, dated as of January 29, 2015, by and among InfraREIT, Inc., InfraREIT Partners, LP, Hunt-InfraREIT, L.L.C. and Hunt Consolidated, Inc.	
			
10.11	  	    —    	  	Third Amended and Restated Company Agreement of Sharyland Distribution & Transmission Services, L.L.C., dated as of January 29, 2015, by and between Sharyland Utilities, L.P. and Transmission and Distribution Company, L.L.C.	
			
10.12	  	    —    	  	Delegation Agreement, dated as of January 29, 2015, by and between Sharyland Utilities, L.P. and InfraREIT, Inc.	
			
10.13	  	    —    	  	Second Amended and Restated Agreement of Limited Partnership of InfraREIT Partners, LP, dated as of January 29, 2015, by and	
 
13

					
			
	  		  	among InfraREIT, Inc., InfraREIT, L.L.C., Hunt-InfraREIT, L.L.C. and the other persons whose names are set forth on the partner registry as limited partners	
			
 16.1	  	    —    	  	Letter from KPMG LLP to the Securities and Exchange Commission, dated February 4, 2015	
			
99.1	  	    —    	  	Press release, dated January 29, 2015	
			
99.2	  	    —    	  	Press release, dated February 2, 2015	
 
14

Exhibit 2.1
MERGER AND TRANSACTION AGREEMENT
This MERGER AND TRANSACTION AGREEMENT (this “ Agreement ”), is executed as of the 29th day of January, 2015, by and between InfraREIT, L.L.C., a Delaware limited liability company (“ InfraREIT LLC ”), InfraREIT, Inc., a Maryland corporation (“ InfraREIT Inc. ”), and InfraREIT Partners, LP, a Delaware limited partnership (the “ Operating Partnership ”).
W I T N E S S E T H :
WHEREAS, certain capitalized terms have the meanings assigned to them in Section 1 below;
WHEREAS, InfraREIT LLC is the general partner of the Operating Partnership, which is the indirect owner of electric transmission and distribution assets;
WHEREAS, InfraREIT Inc. has filed with the Securities and Exchange Commission (the “ SEC ”) a registration statement on Form S-11 (the “ Registration Statement ”) with respect to an initial public offering (“ IPO ”) of its common stock, par value $0.01 per share (“ Common Stock ”);
WHEREAS, in consideration for the significant time and effort of Hunt-InfraREIT and its affiliates assisting InfraREIT Inc. and InfraREIT LLC in preparation for the restructuring transactions to be undertaken in connection with the IPO, including the transactions contemplated by this Agreement, InfraREIT Inc. paid a Structuring Fee to Hunt-InfraREIT pursuant to the Structuring Fee Agreement;
WHEREAS, pursuant to an Assignment of Shares of Common Stock and effective immediately after the issuance of the Structuring Fee to Hunt-InfraREIT, Hunt-InfraREIT transferred 75,000 shares of Common Stock to OpTrust;
WHEREAS, the respective boards of directors of InfraREIT LLC and InfraREIT Inc. have determined that it is in the best interests of the parties to merge InfraREIT LLC with and into InfraREIT Inc. (the “ Merger ”) on the date of the closing of the IPO (the “ IPO Closing ”) on the terms and conditions set forth herein, with InfraREIT Inc. surviving as a Maryland corporation;
WHEREAS, the Registration Statement contemplates that a certain portion of the proceeds from the IPO will be paid as Merger consideration to existing holders of equity in InfraREIT LLC;
WHEREAS, the holders of Common Shares, other than the Trust Shares, will receive either exclusively shares of Class A Common Stock or a combination of cash and shares of Redeemable Class A Common Stock and/or Class A Common Stock in the Merger, as provided herein;

WHEREAS, the holders of Class C Shares will receive shares of Class C Common Stock in the Merger;
WHEREAS, the Trust currently holds 6,242,999 Common Shares (the “ Trust Shares ”) for the benefit of the Charitable Beneficiary as a result of the operation of certain provisions of Article 6 of the Existing LLC Agreement;
WHEREAS, pursuant to Section 6.18 of the Existing LLC Agreement, on January 26, 2015, InfraREIT LLC accepted the offer to purchase the Trust Shares at a price of $10.654733 per share by delivery of a notice of acceptance (“ Notice of Acceptance ”) to the Trust;
WHEREAS, pursuant to the Merger, InfraREIT Inc. will consummate the purchase of the Trust Shares in satisfaction of InfraREIT LLC’s acceptance of the offer to purchase such shares contemporaneously with the Merger by delivering to the Trustee the ES Note;
WHEREAS, upon receipt of the ES Note, the Trust will immediately transfer the ES Note to Marubeni or its designated affiliate as the Purported Record Holder of the Trust Shares;
WHEREAS, immediately following the Merger, Marubeni or its designated affiliate will purchase 3,325,874 Common Units from the Operating Partnership by assigning the ES Note to the Operating Partnership; and
WHEREAS, contemporaneously with the Merger and pursuant to Section 4.6.D of the Amended and Restated OP Agreement, InfraREIT Inc. will issue Hunt-InfraREIT a number of shares of Common Stock, in satisfaction of the redemption of an equal number of Class A Units, sufficient to ensure that, upon completion of the Merger, the Threshold Test will be satisfied, but in no event will the number of shares of Common Stock to be issued exceed the Maximum Hunt Redemption Shares.
NOW, THEREFORE, in consideration of the promises and the mutual covenants and agreements hereinafter contained, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Definitions . For purposes of this Agreement, the following terms shall have the meanings specified in this Section 1.1 :
“ Agreement ” shall have the meaning set forth in the preamble.
“ All-Stock Election ” shall mean the election by a holder of Common Shares to exchange 100% of its Common Shares for Class A Common Stock in the Merger either pursuant to a duly completed Merger Election Notice or by default as a result of failing to properly and timely return a Merger Election Notice to the Secretary of InfraREIT LLC.
“ Amended and Restated Charter ” shall have the meaning set forth in Section 5.4 .
 
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“ Amended and Restated OP Agreement ” shall mean the Second Amended and Restated Limited Partnership Agreement of the Operating Partnership to be effective of the Effective Date.
“ Carry Shortfall ” shall have the meaning set forth in the Amended and Restated OP Agreement.
“ Charitable Beneficiary ” shall mean Communities Foundation of Texas.
“ Charter ” shall mean the Articles of Incorporation of InfraREIT Inc. in effect as of the date hereof.
“ Class A Common Stock ” shall mean shares of Class A Common Stock as designated in the Amended and Restated Charter.
“ Class A Units ” shall have the meaning set forth in the Amended and Restated OP Agreement.
“ Class C Common Stock ” shall mean shares of Class C Common Stock as designated in the Amended and Restated Charter.
“ Classified Common Stock ” shall mean the Class A Common Stock, Redeemable Class A Common Stock and the Class C Common Stock.
“ Class C Units ” shall have the meaning set forth in the Amended and Restated OP Agreement.
“ Class C Shares ” shall have the meaning set forth in the Existing LLC Agreement.
“ Common Holders ” shall mean holders of Common Shares.
“ Common Share Merger Consideration ” shall have the meaning set forth in Section 5.8(b) .
“ Common Shares ” shall have the meaning set forth in the Existing LLC Agreement.
“ Common Stock ” shall have the meaning set forth in the recitals.
“ Common Units ” shall have the meaning set forth in the Amended and Restated OP Agreement.
“ Delaware Act ” shall mean the Delaware Limited Liability Company Act.
“ Effective Date ” shall mean the date on which the IPO Closing occurs.
 
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“ Effective Time ” shall have the meaning set forth in Section 5.2 .
“ ES Note ” shall mean a promissory note in the form attached to this Agreement as Exhibit A issued by InfraREIT Inc. in the principal amount of $66,517,480.
“ Existing Common Stock ” shall mean shares of Common Stock held by Hunt Equities, Inc. immediately before the IPO Closing.
“ Existing LLC Agreement ” shall mean the Amended and Restated Limited Liability Company Agreement, dated as of November 23, 2010, of InfraREIT, L.L.C. (formerly, Electric Infrastructure Alliance of America, L.L.C.), as amended by the LLC Agreement Amendment.
“ Forfeited Dividends ” shall mean the $1,646,864.14 previously distributed to Marubeni with respect to the Trust Shares.
“ Hancock ” shall mean John Hancock Life Insurance Company (U.S.A.).
“ Hunt-InfraREIT ” shall mean Hunt-InfraREIT, L.L.C., a Delaware limited liability company.
“ Hunt Note ” shall mean the promissory note, dated November 20, 2014, issued by InfraREIT Inc. in favor of Hunt Consolidated, Inc., in the principal amount of $1,000,000.
“ Hunt Redemption ” shall have the meaning set forth in Article III .
“ Hunt Structure Fee Shares ” shall mean the shares of Common Stock issued to Hunt-InfraREIT pursuant to the Structuring Fee Agreement.
“ InfraREIT Inc. ” shall have the meaning set forth in the preamble.
“ InfraREIT LLC ” shall have the meaning set forth in the preamble.
“ Initial Cash Election ” shall mean the election by a holder of Common Shares to exchange 58.2207% of the Common Shares it holds prior to the IPO Closing (rounded in a manner determined by InfraREIT LLC in its discretion) for the Net Cash Consideration at the Effective Time and exchange the remainder of its Common Shares for Class A Common Stock on a one-to-one basis pursuant to a duly completed Merger Election Notice.
“ IPO ” shall have the meaning set forth in the recitals.
“ IPO Closing ” shall have the meaning set forth in the recitals.
“ LLC Agreement Amendment ” means Amendment No. 1 to Amended and Restated Limited Liability Company Agreement of InfraREIT LLC dated on or around the date hereof.
“ Marubeni ” shall mean Marubeni Corporation.
“ Marubeni Shares ” shall mean the shares of Common Stock and Classified Common Stock held by Marubeni and its affiliates upon consummation of the Merger.
 
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“ Maryland Act ” shall mean the Maryland General Corporation Law.
“ Maximum Hunt Redemption Shares ” shall mean the number of shares of Common Stock, that, when combined with the Hunt Structure Fee Shares (after giving effect to the transfer of shares by Hunt-InfraREIT to OpTrust described in the recitals) and the Marubeni Shares, would aggregate 9.8% of the total number of outstanding shares of Common Stock and Classified Common Stock following the Merger.
“ Merger ” shall have the meaning set forth in the recitals.
“ Merger Election Notice ” shall have the meaning set forth in Section 5.7(a) .
“ Merger Filings ” shall have the meaning set forth in Section 5.2 .
“ Mixed Election ” shall mean the election by a holder of Common Shares pursuant to a duly completed Merger Election Notice to exchange:
 
 	(a)	11.9221% of the Common Shares it holds prior to the IPO Closing (rounded in a manner determined by InfraREIT LLC in its discretion) for the Net Cash Consideration at the Effective Time and up to an additional 11.9221% of the Common Shares it holds prior to the IPO Closing (rounded in a manner determined by InfraREIT LLC in its discretion) for the Net Cash Consideration at the Effective Time if there is a Simultaneous Overallotment Closing, pro rata depending on the percentage of the Overallotment Shares that are subject to the Simultaneous Overallotment Closing;	
 
 	(b)	76.1558% of the Common Shares it holds prior to the IPO Closing (rounded in a manner determined by InfraREIT LLC in its discretion) for Class A Common Stock on a one-to-one basis; and	
 
 	(c)	unless there is a Simultaneous Overallotment Closing with respect to 100% of the Overallotment Shares, the remainder of its Common Shares for Redeemable Class A Common Stock.	
“ Net Cash Consideration ” shall mean an amount equal to the net price per share of Common Stock paid by the Underwriters in the IPO after taking into account all underwriting discounts and commissions.
“ Notice of Acceptance ” shall have the meaning set forth in the recitals.
“ Operating Partnership ” shall have the meaning set forth in the preamble.
“ OpTrust ” shall mean OpTrust N.A. Holdings Trust.
“ Overallotment Shares ” shall mean the shares of Common Stock designated as Option Securities pursuant to the Underwriting Agreement.
“ Purported Record Holder ” shall have the meaning set forth in the Existing LLC Agreement.
“ Redeemable Class A Common Stock ” shall have the meaning set forth in the Amended and Restated Charter.
 
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“ Registration Statement ” shall have the meaning set forth in the recitals.
“ SEC ” shall have the meaning set forth in the recitals.
“ Secondary Shares ” shall mean shares of Common Stock sold in the IPO to the extent the proceeds thereof are either paid to holders of Common Shares as consideration in the Merger or used to redeem shares of Redeemable Class A Common Stock after the Effective Date.
“ Shares ” shall have the meaning set forth in the Existing LLC Agreement.
“ Simultaneous Overallotment Closing ” shall mean the Overallotment Option is exercised and all or a portion of the Overallotment Shares are purchased by the Underwriters on the Effective Date.
“ Structuring Fee ” shall mean the fee paid to Hunt-InfraREIT pursuant to the Structuring Fee Agreement equal to 1,700,000 shares of Common Stock.
“ Structuring Fee Agreement ” shall mean that certain Structuring Fee Agreement by and between InfraREIT Inc. and Hunt-InfraREIT.
“ Surviving Company ” shall have the meaning set forth in Section 5.1 .
“ Threshold Test ” shall mean that, after giving effect to the Merger, the issuance of the Hunt Structure Fee Shares, the transfer of shares by Hunt-InfraREIT to OpTrust described in the recitals and the Hunt Redemption, the Shareholders (as defined in the Existing LLC Agreement) of InfraREIT LLC immediately prior to the Merger shall hold 49.5% or less of the total aggregate value of the outstanding shares of Common Stock and Classified Common Stock immediately following the Merger and the Hunt Redemption.
“ TIAA ” shall mean Teachers Insurance and Annuity Association of America.
“ Trust ” shall mean the trust for the benefit of a charitable trustee, with Westwood Trust as Trustee.
“ Trust Shares ” shall have the meaning set forth in the recitals.
“ Underwriters ” shall mean Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citigroup Global Markets Inc. and each of the other Underwriters named in Schedule A to the Underwriting Agreement.
“ Underwriting Agreement ” shall mean the Underwriting Agreement among InfraREIT Inc., the Operating Partnership, InfraREIT LLC, Hunt Utility Services, LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated and Citigroup Global Markets Inc., on behalf of themselves and as representatives of the other Underwriters, dated the date hereof, entered into in connection with the IPO.
 
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ARTICLE II
CARRY CRYSTALLIZATION
As set forth in Section 4.6 of the Amended and Restated OP Agreement, on the Effective Date, immediately after the IPO Closing but prior to the consummation of the Merger, as accelerated satisfaction of a portion of Hunt-InfraREIT’s carried interest, the Operating Partnership is issuing Common Units to Hunt-InfraREIT and canceling an equal number of Class A Units held by InfraREIT LLC. Simultaneously, pursuant to the LLC Agreement Amendment, InfraREIT LLC is cancelling a number of Common Shares equal to the number of Class A Units to be cancelled in the foregoing sentence, with such cancellations allocated among the holders of Common Shares in the manner set forth in the LLC Agreement Amendment.
ARTICLE III
HUNT CONVERSION/REDEMPTION
As set forth in Section 4.6 of the Amended and Restated OP Agreement, the Operating Partnership is redeeming a number of Class A Units held by Hunt-InfraREIT equal to the Maximum Hunt Redemption Shares and InfraREIT Inc. is satisfying the redemption by the issuance of an equal number of shares of Common Stock effective immediately after the IPO Closing and simultaneously with the Merger pursuant to a Redemption Agreement dated on or around the date hereof (the “ Hunt Redemption ”).
ARTICLE IV
IPO PROCEEDS CONTRIBUTION
As set forth in Section 4.6 of the Amended and Restated OP Agreement, on the Effective Date, immediately after the IPO Closing and simultaneously with consummation of the Merger, InfraREIT Inc. shall contribute $323,265,000 to the Operating Partnership and, in exchange therefor, the Operating Partnership shall issue to InfraREIT Inc. 15,000,000 Common Units.
ARTICLE V
THE MERGER
5.1 Merger . Upon the terms and subject to the conditions set forth in this Agreement, at the Effective Time, InfraREIT LLC shall be merged with and into InfraREIT Inc. in accordance with the terms of, and subject to the conditions set forth in, this Agreement, the Delaware Act and the Maryland Act. Following the Merger, InfraREIT Inc. shall continue as the surviving company (sometimes hereinafter referred to as the “ Surviving Company ”) and InfraREIT LLC shall cease to have a separate existence. InfraREIT Inc. shall continue unaffected and unimpaired by the Merger, and, as the Surviving Company, it shall continue to be governed by the laws of the State of Maryland.
5.2 Effective Time . The parties shall cause the Merger to be consummated by filing Articles of Merger and a Certificate of Merger in the forms attached hereto as Exhibit B-1 and Exhibit B-2 and meeting the requirements of the Maryland Act and the Delaware Act, respectively (collectively, the “ Merger Filings ”), with the State Department of Assessments and Taxation of Maryland and the Secretary of State of the State of Delaware. The Merger shall become effective immediately following the closing of the IPO as specified in the Merger Filings (the date and time the Merger becomes effective, the “ Effective Time ”).
 
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5.3 Effects of the Merger . The Merger shall have the effects set forth in the Maryland Act and the Delaware Act. Without limiting the generality of the foregoing and subject thereto, at the Effective Time all the property, rights, privileges, immunities, powers, and franchises of InfraREIT LLC shall vest in the Surviving Company, and all debts, liabilities, obligations and duties of InfraREIT LLC shall become the debts, liabilities, obligations and duties of the Surviving Company.
5.4 Organizational Documents . Prior to the Effective Time, the Charter shall be amended and restated in the form attached hereto as Exhibit C (the “ Amended and Restated Charter ”), and as so amended and restated, shall be the charter of the Surviving Company following the Merger, until duly amended in accordance with applicable law. At the Effective Time, by virtue of the Merger, and without any action on the part of any party, the Bylaws of InfraREIT Inc. in existence at the time shall become the Bylaws of the Surviving Company, until duly amended in accordance with applicable law.
5.5 Board of Directors . The Board of Directors of InfraREIT Inc. in office immediately prior to the Effective Time shall be the Board of Directors of the Surviving Company and shall continue to hold such office from the Effective Time until their respective successors are duly elected or appointed in the manner provided in the Amended and Restated Charter, the Bylaws of InfraREIT Inc. or as otherwise provided by law.
5.6 Officers . From and after the Effective Time, the officers of InfraREIT Inc. in office immediately prior to the Effective Time shall be the officers of the Surviving Company and shall continue to hold such office from the Effective Time until their respective successors are duly elected or appointed in the manner provided in the Amended and Restated Charter, the Bylaws of InfraREIT Inc. or as otherwise provided by law.
5.7 Merger Elections .
(a) Pursuant to a Merger Election Notice in the form attached hereto as Exhibit D (a “ Merger Election Notice ”), Marubeni has made an Initial Cash Election and each of Hancock, OpTrust and TIAA have made Mixed Elections. Each other holder of Common Shares (other than the Trust) has either made an All-Stock Election or a Mixed Election or has failed to properly and timely return a Merger Election Notice to the Secretary of InfraREIT LLC, and as a result has been deemed to have made an All-Stock Election pursuant to the Merger Election Notice and the LLC Agreement Amendment.
(b) In determining the number of Common Shares that are exchanged for Net Cash Consideration pursuant to such Common Holder’s Initial Cash Election or Mixed Election, InfraREIT Inc. may make appropriate determinations to a whole number of Common Shares (either up or down, on a holder by holder basis) in order to match the number of Common Shares so exchanged for cash with the number of Secondary Shares sold in the IPO.
5.8 Effect on Shares . In consideration of the promises, covenants, and agreements contained in this Agreement, by virtue of the Merger and without any action on the part of any party:
(a) Each Class C Share issued and outstanding immediately prior to the Effective Time shall, at the Effective Time, be converted into the right to receive one (1) share of Class C Common Stock;
 
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(b) Each Common Share (other than the Trust Shares) issued and outstanding immediately prior to the Effective Time shall, at the Effective Time, be converted into the right to receive cash, a number of shares of Class A Common Stock and/or shares of Redeemable Class A Common Stock in accordance with the election made in the Merger Election Notice by the holder of such Common Share (or deemed made, in the case of holders who failed to return a timely and completed Merger Election Notice) (the “ Common Share Merger Consideration ”);
(c) Each share of Existing Common Stock issued and outstanding immediately prior to the Effective Time shall by virtue of the Merger be cancelled for no consideration; and
(d) Each share of Common Stock (other than the Existing Common Stock) issued and outstanding immediately prior to the Effective Time shall remain issued and outstanding and shall not be entitled to any consideration by virtue of the Merger.
5.9 Operating Partnership . As a result of the Merger, on the Effective Date, InfraREIT Inc. will acquire all of the Class A Units and Class C Units formerly held by InfraREIT LLC consistent with Section 6.3 and will be admitted as the general partner of the Operating Partnership pursuant to the Amended and Restated OP Agreement. As a result of the consummation of the Merger, 5,000,000 Class A Units (plus a number of Class A Units equal to the number of Overallotment Shares issued in a Simultaneous Overallotment Closing, if any) will be automatically converted into Common Units pursuant to the Amended and Restated OP Agreement.
5.10 No Further Ownership Rights and Interests . From and after the Effective Time, all consideration paid upon conversion of the Shares in accordance with this Article V shall be deemed to have been paid in full satisfaction of all rights pertaining to the interests cancelled.
5.11 Payment of Fees . The Surviving Company will be responsible for the payment of all fees and taxes, if any, of InfraREIT Inc. or InfraREIT LLC relating to the Merger.
5.12 Tax Treatment . InfraREIT LLC and InfraREIT Inc. intend that the Merger be treated as a tax free reorganization under Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended from time to time, and that this Agreement be treated as a plan of reorganization within the meaning of Treasury Regulation Section 1.368-1(c).
ARTICLE VI
REPAYMENT OF HUNT NOTE
At the Effective Time, InfraREIT Inc. shall repay all outstanding principal plus accrued interest owed on the Hunt Note, and the Hunt Note shall be cancelled.
 
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ARTICLE VII
TRUST SHARES
At the Effective Time, InfraREIT Inc. (as successor to InfraREIT LLC) is acquiring the Trust Shares in consideration for the ES Note pursuant to a purchase and sale agreement dated on or about the date of this Agreement, which will satisfy the obligation of InfraREIT LLC (as the predecessor to InfraREIT Inc.) to purchase such Trust Shares pursuant to the Notice of Acceptance. Immediately thereafter, the Trust is transferring the ES Note to Marubeni or its designated affiliate, as required by the Existing LLC Agreement.
ARTICLE VIII
MARUBENI SUBSCRIPTION AND TRANSFER OF FORFEITED DIVIDENDS
As set forth in Section 4.6 of the Amended and Restated OP Agreement and the Subscription Agreement dated January 29, 2015, effective immediately after the Merger, Marubeni or its designated affiliate is purchasing, and the Operating Partnership is issuing, 3,325,874 Common Units in consideration for the contribution of the ES Note to the Operating Partnership. In addition, in accordance with Section 6.15 of the Existing LLC Agreement, concurrently with the purchase of Common Units from the Operating Partnership, Marubeni is transferring the Forfeited Dividends to the Trust.
ARTICLE IX
OP UNIT REDEMPTION
Effective immediately after the Merger and the issuance to Marubeni (or its designated affiliate) of the Common Units described in Article VIII , InfraREIT Inc. is transferring to the Operating Partnership for redemption 6,242,999 Class A Units and, in exchange therefor, the Operating Partnership is transferring to InfraREIT Inc. the ES Note, which shall then be cancelled.
ARTICLE X
OVERALLOTMENT EXERCISE
If the Company issues Overallotment Shares at any time after the Effective Date (i.e., at any time other than in a Simultaneous Overallotment Closing), then, in addition to such issuance (a) pursuant to the Amended and Restated Charter, the Company will redeem an equal number of shares of Redeemable Class A Common Stock, pro rata among holders of Redeemable Class A Common Stock (based on the total number of such shares of Redeemable Class A Common Stock held by such holders), and (b) pursuant to Section 4.6 of the Amended and Restated OP Agreement, an equal number of Class A Units held by InfraREIT Inc. will be converted to Common Units.
 
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ARTICLE XI
CARRIED INTEREST
11.1 On the Mandatory Conversion Date (as defined in the Amended and Restated OP Agreement), pursuant to Section 4.6 of the Amended and Restated OP Agreement, if there is a Carry Shortfall, the Operating Partnership will issue a certain number of Common Units to Hunt-InfraREIT (as determined in accordance with Section 4.6 of the Amended and Restated OP Agreement) and cancel an equal number of Class A Units held by InfraREIT Inc. and, consistent with the Amended and Restated Charter, a certain number of the Class A Common Stock will be canceled (as determined in accordance with the Amended and Restated Charter), and, thereafter, all remaining shares of Class A Common Stock will convert to Common Stock.
11.2 On the Mandatory Conversion Date, if the Carry Crystallization Value (as defined in the Amended and Restated OP Agreement) exceeds the dollar amount allocable to Hunt-InfraREIT pursuant to Section 4.6.I.(ii)(b) of the Amended and Restated OP Agreement, Hunt-InfraREIT shall make a cash payment equal, in the aggregate, to such excess to the holders of the shares of Class A Common Stock. Such payment shall be allocated among such holders in proportion to the percentages set forth on Exhibit B to the LLC Agreement Amendment. For avoidance of doubt, no such payment will be made in respect of the Trust Shares, and the Trust Shares will be disregarded in determining the amount of payment to which each such holder is entitled. The parties hereto intend and agree, to the extent permitted under applicable law, to (i) treat any such payments by Hunt-InfraREIT to the holders of the shares of Class A Common Stock under this Article XI as constituting consideration for the shares of Class A Common Stock held by such holders and (ii) adopt tax reporting positions that are consistent in all respects with such treatment.
ARTICLE XII
MISCELLANEOUS
12.1 Termination of Agreement . This Agreement shall be terminated and of no further force and effect on February 12, 2015 if the IPO has not closed prior to such date.
12.2 Governing Law . This Agreement will be governed by and construed in accordance with the laws of the State of Maryland without regard to any conflicts of law provisions that would result in the application of the laws of any other jurisdiction.
12.3 Further Actions . Each of the parties will take all such lawful action as may be necessary or appropriate to effect the transactions described in this Agreement. If at any time the Surviving Company considers or is advised that any further assignment, assurance or other action is necessary or desirable to vest in the Surviving Company the title to any property or right of InfraREIT LLC or otherwise to carry out the purposes of this Agreement, the proper officers or representatives of InfraREIT LLC will execute and make all such proper assignments or assurances and take such other actions. The proper officers or representatives of the Surviving Company are authorized in the name of the Surviving Company, InfraREIT LLC or otherwise, to take any and all such action.
12.4 Binding Effect . This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns.
12.5 Counterparts . For the convenience of the parties hereto, any number of counterparts hereof may be executed and each such counterpart shall be deemed to be an original instrument.
 
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective duly authorized officers or representatives, as of the date first written above.

InfraREIT, L.L.C.	
		
By:		/s/ David A. Campbell	
  Name:		David A. Campbell	
  Title:		President	

InfraREIT Partners, LP	
	
By: InfraREIT, L.L.C., its general partner	
		
            By:		/s/ David A. Campbell	
              Name:		David A. Campbell	
              Title:		President	

InfraREIT, Inc.	
		
By:		/s/ David A. Campbell	
    Name:		David A. Campbell	
    Title:		President	
Signature Page to Merger and Transaction Agreeme nt

EXHIBIT A
Form of ES Note
Exhibit A-1

EXHIBIT B-1
Maryland Articles of Merger
Exhibit B-1-1

EXHIBIT B-2
Delaware Certificate of Merger
Exhibit B-2-1

EXHIBIT C
Amended and Restated Charter
Exhibit C-1

EXHIBIT D
Form of Merger Election Notice
Exhibit D-1

Exhibit 10.1
STRUCTURING FEE AGREEMENT
This Structuring Fee Agreement (the “ Agreement ”), dated as of January 29, 2015 (the “ Effective Date ”), is made by and between InfraREIT, Inc., a Maryland corporation (the “ Company ”), and Hunt-InfraREIT, L.L.C., a Delaware limited liability company (“ Hunt-InfraREIT ”).
RECITALS
WHEREAS, the Company has filed with the United States Securities and Exchange Commission a registration statement on Form S-11 (the “ Registration Statement ”) with respect to an initial public offering (the “ IPO ”) of its common stock, par value $0.01 per share (“ Common Stock ”);
WHEREAS, in consideration for the significant time and effort of Hunt-InfraREIT and its affiliates in connection with preparing the Company for the IPO, the Company desires to pay to Hunt-InfraREIT 1,700,000 shares of Common Stock (the “ Structuring Fee Securities ”) pursuant to the terms and conditions set forth herein;
WHEREAS, Hunt-InfraREIT desires to accept the Structuring Fee Securities, subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual promises, covenants, conditions and agreements contained herein, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
1.     Structuring Fee Securities .
       1.1.     Allocation .    The Company hereby agrees to pay the Structuring Fee Securities to Hunt-InfraREIT at the Closing (as defined below).
       1.2.     Terms of Common Stock .    The powers, privileges and rights of the holders of shares of Common Stock, and the qualifications, limitations and restrictions thereof, are set forth in the charter of the Company as in effect as of the date hereof, attached hereto as Exhibit A , and as the same may be amended and restated effective as of the closing of the IPO (the “ IPO Closing ”), the form of which is attached hereto as Exhibit B (collectively, as may be amended and restated from time to time, the “ Charter ”).
2.     Closing .    The closing of the transactions contemplated by this Agreement (the “ Closing ”) shall occur as of the Effective Date.
3.     Representations and Warranties of the Company .    The Company hereby represents and warrants to Hunt-InfraREIT as follows:
       3.1.     Organization, Good Standing, Power and Qualification .    The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Maryland and has all requisite corporate power and authority to own and operate its properties and assets and to carry on its business as presently conducted and as proposed to be conducted.
 
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       3.2.     Authorization .    This Agreement and the transactions contemplated hereby, including the issuance of the Structuring Fee Securities, have been duly authorized by all necessary corporate action on behalf of the Company in order to authorize the Company to enter into this Agreement. This Agreement, when executed and delivered by the Company, shall constitute a valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, or other laws of general application relating to or affecting the enforcement of creditors’ rights generally, or (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies.
       3.3.     Structuring Fee Securities .    The Structuring Fee Securities, when issued, sold and delivered in accordance with the terms and for the consideration set forth in this Agreement, will be validly issued, fully paid and nonassessable and free of restrictions on transfer other than (i) restrictions on transfer set forth in (y) the Charter or (z) applicable state and federal securities laws and (ii) liens or encumbrances created by or imposed by Hunt-InfraREIT. Assuming the accuracy of the representations of Hunt-InfraREIT in Section 4 of this Agreement, the Structuring Fee Securities will be issued in material compliance with all applicable federal and state securities laws.
4.     Representations and Warranties of Hunt-InfraREIT .    Hunt-InfraREIT hereby represents and warrants to the Company as follows:
       4.1.     Organization, Good Standing, Power and Qualification .    Hunt-InfraREIT is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Delaware and has all requisite limited liability company power and authority to own and operate its properties and assets and to carry on its business as presently conducted and as proposed to be conducted.
       4.2.     Authorization .    This Agreement and the transactions contemplated hereby have been duly authorized by all necessary limited liability company action on behalf of Hunt-InfraREIT in order to authorize Hunt-InfraREIT to enter into this Agreement. This Agreement, when executed and delivered by Hunt-InfraREIT, shall constitute a valid and legally binding obligation of Hunt-InfraREIT, enforceable against Hunt-InfraREIT in accordance with its terms except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, or other laws of general application relating to or affecting the enforcement of creditors’ rights generally, or (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies.
       4.3.     Acquisition Entirely for Own Account .    This Agreement is made with Hunt-InfraREIT in reliance upon Hunt-InfraREIT’s representation to the Company, which by Hunt-InfraREIT’s execution of the Agreement, Hunt-InfraREIT hereby confirms, that, subject to the final sentence of this Section 4.3, the Structuring Fee Securities to be acquired by Hunt-InfraREIT will be acquired for investment for Hunt-InfraREIT’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that Hunt-InfraREIT has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Agreement, Hunt-InfraREIT further represents that, subject to the final sentence of this Section 4.3, Hunt-InfraREIT does not presently have any
 
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contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Structuring Fee Securities. Hunt-InfraREIT has not been formed for the specific purpose of acquiring the Structuring Fee Securities. Notwithstanding anything to the contrary contained in this Section 4.3, Hunt-InfraREIT has agreed to transfer a portion of the shares of Common Stock issued to it hereunder to OPTrust N.A. Holdings Trust (“ OpTrust ”) pursuant to an agreement of transfer in which OpTrust has made representations and warranties that are reasonably necessary to confirm that such transfer does not otherwise cause the issuance of the Structuring Fee Securities pursuant to this Agreement to fail to be exempt from registration under the Securities Act of 1933, as amended (the “ Securities Act ”).
       4.4.     Restricted Securities .    Hunt-InfraREIT understands that the Structuring Fee Securities have not been, and will not be, registered under the Securities Act, by reason of a specific exemption from the registration provisions of the Securities Act that depends upon, among other things, the bona fide nature of the investment intent and the accuracy of Hunt-InfraREIT’s representations as expressed herein. Hunt-InfraREIT understands that the Structuring Fee Securities are “restricted securities” under applicable U.S. federal and state securities laws and that, pursuant to these laws, Hunt-InfraREIT must hold the Structuring Fee Securities indefinitely unless they are registered with the Securities and Exchange Commission and qualified by state authorities, or an exemption from such registration and qualification requirements is available. Hunt-InfraREIT acknowledges that the Company has no obligation to register or qualify the Structuring Fee Securities for resale other than pursuant to the terms of the Registration Rights Agreement among the Company, Hunt-InfraREIT and the other investors party thereto, as it will be amended and restated upon the IPO Closing. Hunt-InfraREIT further acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Structuring Fee Securities, and on requirements relating to the Company that are outside of Hunt-InfraREIT’s control, and that the Company is under no obligation and may not be able to satisfy.
       4.5.     Legends .    Hunt-InfraREIT understands that the Structuring Fee Securities and any securities issued in respect of or exchange for the Structuring Fee Securities, may bear one or all of the following legends:
                 (a)    “THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), THE SECURITIES LAWS OF ANY STATE OR ANY OTHER APPLICABLE U.S. OR NON-U.S. SECURITIES LAWS, IN EACH CASE IN RELIANCE UPON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. SUCH SECURITIES MAY NOT BE SOLD, PLEDGED, OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR A VALID EXEMPTION FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE SECURITIES ACT, ANY APPLICABLE STATE SECURITIES LAWS AND ANY OTHER APPLICABLE SECURITIES LAWS.”
 
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                 (b)    Any legend required by the Charter and/or the securities laws of any state or any other securities laws to the extent such laws are applicable to the Structuring Fee Securities.
       4.6.     Accredited Investor .    Hunt-InfraREIT is an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Securities Act.
       4.7.     No General Solicitation .    Neither the Company, nor any of its respective agents, has either directly or indirectly, including through a broker or finder (i) engaged in any general solicitation, or (ii) published any advertisement in connection with the offer and sale of the Structuring Fee Securities. Hunt-InfraREIT has a pre-existing relationship with the Company and has not relied upon any of the statements contained in the Registration Statement in connection with its determination to accept the Structuring Fee Securities. In making the decision to accept the Structuring Fee Securities, Hunt-InfraREIT has relied solely upon (i) the Charter and this Agreement, and (ii) its own independent investigations of the business to be undertaken by the Company or investigations conducted by its own independent advisers in evaluating its participation in the Company.
5.     Miscellaneous .
       5.1.     Amendments; Waiver .    This Agreement may be amended, modified or supplemented only by a written instrument signed by each of the parties hereto. No waiver of any of the provisions of this Agreement shall be valid and enforceable unless such waiver is in writing and signed by the party to be charged, and, unless otherwise stated therein, no such waiver shall constitute a waiver of any other provision hereof (whether or not similar) or a continuing waiver.
       5.2.     Binding Effect; Assignment .    This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement.
       5.3.     Entire Agreement .    This Agreement constitutes the entire agreement between the parties pertaining to the subject matter hereof and supersedes all prior and contemporaneous negotiations, agreements and understandings of the parties.
       5.4.     Governing Law .    This Agreement will be governed by and construed in accordance with the laws of the State of Maryland without regard to any conflicts of law provisions that would result in the application of the laws of any other jurisdiction. Any legal action or proceeding arising from this Agreement shall be adjudicated solely and exclusively in the state and/or federal courts in Maryland. Each party irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding.
       5.5.     Notices .    All notices, offers or other communications required or permitted to be given pursuant to this Agreement shall be in writing and may be personally served, sent via facsimile, sent via electronic mail or sent by United States mail or by commercial courier and shall be deemed to have been given when received at the address set forth below:
 
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If to Hunt-InfraREIT:
Hunt-InfraREIT, L.L.C.
Attn: Hunter L. Hunt, President
1900 North Akard Street
Dallas, TX 75201
Facsimile: 214-978-8989
E-mail: HHunt@huntoil.com
If to the Company:
InfraREIT, Inc.
Attn: Chief Executive Officer
1807 Ross Avenue, 4th Floor
Dallas, TX 75201
E-mail: DCampbell@huntutility.com
With a copy to:
InfraREIT, Inc.
Attn: General Counsel
1807 Ross Avenue, 4th Floor
Dallas, TX 75201
E-Mail: Legal@huntutility.com
The address of any party hereto may be changed by a notice in writing given in accordance with the provisions of this Section 5.6.
       5.6.     Severability .    If all or any portion of any provision contained in this Agreement shall be determined by a court of law to be invalid, illegal or unenforceable in any respect for any reason, such provision or portion thereof shall be deemed stricken and severed from this Agreement, and the remaining provisions and portions thereof shall continue in full force and effect.
       5.7.     Counterparts .     Any number of counterparts hereof may be executed and each such counterpart shall be deemed to be an original instrument. A signature delivered by facsimile or other means of electronic transmission shall be deemed to constitute an original signature.
       5.8.     Titles and Subtitles .    The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.
[ Signature page follows ]
 
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IN WITNESS WHEREOF, the parties have executed this Structuring Fee Agreement as of the date first set forth above.

InfraREIT, Inc.			
			
By:		/s/ Benjamin D. Nelson			
Name:		Benjamin D. Nelson			
Title:		Senior Vice President and General Counsel			
		
Hunt-InfraREIT, L.L.C.			
			
By:		/s/ Benjamin D. Nelson			
Name:		Benjamin D. Nelson			
Title:		Senior Vice President			
Signature Page to Structuring Fee Agreement

EXHIBIT A
Charter

EXHIBIT B
Amended and Restated Charter

Exhibit 10.2
REDEMPTION AGREEMENT
This redemption agreement (this “ Agreement ”), dated as of January 29, 2015, is made by and among Hunt-InfraREIT, L.L.C. (“ Hunt-InfraREIT ”), InfraREIT, Inc. (“ InfraREIT Inc. ”) and InfraREIT Partners, LP (the “ Operating Partnership ”).
RECITALS
WHEREAS, this Agreement is being entered into in connection with the Merger and Transaction Agreement, dated as of January 29, 2015, by and among InfraREIT, L.L.C. (“ InfraREIT LLC ”), InfraREIT Inc. and the Operating Partnership (as the same may be amended, modified or supplemented from time to time, the “ Merger Agreement ”), pursuant to which, among other things, InfraREIT LLC will be merged with and into InfraREIT Inc. (the “ Merger ”), with InfraREIT Inc. surviving the Merger as the general partner of the Operating Partnership;
WHEREAS, InfraREIT Inc. has filed with the United States Securities and Exchange Commission a registration statement on Form S-11 (the “ Registration Statement ”) with respect to an initial public offering (the “ IPO ”) of its common stock, par value $0.01 per share (“Common Stock ”);
WHEREAS, pursuant to the Merger Agreement and Sections 4.6.D and 8.7 of the Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership (the “ Partnership Agreement ”), which will become effective as of the closing of the IPO (the “ IPO Closing ”), Hunt-InfraREIT desires to exercise its Redemption Right (as defined in the Partnership Agreement) with respect to 1,551,878 Class A units representing limited partnership interests in the Operating Partnership (the “ Redeemed Units ”);
WHEREAS, pursuant to Section 8.7.B of the Partnership Agreement, InfraREIT Inc. desires to assume the Operating Partnership’s obligation to redeem the Redeemed Units by paying Hunt-InfraREIT the Shares Amount (as defined in the Partnership Agreement) equal to 1,551,878 shares of Common Stock (the “ Exchange Shares ”).
NOW, THEREFORE, in consideration of the premises and of the mutual promises, covenants, conditions and agreements contained herein, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
 
 	1.	Redemption Election and Assumption; Conversion of Redeemed Units .	
a. Pursuant to Sections 4.6.D and 8.7.A of the Partnership Agreement and subject to Section 2 of this Agreement, Hunt-InfraREIT hereby (i) exercises its Redemption Right with respect to the Redeemed Units and (ii) surrenders the Redeemed Units and all right, title and interest therein.
 
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b. Pursuant to Section 8.7.B of the Partnership Agreement, InfraREIT Inc. elects to assume directly and satisfy Hunt-InfraREIT’s exercise of the Redemption Right pursuant to Section 1(a) of this Agreement by issuing the Exchange Shares in exchange for the Redeemed Units, and Hunt-InfraREIT hereby consents to InfraREIT Inc.’s election to assume directly and satisfy Hunt-InfraREIT’s exercise of the Redemption Right pursuant to Section 1(a) of this Agreement.
c. Upon InfraREIT Inc.’s acquisition of the Redeemed Units pursuant to Section 1(b) of this Agreement, and pursuant to Section 4.6.C of the Partnership Agreement, the Redeemed Units will be automatically converted into an equivalent number of Common Units (as defined in the Partnership Agreement).
2. Effective Time . The closing of the transactions contemplated by this Agreement shall occur immediately following the IPO Closing and simultaneously with the Merger.
3. Waiver of Minimum Holding Period . Each of the parties hereto expressly agrees and acknowledges that the transactions contemplated by this Agreement shall be deemed to be in full satisfaction of the parties’ respective rights and obligations under Section 8.7 of the Partnership Agreement with respect to the redemption of the Redeemed Units, notwithstanding the provisions of such section imposing minimum holding periods, notice requirements or other conditions upon the exercise of the Redemption Right and the other transactions contemplated hereby.
4. Termination . If the IPO Closing shall not have occurred within 10 business days of the date of this Agreement, this Agreement shall automatically terminate and be of no further force and effect.
5. Entire Agreement . This Agreement constitutes the entire agreement between the parties pertaining to the subject matter hereof and supersedes all prior and contemporaneous negotiations, agreements and understandings of the parties.
6. Binding Effect; Assignment . This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement.
7. Amendment and Modification . This Agreement may be amended, modified or supplemented only by written agreement of each of the parties hereto.
8. Counterparts . Any number of counterparts hereof may be executed and each such counterpart shall be deemed to be an original instrument. A signature delivered by facsimile or other means of electronic transmission shall be deemed to constitute an original signature.
9. Governing Law . This Agreement will be governed by and construed in accordance with the laws of the State of Delaware without regard to any conflicts of law provisions that would result in the application of the laws of any other jurisdiction. Any legal action or proceeding between two or more of the parties to this Agreement shall be adjudicated solely and exclusively in the state and/or federal courts in Delaware. Each party irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding.
[ Signature page follows ]
 
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IN WITNESS WHEREOF, the parties hereto have each executed and delivered this Agreement as of the day and year first above written.

Hunt-InfraREIT, L.L.C.	
		
By:		/s/ Hunter L. Hunt	
  Name:		Hunter L. Hunt	
  Title:		President	

InfraREIT, Inc.	
		
By:		/s/ David A. Campbell	
  Name:		David A. Campbell	
  Title:		President	

InfraREIT Partners, LP
 
By: InfraREIT, L.L.C., its general partner	
		
            By:		/s/ David A. Campbell	
              Name:		David A. Campbell	
              Title:		President	
 
[Signature Page to Redemption Agreement (Hunt-InfraREIT)]

Exhibit 10.3
SHARE PURCHASE AGREEMENT
This Share Purchase Agreement (this “ Agreement ”) is entered into as of January 29, 2015 by and between InfraREIT, Inc., a Maryland corporation (the “ Purchaser ”), and Westwood Trust, as Trustee of the Excess Shares Trust (the “ Trust ”).
WHEREAS, this Agreement is being entered into in connection with the Merger and Transaction Agreement, dated as of January 29, 2015, by and among the Purchaser, InfraREIT, L.L.C. (“ InfraREIT LLC ”), and InfraREIT Partners, LP (as the same may be amended, modified or supplemented from time to time, the “ Merger Agreement ”), pursuant to which, among other things, InfraREIT LLC will be merged with and into the Purchaser, with InfraREIT Inc. as the surviving entity in the merger (the “ Merger ”);
WHEREAS, the Trust currently holds 6,242,999 limited liability company interests (the “ Shares ”) of InfraREIT LLC, which are classified as common shares in the Amended and Restated Limited Liability Company Agreement of InfraREIT LLC, dated as of November 23, 2010 (the “ LLC Agreement ”);
WHEREAS, pursuant to Section 6.18 of the LLC Agreement, InfraREIT LLC has accepted the offer to purchase the Shares at a price of $10.654733 per share by delivery to the Trust of a notice of acceptance (“ Notice of Acceptance ”) dated January 26, 2015 (the “ Acceptance Date ”); and
WHEREAS, in satisfaction of InfraREIT LLC’s obligations under the Notice of Acceptance, the Purchaser (as successor in interest to InfraREIT LLC) desires to purchase the Shares from the Trust, and the Trust desires to sell the Shares to the Purchaser.
NOW, THEREFORE, in consideration of the mutual covenants, agreements and warranties contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
Purchase and Sale of Shares
Section 1.1 Sale of Shares . Upon the terms and conditions of this Agreement, the Purchaser agrees to purchase from the Trust at the ES Purchase Effective Time (as defined below) and the Trust agrees to sell to the Purchaser at the ES Purchase Effective Time all Shares owned by the Trust as of the ES Purchase Effective Time for the sales price of $10.654733 per Share. The purchase of the Shares pursuant to this Agreement shall be deemed to satisfy InfraREIT LLC’s acceptance of the offer to purchase such Shares pursuant to the Notice of Acceptance.
Section 2.2 Effective Time . The closing of the purchase and sale of the Shares hereunder (the “ Closing ”) shall occur concurrently with and shall be conditioned upon the consummation of the Merger (the “ ES Purchase Effective Time ”).
 
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Section 2.3 Delivery . At the Closing, the Trust shall deliver to the Purchaser the certificates representing the Shares held by the Trust and appropriate share transfer forms or stock powers executed in blank, against payment by the Purchaser of the sale price for the Trust’s Shares by delivering to the Trust a promissory note in the principal aggregate amount of $66,517,480 substantially in the form attached hereto as Exhibit A.
ARTICLE III
Miscellaneous
Section 3.1 Termination . If the Merger shall not have occurred within 10 business days of the date of this Agreement, this Agreement shall automatically terminate and be of no further force and effect.
Section 3.2 Further Assurances . Each of the parties hereto will take all such lawful action as may be necessary or appropriate to effect the transactions described in this Agreement.
Section 3.3 Binding Effect . This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns.
Section 3.4 Amendments; Waiver . This Agreement may be amended, modified or supplemented only by a written instrument signed by each of the parties hereto. No waiver of any of the provisions of this Agreement shall be valid and enforceable unless such waiver is in writing and signed by the party to be charged, and, unless otherwise stated therein, no such waiver shall constitute a waiver of any other provision hereof (whether or not similar) or a continuing waiver.
Section 3.5 No Third-Party Rights . Nothing express or implied in this Agreement is intended or shall be construed to confer on any person other than the parties hereto any rights under this Agreement.
Section 3.6 Entire Agreement . This Agreement constitutes the entire agreement between the parties pertaining to the subject matter hereof and supersedes all prior and contemporaneous negotiations, agreements and understandings of the parties.
Section 3.7 Governing Law . This Agreement will be governed by and construed in accordance with the laws of the State of Delaware without regard to any conflicts of law provisions that would result in the application of the laws of any other jurisdiction. Any legal action or proceeding between the parties to this Agreement shall be adjudicated solely and exclusively in the state and/or federal courts in Delaware. Each party irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding.
Section 3.8 Counterparts . Any number of counterparts hereof may be executed and each such counterpart shall be deemed to be an original instrument. A signature delivered by facsimile or other means of electronic transmission shall be deemed to constitute an original signature.
[ Signature page follows ]
 
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written.

INFRAREIT, INC.	
		
By:		/s/ David A. Campbell	
Name:		David A. Campbell	
Title:		President	
 
Signature Page to Trust Share Purchase Agreement

			
WESTWOOD TRUST , as Trustee	
		
By:		/s/ Kallie Myers	
Name:		Kallie Myers	
Title:		Vice President Trust Law	
 
Signature Page to Trust Share Purchase Agreement

EXHIBIT A
Form of Promissory Note

Exhibit 10.4
UNIT SUBSCRIPTION AGREEMENT
This Unit Subscription Agreement (this “ Agreement ”), dated as of January 29, 2015, is made by and between InfraREIT Partners, LP (the “ Partnership ”) and MC Transmission Holdings, Inc. (“ Marubeni ”).
RECITALS
WHEREAS, this Agreement is being entered into in connection with the Merger and Transaction Agreement, dated as of January 29, 2015 by and among InfraREIT, L.L.C. (“ InfraREIT LLC ”), InfraREIT, Inc. (“ InfraREIT Inc. ”) and the Partnership (as the same may be amended, modified or supplemented from time to time, the “ Merger Agreement ”), pursuant to which, among other things, InfraREIT LLC will be merged with and into InfraREIT Inc., with InfraREIT Inc. as the surviving entity in the merger (the “ Merger ”);
WHEREAS, InfraREIT Inc. has filed with the United States Securities and Exchange Commission a registration statement on Form S-11 (the “ Registration Statement ”) with respect to an initial public offering (the “ IPO ”) of its common stock, par value $0.01 per share;
WHEREAS, 6,242,999 limited liability company interests in InfraREIT LLC designated as common shares were transferred to a trust (the “ Trust Shares ”) for the benefit of the Charitable Beneficiary (as defined in the Merger Agreement) as a result of the operation of certain provisions of Article 6 of the Amended and Restated Limited Liability Company Agreement of InfraREIT LLC, dated as of November 23, 2010 (the “ LLC Agreement ”);
WHEREAS, pursuant to Section 6.18 of the LLC Agreement, InfraREIT LLC has accepted the offer to purchase the Trust Shares from the Trust and InfraREIT Inc. (as successor in interest to InfraREIT LLC) has agreed to consummate the purchase of the Trust Shares contemporaneously with the Merger in consideration for a promissory note in the principal amount of $66,517,480 (the “ ES Note ”);
WHEREAS, in accordance with Section 6.18 of the LLC Agreement, immediately upon receipt, Westwood Trust, as Trustee of the Trust (the “ Trustee ”), will transfer the ES Note to Marubeni Corporation or its designated affiliate as the Purported Record Holder (as defined in the LLC Agreement) pursuant to an assignment agreement, in form and substance attached hereto as Exhibit A (the “ Trust Promissory Note Assignment ”);
WHEREAS, immediately upon receipt of the ES Note from the Trustee pursuant to the Trust Promissory Note Assignment, Marubeni Corporation will contribute the ES Note to Marubeni pursuant to the Contribution Agreement, of even date herewith;
WHEREAS, Marubeni desires to purchase an aggregate of 3,325,874 common units representing limited partnership interests in the Partnership (the “ Subscribed Units ”);
WHEREAS, Marubeni has agreed to transfer the ES Note to the Partnership in consideration for the purchase of the Subscribed Units immediately upon receipt of the ES Note from the Trustee, pursuant to the terms and conditions set forth herein and an assignment agreement, in form and substance attached hereto as Exhibit B (the “ Marubeni Promissory Note Assignment ”);
 
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NOW, THEREFORE, in consideration of the premises and of the mutual promises, covenants, conditions and agreements contained herein, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Subscription . Subject to the terms and conditions of this Agreement and the Partnership Agreement (as defined below), Marubeni hereby subscribes for, and agrees to purchase, the Subscribed Units on the terms and conditions set forth in this Agreement. The powers, privileges and rights of the Subscribed Units, and the qualifications, limitations and restrictions thereof, are set forth in the Second Amended and Restated Agreement of Limited Partnership of the Partnership (the “ Partnership Agreement ”), the form of which is attached hereto as Exhibit C , and upon consummation of the purchase of the Subscribed Units by Marubeni, Marubeni agrees to become and shall be admitted by the Partnership as a limited partner in the Partnership, in accordance with the terms and conditions thereof.
2. Closing . The purchase of the Subscribed Units shall occur on the date of and shall be conditioned upon the closing of the IPO immediately following (i) Marubeni Corporation’s receipt of the ES Note from the Trustee in accordance with Section 6.18 of the LLC Agreement and the Promissory Note Assignment and (ii) contribution of the ES Note by Marubeni Corporation to Marubeni.
3. Payment for Subscribed Units . The Partnership and Marubeni agree that Marubeni’s transfer of the ES Note to the Partnership pursuant to the Marubeni Promissory Note Assignment shall constitute full and complete consideration for, and satisfaction of any and all obligations of Marubeni to the Partnership with respect to, the Subscribed Units.
4. Representations and Warranties of the Partnership . The Partnership hereby represents and warrants to Marubeni as follows:
4.1. Organization, Good Standing, Power and Qualification . The Partnership is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite limited partnership power and authority to own and operate its properties and assets and to carry on its business as presently conducted and as proposed to be conducted.
4.2. Authorization . This Agreement and the Partnership Agreement and the transactions contemplated hereby and thereby, including the issuance of the Subscribed Units and admission of Marubeni as limited partner, have been duly authorized by all necessary limited partnership action on behalf of the Partnership in order to authorize the Partnership to enter into this Agreement and the Partnership Agreement. This Agreement and the Partnership Agreement, when executed and delivered by the Partnership, shall constitute a valid and legally binding obligation of the Partnership, enforceable against the Partnership in accordance with their terms except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, or other laws of general application relating to or affecting the enforcement of creditors’ rights generally, or (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies.
 
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4.3. Subscribed Units . The Subscribed Units, when issued, sold and delivered in accordance with the terms and for the consideration of the transfer of the ES Note to the Partnership, as set forth in this Agreement, will be validly issued, fully paid and nonassessable and free of restrictions on transfer other than (i) restrictions on transfer set forth in (y) the Partnership Agreement or (z) applicable state and federal securities laws and (ii) liens or encumbrances created by or imposed by Marubeni. Assuming the accuracy of the representations of Marubeni in Section 5 of this Agreement, the Subscribed Units will be issued in compliance with all applicable federal and state securities laws.
5. Representations and Warranties of Marubeni . Marubeni hereby represents and warrants to the Partnership as follows:
5.1. Organization, Good Standing, Power and Qualification . Marubeni is a corporation duly formed, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own and operate its properties and assets and to carry on its business as presently conducted and as proposed to be conducted.
5.2. Authorization . This Agreement and the Partnership Agreement and the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action on behalf of Marubeni in order to authorize Marubeni to enter into this Agreement and the Partnership Agreement. This Agreement and the Partnership Agreement, when executed and delivered by Marubeni, will constitute a valid and legally binding obligation of Marubeni, enforceable against Marubeni in accordance with their terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, or other laws of general application relating to or affecting the enforcement of creditors’ rights generally, or (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies.
5.3. Acquisition Entirely for Own Account . This Agreement is made with Marubeni in reliance upon Marubeni’s representation to the Partnership, which by Marubeni’s execution of the Agreement, Marubeni hereby confirms, that the Subscribed Units to be acquired by Marubeni will be acquired for investment for Marubeni’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that Marubeni has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Agreement, Marubeni further represents that Marubeni does not presently have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Subscribed Units.
5.4. Restricted Securities . Marubeni understands that the Subscribed Units have not been, and will not be, registered under the Securities Act of 1933, as amended (the “ Securities Act ”), by reason of a specific exemption from the registration provisions of the Securities Act that depends upon, among other things, the bona fide nature of the investment intent and the accuracy of Marubeni’s representations as expressed herein. Marubeni understands that the Subscribed Units are “restricted securities” under applicable U.S. federal and state securities laws and that, pursuant to these laws, Marubeni must hold the Subscribed Units indefinitely unless they are registered with the Securities and Exchange Commission and qualified by state authorities, or an exemption from such registration and qualification requirements is available. Marubeni acknowledges that the Partnership has no obligation to
 
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register or qualify the Subscribed Units for resale other than pursuant to the terms of the Amended and Restated Registration Rights Agreement among the Partnership, InfraREIT Inc., Marubeni and the other investors party thereto. Marubeni further acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Subscribed Units, and on requirements relating to the Partnership that are outside of Marubeni’s control, and that the Partnership is under no obligation and may not be able to satisfy.
5.5. Legends . Marubeni understands that the Subscribed Units and any securities issued in respect of or exchange for the Subscribed Units, may bear one or all of the following legends:
(a) “THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), THE SECURITIES LAWS OF ANY STATE OR ANY OTHER APPLICABLE U.S. OR NON-U.S. SECURITIES LAWS, IN EACH CASE IN RELIANCE UPON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. SUCH SECURITIES MAY NOT BE SOLD, PLEDGED, OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR A VALID EXEMPTION FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE SECURITIES ACT, ANY APPLICABLE STATE SECURITIES LAWS AND ANY OTHER APPLICABLE SECURITIES LAWS.”
(b) Any legend required by the Partnership Agreement and/or the securities laws of any state or any other securities laws to the extent such laws are applicable to the Subscribed Units.
5.6. Accredited Investor . Marubeni is an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Securities Act.
5.7. No General Solicitation . Marubeni did not acquire the Subscribed Units pursuant to (i) any general solicitation, or (ii) any advertisement in connection with the offer and sale of the Subscribed Units. Marubeni has a pre-existing relationship with the Partnership and has not relied upon any of the statements contained in the Registration Statement in connection with its determination to accept the Subscribed Units. In making the decision to accept the Subscribed Units, Marubeni has relied solely upon (i) the Partnership Agreement and this Agreement and (ii) its own independent investigations of the business to be undertaken by the Partnership or investigations conducted by its own independent advisers in evaluating its participation in the Partnership.
6. Miscellaneous .
6.1. Termination . This Agreement shall terminate if the closing of the IPO has not occurred within 10 business days of the date hereof.
 
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6.2. Amendments; Waiver . This Agreement may be amended, modified or supplemented only by a written instrument signed by each of the parties hereto. No waiver of any of the provisions of this Agreement shall be valid and enforceable unless such waiver is in writing and signed by the party to be charged, and, unless otherwise stated therein, no such waiver shall constitute a waiver of any other provision hereof (whether or not similar) or a continuing waiver.
6.3. Binding Effect; Assignment . This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement.
6.4. Entire Agreement . This Agreement constitutes the entire agreement between the parties pertaining to the subject matter hereof and supersedes all prior and contemporaneous negotiations, agreements and understandings of the parties.
6.5. Governing Law . This Agreement will be governed by and construed in accordance with the laws of the State of Delaware without regard to any conflicts of law provisions that would result in the application of the laws of any other jurisdiction. Any legal action or proceeding between two or more parties to this Agreement shall be adjudicated solely and exclusively in the state and/or federal courts in Delaware. Each party irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding.
6.6. Notices . All notices, offers or other communications required or permitted to be given pursuant to this Agreement shall be in writing and may be personally served, sent via facsimile, sent via electronic mail or sent by United States mail or by commercial courier and shall be deemed to have been given when received at the address set forth below:
If to Marubeni:
Marubeni Corporation
c/o Marubeni Power International, Inc.
375 Lexington Avenue, New York, NY 10017
Attention: Takashi Fujinaga
Telephone: (212) 450-0640
E-mail: fukumura-toshihiro@marubeni.com
If to the Partnership:
InfraREIT, Partners, LP
Attn: Chief Executive Officer
1807 Ross Avenue, 4th Floor
Dallas, TX 75201
E-mail: DCampbell@huntutility.com
 
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With a copy to:
InfraREIT, Inc.
Attn: General Counsel
1807 Ross Avenue, 4th Floor
Dallas, TX 75201
E-Mail: Legal@huntutility.com
The address of any party hereto may be changed by a notice in writing given in accordance with the provisions of this Section 6.6.
6.7. Severability . If all or any portion of any provision contained in this Agreement shall be determined by a court of law to be invalid, illegal or unenforceable in any respect for any reason, such provision or portion thereof shall be deemed stricken and severed from this Agreement, and the remaining provisions and portions thereof shall continue in full force and effect.
6.8. Counterparts . For the convenience of the parties hereto, any number of counterparts hereof may be executed and each such counterpart shall be deemed to be an original instrument. A signature delivered by facsimile or other means of electronic transmission shall be deemed to constitute an original signature.
6.9. Titles and Subtitles . The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.
[ Signature page follows ]
 
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IN WITNESS WHEREOF, the parties have executed this Unit Subscription Agreement as of the date first set forth above.

Partnership:	
	
InfraREIT Partners, LP	
By:		InfraREIT, L.L.C., its general partner	

By:		/s/ David A. Campbell	
Name:		David A. Campbell	
Title:		President	

Subscriber:	
	
MC Transmission Holdings, Inc.	
		
By:		/s/ Takashi Fujinaga	
Name:		Takashi Fujinaga	
Title:		President	
Signature Page to Unit Subscription Agreement

EXHIBIT A
Trust Promissory Note Assignment

EXHIBIT B
Marubeni Promissory Note Assignment

EXHIBIT C
Partnership Agreement

Exhibit 10.5
REDEMPTION AGREEMENT
This redemption agreement (this “ Agreement ”) is executed as of January 29, 2015 by and between InfraREIT, Inc. (“ InfraREIT Inc. ”) and InfraREIT Partners, LP (the “ Operating Partnership ”).
RECITALS
WHEREAS, this Agreement is being entered into in connection with the Merger and Transaction Agreement, dated as of January 29, 2015, by and among InfraREIT, L.L.C. (“ InfraREIT LLC ”), InfraREIT Inc. and the Operating Partnership (as the same may be amended, modified or supplemented from time to time, the “ Merger Agreement ”), pursuant to which, among other things, InfraREIT LLC will be merged with and into InfraREIT Inc., with InfraREIT Inc. as the surviving entity in the merger (the “ Merger ”);
WHEREAS, InfraREIT Inc. has filed with the United States Securities and Exchange Commission a registration statement on Form S-11 with respect to an initial public offering (the “ IPO ”) of its common stock, par value $0.01 per share;
WHEREAS, 6,242,999 limited liability company interests in InfraREIT LLC designated as common shares were transferred to a trust (the “ Trust Shares ”) for the benefit of the Charitable Beneficiary (as defined in the Merger Agreement) as a result of the operation of certain provisions of Article 6 of the Amended and Restated Limited Liability Company Agreement of InfraREIT LLC, dated as of November 23, 2010 (the “ LLC Agreement ”);
WHEREAS, pursuant to Section 6.18 of the LLC Agreement, InfraREIT LLC has accepted the offer to purchase the Trust Shares from the Trust and InfraREIT Inc., as successor to InfraREIT LLC, has agreed to acquire the Trust Shares contemporaneously with the Merger in consideration for a promissory note with a principal balance equal to $66,517,480 (the “ ES Note ”);
WHEREAS, it is contemplated that the Operating Partnership will acquire the ES Note;
WHEREAS, pursuant to Section 4.6.G of the Second Amended and Restated Agreement of Limited Partnership of the Partnership (the “ Second Amended and Restated OP Agreement ”), which will become effective upon the consummation of the IPO, InfraREIT Inc. shall cause the Operating Partnership to purchase from InfraREIT Inc. a number of Class A Units equal to the number of Trust Shares being repurchased on the same terms and for the same aggregate price that InfraREIT Inc. purchases the Trust Shares; and
WHEREAS, in consideration of the transfer and cancellation of the ES Note, the Operating Partnership desires to redeem 6,242,999 Class A Units (the “ Redeemed Units ”) held by InfraREIT Inc.
 
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NOW, THEREFORE, in consideration of the premises and of the mutual promises, covenants, conditions and agreements contained herein, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Redemption of Redeemed Units . Pursuant to Section 4.6.G of the Second Amended and Restated OP Agreement, immediately upon acquisition of the ES Note, the Operating Partnership hereby transfers to InfraREIT Inc. the ES Note and InfraREIT Inc. hereby surrenders the Redeemed Units and all right, title and interest therein.
2. Cancellation of the ES Note . InfraREIT Inc. and the Operating Partnership agree that upon transfer of the ES Note in accordance with Paragraph 1, the ES Note shall be deemed cancelled and of no further force and effect and none of the respective parties thereto shall have any right or obligation thereunder or arising from the cancellation thereof and that such cancellation shall constitute full and complete satisfaction of any and all obligations of the Operating Partnership to InfraREIT Inc. with respect to the redemption of the Redeemed Units.
3. Termination . This Agreement shall terminate if the closing of the IPO has not occurred within 10 business days of the date hereof.
4. Entire Agreement . This Agreement constitutes the entire agreement between the parties pertaining to the subject matter hereof and supersedes all prior and contemporaneous negotiations, agreements and understandings of the parties.
5. Binding Effect; Assignment . This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement.
6. Amendment and Modification . This Agreement may be amended, modified or supplemented only by written agreement of each of the parties hereto.
7. Counterparts . Any number of counterparts hereof may be executed and each such counterpart shall be deemed to be an original instrument. A signature delivered by facsimile or other means of electronic transmission shall be deemed to constitute an original signature.
8. Governing Law . This Agreement will be governed by and construed in accordance with the laws of the State of Delaware without regard to any conflicts of law provisions that would result in the application of the laws of any other jurisdiction. Any legal action or proceeding between the parties to this Agreement shall be adjudicated solely and exclusively in the state and/or federal courts in Delaware. Each party irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding.
[ Signature page follows ]
 
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IN WITNESS WHEREOF, the parties hereto have each executed and delivered this Agreement as of the day and year first above written.

InfraREIT, Inc.	
		
By:		/s/ David A. Campbell	
  Name:		David A. Campbell	
  Title:		President	

InfraREIT Partners, LP	
	
By: InfraREIT, L.L.C., its general partner	
		
            By:		/s/ David A. Campbell	
              Name:		David A. Campbell	
              Title:		President	
Signature Page to Redemption Agreement of InfraREIT, Inc .

Exhibit 10.6
GENERAL RELEASE AGREEMENT
This general release agreement (this “ Release ”) is executed as of January 29, 2015 by and among Hunt Transmission Services, L.L.C. (“ Hunt ”), InfraREIT, L.L.C. (formerly Electric Infrastructure Alliance of America, L.L.C.) (“ InfraREIT LLC ”), InfraREIT Partners, LP (formerly Electric Infrastructure Alliance of America, L.P. (the “ Operating Partnership ”), InfraREIT, Inc. (formerly known as Hunt Electrical Infrastructure Investment Corporation) (“ InfraREIT Inc. ”), John Hancock Life Insurance Company (U.S.A.) (“ Hancock ”), Marubeni Corporation (“ Marubeni ”), OpTrust Infrastructure N.A. Inc. (“ OpTrust ”), OPTrust N.A. Holdings Trust (“ OPTrust Holdings ”), and Teachers Insurance and Annuity Association of America (“ TIAA ” and, together with Hancock, Marubeni, OpTrust and OPTrust Holdings, each an “ Investor ” and, collectively, the “ Investors ”). Hunt, InfraREIT LLC, the Operating Partnership, InfraREIT Inc. and the Investors are each referred to herein as a “ Party ” and collectively as the “ Parties .”
RECITALS
WHEREAS, this Release is being entered into in connection with the Merger and Transaction Agreement, dated as of the date hereof, by and among InfraREIT LLC, InfraREIT Inc. and the Operating Partnership (as the same may be amended, modified or supplemented from time to time, the “ Merger Agreement ”), pursuant to which, among other things, InfraREIT LLC will be merged with and into InfraREIT Inc. with InfraREIT Inc. surviving (the “ Merger );
WHEREAS, InfraREIT Inc. has filed with the United States Securities and Exchange Commission (the “ SEC ”) a registration statement on Form S-11 (the “ Registration Statement ”) with respect to an initial public offering (“ IPO ”) of its common stock, par value $0.01 per share (“ Common Stock ”);
WHEREAS, a trust for the benefit of a charitable beneficiary with Westwood Trust as Trustee (the “ Trust ”), currently holds 6,242,999 Common Shares (as defined in the Existing LLC Agreement (as defined below)) (the “ Trust Shares ”) for the benefit of the Charitable Beneficiary (as defined in the Merger Agreement) as a result of the operation of certain provisions of Article 6 of the Existing LLC Agreement (the “ Excess Share Provisions ”);
WHEREAS, pursuant to Section 6.18 of the Amended and Restated Limited Liability Company Agreement of InfraREIT LLC, dated as of November 23, 2010 (the “ Existing LLC Agreement ), on or prior to the date hereof, InfraREIT LLC accepted the offer to purchase the Trust Shares at a price of $10.654733 per share; and
WHEREAS, InfraREIT Inc. (as successor to InfraREIT LLC) will consummate the purchase of the Trust Shares contemporaneously with the Merger in satisfaction of InfraREIT LLC’s acceptance of the offer to purchase such shares.
 
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NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL PROMISES MADE HEREIN, THE SUFFICIENCY OF WHICH IS HEREBY ACKNOWLEDGED, IT IS HEREBY AGREED AND REPRESENTED AS FOLLOWS:
1. For purposes of this Release, “ Released Claims ” shall mean any and all past, present and future disputes, claims, controversies, demands, rights, contracts, agreements, obligations, accounts, defenses, debts, liabilities, suits, actions, causes of action, damages, or claims of relief, or obligations of every kind and nature, express or implied, whether known or unknown, matured or unmatured, suspected or unsuspected, whether liquidated or unliquidated, fixed or contingent, directly or derivatively, whether based in tort, contract or statute, or in law or in equity, and arising out of, or relating to, (a) the events, actions and occurrences giving rise, or relating, to the triggering of the Excess Share Provisions, (b) the implementation and effects of the Excess Share Provisions, including the transfer of the Trust Shares to the Trust, the acceptance of the purchase of the Trust Shares by InfraREIT LLC, the purchase of the Trust Shares by InfraREIT Inc., the transfer of consideration received by the Trust to Marubeni, and the redemption, cancellation or forfeiture by InfraREIT Inc. of units in the Operating Partnership that correspond to the purchase of the Trust Shares by InfraREIT Inc., and (c) the purchase by Marubeni or its affiliates of units in the Operating Partnership in exchange for the consideration transferred by the Trust to Marubeni. For the avoidance of doubt, Released Claims shall not include any claims for indemnification pursuant to that certain letter agreement dated November 3, 2014, among Hunt Transmission Services, L.L.C., Marubeni Corporation and OpTrust Infrastructure N.A. Inc. which has been assigned to OPTrust Holdings together with the interest of OPTrust in InfraREIT LLC.
2. Releases: Effective as of the Effective Date (as defined below):
 
 	a.	Each of InfraREIT LLC, the Operating Partnership, InfraREIT Inc., Hancock, OpTrust, OPTrust Holdings and TIAA, on behalf of itself and its heirs, executors, administrators, legal representatives, agents, advisors (including investment advisors, investment managers or other persons or entities acting in any other similar capacities), estates, employees, stockholders, controlling persons, officers, directors, partners, members, subsidiaries, parents, Affiliates (as defined in the Existing LLC Agreement), predecessors, insurers, successors and assignees, hereby fully, completely, irrevocably and forever releases, discharges, and acquits each other Party and its past, present or future heirs, executors, administrators, legal representatives, agents, advisors (including investment advisors, investment managers or other persons or entities acting in any other similar capacities), estates, employees, stockholders, controlling persons, officers, directors, partners, members, subsidiaries, parents, Affiliates, including any other entities with respect to which any of the foregoing released parties serve as investment advisors, investment managers or in any other similar capacities, predecessors, insurers, successors and assignees from any and all Released Claims;	
 
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 	b.	Hunt, on behalf of itself and its heirs, executors, administrators, legal representatives, agents, advisors (including investment advisors, investment managers or other persons or entities acting in any other similar capacities), estates, employees, stockholders, controlling persons, officers, directors, partners, members, subsidiaries, parents, Affiliates, predecessors, insurers, successors and assignees, hereby fully, completely, irrevocably and forever releases, discharges, and acquits each of InfraREIT LLC, the Operating Partnership, InfraREIT Inc., Hancock, OpTrust, OPTrust Holdings and TIAA and their past, present or future heirs, executors, administrators, legal representatives, agents, advisors (including investment advisors, investment managers or other persons or entities acting in any other similar capacities), estates, employees, stockholders, controlling persons, officers, directors, partners, members, subsidiaries, parents, Affiliates, including any other entities with respect to which any of the foregoing released parties serve as investment advisors, investment managers or in any other similar capacities, predecessors, insurers, successors and assignees from any and all Released Claims; and	
 
 	c.	Marubeni, on behalf of itself and its heirs, executors, administrators, legal representatives, agents, advisors (including investment advisors, investment managers or other persons or entities acting in any other similar capacities), estates, employees, stockholders, controlling persons, officers, directors, partners, members, subsidiaries, parents, Affiliates (as defined in the Existing LLC Agreement), predecessors, insurers, successors and assignees, hereby fully, completely, irrevocably and forever releases, discharges, and acquits each of InfraREIT LLC, the Operating Partnership, InfraREIT Inc., Hancock, OpTrust, OPTrust Holdings and TIAA and their past, present or future heirs, executors, administrators, legal representatives, agents, advisors (including investment advisors, investment managers or other persons or entities acting in any other similar capacities), estates, employees, stockholders, controlling persons, officers, directors, partners, members, subsidiaries, parents, Affiliates, including any other entities with respect to which any of the foregoing released parties serve as investment advisors, investment managers or in any other similar capacities, predecessors, insurers, successors and assignees from any and all Released Claims.	
3. With respect to all claims released under paragraph 2 of this Release, the Parties expressly agree that the releases described in this Release extend to all Released Claims whether currently known or unknown, claimed or suspected, accrued or unaccrued, by the Parties. The Parties expressly understand and agree that the facts upon which this Release is based may hereinafter turn out to be other than, or different from, the facts now known or believed by each to be true. The Parties expressly understand and further agree that each is assuming a risk in this regard, and that this Release is not subject to termination or rescission by reason of discovering any such difference in facts. The Parties acknowledge the significance and consequences of such specific waiver of unknown claims, and hereby assume full responsibility for any injuries, damages, losses or liabilities that each may hereinafter incur from the waiver of these unknown claims.
 
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4. This Release shall become effective immediately upon and shall be conditioned upon the consummation of the Merger without any action on the part of any Party (the Effective Date ”). This Release shall terminate automatically, without any action on the part of any Party, if the Effective Date has not occurred on or prior to February 12, 2015.
5. Each Party hereby irrevocably covenants to refrain from, directly or indirectly, asserting any claim or demand, or commencing, instituting or causing to be commenced, any proceeding of any kind whatsoever against each other Party, based upon or relating to any matter purported to be released in paragraph 2 of this Release.
6. This Release shall bind and inure to the benefit of the executing Parties below, and their respective heirs, successors, assigns, Affiliates, subsidiaries, transferors, directors, officers, members, partners, employees, agents and attorneys.
7. This Release is the result of arms-length negotiations amongst the Parties, each represented by counsel of its choice, such that this Release shall not be deemed, at any time, to have been drafted solely by any one Party.
8. All provisions of this Release shall always be construed as a whole, according to their meaning, and not strictly for or against any Party. Should any provision of this Release be declared or be determined by any court of competent jurisdiction to be unenforceable, in whole or in part, the remaining provisions of this Release shall nevertheless be interpreted as binding and enforceable among the Parties to the maximum extent permitted by law so as to achieve the intent of the Parties discernable from it when read as a whole.
9. This Release will be governed by and construed in accordance with the Laws of the State of Delaware. Any legal action or proceeding between two or more of the Parties to this Release shall be adjudicated solely and exclusively in the state and/or federal courts in Delaware. Each Party irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding.
10. This Release contains the entire understanding by the Parties concerning the subject matter hereof, and supersedes any and all other agreements, arrangements, understandings, and representations between or among the Parties. The Parties each represent and warrant that no statements or representations made by another Party, except as specifically recited in this Agreement, have influenced, induced or caused them to execute this Release, or were relied upon by them in entering into this Release.
11. The Parties each represent and warrant that they and their undersigned representatives have full power and authority to enter into this Release, and to consummate all transactions set forth in this Release and that they have received all necessary or required approvals with respect hereto and thereto. The Parties each further represent and warrant that they have not assigned, pledged, encumbered or in any manner transferred or conveyed all or any portion of the Released Claims covered by this Release.
 
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12. This Release may be amended, modified, superseded or canceled only by an instrument in writing signed by each of the Parties.
13. EACH OF THE PARTIES KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON THIS RELEASE, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS RELEASE OR ANY COURSE OF CONDUCT, COURSE OF DEALING OR STATEMENTS (WHETHER VERBAL OR WRITTEN) RELATING TO THE FOREGOING. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES TO ENTER INTO THIS RELEASE.
14. This Release may be executed in any number of counterparts and will be binding when it has been executed by the last signatory hereto to execute a counterpart and delivered by (or on the Parties’ behalf). A signature delivered by facsimile or other means of electronic transmission shall be deemed to constitute an original signature for purposes of this Release.
[ Signature pages follow ]
 
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IN WITNESS WHEREOF, the Parties have each executed and delivered this Release as of the day and year first above written.

InfraREIT, L.L.C.	
		
By:		/s/ David A. Campbell	
  Name:		David A. Campbell	
  Title:		President	

InfraREIT Partners, LP	
	
By: InfraREIT, L.L.C., its general partner	
		
        By:		/s/ David A. Campbell	
          Name:		David A. Campbell	
          Title:		President	

InfraREIT, Inc.	
		
By:		/s/ David A. Campbell	
  Name:		David A. Campbell	
  Title:		President	

Hunt Transmission Company, L.L.C.	
		
By:		/s/ Hunter L. Hunt	
  Name:		Hunter L. Hunt	
  Title:		President	
 
Signature Page to General Release

			
John Hancock Life Insurance Company (U.S.A.)	
		
By:		/s/ Gerald C. Hanrahan, Jr.	
  Name:		Gerald C. Hanrahan, Jr.	
  Title:		Senior Managing Director	

Marubeni Corporation	
		
By:		/s/ Takashi Fujinaga	
  Name:		Takashi Fujinaga	
  Title:		General Manager, Overseas Power Project Dept. - III	

OpTrust Infrastructure N.A. Inc.	
		
By:		/s/ John Walsh	
  Name:		John Walsh	
  Title:		Director	

OPTrust N.A. Holdings Trust	
		
By:		/s/ Derrice Richards	
  Name:		Derrice Richards	
  Title:		Senior Advisor Trust Services	
		
By:		/s/ Carol Milkos	
  Name:		Carol Milkos	
  Title:		Vice President Trust Services	

Teachers Insurance and Annuity Association of America	
		
By:		/s/ Mario Maselli	
  Name:		Mario Maselli	
  Title:		Director	
 
Signature Page to General Release

Exhibit 10.7
DEVELOPMENT AGREEMENT
This DEVELOPMENT AGREEMENT (this “ Agreement ”) is made and entered into as of January 29, 2015, by and between Hunt Transmission Services, L.L.C., a Delaware limited liability company (“ Hunt ”), Sharyland Utilities, L.P., a Texas limited partnership (“ Sharyland ”), InfraREIT Partners, LP, a Delaware limited partnership (the “ Operating Partnership ”), InfraREIT, Inc., the general partner of the Operating Partnership (the “ REIT ” and, together with the Operating Partnership and all direct and indirect subsidiaries of the REIT, “ InfraREIT ”). Hunt, Sharyland, the Operating Partnership and the REIT are sometimes referred to in this Agreement individually as a “ Party ” or collectively as the “ Parties .” Capitalized terms used herein but not otherwise defined have the meaning set forth in Article I .
RECITALS:
WHEREAS, Hunt has informed the REIT that Hunt currently intends for a REIT Entity to be the primary owner of all T&D Projects that Hunt or an Affiliate thereof develops (once those T&D Projects become Operating T&D Assets); and
WHEREAS, in connection with the initial public offering of the REIT, the Parties desire to enter into this Agreement in order to evidence their understanding with respect to, among other things, the procedures whereby ROFO Projects (as defined below) are to be offered to InfraREIT and accepted or declined and ROFL Assets (as defined below) are to be offered to Sharyland (as defined below) and accepted or declined.
NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, the Parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Capitalized terms used in this Agreement (including exhibits, schedules and amendments) shall have the meanings set forth below or in the Section of this Agreement referred to below, except as otherwise expressly indicated or limited by the context in which they appear in this Agreement.
“ Affiliate ” means, with regard to a Person, a Person that controls, is controlled by, or is under common control with such original Person. For purposes of this definition, “control,” when used with respect to any Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms “affiliated,” “controlling” and “controlled” have meanings correlative to the foregoing. Notwithstanding the foregoing, for purposes of this Agreement, the REIT Entities shall not be deemed to be Affiliates of Hunt. For the avoidance of doubt, a Person holding direct or indirect Equity Interests in a ROFO Entity shall not be deemed to be an Affiliate of the other holders of direct or indirect Equity Interests in such ROFO Entity solely as a result of such common ownership.

“ Agreement ” has the meaning set forth in the Preamble.
“ Arbitration Panel ” has the meaning set forth in Section 4.7(a) .
“ Confidential Information ” has the meaning set forth in Section 4.8(a) .
“ Drag-able Equity Interests ” are Equity Interests that comprise 100% of the Equity Interests in the ROFO Entity, other than such Equity Interests held by (a) Sharyland or another regulated utility necessary under the regulatory regime of the jurisdiction(s) in which the related ROFO Project is located and (b) another third-party utility for strategic purposes, in each case as determined by Hunt in its good faith discretion.
“ Drag-Along Right ” is the right, subject to the Drag-Along Conditions, to either (a) cause all or substantially all of the T&D Assets that comprise the ROFO Project to be Transferred to a REIT Entity or (b) cause 100% of the Drag-able Equity Interests to be Transferred to a REIT Entity.
“ Drag-Along Conditions ” means the requirement that each holder of Equity Interests (other than Hunt and its Affiliates) receive cash consideration with a value equal to at least 1.5 multiplied by the amount of cash invested in such Equity Interests upon issuance and in connection with any subsequent capital contributions to the ROFO Entity.
“ Effective Date ” means the closing date of the REIT’s initial public offering of its Common Stock pursuant to the Registration Statement on Form S-11 (Reg. No. 333-201106) and the effectiveness of the merger of InfraREIT, L.L.C. with and into the REIT.
“ Entity ” means any partnership, limited partnership, proprietorship, corporation, joint venture, joint stock company, limited liability company, limited liability partnership, business trust, estate, governmental entity, cooperative, association or other foreign or domestic enterprise.
“ Equity Interests ” means any shares of capital stock, membership interests, partnership interests or other equity interests and options or warrants to acquire, or securities convertible or exchangeable into, capital stock, membership interests, partnership interests or other equity securities of an Entity.
“ FERC ” means the Federal Energy Regulatory Commission.
“ Footprint Projects ” means T&D Projects that (a) are located in the distribution service territory of an electric distribution utility that is leasing T&D Assets from a REIT Entity that are being used in that distribution service territory, (b) constitute a Transmission Addition to the transmission assets owned by a REIT Entity or (c) are Reclassified Projects. For purposes of the definition of Footprint Projects, the distribution service territory in part (a) of the definition and the transmission assets in part (b) of the definition will be deemed to include the distribution service territory and transmission assets of any T&D Projects acquired by the REIT Entities after
 
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the date of this Agreement; provided, however, that to the extent that Hunt or an Affiliate thereof is actively developing a T&D Project in the distribution service territory of any T&D Projects or Operating T&D Assets acquired by the REIT after the date of this Agreement at the time of such acquisition (including any ROFO Project), the T&D Project being actively developed by Hunt or such Affiliate will not be characterized as a Footprint Project. For avoidance of doubt, if a REIT Entity acquires a ROFO Project or other T&D Assets, then any such acquisition will expand the definition of Footprint Project hereunder such that, after the related T&D Project is acquired by a REIT Entity, Transmission Additions to any such T&D Assets will constitute Footprint Projects.
“ Hunt ” has the meaning set forth in the Preamble.
“ Hunt Panel Member ” has the meaning set forth in Section 4.7(b) .
“ Indirect Owners ” has the meaning set forth in Section 3.1(a)(ii) .
“ InfraREIT ” has the meaning given to it in the Preamble.
“ InfraREIT Panel Member ” has the meaning set forth in Section 4.7(b) .
“ Initial Term ” has the meaning set forth in Section 4.1 .
“ IRS ” means the Internal Revenue Service.
“ Lease Offer ” has the meaning set forth in Section 3.7(a) .
“ Lien ” means any mortgage, pledge, hypothecation, assignment, encumbrance, lien, charge, preference or other security interest or preferential arrangement in the nature of a security interest of any kind or nature whatsoever.
“ Management Agreement ” means the Management Agreement, of even date herewith, among Hunt Utility Services, LLC, the Operating Partnership and the REIT, as the same may be amended from time to time.
“ Merchant Project ” means a project for which the recovery on and of capital invested is expected to be based on negotiated rates with a third party such as a generator, a consumer of electricity or a regulated utility, and not based on the inclusion of such invested capital in the regulated rate base of an invested utility.
“ Negotiation Period ” has the meaning set forth in Section 3.4 .
“ Non-Breaching Party ” has the meaning set forth in Section 4.8(a) .
“ Operating Partnership ” has the meaning set forth in the Preamble.
 
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“ Operating T&D Asset ” means a T&D Project once one of the following has occurred: (a) with respect to a T&D Project that is not a Merchant Project, the related T&D Assets have been “placed in service” by the utility whose customers are served by such assets (with “placed in service” determined based on such utility’s accounting records applied in a manner consistent with the FERC Uniform System of Accounts); and (b) with respect to a T&D Project that is a Merchant Project, at least a significant portion of the related T&D Assets are used and useful by generators, a consumer of electricity or a regulated utility.
“ Party ” or “ Parties ” has the meaning set forth in the Preamble.
“ Person ” means any individual, corporation, proprietorship, firm, partnership, limited partnership, limited liability company, trust, association or other Entity.
“ Reclassified Project ” means any T&D Project that does not otherwise meet the definition of Footprint Project but Hunt and the REIT jointly agree, in their sole discretion, to classify such T&D Project as a Footprint Project based upon such factors that the Parties deem relevant, including: (a) the expected rate base of the T&D Project, it being understood that the Parties generally expect that only T&D Projects with an expected rate base of less than $25 million could constitute a Reclassified Project; (b) whether the T&D Project is physically connected to the T&D Assets owned by a REIT Entity; and (c) whether the T&D Project is necessary to serve distribution customers situated in the service territories of the REIT Entities. As of the date of this Agreement, the Parties have agreed that the T&D Project described on Schedule II constitutes a Reclassified Project.
“ REIT ” has the meaning set forth in the Preamble.
“ REIT Entity ” or “ REIT Entities ” means the REIT, the Operating Partnership and any other Subsidiary of the REIT.
“ Renewal Term ” has the meaning set forth in Section 4.1 .
“ Restricted Indirect Owners ” has the meaning set forth in Section 3.1(a)(ii) .
“ ROFL Assets ” means T&D Assets acquired or developed by any REIT Entity other than: (a) T&D Assets acquired in connection with the acquisition by any REIT Entity of an investor-owned utility, (b) T&D Assets for which a utility other than Sharyland has or retains a license or other right to operate such asset or has a right of first refusal to build in connection with such asset, (c) T&D assets that the REIT determines in good faith should be leased to a third party other than Sharyland for strategic reasons, (d) T&D Assets that were previously subject to a lease between a REIT Entity and Sharyland (or an Affiliate thereof), (e) T&D Assets that were previously subject to a lease between a REIT Entity and a Third Party, or (f) T&D Assets that were, at the time acquired by the REIT Entity, subject to a lease with a Third Party (other than leases established in connection with such acquisition).
“ ROFO ” means the obligation to offer ROFO Projects to the REIT in accordance with Article III .
“ ROFO Entity ” means an Entity that holds title to the T&D Assets comprising a ROFO Project.
 
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“ ROFO Offer ” means a written offer to the REIT to acquire a ROFO Project or 100% of the Drag-able Equity Interests therein, provided that the written offer includes the following information with respect to such ROFO Project:
(a) a description of the ROFO Project, including its location and the T&D Assets which make up such ROFO Project;
(b) the expected rate base of such T&D Project at the time it becomes an Operating T&D Asset, together with the underlying data supporting such calculation;
(c) a summary description of the terms of any lease entered into with respect to the ROFO Project together with a copy of any such lease agreement and, if there is no lease, a summary of the reasons why no lease exists and a description of how a REIT Entity will generate qualifying income with respect to the T&D Assets which make up such ROFO Project;
(d) a summary of, and copies of any definitive documentation relating to, any outstanding project-level indebtedness related to such ROFO Project;
(e) copies of any environmental, engineering or other third party reports received by Hunt or its Affiliates that are material to an understanding or due diligence of such ROFO Project;
(f) a schedule showing all of the outstanding Equity Interests in the ROFO Entity, if applicable;
(g) Hunt’s proposed terms of the Transfer of the ROFO Project to the REIT Entities, including the purchase price, form of consideration, the expected timing of closing, proposed conditions to the consummation of the Transfer and all other material transaction terms;
(h) market data related to the use of the T&D Asset that is the subject of the ROFO Offer; and
(i) such other information as is reasonably requested by the REIT, including all relevant financial statements, as applicable.
“ ROFO Project ” means any T&D Project described on Schedule I to this Agreement, as such Schedule may be updated from time to time upon the mutual agreement of Hunt and the REIT.
“ Sharyland ” has the meaning set forth in the Preamble.
 
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“ Sharyland Lease ” means any lease agreement for the lease of T&D Assets between the Operating Partnership or any of its Subsidiaries, on the one hand, and Sharyland or a Subsidiary thereof, on the other hand, as may be in effect from time to time.
“ Subsidiary ” means, with respect to any Person, any corporation, limited liability company, trust, partnership or joint venture, or other Entity of which a majority of (i) the voting power of the voting equity securities or (ii) the outstanding Equity Interests is owned, directly or indirectly, by such Person; provided , however , that Sharyland Distribution & Transmission Services, L.L.C., a Texas limited liability company, and its Subsidiaries will not be considered to be Subsidiaries of Sharyland.
“ T&D Assets ” means electric transmission and/or distribution assets.
“ T&D Project ” means the construction or development of T&D Assets.
“ Third Panel Member ” has the meaning set forth in Section 4.7(b) .
“ Third Party ” means any Person other than a Party or an Affiliate of a Party. For the avoidance of doubt, Sharyland and its Subsidiaries shall not be considered Third Parties.
“ Transfer ” means any assignment, sale, offer to sell, pledge, mortgage, hypothecation, encumbrance, disposition of or any like transfer or encumbering; provided that, Transfer shall not include the granting of any Liens under any project-level indebtedness in respect of any ROFO Project that is incurred from time to time and any disposition of assets resulting from the enforcement of such Liens.
“ Transmission Addition ” means transmission assets that (a) are added to an existing transmission substation owned by a REIT Entity or (b) hang from transmission towers owned by a REIT Entity.
“ Unrestricted Period ” has the meaning set forth in Section 3.4 .
 
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ARTICLE II
FOOTPRINT AND ROFO PROJECTS
Section 2.1 Right to Fund Footprint Projects . During the term of this Agreement, except as otherwise described in this Section 2.1 or the Sharyland Leases, the REIT Entities shall have the exclusive right to own and fund all Footprint Projects. Hunt and its Affiliates shall not fund any construction costs or take any ownership interests in a Footprint Project without the prior written consent of the REIT. The REIT Entities shall fund Footprint Projects in the manner set forth in the Sharyland Leases. Notwithstanding the foregoing, if the REIT Entities decline to fund a Footprint Project, Sharyland will have the right to fund such Footprint Project in accordance with the terms of the Sharyland Leases.
Section 2.2 Right to Fund ROFO Projects . Subject to the obligations set forth in Article III , during the term of this Agreement, Hunt shall have the exclusive right to own and fund all ROFO Projects.
ARTICLE III
RIGHT OF FIRST OFFER
Section 3.1 General .
(a) Subject to the other provisions of this Section 3.1 , Hunt will not:
(i) Transfer or permit any ROFO Entity to Transfer a material portion of any of the T&D Assets that comprise part of a ROFO Project; or
(ii) Transfer, or permit any Hunt Affiliate to Transfer, any direct or indirect Equity Interest in a ROFO Entity; provided , however , such restriction will not apply to Transfers of Equity Interests in Hunt Affiliates that are direct or indirect owners of a ROFO Entity (“ Indirect Owners ”) unless the ROFO Entity and its assets comprise all or substantially all of the assets of such Indirect Owner (“ Restricted Indirect Owners ”);
in any case, without first complying with the requirements of this Article III .
(b) Section 3.1(a) and the ROFO will not apply to Transfers to Affiliates of Hunt (including Sharyland), nor will they affect the right of any Affiliate of Hunt (including Sharyland) to abandon a ROFO Project.
(c) Hunt will ensure that a Hunt Affiliate retains the Drag-Along Rights with respect to all ROFO Projects until such time as the ROFO Projects are, following compliance with Section 3.2 and (if applicable) Section 3.3 , Transferred to a REIT Entity or a Third Party. Furthermore, Hunt will not permit the ROFO Entity and the Restricted Indirect Owners to issue Equity Interests unless all net proceeds of such Equity Interest issuances are either (i) retained by the Restricted Indirect Owner or ROFO Entity or contributed to the ROFO Entity, or (ii) paid to a Hunt Affiliate to reimburse the Hunt Affiliate for its development expenses incurred in connection with the related ROFO Project. Subject to the restrictions set forth above in this Section 3.1(c) , nothing in this Agreement will prohibit the ROFO Entity or any other Hunt Affiliate from issuing Equity Interests.
 
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Section 3.2 Pre-Energization Offer . Hunt shall deliver a ROFO Offer at least 90 days prior to the date on which a ROFO Project becomes an Operating T&D Asset regardless of whether Hunt intends to Transfer such ROFO Project to a Third Party.
Section 3.3 Pre-Transfer Offers . Hunt shall deliver a ROFO Offer to the REIT prior to engaging in any negotiation regarding any proposed Transfer of any ROFO Project (or any portion thereof) to any Third Party (other than, for avoidance of doubt, Hunt Affiliates), unless such negotiation occurs during an Unrestricted Period.
Section 3.4 Offer Process . Following delivery of a ROFO Offer under Section 3.2 , Section 3.3 or Section 3.6 , Hunt and the REIT shall enter into non-binding discussions and negotiate in good faith the definitive terms of the acquisition by a REIT Entity of the ROFO Project that is the subject of the ROFO Offer (or direct or indirect Equity Interests therein) for a period of 75 days from the date on which the REIT receives the ROFO Offer (the “ Negotiation Period ”). If Hunt and the REIT have not agreed in writing to definitive terms for the Transfer of the ROFO Project to a REIT Entity by the end of the Negotiation Period, then, during the 18-month period (the “ Unrestricted Period ”) from the end of the Negotiation Period, this Agreement will not impose any restrictions on the Transfer of such ROFO Project (or direct or indirect Equity Interests therein) to a Third Party, as long as such Transfer is on terms that are not more favorable to the Third Party than those offered to the REIT during the Negotiation Period. If such Transfer does not occur within the Unrestricted Period, Hunt will thereafter remain subject to the restrictions contained in this Article III with respect to such ROFO Project (and direct and indirect Equity Interests therein).
Section 3.5 Negotiations with Third Parties . Neither Hunt nor any of its representatives, agents or Affiliates shall solicit offers from, or negotiate with, any Third Party for the Transfer of any ROFO Project (or the direct or indirect Equity Interests therein) until the expiration of the Negotiation Period related to such ROFO Project. If no agreement has been reached between Hunt and the REIT during the Negotiation Period, then, during the Unrestricted Period, Hunt shall have the right to solicit offers from, negotiate with, and enter into agreements with, any Third Party to Transfer such ROFO Project, as long as such Transfer is on terms no more favorable to the Third Party than those offered to the REIT during the Negotiation Period.
Section 3.6 Structure of ROFO Projects . Hunt shall use its commercial best efforts to structure ROFO Projects so that they can be acquired by a REIT Entity prior to becoming Operating T&D Assets without jeopardizing the REIT’s status as a real estate investment trust under applicable IRS rules. If, notwithstanding Hunt’s commercial best efforts, a ROFO Project is not qualified to be held by a REIT Entity prior to becoming Operating T&D Assets, the ROFO included in Section 3.3 shall continue to apply until such time as the Operating T&D Assets qualify to be held by a REIT Entity. Within 30 days of the date on which such Operating T&D Assets qualify to be held by a REIT Entity, Hunt shall deliver a ROFO Offer to the REIT.
 
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Section 3.7 Right of First Offer to Lease ROFL Assets .
(a) During the term of this Agreement, no REIT Entity may lease to any Third Party any ROFL Assets unless such REIT Entity has first presented in writing to Sharyland the right to act as the tenant under a lease of such ROFL Assets (each, a “ Lease Offer ”). The Lease Offer shall include the material proposed lease terms, along with any other information reasonably requested by Sharyland to evaluate the Lease Offer.
(b) Upon receipt of a Lease Offer, Sharyland shall have 75 days to review such Lease Offer and take one of the following actions:
(i) accept the Lease Offer, in which case such REIT Entity and Sharyland will proceed to negotiate a final lease agreement in good faith for a period of 75 days from the date on which Sharyland receives the Lease Offer; or
(ii) reject the Lease Offer, in which case such REIT Entity may lease the subject ROFL Assets to a third party on terms that are not materially more favorable to the lessee than those offered to Sharyland in the Lease Offer;
provided , however , that if Sharyland fails to take one of the foregoing actions within such period, Sharyland will be deemed to have rejected the Lease Offer and the REIT Entity will have the right to lease the subject ROFL Assets to a third party on terms that are not materially more favorable to the lessee than those offered to Sharyland in the Lease Offer.
ARTICLE IV
MISCELLANEOUS
Section 4.1 Term and Termination . The Parties’ obligations under this Agreement shall become effective on the Effective Date and shall remain in effect until December 31, 2019 (the “ Initial Term ”) and shall be automatically renewed for a five-year term (a “ Renewal Term ”) upon the expiration of the Initial Term and upon the expiration of each Renewal Term. Notwithstanding the foregoing, this Agreement shall automatically terminate upon the expiration or termination of the Management Agreement.
Section 4.2 Notices . All notices, offers or other communications required or permitted to be given pursuant to this Agreement shall be in writing and may be personally served, sent via facsimile or sent by United States mail or by commercial courier and shall be deemed to have been given when received at the address set forth below:
If to Hunt:
Hunt Transmission Services, L.L.C.
Attn: Hunter L. Hunt, President
1900 North Akard Street
Dallas, TX 75201
E-Mail: HHunt@huntoil.com
 
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with a copy to:
Hunt Transmission Services, L.L.C.
Attn: General Counsel
1900 North Akard Street
Dallas, TX 75201
E-Mail: DHernandez@huntoil.com
If to Sharyland:
Sharyland Utilities, L.P.
Attn: Hunter L. Hunt, President
1900 North Akard Street
Dallas, TX 75201
Facsimile: HHunt@huntoil.com
with a copy to:
Sharyland Utilities, L.P.
Attn: General Counsel
1900 North Akard Street
Dallas, TX 75201
Facsimile: SFrenzel@huntoil.com
If to the REIT or the Operating Partnership:
InfraREIT, Inc.
Attn: Chairman of the Conflicts Committee
1807 Ross Avenue, 4th Floor
Dallas, TX 75201
E-Mail: conflictscommittee@Huntutility.com
with a copy to:
InfraREIT, Inc.
Attn: General Counsel
1807 Ross Avenue, 4th Floor
Dallas, TX 75201
E-Mail: Legal@Huntutility.com
The address of any party hereto may be changed by a notice in writing given in accordance with the provisions of this Section 4.2 .
Section 4.3 Third Party Beneficiaries . This Agreement shall be binding upon and inure solely to the benefit of each Party hereto, and nothing in this Agreement, express or implied, is intended to or shall confer upon any Person other than the Parties and their respective successors and permitted assigns any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement, except with respect to the provisions of Section 3.7 , which shall inure to the benefit of Sharyland, who is intended to be a third-party beneficiary thereof.
 
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Section 4.4 Assignment; Successors and Assigns . Neither this Agreement nor any of the rights, interests or obligations under this Agreement may be assigned or delegated, in whole or in part, by operation of law or otherwise, by any Party without the prior written consent of the other Parties, and any such assignment without such prior written consent shall be null and void. Subject to the preceding sentence, and except as expressly herein otherwise provided, this Agreement and all of the terms and provisions hereof shall be binding upon and shall inure to the benefit of all Parties, and their legal representatives, heirs, successors and permitted assigns.
Section 4.5 Complete Agreement; Amendments . This Agreement contains the entire understanding of the parties with respect to the transactions contemplated hereby and supersedes all prior arrangements or understandings with respect thereto. This Agreement shall not be modified or amended except in a writing signed by all Parties. No purported modifications or amendments, including without limitation any oral agreement (even if supported by new consideration), course of conduct or absence of a response to a unilateral communication, shall be binding on any Party.
Section 4.6 Governing Law . This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware.
Section 4.7 Arbitration .
(a) Any dispute under or relating to this Agreement shall, if not resolved by the Parties within 60 days after notice of such dispute is served by one Party to the other (or, if different, the period provided for resolution by the Parties in the provision of this Agreement under which such dispute is brought), be submitted to an “ Arbitration Panel ” comprised of three members. No more than one panel member may be with the same firm (which shall not be deemed to prohibit the panel members from being members of the same organization such as the American Arbitration Association or Judicial Arbitration and Mediations Services), and no panel member may have an economic interest in the outcome of the arbitration.
(b) The Arbitration Panel shall be selected as follows: Within five business days after the expiration of the period referenced above, Hunt shall select a panel member meeting the criteria of the above paragraph (the “ Hunt Panel Member ”) and the independent directors of the general partner of the Operating Partnership shall select its panel member meeting the criteria of the above paragraph (the “ InfraREIT Panel Member ”). If a Party fails to timely select its respective panel member, the other Party may notify such Party in writing of such failure, and if such Party fails to select its respective panel member within three business days from such notice, then the other Party may select such panel member on such Party’s behalf. Within five business days after the selection of the Hunt Panel Member and the InfraREIT Panel Member, the Hunt Panel Member and the InfraREIT Panel Member shall jointly select a third panel member meeting the criteria of the above paragraph (the “ Third Panel Member ”). If the Hunt Panel Member and the InfraREIT Panel Member fail to timely select the Third Panel Member and such failure continues for more than three business days after written notice of such failure is delivered to the Hunt Panel Member and the InfraREIT Panel Member by either Hunt or the Operating Partnership, either Hunt or the Operating Partnership may request the managing officer of the American Arbitration Association to appoint the Third Panel Member.
 
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(c) Within ten business days after the selection of the Arbitration Panel, each Party shall submit to the Arbitration Panel a written statement identifying its summary of the issues and claims. Any Party may also request an evidentiary hearing on the merits in addition to the submission of written statements. The Arbitration Panel shall make its decision within 20 days after the later of (i) the submission of such written statements of particulars, and (ii) the conclusion of any evidentiary hearing on the merits, and shall take into consideration the relative risks and rewards undertaken and capital invested by each Party. The Arbitration Panel shall reach its decision by majority vote and shall communicate its decision by written notice to the Parties.
(d) The decision by the Arbitration Panel shall be final, binding and conclusive and shall be non-appealable and enforceable in any court having jurisdiction. All hearings and proceedings held by the Arbitration Panel shall take place in Dallas, Texas.
(e) The resolution procedure described herein shall be governed by the Commercial Rules of the American Arbitration Association and the Procedures for Large, Complex Commercial Disputes in effect as of the date hereof and subject to the Texas General Arbitration Act to the extent such act is applicable hereto.
(f) The Parties shall bear equally the fees, costs and expenses of the Arbitration Panel in conducting the arbitration.
Section 4.8 Confidentiality and Non-Disclosure .
(a) The Parties each acknowledge and agree that, in connection with this Agreement, a Party and its employees or agents may, directly or indirectly, receive or be provided with certain information relating to the business and operations of the other Party and the other Party’s Affiliates, including information relating to the technology, clients, customers, suppliers, vendors, employees, consultants, projects, financial information and status, methodologies, know-how, processes, practices, approaches, projections, forecasts, formats, systems, data gathering methods and/or strategies, assets, collateral and reports of the other Party and the other Party’s Affiliates (“ Confidential Information ”); provided, however, that Confidential Information shall not include information which has previously become publicly available through the actions of a person not resulting from the violation of this Section 4.8 . Each Party acknowledges that the other Party considers all such information valuable, confidential and proprietary. Therefore, each Party expressly agrees that, except as otherwise required by applicable law, court or governmental order:
(i) Such Party, and its employees and agents, will not, without the other Party’s express, written permission, use or disclose any Confidential Information of the other Party or its Affiliates other than for the purpose of performing its duties and obligations under this Agreement, and any use or disclosure of Confidential Information shall be limited to the specific purposes for which the permission was given or for which the use or disclosure is necessary to perform duties and obligations under this Agreement;
 
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(ii) Such Party will take all steps reasonably necessary to protect the Confidential Information of the other Party and its Affiliates, including, at a minimum, any such steps that the Party would take to protect its own Confidential Information; provided , however , that in no event will the Party exercise less than reasonable care to protect the Confidential Information;
(iii) Such Party agrees to advise the other Party in writing of any misappropriation or misuse by any person of such Confidential Information of which such Party may become aware; and
(iv) Such Party agrees to return the Confidential Information of the other Party and its Affiliates to the other Party at the earlier of the other Party’s request for return of the Confidential Information or the termination of this Agreement. At the option of the other Party, such Party may instead destroy the Confidential Information, with such Party providing written certification of such destruction. Such Party will not be obligated to return any of its own internally prepared documents, notes, copies or other associated materials containing any Confidential Information. However, such Party must, at the other Party’s request, collect and destroy such internally prepared documents, with such Party providing written certification of such destruction.
Each Party expressly acknowledges and agrees that the remedy of the other Party (the “ Non-Breaching Party ”) at law for a breach or threatened breach of any of the provisions of this Section 4.8 by such Party would be inadequate. In recognition of that fact, in the event of a breach or threatened breach by a Party of the provisions of this Section, it is agreed that, in addition to its remedy at law and without posting any bond, the Non-Breaching Party shall be entitled to equitable relief in the form of a temporary restraining order, temporary or permanent injunction or other equitable available relief. If the Non-Breaching Party establishes that a breach or a threatened breach of any provisions of this Section 4.8 has occurred by the other Party, the other Party agrees not to oppose the Non-Breaching Party’s request for equitable relief in the form of a temporary restraining order or a temporary injunction. Nothing herein contained shall be construed as prohibiting the Non-Breaching Party from pursuing any other remedies available to it for such breach or threatened breach.
(b) Hunt acknowledges that it is aware that the United States securities laws prohibit any person who has received from an issuer material non-public information from purchasing or selling securities of such issuer and from communicating such information to any other person under circumstances in which it is reasonably foreseeable that such person is likely to purchase or sell such securities.
Section 4.9 Cure of Invalid Provisions . If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable, and this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, and the remaining provisions hereof shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement; provided, however, that if such illegal, invalid or unenforceable provision may be made legal, valid and enforceable by limitation thereof, then the provision shall be revised and reformed to make it legal, valid and enforceable to the maximum extent permitted by law.
 
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Section 4.10 Construction of Agreement . As used herein, the singular shall be deemed to include the plural, and the plural shall be deemed to include the singular, and all pronouns shall include the masculine, feminine and neuter, whenever the context and facts require such construction. The headings, captions, titles and subtitles herein are inserted for convenience of reference only and are to be ignored in any construction of the provisions hereof. Except as otherwise indicated herein, all section, schedule and exhibit references in this Agreement shall be deemed to refer to the sections, schedules and exhibits of and to this Agreement, and the terms “herein”, “hereof”, “hereto”, “hereunder” and similar terms refer to this Agreement generally rather than to the particular provision in which such term is used. Whenever the words “including”, “include” or “includes” are used in this Agreement, they shall be interpreted in a non-exclusive manner as though the words “but [is] not limited to” immediately followed the same. Time is of the essence for this Agreement. The language in all parts of this Agreement shall in all cases be construed simply according to the fair meaning thereof and not strictly against the party that drafted such language. Except as otherwise provided herein, references in this Agreement to any agreement, articles, by-laws, instrument or other document are to such agreement, articles, by-laws, instrument or other document as amended, modified or supplemented from time to time.
Section 4.11 Multiple Counterparts . This Agreement may be executed in multiple counterparts, each of which shall constitute an original hereof and all of which taken together shall constitute one and the same agreement. If any signature is delivered by facsimile transmission or by PDF, such signature shall create a valid and binding obligation of the party executing (or on whose behalf the signature is executed) with the same force and effect as if such facsimile or PDF signature were an original thereof.
* * *
[ Signature page follows ]
 
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IN WITNESS WHEREOF, the Parties have executed this Agreement to be effective as of the date first above written.

HUNT TRANSMISSION SERVICES, L.L.C.,	
		a Delaware limited liability company	
		
By:		/s/ Hunter L. Hunt	
		Name: Hunter L. Hunt	
		Title: President	
	
SHARYLAND UTILITIES, L.P.,	
		a Texas limited partnership	
	
By: Shary Holdings, L.L.C., its general partner	
		
		    By:  /s/ Hunter L. Hunt                                                 	
		    Name: Hunter L. Hunt	
		    Title: Chairman	
	
INFRAREIT PARTNERS, LP,	
		a Delaware limited partnership	
		
		By: InfraREIT, L.L.C., its general partner	
		
By:		/s/ David A. Campbell	
		Name: David A. Campbell	
		Title: President	
	
INFRAREIT, INC.,	
		a Maryland corporation	
		
By:		/s/ David A. Campbell	
		Name: David A. Campbell	
		Title: President	
 
Signature Page to Development Agreement

SCHEDULE I
ROFO PROJECTS
 
 	1)	Cross Valley	
 
 	2)	Golden Spread	
 
 	3)	All generation inter-connections to the CREZ Panhandle Transmission Lines (other than those that would be classified as Footprint Projects under the definition thereof)	
 
 	4)	Southline Transmission Project	
 
 	5)	Verde Transmission Project	
 
 	6)	South Plains Reinforcement	
 
 	7)	Indiana to Illinois Transmission Project	
 
 	8)	ERCOT Southeast Loop Transmission Line	
 
 	9)	All DC Ties (defined below) that Hunt or an Affiliate thereof is currently developing between U.S.-based grids or between a U.S.-based grid and Mexico (CFE)	
 
 	10)	All Southern California electricity import projects that Hunt or an Affiliate thereof is currently developing	
“ DC Ties ” are high-voltage direct current interconnections necessary to provide for electricity flow between asynchronous electric grids.
 
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SCHEDULE II
RECLASSIFIED PROJECTS
 
1.	Andrews 345kV substation project (with a projected rate base of $8.5 million)	
 
2.	White River substation	
 
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Exhibit 10.8
MANAGEMENT AGREEMENT
This MANAGEMENT AGREEMENT (this “ Agreement ”), is made and entered into on January 29, 2015 to be effective as of the Effective Date (as hereinafter defined), by and between Hunt Utility Services, LLC, a Delaware limited liability company (the “ Manager ”), InfraREIT Partners, LP, a Delaware limited partnership (the “ Operating Partnership ”), and InfraREIT, Inc., a Maryland corporation and the general partner of the Operating Partnership (the “ Company ”). The Manager, the Operating Partnership and the Company are sometimes referred to in this Agreement individually as a “ Party ” or collectively as the “ Parties .”
RECITALS:
WHEREAS, the Company is a corporation that intends to elect to be taxed as a real estate investment trust (“ REIT ”) and intends to continue to qualify to be taxed as a REIT for federal income tax purposes;
WHEREAS, the Manager is an indirect subsidiary of Hunt Consolidated, Inc. (“ Hunt ”); and
WHEREAS, the Company, the Operating Partnership and each of the Subsidiaries (as defined below) desire to retain the Manager to provide management and advisory service on the terms and conditions set forth herein, and the Manager wishes to be retained to provide such services.
NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, the Parties hereby agree as follows:
Section 1. Definitions . Capitalized terms used in this Agreement (including exhibits, schedules and amendments) shall have the meanings set forth below or in the section of this Agreement referred to below, except as otherwise expressly indicated or limited by the context in which they appear in this Agreement.
“ Adjustments ” means additions or subtractions to the Company’s Cash Available for Distribution related to the following: (i) the effect of the Company’s percentage rent calculation method, which represents the difference between the quarterly cash payments due on percentage rent and the revenue included in net income; (ii) the effect of straight-line rents, which represents the difference between the timing of cash based rent payments and the recognition of base rent revenue in accordance with GAAP; (iii) the fair value adjustment of balance sheet items such as contingent consideration and hedges; (iv) non-cash equity compensation; (v) goodwill impairment; and (vi) subject to the approval of the Independent Directors, such other adjustments as the Manager may recommend from time to time to give effect to the intent of the Parties in the calculation of Cash Available for Distribution under this Agreement or to reflect changes in the public reporting practices of the Company.

“ Affiliate ” means, with regard to a Person, a Person that controls, is controlled by, or is under common control with such original Person. For purposes of this definition, “control,” when used with respect to any Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms “affiliated,” “controlling” and “controlled” have meanings correlative to the foregoing. By way of example, and not limitation, Affiliates of the Manager include, and are not limited to, Hunt Consolidated, Inc., Hunt Investment Company, L.P., Hunt Equities, Inc., Hunt Transmission Services, LLC, and Hunt Power, L.P.
“ AFUDC ” means allowance for funds used during construction.
“ AFUDC on Other Funds ” means the portion of AFUDC that relates to the cost of equity, as determined in accordance with the electric plant instructions found in the Federal Energy Regulatory Commission regulations.
“ Agreement ” has the meaning set forth in the Preamble.
“ Arbitration Panel ” has the meaning set forth in Section 24(a) .
“ Assets ” means the assets of the Company Entities.
“ Audit Committee ” means the audit committee of the Board of Directors.
“ Bankruptcy ” means, with respect to any Person, (a) the filing by such Person of a voluntary petition seeking liquidation, reorganization, arrangement or readjustment, in any form, of its debts under Title 11 of the United States Code or any other federal, state or foreign insolvency law, or such Person’s filing an answer consenting to or acquiescing in any such petition, (b) the making by such Person of any assignment for the benefit of its creditors, (c) the expiration of 60 days after the filing of an involuntary petition under Title 11 of the United States Code, an application for the appointment of a receiver for a material portion of the assets of such Person, or an involuntary petition seeking liquidation, reorganization, arrangement or readjustment of its debts under any other federal, state or foreign insolvency law, provided that the same shall not have been vacated, set aside or stayed within such 60-day period or (d) the entry against it of a final and non-appealable order for relief under any bankruptcy, insolvency or similar law now or hereinafter in effect.
“ Base Fee ” means (a) for the period from January 1, 2014 through March 31, 2015, an annual amount equal to $10,000,000 (prorated for partial periods), and (b) for each 12 month Base Fee Period thereafter, an amount equal to 1.50% of Total Equity as of the end of the immediately preceding calendar year; provided that, in no event shall the Base Fee be more than $30,000,000 unless a greater amount is approved by a majority of the Independent Directors (or a committee consisting entirely of Independent Directors). By way of example, the Base Fee for the Base Fee Period from April 1, 2016 through March 31, 2017 will be an amount equal to 1.50% of Total Equity as of December 31, 2015.
“ Base Fee Period ” shall mean each 12-month period beginning on April 1 and ending on March 31 of the following year.
 
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“ Board of Directors ” means the Board of Directors of the Company.
“ Cash Available for Distribution ” means, for any calendar quarter, an amount equal to (i) (A) Net Income Before Noncontrolling Interest, plus (B) depreciation, plus (C) amortization of deferred financing costs, if any, minus (D) AFUDC on Other Funds, minus (E) capital expenditures to maintain net assets, (ii) as adjusted by the Adjustments. The Parties intend that Cash Available for Distribution will be calculated in a manner consistent with the Company’s public reporting of Cash Available for Distribution from time to time. Capital expenditures to maintain net assets means, for any calendar quarter, an amount equal to the depreciation expense recognized by the Company. For the avoidance of doubt, Cash Available for Distribution does not include the proceeds of any debt recapitalization.
“ Code ” means the Internal Revenue Code of 1986, as amended.
“ Company ” has the meaning set forth in the Preamble.
“ Company Account ” has the meaning set forth in Section 6 .
“ Company Entity ” or “ Company Entities ” means the Company, the Operating Partnership and any of their Subsidiaries.
“ Company Indemnified Party ” has the meaning set forth in Section 13(b) .
“ Company Panel Member ” has the meaning set forth in Section 24(b) .
“ Damages ” has the meaning set forth in Section 13(a) .
“ Development Agreement ” means the Development Agreement, of even date herewith, among the Company, the Operating Partnership, Sharyland Utilities, L.P. and Hunt Transmission Services L.L.C.
“ Effective Date ” means the closing date of the Initial Public Offering and the effectiveness of the merger of InfraREIT, L.L.C. with and into the Company.
“ Entity ” means any partnership, limited partnership, proprietorship, corporation, joint venture, joint stock company, limited liability company, limited liability partnership, business trust, estate, governmental entity, cooperative, association or other foreign or domestic enterprise, including accounts or funds managed by an investor or any of its Subsidiaries.
“ Equity Interests ” means any shares of capital stock, membership interests, partnership interests or other equity interests and options or warrants to acquire, or securities convertible or exchangeable into, capital stock, membership interests, partnership interests or other equity securities of an Entity.
“ Exchange Act ” means the Securities Exchange Act of 1934, as amended.
“ Expenses ” has the meaning set forth in Section 10 .
 
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“ GAAP ” means generally accepted accounting principles in the United States, consistently applied.
“ Governing Instruments ” means, with regard to any entity, the articles or certificate of incorporation and bylaws in the case of a corporation, certificate of limited partnership (if applicable) and the partnership agreement in the case of a general or limited partnership, the articles or certificate of formation and the operating agreement in the case of a limited liability company, or similar governing documents, in each case as amended from time to time.
“ Hunt ” has the meaning set forth in the Recitals.
“ Incentive Fee ” means, for any calendar quarter an amount equal to the Per Unit Incentive Fee for such calendar quarter multiplied by the aggregate number of OP Units outstanding as of the record date for the payment of Quarterly Distributions during such calendar quarter.
“ Indemnitee ” has the meaning set forth in Section 13(b) .
“ Indemnitor ” has the meaning set forth in Section 13(c) .
“ Independent Directors ” means the members of the Board of Directors who are not officers or employees of the Manager, Hunt or any of their Affiliates, and who are otherwise “independent” in accordance with the Company’s Governing Instruments and policies and, if applicable, the rules of any national securities exchange on which the Company’s common stock is listed.
“ Initial Public Offering ” means the initial public offering of the Company’s common stock under the Securities Act pursuant to the Registration Statement.
“ Initial Term ” means a period commencing on the date hereof and ending on the earlier of (i) December 31, 2019 and (ii) a Successful Challenge.
“ Intellectual Property ” means all work product, documents, code, works of authorship, programs, manuals, developments, processes, formulae, data, specifications, fixtures, tooling, equipment, supplies, processes, inventions, discoveries, improvements, trade secrets, and know-how or similar rights.
“ Intellectual Property Rights ” means the worldwide right, title, and interest in any Intellectual Property and any goodwill appurtenant thereto, including, without limitation, all copyrights, copyright renewals or reversions, trademarks, trade names, trade dress rights, inventions, priority rights, patent rights, patents, and any other rights or protections in connection therewith or related thereto.
“ Investment Company Act ” means the Investment Company Act of 1940, as amended.
“ Manager ” has the meaning set forth in the Preamble.
“ Manager Indemnified Party ” has the meaning set forth in Section 13(a) .
 
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“ Manager Panel Member ” has the meaning set forth in Section 24(b) .
“ Net Income Before Noncontrolling Interest ” means the Company’s consolidated net income, calculated in accordance with GAAP, before any deduction or reduction thereto as a result of net income attributable to a noncontrolling interest.
“ Operating Partnership ” has the meaning set forth in the Preamble.
“ OP Unit ” means a partnership unit in the Operating Partnership.
“ Party ” or “ Parties ” has the meaning set forth in the Preamble.
“ Person ” means any individual, corporation, proprietorship, firm, partnership, limited partnership, limited liability company, trust, association or other Entity.
“ Per Unit Incentive Fee ” means, for any calendar quarter, an amount equal to 20% of the amount by which (a) the Quarterly Distributions made by the Operating Partnership during such quarter plus the amount of the Per Unit Incentive Fee exceed (b) the Threshold Distribution Amount. By way of example, if the Quarterly Distributions during a quarter are $0.37, the Per Unit Incentive Fee for such quarter will be $0.025 (i.e., 20% multiplied by ($0.37 of Quarterly Distributions, plus the $0.025 Per Unit Incentive Fee, minus the $0.27 Threshold Distribution Amount).
“ Quarterly Distributions ” means the amount of per OP Unit distributions made by the Operating Partnership during a particular calendar quarter; provided, however , that any distributions in excess of 100% of quarterly Cash Available for Distribution shall not be considered distributions for purposes of calculating the amount of Quarterly Distributions; provided, further , any such OP Unit distributions made to the Company will only be considered distributions for purposes of this definition to the extent they are subsequently distributed by the Company to its shareholders. For purposes of this definition, quarterly Cash Available for Distribution will be measured based on the most recent quarterly results that, at the time of declaration of the applicable OP Unit distributions by the Board of Directors or a committee thereof, have been publicly disclosed or, if no quarterly results have been publicly disclosed in the preceding 90 days, the results from the Company’s most recently completed quarter that have been reviewed by the Company’s independent auditors and certified by an officer of the Company.
“ Registration Statement ” means the Registration Statement on Form S-11 (file no. 333-201106) filed by the Company.
“ REIT ” has the meaning set forth in the Recitals.
“ Renewal Term ” means a period commencing on the expiration of the Initial Term or a Renewal Term and ending on the earlier of (i) the date that is five years from the commencement of such Renewal Term and (ii) a Successful Challenge.
“ SEC ” means the United States Securities and Exchange Commission.
 
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“ Securities Act ” means the Securities Act of 1933, as amended.
“ Subsidiary ” means, with respect to any Person, any corporation, limited liability company, trust, partnership or joint venture, or other Entity of which a majority of (i) the voting power of the voting equity securities or (ii) the outstanding Equity Interests is owned, directly or indirectly, by such Person.
“ Successful Challenge ” means the date a court of competent jurisdiction has determined in a final, non-appealable order that this Agreement, or any term or provision hereof, after giving effect to Section 27, caused a termination of the Company’s REIT election under Section 856(g) of the Code.
“ Termination Fee ” has the meaning set forth in Section 16(b) .
“ Third Panel Member ” has the meaning set forth in Section 24(b) .
“ Threshold Distribution Amount ” means an amount per OP Unit equal to $0.270, as adjusted for recapitalizations, reclassifications, stock splits, stock dividends or other similar events.
“ Total Equity ” means, as of a particular date, the amount of total equity reflected on the Company’s consolidated balance sheet as of such date (before any reduction or deduction therefrom as a result of noncontrolling interest) prepared in accordance with GAAP; provided that, Total Equity as of December 31, 2014 shall be $873.3 million. For reference, the “Total Equity” line is not included in the Company’s audited Consolidated Balance Sheets included in the Registration Statement (such line item is entitled “Total Members’ Capital” on such balance sheets), but is included in the Company’s unaudited Pro Forma Condensed Consolidated Balance Sheet as of September 30, 2014 included in the Registration Statement. The Company expects that such line item will continue to be included in the Company’s balance sheet data following the completion of the Initial Public Offering.
Section 2. Appointment and Duties of the Manager .
(a) The Company and the Operating Partnership (in each case, on its own behalf and on behalf of its Subsidiaries) hereby appoint the Manager to manage the Assets and the day-to-day operations of the Company Entities subject to the further terms and conditions set forth in this Agreement, and the Manager hereby agrees to use its reasonable best efforts to perform each of the duties set forth herein except where a higher standard of care is specified in this Agreement. The appointment of the Manager shall be exclusive to the Manager except to the extent that the Manager otherwise agrees, in its sole and absolute discretion, and except to the extent that the Manager elects, pursuant to the terms of this Agreement, to cause the duties of the Manager hereunder to be provided by third parties.
(b) The Parties acknowledge that (i) the Manager is an Affiliate of Hunt; and (ii) the Manager may perform its services for the Company Entities in part through the personnel and facilities of Hunt or other Hunt Affiliates.
 
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(c) The Manager, in its capacity as manager of the Assets and the day-to-day operations of the Company Entities, at all times will be subject to the supervision and oversight of the Company’s Board of Directors and will have only such functions and authority as the Company may delegate to it, including the functions and authority identified herein and delegated to the Manager hereby. The Manager will be responsible for the day-to-day operations of the Company Entities and will perform (or cause to be performed) in accordance with the guidelines that may be adopted from time to time by the Board of Directors, and subject to the budget limitations set forth in Section 11(a) , such services and activities relating to the Assets and operations of the Company Entities as set forth herein, including:
(i) administering the day-to-day business and performing and supervising the performance of such other administrative functions necessary or appropriate for the Company Entities’ management, including the collection of revenues and the payment of debts and obligations;
(ii) providing executive and administrative personnel, office space and office services required in rendering services to the Company Entities;
(iii) engaging, retaining and supervising, on behalf of a Company Entity, such services of accountants, legal counsel, appraisers, insurers, brokers, transfer agents, registrars, investment banks, valuation firms, financial advisors, due diligence firms, underwriting review firms and banks as the Manager deems necessary or advisable in connection with the management and operations of such Company Entity;
(iv) communicating with the holders of any of the securities of a Company Entity as required to satisfy the reporting and other requirements of any governmental bodies or agencies or trading markets and to maintain effective relations with such holders, including website maintenance, logo design, analyst presentations, investor conferences and annual meeting arrangements;
(v) preparing for the review and approval of the Board of Directors and filing on behalf of the Company Entities current reports on Form 8-K, quarterly reports on Form 10-Q and annual reports on Form 10-K, proxy statements and other reports required to be filed by the Exchange Act with the SEC and otherwise satisfying reporting and compliance obligations under applicable securities laws or the rules of the New York Stock Exchange and any exchange on which securities of a Company Entity are listed;
(vi) arranging marketing materials, advertising, industry group activities (such as conference participation and industry organization memberships) and other promotional efforts designed to promote the business of the Company Entities;
(vii) communicating with analysts and the investment community generally;
(viii) sourcing, evaluating, submitting for Board of Director approval, and, subject to obtaining such Board of Director approval, directing the issuance of any common or preferred stock issuances or other equity issuances;
 
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(ix) drawing on existing lines of credit at such times as the Manager deems appropriate to support the business of the Company Entities and sourcing, facilitating, evaluating and submitting for Board of Director approval any other loan, indebtedness, guaranty or other financing arrangements necessary or appropriate in connection with the business of the Company Entities and managing the Company’s and the Company Entities’ relationships with existing or potential lenders;
(x) evaluating and recommending to the Board of Directors hedging strategies and engaging in hedging activities, consistent with such strategies as modified from time to time, while maintaining the Company’s qualification as a REIT;
(xi) opening and managing Company Accounts and treasury/cash management activities on behalf of the Company Entities;
(xii) investing and reinvesting any money and securities in short-term investments pending investment in other investments; paying related fees, costs and expenses;
(xiii) advising the Board of Directors on capital structure and capital raising;
(xiv) negotiating with tenants any new leases, lease amendments, lease supplements or lease renewals, all in accordance with leasing standards promulgated by the Board of Directors from time to time, and causing the applicable Company Entity to perform its obligations under any such agreements and enforcing any related rights; provided, however, the negotiation and execution of any operating lease of a transmission and distribution Asset to an operator thereof (e.g., Sharyland Utilities, L.P.), and any amendments thereto, shall be subject to the direction and, subject to procedures approved by the Board of Directors, approval of the Board of Directors;
(xv) evaluating, negotiating, submitting for Board of Director approval, and, subject to receipt of such Board of Director approval, entering into, any project acquisitions from a Hunt Affiliate in accordance with the terms of the Development Agreement or from third parties;
(xvi) working with tenants or other third parties to construct transmission and distribution projects, including causing a Company Entity to negotiate, enter into and perform its obligations under any related construction contracts, engineering, procurement and construction (EPC) contracts or other contracts related to such construction activities;
(xvii) preparing annual budgets, and any related amendments, for Board of Director approval and causing the Company Entities to perform and implement then-effective annual budgets;
(xviii) preparing financial statements;
 
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(xix) coordinating the relationship with external auditors, subject to oversight from the Audit Committee or other appropriate governing body when appropriate;
(xx) administering bookkeeping and accounting functions as are required for the management and operation of the Company Entities;
(xxi) evaluating and recommending and, subject to obtaining approval of the Board of Directors, making any accounting policy changes;
(xxii) designing, preparing, updating and monitoring internal control over financial reporting and disclosure controls and procedures, subject to oversight from the Audit Committee or other appropriate governing body when applicable;
(xxiii) managing any internal audit function required by securities laws, exchange rules or the Board of Directors, including, if appropriate, engaging a third party firm on behalf of a Company Entity to provide such function, and managing the relationship with that firm, subject to oversight from the Audit Committee or other appropriate governing body when appropriate;
(xxiv) sourcing, evaluating and submitting for Board of Director approval, and, subject to receipt of such Board of Director approval, entering into, any potential merger, acquisition, joint venture, financing, development, refinancing or disposition opportunities;
(xxv) coordinating and managing the business of any joint venture or co-investment interests a Company Entity holds directly or indirectly and conducting all matters with the joint venture or co-investment partners;
(xxvi) sourcing and evaluating relationships with potential project developers;
(xxvii) monitoring the insurance required under the Company’s leases and sourcing and evaluating any insurance, such as director and officer insurance, and, subject to obtaining Board of Director or other appropriate approvals when applicable, causing a Company Entity to obtain any such insurance;
(xxviii) enforcing the rights of Company Entities under any applicable insurance policies when and as appropriate, subject to oversight and direction from the Board of Directors or a committee thereof, when appropriate;
(xxix) assisting the Company regarding the maintenance of its qualification as a REIT and monitoring compliance with the various REIT qualification tests and other tax laws and regulations, and, in accordance with Section 8(b)(ii) hereof, causing the Company to qualify as a REIT for U.S. federal income tax purposes;
 
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(xxx) managing all tax matters, including making necessary tax filings and causing each Company Entity to make any related payments that are owed to taxing authorities and filing appropriate tax appeals;
(xxxi) scheduling, managing and preparing materials for all meetings of the Board of Directors or committees thereof;
(xxxii) counseling the Board of Directors in connection with any policy decisions;
(xxxiii) subject to obtaining Board of Director or other appropriate Company approvals, handling and resolving all claims, disputes or controversies between Company Entities and third parties;
(xxxiv) furnishing the Board of Directors with reports and statistical and economic research regarding activities and services performed by the Manager on behalf of a Company Entity, as appropriate;
(xxxv) assisting the Company Entities in complying with all regulatory requirements applicable to the Company Entities with respect to the Company Entities’ business;
(xxxvi) keeping the Board of Directors apprised of material events affecting the assets of the Company Entities, and, from time to time, at the request of the Board of Directors, making reports to the Company of its performance of the services set forth herein;
(xxxvii) performing the functions and tasks delegated to the Company pursuant to that certain Delegation Agreement dated on or around the date hereof between Sharyland Utilities, L.P. and the Company related to responsibilities and rights under the Third Amended and Restated Company Agreement of Sharyland Distribution & Transmission Services, L.L.C.; and
(xxxviii) performing such other services as may be required from time to time for the management of, and other activities relating to, the Assets and business and operations of the Company Entities as the Board of Directors shall reasonably request or as Manager deems appropriate under the particular circumstances.
(d) The Manager shall have the right and power to establish an employee stock purchase plan (as such term is defined in section 423 of the Code) at the Company for the benefit of employees of the Manager, Hunt and their Affiliates; provided that , the Manager shall fund all costs associated with any such plan, including the funds necessary to purchase shares of the Company’s stock in the open market pursuant to the plan.
(e) In performing its duties under this Section 2 , the Manager shall be entitled to rely reasonably on qualified experts and professionals (including accountants, legal counsel and other service providers) hired by the Manager at the Company Entities’ sole cost and expense (subject to the last paragraph of Section 10 ).
 
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Section 3. Devotion of Time; Additional Activities .
(a) The Manager and its Affiliates will provide the Company Entities with a management team, including a Chief Executive Officer, President and Chief Financial Officer, as well as other support personnel, to provide the management services to be provided by the Manager to the Company Entities hereunder, the members of which team shall devote such portion of their time to the management of the Company Entities as is necessary and appropriate to operate the businesses of the Company Entities. The Manager shall not be obligated to dedicate itself exclusively to the management of the Company Entities nor shall the Manager’s personnel be obligated to dedicate any specific portion of their time to the Company Entities; provided, however , that the Manager devotes sufficient resources to the business of the Company Entities as is necessary and appropriate, commensurate with its level of activity, to discharge Manager’s obligations under this Agreement. The Manager shall dedicate sufficient time and shall engage and make available sufficient personnel (including personnel of the Manager’s Affiliates) to perform the tasks and activities that typically would be performed internally (and not outsourced to third parties) by a manager rendering management and advisory services similar to those to be rendered by the Manager hereunder, and the Manager shall engage third parties to perform such tasks and activities only in accordance with the budget limitations set forth in Section 11(a) hereof. For clarity, nothing in this Section 3(a), Section 2 or any other provision of this Agreement will require the Manager or any Affiliate thereof to bear or incur any Expenses (except as described in the last paragraph of Section 10 ).
(b) Subject to the provisions of Section 3(a) and the Development Agreement, nothing in this Agreement shall (i) prevent the Manager, Hunt or any of their Affiliates, officers, directors, employees or personnel, from engaging in other businesses or from rendering services of any kind (including the services to be provided to the Company Entities hereunder) to any other Person, including investing in, or rendering advisory services to others investing in, any type of business (including acquisitions of assets that meet the principal investment objectives of the Company), whether or not the investment objectives or policies of any such other Person or Entity are similar to those of the Company or (ii) in any way bind or restrict the Manager, Hunt or any of their Affiliates, officers, directors, employees or personnel from buying, selling or trading any securities or investments for their own accounts or for the account of others for whom Hunt or any of its Affiliates (other than the Manager), officers, directors, employees or personnel may be acting. For the avoidance of doubt, the foregoing shall not limit any of the Company Entities’ rights under the Development Agreement.
(c) Managers, partners, officers, employees, personnel and agents of the Manager or Affiliates of the Manager may serve as directors, officers, employees, personnel, agents, nominees or signatories for the Company Entities, to the extent permitted by their Governing Instruments or by any resolutions duly adopted by the applicable governing entities pursuant to the Company Entities’ Governing Instruments. When executing documents or otherwise acting in such capacities for the Company Entities, such persons shall use their respective titles in the applicable Company Entity.
Section 4. Development Activities and Rights of First Offer . On the date hereof, the Company, the Operating Partnership, Sharyland Utilities, L.P. and Hunt Transmission Services, L.L.C. have entered into the Development Agreement, which, among other things, governs (a)
 
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the rights of the Company Entities to develop and construct Footprint Projects (as defined in the Development Agreement) and (b) the circumstances under which Hunt must offer to the Company the opportunity to acquire a ROFO Project (as defined in the Development Agreement).
Section 5. Agency . Without expanding in any way the Manager’s powers or authorities in Section 2 , the Manager may act as agent of the Company Entities in acquiring, financing, leasing, managing and disposing of Assets, disbursing and collecting the funds of the Company Entities, paying the debts and fulfilling the obligations of the Company Entities, supervising the performance of professionals engaged by or on behalf of the Company Entities and handling, prosecuting and settling any claims of or against the Company Entities, the Board of Directors, holders of the Company Entities’ securities or representatives or properties of the Company Entities.
Section 6. Bank Accounts . The Manager may establish and maintain one or more bank accounts in the name of any Company Entity (any such account, a “ Company Account ”), and may collect and deposit funds into any such Company Account or Company Accounts, and disburse funds from any such Company Account or Company Accounts in accordance herewith; and the Manager shall, on a quarterly basis or upon request of the Board of Directors or a committee thereof from time to time, render appropriate accountings of such collections and payments to the Board of Directors and, upon request, to the auditors of the Company Entities. All funds collected by Manager on behalf of Company Entities shall be deposited by Manager in Company Accounts.
Section 7. Records; Confidentiality . The Manager shall maintain appropriate books of accounts and records relating to services performed under this Agreement, and such books of account and records shall be accessible for inspection by representatives of the Company Entities at any time during normal business hours upon reasonable advance notice. The Manager shall keep confidential any and all information obtained in connection with the services rendered under this Agreement and shall not disclose any such information (or use the same except in furtherance of its duties under this Agreement) to unaffiliated third parties except (i) with the prior written consent of the Board of Directors; (ii) to legal counsel, accountants and other professional advisors to the Company; (iii) to appraisers, financing sources and others in the ordinary course of the Company’s business; (iv) pursuant to the order of governmental officials having jurisdiction over any Company Entity; (v) in connection with any governmental or regulatory filings of the Company Entities or disclosure or presentations to the Company’s stockholders or prospective stockholders; (vi) as required by law or legal process to which the Manager or any Person to whom disclosure is permitted hereunder is a party; or (vii) to the extent reasonably required to perform the services under this Agreement or otherwise in connection with the business or assets of the Company Entities. The foregoing shall not apply to information which has previously become publicly available through the actions of a Person other than the Manager not resulting from the Manager’s violation of this Section 7 . The provisions of this Section 7 shall survive the expiration or earlier termination of this Agreement for a period of three years. The Manager shall cause its agents, representatives and subcontractors to keep confidential any such information to the same degree set forth in this Section 7 .
 
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Section 8. Obligations of Manager; Restrictions .
(a) The Manager shall require each seller or transferor of assets to the Company Entities to make such representations and warranties regarding such assets as may, in the commercially reasonable judgment of the Manager, be necessary and appropriate. In addition, the Manager shall take such other action as it deems necessary or appropriate in its commercially reasonable discretion with regard to the protection of the Assets.
(b) The Manager shall use its reasonable best efforts to monitor relationships among the Company Entities, any tenant that leases the assets of the Company Entities, the Manager and its Affiliates and holders of equity interests in the Company to ensure compliance with REIT rules and regulations related to related party rents.
(c) The Manager shall refrain from any action that, in its sole but reasonable judgment made in good faith, (i) is not in compliance with the guidelines and policies of the Board of Directors, (ii) would adversely affect the status of the Company as a REIT under the Code, (iii) would adversely affect the Company Entities’ status as an entity intended to be exempted or excluded from investment company status under the Investment Company Act or (iv) would violate any law, rule or regulation of any governmental body or agency having jurisdiction over any Company Entity or that would otherwise not be permitted by the Company Entities’ Governing Instruments, code of conduct or other compliance policies. If the Manager is ordered to take any such action by the Board of Directors, the Manager shall promptly notify the Board of Directors of the Manager’s judgment that such action would adversely affect such status or violate any such law, rule or regulation or the Governing Instruments.
Section 9. Compensation .
(a) During the Initial Term and any Renewal Term, the Operating Partnership shall pay the Manager an annual Base Fee. The annual Base Fee shall be payable in cash in quarterly installments in arrears on the last day of each calendar quarter (or the first business day that follows such day, if the last day of the calendar quarter is not a business day). Within 10 days of the receipt by the Company of its audited financial statements with respect to the most recently completed fiscal year, the Manager shall deliver to the Board of Directors for informational purposes only its computation of the Base Fee (and the identification of the applicable quarterly installments in which the Base Fee will be paid by the Company) based on the amount of Total Equity reflected in such financial statements (or, in the case of Total Equity as of December 31, 2014, derived from such financial statements). If the Company does not have audited financial statements within 90 days of the end of the most recently completed fiscal year, the Manager shall calculate and send to the Board of Directors its computation of Total Equity as of the end of the most recent fiscal year and the resulting Base Fee, in which case the Audit Committee shall review and approve or disapprove the calculation of the Base Fee within 10 days of receipt thereof from the Manager. If the Manager and the Audit Committee are unable to agree on the calculations during such 10 day period, the dispute will be submitted to arbitration pursuant to Section 24 of this Agreement (however, if the audited financial statements are received before the arbitration is completed, then the calculation shall be based on such financial statements).
 
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(b) During the Initial Term and any Renewal Term, the Operating Partnership shall pay the Manager the Incentive Fee in cash. The Incentive Fee shall be payable within five days of the actual payment of Quarterly Distributions by the Operating Partnership. In connection with its recommendation regarding the amount of the Quarterly Distribution the Operating Partnership should make in a calendar quarter, the Manager shall deliver to the Board of Directors its computation of the Incentive Fee based on the amount of such recommended Quarterly Distribution during such quarter. If the Audit Committee determines that the amount of Quarterly Distributions will be different than the amount recommended by the Manager, then the Manager will re-calculate the Incentive Fee payment based on the Audit Committee’s determination of Quarterly Distributions. In connection with approving the amount of Quarterly Distribution, the Audit Committee will also approve or disapprove the amount of the Incentive Fee. If the Audit Committee does not approve the amount of the Incentive Fee in connection with any such approval of the amount of Quarterly Distributions, the Manager may submit the determination of the amount of the Incentive Fee to arbitration pursuant to Section 24 of this Agreement.
(c) In the event that the Company’s or the Operating Partnership’s financial statements with respect to any period during the Initial Term or any Renewal Term are restated, and such restatement results in a change to the calculation of Total Equity or Cash Available for Distribution that would have caused the amount of the Base Fee or Incentive Fee paid in any period or the amount of the Termination Fee to have been less than the amount actually paid, the Manager shall re-pay to the Company any such excess fee amounts it received. To the extent the Board of Directors or a committee thereof determines a portion of the Base Fee, Incentive Fee or Termination Fee is recoverable from the Manager pursuant to this Section 9(c) , the Board of Directors or committee thereof may (1) require the Manager to re-pay such amount in cash directly to the Operating Partnership within 30 days of the determination that excess fees have been paid, (2) reduce future payments of the Base Fee, Incentive Fee or Termination Fee by such amounts or (3) recover such amounts through any combination of (1) and (2). This Section 9(c) shall survive the expiration or earlier termination of this Agreement.
Section 10. Expenses of the Company . The Company Entities shall bear and be responsible for all expenses related to the conduct of the business of the Company Entities (collectively, the “ Expenses ”), including any such Expenses initially incurred by the Manager, and including the following:
(a) expenses in connection with the acquisition, disposition and financing of other entities and Assets on behalf of the Company;
(b) costs of legal, tax, accounting, third party administrators for the establishment and maintenance of the books and records, consulting, auditing, administrative, and other similar services rendered for the Company Entities by third parties retained by a Company Entity or by the Manager on behalf of a Company Entity;
(c) the compensation and expenses of the Company’s directors and the cost of liability insurance related to the officers, directors, consultants or agents of any Company Entity and any obligations to indemnify any such persons;
 
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(d) costs associated with the establishment and maintenance of any of the Company Entities’ secured and unsecured forms of borrowings (including commitment fees, accounting fees, legal fees, closing and other similar costs) or any of the Company Entities’ securities offerings (including the Initial Public Offering);
(e) expenses connected with communications to holders of any Company Entities’ securities and other bookkeeping and clerical work necessary in maintaining relations with holders of such securities and in complying with the continuous reporting and other requirements of governmental bodies or agencies, including all costs of preparing and filing required reports with the SEC, the costs payable by a Company Entity to any transfer agent and registrar in connection with the listing and/or trading of the Company’s stock on any exchange, the fees payable by a Company Entity to any such exchange in connection with its listing, and costs of preparing, printing and mailing any annual report to stockholders and proxy materials with respect to any stockholder meetings;
(f) costs associated with any computer software or hardware, electronic equipment or purchased information technology services from third party vendors that is used for the Company Entities; provided that , if such software, hardware, equipment or services also benefit the businesses of Affiliates of the Manager or activities of the Manager that are unrelated to those of the Company Entities, the Expenses shall only include an amount reasonably allocated to the Company Entities by the Manager;
(g) costs and expenses incurred with respect to market information systems and publications, pricing and valuation services, research publications and materials, including financial analytics and market data, and settlement, clearing and custodial fees and expenses, relevant to the business of a Company Entity;
(h) compensation and expenses of the Company’s custodian and transfer agent, if any;
(i) the costs of maintaining the Company’s compliance with all federal, state and local rules and regulations or any other regulatory agency;
(j) all taxes and license fees payable by any Company Entity;
(k) all insurance costs incurred in connection with the operation of the business of the Company Entities;
(l) all other costs and expenses relating to the business and investment operations of the Company Entities, including the costs and expenses of acquiring, owning, protecting, maintaining, developing and disposing of Assets, including appraisal, valuation, reporting, audit and legal fees;
(m) expenses relating to any office(s) or office facilities, including disaster backup recovery sites and facilities, maintained for the Company Entities or Assets separate from the office or offices of the Manager;
 
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(n) expenses connected with the payments of interest, dividends or distributions in cash or any other form authorized or caused to be made by the Board of Directors to or on account of holders of the Company Entities’ securities, including in connection with any dividend reinvestment plan;
(o) any judgment or settlement of pending or threatened proceedings (whether civil, criminal or otherwise) against any Company Entity, or against any trustee, director or officer of any Company Entity in his capacity as such for which any Company Entity is required to indemnify such trustee, director or officer by any court or governmental agency;
(p) all costs and expenses relating to the development and management of the Company’s website; and
(q) all other third-party expenses actually incurred by the Manager that are reasonably necessary for the performance by the Manager of its duties and functions under this Agreement.
Notwithstanding the foregoing or anything to the contrary herein, Expenses will not include the following, which will be the responsibility of (and paid directly by) the Manager or another Affiliate thereof: (1) compensation expenses related to the Manager’s and its Affiliates’ personnel, including officers of the Company, (2) occupancy costs incurred by the Manager related to its place of business, (3) time or project-based billing for work done by Affiliates of the Manager, (4) office-related costs, travel and entertainment costs or costs associated with professional service organizations, publications, professional development or related matters for the Manager’s or any of its Affiliate’s employees, or (5) income or franchise taxes payable by the Manager. The provisions of this Section 10 shall survive the expiration or earlier termination of this Agreement to the extent such Expenses have previously been incurred or are incurred in connection with such expiration or termination. For the avoidance of doubt, if a particular item of expense is described in this paragraph, it will be the obligation of Manager or an Affiliate thereof, and not the obligation of a Company Entity, even if such item of expense falls within one of the enumerated list of Expenses set forth in Section 10(a)-(q)  above.
Section 11. Preparation of Expense Budget; Calculation and Payment of Expenses .
(a) The Manager shall, in connection with the annual budgeting process established by the Board of Directors, submit to the Board of Directors its estimate of the general and administrative Expenses (“ G&A Expenses ”) to be incurred on behalf of the Company Entities for each annual budgeting period. The Manager shall use reasonable best efforts to cause the G&A Expenses for such annual period not to materially exceed the estimates submitted to the Board of Directors, and shall promptly notify the Board of Directors of any expected material deviations from the estimates and the reasons for such deviations. Upon receipt of such notice of expected material deviations from the budget, the Board of Directors may instruct the Manager that any or all additional expenses in excess of the budget shall be subject to approval of the Board of Directors.
 
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(b) The Manager may prepare and deliver to the Company a statement documenting the unreimbursed Expenses incurred by the Manager on behalf of a Company Entity in accordance herewith, which shall be reimbursed by the Operating Partnership to the Manager on or before the 30th day following the date of delivery of such statement. Expenses incurred by the Manager on behalf of a Company Entity in accordance herewith shall be reimbursed by the Operating Partnership to the Manager. The provision of this Section 11 shall survive the expiration or earlier termination of this Agreement with respect to Expenses that have previously been incurred or are incurred in connection with such expiration or termination. All obligations of the Company under this Agreement to pay any fees, reimbursements, indemnities or other amounts to the Manager shall be paid by the Operating Partnership.
Section 12. Insurance .
(a) The Company will cover the Manager and its Affiliates under the Company’s directors and officers insurance policy, including professional liability coverage with limits no less than $50,000,000. The Manager may also request that additional professional liability insurance be purchased and added to the Company policy, and the Manager shall bear any premium costs over and above the cost of coverage limits of $50,000,000. The Manager and the Company shall review all such policies annually and shall mutually agree upon the terms and conditions of such policies.
(b) Manager (or an Affiliate of Manager, on Manager’s behalf), shall maintain, at its expense and at all times during the term of this Agreement, insurance as follows:
(i) Commercial General Liability Insurance including Umbrella Liability Insurance, written on occurrence basis, with limits of not less than $50,000,000 combined for bodily injury and property damage liability.
(ii) Workers Compensation Insurance, as required by the law of the State where the Assets are located, covering all Manager’s employees, and Employer’s Liability Insurance with limits of not less than $1,000,000 for bodily injury by accident and $1,000,000 for bodily injury by disease.
(iii) Commercial Crime and/or Employee Dishonesty Insurance, covering the activities of all of its employees who may handle or be responsible for monies or other property of Company, with limits of not less than $5,000,000.
Upon request by the Company, the Manager shall furnish to the Company certificates of insurance evidencing the insurance coverage required hereunder. The Company Entities shall be included as additional insureds on the Manager’s insurance policies.
(c) Notwithstanding any other provision in this Agreement to the contrary, each of the Company and the Manager hereby waives any and all rights of recovery, claim, action or cause of action, and release all claims against the other party, and the other party’s Affiliates, agents, employees, officers, partners, servants and shareholders, for any loss or damage to such party’s property by reason of any casualty which is covered by insurance, regardless of the cause or origin thereof, including, without limitation, the negligence, gross negligence or willful misconduct of the other party or the other party’s Affiliates, agents, employees, officers, partners, servants or shareholders. Each party also covenants that all property insurance policies carried by such party shall contain provisions under which such party’s insurer waives its right of subrogation against the other party (and such policies shall be so endorsed), unless such waiver is illegal or against public policy or such waiver renders such policy void or voidable, or is not available at a reasonable cost.
 
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Section 13. Limits of Manager Responsibility; Indemnification .
(a) The Manager assumes no responsibility under this Agreement other than to render the services in the manner called for under this Agreement and shall not be responsible for any action of the Board of Directors in following or declining to follow any advice or recommendations of the Manager, including as set forth in Section 8(b) of this Agreement. The Manager, its Affiliates, their respective officers, directors, stockholders and employees and any Person providing sub-advisory services to the Manager will not be liable to the Company, to the Board of Directors, the Company’s stockholders or the Operating Partnership’s partners for any acts or omissions by any such Person, pursuant to or in accordance with this Agreement, except by reason of acts or omissions constituting gross negligence, willful misconduct, bad faith or reckless disregard of their duties under this Agreement, as determined by a final non-appealable order of a court of competent jurisdiction. The Operating Partnership shall, to the full extent lawful, reimburse, indemnify and hold the Manager, its Affiliates, their respective officers, directors, stockholders and employees and any Person providing sub-advisory services to the Manager (each a “ Manager Indemnified Party ”), harmless of and from any and all expenses, losses, damages, liabilities, demands, charges and claims of any nature whatsoever (including reasonable attorneys’ fees) (“ Damages ”) in respect of or arising from any acts or omissions of such Manager Indemnified Party, unless it has been determined in a final non-appealable decision pursuant to Section 24 or non-appealable order of a court of competent jurisdiction that such Damages result from such Manager Indemnified Party’s gross negligence, willful misconduct, bad faith or reckless disregard of duties under this Agreement.
(b) The Manager shall, to the full extent lawful, reimburse, indemnify and hold the Company Entities and their respective officers, directors, employees and agents (each, a “ Company Indemnified Party ” and together with a Manager Indemnified Party, the “ Indemnitee ”), harmless of and from any and all Damages in respect of or arising from (i) acts or omissions of the Manager constituting gross negligence, willful misconduct, bad faith or reckless disregard of its duties under this Agreement, as determined in a final non-appealable decision pursuant to Section 24 or non-appealable order of a court of competent jurisdiction or (ii) any claims by or relating to the Manager’s or its Affiliates’ employees relating to the terms and conditions of their employment by the Manager or such Affiliate (including, without limitation, any liability with respect to severance or withdrawal liability).
(c) The Indemnitee will promptly notify the party against whom indemnity is claimed (the “ Indemnitor ”) of any claim for which it seeks indemnification; provided , however , that the failure to so notify the Indemnitor will not relieve the Indemnitor from any liability which it may have hereunder, except to the extent such failure actually prejudices the Indemnitor. The Indemnitor shall have the right to assume the defense and settlement of such claim; provided , that the Indemnitor notifies the Indemnitee of its election to assume such defense and settlement within 30 days after the Indemnitee gives the Indemnitor notice of the claim. In such case, the Indemnitor will not settle or compromise such claim, and the Indemnitee
 
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will not be liable for any such settlement made by Indemnitor without Indemnitee’s prior written consent. If the Indemnitor is entitled to, and does, assume such defense by delivering the aforementioned notice to the Indemnitee, the Indemnitee will (i) have the right to approve the Indemnitor’s counsel (which approval will not be unreasonably withheld, delayed or conditioned), (ii) be obligated to cooperate in furnishing evidence and testimony and in any other manner in which the Indemnitor may reasonably request and (iii) be entitled to participate in (but not control) the defense of any such action, with its own counsel and at its own expense.
(d) The Operating Partnership shall be required to advance funds to a Manager Indemnified Party for legal expenses and other costs incurred as a result of any legal action or proceeding if a claim in respect thereof is to be made pursuant hereto and if requested by such Manager Indemnified Party if (i) such suit, action or proceeding relates to or arises out of, or is alleged to relate to or arise out of or has been caused or alleged to have been caused in whole or in part by, any action or inaction on the part of the Manager Indemnified Party in the performance of its duties or provision of its services on behalf of the Company Entities; and (ii) the Manager Indemnified Party affirms in writing that such person in good faith believes that it has met the standard of conduct necessary for indemnification under this Section 13 and undertakes to promptly repay any funds advanced pursuant to this Section 13(d) in cases in which such Manager Indemnified Party would not be entitled to indemnification under Section 13(a) . If advances are required under this Section 13(d) , the Manager Indemnified Party shall furnish the Operating Partnership with an affirmation and undertaking as set forth in clause (ii) of the preceding sentence and shall thereafter have the right to bill the Operating Partnership for, or otherwise require the Operating Partnership to pay, at any time and from time to time after such Manager Indemnified Party shall become obligated to make payment therefor, any and all reasonable amounts for which such Manager Indemnified Party is entitled to indemnification under this Section 13 , and the Operating Partnership shall pay the same within thirty (30) days after request for payment. In the event that a determination is made by a final non-appealable decision pursuant to Section 24 or non-appealable order of a court of competent jurisdiction that the Operating Partnership is not so obligated in respect of any amount paid by it to a particular Manager Indemnified Party, such Manager Indemnified Party will refund such amount within sixty (60) days of such determination, and in the event that a determination is made by a final non-appealable decision pursuant to Section 24 or non-appealable order of a court of competent jurisdiction that the Operating Partnership is so obligated in respect to any amount not paid by the Operating Partnership to a particular Manager Indemnified Party, the Operating Partnership will pay such amount to such Manager Indemnified Party within thirty (30) days of such final determination, in either case together with interest at the current prime rate plus two percent (2%) from the date paid until repaid or the date it was obligated to be paid until the date actually paid.
(e) Any Manager Indemnified Party entitled to indemnification under this Agreement must seek recovery under any insurance policies by which such Manager Indemnified Party is covered and must obtain the Company’s written consent prior to entering into any compromise or settlement which would result in the Operating Partnership having an obligation to indemnify such Manager Indemnified Party. Any amounts actually recovered under any applicable Company-funded insurance policies will offset any amounts that the Operating Partnership owes pursuant to the Operating Partnership’s indemnification obligations under this Agreement. If the
 
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amounts for which indemnification is sought arise out of the conduct of the Company’s or the Company Entities’ business and affairs and also of any other person for which a Manager Indemnified Party was then acting in a similar capacity, the amount of the indemnification to be provided by the Operating Partnership may be limited to its proportionate share thereof if so determined by the Operating Partnership in good faith.
Section 14. Intellectual Property; License .
(a) All Intellectual Property created or developed in connection with the Manager’s performance of this Agreement or otherwise and the Intellectual Property Rights associated therewith shall be the sole and exclusive property of the Manager. The Company and Operating Partnership (on behalf of themselves and any Subsidiary) shall assign and do hereby assign to the Manager all Intellectual Property Rights in such Intellectual Property. The Manager hereby grants the Company Entities a non-exclusive, perpetual, worldwide, fully paid up, royalty-free, non-sub-licensable, non-transferable license and right to use the Intellectual Property made in connection with the Manager’s performance of this Agreement for their business purposes. The Company and the Operating Partnership will, or will cause their Subsidiaries to, upon request of the Manager, do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered all such further acts, deeds, assignments, transfers, conveyances, powers of attorney and assurances as may be requested by the Manager to carry out the intent of this Agreement or to otherwise perfect, record, confirm, or enforce the Manager’s rights in and to the Intellectual Property.
(b) The Manager hereby grants to the Company Entities a non-transferable, non-assignable, non-exclusive royalty-free right and license to use the logo described on Exhibit A during the term of this Agreement.
Section 15. No Joint Venture . Nothing in this Agreement shall be construed to make the Company (or any Subsidiary) and the Manager partners or joint venturers or impose any liability as such on either of them.
Section 16. Term; Termination .
(a) Until this Agreement is terminated in accordance with its terms, this Agreement shall be in effect during the Initial Term, and, subject to Section 16(b) and Section 16(c) , shall be automatically renewed for a Renewal Term upon the expiration of the Initial Term and upon the expiration of each Renewal Term. Notwithstanding the foregoing, in connection with the renewal of this Agreement, at least 15 months prior to the expiration of the Initial Term or a Renewal Term, a Party may request changes to this Agreement or the Development Agreement to address market changes, changes in the relationship between the Parties or such other changes in circumstances that a Party determines in good faith warrant revisions to this Agreement (including, without limitation, a request that the list of ROFO Projects included in the Development Agreement be updated to include the transmission and development projects in the then-current pipeline of Hunt and its Affiliates); provided, however , that the Parties do not generally expect to change the manner in which the Base Fee, Incentive Fee or Termination Fee are calculated unless such amounts are determined to be, in consultation with a nationally recognized investment banking firm, materially less favorable to the Manager or the Company,
 
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as the case may be, than other similar compensation arrangements for externally managed vehicles in the same or comparable industries. Without limiting the generality of the foregoing, the Parties shall negotiate any such requested changes in good faith prior to the renewal of this Agreement, but neither Party shall be obligated to agree to any such changes.
(b) Notwithstanding any other provision of this Agreement to the contrary, the Independent Directors may elect not to renew this Agreement by delivering notice of such election to the Manager at least 365 days prior to the end of the Initial Term or any Renewal Term. In the event of such election, on the last day of the Initial Term or Renewal Term, as applicable, the Operating Partnership shall pay a termination fee (the “ Termination Fee ”) equal to three times the sum of (i) the amount of the Base Fee paid with respect to the four full calendar quarters preceding the date on which the termination notice is given and (ii) the amount of the Incentive Fee paid with respect to the four full calendar quarters preceding the date on which the termination notice is given. At the Company’s election, the Termination Fee may be paid in cash or in OP Units (in whole or in part). If the Company elects to pay the Termination Fee in OP Units, such OP Units will be issued five days after the effective date of termination, with the number of OP Units equal to the Termination Fee divided by the volume weighted average price of the Company’s common stock on the New York Stock Exchange (or such other national exchange on which the Company’s stock is then traded) during the 10 trading day period that precedes the termination date. If the Company’s common stock is not then traded on the New York Stock Exchange or other national exchange, the Company will pay the Termination Fee in cash. For the avoidance of doubt, the Termination Fee applies to terminations of this Agreement pursuant to this Section 16(b) only and is not required to be paid in the event of a termination of this Agreement pursuant to any other provision hereof or for any other reason.
(c) Notwithstanding any other provision of this Agreement to the contrary, the Manager may terminate this Agreement at any time upon 365 days’ prior written notice to the Company and the Operating Partnership; provided, however , that the Manager may not deliver notice of its termination of this Agreement prior to December 31, 2018. In the event of a termination of this Agreement pursuant to this Section 16(c) , no Termination Fee shall be payable.
(d) Upon the expiration or termination of this Agreement for any reason, the Manager shall: (i) immediately pay over to the Company Entities any and all monies collected and held by the Manager for the account or on behalf of the Company Entities, without deduction or offset; (ii) promptly turn over to the Company Entities all books, papers, leases, agreements, documents, records, keys and other items relating to the management and operation of the Assets; and (iii) within thirty (30) days thereafter, render to the Company Entities a final accounting with respect to the management and operation of the Assets through the date of termination. In connection with any expiration or termination of this Agreement for any reason, the Manager shall, prior to and following such expiration or termination, cooperate with the Company Entities and provide reasonable assistance to support a transition of the management duties to the Company Entities or the Company’s designee.
(e) If this Agreement is terminated pursuant to this Section 16 or Section 18 of this Agreement, such termination shall be without any further liability or obligation of either party to the other, except that Sections 7 , 9(c) , 10 , 11(b) , 12(c) , 13 , and 19 through 28 will survive any such termination.
 
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Section 17. Assignment . This Agreement shall terminate automatically in the event of its assignment, in whole or in part, by the Manager, unless such assignment is consented to in writing by the Company after the approval of a majority of the Board of Directors, including a majority of the Independent Directors; provided, however, that the Manager may assign this Agreement to an Affiliate of Hunt without the consent of the Company. Any such permitted assignment shall bind the assignee under this Agreement in the same manner as the Manager is bound, and the Manager shall be liable to the Company and the Operating Partnership for all errors or omissions of the assignee under any such assignment. In addition, the assignee shall execute and deliver to the Company and the Operating Partnership a counterpart of this Agreement naming such assignee as Manager. This Agreement shall not be assigned by the Company or the Operating Partnership without the prior written consent of the Manager, except in the case of assignment by the Company or Operating Partnership to another REIT or other organization which is a successor (by merger, consolidation, purchase of assets, or other transaction) to the Company or the Operating Partnership, in which case such successor organization shall be bound under this Agreement and by the terms of such assignment in the same manner as the Company and Operating Partnership are bound under this Agreement.
Section 18. Termination for Cause . Notwithstanding anything to the contrary contained in Section 16 , the Company, with the approval of a majority of the Independent Directors, may terminate this Agreement effective upon 30 days’ prior written notice of termination (or, with respect to clauses (iv) through (vii) below, effective immediately upon written notice of termination) from the Company to the Manager, without payment of any Termination Fee or any accrued and unpaid Base Fee or Incentive Fee, if (i) the Manager materially breaches any provision of this Agreement and, if such breach is capable of being cured, such breach shall continue for a period of 30 days after written notice thereof specifying such breach and requesting that the same be remedied in such 30-day period, (ii) the Manager engages in any act of fraud, misappropriation of funds, or embezzlement against any Company Entity, other than an immaterial misapplication of funds that is promptly corrected, (iii) there is an event of any bad faith, willful misconduct or gross negligence on the part of the Manager in the performance of its duties under this Agreement that results in material harm to any Company Entity, (iv) there is a commencement of any voluntary proceeding relating to the Manager’s Bankruptcy or insolvency or an order for relief in an involuntary Bankruptcy case, (v) there is a dissolution of the Manager, (vi) the Manager is convicted of a felony (including a plea of nolo contendere ) or (vii) there is a Manager Change of Control (provided that, in the case of (vii), any termination under this Section 18 must occur within 90 days after the date the Independent Directors receive written notice from the Manager of such Manager Change of Control, which Manager agrees to provide promptly). For purposes of this Agreement, “ Manager Change of Control ” shall be deemed to have occurred if members of the Hunt Group cease to both (1) own, directly or indirectly, at least 51% of the Equity Interests in Manager or its successor hereunder and (2) Control Manager or its successor hereunder. For purposes of this Agreement: (A) “ Control ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management, policies or activities of a Person, whether through ownership of voting securities, by contract or otherwise; and (B)
 
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“ Hunt Group ” means (a) Ray L. Hunt and Hunter L. Hunt; (b) any lineal descendent of the foregoing (including by adoption); (c) any spouse of the foregoing; (d) any trust established primarily for the benefit of any one or more of the foregoing; and (e) any entity controlled, individually or collectively, by any of the foregoing Persons identified in the preceding clauses (a) through (d) (including Hunt and its Subsidiaries).
Section 19. Action Upon Termination . From and after the effective date of termination of this Agreement, pursuant to Sections 16 or 18 of this Agreement, the Manager shall not be entitled to compensation for further services under this Agreement, but shall be paid (i) if terminated pursuant to Section 16 , all compensation accruing to the date of termination, (ii) if terminated pursuant to Section 16(b) , the applicable Termination Fee, and (iii) as provided in Section 10 and Section 11 .
Section 20. Notices . All notices, offers or other communications required or permitted to be given pursuant to this Agreement shall be in writing and may be personally served, sent via facsimile, sent via electronic mail or sent by United States mail or by commercial courier and shall be deemed to have been given when received at the address set forth below:
If to the Manager:
Hunt Utility Services, LLC
Attn: Hunter L. Hunt, President
1900 North Akard Street
Dallas, TX 75201
Facsimile: 214-978-8989
E-mail: HHunt@huntoil.com
If to the Company:
InfraREIT, Inc.
Attn: Chief Executive Officer
1807 Ross Avenue, 4th Floor
Dallas, TX 75201
E-mail: DCampbell@huntutility.com
With a copy to:
InfraREIT, Inc.
Attn: General Counsel
1807 Ross Avenue, 4th Floor
Dallas, TX 75201
E-Mail: Legal@Huntutility.com
The address of any party hereto may be changed by a notice in writing given in accordance with the provisions of this Section 20 .
 
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Section 21. Binding Nature of Agreement; Third Party Beneficiaries; Successors and Assigns . This Agreement shall be binding upon and inure solely to the benefit of each Party hereto and, with respect to Section 13 of this Agreement, the Indemnitees, and nothing in this Agreement, express or implied, is intended to or shall confer upon any Person other than the Parties and their respective successors and permitted assigns any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.
Section 22. Complete Agreement; Amendments . This Agreement contains the entire understanding of the parties with respect to the transactions contemplated hereby and supersedes all prior arrangements or understandings with respect thereto. This Agreement shall not be modified or amended except in a writing signed by all Parties. No purported modifications or amendments, including without limitation any oral agreement (even if supported by new consideration), course of conduct or absence of a response to a unilateral communication, shall be binding on any Party.
Section 23. Governing Law . THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF DELAWARE WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES TO THE CONTRARY.
Section 24. Arbitration .
(a) Any dispute under or relating to this Agreement shall, if not resolved by the Parties within 60 days after notice of such dispute is served by one Party to the other (or, if different, the period provided for resolution by the Parties in the provision of this Agreement under which such dispute is brought), be submitted to an “ Arbitration Panel ” comprised of three members. No more than one panel member may be with the same firm (which shall not be deemed to prohibit the panel members from being members of the same organization such as the American Arbitration Association or Judicial Arbitration and Mediations Services), and no panel member may have an economic interest in the outcome of the arbitration.
(b) The Arbitration Panel shall be selected as follows: Within five business days after the expiration of the period referenced above, the Manager shall select a panel member meeting the criteria of the above paragraph (the “ Manager Panel Member ”) and the Company shall select its panel member meeting the criteria of the above paragraph (the “ Company Panel Member ”). If a Party fails to timely select its respective panel member, the other Party may notify such Party in writing of such failure, and if such Party fails to select its respective panel member within three business days from such notice, then the other Party may select such panel member on such Party’s behalf. Within five business days after the selection of the Manager Panel Member and the Company Panel Member, the Manager Panel Member and the Company Panel Member shall jointly select a third panel member meeting the criteria of the above paragraph (the “ Third Panel Member ”). If the Manager Panel Member and the Company Panel Member fail to timely select the Third Panel Member and such failure continues for more than three business days after written notice of such failure is delivered to the Manager Panel Member and Company Panel Member by either the Manager or the Company, either the Manager or the Company may request the managing officer of the American Arbitration Association to appoint the Third Panel Member.
 
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(c) Within ten business days after the selection of the Arbitration Panel, each Party shall submit to the Arbitration Panel a written statement identifying its summary of the issues and claims. Any Party may also request an evidentiary hearing on the merits in addition to the submission of written statements. The Arbitration Panel shall make its decision within 20 days after the later of (i) the submission of such written statements of particulars, and (ii) the conclusion of any evidentiary hearing on the merits, and shall take into consideration the relative risks and rewards undertaken and capital invested by each Party. The Arbitration Panel shall reach its decision by majority vote and shall communicate its decision by written notice to the Parties.
(d) The decision by the Arbitration Panel shall be final, binding and conclusive and shall be non-appealable and enforceable in any court having jurisdiction. All hearings and proceedings held by the Arbitration Panel shall take place in Dallas, Texas.
(e) The resolution procedure described herein shall be governed by the Commercial Rules of the American Arbitration Association and the Procedures for Large, Complex Commercial Disputes in effect as of the date hereof and subject to the Texas General Arbitration Act to the extent such act is applicable hereto.
(f) The Parties shall bear equally the fees, costs and expenses of the Arbitration Panel in conducting the arbitration.
Section 25. No Waiver; Cumulative Remedies . No failure to exercise and no delay in exercising, on the part of any party hereto, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. No waiver of any provision hereunder shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.
Section 26. Headings . The headings of the sections of this Agreement have been inserted for convenience of reference only and shall not be deemed part of this Agreement.
Section 27. Cure of Invalid Provisions . If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable, and this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, and the remaining provisions hereof shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement; provided, however, that if such illegal, invalid or unenforceable provision may be made legal, valid and enforceable by limitation thereof, then the provision shall be revised and reformed to make it legal, valid and enforceable to the maximum extent permitted by law. Without limiting the foregoing, if, due to an amendment to any provision of the Code or the Treasury Regulations, the issuance of a
 
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court opinion in any tax litigation, or the issuance of an IRS revenue ruling or revenue procedure, it is determined by tax counsel for the Company, or if a court of competent jurisdiction determines with respect to the Company, that one or more provisions of this Agreement cause or will cause the Company to fail to meet one or more of the requirements that are required to be met in order for the Company to continue to qualify as a REIT, then the provision or provisions that caused or will cause such failure shall be fully severable, and this Agreement shall be construed and enforced as if such provision or provisions that caused such failure had never comprised a part hereof.
Section 28. Construction of Agreement . As used herein, the singular shall be deemed to include the plural, and the plural shall be deemed to include the singular, and all pronouns shall include the masculine, feminine and neuter, whenever the context and facts require such construction. The headings, captions, titles and subtitles herein are inserted for convenience of reference only and are to be ignored in any construction of the provisions hereof. Except as otherwise indicated herein, all section, schedule and exhibit references in this Agreement shall be deemed to refer to the sections, schedules and exhibits of and to this Agreement, and the terms “herein”, “hereof”, “hereto”, “hereunder” and similar terms refer to this Agreement generally rather than to the particular provision in which such term is used. Whenever the words “including”, “include” or “includes” are used in this Agreement, they shall be interpreted in a non-exclusive manner as though the words “but [is] not limited to” immediately followed the same. Time is of the essence for this Agreement. The language in all parts of this Agreement shall in all cases be construed simply according to the fair meaning thereof and not strictly against the party that drafted such language. Except as otherwise provided herein, references in this Agreement to any agreement, articles, by-laws, instrument or other document are to such agreement, articles, by-laws, instrument or other document as amended, modified or supplemented from time to time.
Section 29. Multiple Counterparts . This Agreement may be executed in multiple counterparts, each of which shall constitute an original hereof and all of which taken together shall constitute one and the same agreement. If any signature is delivered by facsimile transmission or by PDF, such signature shall create a valid and binding obligation of the party executing (or on whose behalf the signature is executed) with the same force and effect as if such facsimile or PDF signature were an original thereof.
* * *
[Signature page follows]
 
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IN WITNESS WHEREOF, the parties have executed this Agreement to be effective as of the Effective Date.

HUNT UTILITY SERVICES, LLC, a Delaware limited liability company	
		
By:		/s/ David A. Campbell	
		Name: David A. Campbell	
		Title: President	
	
INFRAREIT, INC., a Maryland corporation	
		
By:		/s/ David A. Campbell	
		Name: David A. Campbell	
		Title: President	
	
INFRAREIT PARTNERS, LP, a Delaware limited partnership	
	
By: InfraREIT, L.L.C., its general partner	
		
By:		/s/ David A. Campbell	
		Name: David A. Campbell	
		Title: President	

Exhibit A
(logo)

Exhibit 10.9

INFRAREIT, INC.
AMENDED AND RESTATED
REGISTRATION RIGHTS AND LOCK-UP AGREEMENT

Dated as of January 29, 2015

TABLE OF CONTENTS
Page

ARTICLE 1 DEFINITIONS	  	 	2	  	
Section 1.1	 	Definitions	  	 	2	  	
Section 1.2	 	Interpretation	  	 	7	  	
		
ARTICLE 2 LOCK-OUT PERIOD FOR OFFERING	  	 	7	  	
Section 2.1	 	Lock-Out Period for Offering	  	 	7	  	
		
ARTICLE 3 REGISTRATION RIGHTS	  	 	8	  	
Section 3.1	 	Shelf Registration Under the Securities Act	  	 	8	  	
Section 3.2	 	Registration Procedures	  	 	11	  	
Section 3.3	 	Suspension of Use of the Shelf Registration Statement	  	 	16	  	
Section 3.4	 	Lockout Periods for Holder Sales	  	 	16	  	
Section 3.5	 	Piggy-Back Registration	  	 	17	  	
Section 3.6	 	Indemnification	  	 	18	  	
Section 3.7	 	Rule 144; Reports under Exchange Act	  	 	21	  	
		
ARTICLE 4 MISCELLANEOUS	  	 	21	  	
Section 4.1	 	Notices	  	 	21	  	
Section 4.2	 	Further Action	  	 	22	  	
Section 4.3	 	Successors and Assigns	  	 	22	  	
Section 4.4	 	Amendment and Waiver	  	 	22	  	
Section 4.5	 	Additional Holders	  	 	23	  	
Section 4.6	 	Severability	  	 	23	  	
Section 4.7	 	Counterparts	  	 	23	  	
Section 4.8	 	Governing Law	  	 	24	  	
Section 4.9	 	Waiver of Jury Trial	  	 	24	  	
Section 4.10	 	Forum Selection and Consent to Jurisdiction	  	 	24	  	
Section 4.11	 	Entire Understanding	  	 	24	  	
Section 4.12	 	No Third Party Beneficiaries	  	 	24	  	
Section 4.13    	 	No Presumption Against Drafter	  	 	24	  	
 
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INFRAREIT, INC.
AMENDED AND RESTATED
REGISTRATION RIGHTS AND LOCK-UP AGREEMENT
THIS AMENDED AND RESTATED REGISTRATION RIGHTS AND LOCK-UP AGREEMENT (this “ Agreement ”) is made and entered into as of January 29, 2015, among InfraREIT, Inc., a Maryland corporation (together with its successors and assigns, the “ Company ”), and each of the persons listed on the attached Schedule A who become signatories to this Agreement (each, an “ Initial Holder ” and collectively, the “ Initial Holders ”).
RECITALS
WHEREAS, some of the Initial Holders and InfraREIT, L.L.C., a Delaware limited liability company formerly known as Electric Infrastructure Alliance of America, L.L.C. (the “ Predecessor Company ”), were parties to a Registration Rights and Lock-Up Agreement, dated as of November 23, 2010 (the “ Original Agreement ”);
WHEREAS, the Company is contemplating a firmly underwritten public offering (the “ Offering ”) of shares of the Company’s common stock, par value $0.01 per share (“ Common Shares ”), registered under the Securities Act (as defined below);
WHEREAS, immediately following the closing of the Offering (the “ Closing ”), the Predecessor Company will merge (the “ Merger ”) with and into the Company, with the Company surviving as the general partner of InfraREIT Partners, L.P., a Delaware limited partnership formerly known as Electric Infrastructure Alliance of America, L.P. (together with its successors and assigns, the “ Operating Partnership ”);
WHEREAS, certain Initial Holders are owners, or will become owners immediately following the consummation of the Merger, of Partnership Units (as defined below) and as such are granted a Redemption Right (as defined below) under the Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership that will become effective upon the Closing (as it may be amended, supplemented or otherwise modified from time to time, the “ Partnership Agreement ”), pursuant to which such Initial Holders may receive Common Shares calculated in accordance with the Partnership Agreement and such Initial Holders have elected to become Holders (as defined below) under this Agreement;
WHEREAS, upon consummation of the Merger, certain Initial Holders will hold Common Shares directly and will hold additional Common Shares upon the conversion of shares of Class A common stock, par value $0.01 per share, and Class C common stock, par value $0.01 per share, of the Company into Common Shares on or about 32 days following the date of the Closing in accordance with the Amended and Restated Charter of the Company (the “ Charter ”); and
WHEREAS, the parties hereto desire to amend and restate the Original Agreement in its entirety to substitute the Company for the Predecessor Company and record their understanding regarding the registration and transfer of Registrable Securities.

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.1 Definitions . Capitalized terms used in this Agreement (including exhibits, schedules and amendments) shall have the meanings set forth below or in the Section of this Agreement referred to below, except as otherwise expressly indicated or limited by the context in which they appear in this Agreement.
“ Affiliate ” means, with respect to any Person, any Person directly or indirectly controlling, controlled by or under common control with such Person. For purposes of this definition, “control,” when used with respect to any Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlling” and “controlled” have meanings correlative to the foregoing.
“ Agreement ” has the meaning set forth in the preamble to this Agreement.
“ Board of Directors ” or “ Board ” means the board of directors of the Company or any similar governing body of its successors and assigns.
“ Business Day ” means any day other than a Saturday, Sunday or other day in which commercial banks in New York, New York are authorized or required by law or executive order to be closed; provided that as long as Marubeni Corporation or its Controlled Affiliate is a Founding Investor, “Business Day” shall also exclude each public holiday in Tokyo, Japan if Marubeni Corporation or such Controlled Affiliate has delivered to the Company at least ten (10) days prior to the end of a calendar year a list of public holidays in Tokyo, Japan during the next calendar year.
“ Charter ” has the meaning set forth in the recitals to this Agreement.
“ Closing ” has the meaning set forth in the recitals to this Agreement.
“ Closing Price ” means the last reported sale price of a unit of a security regular way on a given day or, in case no such sale takes place on such day, the average of the reported closing bid and asked prices regular way, in each case on the New York Stock Exchange or such other principal national securities exchange on which the security is listed or admitted to trading, or, if the security is not listed or admitted to trading on any national securities exchange, the average of the closing bid and asked prices as furnished by any nationally recognized member of FINRA selected from time to time by the Company, reasonably and in good faith, for that purpose, or, if no such prices are furnished, the fair market value of the security as estimated by the Company using an identical valuation formula to that used in determining the pricing for the Company’s then most-recent sale of more than thirty five million dollars ($35,000,000) of similar securities to unaffiliated third parties, or if no such sale has occurred, as determined in good faith by the Board, which estimate shall be prepared at the expense of the Company; provided that any determination of the “Closing Price” of any security hereunder shall be based on the assumption that such security is freely transferable without registration under the Securities Act.
 
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“ Commission ” means the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act.
“ Common Shares ” has the meaning set forth in the recitals to this Agreement.
“ Company ” has the meaning set forth in the preamble to this Agreement.
“ Controlled Affiliate ” means, with respect to any Founding Investor, (a) any corporation, limited liability company, joint venture or other Entity of which a majority of the economic interest, and either (x) a majority of the voting power or (y) the right to direct the disposition of a majority of the shares of capital stock, membership interests, partnership interests or other equity interests and options or warrants to acquire, or securities convertible into, capital stock, membership interests, partnership interests or other equity securities of such Entity, are held, directly or indirectly, by such Founding Investor or by another Person in respect of which such Founding Investor is a Controlled Affiliate, or (b) any corporation, limited liability company, joint venture or other Entity of which such Founding Investor controls the voting power in such Entity and has the right to direct the disposition of the assets of such Entity.
“ Entity ” means any general partnership, limited partnership, proprietorship, corporation, joint venture, joint stock company, limited liability company, limited liability partnership, business trust, estate, governmental entity, cooperative, association or other foreign or domestic enterprise, including accounts or funds managed by a Holder or any of its subsidiaries.
“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time of reference.
“ FINRA ” means the Financial Industry Regulatory Authority, Inc.
“ Founding Investor ” means each of John Hancock Life Insurance Company (U.S.A.), Marubeni Corporation, Teachers Insurance and Annuity Association of America, the OpTrust Original Founding Investor and Hunt-InfraREIT, L.L.C. (formerly known as Hunt EIAA, L.L.C.).
“ GAAP ” means generally accepted accounting principles in the United States, as consistently applied by the Company and the Operating Partnership.
“ Holder ” means (i) any Initial Holder who is the record or beneficial owner of any Registrable Security or any assignee or transferee of such Registrable Security (including assignments or transfers of Registrable Securities to such assignees or transferees as a result of the foreclosure on any loans secured by such Registrable Securities) (x) to the extent permitted under the Partnership Agreement or the Charter, as applicable, and (y)  provided such assignee or transferee agrees in writing to be bound by all the provisions hereof, unless such owner, assignee or transferee acquires such Registrable Security in a public distribution pursuant to a registration statement under the Securities Act or pursuant to transactions exempt from registration under the Securities Act where securities sold in such transaction may be resold without subsequent registration under the Securities Act and (ii) any other Person who becomes a Holder in accordance with Section 4.5(a) hereof.
 
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“ Holder Notice ” has the meaning set forth in Section 3.1(f) .
“ Initial Holder ” and “ Initial Holders ” have the meaning set forth in the preamble to this Agreement.
“ Issuer Shelf Registration Statement ” has the meaning set forth in Section 3.1(b) .
“ Notice and Questionnaire ” means a written notice, substantially in the form attached as Exhibit A , delivered by a Holder to the Company (i) notifying the Company of such Holder’s desire to include Registrable Securities held by it in a Shelf Registration Statement, (ii) containing all information about such Holder required to be included in such registration statement in accordance with applicable law, including Item 507 of Regulation S-K promulgated under the Securities Act, as amended from time to time, or any similar successor rule thereto, and (iii) pursuant to which such Holder agrees to be bound by the terms and conditions hereof.
“ Offering ” has the meaning set forth in the recitals to this Agreement.
“ Operating Partnership ” has the meaning set forth in the recitals to this Agreement.
“ OpTrust Original Founding Investor ” means, collectively, OPSEU Pension Plan Trust Fund, OpTrust Infrastructure N.A. Inc., and any other Controlled Affiliate of OPSEU Pension Plan Trust Fund which holds Common Shares as of the date of this Agreement.
“ Original Agreement ” has the meaning set forth in the recitals to this Agreement.
“ Partnership Agreement ” has the meaning set forth in the recitals to this Agreement.
“ Partnership Unit ” has the meaning set forth in the Partnership Agreement.
“ Permitted Transferee ” has the meaning set forth in the Partnership Agreement.
“ Person ” means any individual, corporation, proprietorship, firm, partnership, limited partnership, limited liability company, trust, association or other Entity.
“ Prospectus ” means the prospectus included in the Shelf Registration Statement, including any preliminary prospectus, and any amendment or supplement thereto, including any supplement relating to the terms of the offering of any portion of the Registrable Securities covered by the Shelf Registration Statement, and in each case including all material incorporated by reference therein.
“ Publicly Traded ” means listed or admitted to trading on the New York Stock Exchange, NYSE Amex, the NASDAQ Stock Market or another national securities exchange, or any successor to any of the foregoing.
 
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“ Redeemable Units ” means Partnership Units that are redeemable for Common Shares pursuant to the Redemption Right.
“ Redemption Right ” has the meaning set forth in the Partnership Agreement.
“ Registrable Securities ” means, with respect to any Holder, (a) all Common Shares owned, either of record or beneficially, by the Holder, (b) any Common Shares that may be issued upon redemption of Redeemable Units held by the Holder that are exchanged for Common Shares upon a redemption of Partnership Units pursuant to the Partnership Agreement, (c) any securities issued upon conversion or exchange of such Common Shares, or (d) any securities issued or issuable with respect to such Common Shares by way of conversion, exchange, stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise, including securities issued or issuable as a dividend or other distribution with respect to or in replacement of any shares referred to above. As to any particular Registrable Securities, they shall cease to be Registrable Securities at the earliest time as one of the following shall have occurred: (i) a registration statement (including a Resale Shelf Registration Statement) covering the sale or other transfer of such Common Shares has been declared effective by the Commission and all such Common Shares have been disposed of pursuant to such effective registration statement; (ii) such shares (other than Restricted Shares) were issued pursuant to an effective registration statement (including an Issuer Shelf Registration Statement) and are freely tradeable by the Holder without restriction; (iii) such Common Shares have been publicly sold under Rule 144; (iv) such Common Shares are held by each Holder who is an Affiliate of the Company if all of such Common Shares are eligible for sale pursuant to Rule 144 and could be sold in one transaction in accordance with the volume limitations contained in Rule 144(e)(1)(i); (v) such Common Shares are held by Holders who are not Affiliates of the Company that are eligible for sale pursuant to Rule 144(d); or (vi) such Common Shares have been otherwise transferred in a transaction that constitutes a sale thereof under the Securities Act, the Company has delivered to the Holder’s transferee a new certificate or other evidence of ownership for such Common Shares not bearing the Securities Act restricted stock legend and such Common Shares subsequently may be publicly resold or otherwise transferred by such transferee without restriction or registration under the Securities Act. For the avoidance of doubt, Registrable Securities shall be deemed to include all Common Shares held by a Holder, including Common Shares issuable upon redemption of Redeemable Units, without regard to the ownership limitations set forth in the Charter, to the maximum extent necessary to accommodate the sale of Common Shares pursuant to a registered offering in accordance with Section 8.7.C of the Partnership Agreement.
“ Registration Expenses ” means any and all expenses incident to performance of or compliance with this Agreement, including: (i) all applicable registration and filing fees imposed by the Commission, FINRA or any other self-regulatory organization; (ii) all fees and expenses incurred in connection with compliance with state securities or “blue sky” laws (including reasonable fees and disbursements of counsel in connection with qualification of any of the Registrable Securities under any state securities or blue sky laws and the preparation of a blue sky memorandum) and compliance with the rules of FINRA; (iii) all expenses of any Persons in preparing or assisting in preparing, word processing, printing and distributing the Shelf Registration Statement, any Prospectus, certificates and other documents relating to the
 
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performance of and compliance with this Agreement; (iv) all fees and expenses incurred in connection with the listing, if any, of any of the Registrable Securities on any securities exchange or exchanges pursuant to Section 3.2(m) ; (v) the fees and disbursements of counsel for the Company and of the independent public accountants of the Company, including the expenses of any special audits or “cold comfort” letters required by or incident to such performance and compliance; and (vi) the fees and expenses, not to exceed $100,000 in the aggregate for all Shelf Registrations effected pursuant to this Agreement, of one counsel for all the Holders (which counsel shall be chosen by the Holders and be reasonably acceptable to the Company). Registration Expenses shall specifically exclude underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of Registrable Securities by a Selling Holder, all of which shall be borne by such Holder in all cases.
“ Requesting Holders ” has the meaning set forth in Section 3.1(f) .
“ Resale Rules ” has the meaning set forth in Section 3.7 .
“Resale Shelf Registration Statement” has the meaning set forth in Section 3.1(a) .
“ Restricted Shares ” means Common Shares issued under an Issuer Shelf Registration Statement which if sold by the holder thereof would constitute “restricted securities” as defined under Rule 144 or would otherwise be subject to volume limitations under Rule 144.
“ Rule 144 ” means Rule 144 (or any similar provision then in force) promulgated under the Securities Act.
“ Securities Act ” means the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time of reference.
“ Selling Expenses ” means (a) any underwriting discounts and commissions or similar charges attributable to the sale of Registrable Shares included in a registration, (b) any transfer taxes relating to the sale or disposition of Registrable Securities by a Selling Holder or (c) any other expenses of the Selling Holders that do not constitute Registration Expenses.
“ Selling Holder ” means any Holder who sells Registrable Securities pursuant to a public offering registered hereunder.
“ Shelf Registration ” means a registration required pursuant to Section 3.1 .
“ Shelf Registration Statement ” means a Resale Shelf Registration Statement or an Issuer Shelf Registration Statement, as applicable.
“ Suspension Notice ” has the meaning set forth in Section 3.3(a) .
“ Transfer ” means, whether by operation of law or otherwise, any sale, transfer, distribution, assignment, bequest, lease, pledge, hypothecation, encumbrance, grant of a security interest in, or grant, issue, sale or conveyance of any option, warrant or right to acquire or to otherwise dispose of, transfer, or permit to be transferred (including (a) the granting of any option or entering into any agreement for the sale, transfer or other disposition of Common
 
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Shares or Partnership Units, (b) the sale, transfer, assignment or other disposition of any securities or rights convertible into or exchangeable for Common Shares, but excluding (i) the exchange or conversion of any security of the Company for Common Shares or the Operating Partnership for Partnership Units or (ii) the redemption of Partnership Units pursuant to Section 8.7 of the Partnership Agreement, as applicable, (c) any transfer or other disposition of any interest in Common Shares or Partnership Units as a result of a change in the marital status of the holder thereof), and (d) any change in the citizenship or country of formation, incorporation, organization or domicile of the holder of Common Shares or Partnership Units). For clarity, a “Transfer” shall include any transaction, occurrence or event described in the foregoing clauses (a), (b), (c) or (d) that is effected, occurs or arises directly or indirectly, including without limitation, by a sale, transfer or assignment of a controlling interest in a Holder or by way of a merger, consolidation, business combination or similar transaction; provided , however , for any Holder which has issued securities of a class that are Publicly Traded (or securities of a class which are similarly traded publicly on a securities exchange or market in any other jurisdiction), “Transfer” shall not include a sale of any such securities of a class which are so publicly traded. The term “ Transferred ” shall have correlative meanings.
“ Underwriting Notice ” has the meaning set forth in Section 3.1(f) .
“ Violation ” has the meaning set forth in Section 3.6(a) .
Section 1.2 Interpretation . Unless the context otherwise requires: (i) a technical accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (ii) “or” is not exclusive; (iii) references to “Articles,” “Sections” and “Exhibits” refer to the articles, sections and the exhibits to this Agreement, unless explicitly stated or the context requires otherwise; (iv) “herein,” “hereof” and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section, Exhibit or other subdivision; (v) references to statutes, regulations and rules include subsequent amendments and successors thereto unless the context otherwise requires; (vi) the various headings of this Agreement are provided herein for convenience only and shall not affect the meaning or interpretation of this Agreement or any provision hereof; (vii) wherever from the context it appears appropriate, each term stated in either the singular or the plural shall include the singular and the plural, and pronouns stated in either the masculine, the feminine or the neuter gender shall include the masculine, feminine and neuter; (viii) “including” means “including, without limitation”; and (ix) if any payment hereunder shall become due on any day which is not a Business Day, such payment shall be made on the next succeeding Business Day.
ARTICLE 2
LOCK-OUT PERIOD FOR OFFERING
Section 2.1 Lock-Out Period for Offering . Each Holder hereby acknowledges and agrees that it is subject to the lock-out period described in Section 2.1 of the Original Agreement, and, in furtherance of such provision, has executed a lock-up agreement with the underwriters in connection with the Offering, pursuant to which such Holder has agreed not to Transfer any Registrable Securities for a period of time following the closing of the Offering subject to the terms and conditions of such lock-up agreement.
 
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ARTICLE 3
REGISTRATION RIGHTS
Section 3.1 Shelf Registration Under the Securities Act .
(a) Filing of Resale Shelf Registration Statement . The Company shall use its commercially reasonable efforts to cause to be filed on the first Business Day after the first anniversary of the Closing, or as soon as reasonably practicable thereafter, a registration statement on an appropriate form for an offering to be made on a delayed or continuous basis pursuant to Rule 415 under the Securities Act (the “ Resale Shelf Registration Statement ”) and providing for the sale by the Holders of all, but not less than all, of their Registrable Securities in accordance with the terms hereof and will use its commercially reasonable efforts to cause the Resale Shelf Registration Statement to be declared effective by the Commission as soon thereafter as is practicable. The Company agrees to use its commercially reasonable efforts to keep the Resale Shelf Registration Statement with respect to the Registrable Securities continuously effective for a period expiring on the date on which all remaining Registrable Securities covered by the Resale Shelf Registration Statement have been sold. Subject to Section 3.2(b) below, the Company further agrees to amend the Resale Shelf Registration Statement if and as required by the rules, regulations or instructions applicable to the registration form used by the Company for the Resale Shelf Registration Statement or by the Securities Act or any rules and regulations thereunder.
(b) Filing of an Issuer Shelf Registration Statement . The Company may, at its option, satisfy its obligation to prepare and file a Resale Shelf Registration Statement pursuant to Section 3.1(a) above with respect to Common Shares issuable upon redemption of Partnership Units pursuant to the Partnership Agreement (the “ Redeemable Units ”) by preparing and filing with the Commission no later than ten (10) Business Days after the first anniversary of the Closing, or as soon as reasonably practicable thereafter, a registration statement on an appropriate form for an offering to be made on a delayed or continuous basis pursuant to Rule 415 under the Securities Act (an “ Issuer Shelf Registration Statement ”) providing for the issuance by the Company of Common Shares registered under the Securities Act, from time to time, to the Holders of such Redeemable Units in lieu of the Operating Partnership’s obligation to pay cash for such Redeemable Units. The Company shall use commercially reasonable efforts to cause the Issuer Shelf Registration Statement to be declared effective by the Commission as promptly as reasonably practicable after filing thereof. The Company shall use commercially reasonable efforts, subject to Sections 3.1(d) and 3.3 hereof, to keep the Issuer Shelf Registration Statement continuously effective for a period expiring on the date all of the Common Shares covered by such Issuer Shelf Registration Statement have been issued by the Company pursuant thereto. If the Company shall exercise its rights under this Section 3.1(b) , Holders (other than Holders of Restricted Shares) shall have no right to have Common Shares issued or issuable upon exchange of the Redeemable Units included in a Resale Shelf Registration Statement pursuant to Section 3.1(a) above.
 
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(c) Inclusion in Shelf Registration Statement . Each Holder that has delivered a duly completed and executed Notice and Questionnaire to the Company as promptly as practicable after receipt of the Company’s request for such document, but in no event later than twenty (20) Business Days thereafter, shall be entitled to have its Registrable Securities included in the applicable Shelf Registration Statement and shall be named as a selling securityholder in such Shelf Registration Statement and the related prospectus in such a manner as to permit such Holder to deliver such prospectus to purchasers of Registrable Securities in accordance with applicable law. If required by applicable law, subject to the terms and conditions hereof, after effectiveness of the applicable Shelf Registration Statement, the Company shall file a supplement to such prospectus or amendment to such Shelf Registration Statement not less frequently than once a quarter as necessary to name as selling securityholders therein any Holders that provide to the Company a duly completed and executed Notice and Questionnaire and shall use commercially reasonable efforts to cause any post-effective amendment to such Shelf Registration Statement filed for such purpose to be declared effective by the Commission as promptly as reasonably practicable after the filing thereof.
(d) Subsequent Filing . The Company shall prepare and file such additional registration statements as necessary every three (3) years and use commercially reasonable efforts to cause such registration statements to be declared effective by the Commission so that the registration statement remains continuously effective, subject to Section 3.3 hereof, with respect to resales of Registrable Securities as of and for the periods required under Section 3.1(a) or (b)  hereof, as applicable, such subsequent registration statements to constitute an Issuer Shelf Registration Statement or a Resale Shelf Registration Statement, as the case may be, hereunder.
(e) Expenses . Except as provided herein, the Company shall pay all Registration Expenses in connection with the registration pursuant to Section 3.1(a) and Section 3.1(b) and the performance of the Company’s obligations under this Section 3.1 and Section 3.2 . The Company shall not be liable for any underwriting or brokerage discounts and commissions, the fees and expenses of counsel retained by any Holder (other than the fees and expenses, not to exceed $100,000 in the aggregate for all Shelf Registrations effected pursuant to this Agreement, of one counsel reasonably acceptable to the Company for all the Holders, which fees and expenses of counsel are Registration Expenses hereunder), and transfer taxes, if any, relating to the sale or disposition of such Holder’s Registrable Securities pursuant to the Shelf Registration Statement or Rule 144.
(f) Underwritten Offering .
(i) If any of the Registrable Securities covered by the Shelf Registration are to be sold in an underwritten public offering, one or more Holders intending to pursue such underwritten offering (the “ Requesting Holders ”) shall deliver a notice to the Company of such intent (the “ Holder Notice ”), and within ten (10) Business Days after receipt of the notice of intent from such Holder for an underwritten offering, the Company shall give written notice (the “ Underwriting Notice ”) of such notice of intent to all other Holders and such other Holders shall be entitled to include in such an underwritten offering all or part of their respective Registrable Securities by notice to the Company for inclusion therein within fifteen (15) Business Days after the Underwriting Notice is given. All notices made pursuant to this Section 3.1(f) shall specify the aggregate number of Registrable Securities to be included. The
 
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Company agrees to cooperate with any such request for an underwritten offering and to take all such other reasonable actions in connection therewith as provided in Section 3.2(p) ; provided that (x) the Holder Notice must be delivered by Requesting Holders that hold in the aggregate at least ten percent (10%) of the then outstanding Registrable Securities and (y) the Registrable Securities to be included in such underwritten public offering shall have an aggregate value equal to or greater than fifty million dollars ($50,000,000), based upon the Closing Price as of the date of receipt of the Holder Notice by the Company; and provided , further , that the Company shall not be obligated to effect more than four (4) underwritten offerings hereunder; and provided , further , that the Company shall not be obligated to effect, or take any action to effect, an underwritten offering within ninety (90) days following the last date on which an underwritten offering was effected pursuant to this Section 3.1(f) or if longer, the length of any lock-up required by the underwriters in the prior underwritten offering; and provided , further , that the Company shall not be obligated to effect, or take any action to effect, an underwritten offering if the Company responds to the Holder Notice with an indication that the Company has the good faith intention to commence, within 90 days of the Holder Notice, an underwritten primary offering to which Section 3.5 will apply, in which case the Holders may not request an underwritten offering pursuant to this Section 3.1(f) during such 90-day period (the Company may not exercise its rights under this proviso more than one time during any 12-month period).
(ii) In the case of any firm commitment underwritten offering, if the managing underwriter or underwriters of such offering advise the Company in writing that in its or their opinion the number of Registrable Securities proposed to be sold in such offering exceeds the number of Registrable Securities that can be sold in such offering without adversely affecting the market for the Common Shares, the Company will include in such offering the number of Registrable Securities that in the opinion of such managing underwriter or underwriters can be sold without adversely affecting the market for the Common Shares. In such event, the number of Registrable Securities to be offered for the account of each Holder requesting to include Registrable Securities in such offering (including the Holder providing the initial Holder Notice) shall be reduced pro rata on the basis of the relative number of Registrable Securities requested by each such Holder to be included in such offering to the extent necessary to reduce the total number of Registrable Securities to be included in such offering to the number recommended by such managing underwriter or underwriters.
(iii) No Person may participate in any underwritten offerings hereunder unless such Person (A) agrees to sell such Person’s securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (B) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements and these registration rights provided for in this Article 3 .
 
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(g) Selection of Underwriters . If any of the Registrable Securities covered by the Shelf Registration are to be sold in an underwritten offering, the Company shall have the right to select the investment banker or investment bankers and manager or managers that will underwrite the offering and to approve the underwriting arrangements; provided , however , that such investment bankers and managers and underwriting arrangements must be reasonably acceptable to the Selling Holders holding a majority of the Registrable Securities to be sold in the underwritten offering.
(h) Company’s Ability to Delay . The Company may delay the filing of a registration statement under this Section 3.1 only if it would be entitled to delay such filing pursuant to, and for such time as is permitted by, Section 3.3 below.
(i) Form S-3 . The Company agrees to use its commercially reasonable efforts to meet the general eligibility requirements under the Securities Act for the use of a registration statement on Form S-3.
Section 3.2 Registration Procedures . In connection with the obligations of the Company with respect to the applicable Shelf Registration Statement contemplated by Section 3.1 , the Company shall (except as otherwise provided in this Agreement), as expeditiously as possible after the Company’s obligations vest under Section 3.1 :
(a) prepare and file with the Commission the Shelf Registration Statement, which shall (i) be available for the sale of the Registrable Securities in accordance with the intended method or methods of distribution by the Selling Holders thereof and (ii) comply as to form in all material respects with the requirements of the applicable form and include all financial statements required by the Commission to be filed therewith;
(b) (i) prepare and file with the Commission such amendments to the Shelf Registration Statement as may be necessary to keep the Shelf Registration Statement effective for the applicable period; (ii) cause the Prospectus to be amended or supplemented as required and to be filed as required by Rule 424 or any similar rule that may be adopted under the Securities Act; (iii) respond as promptly as practicable to any comments received from the Commission with respect to the Shelf Registration Statement or any amendment thereto; and (iv) comply with the provisions of the Securities Act with respect to the disposition of all securities covered by the Shelf Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the Selling Holders thereof;
(c) promptly furnish to each Selling Holder of Registrable Securities, without charge, as many copies of each Prospectus and any amendment or supplement thereto as such Selling Holder may reasonably request in order to facilitate the public sale or other disposition of the Registrable Securities; the Company consents to the use of the Prospectus and any amendment or supplement thereto by each such Selling Holder of Registrable Securities in connection with the offering and sale of the Registrable Securities covered by the Prospectus or amendment or supplement thereto;
 
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(d) use its commercially reasonable efforts to register or qualify the Registrable Securities by the time the Shelf Registration Statement is declared effective by the Commission under all applicable state securities or blue sky laws of such jurisdictions in the United States and its territories and possessions as any Holder of Registrable Securities covered by the Shelf Registration Statement shall reasonably request in writing, keep each such registration or qualification effective during the period the Shelf Registration Statement is required to be kept effective or during the period offers or sales are being made by a Selling Holder, whichever is shorter; provided , however , that in connection therewith, the Company shall not be required to (i) qualify as a foreign corporation to do business or to register as a broker or dealer in any such jurisdiction where it would not otherwise be required to qualify or register but for this Section 3.2(d) , (ii) subject itself to taxation in any such jurisdiction, or (iii) file a general consent to service of process in any such jurisdiction;
(e) notify each Holder of Registrable Securities promptly and, if requested by such Holder, confirm in writing, (i) when the Shelf Registration Statement and any post-effective amendments thereto have become effective, (ii) when any amendment or supplement to the Prospectus has been filed with the Commission, (iii) of the issuance by the Commission or any state securities authority of any stop order suspending the effectiveness of the Shelf Registration Statement or any part thereof or the initiation of any proceedings for that purpose, (iv) if the Company receives any notification with respect to the suspension of the qualification of the Registrable Securities for offer or sale in any jurisdiction or the initiation of any proceeding for such purpose, and (v) of the happening of any event during the period the Shelf Registration Statement is effective as a result of which (A) the Shelf Registration Statement contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading or (B) the Prospectus as then amended or supplemented contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading;
(f) make every reasonable effort to obtain the withdrawal of any order suspending the effectiveness of the Shelf Registration Statement or any part thereof as promptly as possible;
(g) furnish to each Selling Holder of Registrable Securities, without charge, at least one conformed copy of the Shelf Registration Statement and any post-effective amendment thereto (without documents incorporated therein by reference or exhibits thereto, unless requested);
(h) cooperate with the Selling Holders of Registrable Securities to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any Securities Act legend; and enable certificates for such Registrable Securities to be issued for such numbers of shares and registered in such names as the Selling Holders may reasonably request at least ten (10) Business Days prior to any sale of Registrable Securities; and in connection therewith, if required by the Company’s transfer agent, the Company shall, promptly after the effectiveness of a Shelf Registration Statement, cause an opinion of counsel as to the effectiveness of such Shelf
 
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Registration Statement to be delivered to and maintained with its transfer agent, together with any other authorizations, certificates and directions required by the transfer agent which authorize and direct the transfer agent to issue such Registrable Securities without legend upon sale by the Selling Holder of such Registrable Securities under such Shelf Registration Statement;
(i) upon the occurrence of any event contemplated by clause (v) of Section 3.2(e) , use its commercially reasonable efforts promptly to prepare and file an amendment or a supplement to the Prospectus or any document incorporated therein by reference or prepare, file and obtain effectiveness of a post-effective amendment to the Shelf Registration Statement, or file any other required document, in any such case to the extent necessary so that, as thereafter delivered to the purchasers of the Registrable Securities, such Prospectus as then amended or supplemented will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading;
(j) make available for inspection by the Holders of Registrable Securities and any counsel, accountants or other representatives retained by such Holders all financial and other records, pertinent corporate documents and properties of the Company and cause the officers, trustees and employees of the Company to supply all such records, documents or information reasonably requested by such Holders, counsel, accountants or representatives in connection with the Shelf Registration Statement; provided , however , that such records, documents or information which the Company determines in good faith to be confidential and notifies such Holders, counsel, accountants or representatives in writing that such records, documents or information are confidential shall not be disclosed by such Holders, counsel, accountants or representatives unless (i) such disclosure is ordered pursuant to a subpoena or other order from a court of competent jurisdiction, or (ii) such records, documents or information become generally available to the public other than through a breach of this Agreement;
(k) a reasonable time prior to the filing of the Shelf Registration Statement or any amendment thereto, or any Prospectus or any amendment or supplement thereto, provide copies of such document (not including any documents incorporated by reference therein unless requested) to the Holders of Registrable Securities;
(l) provide one (1) legal counsel to the Holders (which counsel shall be chosen by the Holders and be reasonably acceptable to the Company) with an opportunity to review and comment upon each Shelf Registration Statement and any related Prospectus included therein at least five (5) Business Days prior to their initial filing with the Commission and upon all amendments and supplements thereto such lesser period prior to their filing with the Commission as shall be reasonable and appropriate under the circumstances, and the Company shall not file any documents to which such legal counsel to the Holders reasonably objects in writing (it being agreed that such writing may for this purpose be in electronic format); provided that any fees and expenses of such counsel shall be borne by the parties as provided in Section 3.1(e) ;
 
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(m) use its commercially reasonable efforts to cause all Registrable Securities to be listed on any national securities exchange on which similar securities issued by the Company are then listed;
(n) provide a CUSIP number for all Registrable Securities, not later than the effective date of the Shelf Registration Statement;
(o) use its commercially reasonable efforts to make available to its security holders, as soon as reasonably practicable, an earnings statement covering at least twelve (12) months which shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder;
(p) if requested by a Selling Holder or any underwriters engaged by such Selling Holder for purposes of distributing the Registrable Securities, enter into such agreements (including an underwriting agreement in form, scope and substance as is customary in underwritten offerings) and take all such other reasonable actions in connection therewith (including those reasonably requested by the underwriters or such Selling Holder) in order to expedite or facilitate the disposition of such Registrable Securities, and in such connection, (i) make such representations and warranties to the underwriters with respect to the business of the Company and the Shelf Registration Statement, Prospectus and documents, if any, incorporated or deemed to be incorporated by reference therein, in each case, in form, substance and scope as are customarily made by issuers to underwriters in underwritten offerings, and confirm the same if and when requested; (ii) obtain customary opinions of counsel to the Company and updates thereof (which shall be in form and substance reasonably satisfactory to the Selling Holders or to the underwriters and their counsel, as the case may be), addressed to such Selling Holder and, if applicable, each of the underwriters; (iii) obtain “cold comfort” letters and updates thereof from the independent registered public accountants of the Company, addressed to such Selling Holder and, if applicable, each of the underwriters, such letters to be in customary form and covering matters of the type customarily covered in “cold comfort” letters in connection with any such offerings (in each case, to the extent permitted by applicable accounting rules and guidelines); (iv) if an underwriting agreement is entered into, the same shall contain indemnification provisions and procedures no less favorable to the underwriters than those set forth in Section 3.6 and cross indemnification by the underwriters in form and substance as is customary in connection with such offering, in favor of the Company or the Selling Holders, as the case may be; and (v) deliver such documents and certificates as may be reasonably requested by the managing underwriters and their counsel to evidence the continued validity of the representations and warranties made pursuant to clause (i) above of this Section 3.2(p) and to evidence compliance with any customary conditions contained in the underwriting agreement entered into by the Company;
(q) otherwise comply in all material respects with all applicable rules and regulations of the Commission that are applicable to the Company in connection with any Shelf Registration Statement and the disposition of all Registrable Securities covered by such Shelf Registration Statement, including by filing with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act in order to keep any Shelf Registration Statement effective; and
 
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(r) subject to the foregoing, take all other reasonable actions necessary to facilitate disposition by the Holders pursuant to such Shelf Registration Statement.
Each Selling Holder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3.2(e)(iii) , (iv)  and (v)  hereof or upon receipt of a Suspension Notice, such Selling Holder will forthwith discontinue disposition of Registrable Securities pursuant to the Shelf Registration Statement covering such Registrable Securities until such Selling Holder’s receipt of written notice from the Company that such disposition may be made and, in the case of Section 3.2(e)(v) hereof or, if applicable, Section 3.3 hereof, copies of any supplemented or amended prospectus contemplated by Section 3.2(e)(v) hereof or, if applicable, prepared under Section 3.3 hereof, and, if so directed by the Company, such Selling Holder will deliver to the Company all copies, other than permanent file copies, then in such Selling Holder’s possession, of the most recent prospectus covering such Registrable Securities at the time of receipt of such notice. Each Selling Holder of Registrable Securities agrees that it will immediately notify the Company at any time when a prospectus relating to the registration of such Registrable Securities is required to be delivered under the Securities Act of the happening of an event as a result of which information previously furnished by such Selling Holder to the Company in writing for inclusion in such prospectus contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances in which they were made.
The Company may require each Selling Holder of Registrable Securities to furnish to the Company in writing such information regarding the proposed distribution by such Selling Holder of such Registrable Securities as the Company may from time to time reasonably request in writing.
In connection with and as a condition to the Company’s obligations with respect to the Shelf Registration Statement pursuant to Section 3.1 and this Section 3.2 , each Selling Holder covenants and agrees that (i) it will not offer or sell any Registrable Securities under the Shelf Registration Statement until it has received copies of the Prospectus as then amended or supplemented as contemplated by Section 3.2(c) and notice from the Company that the Shelf Registration Statement and any post-effective amendments thereto have become effective as contemplated by Section 3.2(e) ; (ii) such Holder and any of its officers, directors or Affiliates, if any, must comply with the provisions of Regulation M under the Exchange Act as applicable to them in connection with sales of Registrable Securities pursuant to the Shelf Registration Statement; and (iii) such Selling Holder and any of its officers, directors or Affiliates, if any, must enter into such customary written agreements as the Company shall reasonably request to ensure compliance with clause (ii) above.
 
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Section 3.3 Suspension of Use of the Shelf Registration Statement .
(a) Notwithstanding anything to the contrary contained herein, the Company shall not be required to take any of the actions described in Section 3.1(a) , Section 3.2(a) , clauses (i), (ii) or (iii) of Section 3.2(b) , Section 3.2(d) or Section 3.2(i) with respect to each Holder holding Registrable Securities, and each Holder holding Registrable Securities agrees not to effect any sale of Registrable Securities through the Shelf Registration Statement, for a period not to exceed ninety (90) days from the date of the Suspension Notice (as defined below) in the event that the Company delivers written notice (each, a “ Suspension Notice ”) to each such Selling Holder of Registrable Securities to the effect that in the good faith judgment of the Board, as a result of a pending material corporate development or transaction, it would be seriously detrimental to the Company or its stockholders to cause the Shelf Registration Statement or such filings to be made or to become effective or to amend or supplement the Shelf Registration Statement or to permit the continued use thereof and that such Selling Holder may not make offers or sales under the Shelf Registration Statement for a period not to exceed ninety (90) days from the date of such Suspension Notice; provided , however , that the Company may deliver only two (2) such Suspension Notices within any twelve (12) month period and the period(s) of time addressed by such Suspension Notices shall not exceed one hundred twenty (120) days in the aggregate in any twelve (12) month period.
(b) If all reports required to be filed by the Company pursuant to the Exchange Act have not been filed by the required date without regard to any extension, or if the consummation of any business combination by the Company has occurred or is probable for purposes of Rule 3-05 or Article 11 of Regulation S-X promulgated under the Securities Act or any similar successor rule, or if a post-effective amendment must be filed to update the prospectus pursuant to Section 10(a)(3) of the Securities Act, upon written notice thereof by the Company to the Holders, the rights of the Holders to offer, sell or distribute any Registrable Securities pursuant to a Shelf Registration Statement or to require the Company to take action with respect to the registration or sale of any Registrable Securities pursuant to a Shelf Registration Statement shall be suspended until the date on which the Company has filed such reports or obtained and filed the financial information required by Rule 3-05 or Article 11 of Regulation S-X to be included or incorporated by reference, as applicable, in a Shelf Registration Statement, and the Company shall use commercially reasonable efforts to file the required reports or post-effective amendment or obtain and file the financial information required to be included or incorporated by reference, as applicable, as promptly as commercially practicable, and shall notify the Holders as promptly as practicable when such suspension is no longer required.
Section 3.4 Lockout Periods for Holder Sales . In the event (a) of an underwritten offering covered by the Shelf Registration following the delivery of an Underwriting Notice or (b) the Company intends to issue shares of beneficial interest to the public in an underwritten offering after the Closing, each Holder agrees, if requested by the managing underwriter or underwriters for such underwritten offering, not to effect any Transfer of Registrable Securities or any securities convertible into or exchangeable or exercisable for such Registrable Securities, including a sale pursuant to Rule 144, except with the consent of the managing underwriter or underwriters, during the period reasonably required by the underwriter or underwriters for such offering, which shall not be longer than the period beginning ten (10) Business Days prior to the consummation of such underwritten offering and ending on the day that is ninety (90) days after the consummation of such underwritten offering; provided that the foregoing restriction shall not
 
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apply with respect to any non-public Transfer by any Holder to a Permitted Transferee of such Holder. Notwithstanding the foregoing, this Section 3.4 shall not be applicable to or otherwise be binding on any Holder unless it is applicable to and otherwise binding on all Holders who hold at least one percent (1%) of the Company’s Common Shares and the Company causes all of its executive officers and directors to be similarly bound.
Section 3.5 Piggy-Back Registration.
(a) If at any time on or after the date hereof, the Company proposes to register Common Shares under the Securities Act (other than (i) a registration statement on Form S-4 or S-8, or any successor or other forms promulgated for similar purposes, or (ii) a registration statement with respect to corporate reorganizations or other transactions under Rule 145 of the Securities Act or any successor rule promulgated for similar purposes), whether or not for sale for its own account (including, without limitation, any registration effected pursuant to Section 3.1 hereof), in a manner which would permit registration of Registrable Securities for sale to the public under the Securities Act, each Holder shall have the right to include in such registration all or part of the Registrable Securities held by such Holder (the “ Piggyback Registration Right ”). At such time, the Company shall give prompt written notice to all Holders of Registrable Securities of its intention to register Common Shares.
(b) Any Holder wishing to exercise its Piggyback Registration Right shall deliver to the Company a written notice within fifteen (15) days after the receipt of the Company’s notice. Such Holder’s written notice shall specify the number of Common Shares intended to be disposed of by such Holder, which might be all or a portion of such Holder’s Registrable Securities. The Company will, subject to Sections 3.5(c) and (f)  below, use its commercially reasonable efforts to effect the registration under the Securities Act of all Registrable Securities which the Company has been so requested to register by the Holders thereof, to the extent requisite to permit the disposition of the Registrable Securities so to be registered; provided that (x) if, at any time after giving written notice of its intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to proceed with the proposed registration of the securities to be sold by it, the Company may, at its election, give written notice of such determination to each Holder of Registrable Securities and, thereupon, shall be relieved of its obligation to register any Registrable Securities in connection with such registration, and (y) if such registration involves an underwritten offering, all Holders of Registrable Securities requesting to be included in the Company’s registration must sell their Registrable Securities to the underwriters selected by the Company on the same terms and conditions as apply to the Company (including entering into an underwriting agreement in customary form with the underwriter or underwriters selected for such offering by the Company), as may be customary or appropriate in combined primary and secondary offerings.
(c) If a registration requested pursuant to this Section 3.5 involves an underwritten public offering, any Holder of Registrable Securities requesting to be included in such registration may elect, in writing at least one (1) day prior to the first use of a preliminary prospectus in connection with such registration, not to register such securities in connection with such registration.
 
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(d) All Holders of Registrable Securities requesting to be included in any registration shall cooperate with the Company in all reasonable respects by supplying information and executing documents relating to such Holder or the Registrable Securities owned by such Holder in connection with such registration and shall enter into such undertakings and take such other action relating to a proposed offering which the Company or the underwriters may reasonably request as being necessary to ensure compliance with federal and state securities laws and the rules or other requirements of a securities exchange listing or otherwise to effectuate an offering.
(e) The Company shall pay all Registration Expenses incurred in connection with each registration of Registrable Securities pursuant to this Section 3.5 . All Selling Expenses applicable to Registrable Securities sold by Holders incurred in connection with each registration pursuant to this Section 3.5 shall be borne by the Holders of the Registrable Securities so registered pro rata based on the number of securities so registered.
(f) If a registration pursuant to this Section 3.5 involves an underwritten offering and the managing underwriter determines in good faith that marketing factors require a limitation on the number of securities to be underwritten, the number of securities that may be included will be limited to the number of securities that, in the opinion of such underwriter, should be included, and the securities to be included in the underwriting shall be allocated, first, to the Company and, second, pro rata to all other requesting Holders on the basis of the relative number of Registrable Securities then requested to be sold by each such Holder (provided that any securities thereby allocated to any such Holder that exceed such Holder’s request will be reallocated among the remaining requesting Holders in like manner).
Section 3.6 Indemnification . In the event Common Shares are sold by Holders pursuant to the Offering or any Registrable Securities are included in a Shelf Registration under Section  3.1 or in a registration statement pursuant to Section 3.5:
(a) Indemnity by the Company . Without limitation of any other indemnity provided to any Holder, to the extent permitted by law, the Company will indemnify and hold harmless each Holder, the Affiliates, officers, directors and partners of each Holder, any underwriter (as defined in the Securities Act), and each Person, if any, who controls such Holder or underwriter (within the meaning of the Securities Act or the Exchange Act), against any losses, claims, damages, liabilities and expenses (joint or several) to which they may become subject under the Securities Act, the Exchange Act or any other federal or state law, as and when incurred, insofar as such losses, claims, damages, liabilities and expenses (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a “ Violation ”): (i) any untrue statement or alleged untrue statement of a material fact contained in a registration statement (including any preliminary Prospectus or final Prospectus contained therein or any amendments or supplements thereto or any “issuer free writing prospectus” (as defined in Rule 433 under the Securities Act) related thereto), (ii) the omission or alleged
 
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omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading or (iii) any other violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law, and the Company will reimburse each such Holder, Affiliate, officer, director, partner, underwriter or controlling person for any reasonable legal or other expenses incurred by them in connection with investigating or defending any such loss, claim, damage, liability, expense or action; provided , however , that the Company shall not be liable to any Holder in any such case for any such loss, claim, damage, liability, expense or action to the extent that it arises out of or is based upon a Violation which occurs (A) in reliance upon and in conformity with written information furnished expressly for use in the Offering registration statement or the Shelf Registration Statement or Prospectus by any such Holder or any officer, director, partner or controlling person thereof or (B) by such Holder’s failure to deliver a copy of the Offering registration statement or the Shelf Registration Statement or Prospectus or any amendments or supplements thereto after the Company has furnished such Holder with a sufficient number of copies of the same.
(b) Indemnity by Holders . In connection with any registration in which a Holder is participating, each such Holder will furnish to the Company in writing such information and affidavits as the Company reasonably requests for use in connection with the Shelf Registration Statement or Prospectus or registration statement pursuant to Section 3.5 and, to the extent permitted by law, will indemnify the Company, its directors and officers and each Person who controls the Company (within the meaning of the Securities Act or Exchange Act) against any losses, claims, damages, liabilities and expenses resulting from any Violation, but only to the extent that such Violation occurs in reliance upon and in conformity with any information so furnished in writing by such Holder expressly for use in the Shelf Registration Statement or Prospectus or registration statement pursuant to Section 3.5 or by virtue of such Holder’s failure to deliver a copy of the Shelf Registration Statement or Prospectus or registration statement pursuant to Section 3.5 or any amendments or supplements thereto after the Company has furnished such Holder with a sufficient number of copies of the same; provided that the obligation to indemnify will be several and not joint and several with any other Person and will be limited to the net amount received by such Holder from the sale of Registrable Securities pursuant to the Shelf Registration Statement or registration statement pursuant to Section 3.5.
(c) Notice; Right to Defend . Promptly after receipt by an indemnified party under this Section 3.6 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 3.6 , deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, if the indemnifying party agrees in writing that it will be responsible for any costs, expenses, judgments, damages and losses incurred by the indemnified party with respect to such claim, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties and the indemnified party may participate in such defense at such party’s expense;
 
19

provided , however , that an indemnified party shall have the right to retain its own counsel, with the fees and expenses to be paid by the indemnifying party, if the indemnified party reasonably believes that representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding, provided that the indemnifying party shall not be responsible for the fees and expenses of more than one counsel for the indemnified parties. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall relieve such indemnifying party of any liability to the indemnified party under this Section 3.6 only if and to the extent that such failure is materially prejudicial to its ability to defend such action, and the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party other than under this Section 3.6 .
(d) Contribution . If the indemnification provided for in this Section 3.6 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other hand in connection with the statements or omissions which resulted in such loss, liability, claim, damage or expense as well as any other relevant equitable considerations. The relative fault of the indemnifying party and the indemnified party shall be determined by reference to, among other things, whether the untrue statement or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. Notwithstanding the foregoing, the amount any Holder shall be obligated to contribute pursuant to this Section 3.6(d) shall be limited to an amount equal to the net proceeds to such Holder of the Registrable Securities sold pursuant to the Shelf Registration Statement or registration statement pursuant to Section 3.5 that gives rise to such obligation to contribute (less the aggregate amount of any damages which the Holder has otherwise been required to pay in respect of such loss, claim, damage, liability or expense or any substantially similar loss, claim, damage, liability or expense arising from the sale of such Registrable Securities).
(e) Survival of Indemnity and Contribution . The indemnification and contribution provided by this Section 3.6 shall be a continuing right to indemnification and contribution and shall survive the registration and sale of any securities by any Person entitled to indemnification and contribution hereunder and the expiration or termination of this Agreement.
 
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Section 3.7 Rule 144; Reports under Exchange Act . From and after the time of the effective date of the Shelf Registration Statement filed with the Commission pursuant to Section 3.1(a) , in order to permit the Holders to sell the Registrable Securities they hold, if they so desire, from time to time pursuant to Rule 144 promulgated by the Commission or any successor to such rule or any other rule or regulation of the Commission that may at any time permit a Holder to sell Registrable Securities to the public without registration (the “ Resale Rules ”), the Company will:
(a) comply with all rules and regulations of the Commission applicable in connection with use of the Resale Rules;
(b) make and keep adequate and current public information available, as those terms are understood and defined in the Resale Rules, at all times;
(c) file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act as required by the Resale Rules;
(d) furnish annually to all Holders material containing the information required by Rule 14a-3(b) under the Exchange Act and Items 401, 402 and 403 of Regulation S-K of the Commission;
(e) furnish to any Holder so long as such Holder owns any Registrable Securities, forthwith upon request (i) a written statement by the Company that it has complied with the reporting requirements of the Resale Rules, the Securities Act and the Exchange Act, (ii) a copy of the most recent annual or quarterly report of the Company and any other reports and documents so filed by the Company and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the Commission which permits the selling of any such securities to the public without registration; and
(f) take any action (including cooperating with the Holder to cause the transfer agent to remove any restrictive legends on such securities) as shall be reasonably requested by any Holder or which shall otherwise facilitate the sale of Registrable Securities from time to time by the Holders pursuant to the Resale Rules.
ARTICLE 4
MISCELLANEOUS
Section 4.1 Notices . In order to be deemed effective, all documents to be delivered and all notices, approvals, authorizations, demands, requests, reports and/or consents to be given or obtained by any party to this Agreement shall be deemed received, unless earlier received, (i) if sent by certified or registered mail, return receipt requested, when actually delivered as aforesaid, except that such delivery shall be prior to 5:00 p.m., recipient’s time, on any Business Day and if a notice is not delivered on a Business Day or is delivered after 5:00 p.m., recipient’s time, such notice shall be deemed to have been received by such recipient at the commencement of such recipient’s first Business Day next following the time of delivery, (ii) if sent by overnight mail or international courier, when actually delivered as aforesaid, except that such delivery shall be prior to 5:00 p.m., recipient’s time, on any Business Day and if a notice is not delivered on a Business Day or is delivered after 5:00 p.m., recipient’s time, such notice shall be deemed to have been received by such recipient at the commencement of such recipient’s first Business Day
 
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next following the time of delivery, (iii) if sent by email or facsimile transmission, prior to 5:00 p.m., recipient’s time, on any Business Day and if a notice is not transmitted on a Business Day or is transmitted after 5:00 p.m., recipient’s time, such notice shall be deemed to have been received by such recipient at the commencement of such recipient’s first Business Day next following transmission of such notice, provided that confirmatory notice is sent promptly thereafter by first-class mail, postage prepaid, and (iv) if delivered by hand, on the date of receipt, at the address set forth below:
 
 	(a)	To the Company:	
InfraREIT, Inc.
1807 Ross Avenue, 4th Floor
Dallas, Texas 75201
Attention: General Counsel
Facsimile:
Email Address: Legal@Huntutility.com
 
 	(b)	To any Holder:	
to the address of such Holder as it appears in the Company’s records.
The above addresses may be changed for future communications or delivery of notice hereunder by giving notice of such change to the others listed above in the manner prescribed by this Section 4.1 . All notices shall be deemed effective when received by all applicable parties at the addresses set forth above (as such addresses may be changed by the parties in accordance herewith). Notwithstanding the foregoing, no notice shall be deemed ineffective because of any party’s refusal to accept delivery at the address specified for the giving of such notice in accordance herewith.
Section 4.2 Further Action . The parties shall execute and deliver all documents, provide all information and take or refrain from taking action as may be necessary or appropriate to achieve the purposes of this Agreement.
Section 4.3 Successors and Assigns . Except as otherwise expressly provided herein, this Agreement shall inure to the benefit of and be binding upon the successors and assigns of the Company and each of the Holders (including, for the avoidance of doubt, (x) any subsequent holder of Registrable Securities, whether or not any express assignment has been made and (y) any entity which is the successor to the Company by merger, consolidation or similar transaction); provided , however , that upon any Transfer of Registrable Securities pursuant to a registration statement or under any Resale Rule that permits a Holder to sell Registrable Securities to the public without registration, this Agreement shall not inure to the benefit of the transferee; and provided , further , that the term “ Holder ” as used in this Agreement shall include any transferee to whose benefit this Agreement has so inured.
Section 4.4 Amendment and Waiver . This Agreement may be amended, and the observance of any term of this Agreement may be waived, but only with the written consent of the Company and Holders then holding a majority of the outstanding Registrable Securities; provided , however , that the effect of any such amendment will be that the consenting Holders
 
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will not be treated more favorably than all other Holders (without regard to any differences in effect that such amendment or waiver may have on the Holders due to the differing amounts of Registrable Securities held by such Holders); and provided , further , that without the consent of any other Holder, but with the written agreement of the Company (other than in the case of a waiver of any right to which a Holder is entitled hereunder), any Holder may from time to time enter into one or more agreements amending, modifying or waiving the provisions of this Agreement with respect to such Holder if such action does not adversely affect the rights or interest of any other Holder and such agreements do not provide any more favorable rights to such Holder than the rights set forth herein. No delay on the part of any party in the exercise of any right, power or remedy shall operate as a waiver thereof, nor shall any single or partial exercise by any party of any right, power or remedy preclude any other or further exercise thereof, or the exercise of any other right, power or remedy.
Section 4.5 Additional Holders .
(a) Notwithstanding the provisions of Section 4.3 , additional Persons may be added as Holders under this Agreement in connection with the acquisition of Common Shares by such Persons by executing a joinder to this Agreement and such Person shall become a Holder for all purposes of this Agreement.
(b) The Company will not enter into any contract, arrangement or understanding from and after the date hereof with any future Holders with respect to Common Shares that has the effect of establishing rights or otherwise benefiting such person in a manner more favorable in any material respect with respect to the matters contemplated by Article 3 of this Agreement than the rights and benefits established in favor of the Holders with respect to Common Shares pursuant to this Agreement, unless the Company shall grant similar rights or benefits in favor of the Holders party hereto.
Section 4.6 Severability . Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, provided , however , if performance of any provision of this Agreement, at the time such performance shall be due, shall transcend the limit of validity prescribed by law, then the obligation to be performed shall be reduced to the limit of such validity; and if any clause or provision contained in this Agreement operates or would operate to invalidate this Agreement, in whole or in part, then such clause or provision only shall be held ineffective, as though not herein contained, and the remainder of this Agreement shall remain operative and in full force and effect. The parties shall negotiate in good faith a replacement clause or provision as consistent with the ineffective clause or provision as is practicable under law.
Section 4.7 Counterparts . This Agreement may be executed and delivered in one or more counterparts (including by means of facsimile or electronic mail transmission), each of which when so executed and delivered shall be deemed an original, none of which need contain the signatures of each of the parties hereto and all of which together shall constitute one and the same instrument binding on all the parties hereto. Each party shall become bound by this Agreement immediately upon affixing its signature hereto.
 
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Section 4.8 Governing Law . THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS.
Section 4.9 Waiver of Jury Trial . TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 4.10 Forum Selection and Consent to Jurisdiction . ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT, SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK LOCATED IN THE BOROUGH OF MANHATTAN OR IN A UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK LOCATED IN THE BOROUGH OF MANHATTAN. EACH OF THE PARTIES HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK LOCATED IN THE BOROUGH OF MANHATTAN AND OF A UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK LOCATED IN THE BOROUGH OF MANHATTAN FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE. EACH OF THE PARTIES HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
Section 4.11 Entire Understanding . This Agreement contains the entire understanding and agreement among the parties with respect to the subject matter hereof and supersedes any prior written or oral understandings or agreements among them with respect thereto, including the Original Agreement.
Section 4.12 No Third Party Beneficiaries . This Agreement is solely for the benefit of the parties hereto and no provisions of this Agreement shall be deemed to confer upon any other party any remedy, claim, liability, reimbursement, cause of action or other right.
Section 4.13 No Presumption Against Drafter . Each of the parties hereto have jointly participated in the negotiation and drafting of this Agreement. In the event of an ambiguity or if a question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by each of the parties hereto and no presumptions or burdens of proof shall arise favoring any party by virtue of the authorship of any of the provisions of this Agreement.
[Remainder of Page Intentionally Left Blank]
 
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IN WITNESS WHEREOF, the undersigned has executed this Registration Rights and Lock-Up Agreement as of the date and year first above written.

INFRAREIT, INC.	
a Maryland corporation	
		
By:		/s/ Ben Nelson	
Name:		Ben Nelson	
Title:		Senior Vice President and General Counsel	
[Signature Page to Registration Rights and Lock-Up Agreement]

Schedule A
Holders
John Hancock Life Insurance Company (U.S.A.)
Marubeni Corporation
MC Transmission Holdings, Inc.
OPTrust N.A. Holdings Trust
Teachers Insurance and Annuity Association of America
Hunt-InfraREIT, L.L.C.
The names of other individuals on file with the Company
 
Schedule A-1

EXHIBIT A
INFRAREIT, INC.
FORM OF NOTICE AND QUESTIONNAIRE
The undersigned beneficial holder of shares of Common Stock, par value $0.01 per share (“Common Shares”), of InfraREIT, Inc. (the “Company”) and/or units of limited partnership interests (“Partnership Units” and, together with the Common Shares, the “Registrable Securities”) of InfraREIT Partners, L.P. (the “Operating Partnership”), understands that the Company has filed or intends to file with the Securities and Exchange Commission one or more registration statements (collectively, the “Shelf Registration Statement”) for the registration and resale under Rule 415 of the Securities Act of 1933, as amended (the “Securities Act”), of the Registrable Securities in accordance with the terms of the Amended and Restated Registration Rights and Lock-Up Agreement (the “Registration Rights Agreement”), dated January 29, 2015, among the Company and the holders listed on Schedule A thereto. A copy of the Registration Rights Agreement is available from the Company upon request at the address set forth below. All capitalized terms not otherwise defined herein shall have the meanings set forth in the Registration Rights Agreement.
Each beneficial owner of Registrable Securities is entitled to the benefits of the Registration Rights Agreement. To be included in a Shelf Registration Statement, this Notice and Questionnaire must be completed, executed and delivered to the Company at the address set forth herein as promptly as practicable after receipt of this request, but in no event later than twenty (20) Business Days thereafter. We will give notice of the filing and effectiveness of the Shelf Registration Statement by issuing a press release and by mailing a notice to the holders of Registrable Securities at their addresses set forth in the register of the registrar.
Beneficial owners that do not complete this Notice and Questionnaire and deliver it to the Company as provided below will not be named as selling security holders in the prospectus and therefore will not be permitted to acquire and/or sell any Registrable Securities pursuant to the Shelf Registration Statement. Beneficial owners are encouraged to complete and deliver this Notice and Questionnaire prior to the effectiveness of the Shelf Registration Statement so that such beneficial owners may be named as selling security holders in the related prospectus at the time of effectiveness. Upon receipt of a completed Notice and Questionnaire from a beneficial owner following the effectiveness of the Shelf Registration Statement, in accordance with the Registration Rights Agreement, the Company will file such amendments to the Shelf Registration Statement or additional shelf registration statements or supplements to the related prospectus as are necessary to permit such holder to deliver such prospectus to purchasers of Registrable Securities.
Certain legal consequences arise from being named as selling security holders in a Shelf Registration Statement and the related prospectus. Accordingly, holders and beneficial owners of Registrable Securities are advised to consult their own securities law counsel regarding the consequences of being named or not being named as a selling security holder in a Shelf Registration Statement and the related prospectus.
 
Exhibit A-1

NOTICE
The undersigned beneficial owner (the “ Selling Security Holder ”) of Registrable Securities hereby elects to include in the prospectus forming a part of the Shelf Registration Statement the Registrable Securities beneficially owned by it and listed below in Item 3 (unless otherwise specified under Item 3). The undersigned, by signing and returning this Notice and Questionnaire, understands that it will be bound by the terms and conditions of this Notice and Questionnaire and the Registration Rights Agreement.
The undersigned hereby provides the following information to the Company and represents and warrants to the Company that such information is accurate and complete:
QUESTIONNAIRE

			
1.	 	(a)	  	Full Legal Name of Selling Security Holder:

	 	(b)	  	Full Legal Name of registered holder (if not the same as (a) above) through which Registrable Securities listed in Item (3) below are held:

	 	(c)	  	Full Legal Name of DTC Participant (if applicable and if not the same as (b) above) through which Registrable Securities listed in Item (3) below are held:

	 	(d)	  	List below the individual or individuals who exercise voting and/or dispositive powers with respect to the Registrable Securities listed in Item (3) below:

		
2.	 	Address for Notices to Selling Security Holder:	

	 	 	
			
	 	Telephone:	 	 	
			
	 	Fax:	 	 	
			
	 	E-mail address:	 	 	
			
	 	Contact Person:	 	 	
 
Exhibit A-2

					
3.	 	Beneficial Ownership of Registrable Securities:
 
Type of Registrable Securities beneficially owned, and number of Common Shares and/or Partnership Units, as the case may be, beneficially owned:

4.	 	Beneficial Ownership of Securities of the Company Owned by the Selling Security Holder:
 
Except as set forth below in this Item (4), the undersigned is not the beneficial or registered owner of any securities of the Company, other than the Registrable Securities listed above in Item (3).
 
Type and amount of other securities beneficially owned by the Selling Security Holder:

Exhibit A-3

					
5.	 	Broker-Dealer Status:
 	
	 	(a) Is the Selling Security Holder a broker-dealer?
 
Yes              No ____
 
(b) If the Selling Security Holder is a broker-dealer, did the Selling Security Holder receive the Registrable Securities as compensation for investment banking services to the Company?
 
Yes ____     No ____
 
Note: If “yes” to Question 5(b), the Commission’s staff has indicated that the Selling Security Holder should be identified as an underwriter in the Registration Statement and related prospectus.
 
(c) Is the Selling Security Holder an affiliate of a broker-dealer?
 
Yes ____     No ____
 
(d) If the Selling Stockholder is an affiliate of a broker-dealer, does the Selling Security Holder certify that it purchased the Registrable Securities in the ordinary course of business, and at the time of the purchase of the Registrable Securities to be sold, the Selling Security Holder had no agreements or understandings, directly or indirectly, with any person to distribute the Registrable Securities?
 
Yes ____     No ____
 
Note: If “no” to Question 5(d), the Commission’s staff has indicated that the Selling Stockholder should be identified as an underwriter in the Registration Statement and related prospectus.	
		
6.	 	Relationship with the Company
 
Except as set forth below, neither the undersigned nor any of its affiliates, officers, directors or principal equity holders (5% or more) has held any position or office or has had any other material relationship with the Company (or its predecessors or affiliates) during the past three years.
 
State any exceptions here:

 
Exhibit A-4

					
7.	 	Plan of Distribution
 
Except as set forth below, the undersigned (including its donees or pledgees) intends to distribute the Registrable Securities listed above in Item (3) pursuant to the Shelf Registration Statement only as follows and will not be offering any of such Registrable Securities pursuant to an agreement, arrangement or understanding entered into with a broker or dealer prior to the effective date of the Shelf Registration Statement. Such Registrable Securities may be sold from time to time directly by the undersigned or, alternatively, through underwriters or broker-dealers or agents. If the Registrable Securities are sold through underwriters or broker-dealers, the Selling Security Holder will be responsible for underwriting discounts or commissions or agent’s commissions. Such Registrable Securities may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of sale, at varying prices determined at the time of sale, or at negotiated prices. Such sales may be effected in transactions (which may involve crosses or block transactions):
 	
	 	(i)     on any national securities exchange or quotation service on which the Registrable Securities may be listed or quoted at the time of sale;
 
(ii)    in the over-the-counter market;
 
(iii)  in transactions other than on such exchanges or services or in the over-the-counter market; or
 
(iv)   through the writing of options.
 
In connection with sales of the Registrable Securities or otherwise, the undersigned may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the Registrable Securities and deliver Registrable Securities to close out such short positions, or loan or pledge Registrable Securities to broker-dealers that in turn may sell such securities.
 
State any exceptions here:

 
Note:	In no event may such method(s) of distribution take the form of an underwritten offering of the Registrable Securities without the prior written agreement of the Company.	
 
Exhibit A-5

ACKNOWLEDGEMENTS
The undersigned acknowledges that it understands its obligation to comply with the provisions of the Securities Exchange Act of 1934, as amended, and the rules thereunder relating to stock manipulation, particularly Regulation M thereunder (or any successor rules or regulations), in connection with any offering of Registrable Securities pursuant to the Registration Rights Agreement. The undersigned agrees that neither it nor any person acting on its behalf will engage in any transaction in violation of such provisions.
The Selling Security Holder hereby acknowledges its obligations under the Registration Rights Agreement to indemnify and hold harmless certain persons as and to the extent provided therein. Pursuant to the Registration Rights Agreement, the Company has agreed under certain circumstances to indemnify the Selling Security Holders against certain liabilities.
In accordance with the undersigned’s obligation under the Registration Rights Agreement to provide such information as may be required by law for inclusion in the Shelf Registration Statement, the undersigned agrees to promptly notify the Company of any inaccuracies or changes in the information provided herein that may occur subsequent to the date hereof at any time while the applicable Shelf Registration Statement remains effective. All notices hereunder and pursuant to the Registration Rights Agreement shall be made in writing at the address set forth below.
In the event that the undersigned transfers all or any portion of the Registrable Securities listed in Item 3 above after the date on which such information is provided to the Company, the undersigned agrees to notify the transferee(s) at the time of transfer of its rights and obligations under this Notice and Questionnaire and the Registration Rights Agreement.
By signing this Notice and Questionnaire, the undersigned consents to the disclosure of the information contained herein in its answers to Items (1) through (7) above and the inclusion of such information in the applicable Shelf Registration Statement and the related prospectus. The undersigned understands that such information will be relied upon by the Company in connection with the preparation or amendment of the applicable Shelf Registration Statement and the related prospectus.
Once this Notice and Questionnaire is executed by the Selling Security Holder and received by the Company, the terms of this Notice and Questionnaire and the representations and warranties contained herein shall be binding on, shall inure to the benefit of and shall be enforceable by the respective successors, heirs, personal representatives and assigns of the Company and the Selling Security Holder with respect to the Registrable Securities beneficially owned by such Selling Security Holder and listed in Item 3 above.
This Notice and Questionnaire shall be governed by, and construed in accordance with, the laws of the State of Delaware, without regard to the principles of conflicts of law.
 
Exhibit A-6

IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused this Notice and Questionnaire to be executed and delivered either in person or by its duly authorized agent.

	 		 	Beneficial Owner	
				
	 		 	By	 	 	
	 		 		 	Name:
Title:	
				
Dated:	 		 		 		
Please return the completed and executed Notice and Questionnaire to:
InfraREIT, Inc.
1807 Ross Avenue, 4th Floor
Dallas, Texas 75201
Attention: General Counsel
 
Exhibit A-7

Exhibit 10.10
LOCK-UP AGREEMENT
THIS LOCK-UP AGREEMENT (this “ Agreement ”) is made and entered into as of January 29, 2015, by and among InfraREIT, Inc., a Maryland corporation (together with its successors and assigns, the “ Company ”), InfraREIT Partners, LP, a Delaware limited partnership (the “ Operating Partnership ” and, together with the Company, “ InfraREIT ”), Hunt-InfraREIT, L.L.C., a Delaware limited liability company (“ Hunt-InfraREIT ”), and Hunt Consolidated, Inc., a Delaware corporation (“ HCI ” and, together with Hunt-InfraREIT, “ Hunt ”).
RECITALS
WHEREAS, the Company has filed a registration statement on Form S-11 (the “ Registration Statement ”) with the Securities and Exchange Commission (the “ SEC ”) with respect to the initial public offering (the “ Offering ”) of shares of the Company’s common stock, par value $0.01 per share (the “ Common Stock ”);
WHEREAS, immediately prior to the effectiveness of the Registration Statement, Hunt-InfraREIT received 1,700,000 shares of Common Stock as payment of a structuring fee (the “ Structuring Fee Shares ”) and immediately transferred 75,000 of such shares to OpTrust Infrastructure N.A. Holdings Trust (the “ OpT Shares ”);
WHEREAS, on the date of the closing of the Offering (the “ Closing Date ”), the Company will engage in certain reorganization transactions, as a result of which, among other things, InfraREIT, L.L.C. (formerly Electric Infrastructure Alliance of America, L.L.C.) will be merged with and into the Company (the “ IPO Date Transactions ”);
WHEREAS, as part of the IPO Date Transactions, Hunt-InfraREIT will redeem 1,551,878 Class A Units which the Company will satisfy through the issuance to Hunt-InfraREIT of 1,551,878 shares of Common Stock on the IPO Closing Date (the “ Redemption ”);
WHEREAS, as a result of the issuance by the Company of the Structuring Fee Shares, the transfer of the OpTrust Shares by Hunt-InfraREIT and the IPO Date Transactions, including the Redemption, Hunt-InfraREIT will hold (i) 3,176,878 shares of Common Stock of the Company, (ii) 1,167,287 common units in the Operating Partnership (“ Common Units ”), (iii) 10,166,525 Class A units (“ Class A Units ”) in the Operating Partnership and (iv) 45,799,362 Class B units (“ Class B Units ”) in the Operating Partnership (collectively, the “ IPO Date Equity ”);
WHEREAS, in accordance with the Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership to become effective on the Closing Date (the “ OP Agreement ”), and the Amended and Restated Charter of the Company (the “ Charter ”), on or around the day that is 32 days after the Closing Date, the Company and the Operating Partnership will engage in certain reorganization transactions as a result of which, among other things, all of the Class A Units will convert into Common Units, the Class B Units will be cancelled and Hunt-InfraREIT may receive additional Common Units as more fully described in the Registration Statement (the “ Post-IPO Reorganization ”);
WHEREAS, Hunt has informed the Company that it intends to continue to hold substantially all of its equity, including (i) the Common Stock and Common Units it holds

following the IPO Date Transactions and (ii) the Common Units Hunt-InfraREIT receives in the Post-IPO Reorganization and any shares of Common Stock it receives upon redemption thereof in accordance with the OP Agreement (collectively, the “ Post-Reorganization Equity ) for the foreseeable future; and
WHEREAS, the parties hereto wish to provide for certain arrangements with respect to the sale and transfer of the Post-Reorganization Equity held by Hunt-InfraREIT;
NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
AGREEMENT
1. Restrictions . Hunt hereby agrees that, for the period described in Section 2 (the “ Lock-Up Period ”), it will not, without the prior written consent of the Company (which the parties acknowledge will require the approval of at least a majority of the members of the Board of Directors not affiliated with Hunt), directly or indirectly: (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of, or otherwise dispose of or transfer (A) any IPO Date Equity or (B) any Post-Reorganization Equity owned by Hunt as of the consummation of the Post-IPO Reorganization (collectively, the “ Lock-Up Securities ”), or (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of the Lock-Up Securities, whether any such swap or transaction is to be settled by delivery of Common Stock or other securities, in cash or otherwise. The foregoing restrictions are expressly agreed to preclude Hunt from engaging in any hedging or other transaction which is designed to or which reasonably could be expected to lead to or result in a sale or disposition of Hunt’s Lock-Up Securities even if such Lock-Up Securities would be disposed of by someone other than Hunt. Such prohibited hedging or other transactions would include without limitation any short sale or any purchase, sale or grant of any right (including without limitation any put or call option) with respect to any of Hunt’s Lock-Up Securities or with respect to any security that includes, relates to, or derives any significant part of its value from such Lock-Up Securities. Notwithstanding the foregoing, the restrictions contained in this Section 1 shall not apply to (a) the IPO Date Transactions, (b) the Post-IPO Reorganization or (c) Hunt’s redemption of units of partnership interests in the Operating Partnership (“ OP Units ”) for cash (or, at the election of the Company, shares of Common Stock) in accordance with the terms of the OP Agreement. For the avoidance of doubt, Lock-Up Securities shall not include any OP Units or shares of Common Stock acquired by Hunt after the date hereof (other than as a result of the IPO Date Transactions, the Post-IPO Reorganization or the redemption of OP Units held by Hunt as of the consummation of the Post-IPO Reorganization).
2. Lock-Up Period . For the purposes of this Agreement, the Lock-Up Period shall mean: (i) with respect to 100% of the Lock-Up Securities, the period beginning on the date hereof and ending one year after the Closing Date; (ii) with respect to 80% of the Post-Reorganization Equity, the period beginning on the date hereof and ending three years after the Closing Date and (iii) with respect to 50% of the Post-Reorganization Equity, the period beginning on the date hereof and ending five years after the Closing Date. The period beginning

on the date hereof and ending one year after the Closing Date shall hereinafter be referred to as the “ One-Year Lock-Up Period .” For the avoidance of doubt, Hunt’s redemption of OP Units for shares of Common Stock pursuant to the OP Agreement shall not affect the timing of the commencement or the expiration of the Lock-Up Period.
3. Permitted Transfers . Notwithstanding the foregoing, Hunt may transfer Lock-Up Securities without the prior written consent of the Company:
 
 	a.	to current or former employees or service providers of Hunt who are not Hunt Group Members (as defined in the OP Agreement); provided that (x) the total number of shares or OP Units transferred to such employees or service providers does not exceed 20% of the Post-Reorganization Equity and (y) any such transferee agrees to the One Year Lock-Up Period; and	
 
 	b.	to Hunt Group Members; provided that such Hunt Group Member executes a joinder to this Agreement agreeing to be bound by the terms and conditions of this Agreement to the same extent as Hunt.	
4. Employees and Officers . Hunt shall take reasonable steps to ensure that, during the One Year Lock-Up Period, employees and officers of either Hunt or its affiliates (other than employees who hold, in the aggregate, less than 50,000 shares Common Stock, after giving effect to the Post-IPO Reorganization) may not, without the prior written consent of the Company, directly or indirectly: (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of, or otherwise dispose of or transfer any of the equity in the Company or the Operating Partnership held at the Closing Date, received in connection with the Offering or received from Hunt pursuant to Section 3, or (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of the Securities, whether any such swap or transaction is to be settled by delivery of Common Stock or other securities of the Company or the Operating Partnership, in cash or otherwise, other than transfers upon death or incapacity of the employee or officer or transfers for estate planning purposes to trusts or other vehicles, as long as, in each case, the transferee agrees to the One Year Lock-Up Period.
5. Effectiveness and Termination . This Agreement shall become effective on the Closing Date. This Agreement shall terminate, and Hunt shall be released from its obligations hereunder, upon the termination or non-renewal of the Management Agreement, dated as of the date hereof, by and among Hunt Utility Services, LLC (“ Hunt-Manager ”), the Operating Partnership and the Company, other than a termination by Hunt-Manager pursuant to Section 16(c) of such Management Agreement or a termination for cause pursuant to Section 18 thereof.

6. Notices . All notices, offers or other communications required or permitted to be given pursuant to this Agreement shall be in writing and may be personally served, sent via facsimile, sent via electronic mail or sent by United States mail or by commercial courier and shall be deemed to have been given when received at the address set forth below:
If to the Company or the Operating Partnership:
InfraREIT, Inc.
Attn: Chief Executive Officer
1807 Ross Avenue, 4th Floor
Dallas, TX 75201
E-mail:
With a copy to:
InfraREIT, Inc.
Attn: General Counsel
1807 Ross Avenue, 4th Floor
Dallas, TX 75201
E-Mail: Legal@huntutility.com
If to Hunt:
Hunt Consolidated, Inc.
Attn: General Counsel
1900 N. Akard
Dallas, Texas 75201:
E-mail: dhernandez@huntoil.com
The address of any party hereto may be changed by a notice in writing given in accordance with the provisions of this Section 6 .
7. Applicable Law . THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS.
8. Severability . Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, however, if such performance or any provision of this Agreement, at any time such performance shall be due, shall transcend the limit of validity prescribed by law, then the obligation to be performed shall be reduced to the limit of such validity; and if any clause or provision contained in this Agreement operates or would operate to invalidate this Agreement, in whole or in part, then such clause or provision only shall be held ineffective, as though not contained herein, and the remainder of this Agreement shall remain operative and in full force and effect. The parties shall negotiate in good faith a replacement clause or provision as consistent with the ineffective clause or provision as is practicable under law.
9. Counterparts . This Agreement may be executed and delivered in one or more counterparts (including by means of facsimile or electronic mail transmission), each of which when so executed and delivered shall be deemed an original, none of which need contain the signatures of each of the parties hereto and all of which together shall constitute one and the same instrument binding on all the parties hereto. Each party shall become bound by this Agreement immediately upon affixing its signature hereto.

[Remainder of Page Intentionally Left Blank]

IN WITNESS WHEREOF, the Parties have executed and delivered this Lock-Up Agreement as of the date and year first above written.

THE COMPANY:			
		
InfraREIT, Inc.			
		
By:		/s/ David A. Campbell	
		Name:		David A. Campbell	
		Title:		President	
	
THE OPERATING PARTNERSHIP:	
	
InfraREIT Partners, LP	
	
By: InfraREIT, L.L.C., its general partner	
				
				By:		/s/ David A. Campbell	
						Name:		David A. Campbell	
						Title:		President	
	
HUNT-INFRAREIT:	
	
Hunt-InfraREIT, L.L.C.	
		
By:		/s/ Hunter L. Hunt	
		Name:		Hunter L. Hunt	
		Title:		President	
		
HCI:			
	
Hunt Consolidated, Inc.	
		
By:		/s/ Hunter L. Hunt	
		Name:		Hunter L. Hunt	
		Title:		 	
Signature Page to Hunt Lock-Up Agreement

Exhibit 10.11

THIRD AMENDED AND RESTATED
COMPANY AGREEMENT
SHARYLAND DISTRIBUTION
&
TRANSMISSION SERVICES, L.L.C.

TABLE OF CONTENTS

ARTICLE I. THE COMPANY	  	 	1	  	
		
Section 1.1 Organization as Limited Liability Company	  	 	1	  	
		
Section 1.2 Names and Addresses of Members	  	 	2	  	
		
Section 1.3 Name	  	 	2	  	
		
Section 1.4 Registered Office; Registered Agent	  	 	2	  	
		
Section 1.5 Principal Place of Business	  	 	2	  	
		
Section 1.6 Purpose	  	 	2	  	
		
Section 1.7 Duration	  	 	3	  	
		
Section 1.8 Right of Competition	  	 	3	  	
		
ARTICLE II. CERTAIN DEFINITIONS	  	 	3	  	
		
Section 2.1 Definitions	  	 	3	  	
		
Section 2.2 References to this Agreement; Interpretation	  	 	13	  	
		
ARTICLE III. THE MEMBERS; CAPITAL CONTRIBUTIONS	  	 	13	  	
		
Section 3.1 Identification	  	 	13	  	
		
Section 3.2 Capital Contributions	  	 	13	  	
		
Section 3.3 Capital Accounts	  	 	14	  	
		
Section 3.4 Additional Provisions Regarding Capital Accounts	  	 	15	  	
		
ARTICLE IV. ALLOCATIONS OF NET PROFIT AND NET LOSS; DISTRIBUTIONS	  	 	16	  	
		
Section 4.1 Allocations of Net Profit and Net Loss	  	 	16	  	
		
Section 4.2 Distributions of Available Cash	  	 	17	  	
		
Section 4.3 Distributions of Net Proceeds from a Capital Transaction	  	 	18	  	
		
Section 4.4 In Kind Distributions	  	 	18	  	
		
Section 4.5 Tax Distributions	  	 	18	  	
		
Section 4.6 Special Allocation Rules	  	 	19	  	
		
Section 4.7 Allocations for Tax Purposes	  	 	20	  	
 
i

					
		
ARTICLE V. THE SHARYLAND MEMBER	  	 	21	  	
		
Section 5.1 Power and Authority of Sharyland Member	  	 	21	  	
		
Section 5.2 Restrictions on Sharyland Member	  	 	26	  	
		
Section 5.3 Reimbursement and Fees	  	 	28	  	
		
Section 5.4 Performance of Sharyland Member	  	 	28	  	
		
Section 5.5 Purchase of Sharyland Interest	  	 	28	  	
		
ARTICLE VI. THE MEMBERS	  	 	29	  	
		
Section 6.1 Rights of the Members	  	 	29	  	
		
Section 6.2 Liability for the Company’s Obligations	  	 	30	  	
		
Section 6.3 Use of Affiliates	  	 	30	  	
		
ARTICLE VII. INDEMNIFICATION	  	 	30	  	
		
Section 7.1 Liability of the Covered Persons	  	 	30	  	
		
Section 7.2 Indemnification	  	 	30	  	
		
ARTICLE VIII. COMPANY OPERATIONS	  	 	32	  	
		
Section 8.1 Annual Business Plan; Capital Expenditures Budget	  	 	32	  	
		
Section 8.2 Insurance	  	 	34	  	
		
ARTICLE IX. ACCOUNTING AND RECORDS	  	 	34	  	
		
Section 9.1 Books and Records	  	 	34	  	
		
Section 9.2 Reports	  	 	35	  	
		
Section 9.3 Annual Audit	  	 	35	  	
		
Section 9.4 Exchange Act Reporting	  	 	36	  	
		
Section 9.5 Fiscal Year	  	 	36	  	
		
Section 9.6 Bank Accounts	  	 	36	  	
		
Section 9.7 Quarterly Meetings	  	 	36	  	
		
Section 9.8 Appointment of Representatives	  	 	36	  	
		
ARTICLE X. TAX MATTERS	  	 	37	  	
		
Section 10.1 Preparation of Tax Returns	  	 	37	  	
		
Section 10.2 Tax Elections	  	 	37	  	
		
Section 10.3 Tax Matters Member	  	 	37	  	
		
Section 10.4 Organizational Expenses	  	 	38	  	
		
Section 10.5 Withholding	  	 	38	  	
		
Section 10.6 Code Section 83 Safe Harbor Election	  	 	39	  	
 
ii

					
		
ARTICLE XI. REPRESENTATIONS AND WARRANTIES	  	 	40	  	
		
Section 11.1 Sharyland Member	  	 	40	  	
		
Section 11.2 TDC Member	  	 	40	  	
		
ARTICLE XII. TRANSFER OF INTERESTS	  	 	41	  	
		
Section 12.1 Restrictions on Transfer	  	 	41	  	
		
Section 12.2 General Transfer Provisions	  	 	41	  	
		
Section 12.3 Compliance	  	 	41	  	
		
ARTICLE XIII. TERMINATION OF THE COMPANY	  	 	41	  	
		
Section 13.1 Events of Winding Up	  	 	41	  	
		
Section 13.2 Effect of Winding Up	  	 	42	  	
		
Section 13.3 Sale or Distribution of Assets Resulting from Liquidation	  	 	43	  	
		
ARTICLE XIV. MISCELLANEOUS	  	 	43	  	
		
Section 14.1 Notices	  	 	43	  	
		
Section 14.2 Confidentiality	  	 	44	  	
		
Section 14.3 Successors and Assigns	  	 	44	  	
		
Section 14.4 Amendments; No Oral Modifications	  	 	44	  	
		
Section 14.5 Captions	  	 	44	  	
		
Section 14.6 Terms	  	 	44	  	
		
Section 14.7 Severability	  	 	45	  	
		
Section 14.8 Further Assurances	  	 	45	  	
		
Section 14.9 Complete Agreement	  	 	45	  	
		
Section 14.10 Attorneys’ Fees	  	 	45	  	
		
Section 14.11 Governing Law	  	 	45	  	
		
Section 14.12 No Third Party Beneficiary	  	 	45	  	
		
Section 14.13 Approvals	  	 	46	  	
		
Section 14.14 Drafting Conventions	  	 	46	  	
		
Section 14.15 Counterparts	  	 	46	  	
		
Section 14.16 Telecopy Execution and Delivery	  	 	46	  	
 
iii

THIRD AMENDED AND RESTATED COMPANY AGREEMENT
OF SHARYLAND DISTRIBUTION & TRANSMISSION SERVICES, L.L.C.
THIS THIRD AMENDED AND RESTATED COMPANY AGREEMENT (herein called this “ Agreement ”) is made and entered into on January 29, 2015 to be effective as of the Effective Date (as hereinafter defined), by and between Sharyland Utilities, L.P., a Texas limited partnership (“ Sharyland Utilities ” or the “ Sharyland Member ”), and Transmission and Distribution Company, L.L.C., a Texas limited liability company (formerly known as Texas T&D Company, L.L.C., the “ TDC Member ”).
Certain capitalized terms used in this Agreement have the meaning assigned to them in Article II .
WITNESSETH :
WHEREAS, the Members entered into the Second Amended and Restated Company Agreement of Sharyland Distribution & Transmission Services, L.L.C. (the “ Company ”) as of November 23, 2010 (the “ Company Agreement ”);
WHEREAS, the TDC Member is owned by InfraREIT Partners, LP (the “ Operating Partnership ”);
WHEREAS, immediately following the consummation of the initial public offering of InfraREIT (the “ REIT IPO ”), the current general partner of the Operating Partnership will merge with and into InfraREIT, with InfraREIT surviving the merger and succeeding to all of the rights, powers, authority, duties and obligations as general partner of the Operating Partnership; and
WHEREAS, in connection with the foregoing, the Members desire to amend the terms of the Company Agreement in certain respects and restate the Company Agreement as so amended, effective as of the date the REIT IPO is consummated (the “ Effective Date ”).
NOW, THEREFORE, in consideration of the mutual covenants set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby amend and restate the Company Agreement in its entirety to read as follows:
ARTICLE I.
THE COMPANY
Section 1.1 Organization as Limited Liability Company . The Sharyland Member and the TDC Member organized, created and formed the Company as a limited partnership under the Texas Limited Partnership Law (which has the meaning set forth in the Texas Business Organizations Code) on June 28, 2006, by filing with the Secretary of State of the State of Texas a certificate of limited partnership that complied with the requirements of the Texas Limited Partnership Law for the formation of a limited partnership thereunder. Pursuant to a plan of conversion duly adopted by the Members and a certificate of conversion and a certificate of formation (the “ Certificate ”) filed with the Secretary of State of the State of Texas on December 14, 2009, the Company converted from a limited partnership to a limited liability company
 
1

formed under the Act. The Company shall continue uninterrupted as a limited liability company under the Act, and the Members agree that this Agreement replaces and supersedes in its entirety the Company Agreement. The Members further agree and obligate themselves to execute, acknowledge, file, record and/or publish, as necessary, such amendments to the Certificate and such other certificates and documents and to take all other action required by law to perfect and maintain the Company as a limited liability company under the Act and in all other jurisdictions in which the Company may elect to conduct business.
Section 1.2 Names and Addresses of Members . The name and address of the Sharyland Member is Sharyland Utilities, L.P., 1807 Ross Avenue, Dallas, Texas 75201. The name and the address of the TDC Member is Transmission and Distribution Company, L.L.C., 1807 Ross Avenue, 4th Floor, Dallas, Texas 75201.
Section 1.3 Name . The name of the Company is Sharyland Distribution & Transmission Services, L.L.C., a Texas limited liability company (formerly known as Sharyland Distribution & Transmission Services, L.P., a Texas limited partnership), and all business of the Company shall be conducted in such name unless under the law of some jurisdiction in which the Company does business such business must be conducted under another name. In such a case, the business of the Company in such jurisdiction may be conducted under such other name or names (except the name of the TDC Member or any Person or Entity that is a member of the TDC Member or that is otherwise associated with the TDC Member) as the Sharyland Member shall determine to be necessary. The Sharyland Member shall cause to be filed on behalf of the Company such assumed or fictitious name certificate or certificates or similar instruments as may from time to time be required by law.
Section 1.4 Registered Office; Registered Agent . The registered office of the Company in the State of Texas is located at CT Corporation System, 350 North St. Paul Street, Dallas, Texas 75201, and the registered agent for service of process on the Company is CT Corporation System. The registered office and registered agent for service of process may be changed if Approved by the Members.
Section 1.5 Principal Place of Business . The principal place of business of the Company is located at 1807 Ross Avenue, Dallas, Texas 75201 or at such other place as may be Approved by the Members.
Section 1.6 Purpose . Subject to the other provisions of this Agreement, the Members intend that the Company will own the Systems owned by the Company as of the date hereof and from time to time consider and provide for any improvements to and expansions of any System then owned by the Company and/or acquire or construct electrical transmission or distribution facilities, in each case, as may be consistent with an Approved Annual Business Plan, and to take all such other actions incident to any of the foregoing as are necessary or desirable pursuant to the terms of this Agreement. Except as otherwise provided in this Agreement or in the Approved Annual Business Plan, the Company shall not engage in any other activity or business, and no Member shall have any authority to hold itself out as a general agent of the other Member in connection with these or any other businesses or activities.
 
2

Section 1.7 Duration . The Company commenced on June 28, 2006 and shall continue unless terminated pursuant to Article XIII .
Section 1.8 Right of Competition .
(a) The Members hereby expressly agree that, except as set forth in any Lease Agreement, the Development Agreement or as otherwise may be agreed by both Members, (i) there is no duty or obligation of a Member or its Affiliates to offer to the Company or its other Members or their Affiliates any particular business opportunity, project or property which may become available to such Member or its Affiliates, and (ii) to the extent permitted by Applicable Law and subject to the foregoing, the Members waive any duties or obligations of the other Members and their Affiliates under Applicable Law to offer to the Company or such Members or their Affiliates any such business opportunity, project or property.
(b) Subject to (x) a Member’s obligations under this Agreement, (y) any other agreement to which a Member or any of its Affiliates may be a party or by which it may be bound and (z) Applicable Laws, it is understood and agreed that (i) each of the Members shall devote its time to the Company’s business as may be necessary to carry out its duties and obligations set forth herein and (ii) any Member and its Affiliates may engage in and possess interests in other business ventures of any and every type and description, independently or with others, including the ownership, acquisition, development, operation and management of Systems and/or any other business venture which may be in direct or indirect competition with the business and assets of the Company (subject to the obligations and restrictions set forth in Section 1.8(a) or as may otherwise be agreed by the Members). Subject to (x) a Member’s obligations under this Agreement, (y) any other agreement to which such Member or any of its Affiliates may be a party or by which it may be bound and (z) Applicable Laws, (A) neither the Company nor any other Members or their Affiliates shall have any right, title or interest in or to such independent ventures or to any profits therefrom, (B) to the extent permitted by Applicable Laws, no Member or any of its Affiliates shall be in breach of its duties or obligations to the Company or other Members or their Affiliates under Applicable Laws by engaging in such independent ventures and (C) each Member and the Company hereby waives any right or claim it may have against a Member or any of its Affiliates or any of their successors with respect to any such independent ventures or the income or profits therefrom.
ARTICLE II.
CERTAIN DEFINITIONS
Section 2.1 Definitions . When used in this Agreement, the following terms will have the meanings respectively indicated:
“ 704(c) Value ” of any Contributed Property shall mean the fair market value of such property at the time of contribution as determined by the Sharyland Member using such reasonable method of valuation as it may adopt; provided, however, subject to Article IV , the Sharyland Member shall, in its sole and absolute discretion, use such method as it deems reasonable and appropriate to allocate the aggregate of the 704(c) Value of Contributed Properties in a single or integrated transaction among each separate property on a basis proportional to its fair market values.
 
3

“ Accountants ” shall mean such firm of nationally-recognized independent certified public accountants as may be Approved by the Members.
“ Act ” shall mean the Texas Limited Liability Company Law as set forth in the Texas Business Organizations Code, as the same may be amended from time to time.
“ Adjusted Capital Account ” shall mean the Capital Account maintained for each Member as of the end of each Fiscal Year (i) increased by any amounts which such Member is obligated to restore pursuant to any provision of this Agreement or is deemed to be obligated to restore pursuant to the penultimate sentences of Regulations Sections 1.704-2(g)(l) and 1.704-2(i)(5) and (ii) decreased by the items described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-l(b)(2)(ii)(d)(6). The foregoing definition of Adjusted Capital Account is intended to comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
“ Adjusted Capital Account Deficit ” shall mean, with respect to any Member, the deficit balance, if any, in such Member’s Adjusted Capital Account as of the end of the relevant Fiscal Year.
“ Adjusted Property ” shall mean any property the Carrying Value of which has been adjusted pursuant to Section 3.4 .
“ Affiliate ” shall mean (a) any Person directly or indirectly Controlling, Controlled by or under common Control with the Person in question, and (b) any officer, director, member, or partner of the Person in question or of any Person described in subsection (a) or (b) of this paragraph.
“ Agreed Value ” shall mean (i) in the case of any Contributed Property, the 704(c) Value of such property as of the time of its contribution to the Company, reduced by any liabilities either assumed by the Company upon such contribution or to which such property is subject when contributed, as the same is reflected in the books and records of the Company; and (ii) in the case of any property distributed to a Member by the Company, the Company’s Carrying Value of such property at the time such property is distributed, reduced by any indebtedness either assumed by such Member upon such distribution or to which such property is subject at the time of distribution as determined under Section 752 of the Code and the regulations thereunder.
“ Agreement ” shall have the meaning assigned to such term in the preamble of this Agreement.
“ Annual Business Plan ” shall have the meaning assigned to such term in Section 8.1(a) .
“ Applicable Laws ” shall mean all laws, ordinances, statutes, orders and regulations of any federal, state, or local government, regulatory or administrative authority, any agency or commission thereof, or any court or tribunal, including without limitation all requirements of any Regulatory Authority, applicable to the Company, its subsidiaries or their properties.
 
4

“ Approval of ,” “ Approved by ,” “ Approved ” and derivations thereof, when used in reference to a Member, shall mean the written consent or approval of the matter in question by an authorized officer or partner of the Member.
“ Approved Annual Business Plan ” shall mean an Annual Business Plan that has been submitted by the Sharyland Member and Approved by the TDC Member in accordance with Section 8.1 .
“ Approved by the Members ” shall mean that the matter in question has been Approved by all of the Members pursuant to a request by one of the Members, submitted in accordance with Section 5.2(a) or such other provision of this Agreement as may be applicable.
“ Available Cash ” shall mean all Company cash funds on hand from time to time (including but not limited to cash derived from operations), but excluding: (i) cash funds obtained as contributions to the capital of the Company by the Members that are being held temporarily pending investment in Footprint Projects that have been Approved by the Members; (ii) cash funds obtained from loans to the Company unless such cash funds are the result, in whole or in part, of a decision by the Company, with the Approval of the TDC Member, to use excess financing proceeds as Available Cash; (iii) cash funds which use is restricted by third parties and (iv) Net Proceeds of any Capital Transaction; after, without duplication of any amounts, (a) payment of all expenses of operations payable as of the date in question, (b) provision for the Working Capital Reserve in such amount as is included in the then applicable Approved Annual Business Plan or is otherwise Approved by the Members, and (c) provision for any other reserves Approved by the Members.
“ Bank ” shall mean such financial institution as may be Approved by the Members.
“ Book-Tax Disparities ” shall mean, with respect to any item of Contributed Property or Adjusted Property, as of the date of any determination, the difference between the Carrying Value of such Contributed Property or Adjusted Property and the adjusted basis thereof for federal income tax purposes as of such date. A Member’s share of the Company’s Book-Tax Disparities in all of its Contributed Property and Adjusted Property will be reflected by the difference between such Member’s Capital Account balance as maintained pursuant to Section 3.3 and Section 3.4 and the hypothetical balance of such Member’s Capital Account computed as if it had been maintained strictly in accordance with federal income tax accounting principles.
“ Business Day ” shall mean any day on which the Bank is open for the purpose of conducting business and receiving deposits in Dallas, Texas.
“ Capital Account ” shall have the meaning assigned to such term in Section 3.3 .
“ Capital Expenditure Budget ” shall have the meaning assigned to such term in Section 8.1(a) .
“ Capital Transaction ” shall mean (a) a sale, condemnation, exchange, abandonment, or other actual or deemed disposition of a System, which is of all or substantially all of such asset, (b) an insurance recovery relating to all or substantially all of such asset, or (c) any other transaction that is considered capital in nature.
 
5

“ Capital Transaction Post-Payout Percentage ” of (i) the Sharyland Member shall mean one percent (1%) and (ii) the TDC Member shall mean ninety-nine percent (99%).
“ Carrying Value ” shall mean (i) with respect to a Contributed Property or Adjusted Property, the 704(c) Value of such property reduced (but not below zero) by all Depreciation with respect to such Contributed Property or Adjusted Property, as the case may be, charged to the Members’ Capital Accounts and (ii) with respect to any other Company property, the adjusted basis of such property for federal income tax purposes, all as of the time of determination. The Carrying Value of any property shall be adjusted from time to time in accordance with Section 3.4 , and to reflect changes, additions (including capital improvements thereto) or other adjustments to the Carrying Value for dispositions and acquisitions of Company properties, as deemed appropriate by the Sharyland Member.
“ Certificate ” shall have the meaning assigned to such term in Section 1.1 .
“ Code ” shall mean the Internal Revenue Code of 1986, as amended from time to time. All references herein to sections of the Code shall include any corresponding provision or provisions of succeeding law.
“ Company ” shall mean the limited liability company governed by this Agreement, as such limited liability company may from time to time be constituted and amended.
“ Company Agreement ” shall have the meaning assigned to such term in the recitals to this Agreement.
“ Company Minimum Gain ” has the meaning ascribed to “Partnership Minimum Gain” set forth in Regulations Section 1.704-2(b)(2), and the amount of Company Minimum Gain, as well as any net increase or decrease in Company Minimum Gain, for a Fiscal Year shall be determined in accordance with the rules of Regulations Section 1.704-2(d).
“ Contributed Property ” shall mean each property or other asset contributed to the Company, in such form as may be permitted by the Act, but excluding cash contributed or deemed contributed to the Company. Once the Carrying Value of a Contributed Property is adjusted pursuant to Section 3.4 , such property shall no longer constitute a Contributed Property for purposes of Article IV , but shall be deemed an Adjusted Property for such purposes.
“ Control ” and all derivations thereof shall mean the direct or indirect ability or power to either (i) vote (or direct the vote of) 50% or more of the voting interests in any Person or (ii) direct or cause the direction of the management and policies of another, whether through voting power, contract or otherwise.
“ Covered Person ” shall mean (i) a Member, (ii) an officer, director, partner, member or shareholder of such Member, (iii) an officer of the Company, or (iv) any Person serving at the request of the Company or the Sharyland Member as an officer, director, partner, member, trustee, employee or agent of any Entity in which the Company holds an interest.
 
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“ Depreciation ” shall mean, for each fiscal year, an amount equal to the U.S. federal income tax depreciation, amortization, or other cost recovery deduction allowable with respect to an asset for such year, except that, if the Carrying Value of an asset differs from its adjusted basis for U.S. federal income tax purposes at the beginning of such year or other period, Depreciation shall be an amount which bears the same ratio to such beginning Carrying Value as the U.S. federal income tax depreciation, amortization, or other cost recovery deduction for such year bears to such beginning adjusted tax basis; provided, however, that if the U.S. federal income tax depreciation, amortization, or other cost recovery deduction for such year is zero, Depreciation shall be determined with reference to such beginning Carrying Value using any reasonable method selected by the Sharyland Member.
“ Development Agreement ” shall mean that certain Development Agreement entered into by Hunt Transmission Services, L.L.C., a Delaware limited liability company, Sharyland Utilities, the Operating Partnership and InfraREIT, pursuant to which the parties thereto evidenced their understanding with respect to business opportunities and assets of the parties.
“ Disclosing Party ” shall have the meaning assigned to such term in Section 14.2 .
“ Effective Date ” shall have the meaning assigned to such term in the recitals to this Agreement.
“ Emergency ” shall mean a sudden or unexpected event or act of God that causes or risks causing (i) material damage to the environment, (ii) material damage to the System, (iii) material damage to other property, equipment or facilities relating to or affecting the System, or (iv) serious injury to any Person.
“ Entity ” shall mean a Person other than an individual.
“ Event of Bankruptcy ” as to the Company or a Member shall mean:
(a) filing a voluntary petition in bankruptcy or for reorganization or for the adoption of an arrangement under Title 11 of the United States Code (or any corresponding provision or provisions of succeeding law) or an admission seeking the relief therein provided or the taking of similar action under the laws of any state or local jurisdiction;
(b) making a general assignment for the benefit of its creditors;
(c) consenting to the appointment of a receiver for all or a substantial part of its property;
(d) in the case of the filing of an involuntary petition in bankruptcy, the failure to have such filing dismissed by the earlier of (i) ninety (90) days after filing or (ii) the date of an entry of an order for relief;
(e) the entry of a court order appointing a receiver or trustee for all or a substantial part of its property without its consent; or
(f) the assumption of custody or sequestration by a court of competent jurisdiction of all or substantially all of its property.
 
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“ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended.
“ FERC ” shall mean the Federal Energy Regulatory Commission.
“ Final Adjustment ” shall have the meaning assigned to such term in Section 10.3(b)(ii) .
“ Fiscal Year ” shall have the meaning assigned to such term in Section 9.5 .
“ Footprint Project(s) ” shall have the meaning assigned to such term in the Lease Agreements, as amended from time to time in accordance with the Lease Agreements.
“ For Cause Event ” shall mean the occurrence of (i) a material breach by the Sharyland Member of (x) the then current Approved Annual Business Plan, or (y) this Agreement and such breach of this Agreement constitutes fraud or a violation of a fiduciary duty owed to the Company or the TDC Member, or (ii) any act or omission of the Sharyland Member that constitutes gross negligence or willful misconduct.
“ GAAP ” shall mean generally accepted accounting principles of the United States of America, consistently applied.
“ Good Utility Practices ” shall mean the practices, methods and acts engaged in or approved by a significant portion of the electric utility industry during the relevant time period, or any of the practices, methods and acts that, in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at a reasonable cost consistent with good business practices, reliability, safety and expedition. Good Utility Practices are not intended to be limited to the optimum practice, method or act, to the exclusion of all others, but rather is intended to include practices, methods and acts generally accepted in the region.
“ InfraREIT ” shall mean InfraREIT, Inc., a Maryland corporation, or any other entity that succeeds such entity as the general partner of the Operating Partnership and elects to be taxed as a REIT.
“ Interest ” shall mean the entire ownership interest (which may be segmented into and/or expressed as a percentage of various rights and/or liabilities) of a Member in the Company at any particular time, including the right of such Member to any and all benefits to which a Member may be entitled as provided in this Agreement and in the Act, together with the obligations of such Member to comply with all the terms and provisions of this Agreement and of the Act. For purposes of this definition, an Interest shall also include the Sharyland Interest or the TDC Interest, as applicable.
“ IRS ” shall mean the Internal Revenue Service, which administers the internal revenue laws of the United States.
“ Lease Agreement ” shall mean any lease agreement between the Sharyland Member or its Affiliates, on the one hand, and the TDC Member or its Affiliates, on the other, as the same may be amended or supplemented from time to time.
 
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“ Liquidating Trustee ” shall have the meaning assigned to such term in Section 13.3(a) .
“ Management Agreement ” shall mean that certain Management Agreement entered into by Hunt Utility Services, L.L.C., a Delaware limited liability company (the “ Manager ”), the Operating Partnership and InfraREIT, pursuant to which the Manager manages the business of the Operating Partnership and InfraREIT.
“ Member(s) ” shall mean the TDC Member and the Sharyland Member, and such successors, assigns, or additional members as may be admitted to the Company, from time to time, pursuant to the terms and provisions of this Agreement.
“ Member Nonrecourse Debt ” shall have the meaning ascribed to “Partner Nonrecourse Debt” set forth in Regulations Section 1.704-2(b)(4).
“ Member Nonrecourse Debt Minimum Gain ” shall mean an amount, with respect to each Member Nonrecourse Debt, equal to the Company Minimum Gain that would result if such Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Regulations Section 1.704-2(i)(3).
“ Member Nonrecourse Deductions ” shall have the meaning ascribed to “Partner Nonrecourse Deductions” set forth in Regulations Section 1.704-2(i), and the amount of Member Nonrecourse Deductions with respect to a Member Nonrecourse Debt for a Fiscal Year shall be determined in accordance with the rules of Regulations Section 1.704-2(i)(2).
“ Net Loss ” shall mean, for any taxable period, the excess, if any, of the Company’s items of loss and deduction for such taxable period over the Company’s items of income and gain for such taxable period. The items included in the calculation of Net Loss shall be determined in accordance with Article IV . If an item of income, gain, loss or deduction that has been included in the initial computation of Net Loss is subjected to the special allocation rules in Section 4.6 , Net Loss or the resulting Net Profit, whichever the case may be, shall be recomputed without regard to such item.
“ Net Proceeds ” shall mean, with respect to any Capital Transaction, the proceeds received by the Company in connection with such Capital Transaction reduced by (a) the payment of all costs and expenses incurred by the Company with respect to such Capital Transaction including, without limitation, brokers’ commissions payable to non-Affiliates, title insurance fees, commitment fees, professional fees and other closing costs necessitated or incurred in connection with such Capital Transaction, (b) if the Capital Transaction is a financing or refinancing, or requires payment of indebtedness or fees in connection therewith, the payment by the Company of indebtedness required or intended to be repaid in connection with the transaction in question, and (c) any deposits into the Working Capital Reserve made in accordance with the provisions of this Agreement (without duplication of any amounts in the Working Capital Reserve or other reserve).
“ Net Profit ” shall mean, for any taxable period, the excess, if any, of the Company’s items of income and gain for such taxable period over the Company’s items of loss and deduction for such taxable period. The items included in the calculation of Net Profit shall be determined in accordance with Article IV . If an item of income, gain, loss or deduction that has been included in the initial computation of Net Profit is subjected to the special allocation rules in Section 4.6 , Net Profit or the resulting Net Loss, whichever the case may be, shall be recomputed without regard to such item.
 
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“ Non-Public Information ” shall have the meaning assigned to such term in Section 14.2 .
“ Nonrecourse Built-in Gain ” shall mean, with respect to any Contributed Properties or Adjusted Properties that are subject to a mortgage or negative pledge securing a Nonrecourse Liability, the amount of any taxable gain that would be allocated to the Members pursuant to Section 4.7(b) if such properties were disposed of in a taxable transaction in full satisfaction of such liabilities and for no other consideration.
“ Nonrecourse Deductions ” shall have the meaning set forth in Regulations Section 1.704-2(b)(l), and the amount of Nonrecourse Deductions for a Fiscal Year shall be determined in accordance with the rules of Regulations Section 1.704-2(c).
“ Nonrecourse Liability ” shall have the meaning set forth in Regulations Section 1.752- l(a)(2).
“ Notice ” shall have the meaning assigned to such term in Section 10.6 .
“ Operating Partnership ” shall have the meaning assigned to such term in the recitals to this Agreement.
“ Person ” shall mean an individual, an estate, a corporation, a partnership, an association, a limited liability company, a joint stock company, a trust or any other Entity.
“ Post-Payout Percentage ” of (i) the Sharyland Member shall mean ten percent (10%) and (ii) the TDC Member shall mean ninety percent (90%).
“ Prior Unpaid Preference Amount ” of the TDC Member, as of the end of any other day during the term hereof, shall mean an amount equal to (a) the Unpaid Preference Amount of the TDC Member as of the end of the immediately preceding day, plus (b) the product of the Unpaid Preference Amount of the TDC Member as of the end of the immediately preceding day multiplied by 0.000310538 (i.e., the equivalent daily interest factor for an interest rate of twelve percent (12%) per annum, compounded annually).
“ PUCT ” shall mean the Public Utility Commission of Texas.
“ Purchase Offer ” shall have the meaning assigned to such term in Section 13.3(d) .
“ Recapture Income ” shall mean any gain recognized by the Company (computed without regard to any adjustment required by Section 734 or Section 743 of the Code) upon the disposition of any property or asset of the Company, which gain is characterized either as ordinary income or as “unrecaptured Section 1250 gain” (as defined in Section 1(h)(7) of the Code) because it represents the recapture of deductions previously taken with respect to such property or asset.
 
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“ Receiving Party ” shall have the meaning assigned to such term in Section 14.2 .
“ Recourse Liabilities ” shall mean the amount of liabilities owed by the Company (other than Nonrecourse Liabilities and liabilities to which Member Nonrecourse Deductions are attributable in accordance with Section 1.704-(2)(i) of the Regulations).
“ Regulations ” shall mean the regulations promulgated by the United States Department of the Treasury pursuant to and in respect of provisions of the Code. All references herein to sections of the Regulations shall include any corresponding provision or provisions of succeeding, similar, substitute proposed or final Regulations.
“ Regulatory Allocations ” shall have the meaning assigned to such term in Section 4.6(h) . “Regulatory Approvals” shall mean the approval of all Regulatory Authorities applicable to the transaction and/or the parties for which the approval is required to be obtained.
“ Regulatory Authority(ies) ” shall mean the PUCT, the Electric Reliability Council of Texas, the Texas Regional Entity, any governmental agency having jurisdiction over the Company or its assets (including a System) and any self-regulatory organization, including, without limitation, a national securities exchange registered with the Securities and Exchange Commission.
“ REIT ” shall mean a real estate investment trust within the meaning of the Code.
“ REIT IPO ” shall have the meaning assigned to such term in the recitals to this Agreement.
“ REIT Requirements ” shall have the meaning assigned to such term in Section 5.1(d) .
“ Representatives ” shall have the meaning assigned to such term in Section 14.2 .
“ Residual Gain ” or “ Residual Loss ” shall mean any item of gain or loss, as the case may be, of the Company recognized for U.S. federal income tax purposes resulting from a sale, exchange or other disposition of Contributed Property or Adjusted Property, to the extent such item of gain or loss is not allocated pursuant to Section 4.7(b)(i)(A) or 4.7(b)(ii)(A) to eliminate Book-Tax Disparities.
“ Securities Act ” shall mean the Securities Act of 1933, as amended.
“ Sharyland Interest ” shall mean the Interest of the Sharyland Member.
“ Sharyland Member ” shall have the meaning assigned to such term in the preamble to this Agreement.
“ System ” shall mean the electric transmission and/or distribution systems that are owned by the Company at the time of reference.
 
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“ Taxable Year ” shall mean the Company’s taxable year ending December 31 (or part thereof, in the case of the Company’s last taxable year), or such other year as is determined by the Board in compliance with Section 706 of the Code.
“ Tax Matters Member ” shall have the meaning assigned to such term in Section 10.3(a) .
“ T&D Project ” shall mean a business, project or assets relating primarily to the transmission and/or distribution of electricity.
“ TDC Interest ” shall mean the Interest of the TDC Member.
“ TDC Member ” shall have the meaning assigned to such term in the preamble of this Agreement.
“ Transfer ” shall have the meaning assigned to such term in Section 12.1 .
“ Unpaid Preference Amount ” of the TDC Member, as of the end of any other day during the term hereof, shall mean an amount equal to the Prior Unpaid Preference Amount plus (a) the product of the Unreturned Cash Capital Amount of the TDC Member as of the end of the immediately preceding day multiplied by 0.000310538 (i.e., the equivalent daily interest factor for an interest rate of twelve percent (12%) per annum, compounded annually), minus (b) any distributions made to the TDC Member during the day in question pursuant to Section 4.2(a)(i) or Section 4.3(a) . The “Unpaid Preference Amount” of the TDC Member shall never be less than zero (0).
“ Unrealized Gain ” attributable to any item of Company property shall mean, as of any date of determination, the excess, if any, of (i) the fair market value of such property (as determined under Article IV ) as of such date, over (ii) the Carrying Value of such property (prior to any adjustment to be made pursuant to Article IV ) as of such date.
“ Unrealized Loss ” attributable to any item of Company property means, as of any date of determination, the excess, if any, of (i) the Carrying Value of such property (prior to any adjustment to be made pursuant to Article IV ) as of such date, over (ii) the fair market value of such property (as determined under Article IV ) as of such date.
“ Unreturned Cash Capital Amount ” of the Sharyland Member, as of the date hereof, shall be zero ($0), and of the TDC Member, as of the date hereof, shall be the amount of capital and property contributed by the TDC Member as of the date hereof plus the Agreed Value of the Contributed Property contributed by the TDC Member, in each case as set forth in the Company’s books and records. The “Unreturned Cash Capital Amount” of any Member, as of the end of any other day during the term hereof, shall mean an amount equal to (a) the Unreturned Cash Capital Amount of such Member as of the end of the immediately preceding day, plus (b) the amount of any cash contributions of capital made to the Company by, and the Agreed Value of any Contributed Property from, such Member during the day in question pursuant to Section 3.2(b) (to the extent not made on the date hereof) or Section 3.2(c) , minus (c) any distributions actually made to such Member during the day in question pursuant to Section 4.2(a)(ii) and Section 4.3(b) . The Unreturned Cash Capital Amount of each Member shall never be less than zero (0).
 
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“ Working Capital Reserve ” shall mean a reasonable working capital reserve of funds (including any Working Capital Reserve for Required Footprint Projects) established pursuant to Section 4.2 .
“ Working Capital Reserve for Required Footprint Projects ” shall have the meaning assigned to such term in Section 4.2
Section 2.2 References to this Agreement; Interpretation . Numbered or lettered articles, sections and subsections herein contained refer to articles, sections and subsections of this Agreement unless otherwise expressly stated. The words “herein,” “hereof,” “hereunder,” “hereby,” “this Agreement” and other similar references shall be construed to mean and include this Agreement and all amendments thereof and supplements thereto unless the context shall clearly indicate or require otherwise. The use of the words “include,” “including,” and derivations thereof in this Agreement shall be deemed to have the phrase “without limitation” attached thereto unless otherwise expressly stated.
ARTICLE III.
THE MEMBERS; CAPITAL CONTRIBUTIONS
Section 3.1 Identification . The Sharyland Member and the TDC Member shall be the Members of the Company. No other Person may become a Member except by means of a Transfer of an Interest specifically permitted under and effected in compliance with this Agreement or as otherwise Approved by the Members.
Section 3.2 Capital Contributions .
(a) Except as set forth in Section 3.2(d) , the Members shall not have any obligation to make contributions to the capital of the Company until such time as any such capital contributions shall have been Approved by the Members.
(b) Each Member has made Capital Contributions to the Company, and the Sharyland Member and the TDC Member own the Sharyland Interest and the TDC Interest, respectively.
(c) The Sharyland Member may request cash capital contributions from the TDC Member upon not less than ten (10) Business Days prior written notice, such notice setting forth the details regarding the amount of the capital and purpose; provided, however, the TDC Member shall have no duty to provide such additional capital to the Company except to the extent such capital is associated with Footprint Projects set forth in the Approved Annual Business Plan or otherwise Approved by the TDC Member. All capital contributions shall be used by the Company for the purposes contemplated in the written notice to the TDC Member or as set forth in the Approved Annual Business Plan. The Sharyland Member may not contribute cash to the Company unless Approved by the TDC Member.
(d) Notwithstanding the foregoing or anything else to the contrary in this Agreement, if the Company is obligated to provide for Footprint Projects (i) required by Regulatory Authorities or (ii) reasonably necessary to satisfy Sharyland Utilities’ or another lessee’s obligation as a regulated utility to serve its customers or to maintain the safety or
 
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reliability of a System, and the Working Capital Reserve for Required Footprint Projects is insufficient for such Footprint Projects, the TDC Member shall either (A) contribute to the Company such capital in cash required to make the Working Capital Reserve for the Required Footprint Projects be sufficient for such Footprint Projects or (B) allow, in the Sharyland Member’s sole discretion, (x) the Sharyland Member to contribute such necessary capital in cash or (y) the Sharyland Member to seek and obtain reasonable alternative capital sources for the Company, including, without limitation, admitting additional members.
(e) On each occasion on which any Member is required to make capital contributions to the Company pursuant to this Section 3.2 (including pursuant to an Approved Annual Business Plan), such Member shall deposit its required capital contribution, by wire transfer of immediately available funds, in the account designated by the Sharyland Member maintained at the Bank.
(f) Notwithstanding anything in this Agreement to the contrary, no Member shall have any obligation whatsoever to make any capital or other contributions or loan any funds to the Company except (i) as expressly provided in this Article III , or (ii) as contemplated with respect to any Approved Annual Business Plan. The capital contribution commitments of the Members under this Agreement are solely for the benefit of the Members, as among themselves, and may not be enforced by or for the benefit of any other Person (including any creditor, receiver, or trustee of, or for the benefit of any one or more creditors of, the Company).
Section 3.3 Capital Accounts . A separate “Capital Account” (herein so called) shall be maintained for each Member for the full term of the Agreement in accordance with the capital account rules of section 1.704-l(b)(2)(iv) of the Regulations. Pursuant to the basic rules of section 1.704-1(b)(2)(iv) of the Regulations, the balance of each Member’s Capital Account shall be:
(a) Increased by the amount of cash contributed by such Member (or such Member’s predecessor in interest) to the capital of the Company pursuant to Section 3.2 and decreased by the amount of cash distributed to such Member (or such Member’s predecessor in interest) pursuant to Article IV ;
(b) Increased by the Agreed Value of each property (other than cash) contributed by such Member (or such Member’s predecessor in interest) to the capital of the Company pursuant to Section 3.2 and decreased by the Agreed Value of each property (other than cash) distributed to such Member (or such Member’s predecessor in interest) by the Company pursuant to Article IV ;
(c) Increased by the amount of each item of Company Net Profit allocated to such Member (or such Member’s predecessor in interest) pursuant to Section 4.1 hereto;
(d) Decreased by the amount of each item of Company Net Loss allocated to such Member (or such Member’s predecessor in interest) pursuant to Section 4.1 ; and
(e) Otherwise adjusted in accordance with the other capital account maintenance rules of section 1.704-1(b)(2)(iv) of the Regulations.
 
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Section 3.4 Additional Provisions Regarding Capital Accounts .
(a) If a Member pays any Company indebtedness, such payment shall be treated as a contribution by that Member to the capital of the Company, and the Capital Account of such Member shall be increased by the amount so paid by such Member.
(b) Except as otherwise provided herein, no Member may contribute capital to, or withdraw capital from, the Company. To the extent any monies which any Member is entitled to receive pursuant to Article IV or any other provision of this Agreement would constitute a return of capital, each Member consents to the withdrawal of such capital.
(c) A loan by a Member to the Company shall not be considered a contribution of money to the capital of the Company, and the balance of such Member’s Capital Account shall not be increased by the amount so loaned. No repayment of principal or interest on any such loan, reimbursement made to a Member with respect to advances or other payments made by such Member on behalf of the Company, or payments of fees to a Member which are made by the Company shall be considered a return of capital or in any manner affect the balance of such Member’s Capital Account. The Sharyland Member shall not make a loan to the Company unless such loan is approved by the TDC Member.
(d) No Member with a deficit balance in its Capital Account shall have any obligation to the Company, the other Member or any creditor of the Company or Members to restore said deficit balance. In addition, no venturer or partner in any Member shall have any liability to the Company, the other Member or any creditor of the Company or Members for any deficit balance in such venturer’s or partner’s capital account in the Member in which it is a partner or venturer. Furthermore, a deficit Capital Account balance of a Member (or a capital account of a partner or venturer in a Member) shall not be deemed to be a liability of such Member (or of such venturer or partner in such Member) or a Company asset or property.
(e) Except as otherwise provided herein, no interest will be paid on any capital contributed to the Company or the balance in any Member’s Capital Account.
(f) (i) Consistent with the provisions of Regulations Section 1.704-1(b)(2)(iv)(f), and as provided in Section 3.4(f)(ii) , the Carrying Values of all Company assets shall be adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss attributable to such Company property, as of the times of the adjustments provided in Section 3.4.(f)(ii) hereof, as if such Unrealized Gain or Unrealized Loss had been recognized on an actual sale of each such property and allocated pursuant to Section 4.1 and Section 4.7 .
(ii) Such adjustments shall be made as of the following times: (a) immediately prior to the acquisition of an additional interest in the Company by any new or existing Member in exchange for more than a de minimis Capital Contribution; (b) immediately prior to the distribution by the Company to a Member of more than a de minimis amount of property as consideration for an interest in the Company; and (c) immediately prior to the liquidation of the Company within the meaning of Regulations Section 1.704-l(b)(2)(ii)(g); and (d) in connection with the grant of an interest in the Company (other than a de minimis interest) as consideration for the provision of services
 
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to or for the benefit of the Company by an existing Member acting in a Member capacity, or by a new Member acting in a Member capacity in anticipation of being a Member, provided, however, that adjustments pursuant to clauses (a), (b) and (d) above shall be made only if the Sharyland Member determines that such adjustments are necessary or appropriate to reflect the relative economic interests of the Members in the Company.
(iii) In accordance with Regulations Section 1.704-l(b)(2)(iv)(e), the Carrying Value of Company assets distributed in kind shall be adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss attributable to such Company property, as of the time any such asset is distributed.
(iv) In determining Unrealized Gain or Unrealized Loss for purposes of this Section 3.4 , the aggregate cash amount and fair market value of all Company assets (including cash or cash equivalents) shall be determined by the Sharyland Member using such reasonable method of valuation as it may adopt, or in the case of a liquidating distribution pursuant to Article XIII , shall be determined and allocated by the Liquidating Trustee using such reasonable methods of valuation as it may adopt. The Sharyland Member, or the Liquidating Trustee, as the case may be, shall allocate such aggregate fair market value among the assets of the Company in such manner as it determines in its sole and absolute discretion to arrive at a fair market value for individual properties.
(g) The provisions of the Agreement (including this Section 3.4 ) relating to the maintenance of Capital Accounts are intended to comply with Regulations Section 1.704- l(b), and shall be interpreted and applied in a manner consistent with such Regulations. In the event the Sharyland Member shall determine that it is prudent to modify the manner in which the Capital Accounts, or any debits or credits thereto (including, without limitation, debits or credits relating to liabilities which are secured by contributed or distributed property or which are assumed by the Company, the Sharyland Member, or the TDC Member) are computed in order to comply with such Regulations, the Sharyland Member may make such modification without regard to Section 14.4 , provided that it is not likely to have a material effect on the amounts distributable to any Person pursuant to Article XIII upon an event requiring winding up of the Company. The Sharyland Member also shall (i) make any adjustments that are necessary or appropriate to maintain equality between the Capital Accounts of the Members and the amount of Company capital reflected on the Company’s balance sheet, as computed for book purposes, in accordance with Regulations Section 1.704-l(b)(2)(iv)(q), and (ii) make any appropriate modifications in the event unanticipated events might otherwise cause this Agreement not to comply with Regulations Section 1.704-1(b).
ARTICLE IV.
ALLOCATIONS OF NET PROFIT AND NET LOSS; DISTRIBUTIONS
Section 4.1 Allocations of Net Profit and Net Loss .
(a) Except as otherwise provided in this Article IV , for any allocation period in which the Company has Net Profit or Net Loss, such Net Profit or Net Loss (and any item of income, gain, loss or deduction thereof) shall be allocated to the Members in a manner such that, as nearly as possible, immediately after such allocation each Member has a positive balance in its
 
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Capital Account equal to the amount such Member would be entitled to receive if the Company were liquidated as of such date, its affairs wound up and its assets distributed to the Members pursuant to Section 4.2 , taking into account the Member’s share of Company Minimum Gain and Member Nonrecourse Debt Minimum Gain before the hypothetical liquidation. Prior to the liquidation of the Company, the assets of the Company on any date shall be deemed to have a value equal to their Carrying Value.
(b) Allocation of Nonrecourse Debt. For purposes of Regulation Section 1.752-3(a), the Members agree that Nonrecourse Liabilities of the Company in excess of the sum of (i) the amount of Company Minimum Gain and (ii) the total amount of Nonrecourse Built-in Gain shall be allocated 100% to the TDC Member.
(c) Recapture Income. Any gain allocated to the Members upon the sale or other taxable disposition of any Company asset shall, to the extent reasonably practicable after taking into account other required allocations of gain pursuant to Sections 4.6 and 4.7 , be characterized as Recapture Income in the same proportions and to the same extent as such Members have been allocated any deductions directly or indirectly giving rise to the treatment of such gains as Recapture Income.
Section 4.2 Distributions of Available Cash . Periodically, but not less frequently than quarterly, Available Cash (if any) shall be distributed among the Members in accordance with the provisions of this Section 4.2 . For any period, funds that would otherwise constitute Available Cash need not be so treated and distributed to the extent that such funds are required for, set aside and retained in the Working Capital Reserve, the amount of such reserve to be determined, with the Approval of the TDC Member (which Approval shall not be unreasonably withheld), by the Sharyland Member using reasonable business judgment. The purpose of the establishment and maintenance of the Working Capital Reserve is to avoid a depletion of the Company’s money resources to be used for operations or working capital, but not for capital expenditures with respect to Footprint Projects (other than with respect to any capital expenditure for any Footprint Projects either (i) required by Regulatory Authorities or (ii) reasonably necessary to satisfy Sharyland Utilities’ or another lessee’s obligation as a regulated utility to serve its customers or to maintain the safety or reliability of a System) (“ Working Capital Reserve for Required Footprint Projects ”). The establishment or maintenance of the Working Capital Reserve is not intended to and will not alter or diminish the rights of the Members to Available Cash except if such funds are retained and used for the purpose for which they were reserved. When and to the extent the Sharyland Member, with the Approval of the TDC Member (which Approval shall not be unreasonably withheld), no longer regards funds set aside and retained in the Working Capital Reserve as reasonably necessary to the efficient conduct of the affairs of the Company, such funds shall be treated as additions to Available Cash.
(a) For each Fiscal Year, Available Cash which is to be distributed among the Members pursuant to this Section 4.2 shall be distributed among the Members as follows and in the following order of priority:
(i) First : Available Cash shall be distributed one hundred percent (100%) to the TDC Member to the least extent necessary to cause the TDC Member’s Unpaid Preference Amount to equal zero (0);
 
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(ii) Second : Available Cash shall be distributed one hundred percent (100%) to the TDC Member to the least extent necessary to cause the TDC Member’s Unreturned Cash Capital Amount to equal zero (0); and
(iii) Third : All remaining Available Cash shall be distributed among both of the Members, pro rata in accordance with their respective Post-Payout Percentages.
Section 4.3 Distributions of Net Proceeds from a Capital Transaction . Promptly following the collection of the Net Proceeds of a Capital Transaction and after payment of the Company’s debts and liabilities and the expenses of such Capital Transaction and/or the establishment of a reasonable reserve for the Company’s debts and liabilities (contingent or otherwise) if deemed necessary by the Sharyland Member, the amount of all such proceeds and cash held by the Company shall be distributed to each of the Members as follows and in the following order of priority:
(a) First : Proceeds shall be distributed one hundred percent (100%) to the TDC Member to the least extent necessary to cause the TDC Member’s Unpaid Preference Amount to equal zero (0);
(b) Second : Proceeds shall be distributed one hundred percent (100%) to the TDC Member to the least extent necessary to cause the TDC Member’s Unreturned Cash Capital Amount to equal zero (0); and
(c) Third : All remaining Proceeds shall be distributed to both of the Members, pro rata in accordance with their respective Capital Transaction Post-Payout Percentages.
Section 4.4 In Kind Distributions . Assets of the Company (other than cash) shall not be distributed in kind to either Member unless Approved by the Members. If any assets of the Company are distributed among the Members in kind, such assets shall be valued on the basis of the fair market value thereof on the date of the distribution, and each distributee shall receive such distribution in kind in lieu of distributions of cash. The fair market value of such assets shall be determined by an independent appraiser Approved by the Members.
Section 4.5 Tax Distributions . Unless otherwise Approved by the TDC Member, the Sharyland Member shall cause the Company to distribute from its funds to each Member with respect to each Taxable Year (within 60 days after the close of such Taxable Year, or on a quarterly or more frequent basis) an amount of cash equal to the taxable income of the Company allocated to such Member with respect to such Taxable Year. Any distribution to a Member pursuant to this Section 4.5 shall be treated as an advance distribution under the appropriate provisions of Section 4.2 or 4.3 that resulted in the allocation of income pursuant to Section 4.1 to which such distribution relates.
 
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Section 4.6 Special Allocation Rules . Notwithstanding any other provision of this Agreement, the following special allocations shall be made in the following order:
(a) Minimum Gain Chargeback . Notwithstanding the provisions of Section 4.1 or any other provisions of this Section 4.6 or Section 4.7 , if there is a net decrease in Company Minimum Gain during any Fiscal Year, each Member shall be specially allocated items of Company income and gain for such year (and, if necessary, subsequent years) in an amount equal to such Member’s share of the net decrease in Company Minimum Gain, as determined under Regulations Section 1.704-2(g). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Member pursuant thereto.
The items to be so allocated shall be determined in accordance with Regulations Section 1.704-2(f)(6). This Section 4.6(a) is intended to comply with the minimum gain chargeback requirements in Regulations Section 1.704-2(f) and for purposes of this Section 4.6(a) only, each Member’s Adjusted Capital Account Deficit shall be determined prior to any other allocations pursuant to Article IV of this Agreement with respect to such Fiscal Year.
(b) Member Minimum Gain Chargeback . Notwithstanding any other provision of Section 4.1 of this Agreement or any other provisions of this Section 4.6 or Section 4.7 (except Section 4.6(a) hereof), if there is a net decrease in Member Nonrecourse Debt Minimum Gain attributable to a Member Nonrecourse Debt during any Fiscal Year, each Member who has a share of the Member Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(5), shall be specially allocated items of Company income and gain for such year (and, if necessary, subsequent years) in an amount equal to such Member’s share of the net decrease in Member Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(5). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Sharyland Member and TDC Member pursuant thereto. The items to be so allocated shall be determined in accordance with Regulations Section 1.704-2(i)(4). This Section 4.6(b) is intended to comply with the minimum gain chargeback requirement in such Section of the Regulations and shall be interpreted consistently therewith. Solely for purposes of this Section 4.6(b) , each Member’s Adjusted Capital Account Deficit shall be determined prior to any other allocations pursuant to Article IV with respect to such Fiscal Year, other than allocations pursuant to Section 4.6(b) hereof.
(c) Qualified Income Offset . In the event any Member unexpectedly receives any adjustments, allocations or distributions described in Regulations Sections 1.704- l(b)(2)(ii)(d)(4), 1.704-l(b)(2)(ii)(d)(5), or 1.704-l(b)(2)(ii)(d)(6), and after giving effect to the allocations required under Sections 4.6(a) and 4.6(b) hereof with respect to such Fiscal Year, such Member has an Adjusted Capital Account Deficit, items of Company income and gain (consisting of a pro rata portion of each item of Company income, including gross income and gain for the Fiscal Year) shall be specifically allocated to such Member in an amount and manner sufficient to eliminate, to the extent required by the Regulations, its Adjusted Capital Account Deficit created by such adjustments, allocations or distributions as quickly as possible. This Section 4.6(c) is intended to constitute a “qualified income offset” under Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
(d) Gross Income Allocation . In the event that any Member has an Adjusted Capital Account Deficit at the end of any Fiscal Year (after taking into account allocations to be made under the preceding paragraphs hereof with respect to such Fiscal Year), each such Member shall be specially allocated items of Company income and gain (consisting of a pro rata portion of each item of Company income, including gross income and gain for the Fiscal Year) in an amount and manner sufficient to eliminate, to the extent required by the Regulations, its Adjusted Capital Account Deficit.
 
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(e) Nonrecourse Deductions . Nonrecourse Deductions for any Fiscal Year shall be allocated to the Members in accordance with their respective Interests. If the Sharyland Member determines in its good faith discretion that the Company’s Nonrecourse Deductions must be allocated in a different ratio to satisfy the safe harbor requirements of the Regulations promulgated under Section 704(b) of the Code, the Sharyland Member is authorized, upon notice to the TDC Member, to revise the prescribed ratio for such Fiscal Year to the numerically closest ratio which would satisfy such requirements.
(f) Member Nonrecourse Deductions . Any Member Nonrecourse Deductions for any Fiscal Year shall be specially allocated to the Member who bears the economic risk of loss with respect to the Member Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable in accordance with Regulations Sections 1.704-2(b)(4) and 1.704-2(i).
(g) Code Section 754 Adjustments . To the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Section 734(b) or 743(b) of the Code is required, pursuant to Regulations Section 1.704-l(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis), and such item of gain or loss shall be specially allocated to the Members in a manner consistent with the manner in which their Capital Accounts are required to be adjusted pursuant to such Section of the Regulations.
(h) Curative Allocations . The allocations set forth in this Section 4.6 (the “ Regulatory Allocations ”) are intended to comply with certain requirements of Treasury Regulations Sections 1.704-l(b) and 1.704-2. Notwithstanding any other provision of this Section 4.1 (other than the Regulatory Allocations), the Sharyland Member is authorized to make offsetting special allocations of Company income, gain, loss or deduction in whatever manner it deems appropriate so that, after such offsetting allocations are made, each Member’s Capital Account balance is, to the extent possible, equal to the Capital Account balance such Member would have had if the Regulatory Allocations were not part of this Agreement and all Company items were allocated pursuant to Section 4.1 .
Section 4.7 Allocations for Tax Purposes .
(a) Except as otherwise provided in this Section 4.7 , for federal income tax purposes, each item of income, gain, loss and deduction shall be allocated among the Members in the same manner as its correlative item of “book” income, gain, loss or deduction is allocated pursuant to Section 4.1 and Section 4.6 hereof.
 
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(b) In an attempt to eliminate Book-Tax Disparities attributable to a Contributed Property or Adjusted Property, items of income, gain, loss, and deduction shall be allocated for federal income tax purposes among the Members as follows:
(i) (A) In the case of a Contributed Property, such items attributable thereto shall be allocated among the Members consistent with the principles of Section 704(c) of the Code to take into account the variation between the 704(c) Value of such property and its adjusted basis at the time of contribution (taking into account Section 4.7(c) ); and (B) any item of Residual Gain or Residual Loss attributable to a Contributed Property shall be allocated among the Members in the same manner as its correlative item of “book” gain or loss is allocated pursuant to Section 4.1 and Section 4.6 hereof.
(ii) In the case of an Adjusted Property, such items shall:
(A) first, be allocated among the Members in a manner consistent with the principles of Section 704(c) of the Code to take into account the Unrealized Gain or Unrealized Loss attributable to such property and the allocations thereof pursuant to Section 3.4 ;
(B) second, in the event such property was originally a Contributed Property, be allocated among the Members in a manner consistent with Section 4.7(b)(i) ; and
(iii) any item of Residual Gain or Residual Loss attributable to an Adjusted Property shall be allocated among the Members in the same manner its correlative item of “book” gain or loss is allocated pursuant to Section 4.1 and Section 4.6 hereof.
(iv) all other items of income, gain, loss and deduction shall be allocated among the Members in the same manner as their correlative item of “book” gain or loss is allocated pursuant to Section 4.1 and Section 4.6 hereof.
(c) To the extent Regulations promulgated pursuant to Section 704(c) of the Code permit the Company to utilize alternative methods to eliminate the disparities between the Carrying Value of property and its adjusted basis, the Sharyland Member shall, subject to the following, have the authority to elect the method to be used by the Company and such election shall be binding on all Members; provided that, to the extent that the Sharyland Member has agreed to use a particular method with respect to a Contributed Property, the Sharyland Member shall be bound by such agreement pursuant to the terms thereof.
ARTICLE V.
THE SHARYLAND MEMBER
Section 5.1 Power and Authority of Sharyland Member .
(a) (i) Except as provided in Section 5.2 and elsewhere in this Agreement and except as otherwise provided by applicable law, the Sharyland Member shall have full and exclusive power and authority on behalf of the Company to manage, control, administer and operate the properties, business and affairs of the Company in accordance with this Agreement and to do or cause to be done any and all acts deemed by the Sharyland Member to be necessary or appropriate thereto, and (except as aforesaid in this Section 5.1 ) the scope of such power and authority shall encompass all matters in any way connected with such business or incident thereto, including property and asset management, compliance with governmental regulations
 
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and registration requirements and operational activities of the Company and the authority to bind the Company in making contracts and incurring obligations in the Company’s name in the course of the Company’s business, including, without limitation, causing the Company to enter into, and be bound by the terms of, the Lease Agreements. Without limiting the generality of the foregoing, the Sharyland Member shall have the power and authority to cause the Company to timely perform all of its obligations under all agreements binding upon the Company or its assets, including without limitation, all obligations under the Lease Agreements (including specifically the obligations for Footprint Projects (x) required by Regulatory Authorities or (y) reasonably necessary to satisfy Sharyland Utilities’ or another lessee’s obligation as a regulated utility to serve its customers or to maintain the safety or reliability of a System) and the loan agreements and related documents, including promissory notes and security documents, to which the Company is a party. Further, the Sharyland Member may in its reasonable discretion contract with third-party service providers to perform any of the services it is obligated to provide to the Company under this Agreement.
(ii) Notwithstanding the limitations in Section 5.2 or any other provision of this Agreement, the Sharyland Member shall have the power and authority on behalf of the Company, without the Approval of the TDC Member, to:
(A) make any filing of changes in the Company’s or any of its subsidiaries’ rates or charges that are required to be filed by Applicable Laws; and
(B) consistent with the Lease Agreements, (x) initiate regulatory proceedings with Regulatory Authorities in accordance with Good Utility Practice, including rate proceedings, interim transmission cost of service filings and distribution cost recovery factor filings, (y) initiate, prosecute, defend and participate in any administrative or judicial proceeding reasonably necessary or advisable to operate the System in an economical and efficient manner, provided that the Sharyland Member shall consult with the TDC Member prior to initiating any rate proceeding with the PUCT to change the rates the Sharyland Member can lawfully charge, but, with or without the Approval of the TDC Member, the Sharyland Member shall be authorized to initiate any such rate proceeding.
Furthermore, upon the TDC Member’s request, the Sharyland Member shall file a rate proceeding before the PUCT, and, in such circumstances, the Company or the TDC Member shall be responsible for reimbursing the Sharyland Member for all costs associated with prosecution of such proceeding to the extent that such costs are not recoverable in the Sharyland Member’s PUCT-approved rates.
(iii) The Sharyland Member may elect officers of the Company, who will have the powers and authority and will be governed by the terms and provisions set forth below:
(A) Each officer of the Company shall be a natural person. An officer need not be a resident of the State of Texas, a Member or an employee of the Company.
 
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(B) The officers of the Company, if any, shall have such powers and authority, subject to the direction and control of the Sharyland Member and shall perform such duties in connection with the management of the business and affairs of the Company as are provided in this Company Agreement, or as may be determined from time to time by resolution of the Sharyland Member. In addition, except as otherwise expressly provided herein, each officer shall have such powers and authority as would be incident to his or her office if he or she served as a comparable officer of a Texas corporation.
(C) The officers of the Company, if any, shall consist of a President, a Secretary and a Treasurer, each of whom shall be elected by the Sharyland Member. In addition, the Sharyland Member shall have the authority to elect such other officers, including Vice Presidents and assistant officers, as it may from time to time determine. Any two or more offices may be held by the same person.
(D) Any vacancy occurring in an office may be filled by the Sharyland Member.
(E) Any officer of the Company may be removed by the Sharyland Member whenever in its judgment the best interests of the Company will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the officer so removed. Election as an officer of the Company shall not of itself create any contract rights.
(F) President . The President shall be the chief executive officer of the Company, and, under the direction and subject to the control of the Sharyland Member, the President in general shall supervise and control all of the business and affairs of the Company and shall see that all orders and resolutions of the Sharyland Member are carried into effect. The President may execute any deeds, mortgages, bonds, contracts or other instruments that the Sharyland Member has authorized to be executed and delivered, except in cases where the execution and delivery thereof shall be expressly and exclusively delegated to another officer of the Company by the Sharyland Member or this Company Agreement, or where the execution and delivery thereof shall be required by law to be carried out by another person. In general, the President shall perform all duties incident to the office of President and such other duties as may be prescribed from time to time by the Sharyland Member.
(G) Vice Presidents . Each Vice President, if there be any, shall report to the President. Each Vice President may perform the usual and customary duties that pertain to such office (but not unusual or extraordinary duties or the duties conferred by the Sharyland Member upon the President) and, under the direction and subject to the control of the Sharyland Member and the President, such other duties as may be assigned to him or her from time to time by the Sharyland Member or the President. Any Vice President may be designated by the Sharyland Member as an Executive Vice President.
 
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(H) Secretary . It shall be the duty of the Secretary to attend all meetings of the Company and to record correctly the proceedings of such meetings and record all votes in a book suitable for such purposes. The Secretary shall give, or cause to be given, notice of all meetings of the Company. It shall also be the duty of the Secretary to keep a register in which all transactions pertaining to the Membership Interests shall be correctly recorded. The Secretary shall also perform, under the direction and subject to the control of the Sharyland Member and the President, such other duties as may be assigned to him or her from time to time.
(I) Treasurer . The Treasurer shall have the care and custody of all the funds and securities of the Company that may come into his or her hands as Treasurer. The Treasurer may endorse checks, drafts and other instruments for the payment of money for deposit or collection when necessary or proper and may deposit the same to the credit of the Company in such banks or depositories as the Sharyland Member may designate from time to time, and the Treasurer may endorse all commercial documents requiring endorsements for or on behalf of the Company. The Treasurer may sign all receipts and vouchers for the payments made to the Company. The Treasurer shall render an account of his or her transactions to the Sharyland Member or the President as often as the Sharyland Member or the President shall require from time to time. The Treasurer shall enter regularly in the books to be kept by him or her for that purpose, a full and adequate account of all monies received and paid by him or her on account of the Company. The Treasurer shall also perform, under the direction and subject to the control of the Sharyland Member and the President, such other duties as may be assigned to him or her from time to time.
(J) Delegation of Authority . In the case of any absence of any officer of the Company or for any other reason that the Sharyland Member may deem sufficient, the Sharyland Member may delegate some or all of the powers or duties of such officer to any other officer for whatever period of time the Sharyland Member deems appropriate.
(K) No Initial Officers . There shall be no officers until such time as the Sharyland Member elects such officers as provided in this Section 5.1(a)(iii) .
(b) The Sharyland Member shall, subject to the provisions of this Agreement and the availability of cash funds of the Company, use reasonable efforts to implement the then applicable Approved Annual Business Plan, and, subject to the provisions of this Agreement, shall have all right, power and authority to do so.
(c) In exercising its authority under this Section 5.1 , the Sharyland Member shall have the power and authority to act alone, and in the name and on behalf of the Company, including the power to execute for and on behalf of the Company any and all documents and instruments which may be necessary to carry on the business of the Company, in connection with the affairs of the Company, except to the extent that (i) the prior Approval of the TDC Member
 
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is required pursuant to this Agreement, including but not limited to those described in Section 5.2 hereof, or (ii) any such action is otherwise prohibited, restricted or limited under the provisions of this Agreement, in which case the Sharyland Member may exercise only such authority for which Approval has been given by the TDC Member or which is expressly permitted under this Agreement. Any third party conducting business with the Company shall be entitled to rely on the authority of the Sharyland Member to conduct Company business solely by the execution of any documents or instruments by the Sharyland Member, and such third party shall not be required to determine the authority of the Sharyland Member under this Agreement or to otherwise determine any fact or circumstance bearing upon the existence of the Sharyland Member’s authority to obligate or bind the Company or any fact relating to the Approved Annual Business Plan.
(d) InfraREIT has elected or expects to elect to be treated as a REIT. In order to maintain its status as a REIT, InfraREIT will be required to comply with numerous and complex rules and regulations set forth in the Code and the Regulations, many of which are applied on a quarterly and/or annual basis (the “ REIT Requirements ”), and the management and operation of the Company by the Sharyland Member will have a material effect on the ability of InfraREIT to continue to maintain its status as a REIT. Accordingly, notwithstanding any other provision of this Agreement or any non-mandatory provision of the Act, the Sharyland Member shall not permit the Company to take any action which (or omit to take any action, the omission of which) would result in (A) less than seventy-five percent (75%) of the assets of the Company at the close of any calendar quarter qualifying as “real estate assets” under Section 856(c)(4)(A) of the Code, (B) more than twenty-five percent (25%) of the assets of the Company at the close of any calendar quarter to consist of assets described in Section 856(c)(4)(B) of the Code, (C) any of the assets of the Company at the close of any calendar quarter to violate or exceed the limitations described in Section 856(c)(4)(B)(iii) of the Code, (D) less than 75% of the gross income of the Company in any calendar year qualifying as income described in Section 856(c)(3) of the Code and less than 95% of gross income in any calendar year qualifying as income described in Section 856(c)(2) of the Code, (E) any portion of the gross revenues or net income of the Company in any calendar year constituting income from a “prohibited transaction” as defined in Section 857(b)(6)(B)(iii) of the Code, or (F) any material amount of the Company’s assets to be property described in Section 1221(a)(l) of the Code (other than “foreclosure property” as defined in Section 856(e) of the Code), (clauses (A), (B), (C), (D), (E) and (F) are collectively referred to herein as the “ REIT Restriction Covenants ”).
The foregoing provisions are intended to ensure that the assets, income and operations of the Company are such that they will satisfy the various provisions of the Code that restrict the assets, income and operations of REITs and thereby ensure that the REIT status of InfraREIT will not be jeopardized by its direct or indirect ownership of an interest in the Company. In the event that any additional restrictions on the assets, income or operations of REITs are imposed by any new provisions of the Code or Regulations, any amendments to the Code or Regulations or by any judicial precedent or any notice, ruling or release of the U.S. Treasury Department or the IRS, then upon written advice of InfraREIT’s counsel, the Sharyland Member shall agree to amend the provisions of this Section 5.1(d) as required to ensure that the assets, income or operations of the Company will not jeopardize the REIT status of InfraREIT. Notwithstanding any other provision of this Agreement to the contrary, any expenses related to any amendment made pursuant to this Section 5.1(d) or to maintain compliance by the Company with the REIT Requirements or the REIT Restriction Covenants or to continue InfraREIT’s maintenance of its REIT status shall be borne solely by InfraREIT.
 
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Section 5.2 Restrictions on Sharyland Member .
(a) Notwithstanding anything in this Agreement to the contrary, including without limitation Section 5.1 , except to the extent required by Applicable Laws, the Sharyland Member shall have no authority to do or permit any of the following acts on behalf of the Company or any of its subsidiary entities without the Approval of the TDC Member (it being recognized that the Approval for any particular act may be contemplated by an Approved Annual Business Plan):
(i) doing any act in contravention of this Agreement or which would make it impossible or unreasonably burdensome to carry on the business of the Company;
(ii) confess a judgment against the Company in any material amount;
(iii) borrow any money from the Company;
(iv) do any other act which the Act specifically requires to be Approved by the Members;
(v) Any acquisition or exchange (including by way of merger, consolidation, business combination or similar transaction) involving the Company or any of its subsidiaries of any assets or the development and construction of any Footprint Projects;
(vi) Any sale, exchange or other Transfer of any assets of the Company or any of its subsidiaries;
(vii) Any incurrence of indebtedness other than in the ordinary course of the Company’s or any of its subsidiaries’ business, or any change in the repayment (including making any voluntary prepayment) or maturity of such indebtedness;
(viii) Any issuance of equity interests, options, warrants, or other similar convertible securities of the Company or any of its subsidiaries to third parties (including, without limitation, their employees and consultants pursuant to equity awards under any equity incentive program), including any material modification thereof, except as provided in Section 3.2(d) ;
(ix) Any open market purchases of publicly traded securities;
(x) Approval of the Company’s or any of its subsidiaries’ annual budget (construction or operating) or business plan and any related material business policies and any material amendments to the foregoing other than an Approved Annual Business Plan or an amendment thereto, as provided in Section 8.1 ;
 
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(xi) Expenditures in excess of 5% of the amounts set forth in the then current Approved Annual Business Plan, except (A) to the extent necessary to comply with Applicable Laws or in the case of emergencies so long as such expenditure is reasonable and prudent and consistent with Good Utility Practices or (B) as otherwise expressly provided in Section 8.1(b) or Section 8.1(c) ;
(xii) Any appointment or removal of outside auditors;
(xiii) Any change to accounting methods (other than as required to comply with the FERC Chart of Accounts or in accordance with an order of the PUCT) or Fiscal Year;
(xiv) Except as provided in Section 5.1(a)(ii) , any (w) initiation or settlement of any material litigation, arbitration or administrative proceeding related to the System, (x) settle any rate case or rate proceeding related to the Company or any of its subsidiaries, (y) material changes in the Company’s or any of its subsidiaries’ rates or charges from those in effect on the date hereof, or (z) arrangement or consent, whether written or oral, with respect to such a material change in charges or rates;
(xv) Entry into any lease or any material amendment, waiver, renewal, termination or modification of the Lease Agreements;
(xvi) Any agreement or transaction, directly or indirectly, between the Company or any of its subsidiaries, on the one hand, and the Sharyland Member, on the other hand, other than any transactions described in or contemplated by this Agreement;
(xvii) Any actions pursuant Section 4.7(c) or Article X ;
(xviii) Effecting any consolidation of the Company or any of its subsidiaries with another Entity or any merger of the Company or any of its subsidiaries with or into another Entity, or causing the Company to be converted into an Entity other than a Texas limited liability company; or
(xix) Filing any petition seeking to reorganize the Company or any of its subsidiaries pursuant to, or to obtain relief under, any federal or state bankruptcy or insolvency law.
(b) (i) Notwithstanding the provisions set forth in Section 5.2(a) , the Sharyland Member shall have the right to take such actions as it, in its reasonable judgment, deems (i) necessary to comply with any order or mandate of a Regulatory Authority; (ii) reasonable and prudent and consistent with Good Utility Practice, or (iii) necessary in an Emergency if, under the circumstances, in the good faith estimation of the Sharyland Member, there is insufficient time to allow the Sharyland Member to obtain the Approval of the TDC Member to such action and any delay would cause the Company to violate such order or mandate of a Regulatory Authority, materially increase the risk to life or health or preservation of assets or cause the Company not to exercise reasonable, prudent, and consistent Good Utility Practices. The Sharyland Member shall notify the TDC Member of each such action or as soon as reasonably practicable thereafter.
 
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(ii) The Sharyland Member and the TDC Member each agree that they will cooperate to assure compliance with all Applicable Laws and lawful requests of any Regulatory Authorities. The TDC Member agrees to provide such information to any Regulatory Authority as the Sharyland Member or such Regulatory Authority may reasonably request in connection therewith. The TDC Member further agrees to use its best efforts to cooperate and promptly respond to any reasonable requests from the Sharyland Member relating to its efforts to comply with any regulatory requirements or to participate in any necessary or advisable legal proceedings, whether judicial or administrative.
Section 5.3 Reimbursement and Fees . Subject to the extent contemplated by the Approved Annual Business Plan, the Sharyland Member shall be reimbursed promptly by the Company for third-party, out-of-pocket administrative costs and expenses reasonably incurred by it in connection with the performance of its duties to the Company. Neither the Sharyland Member nor any of its Affiliates shall be entitled to reimbursement for any internal (i.e., not third party) general or administrative costs or expenses.
Section 5.4 Performance of Sharyland Member . The Sharyland Member, as its continuing covenant, agrees to perform all of its duties and obligations under this Agreement in accordance with the terms and provisions of this Agreement.
Section 5.5 Purchase of Sharyland Interest .
(a) Subject to the provisions of Section 5.5(c) , upon the occurrence of any of the following events, the TDC Member may cause the Company to purchase the Sharyland Interest and upon the completion of such purchase the Sharyland Member shall be deemed to have withdrawn from the Company and shall no longer have any authority or power to act on behalf of the Company:
(i) (A) If the Management Agreement is terminated in a manner that requires InfraREIT to pay a Termination Fee (as defined therein), and, in connection with such termination, the TDC Member elects by written notice to the Sharyland Member to cause the Company to purchase the Sharyland Interest pursuant hereto;
(B) If, within a period of thirty (30) days from the date on which the Sharyland Member gives written notice to the TDC Member stating that a For Cause Event has occurred and setting forth in reasonable detail a description of such For Cause Event (it being understood that the Sharyland Member shall give such notice to the TDC Member promptly after the occurrence thereof), (x) the TDC Member elects by written notice to the Sharyland Member to cause the Company to purchase the Sharyland Interest, and (y) within such thirty (30) day period the Sharyland Member has not cured or corrected such For Cause Event or, if such For Cause Event is not reasonably capable of being cured or corrected within such thirty (30) day period, the Sharyland Member has not commenced to cure or correct such For Cause Event during such thirty (30) day period and thereafter diligently proceeded to complete such cure or correction; or
 
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(C) If within a period of ninety (90) days of the occurrence of an Event of Bankruptcy with respect to the Sharyland Member such Event of Bankruptcy is not discharged or stayed and the Company is not reconstituted pursuant to the provisions of this Agreement; and
(ii) Upon payment to the Sharyland Member for the Sharyland Interest of an amount equal to the Sharyland Member’s Capital Account, which shall be calculated as of (A) the date the TDC Member gives notice of its election to cause the Company to purchase the Sharyland Interest if such purchase is pursuant to clause (i)(A) or (i)(B) of this Section 5.5(a) , or (B) as of the date of such Event of Bankruptcy if such purchase is made pursuant to clause (i)(C) of this Section 5.5(a) .
(b) Subject to the provisions of Section 5.5(c) , at any time and for any reason or for no reason, the TDC Member, in its discretion, may cause the Company to purchase the Sharyland Interest by written notice to the Sharyland Member and payment of an amount which is the greater of (i) twenty-five million dollars ($25,000,000), and (ii) five (5) times the Sharyland Member’s Capital Account, calculated as of the notice date.
(c) Notwithstanding anything in this Agreement to the contrary, in the event the TDC Member exercises its rights under Sections 5.5(a) or (b) , (i) the Sharyland Interest cannot be purchased and (ii) the Sharyland Member shall not, and cannot be forced to, surrender, resign, transfer, assign or otherwise cease its authority and power under this Agreement unless and until all necessary Regulatory Approvals have been obtained. The parties shall use reasonable best efforts to obtain all such necessary Regulatory Approvals as soon as reasonably practicable. During such time period, the Sharyland Member shall continue to own the Sharyland Interest and shall exercise all of its authority and power pursuant to the terms and conditions of this Agreement and under the Act, including carrying out its obligations in a reasonable and prudent manner and consistent with Good Utility Practices. The Sharyland Member shall continue to have its rights and obligations under this Agreement and the Act during this period, including without limitation, allocations of Net Profit and Net Loss and distributions of Available Cash with respect to the Sharyland Interest.
ARTICLE VI.
THE MEMBERS
Section 6.1 Rights of the Members . In addition to the other rights specifically set forth herein, each Member shall have the right to: (a) have the books and records of the Company and each subsidiary entity (including without limitation those required in the Act) kept at the principal United States office of the Company and at all reasonable times to inspect and copy any of them, (b) have on demand true and full information of all things affecting the Company and any subsidiary Entity and a formal account of the affairs of the Company and any subsidiary Entity, (c) have winding up of the Company by decree of court as provided for in the Act, (d) exercise all rights of a member under the Act (except to the extent otherwise specifically provided for herein) and (e) take, consent to, waive and/or approve all actions and requirements, vote and make all elections permitted or required under or pursuant to this Agreement.
 
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Section 6.2 Liability for the Company’s Obligations . Except as otherwise required by the Act, the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company, and the Members shall not be obligated personally for any such debt, obligation or liability solely by reason of being a Member of the Company. Each Member shall be obligated to make payment of its contributions of capital as and when due hereunder and other payments as provided in this Agreement.
Section 6.3 Use of Affiliates . Any right, power, circumstance or situation wherein a Member may take or require certain actions may be undertaken through an Affiliate of such Member.
ARTICLE VII.
INDEMNIFICATION
Section 7.1 Liability of the Covered Persons . Notwithstanding anything to the contrary set forth in this Agreement, no Covered Person shall be liable for monetary damages to the Company, or any other Member for losses sustained, liabilities incurred or benefits not derived as a result of errors in judgment or mistakes of fact or law or of any act or omission unless such Covered Person acted in bad faith and the act or omission was material to the matter giving rise to the loss, liability or benefit not derived.
Section 7.2 Indemnification .
(a) The Company shall indemnify each Covered Person to the fullest extent provided by the Act from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including, without limitation, attorneys’ fees and other legal fees and expenses), judgments, fines, settlements and other amounts arising from or in connection with any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative, incurred by such Covered Person and relating to the Company or a Member or the operation of, or the ownership of property by, the Company or such Member as set forth in this Agreement in which any such Covered Person may be involved, or is threatened to be involved, as a party or otherwise, unless it is established by a final determination of a court of competent jurisdiction that: (i) the act or omission of such Covered Person was material to the matter giving rise to the proceeding and either was committed in bad faith or was the result of active and deliberate dishonesty, (ii) such Covered Person actually received an improper personal benefit in money, property or services or (iii) in the case of any criminal proceeding, such Covered Person had reasonable cause to believe that the act or omission was unlawful. Without limitation, the foregoing indemnity shall extend to any liability of any Covered Person, pursuant to a loan guarantee, contractual obligation for any indebtedness or other obligation or otherwise, for any indebtedness of the Company (including, without limitation, any indebtedness which the Company has assumed or taken subject to), and the Sharyland Member is hereby authorized and empowered, on behalf of the Company, to enter into one or more indemnity agreements consistent with the provisions of this Section 7.2 in favor of any Covered Person having or potentially having liability for any such indebtedness. The termination of any proceeding by judgment, order or settlement does not create a presumption that the Covered Person did not meet the requisite standard of conduct set forth in this Section 7.2.(a) . The termination of any
 
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proceeding by conviction or upon a plea of nolo contendere or its equivalent, or an entry of an order of probation prior to judgment, creates a rebuttable presumption that the Covered Person acted in a manner contrary to that specified in this Section 7.2 with respect to the subject matter of such proceeding. Any indemnification pursuant to this Section 7.2 shall be made only out of the assets of the Company, and any insurance proceeds from the liability policy covering a Member and any Covered Person, and neither the Sharyland Member nor any TDC Member shall have any obligation to contribute to the capital of the Company or otherwise provide funds to enable the Company to fund its obligations under this Section 7.2 .
(b) Reasonable expenses paid or expected to be incurred by a Covered Person shall be paid or reimbursed by the Company in advance of the final disposition of any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative made or threatened against a Covered Person upon receipt by the Company of (i) a written affirmation by the Covered Person of the Covered Person’s good faith belief that the standard of conduct necessary for indemnification by the Company as authorized in this Section 7.2 has been met and (ii) a written undertaking by or on behalf of the Covered Person to repay the amount if it shall ultimately be determined that the standard of conduct has not been met.
(c) The indemnification provided by this Section 7.2 shall be in addition to any other rights to which a Covered Person or any other Person may be entitled under any agreement, pursuant to any vote of the Members, as a matter of law or otherwise, and shall continue as to a Covered Person who has ceased to serve in such capacity unless otherwise provided in a written agreement pursuant to which such Covered Person is indemnified.
(d) The Company may purchase and maintain insurance on behalf of the Covered Persons and such other Persons as the Sharyland Member shall determine against any liability that may be asserted against or expenses that may be incurred by such Person in connection with the Company’s activities, regardless of whether the Company would have the power to indemnify such Person against such liability under the provisions of this Agreement.
(e) In no event may a Covered Person subject any of the Members to personal liability by reason of the indemnification provisions set forth in this Agreement.
(f) A Covered Person shall not be denied indemnification in whole or in part under this Section 7.2 because the Covered Person had an interest in the transaction with respect to which the indemnification applies if the transaction was otherwise permitted by the terms of this Agreement.
(g) The provisions of this Section 7.2 are for the benefit of the Covered Persons, their employees, officers, directors, trustees, partners, members, heirs, successors, assigns and administrators and shall not be deemed to create any rights for the benefit of any other Persons. Any amendment, modification or repeal of this Section 7.2 , or any provision hereof, shall be prospective only and shall not in any way affect the limitation on the Company’s liability to any Covered Person under this Section 7.2 as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or related to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted.
 
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(h) If and to the extent any payments to a Member pursuant to this Section 7.2 constitute gross income to such Member (as opposed to the repayment of advances made on behalf of the Company), such amounts shall constitute guaranteed payments within the meaning of Section 707(c) of the Code, shall be treated consistently therewith by the Company and all Members, and shall not be treated as distributions for purposes of computing the Members’ Capital Accounts.
ARTICLE VIII.
COMPANY OPERATIONS
Section 8.1 Annual Business Plan; Capital Expenditures Budget .
(a) No later than November 15th of each Fiscal Year, the Sharyland Member shall prepare and submit to the TDC Member for its Approval a proposed Annual Business Plan for the next Fiscal Year (each, an “ Annual Business Plan ”). The parties agree that any annual business plan of InfraREIT that includes forecasted expenditures for the Company may be deemed an Annual Business Plan hereunder. The Annual Business Plan shall, as a separate line item, specify (without limitation) (i) each category of the operating expenses of the Company and any of its subsidiaries, and (ii) the Capital Expenditure Budget. Except as otherwise contemplated by Section 5.2(a)(xi) , Section 8.1(b) or Section 8.1(c) , no increases from any category of operating expenses or capital expenditure item in an Approved Annual Business Plan shall be made (and no expenditures shall be made for any such increased amounts therein) without the prior Approval of the TDC Member. With respect to the portion of the Annual Business Plan that is comprised of the Capital Expenditure Budget, the Sharyland Member has provided to the TDC Member the approximate amounts of capital expenditures that the Sharyland Member expects will be needed for purposes of funding Footprint Projects in each Fiscal Year through 2016. No later than October 15th of each calendar year, the Sharyland Member shall review and revise the Capital Expenditure Budget on a rolling three-year basis, taking into account any changed circumstances that (i) make it no longer feasible to incur one or more of the costs reflected on the prevailing Capital Expenditure Budget, (ii) make it necessary to amend the nature or amounts reflected for a particular Footprint Project or (iii) dictate that additional Footprint Projects be added (such budget, as so updated and revised, is referred to herein as the “ Capital Expenditure Budget ”) and shall submit the Capital Expenditure Budget to the TDC Member for its Approval. The parties envision that the Capital Expenditure Budgets will be the aggregate of all capital expenditures included in CapEx Budgets (as such term is defined in the Lease Agreements) delivered pursuant to the Lease Agreements.
(b) As soon as practicable after any proposed Annual Business Plan is submitted to the TDC Member but no later than forty-five (45) days after receipt by the TDC Member, the TDC Member shall Approve or disapprove such proposed Annual Business Plan. If the proposed Annual Business Plan is Approved by the TDC Member, then such proposed Annual Business Plan shall be deemed thereafter to constitute the Approved Annual Business Plan for the Fiscal Year in question for all purposes hereof, subject to amendment from time to time. If the TDC Member does not Approve the proposed Annual Business Plan, it shall notify the Sharyland Member of its reason(s) for not granting such Approval. The Members shall use their best efforts to resolve any questions with respect to revisions to the proposed Annual Business Plan and to agree upon an Annual Business Plan for the Fiscal Year in question prior to
 
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the beginning of the Fiscal Year to which such Annual Business Plan relates. In the event an Annual Business Plan for any Fiscal Year is not Approved by the TDC Member prior to the commencement thereof, the Sharyland Member shall continue to manage, maintain, supervise and direct the Company in accordance with the applicable Approved Annual Business Plan for the previous Fiscal Year dealing solely with maintaining and preserving the assets of the Company in accordance with reasonable, prudent and consistent Good Utility Practices, such as the payment of taxes, insurance, debt service and other expenses necessary to maintain the essential day-to-day operations of the assets of the Company until a new Annual Business Plan is Approved by the TDC Member; provided, however, the Sharyland Member shall be authorized during any interim period to reasonably exceed the budgeted amounts for taxes, insurance, debt service and other costs if the cost of such items has increased above the amounts budgeted therefor for the prior Fiscal Year and such payments are required to preserve the value of the assets.
(c) The Sharyland Member shall have the right from time to time during each Fiscal Year to prepare and submit to the TDC Member for its Approval proposed amendments to the Approved Annual Business Plan for such Fiscal Year. The TDC Member shall, within ten (10) days, Approve, disapprove or make such revision thereto as the TDC Member may deem necessary and proper, which Approval may be withheld by the TDC Member in its sole discretion. The TDC Member shall use its reasonable best efforts to provide some form of response within such ten (10) day period, but a failure of the TDC Member to respond within such ten (10) day period shall constitute disapproval of such amendment. Once Approved by the TDC Member, or so revised by the TDC Member and Approved by the Sharyland Member, such amendments shall be incorporated into and become part of the Approved Annual Business Plan for the Fiscal Year in question. Notwithstanding anything to the contrary contained in this Agreement, amendments or modifications of the Approved Annual Business Plan which reflect changes as a result of an increase in Working Capital Reserve for Required Footprint Projects shall be submitted to the TDC Member but shall not require the Approval of the TDC Member.
(d) Any modifications made to an Annual Business Plan at the request of the TDC Member after submission by the Sharyland Member must also be Approved by the Sharyland Member before the Annual Business Plan is Approved by the Members. It is possible that an Annual Business Plan, or an amendment thereto, may be partially Approved and partially disapproved, in which event, the Sharyland Member shall proceed to conduct business on the basis of the Annual Business Plan to the extent that it is so Approved.
(e) The TDC Member agrees that a Capital Expenditure Budget may contain Footprint Project(s) that require multi-year commitments of funds, capital or credit enhancement. If the TDC Member Approves a multi-year commitment of funds, capital or credit enhancement for such Footprint Projects, the Sharyland Member shall not be required to obtain the re-Approval of the TDC Member for such expenditures or commitments in subsequent years, and such commitments and expenditures shall remain Approved by the TDC Member for purposes of this Agreement whether or not the TDC Member Approves subsequent Annual Business Plans and/or Capital Expenditure Budgets proposed by the Sharyland Member provided that, other than as contemplated by Section 5.2(a)(xi) , Section 8.1(b) or Section 8.1(c) , any increase in expenditures or commitments for such Footprint Projects does not exceed 105% of the amounts set forth in the then current Approved Annual Business Plan for the year in question and there
 
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has been no material increase in time for completion of such Footprint Projects in the current schedule compared to the schedule previously Approved by the TDC Member. Any Footprint Projects with a multi-year commitment must be so designated in the applicable Capital Expenditure Budget and must be the type of Footprint Projects that in the ordinary course of business would be conducted on an extended or multi-year basis as opposed to an annual basis to qualify for the special continuation of funding or commitment without re-Approval provisions of this Section 8.1(e) . Continuing Approval of multi-year projects is conditioned upon the cost of the applicable Footprint Project being within 105% of the amounts set forth in the then current Approved Annual Business Plan with no material increase in time for completion in the current schedule compared to the schedule presented when the Footprint Project was previously Approved by the TDC Member. If the Footprint Project budget is in excess of 105% of the amounts set forth in the then current Approved Annual Business Plan or there has been a material increase in the time for completion compared to the schedule previously Approved by the TDC Member, then the increase in the cost of the Footprint Project must be again presented to the TDC Member for Approval with such revised budgets and project schedules as the Sharyland Member shall reasonably determine.
Section 8.2 Insurance . Insurance with respect to the affairs, activities, operations, business, Footprint Projects and other assets of the Company shall be maintained as reasonably required for ownership and prudent operation of electric transmission and distribution facilities as determined by the Sharyland Member from time to time, or any specific provision of an Approved Annual Business Plan.
ARTICLE IX.
ACCOUNTING AND RECORDS
Section 9.1 Books and Records .
(a) The Sharyland Member, at the Company’s expense, shall keep at the Company’s principal office separate books of account for the Company which shall show a true and accurate record of all costs and expenses incurred, all charges made, all credits made and received and all income derived in connection with the operation of the Company’s business in accordance with GAAP as to the Company’s financial position and results of operations. The Sharyland Member shall maintain or cause to be maintained all logs, drawings, manuals, specifications and data and inspection, modification and maintenance records and other materials required to be maintained in respect of the Company’s assets by Applicable Laws or by reasonable and prudent Good Utility Practices.
(b) Each Member shall, at its sole expense, have the right, at any time upon reasonable prior written notice to the other, to examine, copy and audit the Company’s books and records during normal business hours.
 
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Section 9.2 Reports .
(a) The Sharyland Member, at the expense of the Company, shall cause to be prepared and distributed to the TDC Member the following reports:
(i) Unless waived by the TDC Member, monthly: a balance sheet, income statement and statement of cash flows within fifteen (15) days after the last day of each month.
(ii) Quarterly: portfolio reporting forms in such form and containing such information regarding the performance of the Company and its subsidiaries, as the TDC Member may request from time to time within forty-five (45) days following the last day of each calendar quarter.
(iii) Periodically: at least ten (10) days prior to each estimated tax payment date of the TDC Member, an estimate of the taxable income of the Company allocable to the TDC Member for the period for which such estimated tax payment relates, provided that the TDC Member shall furnish the Sharyland Member with notice as to each such estimated tax payment date and applicable period.
(iv) Quarterly: (x) financial statements and other information required under Applicable Laws and by Good Utility Practices, and (y) such additional information, as may be necessary or desirable for an entity subject to the reporting requirements of the Exchange Act, including the Sarbanes-Oxley Act of 2002.
(v) Other: such other financial statements, budgets, plans and schedules as are from time to time reasonably requested by the TDC Member.
(b) The foregoing, to the extent applicable, shall be prepared using GAAP and shall cover the immediately preceding month or quarter, as the case may be, plus the current Fiscal Year through the end of such preceding month or quarter, as the case may be, on both an actual and year-to-date budgeted basis.
Section 9.3 Annual Audit . Within ninety (90) days after the end of each Fiscal Year, a general accounting and audit of the Company in accordance with GAAP shall be completed by the Accountants at the expense of the Company and delivered to the TDC Member by the Sharyland Member. The audit shall be conducted in accordance with the auditing standards of the Public Company Accounting Oversight Board and shall include a balance sheet, statement of operations, statement of members’ capital and statement of cash flows as of and for the Fiscal Year ended as well as appropriate disclosures as required by GAAP and the auditing standards of the Public Company Accounting Oversight Board. The Company shall prepare or cause the Accountants to prepare, such additional information as may be necessary or desirable for an entity subject to the reporting requirements of the Exchange Act, including the Sarbanes-Oxley Act of 2002. In addition, the Sharyland Member, at the expense of the Company, will cause supplemental schedules to the audit report to be included for items or information, such as an audit of Available Cash, as the TDC Member may request. If the additional information requested by the TDC Member cannot be adequately presented as part of the audit report, the Sharyland Member, at the expense of the Company, will engage the Accountants to perform additional attestation services sufficient to comply with the TDC Member’s request.
 
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Section 9.4 Exchange Act Reporting . Notwithstanding anything to the contrary in Section 9.2 or Section 9.3 , the Company shall prepare or cause the Accountants to prepare, such additional information relating to the Company, its assets and operations as may be necessary or desirable in order to allow InfraREIT to comply with the reporting requirements of the Exchange Act and any other applicable laws or exchange listing requirements.
Section 9.5 Fiscal Year . The “ Fiscal Year ” (herein so called) of the Company shall be the calendar year, unless otherwise Approved by the Members. As used in this Agreement, a Fiscal Year shall include any partial calendar year at the beginning and end of the Company term.
Section 9.6 Bank Accounts .
(a) The Sharyland Member shall exercise its commercially reasonable best efforts for the safekeeping and use of all funds and assets of the Company, whether or not in its immediate possession or control. The funds of the Company shall not be commingled with the funds of any other Person and the Sharyland Member shall not employ, or permit any other Person to employ, such funds in any manner except for the benefit of the Company. At the Company’s expense, all signatories on Company bank accounts shall be bonded in an amount and by a fidelity insurance carrier Approved by the TDC Member in the exercise of its reasonable discretion.
(b) The bank accounts of the Company shall be maintained in the Bank and withdrawals shall be made only in the regular course of Company business and as otherwise authorized in this Agreement on such signature or signatures as the Sharyland Member may determine.
Section 9.7 Quarterly Meetings . At least once during each calendar quarter, the Members shall meet in Dallas, Texas or at such other place as may be mutually agreed upon by the Members, at which time the Sharyland Member shall report on the affairs of the Company and the progress being made under the then applicable Approved Annual Business Plan. The meeting of the Members during the last calendar quarter of each Fiscal Year shall be for the purpose of reviewing and approving the Annual Business Plan for the next succeeding year. The Sharyland Member shall be responsible for scheduling the quarterly meetings and shall give at least ten (10) days prior written notice to the other Member of the time and place of the meeting. The costs and expenses of each quarterly meeting shall be borne by the Company.
Section 9.8 Appointment of Representatives . Each of the Sharyland Member and the TDC Member shall appoint a natural Person to be the agent of and for such Member. On the date of this Agreement, the agent of the Sharyland Member is Hunter Hunt, and the agent of the TDC Member is David Campbell. Either Member desiring to change the identity of its agent shall execute and deliver to the other Member a written instrument in which it shall designate the identity of the new agent, provided that no change in a Member’s agent shall be effective until such written notice is provided to the other Member. Such agent shall be responsible for exercising all rights, votes, consents, approvals and consultation rights and privileges of the Sharyland Member and the TDC Member, respectively, under this Agreement. Each of the agents shall be authorized to bind its principal.
 
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ARTICLE X.
TAX MATTERS
Section 10.1 Preparation of Tax Returns . The Sharyland Member shall arrange for the preparation and timely filing of all returns of Company income, gains, deductions, losses and other items required of the Company for federal and state income tax purposes and shall use all reasonable efforts to furnish, within one hundred and fifty (150) days of the close of each Taxable Year, the tax information reasonably required by the TDC Member for federal and state income tax reporting purposes.
Section 10.2 Tax Elections . Except as otherwise provided herein, the Sharyland Member shall, in its sole and absolute discretion, determine whether to make any available election pursuant to the Code; provided, however, that the Sharyland Member shall make the election under Section 754 of the Code in accordance with applicable regulations thereunder. The Sharyland Member shall have the right to seek to revoke any such election (including, without limitation, the election under Section 754 of the Code) upon the Sharyland Member’s determination in its sole and absolute discretion that such revocation is in the best interests of the Members.
Section 10.3 Tax Matters Member .
(a) General . The Sharyland Member shall be the “tax matters partner” of the Company for federal income tax purposes as defined in Section 6231 of the Code (the “ Tax Matters Member ”). Pursuant to Section 6223(c)(3) of the Code, upon receipt of notice from the IRS of the beginning of an administrative proceeding with respect to the Company, the Tax Matters Member shall furnish the IRS with the name, address, taxpayer identification number and profit interest of each Member and any of its assignees; provided, however, that such information is provided to the Company by such Member.
(b) Powers . The Tax Matters Member is authorized, but not required:
(i) to enter into any settlement with the IRS with respect to any administrative or judicial proceedings for the adjustment of Company items required to be taken into account by a Member for income tax purposes (such administrative proceedings being referred to as a “tax audit” and such judicial proceedings being referred to as “judicial review”), and in the settlement agreement the Tax Matters Member may expressly state that such agreement shall bind all Members, except that such settlement agreement shall not bind any Member (A) who (within the time prescribed pursuant to the Code and Regulations) files a statement with the IRS providing that the Tax Matters Member shall not have the authority to enter into a settlement agreement on behalf of such Member or (B) who is a “notice partner” (as defined in Section 6231(a)(8) of the Code) or a member of a “notice group” (as defined in Section 6223(b)(2) of the Code);
 
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(ii) if a notice of a final administrative adjustment at the Company level of any item required to be taken into account by a Member for tax purposes (a “ Final Adjustment ”) is mailed to the Tax Matters Member, to seek judicial review of such final adjustment, including the filing of a petition for readjustment with the Tax Court or the filing of a complaint for refund with the United States Claims Court or the District Court of the United States for the district in which the Company’s principal place of business is located;
(iii) to intervene in any action brought by any other Member for judicial review of a Final Adjustment;
(iv) to file a request for an administrative adjustment with the IRS at any time and, if any part of such request is not allowed by the IRS, to file an appropriate pleading (petition or complaint) for judicial review with respect to such request;
(v) to enter into an agreement with the IRS to extend the period for assessing any tax which is attributable to any item required to be taken into account by a Member for tax purposes, or an item affected by such item; and
(vi) to take any other action on behalf of the Members of the Company in connection with any tax audit or judicial review proceeding to the extent permitted by applicable law or regulations.
The taking of any action and the incurring of any expense by the Tax Matters Member in connection with any such proceeding, except to the extent required by law, is a matter in the sole and absolute discretion of the Tax Matters Member and the provisions relating to indemnification of the Sharyland Member set forth in Article VII shall be fully applicable to the Tax Matters Member in its capacity as such.
(c) Reimbursement . The Tax Matters Member shall receive no compensation for its services. All third party costs and expenses incurred by the Tax Matters Member in performing its duties as such (including legal and accounting fees and expenses) shall be borne by the Company. Nothing herein shall be construed to restrict the Company from engaging an accounting firm and/or law firm to assist the Tax Matters Member in discharging its duties hereunder, so long as the compensation paid by the Company for such services is reasonable.
Section 10.4 Organizational Expenses . The Company shall elect to deduct expenses, if any, incurred by it in organizing the Company ratably over a one hundred eighty (180) month period as provided in Section 709 of the Code.
Section 10.5 Withholding . Each Member hereby authorizes the Company to withhold from or pay on behalf of or with respect to such Member any amount of federal, state, local, or foreign taxes that the Sharyland Member determines the Company is required to withhold or pay with respect to any amount distributable or allocable to such Member pursuant to this Agreement, including, without limitation, any taxes required to be withheld or paid by the Company pursuant to Section 1441, 1442, 1445, or 1446 of the Code. Any amount paid on behalf of or with respect to a Member shall constitute a loan by the Company to such Member, which loan shall be repaid by such Member within fifteen (15) days after notice from the Sharyland Member that such payment must be made unless (i) the Company withholds such payment from a distribution which would otherwise be made to the Member or (ii) the Sharyland Member determines, in its sole and absolute discretion, that such payment may be satisfied out of
 
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the available funds of the Company which would, but for such payment, be distributed to the Member. Any amounts withheld pursuant to the foregoing clauses (i) or (ii) shall be treated as having been distributed to such Member. Each Member hereby unconditionally and irrevocably grants to the Company a security interest in its Interest to secure such Member’s obligation to pay to the Company any amounts required to be paid pursuant to this Section 10.5 . If a Member fails to pay any amounts owed to the Company pursuant to this Section 10.5 when due, the Sharyland Member may, in its’ sole and absolute discretion, elect to make the payment to the Company on behalf of such defaulting Member, and in such event shall be deemed to have loaned such amount to such defaulting Member and shall succeed to all rights and remedies of the Company as against such defaulting Member (including, without limitation, the right to receive distributions). Any amounts payable by a Member hereunder shall bear interest at the base rate on corporate loans at large United States money center commercial banks, as published from time to time in the Wall Street Journal, plus four (4) percentage points per annum (but not higher than the maximum lawful rate under the laws of the State of Texas) from the date such amount is due (i.e., fifteen (15) days after demand) until such amount is paid in full. Each Member shall take such actions as the Company or the Sharyland Member shall request to perfect or enforce the security interest created hereunder.
Section 10.6 Code Section 83 Safe Harbor Election . By executing this Agreement, each Member authorizes and directs the Company to elect to have the “Safe Harbor” described in the proposed Revenue Procedure set forth in Internal Revenue Service Notice 2005-43 (the “ Notice ”) apply to any interest in the Company transferred to a service provider by the Company on or after the effective date of such Revenue Procedure in connection with services provided to the Company. For purposes of making such Safe Harbor election, the Tax Matters Member is hereby designated as the “partner who has responsibility for federal income tax reporting” by the Company and, accordingly, execution of such Safe Harbor election by the Tax Matters Member constitutes execution of a “Safe Harbor Election” in accordance with Section 3.03(1) of the Notice. The Company and each Member hereby agree to comply with all requirements of the Safe Harbor described in the Notice, including, without limitation, the requirement that each Member shall prepare and file all federal income tax returns reporting the income tax effects of each “Safe Harbor Partnership Interest”) (as described in Section 3.02 of the Notice) issued by the Company in a manner consistent with the requirements of the Notice. Each Member authorizes the Tax Matters Member to amend this Section 10.6 to the extent necessary to achieve substantially the same tax treatment with respect to any interest in the Company transferred to a service provider by the Company in connection with services provided to the Company as set forth in Section 4 of the Notice (e.g., to reflect changes from the rules set forth in the Notice in subsequent Internal Revenue Service guidance), provided that such amendment is not materially adverse to any Member (as compared with the after-tax consequences that would result if the provisions of the Notice applied to all interests in the Company transferred to a service provider by the Company in connection with services provided to the Company).
 
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ARTICLE XI.
REPRESENTATIONS AND WARRANTIES
Section 11.1 Sharyland Member . As of the date hereof each of the statements in this Section 11.1 shall be a true, accurate and full disclosure of all facts relevant to the matters contained therein, and such warranties and representations shall survive the execution of this Agreement. The Sharyland Member hereby represents and warrants that:
(a) The Sharyland Member is a duly organized and validly existing Texas limited partnership and has the requisite right, power and authority to enter into and carry out the terms and provisions of this Agreement.
(b) All formal action required to be taken by the Sharyland Member to execute and deliver and perform its obligations under, this Agreement has been taken by the Sharyland Member and no further approval of any board, court, or other body is necessary in order to permit the Sharyland Member to execute, deliver or perform this Agreement.
(c) The Sharyland Member understands that its right to Transfer all or any portion of its Interest is restricted by the terms and provisions of this Agreement and that it therefore must be prepared to bear the economic risks of its investment for an indefinite period of time.
(d) There are no oral agreements between the Members, and this Agreement may not be contradicted by evidence of prior, contemporaneous or subsequent oral agreements of the Members or their agents.
Section 11.2 TDC Member . As of the date hereof each of the statements in this Section 11.2 shall be a true, accurate and full disclosure of all facts relevant to the matters contained therein, and such warranties and representations shall survive the execution of this Agreement. The TDC Member hereby represents and warrants that:
(a) The TDC Member is a duly organized and validly existing Texas limited liability company and has the requisite right, power and authority to enter into and carry out the terms and provisions of this Agreement.
(b) All action required to be taken by the TDC Member to execute and deliver and perform its obligations under, this Agreement has been taken and that no further approval of any board, court, or other body is necessary in order to permit the TDC Member to execute, deliver or perform this Agreement.
(c) The TDC Member understands that its right to Transfer all or any portion of its Interest is restricted by the terms and provisions of this Agreement and that it therefore must be prepared to bear the economic risks of its investment for an indefinite period of time.
(d) There are no oral agreements between the Members, and this Agreement may not be contradicted by evidence of prior, contemporaneous or subsequent oral agreements of the Members or their agents.
 
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ARTICLE XII.
TRANSFER OF INTERESTS
Section 12.1 Restrictions on Transfer . Except as expressly provided for in this Agreement, no Member may, without the Approval of the other Member, sell, convey, transfer, assign, mortgage, pledge, hypothecate or otherwise encumber in any way (“ Transfer ”) all or any portion of or interest in its Interest or any interest it may have in any property of the Company, or withdraw or retire from the Company. Any such attempted Transfer, withdrawal or retirement not permitted hereunder shall be null and void. Notwithstanding anything herein to the contrary, no Transfer of an Interest shall be valid unless and until all necessary Regulatory Approvals applicable to such Transfer have been obtained.
Section 12.2 General Transfer Provisions .
(a) All Transfers shall be by instrument in form and substance satisfactory to counsel for the Company and shall contain an agreement by the assignee to accept the assignment and to accept and agree to all of the terms and provisions of this Agreement, as the same may have been amended, and shall provide for the payment by the assignor of all reasonable expenses incurred by the Company in connection with such assignment, including, without limitation, the necessary amendments to this Agreement to reflect such Transfer (including, without limitation, reasonable attorneys’ fees). The transferor shall execute and acknowledge all such instruments, in form and substance reasonably satisfactory to the Company’s counsel, as may be necessary or desirable to effectuate such Transfer.
(b) In no event shall the Company terminate (other than for tax purposes) upon the admission of any Member to the Company or upon any permitted assignment of an Interest by any Member. Each Member hereby waives its right to liquidate or terminate the Company in such event.
(c) Upon completion of a Transfer in compliance with this Agreement, the transferor shall be released from all future obligations occurring under this Agreement, after the date of such Transfer, provided the assignee of such transferor assumes, by written instrument reasonably acceptable to the Company, all such obligations of the transferor. Notwithstanding the immediately preceding sentence, the transferor shall remain liable for its obligations under this Agreement accruing or occurring on or prior to the date of such Transfer.
(d) Notwithstanding anything to the contrary in this Section 12.2 , the TDC Member may mortgage, pledge or otherwise Transfer its Interest to a third party as collateral in connection with a bona fide financing transaction.
Section 12.3 Compliance . Notwithstanding anything to the contrary in this Agreement, at law or in equity, no Partner shall Transfer or otherwise deal with any Interest in a way that would cause a default under any agreement to which the Company is a party or by which it is bound.
ARTICLE XIII.
TERMINATION OF THE COMPANY
Section 13.1 Events of Winding Up . The Company shall commence to wind up upon the first to occur of the following events:
 
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(a) the sale or other disposition (including, without limitation, taking by eminent domain) of all or substantially all of the assets of the Company (subject to any required Regulatory Approvals) unless such sale or other disposition involves any deferred payment of the consideration for such sale or disposition, in which case the Company shall not commence to wind up until the last day of the calendar year during which the Company shall receive the balance of such deferred payment;
(b) the agreement of the Members in writing to wind up the Company;
(c) the occurrence of an Event of Bankruptcy with respect to the Sharyland Member, unless within ninety (90) days after such Event of Bankruptcy the TDC Member consents in writing to continue the business of the Company and to the appointment effective as of the date of such Event of Bankruptcy, of a substitute Sharyland Member;
(d) the issuance of a decree of winding up by a court of competent jurisdiction; or
(e) the occurrence of any other event or action which requires winding up of the Company under Applicable Laws.
Section 13.2 Effect of Winding Up . Upon an event requiring winding up of the Company pursuant to Section 13.1 , the Company shall not terminate but shall continue for the purposes (i) of obtaining any necessary Regulatory Approvals required as result of the occurrence of any of the events described in Section 13.1 ; (ii) as may be required by any Regulatory Agency; and (iii) of distributing or liquidating all of the assets owned by the Company and, if liquidating, collecting the proceeds from such sales and all receivables of the Company until the same has been written off as uncollectible. Upon an event requiring winding up of the Company, the Company shall continue to operate its business in the ordinary course consistent with reasonable and prudent Good Utility Practices, until such time as all necessary Regulatory Approvals relating to the liquidation of the Company have been obtained, but otherwise engage in no further business thereafter other than as necessary for the Company to collect its receivables, liquidate and/or distribute its assets and pay or discharge its liabilities. The liquidating distribution of assets, whether in cash or in kind as hereinafter provided, shall occur in accordance with Section 4.3 hereof. It is intended that the foregoing distributions to each Member will be equal to each Member’s respective positive Capital Account balance as determined after giving effect to all adjustments attributable to allocations of items of income, gain, loss and deduction realized by the Company during the Fiscal Year in question (including items of gain and loss realized on the sale of all properties and assets of the Company pursuant to this Section 13.2 and all adjustments attributable to contributions and distributions of money and property effected prior to such distribution) as described in Section 4.1 . To the extent that any such Member’s positive Capital Account balance does not correspond to such distribution, the allocations provided for in Section 4.1 shall be adjusted, to the least extent necessary, to produce a Capital Account balance for the Member which corresponds to the amount of such distribution.
 
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Section 13.3 Sale or Distribution of Assets Resulting from Liquidation .
(a) Unless the Company is continued pursuant to Section 13.1(c) , upon an event requiring winding up of the Company, the Sharyland Member or, if the winding up is caused by an Event of Bankruptcy of the Sharyland Member, a third party appointed by the TDC Member, shall act as liquidator trustee (the “ Liquidating Trustee ”) of the Company and shall diligently proceed to wind up the affairs of the Company in accordance with a plan of liquidation approved by the Members, or, in the case of winding up of the Company caused by an Event of Bankruptcy, by the TDC Member. Such plan of liquidation shall provide that the Company shall continue to operate its business in the ordinary course consistent with reasonable and prudent Good Utility Practices, until such time as all necessary Regulatory Approvals relating to the liquidation of the Company have been obtained. Another Person may be selected by a majority vote of the Interests to succeed the original Liquidating Trustee, or to succeed any subsequently selected successor, whenever the Person originally selected or any such subsequently selected successor, as the case may be, fails for any reason to carry out such purpose. The Liquidating Trustee may be an individual, corporation or general or limited partnership or other Entity.
(b) The Liquidating Trustee shall promptly after an event requiring winding up obtain an appraisal of the assets of the Company by an appraiser with appropriate experience in valuing the types of assets and properties then owned by the Company as selected by the Liquidating Trustee. All of the assets of the Company remaining after any required distributions of such assets in kind as Approved by Members under the terms of this Agreement, other than cash, shall be offered (either as an entirety or on an asset-by-asset basis) promptly for sale, upon such terms as the Liquidating Trustee shall determine using the foregoing appraisal as a guide.
(c) The Members and their Affiliates shall have the right to negotiate or bid for any or all of the remaining assets being offered for sale from and after the date of an event requiring winding up of the Company, but not before such date.
(d) The decision to accept or reject an offer to purchase any remaining assets of the Company (a “ Purchase Offer ”) shall be made solely by the Liquidating Trustee; provided that, if the Sharyland Member is the Liquidating Trustee and proposes to sell such remaining assets to itself or an Affiliate, the terms of such sale must be Approved by the TDC Member.
(e) In winding up the affairs of the Company, the Liquidating Trustee shall pay the liabilities of the Company in such order of priority as provided by law.
ARTICLE XIV.
MISCELLANEOUS
Section 14.1 Notices . All notices required or permitted by this Agreement shall be in writing, and shall be served personally or by depositing same in the United States mail, addressed to the Member to be notified, by registered or certified mail, with postage prepaid, return receipt requested, or may be transmitted by facsimile or electronic transmission, and addressed to the Members at their respective addresses set forth in Section 1.2 , or to such other address as shall from time to time be supplied in writing by either Member to the other Member in accordance with the procedures of this Section 14.1 . Notice sent by registered or certified mail, postage paid, with return receipt requested, receipt addressed as above provided, shall be deemed given upon actual receipt or upon the date such notice is tendered and refused delivery at the address provided for herein or the date of failure of delivery by reason of changed address of which no notice was given. If any notice is transmitted by facsimile or electronic transmission, the same shall be deemed served or delivered upon actual receipt. Any notice or other document sent or delivered in any other manner shall be effective only if and when received.
 
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Section 14.2 Confidentiality . Each Member agrees to use all information received by it (the “ Receiving Party ”) or its Representatives from the other Member, the Company or its Representatives (the “ Disclosing Party ”) in connection with the business and activities of the Company (“ Non-Public Information ”) solely for the purpose of the Company’s business and activities, and shall treat confidentially all such Non-Public Information; provided, that this Section 14.2 shall not restrict the Receiving Party from disclosing any Non-Public Information (a) to the extent such Non-Public Information is or becomes generally available to the public other than as a result of a disclosure by the Receiving Party or its Representatives in violation of the provisions of this Section 14.2 ; (b) was or becomes available on a non-confidential basis to the Receiving Party or its Representatives from a source other than the Disclosing Party or its Representatives, provided that, to the Receiving Party’s knowledge, such source is not prohibited from disclosing such information to the Receiving Party by a contractual, legal or fiduciary obligation; (c) was already in the possession of the Receiving Party or its Representatives prior to the date hereof and was not obtained directly or indirectly from the Disclosing Party or its Representatives; (d) in any legal, judicial or administrative proceeding or otherwise as required by Applicable Laws (in which case the Receiving Party, as applicable, shall promptly notify the Disclosing Party to the extent permitted by law), (e) upon the request or demand of any Regulatory Authority having jurisdiction over the Receiving Party or any of their respective Affiliates (in which case the Receiving Party, as applicable, shall promptly notify the Disclosing Party to the extent permitted by law); or (f) to respective partners, members, directors, officers, employees, Affiliates, advisors, consultants, representatives, and other experts or agents (“ Representatives ”) of the Receiving Party who need to know such information and are informed of the confidential nature of such information and are or have been advised of their obligation to keep information of this type confidential; and the Receiving Party, as applicable shall be responsible for its Affiliate’s compliance with this Section 14.2 ).
Section 14.3 Successors and Assigns . Subject to the restrictions on Transfer set forth herein, this Agreement shall bind and inure to the benefit of the parties hereto and their respective legal representatives, successors and assigns.
Section 14.4 Amendments; No Oral Modifications . No oral modification or amendment of this Agreement shall be binding on either Member. This Agreement may be modified or amended only by a written instrument executed by both of the Members.
Section 14.5 Captions . Any article, section or paragraph titles or captions contained in this Agreement are for convenience of reference only and shall not be deemed a part of this Agreement.
Section 14.6 Terms . Common nouns and pronouns shall be deemed to refer to the masculine, feminine, neuter, singular and plural, as the identity of the Person or Entity may in the context require. Any reference to the Code, Act or other statutes or laws shall include all amendments, modifications or replacements of the specific sections and provisions concerned. All plurals used in this Agreement shall, where appropriate, be deemed to be singular, and vice versa.
 
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Section 14.7 Severability . Should any provision of this Agreement be held unenforceable or invalid under the laws of the United States of America or the State of Texas or under any other applicable laws of any other jurisdiction, then the parties hereto agree that such provision shall be deemed modified for purposes of performance of this Agreement in such jurisdiction to the extent necessary to render it lawful and enforceable, or if such a modification is not possible without materially altering the intention of the parties hereto, then such provision shall be severed herefrom for purposes of performance of this Agreement in such jurisdiction. The validity of the remaining provisions of this Agreement shall not be affected by any such modification or severance, except that if any severance materially alters the intentions of the parties hereto as expressed herein (a modification being permitted only if there is no material alteration), then the parties hereto shall use their best reasonable efforts to agree to appropriate equitable amendments to this Agreement in light of such severance, and if no such agreement can be reached within a reasonable time, any party hereto may initiate arbitration under the then current commercial arbitration rules of the American Arbitration Association to determine and effect such appropriate equitable amendments.
Section 14.8 Further Assurances . The parties hereto agree that they will cooperate with each other and will execute and deliver, or cause to be delivered, all such other instruments, and will take all such other actions, as either party hereto may reasonably request from time to time in order to effectuate the provisions and purposes hereof, provided that such action is within the reasonable control of the party upon whom the request is made and that such action will not increase the liability or obligation of the party upon whom the request is made unless such increase is specifically required hereunder.
Section 14.9 Complete Agreement . This Agreement constitutes the complete and exclusive statement of the agreement between the Members. It supersedes all prior written and oral statements and no representation, statement, condition or warranty not contained in this Agreement shall be binding on the Members or have any force or effect whatsoever.
Section 14.10 Attorneys’ Fees . If any proceeding is brought by one Member against the other Member to enforce, or for breach of, any of the provisions in this Agreement, the prevailing Member shall be entitled in such proceeding to recover reasonable attorneys’ fees together with the costs of such proceeding therein incurred.
Section 14.11 Governing Law . This Agreement shall be construed and enforced in accordance with the laws of the State of Texas without reference to the principles of conflicts of laws.
Section 14.12 No Third Party Beneficiary . Any agreement to pay any amount and any assumption of liability herein contained, express or implied, shall be only for the benefit of the Members, Covered Persons and their respective heirs, successors and assigns, and such agreements and assumption shall not inure to the benefit of the obligees of any indebtedness or any other party, whomsoever, it being the intention of the Members that, except as otherwise provided in Section 7.2 or this Section 14.12 , no one shall be deemed to be a third party beneficiary of this Agreement.
 
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Section 14.13 Approvals . Whenever the Approval of a Member is required by this Agreement, such Member shall have the right to give or withhold such Approval in its sole discretion, unless otherwise specified.
Section 14.14 Drafting Conventions . The language in all parts of this Agreement shall in all cases be construed according to its fair meaning and not against the drafting party. Section headings are for convenience only and are not intended to be a part of this Agreement nor shall they in any way limit, define or amplify the provisions hereof. Time shall be of the essence with respect to any time periods prescribed herein.
Section 14.15 Counterparts . This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which, when taken together, shall constitute one and the same instrument, binding on the Members, and the signature of any party to any counterpart shall be deemed a signature to, and may be appended to, any other counterpart.
Section 14.16 Telecopy Execution and Delivery . A facsimile, telecopy or other reproduction of this Agreement may be executed by one or more parties hereto, and an executed copy of this Agreement may be delivered by one or more parties hereto by facsimile or similar electronic transmission device pursuant to which the signature of or on behalf of such party can be seen, and such execution and delivery shall be considered valid, binding and effective for all purposes. At the request of either party hereto, all parties hereto agree to execute an original of this Agreement as well as any facsimile, telecopy or other reproduction hereof.
* * * * *
[Remainder of Page Intentionally Left Blank]
 
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IN WITNESS WHEREOF, this Agreement has been signed by each of the parties as of the date hereof.

SHARYLAND UTILITIES, L.P.	
		
By:		/s/ Hunter L. Hunt	
Name:		Hunter L. Hunt	
Title:		Chairman	
	
TRANSMISSION AND DISTRIBUTION	
COMPANY, L.L.C.	
		
By:		/s/ David A. Campbell	
Name:		David A. Campbell	
Title:		President	
Signature Page to SDTS Company Agreement

Exhibit 10.12
DELEGATION AGREEMENT
between
SHARYLAND UTILITIES, L.P.
and
INFRAREIT, INC.

TABLE OF CONTENTS

ARTICLE 1.	  	DEFINITIONS; GENERAL REFERENCES	  	 	1	  	
1.1	  	Definitions	  	 	1	  	
1.2	  	Rules of Construction	  	 	4	  	
1.3	  	Precedence	  	 	4	  	
			
ARTICLE 2.	  	DELEGATION OF POWER	  	 	4	  	
2.1	  	Delegation of Power	  	 	4	  	
2.2	  	Amendments to Delegation	  	 	6	  	
2.3	  	Corporate Affiliates and Contractors	  	 	7	  	
			
ARTICLE 3.	  	SHARYLAND RESERVATION OF POWER AND ADDITIONAL RESPONSIBILITIES	  	 	7	  	
3.1	  	Reservation of Power	  	 	7	  	
3.2	  	No Delegation of Power Prohibited by Applicable Law or Regulatory Authorities	  	 	7	  	
3.3	  	Sharyland’s Responsibilities	  	 	8	  	
			
ARTICLE 4.	  	COMPENSATION	  	 	8	  	
4.1	  	No Internal Expenses	  	 	8	  	
4.2	  	Third Party Expenses	  	 	8	  	
			
ARTICLE 5.	  	INDEMNIFICATION	  	 	8	  	
5.1	  	Indemnification By Delegatee	  	 	8	  	
5.2	  	Indemnification by Sharyland	  	 	8	  	
5.3	  	Limitation of Liability	  	 	9	  	
			
ARTICLE 6.	  	TERM AND TERMINATION	  	 	9	  	
6.1	  	Term	  	 	9	  	
6.2	  	Termination	  	 	9	  	
6.3	  	Rights Upon Termination	  	 	9	  	
			
ARTICLE 7.	  	REPRESENTATIONS AND WARRANTIES	  	 	10	  	
7.1	  	Representations and Warranties by Both Parties	  	 	10	  	
			
ARTICLE 8.	  	DISPUTE RESOLUTION	  	 	10	  	
8.1	  	Arbitration	  	 	10	  	
8.2	  	Continued Performance	  	 	11	  	
			
ARTICLE 9.	  	MISCELLANEOUS	  	 	12	  	
9.1	  	Confidentiality and Non-Disclosure	  	 	12	  	
9.2	  	Assignment	  	 	13	  	
9.3	  	Not for Benefit of Third Parties	  	 	13	  	
9.4	  	Amendments	  	 	13	  	
9.5	  	Survival	  	 	13	  	
9.6	  	No Waiver	  	 	13	  	
9.7	  	Notices	  	 	13	  	
 
ii

							
9.8	  	Counterparts	  	 	14	  	
9.9	  	Governing Law	  	 	14	  	
9.10	  	Captions	  	 	14	  	
9.11	  	Severability	  	 	14	  	
9.12	  	Entire Agreement	  	 	14	  	
9.13	  	Further Assurances	  	 	15	  	
 
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DELEGATION AGREEMENT
This DELEGATION AGREEMENT (this “ Agreement ”), entered into on January 29, 2015 to be effective as of the Effective Date (as hereinafter defined), is by and between Sharyland Utilities, L.P., a Texas limited partnership (“ Sharyland ”), and InfraREIT, Inc., a Maryland corporation (“ Delegatee ”). Each of Sharyland and Delegatee may be referred to herein as a “ Party ” and together as the “ Parties .”
RECITALS
WHEREAS, Sharyland and Transmission and Distribution Company, L.L.C., a Texas limited liability company (the “ TDC Member ”, together with Sharyland, the “ Members ”) formed Sharyland Transmission Services, L.P. as a Texas limited partnership (the “ Company ”) and entered into an Agreement of Limited Partnership as of June 28, 2006 and subsequently changed the name of the Company to “Sharyland Distribution & Transmission Services, L.P.”;
WHEREAS, the Members converted the Company from a Texas limited partnership to a Texas limited liability company as provided for under the Act and the Company became “Sharyland Distribution & Transmission Services, L.L.C.”;
WHEREAS, Sharyland is the managing member of the Company and has the power and authority on behalf of the Company to manage, control, administer and operate the properties, business and affairs of the Company subject to, and in accordance with, the Third Amended and Restated Company Agreement of the Company, effective as of the Effective Date (as amended from time to time, the “ Company Agreement ”);
WHEREAS, pursuant to Section 5.1(a) of the Company Agreement, Sharyland has the right to delegate such power and authority to a third party;
WHEREAS, consistent with the power and authority granted to Sharyland under the Company Agreement, Sharyland desires to enter into this Agreement with Delegatee pursuant to which Sharyland will delegate certain of its power and authority to perform duties in connection with the management of the business and affairs of the Company; and
WHEREAS, notwithstanding anything to the contrary herein, Sharyland shall reserve for itself and shall not delegate any power or authority (i) to operate any of the T&D Assets; (ii) to cause the Company to fund necessary Footprint Projects (as defined in the Company Agreement) in order to maintain the safety or reliability of the T&D Assets; or (iii) to take certain other actions as more fully described herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and other valuable consideration, the Parties hereby agree as follows:
ARTICLE 1. DEFINITIONS; GENERAL REFERENCES
1.1 Definitions . For all purposes of this Agreement (including the preceding recitals) unless otherwise required by the context in which any defined term appears, capitalized terms have the meanings specified in this Article 1 .
 
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“ Act ” shall mean the Texas Limited Liability Company Law as set forth in the Texas Business Organizations Code, as the same may be 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 first Person. The term “ control ” (including correlative terms such as “ controlled by ” and “ under common control with ”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise; provided , however , that the Affiliates of Delegatee shall not include Sharyland, Sharyland’s subsidiaries and parent companies with ownership interests in Sharyland, and the Affiliates of Sharyland shall not include Delegatee or Delegatee’s subsidiaries.
“ Agreement ” has the meaning set forth in the preamble.
“ Annual Business Plan ” has the meaning ascribed to such term in the Company Agreement.
“ Applicable Law ” means any and all laws, ordinances, statutes, orders and regulations of any Governmental Authorities, including any securities exchange listing requirements.
“ Approved Annual Business Plan ” has the meaning ascribed to such term in the Company Agreement.
“ Approved Capital Expenditure Budget ” means a Capital Expenditure Budget that has been submitted by Sharyland and Approved (as defined in the Company Agreement) by the Delegatee in accordance with Section 8.1 of the Company Agreement.
“ Arbitration Panel ” has the meaning set forth in Section 8.1(a) .
“ Bankruptcy ” means a situation in which a Person (i) is generally not paying, or admits in writing its inability to pay, its debts as they become due, (ii) files, or consents by answer or otherwise to the filing against it of, a petition for relief or reorganization or arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency, reorganization, moratorium or other similar law of any jurisdiction, (iii) makes an assignment for the benefit of its creditors, (iv) consents to the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, (v) is adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for the purpose of any of the foregoing.
“ Capital Expenditure Budget ” shall mean the rolling three-year capital expenditure budget that Sharyland provides to the Delegatee, the provisions of which are reflected in the Company Agreement.
“ Company ” has the meaning set forth in the recitals.
“ Company Agreement ” has the meaning set forth in the recitals.
 
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“ Confidential Information ” has the meaning set forth in Section 9.1(a) .
“ Delegatee ” has the meaning set forth in the preamble and shall be deemed to include any successor by operation of law or any permitted assign pursuant to Section 9.2 .
“ Delegatee Indemnitees ” has the meaning set forth in Section 5.2 .
“ Delegatee Panel Member ” has the meaning set forth in Section 8.1(b) .
“ Effective Date ” means the date on which the initial public offering of the Delegatee is consummated.
“ ERCOT ” means the Electric Reliability Council of Texas.
“ Footprint Project(s) ” has the meaning set forth in the recitals.
“ Good Utility Practice ” shall be as defined from time to time by the PUCT and, as of the date hereof, means any of the practices, methods, and acts engaged in or approved by a significant portion of the electric utility industry during the relevant time period, or any of the practices, methods, and acts that, in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at a reasonable cost consistent with good business practices, reliability, safety, and expedition. Good Utility Practice is not intended to be limited to the optimum practice, method, or act, to the exclusion of all others, but rather is intended to include acceptable practices, methods, and acts generally accepted in the region.
“ Governmental Authority ” means any federal, state, or local government, regulatory or administrative authority, any agency or commission thereof, or any court or tribunal and any self-regulatory organization, including, but not limited to, a national securities exchange registered with the Securities and Exchange Commission.
“ Liabilities ” has the meaning set forth in Section 5.1 .
“ Members ” has the meaning set forth in the recitals.
“ New Project ” has the meaning ascribed to such term in the Company Agreement.
“ Non-Breaching Party ” has the meaning set forth in Section 9.1(b) .
“ Party ” or “ Parties ” has the meaning set forth in the preamble.
“ Person ” means any Party, individual, partnership, corporation, association, limited liability company, business trust, government or political subdivision thereof, governmental agency or other entity.
“ PUCT ” means the Public Utility Commission of Texas.
“ PURA ” means the Public Utility Regulatory Act, as amended.
 
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“ Regulatory Authority(ies) ” means the PUCT, ERCOT, the Texas Regional Entity, FERC and any similar Governmental Authority having jurisdiction over the T&D Assets.
“ Sharyland ” has the meaning set forth in the preamble.
“ Sharyland Indemnitees ” has the meaning set forth in Section 5.1 .
“ Sharyland Panel Member ” has the meaning set forth in Section 8.1(b) .
“ T&D Assets ” shall mean all electric transmission and/or distribution assets that are owned by the Company at the time of reference.
“ TDC Member ” has the meaning set forth in the recitals.
“ Term ” has the meaning set forth in Section 6.1 .
“ Third Panel Member ” has the meaning set forth in Section 8.1(b) .
1.2 Rules of Construction . As used in this Agreement, the terms “herein” and “hereof” are references to this Agreement, taken as a whole; the term “includes” or “including” shall mean “including, without limitation”; and references to a “Section” or “Article” shall mean a Section or Article of this Agreement, as the case may be, unless in any such case the context requires otherwise. All references to a given agreement, instrument or other document shall be a reference to that agreement, instrument or other document as modified, amended, supplemented and restated through the date as of which such reference is made, and reference to a law includes any amendment or modification thereof. The singular shall include the plural, as the context requires, and the masculine shall include the feminine and neuter, and vice versa.
1.3 Precedence . In the event of a conflict or discrepancy between this Agreement and the Company Agreement, the interpretation of this Agreement or any amendment thereof shall have precedence over the provisions of the Company Agreement or any amendment thereof.
ARTICLE 2. DELEGATION OF POWER
2.1 Delegation of Power . During the Term, Sharyland irrevocably delegates to Delegatee, to the fullest extent permitted under the Company Agreement and Applicable Law, the power and authority to perform the duties of managing the business and affairs of the Company that are set below:
(a) sourcing, evaluating and obtaining on the Company’s or any of its subsidiaries’ behalf any loan, indebtedness or other financing arrangements necessary or appropriate in connection with the Company’s or such subsidiary’s business;
(b) causing the Company or any subsidiary thereof to negotiate and enter into any such loan, indebtedness or other financing arrangements, and any amendments thereto, and causing the Company to enter into and perform any obligations under any related financing documents;
 
4

(c) causing the Company or any subsidiary thereof to provide any contractual or other support for any loan, indebtedness or equity financing arrangements obtained by the TDC Member or Affiliate thereof;
(d) causing the Company or any subsidiary thereof to provide any necessary information or support related to communications, compliance or other matters related to equity capital that the TDC Member or any Affiliate thereof has raised;
(e) conducting the business of the Company or any subsidiary thereof (or any of their respective joint ventures or co-investments) under its name or such other names as may be determined as necessary by Delegatee;
(f) causing the Company and its subsidiaries to comply with all Applicable Laws of any Governmental Authorities (other than the Applicable Laws (x) of any Regulatory Authorities and (y) related to the operation of the T&D Assets);
(g) causing the Company or any subsidiary thereof to negotiate and enter into contracts (including any leases), to incur and be bound by any related obligations thereto, and to enforce any rights therein, including, but not limited to, determining any breach of contract and seeking and enforcing any remedies available under contract, law or equity;
(h) participating with Sharyland in the preparation of the Capital Expenditure Budget and any amendments thereto;
(i) preparing the portions of the Annual Business Plan that relate to matters other than capital expenditures;
(j) monitoring the insurance required under any lease of the T&D Assets and enforcing the Company’s and any subsidiary’s rights under the applicable insurance policies; provided that , Sharyland shall determine from time to time the amount of insurance coverage with respect to the operations and Footprint Projects and other assets of the Company as reasonably required for ownership and prudent operation of the T&D Assets;
(k) causing the Company or any subsidiary thereof to negotiate and enter into any renewals or supplements of any leases with Sharyland, any Affiliate thereof or any other third party;
(l) keeping the books of accounts and other financial and corporate records of the Company and any subsidiary thereof; provided that , Sharyland shall continue to maintain, or cause to be maintained, all logs, drawings, manuals, specifications and data and inspection, modification and maintenance records and other materials required to be maintained in respect of the T&D Assets required by Applicable Laws or consistent with Good Utility Practices;
(m) preparing and distributing any periodic financial reports and annual audits of the Company and any subsidiary thereof and coordinating with Sharyland in preparing those reports;
 
5

(n) preparing, documenting and updating any accounting or other internal controls of the Company and any subsidiary thereof, including internal controls over financial reporting;
(o) assisting any Affiliate of the Company in satisfying reporting and compliance obligations under applicable securities laws or the rules of any exchange on which the securities of such Affiliate may trade;
(p) opening and managing bank accounts and Treasury/cash management activities on behalf of the Company or any subsidiary thereof;
(q) managing all tax matters and administration thereof on behalf of the Company and any subsidiary thereof;
(r) planning, sourcing and managing all capital needs of the Company and any subsidiary thereof, including but not limited to, forecasting the needs for capital (subject to Sharyland’s participation), determining uses for capital, and raising capital;
(s) managing all investor communications and relations and preparing the annual reports of the Company or any subsidiary thereof;
(t) causing the Company or a subsidiary thereof to acquire or dispose of transmission, distribution or other assets and negotiating and causing the Company or any such subsidiary to perform its obligations under any related acquisition or disposition agreements; provided that , the delegation of Sharyland’s power to Delegatee will not affect Sharyland’s authority to cause the Company to take such actions, subject to the negative control rights of the TDC Member in the Company Agreement;
(u) causing the Company or a subsidiary thereof to negotiate, enter into and perform its obligations under contracts for the construction of transmission and distribution projects and related engineering, procurement and construction (EPC) or other contracts;
(v) electing, removing and replacing officers and managing the corporate minute books of the Company and any subsidiary thereof; provided that , in all circumstances at least one designated employee of Sharyland will remain as a senior vice president or other officer of the Company;
(w) directing Sharyland to file a rate case proceeding with the PUCT with respect to the T&D Assets pursuant to the leases between the Company or any subsidiary thereof and Sharyland or any subsidiary thereof; and
(x) any other responsibilities, rights or duties to manage the affairs of the Company other than those reserved for Sharyland as set forth below.
2.2 Amendments to Delegation . If the power and/or authority of Sharyland as the managing member of the Company are modified pursuant to a subsequent amendment and/or restatement to the Company Agreement, changes in Applicable Law or otherwise, then the power and authority delegated to the Delegatee shall be modified on the same basis.
 
6

2.3 Corporate Affiliates and Contractors . Delegatee shall be authorized to utilize the services of its Affiliates or third-party contractors, in each case, that are necessary or appropriate for the exercise of the powers and authorities delegated to it hereunder.
ARTICLE 3. SHARYLAND RESERVATION OF POWER AND ADDITIONAL RESPONSIBILITIES .
3.1 Reservation of Power . Notwithstanding anything to the contrary herein, subject to any limitation set forth in the Company Agreement, Sharyland expressly reserves the following powers, rights and responsibilities:
(a) operational control over the T&D Assets, including but not limited to, maintenance, planning Footprint Projects, managing quality of service, handling customer and community relations matters, accounting for operating and maintenance costs, operating in compliance with all environmental, safety and other Applicable Laws applicable to operating the T&D Assets;
(b) compliance with all Applicable Laws (x) of any Regulatory Authorities and (y) related to the operation of the T&D Assets and managing all regulatory matters and relationships with any such Regulatory Authorities;
(c) rights under Section 3.2(d) of the Company Agreement to either contribute capital to fund certain Footprint Projects or to seek and obtain reasonable alternative capital sources for such Footprint Projects in accordance with the terms of Section 3.2(d) of the Company Agreement;
(d) rights under Section 5.2(b) of the Company Agreement to take certain actions on behalf of the Company in its reasonable judgment in accordance with Section 5.2(b) of the Company Agreement, notwithstanding the approval rights of the TDC Member;
(e) participation and coordination with Delegatee in forecasting the capital needs of the Company and preparing the Capital Expenditure Budget and any amendments thereto;
(f) rights (i) to propose amendments to an Approved Capital Expenditure Budget or Approved Annual Business Plan or (ii) to exceed an Approved Capital Expenditure Budget or Approved Annual Business Plan in certain circumstances in accordance with the Company Agreement; and
(g) all other rights under the Company Agreement requiring the express consent or approval of Sharyland.
3.2 No Delegation of Power Prohibited by Applicable Law or Regulatory Authorities . Sharyland does not delegate any power, authority or right that would in any manner be contrary or inconsistent with any order or rule of the PUCT or PURA. To the extent that any inconsistency exists, it shall be deemed that Sharyland has not delegated any such power, authority or right to Delegatee.
 
7

3.3 Sharyland’s Responsibilities . Sharyland shall render to Delegatee all reasonably necessary assistance and cooperate with Delegatee for Delegatee to exercise the power and authority delegated to it under this Agreement, including providing reasonable access to premises and information, if any, under the control of Sharyland or any of its Affiliates and not in the possession of Delegatee. All such items shall be made available at such times and in such manner as may be reasonably required by Delegatee.
ARTICLE 4. COMPENSATION
4.1 No Internal Expenses . The Parties acknowledge that other valuable consideration has been provided to each other to induce the Parties to enter into this Agreement. Neither Delegatee nor any of its Affiliates shall be entitled to compensation or reimbursement from Sharyland with respect to any internal general or administration costs or expenses in connection with this Agreement.
4.2 Third Party Expenses . Pursuant to Section 5.3 of the Company Agreement, Delegatee shall be reimbursed promptly by the Company for any third-party, out-of-pocket administrative costs and expenses reasonably incurred by it in connection with this Agreement. Delegatee shall directly seek reimbursement for any such cost from the Company.
ARTICLE 5. INDEMNIFICATION
5.1 Indemnification By Delegatee . SUBJECT TO THE LIMITATIONS OF LIABILITY IN SECTION 5.3 , DELEGATEE SHALL INDEMNIFY AND HOLD HARMLESS SHARYLAND AND ITS AFFILIATES, AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND REPRESENTATIVES (THE “ SHARYLAND INDEMNITEES ”) FROM AND AGAINST, AND NO SHARYLAND INDEMNITEE WILL BE RESPONSIBLE HEREUNDER FOR, ANY AND ALL CLAIMS, ASSERTIONS, DEMANDS, SUITS, DAMAGES, JUDGMENTS, LOSSES, OBLIGATIONS, LIABILITIES, ACTIONS AND CAUSES OF ACTION, FEES (INCLUDING REASONABLE ATTORNEY’S FEES AND DISBURSEMENTS), COSTS (INCLUDING COURT COSTS), EXPENSES, INVESTIGATIONS, INQUIRIES, ADMINISTRATIVE PROCEEDINGS, PENALTIES, FINES AND SANCTIONS (COLLECTIVELY, “ LIABILITIES ”) SUSTAINED OR SUFFERED BY ANY SHARYLAND INDEMNITEE IN CONNECTION WITH INJURY OR DEATH TO THIRD PARTIES OR LOSS OF OR DAMAGE TO THE PROPERTY OF THIRD PARTIES, TO THE EXTENT ARISING OUT OF OR RELATED TO THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF DELEGATEE OR ITS EMPLOYEES, AGENTS, OFFICERS OR DIRECTORS.
5.2 Indemnification by Sharyland . SUBJECT TO THE LIMITATIONS OF LIABILITY IN SECTION 5.3 , SHARYLAND SHALL INDEMNIFY AND HOLD HARMLESS DELEGATEE AND ITS AFFILIATES, AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND REPRESENTATIVES (THE “ DELEGATEE INDEMNITEES ”), FROM AND AGAINST, AND NO DELEGATEE INDEMNITEE WILL BE RESPONSIBLE HEREUNDER FOR, ANY AND ALL LIABILITIES SUSTAINED OR SUFFERED BY ANY DELEGATEE INDEMNITEE IN CONNECTION WITH INJURY OR DEATH TO THIRD PARTIES OR LOSS OF OR DAMAGE TO PROPERTY OF THIRD PARTIES, TO THE EXTENT ARISING OUT OF OR RELATED TO THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SHARYLAND OR ITS EMPLOYEES, AGENTS, OFFICERS OR DIRECTORS.
 
8

5.3 Limitation of Liability . NOTWITHSTANDING ANY PROVISION IN THIS AGREEMENT TO THE CONTRARY, NEITHER PARTY SHALL BE LIABLE HEREUNDER FOR ANY CONSEQUENTIAL, INCIDENTAL, SPECIAL OR INDIRECT LOSS OR DAMAGE WHATSOEVER NO MATTER HOW CLAIMED, CALCULATED OR CHARACTERIZED, WHETHER IN CONTRACT, TORT (INCLUDING, WITHOUT LIMITATION, STRICT LIABILITY AND NEGLIGENCE OF ANY KIND) OR OTHERWISE.
ARTICLE 6. TERM AND TERMINATION
6.1 Term . This Agreement shall become effective on the Effective Date and shall continue until the earlier of (a) the expiration or termination of the Company Agreement or (b) such time as Sharyland is no longer the managing member of the Company, unless earlier terminated in accordance with this Agreement (the “Term” ).
6.2 Termination .
(a) Termination by Sharyland . Sharyland is permitted to terminate this Agreement if any of the following events occur: (a) the Bankruptcy of Delegatee or (b) a material default by Delegatee in performance of its obligations under this Agreement after written notice of such default by Sharyland; provided , however , that Delegatee shall have up to sixty (60) days after Delegatee has received written notice of such default to cure the default or make substantial progress (in the reasonable opinion of Sharyland) towards curing the default.
(b) Termination by Delegatee . Delegatee is permitted to terminate this Agreement if any of the following events occur: (a) the Bankruptcy of Sharyland, (b) a material default by Sharyland of any other obligation under this Agreement after written notice by Delegatee; provided , however , that Sharyland shall have up to sixty (60) days after Sharyland has received written notice of such default to cure the default or make substantial progress (in the reasonable opinion of Delegatee) towards curing the default, or (c) Sharyland is no longer a member of the Company.
6.3 Rights Upon Termination . Upon any expiration or termination of this Agreement, Delegatee shall as soon as practicable deliver to Sharyland at Sharyland’s principal place of business all records, documents, accounts, files and other materials of the Company or pertaining to the Company’s business as Sharyland may reasonably request. Expiration or termination of this Agreement shall not relieve any Party hereto of liability which has accrued or arisen prior to the date of such expiration or termination.
 
9

ARTICLE 7. REPRESENTATIONS AND WARRANTIES
7.1 Representations and Warranties by Both Parties . Each Party represents and warrants to the other Party that, as of the Effective Date:
(a) Existence . It is duly organized and validly existing under the laws of the state of its organization and has all requisite power and authority to own its property and assets and conduct its business as presently conducted or proposed to be conducted under this Agreement.
(b) Authority . It has the power and authority to execute and deliver this Agreement, to consummate the transactions contemplated hereby and to perform its obligations hereunder.
(c) Validity . It has taken all necessary action to authorize its execution, delivery and performance of this Agreement, and this Agreement constitutes the valid, legal and binding obligation of such Party enforceable against it in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, moratorium or similar laws affecting the rights of creditors or by general equitable principles (whether considered in a proceeding in equity or at law).
(d) No Conflict . None of the execution or delivery of this Agreement, the performance by such Party of its obligations in connection with the transactions contemplated hereby, or the fulfillment of the terms and conditions hereof, materially conflicts with or violates any provision of its constituting documents or the other agreements to which it is a party.
(e) No Consent . No consent or approval (including any Permit that such warranting Party is required to obtain) is required from any third party (including any Governmental Authority) for either the valid execution and delivery of this Agreement, or the performance by such Party of its obligations under this Agreement, except such as have been duly obtained or will be obtained in the ordinary course of business.
(f) No Breach . None of the execution or delivery of this Agreement, the performance by such Party of its obligations in connection with the transactions contemplated hereby, or the fulfillment of the terms and conditions hereof either conflicts with, violates or results in a breach of, any Applicable Law currently in effect, or conflicts with, violates or results in a breach of, or constitutes a default under or results in the imposition or creation of, any lien or encumbrance under any agreement or instrument to which it is a party or by which it or any of its properties or assets are bound.
(g) No Material Claims . No claim, allegation, suit, action, demand, cause of action, or legal, administrative, arbitral or other proceeding, investigation or controversy is pending or threatened against it that would adversely affect such Party’s ability to perform its material obligations under this Agreement.
ARTICLE 8. DISPUTE RESOLUTION
8.1 Arbitration .
(a) Any dispute under this Agreement shall, if not resolved by the Parties within sixty (60) days after notice of such dispute is served by one Party to the other (or, if different, the period provided for resolution by the Parties in the provision of this Agreement under which such dispute is brought), be submitted to an “ Arbitration Panel ” comprised of three members. No more than one panel member may be with the same firm, and no panel member may have an economic interest in the outcome of the arbitration.
 
10

(b) The Arbitration Panel shall be selected as follows: Within five business days after the expiration of the period referenced above, Sharyland shall select a panel member meeting the criteria of the above paragraph (the “ Sharyland Panel Member ”) and Delegatee shall select its panel member meeting the criteria of the above paragraph (the “ Delegatee Panel Member ”). If a Party fails to timely select its respective panel member, the other Party may notify such Party in writing of such failure, and if such Party fails to select its respective panel member within three business days from such notice, then the other Party may select such panel member on such Party’s behalf. Within five business days after the selection of the Sharyland Panel Member and the Delegatee Panel Member, the Sharyland Panel Member and the Delegatee Panel Member shall jointly select a third panel member meeting the criteria of the above paragraph (the “ Third Panel Member ”). If the Sharyland Panel Member and the Delegatee Panel Member fail to timely select the Third Panel Member and such failure continues for more than three business days after written notice of such failure is delivered to the Sharyland Panel Member and Delegatee Panel Member by either Sharyland or Delegatee, either Sharyland or Delegatee may request the managing officer of the American Arbitration Association to appoint the Third Panel Member.
(c) Within ten business days after the selection of the Arbitration Panel, each Party shall submit to the Arbitration Panel a written statement identifying its summary of the issues and claims. Any Party may also request an evidentiary hearing on the merits in addition to the submission of written statements. The Arbitration Panel shall make its decision within twenty (20) days after the later of (i) the submission of such written statements of particulars, and (ii) the conclusion of any evidentiary hearing on the merits, and shall take into consideration the relative risks and rewards undertaken and capital invested by each Party. The Arbitration Panel shall reach its decision by majority vote and shall communicate its decision by written notice to the Parties.
(d) The decision by the Arbitration Panel shall be final, binding and conclusive and shall be non-appealable and enforceable in any court having jurisdiction. All hearings and proceedings held by the Arbitration Panel shall take place in Dallas, Texas.
(e) The resolution procedure described herein shall be governed by the Commercial Rules of the American Arbitration Association and subject to the Texas General Arbitration Act to the extent such act is applicable hereto.
(f) The Parties shall bear equally the fees, costs and expenses of the Arbitration Panel in conducting the arbitration.
8.2 Continued Performance . Pending the resolution of a Dispute in accordance with this Article 8 , the Parties may continue to exercise their rights and must continue to perform their obligations under this Agreement to the extent that those rights and obligations are not the subject of the Dispute.
 
11

ARTICLE 9. MISCELLANEOUS
9.1 Confidentiality and Non-Disclosure .
(a) The Parties each acknowledge and agree that, in connection with this Agreement, a Party and its employees or agents may, directly or indirectly, receive or be provided with certain information relating to the business and operations of the other Party and the other Party’s Affiliates, including information relating to the technology, clients, customers, suppliers, vendors, employees, consultants, projects, financial information and status, methodologies, know-how, processes, practices, approaches, projections, forecasts, formats, systems, data gathering methods and/or strategies, assets, collateral and reports of the other Party and the other Party’s Affiliates (“ Confidential Information ”). Each Party acknowledges that the other Party considers all such information valuable, confidential and proprietary. Therefore, each Party expressly agrees that, except as otherwise required by applicable law, court or governmental order:
(i) Such Party, and its employees and agents, will not, without the other Party’s express, written permission, use or disclose any Confidential Information of the other Party or its Affiliates other than for the purpose of performing its duties and obligations under this Agreement, and any use or disclosure of Confidential Information shall be limited to the specific purposes for which the permission was given or for which the use or disclosure is necessary to perform duties and obligations under this Agreement;
(ii) Such Party will take all steps reasonably necessary to protect the Confidential Information of the other Party and its Affiliates, including, at a minimum, any such steps that the Party would take to protect its own Confidential Information; provided , however , that in no event will the Party exercise less than reasonable care to protect the Confidential Information;
(iii) Such Party agrees to advise the other Party in writing of any misappropriation or misuse by any person of such Confidential Information of which such Party may become aware; and
(iv) Such Party agrees to return the Confidential Information of the other Party and its Affiliates to the other Party at the earlier of the other Party’s request for return of the Confidential Information or the termination of this Agreement. At the option of the other Party, such Party may instead destroy the Confidential Information, with such Party providing written certification of such destruction. Such Party will not be obligated to return any of its own internally prepared documents, notes, copies or other associated materials containing any Confidential Information. However, such Party must, at the other Party’s request, collect and destroy such internally prepared documents, with such Party providing written certification of such destruction.
 
12

(b) Each Party expressly acknowledges and agrees that the remedy of the other Party (the “ Non-Breaching Party ”) at law for a breach or threatened breach of any of the provisions of this Section 9.1 by such Party would be inadequate. In recognition of that fact, in the event of a breach or threatened breach by a Party of the provisions of this Section, it is agreed that, in addition to its remedy at law and without posting any bond, the Non-Breaching Party shall be entitled to equitable relief in the form of a temporary restraining order, temporary or permanent injunction or other equitable available relief. If the Non-Breaching Party establishes that a breach or a threatened breach of any provisions of this Section 9.1 has occurred by the other Party, the other Party agrees not to oppose the Non-Breaching Party’s request for equitable relief in the form of a temporary restraining order or a temporary injunction. Nothing herein contained shall be construed as prohibiting the Non-Breaching Party from pursuing any other remedies available to it for such breach or threatened breach.
9.2 Assignment . This Agreement is not assignable by any Party without the prior written consent of the other Party, which consent will not be unreasonably withheld, and may be freely assignable by either Party to such Party’s Affiliates. This Agreement will be binding upon and will inure to the benefit of the successors and permitted assigns of the Parties.
9.3 Not for Benefit of Third Parties . This Agreement and each and every provision hereof are for the exclusive benefit of the Parties that executed this Agreement and not for the benefit of any third party.
9.4 Amendments . No amendments or modifications of this Agreement are valid unless evidenced in writing and signed by duly authorized representatives of the Parties.
9.5 Survival . Notwithstanding any provisions herein to the contrary, the obligations set forth in Articles 5 and 8 , this Section 9.5 , Sections 9.1 , 9.4 , 9.6 , 9.7 , 9.9 , 9.10 , 9.11 , 9.12 and 9.13 , and the limitations on liabilities set forth in Article 5 , will survive, in full force and effect, the expiration or termination of this Agreement.
9.6 No Waiver . A waiver of a provision or of a right arising under this Agreement may only be given in writing by the Party granting the waiver. A waiver is effective only in the specific instance and for the specific purpose for which it is given. A single or partial exercise of a right by a Party does not preclude another or further exercise or attempted exercise of that right or the exercise of another right. Failure by a Party to exercise or delay in exercising a right does not prevent its exercise or operate as a waiver.
9.7 Notices . Any written notice required or permitted under this Agreement will be deemed to have been duly given on the date of receipt, and will be either delivered personally to the Party to whom notice is given, or mailed to the Party to whom notice is to be given, by facsimile, courier service or first class registered or certified mail, return receipt requested, postage prepaid, and addressed to the addressee at the address set forth below, or at the most recent address specified by written notice given to the other Parties in the manner provided in this Section 9.7 .

If to Sharyland:	  	Sharyland Utilities, L.P.
1807 Ross Avenue
Dallas, TX 75201
Attention: President	
 
13

			
		
with copy to:	  	 
Sharyland Utilities, L.P.
1807 Ross Avenue
Dallas, TX 75201
Attention: General Counsel	
		
If to Delegatee:	  	 
InfraREIT, Inc.
1807 Ross Avenue, 4 th Floor
Dallas, TX 75201
Attention: President	
		
with copy to:	  	 
InfraREIT, Inc.
1807 Ross Avenue, 4 th Floor
Dallas, TX 75201
Attention: General Counsel	
9.8 Counterparts . This Agreement may be signed in counterparts and all counterparts taken together constitute one document. Once all counterparts have been executed, each counterpart is an effective instrument.
9.9 Governing Law . This Agreement is governed by and to be construed in accordance with the laws of the State of Texas without regard to its conflicts of law principles.
9.10 Captions . Titles or captions contained in this Agreement are inserted only as a matter of convenience and for reference, and in no way define, limit, extend, describe or otherwise affect the scope or meaning of this Agreement or the intent of any provision hereof.
9.11 Severability . If any provision of this Agreement, or the application of any such provision to any Person or circumstance, is held invalid by any court or other forum of competent jurisdiction, the remainder of this Agreement, or the application of such provision to Persons or circumstances other than those as to which it is held invalid, will nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any Party. Upon any such determination of invalidity, the Parties will negotiate in good faith to modify this Agreement so as to affect the original intent of the Parties as closely as possible in an acceptable manner in order that this Agreement is consummated as originally contemplated to the greatest extent possible.
9.12 Entire Agreement . This Agreement and any other documents referred to in this Agreement or executed in connection with this Agreement comprise the entire agreement of the parties about the subject matter of this Agreement and supersede any prior representations, negotiations, arrangements, understandings or agreements and all other communications.
 
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9.13 Further Assurances . Each Party must, at its own expense, whenever requested by another Party, promptly do or cause to be done everything reasonably necessary to give full effect to this Agreement and the delegation and other transactions contemplated by this Agreement.
[Remainder of Page Intentionally Left Blank.]
 
15

IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed by their officers as of the day and year first above written.

SHARYLAND:				SHARYLAND UTILITIES, L.P.	
					
						By:		/s/ Hunter L. Hunt	
						Name:		Hunter L. Hunt	
						Title:		Chairman	

DELEGATEE:				INFRAREIT, INC.	
					
						By:		/s/ David A. Campbell	
						Name:		David A. Campbell	
						Title:		President	
Signature Page to Delegation Agreement

Exhibit 10.13

SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
INFRAREIT PARTNERS, LP

Dated as of February 4, 2015
THE LIMITED PARTNERSHIP INTERESTS (THE “INTERESTS”) OF INFRAREIT PARTNERS, LP HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), THE SECURITIES LAWS OF ANY STATE OR ANY OTHER APPLICABLE U.S. OR NON-U.S. SECURITIES LAWS, IN EACH CASE IN RELIANCE UPON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THE INTERESTS MAY BE ACQUIRED FOR INVESTMENT ONLY, AND NEITHER THE INTERESTS NOR ANY PART THEREOF MAY BE OFFERED FOR SALE, PLEDGED, HYPOTHECATED, SOLD, ASSIGNED OR TRANSFERRED AT ANY TIME EXCEPT IN COMPLIANCE WITH (I) THE SECURITIES ACT, ANY APPLICABLE STATE SECURITIES LAWS AND ANY OTHER APPLICABLE SECURITIES LAWS AND (II) THE TERMS AND CONDITIONS OF THIS SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP. THE INTERESTS WILL NOT BE TRANSFERRED OF RECORD EXCEPT IN COMPLIANCE WITH SUCH LAWS AND THIS SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP. THEREFORE, PURCHASERS OF THE INTERESTS WILL BE REQUIRED TO BEAR THE RISK OF THEIR INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

TABLE OF CONTENTS

 	  	 	  	Page	 	
ARTICLE I DEFINED TERMS	  	 	3	  	
		
ARTICLE II ORGANIZATIONAL MATTERS	  	 	25	  	
			
Section 2.1	  	Organization	  	 	25	  	
			
Section 2.2	  	Name	  	 	25	  	
			
Section 2.3	  	Registered Office and Agent; Principal Office	  	 	25	  	
			
Section 2.4	  	Power of Attorney	  	 	26	  	
			
Section 2.5	  	Term	  	 	27	  	
		
ARTICLE III PURPOSE	  	 	27	  	
			
Section 3.1	  	Purpose and Business	  	 	27	  	
			
Section 3.2	  	Powers	  	 	27	  	
			
Section 3.3	  	Partnership Only for Purposes Specified	  	 	28	  	
			
Section 3.4	  	Representations and Warranties by the Parties	  	 	28	  	
		
ARTICLE IV CAPITAL CONTRIBUTIONS AND ISSUANCES OF PARTNERSHIP INTERESTS	  	 	30	  	
			
Section 4.1	  	Capital Contributions of the Partners	  	 	30	  	
			
Section 4.2	  	Issuances of Partnership Interests	  	 	32	  	
			
Section 4.3	  	Additional Funds and Capital Contributions	  	 	34	  	
			
Section 4.4	  	Equity Incentive Plan	  	 	35	  	
			
Section 4.5	  	Dividend Reinvestment Plan or Cash Option Purchase Plan	  	 	42	  	
			
Section 4.6	  	Mandatory Conversion of Independent Director LTIP Units, Class A Units and Class C Units; Cancellation of Class B Units	  	 	42	  	
			
Section 4.7	  	Other Contribution Provisions	  	 	45	  	
			
Section 4.8	  	No Interest on Capital	  	 	45	  	
			
Section 4.9	  	Separate Agreements	  	 	45	  	
		
ARTICLE V DISTRIBUTIONS	  	 	46	  	
			
Section 5.1	  	Requirement and Characterization of Distributions	  	 	46	  	
			
Section 5.2	  	Distributions in-Kind	  	 	47	  	
			
Section 5.3	  	Amounts Withheld	  	 	47	  	
			
Section 5.4	  	Distributions Upon Liquidation	  	 	47	  	
			
Section 5.5	  	Revisions to Reflect Issuance of Partnership Interests	  	 	47	  	
			
Section 5.6	  	No Distributions Prior to Mandatory Conversion Date	  	 	47	  	
 
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 	  	 	  	Page	 	
Section 5.7	  	Restricted Distributions	  	 	47	  	
		
ARTICLE VI ALLOCATIONS	  	 	47	  	
			
Section 6.1	  	Allocations For Capital Account Purposes	  	 	47	  	
			
Section 6.2	  	Capital Accounts of the Partners	  	 	49	  	
			
Section 6.3	  	No Withdrawal	  	 	52	  	
			
Section 6.4	  	Revisions to Allocations to Reflect Issuance of Partnership Interests	  	 	52	  	
			
Section 6.5	  	Special Allocation Rules	  	 	53	  	
			
Section 6.6	  	Allocations for Tax Purposes	  	 	56	  	
		
ARTICLE VII MANAGEMENT AND OPERATIONS OF BUSINESS	  	 	58	  	
			
Section 7.1	  	Management	  	 	58	  	
			
Section 7.2	  	Certificate of Limited Partnership	  	 	63	  	
			
Section 7.3	  	Title to Partnership Assets	  	 	63	  	
			
Section 7.4	  	Reimbursement of the General Partner	  	 	63	  	
			
Section 7.5	  	Outside Activities of the General Partner	  	 	65	  	
			
Section 7.6	  	Transactions With Partners and Affiliates	  	 	65	  	
			
Section 7.7	  	Limitation on Liability and Indemnification	  	 	66	  	
			
Section 7.8	  	Liability of the General Partner	  	 	68	  	
			
Section 7.9	  	Other Matters Concerning the General Partner	  	 	69	  	
			
Section 7.10	  	Reliance By Third Parties	  	 	71	  	
			
Section 7.11	  	Restrictions On General Partner’s Authority	  	 	71	  	
		
ARTICLE VIII RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS	  	 	72	  	
			
Section 8.1	  	Limitation Of Liability	  	 	72	  	
			
Section 8.2	  	Management Of Business	  	 	72	  	
			
Section 8.3	  	Outside Activities of Limited Partners	  	 	72	  	
			
Section 8.4	  	Exclusion of Other Rights	  	 	72	  	
			
Section 8.5	  	Return Of Capital	  	 	73	  	
			
Section 8.6	  	Rights Of Limited Partners Relating to the Partnership	  	 	73	  	
			
Section 8.7	  	Redemption Right	  	 	74	  	
		
ARTICLE IX BOOKS, RECORDS, ACCOUNTING AND REPORTS	  	 	77	  	
			
Section 9.1	  	Records and Accounting	  	 	77	  	
			
Section 9.2	  	Reports	  	 	77	  	
		
ARTICLE X TAX MATTERS	  	 	78	  	
			
Section 10.1	  	Preparation of Tax Returns	  	 	78	  	
 
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 	  	 	  	Page	 	
Section 10.2	  	Tax Elections	  	 	78	  	
			
Section 10.3	  	Tax Matters Partner	  	 	78	  	
			
Section 10.4	  	[Reserved]	  	 	80	  	
			
Section 10.5	  	Withholding	  	 	80	  	
			
Section 10.6	  	Code Section 83 Safe Harbor Election	  	 	81	  	
			
Section 10.7	  	Limitation to Preserve REIT Status	  	 	81	  	
			
Section 10.8	  	Certain Taxes	  	 	82	  	
		
ARTICLE XI TRANSFERS AND WITHDRAWALS	  	 	82	  	
			
Section 11.1	  	Transfer	  	 	82	  	
			
Section 11.2	  	Transfers of Partnership Interests of General Partner	  	 	82	  	
			
Section 11.3	  	Limited Partners’ Rights to Transfer	  	 	84	  	
			
Section 11.4	  	Substituted Limited Partners	  	 	86	  	
			
Section 11.5	  	Assignees	  	 	86	  	
			
Section 11.6	  	General Provisions	  	 	87	  	
		
ARTICLE XII ADMISSION OF PARTNERS	  	 	89	  	
			
Section 12.1	  	Admission of a Successor General Partner	  	 	89	  	
			
Section 12.2	  	Admission of Additional Limited Partners	  	 	89	  	
			
Section 12.3	  	Amendment of Agreement and Certificate of Limited Partnership	  	 	90	  	
			
Section 12.4	  	Limit on Number of Partners	  	 	90	  	
		
ARTICLE XIII DISSOLUTION AND LIQUIDATION	  	 	90	  	
			
Section 13.1	  	Dissolution	  	 	90	  	
			
Section 13.2	  	Winding Up	  	 	92	  	
			
Section 13.3	  	Compliance With Timing Requirements of Regulations; Restoration of Deficit Capital Accounts	  	 	92	  	
			
Section 13.4	  	Rights of Limited Partners	  	 	93	  	
			
Section 13.5	  	Notice of Dissolution	  	 	93	  	
			
Section 13.6	  	Cancellation of Certificate of Limited Partnership	  	 	93	  	
			
Section 13.7	  	Reasonable Time For Winding Up	  	 	94	  	
			
Section 13.8	  	Waiver of Partition	  	 	94	  	
			
Section 13.9	  	Liability of Liquidator	  	 	94	  	
		
ARTICLE XIV AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS	  	 	94	  	
			
Section 14.1	  	Amendments	  	 	94	  	
			
Section 14.2	  	Meetings of the Partners	  	 	97	  	
 
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 	  	 	  	Page	 	
ARTICLE XV GENERAL PROVISIONS	  	 	97	  	
			
Section 15.1	  	Addresses and Notice	  	 	97	  	
			
Section 15.2	  	Further Action	  	 	98	  	
			
Section 15.3	  	Binding Effect	  	 	98	  	
			
Section 15.4	  	Creditors	  	 	98	  	
			
Section 15.5	  	Waiver	  	 	98	  	
			
Section 15.6	  	Counterparts	  	 	99	  	
			
Section 15.7	  	Applicable Law	  	 	99	  	
			
Section 15.8	  	Waiver of Jury Trial	  	 	99	  	
			
Section 15.9	  	Forum Selection and Consent to Jurisdiction	  	 	99	  	
			
Section 15.10	  	Invalidity of Provisions	  	 	99	  	
			
Section 15.11	  	Determinations	  	 	100	  	
			
Section 15.12	  	Conversion Agent	  	 	100	  	
			
Section 15.13	  	Entire Agreement	  	 	100	  	
			
Section 15.14	  	No Rights as Stockholders	  	 	100	  	
			
Section 15.15	  	No Presumption Against Drafter	  	 	101	  	
			
Section 15.16	  	Rules of Construction	  	 	101	  	

EXHIBIT A	  	  PARTNER REGISTRY	  		
EXHIBIT B	  	  NOTICE OF REDEMPTION	  		
 
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SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
INFRAREIT PARTNERS, LP
THIS SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP , effective as of the Effective Date (as hereinafter defined), is entered into by and among InfraREIT, Inc., a Maryland corporation (“ InfraREIT Inc. ”), as the General Partner, InfraREIT, LLC, as the Predecessor General Partner (defined below), Hunt-InfraREIT, L.L.C., a Delaware limited liability company, as the Initial Limited Partner, and the other Persons whose names are set forth on the Partner Registry (as hereinafter defined) as Limited Partners, together with any other Persons who become Partners in the Partnership as provided herein. Capitalized terms used in this Agreement have the meaning assigned to them in Article I .
WHEREAS , Energy Trans Alliance Trust, a Maryland real estate investment trust (“ ETAT ”), as general partner, and the Initial Limited Partner formed the Partnership as “Energy Trans Alliance, L.P.” under the LP Act pursuant to the Certificate and an Agreement of Limited Partnership of the Partnership, dated December 16, 2009 (the “ Original Agreement ”);
WHEREAS , ETAT, with the consent of the Initial Limited Partner, filed an amendment to the Certificate on October 5, 2010, whereby the name of the Partnership was changed to “Electricity Trans Alliance, L.P.”;
WHEREAS , InfraREIT, L.L.C., a Delaware limited liability company (the “ Predecessor General Partner ”), which was at that time known as Electric Infrastructure Alliance of America, L.L.C., acquired all of the right, title and interest of ETAT in and to the general partner interest in the Partnership and succeeded to all of the rights, powers, authority, duties and obligations of ETAT as general partner of the Partnership as a result of the merger of ETAT into the Predecessor General Partner on November 9, 2010, with the Predecessor General Partner as the surviving Entity;
WHEREAS , the Predecessor General Partner, with the consent of the Initial Limited Partner, filed another amendment to the Certificate on November 10, 2010, whereby the name of the Partnership was changed to “Electric Infrastructure Alliance of America, L.P.”;
WHEREAS , the Predecessor General Partner and the Initial Limited Partner amended and restated the Original Agreement on November 23, 2010 (as amended, the “ Amended and Restated Agreement ”);
WHEREAS , the Predecessor General Partner filed another amendment to the Certificate on July 15, 2014, whereby the name of the Partnership was changed to “InfraREIT Partners, LP”;
WHEREAS , on January 29, 2015, the Predecessor General Partner effected a 1 for 0.938550 reverse split of its outstanding shares (the “ Share Split ”), and, simultaneously, pursuant to Amendment No. 1 to the Amended and Restated Agreement, dated as of January 29, 2015, the Partnership effected a corresponding 1 for 0.938550 reverse unit split (the “ Unit Split ”) whereby (i) the number

of Class A Units held by each Holder immediately prior to the Unit Split was reduced to a number equal to (x) the number of Class A Units held by such Holder immediately before the Unit Split multiplied by (y) 0.938550, rounded up to the nearest whole Class A Unit, and, in the case of the Predecessor General Partner, an additional 32 Class A Units were issued to account for the Share Rounding, (ii) the number of Class B Units held by each Holder was reduced to a number equal to (x) the number of Class B Units held by such Holder immediately before the Unit Split multiplied by (y) 0.938550, rounded up to the nearest whole Class B Unit, (iii) the number of Class C Units held by each Holder immediately prior to the Unit Split was reduced to a number equal to (x) the number of Class C Units held by such Holder immediately prior to the Unit Split multiplied by (y) 0.938550, rounded up to the nearest whole Class C Unit, and, in the case of the Predecessor General Partner, an additional 38 Class C Units were issued to account for Share Rounding, and (iv) the number of Independent Director LTIP Units held by each Holder was reduced to a number equal to (x) the number of Independent Director LTIP Units held by such Holder immediately prior to the Unit Split multiplied by (y) 0.938550, rounded up to the nearest whole Independent Director LTIP Unit;
WHEREAS , on February 4, 2015 (the “ Effective Date ”), InfraREIT Inc. is consummating its initial public offering (the “ REIT IPO ”), pursuant to which the public investors in the REIT IPO are being issued shares of common stock, par value $0.01 per share (“ Public REIT Common Stock ”) of InfraREIT Inc.;
WHEREAS , on the Effective Date but immediately following the Carry Crystallization and the closing of the REIT IPO, the Predecessor General Partner is being merged into InfraREIT Inc. with the result that InfraREIT Inc. is acquiring all of the right, title and interest of the Predecessor General Partner in and to the general partner interest in the Partnership and succeeding to all of the rights, powers, authority, duties and obligations of the Predecessor General Partner as general partner of the Partnership (the “ Merger ”);
WHEREAS , on the Effective Date immediately after the Merger, pursuant to a Unit Subscription Agreement between MC Transmission (defined below) and the Partnership dated January 29, 2015, MC Transmission is contributing the ES Note to the Partnership in exchange for the issuance by the Partnership of 3,325,874 Common Units to MC Transmission and MC Transmission is admitted as a Limited Partner hereunder;
WHEREAS , immediately after the transaction described in the preceding paragraph, the Partnership is distributing the ES Note to InfraREIT Inc. in redemption of 6,242,999 Class A Units held by InfraREIT Inc.; and
WHEREAS , in connection with the foregoing, the parties hereto desire to amend and restate the Amended and Restated Agreement on the terms and conditions set forth herein effective as of the Effective Date.
 
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NOW, THEREFORE , in consideration of the mutual covenants set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
DEFINED TERMS
Capitalized terms used in this Agreement (including exhibits, schedules and amendments) shall have the meanings set forth below or in the Section of this Agreement referred to below, except as otherwise expressly indicated or limited by the context in which they appear in this Agreement.
“ 30-Day Class A Value ” means the 30-Day VWAP Price multiplied by the difference between 23,785,042 and the number of shares of Public REIT Common Stock acquired by the underwriters pursuant to an exercise of the Overallotment Option (if any).
“ 30-Day Class C Value ” means the 30-Day VWAP Price multiplied by 25,145.
“ 30-Day VWAP Price ” means the average of the per Share volume-weighted average price of the Public REIT Common Stock as displayed on the applicable Bloomberg page in respect of the period from 9:30 a.m. to 4:00 p.m. (New York City time) on the applicable Trading Day (or if such volume-weighted average price is unavailable, the Value of one Share of Public REIT Common Stock on such applicable Trading Day) for the ten (10) consecutive Trading Days ending on the date that is 30 days after the Effective Date (or, if such 30 th day is not a Business Day, the next succeeding Business Day).
“ 704(c) Value ” of (i) any Contributed Property means the fair market value of such property at the time of contribution as determined by the General Partner using such reasonable method of valuation as it may adopt; provided , however , subject to Article VI, the General Partner shall, in its sole and absolute discretion, use such method as it deems reasonable and appropriate to allocate the aggregate of the 704(c) Value of Contributed Properties in a single or integrated transaction among each separate property on a basis proportional to its fair market value and (ii) any Adjusted Property means the fair market value of such property on the date the Carrying Value of such property is adjusted pursuant to Section 6.2.D .
“ Additional Funds ” has the meaning set forth in Section 4.3.A .
“ Additional Limited Partner ” means a Person admitted to the Partnership as a Limited Partner pursuant to Section 12.2 and who is shown as such in the Partner Registry.
“ Adjusted Capital Account ” means the Capital Account maintained for each Partner as of the end of each Fiscal Year or other relevant period (i) increased by any amounts which such Partner is obligated to restore pursuant to any provision of this Agreement or is deemed to be obligated to restore pursuant to the penultimate sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5) and (ii) decreased by the items described in Regulations Sections 1.704-l(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6). The foregoing definition of Adjusted Capital Account is intended to comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
 
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“ Adjusted Capital Account Deficit ” means, with respect to any Partner, the deficit balance, if any, in such Partner’s Adjusted Capital Account as of the end of the relevant Fiscal Year or other relevant period.
“ Adjusted Property ” means any property the Carrying Value of which has been adjusted pursuant to Section 6.2.D .
“ Adjustment Event ” has the meaning set forth in Section 4.4.C(i) .
“ Advisers Act ” means the Investment Advisers Act of 1940, as it may be amended from time to time, and any successor to such statute.
“ Affiliate ” means, with regard to a Person, a Person that controls, is controlled by, or is under common control with such original Person. For purposes of this definition, “control,” when used with respect to any Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms “affiliated,” “controlling” and “controlled” have meanings correlative to the foregoing.
“ Agreed Value ” means (i) in the case of any Contributed Property, the 704(c) Value of such property as of the time of its contribution to the Partnership, reduced by any liabilities either assumed by the Partnership upon such contribution or to which such property is subject when contributed, as the same is reflected in the books and records of the Partnership; and (ii) in the case of any property distributed to a Partner by the Partnership, the Partnership’s Carrying Value of such property at the time such property is distributed, reduced by any indebtedness either assumed by such Partner upon such distribution or to which such property is subject at the time of distribution as determined under Section 752 of the Code and the regulations thereunder. The Agreed Value of any Contributed Property shall be set forth in the Partner Registry.
“ Agreement ” means this Second Amended and Restated Agreement of Limited Partnership of the Partnership, effective as of the Effective Date, as it may be amended, supplemented, restated or otherwise modified from time to time.
“ Amended and Restated Agreement ” has the meaning set forth in the recitals to this Agreement.
“ Applicable Laws ” means all laws, ordinances, statutes, orders and regulations of any federal, state or local government, regulatory or administrative authority, agency or commission thereof, or any court or tribunal relating to the Investments or operations of the Partnership or any of its Subsidiaries, including, all requirements of the FERC, Public Utility Commission of Texas, Southwest Power Pool and Electric Reliability Council of Texas.
“ Assignee ” means a Person to whom one or more Partnership Units have been transferred in a manner permitted under this Agreement, but who has not become a Substituted Limited Partner, and who has the rights set forth in Section 11.5 .
“ Award Agreement ” has the meaning set forth in Section 4.4.D(ii) .
 
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“ Benefit Plan Investor ” means any Partner that is a “ benefit plan investor ” as defined in Section 3(42) of ERISA and any regulations promulgated thereunder.
“ Book-Tax Disparities ” means, with respect to any item of Contributed Property or Adjusted Property, as of the date of any determination, the difference between the Carrying Value of such Contributed Property or Adjusted Property and the adjusted basis thereof for U.S. federal income tax purposes as of such date. A Partner’s share of the Partnership’s Book-Tax Disparities in all of its Contributed Property and Adjusted Property will be reflected by the difference between such Partner’s Capital Account balance as maintained pursuant to Article VI and the hypothetical balance of such Partner’s Capital Account computed as if it had been maintained strictly in accordance with U.S. federal income tax accounting principles.
“ Book-Up Target ” has the meaning set forth in Section 6.5.J(i) .
“ Business Day ” means any day other than a Saturday, Sunday or other day in which commercial banks in New York, New York are authorized or required by Applicable Law or executive order to be closed.
“ Bylaws ” means the Bylaws of the General Partner, as amended, restated or supplemented from time to time.
“ Capital Account ” means the Capital Account maintained for a Partner pursuant to Article VI .
“ Capital Account Limitation ” has the meaning set forth in Section 4.4.E(ii) .
“ Capital Contribution ” means, with respect to any Partner, the amount of any cash or the Agreed Value of Contributed Property that such Partner contributes or is deemed to contribute to the Partnership in respect of such Partner’s Partnership Units.
“ Carry Crystallization ” means the issuance of Common Units to the Initial Limited Partner, and corresponding cancellation of Class A Units held by the Predecessor General Partner, pursuant to Section 4.6.A .
“ Carry Crystallization Shares ” means a number of shares of Public REIT Common Stock equal to the number of Common Units issued to the Initial Limited Partner pursuant to Section 4.6.A in the Carry Crystallization.
“ Carry Crystallization Value ” means the number of Carry Crystallization Shares multiplied by the 30-Day VWAP Price.
“ Carrying Value ” means (i) with respect to a Contributed Property or Adjusted Property, the 704(c) Value of such property reduced (but not below zero) by all Depreciation with respect to such Contributed Property or Adjusted Property, as the case may be, charged to the Partners’ Capital Accounts, and (ii) with respect to any other Partnership property, the adjusted basis of such property for U.S. federal income tax purposes, all as of the time of determination. The Carrying Value of any property shall be adjusted from time to time in accordance with Article VI , and to reflect changes, additions (including capital improvements thereto) or other adjustments to the Carrying Value for dispositions and acquisitions of Partnership properties, as deemed appropriate by the General Partner.
 
-5-

“ Carry Shortfall ” means, if the dollar amount allocable to the Initial Limited Partner pursuant to Section 4.6.I.(ii)(b) is greater than the Carry Crystallization Value, the amount of the difference.
“ Cash Amount ” means an amount of cash equal to the Value on the Valuation Date of the Shares Amount.
“ Cash From Operations ” means, with respect to any period for which such calculation is being made:
(a) all cash revenues and funds received by the Partnership from whatever source (excluding the proceeds of any Capital Contribution but including, to the extent deemed appropriate by the General Partner, any net proceeds remaining from a Debt issuance or a refinancing) plus the amount of any reduction (including a reduction resulting because the General Partner determines such amounts are no longer necessary) in reserves of the Partnership, which reserves are referred to in clause (b)(iv) below;
less
(b) the sum of the following (except to the extent made with the proceeds of any Capital Contribution):
(i) all interest, principal and other debt payments made during such period by the Partnership,
(ii) all cash expenditures (including operating expenses, taxes if any, redemption of Partnership Interests, and capital expenditures) made by the Partnership during such period,
(iii) investments in any Entity (including loans made thereto) to the extent that such investments are permitted under this Agreement and are not otherwise described in clauses (b)(i) or (ii), and
(iv) the amount of any increase in reserves established during such period which the General Partner determines is necessary or appropriate in its sole and absolute discretion.
Cash From Operations shall include cash proceeds from the sale or other disposition of assets, provided that, Cash From Operations shall not include any cash received or reductions in reserves, or take into account any disbursements made or reserves established, after commencement of the dissolution and liquidation of the Partnership.
“ Cash Merger Amount ” means $172,408,000.
 
-6-

“ Certificate ” means the Certificate of Limited Partnership of the Partnership, which was executed on behalf of the General Partner and filed in the office of the Secretary of State on December 16, 2009, as amended on October 5, 2010, November 10, 2010, and July 15, 2014, and as it may be further amended or restated from time to time in accordance with the terms hereof and the LP Act.
“ Charter ” means the Articles of Incorporation of the General Partner, as amended, restated or supplemented from time to time.
“ Class A Unit ” means a Partnership Unit designated as a Class A Unit by the General Partner, with the preferences, conversion or other rights, voting powers or rights, restrictions, limitations as to distributions, qualifications or other terms or conditions set forth in this Agreement.
“ Class B Unit ” means a Partnership Unit designated as a Class B Unit by the General Partner with the preferences, conversion or other rights, voting powers or rights, restrictions, limitations as to distributions, qualifications or other terms or conditions set forth in this Agreement.
“ Class C Common Shares ” means the limited liability company interests of the Predecessor General Partner prior to the Merger which were classified as Class C common shares.
“ Class C Unit ” means a Partnership Unit designated as a Class C Unit by the General Partner with the preferences, conversion or other rights, voting power or rights, restrictions, limitation as to distributions, qualifications or other terms or conditions set forth in this Agreement.
“ Closing Date ” means, with respect to a Partner, the date such Partner was initially admitted to the Partnership and made its initial capital contribution to the Partnership.
“ Code ” means the Internal Revenue Code of 1986, as amended and in effect from time to time, as interpreted by the applicable regulations thereunder. Any reference herein to a specific section or sections of the Code shall be deemed to include a reference to any corresponding provision of future law.
“ Commission ” means the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act.
“ Common LLC Shares ” means the limited liability company interests of the Predecessor General Partner prior to the Merger which were classified as common shares.
“ Common Unit ” means a Partnership Unit designated as a Common Unit by the General Partner, with the preferences, conversion or other rights, voting powers or rights, restrictions, limitations as to distribution, qualifications or other terms or conditions set forth in this Agreement.
“ Common Unit Economic Balance ” has the meaning set forth in Section 6.5.J(ii) .
 
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“ Consent ” means the consent or approval of a proposed action by a Partner given in accordance with Section 14.2 .
“ Contributed Property ” means each property or other asset contributed to the Partnership, in such form as may be permitted by the LP Act, but excluding cash contributed or deemed contributed to the Partnership. Once the Carrying Value of a Contributed Property is adjusted pursuant to Section 6.2.D , such property shall no longer constitute a Contributed Property for purposes of Article VI , but shall be deemed an Adjusted Property for such purposes.
“ Conversion Agent ” means the transfer agent appointed pursuant to Section 15.12 .
“ Conversion Date ” has the meaning set forth in Section 4.4.E(ii) .
“ Conversion Factor ” means 1.0;
provided that the Conversion Factor will be adjusted as set forth below, other than with respect to the Unit Split (any adjustments related to the Unit Split have already been made and are reflected herein without any further action by the General Partner or any adjustment to the Conversion Factor):
(a) if the General Partner (i) declares or pays a dividend on its outstanding Shares in Shares or makes a distribution to all holders of its outstanding Shares in Shares, (ii) splits or subdivides its outstanding Shares or (iii) effects a reverse stock split or otherwise combines its outstanding Shares into a smaller number of Shares, the Conversion Factor shall be adjusted by multiplying the Conversion Factor previously in effect by a fraction, the numerator of which shall be the number of Shares issued and outstanding on the record date for such dividend, distribution, split, subdivision, reverse split or combination (assuming for such purposes that such dividend, distribution, split, subdivision, reverse split or combination has occurred as of such time) and the denominator of which shall be the actual number of Shares (determined without the above assumption) issued and outstanding on the record date for such dividend, distribution, split, subdivision, reverse split or combination;
(b) if the General Partner distributes any rights, options or warrants to all holders of its Shares to subscribe for or to purchase or to otherwise acquire Shares (or other securities or rights convertible into, exchangeable for or exercisable for Shares) at a price per share less than the Value of a Share on the record date for such distribution (other than Shares issuable pursuant to a Qualified DRIP/COPP or as compensation to employees or other service providers) (each a “ Distributed Right ”), then, as of the distribution date of such Distributed Rights or, if later, the time such Distributed Rights first become exercisable, the Conversion Factor shall be adjusted by multiplying the Conversion Factor previously in effect by a fraction (a) the numerator of which shall be the number of Shares issued and outstanding on the record date (or, if later, the date such Distributed Rights first become exercisable) plus the maximum number of Shares purchasable under such Distributed Rights and (b) the denominator of which shall be the number of Shares issued and outstanding on the record date (or, if later, the date such Distributed Rights first become exercisable) plus a fraction (1) the numerator of which is the maximum number of Shares purchasable under such Distributed Rights times the minimum purchase price per Share
 
-8-

under such Distributed Rights and (2) the denominator of which is the Value of a Share as of the record date (or, if later, the date such Distributed Rights first become exercisable); provided , however , that if any such Distributed Rights expire or become no longer exercisable, then the Conversion Factor shall be adjusted, effective retroactive to the date of distribution of the Distributed Rights, to reflect a reduced maximum number of Shares or any change in the minimum purchase price for the purposes of the above fraction;
(c) if the General Partner shall, by dividend or otherwise, distribute to all holders of its Shares evidences of its indebtedness or assets (including securities, but excluding any dividend or distribution referred to in subsection (i) above), which evidences of indebtedness or assets relate to assets not received by the General Partner or its Subsidiaries pursuant to a pro rata distribution by the Partnership, then the Conversion Factor shall be adjusted to equal the amount determined by multiplying the Conversion Factor in effect immediately prior to the close of business on the date fixed for determination of Stockholders entitled to receive such distribution by a fraction (i) the numerator of which shall be such Value of a Share on the date fixed for such determination and (ii) the denominator of which shall be the Value of a Share on the dates fixed for such determination less the then fair market value (as determined by the General Partner, whose determination shall be conclusive) of the portion of the evidences of indebtedness or assets so distributed applicable to one Share; and
(d) if an entity other than an Affiliate of the General Partner shall become General Partner pursuant to any merger, consolidation or combination of the General Partner with or into another entity (the “ Successor Entity ”), the Conversion Factor shall be adjusted by multiplying the Conversion Factor by the number of shares of the Successor Entity into which one Share is converted pursuant to such merger, consolidation or combination, determined as of the date of such merger, consolidation or combination.
Notwithstanding the foregoing, no adjustments to the Conversion Factor will be made for any class or series of Partnership Interests to the extent that the Partnership makes or effects any correlative distribution or payment to all of the Partners holding Partnership Interests of such class or series, or effects any correlative split or reverse split in respect of the Partnership Interests of such class or series. Any adjustment to the Conversion Factor shall become effective immediately after the effective date of the event retroactive to the record date, if any, for the event giving rise thereto, it being intended that (x) adjustments to the Conversion Factor are to be made to avoid unintended dilution or anti-dilution as a result of transactions in which Shares are issued, redeemed or exchanged without a corresponding issuance, redemption or exchange of Partnership Units and (y) if a Specified Redemption Date shall fall between the record date and the effective date of any event of the type described above, the Conversion Factor applicable to such redemption shall be adjusted to take into account such event.
“ Conversion Notice ” has the meaning set forth in Section 4.4.E(ii) .
“ Conversion Right ” has the meaning set forth in Section 4.4.E(i) .
“ Covered Person ” means (i) the General Partner or an officer or director of the General Partner, (ii) an officer of the Partnership, or (iii) any Person serving at the request of the Partnership or the General Partner as an officer, director, trustee, employee or agent of any Entity in which the Partnership or the General Partner holds an Investment (excluding, for the avoidance of doubt, SU and its Subsidiaries).
 
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“ Debt ” means, as to any Person, as of any date of determination, (i) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services, (ii) all amounts owed by such Person to banks or other Persons in respect of reimbursement obligations under letters of credit, surety bonds and other similar instruments guaranteeing payment or other performance of obligations by such Person, (iii) all indebtedness for borrowed money or for the deferred purchase price of property or services secured by any lien on any property owned by such Person, to the extent attributable to such Person’s interest in such property, even though such Person has not assumed or become liable for the payment thereof, and (iv) lease obligations of such Person that, in accordance with GAAP, should be capitalized.
“ Depreciation ” means, for each Fiscal Year or other relevant period, an amount equal to the U.S. federal income tax depreciation, amortization, or other cost recovery deduction allowable with respect to an asset for such year or period, except that if the Carrying Value of an asset differs from its adjusted basis for U.S. federal income tax purposes at the beginning of such year or other period, Depreciation shall be an amount which bears the same ratio to such beginning Carrying Value as the U.S. federal income tax depreciation, amortization, or other cost recovery deduction for such year or period bears to such beginning adjusted tax basis; provided , however , that if the U.S. federal income tax depreciation, amortization, or other cost recovery deduction for such year or period is zero, Depreciation shall be determined with reference to such beginning Carrying Value using any reasonable method selected by the General Partner.
“ Development Agreement ” means that certain Development Agreement, dated effective as of the Effective Date, between Hunt, SU, the General Partner and the Partnership.
“ Disregarded Entity ” means, with respect to any Person, (i) any “qualified REIT subsidiary” (within the meaning of Section 856(i)(2) of the Code) of such Person, (ii) any entity treated as a disregarded entity for U.S. federal income tax purposes with respect to such Person, or (iii) any grantor trust if the sole owner of the assets of such trust for U.S. federal income tax purposes is such Person.
“ Distributed Right ” has the meaning set forth in the definition of “Conversion Factor” herein.
“ Economic Capital Account Balance ” has the meaning set forth in Section 6.5.J(iii) .
“ Effective Date ” has the meaning set forth in the recitals to this Agreement.
“ Electric Systems Project ” means a business, project or assets relating primarily to (i) the transmission or distribution of electricity or (ii) a vertically integrated electric utility.
“ Entity ” means any partnership, limited partnership, proprietorship, corporation, joint venture, joint stock company, limited liability company, limited liability partnership, business trust, estate, governmental entity, cooperative, association or other foreign or domestic enterprise, including accounts or funds managed by an investor or any of its Subsidiaries.
 
-10-

“ Equity Incentive Plan ” has the meaning set forth in Section 4.4.A .
“ Equity Interests ” means any shares of capital stock, membership interests, partnership interests or other equity interests and options or warrants to acquire, or securities convertible into, capital stock, membership interests, partnership interests or other equity securities of an Entity.
“ ERISA ” means the Employee Retirement Income Security Act of 1974, as it may be amended from time to time, and any successor statute.
“ ES Note ” means that certain promissory note dated the Effective Date in the original principal amount of $66,517,480 issued by InfraREIT Inc. as maker.
“ ETAT ” has the meaning set forth in the recitals to this Agreement.
“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time of reference.
“ FBO ” has the meaning set forth in Section 14.4.A .
“ FERC ” means the Federal Energy Regulatory Commission, or any successor Governmental Authority.
“ Fiscal Year ” means, with respect to any Entity, the calendar year, unless the governing body or governing documents of such Entity provide otherwise.
“ Forced Conversion ” has the meaning set forth in Section 4.4.E(iii) .
“ Forced Conversion Notice ” has the meaning set forth in Section 4.4.E(iii) .
“ Funding Debt ” means the incurrence of any Debt for the purpose of providing funds to the Partnership by or on behalf of the General Partner or any of its Subsidiaries.
“ GAAP ” means generally accepted accounting principles in the United States, as consistently applied by the General Partner and the Partnership.
“ General Partner ” means InfraREIT, Inc., or its successor, in its capacity as the general partner of the Partnership.
“ General Partner Loan ” has the meaning set forth in Section 4.3.E .
“ General Partner Payment ” has the meaning set forth in Section 10.7 hereof.
 
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“ General Partnership Interest ” means a Partnership interest held by the General Partner that is a general partnership interest. A General Partnership Interest may be expressed as a number of Partnership Units.
“ Governmental Authority ” means the government of any nation, state, province or other political subdivision thereof or any other Person exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including the Securities Valuation Office of the National Association of Insurance Commissioners or any similar or successor authority.
“ Holder ” means a holder of Partnership Units.
“ Hunt ” means Hunt Transmission Services, L.L.C., a Delaware limited liability company, or its successors.
“ Hunt Employee Investor ” means a Partner that is an employee of the Hunt Group.
“ Hunt Family Members ” means (i) Ray L. Hunt; (ii) the spouse of Ray L. Hunt and each of his children and siblings; (iii) the spouse and lineal descendants of any Person identified in the foregoing clause (ii); (iv) any trust or account primarily for the benefit of any Person or Persons identified in the foregoing clauses (i), (ii) or (iii); (v) any corporation, partnership or other Entity in which any of the Persons identified in the foregoing clauses (i), (ii), (iii) or (iv) are the beneficial owners of substantially all of the Equity Interests; and (vi) the personal representative or guardian of any of the Persons identified in the foregoing clauses (i), (ii) and (iii) upon such Person’s death for purposes of the administration of such Person’s estate or upon such Person’s disability or incompetency for purposes of the protection and management of the assets of such Person.
“ Hunt Group ” means (a) Ray L. Hunt and Hunter L. Hunt; (b) any lineal descendent of the foregoing (including by adoption); (c) any spouse of the foregoing; (d) any trust established primarily for the benefit of any one or more of the foregoing; and (e) any Entity controlled, individually or collectively, by any of the foregoing Persons identified in the preceding clauses (a) and (d) (including Hunt and the Initial Limited Partner).
“ Hunt Group Member ” means any member of the Hunt Group.
“ Immediate Family ” means, with respect to any Partner who is a natural person, such Partner’s spouse, parents and descendants (whether natural or adopted) and any trust for the benefit of such Partner and/or such Partner’s spouse, parents, descendants, nephews, nieces, brothers, and sisters, any of such Partner’s executors, administrators, testamentary trustee, legatees or beneficiaries upon such Partner’s death or any Entity that is, directly or indirectly, wholly owned by such Partner and/or any of the foregoing Persons.
“ Implied IRR ” means as of any measurement date and with respect to a Holder of Partnership Units, the interest rate (compounded quarterly) which, when used as the discount rate to calculate the net present value as of the Closing Date of (i) aggregate amounts which have
 
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previously been distributed and, with respect to the distribution in question, the aggregate amount being distributed to such Holder of Partnership Units (in each case without reduction for taxes payable by such Holder of Partnership Units as a result of such distributions) and (ii) the aggregate Capital Contributions made by such Holder of Partnership Units, causes such net present value to equal zero. For purposes of the net present value calculation, (A) distributions shall be positive numbers, (B) Capital Contributions shall be negative numbers, (C) distributions and Capital Contributions shall be deemed to have been received or made on the actual date of such receipt or payment, as the case may be, (D) tax distributions to a Holder of Partnership Units shall be deemed amounts distributed to such Holder of Partnership Units, and (E) allocations pursuant to Sections 4.6.I and 4.6.J will be deemed distributed to such Holder (x) on the Effective Date, in the case of Cash Merger Amount, (y) on the date of the applicable Overallotment Option closing, in the case of the Overallotment Amount, and (z) on the Mandatory Conversion Date, in the case of the 30-Day Class A Value and the 30-Day Class C Value. For the avoidance of doubt, a thirteen and one-half percent (13.5%) annual rate equals a 3.2165% quarterly rate for purposes of this definition.
“ Incapacity ” or “ Incapacitated ” means, (i) as to any individual who is a Partner, death, total physical disability or entry by a court of competent jurisdiction adjudicating such Partner incompetent to manage his or her Person or estate; (ii) as to any corporation which is a Partner, the filing of a certificate of dissolution, or its equivalent, for the corporation or the revocation of its charter; (iii) as to any partnership or limited liability company which is a Partner, the dissolution and commencement of winding up of the partnership or limited liability company; (iv) as to any estate which is a Partner, the distribution by the fiduciary of the estate’s entire interest in the Partnership, as applicable; (v) as to any trust which is a Partner, the termination of the trust (but not the substitution of a new trustee) or (vi) as to any Partner, the bankruptcy of such Partner. For purposes of this definition, bankruptcy of a Partner shall be deemed to have occurred when (a) the Partner commences a voluntary proceeding seeking liquidation, reorganization or other relief under any bankruptcy, insolvency or other similar law now or hereafter in effect, (b) the Partner is adjudged by a court of competent jurisdiction as bankrupt or insolvent, or a final and nonappealable order for relief under any bankruptcy, insolvency or similar law now or hereafter in effect has been entered against the Partner, (c) the Partner executes and delivers a general assignment for the benefit of the Partner’s creditors, (d) the Partner files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against the Partner in any proceeding of the nature described in clause (b) above, (e) the Partner seeks, consents to or acquiesces in the appointment of a trustee, receiver or liquidator for the Partner or for all or any substantial part of the Partner’s properties, (f) any proceeding seeking liquidation, reorganization or other relief under any bankruptcy, insolvency or other similar law now or hereafter in effect has not been dismissed within one hundred twenty (120) days after the commencement thereof, (g) the appointment without the Partner’s consent or acquiescence of a trustee, receiver or liquidator for the Partner or for all or any substantial part of the Partner’s properties has not been vacated or stayed within ninety (90) days of such appointment or (h) an appointment referred to in clause (g) is not vacated within ninety (90) days after the expiration of any such stay.
“ Independent Director LTIP Units ” means the 11,264 LTIP Units (post-split) issued by the Partnership pursuant to the Classification and Designation of Partnership Units as LTIP Units set forth in Exhibit D to the Amended and Restated Agreement.
 
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“ InfraREIT Inc. ” has the meaning set forth in the Preamble.
“ Initial Limited Partner ” means Hunt-InfraREIT, L.L.C., a Delaware limited liability company.
“ Investment ” means a Qualified Energy Project in which the Partnership owns an interest, either directly or indirectly through another Entity.
“ Investment Company Act ” means the Investment Company Act of 1940, as it may be amended from time to time, and any successor to such statute.
“ IRS ” means the Internal Revenue Service, which administers the internal revenue laws of the United States.
“ Limited Partner ” means the Initial Limited Partner or any other Person named as a Limited Partner in the Partner Registry in such Person’s capacity as a Limited Partner in the Partnership.
“ Limited Partnership Interest ” means a Partnership Interest of a Limited Partner in the Partnership representing a fractional part of the Partnership Interests of all Limited Partners and includes any and all benefits to which the holder of such a Partnership Interest may be entitled as provided in this Agreement, together with all obligations of such Person to comply with the terms and provisions of this Agreement. A Limited Partnership Interest may be expressed as a number of Partnership Units. For the avoidance of doubt, the General Partner may hold Limited Partnership Interests in addition to General Partnership Interests.
“ Liquidating Gains ” has the meaning set forth in Section 6.5.J(iv) .
“ Liquidating Events ” has the meaning set forth in Section 13.1 .
“ Liquidating Losses ” has the meaning set forth in Section 6.5.J(v) .
“ Liquidator ” has the meaning set forth in Section 13.2.A .
“ LLC Agreement Amendment ” means Amendment No. 1 to the Amended and Restated Limited Liability Company Agreement of InfraREIT LLC dated January 29, 2015.
“ LP Act ” means the Delaware Revised Uniform Limited Partnership Act, as it may be amended from time to time, and any successor to such statute.
“ LTIP Unit ” means a Partnership Unit designated as a LTIP Unit by the General Partner with the preferences, conversion or other rights, voting power or rights, restrictions, limitation as to distributions, qualifications or other terms or conditions set forth in this Agreement.
“ majority in interest ” has the meaning set forth in Section 13.1 .
 
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“ Management Agreement ” means that certain Management Agreement, dated effective as of the Effective Date, between Hunt Utility Services, LLC, the General Partner and the Partnership.
“ Mandatory Conversion Date ” means the close of business on the thirty-second (32 nd ) day following the Effective Date (or if such day is not a Business Day, upon the close of business on the next succeeding Business Day) or, if the Overallotment Option has been exercised but not yet closed on or before such day, on the date of closing of such exercise of the Overallotment Option.
“ Market Disruption Event ” means the occurrence or existence for more than a one-half hour period in the aggregate on any scheduled Trading Day for the Public REIT Common Stock of any suspension or limitation imposed on trading (by reason of movements in price exceeding limits permitted by the stock exchange or otherwise) in the Public REIT Common Stock or in any options, contracts or future contracts relating to the Public REIT Common Stock, and such suspension or limitation occurs or exists at any time before 1:00 p.m. (New York City time) on such day.
“ Market Price ” on any date means, with respect to the Public REIT Common Stock, the last sale price for the Public REIT Common Stock, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, for the Public REIT Common Stock, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Public REIT Common Stock is not listed or admitted to trading on the New York Stock Exchange, as reported on the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Common stock is listed or admitted to trading or, if the Public REIT Common Stock is not listed or admitted to trading on any national securities exchange, the last quoted price, or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System or, if such system is no longer in use, the principal other automated quotation system that may then be in use or, if the Public REIT Common Stock is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Public REIT Common Stock selected by the General Partner or, in the event that no trading price is available for the Public REIT Common Stock, the fair market value of the Public REIT Common Stock, as determined in good faith by the General Partner.
“ Marubeni ” means Marubeni Corporation.
“ MC Common Units ” means the Common Units issued to MC Transmission pursuant to Section 4.6.F .
“ MC Transmission ” means MC Transmission Holdings, Inc., an Affiliate of Marubeni.
“ Merger ” has the meaning set forth in the recitals to this Agreement.
 
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“ Merger and Transaction Agreement ” means the Merger and Transaction Agreement, dated January 29, 2015, among InfraREIT Inc., the Predecessor General Partner and the Partnership.
“ Net Income ” means, for any taxable period, the excess, if any, of the Partnership’s items of income and gain for such taxable period over the Partnership’s items of loss and deduction for such taxable period. The items included in the calculation of Net Income shall be determined in accordance with Section 6.2.B . If an item of income, gain, loss or deduction that has been included in the initial computation of Net Income is subjected to the special allocation rules in Section 6.5 , Net Income or the resulting Net Loss, whichever the case may be, shall be recomputed without regard to such item.
“ Net Loss ” means, for any taxable period, the excess, if any, of the Partnership’s items of loss and deduction for such taxable period over the Partnership’s items of income and gain for such taxable period. The items included in the calculation of Net Loss shall be determined in accordance with Section 6.2.B . If an item of income, gain, loss or deduction that has been included in the initial computation of Net Loss is subjected to the special allocation rules in Section 6.5 , Net Loss or the resulting Net Income, whichever the case may be, shall be recomputed without regard to such item.
“ New Securities ” means (i) any rights, options, warrants or convertible or exchangeable securities having the right to subscribe for or purchase Shares, excluding grants under any Equity Incentive Plan, or (ii) any Debt issued by the General Partner that provides any of the rights described in clause (i).
“ Nonrecourse Built-in Gain ” means, with respect to any Contributed Properties or Adjusted Properties that are subject to a mortgage or negative pledge securing a Nonrecourse Liability, the amount of any taxable gain that would be allocated to the Partners pursuant to Section 6.6.B if such properties were disposed of in a taxable transaction in full satisfaction of such liabilities and for no other consideration.
“ Nonrecourse Deductions ” has the meaning set forth in Regulations Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions for a Fiscal Year or other relevant period shall be determined in accordance with the rules of Regulations Section 1.704-2(c).
“ Nonrecourse Liability ” has the meaning set forth in Regulations Section 1.752-1(a)(2).
“ Notice ” has the meaning set forth in Section 10.6 .
“ Notice of Redemption ” means a Notice of Redemption substantially in the form of Exhibit B .
“ Operating Entity ” has the meaning set forth in Section 7.4.E .
“ Original Agreement ” has the meaning set forth in the recitals to this Agreement.
 
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“ Overallotment Option ” means the option held by the underwriters to acquire additional shares of Public REIT Common Stock in connection with the REIT IPO.
“ Overallotment Amount ” means $21.551 multiplied by the number of shares of Public REIT Common Stock acquired by the underwriters pursuant to an exercise of the Overallotment Option (for clarity, if the Overallotment Option is not exercised, in whole or in part, the Overallotment Amount will be zero).
“ Parent Entity ” has the meaning set forth in Section 7.4.E .
“ Partner ” means the General Partner or a Limited Partner, and “ Partners ” means the General Partner and the Limited Partners.
“ Partner Nonrecourse Debt ” has the meaning set forth in Regulations Section 1.704-2(b)(4).
“ Partner Nonrecourse Debt Minimum Gain ” means an amount, with respect to each Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if such Partner Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Regulations Section 1.704-2(i)(3).
“ Partner Nonrecourse Deductions ” has the meaning set forth in Regulations Section 1.704-2(i), and the amount of Partner Nonrecourse Deductions with respect to a Partner Nonrecourse Debt for a Fiscal Year or other relevant period shall be determined in accordance with the rules of Regulations Section 1.704-2(i)(2).
“ Partner Registry ” means the Partner Registry maintained by the General Partner in the books and records of the Partnership in substantially the form of the Partner Registry attached as Exhibit A to this Agreement and in accordance with Section 7.1.A(xxiii) .
“ Partnership ” means the limited partnership formed under the LP Act upon the terms and conditions set forth in the Original Agreement and continued pursuant to this Agreement, or any successor to such limited partnership.
“ Partnership Interest ” means a Limited Partnership Interest or General Partnership Interest and includes any and all benefits to which the holder of such Partnership Interest may be entitled as provided in this Agreement, together with all obligations of such Person to comply with this Agreement. A Partnership Interest may be expressed as a number of Partnership Units.
“ Partnership Minimum Gain ” has the meaning set forth in Regulations Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain, as well as any net increase or decrease in Partnership Minimum Gain, for a Fiscal Year or other relevant period shall be determined in accordance with the rules of Regulations Section 1.704-2(d).
“ Partnership Record Date ” means the record date established by the General Partner either (i) for the distribution of Cash From Operations pursuant to Section 5.1 hereof, which record date shall be the same as the record date established by the General Partner for a distribution to its Stockholders of some or all of its portion of such distribution, (ii) if applicable,
 
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for determining the Partners entitled to Consent to any proposed action for which the Consent of the Partners is sought pursuant to Section 14.2 hereof, or (iii) for any other proper Partnership purpose.
“ Partnership Unit ” means a fractional, undivided share of the Partnership Interests of all Partners issued pursuant to Sections 4.1 and 4.2 of this Agreement and includes Class A Units, Class B Units, Class C Units, Common Units and LTIP Units and any other classes or series of Partnership Units established pursuant to this Agreement.
“ Partnership Unit Designation ” has the meaning set forth in Section 4.2.A .
“ Percentage Interest ” means, as to a Partner holding a class or series of Partnership Interests, its interest in such class or series, determined by dividing the Partnership Units of such class or series owned by such Partner by the total number of Partnership Units of such class or series then outstanding as specified in the Partner Registry. If the Partnership shall at any time have outstanding more than one class or series of Partnership Interests, the Percentage Interest attributable to each class or series of Partnership Interests shall be determined as set forth in the amendment to the Partnership Agreement setting forth the rights and privileges of such additional class or series of Partnership Interest, as contemplated by Section 4.2.A .
“ Permitted Transferee ” means (i) with respect to the Initial Limited Partner or any Hunt Group Member, an assignee or transferee of Partnership Units that is a Hunt Group Member, a Service Provider Entity or a current or former employee or service provider of any Hunt Group Member who has or receives the right to receive distributions or transfers of such Partnership Units pursuant to an agreement or other arrangement with any Hunt Group Member or Service Provider Entity, (ii) with respect to any Service Provider Entity, an assignee or transferee of Partnership Units that is any other Service Provider Entity or a current or former employee or service provider of any Hunt Group Member who has or receives the right to receive distributions or transfers of such Partnership Units pursuant to an agreement or other arrangement with any Hunt Group Member or Service Provider Entity, and (iii) with respect to any other Limited Partner, an assignee or transferee of Partnership Units that is a member of such Partner’s Immediate Family.
“ Person ” means any individual, corporation, proprietorship, firm, partnership, limited partnership, limited liability company, trust, association or other Entity.
“ Plan Asset Regulation ” means the U.S. Department of Labor regulation located at 29 C.F.R. Section 2510.3-101, or any successor regulation thereto, as in effect at the time of reference, as modified by Section 3(42) of ERISA.
“ Predecessor General Partner ” has the meaning set forth in the recitals to this Agreement.
“ Preferred Unit ” means a Partnership Unit that is entitled to a preference as compared to the class of Partnership Interests corresponding to common shares of beneficial interest (or other comparable Equity Interest) of the General Partner.
 
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“ Prohibited Party ” has the meaning set forth in the definition of “Unacceptable Investor” in this Article I .
“ Public REIT Class A Common Stock ” means shares of Class A common stock, par value $0.01 per share, of InfraREIT Inc.
“ Public REIT Class C Common Stock ” means shares of Class C common stock, par value $0.01 per share, of InfraREIT Inc.
“ Public REIT Common Stock ” has the meaning set forth in the recitals to this Agreement.
“ Publicly Traded ” means listed or admitted to trading on the New York Stock Exchange, the NYSE Amex, the NASDAQ Stock Market or another national securities exchange, or any successor to any of the foregoing.
“ Qualified DRIP/COPP ” means a dividend reinvestment plan or a cash option purchase plan of the General Partner that permits participants to acquire Shares using the proceeds of dividends paid by the General Partner or cash of the participant, respectively; provided , however , that if such shares are offered at a discount, such discount must (i) be designed to pass along to the Stockholders the savings enjoyed by the General Partner in connection with the avoidance of stock issuance costs, and (ii) not exceed 5% of the Value of a Share as computed under the terms of such plan.
“ Qualified Energy Project ” means an Electric Systems Project located within North America.
“ Qualified REIT Subsidiary ” means any Subsidiary of the General Partner that is a “qualified REIT subsidiary” within the meaning of Section 856(i) of the Code.
“ Qualified Transferee ” means an “Accredited Investor” as defined in Rule 501 promulgated under the Securities Act.
“ Qualifying Costs ” has the meaning set forth in Section 4.1.C .
“ Recapture Income ” means any gain recognized by the Partnership (computed without regard to any adjustment required by Section 734 or Section 743 of the Code) upon the disposition of any property or asset of the Partnership, which gain is characterized either as ordinary income or as “unrecaptured Section 1250 gain” (as defined in Section 1(h)(6) of the Code) because it represents the recapture of deductions previously taken with respect to such property or asset.
“ Redeemed Interest ” has the meaning set forth in Section 7.9.E(iii) .
“ Redeemed Limited Partner ” has the meaning set forth in Section 7.9.E(iii) .
“ Redeeming Partner ” has the meaning set forth in Section 8.7.A(i) .
 
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“ Redemption Amount ” means either the Cash Amount or the Shares Amount, as determined by the General Partner, in its sole and absolute discretion. A Redeeming Partner shall have no right, without the General Partner’s consent, in its sole and absolute discretion, to receive the Redemption Amount in the form of the Shares Amount.
“ Redemption Effective Date ” has the meaning set forth in Section 7.9.E(iii) .
“ Redemption Right ” has the meaning set forth in Section 8.7.A(i) .
“ Redemption Value ” means, with respect to a Redeemed Interest, the fair market value of such Redeemed Interest as of the applicable Redemption Effective Date, as determined in good faith by the General Partner; provided , that, if the Regulatory Issue is a result of a breach of a representation, warranty or covenant made by the Redeemed Limited Partner or a change in law applicable to the Redeemed Limited Partner, the Redemption Value shall be (in each case as determined in good faith by the General Partner) the lesser of (i) the fair market value of such Redeemed Interest on the applicable Redemption Effective Date and (ii) the fair market value of the Redeemed Interest on the date on which cash is allocated to make redemption payments. In making such determination of fair market value, the General Partner shall assume that all of the assets of the Partnership will be sold on the applicable date in a commercially reasonable manner and the proceeds of such sale, net of estimated closing costs, as reasonably determined by the General Partner, and all obligations of the Partnership (other than the redemption of the Redeemed Interests being redeemed as of such date), will be distributed to the Partners pursuant to this Agreement. With respect to a Regulatory Issue that is not a result of a breach of a representation, warranty or covenant made by the Redeemed Limited Partner or a change in law, if the majority of such Redeemed Limited Partners disagree with the General Partner’s determination of the Redemption Value of the applicable interests in the Partnership, such Redeemed Limited Partners shall negotiate in good faith to resolve such disagreement, and if such Redeemed Limited Partners continue to disagree after negotiations arc held, either side may request that an independent valuation firm (who must be reasonably acceptable to the other party) be retained, whose valuation shall be final and binding on the Partnership and all of the Partners. The Partnership will bear the cost of such independent valuation firm.
“ Regulated Investor ” has the meaning set forth in Section 7.9.E(ii) .
“ Regulations ” means the Treasury Regulations promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).
“ Regulatory Allocations ” has the meaning set forth in Section 6.5.H .
“ Regulatory Issue ” has the meaning set forth in Section 7.9.E(ii) .
“ REIT ” means a real estate investment trust under Section 856 of the Code.
“ REIT IPO ” has the meaning set forth in the recitals to this Agreement.
“ REIT Rules ” means the requirements for qualification as a REIT under the Code and the Regulations.
 
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“ Residual Gain ” or “ Residual Loss ” means any item of gain or loss, as the case may be, of the Partnership recognized for U.S. federal income tax purposes resulting from a sale, exchange or other disposition of Contributed Property or Adjusted Property, to the extent such item of gain or loss is not allocated pursuant to Section 6.6.B.(i)(a) or 6.6.B.(ii)(a) to eliminate Book-Tax Disparities.
“ Safe Harbors ” has the meaning set forth in Section 11.6.F .
“ Secretary of State ” means the Secretary of State of the State of Delaware.
“ Securities Act ” means the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time of reference.
“ Service Provider Entity ” means any Entity primarily owned or controlled by individuals that are current or former employees or service providers of the Partnership, any Hunt Group Member or any of their respective Affiliates.
“ Share ” means a share of common stock or preferred stock of the General Partner issued upon or following consummation of the REIT IPO.
“ Share Rounding ” means the rounding of fractional shares of InfraREIT LLC or InfraREIT Inc., as the case may be, on a holder by holder basis, in connection with the Share Split, the Carry Crystallization and the Carry Shortfall.
“ Shares Amount ” means a number of Shares equal to the product of the number of Partnership Units offered for redemption by a Redeeming Partner times the Conversion Factor; provided , that, if the General Partner issues to all holders of Shares rights, options, warrants or convertible or exchangeable securities entitling such holders to subscribe for or purchase Shares or any other securities or property (collectively, the “ rights ”) and clause (ii) of the definition of “Conversion Factor” does not apply to the issuances of such rights, the Shares Amount shall also include such rights that a holder of that number of Shares would be entitled to receive.
“ Share Split ” has the meaning set forth in the recitals to this Agreement.
“ Specified Redemption Date ” means the tenth (10th) Business Day after receipt by the General Partner of a Notice of Redemption (or such other date agreed to by the General Partner and the Limited Partner exercising its Redemption Right); provided , that, if the Shares are not Publicly Traded, the Specified Redemption Date means the thirtieth (30th) Business Day after receipt by the General Partner of a Notice of Redemption (or such other date agreed to by the General Partner and the Limited Partner exercising its Redemption Right).
“ Stockholder ” means a Person who holds any Shares of the General Partner in such Person’s capacity as a Stockholder in the General Partner.
“ SU ” means Sharyland Utilities, L.P., a Texas limited partnership.
 
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“ Subscription Agreement ” means a subscription agreement (including the exhibits, annexes and the Investor Questionnaire thereto) pursuant to which each Limited Partner subscribes for Partnership Units in the Partnership.
“ Subsidiary ” means, with respect to any Person, any corporation, limited liability company, trust, partnership or joint venture, or other Entity of which a majority of (i) the voting power of the voting equity securities or (ii) the outstanding Equity Interests is owned, directly or indirectly, by such Person.
“ Substituted Limited Partner ” means a Person who is admitted as a Limited Partner to the Partnership pursuant to Section 11.4 or any Partnership Unit Designation.
“ Successor Entity ” has the meaning set forth in the definition of “Conversion Factor” herein.
“ Surviving Partnership ” has the meaning set forth in Section 11.2.B.
“ System Lease ” means a lease of an Investment to a third party (which may be an Affiliate of Hunt) to operate such Investment.
“ Target Balance ” has the meaning set forth in Section 6.5.J .
“ Terminating Capital Transaction ” means any sale or other disposition of all or substantially all of the assets of the Partnership for cash or a related series of transactions that, taken together, result in the sale or other disposition of all or substantially all of the assets of the Partnership for cash.
“ Termination Transaction ” has the meaning set forth in Section 11.2.B .
“ Trading Day ” means a day during which (i) trading in shares of Public REIT Common Stock generally occurs, (ii) there is no Market Disruption Event and (iii) a Market Price for Public REIT Common Stock (other than a Market Price referred to in the last sentence of the definition thereof) is available for such day; provided , that, if the shares of Public REIT Common Stock are not admitted for trading or quotation on or by any exchange, bureau or other organization referred to in the definition of Market Price (excluding the last sentence of that definition), Trading Day shall mean any Business Day.
“ Transaction ” has the meaning set forth in Section 4.4.E(vi) .
“ Transfer ” means, whether by operation of law or otherwise, any sale, transfer, distribution, assignment, bequest, lease, pledge, hypothecation, encumbrance, grant of a security interest in, or grant, issue, sale or conveyance of any option, warrant or right to acquire or to otherwise dispose of, transfer, or permit to be transferred, during life or at death (including (a) the granting of any option or entering into any agreement for the sale, transfer or other disposition of Shares or Partnership Units, (b) the sale, transfer, assignment or other disposition of any securities or rights convertible into or exchangeable for Shares or Partnership Units, but excluding (i) the exchange or conversion of any security of the General Partner for Shares or the Partnership for Partnership Units, as applicable, (ii) the redemption of Partnership Units pursuant
 
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to Section 8.7 or any Partnership Unit Designation or (iii) any conversion of LTIP Units into Common Units pursuant to Section 4.4.E , (c) any transfer or other disposition of any interest in Shares or Partnership Units as a result of a change in the marital status of the holder thereof, and (d) any change in the citizenship, or the country of formation, incorporation, organization or domicile, of the holder of Shares or Partnership Units). For clarity, a “Transfer” shall include any transaction, occurrence or event described in the foregoing clauses (a), (b), (c) or (d) that is effected, occurs or arises directly or indirectly, including the sale, transfer or assignment of a controlling interest in a Partner or by way of a merger, consolidation, business combination or similar transaction; provided , however , for any Partner which has issued securities of a class that are Publicly Traded (or securities of a class which are similarly traded publicly on a securities exchange or market in any other jurisdiction), “Transfer” shall not include a sale of any such securities of a class which are so publicly traded. The term “Transferred” shall have a correlative meaning. Notwithstanding anything to the contrary in this definition, a “Transfer” shall not include any sale, transfer, distribution, assignment or other disposition of an interest in the Initial Limited Partner to a partnership or limited liability company whose partners or members consist solely of Hunt Employee Investors, the members of their respective Immediate Family or Hunt Family Members.
“ Trust Shares ” has the meaning assigned to such term in the Merger and Transaction Agreement.
“ Unacceptable Investor ” means any Partner who is (a) a “designated national,” “specially designated national,” “specially designated terrorist,” “specially designated global terrorist,” “foreign terrorist organization,” or “blocked person” (any of these a “ Prohibited Party ”) within the definitions set forth in the Foreign Assets Control Regulations of the United States Treasury Department; (b) acting on behalf of, or a Person owned or controlled by, any Prohibited Party or government against whom the United States maintains economic sanctions or embargoes under the regulations of the United States Treasury Department, including, but not limited to, the “Government of Sudan,” the “Government of Iran,” and the “Government of Cuba”; (c) designated as a Prohibited Party by the United States Treasury Department pursuant to Executive Order 13224—Blocking Property and Prohibiting Transactions with Persons who Commit, Threaten to Commit, or Support Terrorism, effective September 24, 2001; (d) designated as a Prohibited Party by the United States Treasury Department pursuant to any of the following statutes or regulations and executive orders issued thereunder: the Trading with the Enemy Act, the Iraq Sanctions Act, the National Emergencies Act, the Antiterrorism and Effective Death Penalty Act of 1996, the International Emergency Economic Powers Act, the United Nations Participation Act, the International Security and Development Cooperation Act, the Nuclear Proliferation Prevention Act of 1994, the Foreign Narcotics Kingpin Designation Act, the Cuban Democracy Act, the Cuban Liberty and Democratic Solidarity Act, and the Foreign Operations, Export Financing, and Related Programs Appropriations Act and any similar laws enacted by the U.S.; and (e) designated as a Prohibited Party by the United States or any other government under laws, regulations or executive orders similar to, or any other law, regulation or executive order of similar import as, those set forth above under the preceding clauses (a) through (d), whether as to the United States or any non-U.S. country, if and to the extent such laws, regulations or executive orders are in effect, or as any of the laws, regulations or executive or other orders in the preceding clauses may be amended, supplemented, adjusted, modified, reviewed or interpreted from time to time.
 
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“ Unit Split ” has the meaning set forth in the recitals to this Agreement.
“ United States ” or “ U.S. ” means the United States of America, its territories and possessions, any state of the United States and the District of Columbia.
“ Unrealized Gain ” attributable to any item of Partnership property means, as of any date of determination, the excess, if any, of (i) the fair market value of such property (as determined under Section 6.2.D ) as of such date, over (ii) the Carrying Value of such property (prior to any adjustment to be made pursuant to Section 6.2.D ) as of such date.
“ Unrealized Loss ” attributable to any item of Partnership property means, as of any date of determination, the excess, if any, of (i) the Carrying Value of such property (prior to any adjustment to be made pursuant to Section 6.2.D ) as of such date, over (ii) the fair market value of such property (as determined under Section 6.2.D ) as of such date.
“ Unvested LTIP Units ” has the meaning set forth in Section 4.4.D(ii) .
“ Valuation Date ” means the date of receipt by the General Partner of a Notice of Redemption or, if such date is not a Business Day, the first Business Day thereafter.
“ Value ” means, with respect to either (x) any outstanding Shares of the General Partner that are Publicly Traded, or (y) any Public REIT Common Stock, the average of the daily market price per share for the ten (10) consecutive trading days immediately preceding the date with respect to which value must be determined. The market price for each such trading day shall be the closing price, regular way, on such day, as reported by the national exchange on which the Public REIT Common Stock is listed and traded, or if no such sale takes place on such day, the average of the closing bid and asked prices on such day. If the outstanding Shares of the General Partner are Publicly Traded and the Shares Amount includes rights that a holder of Shares would be entitled to receive, then the Value of such rights shall be determined by the General Partner acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate. If the Shares of the General Partner are not Publicly Traded, the Value of the Shares Amount per Partnership Unit offered for redemption (which will be the Cash Amount per Partnership Unit offered for redemption payable pursuant to Section 8.7.A ) means the amount that a holder of one Partnership Unit would receive if each of the assets of the Partnership were to be sold for their fair market value on the Specified Redemption Date, the Partnership were to pay all of its outstanding liabilities, and the remaining proceeds were to be distributed to the Partners in accordance with the terms of this Agreement. Such Value shall be determined by the General Partner, acting in good faith and based upon a commercially reasonable estimate of the amount that would be realized by the Partnership if each asset of the Partnership (and each asset of each partnership, limited liability company, trust, joint venture or other Entity in which the Partnership owns a direct or indirect interest) were sold to an unrelated purchaser in an arms’ length transaction where neither the purchaser nor the seller were under economic compulsion to enter into the transaction (without regard to any discount in value as a result of the Partnership’s minority interest in any property or any illiquidity of the Partnership’s interest in any property). In connection with determining the Value of the Partnership Interest for purposes of determining the number of additional Partnership Units issuable upon a Capital Contribution funded by an underwritten public offering or an arm’s length private placement of
 
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shares of beneficial interest (or other comparable Equity Interest) of the General Partner, the Value of such shares shall be the public offering or arm’s length private placement price per share of such class of beneficial interest (or other comparable Equity Interest) sold.
“ Vested LTIP Units ” has the meaning set forth in Section 4.4.D(ii) .
ARTICLE II
ORGANIZATIONAL MATTERS
Section 2.1 Organization
The Partnership is a limited partnership organized pursuant to the provisions of the LP Act and upon the terms and conditions set forth in the Original Agreement. The Partners hereby agree to continue the business of the Partnership on the terms set forth in this Agreement. Except as expressly provided herein to the contrary, the rights and obligations of the Partners and the administration and termination of the Partnership shall be governed by the LP Act. The Partnership Interest of each Partner shall be personal property for all purposes.
Section 2.2 Name
The name of the Partnership is “InfraREIT Partners, LP.” The Partnership’s business may be conducted under any other name or names deemed advisable by the General Partner, including the name of the General Partner or any Affiliate thereof. The words “Limited Partnership,” “LP,” “Ltd.” or similar words or letters shall be included in the Partnership’s name where necessary for the purposes of complying with the laws of any jurisdiction that so requires. The General Partner in its sole and absolute discretion may change the name of the Partnership at any time and from time to time and shall notify the Limited Partners of such change in the next regular communication to the Limited Partners.
Section 2.3 Registered Office and Agent; Principal Office
The address of the registered office of the Partnership in the State of Delaware shall be located at Corporation Trust Center, 1209 Orange Street, Wilmington, County of New Castle, Delaware 19801, and the registered agent for service of process on the Partnership in the State of Delaware at such registered office shall be The Corporation Trust Company. The principal office of the Partnership shall be located at 1807 Ross Avenue, 4 th Floor, Dallas, Texas 75201, or such other place as the General Partner may from time to time designate by notice to the Limited Partners. The Partnership may maintain offices at such other place or places within or outside the State of Delaware as the General Partner deems advisable.
 
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Section 2.4 Power of Attorney
A. Each Limited Partner and each Assignee constitutes and appoints each of the General Partner and any Liquidator (and any successor to any thereof by merger, transfer, assignment, election or otherwise) and each of the authorized officers and attorneys-in-fact of each of the foregoing, and each of those acting singly, in each case, with full power of substitution, as its true and lawful agent and attorney-in-fact, with full power and authority in its name, place and stead to:
(i) execute, swear to, acknowledge, deliver, file and record in the appropriate public offices: (a) all certificates, documents and other instruments (including this Agreement and the Certificate and all amendments or restatements thereof) that the General Partner or any Liquidator, as applicable, deems appropriate or necessary to form, qualify or continue the existence or qualification of the Partnership as a limited partnership (or a partnership in which the limited partners have limited liability) in the State of Delaware and in all other jurisdictions in which the Partnership may conduct business or own property; (b) all instruments that the General Partner or any Liquidator, as applicable, deems appropriate or necessary to reflect any amendment, change, modification or restatement of this Agreement made in accordance with the terms of this Agreement; (c) all conveyances and other instruments or documents that the General Partner or any Liquidator, as applicable, deems appropriate or necessary to reflect the dissolution and liquidation of the Partnership pursuant to the terms of this Agreement, including a certificate of cancellation; (d) all instruments relating to the admission, withdrawal, removal or substitution of any Partner pursuant to, or other events described in, Articles XI , XII or XIII or the Capital Contribution of any Partner; and (e) all certificates, documents and other instruments relating to the determination of the rights, preferences and privileges of Partnership Units, including any class of Partnership Units issued pursuant to Article IV ; and
(ii) execute, swear to, acknowledge and file all ballots, consents, approvals, waivers, certificates and other instruments appropriate or necessary, in the sole discretion of the General Partner or any Liquidator, as applicable, to make, evidence, give, confirm or ratify any vote, consent, approval, agreement or other action which is made or given by the Partners hereunder or is consistent with the terms of this Agreement or appropriate or necessary, in the discretion of the General Partner or any Liquidator, as applicable, to effectuate the terms or intent of this Agreement.
Nothing contained in this Section 2.4 shall be construed as authorizing the General Partner or any Liquidator, as applicable, to amend this Agreement except in accordance with Article XIV or as may be otherwise expressly provided for in this Agreement.
B. The foregoing power of attorney is hereby declared to be irrevocable and a power coupled with an interest, in recognition of the fact that each of the Partners will be relying upon the power of the General Partner and any Liquidator, as applicable, to act as contemplated by this Agreement in any filing or other action by it on behalf of the Partnership, and it shall survive and not be affected by the subsequent Incapacity of any Limited Partner or Assignee or the Transfer of all or any portion of such Limited Partner’s or Assignee’s Partnership Units or Partnership Interests and shall extend to such Limited Partner’s or Assignee’s heirs, successors, assigns and personal representatives. Each such Limited Partner or Assignee hereby agrees to be bound by any representation made by the General Partner or any Liquidator, as applicable, acting in good faith pursuant to such power of attorney; and each such Limited Partner or Assignee hereby waives any and all defenses which may be available to it to contest, negate or disaffirm
 
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the action of the General Partner or any Liquidator, as applicable, taken in good faith under such power of attorney. Each Limited Partner or Assignee shall execute and deliver to the General Partner or any Liquidator, as applicable, within 15 days after receipt of the General Partner’s or Liquidator’s, as applicable, request therefor, such further designation, powers of attorney and other instruments as the General Partner or the Liquidator, as the case may be, deems necessary to effectuate this Agreement and the purposes of the Partnership.
Section 2.5 Term
The term of the Partnership commenced on December 16, 2009, and shall continue in existence until the dissolution and termination of the Partnership pursuant to the provisions of Article XIII or as otherwise provided by Applicable Law.
ARTICLE III
PURPOSE
Section 3.1 Purpose and Business
The purpose and nature of the business to be conducted by the Partnership is:
(i) to conduct any business that may be lawfully conducted by a limited partnership organized pursuant to the LP Act;
(ii) to engage in activities necessary, incidental or ancillary thereto; and
(iii) to invest in or enter into any corporation, partnership, joint venture, trust, limited liability company or other Entity to engage in any of the foregoing or acquire ownership of interests in any Entity engaged, directly or indirectly, in any of the foregoing; provided , however , that such business shall be limited to and conducted in such a manner as to permit the General Partner at all times to be classified as a REIT unless the General Partner, in accordance with its Charter and the Bylaws, determines in its sole and absolute discretion, that it is no longer in the best interests of the General Partner to continue to qualify as a REIT, in which case the General Partner may revoke or otherwise terminate the General Partner’s REIT election pursuant to applicable U.S. federal income tax law and elect to be treated thereafter as a C corporation, partnership or other type of Entity as it determines in accordance with applicable U.S. federal income tax law. Without limiting the generality of the foregoing, the Partners acknowledge that the status of the General Partner as a REIT inures to the benefit of all the Partners and not solely to the General Partner or its Affiliates.
Section 3.2 Powers
The Partnership is empowered to do any and all acts and things necessary, appropriate, proper, advisable, incidental to or convenient for the furtherance and accomplishment of the purposes and business described herein and for the protection and benefit of the Partnership, including full power and authority, directly or through its ownership interest
 
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in other Entities, to enter into, perform and carry out contracts of any kind, borrow money and issue evidences of indebtedness, whether or not secured by mortgage, deed of trust, pledge or other lien, acquire, own, manage, improve and develop real property, and lease, sell, transfer and dispose of real property; provided , however , that the Partnership shall not take, or shall refrain from taking, any action which, in the judgment of the General Partner, in its sole and absolute discretion, (i) could adversely affect the ability of the General Partner to continue to qualify as a REIT, or could subject the General Partner to any taxes under Section 856, Section 857 or Section 4981 of the Code, unless the General Partner, as provided in Section 3.1 , has previously determined to terminate its REIT election for U.S. federal income tax purposes or (ii) could violate any law or regulation of any governmental body or agency having jurisdiction over either the General Partner or its securities.
Section 3.3 Partnership Only for Purposes Specified
The Partnership shall be a partnership only for tax purposes and the purposes specified in Section 3.1 , and this Agreement shall not be deemed to create a partnership among the Partners with respect to any activities whatsoever other than the activities within such purposes. Except as otherwise expressly provided in this Agreement, no Limited Partner shall have any authority to act for, bind, commit or assume any obligation or responsibility on behalf of the Partnership, its properties or any other Partner. No Partner, in its capacity as a Partner under this Agreement, shall be responsible or liable for any indebtedness or obligation of another Partner, nor shall the Partnership be responsible or liable for any indebtedness or obligation of any Partner, incurred either before or after the execution and delivery of this Agreement by such Partner, except as to those responsibilities, liabilities, indebtedness or obligations incurred or assumed pursuant to and as limited by the terms of this Agreement and the LP Act.
Section 3.4 Representations and Warranties by the Parties
A. Each Partner that is an individual (including, without limitation, each Additional Limited Partner or Substituted Limited Partner as a condition to becoming an Additional Limited Partner or a Substituted Limited Partner) represents and warrants to, and covenants with, each other Partner that (i) the consummation of the transactions contemplated by this Agreement to be performed by such Partner will not result in a breach or violation of, or a default under, any material agreement by which such Partner or any of such Partner’s property is bound, or any statute, regulation, order or other law to which such Partner is subject, (ii) if 5% or more (by value) of the Partnership’s interests are or will be owned by such Partner within the meaning of Section 7704(d)(3) of the Code, such Partner does not, and for so long as it is a Partner will not, own, directly or indirectly, (a) stock of any corporation that is a tenant of (I) the General Partner or any Disregarded Entity with respect to the General Partner, (II) the Partnership or (III) any partnership, venture or limited liability company of which the General Partner, any Disregarded Entity with respect to the General Partner, or the Partnership is a direct or indirect member or (b) an interest in the capital or net profits of any non-corporate tenant of (I) the General Partner or any Disregarded Entity with respect to the General Partner, (II) the Partnership or (III) any partnership, venture, or limited liability company of which the General Partner, any Disregarded Entity with respect to the General Partner, or the Partnership is a direct or indirect member, (iii) such Partner has the legal capacity to enter into this Agreement and perform such Partner’s obligations hereunder, and (iv) this Agreement is binding upon, and
 
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enforceable against, such Partner in accordance with its terms. Notwithstanding the foregoing, a Partner that is an individual shall not be subject to the ownership restrictions set forth in clause (ii) of the immediately preceding sentence to the extent such Partner obtains the written Consent of the General Partner prior to violating any such restrictions. Each Partner that is an individual shall also represent and warrant to the Partnership that such Partner is neither a “foreign person” within the meaning of Section 1445(f) of the Code nor a foreign partner within the meaning of Section 1446(e) of the Code.
B. Each Partner that is not an individual (including, without limitation, each Additional Limited Partner or Substituted Limited Partner as a condition to becoming an Additional Limited Partner or a Substituted Limited Partner) represents and warrants to, and covenants with, each other Partner that (i) all transactions contemplated by this Agreement to be performed by it have been duly authorized by all necessary action, including, without limitation, that of its general partner(s), committee(s), trustee(s), beneficiaries, directors and/or stockholder(s) (as the case may be) as required, (ii) the consummation of such transactions shall not result in a breach or violation of, or a default under, its partnership or operating agreement, trust agreement, charter or bylaws (as the case may be) any material agreement by which such Partner or any of such Partner’s properties or any of its partners, members, beneficiaries, trustees or stockholders (as the case may be) is or are bound, or any statute, regulation, order or other law to which such Partner or any of its partners, members, trustees, beneficiaries or stockholders (as the case may be) is or are subject, (iii) if 5% or more (by value) of the Partnership’s interests are or will be owned by such Partner within the meaning of Section 7704(d)(3) of the Code, such Partner does not, and for so long as it is a Partner will not, own, directly or indirectly, (a) stock of any corporation that is a tenant of (I) the General Partner or any Disregarded Entity with respect to the General Partner, (II) the Partnership or (III) any partnership, venture or limited liability company of which the General Partner, any Disregarded Entity with respect to the General Partner, or the Partnership is a direct or indirect member or (b) an interest in the capital or net profits of any non-corporate tenant of (I) the General Partner or any Disregarded Entity with respect to the General Partner, (II) the Partnership or (III) any partnership, venture, or limited liability company of which the General Partner, any Disregarded Entity with respect to the General Partner, or the Partnership is a direct or indirect member, and (iv) this Agreement is binding upon, and enforceable against, such Partner in accordance with its terms. Notwithstanding the foregoing, (x) none of the Initial Limited Partner, MC Transmission or their respective Affiliates shall be subject to the ownership restrictions set forth in clause (iii) of the immediately preceding sentence and (y) any other Partner that is not an individual shall not be subject to the ownership restrictions set forth in clause (iii) of the immediately preceding sentence to the extent such Partner obtains the written Consent of the General Partner prior to violating any such restrictions. Each Partner that is not an individual shall also represent and warrant to the Partnership that such Partner is neither a “foreign person” within the meaning of Section 1445(f) of the Code nor a foreign partner within the meaning of Section 1446(e) of the Code.
C. Each Partner (including, without limitation, each Additional Limited Partner or Substituted Limited Partner as a condition to becoming an Additional Limited Partner or Substituted Limited Partner) represents, warrants and agrees that (i) it has acquired and continues to hold its interest in the Partnership for its own account for investment purposes only and not for the purpose of, or with a view toward, the resale or distribution of all or any part
 
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thereof in violation of applicable laws, and not with a view toward selling or otherwise distributing such interest or any part thereof at any particular time or under any predetermined circumstances in violation of applicable laws and (ii) it is a sophisticated investor, able and accustomed to handling sophisticated financial matters for itself, particularly real estate investments, and that it has a sufficiently high net worth that it does not anticipate a need for the funds that it has invested in the Partnership in what it understands to be a highly speculative and illiquid investment.
D. The representations and warranties contained in Sections 3.4.A , 3.4.B and 3.4.C hereof shall survive the execution and delivery of this Agreement by each Partner (and, in the case of an Additional Limited Partner or a Substituted Limited Partner, the admission of such Additional Limited Partner or Substituted Limited Partner as a Limited Partner in the Partnership) and the dissolution, liquidation and termination of the Partnership.
E. Each Partner (including, without limitation, each Additional Limited Partner or Substituted Limited Partner as a condition to becoming an Additional Limited Partner or Substituted Limited Partner) hereby acknowledges that no representations as to potential profit, cash flows, funds from operations or yield, if any, in respect of the Partnership or the General Partner have been made by any Partner or any employee or representative or Affiliate of any Partner, and that projections and any other information, including, without limitation, financial and descriptive information and documentation, that may have been in any manner submitted to such Partner shall not constitute any representation or warranty of any kind or nature, express or implied.
F. Notwithstanding the foregoing, the General Partner may, in its sole and absolute discretion, permit the modification of any of the representations and warranties contained in Sections 3.4.A , 3.4.B and 3.4.C above as applicable to any Partner (including, without limitation any Additional Limited Partner or Substituted Limited Partner or any transferee of either), provided that such representations and warranties, as modified, shall be set forth in either (i) a Partnership Unit Designation applicable to the Partnership Units held by such Partner or (ii) a separate writing addressed to the Partnership and the General Partner.
ARTICLE IV
CAPITAL CONTRIBUTIONS AND ISSUANCES
OF PARTNERSHIP INTERESTS
Section 4.1 Capital Contributions of the Partners
A. General . Each Partner has made (or shall be deemed to have made) the Capital Contributions to the Partnership and owns Partnership Units in the respective amounts set forth for such Partner in the Partner Registry, as the same may be amended from time to time by the General Partner to the extent necessary to reflect accurately sales, exchanges, conversions or other Transfers, redemptions, Capital Contributions, the issuance of additional Partnership Units or similar events having an effect on a Partner’s ownership of Partnership Units occurring after the date hereof in accordance with the terms of this Agreement. The Partner Registry attached as Exhibit A hereto gives effect to (x) all prior issuances of Partnership Units, including
 
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any issuances effective on the Effective Date as described in the recitals to this Agreement and/or related to the acceleration of the issuances described in Section 4.1.B and Section 4.1.C hereof, (y) the Unit Split and (z) the transactions specified in subsections A-G of Section 4.6 , but does not give effect to (A) the issuance of any Partnership Units that may be issued after the Effective Date or (B) the automatic conversions and cancellations contemplated by subsections I-L of Section 4.6 hereof. Except as provided in Sections 10.5 and 13.3 hereof or as may be provided in another agreement between the Partnership and any Partner, the Partners shall have no obligation to make any additional Capital Contributions or provide any additional funding to the Partnership (whether in the form of loans, repayments of loans or otherwise). Except as otherwise set forth in Section 13.3 hereof, no Partner shall have any obligation to restore any deficit that may exist in its Capital Account, either upon a liquidation of the Partnership or otherwise.
B. CREZ Project Credit . Pursuant to Section 4.1.B(i) of the Amended and Restated Agreement, the Initial Limited Partner was entitled to receive credit for deemed Capital Contributions, up to $82,500,000, for certain construction-related capital expenditures, as well as Class A Units (at a deemed issue price of ten dollars ($10) per Class A Unit, before giving effect to the Unit Split, or $10.654733 per Class A Unit after giving effect to the Unit Split) with respect to such deemed Capital Contributions. The amount of such accrued deemed credit is $72,021,950 immediately before the Effective Date. Consistent with the Amended and Restated Agreement, on the Effective Date (x) the Partnership hereby issues deemed Capital Contribution credit to the Initial Limited Partner of $10,478,050, accelerating such credit to an aggregate of $82,500,000, and (y) the Partnership hereby issues 983,418 Class A Units at $10.654733 per Class A Unit (after giving effect to the Unit Split) in respect of such accelerated credit. The Initial Limited Partner agrees that such issuances settle the Partnership’s obligation to the Initial Limited Partner under Section 4.1.B(i) of the Amended and Restated Agreement, and that such issuances, together with the issuances referred to in Section 4.1.C hereof, settle any and all deemed Capital Contribution obligations the Partnership owes the Initial Limited Partner. The Partner Registry attached hereto as Exhibit A reflects the effect of the issuances described in clauses (x) and (y) of this Section 4.1.B .
C. Other Deemed Capital Contributions . The Partnership also had the obligation to credit the Initial Limited Partner for deemed Capital Contributions, and issue Class A Units, pursuant to Section 4.1.B(ii) of the Amended and Restated Agreement in respect of five percent (5%) of certain costs and expenses incurred by or on behalf of the Partnership or any of its Subsidiaries with respect to certain Identified Development Projects (as defined in the Amended and Restated Agreement) and included in the rate base for such Identified Development Project, as adjusted pursuant to the final regulatory order, if applicable (“ Qualifying Costs ”). In this regard, the Capital Contributions and Class A Units reflected in the Partner Registry attached as Exhibit A hereto include $187,460 of deemed Capital Contributions and 17,595 Class A Units which Capital Contributions and Class A Units are in respect of $3,749,182 of estimated Qualifying Costs incurred in the fourth quarter of 2014 related to the “D/C tie” Identified Development Project. Because the Partnership has not yet closed its books for 2014, these numbers are preliminary. If the Partnership in good faith determines that the amount of the Qualifying Costs actually incurred in the fourth quarter of 2014 with respect to the D/C tie project are more or less than $3,749,182, and, as a result, the Initial Limited Partner was issued an incorrect number of Class A Units than it otherwise would have been entitled to, then (i) if the
 
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number originally issued was too high, the Initial Limited Partner shall contribute to the Partnership (in cash) an amount equal to the difference (i.e., the amount of Class A Units that were actually issued minus the amount that should have been issued) multiplied by the Value of a share of Public REIT Stock as of the issuance date of the financial statements of the General Partner as of December 31, 2014 and the year then ended, and (ii) if the number was too low, the Partnership will pay the Initial Limited Partner (in cash) an amount equal to the difference (i.e., the amount of Class A Units that should have been issued minus the amount that were issued) multiplied by the Value of a share of Public REIT Stock as of the issuance date of the financial statements of the General Partner as of December 31, 2014 and the year then ended, provided, however, with respect to clause (ii), in no event will the Partnership be required to make a payment that exceeds $50,000. Determinations hereunder will be made by the Partnership in good faith. Subject to the obligation of the Initial Limited Partner and the Partnership specified in this Section 4.1C , the Initial Limited Partner agrees that the Capital Contributions and Class A Units reflected in the Partner Registry attached as Exhibit A hereto reflects all issuances specified in Section 4.1.B(ii) of the Amended and Restated Agreement, and that such issuances, together with the issuances referred to in Section 4.1.B hereof, settle any and all deemed Capital Contribution obligations the Partnership owes the Initial Limited Partner. All of the Class A Unit numbers set forth above give effect to the Unit Split. The obligation of the Initial Limited Partner to make a cash contribution to the Partnership, and of the Partnership to make a cash payment to the Initial Limited Partner, in this Section 4.1.C will terminate on April 1, 2015.
Section 4.2 Issuances of Partnership Interests
Subject to the rights of any Holder of any Partnership Units set forth in a Partnership Unit Designation:
A. General . Subject to Section 7.9.E hereof, the General Partner may cause the Partnership from time to time to issue additional Partnership Interests, in the form of Partnership Units, for any Partnership purpose, to the Partners (including the General Partner and its Affiliates) or other Persons (including in connection with any agreement to which the Partnership is a party with respect to Contributed Property or otherwise) and to admit such Persons as Additional Limited Partners, for such consideration and on such terms and conditions as shall be established by the General Partner in its sole and absolute discretion, subject to Delaware law, all without the approval of any Limited Partners. Without limiting the foregoing, the Partnership is expressly authorized to cause the Partnership to issue Partnership Units (i) upon the conversion, redemption or exchange of any Debt, Partnership Units or other securities issued by the Partnership, (ii) for less than fair market value, so long as the General Partner concludes in good faith that such issuance is in the best interest of the Stockholders and the Partnership, (iii) in connection with any merger of any other Person into the Partnership or any Subsidiary of the Partnership if the applicable merger agreement provides that Persons are to receive Partnership Units in exchange for their interests in the Person merging into the Partnership or any Subsidiary of the Partnership, (iv) in consideration for services rendered to or for the benefit of the Partnership and (v) pursuant to the provisions of the Management Agreement, Development Agreement or any other agreement to which the Partnership is a party. Subject to Delaware law, any additional Partnership Units may be issued in one or more classes, or in one or more series of any of such classes, with such designations, preferences and relative, participating, optional or other special rights, powers and duties (including rights, powers and
 
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duties senior to existing classes of Partnership Units), all as shall be determined by the General Partner in its sole and absolute discretion without the approval of any Limited Partner or any other Person, and set forth in a written document thereafter attached to and made an exhibit to this Agreement, which exhibit shall be an amendment to this Agreement and shall be incorporated herein by reference (each, a “ Partnership Unit Designation ”), without the approval of any Limited Partner or any other Person. Without limiting the generality of the foregoing, the General Partner shall have authority to specify: (i) the allocations of items of Partnership income, gain, loss, deduction and credit to each such class or series of Partnership Interests, (ii) the right of each such class or series of Partnership Interests to share in Partnership distributions, (iii) the rights of each such class or series of Partnership Interests upon dissolution and liquidation of the Partnership, (iv) the voting rights, if any, of each such class or series of Partnership Interests, (v) the conversion, redemption or exchange rights applicable to each such class or series of Partnership Interests, and (vi) any vesting conditions applicable to such class or series of Partnership Interests. Upon the issuance of any additional Partnership Interests, the General Partner shall amend the Partner Registry as appropriate to reflect such issuance.
B. Issuances to the General Partner . No additional Partnership Units shall be issued to the General Partner unless (i) the additional Partnership Units are issued to all Partners in proportion to their respective Percentage Interests with respect to the class of Partnership Units so issued, (ii) the additional Partnership Units are issued in connection with an issuance of Shares and the General Partner directly or indirectly contributes or otherwise causes to be transferred to the Partnership the net cash proceeds or other net consideration, if any, received in connection with the issuance of such Shares, or (iii) the additional Partnership Units are issued upon the conversion, redemption or exchange of Debt or other securities issued by the Partnership. If the Partnership issues Partnership Interests pursuant to this Section 4.2 , the General Partner shall make such revisions to this Agreement as it deems necessary to reflect the issuance of such Partnership Interests.
C. Classes of Partnership Units . Subject to Section 4.2.B above, as of the Effective Date the Partnership has five (5) classes of Partnership Units entitled “ Common Units ,” “ Class A Units ,” “ Class B Units ,” “ Class C Units ” and “ LTIP Units. ”
(i) Common Units may be issued by the General Partner in accordance with Section 4.2.A ; provided , that, following the Mandatory Conversion Date, any Partnership Unit that is not specifically designated by the General Partner as being of a particular class shall be deemed to be a Common Unit.
(ii) Class A Units, at the election of the General Partner in its sole and absolute discretion, but subject to Section 7.9.E , may be issued to newly admitted Partners in exchange for the contribution by such Partners of cash, Contributed Property, stock, notes or other assets or consideration; provided , that , prior to the Mandatory Conversion Date, any Partnership Unit that is not specifically designated by the General Partner as being of a particular class shall be deemed to be a Class A Unit. No Class A Units may be issued after the Mandatory Conversion Date. The Partnership may deem and treat the record holder of any Class A Units as the true and lawful owner thereof for all purposes, and the Partnership shall not be affected by any notice to the contrary.
 
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(iii) Class B Units have been issued to the Initial Limited Partner. No Class B Units may be issued after the Mandatory Conversion Date. The Partnership may deem and treat the record holder of any Class B Units as the true and lawful owner thereof for all purposes, and the Partnership shall not be affected by any notice to the contrary.
(iv) Class C Units, at the election of the General Partner in its sole and absolute discretion, but subject to Section 7.9.E , may be issued to newly admitted Partners in exchange for the contribution by such Partners of cash, Contributed Property, stock, notes or other assets or consideration. No Class C Units may be issued after the Mandatory Conversion Date. The Partnership may deem and treat the record holder of any Class C Units as the true and lawful owner thereof for all purposes, and the Partnership shall not be affected by any notice to the contrary.
(v) LTIP Units, at the election of the General Partner in its sole and absolute discretion, but subject to Sections 4.4.C , 4.4.D and 4.4.E , may be issued to newly admitted Partners as consideration for the performance of past or future services on behalf of the General Partner, the Partnership, or its Subsidiaries.
D. Certificates for Partnership Units . The Partnership Units shall be uncertificated; provided , however , that the General Partner may provide otherwise as to some or all of any classes or series of the Partnership Units; provided , further , that any Partner will be entitled, upon request, to receive a certificate representing the Partnership Units held by such Partner in connection with a pledge of such Partnership Units permitted pursuant to Section 11.3 . All Partnership Units held by a Partner shall be securities within the meaning of, and governed by, (i) Article 8 of the Delaware Uniform Commercial Code and (ii) Article 8 of the Uniform Commercial Code of any other applicable jurisdiction.
Section 4.3 Additional Funds and Capital Contributions.
A. General . The General Partner may, at any time and from time to time, determine that the Partnership requires additional funds (“ Additional Funds ”) for the acquisition of additional Partnership assets, for the redemption of Partnership Units or for such other Partnership purposes as the General Partner may determine in its sole and absolute discretion. Additional Funds may be raised by the Partnership, at the election of the General Partner, in any manner provided in, and in accordance with, the terms of this Section 4.3 . No Person shall have any preemptive, preferential or similar right or rights to subscribe for or acquire any Partnership Interests.
B. Additional Capital Contributions . The Partnership may raise all or any portion of such Additional Funds by accepting additional Capital Contributions from the Partners or from third parties on terms and conditions as shall be determined by the General Partner. In connection with any such additional Capital Contributions (of cash or property), the General Partner is hereby authorized and directed to cause the Partnership to issue additional Partnership Units. In the event that the Partnership accepts additional Capital Contributions pursuant to this Section 4.3.B , the General Partner shall make such additional revisions to this Agreement (including the Partner Registry) as are consistent with and necessary to reflect such additional Capital Contributions.
 
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C. Issuance of Securities by the General Partner . The General Partner shall not issue any additional Shares unless the General Partner contributes directly or indirectly the cash proceeds or other consideration, if any, received from the issuance of such additional Shares to the Partnership in exchange for Partnership Units; provided , however , that notwithstanding the foregoing, the General Partner may issue Shares (i) pursuant to Section 8.7 , (ii) pursuant to a dividend or distribution (including any stock split) or otherwise pursuant to which there is an adjustment to the Conversion Factor pursuant to the definition thereof, or (iii) pursuant to share grants or awards made pursuant to any Equity Incentive Plan. In the event of any issuance of additional Shares by the General Partner, and the direct or indirect contribution to the Partnership, by the General Partner, of the cash proceeds or other consideration received from such issuance, the Partnership shall pay the General Partner’s expenses associated with such issuance, including any underwriting discounts or commissions (it being understood that if the proceeds actually received by the General Partner are less than the gross proceeds of such issuance as a result of any underwriter’s discount or other expenses paid or incurred by the General Partner in connection with such issuance, then the General Partner shall be deemed to have made a Capital Contribution to the Partnership in the amount of the gross proceeds of such issuance and the Partnership shall be deemed simultaneously to have reimbursed the General Partner for the amount of, or paid directly, as the case may be, such underwriter’s discount or other expenses).
D. Loans by Third Parties . The General Partner, on behalf of the Partnership, may obtain any Additional Funds by causing the Partnership to incur Debt to any Person upon such terms as the General Partner determines appropriate, including making such Debt convertible, redeemable or exchangeable for Partnership Units; provided , however , that the Partnership shall not incur any such Debt if any Partner would be personally liable for the repayment of such Debt (unless such Partner otherwise agrees).
E. General Partner Loans . The General Partner, on behalf of the Partnership, may obtain any Additional Funds by causing the Partnership to incur Debt with the General Partner (a “ General Partner Loan ”), if (i) such Debt is, to the extent permitted by Applicable Law, on substantially the same terms and conditions (including interest rate, repayment schedule, and conversion, redemption, repurchase and exchange rights) as Funding Debt incurred by the General Partner, the net proceeds of which are loaned to the Partnership to provide such Additional Funds or (ii) such Debt is on terms and conditions no less favorable to the Partnership than would be available to the Partnership from any third party; provided , however , that the Partnership shall not incur any such Debt if (a) a breach, violation or default of such Debt would be deemed to occur by virtue of the Transfer by any Limited Partner of any Partnership Interest or (b) such Debt is recourse to any Partner (unless such Partner otherwise agrees).
Section 4.4 Equity Incentive Plan
A. Establishment of Equity Incentive Plan . Nothing in this Agreement shall be construed or applied to preclude or restrain the General Partner from adopting, modifying or terminating stock incentive plans for the benefit of employees, directors or other business
 
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associates of the General Partner, the Partnership or any of their Affiliates (“ Equity Incentive Plans ”). The General Partner may implement such Equity Incentive Plans and any actions taken under such plans (such as the grant or exercise of options to acquire Shares or Partnership Units, the issuance of restricted Shares or Partnership Units, or the issuance of LTIP Units), whether taken with respect to or by an employee or other service provider of the General Partner, the Partnership or its Subsidiaries, in a manner reasonably determined by the General Partner, which may be set forth in plan implementation guidelines and/or Award Agreements that the General Partner may establish or amend from time to time. The Partners acknowledge and agree that, in the event that any such Equity Incentive Plan is adopted, modified or terminated by the General Partner, amendments to this Agreement may become necessary or advisable and that any such amendments requested by the General Partner shall not require any Consent or approval by the Limited Partners. The Partnership is expressly authorized to issue Partnership Units as contemplated by this Section 4.4 without any further act, approval or vote of any Partner or any other Persons.
B. Options Granted or Other Issuances of Shares . If at any time or from time to time, in connection with an Equity Incentive Plan, a stock option to acquire Shares is duly exercised or any Shares are otherwise issued (e.g., an award of restricted stock), (i) the General Partner shall, as soon as practicable after such exercise or issuance, make or cause to be made directly or indirectly a Capital Contribution to the Partnership in an amount equal to the exercise price (if any) paid to the General Partner by such exercising party in connection with the exercise of such stock option or recipient in connection with such other issuance of Shares and (ii) notwithstanding the amount of the Capital Contribution (if any) actually made upon any such exercise or issuance, the General Partner shall be deemed to have contributed directly or indirectly to the Partnership, as a Capital Contribution, in consideration of an additional Limited Partnership Interest (expressed in and as additional Partnership Units), an amount equal to the Value of a Share as of the date of exercise or issuance multiplied by the number of Shares then being issued in connection with the exercise of such stock option or otherwise. For purposes of this Section 4.4.B , in determining the Value of a Share, only the trading date immediately preceding the exercise of the relevant stock option or other issuance of Shares under the Equity Incentive Plan shall be considered.
C. Issuance of LTIP Units . The General Partner may from time to time issue LTIP Units to Persons who provide services to or for the benefit of the Partnership or its Subsidiaries, for such consideration as the General Partner may determine to be appropriate, and admit such Persons as Limited Partners. Subject to the provisions of this Section 4.4 , LTIP Units shall be treated as Common Units, with all of the rights, privileges and obligations attendant thereto. For purposes of computing the Partners’ Percentage Interests, Holders of LTIP Units shall be treated as holders of Common Units and LTIP Units shall be treated as Common Units. In particular, the Partnership shall maintain at all times a one-to-one correspondence between LTIP Units and Common Units for conversion, distribution and other purposes, including without limitation complying with the following procedures:
(i) If an Adjustment Event (as defined below) occurs, then the General Partner shall make a corresponding adjustment to the LTIP Units to maintain a one-for-one conversion and economic equivalence ratio between Common Units and LTIP Units. The following shall be “ Adjustment Events ”: (A) the Partnership makes a
 
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distribution on all outstanding Common Units in Partnership Units, (B) the Partnership subdivides the outstanding Common Units into a greater number of units or combines the outstanding Common Units into a smaller number of units, or (C) the Partnership issues any Partnership Units in exchange for its outstanding Common Units by way of a reclassification or recapitalization of its Common Units. If more than one Adjustment Event occurs, the adjustment to the LTIP Units need be made only once using a single formula that takes into account each and every Adjustment Event as if all Adjustment Events occurred simultaneously. For the avoidance of doubt, the following shall not be Adjustment Events: (x) the issuance of Partnership Units in a financing, reorganization, acquisition or other similar business transaction, (y) the issuance of Partnership Units pursuant to any employee benefit or compensation plan or distribution reinvestment plan, or (z) the issuance of any Partnership Units to the General Partner in respect of a Capital Contribution to the Partnership of proceeds from the sale of securities by the General Partner. If the Partnership takes an action affecting the Common Units other than actions specifically described above as “Adjustment Events” and in the opinion of the General Partner such action would require an adjustment to the LTIP Units to maintain the one-to-one correspondence described above, the General Partner shall have the right to make such adjustment to the LTIP Units, to the extent permitted by law and by any Equity Incentive Plan, in such manner and at such time as the General Partner, in its sole discretion, may determine to be appropriate under the circumstances. If an adjustment is made to the LTIP Units as herein provided , the Partnership shall promptly file in the books and records of the Partnership an officer’s certificate setting forth such adjustment and a brief statement of the facts requiring such adjustment, which certificate shall be conclusive evidence of the correctness of such adjustment absent manifest error. Promptly after the filing of such certificate, the Partnership shall mail a notice to each Holder of a LTIP Unit setting forth the adjustment to his or her LTIP Units and the effective date of such adjustment; and
(ii) The Holders of LTIP Units shall, when, as and if authorized and declared by the General Partner out of assets legally available for that purpose, be entitled to receive distributions in an amount per LTIP Unit equal to the distributions per Common Unit, paid to holders of Common Units on such Partnership Record Date established by the General Partner with respect to such distribution. So long as any LTIP Units are outstanding, no distributions (whether in cash or in kind) shall be authorized, declared or paid on Common Units, unless equal distributions have been or contemporaneously are authorized, declared and paid on the LTIP Units. Subject to the terms of any Award Agreement, a Holder of a LTIP Unit shall be entitled to transfer his or her LTIP Units to the same extent, and subject to the same restrictions as holders of Common Units are entitled to transfer their Common Units pursuant to Article XI of this Agreement.
D. Special Provisions Applicable to LTIP Units .
(i) Priority . Subject to the provisions of this Section 4.4.D and Section 4.4.E , the LTIP Units shall rank pari passu with the Common Units as to the payment of regular and special periodic or other distributions. Immediately prior to any
 
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liquidation, dissolution or winding up of the Partnership, the General Partner shall exercise its right to cause a Forced Conversion with respect to the maximum number of LTIP Units then eligible for conversion, taking into account any allocations that occur in connection with the liquidation, dissolution or winding up, at a value determined by the General Partner in good faith using the value attributed to the Partnership Units in the context of the liquidation, dissolution or winding up (in which case the Conversion Date shall be the effective date of the liquidation, dissolution or winding up). As to the payment of distributions and as to distribution of assets upon liquidation, dissolution or winding up, any class or series of Partnership Units or Partnership Interests which by its terms specifies that it shall rank junior to, on a parity with, or senior to the Common Units shall also rank junior to, or pari passu with, or senior to, as the case may be, the LTIP Units.
(ii) Award Agreements; Vesting . LTIP Units may, in the sole discretion of the General Partner, be issued subject to such vesting, forfeiture and additional restrictions on transfer as are set forth in an award agreement entered into between the recipient and the General Partner and/or the Partnership (an “ Award Agreement ”). The terms of any Award Agreement may be modified by the General Partner from time to time in its sole discretion, subject to any restrictions on amendment imposed by the relevant Award Agreement or by the Equity Incentive Plan, if applicable. LTIP Units that have vested under the terms of an Award Agreement are referred to as “ Vested LTIP Units ”; all other LTIP Units shall be treated as “ Unvested LTIP Units .”
(iii) Forfeiture . Unless otherwise specified in the Award Agreement, upon the occurrence of any event specified in an Award Agreement as resulting in either the right of the Partnership or the General Partner to repurchase LTIP Units at a specified purchase price or some other forfeiture of any LTIP Units, then if the Partnership or the General Partner exercises such right to repurchase or forfeiture in accordance with the applicable Award Agreement, the relevant LTIP Units shall immediately, and without any further action, be treated as cancelled and no longer outstanding for any purpose. Unless otherwise specified in the Award Agreement, no consideration or other payment shall be due with respect to any LTIP Units that have been forfeited, other than any distributions declared with respect to a Partnership Record Date prior to the effective date of the forfeiture. In connection with any repurchase or forfeiture of LTIP Units, the balance of the portion of the Capital Account of the Holder of the LTIP Units that is attributable to all of his or her LTIP Units shall be reduced by the amount, if any, by which it exceeds the Target Balance (as determined and defined in Section 6.5.J ), calculated with respect to such Holder’s remaining LTIP Units, if any.
(iv) Redemption . The redemption right provided to Limited Partners under Section 8.7 shall not apply with respect to LTIP Units unless and until they are converted to Common Units as provided in Section 4.4.E below.
(v) Voting . LTIP Units shall not have any voting rights until such time as they are converted into Common Units as provided herein.
 
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(vi) Characterization as Profits Interests . Any LTIP Units to be issued under this Agreement are intended to qualify as “profits interests” under IRS Revenue Procedures 93-27 and 2001-43, and the sections of this Agreement relating to such interests shall be interpreted and applied consistently therewith. In this regard, (x) any such LTIP Units so issued shall have a Capital Account as of their issue date equal to $0 and (y) to the extent any portion of a distribution otherwise payable to a holder of LTIP Units would cause such holder to have a deficit balance in its Adjusted Capital Account after taking into account all allocations of income, gain, loss and deduction expected to be made to such holder for the year in or for which the distribution is made, such portion of the distribution shall not be paid to such holder until such time, if any, that the payment of such portion of the distribution would not have the result described in this clause (y).
E. Conversion of LTIP Units .
(i) Subject to Section 4.4.E(ii) , a Holder of LTIP Units shall have the right (the “ Conversion Right ”), at his or her option, at any time to convert all or a portion of his or her Vested LTIP Units into Common Units; provided , however , that a holder may not exercise the Conversion Right for less than 100 Vested LTIP Units or, if such holder holds less than 100 Vested LTIP Units, all of the Vested LTIP Units held by such holder. A Holder of LTIP Units shall not have the right to convert Unvested LTIP Units into Common Units until they become Vested LTIP Units; provided , however , that when a Holder of LTIP Units is notified of the expected occurrence of an event that will cause his or her Unvested LTIP Units to become Vested LTIP Units, such Holder of LTIP Units may give the Partnership a Conversion Notice (as defined in Section 4.4.E(ii) below) conditioned upon and effective as of the time of vesting and such Conversion Notice, unless subsequently revoked by such Holder of LTIP Units, shall be accepted by the Partnership subject to such condition. The General Partner shall have the right at any time to cause a conversion of Vested LTIP Units into Common Units. In all cases, the conversion of any LTIP Units into Common Units shall be subject to the conditions and procedures set forth in this Section 4.4.E .
(ii) A holder of Vested LTIP Units may convert such Units into an equal number of fully paid and nonassessable Common Units, giving effect to all adjustments (if any) made pursuant to Section 4.4.D . Notwithstanding the foregoing, in no event may a holder of Vested LTIP Units convert a number of Vested LTIP Units that exceeds (x) the portion of the Economic Capital Account Balance of such Limited Partner which is attributable to all the LTIP Units owned by such Limited Partner, divided by (y) the Common Unit Economic Balance, in each case as determined as of the effective date of conversion (the “ Capital Account Limitation ”). In order to exercise his or her Conversion Right, a Holder of LTIP Units shall deliver a notice (a “ Conversion Notice ”) to the Partnership (with a copy to the General Partner) which specifies the number of Vested LTIP Units to be converted and a conversion date (the “ Conversion Date ”) that is not less than 10 days, or more than 60 days, after the date of delivery of such Conversion Notice. Each Holder of LTIP Units covenants and agrees with the Partnership that all Vested LTIP Units to be converted pursuant to this Section 4.4.E(ii) shall be free and clear of all liens. Notwithstanding anything
 
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herein to the contrary, a holder of LTIP Units may deliver a Notice of Redemption pursuant to Section 8.7.A of this Agreement relating to those Common Units that will be issued to such holder upon conversion of such LTIP Units into Common Units in advance of the Conversion Date; provided , however , that the redemption of such Common Units by the Partnership shall in no event take place until after the Conversion Date. For clarity, it is noted that the objective of this paragraph is to put a Holder of LTIP Units in a position where, if he or she so wishes, the Common Units into which his or her Vested LTIP Units will be converted can be redeemed by the Partnership simultaneously with such conversion, with the further consequence that, if the General Partner elects to assume the Partnership’s redemption obligation with respect to such Common Units under Section 8.7.B of this Agreement by delivering to such holder Shares rather than cash, then such holder can have such Shares issued to him or her simultaneously with the conversion of his or her Vested LTIP Units into Common Units. The General Partner shall reasonably cooperate with a Holder of LTIP Units to coordinate the timing of the different events described in the foregoing sentence.
(iii) The Partnership, at any time at the election of the General Partner, may cause any number of Vested LTIP Units held by a Holder of LTIP Units to be converted (a “ Forced Conversion ”) into an equal number of Common Units, giving effect to all adjustments (if any) made pursuant to Section 4.4.D ; provided , however , that the Partnership may not cause Forced Conversion of any LTIP Units that would not at the time be eligible for conversion at the option of such Holder of LTIP Units pursuant to Section 4.4.E(ii) (e.g., due to the application of the Capital Account Limitation). In order to exercise its right of Forced Conversion, the Partnership shall deliver a notice (a “ Forced Conversion Notice ”) to the applicable Holder of LTIP Units not less than ten nor more than 60 days prior to the Conversion Date specified in such Forced Conversion Notice.
(iv) A conversion of Vested LTIP Units for which the holder thereof has given a Conversion Notice or the Partnership has given a Forced Conversion Notice shall occur automatically after the close of business on the applicable Conversion Date without any action on the part of such Holder of LTIP Units, as of which time such Holder of LTIP Units shall be credited on the books and records of the Partnership with the issuance as of the opening of business on the next day of the number of Common Units issuable upon such conversion. After the conversion of LTIP Units as aforesaid, the Partnership shall deliver to such Holder of LTIP Units, upon his or her written request, a certificate of the General Partner certifying the number of Common Units and remaining LTIP Units, if any, held by such person immediately after such conversion. The permitted Assignee of any Limited Partner pursuant to Article XI hereof and any applicable Award Agreement may exercise the rights of such Limited Partner pursuant to this Section 4.4.E and such Limited Partner shall be bound by the exercise of such rights by the Assignee.
(v) For purposes of making future allocations under Section 6.1 and applying the Capital Account Limitation, the portion of the Economic Capital Account Balance of the applicable Holder of LTIP Units that is treated as attributable to his or
 
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her remaining LTIP Units shall be reduced, as of the date of conversion, by the product of the number of LTIP Units converted and the Common Unit Economic Balance.
(vi) If the Partnership, the General Partner or the Partner shall be a party to any transaction (including without limitation a merger, consolidation, unit exchange, self-tender offer for all or substantially all Common Units or other business combination or reorganization, or sale of all or substantially all of the Partnership’s assets, but excluding any transaction which constitutes an Adjustment Event) in each case as a result of which Common Units shall be exchanged for or converted into the right, or the holders of Common Units shall otherwise be entitled, to receive cash, securities or other property or any combination thereof (any of the foregoing being referred to herein as a “ Transaction ”), then, immediately prior to the Transaction, (x) in the event of a merger, consolidation, exchange or other similar transaction resulting in a change of control of the Partnership, all Unvested LTIP Units shall immediately vest and (y) the General Partner shall exercise its right to cause a Forced Conversion with respect to the maximum number of LTIP Units then eligible for conversion, taking into account any allocations that occur in connection with the Transaction or that would occur in connection with the Transaction if the assets of the Partnership were sold at the Transaction price or, if applicable, at a value determined by the General Partner in good faith using the value attributed to the Partnership Units in the context of the Transaction (in which case the Conversion Date shall be the effective date of the Transaction).
In anticipation of such Forced Conversion and the consummation of the Transaction, the Partnership shall use commercially reasonable efforts to cause each Holder of LTIP Units to be afforded the right to receive in connection with such Transaction, in consideration for the Common Units into which his or her LTIP Units will be converted, the same kind and amount of cash, securities and other property (or any combination thereof) receivable upon the consummation of such Transaction by a holder of the same number of Common Units, assuming such holder of Common Units is not a Person with which the Partnership consolidated or into which the Partnership merged or which merged into the Partnership or to which such sale or transfer was made, as the case may be, or an affiliate of such Person. In the event that holders of Common Units have the opportunity to elect the form or type of consideration to be received upon consummation of the Transaction, prior to such Transaction the General Partner shall give prompt written notice to each Holder of LTIP Units of such election, and shall use commercially reasonable efforts to afford the Holder of LTIP Units the right to elect, by written notice to the General Partner, the form or type of consideration to be received upon conversion of each LTIP Unit held by such holder into Common Units in connection with such Transaction. If a Holder of LTIP Units fails to make such an election, such holder (and any of its transferees) shall receive upon conversion of each LTIP Unit held by him or her (or by any of his or her transferees) the same kind and amount of consideration that a Holder of a Common Unit would receive if such Holder of a Common Unit failed to make such an election.
 
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(vii) Conversions under this Section 4.4.E shall not be treated as a Transfer (and, thus, shall not be subject to the restrictions on Transfers).
(viii) Effective as of the Effective Date, the Partnership is issuing 28,000 LTIP Units to certain members of the board of directors of the General Partner. The Partner Registry attached hereto as Exhibit A reflects the effect of these issuances. For the avoidance of doubt, these LTIP Units will not be subject to Section 4.6.K .
Section 4.5 Dividend Reinvestment Plan or Cash Option Purchase Plan.
Except as may otherwise be provided in this Article IV , all amounts received or deemed received by the General Partner in respect of any Qualified DRIP/COPP, either (a) shall be utilized by the General Partner to effect open market purchases of Shares, or (b) if the General Partner elects instead to issue new Shares with respect to such amounts, shall be contributed by the General Partner to the Partnership in exchange for additional Partnership Common Units. Upon such contribution, the Partnership will issue to the General Partner a number of Common Units equal to the quotient of (i) the new Shares so issued, divided by (ii) the Conversion Factor then in effect. The Partnership is expressly authorized to issue Common Units as contemplated by this Section 4.5 without any further act, approval or vote of any Partner or any other Persons.
Section 4.6 Transactions Occurring on Effective Date and Mandatory Conversion Date.
A. Carry Crystallization . On the Effective Date, immediately after the consummation of the REIT IPO but prior to the transactions described in the following subsections of this Section 4.6 , as an accelerated payment of the Initial Limited Partner’s carried interest, the Partnership shall issue the Initial Limited Partner 1,167,287 Common Units and shall cancel an equal number of Class A Units held by the Predecessor General Partner. The Partner Registry attached hereto as Exhibit A reflects the effect of this issuance, cancellation and allocation.
B. Structuring Fee Equity Issuance . On the Effective Date, immediately after the consummation of the REIT IPO and simultaneously with the consummation of the Merger, the Partnership shall issue 1,700,000 Common Units to InfraREIT Inc. in respect of the structuring fee issuance of 1,700,000 shares of Public REIT Common Stock by InfraREIT Inc. to the Initial Limited Partner or one of its Affiliates which occurred prior to the consummation of the REIT IPO. The Partner Registry attached hereto as Exhibit A reflects the effect of this issuance.
C. Contribution of IPO Proceeds . On the Effective Date, immediately after the consummation of the REIT IPO and simultaneously with the consummation of the Merger, InfraREIT Inc. shall contribute $323,265,000 to the Partnership and, in exchange therefor, the Partnership shall issue to InfraREIT Inc. 15,000,000 Common Units and InfraREIT, Inc. shall be admitted into the Partnership as a General Partner. The Partner Registry attached hereto as Exhibit A reflects the effect of this contribution and issuance.
D. Conversion/Redemption . On the Effective Date, immediately after the consummation of the REIT IPO and simultaneously with the consummation of the Merger, the
 
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Initial Limited Partner shall (pursuant to Section 8.7 ) exchange 1,551,878 Class A Units for 1,551,878 shares of Public REIT Common Stock, and such Class A Units shall be automatically converted into Common Units. The Partner Registry attached hereto as Exhibit A reflects the effect of this exchange.
E. Merger . As a result of the Merger, on the Effective Date, InfraREIT Inc. shall acquire all of the Class A Units and Class C Units formerly held by the Predecessor General Partner pursuant to the Merger and Transaction Agreement. Upon the consummation of the Merger, 8,000,000 Class A Units will automatically be converted into Common Units. The Partner Registry attached hereto as Exhibit A reflects the effect of the Merger.
F. Acquisition of Common Units by MC Transmission . Effective immediately after the Merger and pursuant to the Unit Subscription Agreement, dated January 29, 2015, between MC Transmission and the Partnership, MC Transmission shall contribute to the Partnership the ES Note, and the Partnership shall issue to MC Transmission 3,325,874 Common Units (the “ MC Common Units ”). Upon such issuance of MC Common Units to MC Transmission, MC Transmission shall automatically be admitted to the Partnership as a Limited Partner. The Partner Registry attached hereto as Exhibit A reflects this contribution and admission.
G. Redemption of Class A Units Held by InfraREIT Inc. Effective immediately after the Merger and the contribution of the ES Note specified in Section 4.6.F , and consistent with Section 7.5.B of the Amended and Restated Agreement, InfraREIT Inc. shall transfer to the Partnership for redemption 6,242,999 Class A Units and, in exchange therefor, the Partnership shall transfer to InfraREIT Inc. the ES Note, which shall then be cancelled by InfraREIT Inc.
H. Reserved.
I. Class A Unit Mandatory Conversion .
(i) This Section 4.6.I. sets forth the manner in which any outstanding Class A Units held by InfraREIT Inc. will automatically convert to Common Units on the Mandatory Conversion Date, among other matters.
(ii) As of the Mandatory Conversion Date, the General Partner shall calculate the dollar amount that InfraREIT Inc. and the Initial Limited Partner would have been entitled to receive if an amount equal to the sum of the Cash Merger Amount, the Overallotment Amount and the 30-Day Class A Value were allocated as follows:
(a) First, to InfraREIT Inc. until the sum of prior distributions to the Predecessor General Partner in respect of its Class A Units under Article V of the
 
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Amended and Restated Agreement, plus any prior distributions to InfraREIT Inc. in respect of its Class A Units pursuant to Section 5.1.C hereof, plus the allocation of the Cash Merger Amount, the Overallotment Amount and the 30-Day Class A Value under this Section 4.6.I.(ii)(a) , equals an Implied IRR of 13.5% per annum with respect to the aggregate Capital Contributions made by the Predecessor General Partner to the Partnership in respect of its Class A Units (other than the Class A Units redeemed pursuant to Section 4.6.G ); and
(b) Thereafter, (x) 70% to InfraREIT Inc. and (y) 30% to the Initial Limited Partner.
(iii) Following such calculation, if there is a Carry Shortfall, the Partnership will (A) cancel a number of Class A Units held by InfraREIT Inc. equal to the amount of the Carry Shortfall divided by the 30-Day VWAP Price (with such number of Class A Units adjusted up or down by less than 60 Class A Units in order to account for Share Rounding so as to cause the number of Common Units held by InfraREIT Inc. to equal the number of shares of Public REIT Common Stock outstanding immediately after the Mandatory Conversion Date) and (B) issue the Initial Limited Partner an equal number of Common Units.
(iv) After the application of the foregoing provisions of this Section 4.6.I. , all remaining outstanding Class A Units held by InfraREIT Inc. shall be automatically converted into an equal number of Common Units.
J. Class C Unit Mandatory Conversion .
(i) This Section 4.6.J. sets forth the manner in which the Class C Units held by InfraREIT Inc. will automatically convert to Common Units on the Mandatory Conversion Date.
(ii) As of the Mandatory Conversion Date, the General Partner shall calculate the dollar amount that InfraREIT Inc. and the Initial Limited Partner would have been entitled to receive if an amount equal to the 30-Day Class C Value were allocated as follows:
(a) First, to InfraREIT Inc. until the sum of prior distributions to the Predecessor General Partner in respect of its Class C Units under Article V of the Amended and Restated Agreement, plus any distributions to InfraREIT Inc. in respect of its Class C Units pursuant to Section 5.1.C hereof, plus the allocation of the 30-Day Class C Value under this Section 4.6.J.(ii)(a) , equals an Implied IRR of 13.5% per annum with respect to the aggregate Capital Contributions made by the Predecessor General Partner to the Partnership in respect of its Class C Units; and
(b) Thereafter, (x) 70% to InfraREIT Inc. and (y) 30% to the Initial Limited Partner.
 
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(iii) If an amount is allocable to the Initial Limited Partner pursuant to Section 4.6.J.(ii)(b) , the Partnership will (A) cancel a number of Class C Units held by InfraREIT Inc. equal to such amount divided by the 30-Day VWAP Price (with such number of Class C Units adjusted up or down by less than 100 Class C Units in order to account for Share Rounding so as to cause the number of Common Units held by InfraREIT Inc. to equal the number of shares of Public REIT Common Stock outstanding immediately after the Mandatory Conversion Date) and (B) issue the Initial Limited Partner an equal number of Common Units.
(iv) After the application of the foregoing provisions of this Section 4.6.J. , all remaining outstanding Class C Units held by InfraREIT Inc. shall be automatically converted into an equal number of Common Units.
K. Automatic LTIP Conversion . On the Mandatory Conversion Date (and immediately after the application of the foregoing subsections of this Section 4.6 ), each outstanding Independent Director LTIP Unit will automatically convert into one (1) Common Unit.
L. Initial Limited Partner Units . On the Mandatory Conversion Date, all Class B Units will be canceled. Following this cancellation and the transactions described in the foregoing subsections of this Section 4.6 , all remaining Class A Units held by the Initial Limited Partner will be automatically converted into an equal number of Common Units.
M. Notice of Issuance . The Conversion Agent is delegated the authority to manage all conversion and other logistical matters associated with the implementation of this Section 4.6 .
Section 4.7 Other Contribution Provisions
If any Partner is admitted to the Partnership and is given a Capital Account in exchange for services rendered to the Partnership, such transaction shall be treated by the Partnership and the affected Partner as if the Partnership had compensated such Partner in cash, and the Partner had contributed such cash to the capital of the Partnership.
Section 4.8 No Interest on Capital
No Partner shall be entitled to interest on its Capital Contributions or its Capital Account.
Section 4.9 Separate Agreements
In connection with the issuance of Partnership Units to certain Additional Limited Partners, the Partnership may enter into separate agreements that set forth additional rights and obligations of such Additional Limited Partners and additional terms and conditions of such Additional Limited Partners’ Partnership Interests, subject to Section 7.9.E hereof.
 
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ARTICLE V
DISTRIBUTIONS
Section 5.1 Requirement and Characterization of Distributions
A. General . Subject to the rights of any Holder of any Partnership Unit set forth in a Partnership Unit Designation, the General Partner shall distribute Cash From Operations generated by the Partnership to the Partners who are Partners on the Partnership Record Date with respect to the applicable period as provided in Sections 5.1.B and 5.1.C . Notwithstanding anything to the contrary contained herein, in no event may a Partner receive a distribution of Cash From Operations with respect to a Partnership Unit for an applicable period if such Partner is entitled to receive a distribution with respect to a Share for which such Partnership Unit has been redeemed or exchanged. Unless otherwise expressly provided for herein or in an agreement from and after the time a new class or series of Partnership Interests is created in accordance with Article IV hereof, no Partnership Interest shall be entitled to a distribution in preference to any other Partnership Interest. The General Partner shall make such reasonable efforts, as determined by it in its sole and absolute discretion and consistent with the qualification of the General Partner as a REIT, to distribute Cash From Operations to the General Partner in an amount sufficient to enable the General Partner to make distributions to its Stockholders that will enable the General Partner to (1) satisfy the requirements for qualification as a REIT under the REIT Rules and (2) avoid any U.S. federal income or excise tax liability.
B. Method . Except as provided in Section 5.1.C ,
(i) Each Holder of a class of Partnership Units that, as a class, is entitled to any preference in distribution shall be entitled to a distribution in accordance with the rights of any such class of Partnership Units (and, within such class, pro rata in proportion to the respective Percentage Interests in such class on such Partnership Record Date); and
(ii) To the extent there is Cash From Operations remaining after payment of any preference in distribution in accordance with the foregoing clause (i), with respect to Partnership Interests that are not entitled to any preference in distribution, pro rata to each such class in accordance with the terms of such class (and, within each such class, pro rata in proportion to the respective Percentage Interests in such class on such Partnership Record Date).
C. Notwithstanding Section 5.1.B , the day that is one day before the Effective Date shall be considered to be a Partnership Record Date (the “ Final Pre-IPO Record Date ”) and, on the Effective Date, the General Partner shall distribute Cash From Operations for the period ending on the Final Pre-IPO Record Date among the Partners owning Class A Units, Class B Units and Class C Units on the Final Pre-IPO Record Date in accordance with Section 5.1.C of the Amended and Restated Agreement. The General Partner shall make such reasonable efforts, as determined by it in its sole and absolute discretion, to cause the amount of such distribution to be in an amount at least equal to the Partnership’s net taxable income and gain generated through the portion of the Fiscal Year ending on the Effective Date.
 
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Section 5.2 Distributions in-Kind
No right is given to any Partner to demand and receive property other than cash as provided in this Agreement. The General Partner may determine, in its sole and absolute discretion, to make a distribution in-kind of Partnership assets to the Holders of Partnership Units, and such assets shall be distributed in such a fashion as to ensure that the fair market value is distributed and allocated in accordance with Articles V , VI and X .
Section 5.3 Amounts Withheld
All amounts withheld pursuant to the Code or any provisions of any state or local tax law and Section 10.5 with respect to any allocation, payment or distribution to the General Partner, the Limited Partners or Assignees shall be treated as amounts distributed to the General Partner, Limited Partners or Assignees pursuant to Section 5.1 for all purposes under this Agreement.
Section 5.4 Distributions Upon Liquidation
Proceeds from a Terminating Capital Transaction shall be distributed to the Partners in accordance with Section 13.2 .
Section 5.5 Revisions to Reflect Issuance of Partnership Interests
If the Partnership issues Partnership Interests to the General Partner or any Additional Limited Partner pursuant to Article IV hereof, subject to the rights of any Holder of any Partnership Interest set forth in a Partnership Unit Designation, the General Partner shall make such revisions to this Article V and the Partner Registry as it deems necessary to reflect the issuance of such additional Partnership Interests without the requirements for any other consents or approvals.
Section 5.6 No Distributions Prior to Mandatory Conversion Date. Prior to the Mandatory Conversion Date, the General Partner will not authorize any distribution of Cash From Operations or set a Partnership Record Date for any purpose, without the express written approval of the Chief Executive Officer of Hunt (or its successor Entity).
Section 5.7 Restricted Distributions. Notwithstanding any provision to the contrary contained in this Agreement, neither the Partnership nor the General Partner, on behalf of the Partnership, shall make a distribution to any Partner on account of its Partnership Interest if such distribution would violate the LP Act or other Applicable Law.
ARTICLE VI
ALLOCATIONS
Section 6.1 Allocations For Capital Account Purposes
For purposes of maintaining the Capital Accounts and in determining the rights of the Partners among themselves, the Partnership’s items of income, gain, loss and deduction
 
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(computed in accordance with Section 6.2 ), shall, except as provided in Section 6.5 , be allocated among the Partners (and determined separately for each class of Partnership Interest held by each Partner) in each Fiscal Year (or portion thereof) as provided in this Section 6.1 below.
A. Net Income . After giving effect to the special allocations set forth in Section 6.5 , and subject to Section 6.1.C , Net Income for each Fiscal Year (or portion thereof) shall be allocated as follows:
(i) first, to the General Partner until the cumulative Net Income allocated to the General Partner pursuant to this clause (i) equals the cumulative Net Losses previously allocated to the General Partner pursuant to Section 6.1.B(iv) ;
(ii) second, to the Holders of any Partnership Units that are entitled to any preference upon liquidation until the cumulative Net Income allocated under this clause (ii) equals the cumulative Net Losses allocated to such Partners under Section 6.1.B(iii) ;
(iii) third, to the Holders of any Partnership Units that are entitled to any preference in distribution (other than a preferred return of capital) in accordance with the rights of any such class of Partnership Interests until each such Partnership Unit has been allocated, on a cumulative basis pursuant to this clause (iii), Net Income equal to the amount of any such preference in distribution (other than a preferred return of capital) of such class of Partnership Units (and, within such class, pro rata in proportion to the respective Percentage Interests as of the last day of the period for which such allocation is being made); and
(iv) thereafter with respect to Partnership Units that are not entitled to any preference in the allocation of Net Income, pro rata to each such class in accordance with the terms of such class (and, within such class, pro rata in proportion to the respective Percentage Interests as of the last day of the period for which such allocation is being made).
B. Net Losses . After giving effect to the special allocations set forth in Section 6.5 , and subject to Section 6.1.C , Net Losses for each Fiscal Year (or portion thereof) shall be allocated as follows:
(i) first, to the Holders of Partnership Units, in proportion to and to the extent of the excess of (i) the cumulative Net Income previously allocated to such holders pursuant to Section 6.1.A(iv) , over (ii) the sum of (A) the aggregate distributions with respect to such Partnership Units pursuant to clause (ii) of Section 5.1.B , and (B) the cumulative allocations of Net Losses to such holders pursuant to this Section 6.1.B(i) for all prior taxable years;
(ii) second, with respect to classes of Partnership Units that are not entitled to any preference in distribution upon liquidation, pro rata to each such class in accordance with the terms of such class (and, within such class, pro rata in proportion to the respective Percentage Interests as of the last day of the period for which such allocation is being made); provided , that Net Losses shall not be allocated to any
 
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Partner pursuant to this Section 6.1.B(ii) to the extent that such allocation would cause such Partner to have an Adjusted Capital Account Deficit (or increase any existing Adjusted Capital Account Deficit) (determined in the case of a Partner who also holds classes of Partnership Units that are entitled to any preferences in distribution upon liquidation, by subtracting from such Partners’ Adjusted Capital Account the amount of such preferred distribution to be made upon liquidation) at the end of such Fiscal Year (or portion thereof));
(iii) third, with respect to classes of Partnership Interests that are entitled to any preference in distribution upon liquidation, in reverse order of the priorities of each such class (and within each such class, pro rata in proportion to their respective Percentage Interests as of the last day of the period for which such allocation is being made; provided , that Net Losses shall not be allocated to any Partner pursuant to this Section 6.1.B(iii) to the extent that such allocation would cause such Partner to have an Adjusted Capital Account Deficit (or increase any existing Adjusted Capital Account Deficit) at the end of such Fiscal Year (or portion thereof); and
(iv) thereafter, to the General Partner.
C. Special Allocations Upon Liquidation . Notwithstanding Sections 6.1.A and 6.1.B , in the event that the Partnership disposes of all or substantially all of its assets in a transaction that will lead to a liquidation of the Partnership pursuant to Article XIII hereof, any Net Income or Net Losses realized in connection with such transaction and thereafter (and, if necessary, constituent items of income, gain, loss and deduction) shall be specially allocated for such Fiscal Year or other relevant period (and to the extent permitted by Section 761(c) of the Code, for the immediately preceding Fiscal Year or period) among the Holders as required so as to cause liquidating distributions pursuant to Section 13.2.A(v) hereof to be made in the same amounts and proportions as would have resulted had such distributions instead been made pursuant to Article V hereof. In addition, if there is an adjustment to the Carrying Value of the assets of the Partnership pursuant to Section 6.2.D , allocations of Net Income or Net Losses arising from such adjustment shall be allocated in the same manner as described in the prior sentence.
D. Allocation of Nonrecourse Debt . For purposes of Regulations Section 1.752-3(a), the Partners agree that Nonrecourse Liabilities of the Partnership in excess of the sum of (i) the amount of Partnership Minimum Gain and (ii) the total amount of Nonrecourse Built-in Gain shall be allocated by the General Partner by taking into account the facts and circumstances relating to each Partner’s respective interest in the profits of the Partnership. For this purpose, the General Partner will have discretion in any Fiscal Year or other relevant period to allocate such excess Nonrecourse Liabilities among the Partners in any manner permitted under Section 752 of the Code and the Regulations thereunder.
Section 6.2 Capital Accounts of the Partners
A. The Partnership shall maintain for each Partner a separate Capital Account in accordance with the rules of Regulations Section 1.704-1(b)(2)(iv). Such Capital Account shall be increased by (i) the amount of all Capital Contributions and any other deemed
 
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contributions made by such Partner to the Partnership pursuant to this Agreement and (ii) all items of Partnership income and gain (including income and gain exempt from tax) computed in accordance with Section 6.2.B hereof and allocated to such Partner pursuant to Sections 6.1 and 6.5 , and decreased by (x) the amount of cash or Agreed Value of all actual and deemed distributions of cash or property made to such Partner pursuant to this Agreement and (y) all items of Partnership deduction and loss computed in accordance with Section 6.2.B hereof and allocated to such Partner pursuant to Sections 6.1 and 6.5 .
B. For purposes of computing the amount of any item of income, gain, deduction or loss to be reflected in the Partners’ Capital Accounts, unless otherwise specified in this Agreement, the determination, recognition and classification of any such item shall be the same as its determination, recognition and classification for U.S. federal income tax purposes determined in accordance with Section 703(a) of the Code (for this purpose all items of income, gain, loss or deduction required to be stated separately pursuant to Section 703(a)(1) of the Code shall be included in taxable income or loss), with the following adjustments:
(i) Except as otherwise provided in Regulations Section 1.704-1(b)(2)(iv)(i), the computation of all items of income, gain, loss and deduction shall be made without regard to any election under Section 754 of the Code which may be made by the Partnership, provided that the amounts of any adjustments to the adjusted bases of the assets of the Partnership made pursuant to Section 734 of the Code as a result of the distribution of property by the Partnership to a Partner (to the extent that such adjustments have not previously been reflected in the Partners’ Capital Accounts) shall be reflected in the Capital Accounts of the Partners in the manner and subject to the limitations prescribed in Regulations Section 1.704-1(b)(2)(iv)(m)(4).
(ii) The computation of all items of income, gain, and deduction shall be made without regard to the fact that items described in Sections 705(a)(1)(B) or 705(a)(2)(B) of the Code are not includible in gross income or are neither currently deductible nor capitalized for federal income tax purposes.
(iii) Any income, gain or loss attributable to the taxable disposition of any Partnership property shall be determined as if the adjusted basis of such property as of such date of disposition were equal in amount to the Partnership’s Carrying Value with respect to such property as of such date.
(iv) In lieu of the depreciation, amortization, and other cost recovery deductions taken into account in computing such taxable income or loss, there shall be taken into account Depreciation for such Fiscal Year or other relevant period.
(v) In the event the Carrying Value of any Partnership asset is adjusted pursuant to Section 6.2.D hereof, the amount of any such adjustment shall be taken into account as gain or loss from the disposition of such asset.
(vi) Any items specially allocated under Section 6.5 of this Agreement shall not be taken into account.
 
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C. A transferee (including any Assignee) of a Partnership Unit shall succeed to a pro rata portion of the Capital Account of the transferor.
D.
(i) Consistent with the provisions of Regulations Section 1.704-1(b)(2)(iv)(f), and as provided in Section 6.2.D(ii) , the Carrying Values of all Partnership assets shall be adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss attributable to such Partnership property, as of the times of the adjustments provided in Section 6.2.D(ii) hereof, as if such Unrealized Gain or Unrealized Loss had been recognized on an actual sale of each such property and allocated pursuant to Sections 6.1 and 6.5 .
(ii) Such adjustments shall be made as of the following times: (a) immediately prior to the acquisition of an additional interest in the Partnership by any new or existing Partner in exchange for more than a de minimis Capital Contribution or as consideration for the performance of services for or on behalf of the General Partner, the Partnership or any Subsidiary; (b) immediately prior to the distribution by the Partnership to a Partner of more than a de minimis amount of property as consideration for an interest in the Partnership; and (c) immediately prior to the liquidation of the Partnership within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), provided , however , that adjustments pursuant to clauses (a) and (b) above shall be made only if the General Partner determines that such adjustments are necessary or appropriate to reflect the relative economic interests of the Partners in the Partnership.
(a) In accordance with Regulations Section 1.704-l(b)(2)(iv)(e), the Carrying Value of Partnership assets distributed in-kind shall be adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss attributable to such Partnership property, as of the time any such asset is distributed.
(b) In determining Unrealized Gain or Unrealized Loss for purposes of this Section 6.2 , the aggregate Cash Amount and fair market value of all Partnership assets (including cash or cash equivalents) shall be determined by the General Partner using such reasonable method of valuation as it may adopt, or in the case of a liquidating distribution pursuant to Article XIII , shall be determined and allocated by the Liquidator using such reasonable methods of valuation as it may adopt. The General Partner, or the Liquidator, as the case may be, shall allocate such aggregate fair market value among the assets of the Partnership in such manner as it determines in its sole and absolute discretion to arrive at a fair market value for individual properties.
(c) Notwithstanding anything herein to the contrary, (x) the transactions that occur in connection with the REIT IPO (including any contribution of proceeds received by InfraREIT Inc. in the REIT IPO to the Partnership for Common Units, the transactions described in subsections B-G of Section 4.6 which occur on the Effective Date and the transactions described in
 
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Sections 4.6.I , 4.6.J , 4.6.K and 4.6.L that occur on the Mandatory Conversion Date) shall be treated as transactions described in Section 6.2.D(ii) that trigger the adjustments described in Section 6.2.D(i) and (y) Unrealized Gain and Unrealized Loss resulting from such adjustments shall be allocated among the Partners in such a manner so as to cause the Capital Account balances of each of the Members (determined immediately after the Mandatory Conversion Date) to be in the same ratios to one another as the number of Common Units owned by each of the Members (determined immediately after the Mandatory Conversion Date) is to one another.
E. The provisions of this Agreement (including this Section 6.2 ) relating to the maintenance of Capital Accounts are intended to comply with Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner consistent with such Regulations. In the event the General Partner shall determine 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 which are secured by contributed or distributed property or which are assumed by the Partnership, the General Partner, or the Limited Partners) are computed in order to comply with such Regulations, the General Partner may make such modification without regard to Article XIV , provided that it is not likely to have a material effect on the amounts distributable to any Person pursuant to Article XIII upon the dissolution of the Partnership. The General Partner also shall (i) make any adjustments that are necessary or appropriate to maintain equality between the Capital Accounts of the Partners and the amount of Partnership capital reflected on the Partnership’s balance sheet, as computed for book purposes, in accordance with Regulations Section 1.704-1(b)(2)(iv)(q), and (ii) make any appropriate modifications in the event unanticipated events might otherwise cause this Agreement not to comply with Regulations Section 1.704-1(b).
Section 6.3 No Withdrawal
No Partner shall be entitled to withdraw any part of its Capital Contribution or Capital Account or to receive any distribution from the Partnership, except as provided in Articles IV , V , VII and XIII of this Agreement.
Section 6.4 Revisions to Allocations to Reflect Issuance of Partnership Interests
If the Partnership issues Partnership Interests to the General Partner or any Additional Limited Partner pursuant to Article IV hereof, the General Partner shall make such revisions to this Article VI and the Partner Registry as it deems necessary to reflect the terms of the issuance of such Partnership Interests, including making preferential allocations to classes of Partnership Interests that are entitled thereto. Such revisions shall not require the consent or approval of any other Partner.
 
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Section 6.5 Special Allocation Rules
Notwithstanding any other provision of this Agreement, the following special allocations shall be made in the following order:
A. Minimum Gain Chargeback . Notwithstanding the provisions of Section 6.1 or any other provisions of this Section 6.5 , if there is a net decrease in Partnership Minimum Gain during any Fiscal Year or other relevant period, each Partner shall be specially allocated items of Partnership income and gain for such year or period (and, if necessary, subsequent years or periods) in an amount equal to such Partner’s share of the net decrease in Partnership Minimum Gain, as determined under Regulations Section 1.704-2(g). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Partner pursuant thereto. The items to be so allocated shall be determined in accordance with Regulations Section 1.704-2(f)(6). This Section 6.5.A is intended to comply with the minimum gain chargeback requirements in Regulations Section 1.704-2(f) and for purposes of this Section 6.5.A only, each Partner’s Adjusted Capital Account Deficit shall be determined prior to any other allocations pursuant to Section 6.1 of this Agreement with respect to such Fiscal Year or period and without regard to any decrease in Partner Nonrecourse Debt Minimum Gain during such Fiscal Year or period.
B. Partner Minimum Gain Chargeback . Notwithstanding any other provision of Section 6.1 of this Agreement or any other provisions of this Section 6.5 (except Section 6.5.A hereof), if there is a net decrease in Partner Nonrecourse Debt Minimum Gain attributable to a Partner Nonrecourse Debt during any Fiscal Year or other relevant period, each Partner who has a share of the Partner Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(5), shall be specially allocated items of Partnership income and gain for such year or period (and, if necessary, subsequent years and periods) in an amount equal to such Partner’s share of the net decrease in Partner Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(5). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each General Partner and Limited Partner pursuant thereto. The items to be so allocated shall be determined in accordance with Regulations Section 1.704-2(i)(4). This Section 6.5.B is intended to comply with the minimum gain chargeback requirement in such Section of the Regulations and shall be interpreted consistently therewith. Solely for purposes of this Section 6.5.B , each Partner’s Adjusted Capital Account Deficit shall be determined prior to any other allocations pursuant to Section 6.1 or Section 6.5 with respect to such Fiscal Year or period, other than allocations pursuant to Section 6.5.A hereof.
C. Qualified Income Offset . In the event any Partner unexpectedly receives any adjustments, allocations or distributions described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), l.704-1(b)(2)(ii)(d)(5), or 1.704-l(b)(2)(ii)(d)(6), and after giving effect to the allocations required under Sections 6.5.A and 6.5.B hereof with respect to such Fiscal Year or other relevant period, such Partner has an Adjusted Capital Account Deficit, items of Partnership income and gain (consisting of a pro rata portion of each item of Partnership income, including gross income and gain for the Fiscal Year or period) shall be specifically allocated to such Partner in an amount and manner sufficient to eliminate, to the extent required by the Regulations, its Adjusted Capital Account Deficit created by such adjustments, allocations or distributions as quickly as possible. This Section 6.5.C is intended to constitute a “qualified income offset” under Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
 
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D. Gross Income Allocation . In the event that any Partner has an Adjusted Capital Account Deficit at the end of any Fiscal Year or other relevant period (after taking into account allocations to be made under the preceding paragraphs hereof with respect to such Fiscal Year or period), each such Partner shall be specially allocated items of Partnership income and gain (consisting of a pro rata portion of each item of Partnership income, including gross income and gain for the Fiscal Year or period) in an amount and manner sufficient to eliminate, to the extent required by the Regulations, its Adjusted Capital Account Deficit.
E. Nonrecourse Deductions . Nonrecourse Deductions for any Fiscal Year or other relevant period shall be allocated to the Partners in accordance with the number of Partnership Units owned by each such Partner. If the General Partner determines in its good faith discretion that the Partnership’s Nonrecourse Deductions must be allocated in a different ratio to satisfy the safe harbor requirements of the Regulations promulgated under Section 704(b) of the Code, the General Partner is authorized, upon notice to the Limited Partners, to revise the prescribed ratio for such Fiscal Year or period to the numerically closest ratio which would satisfy such requirements.
F. Partner Nonrecourse Deductions . Any Partner Nonrecourse Deductions for any Fiscal Year or other relevant period shall be specially allocated to the Partner who bears the economic risk of loss with respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable in accordance with Regulations Sections 1.704-2(b)(4) and 1.704-2(i).
G. Code Section 754 Adjustments . To the extent an adjustment to the adjusted tax basis of any Partnership asset pursuant to Section 734(b) or 743(b) of the Code is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis), and such item of gain or loss shall be specially allocated to the Partners in a manner consistent with the manner in which their Capital Accounts are required to be adjusted pursuant to such Section of the Regulations.
H. Curative Allocations . The allocations set forth in paragraphs A.-G. of this Section 6.5 (the “ Regulatory Allocations ”) are intended to comply with certain requirements of Regulations Sections 1.704-1(b) and 1.704-2. Notwithstanding any other provision of this Article VI (other than the Regulatory Allocations), the General Partner is authorized to make offsetting special allocations of Partnership income, gain, loss or deduction in whatever manner it deems 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 and all Partnership items were allocated pursuant to Section 6.1 and Section 6.5.J .
I. Special Allocation For Portion of Year Prior to Effective Date . Notwithstanding the provisions of Section 6.1 above, the Partnership’s Net Income and Net Losses generated through the portion of the Fiscal Year ending on the Final Pre-IPO Record Date, and (to the extent not included in such Net Income and Net Losses) any Unrealized Gain and Unrealized Loss resulting from the adjustments set forth in Section 6.2.D(ii)(c) , shall be
 
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allocated among the Partners in such a manner so as to cause each Partner’s Capital Account balance to equal the product of the Common Unit Economic Balance (as defined in Section 6.5.J(ii) ) and the number of Common Units owned (including those received on the Mandatory Conversion Date pursuant to Section 4.6 ) by each such Partner.
J. Special Allocations Regarding LTIP Units . Notwithstanding the provisions of Section 6.1 above, (a) Liquidating Gains shall first be allocated to the Holders of LTIP Units until the portion of the Economic Capital Account Balance of each such Holder of LTIP Units that is attributable to all the LTIP Units owned by such Holder of LTIP Units is equal to (i) the Common Unit Economic Balance, multiplied by (ii) the number of the LTIP Units owned by such Holder of LTIP Units (the “ Target Balance ”) and (b) prior to the time the result in (a) is achieved, the amount of Net Income other than Liquidating Gains which is allocated under Section 6.1 to a Holder of LTIP Units in respect of each LTIP Unit for any Fiscal Year or other relevant period shall not exceed the amount of distributions made in respect of such LTIP Unit for such Fiscal Year or other period. For purposes of this Agreement:
(i) “ Book-Up Target ” for a LTIP Unit means (i) initially, the Common Unit Economic Balance as determined on the date such LTIP Unit was granted, plus or minus , as the case may be, (ii) the remaining amount, if any, required to be allocated to such LTIP Unit for the Economic Capital Account Balance of the holder of such LTIP Unit, to the extent attributable to such LTIP Unit, to be equal to the Common Unit Economic Balance.
(ii) “ Common Unit Economic Balance ” shall mean (i) the Capital Account balance of the General Partner, plus the amount of the General Partner’s share of any Partner Nonrecourse Debt Minimum Gain or Partnership Minimum Gain, in either case to the extent attributable to the General Partner’s ownership of Common Units and computed on a hypothetical basis after taking into account all allocations through the date on which any allocation is made under this Section 6.5.J (including, without limitation, any expenses of the Partnership reimbursed to the General Partner pursuant to Section 7.4 ), divided by (ii) the number of the General Partner’s Common Units.
(iii) “ Economic Capital Account Balances ” of a Holder of LTIP Units shall mean an amount equal to the portion of such Holder’s Capital Account balance which is attributable to all LTIP Units owned by such Holder, plus the amount of his or her allocable share of any Partner Nonrecourse Debt Minimum Gain or Partnership Minimum Gain attributable to such LTIP Units.
(iv) “ Liquidating Gains ” means gains realized in connection with the sale or other disposition of all or substantially all of the assets of the Partnership, including but not limited to Unrealized Gain resulting from an adjustment to the Carrying Value of Partnership assets pursuant to Section 6.2.D .
(v) “ Liquidating Losses ” means losses realized in connection with the sale or other disposition of all or substantially all of the assets of the Partnership, including but not limited to Unrealized Loss resulting from an adjustment to the Carrying Value of Partnership assets pursuant to Section 6.2.D .
 
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Liquidating Gain allocated to a Holder of LTIP Units under this Section 6.5.J will be attributed to specific LTIP Units of such Holder for purposes of determining (i) allocations under this Section 6.5.J , (ii) the effect of the forfeiture or conversion of specific LTIP Units on such Holder’s Capital Account and (iii) the ability of such Holder of LTIP Units or the Partnership to convert specific LTIP Units into Common Units pursuant to Section 4.4.E(ii) and Section 4.4.E(iii) . Such Liquidating Gain allocated to such Holder of LTIP Units will generally be attributed in the following order: (i) first, to Vested LTIP Units held for more than two years, (ii) second, to Vested LTIP Units held for two years or less, (iii) third, to Unvested LTIP Units that have remaining vesting conditions that only require continued employment or service to the General Partner, the Partnership or an Affiliate of either for a certain period of time (with such Liquidating Gains being attributed in order of vesting from soonest vesting to latest vesting), and (iv) fourth, to other Unvested LTIP Units (with such Liquidating Gains being attributed in order of issuance from earliest issued to latest issued). Within each category, Liquidating Gain will be allocated seriatim (i.e., entirely to the first unit in a set, then entirely to the next unit in the set, and so on, until a full allocation is made to the last unit in the set) in the order of smallest Book-Up Target to largest Book-Up Target. After giving effect to the special allocations set forth above, if, due to distributions with respect to Common Units in which a LTIP Unit does not participate, forfeitures or otherwise, the Economic Capital Account Balance of any present or former Holder of LTIP Units attributable to such Holder’s LTIP Units, exceeds the Target Balance, then Liquidating Losses shall be allocated to such Holder of LTIP Units, or Liquidating Gains shall be allocated to the other Partners, to reduce or eliminate the disparity; provided , however , that if Liquidating Losses or Liquidating Gains are insufficient to completely eliminate all such disparities, such losses or gains shall be allocated among Partners in a manner reasonably determined by the General Partner. In the event that Liquidating Gains or Liquidating Losses are allocated under this Section 6.5.J , Net Income and Net Losses allocable under Section 6.1 shall be recomputed without regard to the Liquidating Gains or Liquidating Losses so allocated. The parties agree that the intent of this Section 6.5.J is (i) to make allocations of Liquidating Gains and Liquidating Loss so as to cause the Capital Account balance associated with each LTIP Unit to be economically equivalent to the Capital Account balance associated with the General Partner’s Common Units (on a per-Common Unit/LTIP Unit basis) and (ii) to allow conversion of a Vested LTIP Unit into a Common Unit when sufficient Liquidating Gains have been allocated to such LTIP Unit pursuant to Section 6.5.J so that either its initial Book-Up Target has been reduced to zero or the parity described in the definition of Target Balance has been achieved.
Section 6.6 Allocations for Tax Purposes
A. Except as otherwise provided in this Section 6.6 , for U.S. federal and applicable state income tax purposes, each item of income, gain, loss and deduction shall be allocated among the Partners in the same manner as its correlative item of “book” income, gain, loss or deduction is allocated pursuant to Section 6.1 and Section 6.5 hereof.
 
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B. In an attempt to eliminate any Book-Tax Disparities attributable to a Contributed Property or Adjusted Property, items of income, gain, loss, and deduction shall be allocated for U.S. federal income tax purposes among the Partners as follows:
(i) (a) In the case of a Contributed Property, such items attributable thereto shall be allocated among the Partners consistent with the principles of Section 704(c) of the Code to take into account the variation between the 704(c) Value of such property and its adjusted basis at the time of contribution (taking into account Section 6.6.C ); and (b) any item of Residual Gain or Residual Loss attributable to a Contributed Property shall be allocated among the Partners in the same manner as its correlative item of “book” gain or loss is allocated pursuant to Section 6.1 and Section 6.5 hereof.
(ii) (a) In the case of an Adjusted Property, such items shall (A) first, be allocated among the Partners in a manner consistent with the principles of Section 704(c) of the Code to take into account the Unrealized Gain or Unrealized Loss attributable to such property and the allocations thereof pursuant to Section 6.1 , Section 6.2.D and Section 6.5.J ; (B) second, in the event such property was originally a Contributed Property, be allocated among the Partners in a manner consistent with Section 6.6.B(i) ; and (b) any item of Residual Gain or Residual Loss attributable to an Adjusted Property shall be allocated among the Partners in the same manner its correlative item of “book” gain or loss is allocated pursuant to Section 6.1 and Section 6.5 hereof.
(iii) all other items of income, gain, loss and deduction shall be allocated among the Partners in the same manner as their correlative item of “book” gain or loss is allocated pursuant to Section 6.1 and Section 6.6 hereof.
C. The Partnership shall use the “traditional” method as set forth in Regulations Section 1.704-3(b), without curative or remedial allocations, to eliminate the disparities between the Carrying Value and adjusted basis of Contributed Property contributed prior to the Effective Date hereof. With respect to all other Contributed Property, to the extent Regulations promulgated pursuant to Section 704(c) of the Code permit a partnership to utilize alternative methods to eliminate the disparities between the Carrying Value of property and its adjusted basis, the General Partner shall, subject to the following, have the authority to elect the method to be used by the Partners and such election shall be binding on all Partners; provided , that, to the extent that the General Partner has agreed to use a particular method with respect to a Contributed Property, the General Partner shall be bound by such agreement pursuant to the terms thereof.
D. Recapture Income . Any gain allocated to the Partners upon the sale or other taxable disposition of any Partnership asset shall, to the extent reasonably practicable after taking into account other required allocations of gain pursuant to Sections 6.5 and 6.6 , be characterized as Recapture Income in the same proportions and to the same extent as such Partners have been allocated any deductions directly or indirectly giving rise to the treatment of such gains as Recapture Income.
 
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ARTICLE VII
MANAGEMENT AND OPERATIONS OF BUSINESS
Section 7.1 Management
A. Powers of General Partner . Except as otherwise expressly provided in this Agreement, including any Partnership Unit Designation, all management powers over the business and affairs of the Partnership are and shall be exclusively vested in the General Partner, and no Limited Partner shall have any right to participate in or exercise control or management power over the business and affairs of the Partnership. The General Partner may not be removed by the Limited Partners with or without cause. In addition to the powers now or hereafter granted a general partner of a limited partnership under Applicable Law or which are granted to the General Partner under any other provision of this Agreement, the General Partner, subject to Section 7.11 and the rights of any Holder of any Partnership Interest set forth in a Partnership Unit Designation, shall have full power and authority to do all things deemed necessary or desirable by it to conduct the business of the Partnership, to exercise all powers set forth in Section 3.2 and to effectuate the purposes set forth in Section 3.1 , including:
(i) engaging in such investment activities as the General Partner may determine, including purchasing, developing, constructing or otherwise acquiring, directly or indirectly, Qualified Energy Projects and Entities ancillary thereto, and leasing such assets pursuant to System Leases;
(ii) the making of any expenditures, the lending or borrowing of money (including making prepayments on loans and borrowing money to permit the Partnership to make distributions to its Partners in such amounts as are required under Section 5.1.A or will permit the General Partner (so long as the General Partner qualifies as a REIT) to avoid the payment of any U.S. federal income tax (including, for this purpose, any excise tax pursuant to Section 4981 of the Code) and to make distributions to its Stockholders sufficient to permit the General Partner to maintain its REIT status), the assumption or guarantee of, or other contracting for, indebtedness and other liabilities, the issuance of evidences of indebtedness (including the securing of same by mortgage, deed of trust or other lien or encumbrance on the Partnership’s assets) and the incurring of any obligations the General Partner deems necessary for the conduct of the activities of the Partnership;
(iii) the making of tax, regulatory and other filings, or rendering of periodic or other reports to governmental or other agencies having jurisdiction over the business or assets of the Partnership;
(iv) the acquisition, development, construction, leasing (including through System Leases), disposition, mortgage, pledge, encumbrance, hypothecation or exchange of any or all of the Investments and other assets of the Partnership or its Subsidiaries (including the exercise or grant of any conversion, option, privilege or subscription right or other right available in connection with any assets at any time held by the Partnership) or the merger or other combination of the Partnership with or into another Entity on such terms as the General Partner deems proper;
 
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(v) the use of the Investments, the System Leases and other assets of the Partnership or any of its Subsidiaries (including cash on hand) for any purpose consistent with the terms of this Agreement and on any terms it sees fit, including the financing of the conduct of the operations of the General Partner, the Partnership or any of the Partnership’s Subsidiaries, the lending of funds to other Persons (including the General Partner, its Subsidiaries and the Partnership’s Subsidiaries) and the repayment of obligations of the Partnership and its Subsidiaries and any other Person in which the Partnership has an equity investment and the making of capital contributions to its Subsidiaries;
(vi) the repair, alteration, demolition or improvement of the Investments or any other real property or improvements owned by the Partnership or any Subsidiary of the Partnership or any Person in which the Partnership has made a direct or indirect equity investment;
(vii) the negotiation, execution, and performance of any contracts, conveyances or other instruments that the General Partner considers useful or necessary to the conduct of the Partnership’s operations or the implementation of the General Partner’s powers under this Agreement, including contracting with contractors, developers, consultants, accountants, legal counsel, other professional advisors and other agents and the payment of their expenses and compensation out of the Partnership’s assets;
(viii) the mortgage, pledge, encumbrance or hypothecation of any assets of the Partnership, and the use of the assets of the Partnership (including cash on hand) for any purpose consistent with the terms of this Agreement and on any terms it sees fit, including the financing of the conduct or the operations of the General Partner or the Partnership, the lending of funds to other Persons (including any Subsidiaries of the Partnership) and the repayment of obligations of the Partnership, any of its Subsidiaries and any other Person in which it has an equity investment;
(ix) the distribution of Partnership cash or other Partnership assets in accordance with this Agreement;
(x) the holding, managing, investing and reinvesting of cash and other assets of the Partnership;
(xi) the collection and receipt of revenues and income of the Partnership;
(xii) the selection, designation of powers, authority and duties and the dismissal of employees of the Partnership (including employees having titles such as “president,” “vice president,” “secretary” and “treasurer”) and agents, outside attorneys, accountants, consultants and contractors of the Partnership and the determination of their compensation and other terms of employment or hiring;
 
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(xiii) the maintenance of such insurance for the benefit of the Partnership and the Partners as it deems necessary or appropriate;
(xiv) the formation of, or acquisition of an interest (including non-voting interests in entities controlled by Affiliates of the Partnership or third parties) in, and the contribution of property to, any further limited or general partnerships, joint ventures, limited liability companies or other relationships that it deems desirable (including the acquisition of interests in, and the contributions of funds or property to, or making of loans to, its Subsidiaries and any other Person in which it has an equity investment from time to time, or the incurrence of indebtedness on behalf of such Persons or the guarantee of the obligations of such Persons); provided , that as long as the General Partner has determined to qualify, or to continue to qualify, as a REIT, the Partnership may not engage in any such formation, acquisition or contribution that would cause the General Partner to fail to qualify as a REIT;
(xv) the control of any matters affecting the rights and obligations of the Partnership, including the settlement, compromise, submission to arbitration or any other form of dispute resolution or abandonment of any claim, cause of action, liability, Debt or damages due or owing to or from the Partnership, the commencement or defense of suits, legal proceedings, administrative proceedings, arbitrations or other forms of dispute resolution, the representation of the Partnership in all suits or legal proceedings, administrative proceedings, arbitrations or other forms of dispute resolution, the incurring of legal expense and the indemnification of any Person against liabilities and contingencies to the extent permitted by Applicable Law;
(xvi) the determination of the fair market value of any Partnership property distributed in-kind, using such reasonable method of valuation as the General Partner may adopt;
(xvii) the exercise, directly or indirectly, through any attorney-in-fact acting under a general or limited power of attorney, of any right, including the right to vote, appurtenant to any assets or investment held by the Partnership;
(xviii) the exercise of any of the powers of the General Partner enumerated in this Agreement on behalf of or in connection with any Subsidiary of the Partnership or any other Person in which the Partnership has a direct or indirect interest, individually or jointly with any such Subsidiary or other Person;
(xix) the exercise of any of the powers of the General Partner enumerated in this Agreement on behalf of any Person in which the Partnership does not have any interest pursuant to contractual or other arrangements with such Person;
(xx) the making, execution and delivery of any and all deeds, leases, notes, deeds to secure Debt, mortgages, deeds of trust, security agreements, conveyances, contracts, guarantees, warranties, indemnities, waivers, releases or other legal instruments or agreements in writing necessary or appropriate in the judgment of the General Partner for the accomplishment of any of the powers of the General Partner enumerated in this Agreement;
 
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(xxi) the distribution of cash to acquire Partnership Units held by a Limited Partner in connection with a Limited Partner’s exercise of its Redemption Right under Section 8.7 ;
(xxii) the determination regarding whether a payment to a Limited Partner who exercises its Redemption Right under Section 8.7 that is assumed by the General Partner will be paid in the form of the Cash Amount or the Shares Amount, except as such determination may be limited by Section 8.7 ;
(xxiii) the maintenance of the Partner Registry to reflect accurately at all times the Capital Contributions and the number and class of Partnership Units held by the Partners as the same are adjusted from time to time to the extent necessary to reflect redemptions, Capital Contributions, the issuance of Partnership Units, the admission of any Additional Limited Partner or any Substituted Limited Partner or otherwise;
(xxiv) the filing of applications, communicating and otherwise dealing with any and all governmental agencies having jurisdiction over, or in any way affecting, the Partnership’s assets or any other aspect of the Partnership’s business;
(xxv) the enforcement of any rights against any Partner pursuant to representations, warranties, covenants and indemnities relating to such Partner’s contribution of property or assets to the Partnership;
(xxvi) the issuance of additional Partnership Units, as appropriate and in the General Partner’s sole and absolute discretion, in connection with Capital Contributions by Additional Limited Partners and additional Capital Contributions by Partners pursuant to Article IV ;
(xxvii) an election to dissolve the Partnership pursuant to Section 13.1 ;
(xxviii) the taking of any action necessary or appropriate to enable the General Partner to qualify as a REIT (so long as the General Partner desires to maintain its qualification as a REIT); and
(xxix) the taking of any action necessary or appropriate to prevent the Partnership or the General Partner from being subject to regulation under the Investment Company Act.
B. Authorized Persons . It is understood and agreed that each officer of the General Partner may act for and in the name of the General Partner, as the case may be, under this Agreement. In dealing with the General Partner acting for or on behalf of the Partnership, no Person shall be required to inquire into, and Persons dealing with the Partnership are entitled to rely conclusively on, the right, power and authority of the General Partner, as the case may be, to bind the Partnership.
 
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C. No Approval by Limited Partners . Except as provided in Section 7.11 or as may otherwise be provided in another agreement and subject to the rights of any Holder of any Partnership Interest set forth in a Partnership Unit Designation, each of the Limited Partners agrees that the General Partner is authorized to (i) execute, deliver and perform the above-mentioned agreements and transactions on behalf of the Partnership and (ii) execute and deliver any affidavit, agreement, certificate, consent, instrument, notice, power of attorney, waiver or other writing or document in the name and on behalf of the Partnership and to otherwise exercise any power of the General Partner under this Agreement and the LP Act on behalf of the Partnership, in each case without any further act, approval or vote of the Partners or any other Persons, notwithstanding any other provision of this Agreement, the LP Act or any Applicable Laws to the full extent permitted under the LP Act or other Applicable Laws, and, in the absence of any specific corporate action on the part of the General Partner to the contrary, the taking of any action or the execution of any such document or writing by an officer of the General Partner, in the name and on behalf of the General Partner, in its capacity as the general partner of the Partnership, shall conclusively evidence (a) the approval thereof by the General Partner, in its capacity as the general partner of the Partnership, (b) the General Partner’s determination that such action, document or writing is necessary, advisable, appropriate, desirable or prudent to conduct the business and affairs of the Partnership, exercise the powers of the Partnership under this Agreement and the LP Act or effectuate the purposes of the Partnership, or any other determination by the General Partner required by this Agreement in connection with the taking of such action or execution of such document or writing, and (c) the authority of such officer with respect thereto. The execution, delivery or performance by the General Partner or the Partnership of any agreement authorized or permitted under this Agreement shall not constitute a breach by the General Partner of any duty that the General Partner may owe the Partnership or the Limited Partners or any other Persons under this Agreement or of any duty stated or implied by law or equity.
D. Insurance . At all times from and after the date hereof, the General Partner may cause the Partnership to obtain and maintain (i) casualty, liability and other insurance on the properties of the Partnership, (ii) liability insurance for the Covered Persons hereunder, and (iii) such other insurance as the General Partner, in its sole and absolute discretion, determines to be necessary.
E. Working Capital and Other Reserves . At all times from and after the date hereof, the General Partner may cause the Partnership to establish and maintain working capital reserves in such amounts as the General Partner, in its sole and absolute discretion, deems appropriate and reasonable from time to time, including upon liquidation of the Partnership under Article XIII .
F. No Obligations to Consider Tax Consequences of Limited Partners . In exercising its authority under this Agreement, the General Partner may, but shall be under no obligation to, take into account the tax consequences to any Partner (including the General Partner) of any action taken (or not taken) by any of them. The General Partner and the Partnership shall not have liability to a Limited Partner for monetary damages or otherwise for losses sustained, liabilities incurred or benefits not derived by such Limited Partner in connection with such decisions, provided that the General Partner has acted in good faith and pursuant to its authority under this Agreement.
 
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Section 7.2 Certificate of Limited Partnership
The General Partner has previously filed the Certificate with the Secretary of State. To the extent that such action is determined by the General Partner to be reasonable and necessary or appropriate, the General Partner shall file amendments to and restatements of the Certificate and do all the things to maintain the Partnership as a limited partnership (or a partnership in which the limited partners have limited liability) under the laws of the State of Delaware and each other state, the District of Columbia or other jurisdiction in which the Partnership may elect to do business or own property. Subject to the terms of Section 8.6.A(iv) , the General Partner shall not be required, before or after filing, to deliver or mail a copy of the Certificate or any amendment thereto to any Limited Partner. The General Partner shall use all reasonable efforts to cause to be filed such other certificates or documents as may be reasonable and necessary or appropriate for the formation, continuation, qualification and operation of a limited partnership (or a partnership in which the limited partners have limited liability) in the State of Delaware and any other state, the District of Columbia or other jurisdiction in which the Partnership may elect to do business or own property.
Section 7.3 Title to Partnership Assets
Title to Partnership assets, whether real, personal or mixed and whether tangible or intangible, shall be deemed to be owned by the Partnership as an Entity, and no Partners, individually or collectively, shall have any ownership interest in such Partnership assets or any portion thereof. Title to any or all of the Partnership assets may be held in the name of the Partnership, the General Partner or one or more nominees, as the General Partner may determine, including Persons controlled by the General Partner. The General Partner hereby declares and warrants that any Partnership assets for which legal title is held in the name of the General Partner or any nominee of or Person controlled by the General Partner shall be held for the use and benefit of the Partnership in accordance with the provisions of this Agreement. All Partnership assets shall be recorded as the property of the Partnership in its books and records, irrespective of the name in which legal title to such Partnership assets is held.
Section 7.4 Reimbursement of the General Partner
A. No Compensation . Except as provided in this Section 7.4 and elsewhere in this Agreement (including the provisions of Articles V and VI regarding distributions, payments and allocations to which it may be entitled), the General Partner shall not be compensated for its services as the general partner of the Partnership.
B. Responsibility for Partnership Expenses . The Partnership shall be responsible for and shall pay all expenses relating to the Partnership’s organization, the ownership of its assets and its operations. The General Partner shall be reimbursed on a monthly basis, or such other basis as the General Partner may determine in its sole and absolute discretion, for all expenses it incurs relating to the ownership and operation of, or for the benefit of, the Partnership (including expenses related to the operations of the General Partner and to the management and administration of any Subsidiaries of the General Partner or the Partnership or Affiliates of the Partnership, such as auditing expenses and filing fees). The General Partner shall determine in good faith the amount of expenses incurred by it related to the ownership and
 
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operation of, or for the benefit of, the Partnership. If certain expenses are incurred for the benefit of the Partnership and other Entities (including the General Partner), such expenses will be allocated to the Partnership and such other Entities in such a manner as the General Partner in its sole and absolute discretion deems fair and reasonable. Such reimbursements shall be in addition to any reimbursement to the General Partner pursuant to Section 10.3.C and as a result of indemnification pursuant to Section 7.7 . All payments and reimbursements hereunder shall be characterized for U.S. federal income tax purposes as expenses of the Partnership incurred on its behalf, and not as expenses of the General Partner.
C. Partnership Interest Issuance Expenses . The General Partner shall also be reimbursed for all expenses it incurs relating to any issuance of Partnership Interests, Shares or Debt of the Partnership or the General Partner or rights, options, warrants or convertible or exchangeable securities pursuant to Article IV (including all costs, expenses, damages and other payments resulting from or arising in connection with litigation related to any of the foregoing), all of which expenses are considered by the Partners to constitute expenses of, and for the benefit of, the Partnership.
D. Reimbursement not a Distribution . If and to the extent any reimbursement made pursuant to this Section 7.4 is determined for U.S. federal income tax purposes not to constitute a payment of expenses of the Partnership, the amount so determined shall constitute a guaranteed payment with respect to capital within the meaning of Section 707(c) of the Code, shall be treated consistently therewith by the Partnership and all Partners and shall not be treated as a distribution for purposes of computing the Partners’ Capital Accounts.
E. Funding for Certain Capital Transactions . In the event that the General Partner shall undertake to acquire (whether by merger, consolidation, purchase, or otherwise) the assets or Equity Interests of another Person and such acquisition shall require the payment of cash by the General Partner (whether to such Person or to any other selling party or parties in such transaction or to one or more creditors, if any, of such Person or such selling party or parties), (i) the Partnership shall advance to the General Partner the cash required to consummate such acquisition if, and to the extent that, such cash is not to be obtained by the General Partner through an issuance of Shares described in Section 4.2 or pursuant to a transaction described in Section 4.3.C , (ii) the General Partner shall immediately, upon consummation of such acquisition, transfer to the Partnership (or cause to be transferred to the Partnership), in full and complete satisfaction of such advance and as required by Section 4.3 , the assets or Equity Interests of such Person acquired by the General Partner in such acquisition, and (iii) pursuant to and in accordance with Section 4.2 and Section 4.3.C , the Partnership shall issue to the General Partner Partnership Interests and/or rights, options, warrants or convertible or exchangeable securities of the Partnership having designations, preferences and other rights that are substantially the same as those of any additional Shares, other equity securities, New Securities and/or debt securities, as the case may be, issued by the General Partner in connection with such acquisition (whether issued directly to participants in the acquisition transaction or to third parties in order to obtain cash to complete the acquisition). In addition to, and without limiting the foregoing, in the event that the General Partner engages in a transaction in which (x) the General Partner (or a wholly owned direct or indirect Subsidiary of the General Partner) merges with another Entity (referred to as the “ Parent Entity ”) that is organized in the “UPREIT format” (i.e., where the Parent Entity holds all or substantially all of its assets and conducts all or
 
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substantially all of its operations through a partnership, limited liability company or other Entity (referred to as an “ Operating Entity ”)) and the General Partner survives such merger, (y) such Operating Entity merges with or is otherwise acquired by the Partnership in exchange in whole or in part for Partnership Interests, and (z) the General Partner is required or elects to pay part of the consideration in connection with such merger involving the Parent Entity in the form of cash and part of the consideration in the form of Shares, the Partnership shall distribute to the General Partner with respect to its existing Partnership Interest an amount of cash sufficient to complete such transaction and the General Partner shall cause the Partnership to cancel a number of Partnership Units (rounded to the nearest whole number) held by the General Partner equal to the product attained by multiplying the number of additional Shares of the General Partner that the General Partner would have issued to the Parent Entity or the owners of the Parent Entity in such transaction if the entire consideration therefor were to have been paid in Shares by a fraction, the numerator of which is one and the denominator of which is the Conversion Factor.
Section 7.5 Outside Activities of the General Partner
The General Partner shall not, directly or indirectly, enter into or conduct any business, other than in connection with (a) the ownership, acquisition and disposition of Partnership Interests as General Partner, (b) the management of the business of the Partnership, (c) if the General Partner becomes a reporting company with a class (or classes) of securities registered under the Exchange Act, the operation of the General Partner as such, (d) financing or refinancing of any type related to the Partnership or its assets or activities, (e) any of the foregoing activities as they relate to a Subsidiary of the Partnership and (f) such activities as are incidental thereto. Nothing contained herein shall be deemed to prohibit the General Partner from executing guarantees of Debt of the Partnership for which it would otherwise be liable in its capacity as General Partner.
Section 7.6 Transactions With Partners and Affiliates
A. Transactions with Certain Affiliates . Except as expressly permitted by this Agreement, the Partnership shall not, directly or indirectly, sell, transfer or convey any property to, or purchase any property from, or borrow funds from, or lend funds to, any Partner or any Affiliate of the Partnership that is not also a Subsidiary of the Partnership, except pursuant to transactions that are on terms that are fair and reasonable and no less favorable to the Partnership than would be obtained from an unaffiliated third party.
B. Permitted Transactions .
(i) The General Partner is expressly authorized to enter into, in the name and on behalf of the Partnership, a right of first opportunity arrangement and other conflict avoidance agreements, including the Development Agreement, with any Partner or any of its Affiliates on such terms as the General Partner, in its sole and absolute discretion, believes are advisable.
(ii) The Partnership may lend or contribute funds or other assets to its Subsidiaries or other Persons in which it has an equity investment, and such Persons may borrow funds from the Partnership, on terms and conditions established in the sole and absolute discretion of the General Partner. The foregoing authority shall not create any right or benefit in favor of any Subsidiary or any other Person.
 
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(iii) The Partnership may transfer assets to joint ventures, limited liability companies, partnerships, corporations, business trusts or other business entities in which it is or thereby becomes a participant upon such terms and subject to such conditions consistent with this Agreement and Applicable Law as the General Partner, in its sole and absolute discretion, believes to be advisable.
Section 7.7 Limitation on Liability and Indemnification
A. Limitation of Liability . To the maximum extent permitted under the LP Act in effect from time to time, no Covered Person shall be liable to the Partnership or to any Partner for (i) any act or omission performed or failed to be performed by it, or for any losses, claims, costs, damages or liabilities arising from any such act or omission, provided that such loss, claim, cost, damage or liability did not result from such Covered Person’s gross negligence, willful misconduct or fraud or any act or omission constituting a breach of such Covered Person’s duty of loyalty or good faith and fair dealing, or (ii) any tax liability imposed on the Partnership, provided that such tax liability did not result from such Covered Person’s gross negligence, willful misconduct or fraud, or (iii) any losses due to the negligence (gross or ordinary), dishonesty or bad faith of any agents of the Partnership that are not Covered Persons or Affiliates of any Covered Person, as long as such Persons are selected with reasonable care. Without limiting the generality of the foregoing, each such Person shall, in the performance of his, her or its duties, be fully protected in relying in good faith upon the records of the General Partner or the Partnership and upon information, opinions, reports or statements presented to such Person by the General Partner or by any other Person as to matters such Person reasonably believes are within such other Person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the General Partner or the Partnership. Any repeal or modification of this Section 7.7.A shall not adversely affect any right or protection of a Person existing at the time of such repeal or modification.
B. Indemnification . To the maximum extent permitted under the LP Act in effect from time to time, the Partnership shall indemnify each Covered Person against any losses, claims, costs, damages or liabilities to which such Covered Person may become subject in connection with the business or affairs of the Partnership or one of its direct or indirect Subsidiaries or serving at the Partnership’s or one of the Partnership’s direct or indirect Subsidiary’s request as a director, trustee, officer, partner, employee or agent of another foreign or domestic corporation, partnership, joint venture, trust or other enterprise or employee benefit plan, provided that such loss, claim, cost, damage or liability did not result from such Covered Person’s gross negligence, willful misconduct or fraud or any act or omission constituting a breach of such Covered Person’s duty of loyalty or good faith and fair dealing. If for any reason (other than such Covered Person’s gross negligence, willful misconduct or fraud or any act or omission constituting a breach of such Covered Person’s duty of loyalty or good faith and fair dealing), the foregoing indemnification is unavailable to such Covered Person, or is insufficient to hold it harmless, then the Partnership shall contribute to the amount paid or payable to the Covered Person as a result of such loss, claim, cost, damage or liability in such proportion as is appropriate to reflect not only the relative benefits received by the Partnership on the one hand
 
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and such Covered Person on the other hand but also the relative fault of the Partnership and such Covered Person, as well as any relevant equitable considerations. The General Partner shall use reasonable efforts to cause a Covered Person to repay amounts paid by the Partnership for indemnification of such Covered Person pursuant to this Section 7.7.B if and to the extent such Covered Person recovers such amounts from insurance recoveries or other source of payment.
C. Advancement of Expenses . Reasonable expenses expected to be incurred by a Covered Person shall be paid or reimbursed by the Partnership in advance of the final disposition of any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative made or threatened against a Covered Person upon receipt by the Partnership of (i) a written affirmation by the Covered Person of the Covered Person’s good faith belief that the standard of conduct necessary for indemnification by the Partnership as authorized in this Section 7.7 has been met and (ii) a written undertaking by or on behalf of the Covered Person to repay the amount if it shall ultimately be determined that the standard of conduct has not been met.
D. No Limitation of Rights . The indemnification provided by this Section 7.7 shall be in addition to any other rights to which a Covered Person or any other Person may be entitled under any agreement, pursuant to any vote of the Partners, as a matter of law or otherwise, and shall continue as to a Covered Person who has ceased to serve in such capacity unless otherwise provided in a written agreement pursuant to which such Covered Person is indemnified.
E. Insurance . The Partnership shall purchase and maintain insurance on behalf of the Covered Persons and such other Persons as the General Partner shall determine against any liability that may be asserted against or expenses that may be incurred by such Person in connection with the Partnership’s activities, regardless of whether the Partnership would have the power to indemnify such Person against such liability under the provisions of this Agreement.
F. No Personal Liability for Partners . Notwithstanding anything in this Agreement to the contrary (including in this Section 7.7 ), any indemnification or other obligation of the Partnership relating to the matters covered in this Section 7.7 shall be provided out of and to the extent of Partnership assets only and no Partner (unless such Partner otherwise agrees in writing or is found in a final decision by a court of competent jurisdiction to have personal liability on account thereof) shall have personal liability on account thereof or shall be required to make additional Capital Contributions (other than as required in any other agreement between the Partnership and a Partner) to help satisfy such indemnity of the Partnership. In no event may a Covered Person subject any of the Partners to personal liability by reason of the indemnification provisions set forth in this Agreement.
G. Interested Transactions . A Covered Person shall not be denied indemnification in whole or in part under this Section 7.7 because the Covered Person had an interest in the transaction with respect to which the indemnification applies if the transaction was otherwise permitted by the terms of this Agreement.
 
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H. Benefit . The provisions of this Section 7.7 are for the benefit of the Covered Persons, their employees, officers, directors, trustees, heirs, successors, assigns and administrators and shall not be deemed to create any rights for the benefit of any other Persons. Any amendment, modification or repeal of this Section 7.7 , or any provision hereof, shall be prospective only and shall not in any way affect the limitation on the Partnership’s liability to any Covered Person under this Section 7.7 as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or related to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted.
I. Indemnification Payments Not Distributions . If and to the extent any payments to the General Partner pursuant to this Section 7.7 constitute gross income to the General Partner (as opposed to the repayment of advances made on behalf of the Partnership), such amounts shall constitute guaranteed payments within the meaning of Section 707(c) of the Code, shall be treated consistently therewith by the Partnership and all Partners, and shall not be treated as distributions for purposes of computing the Partners’ Capital Accounts.
J. Exception to Indemnification . Notwithstanding anything to the contrary in this Agreement, the General Partner shall not be entitled to indemnification hereunder for any loss, claim, damage, liability or expense for which the General Partner is obligated to indemnify the Partnership under any other agreement between the General Partner and the Partnership.
Section 7.8 Liability of the General Partner
A. No Obligation to Consider Separate Interests of Limited Partners . The Limited Partners expressly acknowledge that the General Partner is acting on behalf of the Partnership, that the General Partner is under no obligation to consider the separate interests of the Limited Partners (including the tax consequences to Limited Partners or Assignees) in deciding whether to cause the Partnership to take (or decline to take) any actions, and that the General Partner shall not be liable for monetary damages for losses sustained, liabilities incurred or benefits not derived by Limited Partners in connection with such decisions, provided that the General Partner has acted in good faith.
B. Actions of Agents . Subject to its obligations and duties as General Partner set forth in Section 7.1.A , the General Partner may exercise any of the powers granted to it by this Agreement and perform any of the duties imposed upon it hereunder either directly or by or through its agents. The General Partner shall not be responsible for any misconduct or negligence on the part of any such agent appointed by the General Partner in good faith.
C. Effect of Amendment . Notwithstanding any other provision contained herein, any amendment, modification or repeal of this Section 7.8 or any provision hereof shall be prospective only and shall not in any way affect the limitations on the General Partner’s liability to the Partnership and the Limited Partners under this Section 7.8 as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted.
 
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Section 7.9 Other Matters Concerning the General Partner
A. Reliance on Documents . The General Partner may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture or other paper or document believed by it in good faith to be genuine and to have been signed or presented by the proper party or parties.
B. Reliance on Advisors . The General Partner may consult with legal counsel, accountants, appraisers, management consultants, investment bankers and other consultants and advisers selected by it, and any act taken or omitted to be taken in reliance upon the opinion of such Persons as to matters which the General Partner reasonably believes to be within such Person’s professional or expert competence shall be conclusively presumed to have been done or omitted in good faith and in accordance with such opinion.
C. Action Through Agents . The General Partner shall have the right, in respect of any of its powers or obligations hereunder, to act through any of its duly authorized officers and a duly appointed attorney or attorneys-in-fact. Each such attorney shall, to the extent provided by the General Partner in the power of attorney, have full power and authority to do and perform all and every act and duty which is permitted or required to be done by the General Partner hereunder.
D. Actions to Maintain REIT Status or Avoid Taxation of the General Partner . Notwithstanding any other provisions of this Agreement or non-mandatory provision of the LP Act, any action of the General Partner on behalf of the Partnership or any decision of the General Partner to refrain from acting on behalf of the Partnership undertaken in the good faith belief that such action or omission is necessary or advisable in order (i) to protect the ability of the General Partner to qualify as a REIT or (ii) to allow the General Partner to avoid incurring any liability for taxes under Section 856, Section 857 or Section 4981 of the Code, is expressly authorized under this Agreement and is deemed approved by all of the Limited Partners.
E. Regulatory Matters .
(i) Each Limited Partner acknowledges that the assets of the Partnership are not intended to constitute plan assets of such Limited Partner for purposes of any applicable non-U.S., state or local law governing the investment and management of the assets of that Limited Partner, and that, as a result, none of the Partnership, the General Partner or any of their Affiliates intends to be acting as a fiduciary within the meaning of any applicable non-U.S., state or local law relating to governmental plans or foreign plans with respect to such Limited Partner or the Partnership assets; provided , however , that this provision is not intended to negate the fiduciary duties imposed upon a general partner under the LP Act.
(ii) In the event that the General Partner believes (a) that the investment in the Partnership by a Limited Partner which is a governmental plan, foreign plan or other regulated Entity (other than a Benefit Plan Investor) (each, a “ Regulated Investor ”) may result in (1) any violation of any law applicable to such Regulated
 
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Investor, (2) the treatment of the assets of the Partnership as assets of such Regulated Investor or (3) the treatment of the Partnership or the General Partner as a fiduciary under any law applicable to such Regulated Investor, and (b) if, in the reasonable judgment of the General Partner, any of the foregoing conditions results in or may result in any adverse consequences to the Partnership, the General Partner, the directors or officers of the General Partner (both of (a) and (b), a “ Regulatory Issue ”), then the General Partner, in its sole discretion, (x) may require that such Regulated Investor provide an opinion of counsel (such opinion and counsel reasonably acceptable to the General Partner) that no Regulatory Issue exists, or (y) in the event such an opinion is not delivered within a reasonable time after being requested, may take any of the following actions in its sole discretion and considering the best interests of the Partnership: (A) in accordance with the provisions of Section 14.1 amend this Agreement to avoid any material consequences, (B) cause the Partnership to redeem such Regulated Investor’s interest in the Partnership, in whole or in part in a manner consistent with the procedures of Section 7.9.E(iii) and (iv) , (C) require such Regulated Investor to sell its interest in the Partnership, in whole or in part, to one or more other Partners at the Redemption Value, or (D) cause a dissolution of the Partnership and wind up its affairs in accordance with Article XIII . The reasonable expense of obtaining an opinion described in the preceding sentence shall be shared equally by the Partnership and such Regulated Investor.
(iii) Effective upon the date specified by the General Partner in the notice sent to a Limited Partner, notifying such Limited Partner of the General Partner’s determination to completely or partially redeem such Limited Partner’s interest in the Partnership pursuant to Section 7.9.E(ii) (the “ Redemption Effective Date ”), such Limited Partner (the “ Redeemed Limited Partner ”) shall cease to be a Partner of the Partnership with respect to the withdrawn portion of its interest (the “ Redeemed Interest ”) only and, in addition to its right to receive payment for the Redeemed Interest as provided in Section 7.9.E(iv) , shall continue to be entitled, with respect to its remaining interest only, if any, to the rights of a Partner under this Agreement (including the right to have any allocations made to its Capital Account (as such may be adjusted) pursuant to Article VI , the right to receive distributions pursuant to Article V and upon dissolution of the Partnership pursuant to Article XIII and the right to vote on matters as provided in this Agreement).
(iv) The Redemption Value shall be paid by the Partnership to such Redeemed Limited Partner in cash by paying to such Limited Partner a “pro rata portion” of each distribution payable to the Redeemed Limited Partners until the Redemption Value has been fully paid; provided , that the General Partner shall be under no obligation to sell, finance or refinance any Partnership property or assets or to take any other action to effect such redemption which, in the judgment of the General Partner, may affect adversely the Partnership (taking into account the liquidity needs of the Partnership) or any Partner. For purposes of the preceding sentence, a Redeemed Limited Partner’s “pro rata portion” of a distribution shall be an amount equal to the amount such Redeemed Limited Partner would have received in respect of the Redeemed Interest had such interest not been redeemed.
 
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F. Unacceptable Investor . If the General Partner determines that a Partner is an Unacceptable Investor, the Partnership may withhold such Partner’s distributions and Partnership Units, remove such Partner as a Limited Partner of the Partnership upon terms deemed appropriate by the General Partner in its sole discretion and take such other actions as may be desirable or necessary to comply with Applicable Law.
Section 7.10 Reliance By Third Parties
Notwithstanding anything to the contrary in this Agreement, any Person dealing with the Partnership shall be entitled to assume that the General Partner has full power and authority, without consent or approval of any other Partner or Person, to encumber, sell or otherwise use in any manner any and all assets of the Partnership, to enter into any contracts on behalf of the Partnership and to take any and all actions on behalf of the Partnership, and such Person shall be entitled to deal with the General Partner as if the General Partner were the Partnership’s sole party in interest, both legally and beneficially. Each Limited Partner hereby waives any and all defenses or other remedies which may be available against such Person to contest, negate or disaffirm any action of the General Partner in connection with any such dealing. In no event shall any Person dealing with the General Partner or its representatives be obligated to ascertain that the terms of this Agreement have been complied with or to inquire into the necessity or expedience of any act or action of the General Partner or its representatives. Each and every certificate, document or other instrument executed on behalf of the Partnership by the General Partner or its representatives shall be conclusive evidence in favor of any and every Person relying thereon or claiming thereunder that (i) at the time of the execution and delivery of such certificate, document or instrument, this Agreement was in full force and effect, (ii) the Person executing and delivering such certificate, document or instrument was duly authorized and empowered to do so for and on behalf of the Partnership, and (iii) such certificate, document or instrument was duly executed and delivered in accordance with the terms and provisions of this Agreement and is binding upon the Partnership.
Section 7.11 Restrictions On General Partner’s Authority
The General Partner may not (i) take any action in contravention of an express prohibition or limitation of this Agreement, (ii) perform any act that would subject a Limited Partner to liability as a general partner in any jurisdiction or any other liability except as provided herein or under the LP Act, or (iii) enter into any contract, mortgage, loan or other agreement that restricts, or has the effect of prohibiting or restricting, the ability of a Limited Partner to exercise its Redemption Right, except in each case with the written Consent of (a) all Partners adversely affected or (b) such lower percentage of the Limited Partnership Interests as may be specifically provided for under a provision of this Agreement or the LP Act.
 
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ARTICLE VIII
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
Section 8.1 Limitation Of Liability
No Limited Partner shall have any liability under this Agreement except as expressly provided in this Agreement, including Section 10.5 , or another agreement entered into by such Limited Partner relating to the Partnership (including such Limited Partner’s Subscription Agreement) or under the LP Act.
Section 8.2 Management Of Business
No Limited Partner or Assignee (other than the General Partner, any of its Affiliates, or any officer, director, employee, partner, agent or trustee of the General Partner, the Partnership or any of their Affiliates, in their capacity as such) shall take part in the operation, management or control (within the meaning of the LP Act) of the Partnership’s business, transact any business in the Partnership’s name or have the power to sign documents for or otherwise bind the Partnership. The transaction of any such business by the General Partner, any of its Affiliates or any officer, director, employee, partner, agent or trustee of the General Partner, the Partnership or any of their Affiliates, in their capacity as such, shall not affect, impair or eliminate the limitations on the liability of the Limited Partners or Assignees under this Agreement.
Section 8.3 Outside Activities of Limited Partners
Subject to any agreements entered into by a Limited Partner or its Affiliates with the General Partner (including the Development Agreement), the Partnership or any Affiliate thereof (including any employment agreement), any Limited Partner and any Assignee, officer, director, employee, agent, trustee, Affiliate, member or shareholder of any Limited Partner shall be entitled to and may have business interests and engage in business activities in addition to those relating to the Partnership, including business interests and activities that are in direct or indirect competition with the Partnership or that are enhanced by the activities of the Partnership. Neither the Partnership nor any Partner shall have any rights by virtue of this Agreement in any business ventures of any Limited Partner or Assignee. Subject to such agreements, none of the Limited Partners nor any other Person shall have any rights by virtue of this Agreement or the partnership relationship established hereby in any business ventures of any other Person (other than the General Partner, to the extent expressly provided herein), and such Person shall have no obligation pursuant to this Agreement, subject to any agreements entered into by a Limited Partner or its Affiliates with the General Partner, the Partnership or any Affiliate thereof, to offer any interest in any such business ventures to the Partnership, any Limited Partner or any such other Person, even if such opportunity is of a character that, if presented to the Partnership, any Limited Partner or such other Person, could be taken by such Person.
Section 8.4 Exclusion of Other Rights.
Except as may otherwise be required by Applicable Law, the Class A Units, Class B Units and Class C Units shall not have any rights or powers, other than those specifically provided in this Agreement, as it may be amended from time to time. The Class A Units, Class B Units and Class C Units shall have no preemptive or subscription rights.
 
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Section 8.5 Return Of Capital
Except pursuant to the right of redemption set forth in Section 8.7 or in any Partnership Unit Designation, no Limited Partner shall be entitled to the withdrawal or return of its Capital Contribution, except to the extent of distributions made pursuant to this Agreement or upon termination of the Partnership as provided herein. No Limited Partner or Assignee shall have priority over any other Limited Partner or Assignee either as to the return of Capital Contributions (except as permitted by Section 4.2.A ) or, except to the extent provided by Article VI , in any Partnership Unit Designation or as permitted by Sections 4.2.A , 5.1.B(i) , 6.1.A(ii) and 6.1.B(iii) , or otherwise expressly provided in this Agreement, as to profits, losses, distributions or credits.
Section 8.6 Rights Of Limited Partners Relating to the Partnership
A. General . In addition to other rights provided by this Agreement or by the LP Act, and except as limited by Section 8.6.D , each Limited Partner shall have the right, for a purpose reasonably related to such Limited Partner’s interest as a limited partner in the Partnership, upon written demand with a statement of the purpose of such demand and at such Limited Partner’s own expense:
(i) to obtain a copy of the most recent annual and quarterly reports filed with the Commission by either the General Partner or the Partnership pursuant to the Exchange Act;
(ii) to obtain a copy of the Partnership’s U.S. federal, state and local income tax returns for each Fiscal Year;
(iii) to obtain a current list of the name and last known business, residence or mailing address of each Partner;
(iv) to obtain a copy of this Agreement and the Certificate and all amendments thereto, together with executed copies of all powers of attorney pursuant to which this Agreement, the Certificate and all amendments thereto have been executed; and
(v) to obtain true and full information regarding the amount of cash and a description and statement of any other property or services contributed by each Partner and which each Partner has agreed to contribute in the future, and the date on which each became a Partner.
B. Notice of Conversion Factor . The Partnership shall notify each Limited Partner upon request of the then current Conversion Factor and any changes that have been made thereto.
 
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C. Confidentiality . Notwithstanding any other provision of this Section 8.6 , the General Partner may keep confidential from the Limited Partners, for such period of time as the General Partner determines in its sole and absolute discretion to be reasonable, any information that (i) the General Partner reasonably believes to be in the nature of trade secrets or other information the disclosure of which the General Partner in good faith believes is not in the best interests of the Partnership or could damage the Partnership or its business or (ii) the Partnership is required by Applicable Law or by agreements with unaffiliated third parties to keep confidential.
Section 8.7 Redemption Right
A. General .
(i) Subject to Section 8.7.C , on or after the date that is (1) with respect to Partnership Units issued prior to or as of the REIT IPO (other than the MC Common Units), a twelve (12) month period ending on the day before the first (1st) anniversary of the Effective Date, (2) with respect to Partnership Units (other than the MC Common Units) issued after the completion of the REIT IPO, a twelve (12) month period ending on the day before the first (1st) anniversary of the issuance of such Partnership Units and (3) with respect to the MC Common Units, the six (6) month anniversary of the issuance of the MC Common Units on the Effective Date, each Limited Partner shall have the right (the “ Redemption Right ”) to require the Partnership to redeem all or a portion of the Partnership Units held by such Limited Partner, with such redemption to occur on the Specified Redemption Date and at a redemption price equal to and in the form of the Cash Amount to be paid by the Partnership. Any such Redemption Right shall be exercised pursuant to a Notice of Redemption delivered to the Partnership (with a copy to the General Partner) by the Limited Partner who is exercising the Redemption Right (the “ Redeeming Partner ”).
(ii) The Redeeming Partner shall have no right with respect to any Partnership Units so redeemed to receive any distributions paid after the Specified Redemption Date with respect to such Partnership Units.
(iii) The Assignee of any Limited Partner may exercise the rights of such Limited Partner pursuant to this Section 8.7 , and such Limited Partner shall be deemed to have assigned such rights to such Assignee and shall be bound by the exercise of such rights by such Limited Partner’s Assignee. In connection with any exercise of such rights by such Assignee on behalf of such Limited Partner, the Cash Amount shall be paid by the Partnership directly to such Assignee and not to such Limited Partner.
B. General Partner Assumption of Right .
(i) If a Limited Partner has delivered a Notice of Redemption, the General Partner may, in its sole and absolute discretion, elect to assume directly and satisfy a Redemption Right by paying to the Redeeming Partner either the Cash Amount or the Shares Amount, as the General Partner determines in its sole and absolute discretion,
 
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on the Specified Redemption Date, whereupon the General Partner shall acquire the Partnership Units offered for redemption by the Redeeming Partner and shall be treated for all purposes of this Agreement as the owner of such Partnership Units. Unless the General Partner, in its sole and absolute discretion, shall exercise its right to assume directly and satisfy the Redemption Right, the General Partner shall not have any obligation to the Redeeming Partner or to the Partnership with respect to the Redeeming Partner’s exercise of the Redemption Right. If the General Partner shall exercise its right to satisfy the Redemption Right in the manner described in the first sentence of this Section 8.7.B and shall fully perform its obligations in connection therewith, the Partnership shall have no right or obligation to pay any amount to the Redeeming Partner with respect to such Redeeming Partner’s exercise of the Redemption Right, and each of the Redeeming Partner, the Partnership and the General Partner shall, for U.S. federal income tax purposes, treat the transaction between the General Partner and the Redeeming Partner as a sale of the Redeeming Partner’s Partnership Units to the General Partner. Nothing contained in this Section 8.7.B shall imply any right of the General Partner to require any Limited Partner to exercise the Redemption Right afforded to such Limited Partner pursuant to Section 8.7.A .
(ii) If the General Partner determines to pay the Redeeming Partner the Redemption Amount in the form of Shares, the total number of Shares to be paid to the Redeeming Partner in exchange for the Redeeming Partner’s Partnership Units shall be the applicable Shares Amount. If this amount is not a whole number of Shares, the Redeeming Partner shall be paid (a) that number of Shares which equals the nearest whole number less than such amount plus (b) an amount of cash which the General Partner determines, in its reasonable discretion, to represent the fair value of the remaining fractional Share which would otherwise be payable to the Redeeming Partner. The Shares Amount, if applicable, shall be delivered as duly authorized, validly issued, fully paid and nonassessable Shares and, if applicable, free of any pledge, lien, encumbrance or restriction, other than those provided in the Charter or the Bylaws, the Securities Act, relevant state securities or blue sky laws and any applicable registration rights agreement with respect to such Shares entered into by the Redeeming Partner. Notwithstanding any delay in such delivery (but subject to Section 8.7.C(i) ), the Redeeming Partner shall be deemed the owner of such Shares for all purposes, including rights to vote or consent, and receive dividends, as of the Specified Redemption Date. In addition, the Shares for which the Partnership Units might be exchanged shall also bear such restrictive legends that the General Partner determines are appropriate to mark transfer, ownership or other restrictions and limitations applicable to the Shares.
(iii) Each Redeeming Partner agrees to execute such documents as the General Partner may reasonably require in connection with the issuance of Shares upon exercise of the Redemption Right.
 
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C. Exceptions to Exercise of Redemption Right .
(i) Notwithstanding the provisions of this Section 8.7 or any other provision of this Agreement, a Limited Partner (a) shall not be entitled to effect a Redemption for cash or an exchange for Shares to the extent the ownership or right to acquire Shares pursuant to such exchange by such Limited Partner on the Specified Redemption Date could cause such Limited Partner or any other Person to violate the restrictions on ownership and transfer of Shares set forth in the Charter of the General Partner and (b) shall have no rights under this Agreement to acquire Shares which would otherwise be prohibited under the Charter. To the extent any attempted exercise of the Redemption Right or exchange for Shares would be in violation of this Section 8.7.C(i) , it shall be null and void ab initio and such Limited Partner shall not acquire any rights or economic interest in the cash otherwise payable upon such exercise of such Redemption Right or the Shares otherwise issuable upon such exchange. Notwithstanding the foregoing, the General Partner shall, and shall cause the Partnership to, take reasonable steps to cooperate with any Limited Partner who exercises the Redemption Right to structure any such Redemption that would otherwise violate the restrictions on ownership and transfer of Shares set forth in the Charter of the General Partner in a manner that will permit the Redemption without violating such restrictions. Such steps may include (x) satisfying the Redemption of any Partnership Units with respect to which the issuance of Shares would result in the violation of the restrictions on ownership through the payment of the Cash Amount, (y) the General Partner selling in a registered or private offering Shares and causing the Redemption of Partnership Units with the proceeds from such sales, or (z) otherwise structuring any sales by holders of Shares in a registered offering in manner that would not result in a Limited Partner violating the ownership restrictions set forth in the Charter of the General Partner.
(ii) Notwithstanding the provisions of Sections 8.7.A and 8.7.B , a Partner shall not be entitled to exercise the Redemption Right pursuant to Section 8.7.A if (but only as long as) the delivery of Shares to such Partner on the Specified Redemption Date would be prohibited under applicable U.S. federal or state securities laws or regulations (in each case regardless of whether the General Partner would in fact assume and satisfy the Redemption Right).
D. Notwithstanding anything herein to the contrary (but subject to Section 8.7.C ), with respect to any exercise of the Redemption Right or exchange for Shares pursuant to this Section 8.7 : (i) all Partnership Units acquired by the General Partner pursuant thereto shall automatically, and without further action required, be converted into and deemed to be General Partnership Interests comprised of the same number and class of Partnership Units; (ii) without the consent of the General Partner, each Limited Partner may exercise the Redemption Right only one time in each fiscal quarter; (iii) without the consent of the General Partner, each Limited Partner may not exercise its Redemption Right for less than one thousand (1,000) Partnership Units or, if the Limited Partner holds less than one thousand (1,000) Partnership Units, all of the Partnership Units held by such Limited Partner; (iv) without the consent of the General Partner, each Limited Partner may not exercise its Redemption Right during the period after the Partnership Record Date with respect to a distribution and before the record date established by the General Partner for a distribution to its Stockholders of some or all of its portion of such distribution; (v) the consummation of any exercise of the Redemption Right or
 
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exchange for Shares shall be subject to the expiration or termination of the applicable waiting period, if any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended; and (vi) each Redeeming Partner shall continue to own all Partnership Units subject to any Redemption or exchange for Shares, and be treated as a Limited Partner with respect to such Partnership Units for all purposes of this Agreement, until such Partnership Units are transferred to the General Partner and paid for or exchanged on the Specified Redemption Date. Until a Specified Redemption Date, the Redeeming Partner shall have no rights as a Stockholder with respect to such Redeeming Partner’s Partnership Units.
E. No Liens on Partnership Units Delivered for Redemption . Each Limited Partner covenants to the Partnership and the General Partner that all Partnership Units delivered for redemption shall be delivered to the Partnership or the General Partner, as the case may be, free and clear of all liens; and, notwithstanding anything contained herein to the contrary, neither the General Partner nor the Partnership shall be under any obligation to acquire Partnership Units which are or may be subject to any liens. Each Limited Partner further agrees that, if any state or local property transfer tax is payable as a result of the transfer of its Partnership Units to the Partnership or the General Partner, such Limited Partner shall assume and pay such transfer tax.
F. Additional Partnership Interests . If the Partnership issues Partnership Interests to any Additional Limited Partner pursuant to Article IV , the General Partner shall make such revisions to this Section 8.7 as it determines are necessary to reflect the issuance of such Partnership Interests (including setting forth any restrictions on the exercise of the Redemption Right with respect to such Partnership Interests).
ARTICLE IX
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 9.1 Records and Accounting
The General Partner shall keep or cause to be kept at the principal office of the Partnership appropriate books and records with respect to the Partnership’s business, including all books and records necessary to provide to the Limited Partners any information, lists and copies of documents required to be provided pursuant to Section 8.6 . Any records maintained by or on behalf of the Partnership in the regular course of its business may be kept on, or be in the form of, punch cards, magnetic tape, photographs, micrographics or any other information storage device, provided that the records so maintained are convertible into clearly legible written form within a reasonable period of time. The books of the Partnership shall be maintained, for financial and tax reporting purposes, on an accrual basis in accordance with GAAP.
Section 9.2 Reports
A. Annual Reports . As soon as practicable, but in no event later than five (5) Business Days after the date on which the General Partner mails its annual report to its Stockholders, the General Partner shall cause to be mailed to each Limited Partner an annual report, as of the close of the most recently ended Fiscal Year, containing consolidated financial
 
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statements of the Partnership, or of the General Partner if such statements are prepared solely on a consolidated basis with the Partnership, for such Fiscal Year, presented in accordance with GAAP, such statements to be audited by a nationally recognized firm of independent registered public accountants selected by the General Partner.
B. Quarterly Reports . If and to the extent that the General Partner mails quarterly reports to its Stockholders, as soon as practicable, but in no event later than the date on which such reports are mailed, the General Partner shall cause to be mailed to each Limited Partner a report containing unaudited condensed consolidated financial statements of the Partnership, or of the General Partner if such statements are prepared solely on a consolidated basis with the Partnership, as of the last day of each fiscal quarter, presented in accordance with GAAP, together with an update of material developments of the Investments and such other information as may be required by Applicable Laws or as the General Partner determines to be appropriate.
C. Availability of Reports . The General Partner shall have satisfied its obligations under Section 9.2.A and 9.2.B hereof by posting or making available the reports required by this Section 9.2 on the website maintained from time to time by the Partnership or the General Partnership provided that such reports are able to be printed or downloaded from such website.
ARTICLE X
TAX MATTERS
Section 10.1 Preparation of Tax Returns
The General Partner shall arrange for the preparation and timely filing of all returns of Partnership income, gains, deductions, losses and other items required of the Partnership for U.S. federal and state income tax purposes and shall use all reasonable efforts to furnish, within one hundred and five (105) days of the close of each taxable year, the tax information reasonably required by Limited Partners for U.S. federal and state income tax reporting purposes.
Section 10.2 Tax Elections
Except as otherwise provided herein, the General Partner shall, in its sole and absolute discretion, determine whether to make any available election pursuant to the Code; provided , however , that the General Partner shall make the election under Section 754 of the Code in accordance with applicable regulations thereunder. The General Partner shall have the right to seek to revoke any such election (including the election under Section 754 of the Code) upon the General Partner’s determination in its sole and absolute discretion that such revocation is in the best interests of the Partners.
Section 10.3 Tax Matters Partner
A. General . The General Partner shall be the “tax matters partner” of the Partnership for U.S. federal income tax purposes. Pursuant to Section 6223(c)(3) of the Code,
 
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upon receipt of notice from the IRS of the beginning of an administrative proceeding with respect to the Partnership, the tax matters partner shall furnish the IRS with the name, address, taxpayer identification number and profit interest of each of the Limited Partners and any Assignees; provided , however , that such information is provided to the Partnership by the Limited Partners.
B. Powers . The tax matters partner is authorized, but not required:
(i) to enter into any settlement with the IRS with respect to any administrative or judicial proceedings for the adjustment of Partnership items required to be taken into account by a Partner for income tax purposes (such administrative proceedings being referred to as a “tax audit” and such judicial proceedings being referred to as “judicial review”), and in the settlement agreement the tax matters partner may expressly state that such agreement shall bind all Partners, except that such settlement agreement shall not bind any Partner (i) who (within the time prescribed pursuant to the Code and Regulations) files a statement with the IRS providing that the tax matters partner shall not have the authority to enter into a settlement agreement on behalf of such Partner or (ii) who is a “notice partner” (as defined in Section 6231(a)(8) of the Code) or a member of a “notice group” (as defined in Section 6223(b)(2) of the Code);
(ii) if a notice of a final administrative adjustment at the Partnership level of any item required to be taken into account by a Partner for tax purposes (a “final adjustment”) is mailed to the tax matters partner, to seek judicial review of such final adjustment, including the filing of a petition for readjustment with the Tax Court or the filing of a complaint for refund with the United States Claims Court or the District Court of the United States for the district in which the Partnership’s principal place of business is located;
(iii) to intervene in any action brought by any other Partner for judicial review of a final adjustment;
(iv) to file a request for an administrative adjustment with the IRS at any time and, if any part of such request is not allowed by the IRS, to file an appropriate pleading (petition or complaint) for judicial review with respect to such request;
(v) to enter into an agreement with the IRS to extend the period for assessing any tax which is attributable to any item required to be taken into account by a Partner for tax purposes, or an item affected by such item; and
(vi) to take any other action on behalf of the Partners of the Partnership in connection with any tax audit or judicial review proceeding to the extent permitted by Applicable Law or regulations.
The taking of any action and the incurring of any expense by the tax matters partner in connection with any such proceeding, except to the extent required by Applicable Law, is a matter in the sole and absolute discretion of the tax matters partner and the provisions relating to indemnification of the General Partner set forth in Section 7.7 shall be fully applicable to the tax matters partner in its capacity as such.
 
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C. Reimbursement . The tax matters partner shall receive no compensation for its services. All third party costs and expenses incurred by the tax matters partner in performing its duties as such (including legal and accounting fees and expenses) shall be borne by the Partnership. Nothing herein shall be construed to restrict the Partnership from engaging an accounting firm and/or law firm to assist the tax matters partner in discharging its duties hereunder, so long as the compensation paid by the Partnership for such services is reasonable.
Section 10.4 [Reserved]
Section 10.5 Withholding
Each Limited Partner hereby authorizes the Partnership to withhold from or pay on behalf of or with respect to such Limited Partner any amount of U.S. federal, state, local, or foreign taxes that the General Partner determines that the Partnership is required to withhold or pay with respect to any amount distributable or allocable to such Limited Partner pursuant to this Agreement, including any taxes required to be withheld or paid by the Partnership pursuant to Section 1441, 1442, 1445, 1446 or 1471-1474 of the Code. Any amount paid on behalf of or with respect to a Limited Partner shall constitute a loan by the Partnership to such Limited Partner, which loan shall be repaid by such Limited Partner within fifteen (15) days after notice from the General Partner that such payment must be made unless (i) the Partnership withholds such payment from a distribution which would otherwise be made to the Limited Partner or (ii) the General Partner determines, in its sole and absolute discretion, that such payment may be satisfied out of the available funds of the Partnership which would, but for such payment, be distributed to the Limited Partner. Any amounts withheld pursuant to the foregoing clauses (i) or (ii) shall be treated as having been distributed to such Limited Partner. Each Limited Partner hereby unconditionally and irrevocably grants to the Partnership a security interest in such Limited Partner’s Partnership Interest to secure such Limited Partner’s obligation to pay to the Partnership any amounts required to be paid pursuant to this Section 10.5 . If a Limited Partner fails to pay any amounts owed to the Partnership pursuant to this Section 10.5 when due, the General Partner may, in its sole and absolute discretion, elect to make the payment to the Partnership on behalf of such defaulting Limited Partner, and in such event shall be deemed to have loaned such amount to such defaulting Limited Partner and shall succeed to all rights and remedies of the Partnership as against such defaulting Limited Partner (including the right to receive distributions). Any amounts payable by a Limited Partner hereunder shall bear interest at the base rate on corporate loans at large United States money center commercial banks, as published from time to time in the Wall Street Journal, plus four (4) percentage points (but not higher than the maximum lawful rate under the laws of the State of Texas) from the date such amount is due (i.e., fifteen (15) days after demand) until such amount is paid in full. Each Limited Partner shall take such actions as the Partnership or the General Partner shall request to perfect or enforce the security interest created hereunder.
 
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Section 10.6 Code Section 83 Safe Harbor Election
By executing this Agreement, each Partner authorizes and directs the Partnership to elect to have the “Safe Harbor” described in the proposed Revenue Procedure set forth in Internal Revenue Service Notice 2005-43 (the “ Notice ”) apply to any LTIP Units and any other interest in the Partnership transferred to a service provider by the Partnership on or after the effective date of such Revenue Procedure in connection with services provided to the Partnership. For purposes of making such Safe Harbor election, the tax matters partner is hereby designated as the “partner who has responsibility for federal income tax reporting” by the Partnership and, accordingly, execution of such Safe Harbor election by the tax matters partner constitutes execution of a “Safe Harbor Election” in accordance with Section 3.03(1) of the Notice. The Partnership and each Partner hereby agree to comply with all requirements of the Safe Harbor described in the Notice, including the requirement that each Partner shall prepare and file all U.S. federal income tax returns reporting the income tax effects of each “Safe Harbor Partnership Interest” (as described in Section 3.02 of the Notice) issued by the Partnership in a manner consistent with the requirements of the Notice. Each Partner authorizes the tax matters partner to amend this Section 10.6 to the extent necessary to achieve substantially the same tax treatment with respect to any interest in the Partnership transferred to a service provider by the Partnership in connection with services provided to the Partnership as set forth in Section 4 of the Notice (e.g., to reflect changes from the rules set forth in the Notice in subsequent IRS guidance), provided , that such amendment is not materially adverse to any Partner (as compared with the after-tax consequences that would result if the provisions of the Notice applied to all interests in the Partnership transferred to a service provider by the Partnership in connection with services provided to the Partnership).
Section 10.7 Limitation to Preserve REIT Status
To the extent that any amount paid or credited to the General Partner or any of its officers, trustees, employees or agents pursuant to Section 7.4 or Section 7.7 would constitute gross income to the General Partner for purposes of Section 856(c)(2) or 856(c)(3) of the Code (a “ General Partner Payment ”) then, notwithstanding any other provision of this Agreement, the amount of such General Partner Payment for any Fiscal Year shall not exceed the lesser of:
A. an amount equal to the excess, if any, of (a) 4% of the General Partner’s total gross income (not including the amount of any General Partner Payment) for the Fiscal Year over (b) the amount of gross income (within the meaning of Section 856(c)(2) of the Code) derived by the General Partner from sources other than those described in subsections (A) through (I) of Section 856(c)(2) of the Code (not including the amount of any General Partner Payment); or
B. an amount equal to the excess, if any of (a) 24% of the General Partner’s total gross income (not including the amount of any General Partner Payment) for the Fiscal Year over (b) the amount of gross income (within the meaning of Section 856(c)(3) of the Code) derived by the General Partner from sources other than those described in subsections (A) through (I) of Section 856(c)(3) of the Code (not including the amount of any General Partner Payment); provided , however , that General Partner Payments in excess of the amounts set forth in paragraphs A. and B. above may be made if the General Partner, as a condition precedent, obtains an opinion of tax counsel that the receipt of such excess amounts would not adversely affect the General Partner’s ability to qualify as a REIT. To the extent General Partner Payments
 
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may not be made in any Fiscal Year due to the foregoing limitations, such General Partner Payments shall carry over and be treated as arising in the following Fiscal Year; provided however , that (i) as General Partner Payments are made, such payments shall be applied first to carry over amounts outstanding, if any, and (ii) with respect to carry over amounts for more than one Fiscal Year, such payments shall be applied to the earliest Fiscal Year first.
Section 10.8 Certain Taxes
The Partnership will pay any and all U.S. federal and state documentary, stamp or similar issue or transfer (but not income) taxes payable in respect of the issue or delivery of Common Units on the conversion of Class A Units and Class C Units pursuant to Section 4.6 ; provided , however , that the Partnership shall not be required to pay any tax which may be payable in respect of any registration or transfer involved in the issue or delivery of Common Units in a name other than that of the registered Holder of Class A Units and/or Class C Units converted or to be converted, and no such issue or delivery shall be made unless and until the Person requesting such issue has paid to the Partnership the amount of any such tax or has established, to the satisfaction of the Partnership, that such tax has been paid.
ARTICLE XI
TRANSFERS AND WITHDRAWALS
Section 11.1 Transfer
No Partnership Interest shall be Transferred, in whole or in part, except in accordance with the terms and conditions set forth in this Article XI . Any Transfer or purported Transfer of a Partnership Interest not made in accordance with this Article XI shall be null and void. No part of the interest of a Limited Partner shall be subject to the claims of any creditor or any spouse for alimony or support or to legal process, and may not be voluntarily or involuntarily alienated or encumbered except as may be specifically provided for in this Agreement.
Section 11.2 Transfers of Partnership Interests of General Partner
A. Except as provided in Section 11.2.B or Section 11.2.C , and subject to the rights of any Holder of any Partnership Interest set forth in a Partnership Unit Designation, the General Partner may not Transfer all or any portion of its Partnership Interest (whether by sale, disposition, statutory merger or consolidation, liquidation or otherwise) without the Consent of the Limited Partners. It is a condition to any Transfer of a Partnership Interest of a General Partner otherwise permitted hereunder (including any Transfer permitted pursuant to Section 11.2.B or Section 11.2.C ) that: (i) coincident with such Transfer, the transferee is admitted as a General Partner pursuant to Section 12.1 hereof; (ii) the transferee assumes, by operation of law or express agreement, all of the obligations of the transferor General Partner under this Agreement with respect to such transferred Partnership Interest; and (iii) the transferee has executed such instruments as may be necessary to effectuate such admission and to confirm the agreement of such transferee to be bound by all the terms and provisions of this Agreement with respect to the Partnership Interest so acquired and the admission of such transferee as a General Partner.
 
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B. Subject to the rights of any Holder of any Partnership Interest set forth in a Partnership Unit Designation, the General Partner may, without the Consent of the Limited Partners, Transfer all of its Partnership Interest in connection with (a) a merger, consolidation or other combination of its or the Partnership’s assets with another entity, (b) a sale of all or substantially all of its or the Partnership’s assets not in the ordinary course of the Partnership’s business or (c) a reclassification, recapitalization or change of any outstanding shares of the General Partner’s stock or other outstanding equity interests (each, a “ Termination Transaction ”) if:
(i) in connection with such Termination Transaction, all of the Limited Partners will receive, or will have the right to elect to receive, for each Partnership Unit an amount of cash, securities or other property equal to the product of the Conversion Factor and the greatest amount of cash, securities or other property paid to a holder of one Share in consideration of one Share pursuant to the terms of such Termination Transaction; provided , that if, in connection with such Termination Transaction, a purchase, tender or exchange offer shall have been made to and accepted by the holders of the outstanding Shares, each holder of Partnership Units shall receive, or shall have the right to elect to receive, the greatest amount of cash, securities or other property which such holder of Partnership Units would have received had it exercised its Redemption Right pursuant to Section 8.7 hereof and received Shares in exchange for its Partnership Units immediately prior to the expiration of such purchase, tender or exchange offer and had thereupon accepted such purchase, tender or exchange offer and then such Termination Transaction shall have been consummated; or
(ii) all of the following conditions are met: (w) substantially all of the assets directly or indirectly owned by the surviving entity are owned directly or indirectly by the Partnership or another limited partnership or limited liability company which is the survivor of a merger, consolidation or combination of assets with the Partnership (in each case, the “ Surviving Partnership ”); (x) Limited Partners that held Partnership Units immediately prior to the consummation of such Termination Transaction own a percentage interest of the Surviving Partnership based on the relative fair market value of the net assets of the Partnership and the other net assets of the Surviving Partnership immediately prior to the consummation of such transaction; (y) the rights, preferences and privileges in the Surviving Partnership of such Limited Partners are at least as favorable as those in effect with respect to the Partnership Units immediately prior to the consummation of such transaction and as those applicable to any other limited partners or non-managing members of the Surviving Partnership; and (z) the rights of such Limited Partners include at least one of the following: (a) the right to redeem their interests in the Surviving Partnership for the consideration available to such persons pursuant to Section 11.2.B(i) or (b) the right to redeem their interests in the Surviving Partnership for cash on terms substantially equivalent to those in effect with respect to their Partnership Units immediately prior to the consummation of such transaction, or, if the ultimate
 
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controlling person of the Surviving Partnership has publicly traded common equity securities, such common equity securities, with an exchange ratio based on the determination of relative fair market value of such securities and the Shares.
C. Notwithstanding the other provisions of this Article XI (other than Section 11.6.E hereof), the General Partner may Transfer all of its Partnership Interests at any time to any Person that is, at the time of such Transfer, an Affiliate of the General Partner, including any “qualified REIT subsidiary” (within the meaning of Section 856(i)(2) of the Code), without the Consent of any Limited Partners. The provisions of Section 11.2.B , 11.3 , 11.4.A and 11.5 hereof shall not apply to any Transfer permitted by this Section 11.2.C .
D. Except in connection with Transfers permitted in this Article XI and as otherwise provided in Section 12.1 in connection with the Transfer of the General Partner’s entire Partnership Interest, the General Partner may not voluntarily withdraw as a general partner of the Partnership without the Consent of the Limited Partners.
Section 11.3 Limited Partners’ Rights to Transfer
A. General . Subject to the provisions of Sections 11.3.C , 11.3.D , 11.3.E , 11.4 and 11.6 , a Limited Partner (other than the General Partner) may transfer, with the consent of the General Partner, which may be granted or withheld in the sole and absolute discretion of the General Partner, all or any portion of its Partnership Interest, or any of such Limited Partner’s rights as a Limited Partner, provided that prior written notice of such proposed Transfer is delivered to the General Partner. Notwithstanding the foregoing, any Limited Partner may, at any time, without prior notice to the General Partner, Transfer all or any portion of its Partnership Interest to the General Partner or, subject to Section 11.3.C-E and Section 11.6 , any Permitted Transferee. Any Transfer to a Permitted Transferee will require coordination with the General Partner to ensure that such Transfer does not violate Section 11.3.C-E and Section 11.6 , and the General Partner may require, as a condition to any such Transfer, reasonable assurances that no such violation has occurred.
It is a condition to any transfer otherwise permitted hereunder (excluding pledges of a Partnership Interest, but including any transfer of the pledged Partnership Interest, whether to the secured party or otherwise, pursuant to the secured party’s exercise of its remedies under such pledge or the related loan or extension of credit) that (i) the transferee assumes by operation of law or express agreement all of the obligations of the transferor Limited Partner under this Agreement with respect to such Transferred Partnership Interest, (ii) no such Transfer (other than a Transfer to a Permitted Transferee, a Transfer to a Qualified Transferee or a Transfer pursuant to a statutory merger or consolidation wherein all obligations and liabilities of the transferor Partner are assumed by a successor corporation by operation of law) shall relieve the transferor Partner of its obligations under this Agreement without the approval of the General Partner, in its reasonable discretion, and (iii) such Transfer is effective as of the first day of a fiscal quarter of the Partnership. Any transferee, whether or not admitted as a Substituted Limited Partner, shall take the Transferred Partnership Interest subject to the obligations of the transferor hereunder. Unless admitted as a Substituted Limited Partner, no transferee, whether by a voluntary Transfer, by operation of law or otherwise, shall have rights hereunder, other than the rights of an Assignee as provided in Section 11.5 .
 
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B. Incapacitated Limited Partners . If a Limited Partner is subject to Incapacity, the executor, administrator, trustee, committee, guardian, conservator or receiver of such Limited Partner’s estate shall have all the rights of a Limited Partner, but not more rights than those enjoyed by other Limited Partners for the purpose of settling or managing the estate and such power as the Incapacitated Limited Partner possessed to transfer all or any part of its interest in the Partnership. The Incapacity of a Limited Partner, in and of itself, shall not dissolve or terminate the Partnership.
C. No Transfers Violating Securities Laws . The General Partner may prohibit any Transfer of Partnership Units by a Limited Partner unless the Partnership receives a written opinion of legal counsel (which opinion and counsel shall be reasonably satisfactory to the Partnership) to such Limited Partner or the Partnership (or other evidence reasonably satisfactory to the General Partner) that such Transfer would not require the filing of a registration statement under the Securities Act, would not require the General Partner to register as an investment adviser under the Advisers Act, would not require the Partnership to register as an investment company under the Investment Company Act, and would not otherwise violate any U.S. federal or state securities laws or regulations applicable to the General Partner, the Partnership or the Partnership Units.
D. No Transfers Affecting Tax Status of Partnership . No Transfer of Partnership Units by a Limited Partner (including a redemption or exchange pursuant to Section 8.7 ) may be made to any Person if (i) in the opinion of legal counsel for the Partnership, it would create a material risk of the Partnership being treated as an association taxable as a corporation for U.S. federal income tax purposes or would result in a termination of the Partnership for U.S. federal income tax purposes (except as a result of the redemption or exchange for Shares of all Partnership Units held by all Limited Partners other than the General Partner or any Subsidiary of the General Partner or pursuant to a transaction expressly permitted under Section 11.2 ), (ii) in the opinion of legal counsel for the General Partner, it would adversely affect the ability of the General Partner to continue to qualify as a REIT or would subject the General Partner to any additional taxes under Section 856, Section 857 or Section 4981 of the Code or (iii) such Transfer is effectuated through an “established securities market” or a “secondary market (or the substantial equivalent thereof)” within the meaning of Section 7704 of the Code (provided that this clause (iii) shall not be the basis for limiting or restricting in any manner the exercise of the Redemption Right under Section 8.7 unless, and only to the extent that, outside tax counsel provides to the General Partner an opinion to the effect that, in the absence of such limitation or restriction, there is a significant risk that the Partnership will be treated as a “publicly traded partnership” and, by reason thereof, taxable as a corporation).
E. No Transfers to Holders of Nonrecourse Liabilities . No pledge or other Transfer of any Partnership Units may be made to a lender to the Partnership or any Person who is related (within the meaning of Section 1.752-4(b) of the Regulations) to any lender to the Partnership whose loan constitutes a Nonrecourse Liability unless (i) the General Partner is provided notice thereof and (ii) the lender enters into an arrangement with the Partnership and the General Partner to exchange or redeem for the Redemption Amount any Partnership Units in which a security interest is held simultaneously with the time at which such lender would be deemed to be a partner in the Partnership for purposes of allocating liabilities to such lender under Section 752 of the Code.
 
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Section 11.4 Substituted Limited Partners
A. Consent of General Partner . No Limited Partner shall have the right to substitute a transferee as a Limited Partner in its place. The General Partner shall, however , have the right to consent to the admission of a transferee of the interest of a Limited Partner pursuant to this Section 11.4 as a Substituted Limited Partner, which consent may be given or withheld by the General Partner in its reasonable discretion; provided , that in the case of a Transfer to a Permitted Transferee or a Transfer to a Qualified Transferee, the General Partner shall have no right to consent to the admission of such Permitted Transferee or Qualified Transferee, as applicable, as a Substituted Limited Partner if such Permitted Transferee or Qualified Transferee assumes all of the obligations of the transferor Limited Partner under this Agreement with respect to such Partnership Units. If the General Partner denies admission of a proposed transferee of Partnership Units, the General Partner shall provide to the transferor or proposed transferor of such Partnership Units written notice setting forth the reasons for such denial.
B. Rights of Substituted Limited Partner . A transferee who has been admitted as a Substituted Limited Partner in accordance with this Article XI shall have all the rights and powers and be subject to all the restrictions and liabilities of a Limited Partner under this Agreement. The admission of any transferee as a Substituted Limited Partner shall be conditioned upon the transferee executing and delivering to the Partnership an acceptance of all the terms and conditions of this Agreement and such other documents or instruments as may be required to effect the admission.
C. Partner Registry . Upon the admission of a Substituted Limited Partner, the General Partner shall include the name, address, Capital Account and number and class of Partnership Units of such Substituted Limited Partner on the Partner Registry and eliminate or adjust, if necessary, the name, address, Capital Account and number and class of Partnership Units of the predecessor of such Substituted Limited Partner on the Partner Registry.
Section 11.5 Assignees
If the General Partner, in its reasonable discretion, does not consent to the admission of any permitted transferee under Section 11.3 as a Substituted Limited Partner, as described in Section 11.4 , such transferee shall be considered an Assignee for purposes of this Agreement. An Assignee shall be entitled to all the rights of an assignee of a limited partnership interest under the LP Act, including the right to receive distributions from the Partnership and the share of Net Income, Net Losses, gain, loss and Recapture Income attributable to the Partnership Units assigned to such transferee, and shall have the rights granted to the Limited Partners under Section 8.7 , but shall not be deemed to be a holder of Partnership Units for any other purpose under this Agreement, and shall not be entitled to vote such Partnership Units in any matter presented to the Limited Partners for a vote (such Partnership Units being deemed to have been voted on such matter in the same proportion as all other Partnership Units held by Limited Partners are voted). If any such transferee desires to make a further assignment of any such Partnership Units, such transferee shall be subject to all the provisions of this Article XI to the same extent and in the same manner as any Limited Partner desiring to make an assignment of Partnership Units.
 
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Section 11.6 General Provisions
A. Withdrawal of Limited Partner . No Limited Partner may withdraw from the Partnership other than as a result of a permitted Transfer of all of such Limited Partner’s Partnership Units in accordance with this Article XI or pursuant to redemption of all of its Partnership Units under Section 8.7 and/or pursuant to any Partnership Unit Designation.
B. Termination of Status as Limited Partner . Any Limited Partner who shall transfer all of its Partnership Units in a Transfer permitted pursuant to this Article XI or pursuant to redemption of all of its Partnership Units under Section 8.7 shall cease to be a Limited Partner.
C. Timing of Transfers . Transfers pursuant to this Article XI may only be made upon three Business Days prior notice, unless the General Partner otherwise agrees.
D. Allocations . If any Partnership Interest is transferred during any quarterly segment of the Partnership’s Fiscal Year in compliance with the provisions of this Article XI or redeemed pursuant to Section 8.7 , Net Income, Net Losses, each item thereof and all other items attributable to such interest for such Fiscal Year shall be divided and allocated between the transferor Partner and the transferee Partner by taking into account their varying interests during the Fiscal Year in accordance with Section 706(d) of the Code, using the interim closing of the books method (unless the General Partner, in its sole and absolute discretion, elects to adopt a daily, weekly, or a monthly proration period, in which event Net Income, Net Losses, each item thereof and all other items attributable to such interest for such Fiscal Year shall be prorated based upon the applicable method selected by the General Partner). Solely for purposes of making such allocations, each of such items for the calendar month in which the transfer or redemption occurs shall be allocated to the Person who is a Partner as of midnight on the last day of said month. All distributions of Cash From Operations attributable to any Partnership Unit with respect to which the Partnership Record Date is before the date of such Transfer or redemption shall be made to the transferor Partner or the Redeeming Partner, as the case may be, and, in the case of a Transfer other than a redemption, all distributions of Cash From Operations thereafter attributable to such Partnership Unit shall be made to the transferee Partner.
E. Additional Restrictions . In addition to any other restrictions on Transfer herein contained, including the provisions of this Article XI , in no event may any Transfer of a Partnership Interest by any Partner (including pursuant to Section 8.7 ) be made without the express consent of the General Partner, in its sole and absolute discretion, (i) to any Person who lacks the legal right, power or capacity to own a Partnership Interest; (ii) in violation of Applicable Law; (iii) of any component portion of a Partnership Interest, such as the Capital Account, or rights to distributions, separate and apart from all other components of a Partnership Interest; (iv) if in the opinion of legal counsel to the Partnership such Transfer would cause a termination of the Partnership for U.S. federal or state income tax purposes (except as a result of the redemption or exchange for Shares of all Partnership Units held by all Limited Partners or pursuant to a transaction expressly permitted under Section 11.2 ); (v) if in the opinion of counsel to the Partnership, such Transfer would cause the Partnership to cease to be classified as a partnership for U.S. federal income tax purposes (except as a result of the redemption or exchange for Shares of all Partnership Units held by all Limited Partners or pursuant to a transaction expressly permitted under Section 11.2 ); (vi) if such Transfer would cause the
 
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Partnership Interests of Benefit Plan Investors to become “significant,” within the meaning of the Plan Asset Regulation or would cause the Partnership to become, with respect to any Benefit Plan Investor, a “party-in-interest” (as defined in Section 3(14) of ERISA) or a “disqualified person” (as defined in Section 4975(c) of the Code); (vii) if such Transfer requires the registration of such Partnership Interest pursuant to any applicable federal or state securities laws; (viii) if such Transfer is effectuated through an “established securities market” or a “secondary market” (or the substantial equivalent thereof) within the meaning of Section 7704 of the Code or such Transfer causes the Partnership to become a “publicly traded partnership,” as such term is defined in Section 469(k)(2) or Section 7704(b) of the Code ( provided that this clause (viii) shall not be the basis for limiting or restricting in any manner the exercise of the Redemption Right under Section 8.7 unless, and only to the extent that, outside tax counsel provides to the General Partner an opinion to the effect that, in the absence of such limitation or restriction, there is a significant risk that the Partnership will be treated as a “publicly traded partnership” and, by reason thereof, taxable as a corporation); (ix) if such Transfer subjects the Partnership to regulation under the Investment Company Act or the Advisers Act; (x) such Transfer could adversely affect the ability of the General Partner to remain qualified as a REIT; or (xi) if in the opinion of legal counsel for the transferring Partner (which opinion and counsel shall be reasonably satisfactory to the Partnership) or legal counsel for the Partnership, such Transfer would adversely affect the ability of the General Partner to qualify as a REIT or subject the General Partner to any taxes under Section 856, Section 857 or Section 4981 of the Code.
F. Avoidance of “Publicly Traded Partnership” Status . The General Partner shall monitor the Transfers of interests in the Partnership to determine (i) if such interests are being traded on an “established securities market” or a “secondary market (or the substantial equivalent thereof)” within the meaning of Section 7704 of the Code and (ii) whether additional Transfers of interests would result in the Partnership being unable to qualify for at least one of the “safe harbors” set forth in Regulations Section 1.7704-1 (or such other guidance subsequently published by the IRS setting forth safe harbors under which interests will not be treated as “readily tradable on a secondary market (or the substantial equivalent thereof)” within the meaning of Section 7704 of the Code) (the “ Safe Harbors ”). The General Partner shall take all steps reasonably necessary or appropriate to prevent any trading of interests or any recognition by the Partnership of Transfers made on such markets and, except as otherwise provided herein, to insure that at least one of the Safe Harbors is met; provided , however , that the foregoing shall not authorize the General Partner to limit or restrict in any manner the right of any holder of a Partnership Unit to exercise the Redemption Right in accordance with the terms of Section 8.7 unless, and only to the extent that, outside tax counsel provides to the General Partner an opinion to the effect that, in the absence of such limitation or restriction, there is a significant risk that the Partnership will be treated as a “publicly traded partnership” and, by reason thereof, taxable as a corporation.
G. Indemnification .
(i) The transferor and transferee of a Partner’s interest shall be jointly and severally obligated to reimburse the Partnership for all expenses (including legal fees) incurred by or on behalf of the Partnership in connection with any Transfer. If, under Applicable Law, a Transfer of an interest in the Partnership that does not comply with this Article XI is nevertheless legally effective, the transferor and transferee shall be
 
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jointly and severally liable to the Partnership for, and shall indemnify and hold harmless the Partnership against, any losses, damages or expenses (including attorneys’ fees, judgments, fines and amounts paid in settlement) actually and reasonably incurred by them in connection with such Transfer.
(ii) To the fullest extent permitted under Applicable Law, each Partner shall indemnify and hold harmless the Partnership and all other Partners who were or are parties, or are threatened to be made parties, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of or arising from any actual or alleged misrepresentation, misstatement of facts or omission to state facts made (or omitted to be made), noncompliance with any agreement or failure to perform any covenant by any such Partner in connection with any Transfer of all or any portion of such Partner’s interest (or any economic interest therein) in the Partnership, against any losses, damages or expenses (including attorneys’ fees, judgments, fines and amounts paid in settlement) actually and reasonably incurred by it or them in connection with such action, suit or proceeding and for which it or they have not otherwise been reimbursed.
ARTICLE XII
ADMISSION OF PARTNERS
Section 12.1 Admission of a Successor General Partner
A successor to all of the General Partner’s General Partnership Interest pursuant to Section 11.2 who is proposed to be admitted as a successor General Partner shall be admitted to the Partnership as the General Partner, effective upon such Transfer. Any such successor shall carry on the business of the Partnership without dissolution. In such case, the admission shall be subject to such successor General Partner executing and delivering to the Partnership an acceptance of all of the terms and conditions of this Agreement and such other documents or instruments as may be required to effect the admission.
Section 12.2 Admission of Additional Limited Partners
A. General . No Person shall be admitted as an Additional Limited Partner without the consent of the General Partner, which consent may be given or withheld in the General Partner’s sole and absolute discretion, subject to Section 7.9.E . A Person who makes a Capital Contribution to the Partnership in accordance with this Agreement, including under Section 4.2.A , or who exercises an option to receive Partnership Units shall be admitted to the Partnership as an Additional Limited Partner only with the consent of the General Partner and only upon furnishing to the General Partner (i) evidence of acceptance in form satisfactory to the General Partner of all of the terms and conditions of this Agreement, and (ii) such other documents or instruments as may be required in the discretion of the General Partner to effect such Person’s admission as an Additional Limited Partner. The admission of any Person as an Additional Limited Partner shall become effective on the date upon which the name of such Person is recorded in the Partner Registry, following the consent of the General Partner to such admission.
 
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B. Allocations to Additional Limited Partners . If any Additional Limited Partner is admitted to the Partnership on any day other than the first day of a Fiscal Year, then Net Income, Net Losses, each item thereof and all other items allocable among Partners and Assignees for such Fiscal Year shall be allocated among such Additional Limited Partner and all other Partners and Assignees by taking into account their varying interests during the Fiscal Year in accordance with Section 706(d) of the Code, using the interim closing of the books method (unless the General Partner, in its sole and absolute discretion, elects to adopt a daily, weekly or monthly proration method, in which event Net Income, Net Losses, and each item thereof would be prorated based upon the applicable period selected by the General Partner). Solely for purposes of making such allocations, each of such items for the calendar month in which an admission of any Additional Limited Partner occurs shall be allocated among all the Partners and Assignees including such Additional Limited Partner. All distributions of Cash From Operations with respect to which the Partnership Record Date is before the date of such admission shall be made solely to Partners and Assignees other than the Additional Limited Partner, and all distributions of Cash From Operations thereafter shall be made to all the Partners and Assignees including such Additional Limited Partner.
Section 12.3 Amendment of Agreement and Certificate of Limited Partnership
For the admission to the Partnership of any Partner, the General Partner shall take all steps necessary and appropriate under the LP Act to amend the records of the Partnership and, if necessary, to prepare as soon as practical an amendment of this Agreement and, if required by Applicable Law, shall prepare and file an amendment to the Certificate.
Section 12.4 Limit on Number of Partners
Unless otherwise permitted by the General Partner, no Person shall be admitted to the Partnership as an Additional Limited Partner if the effect of such admission would be to cause the Partnership to have a number of Partners that would cause the Partnership to become a reporting company under the Exchange Act.
ARTICLE XIII
DISSOLUTION AND LIQUIDATION
Section 13.1 Dissolution
The Partnership shall not be dissolved by the admission of Substituted Limited Partners or Additional Limited Partners or by the admission of a successor General Partner in accordance with the terms of this Agreement. Upon the withdrawal of the General Partner, any successor General Partner shall continue the business of the Partnership. The Partnership shall dissolve, and its affairs shall be wound up, upon the first to occur of any of the following (“ Liquidating Events ”):
(i) an event of withdrawal of the General Partner, as defined in the LP Act (other than an event of bankruptcy), unless within ninety (90) days after the withdrawal a “majority in interest” (as defined below) of the remaining Partners consent in writing to continue the business of the Partnership and to the appointment, effective as of the date of withdrawal, of a substitute General Partner;
 
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(ii) an election to dissolve the Partnership made by the General Partner that is approved by the Holders of at least a majority in interest (and all Holders of Partnership Units hereby expressly consent that such approval may be effected upon written consent of said applicable percentage of such outstanding Partnership Units);
(iii) entry of a decree of judicial dissolution of the Partnership pursuant to the provisions of the LP Act;
(iv) the sale of all or substantially all of the assets and properties of the Partnership for cash or for marketable securities;
(v) a good faith determination by the General Partner that dissolution of the Partnership is necessary or desirable to avoid any material adverse consequences to the Partnership, the General Partner, the directors or the officers of the General Partner as a result of any law applicable to a Regulated Investor; or
(vi) a final and non-appealable judgment is entered by a court of competent jurisdiction ruling that the General Partner is bankrupt or insolvent, or a final and non-appealable order for relief is entered by a court with appropriate jurisdiction against the General Partner, in each case under any federal or state bankruptcy or insolvency laws as now or hereafter in effect, unless prior to or at the time of the entry of such order or judgment a “majority in interest” (as defined below) of the remaining Partners consent in writing to continue the business of the Partnership and to the appointment, effective as of a date prior to the date of such order or judgment, of a substitute General Partner.
As used in this Article XIII , a “ majority in interest ” shall refer to, (x) on and prior to the Mandatory Conversion Date, Partners (including the General Partner) who hold more than fifty percent (50%) of the Class A Units, and (y) after the Mandatory Conversion Date, Partners (including the General Partner) who hold more than fifty percent (50%) of the outstanding Partnership Units.
 
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Section 13.2 Winding Up
A. General . Upon the occurrence of a Liquidating Event, the Partnership shall continue solely for the purposes of winding up its affairs in an orderly manner, liquidating its assets, and satisfying the claims of its creditors and Partners. No Partner shall take any action that is inconsistent with, or not necessary to or appropriate for, the winding up of the Partnership’s business and affairs. The General Partner (or, if there is no remaining General Partner, any Person elected by a majority in interest of the Limited Partners (the “ Liquidator ”)) shall be responsible for overseeing the winding up and dissolution of the Partnership and shall take full account of the Partnership’s liabilities and property and the Partnership property shall be liquidated as promptly as is consistent with obtaining the fair value thereof, and the proceeds therefrom (which may, to the extent determined by the General Partner, include equity or other securities of the General Partner or any other Entity) shall be applied and distributed in the following order:
(i) First, to the payment and discharge of all of the Partnership’s liabilities to creditors other than the Partners;
(ii) Second, to the payment and discharge of all of the Partnership’s liabilities to the General Partner;
(iii) Third, to the payment and discharge of all of the Partnership’s liabilities to the Limited Partners;
(iv) Fourth, to the Holders of Partnership Units that are entitled to any preference in distribution upon liquidation in accordance with the rights of any such class or series of Partnership Units, including Preferred Units (and, within each such class or series, to each holder thereof pro rata based on the proportion of the total number of outstanding units of such class or series represented by such holder’s units of such series or class) and as otherwise provided in Article V ; and
(v) The balance, if any, to the Partners in accordance with the positive balances of their respective Capital Accounts, after taking into account all adjustments to their Capital Accounts for all periods.
It is the intention of the Partners that distributions made pursuant to clause (v) of this Section 13.2.A shall be made in the same manner as if such distributions were made pursuant to Section 5.1 .
The General Partner shall not receive any additional compensation for any services performed pursuant to this Article XIII .
B. Deferred Liquidation . Notwithstanding the provisions of Section 13.2.A which require liquidation of the assets of the Partnership, but subject to the order of priorities set forth therein, if prior to or upon dissolution of the Partnership the Liquidator determines that an immediate sale of part or all of the Partnership’s assets would be impractical or would cause undue loss to the Partners, the Liquidator may, in its sole and absolute discretion, defer for a reasonable time the liquidation of any assets except those necessary to satisfy liabilities of the Partnership (including to those Partners as creditors) or distribute to the Partners, in lieu of cash, as tenants in common and in accordance with the provisions of Section 13.2.A , undivided interests in such Partnership assets as the Liquidator deems not suitable for liquidation. Any such distributions in-kind shall be made only if, in the good faith judgment of the Liquidator, such distributions in-kind are in the best interest of the Partners, and shall be subject to such conditions relating to the disposition and management of such properties as the Liquidator deems reasonable and equitable and to any agreements governing the operation of such properties at such time. The Liquidator shall determine the fair market value of any property distributed in-kind using such reasonable method of valuation as it may adopt.
Section 13.3 Compliance With Timing Requirements of Regulations; Restoration of Deficit Capital Accounts
A. Timing of Distributions . If the Partnership is “liquidated” within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made under this
 
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Article XIII to the General Partner and Limited Partners who have positive Capital Accounts in compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(2). In the discretion of the General Partner, a pro rata portion of the distributions that would otherwise be made to the General Partner and Limited Partners pursuant to this Article XIII may be: (A) distributed to a trust established for the benefit of the General Partner and Limited Partners for the purposes of liquidating Partnership assets, collecting amounts owed to the Partnership and paying any contingent or unforeseen liabilities or obligations of the Partnership or of the General Partner arising out of or in connection with the Partnership (in which case the assets of any such trust shall be distributed to the General Partner and Limited Partners from time to time, in the reasonable discretion of the General Partner, in the same proportions as the amount distributed to such trust by the Partnership would otherwise have been distributed to the General Partner and Limited Partners pursuant to this Agreement); or (B) withheld to provide a reasonable reserve for Partnership liabilities (contingent or otherwise) and to reflect the unrealized portion of any installment obligations owed to the Partnership; provided, that such withheld amounts shall be distributed to the General Partner and Limited Partners as soon as practicable.
B. Restoration of Deficit Capital Accounts Upon Liquidation of the Partnership . If any Partner has a deficit balance in its Capital Account (after giving effect to all contributions, distributions and allocations for all taxable years, including the year during which such liquidation occurs), such Partner shall have no obligation to make any contribution to the capital of the Partnership with respect to such deficit, and such deficit shall not be considered a Debt owed to the Partnership or to any other Person for any purpose whatsoever, except as otherwise expressly agreed in writing by the affected Partner and the Partnership after the date hereof.
Section 13.4 Rights of Limited Partners
Except as otherwise provided in this Agreement and subject to the rights of any Holder of any Partnership Interest set forth in a Partnership Unit Designation, each Limited Partner shall look solely to the assets of the Partnership for the return of its Capital Contributions and shall have no right or power to demand or receive property other than cash from the Partnership. Except as otherwise expressly provided in this Agreement, no Limited Partner shall have priority over any other Limited Partner as to the return of its Capital Contributions, distributions, or allocations.
Section 13.5 Notice of Dissolution
If a Liquidating Event occurs or an event occurs that would, but for provisions of an election or objection by one or more Partners pursuant to Section 13.1 , result in a dissolution of the Partnership, the General Partner shall, within thirty (30) days thereafter, provide written notice thereof to each of the Partners and to all other parties with whom the Partnership regularly conducts business (as determined in the discretion of the General Partner).
Section 13.6 Cancellation of Certificate of Limited Partnership
Upon the completion of the liquidation of the Partnership cash and property as provided in Section 13.2 , the Partnership shall be terminated and the Certificate and all
 
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qualifications of the Partnership as a foreign limited partnership in jurisdictions other than the State of Delaware shall be canceled and such other actions as may be necessary to terminate the Partnership shall be taken.
Section 13.7 Reasonable Time For Winding Up
A reasonable time shall be allowed for the orderly winding up of the business and affairs of the Partnership and the liquidation of its assets pursuant to Section 13.2 , to minimize any losses otherwise attendant upon such winding-up, and the provisions of this Agreement shall remain in effect among the Partners during the period of liquidation.
Section 13.8 Waiver of Partition
Each Partner hereby waives any right to partition of the Partnership property.
Section 13.9 Liability of Liquidator
The Liquidator shall be indemnified and held harmless by the Partnership in the same manner and to the same degree as a Covered Person may be indemnified pursuant to Section 7.7 .
ARTICLE XIV
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS
Section 14.1 Amendments
A. General . Amendments to this Agreement may be proposed by the General Partner. Following such proposal (except an amendment pursuant to Section 14.1.B ), the General Partner shall submit any proposed amendment to the Partners. The General Partner shall seek the written vote of the Partners on the proposed amendment or shall call a meeting to vote thereon and to transact any other business that it may deem appropriate. For purposes of obtaining a written vote, the General Partner may require a response within a reasonable specified time, but not less than fifteen (15) days, and failure to respond in such time period shall constitute a vote which is consistent with the General Partner’s recommendation with respect to the proposal. Except as provided in this Agreement (including Sections 14.1.B , 14.1.C and 14.1.D ), a proposed amendment shall be adopted and be effective as an amendment hereto if it is approved by the General Partner and it receives the Consent of Partners holding a majority of the Partnership Units (including Partnership Units held by the General Partner).
B. Amendments Not Requiring Limited Partner Approval . Notwithstanding Section 14.1.A , the General Partner shall have the power, without the Consent of the Partners, to amend this Agreement as may be required to facilitate or implement any of the following purposes:
(i) to add to the obligations of the General Partner or surrender any right or power granted to the General Partner or any Affiliate of the General Partner for the benefit of the Limited Partners;
 
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(ii) to reflect the admission, substitution, termination, or withdrawal of Partners in accordance with this Agreement;
(iii) to set forth the designations, rights, powers, duties, and preferences of the holders of any additional Partnership Interests issued pursuant to Article IV ;
(iv) to reflect a change that does not adversely affect the Limited Partners in any material respect, or to cure any ambiguity, correct or supplement any provision in this Agreement not inconsistent with Applicable Law or with other provisions of this Agreement, or make other changes with respect to matters arising under this Agreement that will not be inconsistent with Applicable Law or with the provisions of this Agreement;
(v) to satisfy any requirements, conditions, or guidelines contained in any order, directive, opinion, ruling or regulation of a U.S. federal, state or local agency or contained in U.S. federal, state or local law;
(vi) to change the name of the Partnership, the location of the principal place of business of the Partnership, the registered agent of the Partnership or the registered office of the Partnership;
(vii) to effect a change that, in the sole discretion of the General Partner, is necessary or appropriate to qualify or continue the qualification of the Partnership as a limited partnership or a partnership in which the limited partners have limited liability under the laws of any state or that is necessary or advisable in the opinion of the General Partner to ensure that the Partnership will not be treated as an association taxable as a corporation or otherwise taxed as an Entity for U.S. federal income tax purposes;
(viii) to effect a change in the Fiscal Year or taxable year of the Partnership and any changes that, in the sole discretion of the General Partner, are necessary or appropriate as a result of a change in the Fiscal Year or taxable year of the Partnership;
(ix) to adopt an amendment that is necessary, in the opinion of counsel to the Partnership, to prevent the Partnership or the General Partner or its directors or officers from in any manner being subjected to the provisions of the Investment Company Act or the Advisers Act;
(x) to take such actions contemplated in Section 7.9.E(ii );
(xi) to adopt any amendment expressly permitted in this Agreement to be made by the General Partner acting alone;
(xii) to reflect such actions as may be necessary or appropriate to avoid the Partnership assets being treated for any purpose of ERISA or Section 4975 of the Code as assets of any “employee benefit plan” as defined in and subject to ERISA or of any “plan” subject to Section 4975 of the Code (or any corresponding provisions of succeeding law) or to avoid the Partnership’s engaging in a prohibited transaction as defined in Section 406 of ERISA or Section 4975(c) of the Code;
 
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(xiii) to the extent the taxation of the “carried interest” of the Holders of Class B Units is adversely affected by any change in Applicable Law, as determined by the General Partner, in its sole discretion, to achieve tax efficiency with respect to the carried interest so long as such amendment does not adversely affect the interest of any Partner; and
(xiv) to effect any other amendments of a substantially similar nature to the foregoing.
The General Partner shall notify the Limited Partners when any action under this Section 14.1.B is taken in the next regular communication to the Limited Partners; provided , however , that no notice need be given of any amendment of this Agreement to reflect the admission, substitution, termination, or withdrawal of Partners in accordance with this Agreement. For purposes of the immediately preceding sentence, notwithstanding any other means by which the General Partner may provide any such notice to the Limited Partners, such notice requirement shall be deemed to have been satisfied upon the filing with the Commission by the Partnership of any amendment to this Agreement permitted under this Section 14.1.B as an exhibit to (i) a registration statement filed by the Partnership under the Securities Act or (ii) any report or other document filed by the Partnership under the Exchange Act.
C. Other Amendments Requiring Limited Partner Approval . Notwithstanding anything in this Section 14.1 to the contrary, (i) no amendment or modification to this Agreement shall take away any right of any Partner hereunder which is personal to that Partner and different from the rights of other Partners without the Consent of such Partner and (ii) no amendment or modification to this Agreement that would adversely affect any Partner in a materially disproportionate manner compared to other Partners shall be effective against such adversely affected Partner without the prior written consent of such adversely affected Partner. Until the Mandatory Conversion Date, no amendment hereto that adversely affects the Class B Units will be effected without the Consent of the holders of a majority in interest of the Class B Units.
D. Minimum Vote for Certain Amendments . Notwithstanding the provisions of Sections 14.1.A and 14.1.B , no provision of this Agreement that establishes a minimum Percentage Interest of Partnership Units (or any class or series thereof) required to take any action shall be amended, altered, changed, repealed or rescinded in any respect that would have the effect of reducing such voting requirement unless such amendment is approved by the written consent or the affirmative vote of holders of such Percentage Interest that constitutes not less than the voting requirement sought to be reduced. No amendment to this Agreement, nor any adoption of a new limited partnership agreement in lieu of this Agreement, may be effected by a merger, consolidation or other extraordinary transaction involving the Partnership unless such amendment or the adoption of such new limited partnership agreement has been approved in accordance with the terms of this Section 14.1 .
 
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Section 14.2 Meetings of the Partners
A. General . Meetings of the Partners may be called by the General Partner and shall be called upon the receipt by the General Partner of a written request by Limited Partners holding a majority in interest or more of the Partnership Units. The call shall state the nature of the business to be transacted. Notice of any such meeting shall be given to all Partners not less than ten (10) days or more than ninety (90) days prior to the date of such meeting. Partners may vote in person or by proxy at such meeting. Whenever the vote or Consent of Partners is permitted or required under this Agreement, such vote or Consent may be given at a meeting of Partners or may be given in accordance with the procedure prescribed in Section 14.1.A . Except as otherwise expressly provided in this Agreement, the Consent of holders of a majority of the Partnership Units held by the Partners (including Partnership Units held by the General Partner) shall control.
B. Actions Without a Meeting . Any action required or permitted to be taken at a meeting of the Partners may be taken without a meeting if a written Consent setting forth the action so taken is signed by Partners who own a majority of the Partnership Units, including Partnership Units owned by the General Partner (or such other percentage as is expressly required by this Agreement). Such Consent may be in one instrument or in several investments, and shall have the same force and effect as a vote of a majority of the Partnership Units held by the Partners (or such other percentage as is expressly required by this Agreement). Such Consent shall be filed with the General Partner. An action so taken shall be deemed to have been taken at a meeting held on the effective date so certified.
C. Proxy . Each Limited Partner may authorize any Person or Persons to act for such Limited Partner by proxy on all matters in which a Limited Partner is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. Every proxy must be signed by the Limited Partner or such Limited Partner’s attorney-in-fact. No proxy shall be valid after the expiration of eleven (11) months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the Limited Partner executing it, such revocation to be effective upon the Partnership’s receipt of written notice thereof.
D. Conduct of Meeting . Each meeting of Partners shall be conducted by the General Partner or such other Person as the General Partner may appoint pursuant to such rules for the conduct of the meeting as the General Partner or such other Person deems appropriate.
ARTICLE XV
GENERAL PROVISIONS
Section 15.1 Addresses and Notice
In order to be deemed effective, all documents to be delivered and all notices, approvals, authorizations, demands, requests, reports and/or consents to be given or obtained by any party to this Agreement shall be deemed received, unless earlier received, (i) if sent by certified or registered mail, return receipt requested, when actually delivered as aforesaid, except
 
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that such delivery shall be prior to 5:00 p.m., recipient’s time, on any Business Day and if a notice is not delivered on a Business Day or is delivered after 5:00 p.m., recipient’s time, such notice shall be deemed to have been received by such recipient at the commencement of such recipient’s first Business Day next following the time of delivery, (ii) if sent by overnight mail or international courier, when actually delivered as aforesaid, except that such delivery shall be prior to 5:00 p.m., recipient’s time, on any Business Day and if a notice is not delivered on a Business Day or is delivered after 5:00 p.m., recipient’s time, such notice shall be deemed to have been received by such recipient at the commencement of such recipient’s first Business Day next following the time of delivery, (iii) if sent by email or facsimile transmission, prior to 5:00 p.m., recipient’s time, on any Business Day and if a notice is not transmitted on a Business Day or is transmitted after 5:00 p.m., recipient’s time, such notice shall be deemed to have been received by such recipient at the commencement of such recipient’s first Business Day next following transmission of such notice, provided that confirmatory notice is sent promptly thereafter by first-class mail, postage prepaid, and (iv) if delivered by hand, on the date of receipt, at the address set forth on the books of the Partnership or such other address as the Partner or assignee of Partnership Units shall notify the General Partner in writing.
Section 15.2 Further Action
The parties shall execute and deliver all documents, provide all information and take or refrain from taking action as may be necessary or appropriate to achieve the purposes of this Agreement.
Section 15.3 Binding Effect
Subject to any provisions hereof restricting Transfers, all covenants and agreements in this Agreement by or on behalf of any of the parties hereto shall bind and inure to the benefit of their respective successors, assigns, heirs, legal representatives and permitted assigns.
Section 15.4 Creditors
Other than as expressly set forth herein with regard to any Covered Person, this Agreement is solely for the benefit of the parties hereto and (i) none of the provisions of this Agreement shall be for the benefit of, or shall be enforceable by, any creditor of the Partnership and (ii) no provisions of this Agreement shall be deemed to confer upon any other party any remedy, claim, liability, reimbursement, cause of action or other right.
Section 15.5 Waiver
Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege or insist on strict performance under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.
 
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Section 15.6 Counterparts
This Agreement may be executed and delivered in one or more counterparts (including by means of facsimile or electronic mail transmission), each of which when so executed and delivered shall be deemed an original, none of which need contain the signatures of each of the parties hereto and all of which together shall constitute one and the same instrument binding on all the parties hereto. Each party shall become bound by this Agreement immediately upon affixing its signature hereto.
Section 15.7 Applicable Law
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS.
Section 15.8 Waiver of Jury Trial
TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 15.9 Forum Selection and Consent to Jurisdiction
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT, SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK LOCATED IN THE BOROUGH OF MANHATTAN OR IN A UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK LOCATED IN THE BOROUGH OF MANHATTAN. EACH OF THE PARTIES HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK LOCATED IN THE BOROUGH OF MANHATTAN AND OF A UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK LOCATED IN THE BOROUGH OF MANHATTAN FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE. EACH OF THE PARTIES HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
Section 15.10 Invalidity of Provisions
A. Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under Applicable Law, however , if performance of any provision of this Agreement, at the time such performance shall be due, shall transcend the limit of validity prescribed by Applicable Law, then the obligation to be performed shall be reduced to the limit of such validity; and if any clause or provision contained in this Agreement
 
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operates or would operate to invalidate this Agreement, in whole or in part, then such clause or provision only shall be held ineffective, as though not herein contained, and the remainder of this Agreement shall remain operative and in full force and effect. The parties shall negotiate in good faith a replacement clause or provision as consistent with the ineffective clause or provision as is practicable under Applicable Law.
B. If any rights or powers of the Partnership Units set forth hereof are invalid, unlawful or incapable of being enforced by reason of any rule of law or public policy, all other rights or powers of the Partnership Units set forth in this Agreement which can be given effect without the invalid, unlawful or unenforceable rights or powers of the Partnership Units shall, nevertheless, remain in full force and effect, and no rights or powers of the Partnership Units herein set forth shall be deemed dependent upon any other such rights or powers of the Partnership Units unless so expressed herein.
Section 15.11 Determinations
The General Partner, on behalf of the Partnership, shall be solely responsible for making all calculations called for hereunder. The General Partner shall make all such calculations in good faith. Absent manifest error, such calculations shall be final and binding on all Holders of Partnership Units.
Section 15.12 Conversion Agent
The duly appointed Conversion Agent for the Common Units, Class A Units, Independent Director LTIP Units and Class C Units shall be the Secretary of the General Partner. The General Partner may, in its sole discretion, remove the Conversion Agent in accordance with the agreement between the Partnership and the Conversion Agent; provided , that the General Partner shall appoint a successor agent who shall accept such appointment prior to the effectiveness of such removal. Upon any such removal or appointment, the General Partner shall send notice thereof by first-class mail, postage prepaid, to the Holders of the Common Units, Class A Units, Independent Director LTIP Units and Class C Units.
Section 15.13 Entire Agreement
This Agreement contains the entire understanding and agreement among the parties with respect to the subject matter hereof and supersedes any prior written or oral understandings or agreements among them with respect thereto. Except as otherwise expressly provided in this Agreement, no amendment, modification or discharge of this Agreement shall be valid or binding unless set forth in writing and duly executed by each of the parties hereto.
Section 15.14 No Rights as Stockholders
Nothing contained in this Agreement shall be construed as conferring upon the Holders of the Partnership Units any rights whatsoever as Stockholders, including any right to receive dividends or other distributions made to Stockholders or to vote or to consent or receive notice as Stockholders in respect to any meeting of Stockholders for the election of members of the board of directors of the General Partner or any other matter.
 
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Section 15.15 No Presumption Against Drafter
Each of the parties hereto have jointly participated in the negotiation and drafting of this Agreement. In the event of an ambiguity or a question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by each of the parties hereto and no presumptions or burdens of proof shall arise favoring any party by virtue of the authorship of any of the provisions of this Agreement.
Section 15.16 Rules of Construction
Unless the context otherwise requires: (i) a technical accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (ii) “or” is not exclusive; (iii) references to “Articles,” “Sections” “and “Exhibits” refer to the articles, sections and the exhibits to this Agreement, unless explicitly stated or the context requires otherwise; (iv) “herein,” “hereof” and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section, Exhibit or other subdivision; (v) references to statutes, regulations and rules include subsequent amendments and successors thereto unless the context otherwise requires; (vi) the various headings of this Agreement are provided herein for convenience only and shall not affect the meaning or interpretation of this Agreement or any provision hereof; (vii) wherever from the context it appears appropriate, each term stated in either the singular or the plural shall include the singular and the plural, and pronouns stated in either the masculine, the feminine or the neuter gender shall include the masculine, feminine and neuter; (viii) “including” means “including, without limitation”; and (ix) if any payment hereunder shall become due on any day which is not a Business Day, such payment shall be made on the next succeeding Business Day.
 
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.

GENERAL PARTNER:	
	
INFRAREIT, INC.	
		
By:		/s/ Benjamin D. Nelson	
			
Name:		Benjamin D. Nelson	
Title:		Senior Vice President and General Counsel	
	
PREDECESSOR GENERAL PARTNER:	
	
INFRAREIT, L.L.C.	

By:		/s/ Greg Imhoff	
			
Name:		Greg Imhoff	
Title:		Vice President	
	
LIMITED PARTNERS:	
	
HUNT-INFRAREIT, L.L.C.	

By:		/s/ Benjamin D. Nelson	
			
Name:		Benjamin D. Nelson	
Title:		Senior Vice President	
	
MC TRANSMISSION HOLDINGS, INC.	

By:		/s/ Takashi Fujinaga	
			
Name:		Takashi Fujinaga	
Title:		President	
Signature Page to Second Amended and Restated Agreement of Limited Partnership of InfraREIT Partners, LP

EXHIBIT A
PARTNER REGISTRY

Name and Address of Partner	  	 	 	  	Class and Number of
Partnership Units	    	 	
General Partner :	  				  		    		
InfraREIT, Inc.	  	 	26,251,878	  	  	Common Units	    		
1807 Ross Avenue, 4 th Floor	  	 	19,617,755	  	  	Class A Units	    		
Dallas, Texas 75201	  	 	25,145	  	  	Class C Units	    		
				
Limited Partners :	  				  		    		
Hunt-InfraREIT, L.L.C.	  	 	1,167,287	  	  	Common Units	    		
1807 Ross Avenue, 4 th Floor	  	 	10,166,525	  	  	Class A Units	    		
Dallas, Texas 75201	  	 	45,799,362	  	  	Class B Units	    		
				
MC Transmission Holdings, Inc., c/o	  	 	3,325,874	  	  	Common Units	    		
Marubeni Corporation	  				  		    		
375 Lexington Avenue	  				  		    		
New York, NY 10017-5644	  				  		    		
				
Ellen Wolf	  	 	5,632	  	  	Independent Director
LTIP Units	    	4,000 LTIP Units	
				
Hal Logan	  	 	5,632	  	  	Independent Director
LTIP Units	    	4,000 LTIP Units	
W. Kirk Baker	  				  		    	4,000 LTIP Units	
John Gates	  				  		    	4,000 LTIP Units	
Storrow Gordon	  				  		    	4,000 LTIP Units	
Trudy Harper	  				  		    	4,000 LTIP Units	
Harvey Rosenblum	  				  		    	4,000 LTIP Units	
 
Exhibit A - 1

EXHIBIT B
NOTICE OF REDEMPTION
The undersigned hereby irrevocably (i) redeems                     Partnership Units in InfraREIT Partners, LP in accordance with the terms of the Second Amended and Restated Agreement of Limited Partnership of InfraREIT Partners, LP, as amended or restated through the date hereof, and the Redemption Right referred to therein, (ii) surrenders such Partnership Units and all right, title and interest therein and (iii) directs that the Cash Amount or Shares Amount (as determined by the General Partner) deliverable upon exercise of the Redemption Right be delivered to the address specified below, and if Shares are to be delivered, such Shares be registered or placed in the name(s) and at the address(es) specified below. The undersigned hereby represents, warrants, and certifies that the undersigned (a) has marketable and unencumbered title to such Partnership Units, free and clear of the rights of or interests of any other person or entity, (b) has the full right, power and authority to redeem and surrender such Partnership Units as provided herein and (c) has obtained the consent or approval of all persons or entities, if any, having the right to consent or approve such redemption and surrender.

	 	Dated:  	 	 	 		 	Name of Limited Partner:  	 	 	

	 		 		 		 	(Signature of Limited Partner)	

	 		 		 		 	(Street Address)	 		

	 		 		 		 	(City)                                                                  (State) (Zip  Code)	

	 		 		 	                Signature Guaranteed by:	 	 	

	 	If Shares are to be issued, issue to:	 		

	 	Name:  	 	 	

	 	Social Security or tax identifying number:	 	 	
 
Exhibit B - 1

Exhibit 16.1
February 4, 2015
Securities and Exchange Commission
Washington, D.C. 20549
Ladies and Gentlemen:
We are currently principal accountants for InfraREIT, Inc. and, under the date of December 5, 2014, we reported on the financial statements of InfraREIT, Inc. as of and for the years ended December 31, 2013 and 2012. On February 4, 2015, we were notified that InfraREIT, Inc. engaged Ernst & Young LLP as its principal auditors for the year ending December 31, 2015, and that the auditor-client relationship with KPMG LLP will cease upon the completion of the audit of InfraREIT, Inc.’s financial statements as of and for the year ended December 31, 2014, and the issuance of our report thereon. We have read InfraREIT, Inc.’s statements included under Item 4.01 of its Form 8-K dated February 4, 2015, and we agree with such statements, except that we are not in the position to agree or disagree with InfraREIT, Inc.’s statement that the change was approved by the board of directors and we are not in a position to agree or disagree with InfraREIT, Inc.’s statement that Ernst & Young LLP was not engaged regarding the application of accounting principles to a specified transaction or the type of audit opinion that might be rendered on InfraREIT, Inc.’s financial statements.
Very truly yours,
/s/ KPMG LLP

Exhibit 99.1

InfraREIT, Inc.
1807 Ross Avenue,
4 th Floor
Dallas, TX 75201					
 
PRESS RELEASE
InfraREIT Prices Initial Public Offering
DALLAS, TEXAS, Jan. 29, 2015—InfraREIT, Inc. (“InfraREIT” or the “Company”) today announced the pricing of the initial public offering of 20 million shares of its common stock at $23.00 per share. The shares of common stock are expected to begin trading on the New York Stock Exchange (“NYSE”) on Jan. 30, 2015, under the ticker symbol “HIFR”. The underwriters have been granted a 30-day option to purchase up to an additional three million shares of common stock from InfraREIT at the initial public offering price, less underwriting discounts and commissions. The offering is expected to close on or about Feb. 4, 2015, subject to customary closing conditions. InfraREIT is a real estate investment trust that owns rate-regulated electric transmission and distribution assets in the state of Texas. The Company is externally managed by Hunt Utility Services, LLC, an affiliate of Hunt Consolidated, Inc. (a diversified holding company based in Dallas, Texas and managed by the Ray L. Hunt family).
BofA Merrill Lynch, Citigroup, RBC Capital Markets and Morgan Stanley are acting as the joint book-running managers for the offering. UBS Investment Bank and Wells Fargo Securities are acting as senior co-managers for the offering. Scotiabank/Howard Weil and Societe Generale are acting as the co-managers for the offering.
The offering of the shares is being made only by means of a prospectus. When available, a copy of the final prospectus may be obtained through:

BofA Merrill Lynch		Citigroup	
Attn: Prospectus Department		c/o Broadridge Financial Solutions	
222 Broadway		1155 Long Island Avenue	
New York, NY 10038		Edgewood, NY 11717	
Dg.prospectus_requests@baml.com		800-831-9146	
		batprospectusdept@citi.com	
			
RBC Capital Markets, LLC		Morgan Stanley & Co. LLC	
Attn: Equity Syndicate		Attn: Prospectus Department	
200 Vesey Street, 8 th Floor
New York, NY 10281		180 Varick Street, 2 nd Floor
New York, NY 10014	
877-822-4089
equityprospectus@rbccm.com			
When available, a copy of the final prospectus may also be obtained free of charge from the U.S. Securities and Exchange Commission’s (the “SEC”) Web site at www.sec.gov .
 
1

A registration statement relating to these securities has been filed with, and has been declared effective by, the SEC. This press release does not constitute an offer to sell or the solicitation of an offer to buy nor will there be any sale of these securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.
# # #
Forward-Looking Statements
This press release contains “forward-looking statements” that state InfraREIT’s or its management’s intentions, beliefs, expectations or predictions of the future, which by their nature, involve known and unknown risks and uncertainties. Factors that could cause actual results to differ materially from those contemplated above include, among others, risks and uncertainties related to the capital markets generally. This press release speaks only as of the date hereof, and the Company disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
For additional information, contact:
 
For Investors:	Brook Wootton	
    	Director, Investor Relations	
    	InfraREIT, Inc.	
    	214-855-6748	
 
For Media:	Jeanne Phillips	
    	Senior Vice President, Corporate Affairs & International Relations	
    	Hunt Consolidated, Inc.	
    	214-978-8534	
 
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Exhibit 99.2

InfraREIT, Inc.
1807 Ross Avenue,
4 th Floor
Dallas, TX 75201					
 
PRESS RELEASE
InfraREIT Announces Exercise of Greenshoe Option in Initial Public Offering
DALLAS, TEXAS, Feb. 2, 2015—InfraREIT, Inc. (“InfraREIT” or the “Company”) today announced the underwriters of the previously announced initial public offering of 20 million shares of its common stock have exercised in full their option to purchase up to an additional three million shares of common stock from InfraREIT at the initial public offering price, less underwriting discounts and commissions. Including the exercise of the option, InfraREIT will issue a total of 23 million shares, for gross proceeds of $529 million before fees and expenses.
The offering is expected to close on or about Feb. 4, 2015, subject to customary closing conditions. InfraREIT is a real estate investment trust that owns rate-regulated electric transmission and distribution assets in the state of Texas. The Company is externally managed by Hunt Utility Services, LLC, an affiliate of Hunt Consolidated, Inc. (a diversified holding company based in Dallas, Texas and managed by the Ray L. Hunt family).
BofA Merrill Lynch, Citigroup, RBC Capital Markets and Morgan Stanley are acting as the joint book-running managers for the offering. UBS Investment Bank and Wells Fargo Securities are acting as senior co-managers for the offering. Scotiabank/Howard Weil and Societe Generale are acting as the co-managers for the offering.
The offering of the shares is being made only by means of a prospectus. When available, a copy of the final prospectus may be obtained through:

BofA Merrill Lynch		Citigroup	
Attn: Prospectus Department		c/o Broadridge Financial Solutions	
222 Broadway		1155 Long Island Avenue	
New York, NY 10038		Edgewood, NY 11717	
Dg.prospectus_requests@baml.com		800-831-9146	
		batprospectusdept@citi.com	
			
RBC Capital Markets, LLC		Morgan Stanley & Co. LLC	
Attn: Equity Syndicate		Attn: Prospectus Department	
200 Vesey Street, 8 th Floor
New York, NY 10281		180 Varick Street, 2 nd Floor
New York, NY 10014	
877-822-4089
equityprospectus@rbccm.com			
When available, a copy of the final prospectus may also be obtained free of charge from the U.S. Securities and Exchange Commission’s (the “SEC”) Web site at www.sec.gov .
 
1

A registration statement relating to these securities has been filed with, and has been declared effective by, the SEC. This press release does not constitute an offer to sell or the solicitation of an offer to buy nor will there be any sale of these securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.
# # #
Forward-Looking Statements
This press release contains “forward-looking statements” that state InfraREIT’s or its management’s intentions, beliefs, expectations or predictions of the future, which by their nature, involve known and unknown risks and uncertainties. Factors that could cause actual results to differ materially from those contemplated above include, among others, risks and uncertainties related to the capital markets generally. This press release speaks only as of the date hereof, and the Company disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law .
For additional information, contact:
 
For Investors:	Brook Wootton	
    	Director, Investor Relations	
    	InfraREIT, Inc.	
    	214-855-6748	
 
For Media:	Jeanne Phillips	
    	Senior Vice President, Corporate Affairs & International Relations	
    	Hunt Consolidated, Inc.	
    	214-978-8534	
 
2