Exhibit 10.1
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
TC PIPELINES INTERMEDIATE LIMITED PARTNERSHIP
TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions.........................................................................1
SECTION 1.2 Construction.......................................................................11
ARTICLE II
ORGANIZATION
SECTION 2.1 Formation..........................................................................12
SECTION 2.2 Name...............................................................................12
SECTION 2.3 Registered Office; Registered Agent; Principal Office; Other Offices...............12
SECTION 2.4 Purpose and Business...............................................................12
SECTION 2.5 Powers.............................................................................13
SECTION 2.6 Power of Attorney..................................................................13
SECTION 2.7 Term...............................................................................15
SECTION 2.8 Title to Partnership Assets........................................................15
ARTICLE III
RIGHTS OF LIMITED PARTNERS
SECTION 3.1 Limitation of Liability............................................................15
SECTION 3.2 Management of Business.............................................................15
SECTION 3.3 Outside Activities of the Limited Partners.........................................16
SECTION 3.4 Rights of Limited Partners.........................................................16
ARTICLE IV
TRANSFERS OF PARTNERSHIP INTERESTS
SECTION 4.1 Transfer Generally.................................................................17
SECTION 4.2 Transfer of General Partner's Partnership Interest.................................17
SECTION 4.3 Transfer of a Limited Partner's Partnership Interest...............................17
SECTION 4.4 Restrictions on Transfers..........................................................18
ARTICLE V
CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS
SECTION 5.1 Initial Contributions..............................................................18
SECTION 5.2 Contributions Pursuant to the Contribution and Conveyance Agreement................18
SECTION 5.3 Additional Capital Contributions...................................................19
SECTION 5.4 Interest and Withdrawal............................................................19
SECTION 5.5 Capital Accounts...................................................................20
SECTION 5.6 Loans from Partners................................................................22
SECTION 5.7 Limited Preemptive Rights..........................................................22
SECTION 5.8 Fully Paid and Non-Assessable Nature of Partnership Interests......................23
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ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS
SECTION 6.1 Allocations for Capital Account Purposes...........................................23
SECTION 6.2 Allocations for Tax Purposes.......................................................27
SECTION 6.3 Distributions......................................................................29
ARTICLE VII
MANAGEMENT AND OPERATION OF BUSINESS
SECTION 7.1 Management.........................................................................30
SECTION 7.2 Certificate of Limited Partnership.................................................32
SECTION 7.3 Restrictions on General Partner's Authority........................................32
SECTION 7.4 Reimbursement of the General Partner...............................................33
SECTION 7.5 Outside Activities.................................................................33
SECTION 7.6 Loans from the General Partner; Loans or Contributions from the Partnership;
Contracts with Affiliates; Certain Restrictions on the General Partner.........................35
SECTION 7.7 Indemnification....................................................................36
SECTION 7.8 Liability of Indemnitees...........................................................38
SECTION 7.9 Resolution of Conflicts of Interest................................................39
SECTION 7.10 Other Matters Concerning the General Partner......................................40
SECTION 7.11 Reliance by Third Parties.........................................................41
ARTICLE VIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS
SECTION 8.1 Records and Accounting.............................................................41
SECTION 8.2 Fiscal Year........................................................................42
ARTICLE IX
TAX MATTERS
SECTION 9.1 Tax Returns and Information........................................................42
SECTION 9.2 Tax Elections......................................................................42
SECTION 9.3 Tax Controversies..................................................................42
SECTION 9.4 Withholding........................................................................42
ARTICLE X
ADMISSION OF PARTNERS
SECTION 10.1 Admission of Partners.............................................................43
SECTION 10.2 Admission of Substituted Limited Partner..........................................43
SECTION 10.3 Admission of Additional Limited Partners..........................................43
SECTION 10.4 Admission of Successor or Transferee General Partner..............................44
SECTION 10.5 Amendment of Agreement and Certificate of Limited Partnership.....................44
ARTICLE XI
WITHDRAWAL OR REMOVAL OF PARTNERS
SECTION 11.1 Withdrawal of the General Partner.................................................44
SECTION 11.2 Removal of the General Partner....................................................46
SECTION 11.3 Interest of Departing Partner.....................................................46
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SECTION 11.4 Withdrawal of a Limited Partner...................................................47
ARTICLE XII
DISSOLUTION AND LIQUIDATION
SECTION 12.1 Dissolution.......................................................................47
SECTION 12.2 Continuation of the Business of the Partnership After Dissolution.................47
SECTION 12.3 Liquidator........................................................................48
SECTION 12.4 Liquidation.......................................................................49
SECTION 12.5 Cancellation of Certificate of Limited Partnership................................50
SECTION 12.6 Return of Contributions...........................................................50
SECTION 12.7 Waiver of Partition...............................................................50
SECTION 12.8 Capital Account Restoration.......................................................50
ARTICLE XIII
AMENDMENT OF PARTNERSHIP AGREEMENT
SECTION 13.1 Amendment to be Adopted Solely by the General Partner.............................50
SECTION 13.2 Amendment Procedures..............................................................52
ARTICLE XIV
MERGER
SECTION 14.1 Authority.........................................................................52
SECTION 14.2 Procedure for Merger or Consolidation.............................................52
SECTION 14.3 Approval by Limited Partners of Merger or Consolidation...........................53
SECTION 14.4 Certificate of Merger.............................................................54
SECTION 14.5 Effect of Merger..................................................................54
ARTICLE XV
GENERAL PROVISIONS
SECTION 15.1 Addresses and Notices.............................................................54
SECTION 15.2 Further Action....................................................................55
SECTION 15.3 Binding Effect....................................................................55
SECTION 15.4 Integration.......................................................................55
SECTION 15.5 Creditors.........................................................................55
SECTION 15.6 Waiver............................................................................55
SECTION 15.7 Counterparts......................................................................55
SECTION 15.8 Applicable Law....................................................................55
SECTION 15.9 Invalidity of Provisions..........................................................56
SECTION 15.10 Consent of Partners..............................................................56
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AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
TC PIPELINES INTERMEDIATE LIMITED PARTNERSHIP
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP of TC PIPELINES
INTERMEDIATE LIMITED PARTNERSHIP, dated as of __________, 1999 is entered into
by and between TC PipeLines GP, Inc., a Delaware corporation, as the General
Partner, and TC PipeLines, LP, a Delaware limited partnership, as the Limited
Partner, together with any other Persons who hereafter become Partners in the
Partnership or parties hereto as provided herein.
R E C I T A L S:
WHEREAS, TC PipeLines GP, Inc. and TC PipeLines, LP formed the Partnership
pursuant to the Agreement of Limited Partnership of TC PipeLines Intermediate
Limited Partnership dated as of December 16, 1998 (the "Prior Agreement") and a
Certificate of Limited Partnership filed with the Secretary of State of the
State of Delaware on such date; and
WHEREAS, the Partners of the Partnership now desire to amend the Prior
Agreement to reflect additional contributions by the Partners and certain other
matters.
NOW, THEREFORE, in consideration of the covenants, conditions and
agreements contained herein, the parties hereto hereby amend the Prior Agreement
and, as so amended, restate it in its entirety as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions.
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
Capitalized terms used herein but not otherwise defined shall have the meaning
assigned to such term in the MLP Agreement.
"Additional Limited Partner" means a Person admitted to the
Partnership as a Limited Partner pursuant to Section 10.4 and who is shown
as such on the books and records of the Partnership.
"Adjusted Capital Account" means the Capital Account maintained for
each Partner as of the end of each taxable period of the Partnership, (a)
increased by any amounts that such Partner is obligated to restore under
the standards set by Treasury Regulation Section 1.704-1(b)(2)(ii)(c) (or
is deemed obligated to restore under Treasury Regulation Sections
1.704-2(g) and 1.704-2(i)(5)) and (b) decreased by (i) the amount of all
losses and deductions that, as of the end of such period, are reasonably
expected to be allocated to such Partner in subsequent years under
Sections 704(e)(2) and 706(d) of the Code and Treasury Regulation Section
1.751-1(b)(2)(ii), and (ii) the amount of all
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distributions that, as of the end of such period, are reasonably expected
to be made to such Partner in subsequent years in accordance with the
terms of this Agreement or otherwise to the extent they exceed offsetting
increases to such Partner's Capital Account that are reasonably expected
to occur during (or prior to) the year in which such distributions are
reasonably expected to be made (other than increases as a result of a
minimum gain chargeback pursuant to Section 6.1(d)(i) or 6.1(d)(ii)). The
foregoing definition of Adjusted Capital Account is intended to comply
with the provisions of Treasury Regulation Section 1.704-1(b)(2)(ii)(d)
and shall be interpreted consistently therewith. The "Adjusted Capital
Account" of a Partner in respect of a General Partner Interest or any
other specified interest in the Partnership shall be the amount which such
Adjusted Capital Account would be if such General Partner Interest,
Limited Partner Interest or other interest in the Partnership were the
only interest in the Partnership held by a Partner from and after the date
on which such interest was first issued.
"Adjusted Property" means any property the Carrying Value of which
has been adjusted pursuant to Section 5.5(d)(i) or 5.5(d)(ii).
"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, the Person in question. As
used herein, the term "control" means the possession, direct or indirect,
of the power to direct or cause the direction of the management and
policies of a Person, whether through ownership of voting securities, by
contract or otherwise.
"Agreed Allocation" means any allocation, other than a Required
Allocation, of an item of income, gain, loss or deduction pursuant to the
provisions of Section 6.1, including, without limitation, a Curative
Allocation (if appropriate to the context in which the term "Agreed
Allocation" is used).
"Agreed Value" of any Contributed Property means the fair market
value of such property or other consideration at the time of contribution
as determined by the General Partner using such reasonable method of
valuation as it may adopt. The General Partner shall, in its discretion,
use such method as it deems reasonable and appropriate to allocate the
aggregate Agreed Value of Contributed Properties contributed to the
Partnership in a single or integrated transaction among each separate
property on a basis proportional to the fair market value of each
Contributed Property.
"Agreement" means this Amended and Restated Agreement of Limited
Partnership of TC PipeLines Intermediate Limited Partnership, as it may be
amended, supplemented or restated from time to time.
"Assets" means the assets being conveyed to the Partnership on the
Closing Date pursuant to Section 5.2 and the Contribution and Conveyance
Agreement.
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"Assignee" means a Person to whom one or more Partnership Interests
have been transferred in a manner permitted under this Agreement, but who
has not been admitted as a Substituted Limited Partner.
"Associate" means, when used to indicate a relationship with any
Person, (a) any corporation or organization of which such Person is a
director, officer or partner or is, directly or indirectly, the owner of
20% or more of any class of voting stock or other voting interest; (b) any
trust or other estate in which such Person has at least a 20% beneficial
interest or as to which such Person serves as trustee or in a similar
fiduciary capacity; and (c) any relative or spouse of such Person, or any
relative of such spouse, who has the same principal residence as such
Person.
"Available Cash" means, with respect to any Quarter ending prior to
the Liquidation Date,
(a) the sum of (i) all cash and cash equivalents of the
Partnership on hand at the end of such Quarter, and (ii) all additional
cash and cash equivalents of the Partnership on hand on the date of
determination of Available Cash with respect to such Quarter resulting
from Working Capital Borrowings made subsequent to the end of such
Quarter, less
(b) the amount of any cash reserves that is necessary or
appropriate in the reasonable discretion of the General Partner to (i)
provide for the proper conduct of the business of the Partnership
(including reserves for future capital expenditures and for anticipated
future credit needs of the Partnership Group) subsequent to such Quarter,
(ii) comply with applicable law or any loan agreement, security agreement,
mortgage, debt instrument or other agreement or obligation to which any
Group Member or any JV Entity is a party or by which it is bound or its
assets are subject or (iii) provide funds for distributions under Section
6.4 or 6.5 of the MLP Agreement in respect of any one or more of the next
four Quarters; provided, however, that the General Partner may not
establish cash reserves pursuant to (iii) above if the effect of such
reserves would be that the MLP is unable to distribute the Minimum
Quarterly Distribution on all Common Units, plus any Cumulative Common
Unit Arrearage on all Common Units, with respect to such Quarter; and
provided further that disbursements made by the Partnership or cash
reserves established, increased or reduced after the end of such Quarter
but on or before the date of determination of Available Cash with respect
to such Quarter shall be deemed to have been made, established, increased
or reduced, for purposes of determining Available Cash, within such
Quarter if the General Partner so determines.
Notwithstanding the foregoing, "Available Cash" with respect
to the Quarter in which the Liquidation Date occurs and any subsequent
Quarter shall equal zero.
"Book-Tax Disparity" means with respect to any item of Contributed
Property or Adjusted Property, as of the date of any determination, the
difference between the Carrying Value of such Contributed Property or
Adjusted Property and the adjusted basis
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thereof for federal income tax purposes as of such date. A Partner's share
of the Partnership's Book-Tax Disparities in all of its Contributed
Property and Adjusted Property will be reflected by the difference between
such Partner's Capital Account balance as maintained pursuant to Section
5.5 and the hypothetical balance of such Partner's Capital Account
computed as if it had been maintained strictly in accordance with federal
income tax accounting principles.
"Business Day" means Monday through Friday of each week, except that
a legal holiday recognized as such by the government of the United States
of America, the State of New York, Canada or the Province of Alberta shall
not be regarded as a Business Day.
"Capital Account" means the capital account maintained for a Partner
pursuant to Section 5.5. The "Capital Account" of a Partner in respect of
a General Partner Interest, Limited Partner Interest or any other
specified interest in the Partnership shall be the amount which such
Capital Account would be if such General Partner Interest, Limited Partner
Interest or other specified interest in the Partnership were the only
interest in the Partnership held by a Partner from and after the date on
which such interest in the Partnership was first issued.
"Capital Contribution" means any cash, cash equivalents or the Net
Agreed Value of Contributed Property that a Partner contributes to the
Partnership pursuant to this Agreement or the Contribution and Conveyance
Agreement.
"Carrying Value" means (a) with respect to a Contributed Property,
the Agreed Value of such property reduced (but not below zero) by all
depreciation, amortization and cost recovery deductions charged to the
Partners' Capital Accounts in respect of such Contributed Property, and
(b) with respect to any other Partnership property, the adjusted basis of
such property for federal income tax purposes, all as of the time of
determination. The Carrying Value of any property shall be adjusted from
time to time in accordance with Sections 5.5(d)(i) and 5.5(d)(ii) and to
reflect changes, additions or other adjustments to the Carrying Value for
dispositions and acquisitions of Partnership properties, as deemed
appropriate by the General Partner.
"Certificate of Limited Partnership" means the Certificate of
Limited Partnership of the Partnership filed with the Secretary of State
of the State of Delaware as referenced in Section 2.1, as such Certificate
of Limited Partnership may be amended, supplemented or restated from time
to time.
"Closing Date" means the first date on which Common Units are sold
by the MLP to the Underwriters pursuant to the provisions of the
Underwriting Agreement.
"Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time. Any reference herein to a specific section or
sections of the Code shall be deemed to include a reference to any
corresponding provision of successor law.
"Commission" means the United States Securities and Exchange
Commission.
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"Common Unit" has the meaning assigned to such term in the MLP
Agreement.
"Contributed Property" means each property or other asset, in such
form as may be permitted by the Delaware Act, but excluding cash,
contributed to the Partnership (or deemed contributed to a new partnership
on termination of the Partnership pursuant to Section 708 of the Code).
Once the Carrying Value of a Contributed Property is adjusted pursuant to
Section 5.5(d), such property shall no longer constitute a Contributed
Property, but shall be deemed an Adjusted Property.
"Contribution and Conveyance Agreement" means that certain
Contribution, Conveyance and Assumption Agreement, dated as of the Closing
Date, among the General Partner, the MLP, the Partnership, TransCanada
Border Pipeline, TransCan Northern and certain other parties, together
with the additional conveyance documents and instruments contemplated or
referenced thereunder.
"Curative Allocation" means any allocation of an item of income,
gain, deduction, loss or credit pursuant to the provisions of Section
6.1(d)(ix).
"Delaware Act" means the Delaware Revised Uniform Limited
Partnership Act, 6 Del. C. ss.17-101, et seq., as amended, supplemented
or restated from time to time, and any successor to such statute.
"Departing Partner" means a former General Partner from and after
the effective date of any withdrawal or removal of such former General
Partner pursuant to Section 11.1 or 11.2.
"Economic Risk of Loss" has the meaning set forth in Treasury
Regulation Section 1.752-2(a).
"Event of Withdrawal" has the meaning assigned to such term in
Section 11.1(a).
"General Partner" means TC PipeLines GP, Inc. and its successors and
permitted assigns as general partner of the Partnership.
"General Partner Interest" means the ownership interest of the
General Partner in the Partnership (in its capacity as a general partner)
and includes any and all benefits to which the General Partner is entitled
as provided in this Agreement, together with all obligations of the
General Partner to comply with the terms and provisions of this Agreement.
"Group" means a Person that with or through any of its Affiliates or
Associates has any agreement, arrangement or understanding for the purpose
of acquiring, holding, voting (except voting pursuant to a revocable proxy
or consent given to such Person in response to a proxy or consent
solicitation made to 10 or more Persons) or disposing of any MLP
Securities with any other Person that beneficially owns, or whose
Affiliates or Associates beneficially own, directly or indirectly, MLP
Securities.
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"Group Member" means a member of the Partnership Group.
"ILP Subsidiary" means a Subsidiary of the Partnership.
"Incentive Distribution Right" has the meaning assigned to such
term in the MLP Agreement.
"Indemnitee" means (a) the General Partner, (b) any Departing
Partner, (c) any Person who is or was an Affiliate of the General Partner
or any Departing Partner, (d) any Person who is or was a member, partner,
officer, director, employee, agent or trustee of any Group Member, the
General Partner or any Departing Partner or any Affiliate of any Group
Member, the General Partner or any Departing Partner, and (e) any Person
who is or was serving at the request of the General Partner or any
Departing Partner or any Affiliate of the General Partner or any Departing
Partner as an officer, director, employee, member, partner, agent or
trustee of another Person; provided, that a Person shall not be an
Indemnitee by reason of providing, on a fee-for-services basis, trustee,
fiduciary or custodial services.
"Initial Offering" means the initial offering and sale of Common
Units to the public, as described in the Registration Statement.
"JV Entity" means a Person other than an individual in which a Group
Member holds an interest but which does not constitute a Subsidiary,
including, without limitation, Northern Border Pipeline.
"Limited Partner" means any Person that is admitted to the
Partnership as a limited partner pursuant to the terms and conditions of
this Agreement; but the term Limited Partner shall not include any Person
from and after the time such Person withdraws as a Limited Partner from
the Partnership.
"Limited Partner Interest" means the ownership interest of a Limited
Partner or Assignee in the Partnership and includes any and all benefits
to which such Limited Partner or Assignee is entitled as provided in this
Agreement, together with all obligations of such Limited Partner or
Assignee to comply with the terms and provisions of this Agreement.
"Liquidation Date" means (a) in the case of an event giving rise to
the dissolution of the Partnership of the type described in clauses (a)
and (b) of the first sentence of Section 12.2, the date on which the
applicable time period during which the Partners have the right to elect
to reconstitute the Partnership and continue its business has expired
without such an election being made, and (b) in the case of any other
event giving rise to the dissolution of the Partnership, the date on which
such event occurs.
"Liquidator" means one or more Persons selected by the General
Partner to perform the functions described in Section 12.3 as liquidating
trustee of the Partnership within the meaning of the Delaware Act.
"Merger Agreement" has the meaning assigned to such term in Section
14.1.
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"Minimum Quarterly Distribution" has the meaning assigned to such
term in the MLP Agreement.
"MLP" means TC PipeLines, LP.
"MLP Agreement" means the Amended and Restated Agreement of Limited
Partnership of TC PipeLines, LP, as it may be amended, supplemented or
restated from time to time.
"MLP Security" has the meaning assigned to the term "Partnership
Security" in the MLP Agreement.
"Net Agreed Value" means, (a) in the case of any Contributed
Property, the Agreed Value of such property reduced by any liabilities
either assumed by the Partnership upon such contribution or to which such
property is subject when contributed, and (b) in the case of any property
distributed to a Partner or Assignee by the Partnership, the Partnership's
Carrying Value of such property (as adjusted pursuant to Section
5.5(d)(ii)) at the time such property is distributed, reduced by any
liabilities either assumed by such Partner or Assignee upon such
distribution or to which such property is subject at the time of
distribution, in either case, as determined under Section 752 of the Code.
"Net Income" means, for any taxable period, the excess, if any, of
the Partnership's items of income and gain (other than those items taken
into account in the computation of Net Termination Gain or Net Termination
Loss) for such taxable period over the Partnership's items of loss and
deduction (other than those items taken into account in the computation of
Net Termination Gain or Net Termination Loss) for such taxable period. The
items included in the calculation of Net Income shall be determined in
accordance with Section 5.5(b) and shall not include any items specially
allocated under Section 6.1(d).
"Net Loss" means, for any taxable period, the excess, if any, of the
Partnership's items of loss and deduction (other than those items taken
into account in the computation of Net Termination Gain or Net Termination
Loss) for such taxable period, over the Partnership's items of income and
gain (other than those items taken into account in the computation of Net
Termination Gain or Net Termination Loss) for such taxable period. The
items included in the calculation of Net Loss shall be determined in
accordance with Section 5.5(b) and shall not include any items specially
allocated under Section 6. 1 (d).
"Net Termination Gain" means, for any taxable period, the sum, if
positive, of all items of income, gain, loss or deduction recognized by
the Partnership after the Liquidation Date. The items included in the
determination of Net Termination Gain shall be determined in accordance
with Section 5.5(b) and shall not include any items of income, gain, loss
or deduction specially allocated under Section 6.1(d).
"Net Termination Loss" means, for any taxable period, the sum, if
negative, of all items of income, gain, loss or deduction recognized by
the Partnership after the
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Liquidation Date. The items included in the determination of Net
Termination Loss shall be determined in accordance with Section 5.5(b) and
shall not include any items of income, gain, loss or deduction specially
allocated under Section 6.1(d).
"Nonrecourse Built-in Gain" means with respect to any Contributed
Properties or Adjusted Properties that are subject to a mortgage, pledge
or other lien securing a Nonrecourse Liability, the amount of any taxable
gain that would be allocated to the Partners pursuant to Sections
6.2(b)(i)(A), 6.2(b)(ii)(A) and 6.2(b)(iii) if such properties were
disposed of in a taxable transaction in full satisfaction of such
liabilities and for no other consideration.
"Nonrecourse Deductions" means any and all items of loss, deduction
or expenditures (described in Section 705(a)(2)(B) of the Code) that, in
accordance with the principles of Treasury Regulation Section 1.704-2(b),
are attributable to a Nonrecourse Liability.
"Nonrecourse Liability" has the meaning set forth in Treasury
Regulation Section 1.752-1(a)(2).
"Northern Border Pipeline" means Northern Border Pipeline Company, a
Texas general partnership.
"Organizational Limited Partner" means TC PipeLines, LP in its
capacity as the organizational limited partner of the Partnership pursuant
to this Agreement.
"Opinion of Counsel" means a written opinion of counsel (who may be
regular counsel to the Partnership or the General Partner or any of its
Affiliates) acceptable to the General Partner in its reasonable
discretion.
"Partner Nonrecourse Debt" has the meaning set forth in Treasury
Regulation Section 1.704-2(b)(4).
"Partner Nonrecourse Debt Minimum Gain" has the meaning set forth in
Treasury Regulation Section 1.704-2(i)(2).
"Partner Nonrecourse Deductions" means any and all items of loss,
deduction or expenditure (including, without limitation, any expenditure
described in Section 705(a)(2)(B) of the Code) that, in accordance with
the principles of Treasury Regulation Section 1.704-2(i), are attributable
to a Partner Nonrecourse Debt.
"Partnership" means TC PipeLines Intermediate Limited Partnership, a
Delaware limited partnership, and any successors thereto.
"Partners" means the General Partner and the Limited Partners.
"Partnership Group" means the Partnership, the MLP and any
Subsidiary of any such entity, treated as a single consolidated entity.
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"Partnership Interest" means an ownership interest of a Partner in
the Partnership, which shall include the General Partner Interest and the
Limited Partner Interest(s).
"Partnership Minimum Gain" means that amount determined in
accordance with the principles of Treasury Regulation Section 1.704-2(d).
"Percentage Interest" means the percentage interest in the
Partnership held by each Partner upon completion of the transactions in
Section 5.2 and shall mean, (a) as to the General Partner, an aggregate
1.0101% and (b) as to the MLP, 98.9899%.
"Person" means an individual or a corporation, limited liability
company, partnership, joint venture, trust, unincorporated organization,
association, government agency or political subdivision thereof or other
entity.
"Prior Agreement" is defined in the Recitals.
"Pro Rata" means, when modifying Partners and Assignees, apportioned
among all Partners and Assignees in accordance with their relative
Percentage Interests.
"Quarter" means, unless the context requires otherwise, a fiscal
quarter of the Partnership.
"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 as ordinary income because it
represents the recapture of deductions previously taken with respect to
such property or asset.
"Registration Statement" means the Registration Statement on Form
S-1 (Registration No. 333-69947) as it has been or as it may be amended or
supplemented from time to time, filed by the MLP with the Commission under
the Securities Act to register the offering and sale of the Common Units
in the Initial Offering.
"Required Allocations" means (a) any limitation imposed on any
allocation of Net Losses or Net Termination Losses under Section 6.1(b) or
6.1(c)(ii) and (b) any allocation of an item of income, gain, loss or
deduction pursuant to Section 6.1(d)(i), 6.1(d)(ii), 6.1(d)(iv),
6.1(d)(vii) or 6.1(d)(ix).
"Residual Gain" or "Residual Loss" means any item of gain or loss,
as the case may be, of the Partnership recognized for federal income tax
purposes resulting from a sale, exchange or other disposition of a
Contributed Property or Adjusted Property, to the extent such item of gain
or loss is not allocated pursuant to Section 6.2(b)(i)(A) or
6.2(b)(ii)(A), respectively, to eliminate Book-Tax Disparities.
"Securities Act" means the Securities Act of 1933, as amended,
supplemented or restated from time to time and any successor to such
statute.
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"Special Approval" has the meaning assigned to such term in the MLP
Agreement.
"Subordinated Unit" has the meaning assigned to such term in the MLP
Agreement.
"Subsidiary" means, with respect to any Person, (a) a corporation of
which more than 50% of the voting power of shares entitled (without regard
to the occurrence of any contingency) to vote in the election of directors
or other governing body of such corporation is owned, directly or
indirectly, at the date of determination, by such Person, by one or more
Subsidiaries of such Person or a combination thereof, (b) a partnership
(whether general or limited) in which such Person or a Subsidiary of such
Person is, at the date of determination, a general or limited partner of
such partnership, but only if more than 50% of the partnership interests
of such partnership (considering all of the partnership interests of the
partnership as a single class) is owned, directly or indirectly, at the
date of determination, by such Person, by one or more Subsidiaries of such
Person, or a combination thereof, or (c) any other Person (other than a
corporation or a partnership) in which such Person, one or more
Subsidiaries of such Person, or a combination thereof, directly or
indirectly, at the date of determination, has (i) at least a majority
ownership interest or (ii) the power to elect or direct the election of a
majority of the directors or other governing body of such Person. The
foregoing definition shall not include any JV Entity, including, without
limitation, Northern Border Pipeline.
"Substituted Limited Partner" means a Person who is admitted as a
Limited Partner to the Partnership pursuant to Section 10.2 in place of
and with all the rights of a Limited Partner and who is shown as a Limited
Partner on the books and records of the Partnership.
"Surviving Business Entity" has the meaning assigned to such term in
Section 14.2(b).
"TransCanada" means TransCanada PipeLines Limited, a Canadian
corporation.
"TransCanada Border Pipeline" means TransCanada Border Pipeline
Ltd., a Nevada corporation and a wholly-owned subsidiary of TransCanada.
"TransCan Northern" means TransCan Northern Ltd., a Delaware
corporation and a wholly-owned subsidiary of TransCanada.
"Treasury Regulations" means the permanent, temporary or proposed
regulations of the United States Department of the Treasury promulgated
under the Code, as such regulations may be amended and in effect from time
to time. Any reference herein to a specific section or sections of the
Treasury Regulations shall be deemed to include a reference to any
corresponding provision of successor law.
"Transfer" has the meaning assigned to such term in Section 4.4(a).
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"Underwriter" means each Person named as an underwriter in Schedule
I to the Underwriting Agreement who purchases Common Units pursuant
thereto.
"Underwriting Agreement" means the Underwriting Agreement dated
_______, 1999 among the Underwriters, the MLP, the Partnership, the
General Partner, TransCanada and certain other parties, providing for the
purchase of Common Units by such Underwriters.
"Unit" has the meaning assigned to such term in the MLP Agreement.
"Unit Majority" has the meaning assigned to such term in the MLP
Agreement.
"Unrealized Gain" attributable to any item of Partnership property
means, as of any date of determination, the excess, if any, of (a) the
fair market value of such property as of such date (as determined under
Section 5.5(d)) over (b) the Carrying Value of such property as of such
date (prior to any adjustment to be made pursuant to Section 5.5(d) as of
such date).
"Unrealized Loss" attributable to any item of Partnership property
means, as of any date of determination, the excess, if any, of (a) the
Carrying Value of such property as of such date (prior to any adjustment
to be made pursuant to Section 5.5(d) as of such date) over (b) the fair
market value of such property as of such date (as determined under Section
5.5(d)).
"U.S. GAAP" means United States Generally Accepted Accounting
Principles consistently applied.
"Working Capital Borrowings" means borrowings exclusively for
working capital purposes. Amounts drawn from a credit facility to enable
the Partnership to pay distributions to partners of the Partnership or
partners of the MLP if there has been a temporary interruption or delay in
receipt of distributions from Northern Border Pipeline shall also
constitute Working Capital Borrowings.
SECTION 1.2 Construction.
Unless the context requires otherwise: (a) any pronoun used in this
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular form of nouns, pronouns and verbs shall include the plural and
vice versa; (b) references to Articles and Sections refer to Articles and
Sections of this Agreement; and (c) the term "include" or "includes" means
includes, without limitation, and "including" means including, without
limitation.
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ARTICLE II
ORGANIZATION
SECTION 2.1 Formation.
The Partnership was previously formed as a limited partnership pursuant to
the provisions of the Delaware Act. The Partners hereby amend and restate the
Prior Agreement in its entirety. This amendment and restatement shall become
effective on the date of this Agreement. Except as expressly provided to the
contrary in this Agreement, the rights, duties (including fiduciary duties),
liabilities and obligations of the Partners and the administration, dissolution
and termination of the Partnership shall be governed by the Delaware Act. All
Partnership Interests shall constitute personal property of the owner thereof
for all purposes and a Partner has no interest in specific Partnership property.
SECTION 2.2 Name.
The name of the Partnership shall be "TC PipeLines Intermediate Limited
Partnership." The Partnership's business may be conducted under any other name
or names deemed necessary or appropriate by the General Partner in its sole
discretion, including the name of the General Partner. The words "Limited
Partnership," "L.P." or "Ltd." or similar words or letters shall be included in
the Partnership's name where necessary for the purpose of complying with the
laws of any jurisdiction that so requires. The General Partner in its discretion
may change the name of the Partnership at any time and from time to time and
shall notify the other Partner(s) of such change in the next regular
communication to the Partners.
SECTION 2.3 Registered Office; Registered Agent; Principal Office; Other
Offices.
Unless and until changed by the General Partner, the registered office of
the Partnership in the State of Delaware shall be located at Corporation Trust
Center, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000, 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 Four Greenspoint Plaza, 00000 Xxxxxxxxxx
Xxxxx, Xxxxxxx, Xxxxx 00000 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 necessary or appropriate. The address of
the General Partner shall be Four Greenspoint Plaza, 00000 Xxxxxxxxxx Xxxxx,
Xxxxxxx, Xxxxx 00000 or such other place as the General Partner may from time to
time designate by notice to the Limited Partners.
SECTION 2.4 Purpose and Business.
The purpose and nature of the business to be conducted by the Partnership
shall be to (a) acquire, manage, operate and sell the Assets, (b) serve as a
general partner of Northern Border Pipeline and, in connection therewith,
exercise all the rights and powers conferred upon the Partnership as a partner
of Northern Border Pipeline pursuant to the partnership agreement of Northern
Border Pipeline or otherwise, (c) (i) acquire, manage, operate and sell any
assets or
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properties similar to the Assets now or hereafter acquired by the Partnership,
(ii) engage directly in, or enter into or form any corporation, partnership,
joint venture, limited liability company or other arrangement to engage
indirectly in, any business activity that the Partnership is permitted to engage
in, or any type of business or activity engaged in by the General Partner prior
to the Closing Date and, in connection therewith, to exercise all of the rights
and powers conferred upon the Partnership pursuant to the agreements relating to
such business activity, and (iii) engage directly in, or enter into or form any
corporation, partnership, joint venture, limited liability company or other
arrangement to engage indirectly in, any business activity that is approved by
the General Partner and which lawfully may be conducted by a limited partnership
organized pursuant to the Delaware Act and, in connection therewith, to exercise
all of the rights and powers conferred upon the Partnership pursuant to the
agreements relating to such business activity; provided, however, that in the
case of any activity described in this subsection (c), the General Partner
reasonably determines, as of the date of the acquisition or commencement of such
activity, that such activity (A) generates "qualifying income" (as such term is
defined pursuant to Section 7704 of the Code) or (B) enhances the operations of
an activity of the Partnership that generates qualifying income, and (d) do
anything necessary or appropriate to the foregoing, including the making of
capital contributions or loans to a Group Member, a JV Entity, the MLP or any
Subsidiary of the MLP. The General Partner has no obligation or duty to the
Partnership, the Limited Partners or the Assignees to propose or approve, and in
its discretion may decline to propose or approve, the conduct by the Partnership
of any business.
SECTION 2.5 Powers.
The Partnership shall be empowered to do any and all acts and things
necessary, appropriate, proper, advisable, incidental to or convenient for the
furtherance and accomplishment of the purposes and business described in Section
2.4.
SECTION 2.6 Power of Attorney.
(a) Each Limited Partner and each Assignee hereby constitutes and
appoints the General Partner and, if a Liquidator shall have been selected
pursuant to Section 12.3, the Liquidator (and any successor to the Liquidator by
merger, transfer, assignment, election or otherwise) and each of their
authorized officers and attorneys-in-fact, as the case may be, with full power
of substitution, as its true and lawful agent and attorney-in-fact, with full
power and authority in his name, place and xxxxx, 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 of Limited
Partnership and all amendments or restatements hereof or thereof) that the
General Partner or the Liquidator deems necessary or appropriate 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
certificates, documents and other instruments that the General Partner or
the Liquidator deems necessary or appropriate to reflect, in accordance
with its terms, any amendment, change, modification or restatement of this
Agreement;
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(C) all certificates, documents and other instruments (including
conveyances and a certificate of cancellation) that the General Partner or
the Liquidator deems necessary or appropriate to reflect the dissolution
and liquidation of the Partnership pursuant to the terms of this
Agreement; (D) all certificates, documents and other instruments relating
to the admission, withdrawal, removal or substitution of any Partner
pursuant to, or other events described in, Article IV, X, XI or XII; (E)
all certificates, documents and other instruments relating to the
determination of the preferences, rights, powers, privileges and duties of
any class or series of Partnership Interests issued pursuant hereto; and
(F) all certificates, documents and other instruments (including
agreements and a certificate of merger) relating to a merger or
consolidation of the Partnership pursuant to Article XIV; and
(ii) execute, swear to, acknowledge, deliver, file and record all
ballots, consents, approvals, waivers, certificates, documents and other
instruments necessary or appropriate, in the discretion of the General
Partner or the Liquidator, to make, evidence, give, confirm or ratify any
vote, consent, approval, agreement or other action that is made or given
by the Partners hereunder or is consistent with the terms of this
Agreement or is necessary or appropriate, in the discretion of the General
Partner or the Liquidator, to effectuate the terms or intent of this
Agreement; provided, that when required by any provision of this Agreement
that establishes a percentage of the Limited Partners or of the Limited
Partners of any class or series required to take any action, the General
Partner and the Liquidator may exercise the power of attorney made in this
Section 2.6(a)(ii) only after the necessary vote, consent or approval of
the Limited Partners or of the Limited Partners of such class or series,
as applicable.
Nothing contained in this Section 2.6(a) shall be construed as authorizing
the General Partner to amend this Agreement except in accordance with Article
XIII or as may be otherwise expressly provided for in this Agreement.
(b) The foregoing power of attorney is hereby declared to be
irrevocable and a power coupled with an interest, and it shall survive and, to
the maximum extent permitted by law, not be affected by the subsequent death,
incompetency, disability, incapacity, dissolution, bankruptcy or termination of
any Limited Partner or Assignee and the transfer of all or any portion of such
Limited Partner's or Assignee's Partnership Interest and shall extend to such
Limited Partner's or Assignee's heirs, successors, assigns and personal
representatives. Each such Limited Partner or Assignee hereby agrees to be bound
by any representation made by the General Partner or the Liquidator acting in
good faith pursuant to such power of attorney; and each such Limited Partner or
Assignee, to the maximum extent permitted by law, hereby waives any and all
defenses that may be available to contest, negate or disaffirm the action of the
General Partner or the Liquidator taken in good faith under such power of
attorney. Each Limited Partner or Assignee shall execute and deliver to the
General Partner or the Liquidator, within 15 days after receipt of the request
therefor, such further designation, powers of attorney and other instruments as
the General Partner or the Liquidator deems necessary to effectuate this
Agreement and the purposes of the Partnership.
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SECTION 2.7 Term.
The term of the Partnership commenced upon the filing of the Certificate
of Limited Partnership in accordance with the Delaware Act and shall continue in
existence until the close of Partnership business on December 31, 2097 or until
the earlier dissolution of the Partnership in accordance with the provisions of
Article XII. The existence of the Partnership as a separate legal entity shall
continue until the cancellation of the Certificate of Limited Partnership as
provided in the Delaware Act.
SECTION 2.8 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 Partner or Assignee, 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, one or more of its Affiliates or one or more nominees, as
the General Partner may determine. The General Partner hereby declares and
warrants that any Partnership assets for which record title is held in the name
of the General Partner or one or more of its Affiliates or one or more nominees
shall be held by the General Partner or such Affiliate or nominee for the use
and benefit of the Partnership in accordance with the provisions of this
Agreement; provided, however, that the General Partner shall use reasonable
efforts to cause record title to such assets (other than those assets in respect
of which the General Partner determines that the expense and difficulty of
conveyancing makes transfer of record title to the Partnership impracticable) to
be vested in the Partnership as soon as reasonably practicable; provided,
further, that, prior to the withdrawal or removal of the General Partner or as
soon thereafter as practicable, the General Partner shall use reasonable efforts
to effect the transfer of record title to the Partnership and, prior to any such
transfer, will provide for the use of such assets in a manner satisfactory to
the General Partner. All Partnership assets shall be recorded as the property of
the Partnership in its books and records, irrespective of the name in which
record title to such Partnership assets is held.
ARTICLE III
RIGHTS OF LIMITED PARTNERS
SECTION 3.1 Limitation of Liability.
The Limited Partners and the Assignees shall have no liability under this
Agreement except as expressly provided in this Agreement or in the Delaware Act.
SECTION 3.2 Management of Business.
No Limited Partner or Assignee, in its capacity as such, shall participate
in the operation, management or control (within the meaning of the Delaware 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. Any
action taken by any Affiliate of the General Partner or any officer, director,
employee, member, general partner, agent or trustee of the General Partner or
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any of its Affiliates, or any officer, director, employee, member, general
partner, agent or trustee of a Group Member, in its capacity as such, shall not
be deemed to be participation in the control of the business of the Partnership
by a limited partner of the Partnership (within the meaning of Section 17-303(a)
of the Delaware Act) and shall not affect, impair or eliminate the limitations
on the liability of the Limited Partners or Assignees under this Agreement.
SECTION 3.3 Outside Activities of the Limited Partners.
Subject to the provisions of Section 7.5, which shall continue to be
applicable to the Persons referred to therein, regardless of whether such
Persons shall also be Limited Partners or Assignees, any Limited Partner or
Assignee 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 in direct competition with any Group Member or
JV Entity. Neither the Partnership nor any of the other Partners or Assignees
shall have any rights by virtue of this Agreement in any business ventures of
any Limited Partner or Assignee.
SECTION 3.4 Rights of Limited Partners.
(a) In addition to other rights provided by this Agreement or by
applicable law, and except as limited by Section 3.4(b), 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 reasonable written demand
and at such Limited Partner's own expense:
(i) to obtain true and full information regarding the status of the
business and financial condition of the Partnership;
(ii) promptly after becoming available, to obtain a copy of the
Partnership's federal, state and local income tax returns for each year;
(iii) to have furnished to him a current list of the name and last
known business, residence or mailing address of each Partner;
(iv) to have furnished to him a copy of this Agreement and the
Certificate of Limited Partnership and all amendments thereto, together
with a copy of the executed copies of all powers of attorney pursuant to
which this Agreement, the Certificate of Limited Partnership and all
amendments thereto have been executed;
(v) to obtain true and full information regarding the amount of cash
and a description and statement of the Net Agreed Value of any other
Capital Contribution by each Partner and which each Partner has agreed to
contribute in the future, and the date on which each became a Partner; and
(vi) to obtain such other information regarding the affairs of the
Partnership as is just and reasonable.
(b) The General Partner may keep confidential from the Limited
Partners and Assignees, for such period of time as the General Partner deems
reasonable, (i) any information
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that the General Partner reasonably believes to be in the nature of trade
secrets or (ii) other information the disclosure of which the General Partner in
good faith believes (A) is not in the best interests of any Group Member or JV
Entity, (B) could damage any Group Member or JV Entity or (C) that any Group
Member or JV Entity is required by law or by agreement with any third party to
keep confidential (other than agreements with Affiliates of the Partnership the
primary purpose of which is to circumvent the obligations set forth in this
Section 3.4).
ARTICLE IV
TRANSFERS OF PARTNERSHIP INTERESTS
SECTION 4.1 Transfer Generally.
(a) The term "transfer," when used in this Agreement with respect to
a Partnership Interest, shall be deemed to refer to a transaction by which the
General Partner assigns its General Partner Interest to another Person who
becomes the General Partner (or an Assignee) or by which the holder of a Limited
Partner Interest assigns such Limited Partner Interest to another Person who is
or becomes a Limited Partner (or an Assignee), and includes a sale, assignment,
gift, pledge, encumbrance, hypothecation, mortgage, exchange or any other
disposition by law or otherwise.
(b) No Partnership Interest shall be transferred, in whole or in
part, except in accordance with the terms and conditions set forth in this
Article IV. Any transfer or purported transfer of a Partnership Interest not
made in accordance with this Article IV shall be null and void.
(c) Nothing contained in this Agreement shall be construed to
prevent a disposition by any stockholder of the General Partner of any or all of
the issued and outstanding capital stock of the General Partner.
SECTION 4.2 Transfer of General Partner's Partnership Interest.
If the General Partner transfers its interest as the general partner of
the MLP to any Person in accordance with the provisions of the MLP Agreement,
the General Partner shall contemporaneously therewith transfer all, but not less
than all, of its General Partner Interest herein to such Person, and the Limited
Partners and Assignees, if any, hereby expressly consent to such transfer.
Except as set forth in the immediately preceding sentence and in Section 5.2, a
General Partner may not transfer all or any part of its Partnership Interest as
the General Partner.
SECTION 4.3 Transfer of a Limited Partner's Partnership Interest.
A Limited Partner may transfer all, but not less than all, of its
Partnership Interest as a Limited Partner in connection with the merger,
consolidation or other combination of such Limited Partner with or into any
other Person or the transfer by such Limited Partner of all or substantially all
of its assets to another Person, and following any such transfer such Person may
become a Substituted Limited Partner pursuant to Article X. Except as set forth
in the immediately preceding sentence and in Section 5.2, or in connection with
any pledge of (or any related foreclosure on) a Partnership Interest as a
Limited Partner solely for the purpose of
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securing, directly or indirectly, indebtedness of the Partnership or the MLP,
and except for the transfers contemplated by Sections 5.2 and 10.1, a Limited
Partner may not transfer all or any part of its Partnership Interest or withdraw
from the Partnership.
SECTION 4.4 Restrictions on Transfers.
(a) Notwithstanding the other provisions of this Article IV, no
transfer of any Partnership Interest shall be made if such transfer would (i)
violate the then applicable federal or state securities laws or rules and
regulations of the Commission, any state securities commission or any other
governmental authority with jurisdiction over such transfer, (ii) terminate the
existence or qualification of the Partnership or the MLP under the laws of the
jurisdiction of its formation or (iii) cause the Partnership or the MLP to be
treated as an association taxable as a corporation or otherwise to be taxed as
an entity for federal income tax purposes (to the extent not already so treated
or taxed).
(b) The General Partner may impose restrictions on the transfer of
Partnership Interests if it determines based upon a subsequent Opinion of
Counsel that such restrictions are necessary to avoid a significant risk of the
Partnership or the MLP being treated as an association taxable as a corporation
or otherwise being taxed as an entity for federal income tax purposes. The
restrictions may be imposed by making such amendments to this Agreement as the
General Partner may determine to be necessary or appropriate to impose such
restrictions.
ARTICLE V
CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS
SECTION 5.1 Initial Contributions.
In connection with the formation of the Partnership under the Delaware
Act, the General Partner made an initial Capital Contribution to the Partnership
in the amount of $ 10.10 in exchange for an interest in the Partnership and was
admitted as General Partner, and the Organizational Limited Partner made an
initial Capital Contribution to the Partnership in the amount of $ 989.90 in
exchange for an interest in the Partnership and was admitted as a Limited
Partner. As of the Closing Date, the interest of the Organizational Limited
Partner shall be redeemed; the initial Capital Contributions of each Partner
shall thereupon be refunded; and the Organizational Limited Partner shall cease
to be a Limited Partner of the Partnership. 98.9899% of any interest or other
profit that may have resulted from the investment or other use of such initial
Capital Contributions shall be allocated and distributed to the Organizational
Limited Partner, and the balance thereof shall be allocated and distributed to
the General Partner.
SECTION 5.2 Contributions Pursuant to the Contribution and Conveyance
Agreement.
(a) Pursuant to the Contribution and Conveyance Agreement, (i)
TransCanada Border Pipeline contributed to the Partnership, as a Capital
Contribution, a general partner interest in Northern Border Pipeline,
representing a 6% "Partner's Percentage" (which term shall, for the purposes of
this Section 5.2, have the meaning assigned to it in the Northern Border
Pipeline Partnership Agreement) in Northern Border Pipeline, in exchange for (A)
a 1.0101%
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General Partner Interest in the Partnership and (B) an 18.9899% Limited Partner
Interest in the Partnership, representing a combined 20% partner interest in the
Partnership, and (ii) TransCan Northern transferred to the Partnership, as a
Capital Contribution, a general partner interest in Northern Border Pipeline
representing a 24% Partner's Percentage in Northern Border Pipeline in exchange
for an 80% Limited Partner Interest in the Partnership.
(b) Pursuant to the Contribution and Conveyance Agreement, (i)
TransCanada Border PipeLine contributed to the MLP all of its Limited Partner
interest in the Partnership, in exchange for (1) a 1% general partner interest
in the MLP, (2) 3,200,000 Subordinated Units, (3) 14,286 Common Units, and (4)
the Incentive Distribution Rights, all as more fully described in the MLP
Agreement, and (ii) TransCan Northern contributed all of its interest in the
Partnership, in exchange for 14,285,714 Common Units.
(c) Pursuant to the Contribution and Conveyance Agreement,
TransCanada Border Pipeline transferred to the General Partner, as a
contribution to capital, (i) its 1% general partner interest in the MLP, (ii)
its 1.0101% General Partner Interest in the Partnership, (iii) its limited
partner interest in the MLP consisting of 3,200,000 Subordinated Units, and (iv)
the Incentive Distribution Rights.
(d) Following the foregoing transactions, the General Partner holds
a 1.0101% Partnership Interest as the General Partner and the MLP holds a
98.9899% Partnership Interest as the Limited Partner.
SECTION 5.3 Additional Capital Contributions.
With the consent of the General Partner, any Limited Partner may, but
shall not be obligated to, make additional Capital Contributions to the
Partnership. Contemporaneously with the making of any Capital Contributions by a
Limited Partner, in addition to those provided in Sections 5.1 and 5.2, the
General Partner shall be required to make an additional Capital Contribution to
the Partnership in an amount equal to 1.0101 divided by 98.9899 times the amount
of the additional Capital Contribution then made by such Limited Partner. Except
as set forth in the immediately preceding sentence and in Article XII, the
General Partner shall not be obligated to make any additional Capital
Contributions to the Partnership.
SECTION 5.4 Interest and Withdrawal.
No interest shall be paid by the Partnership on Capital Contributions. No
Partner or Assignee shall be entitled to the withdrawal or return of its Capital
Contribution, except to the extent, if any, that distributions made pursuant to
this Agreement or upon termination of the Partnership may be considered as such
by law and then only to the extent provided for in this Agreement. Except to the
extent expressly provided in this Agreement, no Partner or Assignee shall have
priority over any other Partner or Assignee either as to the return of Capital
Contributions or as to profits, losses or distributions. Any such return shall
be a compromise to which all Partners and Assignees agree within the meaning of
Section 17-502(b) of the Delaware Act.
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SECTION 5.5 Capital Accounts.
(a) The Partnership shall maintain for each Partner (or a beneficial
owner of Partnership Interests held by a nominee in any case in which the
nominee has furnished the identity of such owner to the Partnership in
accordance with Section 6031(c) of the Code or any other method acceptable to
the General Partner in its sole discretion) holding a Partnership Interest a
separate Capital Account with respect to such Partnership Interest in accordance
with the rules of Treasury Regulation Section 1.704-1(b)(2)(iv). Such Capital
Account shall be increased by (i) the amount of all Capital Contributions made
to the Partnership with respect to such Partnership Interest pursuant to this
Agreement and (ii) all items of Partnership income and gain (including, without
limitation, income and gain exempt from tax) computed in accordance with Section
5.5(b) and allocated with respect to such Partnership Interest pursuant to
Section 6.1, and decreased by (x) the amount of cash or Net Agreed Value of all
actual and deemed distributions of cash or property made with respect to such
Partnership Interest pursuant to this Agreement and (y) all items of Partnership
deduction and loss computed in accordance with Section 5.5(b) and allocated with
respect to such Partnership Interest pursuant to Section 6.1.
(b) For purposes of computing the amount of any item of income,
gain, loss or deduction which is to be allocated pursuant to Article VI and is
to be reflected in the Partners' Capital Accounts, the determination,
recognition and classification of any such item shall be the same as its
determination, recognition and classification for federal income tax purposes
(including, without limitation, any method of depreciation, cost recovery or
amortization used for that purpose), provided, that:
(i) Solely for purposes of this Section 5.5, the Partnership shall
be treated as owning directly its proportionate share (as determined by
the General Partner) of all property owned by any ILP Subsidiary or JV
Entity that is classified as a partnership for federal income tax
purposes.
(ii) All fees and other expenses incurred by the Partnership to
promote the sale of (or to sell) a Partnership Interest that can neither
be deducted nor amortized under Section 709 of the Code, if any, shall,
for purposes of Capital Account maintenance, be treated as an item of
deduction at the time such fees and other expenses are incurred and shall
be allocated among the Partners pursuant to Section 6.1.
(iii) Except as otherwise provided in Treasury Regulation Section
1.704-1(b)(2)(iv)(m), computation of all items of income, gain, loss and
deduction shall be made without regard to any election under Section 754
of the Code which may be made by the Partnership and, as to those items
described in Section 705(a)(1)(B) or 705(a)(2)(B) of the Code, without
regard to the fact that such items are not includable in gross income or
are neither currently deductible nor capitalized for federal income tax
purposes. To the extent an adjustment to the adjusted tax basis of any
Partnership asset pursuant to Section 734(b) or 743(b) of the Code is
required, pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(m), to
be taken into account in determining Capital Accounts, the amount of such
adjustment in the Capital Accounts shall be treated as an item of gain or
loss.
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(iv) Any income, gain or loss attributable to the taxable
disposition of any Partnership property shall be determined as if the
adjusted basis of such property as of such date of disposition were equal
in amount to the Partnership's Carrying Value with respect to such
property as of such date.
(v) In accordance with the requirements of Section 704(b) of the
Code, any deductions for depreciation, cost recovery or amortization
attributable to any Contributed Property shall be determined as if the
adjusted basis of such property on the date it was acquired by the
Partnership were equal to the Agreed Value of such property. Upon an
adjustment pursuant to Section 5.5(d) to the Carrying Value of any
Partnership property subject to depreciation, cost recovery or
amortization, any further deductions for such depreciation, cost recovery
or amortization attributable to such property shall be determined (A) as
if the adjusted basis of such property were equal to the Carrying Value of
such property immediately following such adjustment and (B) using a rate
of depreciation, cost recovery or amortization derived from the same
method and useful life (or, if applicable, the remaining useful life) as
is applied for federal income tax purposes; provided, however, that, if
the asset has a zero adjusted basis for federal income tax purposes,
depreciation, cost recovery or amortization deductions shall be determined
using any reasonable method that the General Partner may adopt.
(vi) If the Partnership's adjusted basis in a depreciable or cost
recovery property is reduced for federal income tax purposes pursuant to
Section 48(q)(1) or 48(q)(3) of the Code, the amount of such reduction
shall, solely for purposes hereof, be deemed to be an additional
depreciation or cost recovery deduction in the year such property is
placed in service and shall be allocated among the Partners pursuant to
Section 6.1. Any restoration of such basis pursuant to Section 48(q)(2) of
the Code shall, to the extent possible, be allocated in the same manner to
the Partners to whom such deemed deduction was allocated.
(c) A transferee of a Partnership Interest shall succeed to a pro
rata portion of the Capital Account of the transferor relating to the
Partnership Interest so transferred.
(d) (i) In accordance with Treasury Regulation Section
1.704-1(b)(2)(iv)(f), on an issuance of additional Partnership Interests
for cash or Contributed Property or the conversion of the General
Partner's Partnership Interest to Common Units pursuant to Section
11.3(a), the Capital Accounts of all Partners and the Carrying Value of
each Partnership property immediately prior to such issuance shall be
adjusted upward or downward to reflect any Unrealized Gain or Unrealized
Loss attributable to such Partnership property, as if such Unrealized Gain
or Unrealized Loss had been recognized on an actual sale of each such
property immediately prior to such issuance and had been allocated to the
Partners at such time pursuant to Section 6.1 in the same manner as any
item of gain or loss actually recognized during such period would have
been allocated. In determining such Unrealized Gain or Unrealized Loss,
the aggregate cash amount and fair market value of all Partnership assets
(including, without limitation, cash or cash equivalents) immediately
prior to the issuance of additional Partnership Interests shall be
determined by the General Partner using such reasonable method of
valuation as it may
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adopt; provided, however, that the General Partner, in arriving at such
valuation, must take fully into account the fair market value of the
Partnership Interests of all Partners at such time. The General Partner
shall allocate such aggregate value among the assets of the Partnership
(in such manner as it determines in its discretion to be reasonable) to
arrive at a fair market value for individual properties.
(ii) In accordance with Treasury Regulation Section
1.704-1(b)(2)(iv)(f), immediately prior to any actual or deemed
distribution to a Partner of any Partnership property (other than a
distribution of cash that is not in redemption or retirement of a
Partnership Interest), the Capital Accounts of all Partners and the
Carrying Value of all Partnership property shall be adjusted upward or
downward to reflect any Unrealized Gain or Unrealized Loss attributable to
such Partnership property, as if such Unrealized Gain or Unrealized Loss
had been recognized in a sale of such property immediately prior to such
distribution for an amount equal to its fair market value, and had been
allocated to the Partners, at such time, pursuant to Section 6.1 in the
same manner as any item of gain or loss actually recognized during such
period would have been allocated. In determining such Unrealized Gain or
Unrealized Loss the aggregate cash amount and fair market value of all
Partnership assets (including, without limitation, cash or cash
equivalents) immediately prior to a distribution shall (A) in the case of
an actual distribution which is not made pursuant to Section 12.4 or in
the case of a deemed contribution and/or distribution occurring as a
result of a termination of the Partnership pursuant to Section 708 of the
Code, be determined and allocated in the same manner as that provided in
Section 5.5(d)(i) or (B) in the case of a liquidating distribution
pursuant to Section 12.4, be determined and allocated by the Liquidator
using such reasonable method of valuation as it may adopt.
SECTION 5.6 Loans from Partners.
Loans by a Partner to the Partnership shall not constitute Capital
Contributions. If any Partner shall advance funds to the Partnership in excess
of the amounts required hereunder to be contributed by it to the capital of the
Partnership, the making of such excess advances shall not result in any increase
in the amount of the Capital Account of such Partner. The amount of any such
excess advances shall be a debt obligation of the Partnership to such Partner
and shall be payable or collectible only out of the Partnership assets in
accordance with the terms and conditions upon which such advances are made.
SECTION 5.7 Limited Preemptive Rights.
Except as provided in Section 5.3, no Person shall have preemptive,
preferential or other similar rights with respect to (a) additional Capital
Contributions; (b) issuance or sale of any class or series of Partnership
Interests, whether unissued, held in the treasury or hereafter created; (c)
issuance of any obligations, evidences of indebtedness or other securities of
the Partnership convertible into or exchangeable for, or carrying or accompanied
by any rights to receive, purchase or subscribe to, any such Partnership
Interests; (d) issuance of any right of subscription to or right to receive, or
any warrant or option for the purchase of, any such Partnership Interests; or
(e) issuance or sale of any other securities that may be issued or sold by the
Partnership.
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SECTION 5.8 Fully Paid and Non-Assessable Nature of Partnership Interests.
All Partnership Interests issued to Limited Partners pursuant to, and in
accordance with the requirements of, this Article V shall be fully paid and
non-assessable Partnership Interests, except as such non-assessability may be
affected by Section 17-607 of the Delaware Act.
ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS
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 (computed in accordance with Section 5.5(b)) shall be
allocated among the Partners in each taxable period (or portion thereof) as
provided herein below.
(a) Net Income. After giving effect to the special allocations set
forth in Section 6.1(d), Net Income for each taxable period and all items of
income, gain, loss and deduction taken into account in computing Net Income for
such taxable period shall be allocated among the Partners as follows:
(i) First, 100% to the General Partner, until the aggregate Net
Income allocated to the General Partner pursuant to this Section 6.1(a)(i)
for the current taxable period and all previous taxable periods is equal
to the aggregate Net Losses allocated to the General Partner pursuant to
Section 6.1(b)(ii)(B) for all previous taxable periods; and
(ii) Second, 1.0101% to the General Partner and 98.9899% to the
Limited Partners.
(b) Net Losses. After giving effect to the special allocations set
forth in Section 6.1(d), Net Losses for each taxable period and all items of
income, gain, loss and deduction taken into account in computing Net Losses for
such taxable period shall be allocated among the Partners as follows:
(i) For taxable years 1999, 2000, 2001 and 2002, 100% to the General
Partner; and
(ii) For taxable years after 2002:
(A) First, 1.0101% to the General Partner and 98.9899% to the
Limited Partners; provided, however, that Net Losses shall not be
allocated to a Limited Partner pursuant to this Section 6.1(b)(i) to the
extent that such allocation would cause a Limited Partner to have a
deficit balance in its Adjusted Capital Account at the end of such taxable
period (or increase any existing deficit balance in such Limited Partner's
Adjusted Capital Account); and
(B) Second, the balance, if any, 100% to the General Partner.
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(c) Net Termination Gains and Losses. After giving effect to the
special allocations set forth in Section 6.1(d), all items of income, gain, loss
and deduction taken into account in computing Net Termination Gain or Net
Termination Loss for each taxable period shall be allocated in the same manner
as such Net Termination Gain or Net Termination Loss is allocated hereunder. All
allocations under this Section 6.1(c) shall be made after Capital Account
balances have been adjusted by all other allocations provided under this Section
6.1 and after all distributions of Available Cash provided under Section 6.4
have been made with respect to the taxable period ending on or before the
Liquidation Date; provided, however, that solely for purposes of this Section
6.1(c), Capital Accounts shall not be adjusted for distributions made pursuant
to Section 12.4.
(i) If a Net Termination Gain is recognized (or deemed recognized
pursuant to Section 5.5(d)), such Net Termination Gain shall be allocated
among the Partners in the following manner (and the Capital Accounts of
the Partners shall be increased by the amount so allocated in each of the
following subclauses, in the order listed, before an allocation is made
pursuant to the next succeeding subclause):
(A) First, 100% to the General Partner until the General
Partner has been allocated Net Termination Gain under this Section
6.1(c)(i)(A) equal to the aggregate amount of Net Losses previously
allocated to the General Partner under Section 6.1(b)(i); provided,
however, that no amount of Net Termination Gain shall be allocated
to the General Partner under this Section 6.1(c)(i)(A) to the extent
that such allocation would cause the General Partner's Capital
Account balance as a percentage of the total Capital Account
balances of the Partners to exceed the Percentage Interest of the
General Partner;
(B) Second, to each Partner having a deficit balance in its
Capital Account, in the proportion that such deficit balance bears
to the total deficit balances in the Capital Accounts of all
Partners, until each such Partner has been allocated Net Termination
Gain equal to any such deficit balance in its Capital Account; and
(C) Third, 1.0101% to the General Partner and 98.9899% to the
Limited Partners.
(ii) If a Net Termination Loss is recognized (or deemed recognized
pursuant to Section 5.5(d)), such Net Termination Loss shall be allocated
among the Partners in the following manner (and the Capital Accounts of
the Partners shall be decreased by the amount so allocated in each of the
following subclauses, in the order listed, before an allocation is made
pursuant to the next succeeding subclause):
(A) First, to the General Partner and the Limited Partners in
proportion to, and to the extent of, the positive balances in their
respective Capital Accounts; and
(B) Second, the balance, if any, 100% to the General Partner.
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(d) Special Allocations. Notwithstanding any other provision of this
Section 6.1, the following special allocations shall be made for such taxable
period:
(i) Partnership Minimum Gain Chargeback. Notwithstanding any other
provision of this Section 6.1, if there is a net decrease in Partnership
Minimum Gain during any Partnership taxable period, each Partner shall be
allocated items of Partnership income and gain for such period (and, if
necessary, subsequent periods) in the manner and amounts provided in
Treasury Regulation Sections 1.704-2(f)(6), 1.704-2(g)(2) and
1.704-2(j)(2)(i). For purposes of this Section 6.1(d), each Partner's
Adjusted Capital Account balance shall be determined, and the allocation
of income or gain required hereunder shall be effected, prior to the
application of any other allocations pursuant to this Section 6.1(d) with
respect to such taxable period (other than an allocation pursuant to
Sections 6.1(d)(v) and 6.1(d)(vi)). This Section 6.1(d)(i) is intended to
comply with the Partnership Minimum Gain chargeback requirement in
Treasury Regulation Section 1.704-2(f) and shall be interpreted
consistently therewith.
(ii) Chargeback of Partner Nonrecourse Debt Minimum Gain.
Notwithstanding any other provision of this Section 6.1 (other than
Section 6.1(d)(i)), except as provided in Treasury Regulation Section
1.704-2(i)(4), if there is a net decrease in Partner Nonrecourse Debt
Minimum Gain during any Partnership taxable period, any Partner with a
share of Partner Nonrecourse Debt Minimum Gain at the beginning of such
taxable period shall be allocated items of Partnership income and gain for
such period (and, if necessary, subsequent periods) in the manner and
amounts provided in Treasury Regulation Sections 1.704-2(i)(4) and
1.704-2(j)(2)(ii). For purposes of this Section 6.1(d), each Partner's
Adjusted Capital Account balance shall be determined, and the allocation
of income or gain required hereunder shall be effected, prior to the
application of any other allocations pursuant to this Section 6.1(d),
other than Section 6.1(d)(i) and other than an allocation pursuant to
Sections 6.1(d)(v) and 6.1(d)(vi), with respect to such taxable period.
This Section 6.1(d)(ii) is intended to comply with the chargeback of items
of income and gain requirement in Treasury Regulation Section
1.704-2(i)(4) and shall be interpreted consistently therewith.
(iii) Qualified Income Offset. In the event any Partner unexpectedly
receives any adjustments, allocations or distributions described in
Treasury Regulation Sections 1.704-l(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), items of Partnership
income and gain shall be specially allocated to such Partner in an amount
and manner sufficient to eliminate, to the extent required by the Treasury
Regulations promulgated under Section 704(b) of the Code, the deficit
balance, if any, in its Adjusted Capital Account created by such
adjustments, allocations or distributions as quickly as possible unless
such deficit balance is otherwise eliminated pursuant to Section 6.1(d)(i)
or (ii).
(iv) Gross Income Allocations. In the event any Partner has a
deficit balance in its Capital Account at the end of any Partnership
taxable period in excess of the sum of (A) the amount such Partner is
required to restore pursuant to the provisions of this Agreement and (B)
the amount such Partner is deemed obligated to restore pursuant to
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Treasury Regulation Sections 1.704-2(g) and 1.704-2(i)(5), such Partner
shall be specially allocated items of Partnership gross income and gain in
the amount of such excess as quickly as possible; provided, that an
allocation pursuant to this Section 6.1(d)(iv) shall be made only if and
to the extent that such Partner would have a deficit balance in its
Capital Account as adjusted after all other allocations provided for in
this Section 6.1 have been tentatively made as if this Section 6.1(d)(iv)
were not in this Agreement.
(v) Nonrecourse Deductions. Nonrecourse Deductions for any taxable
period shall be allocated to the Partners in accordance with their
respective Percentage Interests. If the General Partner determines in its
good faith discretion that the Partnership's Nonrecourse Deductions must
be allocated in a different ratio to satisfy the safe harbor requirements
of the Treasury Regulations promulgated under Section 704(b) of the Code,
the General Partner is authorized, upon notice to the other Partners, to
revise the prescribed ratio to the numerically closest ratio that does
satisfy such requirements.
(vi) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions
for any taxable period shall be allocated 100% to the Partner that bears
the Economic Risk of Loss with respect to the Partner Nonrecourse Debt to
which such Partner Nonrecourse Deductions are attributable in accordance
with Treasury Regulation Section 1.704-2(i). If more than one Partner
bears the Economic Risk of Loss with respect to a Partner Nonrecourse
Debt, such Partner Nonrecourse Deductions attributable thereto shall be
allocated between or among such Partners in accordance with the ratios in
which they share such Economic Risk of Loss.
(vii) Nonrecourse Liabilities. For purposes of Treasury Regulation
Section 1.752-3(a)(3), the Partners agree that Nonrecourse Liabilities of
the Partnership in excess of the sum of (A) the amount of Partnership
Minimum Gain and (B) the total amount of Nonrecourse Built-in Gain shall
be allocated among the Partners in accordance with
their respective Percentage Interests.
(viii) 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(c) of the Code is required, pursuant to Treasury Regulation Section
1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital
Accounts, the amount of such adjustment to the Capital Accounts shall be
treated as an item of gain (if the adjustment increases the basis of the
asset) or loss (if the adjustment decreases such basis), and such item of
gain or loss shall be 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 Treasury Regulations.
(ix) Curative Allocation.
(A) Notwithstanding any other provision of this Section 6.1,
other than the Required Allocations, the Required Allocations shall
be taken into account in making the Agreed Allocations so that, to
the extent possible, the net amount of items of income, gain, loss
and deduction allocated to each Partner pursuant to the
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Required Allocations and the Agreed Allocations, together, shall be
equal to the net amount of such items that would have been allocated
to each such Partner under the Agreed Allocations had the Required
Allocations and the related Curative Allocation not otherwise been
provided in this Section 6.1. Notwithstanding the preceding
sentence, Required Allocations relating to (1) Nonrecourse
Deductions shall not be taken into account except to the extent that
there has been a decrease in Partnership Minimum Gain and (2)
Partner Nonrecourse Deductions shall not be taken into account
except to the extent that there has been a decrease in Partner
Nonrecourse Debt Minimum Gain. Allocations pursuant to this Section
6.1(d)(ix)(A) shall only be made with respect to Required
Allocations to the extent the General Partner reasonably determines
that such allocations will otherwise be inconsistent with the
economic agreement among the Partners. Further, allocations pursuant
to this Section 6.1(d)(ix)(A) shall be deferred with respect to
allocations pursuant to Sections 6.1(d)(ix)(A)(1) and (2) to the
extent the General Partner reasonably determines that such
allocations are likely to be offset by subsequent Required
Allocations.
(B) The General Partner shall have reasonable discretion, with
respect to each taxable period, to (1) apply the provisions of
Section 6.1(d)(ix)(A) in whatever order is most likely to minimize
the economic distortions that might otherwise result from the
Required Allocations, and (2) divide all allocations pursuant to
Section 6.1(d)(ix)(A) among the Partners in a manner that is likely
to minimize such economic distortions.
SECTION 6.2 Allocations for Tax Purposes.
(a) Except as otherwise provided herein, for federal income tax
purposes, each item of income, gain, loss and deduction shall be allocated among
the Partners in the same manner as its correlative item of "book" income, gain,
loss or deduction is allocated pursuant to Section 6.1.
(b) In an attempt to eliminate Book-Tax Disparities attributable to
a Contributed Property or Adjusted Property, items of income, gain, loss,
depreciation, amortization and cost recovery deductions shall be allocated for
federal income tax purposes among the Partners as follows:
(i) (A) In the case of a Contributed Property, such items
attributable thereto shall be allocated among the Partners in the manner
provided under Section 704(c) of the Code that takes into account the
variation between the Agreed Value of such property and its adjusted basis
at the time of contribution; 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.
(ii) (A) In the case of an Adjusted Property, such items shall (1)
first, be allocated among the Partners in a manner consistent with the
principles of Section 704(c)
- 27 -
of the Code to take into account the Unrealized Gain or Unrealized Loss
attributable to such property and the allocations thereof pursuant to
Section 5.5(d)(i) or 5.5(d)(ii), and (2) second, in the event such
property was originally a Contributed Property, be allocated among the
Partners in a manner consistent with Section 6.2(b)(i)(A); 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 as its
correlative item of "book" gain or loss is allocated pursuant to Section
6.1.
(iii) The General Partner shall apply the principles of Treasury
Regulation Section 1.704-3(d) to eliminate Book-Tax Disparities.
(c) For the proper administration of the Partnership and for the
preservation of uniformity of the Units or other limited partner interests of
the MLP (or any class or classes thereof), the General Partner shall have sole
discretion to (i) adopt such conventions as it deems appropriate in determining
the amount of depreciation, amortization and cost recovery deductions; (ii) make
special allocations for federal income tax purposes of income (including,
without limitation, gross income) or deductions; and (iii) amend the provisions
of this Agreement as appropriate (x) to reflect the proposal or promulgation of
Treasury Regulations under Section 704(b) or Section 704(c) of the Code or (y)
otherwise to preserve or achieve uniformity of the Units or other limited
partner interests of the MLP (or any class or classes thereof). The General
Partner may adopt such conventions, make such allocations and make such
amendments to this Agreement as provided in this Section 6.2(c) only if such
conventions, allocations or amendments would not have a material adverse effect
on the Partners, the holders of any class or classes of Units or other limited
partner interests of the MLP issued and outstanding or the Partnership and if
such allocations are consistent with the principles of Section 704 of the Code.
(d) The General Partner in its discretion may determine to
depreciate or amortize the portion of an adjustment under Section 743(b) of the
Code attributable to unrealized appreciation in any Adjusted Property (to the
extent of the unamortized Book-Tax Disparity) using a predetermined rate derived
from the depreciation or amortization method and useful life applied to the
Partnership's common basis of such property, despite any inconsistency of such
approach with Treasury Regulation Section 1.167(c)-1(a)(6), Proposed Treasury
Regulation Section 1.197-2(g)(3), or any successor regulations thereto. If the
General Partner determines that such reporting position cannot reasonably be
taken, the General Partner may adopt depreciation and amortization conventions
under which all purchasers acquiring limited partner interests of the MLP in the
same month would receive depreciation and amortization deductions, based upon
the same applicable rate as if they had purchased a direct interest in the
Partnership's property. If the General Partner chooses not to utilize such
aggregate method, the General Partner may use any other reasonable depreciation
and amortization conventions to preserve the uniformity of the intrinsic tax
characteristics of any limited partner interests of the MLP that would not have
a material adverse effect on the Partners or the holders of any class or classes
of limited partner interests of the MLP.
(e) Any gain allocated to the Partners upon the sale or other
taxable disposition of any Partnership asset shall, to the extent possible,
after taking into account other required allocations of gain pursuant to this
Section 6.2, be characterized as Recapture Income in
- 28 -
the same proportions and to the same extent as such Partners (or their
predecessors in interest) have been allocated any deductions directly or
indirectly giving rise to the treatment of such gains as Recapture Income.
(f) All items of income, gain, loss, deduction and credit recognized
by the Partnership for federal income tax purposes and allocated to the Partners
in accordance with the provisions hereof shall be determined without regard to
any election under Section 754 of the Code which may be made by the Partnership;
provided, however, that such allocations, once made, shall be adjusted as
necessary or appropriate to take into account those adjustments permitted or
required by Sections 734 and 743 of the Code.
(g) The General Partner may adopt such methods of allocation of
income, gain, loss or deduction between a transferor and a transferee of a
Partnership Interest as it determines necessary, to the extent permitted or
required by Section 706 of the Code and the regulations or rulings promulgated
thereunder.
(h) Allocations that would otherwise be made to a Partner under the
provisions of this Article VI shall instead be made to the beneficial owner of
Partnership Interests held by a nominee in any case in which the nominee has
furnished the identity of such owner to the Partnership in accordance with
Section 6031(c) of the Code or any other method acceptable to the General
Partner in its sole discretion.
SECTION 6.3 Distributions.
(a) Within 45 days following the end of each Quarter commencing with
the Quarter ending on June 30, 1999, an amount equal to 100% of Available Cash
with respect to such Quarter shall, subject to Section 17-607 of the Delaware
Act, be distributed in accordance with this Article VI by the Partnership to the
Partners in accordance with their respective Percentage Interests. The
immediately preceding sentence shall not require any distribution of cash if and
to the extent such distribution would be prohibited by applicable law or by any
loan agreement, security agreement, mortgage, debt instrument or other agreement
or obligation to which the Partnership is a party or by which it is bound or its
assets are subject. All distributions required to be made under this Agreement
shall be made subject to Section 17-607 of the Delaware Act.
(b) Notwithstanding Section 6.3(a), in the event of the dissolution
and liquidation of the Partnership, all receipts received during or after the
Quarter in which the Liquidation Date occurs, other than from borrowings
described in (a)(ii) of the definition of Available Cash, shall be applied and
distributed solely in accordance with, and subject to the terms and conditions
of, Section 12.4.
(c) The General Partner shall have the discretion to treat taxes
paid by the Partnership on behalf of, or amounts withheld with respect to, all
or less than all of the Partners, as a distribution of Available Cash to such
Partners.
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ARTICLE VII
MANAGEMENT AND OPERATION OF BUSINESS
SECTION 7.1 Management.
(a) The General Partner shall conduct, direct and manage all
activities of the Partnership. Except as otherwise expressly provided in this
Agreement, all management powers over the business and affairs of the
Partnership shall be exclusively vested in the General Partner, and no Limited
Partner or Assignee shall have any management power over the business and
affairs of the Partnership. 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 7.3, shall have full power and authority to
do all things and on such terms as it, in its sole discretion, may deem
necessary or appropriate to conduct the business of the Partnership, to exercise
all powers set forth in Section 2.5 and to effectuate the purposes set forth in
Section 2.4, including the following:
(i) the making of any expenditures, the lending or borrowing of
money, the assumption or guarantee of, or other contracting for,
indebtedness and other liabilities, the issuance of evidences of
indebtedness, including indebtedness that is convertible into a
Partnership Interest, and the incurring of any other obligations;
(ii) 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;
(iii) the acquisition, disposition, mortgage, pledge, encumbrance,
hypothecation or exchange of any or all of the assets of the Partnership
or the merger or other combination of the Partnership with or into another
Person (the matters described in this clause (iii) being subject, however,
to any prior approval that may be required by Section 7.3);
(iv) the use of the assets of the Partnership (including cash on
hand) for any purpose consistent with the terms of this Agreement,
including the financing of the conduct of the operations of the
Partnership Group, including investments in and any contributions to JV
Entities, subject to Section 7.6, the lending of funds to other Persons
(including the MLP and any member of the Partnership Group), the repayment
of obligations of the MLP or any member of the Partnership Group or any JV
Entity and the making of capital contributions to any Group Member or JV
Entity;
(v) the negotiation, execution and performance of any contracts,
conveyances or other instruments (including contracts, conveyances or
instruments that limit the liability of the Partnership under contractual
arrangements to all or particular assets of the Partnership, with the
other party to the contract to have no recourse against the General
Partner or its assets other than its interest in the Partnership, even if
these arrangements
- 30 -
result in the terms of the transaction being less favorable to the
Partnership than would otherwise be the case);
(vi) the distribution of Partnership cash;
(vii) the selection and dismissal of employees (including employees
having titles such as "president," "vice president," "secretary" and
"treasurer") and agents, outside attorneys, accountants, consultants and
contractors and the determination of their compensation and other terms of
employment or hiring;
(viii) the maintenance of such insurance for the benefit of the
Partnership Group and the Partners as it deems necessary or appropriate;
(ix) the formation of, or acquisition of an interest in, and the
contribution of property and the making of loans to, any further limited
or general partnerships, joint ventures, corporations or other
relationships subject to the restrictions set forth in Section 2.4;
(x) the control of any matters affecting the rights and obligations
of the Partnership, including the bringing and defending of actions at law
or in equity and otherwise engaging in the conduct of litigation and the
incurring of legal expense and the settlement of claims and litigation;
and
(xi) the indemnification of any Person against liabilities and
contingencies to the extent permitted by law.
(b) Notwithstanding any other provision of this Agreement, the MLP
Agreement the Delaware Act or any applicable law, rule or regulation, each of
the Partners and Assignees and each other Person who may acquire an interest in
the Partnership hereby (i) approves, ratifies and confirms the execution,
delivery and performance by the parties thereto of the Partnership Agreement,
the MLP Agreement, the Underwriting Agreement, the Contribution and Conveyance
Agreement and the other agreements, documents and instruments described in or
filed as exhibits to the Registration Statement that are related to the
transactions contemplated by the Registration Statement; (ii) agrees that the
General Partner (on its own or through any officer or attorney-in-fact of the
Partnership) is authorized to execute, deliver and perform the agreements
referred to in clause (i) of this sentence and the other agreements, acts,
transactions and matters described in or contemplated by the Registration
Statement on behalf of the Partnership without any further act, approval or vote
of the Partners or the Assignees or the other Persons who may acquire an
interest in the Partnership; and (iii) agrees that the execution, delivery or
performance by the General Partner, the MLP, any Group Member or any Affiliate
of any of them, of this Agreement or any agreement authorized or permitted under
this Agreement (including the exercise by the General Partner or any Affiliate
of the General Partner of the rights accorded pursuant to Article XV), 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 any other agreements) or of any duty stated or implied by law or
equity.
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SECTION 7.2 Certificate of Limited Partnership.
The General Partner has caused the Certificate of Limited Partnership to
be filed with the Secretary of State of the State of Delaware as required by the
Delaware Act and shall use all reasonable efforts to cause to be filed such
other certificates or documents as may be determined by the General Partner in
its sole discretion to 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 or any other state in which the Partnership may elect to do
business or own property. To the extent that such action is determined by the
General Partner in its sole discretion to be reasonable and necessary or
appropriate, the General Partner shall file amendments to and restatements of
the Certificate of Limited Partnership and do all things to maintain the
Partnership as a limited partnership (or a partnership or other entity in which
the limited partners have limited liability) under the laws of the State of
Delaware or of any other state in which the Partnership may elect to do business
or own property. Subject to the terms of Section 3.4(a), the General Partner
shall not be required, before or after filing, to deliver or mail a copy of the
Certificate of Limited Partnership, any qualification document or any amendment
thereto to any Limited Partner or Assignee.
SECTION 7.3 Restrictions on General Partner's Authority.
(a) The General Partner may not, without written approval of the
specific act by the Limited Partners or by other written instrument executed and
delivered by the Limited Partners subsequent to the date of this Agreement, take
any action in contravention of this Agreement, including, except as otherwise
provided in this Agreement, (i) committing any act that would make it impossible
to carry on the ordinary business of the Partnership; (ii) possessing
Partnership property, or assigning any rights in specific Partnership property,
for other than a Partnership purpose; (iii) admitting a Person as a Partner;
(iv) amending this Agreement in any manner or (v) transferring its General
Partner Interest.
(b) Except as provided in Articles XII and XIV, the General Partner
may not sell, exchange or otherwise dispose of all or substantially all of the
Partnership's assets in a single transaction or a series of related transactions
(including by way of merger, consolidation or other combination) or approve on
behalf of the Partnership the sale, exchange or other disposition of all or
substantially all of the assets of the Partnership, without the approval of the
Limited Partners; provided, however, that this provision shall not preclude or
limit the General Partner's ability to mortgage, pledge, hypothecate or grant a
security interest in all or substantially all of the assets of the Partnership
and shall not apply to any sale of any or all of the assets of the Partnership
pursuant to the foreclosure of, or other realization upon, any such encumbrance.
Without the approval of at least a Unit Majority, the General Partner shall not,
on behalf of the MLP, (i) consent to any amendment to this Agreement or, except
as expressly permitted by Section 7.9(d) of the MLP Agreement, take any action
permitted to be taken by a Partner, in either case, that would have a material
adverse effect on the MLP as a Partner or (ii) except as permitted under Section
4.6, 11.1 or 11.2 of the ML P Agreement, elect or cause the MLP to elect a
successor general partner of the Partnership.
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(c) The General Partner may not approve or consent to the conversion
of Northern Border Pipeline or any other JV Entity that is not then taxable as
an entity for federal income tax purposes to corporate form without first
obtaining the approval of the holders of at least 66 2/3% of the Outstanding
Units during the Subordination Period and at least a majority of the Outstanding
Units thereafter.
SECTION 7.4 Reimbursement of the General Partner.
(a) Except as provided in this Section 7.4 and elsewhere in this
Agreement or in the MLP Agreement, the General Partner shall not be compensated
for its services as General Partner, general partner of the MLP or as general
partner or managing member of any Group Member.
(b) The General Partner shall be reimbursed on a monthly basis, or
such other reasonable basis as the General Partner may determine in its sole
discretion, for (i) all direct and indirect expenses it incurs or payments it
makes on behalf of the Partnership (including salary, bonus, incentive
compensation and other amounts paid to any Person including Affiliates of the
General Partner to perform services for the Partnership or for the General
Partner in the discharge of its duties to the Partnership), and (ii) all other
necessary or appropriate expenses allocable to the Partnership or otherwise
reasonably incurred by the General Partner in connection with operating the
Partnership's business (including expenses allocated to the General Partner by
its Affiliates). The General Partner shall determine the expenses that are
allocable to the Partnership in any reasonable manner determined by the General
Partner in its sole discretion. Reimbursements pursuant to this Section 7.4
shall be in addition to any reimbursement to the General Partner as a result of
indemnification pursuant to Section 7.7.
(c) Subject to Section 5.7, the General Partner, in its sole
discretion and without the approval of the Limited Partners (who shall have no
right to vote in respect thereof), may propose and adopt on behalf of the
Partnership employee benefit plans, employee programs and employee practices, or
cause the Partnership to issue Partnership Interests, in connection with or
pursuant to any employee benefit plan, employee program or employee practice
maintained or sponsored by the General Partner or any of its Affiliates, in each
case for the benefit of employees of the General Partner, any Group Member or
any Affiliate, or any of them, in respect of services performed, directly or
indirectly, for the benefit of the Partnership Group. Expenses incurred by the
General Partner in connection with any such plans, programs and practices shall
be reimbursed in accordance with Section 7.4(b). Any and all obligations of the
General Partner under any employee benefit plans, employee programs or employee
practices adopted by the General Partner as permitted by this Section 7.4(c)
shall constitute obligations of the General Partner hereunder and shall be
assumed by any successor General Partner approved pursuant to Section 11.1 or
11.2 or the transferee of or successor to all of the General Partner's General
Partner Interest pursuant to Section 4.2.
SECTION 7.5 Outside Activities.
(a) After the Closing Date, the General Partner, for so long as it
is the General Partner of the Partnership (i) agrees that its sole business will
be to act as the General Partner of
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the Partnership, the general partner of the MLP, and a general partner or
managing member of any other partnership or limited liability company of which
the Partnership or the MLP is, directly or indirectly, a partner or member and
to undertake activities that are ancillary or related thereto (including being a
limited partner in the MLP) and (ii) shall not engage in any business or
activity or incur any debts or liabilities except in connection with or
incidental to (A) its performance as general partner or managing member of the
Partnership, the MLP or one or more Group Members or as described in or
contemplated by the Registration Statement or (B) the acquiring, owning or
disposing of debt or equity securities or interests in any Group Member.
(b) Except as specifically restricted by Section 7.5(a), each
Indemnitee (other than the General Partner) shall have the right to engage in
businesses of any and every type and description and other activities for profit
and to engage in and possess an interest in other business ventures of any and
every type or description, whether in businesses engaged in or anticipated to be
engaged in by any Group Member or JV Entity, independently or with others,
including business interests and activities in direct competition with the
business and activities of any Group Member or JV Entity, and none of the same
shall constitute a breach of this Agreement or any duty express or implied by
law to the MLP or any Group Member or any Partner or Assignee. Neither any Group
Member, any JV Entity, any Limited Partner, nor any other Person shall have any
rights by virtue of this Agreement, the MLP Agreement or the partnership
relationship established hereby or thereby in any business ventures of any
Indemnitee.
(c) Subject to the terms of Section 7.5(a) and Section 7.5(b), but
otherwise notwithstanding anything to the contrary in this Agreement, (i) the
engaging in competitive activities by any Indemnitees (other than the General
Partner) in accordance with the provisions of this Section 7.5 is hereby
approved by the Partnership and all Partners, (ii) it shall be deemed not to be
a breach of the General Partner's fiduciary duty or any other obligation of any
type whatsoever of the General Partner for the Indemnitees (other than the
General Partner) to engage in such business interests and activities in
preference to or to the exclusion of the Partnership and (iii) the General
Partner and the Indemnities shall have no obligation to present business
opportunities to the Partnership.
(d) The General Partner and any of its Affiliates may acquire Units
or other MLP Securities in addition to those acquired on the Closing Date and,
except as otherwise provided in this Agreement, shall be entitled to exercise
all rights, powers and privileges (as General Partner, Limited Partner or
Assignee, as applicable) relating to such Units or MLP Securities.
(e) The term "Affiliates" when used in Section 7.5(a) and Section
7.5(d) with respect to the General Partner shall not include any Group Member or
any Subsidiary of a Group Member.
(f) Anything in this Agreement to the contrary notwithstanding, to
the extent that provisions of Sections 7.7, 7.8, 7.9, 7.10 or other Sections of
this Agreement purport or are interpreted to have the effect of restricting the
fiduciary duties that might otherwise, as a result of Delaware or other
applicable law, be owed by the General Partner to the Partnership and its
Limited Partners, or to constitute a waiver or consent by the Limited Partners
to any such
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restriction, such provisions shall be inapplicable and have no effect in
determining whether the General Partner has complied with its fiduciary duties
in connection with determinations made by it under Section 7.5(a).
SECTION 7.6 Loans from the General Partner; Loans or Contributions from the
Partnership; Contracts with Affiliates; Certain Restrictions on the General
Partner.
(a) The General Partner or its Affiliates may lend to any Group
Member or JV Entity, and any Group Member or JV Entity may borrow from the
General Partner or any of its Affiliates, funds needed or desired by the Group
Member or the JV Entity for such periods of time and in such amounts as the
General Partner may determine; provided, however, that in any such case the
lending party may not charge the borrowing party interest at a rate greater than
the rate that would be charged the borrowing party or impose terms less
favorable to the borrowing party than would be charged or imposed on the
borrowing party by unrelated lenders on comparable loans made on an arm's-length
basis (without reference to the lending party's financial abilities or
guarantees). The borrowing party shall reimburse the lending party for any costs
(other than any additional interest costs) incurred by the lending party in
connection with the borrowing of such funds. For purposes of this Section 7.6(a)
and Section 7.6(b), the term "Group Member" shall include any Affiliate of a
Group Member that is controlled by the Group Member. No Group Member may lend
funds to the General Partner or any of its Affiliates (other than the MLP, a
Subsidiary of the MLP or a Subsidiary of another Group Member).
(b) The Partnership may lend or contribute to any Group Member or JV
Entity, and any Group Member or JV Entity may borrow from the Partnership, funds
on terms and conditions established in the sole discretion of the General
Partner; provided, however, that the Partnership may not charge the Group Member
or JV Entity interest at a rate less than the rate that would be charged to the
Group Member or JV Entity (without reference to the General Partner's financial
abilities or guarantees) by unrelated lenders on comparable loans. The foregoing
authority shall be exercised by the General Partner in its sole discretion and
shall not create any right or benefit in favor of any Group Member, JV Entity or
any other Person.
(c) The General Partner may itself, or may enter into an agreement
with any of its Affiliates to, render services to a Group Member, JV Entity or
to the General Partner in the discharge of its duties as general partner of the
Partnership. Any services rendered to a Group Member or JV Entity by the General
Partner or any of its Affiliates shall be on terms that are fair and reasonable
to the Partnership; provided, however, that the requirements of this Section
7.6(c) shall be deemed satisfied as to (i) any transaction approved by Special
Approval, (ii) any transaction, the terms of which are no less favorable to such
Group Member or JV Entity than those generally being provided to or available
from unrelated third parties or (iii) any transaction that, taking into account
the totality of the relationships between the parties involved (including other
transactions that may be particularly favorable or advantageous to such Group
Member or JV Entity), is equitable to such Group Member or JV Entity. The
provisions of Section 7.4 shall apply to the rendering of services described in
this Section 7.6(c).
(d) The Partnership Group may transfer assets to joint ventures,
other partnerships, corporations, limited liability companies or other business
entities in which it is or
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thereby becomes a participant upon such terms and subject to such conditions as
are consistent with this Agreement and applicable law.
(e) Neither the General Partner nor any of its Affiliates shall
sell, transfer or convey any property to, or purchase any property from, the
Partnership, any other Group Member or any JV Entity, directly or indirectly,
except pursuant to transactions that are fair and reasonable to the Partnership;
provided, however, that the requirements of this Section 7.6(e) shall be deemed
to be satisfied as to (i) the transactions effected pursuant to Sections 5.2 and
5.3, the Contribution and Conveyance Agreement and any other transactions
described in or contemplated by the Registration Statement, (ii) any transaction
approved by Special Approval, (iii) any transaction, the terms of which are no
less favorable to the Partnership than those generally being provided to or
available from unrelated third parties, or (iv) any transaction that, taking
into account the totality of the relationships between the parties involved
(including other transactions that may be particularly favorable or advantageous
to the Partnership), is equitable to the Partnership.
(f) The General Partner and its Affiliates will have no obligation
to permit any Group Member or JV Entity to use any facilities or assets of the
General Partner and its Affiliates, except as may be provided in contracts
entered into from time to time specifically dealing with such use, nor shall
there be any obligation on the part of the General Partner or its Affiliates to
enter into such contracts.
(g) Without limitation of Sections 7.6(a) through 7.6(f), and
notwithstanding anything to the contrary in this Agreement (including Sections
7.6(a) through 7.6(f)), (i) the existence of the conflicts of interest described
in the Registration Statement and (ii) the Revolving Credit Facility described
in the Registration Statement and any extension, refunding or replacement on
substantially similar terms, including interest rate, are hereby approved by all
Partners.
SECTION 7.7 Indemnification.
(a) To the fullest extent permitted by law but subject to the
limitations expressly provided in this Agreement, all Indemnitees shall be
indemnified and held harmless by the Partnership from and against any and all
losses, claims, damages, liabilities, joint or several, expenses (including
legal fees and expenses), judgments, fines, penalties, interest, settlements or
other amounts arising from any and all claims, demands, actions, suits or
proceedings, whether civil, criminal, administrative or investigative, in which
any Indemnitee may be involved, or is threatened to be involved, as a party or
otherwise, by reason of its status as an Indemnitee; provided, that in each case
the Indemnitee acted in good faith and in a manner that such Indemnitee
reasonably believed to be in, or (in the case of a Person other than the General
Partner) not opposed to, the best interests of the Partnership and, with respect
to any criminal proceeding, had no reasonable cause to believe its conduct was
unlawful; provided, further, no indemnification pursuant to this Section 7.7
shall be available to the General Partner with respect to its obligations
incurred pursuant to the Underwriting Agreement or the Contribution and
Conveyance Agreement (other than obligations incurred by the General Partner on
behalf of the MLP or the Partnership). The termination of any action, suit or
proceeding by judgment, order,
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settlement, conviction or upon a plea of nolo contendere, or its equivalent,
shall not create a presumption that the Indemnitee acted in a manner contrary to
that specified above. Any indemnification pursuant to this Section 7.7 shall be
made only out of the assets of the Partnership, it being agreed that the General
Partner shall not be personally liable for such indemnification and shall have
no obligation to contribute or loan any monies or property to the Partnership to
enable it to effectuate such indemnification.
(b) To the fullest extent permitted by law, expenses (including
legal fees and expenses) incurred by an Indemnitee who is indemnified pursuant
to Section 7.7(a) in defending any claim, demand, action, suit or proceeding
shall, from time to time, be advanced by the Partnership prior to the final
disposition of such claim, demand, action, suit or proceeding upon receipt by
the Partnership of any undertaking by or on behalf of the Indemnitee to repay
such amount if it shall be determined that the Indemnitee is not entitled to be
indemnified as authorized in this Section 7.7.
(c) The indemnification provided by this Section 7.7 shall be in
addition to any other rights to which an Indemnitee may be entitled under any
agreement, pursuant to any vote of the Partners, as a matter of law or
otherwise, both as to actions in the Indemnitee's capacity as an Indemnitee and
as to actions in any other capacity (including any capacity under the
Underwriting Agreement), and shall continue as to an Indemnitee who has ceased
to serve in such capacity and shall inure to the benefit of the heirs,
successors, assigns and administrators of the Indemnitee.
(d) The Partnership may purchase and maintain (or reimburse the
General Partner or its Affiliates for the cost of) insurance, on behalf of the
General Partner, its Affiliates and such other Persons as the General Partner
shall determine, against any liability that may be asserted against or expense
that may be incurred by such Person in connection with the Partnership's
activities or such Person's activities on behalf of the Partnership, regardless
of whether the Partnership would have the power to indemnify such Person against
such liability under the provisions of this Agreement.
(e) For purposes of this Section 7.7, the Partnership shall be
deemed to have requested an Indemnitee to serve as fiduciary of an employee
benefit plan whenever the performance by it of its duties to the Partnership
also imposes duties on, or otherwise involves services by, it to the plan or
participants or beneficiaries of the plan; excise taxes assessed on an
Indemnitee with respect to an employee benefit plan pursuant to applicable law
shall constitute "fines" within the meaning of Section 7.7(a); and action taken
or omitted by it with respect to any employee benefit plan in the performance of
its duties for a purpose reasonably believed by it to be in the interest of the
participants and beneficiaries of the plan shall be deemed to be for a purpose
which is in, or not opposed to, the best interests of the Partnership.
(f) In no event may an Indemnitee subject the Limited Partners to
personal liability by reason of the indemnification provisions set forth in this
Agreement.
(g) An Indemnitee shall not be denied indemnification in whole or in
part under this Section 7.7 because the Indemnitee had an interest in the
transaction with respect to which
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the indemnification applies if the transaction was otherwise permitted by the
terms of this Agreement.
(h) The provisions of this Section 7.7 are for the benefit of the
Indemnitees, their heirs, successors, assigns and administrators and shall not
be deemed to create any rights for the benefit of any other Persons.
(i) No amendment, modification or repeal of this Section 7.7 or any
provision hereof shall in any manner terminate, reduce or impair the right of
any past, present or future Indemnitee to be indemnified by the Partnership, nor
the obligations of the Partnership to indemnify any such Indemnitee under and in
accordance with the provisions of this Section 7.7 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.
SECTION 7.8 Liability of Indemnitees.
(a) Notwithstanding anything to the contrary set forth in this
Agreement, no Indemnitee shall be liable for monetary damages to the
Partnership, the Limited Partners, the Assignees or any other Persons who have
acquired interests in the Units or other MLP Securities, for losses sustained or
liabilities incurred as a result of any act or omission if such Indemnitee acted
in good faith.
(b) 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, and 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) To the extent that, at law or in equity, an Indemnitee has
duties (including fiduciary duties) and liabilities relating thereto to the
Partnership or to the Limited Partners, the General Partner and any other
Indemnitee acting in connection with the Partnership's business or affairs shall
not be liable to the Partnership or to any Partner for its good faith reliance
on the provisions of this Agreement. The provisions of this Agreement, to the
extent that they restrict or otherwise modify the duties and liabilities of an
Indemnitee otherwise existing at law or in equity, are agreed by the Partners to
replace such other duties and liabilities of such Indemnitee.
(d) 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 liability to the Partnership, the Limited Partners, the
General Partner, and the Partnership's and General Partner's directors, officers
and employees 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 Resolution of Conflicts of Interest.
(a) Unless otherwise expressly provided in this Agreement or the MLP
Agreement, whenever a potential conflict of interest exists or arises between
the General Partner or any of its Affiliates, on the one hand, and the
Partnership, the MLP, any Partner or any Assignee, on the other, any resolution
or course of action by the General Partner or its Affiliates in respect of such
conflict of interest shall be permitted and deemed approved by all Partners, and
shall not constitute a breach of this Agreement or the MLP Agreement, of any
agreement contemplated herein or therein, or of any duty stated or implied by
law or equity, if the resolution or course of action is, or by operation of this
Agreement is deemed to be, fair and reasonable to the Partnership. The General
Partner shall be authorized but not required in connection with its resolution
of such conflict of interest to seek Special Approval of such resolution. Any
conflict of interest and any resolution of such conflict of interest shall be
conclusively deemed fair and reasonable to the Partnership if such conflict of
interest or resolution is (i) approved by Special Approval (as long as the
material facts known to the General Partner or any of its Affiliates regarding
any proposed transaction were disclosed to the Conflicts Committee at the time
it gave its approval), (ii) on terms no less favorable to the Partnership than
those generally being provided to or available from unrelated third parties or
(iii) fair to the Partnership, taking into account the totality of the
relationships between the parties involved (including other transactions that
may be particularly favorable or advantageous to the Partnership). The General
Partner may also adopt a resolution or course of action that has not received
Special Approval. The General Partner (including the Conflicts Committee in
connection with Special Approval) shall be authorized in connection with its
determination of what is "fair and reasonable" to the Partnership and in
connection with its resolution of any conflict of interest to consider (A) the
relative interests of any party to such conflict, agreement, transaction or
situation and the benefits and burdens relating to such interest; (B) any
customary or accepted industry practices and any customary or historical
dealings with a particular Person; (C) any applicable generally accepted
accounting practices or principles; and (D) such additional factors as the
General Partner (including the Conflicts Committee) determines in its sole
discretion to be relevant, reasonable or appropriate under the circumstances.
Nothing contained in this Agreement, however, is intended to nor shall it be
construed to require the General Partner (including the Conflicts Committee) to
consider the interests of any Person other than the Partnership. In the absence
of bad faith by the General Partner, the resolution, action or terms so made,
taken or provided by the General Partner with respect to such matter shall not
constitute a breach of this Agreement or any other agreement contemplated herein
or a breach of any standard of care or duty imposed herein or therein or, to the
extent permitted by law, under the Delaware Act or any other law, rule or
regulation.
(b) Whenever this Agreement or any other agreement contemplated
hereby provides that the General Partner or any of its Affiliates is permitted
or required to make a decision (i) in its "sole discretion" or "discretion,"
that it deems "necessary or appropriate" or "necessary or advisable" or under a
grant of similar authority or latitude, except as otherwise provided herein, the
General Partner or such Affiliate shall be entitled to consider only such
interests and factors as it desires and shall have no duty or obligation to give
any consideration to any interest of, or factors affecting, the Partnership, any
other Group Member or JV Entity, any Limited Partner or any Assignee, (ii) it
may make such decision in its sole discretion (regardless of whether there is a
reference to "sole discretion" or "discretion") unless another express standard
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is provided for, or (iii) in "good faith" or under another express standard, the
General Partner or such Affiliate shall act under such express standard and
shall not be subject to any other or different standards imposed by this
Agreement, the MLP Agreement, any other agreement contemplated hereby or under
the Delaware Act or any other law, rule or regulation. In addition, any actions
taken by the General Partner or such Affiliate consistent with the standards of
"reasonable discretion" set forth in the definition of Available Cash shall not
constitute a breach of any duty of the General Partner to the Partnership or the
Limited Partners. The General Partner shall have no duty, express or implied, to
sell or otherwise dispose of any asset of the Partnership Group other than in
the ordinary course of business. No borrowing by any Group Member or the
approval thereof by the General Partner shall be deemed to constitute a breach
of any duty of the General Partner to the Partnership or the Limited Partners by
reason of the fact that the purpose or effect of such borrowing is directly or
indirectly to (A) enable distributions to the General Partner or its Affiliates
to exceed 1.0101% of the total amount distributed to all Partners or (B) hasten
the expiration of the Subordination Period or the conversion of any Subordinated
Units into Common Units.
(c) Whenever a particular transaction, arrangement or resolution of
a conflict of interest is required under this Agreement to be "fair and
reasonable" to any Person, the fair and reasonable nature of such transaction,
arrangement or resolution shall be considered in the context of all similar or
related transactions.
(d) The Limited Partner hereby authorizes the General Partner, on
behalf of the Partnership as a partner or member of a Group Member, to approve
of actions by the general partner or managing member of such Group Member
similar to those actions permitted to be taken by the General Partner pursuant
to this Section 7.9.
SECTION 7.10 Other Matters Concerning the General Partner.
(a) 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 to be genuine and to have been signed or presented by
the proper party or parties.
(b) 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 (including an Opinion of Counsel) of such Persons as to matters
that the General Partner reasonably believes to be within such Person's
professional or expert competence and in accordance with such opinion shall be
conclusively presumed to have been done or omitted in good faith.
(c) The General Partner shall have the right, in respect of any of
its rights, powers or obligations hereunder, to act through any of its duly
authorized officers, a duly appointed attorney or attorneys-in-fact or the duly
authorized officers of the Partnership.
(d) Any standard of care and duty imposed by this Agreement or under
the Delaware Act or any applicable law, rule or regulation shall be modified,
waived or limited, to the
- 40 -
extent permitted by law, as required to permit the General Partner to act under
this Agreement or any other agreement contemplated by this Agreement and to make
any decision pursuant to the authority prescribed in this Agreement, so long as
such action is reasonably believed by the General Partner to be in, or not
inconsistent with, the best interests of the Partnership.
SECTION 7.11 Reliance by Third Parties.
Notwithstanding anything to the contrary in this Agreement, any Person
dealing with the Partnership shall be entitled to assume that (i) the General
Partner and (ii) any officer or attorney-in-fact of the General Partner
authorized by the General Partner to act on behalf of and in the name of the
Partnership has full power and authority to encumber, sell or otherwise use in
any manner any and all assets of the Partnership and to enter into any
authorized contracts on behalf of the Partnership, and such Person shall be
entitled to deal with the General Partner or any such officer or
attorney-in-fact as if it were the Partnership's sole party in interest, both
legally and beneficially. Each Limited Partner hereby waives any and all
defenses or other remedies that may be available against such Person to contest,
negate or disaffirm any action of the General Partner or any such officer or
attorney-in-fact in connection with any such dealing. In no event shall any
Person dealing with the General Partner or any such officer or attorney-in-fact
be obligated to ascertain that the terms of the Agreement have been complied
with or to inquire into the necessity or expedience of any act or action of the
General Partner or any such officer or attorney-in-fact. Each and every
certificate, document or other instrument executed on behalf of the Partnership
by the General Partner or any such officer or attorney-in-fact shall be
conclusive evidence in favor of any and every Person relying thereon or claiming
thereunder that (a) at the time of the execution and delivery of such
certificate, document or instrument, this Agreement was in full force and
effect, (b) 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 (c) 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.
ARTICLE VIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS
SECTION 8.1 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 required to be provided pursuant to Section
3.4(a). Any books and records maintained by or on behalf of the Partnership in
the regular course of its business, including books of account and records of
Partnership proceedings, may be kept on, or be in the form of, computer disks,
hard drives, punch cards, magnetic tape, photographs, micrographics or any other
information storage device; provided, that the books and 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 reporting
purposes, on an accrual basis in accordance with U.S. GAAP.
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SECTION 8.2 Fiscal Year.
The fiscal year of the Partnership shall be a fiscal year ending December
31.
ARTICLE IX
TAX MATTERS
SECTION 9.1 Tax Returns and Information.
The Partnership shall timely file all returns of the Partnership that are
required for federal, state and local income tax purposes on the basis of the
accrual method and a taxable year ending on December 31. The tax information
reasonably required by the Partners for federal and state income tax reporting
purposes with respect to a taxable year shall be furnished to them within 90
days of the close of the calendar year in which the Partnership's taxable year
ends. The classification, realization and recognition of income, gain, losses
and deductions and other items shall be on the accrual method of accounting for
federal income tax purposes.
SECTION 9.2 Tax Elections.
(a) The Partnership shall make the election under Section 754 of the
Code in accordance with applicable regulations thereunder, subject to the
reservation of the right to seek to revoke any such election upon the General
Partner's determination that such revocation is in the best interests of the
Limited Partners.
(b) The Partnership shall elect to deduct expenses incurred in
organizing the Partnership ratably over a sixty-month period as provided in
Section 709 of the Code.
(c) Except as otherwise provided herein, the General Partner shall
determine whether the Partnership should make any other elections permitted by
the Code.
SECTION 9.3 Tax Controversies.
Subject to the provisions hereof, the General Partner is designated as the
Tax Matters Partner (as defined in the Code) and is authorized and required to
represent the Partnership (at the Partnership's expense) in connection with all
examinations of the Partnership's affairs by tax authorities, including
resulting administrative and judicial proceedings, and to expend Partnership
funds for professional services and costs associated therewith. Each Partner
agrees to cooperate with the General Partner and to do or refrain from doing any
or all things reasonably required by the General Partner to conduct such
proceedings.
SECTION 9.4 Withholding.
Notwithstanding any other provision of this Agreement, the General Partner
is authorized to take any action that it determines in its discretion to be
necessary or appropriate to cause the Partnership to comply with any withholding
requirements established under the Code or any other federal, state or local law
including, without limitation, pursuant to Sections 1441, 1442, 1445 and 1446 of
the Code. To the extent that the Partnership is required or elects to withhold
and pay
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over to any taxing authority any amount resulting from the allocation or
distribution of income to any Partner or Assignee (including, without
limitation, by reason of Section 1446 of the Code), the amount withheld may at
the discretion of the General Partner be treated by the Partnership as a
distribution of cash pursuant to Section 6.3 in the amount of such withholding
from such Partner.
ARTICLE X
ADMISSION OF PARTNERS
SECTION 10.1 Admission of Partners.
Upon the consummation of the transfers and conveyances described in
Section 5.2, the General Partner shall be the sole general partner of the
Partnership and the MLP shall be the sole limited partner of the Partnership.
SECTION 10.2 Admission of Substituted Limited Partner.
By transfer of a Limited Partner Interest in accordance with Article IV,
the transferor shall be deemed to have given the transferee the right to seek
admission as a Substituted Limited Partner subject to the conditions of, and in
the manner permitted under, this Agreement. A transferor of a Limited Partner
Interest shall, however, only have the authority to convey to a purchaser or
other transferee (a) the right to negotiate such Limited Partner Interest to a
purchaser or other transferee and (b) the right to request admission as a
Substituted Limited Partner to such purchaser or other transferee in respect of
the transferred Limited Partner Interests. Each transferee of a Limited Partner
Interest shall be an Assignee and be deemed to have applied to become a
Substituted Limited Partner with respect to the Limited Partner Interests so
transferred to such Person. Such Assignee shall become a Substituted Limited
Partner (x) at such time as the General Partner consents thereto, which consent
may be given or withheld in the General Partner's discretion, and (y) when any
such admission is shown on the books and records of the Partnership. If such
consent is withheld, such transferee shall remain an Assignee. An Assignee shall
have an interest in the Partnership equivalent to that of a Limited Partner with
respect to allocations and distributions, including liquidating distributions,
of the Partnership. With respect to voting rights attributable to Limited
Partner Interests that are held by Assignees, the General Partner shall be
deemed to be the Limited Partner with respect thereto and shall, in exercising
the voting rights in respect of such Limited Partner Interests on any matter,
vote such Limited Partner Interests at the written direction of the Assignee who
is the holder of such Limited Partner Interests. If no such written direction is
received, such Partnership Interests will not be voted. An Assignee shall have
no other rights of a Limited Partner.
SECTION 10.3 Admission of Additional Limited Partners.
(a) A Person (other than the General Partner, the MLP or a
Substituted Limited Partner) who makes a Capital Contribution to the Partnership
in accordance with this Agreement shall be admitted to the Partnership as an
Additional Limited Partner 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, including the power of attorney
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granted in Section 2.6, 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.
(b) Notwithstanding anything to the contrary in this Section 10.3,
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 discretion. 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 as such in the books and records of the Partnership, following the
consent of the General Partner to such admission.
SECTION 10.4 Admission of Successor or Transferee General Partner.
A successor General Partner approved pursuant to Section 11.1 or 11.2 or
the transferee of or successor to all of the General Partner's Partnership
Interest pursuant to Section 4.2 who is proposed to be admitted as a successor
General Partner shall, subject to compliance with the terms of Section 11.3, if
applicable, be admitted to the Partnership as the General Partner, effective
immediately prior to the withdrawal or removal of the predecessor or
transferring General Partner pursuant to Section 11.1 or 11.2 or the transfer of
the General Partner Interest pursuant to Section 4.2, provided, however, that no
such successor shall be admitted to the Partnership until compliance with the
terms of Section 4.2 has occurred and such successor has executed and delivered
such other documents or instruments as may be required to effect such admission.
Any such successor shall, subject to the terms hereof, carry on the business of
the members of the Partnership Group without dissolution.
SECTION 10.5 Amendment of Agreement and Certificate of Limited Partnership.
To effect the admission to the Partnership of any Partner, the General
Partner shall take all steps necessary and appropriate under the Delaware Act to
amend the records of the Partnership to reflect such admission and, if
necessary, to prepare as soon as practicable an amendment to this Agreement and,
if required by law, the General Partner shall prepare and file an amendment to
the Certificate of Limited Partnership, and the General Partner may for this
purpose, among others, exercise the power of attorney granted pursuant to
Section 2.6.
ARTICLE XI
WITHDRAWAL OR REMOVAL OF PARTNERS
SECTION 11.1 Withdrawal of the General Partner.
(a) The General Partner shall be deemed to have withdrawn from the
Partnership upon the occurrence of any one of the following events (each such
event herein referred to as an "Event of Withdrawal");
(i) The General Partner voluntarily withdraws from the Partnership
by giving written notice to the other Partners;
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(ii) The General Partner transfers all of its rights as General
Partner pursuant to Section 4.2;
(iii) The General Partner is removed pursuant to Section 11.2;
(iv) The General Partner withdraws from, or is removed as the
General Partner of, the MLP;
(v) The General Partner (A) makes a general assignment for the
benefit of creditors; (B) files a voluntary bankruptcy petition for relief
under Chapter 7 of the United States Bankruptcy Code; (C) files a petition
or answer seeking for itself a liquidation, dissolution or similar relief
(but not a reorganization) under any law; (D) files an answer or other
pleading admitting or failing to contest the material allegations of a
petition filed against the General Partner in a proceeding of the type
described in clauses (A)-(C) of this Section 11.1(a)(v); or (E) seeks,
consents to or acquiesces in the appointment of a trustee (but not a
debtor in possession), receiver or liquidator of the General Partner or of
all or any substantial part of its properties;
(vi) A final and non-appealable order of relief under Chapter 7 of
the United States Bankruptcy Code is entered by a court with appropriate
jurisdiction pursuant to a voluntary or involuntary petition by or against
the General Partner; or
(vii) (A) in the event the General Partner is a corporation, a
certificate of dissolution or its equivalent is filed for the General
Partner, or 90 days expire after the date of notice to the General Partner
of revocation of its charter without a reinstatement of its charter, under
the laws of its state of incorporation; (B) in the event the General
Partner is a partnership or limited liability company, the dissolution and
commencement of winding up of the General Partner; (C) in the event the
General Partner is acting in such capacity by virtue of being a trustee of
a trust, the termination of the trust; (D) in the event the General
Partner is a natural person, his death or adjudication of incompetency;
and (E) otherwise in the event of the termination of the General Partner.
If an Event of Withdrawal specified in Section 11.1(a)(iv) (with respect
to withdrawal), (v), (vi) or (vii)(A), (B), (C) or (E) occurs, the withdrawing
General Partner shall give notice to the Limited Partners within 30 days after
such occurrence. The Partners hereby agree that only the Events of Withdrawal
described in this Section 11.1 shall result in the withdrawal of the General
Partner from the Partnership.
(b) Withdrawal of the General Partner from the Partnership upon the
occurrence of an Event of Withdrawal shall not constitute a breach of this
Agreement under the following circumstances: (i) at any time during the period
beginning on the Closing Date and ending at 12:00 midnight, Eastern Standard
Time, on June 30, 2009, the General Partner voluntarily withdraws by giving at
least 90 days' advance notice of its intention to withdraw to the Limited
Partners; provided that prior to the effective date of such withdrawal, the
withdrawal is approved by the Limited Partners and the General Partner delivers
to the Partnership an Opinion of Counsel ("Withdrawal Opinion of Counsel") that
such withdrawal (following the selection of
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the successor General Partner) would not result in the loss of the limited
liability of any Limited Partner or of the limited partners of the MLP or cause
the Partnership or the MLP to be treated as an association taxable as a
corporation or otherwise to be taxed as an entity for federal income tax
purposes (to the extent not previously treated as such); (ii) at any time after
12:00 midnight, Eastern Standard Time, on June 30, 2009, the General Partner
voluntarily withdraws by giving at least 90 days' advance notice to the Limited
Partners, such withdrawal to take effect on the date specified in such notice;
(iii) at any time that the General Partner ceases to be the General Partner
pursuant to Section 11.1(a)(ii), (iii) or (iv). If the General Partner gives a
notice of withdrawal pursuant to Section 11.1(a)(i) hereof or Section 11.1(a)(i)
of the MLP Agreement, the Limited Partners may, prior to the effective date of
such withdrawal, elect a successor General Partner; provided, however, that such
successor shall be the same person, if any, that is elected by the limited
partners of the MLP pursuant to Section 11.1 of the MLP Agreement as the
successor to the general partner of the MLP. If, prior to the effective date of
the General Partner's withdrawal, a successor is not selected by the Limited
Partners as provided herein or the Partnership does not receive a Withdrawal
Opinion of Counsel, the Partnership shall be dissolved in accordance with
Section 12.1. Any successor General Partner elected in accordance with the terms
of this Section 11.1 shall be subject to the provisions of Section 10.3.
SECTION 11.2 Removal of the General Partner.
The General Partner shall be removed if the General Partner is removed as
the general partner of the MLP pursuant to Section 11.2 of the MLP Agreement.
Such removal shall be effective concurrently with the effectiveness of the
removal of the General Partner as the general partner of the MLP pursuant to the
terms of the MLP Agreement. If a successor general partner for the MLP is
elected in connection with the removal of the General Partner, such successor
general partner for the MLP shall, upon admission pursuant to Article X of the
MLP Agreement, automatically become the successor General Partner of the
Partnership. The admission of any such successor General Partner to the
Partnership shall be subject to the provisions of Section 10.3.
SECTION 11.3 Interest of Departing Partner.
(a) The Partnership Interest of the Departing Partner departing as a
result of withdrawal or removal pursuant to Section 11.1 or 11.2 shall (unless
it is otherwise required to be converted into Common Units pursuant to Section
11.3(b) of the MLP Agreement) be purchased by the successor to the Departing
Partner for cash in the manner specified in the MLP Agreement. Such purchase (or
conversion into Common Units, as applicable) shall be a condition to the
admission to the Partnership of the successor as the General Partner. Any
successor General Partner shall indemnify the Departing Partner as to all debts
and liabilities of the Partnership arising on or after the effective date of the
withdrawal or removal of the Departing Partner.
(b) The Departing Partner shall be entitled to receive all
reimbursements due such Departing Partner pursuant to Section 7.4, including any
employee-related liabilities (including severance liabilities), incurred in
connection with the termination of any employees employed by such Departing
Partner for the benefit of the Partnership.
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SECTION 11.4 Withdrawal of a Limited Partner.
Without the prior written consent of the General Partner, which may be
granted or withheld in its sole discretion, and except as provided in Section
10.1, no Limited Partner shall have the right to withdraw from the Partnership.
ARTICLE XII
DISSOLUTION AND LIQUIDATION
SECTION 12.1 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 removal or withdrawal of the General Partner, if a successor General Partner
is elected pursuant to Section 11.1 or 11.2, the Partnership shall not be
dissolved and such successor General Partner shall continue the business of the
Partnership. The Partnership shall dissolve, and (subject to Section 12.2) its
affairs shall be wound up, upon:
(a) the expiration of its term as provided in Section 2.7;
(b) an Event of Withdrawal of the General Partner as provided in
Section 11.1(a) (other than Section 11.1(a)(ii)), unless a successor is elected
and an Opinion of Counsel is received as provided in Section 11.1(b) or 11.2 and
such successor is admitted to the Partnership pursuant to Section 10.3;
(c) an election to dissolve the Partnership by the General Partner
that is approved by all of the Limited Partners;
(d) the entry of a decree of judicial dissolution of the Partnership
pursuant to the provisions of the Delaware Act;
(e) the sale of all or substantially all of the assets and
properties of the Partnership Group; or
(f) the dissolution of the MLP.
SECTION 12.2 Continuation of the Business of the Partnership After
Dissolution.
Upon (a) dissolution of the Partnership following an Event of Withdrawal
caused by the withdrawal or removal of the General Partner as provided in
Section 11.1(a)(i) or (iii) and the failure of the Partners to select a
successor to such Departing Partner pursuant to Section 11.1 or 11.2, then
within 90 days thereafter, or (b) dissolution of the Partnership upon an event
constituting an Event of Withdrawal as defined in Section 11.1(a)(iv), (v) or
(vi), then, to the maximum extent permitted by law, within 180 days thereafter,
all of the Limited Partners may elect to reconstitute the Partnership and
continue its business on the same terms and conditions set forth in this
Agreement by forming a new limited partnership on terms identical to those set
forth in this Agreement and having as a general partner a Person approved by a
majority in
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interest of the Limited Partners (subject to the proviso in the last sentence of
this Section 12.2). In addition, upon dissolution of the Partnership pursuant to
Section 12.1(f), if the MLP is reconstituted pursuant to Section 12.2 of the MLP
Agreement, the reconstituted MLP may, within 180 days after such event of
dissolution, acting alone, regardless of whether there are any other Limited
Partners, elect to reconstitute the Partnership in accordance with the
immediately preceding sentence. Upon any such election by the Limited Partners
or the MLP, as the case may be, all Partners shall be bound thereby and shall be
deemed to have approved same. Unless such an election is made within the
applicable time period as set forth above, the Partnership shall conduct only
activities necessary to wind up its affairs. If such an election is so made,
then:
(a) the reconstituted Partnership shall continue until the end of
the term set forth in Section 2.7 unless earlier dissolved in accordance with
this Article XII;
(b) if the successor General Partner is not the former General
Partner, then the interest of the former General Partner shall be purchased by
the successor General Partner or converted into Common Units as provided in the
MLP Agreement; and
(c) all necessary steps shall be taken to cancel this Agreement and
the Certificate of Limited Partnership and to enter into and, as necessary, to
file a new partnership agreement and certificate of limited partnership, and the
successor General Partner may for this purpose exercise the power of attorney
granted the General Partner pursuant to Section 2.6;
provided, that the right of the Limited Partners to approve a successor General
Partner and to reconstitute and to continue the business of the Partnership
shall not exist and may not be exercised unless the Partnership has received an
Opinion of Counsel that (x) the exercise of the right would not result in the
loss of limited liability of the Limited Partners or any limited partner of the
MLP and (y) neither the Partnership, the reconstituted limited partnership, the
MLP nor any Group Member would be treated as an association taxable as a
corporation or otherwise be taxable as an entity for federal income tax purposes
upon the exercise of such right to continue.
SECTION 12.3 Liquidator.
Upon dissolution of the Partnership, unless the Partnership is continued
under an election to reconstitute and continue the Partnership pursuant to
Section 12.2, the General Partner shall select one or more Persons to act as
Liquidator. The Liquidator (if other than the General Partner) shall be entitled
to receive such compensation for its services as may be approved by a majority
in interest of the Limited Partners. The Liquidator (if other than the General
Partner) shall agree not to resign at any time without 15 days' prior notice and
may be removed at any time, with or without cause, by notice of removal approved
by a majority in interest of the Limited Partners. Upon dissolution, removal or
resignation of the Liquidator, a successor and substitute Liquidator (who shall
have and succeed to all rights, powers and duties of the original Liquidator)
shall within 30 days thereafter be approved by at least a majority in interest
of the Limited Partners, who shall also approve the compensation payable to such
Liquidator. The right to approve a successor or substitute Liquidator in the
manner provided herein shall be deemed to refer also to any such successor or
substitute Liquidator approved in the manner herein provided. Except as
expressly provided in this Article XII, the Liquidator approved in the manner
provided
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herein shall have and may exercise, without further authorization or
consent of any of the parties hereto, all of the powers conferred upon the
General Partner under the terms of this Agreement (but subject to all of the
applicable limitations, contractual and otherwise, upon the exercise of such
powers, other than the limitation on sale or other disposition set forth in
Section 7.3 (b)) to the extent necessary or desirable in the good faith judgment
of the Liquidator to carry out the duties and functions of the Liquidator
hereunder for and during such period of time as shall be reasonably required in
the good faith judgment of the Liquidator to complete the winding up and
liquidation of the Partnership as provided for herein.
SECTION 12.4 Liquidation.
The Liquidator shall proceed to dispose of the assets of the Partnership,
discharge its liabilities, and otherwise wind up its affairs in such manner and
over such period as the Liquidator determines to be in the best interest of the
Partners, subject to Section 17-804 of the Delaware Act and the following:
(a) Disposition of Assets. The assets may be disposed of by public
or private sale or by distribution in kind to one or more Partners on such terms
as the Liquidator and such Partner or Partners may agree. If any property is
distributed in kind, the Partner receiving the property shall be deemed for
purposes of Section 12.4(c) to have received cash equal to its fair market
value; and contemporaneously therewith, appropriate cash distributions must be
made to the other Partners. The Liquidator may, in its absolute discretion,
defer liquidation or distribution of the Partnership's assets for a reasonable
time if it determines that an immediate sale or distribution of all or some of
the Partnership's assets would be impractical or would cause undue loss to the
Partners. The Liquidator may, in its absolute discretion, distribute the
Partnership's assets, in whole or in part, in kind if it determines that a sale
would be impractical or would cause undue loss to the Partners.
(b) Discharge of Liabilities. Liabilities of the Partnership include
amounts owed to Partners otherwise than in respect of their distribution rights
under Article VI. With respect to any liability that is contingent, conditional
or unmatured or is otherwise not yet due and payable, the Liquidator shall
either settle such claim for such amount as it thinks appropriate or establish a
reserve of cash or other assets to provide for its payment. When paid, any
unused portion of the reserve shall be distributed as additional liquidation
proceeds.
(c) Liquidation Distributions. All property and all cash in excess
of that required to discharge liabilities as provided in Section 12.4(b) shall
be distributed to the Partners in accordance with, and to the extent of, the
positive balances in their respective Capital Accounts, as determined after
taking into account all Capital Account adjustments (other than those made by
reason of distributions pursuant to this Section 12.4(c)) for the taxable period
during which the liquidation of the Partnership occurs (with such date of
occurrence being determined pursuant to Treasury Regulation Section
1.704-1(b)(2)(ii)(g)), and such distribution shall be made by the end of such
taxable period (or, if later, within 90 days after said date of such
occurrence).
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SECTION 12.5 Cancellation of Certificate of Limited Partnership.
Upon the completion of the distribution of Partnership cash and property
as provided in Section 12.4 in connection with the liquidation of the
Partnership, the Partnership shall be terminated and the Certificate of Limited
Partnership, and all 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 12.6 Return of Contributions.
The General Partner shall not be personally liable for, and shall have no
obligation to contribute or loan any monies or property to the Partnership to
enable it to effectuate, the return of the Capital Contributions of the Limited
Partners, or any portion thereof, it being expressly understood that any such
return shall be made solely from Partnership assets.
SECTION 12.7 Waiver of Partition.
To the maximum extent permitted by law, each Partner hereby waives any
right to partition of the Partnership property.
SECTION 12.8 Capital Account Restoration.
No Limited Partner shall have any obligation to restore any negative
balance in its Capital Account upon liquidation of the Partnership. The General
Partner shall be obligated to restore any negative balance in its Capital
Account upon liquidation of its interest in the Partnership by the end of the
taxable period during which such liquidation occurs, or, if later, within 90
days after the date of such liquidation.
ARTICLE XIII
AMENDMENT OF PARTNERSHIP AGREEMENT
SECTION 13.1 Amendment to be Adopted Solely by the General Partner.
Each Partner agrees that the General Partner, without the approval of any
Partner or Assignee, may amend any provision of this Agreement and execute,
swear to, acknowledge, deliver, file and record whatever documents may be
required in connection therewith, to reflect:
(a) a change in 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;
(b) admission, substitution, withdrawal or removal of Partners in
accordance with this Agreement;
(c) a change that, in the sole discretion of the General Partner, is
necessary or advisable 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 to
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ensure that no Group Member will be treated as an association taxable as a
corporation or otherwise taxed as an entity for federal income tax purposes;
(d) a change that, in the discretion of the General Partner, (i)
does not adversely affect the Limited Partners in any material respect, (ii) is
necessary or advisable to (A) satisfy any requirements, conditions or guidelines
contained in any opinion, directive, order, ruling or regulation of any federal
or state agency or judicial authority or contained in any federal or state
statute (including the Delaware Act) or (B) facilitate the trading of limited
partner interests of the MLP (including the division of any class or classes of
outstanding limited partner interests of the MLP into different classes to
facilitate uniformity of tax consequences within such classes of limited partner
interests of the MLP) or comply with any rule, regulation, guideline or
requirement of any National Securities Exchange on which such limited partner
interests are or will be listed for trading, compliance with any of which the
General Partner determines in its discretion to be in the best interests of the
MLP and the limited partners of the MLP, (iii) is required to effect the intent
expressed in the Registration Statement or the intent of the provisions of this
Agreement or is otherwise contemplated by this Agreement or (iv) is required to
conform the provisions of this Agreement with the provisions of the MLP
Agreement as the provisions of the MLP Agreement may be amended, supplemented or
restated from time to time;
(e) a change in the fiscal year or taxable year of the Partnership
and any changes that, in the discretion of the General Partner, are necessary or
advisable as a result of a change in the fiscal year or taxable year of the
Partnership including, if the General Partner shall so determine, a change in
the definition of "Quarter" and the dates on which distributions are to be made
by the Partnership;
(f) an amendment that is necessary, in the Opinion of Counsel, to
prevent the Partnership, or the General Partner or its directors, officers,
trustees or agents from in any manner being subjected to the provisions of the
Investment Company Act of 1940, as amended, the Investment Advisers Act of 1940,
as amended, or "plan asset" regulations adopted under the Employee Retirement
Income Security Act of 1974, as amended, regardless of whether such are
substantially similar to plan asset regulations currently applied or proposed by
the United States Department of Labor;
(g) any amendment expressly permitted in this Agreement to be made
by the General Partner acting alone;
(h) an amendment effected, necessitated or contemplated by a Merger
Agreement approved in accordance with Section 14.3;
(i) an amendment that, in the discretion of the General Partner, is
necessary or advisable to reflect, account for and deal with appropriately the
formation by the Partnership of, or investment by the Partnership in, any
corporation, partnership, joint venture, limited liability company or other
entity, in connection with the conduct by the Partnership of activities
permitted by the terms of Section 2.4;
(j) a merger or conveyance pursuant to Section 14.3(d); or
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(k) any other amendments substantially similar to the foregoing.
SECTION 13.2 Amendment Procedures.
Except with respect to amendments of the type described in Section 13.1,
all amendments to this Agreement shall be made in accordance with the following
requirements. Amendments to this Agreement may be proposed only by or with the
consent of the General Partner which consent may be given or withheld in its
sole discretion. A proposed amendment shall be effective upon its approval by
the Limited Partners.
ARTICLE XIV
MERGER
SECTION 14.1 Authority.
The Partnership may merge or consolidate with one or more corporations,
limited liability companies, business trusts or associations, real estate
investment trusts, common law trusts or unincorporated businesses, including a
general partnership or limited partnership, formed under the laws of the State
of Delaware or any other state of the United States of America, pursuant to a
written agreement of merger or consolidation (a "Merger Agreement") in
accordance with this Article XIV.
SECTION 14.2 Procedure for Merger or Consolidation.
Merger or consolidation of the Partnership pursuant to this Article XIV
requires the prior approval of the General Partner. If the General Partner shall
determine, in the exercise of its discretion, to consent to the merger or
consolidation, the General Partner shall approve the Merger Agreement, which
shall set forth:
(a) The names and jurisdictions of formation or organization of each
of the business entities proposing to merge or consolidate;
(b) The name and jurisdiction of formation or organization of the
business entity that is to survive the proposed merger or consolidation (the
"Surviving Business Entity");
(c) The terms and conditions of the proposed merger or
consolidation;
(d) The manner and basis of exchanging or converting the equity
securities of each constituent business entity for, or into, cash, property or
general or limited partner interests, rights, securities or obligations of the
Surviving Business Entity; and (i) if any general or limited partner interests,
securities or rights of any constituent business entity are not to be exchanged
or converted solely for, or into, cash, property or general or limited partner
interests, rights, securities or obligations of the Surviving Business Entity,
the cash, property or general or limited partner interests, rights, securities
or obligations of any limited partnership, corporation, trust or other entity
(other than the Surviving Business Entity) which the holders of such general or
limited partner interests, securities or rights are to receive in exchange for,
or upon conversion of their general or limited partner interests, securities or
rights, and (ii) in the case of securities
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represented by certificates, upon the surrender of such certificates, which
cash, property or general or limited partner interests, rights, securities or
obligations of the Surviving Business Entity or any general or limited
partnership, corporation, trust or other entity (other than the Surviving
Business Entity), or evidences thereof, are to be delivered;
(e) A statement of any changes in the constituent documents or the
adoption of new constituent documents (the articles or certificate of
incorporation, articles of trust, declaration of trust, certificate or agreement
of limited partnership or other similar charter or governing document) of the
Surviving Business Entity to be effected by such merger or consolidation;
(f) The effective time of the merger, which may be the date of the
filing of the certificate of merger pursuant to Section 14.4 or a later date
specified in or determinable in accordance with the Merger Agreement (provided,
that if the effective time of the merger is to be later than the date of the
filing of the certificate of merger, the effective time shall be fixed no later
than the time of the filing of the certificate of merger and stated therein);
and
(g) Such other provisions with respect to the proposed merger or
consolidation as are deemed necessary or appropriate by the General Partner.
SECTION 14.3 Approval by Limited Partners of Merger or Consolidation.
(a) Except as provided in Section 14.3(d), the General Partner, upon
its approval of the Merger Agreement, shall direct that the Merger Agreement be
submitted to a vote of the Limited Partners, whether at a special meeting or by
written consent. A copy or a summary of the Merger Agreement shall be included
in or enclosed with the notice of a special meeting or the written consent.
(b) Except as provided in Section 14.3(d), the Merger Agreement
shall be approved upon receiving the affirmative vote or consent of the Limited
Partners.
(c) Except as provided in Section 14.3(d), after such approval by
vote or consent of the Limited Partners, and at any time prior to the filing of
the certificate of merger pursuant to Section 14.4, the merger or consolidation
may be abandoned pursuant to provisions therefor, if any, set forth in the
Merger Agreement.
(d) Notwithstanding anything else contained in this Article XIV or
in this Agreement, the General Partner is permitted, in its discretion, without
Limited Partner approval, to merge the Partnership or any Group Member into, or
convey all of the Partnership's assets to, another limited liability entity
which shall be newly formed and shall have no assets, liabilities or operations
at the time of such Merger other than those it receives from the Partnership or
other Group Member if (i) the General Partner has received an Opinion of Counsel
that the merger or conveyance, as the case may be, would not result in the loss
of the limited liability of any Limited Partner or any limited partner in the
MLP or cause the Partnership or the MLP to be treated as an association taxable
as a corporation or otherwise to be taxed as an entity for federal income tax
purposes (to the extent not previously treated as such), (ii) the sole purpose
of such merger or
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conveyance is to effect a mere change in the legal form of the Partnership into
another limited liability entity and (iii) the governing instruments of the new
entity provide the Limited Partners and the General Partner with the same rights
and obligations as are herein contained.
SECTION 14.4 Certificate of Merger.
Upon the required approval by the General Partner and the Limited Partners
of a Merger Agreement, a certificate of merger shall be executed and filed with
the Secretary of State of the State of Delaware in conformity with the
requirements of the Delaware Act.
SECTION 14.5 Effect of Merger.
(a) At the effective time of the certificate of merger:
(i) all of the rights, privileges and powers of each of the business
entities that has merged or consolidated, and all property, real, personal
and mixed, and all debts due to any of those business entities and all
other things and causes of action belonging to each of those business
entities, shall be vested in the Surviving Business Entity and after the
merger or consolidation shall be the property of the Surviving Business
Entity to the extent they were property of each constituent business
entity;
(ii) the title to any real property vested by deed or otherwise in
any of those constituent business entities shall not revert and shall not
in any way be impaired because of the merger or consolidation;
(iii) all rights of creditors and all liens on or security interests
in property of any of those constituent business entities shall be
preserved unimpaired; and
(iv) all debts, liabilities and duties of those constituent business
entities shall attach to the Surviving Business Entity and may be enforced
against it to the same extent as if the debts, liabilities and duties had
been incurred or contracted by it.
(b) A merger or consolidation effected pursuant to this Article
shall not be deemed to result in a transfer or assignment of assets or
liabilities from one entity to another.
ARTICLE XV
GENERAL PROVISIONS
SECTION 15.1 Addresses and Notices.
Any notice, demand, request, report or proxy materials required or
permitted to be given or made to a Partner or Assignee under this Agreement
shall be in writing and shall be deemed given or made when delivered in person
or when sent by first class United States mail or by other means of written
communication to the Partner at the address described below. Any notice to the
Partnership shall be deemed given if received by the General Partner at the
principal office of the Partnership designated pursuant to Section 2.3. The
General Partner may rely and shall be
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protected in relying on any notice or other document from a Partner, Assignee or
other Person if believed by it to be genuine.
SECTION 15.2 Further Action.
The parties hereto 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.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.
SECTION 15.4 Integration.
This Agreement constitutes the entire agreement among the parties hereto
pertaining to the subject matter hereof and supersedes all prior agreements and
understandings pertaining thereto.
SECTION 15.5 Creditors.
None of the provisions of this Agreement shall be for the benefit of, or
shall be enforceable by, any creditor of the Partnership.
SECTION 15.6 Waiver.
No failure by any party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute a waiver of
any subsequent breach or any breach of any other covenant, duty, agreement or
condition.
SECTION 15.7 Counterparts.
This Agreement may be executed in counterparts, all of which together
shall constitute an agreement binding on all the parties hereto, notwithstanding
that all such parties are not signatories to the original or the same
counterpart. Each party shall become bound by this Agreement immediately upon
affixing its signature hereto, independently of the signature of any other
party.
SECTION 15.8 Applicable Law.
This Agreement shall be construed in accordance with and governed by the
laws of the State of Delaware, without regard to the principles of conflicts of
law.
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SECTION 15.9 Invalidity of Provisions.
If any provision of this Agreement is or becomes invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.
SECTION 15.10 Consent of Partners.
Each Partner hereby expressly consents and agrees that, whenever in this
Agreement it is specified that an action may be taken upon the affirmative vote
or consent of less than all of the Partners, such action may be so taken upon
the concurrence of less than all of the Partners and each Partner shall be bound
by the results of such action.
[Rest of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first written above.
GENERAL PARTNER
TC PIPELINES GP, INC.
By:
-------------------------------------
Name:
Its:
LIMITED PARTNER:
TC PIPELINES, LP
By: TC PipeLines GP, Inc.
Its: General Partner
By:
-------------------------------------
Name:
Its:
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