Transcolorado Gas Transmission Company
Partnership Agreement
This Agreement, Effective on the 30th day of June, 1990, is entered into
between K N TransColorado, Inc., El Paso TransColorado Company, successor in
interest to Westgas TransColorado, Inc. as of September 25, 1995, and Questar
TransColorado, Inc.
1. Parties. The following are parties to this Agreement and each shall
have a one-third interest in the partnership.
1.1 K N TransColorado, Inc., a Colorado corporation with its principal
place of business located at 00000 Xxxx 0xx Xxxxx, Xxxxxxxx, Xxxxxxxx
00000-0000.
1.2 El Paso TransColorado Company, a Delaware corporation with its
principal place of business located at 000 Xxxxx Xxxxxxx, Xx Xxxx, Xxxxx
00000.
1.3 Questar TransColorado, Inc., a Utah corporation with its principal
place of business located at 00 Xxxxx Xxxxx Xxxxxx, Xxxx Xxxx Xxxx, Xxxx
00000.
2. Definitions. The terms defined in this section shall have the meanings
set out below for purposes of the Agreement.
2.1 Affiliate. An affiliate is any person which, directly or
indirectly through one or more intermediaries, controls or is controlled
by or is under common control with another person.
2.2 Capital Account. A capital account consists of the capital
contributions and profits credited to the account of a partner, less the
distributions and losses debited to the account, in accordance with
section 6. The capital accounts are maintained for purposes of
reflecting the economic arrangement among the partners and making
allocations. The capital accounts of the partners shall not be, nor
have the same meaning as, the "capital account" of the partnership under
Section 12 of the Natural Gas Act.
2.3 Capital Contribution. A capital contribution consists of the
capital contributed to the partnership by a partner.
2.4 Default. A default is a failure by a partner to make one or more
capital contributions required under section 6 on the date specified for
payment by the management committee under section 6.5.2(iii).
2.5 Defaulting Partner. A defaulting partner is a partner who is in
default.
2.6 Expansion. An expansion is any pipeline, including appurtenances
such as compression facilities, which increases the capacity of the
project that is owned by the partnership.
2.7 FERC. The FERC refers to the Federal Energy Regulatory Commission
or any federal commission, agency or other governmental body succeeding
to the powers of the Federal Energy Regulatory Commission.
2.8 Initial Line. The initial line is the proposed main trunk
pipeline proposed for the project, consisting of approximately 315 miles
of 22 and 24 inch pipe commencing at Questar Pipeline Company's system
in Rio Xxxxxx County, Colorado and running south to Blanco, New Mexico
and including two compressor stations.
2.9 Management Committee. The management committee is the committee
provided for in section 4.
2.10 Operating Agreements. The operating agreements are the agreements
that will be entered into between the partnership and affiliates of the
partners to operate the project.
2.11 Operators. The operators are the companies designated by the
management committee in accordance with section 5.
2.12 Out-of-Pocket Costs. Out-of-pocket costs are costs paid by a
partner or its affiliate to any third party for the benefit of the
project, but do not include affiliate employee expenses for travel,
lodging and incidental items.
2.13 Partner. A partner is a company listed in Section 1 or any person
who acquires a partnership interest in accordance with the terms of this
Agreement.
2.14 Partnership. The partnership is the entity created by this
Agreement.
2.15 Partner's Percentage. A partner's percentage is the percentage
that is determined by dividing a partner's capital account by the sum
total of all partners' capital accounts. Initially, each partner's
percentage shall be one-third.
2.16 Person. A person is an individual, corporation, voluntary
association, joint stock company, business trust, partnership,
proprietorship or other legal entity, however constituted.
2.17 Project. The project is the TransColorado Gas Transmission
System, an interstate natural gas transportation pipeline and related
facilities to be designed, constructed and operated by the partnership
and extending from its proposed interconnection with the facilities of
Questar Pipeline Company located in northwestern Colorado to proposed
interconnections with other interstate or intrastate pipelines located
in Colorado and New Mexico.
2.18 Project Agreement. The project agreement is the agreement between
Rocky Mountain Natural Gas Company, Western Gas Supply Company, and
Questar Pipeline Company dated March 19, 1990, that preceded this
Agreement.
2.19 Project Manager. The project manager is the person designated by
the management committee to perform the duties described in section 5.
2.20 Project Management Agreement. The project management agreement is
the agreement to be entered into between the partnership and the project
manager to manage the design and construction of the project.
2.21 Secondary Facilities. Secondary facilities are pipelines and
attendant facilities that are connected to the project.
2.22 Shipper. A shipper is any person who has signed a letter of
intent, a precedent agreement or a similar agreement to obtain
transportation service on the project.
3. Formation, Term and Purpose. The parties form the partnership described
below for the indicated purposes.
3.1 Formation. By this Agreement the parties create a general
partnership under the Uniform Partnership Law as in force pursuant to
C.R.S. Sections 7-60-101 et seq.
3.2 Name. The name of the partnership is the TransColorado Gas
Transmission Company.
3.3 Partnership Office. The principal office of the partnership shall
be at the offices of K N TransColorado, Inc. or such other place as the
management committee may determine. The management committee may also
determine the location for other offices of the partnership.
3.4 Purpose. The partnership shall design, construct, own and operate
the project. Prior to receiving initial regulatory authorization to
construct the project, however, the partnership shall only conduct such
business as is necessary to seek regulatory approvals and acquire
interests in land and shall not acquire any assets other than interests
in land or incur any liabilities or engage in any other acts except as
determined by the management committee.
3.5 Term. The initial term of the Agreement shall be 25 years from
the date of this Agreement and thereafter from year to year unless
terminated in accordance with Section 13.
3.6 Regulatory Approvals. The partners will cooperate in seeking
authority to construct and operate the project under the FERC's optional
certificate procedures or any successor or alternate authority that is
determined to be appropriate by the management committee. The partners
will cooperate in seeking any additional authorizations, rulings,
permits and approvals from other governmental authorities having
jurisdiction that may be required to construct or to own and operate the
project.
3.7 Secondary Facilities. The right of the partners or the
partnership to acquire, construct, own or operate secondary facilities
interconnecting with the project shall be governed by this section.
3.7.1 Any partner or its affiliate shall have the right to
purchase, construct or acquire and may own any secondary facility,
which will not be considered to be part of the project and will
not be credited to the capital account of the partner.
3.7.2 If any partner or its affiliate would like the partnership
to purchase, construct, acquire or own any secondary facility, the
partner may submit a written request to the partnership. The
partner shall notify each member of the management committee of
the proposed location of the line, facility or extension, its
estimated cost, appropriate engineering data, flow diagrams and
maps and the proposed completion date. If any FERC application is
required, any additional information needed for the filing should
also be provided.
3.7.3 Within 30 days after the information described in section
3.7.2 has been provided to the management committee, it shall
either unanimously approve the proposal or advise the partner
requesting approval that it does not approve the proposal. If the
proposal is approved, the partners agree to have applications
prepared for any necessary regulatory authorizations or other
approvals and to contribute to the partnership the appropriate
portion of the cost of the proposed line, facility or extension.
3.8 Expansion of the Project. The rights and obligations of the
partners to expand the project shall be governed by the provisions of
this section.
3.8.1 Any partner that requests the partnership to construct an
expansion shall notify the management committee of the amount of
additional transportation requested, the proposed shippers who
would use the additional capacity, the likely receipt and delivery
points for the additional gas, the proposed completion date for
the expansion and such other information as is requested by the
management committee.
3.8.2 As soon as possible after receiving the proposal the
management committee shall cause the preparation of cost estimates
of the expansion and shall send them to the partners together with
appropriate engineering data, flow diagrams and maps describing
the expansion and such other information as is reasonably
necessary to evaluate the proposal.
3.8.3 Within 60 days after the information described in section
3.8.2 has been sent to each partner, the management committee
shall either unanimously approve the expansion proposed as set
forth or as modified by the management committee or inform the
partner making the proposal that it will not accept the proposal.
If the management committee accepts the proposal, it shall direct
that any necessary applications for regulatory approvals be
prepared and shall direct the partners to contribute to the
partnership the appropriate portion of the cost of the expansion
or shall arrange for such other financing as the management
committee unanimously approves.
4. Management Committee. The business of the partnership shall be managed
by the management committee, which shall have exclusive authority and full
discretion to manage the affairs of the partnership. Unless otherwise
expressly provided for in this Agreement, no partner shall have the authority
to act for or to assume any obligation or responsibility on behalf of the
partnership without the prior approval of the management committee. The
management committee shall not have authority to take any action inconsistent
with the terms of this Agreement, as it may be amended from time to time.
4.1 Management Committee Members. Each of the partners shall appoint
in writing one member of the management committee and two alternates,
either of whom may serve in the absence of the member. Any action that
a member may perform under this Agreement may be performed, in his
absence, by the alternates, and the member may delegate to the
alternates as many of his powers and duties as he determines to be
appropriate. The member and alternates shall be officers of the partner
that appointed them or of an affiliate of the partner. Members and
alternates shall serve until replaced by the partner that appointed
them.
4.2 Powers of the Management Committee. Without limiting the general
powers of the management committee described in this section, the
management committee is specifically empowered to do the following:
4.2.1 Designate a project manager for the project to serve for the
time and perform the duties specified in the project management
agreement.
4.2.2 Appoint such agents as are necessary to assist the project
manager or the operators. Appoint such technical and other
committees and individuals as necessary and direct them to
undertake all activities needed for the planning, construction,
and operation of the project.
4.2.3 Determine what FERC or other regulatory approvals or
certificates are required to construct and operate the project and
direct the preparation and filing of any needed applications.
4.2.4 Except as otherwise provided in this Agreement or as
delegated in the project management agreement or the operating
agreements, authorize all agreements needed for the project,
including but not limited to agreements with consultants and third
parties to undertake activities or studies for the benefit of the
project, financing arrangements, and commitments for
transportation services for shippers.
4.2.5 Determine all policy or other matters for the project.
4.2.6 Adopt partnership rules and amendments concerning the
conduct of the affairs of the partnership and the management
committee, including procedures for determining the rates to be
charged when the applicable FERC tariff allows discretion in
setting rates. Adopt rules for such other matters as the
management committee determines to be appropriate that are not
inconsistent with this Agreement.
4.2.7 Have prepared and adopt, amend or reject capital and
operating budgets.
4.2.8 Initiate litigation or arbitration, approve termination of
litigation, arbitration or settlement of disputes involving claims
against the partnership; approve all attorneys or agents
representing the partnership in such matters.
4.2.9 Adopt an insurance and indemnity program covering the
interest and obligations of the partnership, and, as appropriate,
the partners.
4.2.10 Approve all tax policy matters regarding the
partnership, including, but not limited to elections relating to
federal income taxes required to be made by the partnership under
Code Section 703(b), state income tax, preparation and filing of
partnership returns, the handling of and participation in tax
audits conducted by any government entity, and designation of a
tax matters partner.
4.2.11 Appoint audit committees for the partnership with such
powers and duties as are specified by the management committee.
The audit committees shall report to the management committee.
4.2.12 Have developed accounting and payment procedures
mutually acceptable to the management committee and the operators.
4.3 Management Committee Meetings. Meetings of the management
committee may be held in person or by a telephone conference call during
which each member may hear at the same time. In lieu of a meeting, the
members may act upon unanimous written consent. Each partner shall have
one vote equal to its partner's percentage at the time of the meeting.
Minutes of each meeting shall be kept and shall be approved by each
member or alternate acting at the meeting. Action by unanimous consent
shall be placed in writing and signed by the members. A quorum shall
consist of the members or their alternates representing all
nondefaulting partners.
4.4 Effect of Management Committee Decisions. Any action taken by the
partnership at the direction of the management committee shall be
binding on the partnership and on each partner, whether approved by the
regular members of the management committee or their alternates.
4.5 Voting Requirements. Unless otherwise provided in the Agreement,
matters shall be decided by a vote of the members representing not less
than a majority of the partners' percentages in the partnership. The
following matters, however, shall require the unanimous approval of all
of the partners.
4.5.1 The means of financing the project or any expansions of the
project.
4.5.2 Selection of project route and design.
4.5.3 The filing of an application for certificates or other
regulatory approvals for the initial line.
4.5.4 To proceed with the acquisition of right of way for the
initial line.
4.5.5 Acceptance of certificates authorizing the initial line that
have been granted by the FERC or other regulatory authority.
4.5.6 After receipt and acceptance of all necessary prior
regulatory approvals and authorizations, the decision to begin
construction of the project.
4.5.7 The form and content of any tariff to be used by the
project.
4.5.8 Any agreement to purchase, construct, acquire or own any
secondary facilities or expansions of the project.
4.5.9 Except as provided in sections 11.2.1 and 11.2.2, consent to
the transfer of a partner's interest.
4.5.10 Except as provided in sections 10, 11 and 12, the
decision to add a new partner to the partnership.
4.5.11 Except as otherwise provided in this Agreement, the
decision to dissolve the partnership.
4.5.12 Any amendment of this Agreement.
4.6 Officials of the Partnership. One of the members of the
management committee shall serve as chairman. A chairman shall serve
for a term of three years unless he resigns or is removed. The first
chairman shall be the management committee member representing K N
TransColorado, Inc. Subsequent chairman shall be selected by a majority
vote of the partners, and a chairman may be removed by a majority vote
of the partners. A chairman may succeed himself for one or more
subsequent terms. If the chairman's position changes to a member
representing a different partner, then the operating agreements will be
reexamined to determine if responsibilities should be reassigned to
other partners or their affiliates. If the partners agree by majority
vote, the operating agreements will be appropriately amended. The
chairman shall have the power and responsibility for the general
supervision of the business and property of the partnership in
accordance with this Agreement and shall perform other administrative
duties commonly incident to this responsibility. The chairman or his
alternate shall chair meetings of the management committee. The
management committee shall have the power to appoint officials or agents
for the partnership to perform such duties as the management committee
may direct.
4.7 Removal of Officials. Each partner may remove an official that it
previously appointed at any time and shall have the right to fill
vacancies occurring in the positions occupied by its appointees. The
management committee may remove an official previously appointed by the
management committee at any time and shall fill vacancies occurring in
the positions occupied by its appointees.
4.8. Indemnification. The partnership shall indemnify and hold
harmless the partners, the members of the management committee and those
officials and agents appointed in writing by the management committee
against all actions, claims, demands, costs and liabilities arising out
of the acts or failures to act of any of the members or officials in
good faith within the scope of their authority in the course of the
partnership's business. These persons shall not be liable for any
obligations, liabilities or commitments incurred by or on behalf of the
partnership as a result of any such acts or failure to act.
5. Project Manager and Operators.
5.1 Project Manager. The partnership shall enter into a project
management agreement with a project manager to serve during the
preconstruction and construction periods. The project manager shall
serve until it resigns or is removed by a majority vote of the
management committee.
5.2 Operators. The partnership shall enter into operating agreements
with affiliates of each of the partners to operate the project.
6. Capital Accounts and Capital Contributions.
6.1 Capital Accounts. The capital account of a partner consists of
the total capital contributions made by the partner in accordance with
sections 6.3 and 6.4, plus all profits of the partnership and less all
distributions and all losses of the partnership allocated to such
account. Capital contributions shall be made in money or property
acceptable to the management committee, other than a note or other
obligation of a partner. Profits and losses shall be determined in
accordance with the accounting rules and regulations, if any, prescribed
by the regulatory body or bodies under the jurisdiction of which the
partnership is then operating, and to the extent of matters not covered
by such rules or regulations, generally accepted accounting principles
prevailing for companies engaged in a business similar to the
partnership.
6.2 Allocation of Profits and Losses. At the end of each calendar
month, each of the partners shall share in all net profits and net
losses of the partnership for that month (determined in accordance with
section 6.1) in proportion to its partner's percentage as of the
beginning of the month for which profits and losses are being allocated,
and the amount allocated to each partner shall be debited or credited,
as the case may be, to the capital account of the partner, as provided
in section 6.1. Except as provided below, all items of income, gain,
loss (including depreciation recapture), deduction or credit for federal
income tax purposes for each month shall be allocated in accordance with
the foregoing allocation of net profits and net losses and are not
subject to any special allocation. However, income, gain, loss and
deduction for federal income tax purposes that is attributable to any
property contributed to the partnership by a partner shall be allocated
to the partners in the manner provided under Internal Revenue Code Section
704(c) and any regulations issued under that section.
6.3 Preconstruction and Construction Capital Contributions. Each
partner agrees to contribute to the capital of the partnership one-third
of the amount necessary to meet the cash requirements of the partnership
prior to and during the construction of the project. These requirements
include, but are not limited to, the costs of preparing and filing an
application for FERC approval, preparing necessary environmental impact
studies, obtaining interests in land and performing preliminary
marketing activities. The capital contributions required by this
section 6.3 shall be made in the amount and at the time specified by the
management committee.
6.4 Post Construction Capital Contributions. Each partner agrees to
contribute to the capital of the partnership one-third of the amount
determined to be necessary by the management committee for the operation
and maintenance of the project and the purchase or construction of any
secondary facilities or expansions of the project approved by the
management committee.
6.5 Payment of Capital Contributions.
6.5.1. The management committee shall cause the project
manager or the appropriate operator to prepare and deliver to each
partner budgets, cash flow projections and other financial
forecasts with respect to the partnership as may be reasonably
requested by any partner. The management committee shall cause to
be issued a written request for payment of each capital
contribution to be made in accordance with sections 6.3 and 6.4,
at such times and in such amounts as the management committee
directs. All amounts received by the partnership from a partner
on or before the date specified in section 6.5.2(iii) shall be
credited to such partner's capital account as of the specified
date and all amounts received from a partner after the date
specified in section 6.5.2(iii) shall be credited to such
partner's capital account as of the date of its receipt.
6.5.2 Each written request for payment issued pursuant to section
6.5.1 shall state: (i) the amount of the capital contribution
requested from each partner; (ii) the purposes for which the
capital contributions are to be applied, in such reasonable detail
as the management committee shall direct; and (iii) the date on
which the payments shall be made and the method of payment.
6.5.3 Each partner will make payment of its capital contributions
in accordance with the requests issued under section 6.5.1. If a
capital contribution is made 10 or more days after the date
specified for payment by the management committee under section
6.5.2(iii), interest on the delinquent amount shall accrue daily
from the date payment should have been made until the date payment
is received by the partnership. Interest shall be calculated on a
daily basis using 365 days for a year at 2% plus the base rate on
corporate loans at large U. S. money center commercial banks
(prime rate) as quoted in The Wall Street Journal under "Money
Rates" for each relevant day. A partner's payment of interest
shall not be used to increase its capital account. Any interest
paid by the defaulting partner shall be allocated as income to the
nondefaulting partners' capital accounts and distributed
immediately. In addition, if a payment is 10 or more days late,
and there has been a reduction in the allocations made under
section 6.2 to the defaulting partner, that partner must make any
necessary payments to bring its capital account into balance with
those of the nondefaulting partners, including additional capital
contributions to its own capital account, or in the case of a
disproportionate allocation of loss, contributions to increase the
capital accounts of the nondefaulting partners, whichever is
appropriate. If a payment is less than 10 days late and there has
been a reduction in the allocations made to the defaulting partner
under section 6.2, such reduction shall be reversed through an
accounting adjustment to all of the partners' capital accounts.
6.6 Unsolicited Contributions. No partner shall make any capital
contributions to the partnership except as requested by the management
committee pursuant to section 6.5.
7. Distributions of Excess Cash. The management committee will determine
the cash requirements of the partnership at least semiannually. Distributions
of any amount in excess of the cash requirements shall be made only to all
partners simultaneously in proportion to their respective partners'
percentages at the time of distribution, in such total amounts and at such
times as directed by the management committee. However, if section 10.1(c)
applies, distribution of excess cash shall be made to each nondefaulting
partner in the proportion that its partner's percentage bears to the partners'
percentages of all nondefaulting partners.
8. Records, Accounting and Taxation.
8.1 Fiscal Year. The fiscal year of the partnership shall begin on
January 1 and end on the following December 31.
8.2 Location of Records. The books of account and other records for
the partnership shall be kept and maintained at the principal office of
the partnership or at such other location as the management committee
directs. Any partner wishing to make copies of any such records of the
partnership may do so at the expense of the partner.
8.3 Books of Account. The books of account for the partnership shall
be maintained on an accrual basis in accordance with the accounting
rules and regulations, if any, prescribed by the regulatory body under
the jurisdiction of which the partnership is operating, and, to the
extent of matters not covered by such rules or regulations, generally
accepted accounting principles prevailing for companies engaged in a
business similar to that of the partnership. The books of account shall
be audited by certified public accountants selected by the management
committee following the end of each fiscal year at the expense of the
partnership and, if reasonably required by any partner, at the end of
the partner's fiscal year at the expense of the partner.
8.4 Annual Financial Statements and Tax Returns. Within 60 days
following the end of the fiscal year, the project manager or appropriate
operator shall prepare and deliver to each partner (with footnote
disclosure) an income statement, a statement of cash flows for the
fiscal year, a statement of financial position and a statement of
changes in each partner's capital account as of the end of the fiscal
year, together with an auditor's opinion by the certified public
accountants. Within 120 days following the end of the fiscal year, the
tax matters partner shall cause to be prepared the federal, state and
local income tax returns and other accounting and tax information and
schedules as shall be necessary for the preparation by each partner of
its income tax returns for the fiscal year. The tax matters partner
shall also cause to be prepared and timely filed the federal and any
state and local income tax returns of the partnership.
8.5 Interim Financial Statements. As soon as practicable after the
end of each calendar month in each fiscal year, the project manager or
appropriate operator shall prepare and deliver to each partner, together
with an appropriate certificate of the person preparing the document, an
income statement, a statement of cash flows, a statement of financial
position, a tax schedule and a statement of changes in each partner's
capital account for the month (including sufficient information to
permit the partners to calculate their tax accruals), for the portion of
the fiscal year then ended and for the 12 month period then ended.
8.6. Taxation of Partnership. The partners intend that the partnership
shall be treated as a partnership for federal, state and local income
tax purposes. The partners will take all action, including amending
this Agreement and executing other documents, needed to qualify for and
receive this tax treatment.
8.7 Government Reports. The project manager or appropriate operator
shall prepare and file all reports prescribed by the FERC and any other
regulatory or governmental agency having jurisdiction.
8.8 Inspection of Facilities and Audit by Partners. Each partner
shall have the right at reasonable times during regular business hours
to inspect the facilities of the partnership and to audit and make
copies of the books of account and other records of the partnership,
including partnership minutes, resolutions and contracts. This right
may be exercised through any agent or employee of the partner designated
in writing by it or by an independent public accountant or attorney so
designated. Each partner shall bear all expenses incurred in any
inspection or audit made at the partner's request.
8.9 Deposit and Withdrawal of Funds. Funds of the partnership shall
be deposited in the financial institutions designated by the management
committee. All individuals authorized as signatories for the
partnership shall be designated by the management committee. All
withdrawals of funds shall be made only by checks, wire transfer, debit
memorandum or other written instrument.
8.10 Record Retention. All records that are required by this Agreement
or other agreements of the partnership shall be retained by the
partnership for the longer of the period of time required by the FERC or
any other federal or state agency having jurisdiction or by state law
or, the period during which any state or federal tax audit may occur, or
as determined by the management committee, but in no event for less than
three years.
8.11 Section 754 Election. At the direction of the management
committee, the tax matters partner shall file an election with the
Internal Revenue Service under Section 754 of the Internal Revenue Code
in the manner prescribed in regulations issued under Section 754. The
election shall provide that the basis of partnership property shall be
adjusted in the case of a distribution of property, in the manner
provided in Code Section 734, and, in the case of a transfer of a
partnership interest, in the manner provided in Code Section 743.
8.12 Tax Matters Partner. The management committee shall designate a
tax matters partner within the meaning of Internal Revenue Code Section
6231(a)(7) in the manner required by regulations issued under that
Section.
9. Reimbursement of Costs. Certain costs incurred by the partners or their
affiliates shall be reimbursed by the partnership as provided in this section.
9.1 Out-of-Pocket Costs. Out-of-pocket costs have been or will be
incurred by the partners or their affiliates. After the execution of
this Agreement, but not more often than monthly, the partners shall
present a detailed accounting of these costs to the partnership for
reimbursement. If approved by the management committee, the partnership
shall reimburse the appropriate partner or affiliate for out-of-pocket
costs.
9.2 In-house Costs. One or more of the partners or their affiliates
may have accrued or may accrue in-house costs, as specified in Exhibit A
to this Agreement, to help with the formation of the partnership and the
design or construction of the project. Each partner that has
accumulated in-house costs shall present a detailed accounting of them
to the partnership for payment as of each April 1 and October 1. If
approved by the management committee, the partnership shall reimburse
the appropriate partner or affiliate for the amount of its accrued
in-house costs.
10. Default.
10.1 Consequences of Default. For as long as a partner is in default,
(a) the representative of the defaulting partner on the management
committee shall not have any vote as a member of the management
committee and action by the management committee shall require the
unanimous vote of the remaining members during the period of default;
(b) the defaulting partner shall continue to be liable to make capital
contributions to the partnership in accordance with section 6; and (c)
no distributions shall be made to the defaulting partner, except as
provided in section 13.3.2. A defaulting partner shall be liable to the
partnership and the other partners for all losses, damages and expenses
sustained or incurred by the partnership or the partners as a result of
the default.
10.2 Action by Management Committee. In the event of default, the
members of the management committee representing the nondefaulting
partners shall promptly vote on a course of action to be taken, which
may include requiring all of the nondefaulting partners to make capital
contributions or lend funds to the partnership proportionate to their
then-existing partners' percentages in a total amount equal to the
amount of the default.
10.3 Sale of Defaulting Partner's Interest. If any default continues
for more than 60 consecutive days, each of the nondefaulting partners
shall have the right to purchase equal percentages of the defaulting
partner's partnership interest. If any of the nondefaulting partners
elects not to purchase equal percentages of such partnership interest,
upon unanimous approval of the nondefaulting partners, they may purchase
unequal percentages of the defaulting partner's partnership interest,
including a purchase of the entire partnership interest by a single
partner, or they may sell all or part of the partnership interest to a
third party. If the nondefaulting partners cannot reach unanimous
agreement on the sale of the defaulting partner's partnership interest
in unequal percentages to the nondefaulting partners or to a third
party, the partnership shall be dissolved. Any sale or assignment of
the defaulting partner's partnership interest may be made without the
consent or other agreement of the defaulting partner.
10.4 Price for Nondefaulting Partners. The price payable by one or
both of the nondefaulting partners for the defaulting partner's
partnership interest shall be the lesser of: (a) the fair market value
of the partnership interest, as determined by the management committee,
or (b) the amount reflected in the defaulting partner's capital account
at the time of the sale. The proceeds from a sale to one or both of the
nondefaulting partners shall be paid to the partnership and applied
first in an amount equal to any losses, damages or expenses, including
attorney's fees, sustained by the partnership as a result of the
default. The proceeds shall next be applied to any nondefaulting
partner in an amount equal to the losses, damages or expenses, including
attorney's fees, incurred by such partner as a result of the default.
Any remaining proceeds shall be paid to the defaulting partner.
10.5 Price for Third Party. The management committee may sell a
defaulting partner's partnership interest to a third party at a
reasonable price, as determined by the management committee. The
proceeds from the sale of the defaulting partner's partnership interest
shall be paid to the partnership, which shall act as an escrow agent in
disbursing such proceeds. The proceeds shall be disbursed in the
following order: (a) to the partnership to the extent of any losses,
damages or expenses, including attorney's fees, sustained or incurred by
the partnership as a result of the default; (b) to any partner to the
extent of any losses, damages or expenses, including attorney's fees,
sustained or incurred by the partner as a result of the default; (c) to
the partnership up to the amount of the arrears in the defaulting
partner's capital account; and (d) to the defaulting partner up to the
balance in that partner's capital account to liquidate its interest in
the partnership. Any proceeds used to satisfy the arrears in the
defaulting partner's capital account shall be treated as a capital
contribution by the new partner and credited to its capital account. If
any proceeds remain after making the payments described in (a) through
(d), the excess proceeds shall be distributed to each nondefaulting
partner, excluding the new partner, in the proportion that its partner's
percentage bears to the partners' percentages of all such nondefaulting
partners.
10.6 Additional Remedies. Nothing in section 10 shall prevent the
partnership or any partner from recovering from a defaulting partner the
amount of any losses, damages or expenses incurred or sustained as a
result of such default and not recovered pursuant to section 10, or from
pursuing any other remedies that may be available in law or equity. The
nondefaulting partners may place a lien on the future cash distributions
to a partner who was in default to recover their losses, damages and
expenses.
10.7 Continuation of Partnership. If a defaulting partner's interest
in the partnership is assigned to a third person or purchased by one or
both of the nondefaulting partners, the partnership shall not be
dissolved and shall continue to carry out the business of the
partnership. If one or both of the nondefaulting partners purchases the
interest of a defaulting partner, the obligation to make capital
contributions pursuant to section 6, the capital accounts, the partners'
percentages, and voting rights on the management committee shall be
appropriately adjusted to reflect the reduction in the number of
partners.
10.8 Cure of Default. A defaulting partner shall have a right to cure
one or more defaults at any time prior to the time its interest in the
partnership is sold as provided in this section 10. A defaulting
partner can cure a default by doing all of the following: (a) paying to
the partnership the amount of the capital contributions it failed to
make. These capital contributions shall be paid in the manner specified
by the management committee and shall be credited to the defaulting
partner's capital account. If the nondefaulting partners were required
to make additional capital contributions due to a default, the
partnership shall make cash distributions to them in the amount of such
additional capital contributions; (b) making all payments required under
section 6.5.3; (c) paying to the partnership the amount of any losses,
damages or expenses, including attorney's fees, sustained or incurred by
the partnership as a result of the default, excluding any amounts
described in (a) and (b); and (d) paying to any partner the amount of
any losses, damages or expenses, including attorney's fees, sustained or
incurred by the partner as a result of the default, excluding any
amounts described in (a) and (b).
10.9 Status of Partner in Default as Partner. A defaulting partner
that has not been required to transfer its interest shall continue to be
a partner.
11. Sale, Transfer or Pledge of Partnership Interest. Except with the
unanimous consent of the management committee, or as permitted by section 11.2
of this Agreement, no partner may (or allow any of its affiliates to) sell,
assign, pledge, hypothecate or otherwise transfer in any manner all or any
part of its right, title or interest in the partnership or in this Agreement.
11.1 Sale of Partnership Interest. A partner may sell some or all of
its interest in the partnership to an unaffiliated party only with the
unanimous consent of the remaining partners and subject to the following
provisions.
11.1.1 If a partner wishes to sell some or all of its
interest in the partnership, it shall submit to the management
committee a notice of intent to sell containing a list of proposed
buyers unaffiliated with any partner. The management committee
must unanimously agree on the acceptability of the buyers before
the selling partner may negotiate on price and terms with those
parties that are approved. The selling partner shall provide such
information as the management committee reasonably requests about
the prospective buyers. If the management committee cannot
unanimously approve one or more of the proposed buyers, the
selling partner may withdraw from the partnership, as provided in
section 12. The management committee shall notify the selling
partner of the acceptable prospective buyers, if any, within 30
days of receiving the notice of intent to sell.
11.1.2 If the selling partner is able to reach agreement on
the terms and conditions for sale of all or part of its interest
to an approved proposed buyer, it must then give the remaining
partners a right of first refusal to purchase the interest on the
same terms and conditions. The remaining partners shall have 30
days from the date they receive the offer to exercise their right
of first refusal. Unless the remaining partners unanimously agree
otherwise, they must purchase the selling partner's partnership
interest in equal percentages.
11.1.3 If the remaining partners elect not to purchase the
selling partner's interest, the sale to the approved buyer must be
on the same terms and conditions as those offered to the remaining
partners.
11.2 Permitted Transfers by a Partner. Provided that a transfer does
not result in a termination of the partnership for federal income tax
purposes, nothing in this Agreement shall prevent:
11.2.1 The transfer by any partner of its entire right, title
and interest in the partnership and in this Agreement to an
affiliate of the partner if the affiliate assumes by express
agreement with the partnership, in a way satisfactory to the
management committee, all of the obligations of the transferor
under this Agreement and if the transfer does not relieve the
transferor of its obligations under the Agreement without the
approval of the management committee, which approval shall not be
unreasonably withheld. Upon approval, the affiliate shall be
substituted as a partner.
11.2.2 An assignment, pledge or other transfer creating a
lien or security interest in all or any portion of a partner's
right, title or interest in the profits and surplus of the
partnership or in any indebtedness of the partnership under any
mortgage, indenture or deed of trust created by such partner;
provided that the assignee, pledgee, mortgagee or trustee shall
hold the same subject to the terms of this Agreement.
11.3 Effect of Permitted Transfers or Withdrawals. No assignment,
pledge or other transfer or withdrawal pursuant to section 12 shall give
rise to a right in the transferring or withdrawing partner to dissolve
the partnership. An assignment, pledge or other transfer shall not give
rise to a right in any transferee to become a partner in the partnership
unless agreed to by unanimous vote of the management committee, except
that affiliates will be substituted as partners, as provided in section
11.2.1.
11.4 Effect of Prohibited Transfers. Any transfer of an interest in
the partnership by a partner in violation of the terms of this Agreement
shall not cause a dissolution of the partnership, but shall result in
the forfeiture of the partner's right to participate in the management
of the partnership. This section does not limit any right the
partnership or the other partners may have against the partner making
the prohibited transfer.
12. Withdrawal of a Partner. A nondefaulting partner shall have the right
to request withdrawal from the partnership if agreement on an acceptable
course of action cannot be reached at any meeting of the management committee.
The withdrawing partner shall give 60 days' notice of its intent to withdraw
to the other partners. If any of the partners gives notice of withdrawal from
the partnership, the following provisions shall apply.
12.1 Purchase by Partners. The remaining partners shall decide whether
to purchase the interest of a withdrawing partner. Unless the remaining
partners unanimously agree otherwise, each remaining partner shall
purchase equal percentages of the partnership interest at the price
provided for in section 12.4. If the remaining partners unanimously
agree to purchase unequal percentages of the withdrawing partner's
partnership interests, the new interests shall be reflected by
appropriate adjustments in the partner's capital accounts and partners'
percentages and voting rights on the management committee.
12.2 Sale to Third Party. If the remaining partners do not purchase
the partnership interest, by unanimous vote the remaining partners may
permit or direct the withdrawing partner to assign its partnership
interest to a third person who will become a partner in the partnership.
However, the withdrawing partner shall have no obligation to assign its
partnership interest to a third party for less than the price specified
in section 12.4.
12.3 Need to Agree. If the remaining partners of the management
committee do not unanimously agree either to purchase the withdrawing
partner's partnership interest or to permit its assignment, the
partnership shall be dissolved.
12.4 Price of Partnership Interest. Unless otherwise agreed, the price
to be paid to any withdrawing partner by the remaining partners as
consideration for the transfer of its interest in the partnership shall
be the amount contained in the withdrawing partner's capital account.
13. Dissolution of the Partnership. Voluntary and involuntary dissolution
of the partnership shall be governed by this section.
13.1 Voluntary Dissolution.
13.1.1 After the initial term of the Agreement, any partner
may elect to dissolve the partnership and terminate this Agreement
by giving the other partners written notice of such election not
less than 1 year prior to the date the termination is to take
place.
13.1.2 By unanimous vote of the management committee, the
partners may elect to dissolve the partnership and terminate this
Agreement at any time during or after its initial term.
13.1.3 Winding up of the partnership business shall include
securing any necessary prior approval of the FERC and, upon such
election of the management committee and receipt of any necessary
FERC approval, the partnership shall undertake sale or abandonment
of all or substantially all of the partnership's business and
assets.
13.2 Automatic Dissolution. The partnership shall automatically and
without notice be dissolved upon the happening of any of the following
events:
13.2.1 Ninety days have elapsed since the commencement of any
proceedings by or against any of the partners for any relief under
any bankruptcy or insolvency law, or any law relating to the
relief of debtors, readjustment of indebtedness, reorganization,
arrangement, composition or extension, and, if such proceedings
have been commenced against any of the partners, the proceedings
have not been dismissed, nullified, stayed or otherwise rendered
ineffective (but then only so long as the stay continues in
force);
13.2.2 Ninety days have elapsed since the entry of a decree
or order of a court having jurisdiction for the appointment of a
receiver or liquidator or trustee or assignee in bankruptcy or
insolvency of any of the partners or of a substantial part of a
partner's property, or for the winding up or liquidation of its
affairs, when the decree or order remains in force undischarged
and unstayed for a period of 90 days, or any substantial part of
the property of any of the partners shall be sequestered or
attached and is not returned to the possession of the partner or
released from the attachment within 90 days;
13.2.3 Any of the partners makes a general assignment for the
benefit of creditors or admits in writing its inability to pay its
debts generally as they become due;
13.2.4 The filing of a certificate of dissolution by any
partner under the laws of the state of its incorporation or the
entering of a final order dissolving any partner by any court of
competent jurisdiction;
13.2.5 The sale or abandonment of all or substantially all of
the partnership's business and assets;
13.2.6 Any event which makes it unlawful for the business of
the partnership to be carried on or for the partners to carry on
such business in a partnership; or
13.2.7 Failure of the management committee to agree to permit
or require the assignment or purchase of a withdrawing partner's
interest in the partnership as provided in section 12.3.
13.3 Winding Up and Liquidation. If the partnership is dissolved
pursuant to the provisions of section 13, the management committee shall
continue to exercise the powers vested in it by this Agreement and
continue to operate the project in the normal course to the extent
appropriate for the purpose of winding up the business of the
partnership and liquidating the assets in an orderly manner.
Partnership assets will be treated as follows:
13.3.1 Unrealized appreciation and depreciation on
partnership assets that are not sold or otherwise disposed of in
connection with the winding up and liquidation of the partnership
shall be allocated to the partners' capital accounts as if such
assets had been sold for their fair market value on the date the
partnership is liquidated. If on the date of liquidation of the
partnership any partner has a deficit in its capital account after
reflecting in its capital account (i) the items specified in
section 6.1 for the period ending on the date of liquidation of
the partnership, and (ii) the allocations required under the first
sentence of this section 13.3.1, that partner shall be required to
contribute sufficient cash to the partnership to eliminate the
deficit.
13.3.2 The net assets of the partnership remaining after the
payment or provision for payment of all of the liabilities of the
partnership shall be distributed to all of the partners in
accordance with the positive capital account balances of the
partners determined after adjustment of the partners' capital
accounts in accordance with section 13.3.1.
13.3.3 No termination or dissolution shall deprive any
partner not in default of any remedy otherwise available to it.
13.4 Termination Subject to the Natural Gas Act. The right and power
to dissolve the partnership shall at all times be subject to the
obligations and duties of the partnership as a natural gas company under
the Natural Gas Act or any successor or parallel statutes and the
jurisdiction of the FERC, and no dissolution under this section 13 shall
be accomplished unless all applicable provisions of the act and any
conditions or obligations of any certificates issued by the FERC have
been complied with or fulfilled.
14. Limitation of Liabilities and Litigation.
14.1 Claims against Partners. If a claim or cause of action is
prosecuted against a partner for a third-party liability incurred by the
partnership, the partner against whom the claim or cause of action was
prosecuted shall have the right to reimbursement of a judgment or
reasonable settlement of the claim, plus costs and attorney's fees from
and to the extent of the assets of the partnership. The management
committee may advance costs and expenses of litigation to a partner. A
partner that has a claim made against it that may result in liability to
the partnership or to any other partner shall promptly notify the
partnership and the other partners of the claim and shall provide the
partnership a reasonable opportunity to participate in any litigation.
14.2 Claims against the Partnership. The management committee shall
give each partner timely notice of all claims or litigation against the
partnership. In addition, any partner that is sued as a partner in the
partnership shall give every other partner and the partnership timely
notice of the litigation.
14.3 Contract Restrictions. Unless approved by the management
committee, the partnership or its agents or representatives shall not
enter into any contracts, leases, subleases, notes, deeds of trust or
other obligations unless the agreements or instruments contain
appropriate provisions limiting the claims of all parties to or
beneficiaries of the agreements or instruments to the assets of the
partnership and expressly waiving any rights of the parties or
beneficiaries to proceed against the partners individually.
15. Representations and Warranties of the Partners. Each partner
represents, warrants and agrees that:
15.1 It is a corporation duly incorporated and validly existing, that
it is in good standing under the laws of its jurisdiction of
incorporation and that it is or will be authorized to do business in
Colorado and other states, as necessary.
15.2 It will not voluntarily cause a dissolution or termination of the
partnership by failure to maintain its corporate existence;
15.3 The execution, delivery and performance of this Agreement have
been duly authorized by each partner's board of directors, and this
Agreement, when executed, will be valid and binding on it; and
15.4 The execution of this Agreement does not contravene any provision
of, or constitute a default under, any relevant indenture, mortgage or
other agreement binding on the partner or any valid order of any court,
commission or governmental agency to which the partner is subject.
16. Miscellaneous Provisions.
16.1 Notices. Any written notices or other communication may be mailed
by certified or registered mail, return receipt requested, postage
prepaid, or sent by overnight delivery service, fax or other electronic
means to each of the partners at the addresses below or at any other
address designated by the partner by written notice, and to the
partnership at its principal office specified in section 3.3 or at any
other address designated by written notice to each of the partners.
Notice shall be deemed given three days following mailing or upon
receipt if sent by any other means.
K N TransColorado, Inc.
00000 Xxxx 0xx Xxxxx
Xxxxxxxx, XX 00000-0000
Attn: President
Telephone: (000) 000-0000
Fax: (000) 000-0000
El Paso TransColorado Company
X.X. Xxx 0000
Xx Xxxx, XX 00000
Attn: X. X. Xxxxx, Vice President
Telephone: (000) 000-0000
Fax: (000) 000-0000
Questar TransColorado, Inc.
00 Xxxxx Xxxxx Xxxxxx
Xxxx Xxxx Xxxx, XX
00000
Attn: President
Telephone: (000) 000-0000
Fax: (000) 000-0000
16.2 Subject to Applicable Law. This Agreement and the obligations of
the partners hereunder are subject to all applicable laws, rules, court
decisions, orders and regulations of governmental authorities having
jurisdiction and in the event of conflict, said laws, rules, court
decision, order and regulations of governmental authorities having
jurisdiction shall control.
16.3 Further Assurances. Each of the partners agrees to execute and
deliver all such other and additional instruments and documents and to
do such other acts and things as may be necessary more fully to
effectuate this Agreement and the partnership created hereby and to
carry on the business of the partnership in accordance with this
Agreement.
16.4 Amendment. This Agreement may be amended, supplemented or
restated only in writing and with a written consent of each of the
partners. Except as provided in section 11.2, if any partner is added
to the partnership for any reason, this Agreement will be amended to add
the partner as a party.
16.5 Choice of Law. This Agreement and the partnership shall be
governed by and interpreted in accordance with the laws of Colorado.
16.6 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
16.7 Waiver. A waiver by any partner of any provision, condition or
requirement shall not be deemed to be a waiver or release of any other
partner from performance of any other provision, condition or
requirement in this Agreement or release of any future performance of
the same provision, condition or requirement.
16.8 Attorney's Fees. Should there be any litigation between the
partners concerning any provision of or the rights and duties under this
Agreement, the party prevailing in such litigation shall be entitled, in
addition to such other relief as may be granted in such proceeding, to a
reasonable sum from the nonprevailing partners (but not from the
partnership) for their attorney's fees in the litigation.
16.9 Entire Agreement and Termination of Prior Agreements. This
Agreement, amended and restated September 25, 1995, constitutes the
agreement between the partners concerning its subject matter and
supersedes any prior understanding or written or oral agreements
concerning the subject matter. The Project Agreement dated March 19,
1990, and the letters of intent dated August 18, 1989, and February 9,
1990, among the partners are terminated as of the effective date of this
Agreement.
16.10 Severability. Any provision of this Agreement prohibited by
applicable law shall be invalid to the extent of such prohibition unless
it is determined by unanimous consent of the management committee the
such prohibition invalidates the purposes or intent of this Agreement.
This Agreement is effective on the day first set forth above and
is entered into as of the date set forth below by the authorized
representatives whose signatures are shown below.
K N Transcolorado, Inc.
By: /s/ S. Xxxxxx Xxxx
S. Xxxxxx Xxxx, Vice President
El Paso TransColorado Company
By: /s/ X. X. Xxxxx
X. X. Xxxxx, Vice President
Questar TransColorado, Inc.
By: /s/ X. X. Xxxxxxxxx
X. X. Xxxxxxxxx, President and
Chief Executive Officer
Date: September 25, 1995
