Exhibit 10.1
CORPUS CHRISTI LNG, L.P.
(A Delaware limited partnership)
LIMITED PARTNERSHIP AGREEMENT
THE SECURITIES REPRESENTED BY THIS INSTRUMENT OR DOCUMENT HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE. WITHOUT SUCH REGISTRATION, SUCH
SECURITIES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED AT ANY TIME, EXCEPT UPON
DELIVERY TO THE PARTNERSHIP OF AN OPINION OF COUNSEL SATISFACTORY TO THE GENERAL
PARTNER OF THE PARTNERSHIP THAT REGISTRATION IS NOT REQUIRED FOR SUCH TRANSFER
OR THE SUBMISSION TO THE GENERAL PARTNER OF THE PARTNERSHIP OF SUCH OTHER
EVIDENCE AS MAY BE SATISFACTORY TO THE GENERAL PARTNER TO THE EFFECT THAT ANY
SUCH TRANSFER OR SALE WILL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR ANY RULE OR REGULATION
PROMULGATED THEREUNDER.
TABLE OF CONTENTS
ARTICLE I DEFINITIONS..........................................................1
1.1 "ACT"..............................................................1
1.2 "ADDITIONAL CONTRIBUTED EQUITY"....................................1
1.3 "ADJUSTED CAPITAL ACCOUNT BALANCE".................................1
1.4 "AFFILIATE"........................................................1
1.5 "AFFILIATE TRANSACTION"............................................1
1.6 "AGREEMENT"........................................................1
1.7 "ASSET VALUE"......................................................2
1.8 "BANKRUPTCY".......................................................2
1.9 "BANKRUPTCY ACTION"................................................2
1.10 "BANKRUPTCY LAW"...................................................3
1.11 "CAPITAL ACCOUNT"..................................................3
1.12 "CHANGE OF CONTROL"................................................3
1.13 "CONSTRUCTION PERIOD"..............................................3
1.14 "CONTRIBUTED EQUITY"...............................................4
1.15 "CONTRIBUTING PARTNER".............................................4
1.16 "CONTRIBUTION DATE"................................................4
1.17 "CONTROL"..........................................................4
1.18 "DELINQUENT CONTRIBUTION"..........................................4
1.19 "DELINQUENT PARTNER"...............................................4
1.20 "DEPRECIATION".....................................................4
1.21 "DIRECTOR".........................................................4
1.22 "EARLY CONTRIBUTION DATE"..........................................4
1.23 "ENVIRONMENTAL LAWS"...............................................4
1.24 "FERC".............................................................5
1.25 "FINANCING PLAN"...................................................5
1.26 "GAAP".............................................................5
1.27 "GENERAL PARTNER"..................................................5
1.28 "GOVERNMENTAL ENTITY"..............................................5
1.29 "GOVERNMENTAL PERMITS".............................................5
1.30 "INDEMNITEE".......................................................5
1.31 "INTEREST".........................................................5
1.32 "I.R.C."...........................................................6
1.33 "LIMITED PARTNERS".................................................6
1.34 "LIQUIDATOR".......................................................6
1.35 "MAJOR DECISIONS"..................................................6
1.36 "MAJORITY".........................................................6
1.37 "MAJORITY IN INTEREST".............................................6
1.38 "MATERIAL ADVERSE EFFECT"..........................................6
1.39 "MINIMUM GAIN".....................................................6
1.40 "NET CASH FLOW"....................................................6
1.41 "NONRECOURSE DEDUCTIONS"...........................................6
1.42 "OTHER PARTNERS"...................................................6
1.43 "PARTNER"..........................................................6
1.44 "PARTNER NONRECOURSE DEBT".........................................6
1.45 "PARTNER NONRECOURSE DEBT MINIMUM GAIN"............................7
1.46 "PARTNER NONRECOURSE DEDUCTIONS"...................................7
1.47 "PARTNERSHIP"......................................................7
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1.48 "PARTNERSHIP ACCOUNTANT"...........................................7
1.49 "PARTNERSHIP ASSETS"...............................................7
1.50 "PARTNERSHIP MINIMUM GAIN".........................................7
1.51 "PERCENTAGE INTEREST"..............................................7
1.52 "PERSON"...........................................................7
1.53 "POSTCONSTRUCTION PERIOD"..........................................7
1.54 "PRECONSTRUCTION PERIOD"...........................................7
1.55 "PROFIT" AND "LOSS"................................................7
1.56 "PROJECT"..........................................................8
1.57 "PROJECT APPROVAL".................................................8
1.58 "PROPERTY".........................................................8
1.59 "REGULATIONS"......................................................8
1.60 "REQUIREMENTS OF LAW"..............................................8
1.61 "TEAM MEMBER"......................................................8
ARTICLE II FORMATION OF THE PARTNERSHIP........................................8
2.1 FORMATION OF LIMITED PARTNERSHIP...................................8
2.2 NAME...............................................................8
2.3 CHARACTER OF BUSINESS..............................................9
2.4 REGISTERED OFFICE AND AGENT........................................9
2.5 OTHER FILING.......................................................9
2.6 TERM AND FISCAL YEAR...............................................9
ARTICLE III CAPITAL/PERCENTAGE INTERESTS/FUTURE FINANCING......................9
3.1 CAPITAL CONTRIBUTIONS..............................................9
3.2 PERCENTAGE INTERESTS CAPITAL......................................10
3.3 FUTURE FINANCING..................................................10
3.4 ADDITIONAL CONTRIBUTED EQUITY.....................................10
3.5 DELINQUENT CONTRIBUTIONS..........................................11
3.6 CONSTRUCTION FINANCING............................................11
3.7 NO FURTHER CONTRIBUTED EQUITY.....................................12
3.8 RETURN OF CAPITAL.................................................13
3.9 BENEFIT OF OBLIGATIONS............................................13
3.10 RETURN OF REAL PROPERTY...........................................13
ARTICLE IV CAPITAL ACCOUNTS, ALLOCATIONS, AND TAX MATTERS.....................13
4.1 CAPITAL ACCOUNTS..................................................13
4.2 ALLOCATION OF PROFIT AND LOSS.....................................14
4.3 SPECIAL ALLOCATIONS...............................................14
4.4 I.R.C. SECTION 704(C) TAX ALLOCATION..............................16
4.5 SPECIAL ALLOCATIONS REGARDING PAYMENTS TO AFFILIATES..............16
4.6 ALLOCATION OF GAINS AND LOSSES UPON LIQUIDATION...................16
4.7 ALLOCATION FOR GAAP AND FINANCIAL REPORTING.......................16
4.8 PARTNER ACKNOWLEDGMENT............................................17
ARTICLE V DISTRIBUTIONS.......................................................17
5.1 DISTRIBUTIONS OF NET CASH FLOW....................................17
5.2 TAX DISTRIBUTIONS.................................................17
5.3 DISTRIBUTIONS IN LIQUIDATION......................................17
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE PARTNERS.....................18
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6.1 IN GENERAL........................................................18
6.2 REPRESENTATIONS AND WARRANTIES....................................18
ARTICLE VII RIGHTS AND OBLIGATIONS OF PARTNERS................................20
7.1 LIMITED LIABILITY.................................................20
7.2 LIABILITY OF A PARTNER TO THE PARTNERSHIP.........................20
7.3 EXCULPATION.......................................................21
7.4 PARTICIPATION IN MANAGEMENT.......................................21
7.5 SURVIVAL OF OBLIGATIONS...........................................21
ARTICLE VIII MEETINGS OF PARTNERS.............................................21
8.1 PLACE OF MEETINGS AND MEETINGS BY TELEPHONE.......................21
8.2 CALL OF MEETINGS..................................................21
8.3 NOTICE OF MEETINGS OF PARTNERS....................................21
8.4 MANNER OF GIVING NOTICE...........................................21
8.5 ADJOURNED MEETING; NOTICE.........................................22
8.6 QUORUM; VOTING....................................................22
8.7 WAIVER OF NOTICE BY CONSENT OF ABSENT PARTNERS....................22
8.8 PARTNER ACTION BY WRITTEN CONSENT WITHOUT A MEETING...............22
8.9 RECORD DATE FOR PARTNER NOTICE, VOTING, AND GIVING CONSENTS.......22
8.10 PROXIES...........................................................23
ARTICLE IX INDEMNIFICATION OF PARTNERS........................................23
9.1 GENERAL...........................................................23
9.2 ENVIRONMENTAL.....................................................23
9.3 LIMITATIONS.......................................................24
ARTICLE X MANAGEMENT OF THE PARTNERSHIP.......................................24
10.1 THE GENERAL PARTNER...............................................24
10.2 MAJOR DECISIONS...................................................25
10.3 RESIGNATION.......................................................26
10.4 REMUNERATION OF GENERAL PARTNER; REIMBURSEMENT OF EXPENSES........26
10.5 LIMITATION ON LIABILITY OF GENERAL PARTNER; INDEMNIFICATION.......26
10.6 NO GUARANTEE OF RETURN BY GENERAL PARTNER.........................26
10.7 OTHER BUSINESSES OR VENTURES......................................27
10.8 AFFILIATE TRANSACTIONS............................................27
10.9 REMOVAL OF CORPUS GP AS GENERAL PARTNER...........................27
10.10 OFFICERS AND EMPLOYEES............................................27
ARTICLE XI COVENANTS..........................................................28
11.1 COVENANTS OF THE PARTNERSHIP AND THE PARTNERS.....................28
11.2 COVENANTS OF THE PARTNERSHIP AND THE GENERAL PARTNER..............29
ARTICLE XII RECORDS AND REPORTS...............................................31
12.1 MAINTENANCE AND INSPECTION OF PARTNER REGISTER....................31
12.2 MAINTENANCE AND INSPECTION OF PARTNERSHIP AGREEMENT...............31
12.3 MAINTENANCE AND INSPECTION OF OTHER RECORDS.......................31
ARTICLE XIII BOOKS, FINANCIALS AND TAX MATTERS................................31
13.1 BOOKS AND RECORDS.................................................31
13.2 FINANCIAL REPORTS.................................................32
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13.3 TAX RETURNS.......................................................32
13.4 TAX ELECTIONS.....................................................32
13.5 TAX MATTERS PARTNER...............................................32
13.6 THE PARTNERSHIP ACCOUNTANT........................................33
ARTICLE XIV NONDISCLOSURE OF INFORMATION......................................33
14.1 CONFIDENTIALITY...................................................33
14.2 DUTY OF CARE......................................................34
ARTICLE XV TRANSFERABILITY....................................................34
15.1 TRANSFERABILITY OF INTERESTS......................................34
15.2 OPTION TO PURCHASE................................................34
15.3 BPU RIGHT TO SELL.................................................35
15.4 BPU TAG-ALONG RIGHT...............................................35
ARTICLE XVI SUBSTITUTED PARTNERS..............................................36
ARTICLE XVII WAIVER OF PARTITION/COVENANT AGAINST RESIGNATION.................36
17.1 WAIVER OF PARTITION...............................................36
17.2 COVENANT NOT TO RESIGN OR DISSOLVE................................36
ARTICLE XVIII ADDITIONAL PARTNERS.............................................37
ARTICLE XIX DISSOLUTION.......................................................37
19.1 DISSOLUTION.......................................................37
19.2 DEEMED LIQUIDATION................................................38
19.3 BANKRUPTCY, ETC., OF A LIMITED PARTNER............................38
ARTICLE XX DISPUTE RESOLUTION.................................................38
ARTICLE XXI MISCELLANEOUS.....................................................39
21.1 AMENDMENTS........................................................39
21.2 CHECKS, DRAFTS, EVIDENCE OF INDEBTEDNESS..........................39
21.3 NOTICES...........................................................39
21.4 GOVERNING LAW.....................................................40
21.5 HEADINGS..........................................................40
21.6 EXTENSION NOT A WAIVER............................................40
21.7 PUBLICITY.........................................................40
21.8 CONSTRUCTION AND AMENDMENT........................................40
21.9 FURTHER ACTION....................................................40
21.10 VARIATION OF PRONOUNS.............................................40
21.11 SUCCESSORS AND ASSIGNS............................................41
21.12 COUNTERPARTS......................................................41
21.13 AMBIGUITIES.......................................................41
21.14 TIME OF THE ESSENCE...............................................41
21.15 ENTIRE AGREEMENT..................................................41
Exhibit A Interests
Exhibit B Cheniere's Contribution
Exhibit C BPU's Contribution
Exhibit D Land Plat
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LIMITED PARTNERSHIP AGREEMENT
This Limited Partnership Agreement (this "Agreement") of Corpus Christi
LNG, LP, is entered into and effective as of May 15, 2003 (the "Effective
Date"), by and among Corpus Christi LNG-GP, Inc., a Delaware corporation
("Corpus GP"), as the general partner, BPU LNG, a Delaware limited liability
company, as a limited partner ("BPU"), and Cheniere LNG, Inc., a Delaware
corporation, as a limited partner ("Cheniere"). Cheniere and BPU and any other
party admitted as a limited partner in accordance with the terms hereof are
hereinafter collectively referred to as the "Limited Partners" and individually,
as a "Limited Partner". The General Partner and the Limited Partners are herein
collectively referred to as the "Partners".
R E C I T A L S:
This Partnership was formed as of the Effective Date to develop, build,
own and operate a liquefied natural gas receiving and regasification facility at
the Sherwin Alumina site in Corpus Christi, Texas and as further shown on the
plat on Exhibit D (the "Project");
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the General Partner
and the Limited Partners hereby agree as follows:
ARTICLE I
DEFINITIONS
The following terms, as used herein, shall have the following respective
meanings:
1.1 "Act" shall mean the Delaware Revised Uniform Limited Partnership
Act, as may from time to time have been or may be amended, or from and after the
date any successor statute applicable to the Partnership, in each case as
amended at such time by amendments that are, at that time applicable to the
Partnership.
1.2 "Additional Contributed Equity" means, with respect to any Partner
the amount of capital contributed by such Partner to the Partnership in
accordance with Section 3.4 of this Agreement.
1.3 "Adjusted Capital Account Balance" means, with respect to any
Partner for any period, the balance, if any, in such Partner's Capital Account
as of the end of such period after giving effect to adjustments in accordance
with Section 1.704 of the Regulations.
1.4 "Affiliate" means with respect to any Person, a second Person
which is controlled by, controls or is under common control with such first
Person and, with respect to the Partnership, any constituent party of the
Partnership. For purposes of the foregoing, "control" of any Person means the
power to direct the management and policies of such Person, whether by the
ownership of voting securities, by contract or otherwise.
1.5 "Affiliate Transaction" has the meaning set forth in Section 10.8.
1.6 "Agreement" means this Limited Partnership Agreement, as amended
or restated from time to time.
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1.7 "Asset Value" with respect to any Partnership Asset means:
(a) The fair market value or otherwise agreed value on the date
of contribution of any asset contributed to the Partnership by any Partner;
(b) The fair market value or otherwise agreed value on the date
of distribution of any asset distributed by the Partnership to any Partner as
consideration for an Interest in the Partnership;
(c) The fair market value of all Partnership Assets at the time
of the happening of any of the following events: (A) the admission of a Partner
to, or the increase of an Interest of an existing Partner in, the Partnership in
exchange for Contributed Equity; or (B) the liquidation of the Partnership under
Section 1.704-1(b)(2)(ii)(g) of the Regulations; or
(d) The basis of the asset in all other circumstances.
1.8 "Bankruptcy" with respect to any Person means any one of:
(a) The filing of a voluntary petition in bankruptcy or
reorganization or the filing for adoption of an arrangement under the United
States Bankruptcy Code;
(b) The making of a general assignment for the benefit of
creditors; or
(c) The commencement against such Person of an involuntary case
seeking the liquidation or reorganization of such Person under the Bankruptcy
Laws or an involuntary case or proceeding seeking the appointment of a receiver,
custodian, trustee or similar official for it, or to take possession of all or
substantially all of its property, and any of the following events occur (i)
such Person consents to such involuntary case or proceeding, (ii) the petition
commencing the involuntary case or preceding remains undismissed and unstayed
for a period of sixty (60) days, or (iii) an order for relief shall have been
issued or entered therein or a receiver, custodian, trustee or similar official
appointed.
1.9 "Bankruptcy Action" means:
(a) Taking any action that might cause the Partnership or the
General Partner to become insolvent; or
(b) Commencing any case, proceeding or other action on behalf
of the Partnership or the General Partner under any existing or future law of
any jurisdiction relating to bankruptcy, insolvency, reorganization or relief of
debtors;
(c) Instituting proceedings to have the Partnership or the
General Partner adjudicated as bankrupt or insolvent;
(d) Consenting to, or acquiescing in, the institution of
bankruptcy or insolvency proceedings against the Partnership or the General
Partner or the Partnership or the General Partner being adjudicated as bankrupt
or insolvent;
(e) Filing a petition or consenting to a petition seeking
reorganization, arrangement, adjustment, winding-up, dissolution, composition,
liquidation or other relief on
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behalf of the Partnership or the General Partner of its debts under federal or
state law relating to bankruptcy;
(f) Seeking or consenting to the appointment of a receiver,
Liquidator, assignee, trustee, sequestrator, custodian or any similar official
for the Partnership or the General Partner or a substantial portion of either of
their properties or the appointment thereof;
(g) Making any assignment for the benefit of the Partnership's
or the General Partner's creditors; or
(h) Taking any action or causing the Partnership or the General
Partner to take any action in furtherance of any of the foregoing.
1.10 "Bankruptcy Law" means Title 11 U.S. Code, or any similar federal
or state law for the relief of debtors.
1.11 "Capital Account" means the capital account maintained for each
Partner in accordance with Section 4.1 of this Agreement.
1.12 "Change of Control" means:
(a) with respect to any Person, the occurrence of any of the
following:
(1) the sale of all or substantially all of that Person's
assets, stock, membership or Partnership interests;
(2) the merger, reorganization, share exchange,
recapitalization, restructuring or consolidation of that Person, other than a
transaction that would result in the voting securities of that Person
outstanding immediately prior thereto to continue to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least 50% of the combined voting power of the voting
securities of that Person or such surviving entity outstanding immediately after
such transaction; or
(3) the acquisition by any "Person" or "Group" (within the
meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934)
of an aggregate of 40% or more of the beneficial ownership (within the meaning
of Rule 13d-3 of the Securities Exchange Act of 1934) of the issued and
outstanding voting securities of that Person; or
(b) with respect to the Partnership:
(1) the admission by the Partnership of any additional or
substitute General Partner; or
(2) any issuance of additional Limited Partner Interests or any
sale by Cheniere or any of Cheniere's Affiliates of their General Partner or
Limited Partner Interests such that the total of Interests owned by Cheniere and
its Affiliates constitutes less than twenty-five percent (25%) of all
then-outstanding Interests.
1.13 "Construction Period" means that period beginning with the receipt
by the Partnership of Project Approval and ending immediately prior to the first
tolling of liquid natural gas through the Project for customers of the
Partnership.
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1.14 "Contributed Equity" of any Partner means that amount of capital
actually contributed by the Partner to the Partnership pursuant to this
Agreement.
1.15 "Contributing Partner" has the meaning set forth in Section 3.5.
1.16 "Contribution Date" has the meaning set forth in Section 3.4.
1.17 "Control" (including the terms "controlling", "controlled by" or
"under common control with") means the possession, directly or indirectly,
through one or more intermediaries, of the power to direct or cause the
direction of the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
1.18 "Delinquent Contribution" has the meaning set forth in Section
3.5.
1.19 "Delinquent Partner" has the meaning set forth in Section 3.5.
1.20 "Depreciation" for each fiscal year shall mean an amount equal to
the depreciation, amortization or other cost recovery deduction allowable with
respect to a Partnership Asset for such fiscal year, except that if the Asset
Value of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of such fiscal year, Depreciation with respect to that
asset shall be an amount that bears the same ratio to such beginning Asset Value
as the federal income tax depreciation, amortization or other cost recovery
deduction with respect to that asset for such fiscal year bears to such
beginning adjusted tax basis; provided, however, that if the federal income tax
depreciation, amortization or other cost recovery deduction with respect to that
asset for such fiscal year is zero, Depreciation shall be determined with
reference to such beginning Asset Value using any reasonable method determined
by the General Partner.
1.21 "Director" means the Person designated by BPU to serve as an
unpaid member of the highest governing body of the General Partner in accordance
with Section 10.1 hereof.
1.22 "Early Contribution Date" has the meaning set forth in Section
3.4(b).
1.23 "Environmental Laws" means any federal, state, or local statute,
code, ordinance, rule, regulation, permit, consent, approval, license, judgment,
order, writ, judicial decision, common law rule, decree, agency interpretation,
injunction or other authorization or requirement whenever promulgated, issued,
or modified, including the requirement to register underground storage tanks,
relating to:
(a) emissions, discharges, spills, releases, or threatened
releases of pollutants, contaminants, hazardous substances, materials containing
hazardous substances, or hazardous or toxic materials or wastes into ambient
air, surface water, groundwater, watercourses, publicly or privately owned
treatment works, drains, sewer systems, wetlands, septic systems, or onto land;
(b) the use, treatment, storage, disposal, handling,
manufacturing, transportation. or shipment of hazardous substances, materials
containing hazardous substances, or hazardous and/or toxic wastes, material,
products, or by-products (or of equipment or apparatus containing hazardous
substances) as defined in or regulated under any statutes and their implementing
regulations including but not limited to: the Hazardous Materials Transportation
Act, 49 U.S.C. Section 1801 et seq., the Resource Conservation and Recovery Act,
42 U.S.C. Section 6901
4
et seq., the Comprehensive Environmental Response, Compensation and Liability
Act, as amended by the Superfund Amendments and Reauthorization Act, 42 U.S.C.
Section 9601 et seq., and/or the Toxic Substance Control Act. 15 U.S.C. Section
2601 et seq., each as amended from time to time; 42 U.S.C. 7401 et seq., 15,
U.S. C. 791 et seq., and
(c) otherwise relating to the pollution or the protection of
human health or the environment.
1.24 "FERC" means the Federal Energy Regulatory Commission.
1.25 "Financing Plan" means any financing plan for the operating and
construction expenses related to the Project during the Construction Period,
which Financing Plan shall describe in detail all intended sources and uses of
all Partnership funds during the Construction Period, including, without
limitation, the following:
(a) copies of or reasonably detailed descriptions of all
material terms of all agreements to be entered into by the Partnership or by the
General Partner on behalf of the Partnership for the admission of additional
Limited Partners, including alternate classes of partnership interests and any
dilution of existing Limited Partners' Interests;
(b) copies of or reasonably detailed descriptions of all
material terms of all agreements to be entered into by the Partnership or by the
General Partner on behalf of the Partnership for the obtainment of loans or debt
financing by the Partnership or by the General Partner on behalf of the
Partnership;
(c) copies of or reasonably detailed descriptions of all
material terms of all agreements to be entered into by the Partnership or by the
General Partner on behalf of the Partnership for the purchase of goods or
services in excess of One Hundred Thousand Dollars ($100,000) from a single
provider in one or more transactions; and
(d) projected monthly statements of operations for the
Construction Period.
1.26 "GAAP" means generally accepted accounting principles consistently
applied in the United States of America.
1.27 "General Partner" means Corpus Christi LNG-GP, Inc. (also referred
to herein as "Corpus GP"), the sole general partner of the Partnership or any
replacement or successor appointed pursuant to the provisions of this Agreement.
1.28 "Governmental Entity" means any United States federal, state or
local, or any foreign government, governmental authority, regulatory or
administrative agency, governmental commission, court or tribunal (or any
department, bureau or division thereof).
1.29 "Governmental Permits" means all franchises, approvals,
authorizations, permits, licenses, easements, registrations, qualifications,
leases, variances and similar rights required by the Partnership, as the case
may be, from any Governmental Entity for the Project.
1.30 "Indemnitee" has the meaning set forth in Section 10.5(b).
1.31 "Interest" means the ownership interest of a Partner in the
Partnership (which shall be considered personal property for all purposes),
consisting of (i) such Partner's
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Percentage Interest in Profit, Loss, allocations of other items of income, gain,
deduction, and loss and distributions, (ii) such Partner's right to vote or
grant or withhold consents with respect to Partnership matters as provided
herein or in the Act, and (iii) such Partner's other rights and privileges as
herein provided.
1.32 "I.R.C." means the Internal Revenue Code of 1986, as amended.
1.33 "Limited Partners" means the parties set forth on Exhibit A and
each of the parties who may hereafter become additional or substituted Limited
Partners in accordance with this Agreement.
1.34 "Liquidator" has the meaning set forth in Section 19.1(b).
1.35 "Major Decisions" has the meaning set forth in Section 10.2.
1.36 "Majority" means more than 50%.
1.37 "Majority In Interest" means Partners holding a Majority of the
Percentage Interests.
1.38 "Material Adverse Effect" means (a) any impairment of the ability
of the Partnership or any Partner to perform its obligations under this
Agreement or to conduct business generally, or of any Partner to enforce any
obligation of any other Partner or of the Partnership, or (b) any other material
adverse effect on the business, operations, properties, assets, condition or
prospects (financial or otherwise) of the Partnership or any Partner or any
Property of the Partnership, or (c) any impairment of the validity or
enforceability of this Agreement.
1.39 "Minimum Gain" has the same meaning as the term "partnership
minimum gain" in Section 1.704-2(b)(2) and (d) of the Regulations.
1.40 "Net Cash Flow" means, for any period, the excess of (a) revenues
for such period, over (b) expenses for such period.
1.41 "Nonrecourse Deductions" has the same meaning as in Section
1.704-2(b)(1) of the Regulations.
1.42 "Other Partners" means each Partner in the Partnership other than
the General Partner.
1.43 "Partner" means each of the parties who executes this Agreement or
a counterpart of this Agreement as either a General Partner or a Limited Partner
and each of the parties who may hereafter become additional or substituted
Limited Partners in accordance herewith. References to the Partner in the
singular or as him, her, it, itself, or other like references shall also, where
the context so requires be deemed to include the plural or the masculine or
feminine reference, as the case may be; references to the Partners in the
plural, or other like references shall also, where the context so requires, be
deemed to include the singular, as the case may be.
1.44 "Partner Nonrecourse Debt" has the same meaning as the term
"partner nonrecourse debt" in Section 1.704-2(b)(4) of the Regulations.
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1.45 "Partner Nonrecourse Debt Minimum Gain" has the same meaning as
the term "partner nonrecourse debt minimum gain" in Section 1.704-2(i)(2) of the
Regulations and shall be determined in the manner set forth in Section
1.704-2(i)(3) of the Regulations.
1.46 "Partner Nonrecourse Deductions" has the meaning set forth in
Section 1.704-2(i)(1) of the Regulations.
1.47 "Partnership" means Corpus Christi LNG, L.P.
1.48 "Partnership Accountant" has the meaning set forth in Section
13.6.
1.49 "Partnership Assets" means all of the personal and real property,
tangible or intangible, owned by the Partnership during the term of its
existence.
1.50 "Partnership Minimum Gain" has the meaning set forth in Section
1.704-2(d) of the Regulations.
1.51 "Percentage Interest" means for each Partner the percentage set
forth opposite such Partner's name on Exhibit A as adjusted pursuant to the
provisions of Section 3.5. The combined Percentage Interest of all Partners
shall at all times equal one hundred percent (100%).
1.52 "Person" means an individual, partnership, limited liability
company, corporation, business trust, joint stock company, trust, unincorporated
association, joint venture, governmental authority or other entity of whatever
nature.
1.53 "Postconstruction Period" means that period beginning on the first
day on which liquid natural gas is tolled through the Project facilities for
customers of the Partnership.
1.54 "Preconstruction Period" means that period beginning with the
formation of the Partnership and ending upon the receipt by the Partnership of
Project Approval.
1.55 "Profit" and "Loss" means for each fiscal year or other period, an
amount equal to the Partnership's taxable income or tax loss for the fiscal year
or other period, determined in accordance with Section 703(a) of the I.R.C.
(including all items of income, gain, loss or deduction required to be stated
separately under Section 703(a)(1) of the I.R.C.), with the following
adjustments:
(a) any income of the Partnership that is exempt from federal
income tax and not otherwise taken into account in computing Profit or Loss will
be added to taxable income or tax loss;
(b) any expenditures of the Partnership described in Section
705(a)(2)(B) of the I.R.C. or treated as Section 705(a)(2)(B) expenditures under
Section 1.704-l(b)(2)(iv)(i) of the Regulations, and not otherwise taken into
account in computing Profit or Loss, will be subtracted from taxable income or
tax loss;
(c) gain or loss resulting from any disposition of Partnership
Assets with respect to which gain or loss is recognized for federal income tax
purposes will be computed by reference to the Asset Value of the property,
notwithstanding that the adjusted tax basis of the property differs from its
Asset Value;
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(d) in lieu of Depreciation, amortization and other cost
recovery deductions taken into account in computing taxable income or tax loss,
there will be taken into account Depreciation for the fiscal year or other
period as determined in accordance with Section 1.704-l(b)(2)(iv)(g) of the
Regulations;
(e) any items specially allocated pursuant to Section 4.3 and
Section 4.5 shall not be considered in determining Profit or Loss; and
(f) any increase or decrease to Capital Accounts as a result of
any adjustment to the book value of Partnership Assets pursuant to Section
1.704-1(b)(2)(iv)(f) or (g) of the Regulations shall constitute an item of
Profit or Loss as appropriate.
1.56 "Project" has the meaning set forth in the Recitals to this
Agreement.
1.57 "Project Approval" means the Partnership's receipt of all final
and non-appealable Governmental Permits, including all FERC approvals, necessary
to commence construction of the Project on the Property.
1.58 "Property" means that certain parcel of real property contributed
to the Partnership by BPU in accordance with Section 3.1 hereof, as is more
completely described on Exhibit C hereto.
1.59 "Regulations" means the Treasury regulations, including temporary
regulations, promulgated under the I.R.C., as from time to time in effect.
1.60 "Requirements of Law" means, as to any Person, the Certificate or
Articles of Formation, Certificate or Articles of Incorporation, bylaws and
operating agreement or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other governmental authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
1.61 "Team Member" means that person designated by BPU in accordance
with Section 10.1 hereof to serve as an employee of the General Partner whose
salary shall be charged against BPU's Additional Contributed Equity specified in
Section 3.4 hereof.
ARTICLE II
FORMATION OF THE PARTNERSHIP
2.1 Formation of Limited Partnership. The Partners desire to form a
limited partnership pursuant to and in accordance with the provisions of the
Act. This Agreement constitutes the partnership agreement of such Partnership,
effective upon the date of the certificate of limited partnership as filed with
the office of the Secretary of State of Delaware. All references to sections of
the Act include any corresponding provision or provisions of any such successor
statute. Except as expressly provided herein to the contrary, the rights and
obligations of the Partners and the administration and termination of the
Partnership shall be governed by the Act.
2.2 Name. The name of the Partnership is Corpus Christi LNG, L.P. The
General Partner may, with prior written approval of a majority in number of the
Limited Partners, change the name of the Partnership from time to time and shall
give prompt written notice thereof to the Limited Partners; provided, however,
that such name may not contain any portion of the name
8
or xxxx of any Limited Partner without such Limited Partner's consent. In any
such event, the General Partner shall promptly file in the office of the
Secretary of State of Delaware an amendment to the Partnership's certificate of
limited partnership reflecting such change of name.
2.3 Character of Business. The sole purpose of the Partnership shall
be to develop, build, own and operate a liquefied natural gas ("LNG") receiving
and regasification facility at the Sherwin Alumina site in Corpus Christi, Texas
and any and all activities necessary or incidental to the foregoing; provided,
however, that under no circumstances shall the Partnership engage in any
trading, hedging, futures activities, or any other derivative transactions
relating to the buying and selling of natural gas (including LNG) that would
expose the Partnership to commodity price fluctuations (but this shall not
preclude the Partnership from taking custody of natural gas in connection with
the normal operation of the Project for the purpose of processing such natural
gas but which does not expose the Partnership to commodity price fluctuations).
The Partnership shall not undertake, and the General Partner shall not without
prior written consent of all of the Limited Partners cause or attempt to cause
the Partnership to undertake, any business or other activity other than those
specified in this Section 2.3.
2.4 Registered Office and Agent. The name and address of the
Partnership's initial registered agent and registered office is Corporation
Service Company, 0000 Xxxxxxxxxxx Xxxx, Xxxxx 000, Xxxxxxxxxx, Xxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000. The Partnership's initial office and principal place of
business shall be 000 Xxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000. The General
Partner may change such registered agent, registered office, or principal place
of business from time to time upon prior written notice to all Limited Partners;
provided, however, that the registered office and registered agent of the
Corporation shall always be located in the continental United States of America.
The Partnership may from time to time have such other place or places of
business as may be determined by the General Partner.
2.5 Other Filing. The General Partner shall, or shall cause the
Partnership to, file, execute, swear to, acknowledge, deliver, or record from
time to time, such limited partnership certificates, certificates of amendment,
certificates of cancellation, or other certificates, consents to and
appointments of agents for service of process, or any other certificates,
notices, statements or instruments as the General Partner deems necessary or
appropriate under the Act or under the laws of any jurisdiction in which the
Partnership is doing business to establish and continue the Partnership as a
limited partnership, to conduct its activities, to protect the limited liability
of the Partners or otherwise to comply with applicable law. The General Partner
shall file, from time to time, such fictitious or tradename statements or
certificates in such jurisdictions and offices as the General Partner considers
necessary or appropriate.
2.6 Term and Fiscal Year. The existence of the Partnership shall be
perpetual, unless dissolved as hereinafter provided. The fiscal year of the
Partnership shall end on December 31 of each calendar year unless, for United
States federal income tax purposes, another fiscal year is required. The
Partnership shall have the same fiscal year for United States federal income tax
purposes and for accounting purposes.
ARTICLE III
CAPITAL/PERCENTAGE INTERESTS/FUTURE FINANCING
3.1 Capital Contributions. The Parties agree that on the date hereof,
(i) Cheniere shall contribute the assets set forth on Exhibit B attached hereto
and (ii) BPU agrees to contribute the assets set forth on Exhibit C attached
hereto.
9
3.2 Percentage Interests Capital. Upon execution of this Agreement and
the contribution of the assets set forth in Section 3.1, each Limited Partner's
initial Capital Contribution and Percentage Interests shall be in the amount set
forth on Exhibit A.
3.3 Future Financing. The Partners anticipate that during the
Postconstruction Period the Partnership may require additional funds for capital
expenditures or working capital requirements, and any such additional funding
shall be obtained from any of the following sources as contained in a budget
prepared by the General Partner:
(a) cash reserves of the Partnership;
(b) loans to be obtained from banks and other non-Affiliate
independent sources;
(c) with the approval of the Limited Partners, Additional
Contributed Equity made to the Partnership by the Partners, in proportion to
their Percentage Interests, in amounts determined according to Section 3.4 of
this Agreement and subject to Section 3.6 of this Agreement; or
(d) any other funding source to be determined by the General
Partner and approved by the Limited Partners.
3.4 Additional Contributed Equity.
During the Preconstruction Period only:
(a) In the event that the Partnership shall require or desire
funds in excess of those available to the Partnership from operations, the
General Partner may call for additional capital contributions to be contributed
to the Partnership pursuant to the terms of this Section 3.4 ("Additional
Contributed Equity"). If the General Partner determines the Partnership requires
such excess funds, the General Partner shall give written notice to the Other
Partners of (i) the purpose for which such Additional Contributed Equity is
required, (ii) the date on which the Additional Contributed Equity is due to the
Partnership, which date (the "Contribution Date") shall not be less than fifteen
(15) nor more than forty-five (45) days following the date of such notice and
(iii) the amount of Additional Contributed Equity due from each Partner, which
amount shall be based on such Partner's Percentage Interest. In the event of a
call for Additional Contributed Equity that is not expressly contemplated in the
budget, (A) the General Partner shall give written notice to the Other Partners
of (i) the purpose for which such Additional Contributed Equity is required,
(ii) the Contribution Date, which date shall not be less than ninety (90) nor
more than one hundred twenty (120) days following the date of such notice, and
(iii) the amount of Additional Contributed Equity due from each Partner, which
amount shall be based on such Partner's Percentage Interest and (B) the terms of
Section 3.4(b) shall apply. Notwithstanding any other provision of this
Agreement or this Section 3.4, pursuant to Section 3.1 above and Exhibit C
attached hereto, that the first Four Million Five Hundred Thousand and No/100
Dollars ($4,500,000) of Additional Contributed Equity shall be contributed by
BPU (including any transferees and assignees of any portion of BPU's Interest)
in complete satisfaction of its obligation to contribute capital as provided in
Section 3.1 (ii) above and Exhibit C hereto, and which contribution shall not
alter the Percentage Interests of the Partners. The collection from BPU and the
subsequent disbursement by the General Partner of the above referenced Four
Million Five Hundred Thousand and No/100 Dollars ($4,500,000) shall be performed
in accordance with cash call procedures agreed between the Partners. The General
Partner shall prepare and submit to BPU a rolling three (3) month forecast of
expenditures until
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the above amount has been fully expended. The General Partner shall not submit a
cash call request to BPU in excess of the expenditures detailed in this
forecast. On or before the Contribution Date, each Partner shall pay to the
Partnership the amount due from such Partner in immediately available funds. It
is acknowledged by the parties that the Partnership may need additional funds
following the date hereof and that the General Partner may be required to call
for Additional Contributed Equity.
(b) Notwithstanding anything to the contrary contained in this
Section 3.4 or Section 3.5, if the General Partner calls for Additional
Contributed Equity that is not expressly contemplated in the budget and the
General Partner determines, in its reasonable business judgment, that the
Partnership requires such funds prior to the Contribution Date, the General
Partner shall provide notice to the Other Partners of such earlier need for
funds and the date by which such funds are required (the "Early Contribution
Date"). If any Partner meets such capital call on the Early Contribution Date,
the remaining Partners shall have until the Contribution Date to contribute the
required Additional Contributed Equity; provided, that the amount of such
required contribution shall accrue interest at the rate of eighteen percent
(18%) per annum from the Early Contribution Date through the date that such
Other Partners make the required contributions. In addition, if such Other
Partners fail to make any required contribution (together with all accrued
interest) by the Contribution Date, such Partner shall be deemed a Delinquent
Partner subject to Section 3.5.
(c) Notwithstanding any other provision herein contained, the
General Partner shall not be permitted pursuant to this Section 3.4 to call for
Additional Contributed Equity, whether via a single call or any series of calls
by the General Partner for Additional Capital, in excess of Nine Million dollars
($9,000.000.00) without first obtaining the written consent of all Limited
Partners.
3.5 Delinquent Contributions. If a Partner fails to contribute any
Additional Contributed Equity required pursuant to Section 3.4 (a "Delinquent
Partner") by the Contribution Date, any other Partner (other than an Affiliate
of the Delinquent Partner) which is not a Delinquent Partner (a "Contributing
Partner") may, but shall not be required, to contribute the portion of such
Additional Contributed Equity that the Delinquent Partner failed to contribute
(the "Delinquent Contribution"). If the Contributing Partner makes a
contribution in the amount of the Delinquent Contribution, the Delinquent
Partner's Percentage Interest shall be reduced to an amount equal to (A) the
aggregate amount of Contributed Equity by all Partners (determined immediately
prior to the Delinquent Contribution) multiplied by (B) the Delinquent Partner's
Percentage Interest, and (C) 0.9, divided by (D) the aggregate amount of
Contributed Equity by all Partners (including the contribution of the Delinquent
Contribution), and then multiplied by (E) 100, and the Percentage Interest of
the Contributing Partner who made the Delinquent Contribution shall be increased
proportionately. In the event a Partner fails to contribute any Additional
Contributed Equity required pursuant to Section 3.4 on more than one occasion,
such Delinquent Partner shall thereafter have no voting or approval rights under
this Agreement (including but not limited to the approval rights under Section
10.2) except the right to approve or vote on amendments to this Agreement but
only to the extent any such amendment would effect the distributions or
allocations to such Limited Partner or its limited liability as a Limited
Partner.
3.6 Construction Financing. At such time as is reasonably determined
by the General Partner but in no event later than obtaining Project Approval and
at least ninety (90) days prior to the execution of any material transaction
contemplated in a Financing Plan, the General Partner shall prepare and
distribute to the Partners a draft Financing Plan. Subject to the
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provisions of this Section 3.6 and Sections 10.2 and 10.8 hereof, the General
Partner shall have the right, and power to effect such Financing Plan on behalf
of the Partnership to satisfy all of the Partnership's capital or funding needs
during the Construction Period.
(a) Notwithstanding the foregoing, the Limited Partners shall,
within seven (7) business days after the delivery of any Financing Plan deliver
to the General Partner in writing, if at all, questions or objections regarding
any transaction contemplated by such Financing Plan (an "LP Query"). Within
seven (7) business days after its receipt of any LP Query, the General Partner
shall meet with the Limited Partners, either in person or telephonically in
accordance with Article VIII hereof, to consider and discuss the issues raised
in the LP Query.
(b) Any equity financing obtained by the Partnership shall
dilute each of the Limited Partners pro rata based on the Percentage Interests
of such Limited Partners. If the General Partner or its Affiliate provides
equity financing for the construction of the Project it will do so at terms not
less favorable than those terms obtainable from an unaffiliated third party.
Each Limited Partner shall have the option to participate in any equity
financing pro rata based on the Percentage Interests of such Limited Partners
relative to all other Limited Partners. In the event a Limited Partner elects to
not participate in the equity financing of the Project during the Construction
Period, the penalty provisions described in Section 3.5 (c) shall not apply.
(c) Neither the General Partner nor any Affiliate of the
General Partner shall be permitted to provide to the Partnership debt or equity
financing pursuant to this Section 3.6 unless the General Partner first obtains
BPU's express written consent.
(d) Notwithstanding the foregoing, and provided BPU has met its
funding obligations per Section 3.4(a) of the Agreement, the General Partner
shall not be permitted to effect any Financing Plan the result of which would be
the dilution of BPU's Interest to less than twenty percent (20%) without first
obtaining BPU's express written consent, such consent not to be unreasonably
withheld; provide however, if BPU does not object to the Financing Plan as
submitted with fourteen (14) days of receipt, the Financing Plan shall be deemed
to be approved as submitted. In the event BPU does not consent to the Financing
Plan as submitted by the General Partner, the parties shall discuss alternatives
or modifications to such Financing Plan that would be acceptable to both
parties.
(e) Subject to the provisions of Sections 10.2 and 10.8 hereof,
the General Partner may, without the consent of the Limited Partners, exceed the
provisions of any Financing Plan approved by the Limited Partners pursuant to
Section 3.6(d) above by up to ten percent (10%) on any line item or up to ten
percent (10%) on overall expenditures budgeted and may apply savings in any line
item toward expenditures toward expenditures for other line items.
Notwithstanding the foregoing, the General Partner shall not be permitted to
exceed the provisions of any Financing Plan approved by the Limited Partners
pursuant to Section 3.6(d) above by more than ten percent (10%) without first
obtaining BPU's express written consent.
3.7 No Further Contributed Equity. Except as expressly provided in
this Agreement or with the prior written consent of all Partners, no Partner
shall be required or entitled to contribute any other or further capital to the
Partnership, nor shall any Partner be required to loan any
12
funds to the Partnership. No Partner will have any obligation to restore any
negative balance in its Capital Account upon liquidation or dissolution of the
Partnership.
3.8 Return of Capital. Except as herein provided with respect to
distributions during the term of the Partnership or following dissolution, no
Partner has the right to demand a return of such Partners' Contributed Equity
(or the balance of such Partner's Capital Account). Further, no Partner has the
right (i) to demand and receive any distribution from the Partnership in any
form other than cash or (ii) to bring an action of partition against the
Partnership or the Partnership Assets. No Partner shall be entitled to or shall
receive interest on such Partner's Contributed Equity. No Partner may withdraw
any capital from the capital of the Partnership except as expressly provided
herein or under the Act. No Partner shall have any priority over any other
Partner with respect to the return of any Contributed Equity, except as
expressly provided herein.
3.9 Benefit of Obligations. Any obligation of the Partners to make
capital contributions to the Partnership shall not inure to the benefit of any
Person other than the Partnership and the Partners.
3.10 Return of Real Property. Notwithstanding any other provision
herein contained, in the event that the Partnership determines for any reason to
cease development of the Project as a liquefied natural gas receiving and
regasification facility prior to the receipt of FERC approval for such facility,
or in the event that the Partnership has for any reason not obtained the
required FERC approval for the Project within five (5) years after the Effective
Date of this Agreement, then BPU shall have the right to cause the dissolution
of the Partnership. Upon such dissolution any and all real property contributed
to the Partnership, together with all improvements thereon or thereto, shall be
distributed to BPU and without any change in the status of title to such real
property. For the avoidance of doubt, the Property shall be conveyed to BPU
without any additional title exceptions or encumbrances other than those
existing as of the date of this Agreement or expressly approved in writing by
BPU. In addition, in the event of such dissolution, each Partner is hereby
granted the unrestricted right to use any intellectual property produced or
developed by or for the Partnership in connection with the Project.
ARTICLE IV
CAPITAL ACCOUNTS, ALLOCATIONS, AND TAX MATTERS
4.1 Capital Accounts. A separate Capital Account will be maintained
for each Partner in accordance with Section 1.704-1(b)(2) of the Regulations;
provided, however, that the initial Capital Accounts for each Partner shall be
equal to the amount set forth opposite such Partner's name on Exhibit A.
Consistent therewith, the Capital Account of each Partner will be determined and
adjusted as follows:
(a) Each Partner's Capital Account will be credited with:
(1) Any contributions of cash made by such Partner to the capital of
the Partnership plus the Asset Value of any property contributed by such
Partner to the capital of the Partnership (net of any liabilities to
which such property is subject or which are assumed by the Partnership),
including, without limitation any contributions made pursuant to Section
3.4;
(2) The Partner's distributive share of Profit and items thereof
allocated to such Partner; and
13
(3) Any other increases required by Section 1.704-1(b)(2) of the
Regulations.
(b) Each Partner's Capital Account will be debited with:
(1) Any distributions of cash made from the Partnership to such
Partner plus the Asset Value of any property distributed in kind to such
Partner (net of any liabilities to which such property is subject or
which are assumed by such Partner);
(2) The Partner's distributive share of Loss and items thereof
allocated to such Partner; and
(3) Any other decreases required by Section 1.704-1(b)(2) of the
Regulations.
The provisions of this Section 4.1 relating to the maintenance of Capital
Accounts have been included in this Agreement to comply with Section 704(b) of
the I.R.C. and the Regulations promulgated thereunder and will be interpreted
and applied in a manner consistent with those provisions. Notwithstanding
anything to the contrary in the preceding provisions of this Section 4.1, in no
event shall any change, modification or other event resulting from such
provisions modify the distributions provided in Article V.
4.2 Allocation of Profit and Loss.
(a) Profit. Subject to the special allocation provisions of
Sections 4.3, 4.4, 4.5 and 4.6 of this Agreement, the Profits for any fiscal
year (or portion thereof) shall be allocated to the Partners, (i) first, to each
Partner to the extent that and in proportion to which they were allocated losses
under Sections 4.2(b) or 4.3 below, then (ii) pro rata, in accordance with their
Percentage Interests.
(b) Loss. Subject to the special allocation provisions of
Section 4.3 of this Agreement, the Losses for any fiscal year (or portion
thereof) shall be allocated as follows:
(i) First, pro rata to each Partner, until its Adjusted
Capital Account Balances is reduced to zero;
(ii) Thereafter, to the extent allowable, pro rata among
the partners in accordance with their respective partnership Percentage
Interests.
4.3 Special Allocations.
(a) Minimum Gain Chargeback. Notwithstanding any other
provision of this Article IV, if there is a net decrease in Partnership Minimum
Gain during any fiscal year, then each Partner shall be allocated such amount of
income and gain for such year (and subsequent years, if necessary) determined
under and in the manner required by Sections 1.704-2(f) and (g) of the
Regulations as is necessary to meet the requirements for a chargeback of
Partnership Minimum Gain as provided in that Regulation.
(b) Partner Nonrecourse Debt Minimum Gain Chargeback.
Notwithstanding any other provision of this Article IV except Section 4.3(a), if
there is a net decrease in Partner Nonrecourse Debt Minimum Gain attributable to
a Partner Nonrecourse Debt during any fiscal year, any Partner who has a share
of the Partner Nonrecourse Debt Minimum Gain attributable to such Partner
Nonrecourse Debt determined in accordance with Section 1.704-2(i)(5) of the
14
Regulations, shall be allocated such amount of income and gain for such year
(and subsequent years, if necessary) determined under and in the manner required
by Section 1.704-2(i)(4) of the Regulations as is necessary to meet the
requirements for a chargeback of Partner Nonrecourse Debt Minimum Gain as is
provided in that Regulation.
(c) Qualified Income Offset. If a Partner unexpectedly receives
any adjustment. allocation or distribution described in Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6) of the Regulations, items of Partnership
income and gain shall be specifically allocated to such Partner in an amount and
manner sufficient to eliminate, to the extent required by the Regulations, any
deficit in the Adjusted Capital Account Balance of such Partner as quickly as
possible, provided that an allocation pursuant to this Subsection (c) shall be
made only if and to the extent that such Partner would have a deficit in the
Adjusted Capital Account Balance after all other allocations provided for in
Section 4.2 and this Section 4.3 of this Agreement tentatively have been made as
if this Subsection (c) were not in this Agreement.
(d) Limitation on Allocation of Loss. Notwithstanding anything
else contained in this Agreement, if an allocation of Loss to any Partner
pursuant to Section 4.2 of this Agreement would exceed the maximum amount of
Loss that may be allocated without causing such Partner to have a deficit in the
Adjusted Capital Account Balance of such Partner at the end of the fiscal year
for which the allocation is made, then an amount of such Loss equal to such
excess shall be allocated to the other Partners to the extent allowable under
this Section 4.3, and the remainder of such Loss, if any, shall be allocated to
that Partner.
(e) I.R.C. Section 754 Election. To the extent that an
adjustment to the tax basis of any asset pursuant to I.R.C. Section 734(b) or
I.R.C. Section 743(b) is required to be taken into account in determining
Capital Accounts as provided in Section 1.704-1(b)(2)(iv)(m) of the Regulations,
the adjustment shall be treated (if an increase) as an item of gain or (if a
decrease) as an item of loss, and such gain or loss shall be allocated to the
Partners consistent with the allocation of the adjustment pursuant to such
Regulation.
(f) Nonrecourse Deductions. Nonrecourse Deductions for any
fiscal year shall be allocated among the Partners in proportion to their
Percentage Interests.
(g) Partner Nonrecourse Deductions. Any Partner Nonrecourse
Deductions shall be allocated pursuant to Section 1.704-2(i) of the Regulations
to the Partner who bears the economic risk of loss with respect to the Partner
Nonrecourse Debt to which they are attributable.
(h) Purpose and Application. The purpose and the intent of the
special allocations provided for in this Section 4.3 are to comply with the
provisions of Sections 1.704-1(b) and 1.704-2 of the Regulations, and such
special allocations are to be made so as to accomplish that result. However, to
the extent possible, the General Partner in allocating items of income, gain,
loss, or deduction among the Partners, shall take into account the special
allocations in such a manner that the net amount of allocations to each Partner
shall be the same as such Partner's distributive share of Profit and Loss would
have been had the events requiring the special allocations not taken place. The
General Partner shall apply the provisions of this Section 4.3 in whatever order
the General Partner with the approval of the Limited Partners reasonably
believes will minimize any economic distortion that otherwise might result from
the application of the special allocations.
15
4.4 I.R.C. Section 704(c) Tax Allocation. Solely for tax purposes, and
in accordance with I.R.C. Section 704(c), income, gain, loss, and deductions
with respect to property contributed to the Partnership by a Partner shall be
shared among the Partners so as to take account of the variation between the
adjusted basis of the property to the Partnership for federal income tax
purposes and its fair market value at the time of its contribution. If the value
of any property of the Partnership reflected in the Partners' Capital Accounts
is adjusted pursuant to Section 4.1(a)(3) or 4.1(b)(3), thereafter, allocations
of depreciation, depletion, amortization and gain or loss with respect to such
property shall be determined so as to take into account the variation between
the adjusted tax basis and the adjusted value of such property as reflected in
the Partners' Capital Accounts in the same manner as under I.R.C. Section
704(c). The Partners agree that the General Partner shall choose the method
under I.R.C. Section 704(c) to address the variation between the adjusted tax
basis and adjusted values of the Partnership Assets on the date hereof and that
the Partnership shall elect to use the method chosen by the General Partner;
provided, that Cheniere's consent shall be required to elect the remedial
allocation method described in Section 1.704-3(d)(1) of the Regulations.
4.5 Special Allocations Regarding Payments to Affiliates. To the
extent that compensation paid to an Affiliate of one or more Partners by the
Partnership ultimately is determined not to be a payment to a third party, a
payment to a Partner other than in its capacity as such under I.R.C. Section
707(a), or a guaranteed payment under I.R.C. Section 707(c), such Partner or
Partners shall be specially allocated gross income of the Partnership in an
amount equal to the amount of such compensation, and such Partner or Partners'
Capital Account shall be adjusted to reflect the above special allocation and to
reflect the payment of such compensation as if it were a distribution. If the
Partnership's gross income for a fiscal year is less than the amount of such
compensation paid in such year, such Partner or Partners shall be specially
allocated gross income of the Partnership in the succeeding year or years until
the total amount so allocated equals the total amount of such compensation.
4.6 Allocation of Gains and Losses upon Liquidation. Except to the
extent provided in Sections 4.3 and 4.4, gains and losses recognized by the
Partnership upon the sale, exchange or other disposition of all or substantially
all of the property owned by the Partnership shall be allocated in the following
manner:
(a) Gains shall be allocated (i) first, to the Partners with
negative Capital Account balances, that portion of gains (including any gains
treated as ordinary income for federal income tax purposes) which is equal in
amount to, and in proportion to, such Partners' respective negative Capital
Account balances; provided that no gain shall be allocated under this Section
4.6(a)(i) to a Partner once such Partner's Capital Account balance is brought to
zero and (ii), second, gains in excess of the amount allocated under (i) shall
be allocated to the Partners in the amounts and to the extent available to cause
the Partners' respective Capital Account balances to be in the same proportion
as the Partners' respective Percentage Interests.
(b) Losses shall be allocated to the Partners in the amounts
and to the extent available to cause the Partners' respective Capital Account
balances to be in the same proportion as the Partners' respective Percentage
Interests and (ii) second, any remaining loss to the Partners in accordance with
their Percentage Interests.
4.7 Allocation for GAAP and Financial Reporting. The Partners agree
that Profits and Losses for any fiscal year shall be allocated to the Partners
for financial reporting purposes pro rata in accordance with their Percentage
Interests.
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4.8 Partner Acknowledgment. The Partners agree to be bound by the
provisions of this Article IV in reporting their shares of Partnership income
and loss for income tax purposes, provided, however, that if a Limited Partner
is advised in good faith by its tax counsel or other tax advisors that the tax
position taken by the Partnership on any return or other statement is clearly
erroneous, and that such Limited Partner's taking a tax position consistent with
the provisions of this Agreement will subject the Limited Partner to a material
risk of fines or other penalties, such Limited Partner shall have the right to
take a position inconsistent with the provisions of this Agreement, so long as
it has given the General Partner written notice not less than ten (10) days
prior to taking any action pursuant to such inconsistent position (unless such
Limited Partner is required to take such action pursuant to such inconsistent
provision less than ten (10) days after receipt of reporting information from
the Partnership with respect to such erroneous position by the Partnership, in
which case such Limited Partner shall give the General Partner such notice that
is reasonable under the circumstances).
ARTICLE V
DISTRIBUTIONS
5.1 Distributions of Net Cash Flow. The Partnership shall, to the
extent available and to the extent such funds are not necessary for future
working capital and operating and development expenses of the Partnership, as
determined by the General Partner in its reasonable discretion, make
distributions of Net Cash Flow on a quarterly basis to the Partners, pro rata,
in accordance with their Percentage Interests.
5.2 Tax Distributions. Notwithstanding any other provision herein
contained, to the maximum extent possible, on or before the tenth (10th) day of
January, April, June and September of each year with the intent to meet
estimated tax payment obligations, the General Partner shall make distributions
of cash or borrowed funds to the Partners in an amount equal to forty percent
(40%) of the estimated Adjusted Allocated Taxable Income (as hereinafter
defined) of all Partners for the immediately preceding calendar quarter(s) (the
"Tax Distribution"), less an amount equal to the Tax Distributions previously
made in any such Fiscal Year. Any such distributions to the Partners shall be
made in proportion to the Adjusted Allocated Taxable Income of each Partner. The
"Adjusted Allocated Taxable Income" of a Partner shall be the estimated taxable
income of the Partnership, if any, which is allocated to such Partner for the
applicable period. For this purpose any income, gain, loss, depreciation and
other deduction which is recognized and allocated to a Partner pursuant to
Section 704(c) of the I.R.C. shall be excluded and tax distributions shall not
be made with respect to such amount(s). Any overpayment of distributions made
under this Section 5.2 shall be carried over to subsequent fiscal years and
treated as a current distribution until it is used.
5.3 Distributions in Liquidation. Subject to the provisions of Article
XIX and after the allocations required by such Article XIX, upon the dissolution
and winding-up of the Partnership, the proceeds of sale and other assets of the
Partnership shall be distributed, not later than the latest time specified for
such distributions pursuant to Section 1.704-l(b)(2)(ii)(b)(2) of the
Regulations, to the Partners, pro rata, in accordance with their positive
Capital Account balances. With the unanimous approval of all of the Partners, a
pro rata portion of the distributions that would otherwise be made to the
Partners under the preceding sentence may be distributed to a trust established
for the benefit of the Partners for the purposes of liquidating Partnership
Assets, collecting amounts owed to the Partnership, and paying any contingent or
unforeseen liabilities or obligations of the Partnership arising out of or in
connection with the Partnership. The assets of any trust established under this
Section 5.3 will be distributed to the Partners from time to time by the trustee
of the trust upon approval of the Partners in the same
17
proportions as the amount distributed to the trust by the Partnership would
otherwise have been distributed to the Partners under this Agreement.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE PARTNERS
6.1 In General. As of the date hereof, each of the Partners hereby
makes each of the representations and warranties applicable to such Partner as
set forth in Section 6.2 hereof, and such warranties and representations shall
survive the execution of this Agreement.
6.2 Representations and Warranties. Each Partner hereby represents and
warrants that:
(a) Due Incorporation or Formation; Authorization of Agreement.
If such Partner is a limited liability company, corporation or a partnership, it
is duly organized or duly formed, validly existing, and in good standing under
the laws of the jurisdiction of its incorporation or formation and has the
company, corporate or partnership power and authority to own its property and
carry on its business as owned and carried on at the date hereof and as
contemplated hereby. Such Partner is duly licensed or qualified to do business
and in good standing in each of the jurisdictions in which the failure to be so
licensed or qualified would have a Material Adverse Effect on its financial
condition or its ability to perform its obligations hereunder. Such Partner has
the company, corporate, or partnership power and authority to execute and
deliver this Agreement and to perform its obligations hereunder and the
execution, delivery, and performance of this Agreement has been duly authorized
by all necessary company, corporate or partnership action. This Agreement
constitutes the legal, valid, and binding obligation of such Partner subject to
applicable bankruptcy and similar laws affecting creditors' rights generally.
(b) No Conflict With Restrictions, No Default. Neither the
execution, delivery, and performance of this Agreement nor the consummation by
such Partner of the transactions contemplated hereby (i) will conflict with,
violate, or result in a breach of any of the terms, conditions, or provisions of
any law, regulation, order, writ, injunction, decree, determination, or award of
any court, any governmental department, board, agency, or instrumentality,
domestic or foreign, or any arbitrator, applicable to such Partner or any of its
Affiliates, (ii) will conflict with, violate, result in a breach of, or
constitute a default under any of the terms, conditions, or provisions of the
articles of incorporation, certificate of formation, bylaws, limited liability
company agreement, or partnership agreement of such Partner or any of its
Affiliates, if such Partner is a limited liability company, corporation or
partnership, or of any material agreement or instrument to which such Partner or
any of its Affiliates is a party or by which such Partner or any of its
Affiliates is or may be bound or to which any of its material properties or
assets is subject, (iii) will conflict with, violate, result in a breach of,
constitute a default under (whether with notice or lapse of time or both),
accelerate or permit the acceleration of the performance required by, give to
others any material interests or rights, or require any consent, authorization,
or approval under any indenture, mortgage, lease agreement, or instrument to
which such Partner or any of its Affiliates is a party or by which such Partner
or any of its Affiliates is or may be bound, or (iv) will result in the creation
or imposition of any lien upon any of the material properties or assets of such
Partner or any of its Affiliates.
(c) Governmental Authorizations. Any registration, declaration
or filing with or consent, approval, license, permit or other authorization or
order by, any governmental or
18
regulatory authority, domestic or foreign, that is required in connection with
the valid execution, delivery, acceptance, and performance by such Partner under
this Agreement or the consummation by such Partner of any transaction
contemplated hereby has been completed, made, or obtained on or before the
effective date of this Agreement.
(d) Litigation. There are no actions, suits, proceedings, or
investigations pending or, to the knowledge of such Partner or any of its
Affiliates, threatened against such Partner or any of its Affiliates or
affecting any of their properties, assets, or businesses in any court or before
or by any governmental department, board, agency, or instrumentality, domestic
or foreign, or any arbitrator which could (or, in the case of an investigation
could lead to any action, suit, or proceeding, which could) reasonably be
expected to materially impair such Partner's ability to perform its obligations
under this Agreement or to have a Material Adverse Effect on the consolidated
financial condition of such Partner; and such Partner or any of its Affiliates
has not received any currently effective notice of any default, and such Partner
or any of its Affiliates is not in default, under any applicable order, writ,
injunction, decree, permit, determination, or award of any court, any
governmental department, board, agency, or instrumentality, domestic or foreign,
or any arbitrator which could reasonably be expected to materially impair such
Partner's ability to perform its obligations under this Agreement or to have a
Material Adverse Effect on the consolidated financial condition of such Partner.
(e) Investigation. Such Partner is acquiring its Interest in
the Partnership based upon its own investigation, and the exercise by such
Partner of its rights and the performance of its obligations under this
Agreement will be based upon its own investigation, analysis, and expertise.
Such Partner's acquisition of its Interest in the Partnership is being made for
its own account for investment, and not with a view to the sale or distribution
thereof.
(f) Title. Subject to certain disclosed title exceptions, as
disclosed in writing as of the Effective Date, with respect to the real property
contributed to the Partnership by BPU as set forth in the title policy, each
Partner has good and marketable title to, and sole possession and control of,
such Partner's assets contributed to the Partnership as described on Exhibit B
and Exhibit C respectively, free and clear of all liens, charges, pledges,
claims, security interests or other encumbrances. With respect to contracts or
similar arrangements which constitute part of the Partner's assets:
(i) such contributing Partner performed all of its
obligations and is not in default or alleged to be in default thereunder,
(ii) there exists no event, condition or occurrence
which, after notice or lapse of time or both, would constitute such a default,
(iii) the transfer or assignment to the Partnership of
such contract or arrangement will not require the consent of any parties thereto
or constitute an event permitting termination thereof.
(g) Investment Representations.
(i) The Interest in the Partnership subscribed for
hereby are being acquired by such Partner for such Partner's own account and for
investment purposes only and not with a view to any resale or distribution
thereof, in whole or in part, to others, and such Partner is not participating,
directly or indirectly, in a distribution of such Interests and will not take,
or cause to be taken, any action that would cause such Partner to be deemed an
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"underwriter" of such Interests as defined in Section 2(11) of the Securities
Act of 1933, as amended.
(ii) Such Partner has had access to all materials, books,
records, documents, and information relating to the Partnership and has been
able to verify the accuracy of, and to supplement, the information contained
therein.
(iii) Such Partner has had an opportunity to ask questions
of, and receive satisfactory answers from, representatives of the Partnership
concerning the terms and conditions pursuant to which the offering of Interests
is being made and all material aspects of the Partnership and its proposed
business, and any request for such information has been fully complied with to
the extent the Partnership possesses such information or can acquire it without
unreasonable effort or expense.
(iv) Such Partner is an "accredited investor" within the
meaning of Rule 501 of the Securities Act of 1933, as amended.
(v) Such Partner is an investor who has such knowledge
and experience in financial and business matters as to be capable of evaluating
the merits and risks of an investment in the Partnership based upon (i) the
information furnished by the Partnership; (ii) such Partner's personal knowledge
of the business and affairs of the Partnership; (iii) the records, files, and
plans of the Partnership to all of such Partner has had full access; (iv) such
additional information as such Partner may have requested and has received from
the Partnership; and (v) the independent inquiries and investigations undertaken
by such Partner.
(vi) No Person has made any direct or indirect
representation or warranty of any kind to such Partner with respect to the
economic return which may accrue to such Partner. Such Partner has consulted
with his, her or its own advisors with respect to an investment in the
Partnership.
(vii) All information, representations, and warranties
contained herein or otherwise given or made to the Partnership by such Partner
in any other written statement or document delivered in connection with the
transactions contemplated hereby are correct and complete as of the date of this
Agreement and may be relied upon by the Partnership, and, if there should be any
material change in such information prior to such Partner's execution of this
Agreement, such Partner will immediately furnish such revised or corrected
information to the Partnership.
ARTICLE VII
RIGHTS AND OBLIGATIONS OF PARTNERS
7.1 Limited Liability. No Limited Partner shall be personally liable
for any debts, liabilities, or obligations of the Partnership; provided that
each Partner shall be responsible (i) for the making of any capital
contributions required to be made to the Partnership by such Partner pursuant to
the terms hereof and (ii) for the amount of any distribution made to such
Partner that must be returned to the Partnership pursuant to the terms hereof or
the Act.
7.2 Liability of a Partner to the Partnership. When a Partner has
received a distribution made by the Partnership in violation of this Agreement
or the Act, the Partner is liable to the Partnership for a period of three (3)
years after such a prohibited distribution for the amount of the distribution.
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7.3 Exculpation. Unless expressly agreed to in writing by such Person,
no shareholder, general or limited partner, member or holder of any equity
interest in any Partner or manager, officer, director or employee of any of the
foregoing, shall be personally liable for the performance of any such Partner's
obligations under this Agreement, but the foregoing shall not relieve any
shareholder, partner, member, holder of an equity interest, manager, officer,
director or employee of any Partner of its obligations to such Partner.
7.4 Participation in Management. No Limited Partner, as such, shall
take any part in the management and control of the Partnership nor shall any
Limited Partner, by reason of its status as such, have any right to transact any
business for the Partnership or any authority or power to sign for or bind the
Partnership. Notwithstanding the foregoing, Limited Partners shall have the
right to approve or disapprove or otherwise consent or withhold consent with
respect to such matters as are specified in this Agreement or the Act.
7.5 Survival of Obligations. Dissolution of the Partnership shall not
release any party from any liability which at the time of dissolution or
termination has already accrued to any party, nor affect in any way the survival
of the rights, duties, and obligations of any party provided for in Articles VI,
VII, and IX of this Agreement.
ARTICLE VIII
MEETINGS OF PARTNERS
8.1 Place of Meetings and Meetings by Telephone. Meetings of Partners
shall be held at the offices of the General Partner or at such other place
within the continental United States designated by the General Partner unless
conducted by telephone conference or similar communications equipment in which
the physical presence of a Partner is not necessary. Any meeting of the Partners
may be held by telephone conference or similar communications equipment so long
as all Partners participating in the meeting can hear one another, and all
Partners participating by telephone or similar communications equipment shall be
deemed to be present in person at the meeting. Each Limited Partner may
participate in any meeting by telephone conference.
8.2 Call of Meetings. Meetings of the Partners may be called at any
time by any Partner for the purpose of taking action upon any matter requiring
the vote or authority of the Partners as provided in this Agreement or upon any
other matter as to which such vote or authority is deemed by any Partner to be
necessary or desirable. In any event, meetings of the Partners shall not be more
frequent than once per month.
8.3 Notice of Meetings of Partners. All notices of meetings of
Partners shall be sent or otherwise given to all Partners in accordance with
Section 8.4 not less than three (3) nor more than ninety (90) days before the
date of the meeting. The notice shall specify (i) the place, date, and hour of
the meeting, and (ii) the general nature of the business to be transacted.
8.4 Manner of Giving Notice. Notice of any meeting of Partners shall
be given personally or by telephone to each Partner or sent by first class mail,
by telecopy (or similar electronic means), or by a nationally recognized
overnight courier, charges prepaid, addressed to the Partner at the address of
that Partner appearing on the books of the Partnership or given by the Partner
to the Partnership for the purpose of notice. Notice shall be deemed to have
been given at the time when deposited in the mail or at the time when deposited
with a nationally recognized overnight courier, or when sent by facsimile (or
similar electronic means).
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8.5 Adjourned Meeting; Notice. Any meeting of Partners, whether or not
a quorum is present, may be adjourned from time to time by the vote of the
Majority of the Percentage Interests represented at that meeting, either in
person or by proxy. When any meeting of Partners is adjourned to another time or
place, notice need not be given of the adjourned meeting, unless a new record
date of the adjourned meeting is fixed or unless the adjournment is for more
than sixty (60) days from the date set for the original meeting, in which case
the General Partner shall set a new record date and shall give notice in
accordance with the provisions of Sections 8.3 and 8.4. At any adjourned
meeting, the Partnership may transact any business that might have been
transacted at the original meeting.
8.6 Quorum; Voting. At any meeting of the Partners, a Majority in
Interest of the Partners, present in person or by proxy, shall constitute a
quorum for all purposes, unless or except to the extent that the presence of
Partners holding a higher aggregate Percentage Interest is required by the
Agreement or applicable law.
8.7 Waiver of Notice by Consent of Absent Partners. The transactions
of a meeting of Partners, however called and noticed and wherever held, shall be
as valid as though taken at a meeting duly held after regular call and notice if
a quorum is present either in person or by proxy and if either before or after
the meeting, each Person entitled to vote who was not present in person or by
proxy signs a written waiver of notice or a consent to a holding of the meeting
or an approval of the minutes. Any waiver of notice or consent shall specify
either the business to be transacted or the purpose of any meeting of Partners.
Attendance by a Person at a meeting shall also constitute a waiver of notice of
that meeting, except when the Person objects at the beginning of the meeting to
the transaction of any business because the meeting is not lawfully called or
convened and except that attendance at a meeting is not a waiver of any right to
object to the consideration of matters not included in the notice of the meeting
if that objection is expressly made at the beginning of the meeting.
8.8 Partner Action by Written Consent Without a Meeting. Except as
provided in this Agreement, any action that may be taken at any meeting of
Partners may be taken without a meeting if a consent in writing setting forth
the action so taken is signed by a Majority in Interest (or Partners holding
such higher aggregate Percentage Interest as is required to authorize or take
such action under the terms of this Agreement or applicable law) at least thirty
(30) days prior to such action. Any such written consent may be executed and
given by facsimile or similar electronic means. Such consents shall be filed
with the Partnership and shall be maintained in the Partnership's records.
8.9 Record Date for Partner Notice, Voting, and Giving Consents. For
purposes of determining the Partners entitled to vote or act at any meeting or
adjournment thereof, the General Partner may fix in advance a record date which
shall not be greater than ninety (90) days nor fewer than five (5) days before
the date of any such meeting. If the General Partner does not so fix a record
date, the record date for determining Partners entitled to notice of or to vote
at a meeting of Partners shall be at the close of business on the business day
immediately preceding the day on which notice is given, or if notice is waived,
at the close of business on the business day next preceding the day on which the
meeting is held.
(a) The record date for determining Partners entitled to give
consent to action in writing without a meeting, (i) when no prior action of the
General Partner has been taken, shall be the day on which the first written
consent is given or (ii) when prior action of the General Partner has been
taken, shall be (x) such date as determined for that purpose by the General
Partner, which record date shall not precede the date upon which the resolution
fixing it is
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adopted by the General Partner and shall not be more than twenty (20) days after
the date of such resolution or (y) if no record date is fixed by the General
Partner the record date shall be the close of business on the day on which the
General Partner adopts the resolution relating to that action.
(b) Only Partners of record on the record date as herein
determined shall have any right to vote or to act at any meeting or give consent
to any action relating to such record date, provided that no Partner who
transfers all or part of such Partner's Interest after a record date (and no
transferee of such Interest) shall have the right to vote or act with respect to
the transferred Interest as regards the matter for which the record date was
set.
8.10 Proxies. Every Partner entitled to vote or act on any matter at a
meeting of Partners shall have the right to do so either in person or by proxy,
provided that an instrument authorizing such a proxy to act is executed by the
Partner in writing and dated not more than eleven (11) months before the
meeting, unless the instrument specifically provides for a longer period. A
proxy shall be deemed executed by a Partner if the Partner's name is placed on
the proxy (whether by manual signature, typewriting, telegraphic transmission,
or otherwise) by the Partner or the Partner's attorney-in-fact. A valid proxy
that does not state that it is irrevocable shall continue in full force and
effect unless (i) revoked by the Person executing it before the vote pursuant to
that proxy by a writing delivered to the Partnership stating that the proxy is
revoked, by a subsequent proxy executed by or attendance at the meeting and
voting in person by the Person executing that proxy or (ii) written notice of
the death or incapacity of the maker of that proxy is received by the
Partnership before the vote pursuant to that proxy is counted. A proxy
purporting to be executed by or on behalf of a Partner shall be deemed valid
unless challenged at or prior to its exercise and the burden of proving
invalidity shall rest on the challenger.
ARTICLE IX
INDEMNIFICATION OF PARTNERS
9.1 General. The Partnership, its receiver, or its trustee (in the
case of its receiver or trustee, to the extent of the Partnership Assets) shall
indemnify, save harmless, and pay all judgments and claims against each Partner
or any managers, members, partners, officers or directors of such Partner
relating to any liability or damage incurred by reason of any act performed or
omitted to be performed by such Partner, manager, member, partner, officer, or
director in connection with the Partnership, including attorneys' fees incurred
by such Partner, manager, member, officer, or director in connection with the
defense of any action based on any such act or omission, which attorneys' fees
may be paid as incurred; provided, however, that the Partnership shall not be
obligated or permitted to indemnify any Partner or any manager, member, partner,
officer, or director of such Partner from or against any judgment, claim, or
damage resulting from any breach of any provision of this Agreement or any
fraud, bad faith, willful misconduct, or gross negligence.
9.2 Environmental. The Partnership, its receiver, or its trustee (in
the case of its receiver or trustee, to the extent of the Partnership Assets)
shall indemnify and hold harmless, to the maximum extent permitted by law, each
Partner from and against any and all liabilities, sums paid in settlement of
claims, obligations, charges, actions (formal or informal), claims (including,
without limitation, claims for personal injury under any theory or for real or
personal property damage), liens, taxes, administrative proceedings, losses,
damages (including, without limitation, punitive damages), penalties, fines,
court costs, administrative service fees, response and remediation costs,
stabilization costs, encapsulation costs treatment, storage or disposal
23
costs, groundwater monitoring or environmental study, sampling or monitoring
costs, other causes of action, and any other costs and reasonable expenses
(including, without limitation, reasonable attorneys', experts', and
consultants' fees and disbursements and investigating, laboratory, and data
review fees) imposed upon or incurred by any Partner (whether or not indemnified
against by any other party) arising from and after the date of this Agreement
directly or indirectly out of:
(a) the past, present, or future treatment, storage, disposal,
generation, use, transport, movement, presence, release, threatened release,
spill, installation, sale, emission injection, leaching, dumping, escaping, or
seeping of any hazardous substances or material containing or alleged to contain
hazardous substances at or from any past, present, or future properties or
assets of the Partnership; and/or
(b) the violation or alleged violation by the Partnership or
any third party of any Environmental Laws with regard to the past, present, or
future ownership, operation, use, or occupying of any Partnership Assets.
9.3 Limitations.
(a) Notwithstanding anything to the contrary in any of Sections
9.1 and 9.2 above, no Partner or any manager, employee, member, officer, or
director of such Partner shall be indemnified from any liabilities incurred as a
result of conduct by the Partner or any manager, employee, member, officer, or
director of such Partner which constitutes any breach of the provisions of this
Agreement, fraud, bad faith, willful misconduct, or gross negligence.
(b) Notwithstanding anything to the contrary in any of Sections
9.1 and 9.2 above, in the event that any provision in any of such Sections is
determined to be invalid in whole or in part, such Sections shall be enforced to
the maximum extent permitted by law.
ARTICLE X
MANAGEMENT OF THE PARTNERSHIP
10.1 The General Partner.
(a) The General Partner of the Partnership shall be Corpus GP
unless a successor has been appointed pursuant to the provisions of this
Agreement.
(b) Subject to the approval rights described herein, the
business and affairs of the Partnership shall be managed exclusively by or under
the direction of the General Partner and the power to act for or to bind the
Partnership shall be vested exclusively in the General Partner, subject to the
General Partner's authority to delegate powers and duties to officers and others
as set forth herein. Subject to obtaining any necessary approvals hereunder, the
General Partner shall have the power and authority to execute and deliver
contracts, instruments, filings, notices, certificates, and other documents of
whatsoever nature on behalf of the Partnership (including without limitation,
the certificate of limited partnership and any amendments thereto and any other
certificates required or permitted to be filed by or on behalf of the
Partnership pursuant to the Act or like law of any other jurisdiction). Except
as otherwise required by applicable law, any such contract, instrument,
certificate, or other document shall require the signature of the General
Partner or the signature of such employee or agent to whom authority has been
delegated by the General Partner.
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(c) Unless authorized to do so by this Agreement or by the
General Partner of the Partnership, no Limited Partner, agent, or employee of
the Partnership shall have any power or authority to bind the Partnership in any
way, to pledge its credit or to render it liable pecuniarily for any purpose.
(d) Notwithstanding the foregoing, for so long as BPU owns an
Interest in the Partnership, it shall have the right to designate (i) the Team
Member and (ii) one Director of Corpus GP.
10.2 Major Decisions. Notwithstanding the general authority of the
General Partner under Section 10.1, the following matters ("Major Decisions")
shall require the prior written consent of all Limited Partners (except to the
extent (1) a Limited Partner has lost its approval and consent rights pursuant
to Section 3.5 or as a result of the transfer of all of its Interest or (2) a
Limited Partner transfers part of such Partner's Interest, in which case only
the consent of both BPU and Cheniere shall be required pursuant to this Section
10.2 and such Limited Partner's assignee or transferee shall have no right to
consent thereto):
(i) the taking of any Bankruptcy Action;
(ii) the sale of all or substantially all of the
Partnership's Assets;
(iii) the assignment of any of the Partnership Assets in
trust for the benefit of creditors, or the making or filing, or acquiescence in
the making or filing by any other Person, of a petition or other action
requesting the reorganization or liquidation of the Partnership under the
Bankruptcy Laws;
(iv) the merger or consolidation of the Partnership with
any other Person;
(v) any change of the business purpose of the
Partnership or any decision to engage in any activities other than the stated
business purpose of the Partnership as set forth in Section 2.3 hereof;
(vi) the investment of any excess funds of the
Partnership (other than those funds reasonably required for the conduct of the
business of the Partnership or reasonable reserves) in other than short-term
investment-grade securities;
(vii) the redemption, purchase, or repurchase of any
Limited Partner's Interest;
(viii) the admission of any other or additional general
partner to the Partnership;
(ix) any action of the General Partner or the Partnership
or entry by the Partnership or the General Partner into any agreement which
would impair or inhibit the ability to return to BPU pursuant to Section 3.10
hereof the real property contributed by BPU to the Partnership;
(x) any and all documentation or agreements necessary or
convenient to effect any Major Decision, including any material amendment to any
existing Financing Plan, documentation, or agreement.
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10.3 Resignation. Corpus GP agrees not to resign as the General
Partner.
10.4 Remuneration of General Partner; Reimbursement of Expenses. The
General Partner shall be reimbursed for its reasonable out of pocket costs in
connection with the Partnership including, without limitation, salaries,
reasonably allocated overhead expenses, compensation and fees paid to
professionals and advisors and travel and lodging expenses incurred by the
General Partner or its Affiliates. The reasonableness of any expenses to be
reimbursed by the Partnership to the General Partner or its Affiliates shall be
determined in good faith in accordance with accepted standards of commercial
reasonability.
10.5 Limitation on Liability of General Partner; Indemnification.
(a) The General Partner of the Partnership shall not have any
liability to the Partnership or the Other Partners for any losses sustained or
liabilities incurred as a result of any act or omission of such General Partner
unless such act or omission constitutes any breach of the terms of this
Agreement, fraud, bad faith, gross negligence, or willful misconduct.
(b) The Partnership shall indemnify and hold harmless (i) the
General Partner, (ii) its managers, officers and employees, and (iii) any
officers of the Partnership designated pursuant to Section 10.10 (each, an
"Indemnitee") from and against any and all losses, claims, demands, costs,
damages, liabilities, expenses of any nature (including reasonable attorneys'
fees and disbursements), judgments, fines, settlements, and other amounts
arising from any and all claims, demands, actions, suits, or proceedings, civil,
criminal, administrative, or investigative, in which an Indemnitee may be
involved, or threatened to be involved, as a party or otherwise, arising out of
or incidental to the Partnership or the Project, regardless of whether an
Indemnitee continues to be a General Partner or a manager, officer or employee
of the General Partner at the time any such liability or expense is paid or
incurred, if (i) the Indemnitee acted in good faith and in a manner it or he or
she reasonably believed to be in, or not opposed to, the best interests of the
Partnership, and, with respect to any criminal proceeding, had no reason to
believe his or her conduct was unlawful and (ii) the Indemnitee's conduct did
not constitute a breach of the provisions of this Agreement, fraud, gross
negligence or willful misconduct.
(c) Expenses incurred by an Indemnitee in defending any claim,
demand, action, suit, or proceeding subject to this Section 10.5 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 an undertaking by or on behalf of the Indemnitee to repay such amounts if it
is ultimately determined that such Person is not entitled to be indemnified as
authorized in this Section 10.5. The indemnification provided by this Section
10.5 shall be in addition to any other rights to which an Indemnitee may be
entitled under any agreement, consent of the Partners, as a matter of law or
equity, or otherwise, 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. Subject to the foregoing sentence,
the provisions of this Section 10.5 are for the benefit of the Indemnitees and
shall not be deemed to create any rights for the benefit of any other Persons.
10.6 No Guarantee of Return by General Partner. The General Partner
does not, in any way, guarantee the return of the Partners' Contributed Equity
or a profit for the Partners from the operations of the Partnership. The General
Partner shall not be responsible to any Partners because of a loss of their
investment in the Partnership or a loss in the operations of
26
the Partnership. The General Partner shall incur no liability to the Partnership
or to any of the Partners as a result of engaging in any other business or
venture.
10.7 Other Businesses or Ventures. Each of the Partners, or any
Affiliate, manager, officer, agent, or employee of any Partner, may engage in
and possess any interest in other businesses or ventures of every nature and
description, whether the same are competitive with the Partnership or otherwise,
independently or with other Persons and neither the Partnership nor any of the
Partners shall have any rights, by virtue of this Agreement or otherwise, in and
to such businesses or ventures or the income or profits derived therefrom, or
any rights, duties, or obligations in respect thereof.
10.8 Affiliate Transactions. The Partners contemplate that the General
Partner may provide certain services to the Partnership, in accordance with the
provisions of this Section 10.8 and that any such services shall be of
comparable quality and expertise, and any expenses incurred by the Partnership
as the result of such services shall be of a comparable level, as if such
services had been provided to the Partnership by an unrelated third party.
Without the express written consent of the Limited Partners, which consent shall
not be unreasonably withheld, the Partnership and the General Partner shall not
(i) enter into any agreement pursuant to which the Partnership purchases goods
and/or services from the General Partner or any Affiliate of the General
Partner, provides goods and/or services to the General Partner or any Affiliate
of the General Partner, pays any fees or reimbursements to the General Partner
or any Affiliate of the General Partner, or (ii) pay or agree to pay to the
General Partner or any Affiliate of the General Partner fees in excess of the
amounts previously approved by the Limited Partners in accordance with this
Section 10.8.
10.9 Removal of Corpus GP as General Partner.
Corpus GP may be removed as the General Partner of the Partnership as follows:
(a) by Cheniere and BPU upon the agreement of both parties; or
(b) by any Limited Partner upon the material breach by the
General Partner of any provision of this Agreement, and such breach is not cured
within one hundred twenty (120) days of receiving written notice.
Upon the removal of the General Partner by the Limited Partners for any reason,
the Limited Partners shall appoint a new General Partner by unanimous vote.
10.10 Officers and Employees.
(a) The General Partner may, from time to time, designate one
or more Persons to be officers of the Partnership. Any officers so designated
shall have such authority and perform such duties as the General Partner may,
from time to time, delegate to them. The General Partner may assign titles to
particular officers. Unless the General Partner decides otherwise, if the title
is one commonly used for officers of a business corporation formed under the
General Corporation Law of the State of Delaware, the assignment of such title
shall constitute the delegation to such officer of the authority and duties that
normally are associated with that office, subject to (i) any specific delegation
of authority and duties made to such officer by the General Partner, (ii) all
standards of care and restrictions applicable to the General Partner hereunder,
and (iii) the general direction and control of the General Partner. The officers
shall hold office until their successors shall be duly designated and shall
qualify, until their
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death, or until they shall resign or shall have been removed in the manner
hereinafter provided. Any number of offices may be held by the same Person.
Reasonable salaries shall be paid to officers of the Partnership for their
services as officers as determined by the General Partner.
(b) Any officer may resign as such at any time. Such
resignation shall be made in writing and shall take effect at the time specified
therein, or if no time be specified, at the time of its receipt by the General
Partner. The acceptance of a resignation shall not be necessary to make it
effective, unless expressly so provided in the resignation. Any officer may be
removed as such, either with or without cause, by the General Partner whenever
in its judgment the best interests of the Partnership will be served thereby;
provided, however, that such removal shall be without prejudice to the contract
rights, if any, of the Person so removed. Any vacancy occurring in any office of
the Partnership may be filled by the General Partner.
(c) The General Partner shall be entitled in its reasonable
discretion to hire employees, including officers, as it deems necessary
(including any officers, members or managers of the General Partner) and to pay
such employees as the General Partner deems fit, in its reasonable discretion.
(d) No officer of the Partnership shall have any liability to
the Partnership or the Partners for any losses sustained or liabilities incurred
as a result of any act or omission of such officer if (i) the officer acted in
good faith and in a manner he or she reasonably believed to be in the interests
of the Partnership and (ii) the conduct of the officer did not constitute actual
fraud, gross negligence, or willful misconduct.
ARTICLE XI
COVENANTS
11.1 Covenants of the Partnership and the Partners. The Partnership and
each Partner hereby covenant as follows:
(a) Each member of the Partnership and each Partner shall
comply with all of its obligations under this Agreement.
(b) Each member of the Partnership and the General Partner
shall at all times remain in compliance with the provisions of Section 11.2
hereof.
(c) The Partnership and the General Partner shall keep proper
books of records and accounts in which full, true and correct entries shall be
made of all dealings and transactions in relation to its respective business and
activities.
(d) Each other Partner agrees that it shall not file or cause
to be filed any petition or other proceedings by or against the Partnership or
the General Partner that would become the subject of bankruptcy, insolvency or
other similar proceedings or cause any other Bankruptcy Action, nor shall it
consent to or acquiesce in any such filing or other proceedings or Bankruptcy
Action, except in each case a Bankruptcy Action that has been approved by all of
the Partners and by the General Partner pursuant to Section 10.2.
(e) The General Partner shall not cause the Partnership to
elect to be taxed as a corporation for federal income tax purposes.
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(f) Each member of the Partnership and each Partner shall act
in good faith and with commercial reasonableness with respect to any action
taken or declined on behalf of or with respect to the Partnership, including,
without limitation, the preparation, negotiation, or execution of any agreement
to which the Partnership or such Partner is a party, and with respect to any
approval or consent granted or withheld as required or permitted pursuant to
this Agreement.
11.2 Covenants of the Partnership and the General Partner. Each of the
Partnership and the General Partner covenant that:
(a) The Partnership and the General Partner each shall
preserve, renew and keep in full force and effect its existence (except, in the
case of the Partnership, in connection with a dissolution required by this
Agreement) and shall take all reasonable action to maintain all material rights,
privileges and franchises necessary or desirable in the normal conduct of its
business, and shall comply with all Requirements of Law.
(b) Each of the Partnership and the General Partner shall
continue to engage in business of the same general type as now conducted by it
and preserve, renew and keep in full force and effect their partnership or
corporate existence, as the case may be, and take all reasonable action to
maintain all material rights, privileges and franchises necessary or desirable
in the normal conduct of its business; comply with all Requirements of Law
except to the extent that failure to comply therewith could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect.
(c) It will (i) maintain and prepare financial reports,
financial statements, books and records and bank accounts separate from those of
its Affiliates, any constituent party and any other Person and maintain its
books, records, resolutions and agreements as official records, (ii) will not
permit any Affiliate or constituent party independent access to its bank
accounts, and (iii) unless otherwise required under the I.R.C., will file its
own tax returns.
(d) It will not commingle the funds and other assets of the
Partnership with those of any Affiliate or constituent party, or any other
Person, and shall hold its assets in its own name.
(e) It shall conduct its own business in its own name.
(f) It is and will remain solvent and shall pay its debts and
liabilities (including employment and overhead expenses) from its assets as the
same shall become due.
(g) It has done or caused to be done and shall do all things
necessary to observe partnership or corporate formalities, as applicable, and
preserve its existence, and it shall not, nor will it permit any constituent
party to, amend, modify or otherwise change the certificate of limited
partnership, this Agreement, the certificate of incorporation or bylaws, or the
partnership agreement or other organizational documents of the Partnership or
the General Partner, as applicable, or such constituent party in a manner
contrary to the provisions of this Section 12.2.
(h) It shall pay the salaries of its own employees and maintain
a sufficient number of employees in light of its contemplated business
operations.
(i) It shall compensate each of its consultants and agents from
its own funds for services provided to it and pay from its own assets all
obligations of any kind incurred.
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(j) It does not and shall not guarantee, become obligated for,
or hold itself or its credit out to be responsible for, the debts or obligations
of any other Person or the decisions or actions respecting the daily business or
affairs of any other Person.
(k) It shall not cause or permit the Partnership to acquire
obligations or securities of any Affiliate or any of the Partners. It shall not
buy or hold any evidence of indebtedness issued by any other Person, other than
cash and investment-grade securities.
(l) It will allocate fairly and reasonably the cost of (i) any
overhead for any office space shared with any Partner or with any Affiliate of
any Partner, and (ii) any services (such as asset management, legal and
accounting) that are provided jointly to the Partnership and one or more
Affiliates.
(m) It will be, and at all times will hold itself out to the
public as, a legal entity separate and distinct from any other Person. In the
event that the Partnership or the General Partner knows of any misunderstanding
regarding the separate identity of the Partnership or the General Partner, the
Partnership or the General Partner shall correct such misunderstanding.
(n) It shall not identify itself or any of its Affiliates as a
division or part of any other Person.
(o) It will maintain adequate capital for the normal
obligations reasonably foreseeable in a business of its size and character and
in light of its contemplated business operations.
(p) It has and shall maintain its assets in such a manner that
it will not be costly or difficult to segregate, ascertain or identify its
individual assets from those of any Affiliate or constituent party, or any other
Person.
(q) The General Partner and the Partnership shall proceed with
the development and completion of the Project in a timely and expeditious manner
and will use good faith, commercially reasonable efforts to obtain Project
Approval.
(r) The General Partner shall market capacity in the Project in
a manner that it deems reasonable. To the extent that the General Partner offers
such capacity to the Limited Partners, it shall do so pro rata based on their
Percentage Interest and at similar terms and conditions.
(s) It shall not take any action or enter into any agreement
which would be detrimental to the best interests of the Partnership or which
would make it impossible to carry out the business of the Partnership.
(t) The General Partner shall not take any action or enter into
any transaction or agreement which might be viewed at the time of such action,
transaction, or agreement as trading against or contrary to the best interests
of the Partnership.
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ARTICLE XII
RECORDS AND REPORTS
12.1 Maintenance and Inspection of Partner Register. The Partnership
shall maintain at its principal place of business a record of its Partners,
giving the names and addresses of all Partners and the Percentage Interest held
by each Partner. Subject to such reasonable standards (including standards
governing what information and documents are to be furnished and at whose
expense) as may be established by the General Partner from time to time, each
Partner has the right to obtain from the Partnership from time to time, upon
reasonable demand for any purpose reasonably related to the Partner's interest
as a Partner of the Partnership, a record of the Partnership's Partners.
12.2 Maintenance and Inspection of Partnership Agreement. The
Partnership shall keep at its principal place of business the original or a copy
of this Agreement as amended to date, which shall be open to inspection by the
Partners at all reasonable times during office hours.
12.3 Maintenance and Inspection of Other Records. The accounting books
and records, minutes of proceedings of the Partners and the General Partner and
any committees or delegates of the General Partner, and all other information
pertaining to the Partnership that is required to be made available to the
Partners under the Act shall be kept at such place or places designated by the
General Partner or in the absence of such designation, at the principal place of
business of the Partnership. The minutes shall be kept in written form and the
accounting books and records and other information shall be kept either in
written form or in any other form capable of being converted into written form.
The books of account and records of the Partnership shall be maintained in
accordance with GAAP consistently applied during the term of the Partnership,
wherein all transactions, matters, and things relating to the business and
properties of the Partnership shall be currently entered. Minutes, accounting
books and records, and all other Partnership information, records, documents,
and agreements shall be open to inspection upon the written demand of any
Partner at any reasonable time during usual business hours for a purpose
reasonably related to the Partner's interests as a Partner. Any such inspection
shall be made in person or by in agent or attorney and shall include the right
to copy and make extracts at the expense of the Partnership.
ARTICLE XIII
BOOKS, FINANCIALS AND TAX MATTERS
13.1 Books and Records. The Partnership shall maintain at its principal
place of business books of account that accurately record all items of income
and expenditure relating to the business of the Partnership and that accurately
and completely disclose the results of the operations of the Partnership. Such
books of account shall be maintained according to GAAP consistently applied and
on the basis of the fiscal year. Each Partner shall have the right to inspect
and copy, at the Partnership expense, the Partnership's books and records at any
time during normal business hours without notice to any other Partner. A general
accounting and audit shall be taken by the Partnership Accountant for each
fiscal year, at the expense of the Partnership. The audit shall be conducted in
accordance with generally accepted auditing standards.
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13.2 Financial Reports.
(a) Subject to the provisions of Sections 3.4 and 3.6 hereof,
the Partnership will furnish to the Partners (i) within thirty (30) days after
the close of each calendar quarter quarterly unaudited financial statements of
this Partnership, (ii) within ninety (90) days after the close of each calendar
year, audited annual financial statements of this Partnership, and (iii)
beginning in 2003, no fewer than sixty (60) days prior to the end of each fiscal
year of the Partnership, an annual budget for the following year of the
Partnership, supplemented by updates to such budgets as necessary to provide
reasonably current and accurate information, which budgets shall be consistent
with any Financing Plan prepared, submitted, or approved in accordance with
Section 3.6 hereof; provided, however, that in the event any Partner becomes
subject to more restrictive filing requirements, including any rules or
regulations adopted by the Securities and Exchange Commission, the Partnership
will furnish the financial statements at least fifteen (15) days prior to the
date of such Partner's required filings.
(b) In addition to the foregoing, during the Construction
Period, the General Partner shall provide to the Limited Partners, at least
monthly, reports detailing the status of the Project and a comparison of actual
results versus projected results, and will include the Limited Partners, either
in person or telephonically in accordance with Article VIII hereof, in all
material meetings regarding the status and progress of the Project.
13.3 Tax Returns. The General Partner shall cause the Partnership
Accountant to prepare all income tax and other tax returns of the Partnership
which shall be filed by the Partnership Accountant with the appropriate taxing
authority. The General Partner shall furnish to each Partner a copy of all such
filed returns together with all schedules thereto and such other information
which each Partner may request in connection with such Partner's own tax
affairs. All such returns, schedules and information shall be provided to the
Partners at the expense of the Partnership.
13.4 Tax Elections. The General Partner may elect to cause or require
the Partnership to make the election provided for in I.R.C. Section 754 for the
fiscal year that includes the date hereof and maintain a record of the
adjustments to basis of Partnership Assets resulting from that election. Such
election may be made on the federal and, if applicable, the state and local
income tax returns for such fiscal year. All costs incurred by the Partnership
in connection with such election and the maintenance of such records shall be an
expense of the Partnership.
13.5 Tax Matters Partner. The General Partner is hereby designated the
Tax Matters Partner (as defined in the I.R.C.) on behalf of the Partnership.
(a) Without the unanimous consent of the Partners, the Tax
Matters Partner shall have no right to extend the statute of limitations for
assessing or computing any tax liability against the Partnership or the amount
of any Partnership tax item.
(b) The Tax Matters Partner may file a petition for
readjustment of any Partnership tax item (in accordance with I.R.C. Section
6226(a)) in the United States Tax Court if the Partners unanimously agree to
file such petition.
(c) The Tax Matters Partner shall, within ten (10) business
days of receipt thereof, forward to each Partner a photocopy of any
correspondence relating to the Partnership received from the Internal Revenue
Service. The Tax Matters Partner shall, within ten (10)
32
business days thereof, advise each Partner in writing of the substance of any
conversation held with any representative of the Internal Revenue Service.
(d) Any reasonable costs incurred by the Tax Matters Partner
for retaining accountants and/or lawyers on behalf of the Partnership in
connection with any Internal Revenue Service audit of the Partnership shall be
expenses of the Partnership. Any accountants and/or lawyers retained by the
Partnership in connection with any Internal Revenue Service audit of the
Partnership shall be selected by the Tax Matters Partner.
13.6 The Partnership Accountant. The Partnership shall retain as the
regular accountant and auditor for the Partnership ("Partnership Accountant") a
nationally recognized independent accounting firm designated by the General
Partner. The fees and expenses of the Partnership Accountant shall be a
Partnership expense.
ARTICLE XIV
NONDISCLOSURE OF INFORMATION
14.1 Confidentiality.
(a) Subject to Section 14.1 (b), all disclosures of trade
secrets, know-how, financial information or other confidential information made
by the Partnership to any Partner or made by any Partner under or in connection
with this Agreement, shall be received and maintained in confidence by the
recipient during the term hereof and for three (3) years after dissolution of
the Partnership and each Partner shall treat all such trade secrets, know-how,
financial information or other confidential information as confidential except:
(i) as to the Persons directly responsible for the
performance of the obligations of this Agreement and for the effective operation
of the Partnership;
(ii) as to the professional advisors of the Partners and
the Partnership;
(iii) as to such disclosures to customers of the
Partnership as are necessary for the effective carrying on of business by the
Partnership;
(iv) as to such information as is required by law to be
disclosed by the Partners or the Partnership, including, without limitation,
disclosures to comply with Securities and Exchange Commission filing
requirements, after providing Corpus GP prior written notice of the form and
content of such disclosure and providing Corpus GP a reasonable opportunity to
comment on such disclosure; and
(v) as to such information as is or may fall within the
public domain otherwise than in violation of the provisions of this Section
14.1.
(b) Each Partner shall have reasonable access to confidential
information, know-how and work product (including third-party reports and
agreements) produced in connection with the Project, and shall be entitled to
use such confidential information, with the consent of the General Partner,
which consent shall not be unreasonably withheld, for any purpose that is not
directly competitive with the Partnership. Further, the General Partner and its
Affiliates are entitled to use any confidential information that is directly
related to the Project, including any know-how and third-party reports,
documents, agreements or work products, in connection with
33
the development or operation of any other business or venture, including the
funding thereof; provided, however, that to the extent that any Partner receives
any information of a confidential nature pertaining to any other Partner but not
directly related to the Project, the Partner receiving such information shall be
prohibited from revealing, disclosing, or employing such information without the
prior written consent of the Partner with whom such information is concerned.
The General Partner and its Affiliates may hire any third-party consultant,
advisor, counsel or other service provider employed by the Partnership and such
Party may use any work-product or know-how developed on behalf of the
Partnership in providing services to such Partner or its Affiliates.
14.2 Duty of Care. Each Partner will take such steps as lie within its
power to assure that all of its employees, agents, officers, directors, and
managers, and the employees, agents, officers, directors, and managers of the
Partnership to whom confidential information is disclosed take all proper
precautions to prevent the unauthorized disclosure and use of the confidential
information referenced in Section 14.1.
ARTICLE XV
TRANSFERABILITY
15.1 Transferability of Interests.
(a) Subject to the provisions of Section 15.4 hereof and with
the prior written consent of the General Partner, which consent shall not be
unreasonably withheld or delayed unless the General Partner reasonably
determines that such transfer would have a Material Adverse Effect on the
Partnership, each of the Limited Partners may transfer all or part of its
Interest in the Partnership (including the transfer of any rights to receive or
share in profits, losses, income, distributions or the return of contributions);
provided, that (1) such transferring Limited Partner gives written notice
(including the name and address of the proposed purchaser, transferee, or
assignee and the date of such transfer) to the Partnership and the
non-transferring Partners, (2) such transferring Limited Partner shall not
transfer all or any part of any Interest to any person or entity that competes
directly with any other Partner unless waived by that Partner, (3) prior to any
transfer, such transferring Limited Partner has provided to the Partnership
assurance reasonably satisfactory to the General Partner that the transferring
Limited Partner and the purchaser of such Limited Partner's Interest have
complied with all applicable state and federal securities laws, and (4) such
transferring Limited Partner shall not transfer a partial Interest in the
Partnership constituting less than ten percent (10%) of the then-outstanding
interests in the Partnership.
(b) Notwithstanding anything to the contrary contained herein
or under the Act, except as provided in Section 3.10, no Partner shall have the
right to resign from the Partnership.
15.2 Option to Purchase. Should Cheniere desire to sell the entirety of
its Interest in the Project to a non-Affiliated third party ("Non Affiliated
Third Party"), and said Non Affiliated Third Party desires to purchase the BPU
Interest, then Cheniere shall have the option to purchase BPU's Interest for the
fair market value of the Interest. The fair market value of BPU's Interest shall
be equal to the per-one-percent price being paid to Cheniere by the Non
Affiliated Third Party for Cheniere's Interest being sold multiplied by BPU's
Interest percentage at the time of such sale. Further, in the event that BPU (or
its permitted transferees or assigns), proposes to or does attempt to transfer,
assign, distribute, pledge, hypothecate, encumber or otherwise dispose of
("Transfer") all or any part of its Interest ("Offered Interest") to any other
34
Person, the Offered Interest shall be for a purchase price payable entirely in
cash and shall first be offered for sale to Cheniere in accordance with this
Section 15.2. BPU shall deliver a notice to Cheniere (the "Offer Notice")
containing a description of the proposed Transfer and the terms thereof, and
such Offer Notice shall contain an offer to sell to Cheniere the Offered
Interest. Such offer to sell shall contain the same terms and conditions and
shall be for the same consideration as offered to such other Person. For a
period of thirty (30) days after such Offer Notice is received by Cheniere,
Cheniere may, by notice to BPU accept the offer to acquire such Offered
Interest. In the event that Cheniere does not agree to purchase the Offered
Interest, BPU shall have the right to proceed with the sale or transfer on the
terms specified in the Offer Notice; provided, however, that if BPU does not
consummate such sale or transfer within ninety (90) days after the date of the
Offer Notice or proposes to consummate the transaction on terms that differ in
any material respect from the terms set forth in the Offer Notice, the option
contemplated by this Section 15.2 shall again be applicable..
15.3 BPU Right to Sell. Notwithstanding any other provision herein
contained, in the event of any Change of Control of the Partnership or of the
General Partner, BPU shall have the right to sell to the Partnership all, but
not less than all of its Interest (the "BPU Put Option"). The BPU Put Option
shall be exercised by written notification to the then General Partner, if at
all, within ninety (90) days following the later of (a) the occurrence of a
Change of Control of the Partnership or of the General Partner, or (b) the date
upon which BPU discovers or is informed of any Change of Control of the
Partnership or of the General Partner. In the event that BPU exercises the BPU
Put Option, the Partnership shall be required to purchase all, but not less than
all, of the Interest owned by BPU for the Fair Value of such BPU's Interest (as
hereinafter defined). In order to determine the Fair Value of BPU's Interest,
the Partnership shall have conducted by a qualified appraiser, at the
Partnership's expense, an appraisal of the fair market value of the Partnership
as a whole (the "First Appraisal"). Within seven (7) days following BPU's
notification by the Partnership of the First Appraisal, BPU shall either (m)
accept the First Appraisal, at which time the First Appraisal shall be deemed to
be the "Accepted Value," or (n) have conducted by a qualified appraiser, at
BPU's expense, an appraisal of the fair market value of the Partnership (the
"Second Appraisal"). If the value reported in the Second Appraisal is within
five percent (5%) of the value reported in the First Appraisal, then the average
of the two (2) values shall be deemed to be the "Accepted Value." If, however,
the value reported in the Second Appraisal differs from the value reported in
the First Appraisal by a factor of greater than five percent (5%), then the
appraisers who performed the First Appraisal and the Second Appraisal shall
appoint a third appraiser to, at the expense of the Partnership, conduct an
appraisal of the fair market value of the partnership (the "Third Appraisal").
If for any reason the appraisers who performed the First Appraisal and the
Second Appraisal are unwilling or unable to appoint a third appraiser, then the
Partnership shall engage the Houston, Texas, office of the American Arbitration
Association to appoint a third appraiser to perform the Third Appraisal. The
value reported in the Third Appraisal, if required, shall be deemed to be the
"Accepted Value of the Partnership. The "Fair Value" of BPU's Interest shall be
equal to the greater of (y) Accepted Value of the Partnership multiplied by
BPU's Percentage Interest without consideration of any minority or other
discount, or (z) the total value of BPU's contributions to the capital of the
Partnership as reported on the financial statements of the Partnership. The
Partnership shall pay to BPU, in complete redemption of BPU's Interest, the Fair
Value of BPU's Interest via cash or other immediately available and verifiable
funds within sixty (60) days following the determination of the Fair Value of
BPU's Interest.
15.4 BPU Tag-Along Right. In the event that the General Partner or any
Affiliate of the General Partner (each a "Selling Partner") receives a bona fide
good faith written offer from an unrelated third party to purchase all or any
part of its Interest, BPU shall have the option to
35
require such third party to also agree at the same per-one-percent price and
other terms and conditions as set forth in the offer to such Selling Partner to
purchase the same proportion of its Interest. The Selling Partner shall give
prompt notice to BPU of any such bona fide third-party offer, which notice shall
include the proposed per-one-percent purchase price and other terms contained in
the offer. BPU may exercise its rights pursuant to this Section, if at all, with
written notice of such exercise to the Partnership and the Selling Partner
within fifteen (15) days after receipt of the offer notice from the Selling
Partner.
ARTICLE XVI
SUBSTITUTED PARTNERS
Any transferee acquiring the Interest of a Partner as permitted under Article XV
shall be deemed admitted as a substituted Partner with respect to the Interest
transferred concurrently with the effectiveness of such transfer (provided that
such transferee, unless already a Partner, shall, as a condition to such
admission, execute a counterpart of this Agreement, agreeing thereby to be bound
by all of the terms and conditions hereof), and such substituted Partner shall
be entitled to all of the rights and benefits under this Agreement of the
transferor of such Interest. No purported transfer of any Interest, or any
portion thereof or Interest therein, in violation of the terms of this Agreement
(including any transfer occurring by operation of law) shall vest the purported
transferee with any rights, powers, or privileges hereunder, and no such
purported transferee shall be deemed for any purposes as a Partner hereunder or
have any right to vote or consent with respect to Partnership matters, to
inspect Partnership records, to maintain derivative proceedings, to maintain any
action for an accounting or to exercise any other rights of a Partner hereunder
or, under the Act.
ARTICLE XVII
WAIVER OF PARTITION/COVENANT AGAINST RESIGNATION
17.1 Waiver of Partition. No Partner shall, either directly or
indirectly, take any action to require partition, file a xxxx for Partnership
accounting or appraisement of the Partnership or of any of its assets or
properties or cause the sale of any Partnership Assets, and notwithstanding any
provisions of applicable law to the contrary, each Partner (and each of his
legal representatives, successors, or assigns) hereby irrevocably waives any and
all rights it may have to maintain any action for partition or to compel any
sale with respect to his Partnership Interest, or with respect to any assets or
properties of the Partnership, except as expressly provided in this Agreement.
17.2 Covenant Not to Resign or Dissolve. Notwithstanding any provision
of the Act to the contrary, each Partner hereby covenants and agrees that the
Partners have entered into this Agreement based on their mutual expectation that
all Partners will continue as Partners and carry out the duties and obligations
undertaken by them hereunder and that, except as otherwise expressly required or
permitted hereby, each Partner hereby covenants and agrees not to (a) take any
action to file a certificate of dissolution or its equivalent with respect to
itself, (b) voluntarily take any Bankruptcy Action, (c) withdraw or attempt to
withdraw from the Partnership, (d) exercise any power under the Act to dissolve
the Partnership, (e) transfer all or any portion of his Interest in the
Partnership in violation of Article XV, (f) petition for judicial dissolution of
the Partnership, or (g) demand a return of such Partner's contributions or
profits (or a bond or other security for the return of such contributions or
profits) except to the extent provided under this Agreement.
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ARTICLE XVIII
ADDITIONAL PARTNERS
Subject to the provisions of Section 3.6 hereof, additional Partners may be
admitted to the Partnership only with the approval of all the Limited Partners
and the Contributed Equity and the Percentage Interest of any additional Partner
shall be as determined by the Limited Partners approving the admission (and the
Percentage Interest of all Other Partners shall be adjusted to reflect the
Percentage Interest granted to the additional Partner, pro rata based on
relative Percentage Interests immediately prior to the admission of the
additional Partner). Any additional Partner shall execute a counterpart of this
Agreement, agreeing thereby to be bound by all of the terms and provisions
hereof; provided that prior to or concurrently with the admission of an
additional Partner, the Partners shall adopt such amendments to this Agreement
as they deem appropriate to cause the provisions hereof that contemplate only
three (3) Partners to be appropriately modified to operate in the context of
four (4) or more Partners.
ARTICLE XIX
DISSOLUTION
19.1 Dissolution.
(a) The Partnership shall be dissolved upon the earliest to
occur of the following:
(1) all or substantially all of the Partnership Assets have been sold,
taken in condemnation, or otherwise disposed and reduced to cash;
(2) the Partners unanimously elect to dissolve the Partnership;
(3) the occurrence of any other event causing a dissolution of the
Partnership under the Act.
(b) Subject to the provisions of Section 3.10 hereof, upon
dissolution of the Partnership the General Partner, or such other Person as is
designated by a Majority of the Partners (such Person being herein referred to
as the "Liquidator") shall proceed to wind up the business and affairs of the
Partnership in accordance with the terms hereof and the requirements of the Act.
A reasonable amount of time shall be allowed for the period of winding-up in
light of prevailing market conditions and so as to avoid undue loss in
connection with any sale of Partnership Assets. This Agreement shall remain in
full force and effect during the period of winding-up.
(c) In connection with the winding-up of the Partnership,
before the later to occur at the end of the fiscal year of the Partnership or
the ninetieth day after the liquidation of the Partnership within the meaning of
Section 1.704-1(b)(2)(ii)(g) of the Regulations, the proceeds from the sale of
Partnership Assets shall be distributed as follows:
(1) to creditors, including Partners who are creditors in satisfaction
of liabilities of the Partnership (whether by payment or the making of
reasonable provision for payment thereof); and
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(2) thereafter to Partners in accordance with Section 5.2 hereof.
(d) If distributions are insufficient to return to any Partner
the full amount of such Partner's Contributed Equity, such Partner shall have no
recourse against any other Partner. No Partner shall have any obligation to
restore, or otherwise pay to the Partnership, any other Partner, or any third
party, the amount of any deficit balance in such Partner's Capital Account upon
dissolution and liquidation. Following the completion of the winding-up of the
affairs of the Partnership and the distribution of the proceeds from the sale of
Partnership Assets, the Partnership shall be deemed terminated and the
Liquidator shall file a certificate of cancellation with the Secretary of State
of the State of Delaware as required by the Act.
19.2 Deemed Liquidation. If no dissolution event has occurred, but the
Partnership is deemed liquidated for federal income tax purposes within the
meaning of Section 1.704-1(b)(2)(ii)(g) of the Regulations, as a result of a
Partnership termination, as defined in I.R.C. Section 708(b)(1)(B), such
termination will be treated in accordance with Section 1.708-1(b)(1)(4) of the
Regulations.
19.3 Bankruptcy, etc., of a Limited Partner. No event with respect to a
Limited Partner, including the death, withdrawal, termination (in the case of a
Limited Partner that is a partnership), dissolution (in the case of a Limited
Partner that is a corporation), retirement or adjudication as a bankrupt of a
Limited Partner, shall dissolve the Partnership, but the rights of such Limited
Partner to share in the profits and losses of the Partnership and to receive
distributions of the Partnership funds shall, upon the happening of such an
event, pass to the Limited Partner's legal representative, or successors in
interest, as the case may be, subject to this Agreement, and the Partnership
shall continue as a limited partnership. In no event shall such Limited
Partner's legal representative, or successors in interest, become a substitute
Partner except as provided in Article XVI.
ARTICLE XX
DISPUTE RESOLUTION
Unless expressly provided otherwise in this Agreement, any and all disputes
arising under the terms of this Agreement ("Arbitrable Dispute") shall be
referred to and resolved through the use of binding arbitration using three (3)
arbitrators, in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, and the Federal Arbitration Act (Title 9 of the United
States Code). If there is any inconsistency between this Article and any of said
statute or rules, the terms of this Article shall control the rights and
obligations of the parties. Arbitration shall be initiated within the applicable
time limits set forth in this Agreement and not thereafter or if no time limit
is given, within the time period allowed by the applicable statute of
limitations. Arbitration shall be initiated by one (1) party ("Claimant")
serving written notice on the other party ("Respondent") that the Claimant
elects to refer the Arbitrable Dispute to binding arbitration and that the
Claimant has appointed an arbitrator who shall be identified in such notice. The
Respondent shall respond to the Claimant within thirty (30) days after receipt
of Claimant's notice, identifying the arbitrator Respondent has appointed. The
two (2) arbitrators so chosen shall select a third arbitrator within thirty (30)
days after the second arbitrator has been appointed. In the event that they are
unable or fail to do so, or if one party fails or refuses to appoint its
party-appointed arbitrator, the Chief Judge of the United States District Court
for the Southern District of Texas shall appoint an arbitrator to satisfy the
duties of the arbitrator not appointed as provided above. Claimant shall pay the
compensation and expenses of the arbitrator named by or for it, and Respondent
shall pay the compensation and expenses of the arbitrator named by or for it.
Claimant and Respondent shall each pay one-half of the
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compensation and expenses of the third arbitrator. Unless expressly provided
otherwise in this Agreement, all arbitrators must be neutral parties who have
never been officers, directors or employees of the parties or any of their
Affiliates. The hearing shall be conducted in Houston, Texas, and shall be
commenced within thirty (30) days after the selection of the third arbitrator.
The parties and the arbitrators shall proceed diligently and in good faith in
order that the award shall be made as promptly as possible. The decision of the
arbitrators shall be binding on and non-appealable by the parties. Judgment on
the arbitration award may be entered and enforced in any court having
jurisdiction over the parties or their assets. The arbitrators shall not have
the authority to grant or award indirect, consequential, punitive or exemplary
damages.
ARTICLE XXI
MISCELLANEOUS
21.1 Amendments. Amendments to this Agreement may be made at any time
by the General Partner and shall be adopted, but shall be effective as an
amendment hereto only upon written approval by Cheniere and BPU (but not their
transferees or assignees).
21.2 Checks, Drafts, Evidence of Indebtedness. All checks, drafts, or
other orders for payment of money, notes, or other evidence of indebtedness
issued in the name of or payable to the Partnership shall be signed or endorsed
in such manner and by such Person or Persons as shall be designated from time to
time in accordance with the resolution of the General Partner.
21.3 Notices. All notices and other communications required or
permitted to be given or made under this Agreement shall be given or made in
writing. Such notices shall be delivered by hand delivery, by facsimile (or
similar electronic means) or by a nationally recognized overnight courier, fees
prepaid, addressed as follows:
If to Corpus GP: Corpus Christi LNG - GP
000 Xxxx Xx., Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Xxxxxx Xxxxx
Fax: (000) 000-0000
If to BPU: BPU, LLC
c/o Sherwin Alumina, LP
Attn: Xxxxx Xxxxxx
X.X. Xxx 0000
Xxxxxx Xxxxxxx, Xxxxx 00000
With copy to: Seyfarth Xxxx
Attn: Xxxxx X. Xxxxxxx, Xx.
0000 Xxxxxxxxx Xxxxxx XX
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
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If to Cheniere: Cheniere LNG, Inc.
000 Xxxx Xx., Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Xxxxxx Xxxxx
Fax: (000) 000-0000
copy to: Xxxxxxx & Xxxxx, LLP
000 Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxxxx
Fax: (000) 000-0000
Any party may make changes, additions or deletions to its address for the
purpose of this Section 21.3 by notice to the other parties given in the manner
set forth above.
21.4 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the state of Delaware (without
regard to principles of conflicts of laws).
21.5 Headings. The Article and Section headings of this Agreement are
for convenience only, do not form a part of this Agreement, and shall not in any
way affect the interpretation hereof.
21.6 Extension Not a Waiver. No delay or omission in the exercise of
any power, remedy or right herein provided or otherwise available to a Partner
or the Partnership shall impair or affect the right of such Partner or the
Partnership thereafter to exercise the same. Any extension of time or other
indulgence granted to a Partner hereunder shall not otherwise alter or affect
any power, remedy or right of any other Partner or of the Partnership, or the
obligations of the Partner to whom such extension or indulgence is granted.
21.7 Publicity. No Partner shall issue any press release or otherwise
publicize or disclose the terms of this Agreement or the terms of the Partners'
acquisition of the Interests in the Partnership, without the consent of the
General Partner, except as such disclosure may be made in the course of normal
reporting practices by a Partner to its partners, shareholders, consultants or
members or as otherwise required by law. Provided, however, the General Partner
shall have the right to publicize, advertise and otherwise promote the facility
and its associated services in a manner it reasonably deems desirable.
21.8 Construction and Amendment. No oral explanation of or oral
information relating to this Agreement offered by either party hereto shall
alter the meaning or interpretation of this Agreement.
21.9 Further Action. Each Partner agrees to perform all further acts
and execute, acknowledge, and deliver any documents which may be reasonably
necessary, appropriate, or desirable to carry out the provisions of this
Agreement.
21.10 Variation of Pronouns. All pronouns and any variations thereof
shall be deemed to refer to masculine, feminine, or neuter, singular or plural,
as the identity of the Person or Persons may require.
40
21.11 Successors and Assigns. Subject to the restrictions on transfer
set forth in Article XV, this Agreement shall bind and inure to the benefit of
the parties hereto and their respective successors and assigns.
21.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same agreement.
21.13 Ambiguities. All of the parties to this Agreement have
participated in the negotiation and drafting hereof. Accordingly, it is
understood and agreed that the general rule that ambiguities are to be construed
against the drafter shall not apply to this Agreement. In the event that any
language of this Agreement is found to be ambiguous, each party shall have an
opportunity, in any legal proceeding, to present evidence as to the actual
intent of the parties with respect to any such ambiguous language.
21.14 Time of the Essence. Time is of the essence of this Agreement and
each provision hereof.
21.15 Entire Agreement. The terms and conditions contained herein and in
the associated agreements constitute the entire agreement between the Partners
concerning the subject matter hereof, and shall supersede all previous
communications, either oral or written, between the parties hereto, and no
agreement or understanding varying or extending this Agreement shall be binding
upon either Partner unless in writing, signed by a duly authorized officer or
representative of each Partner.
[REST OF PAGE LEFT INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives as of the day and year first set forth
above.
GENERAL PARTNER:
CORPUS CHRISTI LNG-GP, INC.
By:
------------------------------------------
Name: Xxxxxx Xxxxx
Title: President and Chairman of the Board
LIMITED PARTNERS:
BPU LNG
By:
------------------------------------------
Name: Xxxxx Xxxxxx
Title: Chief Executive Officer
CHENIERE LNG, INC.
By:
------------------------------------------
Name: Xxxxxx Xxxxx
Title: President
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