AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
NOARK PIPELINE SYSTEM, LIMITED PARTNERSHIP
JANUARY 12, 1998
Table of Contents
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF NOARK PIPELINE SYSTEM, LIMITED PARTNERSHIP............................................................1
ARTICLE I DEFINITIONS.............................................................................................2
1.1 Definitions.....................................................................................2
1.2 Other Terms.....................................................................................8
ARTICLE II FORMATION OF LIMITED PARTNERSHIP.......................................................................9
2.1 Formation.......................................................................................9
2.2 Name............................................................................................9
2.3 Offices and Registered Agent....................................................................9
2.4 Term of Partnership.............................................................................9
2.5 Purpose.........................................................................................9
2.6 Representations and Warranties Concerning Partnership..........................................10
ARTICLE III MANAGEMENT OF THE PARTNERSHIP........................................................................10
3.1 Management Committee...........................................................................10
3.2 Composition of Management Committee............................................................10
3.3 Meetings of Management Committee...............................................................10
3.4 Partners Meetings..............................................................................11
3.5 Restrictions on Authority of the Management Committee..........................................12
3.6 Project Leader.................................................................................15
3.7 Delegation.....................................................................................18
3.8 Officers.......................................................................................19
3.9 Claims.........................................................................................19
3.10 Disputed Charges...............................................................................19
ARTICLE IV FINANCING OF THE PARTNERSHIP..........................................................................20
4.1 Existing Capital Accounts Balances.............................................................20
4.2 Capital Contributions..........................................................................20
4.3 Failure to Contribute..........................................................................21
4.4 Capital Accounts...............................................................................22
4.5 Loans by Partners..............................................................................22
4.6 Interest.......................................................................................22
4.7 Time for Return of Contributions...............................................................22
4.8 Limited Liability of the Limited Partners......................................................22
4.9 Benefits of Agreement..........................................................................22
ARTICLE V CAPITAL AND INCOME ALLOCATIONS AND DISTRIBUTIONS.......................................................22
5.1 Allocations Controlling for Capital Account Purpose............................................22
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5.2 General Allocation of Profits and Losses.......................................................23
5.3 Special Interest Expense.......................................................................23
5.4 Preferential Allocations.......................................................................23
5.5 Special Profits Allocations....................................................................25
5.6 Other Allocation Rules.........................................................................26
5.7 Cash Distributions.............................................................................26
5.8 Amounts Withheld...............................................................................27
5.9 Reimbursements.................................................................................27
ARTICLE VI RELATIONS OF THE PARTNERS.............................................................................27
6.1 Restricted Transactions........................................................................27
6.2 Exculpation from Liability.....................................................................28
6.3 Indemnification................................................................................29
6.4 Title to Partnership Assets....................................................................30
ARTICLE VII ASSIGNABILITY OF PARTNERS' INTERESTS.................................................................31
7.1 Restrictions on Transfer of Partner's Interest.................................................31
7.2 Right of First Refusal.........................................................................31
7.3 Opinion of Counsel.............................................................................31
7.4 Substituted Partner............................................................................32
7.5 Recognition of Transferee as Partner...........................................................32
7.6 Binding Effect.................................................................................33
7.7 Permitted Transfers of Partnership Interests...................................................33
7.8 Succession to Capital Account..................................................................33
ARTICLE VIII WITHDRAWAL AND REMOVAL; ADMISSION OF SUCCESSOR AND
ADDITIONAL GENERAL PARTNERS.............................................................................33
8.1 Voluntary Withdrawal...........................................................................33
8.2 Other Withdrawal Events........................................................................33
8.3 Removal of a Partner...........................................................................34
8.4 Liability of a Withdrawn General Partner.......................................................34
8.5 Additional or Successor Partners...............................................................34
8.6 Continuation of Partnership....................................................................34
8.7 Automatic Suspension of the Vote and Right to Participate
in Management of Partnership Affairs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE IX DISSOLUTION AND LIQUIDATION...........................................................................35
9.1 Dissolution....................................................................................35
9.2 Liquidation....................................................................................35
ARTICLE X ALLOCATIONS AND DISTRIBUTIONS ON LIQUIDATION...........................................................35
10.1 Liquidation and Termination....................................................................35
10.2 Capital Account Deficits.......................................................................36
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10.3 Special Distributions..........................................................................36
10.4 Deemed Distribution and Recontribution.........................................................37
ARTICLE XI CERTIFICATES AND OTHER DOCUMENTS......................................................................37
11.1 Project Leader as Attorney for Partners........................................................37
11.2 Making and Filing of Certificate...............................................................38
11.3 Cancellation of Certificates Evidencing Partnership Interests..................................39
ARTICLE XII BOOKS OF ACCOUNT, FINANCIAL
STATEMENTS AND FISCAL MATTERS...........................................................................39
12.1 Books of Account...............................................................................39
12.2 Reports and Financial Statements...............................................................39
12.3 Tax Returns and Other Reports..................................................................40
12.4 Fiscal Year....................................................................................40
12.5 Bank Accounts, Funds and Assets................................................................40
12.6 Tax Elections..................................................................................40
12.7 Other Partnership Records......................................................................41
12.8 Survival of Tax Provision......................................................................42
12.9 Deposit of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE XIII DISPUTE RESOLUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
13.1 Invoking Procedure.............................................................................42
13.2 Stalemate Defined..............................................................................43
13.3 Investigation..................................................................................43
13.4 Neutral........................................................................................43
13.5 Schedule.......................................................................................44
13.6 Discovery......................................................................................44
13.7 Written Submission.............................................................................44
13.8 Representatives................................................................................44
13.9 Structure......................................................................................44
13.10 Mandatory......................................................................................44
13.11 Fees...........................................................................................45
13.12 Later Proceedings..............................................................................45
13.13 Dispute Resolution.............................................................................45
ARTICLE XIV LIMITATION OF AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
ARTICLE XV LIMITATION OF LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
ARTICLE XVI MISCELLANEOUS........................................................................................48
16.1 Notices........................................................................................48
16.2 Captions and Pronouns..........................................................................49
16.3 Binding Effect.................................................................................49
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16.4 Amendment of the Agreement.....................................................................49
16.5 Governing Law..................................................................................49
16.6 Counterparts and Execution.....................................................................50
16.7 Severability...................................................................................50
16.8 Waiver.........................................................................................50
16.9 Attorneys' Fees................................................................................50
16.10 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
I. Exhibits: Ex. No.
- Description of Interconnection, Integration and Expansion of Pipeline
Facilities of NOARK and Ozark A
- Accounting Procedures B
II. Schedules: Sch. No.
- Initial Capital Account Balances 4.1
- Special Revenue Allocation Base Amounts 5.4(a)
- Supply Receipt Points on NOARK Pipeline System 5.4(b)
- Special Revenue Allocation Examples (5) 5.4(d)
- Insurance 6.3(d)
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THE SECURITIES REPRESENTED BY THIS AGREEMENT OF LIMITED PARTNERSHIP 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. SUCH SECURITIES MAY NOT
BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED AT ANY TIME WHATSOEVER,
EXCEPT UPON REGISTRATION OR UPON DELIVERY TO THE PARTNERSHIP OF AN OPINION OF
COUNSEL SATISFACTORY TO THE GENERAL PARTNERS THAT REGISTRATION IS NOT REQUIRED
FOR SUCH TRANSFER OR THE SUBMISSION TO THE GENERAL PARTNERS OF THE PARTNERSHIP
OF SUCH OTHER EVIDENCE AS MAY BE SATISFACTORY TO THE GENERAL PARTNERS TO THE
EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE SECURITIES ACT OF
1933, AS AMENDED, APPLICABLE STATE SECURITIES LAWS OR ANY RULE OR REGULATION
PROMULGATED UNDER SUCH ACT OR LAWS.
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
NOARK PIPELINE SYSTEM, LIMITED PARTNERSHIP
This Amended and Restated Agreement of Limited Partnership
("Agreement") is made as of January 12, 1998, by and among the Partners (as
defined below).
RECITALS
X. XXXXX Pipeline System, Limited Partnership, an Arkansas limited
partnership (the "Partnership") was formed and organized under the terms of that
certain Limited Partnership Agreement dated as of October 10, 1991 (the
"Original Agreement").
B. The Original Agreement was amended by that certain Amendment No. 1
to the Original Agreement, dated February 24, 1993.
C. SWPL and EAPC and their Affiliates have entered into an Omnibus
Project Agreement dated January 12, 1998 which contemplates, among other things,
this amendment and restatement of the Original Agreement, as amended, in its
entirety.
D. The Parties intend that this Agreement replaces and supersedes the
Original Agreement, as amended, in its entirety.
In consideration of the mutual promises made herein, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Partners hereby agree as follows:
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ARTICLE I
DEFINITIONS
1.1 Definitions. The following terms used in this Agreement shall
(unless otherwise expressly provided herein or unless the context otherwise
requires) have the following respective meanings:
"Act" means the Arkansas Revised Limited Partnership Act of 1991, Ark.
Code Xxx. ss. 4-43-101 et seq., as it may be amended from time to time, and any
successor act.
"Affiliate" or "Affiliates" means with respect to any Person, except as
otherwise provided herein: (i) any person or entity directly or indirectly
controlling, controlled or under common control with such Person; (ii) any
person or entity directly or indirectly owning or controlling ten percent (10%)
or more of the outstanding voting securities or ownership interests of such
Person; (iii) any person or entity ten percent (10%) or more of whose
outstanding voting securities or ownership interests are directly or indirectly
owned or controlled by such Person; (iv) any officer, director, partner, manager
or member of a Person; and (v) any company for which a Person acts as an
officer, director, partner, manager or member.
"Budget" means the annual budget of anticipated capital and operating
costs of the Partnership described in Section 3.6(g) hereof.
"Capital Account" means, with respect to a Partner, the Capital Account
determined and maintained for such Partner in accordance with the following
provisions:
(a) The initial balances of each Capital Account shall be the amounts
set forth in Schedule 4.1.
(b) To each Partner's Capital Account there shall be credited such
Partner's future Capital Contributions when made, such Partner's distributive
share of Profits, allocated pursuant to Section 5.2 hereof, any items in the
nature of income or gain that are specially or curatively allocated pursuant to
Sections 5.3 through 5.5 hereof, and the amount of any Partnership liabilities
assumed by such Partner or which are secured by any asset of the Partnership
distributed to such Partner.
(c) To each Partner's Capital Account there shall be debited the amount
of cash and the Gross Asset Value of any Partnership asset distributed to such
Partner pursuant to any provision of this Agreement, such Partner's distributive
share of Losses allocated pursuant to Section 5.2 hereof, any items in the
nature of deductions or losses that are specially or curatively allocated
pursuant to Sections 5.3 through 5.5 hereof, and the amount of any liabilities
of such Partner assumed by the Partnership or which are secured by any property
contributed by such Partner to the Partnership.
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(d) In the event all or a portion of a Partnership Interest is
transferred in accordance with the terms of this Agreement, the transferee shall
succeed to the Capital Account of the transferor to the extent it relates to the
transferred Partnership Interest.
(e) In determining the amount of any liability for purposes of this
definition of Capital Accounts, there shall be taken into account Code ss.
752(c) and any other applicable provisions of the Code and Regulations.
The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to have a
"substantial economic effect" and to reflect the Partners' economic interests in
the Partnership for tax purposes. However, in the event that changes in the
allocations are required by the Service or any other taxing authority or other
curative allocations and adjustments to the Capital Accounts may be required for
income tax purposes to comply with Treas. Reg. ss. 1.704-1(b) or otherwise, the
Partners agree that such allocations and adjustments will not be made to the
Capital Accounts and the Capital Accounts as herein calculated will control upon
liquidation.
"Capital Contributions" means, with respect to any Partner, the amount
of money and the initial Gross Asset Value of any property (other than money)
contributed in the future to the Partnership with respect to the Partnership
Interest held by such Partner. Loans to the Partnership shall not be included in
the Capital Account of any Partner. The principal amount of a promissory note
which is not readily traded on an established securities market and which is
contributed to the Partnership by the maker of the note shall not be included in
the Capital Account of any Partner until the Partnership makes a taxable
disposition of the note or until (and to the extent) principal payments are made
on the note, all in accordance with Treas. Reg. ss. 1.704-1 (b)(2)(iv)(d)(2)
(relating to the contributions to a partnership of promissory notes).
"Certificate of Limited Partnership" means the Certificate of Limited
Partnership of the Partnership filed with the Secretary of the State of
Arkansas, as it may be amended and/or restated from time to time.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time (or any corresponding provisions of succeeding law).
"Depreciation" means, for each fiscal year or other period, an amount
equal to the depreciation, amortization, or other cost recovery deduction
allowable with respect to an asset for such year or other period, except that if
the Gross Asset Value of an asset differs from its adjusted basis for Federal
income tax purposes at the beginning of such year or other period, Depreciation
shall be an amount which bears the same ratio to such beginning Gross Asset
Value as the Federal income tax depreciation, amortization, or other cost
recovery deduction for such year or other period bears to such beginning
adjusted tax basis; provided, however, that if the Federal income tax
depreciation, amortization, or other cost recovery deduction for such year is
zero, Depreciation shall
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be determined with reference to such beginning Gross Asset Value using any
reasonable method selected by the Management Committee.
"EAPC" means Enogex Arkansas Pipeline Corporation, an Oklahoma
corporation.
"Existing Loans" means the NOARK Debt, and any subsequent loans to the
Partnership replacing the then existing principal balance of the NOARK Debt, or
the then existing principal balance of such subsequent loans, as applicable.
"Expansion" means an expansion of the pipeline facilities included
within the System by looping, adding compression, extending the mainline, or by
constructing or purchasing laterals or gathering facilities linking such
pipeline facilities to a Partner's or a third party's facilities.
"General Partner" or "General Partners" means EAPC and SWPL, and any
additional Person admitted as a general partner of the Partnership, but does not
include any Person who has ceased to be a general partner of the Partnership.
"Gross Asset Value" means, with respect to any asset, the asset's
adjusted basis for Federal income tax purposes, except as follows:
(a) The Gross Asset Value of the Partnership's assets as of the date of
this Agreement shall be consistent with the initial balances of the Capital
Accounts as set forth in Schedule 4.1.
(b) The initial Gross Asset Value of any asset contributed by a Partner
to the Partnership shall be the gross fair market value of such asset, as
determined by agreement between the contributing Partner and the other Partners;
(c) The Gross Asset Values of all Partnership assets shall be adjusted
to equal their respective gross fair market values, as determined by a
SuperMajority in Interest of the Partners as of the following times: (i) the
acquisition of an additional interest in the Partnership by a new or existing
Partner in exchange for more than a de minimis Capital Contribution; (ii) the
distribution by the Partnership to a Partner of more than a de minimis amount of
Property as consideration for an interest in the Partnership; and (iii) the
liquidation of the Partnership within the meaning of Treas. Reg. ss.
1.704-1(b)(2)(ii)(g) (relating to when a liquidation of a partnership occurs);
provided, however, that adjustments pursuant to clauses (i) and (ii) above shall
be made only if a SuperMajority in Interest of the Partners determines that such
adjustments are necessary or appropriate to reflect the relative economic
interests of the Partners in the Partnership;
(d) The Gross Asset Value of any Partnership asset distributed to any
Partner shall be the gross fair market value of such asset on the date of
distribution as determined by the Partners (or by an independent appraiser if
the Partners are unable to agree upon a value); and
4
(e) The Gross Asset Values of Partnership assets shall be increased or
decreased to reflect any adjustments to the adjusted basis of such assets
pursuant to Code ss. 734(b) or Code ss. 743(b), but only to the extent that such
adjustments are taken into account in determining Capital Accounts pursuant to
Treas. Reg. ss. 1.704-1(b)(2)(iv)(m) (relating to Code ss. 754 elections) and
the definition of Capital Account hereof.
"Indemnitee" shall mean (i) any Partner or any former Partner, (ii) any
Project Leader or former Project Leader, (iii) the Management Committee or any
member or former member of the Management Committee, (iv) any Person who is or
was a NOARK Related Entity, (v) any Person who is or was an Affiliate of a
Partner or a former Partner who is or was performing or providing services on
behalf of the Partnership (including any NOARK Related Entity), (vi) any Person
who is or was an officer, director, employee, partner, agent or trustee of the
Partner, the Partnership (including any NOARK Related Entity), any former
Partner, or any such Affiliate, or (vii) any Person who is or was serving at the
request of a Partner, any former Partner, or any such Affiliate, as a director,
officer, employee, partner, agent, attorney or trustee of such Partner, former
Partner or Affiliate.
"Inservice Expansion Date" means the date on which the interconnection,
integration and expansion of the pipeline facilities of the Partnership and
Ozark (as more fully described on Exhibit A) are completed and commence full
time operations.
"Limited Partner" or "Limited Partners" means EAPC with respect to its
Partnership Interest as a Limited Partner and its successor, and any other
person or entity admitted as a Limited Partner of the Partnership pursuant to
this Agreement, but does not include any Person who has ceased to be a Limited
Partner.
"Liquidator" means the Person in charge of the liquidation of the
Partnership's assets which shall be the Management Committee unless a
SuperMajority in Interest of Partners designates another Person as Liquidator.
"Major Decision" shall have the meaning set forth in Section 3.5 of
this Agreement.
"Management Committee" means the Management Committee described in
Article III of this Agreement.
"Management Committee Approval" shall have the meaning set forth in
Section 3.3 of this Agreement.
"NOARK Debt" means (a) the debt incurred by NOARK pursuant to the terms
of that certain Credit Agreement and related documents dated as of February 26,
1993 among NOARK, the lenders and The First National Bank of Chicago, as Agent,
as amended by the First Amendment to NOARK Pipeline System, Limited Partnership
Credit Agreement dated February 1, 1994 and (b) the debt incurred by NOARK
pursuant to the terms of that certain Construction Loan and Note Purchase
5
Agreement and related documents dated as of October 10, 1991 and as amended by
Amendment No. 1 and Amendment No. 2 to the Construction Loan and Note Purchase
Agreement dated as of January 29, 1993 and February 24, 1993, respectively,
between NOARK and The Prudential Insurance Company of America.
"NOARK Related Entity" means any Person which is wholly owned by the
Partnership.
"Omnibus Agreement" means that certain Omnibus Project Agreement dated
as of January 12, 1998, by and among EAPC, SWPL, Southwestern Energy Company and
Enogex Inc.
"Ozark" means Ozark Pipeline, Inc., a Delaware corporation.
"Ozark Acquisition" means the transaction in which Enogex Interstate
Transmission, L.L.C. will acquire all of the pipeline assets of Ozark or all of
the issued and outstanding capital stock of Ozark.
"Partners" or "Partner" means the General Partners and the Limited
Partner, or any of them individually.
"Partnership" means NOARK Pipeline System, Limited Partnership, an
Arkansas limited partnership.
"Partnership Agreement" or "Agreement" means this Amended and Restated
Agreement of Limited Partnership.
"Partnership Interest" means that interest of a Partner in the
Partnership, as described in this Agreement.
"Partnership Percentage" means the percentage of each Partner in the
Partnership as the same may change from time to time in accordance with the
terms of this Agreement. As of the date of this Agreement, the Partnership
Percentage of each Partner is as set forth below:
SWPL 60% (entirely as a General Partner)
EAPC 40% (39% as a General Partner and 1% as a Limited Partner)
At such time as the Ozark Acquisition is consummated and all of the ownership
interests of Enogex Interstate Transmission, L.L.C. are contributed to the
Partnership as provided for in Section 3 of the Omnibus Agreement, the
Partnership Percentage of each Partner shall be changed to the following:
SWPL 32% (entirely as a General Partner)
EAPC 68% (67% as a General Partner and 1% as a Limited Partner)
6
On the Inservice Expansion Date, the Partnership Percentage of each
Partner shall be changed to the following:
SWPL 25% (entirely as a General Partner)
EAPC 75% (74% as a General Partner and 1% as Limited Partner)
"Person" means any individual, corporation, limited liability company,
limited or general partnership, joint venture, association, joint stock company,
trust, unincorporated organization or other entity.
"Profits" and "Losses" means, for each fiscal year or other period, an
amount equal to the Partnership's taxable income or loss for such year or period
determined in accordance with Code ss. 703(a) (for this purpose, all items of
income, gain, loss, or deduction required to be stated separately pursuant to
Code ss. 703(a)(1) shall be included in taxable income or loss), 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 Profits or Losses pursuant
to this definition of Profits and Losses shall be added to such taxable income
or loss;
(b) Any expenditures of the Partnership described in Code ss.
705(a)(2)(B) or treated as Code ss. 705(a)(2)(B) expenditures pursuant to Treas.
Reg. ss. 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing
Profits or Losses pursuant to this definition of Profits and Losses, shall be
subtracted from such taxable income or loss;
(c) In the event the Gross Asset Value of any Partnership asset is
adjusted as required by the terms of subsections (c), (d) or (e) of the
definition of Gross Asset Value hereof, the amount of such adjustment shall be
taken into account as gain or loss from the disposition of such asset for
purposes of computing Profits or Losses;
(d) Gain or loss resulting from any disposition of Partnership assets
with respect to which gain or loss is recognized for Federal income tax purposes
shall be computed by reference to the Gross Asset Value of the property disposed
of, notwithstanding that the adjusted tax basis of such property differs from
its Gross Asset Value; and
(e) In lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or loss, there
shall be taken into account Depreciation for such fiscal year or other period in
accordance with the definition of Depreciation herein.
(f) Any items of gross income specially allocated pursuant to Section
5.4 or interest expense allocated pursuant to Section 5.3 shall not be
considered when calculating "Profits" or "Losses" because such items are
specially allocated.
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"Project Leader" means the person designated as Project Leader in
accordance with Section 3.6 hereof.
"Proposing Partner" shall have the meaning set forth in Section 4.2(b)
of this Agreement.
"SWPL" means Southwestern Energy Pipeline Company, an Arkansas
corporation and its permitted successors and assigns.
"Service" means the Internal Revenue Service of the United States of
America.
"Substituted Partner" shall refer to a Transferee of a Partner's
Partnership Interest who is admitted to the Partnership as a Partner in
accordance with the provisions of Section 7.4 of this Agreement.
"SuperMajority in Interest" means such of the Partners as have, at the
time of determination, eighty percent (80%) or more of the Partnership
Percentages of all Partners.
"System" shall mean the pipeline system and related equipment and
property owned, directly or indirectly, by the Partnership (including any NOARK
Related Entity) on the date hereof together with the pipeline assets and related
equipment and property to be contributed to the Partnership under the terms of
the Omnibus Agreement (whether directly or indirectly through contributions of
ownership interests), and all pipeline facilities and related equipment and
property hereafter acquired directly or indirectly, by the Partnership
(including any NOARK Related Entity), all as same may be modified or expanded
pursuant to the provisions of this Agreement.
"Transfer" means, as a noun, any voluntary or involuntary transfer,
assignment, sale, pledge, gift, hypothecation or other disposition and, as a
verb, voluntarily or involuntarily to transfer, assign, sell, pledge, gift,
hypothecate or otherwise dispose of.
"Transferee" shall have the meaning set forth in Section 7.1 hereof.
"Transferor" shall have the meaning set forth in Section 7.1 hereof.
"Treasury Regulations" or "Treas. Reg." means the income tax
regulations, including proposed and temporary regulations, promulgated under the
Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
1.2 Other Terms. Other terms may be defined elsewhere in the text
of this Agreement and shall have the meaning indicated therein.
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ARTICLE II
FORMATION OF LIMITED PARTNERSHIP
2.1 Formation. The Partnership has been formed pursuant to the Act, and
shall be governed by the Act and the terms and conditions set forth herein.
2.2 Name. The name of the Partnership shall be, and the business of the
Partnership shall be conducted under the name of, NOARK Pipeline System, Limited
Partnership. The Partnership's business may be conducted under any other name or
names deemed advisable by the Management Committee.
2.3 Offices and Registered Agent. The principal offices of the
Partnership shall be at such place or places as the Management Committee may
determine; provided, that, such place or places shall as soon as reasonably
practicable after the date of this Agreement be established in Oklahoma City,
Oklahoma, in an office which is separate from that of any Partner. The
Partnership shall maintain a registered agent and a registered office in
Arkansas as the Management Committee shall designate from time to time on the
Partnership's Certificate of Limited Partnership. As of the date of this
Agreement, the principal office shall be located at 000 Xxxxxxx Xxxx Two, 000
Xxxxxxx Xxxx Xxxxx, Xxxxxxxx Xxxx, Xxxxxxxx 00000-0000 and the registered agent
and registered office shall be The Corporation Company, 000 Xxxxxx Xxxxxx,
Xxxxxx Xxxx, XX 00000. The Partnership may maintain offices at such other place
or places as the Management Committee deems advisable.
2.4 Term of Partnership. The Partnership commenced as of the date of
the filing of the Certificate of Limited Partnership as required under the Act
and shall continue for a period ending the earlier of:
(a) September 30, 2047;
(b) The date on which all of the assets acquired by the Partnership
have been sold and converted to cash (or to cash equivalents, or securities
tradeable on a national securities exchange) or otherwise disposed of and all
installment obligation receivables have been collected;
(c) The date on which the Partnership is voluntarily dissolved upon
approval by a SuperMajority in Interest of the Partners;
(d) The date on which the Partnership is dissolved by operation of
law or judicial decree; or
(e) The date on which the Partnership no longer has any General
Partners.
2.5 Purpose. The purpose and business of the Partnership shall be any
business which may lawfully be conducted by a limited partnership organized
pursuant to the Act. In particular, and not by way of limitation, the
Partnership (including any NOARK Related Entity) shall engage in the
9
gathering, processing, compression, transmission and marketing of natural gas
and natural gas liquids.
2.6 Representations and Warranties Concerning Partnership. Each Partner
represents and warrants that (i) the execution and delivery of this Agreement by
such Partner and the performance thereof by such Partner of its obligations will
not contravene any provision of, or constitute a default under, any indenture,
mortgage or other agreement of such Partner, any applicable law or regulation or
any order of any court, commission or governmental agency having jurisdiction,
(ii) this Agreement is a legal, valid and binding obligation of such Partner
enforceable against such Partner in accordance with its terms, except insofar as
enforcement may be limited by bankruptcy, insolvency, reorganization or other
similar laws relating to or affecting the enforcement of creditors' rights
generally and by general equitable principles (regardless of whether enforcement
is considered in equity or at law), and (iii) it is acquiring its interest in
the Partnership for its own account for investment, and not with a view to the
sale or distribution thereof.
ARTICLE III
MANAGEMENT OF THE PARTNERSHIP
3.1 Management Committee. The Partnership (including all NOARK Related
Entities) shall be managed by the Management Committee, which, except as
otherwise provided in this Agreement (including without limitation, those
matters which under Section 3.5 require the approval of a SuperMajority in
Interest of Partners) shall have exclusive authority with respect to all affairs
of the Partnership (including any NOARK Related Entities).
3.2 Composition of Management Committee. The Management Committee shall
be composed of five (5) members. One member shall be the Project Leader as
determined in Section 3.6 below. EAPC (together with any Substituted Partner(s)
succeeding to EAPC's Partnership Interest) shall designate two of the four
remaining members of the Management Committee, and SWPL, (together with any
Substituted Partner(s) succeeding to SWPL's Partnership Interest) , shall
designate the two remaining members of the Management Committee. Each Partner
shall notify all other Partners in writing of their designations to the
Management Committee, including any alternate members they may choose to
designate. Such alternate members shall have full authority to act in the
absence of a primary member. The Partners shall have authority to remove their
respective designees to the Management Committee at any time and to replace them
with new designees at any time upon giving written notice to the other Partners.
3.3 Meetings of Management Committee. The Project Leader shall preside
at all meetings of the Management Committee, which shall meet at least
quarterly. Special meetings of the Management Committee may be called at such
times and places, and in such manner, as the Project Leader or any Partner deems
necessary and requests in writing, and at such times as requested in writing by
any member of the Management Committee. Unless notice is waived by
10
all members of the Management Committee, notice of all meetings shall be given
by the Project Leader to all Management Committee members and to all Partners at
least five (5) days in advance of the time set for the meeting. The notice will
be accompanied by an agenda of the matters the proponent of the meeting intends
to present at the meeting; provided, that, the scope of the issues to be
discussed at the Management Committee meeting need not be limited to the matters
stated in the notice. Any member of the Management Committee may require that
items be added to the agenda by notice to all other Management Committee members
and Partners given at least forty-eight (48) hours prior to the meeting. Items
may be added to the agenda at a Management Committee meeting only if all members
of the Management Committee are present at such meeting and agree to the
addition of such items. Although discussions of other matters may take place,
only agenda items may be formally decided at any Management Committee meeting.
All meetings of the Management Committee shall be held in person or by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other. The members of the
Management Committee may act through written proxies, and the Management
Committee may take action in lieu of a meeting through a written consent signed
by all of the members of the Management Committee. The presence in person, by
proxy or through alternates of not less than fifty percent (50%) of the members
of the Management Committee shall be necessary to constitute a quorum at any
meeting for the transaction of business. Unless otherwise provided herein, the
affirmative vote of a majority of the members in attendance at a meeting of the
Management Committee at which a quorum is present ("Management Committee
Approval") shall be necessary and sufficient to take any action on behalf of the
Management Committee. Each member on the Management Committee shall have one
vote. In the absence of a quorum, a majority of the members present at the
meeting may adjourn such meeting from time to time until a quorum is present.
Written minutes of all Management Committee meetings shall be maintained and
distributed promptly to all members of the Management Committee.
3.4 Partners Meetings.
(a) Immediately upon execution of this Agreement, each Partner
shall designate, by notice given to each other Partner and to the
Partnership, an individual to serve as its primary representative to
vote at meetings of the Partners. By like notice, each Partner may
designate not more than one alternative representative who shall have
authority to act in lieu of its primary representative. In the absence
of a primary representative, the designated alternate may serve in the
place of the primary representative. Any Partner may at any time, by
written notice to all other Partners and to the Partnership, remove its
primary representative or alternate representative and designate a new
primary representative or alternate representative.
(b) The Project Leader shall preside at all meetings of the
Partners. Meetings of the Partners may be called at such times and
places, and in such manner, as requested in writing by a representative
of any Partner. Such request shall identify the items the Partner
proposes to be placed on the agenda for such meeting. Unless notice is
waived by the representatives of all Partners, notice of all meetings
shall be given by the Project Leader to
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all representatives and alternates at least five days in advance of the
time set for the meeting. The notice will be accompanied by an agenda
of matters to be presented by the Project Leader. Any representative
may require that items be added to the agenda by notice to the
representatives of all other Partners given at least two days prior to
the date of the meeting. Although discussion of other matters may take
place, only agenda items may be formally decided; provided, that by
unanimous vote of the representatives at a meeting in which at least a
SuperMajority in Interest of the Partners are represented, items may be
added to the agenda. All meetings of the Partners shall be held in
person or by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting
can hear each other. All expenses of the meeting and notification shall
be borne by the Partnership. Representatives of Partners (or their
respective designated alternates) holding at least 80% of the
Partnership Percentages shall be necessary to constitute a quorum at
any meeting for the transaction of business. In the absence of a
quorum, a majority of the representatives present at the meeting may
adjourn such meeting from time to time until a quorum is present.
Written minutes of all meetings shall be maintained and distributed
promptly to all representatives.
(c) Each representative at a meeting of Partners shall have a
vote equal to the Partnership Percentages of the Partner he represents.
(d) Personal presence of Partners' representatives shall not
be required, provided that at or prior to the meeting time either (i)
an effective written consent to or rejection of such proposed action is
submitted to the Project Leader or (ii) a proxy is submitted to the
Project Leader. Attendance by the representatives of the Partner (or
its respective designated alternate) and voting in person at any
meeting shall revoke any written consents or rejections of such Partner
or any proxies previously submitted with respect to the action proposed
to be taken at such meeting.
(e) Any matter on which the Partners are authorized to take
action under this Agreement or under law may be taken by the Partners
without a meeting and shall be as valid and effective as action taken
by the Partners at a meeting assembled, if written consents to such
action by the Partners are signed by the Partners entitled to vote upon
such action at a meeting who hold the Partnership Percentages required
to authorize such action, and are delivered to the Project Leader.
3.5 Restrictions on Authority of the Management Committee.
Notwithstanding anything to the contrary in this Agreement (other than Section
3.6(j)), including the provisions set forth in Section 3.1, the following
actions of the Management Committee (a "Major Decision") shall require the
consent of a SuperMajority in Interest of Partners and without such consent, may
not be taken by the Partnership (nor any Partner or other Person on behalf of
the Partnership), unless such actions are approved as a result of arbitration
pursuant to Section 13.13 below):
(a) Admitting any General Partner or Limited Partner.
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(b) Any incurrence of indebtedness for borrowed money other than the
NOARK Debt, the loan entered into with Enogex Inc. as contemplated by Section 9
of the Omnibus Agreement, or in the ordinary course of business. A borrowing, or
series of borrowings for purposes that are operationally related and that take
place in a consecutive 24 month period, shall be considered other than in the
ordinary course of business only if such borrowing or series of borrowings
involves more than $150,000.
(c) Entering into any gas transportation, gas purchase or gas sales
contract or any other contract or transaction between i) any Partner or any of
its Affiliates and ii) the Partnership (including any NOARK Related Entity),
other than contracts or transactions satisfying the parameters of the applicable
policy established by the Partners under Section 3.5(p).
(d) Amending this Agreement.
(e) Changing the nature of the Partnership's business.
(f) Establishing the nature and scope of the business of any NOARK
Related Entity including NOARK Energy Services L.L.C. and Ozark Gas Gathering,
L.L.C., including, without limitation, their operating parameters, functions and
activities.
(g) Selling, exchanging, leasing, mortgaging, pledging or otherwise
transferring Partnership (including any NOARK Related Entity) assets other than
in the ordinary course of business. For purposes of this Section 3.5(g), a sale,
exchange, lease, mortgage, pledge or other transfer of assets or a series of
such transactions that are operationally related and that take place in a
consecutive 24 month period, shall be considered other than in the ordinary
course of business only if such transaction or series of transactions involves
more than $250,000.
(h) Dissolving or winding up the Partnership.
(i) Amending the Certificate of Limited Partnership of the Partnership
except as otherwise permitted under this Agreement.
(j) Forming or dissolving any Partnership committee or changing the
authority or responsibilities of any committee.
(k) Except for expenditures, commitments, or contracts involving
Expansions or matters for which EAPC has agreed to make contributions to the
Partnership pursuant to Section 10(c) of the Omnibus Agreement:
(i) Entering into any contract which involves expenditures or
commitments by the Partnership in excess of $100,000 for projects not
included in any approved Budget or accepting performance under such
contract.
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(ii) Entering into any contract which involves expenditures or
commitments by the Partnership in excess of $500,000 for projects
included in any approved Budget or accepting performance under such
contract.
(iii) Entering into any contract (x) for the transportation,
purchase, sale, exchange or balancing of natural gas or (y) which
creates any material restrictions, conditions or impediments to the
Partnership, and which in the case of either (x) or (y) has a term in
excess of one year.
(l) Approving or amending the Budget.
(m) Acquiring assets for the Partnership involving an amount more than
$100,000 (for matters not included in any approved Budget) or $500,000 (for
matters included in any approved Budget), other than i) for purposes of an
Expansion, which shall be governed by Section 4.2(b), or ii) for matters for
which EAPC has agreed to make contributions to the Partnership pursuant to
Section 10(c) of the Omnibus Agreement, provided, however, that any such
acquisition involves terms that are standard and customary in the industry and
would not have a material adverse effect on the Partnership.
(n) Determining any matter which any contract to which the Partnership
is a party expressly provides shall be approved, decided, determined, or
otherwise resolved or acted upon by the Management Committee.
(o) Determining any material Partnership tax policy, other than that
fixed by this Agreement and approving the annual federal and state income tax
returns of the Partnership. For purposes of the foregoing material Partnership
tax policy shall include without limitation the making of any material tax
election and the adoption of a method of accounting with respect to any material
item.
(p) Approving any material policy decisions of the Partnership and
changes thereof, which approvals shall not be unreasonably withheld. For
purposes of the foregoing, material policy decisions shall include without
limitation i) the making of any decision regarding actions to be taken with any
governmental agency which would have a material effect on the Partnership or the
System, ii) the establishment of parameters for the Partnership (including any
NOARK Related Entity) to enter into gathering or transportation agreements on
the System and iii) the establishment of parameters for the Partnership
(including any NOARK Related Entity) to engage in gas marketing activities. The
Partners hereby acknowledge and agree that it is not their intent to use this
provision to micro-manage the operations of the Partnership.
(q) Determining the gross fair market value of the Partnership assets
as provided for in subsection (c) of the definition of Gross Asset value.
(r) Determining the form of a nominee agreement as contemplated by
Section 6.4.
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(s) Approving appointment of directors, managers or officers of NOARK
(except for the Project Leader whose approval shall be subject to Section
3.6(e)) or any NOARK Related Entity who are employees of any Partner or their
Affiliates; and the Project Leader shall consult with the Partners regarding the
appointment of any director, manager or officer of NOARK or any NOARK Related
Entity who is not an employee of any Partner or their Affiliates, but no
approval of such appointment shall be required.
(t) Approving the final design of the interconnection, integration and
expansion of the pipeline facilities of NOARK and Ozark described on Exhibit "A"
and any contracts for the supply of fuel or electricity to power the compressor
operations of the System. For purposes of the foregoing, the "final" design
shall mean those aspects of the design which would significantly impact future
operating expenses, or future operations, of the System.
(u) The decision to settle or to litigate and defend a claim against
the Partnership as provided in Section 3.9.
3.6 Project Leader.
(a) The Project Leader shall be the chief executive officer of the
Partnership (including the NOARK Related Entities) and, subject to directives of
the Management Committee and the other provisions of this Agreement, shall have
general supervision of the affairs of the Partnership (including the NOARK
Related Entities) and shall have all power and authority reasonably necessary to
perform or cause to be performed the general operation and conduct of the
Partnership. The Project Leader shall preside when present at meetings of the
Partners and the Management Committee. He shall have general authority to
execute bonds, deeds and contracts in the name of the Partnership (including the
NOARK Related Entities) and in general to exercise all the powers usually
appertaining to the office of president of a company, except as otherwise
provided by statute or this Agreement.
(b) The Project Leader shall manage the day-to-day operations of the
Partnership (including the NOARK Related Entities); provided, that, the Project
Leader shall undertake no Major Decision without the approval of a SuperMajority
in Interest of the Partners. Subject at all times to the control and direction
of the Management Committee, the Project Leader shall oversee the executive,
administrative and operating level services of the Partnership (including the
NOARK Related Entities). The Project Leader's executive level management
responsibilities shall include, without limitation: (1) implementation of
decisions of the Management Committee; (2) supervision and oversight of the
System's operations and financial affairs; and (3) such other duties and
services reasonably incidental to the foregoing which the Management Committee
may request the Project Leader to provide. The Project Leader's oversight of
administrative and operating level responsibilities shall include, without
limitation, oversight of: (i) contract and gas management services; (ii) finance
and accounting services; (iii) marketing services; (iv) engineering services;
(v)
15
data systems and operations oversight; (vi) gathering activities and (vii)
day-to-day operating services necessary for the System.
(c) By way of illustration and not by way of limitation, the powers of
the Project Leader shall include: (i) executing, acknowledging and delivering
any and all agreements and instruments on behalf of the Partnership (including
any NOARK Related Entity); (ii) preparing and submitting annual Budgets to the
Partners for approval; (iii) employing or contracting with Persons in the
operations and management of the business of the Partnership (including any
NOARK Related Entity) on such terms and for such compensation as the Project
Leader shall determine, subject to the constraints and restrictions established
by the Budget, and, in the case of Persons employed by or affiliated with any
Partner or an Affiliate of any Partner, the provisions of the Accounting
Procedures attached hereto as Exhibit B; (iv) preparing or causing to be
prepared reports, statements and other relevant information for distribution to
the Partners; (v) opening accounts and deposits and maintaining funds in the
name of the Partnership (including any NOARK Related Entity) in banks or other
financial institutions or investing such funds; and (vi) making all reports and
filings required by governmental authorities.
(d) The Project Leader shall initially be E. Xxxxx Xxxxxxxx who shall
serve in such capacity until the earlier of his death, resignation or removal.
In order for the Project Leader to receive the benefits he has heretofore
received, the Project Leader shall be employed by EAPC, but shall be dedicated
full time to the Partnership. The Project Leader shall maintain his office at
the principal business office of the Partnership.
(e) The Project Leader shall be subject to removal with or without
cause at any time by EAPC (or any Substituted Partner succeeding to all of
EAPC's Partnership Interest); provided such removal shall not be arbitrary or
capricious. If a vacancy occurs in the office of Project Leader, whether through
death, resignation, removal or otherwise, the Partners shall consult regarding
the appointment of a new Project Leader. After such consultation, EAPC (or any
Subsequent Partner succeeding to all of EAPC's Partnership Interest) shall have
the authority to propose the new Project Leader who shall become the Project
Leader upon the consent of SWPL (or any Subsequent Partner(s) succeeding to
SWPL's Partnership Interest), which consent shall not be unreasonably withheld.
It shall be deemed unreasonable for SWPL (or any Subsequent Partner(s)
succeeding to SWPL's Partnership Interest) to withhold its consent by reason of
the fact that the proposed Project Leader is or was an employee of EAPC (or any
Subsequent Partner succeeding to all of EAPC's Partnership Interest) or of an
Affiliate of EAPC.
(f) The Project Leader shall have power to contract with third parties
on behalf of and in the name of the Partnership (including any NOARK Related
Entity) when the contract is approved by the Management Committee (or is within
the approval levels delegated to him by the Management Committee), and to make
expenditures on behalf of the Partnership (including any NOARK Related Entity)
when such expenditures have been approved by the Management Committee (subject,
where applicable, to the provisions of Section 3.5) or when such expenditures do
not exceed that permitted under the approved annual Budget by more than ten
percent (10%) for
16
the line item or items in question (based on a Budget format similar to that
historically used by the Partnership) or $50,000. Upon execution of this
Agreement, the Project Leader shall have authority to make expenditures in
fiscal year 1998 in accordance with the existing Budget of the Partnership for
fiscal year 1997 until a new Budget is approved.
(g) The Project Leader shall submit to the Partners for approval an
annual Budget setting forth on a monthly basis the anticipated costs to be
incurred in connection with the Partnership (including the NOARK Related
Entities), including without limitation the cost of operating and field
personnel providing day-to-day operations of the System, and the anticipated
capital costs to be incurred in connection with the System based on a Budget
format similar to that historically used by the Partnership. A proposed Budget
shall be provided to the Partners as soon as practicable following execution of
this Agreement for the period covering calendar year 1998 and by December 1st
for each year thereafter during the term of this Agreement. Such Budgets shall
be subject to the approval requirements of Section 3.5. In the event Partner
approval of any Budget as required by Section 3.5 is not obtained by the
commencement of the year to which such Budget applies, the most recently
approved Budget shall be utilized until such new Budget is approved.
(h) The Project Leader may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, bond, debenture, or other
paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties. The Project Leader may consult with
legal counsel, accountants, appraisers, management consultants, investment
bankers and other consultants and advisers selected by it and any act taken or
omitted in reliance upon an opinion including, without limitation, a written
opinion of counsel (who shall be regular or special counsel to the Partnership)
acceptable to the Project Leader of such persons as to matters that the Project
Leader reasonably believes to be within such person's professional or expert
competence shall be conclusively presumed to have been done or omitted in good
faith and in accordance with such opinion.
(i) The Project Leader shall have the right, in respect of any of his
powers or duties hereunder, to delegate same to any employee of the Partnership
or, to any Partner. Each such Person shall have full power and authority to do
and perform each and every act and duty that is so delegated to such Person.
(j) In the event the Project Leader incurs expenditures in emergency
situations to safeguard life or property or to maintain the operational
integrity of the System at design capacity, the Project Leader shall notify the
Management Committee and the Partners of the emergency situation as soon as
reasonably possible after any such emergency situation. Such costs so incurred
by the Project Leader shall not require the prior approval of the Management
Committee or the Partners; provided, however, that any expenditures or
transactions undertaken shall involve terms that are standard and customary in
the industry and do not expose or subject the Partnership to any inordinate,
unusual or unreasonable risks, liabilities or obligations given the facts and
circumstances which exist at the time of the Project Leader committing to any
such expenditures or transactions.
17
The Partners acknowledge that the facts and circumstances of an emergency
situation may require terms, expenditures or transactions which under normal
situations would be different.
3.7 Delegation
(a) The Management Committee shall have the authority to delegate any
of its duties and authority to any Partner, the Project Leader, or, subject to
Section 3.5, a committee. Any such delegation shall be in writing and shall be
revocable at any time by the Management Committee.
(b) The Partners shall make available to the Partnership (including any
NOARK Related Entity) executive, administrative and operating personnel with the
appropriate backgrounds and experience to provide such services as the
Management Committee may reasonably delegate for them to provide and to make
available to the Management Committee sufficient time of such executives,
administrative and operating personnel to promptly, faithfully and
professionally provide such services. A Partner may utilize the personnel and
resources of not only itself, but also of its Affiliates and other Persons in
the performance of such services.
(c) The Partners shall be reimbursed by the Partnership in accordance
with the Accounting Procedures attached hereto as Exhibit B, for all direct and
indirect costs and expenses incurred in providing services delegated by the
Management Committee to be provided by them.
(d) Subject to the provisions of this Section 3.7, the Management
Committee shall be deemed to have delegated i) to SWPL the continued performance
of the accounting services for the Partnership and the performance of field
operations and field operations support services SWPL has historically provided
to the Partnership in Arkansas as well as the performance of field operations
and field operations support services in those areas where the facilities of
NOARK and Ozark are in close proximity for which the Partners agree SWPL should
provide such services and ii) to EAPC the performance of operations and
operations support services to provide support, direction and assistance to the
Project Leader in the operation of the Partnership (including the NOARK Related
Entities) and the System.
(e) Subject to Section 3.5, the Management Committee may designate one
or more committees (including, specifically, an executive committee), each of
which shall be comprised of one or more of its members, and may designate one or
more of its members as alternate members of any committee, who may, subject to
any limitations imposed by the Management Committee, replace absent or
disqualified members at any meeting of that committee. Any such committee, to
the extent provided in such resolution, shall have and may exercise the
authority delegated to it by the Management Committee in the management of the
business and affairs of the Partnership, subject to the limitations set forth in
the Act and this Agreement.
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3.8 Officers.
(a) Except for the chief executive officer, who shall be the Project
Leader, the Management Committee may appoint such officers and agents as it
deems necessary or appropriate, who shall be appointed for such terms and shall
exercise such powers and perform such duties as shall be determined from time to
time by the Management Committee. Any two or more offices may be held by the
same person.
(b) Any officer, agent or member of a committee elected or appointed by
the Management Committee may be removed by the Management Committee at any time
with or without cause.
3.9 Claims. The Project Leader shall be responsible for overseeing the
settlement or litigation and defending of any and all claims, damages, or causes
of action in favor of any one other than the Partners arising out of the
Operation of the System (as defined in the Accounting Procedures) which are not
covered by insurance; provided, that Project Leader shall report to the
Management Committee from time to time with respect to such claims, damages or
causes of action and the disposition thereof. The decision to settle or to
litigate and defend against any such claim, demand or cause of action may be
made by Project Leader in accordance with its best judgment and discretion when
the amount involved is $50,000 or less, provided, however, that if the aggregate
of the amounts payable by the Partnership in connection with any final judgment
against the Partnership and/or the settlement of any claim or claims against the
Partnership during any fiscal year exceeds $250,000, any subsequent settlements
shall be effected during such fiscal year only with the approval of a
SuperMajority in Interest of the Partners. Decisions to settle or to defend and
litigate (i) any single claim which involves any amount in excess of $50,000,
(ii) any claim which is commenced against the Partnership during any fiscal year
when the aggregate of all claims commenced against the Partnership during the
same fiscal year have involved amounts in excess of $250,000, and (iii) any
claim in which the Project Leader is named as a defendant or respondent or has
an interest in the claim or the proceedings which is adverse to the Partnership,
shall be made only with the approval of a SuperMajority in Interest of the
Partners.
3.10 Disputed Charges. Within the time provided in the Accounting
Procedures and regardless of whether the applicable Budget has been exceeded,
the Management Committee or any Partner may take written exception to all or any
portion of any xxxx or statement rendered by a Partner to the Partnership on the
ground that the same was not a reasonable expense or expenditure incurred in
good faith in connection with the Operation of the System (as such term is
defined in the Accounting Procedures). NOARK shall nevertheless pay in full when
due the amount of all statements submitted by a Partner. Thereafter, at its
discretion on the vote of Partners representing at least 70% of the Partnership
Interests remaining after excluding the Partner's Partnership Interest whose
xxxx or statement is in dispute, the Management Committee may submit the dispute
to the dispute resolution procedures set forth in Article XIII, and, in such
event the Partners agree to utilize such procedures in resolving such dispute.
If the amount as to which such written exception is taken or any part thereof is
ultimately determined in arbitration not to be a reasonable expense or
19
expenditure incurred in good faith in connection with the Operation of the
System, such amount or portion thereof (as the case may be) shall be refunded to
NOARK together with interest thereon at one hundred basis points over the prime
rate from time to time charged by Citibank, N.A., New York, N.Y. to responsible
commercial and industrial borrowers, not in excess of the maximum lawful rate,
for the period from the date of payment by NOARK to the date of refund.
ARTICLE IV
FINANCING OF THE PARTNERSHIP
4.1 Existing Capital Accounts Balances. Schedule 4.1 hereto sets forth
the Capital Accounts of the Partners as of the date of this Agreement which have
been agreed to by the Partners.
4.2 Capital Contributions.
(a) In order to meet the funding requirements of the Partnership
(including any NOARK Related Entity), the Management Committee shall have
authority to make mandatory capital calls on the Partners for cash contributions
in amounts that the Management Committee deems necessary or advisable to fund
capital and operational needs of the Partnership (including any NOARK Related
Entity). With respect to each mandatory capital call, each Partner shall within
thirty (30) days of receiving such written notice contribute to the Partnership
in cash that portion of the total call equal to its Partnership Percentage.
(b) Notwithstanding the language of Section 4.2(a) above, the
Management Committee shall not have authority to issue mandatory capital calls
to fund a proposed Expansion of the System, other than Expansions included
within an approved Budget. Any such Expansion shall be subject to the consent of
a SuperMajority in Interest of the Partners; provided, that, if such consent is
not obtained within thirty (30) days of the submittal to the Partners of a
proposal for such an Expansion (which consent of any Partner may be conditioned
upon approval of such Partner's board of directors to be obtained (i.e. approved
or rejected) within sixty (60) days of the submittal to the Partners of the
proposed Expansion), but one of the Partners (the "Proposing Partner") desires
to pursue such Expansion, the Proposing Partner shall contribute to the capital
of the Partnership all of the funds necessary to finance such Expansion (such
contribution a "Special Capital Contribution") and shall following such
contribution receive, in addition to any other distributions provided for in
this Agreement, an additional cash distribution equal to all of the additional
net operating income attributable to the Expansion (which shall not include any
revenues realized from the replacement of volumes being transported on the
System prior to the Expansion) until the Proposing Partner has received an
amount equal to 200% of the Special Capital Contribution made by the Proposing
Partner.
(c) The Partners agree that the Existing Loans, including applicable
interest, shall be repaid as follows: (i) sixty percent (60%) of the Existing
Loans, including applicable interest, shall
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be repaid out of any amounts otherwise distributable to SWPL, before taking into
account debt service on the Existing Loans, under this Agreement and (ii) forty
percent (40%) of the Existing Loans, including applicable interest, shall be
repaid out of any amounts otherwise distributable to EAPC, before taking into
account debt service on the Existing Loans, under this Agreement. If such
amounts are insufficient to pay a Partner's percentage share (i.e. 60% or 40% as
set forth above) of the debt service on the Existing Loans, including applicable
interest, in accordance with their terms, then such Partner shall be responsible
to contribute to the capital of the Partnership amounts sufficient to pay its
percentage share (i.e. 60% or 40% as set forth above) of the debt service on the
Existing Loans, including applicable interest, and shall do so upon notice from
the Project Leader. Such Capital Contributions by the Partners shall not alter
the Partnership Percentages of the Partners. Default by a Partner in the making
of such Capital Contributions shall cause it to be deemed a Delinquent Partner
subject to the provisions of Section 4.3 hereof.
(d) Notwithstanding anything to the contrary in Section 4.2(c) above or
elsewhere in this Agreement, it is understood and agreed that the terms of any
Existing Loans may in the future (but do not currently) provide that the
amortization of the principal amount thereof shall be borne or allocated in a
manner different from the percentages set forth in Section 4.2(c) or any Partner
may direct the Project Leader to apply amounts of Partnership cash otherwise
distributable to such Partner (except amounts to be paid to other Partners
pursuant to the other provisions of this Agreement) to the repayment or
prepayment of the principal amount of the Existing Loans in excess of the
amounts required to be repaid under the terms of the Existing Loans, provided
such Partner bears all costs and penalties of doing so. Consequently, a Partner
may thereby pay or bear more than its attributable percentage (i.e. 60% or 40%)
of the principal amount of the Existing Loans to be repaid. In such event, the
percentages of the then outstanding principal amount of the Existing Loans
payable out of the distributable amounts attributable to the Partners set forth
in Section 4.2(c) shall be adjusted as appropriate to reflect the resulting
percentage of the aggregate outstanding principal amount of the Existing Loans
then attributable to each Partner.
4.3 Failure to Contribute. If any Partner fails to make a Capital
Contribution as required under Section 4.2(a) or (c) above, the Partnership may,
in addition to the other rights and remedies the Partnership may have under the
Act or applicable law, take such enforcement action (including, the commencement
and prosecution of court proceedings) against such Partner as the Management
Committee considers appropriate and such Partner shall be deemed to be
delinquent ("Delinquent Partner"). Moreover, each remaining Partner who is not
delinquent shall have the right, but not the obligation, to contribute that
portion of the amount defaulted by the Delinquent Partner equal to such
remaining Partner's Partnership Percentage expressed as a percentage of the
Partnership Percentage of all such remaining Partners who elect to contribute
their applicable portion of the defaulted Capital Contribution. In such an
event, the Partner(s) who contributes on behalf of the Delinquent Partner
("Contributing Partner") will be entitled to a priority distribution out of the
first cash distributions which would otherwise be distributable to the
Delinquent Partner equal to three hundred percent (300%) of the amount which the
Contributing Partner contributed on behalf of the Delinquent Partner. Following
satisfaction of this priority distribution, and any other priority distributions
provided for in this Agreement, distributions would be made in accordance with
Section
21
5.7 hereof. The amount contributed on behalf of a Delinquent Partner shall be
secured by such Delinquent Partner's interest in the Partnership. Each Partner
who may hereafter be deemed delinquent hereby grants to each Contributing
Partner, a security interest in such Delinquent Partner's Partnership Interest.
4.4 Capital Accounts. A separate Capital Account shall be established
and maintained by the Partnership for each Partner in the manner described in
the definition of the term "Capital Account" in Article I hereof.
4.5 Loans by Partners. No Partner shall be required to make loans to
the Partnership. Loans may be made, however, with the approval of the Management
Committee, by any Partner to the Partnership and such loans shall not be
considered contributions to the capital of the Partnership. To the extent loans
are made by any Partner to the Partnership, they shall be made on terms, as to
interest rates and other finance charges, as are comparable to amounts that are
charged by unrelated banks and other financial institutions on comparable loans
for the same purpose.
4.6 Interest. No interest shall be paid to any Partner on the initial
or any subsequent Capital Contribution to the Partnership.
4.7 Time for Return of Contributions. No Partner shall be entitled to
compel the return of its Capital Contribution. Upon the full and complete
winding up and liquidation of the business and affairs of the Partnership, the
Partners shall be entitled to distributions as set forth in Article X.
4.8 Limited Liability of the Limited Partners. Notwithstanding anything
to the contrary contained herein, the liability of a Limited Partner for any of
the debts, losses or obligations of the Partnership shall be limited to the
Limited Partner's Capital Contributions. No Limited Partner shall have any
personal liability whatsoever, whether to the Partnership or any third party,
for the debts of the Partnership or any of its losses.
4.9 Benefits of Agreement. Nothing in this Agreement, and, without
limiting the generality of the foregoing, in this Article IV, expressed or
implied, is intended or shall be construed to give to any creditor of the
Partnership or any creditor of any Partner or of any other Person, other than
the Partners and the Partnership, any legal or equitable right, remedy or claim
under or in respect to this Agreement or any covenant, condition or provisions
herein contained, and such provisions are and shall be held to be for the sole
and exclusive benefit of the Partners and the Partnership.
ARTICLE V
CAPITAL AND INCOME ALLOCATIONS AND DISTRIBUTIONS
5.1 Allocations Controlling for Capital Account Purpose. The Partners
agree that all items of Partnership income, gain, loss and deduction realized by
the Partnership from its operation or upon the sale or other disposition of its
assets shall be credited or charged to the Capital Accounts
22
of the Partners and further, to the extent allowed by the law, among the
Partners for Federal income tax purposes in accordance with Sections 5.2 through
5.6. The allocation of Partnership income, gain, loss and deduction to a Partner
whose interest in the Partnership terminates or to a newly admitted Partner
shall be based upon an actual closing of the books of the Partnership for the
period ending on the date of such termination or admission except as otherwise
determined by the Management Committee. In addition, upon the closing of the
Ozark Acquisition, there shall be an actual closing of the books of the
Partnership for the period ending on the date of the closing of the Ozark
Acquisition, when the Partnership Percentages will change as specified in the
definition of Partnership Percentage. Further, upon the Inservice Expansion
Date, there shall be an actual closing of the books of the Partnership for the
period ending on the date of the Inservice Expansion Date, when the Partnership
Percentages will change as specified in the definition of Partnership
Percentages. For purposes of making the allocations under this Agreement for the
periods ending on the Ozark Acquisition and the Inservice Expansion Date, the
allocation of Partnership income, gain, loss and deduction to a Partner shall be
based upon such dates.
5.2 General Allocation of Profits and Losses. After giving effect to
the special allocations set forth in Sections 5.3 through 5.6 hereof, the
Profits and Losses for any fiscal year, or portion thereof, as applicable, shall
be allocated to the Partners in accordance with the Partnership Percentages of
the respective Partners.
5.3 Special Interest Expense. The Partnership interest expense
deductions incurred with regard to the Existing Loans as referenced in Section
4.2(c) shall be allocated to Partners as follows:
SWPL 60%
EAPC 40%
In the event the percentages of the outstanding principal amounts of the
Existing Loans payable out of the distributable amounts attributable to each
Partner are adjusted pursuant to Section 4.2(d), the foregoing percentages shall
be subject to adjustment to reflect the same percentages as the percentages
established pursuant to Section 4.2(d).
5.4 Preferential Allocations.
(a) During each fiscal year of the period commencing on the Inservice
Expansion Date and ending on December 31, 2009 (the "Special Allocation Period")
SWPL shall receive a special allocation of Partnership gross revenues (items of
gross income and gain) in accordance with the formula set forth below. For
purposes of this Section 5.4(a), a fiscal year shall be a calendar year except
that the first fiscal year of the above described period shall commence on the
Inservice Expansion Date and end on December 31 of the calendar year in which
the Inservice Expansion Date occurs.
Special Revenue Allocation = Base Amount - Increased Volume
Amount, where:
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(1) Base Amount = for each fiscal year during the Special
Allocation Period, the amount specified on Schedule
5.4(a) for such fiscal year
(2) Increased Volume Amount =
(a) the product of (i)the average daily quantity
of gas(in MMBtu's)moved on the System during
the fiscal year less the Firm Quantities (as
defined below) for such year (but not less
than 244,000 MMBtu's per day less the Firm
Quantities), multiplied by (ii) 25% of the
average margin (per MMBtu) realized by (x)
EIT (which, upon the Inservice Expansion
Date, will be a NOARK Related Entity and
will own the integrated interstate
transmission facilities of Ozark and the
Partnership), (y) NES L.L.C. (as defined in
the Omnibus Agreement) the average margin of
which may be negative, and (z) OGG L.L.C.
(as defined in the Omnibus Agreement) but
only to the extent of the Xxxxxx Gathering
Assets (as defined in the Omnibus Agreement)
and the average margin realized from such
assets as they will exist on the date of
their contribution to the System (the
entities and assets specified in items (x),
(y) and (z) herein collectively referred to
as the "Preferential Allocation Group") from
the movement of such average daily quantity
of gas on the System as the System exists on
the Inservice Expansion Date, and as it may
be modified by only the contribution of the
Xxxxxx Gathering Assets (as defined in the
Omnibus Agreement) as they exist on the date
of their contribution to the Partnership,
whether from transportation revenues or
sales revenues (which average margin shall
not be less than $.16 per MMBtu), multiplied
by (iii) the number of days in such fiscal
year minus
(b) the product of (i) 244,000 MMBtu's per day
less the Firm Quantities for such fiscal
year multiplied by (ii) $.04 per MMBtu,
multiplied by (iii) the number of days in
such fiscal year.
(b) For purposes of Section 5.4(a) above, the following shall apply:
(1) The calculation of the Increased Volume Amount shall
not include quantities of gas (in MMBtu's) received
from supply sources in existence on January 1, 1998
located behind those supply points identified on
Schedule 5.4(b), or average margins attributable to
those quantities.
(2) Firm Quantities shall mean the average daily quantity
of gas (in MMBtu's) moved on the System under Firm
Business Agreements (as hereinafter defined) in any
fiscal year.
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(3) For purposes of the foregoing, Firm Business
Agreements shall mean firm gas transportation or
sales agreements having a primary term of one (1)
year or more between any member of the Preferential
Allocation Group and customers (such customers being
other than Affiliates which are NOARK Related
Entities).
(4) For purposes of this Section 5.4, the "average
margin" realized by the Preferential Allocation Group
shall mean (i) in the case of transportation or
gathering revenues, the average gross revenues
received (per MMBtu) from shippers for the movement
of gas on the System (including any demand charges
received under firm transportation agreements which
are not Firm Business Agreements), and (ii) in the
case of sales revenues, the average gross revenues
received (per MMBtu) from the sale of gas after
subtracting therefrom the average costs (per MMBtu)
directly incurred in making such sales, including
without limitation gas costs, gathering costs,
transportation costs and any related imbalance
penalties. In addition, for purposes of calculating
the Special Revenue Allocation, in the event the
Preferential Allocation Group engages in multiple
transactions involving the same gas, such
transactions shall be considered a single transaction
in determining the "average daily quantities" from
such transaction and the "average margin" realized
from such transaction.
(c) The Special Revenue Allocation for any fiscal year shall be
determined within sixty (60) days following the end of the fiscal year to which
such Special Revenue Allocation is applicable, but shall be effective for the
fiscal year in which the revenues were received. In no event will the Special
Revenue Allocation be less than zero.
(d) Schedule 5.4(d) attached hereto, sets forth several examples of the
calculation of the Special Revenue Allocation.
5.5 Special Profits Allocations.
(a) After making the special allocation of Partnership gross revenues
(items of gross income and gain) pursuant to Section 5.4 hereof and the special
allocation of Partnership deductions pursuant to Section 5.3 hereof, the
Partnership Profits shall be specially allocated to the Partners which have
received additional cash distributions in the current or prior years related to
contributions by Contributing Partners pursuant to Section 4.3 above in the
following manner and amount: Partnership Profits otherwise allocable to the
Delinquent Partner (i.e. Profits which would have been allocated to the
Delinquent Partner if this Section 5.5(a) did not exist) shall be allocated to
the Contributing Partners until the cumulative amount of Partnership Profits
allocated pursuant to this Section 5.5(a) equals the cumulative amount of the
cash distributions otherwise distributable to the Delinquent Partner, but which
are made to the Contributing Partners as provided in Section 4.3.
25
(b) After making the special allocation of Partnership gross revenues
(items of gross income and gain) pursuant to Section 5.4 hereof, the special
allocation of Partnership deductions pursuant to Section 5.3 hereof and the
special allocation of Partnership Profits pursuant to Section 5.5(a) hereof, the
Partnership Profits shall be specially allocated to the Partners which have
received additional cash distributions in the current or prior years related to
an Expansion pursuant to Section 4.2(b) above until the cumulative amount of
Partnership Profits allocated pursuant to this Section 5.5(b) equals the
cumulative amount of such additional cash distributions received by the
respective Partners.
5.6 Other Allocation Rules.
(a) Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Code ss. 734(b) or Code
ss. 743(b) is required, pursuant to Treas. Reg. ss. 1.704-1(b)(2)(iv)(m), to be
taken into account in determining Capital Accounts, the amount of such
adjustment shall increase the basis of the asset or loss (if the adjustment
decreases such basis) and such gain or loss shall be specially allocated to the
Partners in a manner consistent with the manner in which their Capital Accounts
are required to be adjusted pursuant to such section.
(b) Code Section 704(c) Tax Allocations. In accordance with Code ss.
704(c) and the Regulations thereunder, income, gain, loss and deduction with
respect to any property contributed to the capital of the Partnership shall,
solely for tax purposes, be allocated among the General Partners and Limited
Partners so as to take account of any variation between the adjusted basis of
such property to the Partnership for Federal tax purposes and its initial Gross
Asset Value using the "traditional method with curative allocations" as set
forth in Treas. Reg. ss. 1.704-3(c). In the event the Gross Asset Value of any
Partnership asset is adjusted as required by the definition of "Gross Asset
Value" as contained in this Agreement, subsequent allocations of income, gain,
loss and deduction with respect to such asset shall take account of any
variation between the adjusted basis of such asset for Federal income tax
purposes and its Gross Asset Value in the same manner as under Code ss. 704(c)
and the Regulations thereunder. Any elections or other decisions relating to
such allocations shall be made by the General Partners in any manner that
reasonably reflects the purpose and intention of this Agreement. Allocations
pursuant to this Section 5.6(b) are solely for purposes of federal, state, and
local income taxes and shall not affect, or in any way be taken into account in
computing, any Partner's Capital Account or share of Profits, Losses, other
items, or distributions pursuant to any provision of this Agreement.
5.7 Cash Distributions. Except as otherwise provided in this Agreement,
the Management Committee in its sole discretion shall have the authority to
cause the Partnership to allocate and distribute cash or other property to the
Partners monthly on a basis in accordance with this Agreement. All distributions
shall be made in accordance with the Partnership Percentages of the respective
Partners, net of each Partner's required share of payments on the Existing
Loans, including interest thereon, as provided in Section 4.2(c), except for i)
distributions related to the funding of Expansions under Section 4.2(b), ii)
distributions under Section 4.3 and iii) distributions in liquidation pursuant
to Article X. It shall be a policy of the Partnership to distribute the maximum
26
amount of cash available after taking into account anticipated future sources of
cash and the working capital and cash requirements to meet the current and
anticipated future obligations of the Partnership.
5.8 Amounts Withheld. All amounts withheld pursuant to the Code or any
provision of any state or local tax law with respect to any payment or
distribution to the Partnership or the Partners shall be treated as distributed
to the Partners pursuant to Section 5.7 for all purposes under this Agreement.
The Management Committee shall allocate such amounts among the Partners in a
manner that is consistent with Article V hereof and applicable law.
5.9 Reimbursements. The Project Leader and any Partner performing
services or providing goods to the partnership, in accordance with the
provisions of this Agreement, shall be reimbursed by the Partnership for all
reasonable direct and indirect costs and expenses incurred on behalf of the
Partnership in the performance of their duties hereunder in accordance with the
Accounting Procedures attached hereto as Exhibit B.
ARTICLE VI
RELATIONS OF THE PARTNERS
6.1 Restricted Transactions.
(a) Except as set forth in Section 6.1(a)(i) below, during the period
of time that a person is a Partner, no Partner shall, nor shall it to the extent
possible permit its Affiliates to, engage in any transactions involving,
directly or indirectly any business activity which is within the scope of the
business activities of any NOARK Related Entity as established by the Partners
pursuant to Section 3.5(f) (a "Restricted Transaction") without first giving the
Partnership a right of first refusal in accordance with the terms set forth in
Section 6.1(b) below with respect to such Restricted Transaction. Any such
business activities of any NOARK Related Entity so established by the Partners
shall be restricted to business activities on the System.
(i) A person who is a Partner, or who is an Affiliate of a
Partner, shall be permitted to (u) conduct gas marketing activities without
restriction, (v) continue to own and/or operate facilities for the gathering,
transportation, processing, compression or storage of natural gas or liquid
hydrocarbons which they owned and/or operated on December 31, 1997 (the
"Existing Facilities"), (w) continue to conduct transactions involving such
Existing Facilities, (x) expand and extend such facilities (by construction,
purchase or otherwise) and transactions involving such facilities (y) expand
and/or extend those businesses or operations and (z) conduct any other business
activities which are not conducted on the System. It is the intent of this
Section (6)(a)(i) to permit Partners and their Affiliates to continue to engage
in those businesses and operations (in which they were engaged on December 31,
1997) and to expand and/or extend those businesses and operations. Any projects
or businesses, however, which do not involve such businesses or operations as
they
27
may be so expanded or extended and which would otherwise meet the requirements
of Section 6.1(a), are to be offered to the Partnership under Section 6.1(b).
(b) Should any Partner or its Affiliate desire to engage in a
Restricted Transaction, such Partner (the "Submitting Partner") shall submit to
the Partnership and to each Partner written notice (a "Submission") of the
Restricted Transaction, including a copy of any contract or agreement setting
forth the terms of the Restricted Transaction. The Partnership (whether itself
or through a NOARK Related Entity) acting upon the unanimous approval of all the
Partners except the Submitting Partner (who shall have no right to vote on the
Restricted Transaction) shall then have sixty (60) days from the delivery to it
of the Submission in which to elect to pursue the Restricted Transaction on the
terms set forth in the Submission. The Partnership shall evidence its election
to pursue the Restricted Transaction by giving written notice of such election
to the Submitting Partner within such sixty (60) day period, and the Submitting
Partner shall no longer have any separate interest in the Restricted Transaction
but shall fully cooperate in assisting the Partnership to pursue the Restricted
Transaction. If the Partnership does not elect in a timely manner to pursue the
Restricted Transaction, then the Partnership shall be deemed to have rejected
the Restricted Transaction and the Submitting Partner shall be free to pursue
the Restricted Transaction for its own separate account; provided, that, the
terms upon which the Submitting Partner shall pursue the Restricted Transaction
shall be the same as those set forth in the Submission to the Partnership. If
the terms of the Restricted Transaction shall vary from those set forth in the
Submission, then the Submitting Partner shall be required to commence again the
right of first refusal process by submitting a new Submission setting forth the
revised terms to the Partnership and the Partners and the Partnership shall have
the right to accept or reject the Restricted Transaction in accordance with the
procedure set forth in this Section 6.1 (b).
(c) Subject to the restrictions contained in Section 6.1(a), (i) the
Partners recognize that each of the Partners, directly or through its respective
Affiliates, may be currently engaged in numerous businesses in the gas industry
including, without limitation, buying, selling, gathering, transporting,
processing, compressing or storing natural gas or liquid hydrocarbons for
profit; and (ii) each Partner agrees that each other Partner may continue such
activities, may form new Affiliates to engage in such activities, and may expand
the present scope of such activities, in each case irrespective of whether such
be deemed in competition with the business and activities of the Partnership,
without in any manner being obligated to disclose such activities to the
Partnership or the other Partners, or to permit the Partnership or the Partners
to participate therein, and without any liability to the Partnership or the
Partners for breach of any duty arising out of such other Partner's position as
a Partner in the Partnership.
6.2 Exculpation from Liability.
(a) The Project Leader, shall have no liability whatsoever to the
Partnership (including any NOARK Related Entity) or to any Partner for loss
caused by any act or by failure to do any act if the loss suffered by the
Partnership (including any NOARK Related Entity) or any Partner arises out of an
action taken, or not taken, by the Project Leader in the course of the
Partnership's
28
(including any NOARK Related Entity) business in good faith and not contrary to
the terms of this Agreement even if such action or failure to act constitutes
negligence.
(b) Neither the Management Committee, nor any member thereof (other
than the Project Leader to whom Section 6.2(a) applies), shall have any
liability whatsoever to the Partnership (including any NOARK Related Entity) or
to any Partner for loss caused by any act or by failure to do any act if the
loss suffered by the Partnership (including any NOARK Related Entity) or any
Partner arises out of an action taken, or not taken by the Management Committee,
or a member thereof in the course of the Partnership's (including any NOARK
Related Entity) business in good faith and not contrary to the terms of this
Agreement even if such action or failure to act constitute negligence; provided,
that, this shall not apply where the Person's action or failure to act
constitute willful misconduct or gross negligence.
6.3 Indemnification.
(a) To the fullest extent permitted by law but subject to the
limitations expressly provided in this Agreement, each Indemnitee shall be
indemnified and held harmless by the Partnership (including any NOARK Related
Entity) from and against any and all losses, claims, damages, liabilities (joint
or several), expenses (including without limitation, reasonable legal fees and
expenses), judgments, fines, settlements and other amounts arising from any and
all claims, demands, actions, suits or proceedings, whether civil, criminal,
administrative or investigative (other than claims by or on behalf of the
Partnership, including any NOARK Related Entity), in which any Indemnitee may be
involved, or is threatened to be involved, as a party or otherwise, by reason of
its status as an Indemnitee arising out of or relating to the performance of
this Agreement or its actions (or failures to act) with respect to the business
of the Partnership (including any NOARK Related Entity); provided, that in each
case the Indemnitee acted in good faith, in a manner which such Indemnitee
believed to be in, or not opposed to, the best interests of the Partnership
(including any NOARK Related Entity) and, with respect to any criminal
proceeding, had no reasonable cause to believe its conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere, or its equivalent, shall not
create a presumption that the Indemnitee acted in a manner contrary to that
specified above.
(b) To the fullest extent permitted by law, expenses (including without
limitation, reasonable legal fees and expenses) incurred by an Indemnitee in
defending any claim, demand, action, suit or proceeding shall, from time to
time, be advanced by the Partnership (including any NOARK Related Entity) 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 amount if it shall be determined that the Indemnitee is not
entitled to be indemnified as authorized in this Section 6.3.
(c) The indemnification provided by this Section 6.3 shall be in
addition to any other rights to which an Indemnitee may be entitled under this
Agreement, as a matter of law or otherwise,
29
as to actions in the Indemnitees' capacity as an Indemnitee and shall continue
as to an Indemnitee who has ceased to serve in such capacity as to actions
during its capacity as an Indemnitee.
(d) The Partnership shall purchase and maintain insurance on the
Partnership (including the NOARK Related Entities) and the assets of the
Partnership (including any NOARK Related Entities). Such insurance shall at a
minimum include the insurance specified on Schedule 6.3(d) attached hereto. The
Partnership may purchase and maintain insurance (in such amounts and for such
purposes as the Partnership shall determine), on behalf of the Partners, the
Project Leader and such other Persons as the Partnership shall determine,
against any liability that may be asserted against or expense that may be
incurred by any such Person in connection with the Partnership's activities,
whether or not the Partnership would have the power to indemnify such Person
against such liabilities under the provisions of this Agreement.
(e) In no event may an Indemnitee subject a Limited Partner to personal
liability by reason of the indemnification provisions set forth in this
Agreement.
(f) An Indemnitee shall not be denied indemnification in whole or in
part under this Section 6.3 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the transaction
was otherwise permitted by the terms of this Agreement.
(g) The provisions of this Section 6.3 are for the benefit of the
Indemnitees, their heirs, successors, assigns and administrators and shall not
be deemed to create any rights for the benefit of any other Persons.
(h) No amendment, modification or repeal of this Section 6.3 or any
other provision hereof shall in any manner terminate, reduce or impair the right
of any Indemnitee, or former Indemnitee, to be indemnified by the Partnership,
nor the obligation of the Partnership to indemnify any such Indemnitee under and
in accordance with the provisions of this Section 6.3 as in effect immediately
prior to such amendment, modification or repeal with respect to claims arising
from or relating to matters occurring, in whole or in part, prior to such
amendment modification or repeal, regardless of when such claims may arise or be
asserted.
6.4 Title to Partnership Assets. Title to assets of the Partnership
(including any NOARK Related Entity), whether real, personal or mixed and
whether tangible or intangible, shall be deemed to be owned by the Partnership
as an entity, and no Partner, individually or collectively, shall have any
ownership interest in such assets of the Partnership or any portion thereof.
Title to any or all of the assets of the Partnership (including any NOARK
Related Entity) may be held in the name of the Partnership (including any NOARK
Related Entity), or one or more nominees as the Management Committee may
determine under the terms of a nominee agreement the form of which shall be
approved by a SuperMajority in Interest of the Partners. All assets of the
Partnership (including any NOARK Related Entity) shall be recorded as the
property of the Partnership in its books and records, irrespective of the name
in which record title to such assets are held.
30
ARTICLE VII
ASSIGNABILITY OF PARTNERS' INTERESTS
7.1 Restrictions on Transfer of Partner's Interest. Except as set forth
in Section 7.7, no Partner may Transfer all or a portion of its Partnership
Interest (the "Transferor"), unless the Transferor and transferee (the
"Transferee"), comply with the provisions of Section 7.2. No portion of a
Partner's right to receive its allocable share of income and losses and
distributions of the Partnership may be Transferred without the Transfer of the
same portion of a Partner's Partnership Interest. Failure to comply with the
provisions of this Article VII shall render the purported Transfer null and void
and of no force or effect for any purpose.
7.2 Right of First Refusal. At any time, a Transferor may offer to sell
for cash all or a portion of its Partnership Interest (but any such portion may
not be less than ten percent (10 %) of the total Partnership Interests)to any or
all of the other Partner(s) by delivering to them a written offer (the "Sales
Offer") specifically referring to this Section 7.2, stating the Transferor's
desire to sell, specifying the portion of such Partnership Interest to which the
Sales Offer applies, stating that such portion is to be sold in its entirety and
setting forth the cash purchase price. Within thirty (30) days following the
receipt of the Sales Offer, each other Partner may elect to accept the Sales
Offer at the purchase price set forth therein. Such acceptance may be
conditioned upon approval by the board of directors of the accepting Partner to
be obtained within sixty (60) days following receipt of the Sales Offer by the
accepting Partner. If more than one of the other Partners elect to accept the
Sales Offer, the purchase shall be made pro rata in accordance with the
accepting Partners' respective Partnership Interests. Payment for such
Partnership Interest shall be made within thirty (30) days after the final date
on which a Partner elects to accept the Sales Offer; provided, however, if any
waiting periods are imposed by applicable law, payment shall, if necessary, be
deferred to the first business day occurring after the expiration of the last
day of such waiting period. In the event that the Partners do not elect to
acquire or do not acquire the entire portion of the Partnership Interest
specified in a Sales Offer within the time periods referred to above, the
Transferor shall be entitled to Transfer to a third party (including an
Affiliate of the Transferor) the Partnership Interest stated in the Sales Offer
for a consideration in cash or other property having equal or greater value than
the cash purchase price stated in the Sales Offer during the six (6) month
period commencing with the day following the expiration of the 60-day time
period referred to above. If the consideration is other than all cash, the
Transferor shall provide the other Partners with the report of a qualified
appraiser concluding that the total value of the consideration to be paid for
the Partnership Interest is equal to or exceeds the value of the cash purchase
price stated in the Sales Offer. Prior to any Transfer becoming effective, the
Transferor shall provide written notice to all of the Partners and shall settle
all unpaid accounts with the Partnership.
7.3 Opinion of Counsel. The Transferor shall deliver to the Project
Leader evidence satisfactory to the Project Leader (including, if requested by
the Project Leader an opinion of counsel in form and substance satisfactory to
counsel to the Partnership), that:
31
(a) such Transfer and any offerings made in connection therewith are in
compliance with applicable federal and state securities laws; and
(b) the Transfer will comply with all applicable rules and regulations
of government authorities.
(c) such Transfer and offerings will not cause the Partnership to be a
publicly traded partnership within the meaning of Section 7704 of the Code.
7.4 Substituted Partner. A Transferee shall become a Substituted
Partner of the Partnership in the event a SuperMajority in Interest of the
Partners consent in writing to the Transferee becoming a Substituted Partner or
if the Transferor and Transferee have complied with all of the requirements of
this Article VII and:
(a) The Transferor states its intention in writing to have the
Transferee become a Substituted Partner as concerns the portion of its
Partnership Interest to be Transferred;
(b) The Transferee agrees to pay any filing fees, reasonable counsel
fees, and other reasonable expenses of the Partnership in connection with its
becoming a Substituted Partner;
(c) The Transferee agrees in writing to be bound by all of the terms
and provisions of the Agreement and any other document or instrument executed by
or otherwise binding upon the Partners as if an original party to the Agreement
or other such document or instrument and to assume all the duties, liabilities
and obligations of the Transferor in respect of such Partnership Interest,
provided, that, the Transferor shall not be released from any liabilities of or
to the Partnership arising prior to the date of the Transfer; and
(d) The Transferee executes a statement satisfactory to the Project
Leader that it is acquiring such Partnership Interest for its own account for
investment and not with a view to the distribution or resale thereof.
7.5 Recognition of Transferee as Partner. Upon the effective Transfer
of a Partnership Interest, compliance with the other provisions of this Article
VII, and admission of the Transferee as a Substituted Partner, the Project
Leader shall, to the extent required by law execute, file and record with the
appropriate governmental agencies such documents as are required to accomplish
the substitution of the Transferee as a Substituted Partner. If required by law,
the Certificate of Limited Partnership shall be amended and recorded not more
often than quarterly, to recognize the admission of Substituted Partners.
Nothing contained herein is meant to require the filing of a Certificate of
Limited Partnership (or amendment thereto) which includes the names of all
Partners and Substituted Partners, if under applicable state law the inclusion
of such names is discretionary. In all events the Project Leader shall amend
this Agreement to reflect the admittance to the Partnership of the Substituted
Partner. The Partnership shall treat a Transferee who becomes a Substituted
Partner pursuant to the provisions of this Article VII as a Substituted Partner
with respect
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to the Partnership Interest, or part thereof, assigned from the last business
day of the calendar quarter following the acceptance by the Project Leader of
the Transfer, notwithstanding the time consumed in preparing and filing the
necessary documents with governmental agencies necessary to effectuate the
substitution.
7.6 Binding Effect. Any Transferee admitted to the Partnership as a
Substituted Partner shall be subject to and bound by all the provisions of the
Agreement as if an original party to the Agreement.
7.7 Permitted Transfers of Partnership Interests. Notwithstanding any
provision of this Article VII or the Agreement to the contrary, a Partner may
transfer its Partnership Interest in accordance with the following, provided the
transfer does not cause a termination of the Partnership under Section 708 of
the Code:
(a) any Partner may transfer all or any part of its Partnership
Interest to its Affiliate, which is directly or indirectly wholly-owned by the
Partner; provided such wholly-owned Affiliate complies with the requirements of
Section 7.4 and that, any such transfer shall not relieve the assigning Partner
of any of its past or future obligations under this Agreement;
(b) the Partners may pledge or otherwise encumber their Partnership
Interests to secure indebtedness of the Partnership or of the Partners;
provided, that, any Person who acquires a Partnership Interest by reason of such
pledge or encumbrance shall not in any event be admitted as a Substituted
Partner unless approved in writing by a SuperMajority in Interest.
7.8 Succession to Capital Account. Any valid Transferee of a
Partnership Interest in accordance with the terms of this Agreement shall
succeed to the balance of its Transferor's Capital Account.
ARTICLE VIII
WITHDRAWAL AND REMOVAL;
ADMISSION OF SUCCESSOR AND ADDITIONAL GENERAL PARTNERS
8.1 Voluntary Withdrawal. Each Partner hereby agrees that it may
withdraw from the Partnership only in connection with a Transfer of the entirety
of its Partnership Interest in accordance with Article VII hereof or with the
prior written consent of all other Partners. Any withdrawal not permitted under
the preceding sentence shall constitute a breach of this Agreement by the
withdrawing Partner.
8.2 Other Withdrawal Events. The occurrence of any of the events
described in Subsection 4-43-402(4) and (5) of the Act shall not effect the
withdrawal of a General Partner.
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8.3 Removal of a Partner. A Partner may not be removed as a
Partner.
8.4 Liability of a Withdrawn General Partner. Any General Partner which
shall for any reason withdraw from the Partnership, whether voluntarily or
involuntarily, or shall Transfer all or a portion of its Partnership Interest,
shall be and remain liable for all obligations and liabilities incurred by such
General Partner (including liabilities of the Partnership or any NOARK Related
Entity) prior to the time such withdrawal or Transfer has become effective, but
shall be free of any obligation or liability incurred on account of the
activities of the Partnership (including any NOARK Related Entity) from and
after the time such withdrawal or Transfer becomes effective except for any
liabilities or damages attributable to its action in withdrawing from the
Partnership.
8.5 Additional or Successor Partners.
(a) The Management Committee may admit additional or successor General
Partners in connection with a Transfer of all or a part of a General Partner's
Partnership Interest subject to compliance with Article VII above.
(b) If a General Partner withdraws pursuant to this Agreement and if
such removal would leave the Partnership without a General Partner, then prior
to the effective date of such removal or withdrawal, the Limited Partners shall
meet to select and appoint one or more successor General Partners to continue
the business of the Partnership, which selection and appointment shall be
effected by the approval of a Majority in Interest of the Limited Partners and
become effective prior to the removal or withdrawal of a sole General Partner. A
one percent (1%) partnership interest shall be reallocated from the Limited
Partners, pro rata, to any successor General Partner(s) required pursuant to
this Section 8.5, unless the successor General Partner makes a capital
contribution to the Partnership equal to or greater than one percent (1%) of the
total of the Capital Contributions to the Partnership.
8.6 Continuation of Partnership. In the event of an event which causes
the dissolution of the Partnership by the provisions of this Agreement, the
Partnership may be reconstituted and its business continued without being wound
up by the agreement in writing of all Partners.
8.7 Automatic Suspension of the Vote and Right to Participate in
Management of Partnership Affairs: A Partner's right to participate in the
management of Partnership affairs shall be suspended in the event of such
Partner's failure to make a capital contribution required to be made under
Section 4.2 above, when such failure continues for a period of ten (10) days
following receipt of notice from the Project Leader of such failure to make such
capital contribution; provided, however, if the capital contribution required to
be made is being disputed by such Partner in good faith and the Partner
contributes that portion, if any, of the capital contribution not in dispute,
such Partner's right to participate in the management of Partnership affairs
shall not be suspended.
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ARTICLE IX
DISSOLUTION AND LIQUIDATION
9.1 Dissolution. The Partnership shall be dissolved:
(a) upon the expiration of its term as provided in Section 2.4;
(b) upon the approval of a SuperMajority in Interest of the
Partners pursuant to Section 3.5; and
(c) upon any other event that, under this Agreement or Section 4-43-801
of the Act, causes its dissolution, except that an event of withdrawal of a
General Partner shall not cause a dissolution of the Partnership unless there
are no remaining General Partners and the Limited Partners do not appoint a
successor General Partner in accordance with Section 8.5 hereof.
9.2 Liquidation. Upon dissolution of the Partnership, unless the
Partnership is continued pursuant to the provisions of this Agreement, the
Liquidator shall proceed with the winding up of the business and the liquidation
of the Partnership as set forth under Article X.
ARTICLE X
ALLOCATIONS AND DISTRIBUTIONS ON LIQUIDATION
10.1 Liquidation and Termination.
(a) In the event of the dissolution of the Partnership in accordance
with Section 9.1 above, unless the remaining Partners, if any, elect to continue
the business of the Partnership as provided by the terms of this Agreement, the
Liquidator of the Partnership shall proceed with the winding up of the affairs
of the Partnership. Upon the dissolution of the Partnership no further business
shall be conducted, except for such action as shall be necessary for the winding
up of the affairs of the Partnership and the distribution of its assets to the
Partners pursuant to the provisions of this section. The Liquidator may appoint
in writing one or more liquidating trustees who shall have full authority to
wind up the affairs of the Partnership and to make final distribution as
provided herein.
(b) Upon dissolution of the Partnership, the Liquidator may sell any or
all Partnership property at the best price available or it may distribute those
properties in kind at their Gross Asset Values. Any Partner or an Affiliate of a
Partner may purchase Partnership property upon liquidation following thirty (30)
days prior public notice of the proposed sale. The price paid by a Partner or
its Affiliates for any Partnership property shall in no event be less than the
greater of (i) the highest bid received from a third party or (ii) the fair
market value of such property as determined by an independent third party
appraiser.
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(c) The Liquidator shall apply and distribute the assets of the
Partnership as follows:
(i) First, to the payment and discharge of all of the
Partnership's debts and liabilities to creditors, including the Existing Loans
but excluding other debts to the Partners;
(ii) Second, to the payment and discharge of all of the
Partnership's other debts and liabilities to the Partners.
(iii) Third, after giving effect to all contributions,
distributions and allocations for taxable years including the taxable year in
which the liquidation occurs, to the Partners in accordance with the positive
balances in their respective Capital Accounts; and
(iv) The balance, if any, according to the Partners'
respective Partnership Percentages.
10.2 Capital Account Deficits. If any General Partner has a deficit
balance in its Capital Account (after giving effect to all contributions,
distributions and allocations for all taxable years, including the year during
which such liquidation occurs and Sections 10.1(c)(i) through (iii), but
excluding Section 10.1(c)(iv)) at the time of the dissolution and liquidation of
the Partnership, such General Partner shall contribute to the capital of the
Partnership the amount necessary to restore such deficit balance to zero in
compliance with Treas. Reg. ss. 1.704-1(b)(2)(ii)(b)(3). If any Limited Partner
has a deficit balance in its Capital Account (after giving effect to all
contributions, distributions and allocations for all taxable years, including
the year during which such liquidation occurs and Sections 10.1(c)(i) through
(iii), but excluding Section 10.1(c)(iv)) such Limited Partner shall have no
obligation to make any contribution to the capital of the Partnership with
respect to such deficit, and such deficit shall not be considered a debt owed to
the Partnership or to any other Person for any purpose whatsoever.
10.3 Special Distributions. In the discretion of the Liquidator, a
portion of the distributions that would otherwise be made pursuant to this
Article X may be:
(a) 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. The assets of any such trust shall be
distributed to the Partners from time to time, in the reasonable discretion of
the Liquidator, in the same proportions as the amount distributed to such trust
by the Partnership would otherwise have been distributed to the Partners
pursuant to this Agreement; or
(b) withheld to provide a reasonable reserve for Partnership
liabilities (contingent or otherwise) and to reflect the unrealized portion of
any installment obligations owed to the Partnership, provided that such withheld
amounts shall be distributed to the Partners as soon as practicable.
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10.4 Deemed Distribution and Recontribution. Notwithstanding any other
provision of this Article X, in the event the Partnership is liquidated within
the meaning of Treas. Reg. ss. 1. 704- 1(b)(2)(ii)(g) (regarding when a
liquidation occurs) but it has not dissolved pursuant to Section 9.1 hereof, the
Partnership shall not be liquidated, the Partnership's liabilities shall not be
paid or discharged, and the Partnership's affairs shall not be wound up.
Instead, pursuant to Treas. Reg. ss. 1.708-1(b)(1)(iv), the Partnership for
federal income tax purposes shall be deemed to have contributed all of its
property and liabilities to a new partnership in exchange for a partnership
interest in such new partnership pursuant to Treas. Reg. ss. 1.708-1(b)(1)(iv).
Immediately thereafter, the Partnership for federal income tax purposes shall be
deemed to have distributed the interests in the new partnership to the Partners
in proportion to their interests as if the Partnership were liquidated.
ARTICLE XI
CERTIFICATES AND OTHER DOCUMENTS
11.1 Project Leader as Attorney for Partners.
(a) Each Partner hereby constitutes and appoints the Project Leader and
any successor of the Project Leader, the true and lawful attorney of, and in the
name, place and stead of said Partner from time to time:
(i) To make all agreements amending this Agreement, as now or
hereafter amended, that may be appropriate to reflect solely:
(1) A change of the name or the location of the
principal place of business of the Partnership;
(2) The disposal by a Partner of his Partnership
Interest in any manner permitted by this Agreement and any return of the Capital
Contribution of a Partner (or any part thereof), if any, provided for by this
Agreement;
(3) A person becoming a Partner of the
Partnership, as permitted by this Agreement;
(4) A change in any provision of this Agreement
or the exercise by any person of any right or rights thereunder, not requiring
the consent of any Partners; and
(5) The exercise by any person of any right or rights
under this Agreement requiring the consent or approval of all or a portion of
the Partners when the required consent or approval has been given;
(ii) To make such certificates, instruments and documents,
including fictitious business name statements, as may be required by, or may be
appropriate under, the laws of the State
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of Arkansas in connection with the use of the name of the Partnership by the
Partnership and to make such applications and filings to transact business as a
foreign limited partnership in those jurisdictions where the nature of the
Partnership's properties or business makes such action advisable;
(iii) To make such certificates, instruments and documents,
including those referenced in Section 11.2 below, and also including amendments
to this Agreement, as said Partner may be required or as may be appropriate for
said Partner to make, by the laws of any state or other jurisdiction solely to
reflect:
(1) A change of address of such Partner;
(2) Any changes in or amendments to this Agreement or the
Certificate of Limited Partnership, or pertaining to the Partnership, of any
kind referred to in Section 11.1(a); and
(3) Any other changes in or amendments to this Agreement or
the Certificate of Limited Partnership, but only if and when such Partner has
agreed to such other changes or amendments by signing, either personally or by
duly appointed attorney (other than the power of attorney set forth herein), an
agreement amending this Agreement.
(b) Each of such agreements, certificates, instruments and documents
shall be in such form as such attorney and counsel for the Partnership shall
deem appropriate. The powers hereby conferred to make agreements, certificates,
instruments and documents shall be deemed to include the powers to sign,
execute, acknowledge, swear to, verify, deliver, file, record and publish the
same.
(c) Each Partner authorizes such attorney to take any further action
which such attorney shall consider necessary or convenient in connection with
any of the foregoing and hereby gives such attorney full power and authority to
do and perform each and every act and thing whatsoever requisite and necessary
to be done in and about the foregoing as fully as such Partner might or could do
if personally present, and hereby ratifies and confirms all that such attorney
shall lawfully do or cause to be done by virtue hereof.
(d) The powers hereby conferred shall continue from the date such
Partner becomes a Partner in the Partnership until such Partner shall cease to
be a Partner and, being coupled with an interest, shall be irrevocable.
11.2 Making and Filing of Certificate. The Project Leader agrees, when
authorized pursuant to Section 11.1 hereof, or otherwise, to make, file or
record with the Secretary of State of the State of Arkansas or any other
appropriate public authority and (if required) to publish the certificate, any
amendments thereof, and such other certificates, instruments and documents as
may be required or appropriate in connection with the business and affairs of
the Partnership.
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11.3 Cancellation of Certificates Evidencing Partnership Interests. On
the date hereof, the Partners shall surrender to the Project Leader all
outstanding certificates evidencing their Partnership Interests which shall be
canceled. The Partnership shall no longer issue such certificates.
ARTICLE XII
BOOKS OF ACCOUNT, FINANCIAL
STATEMENTS AND FISCAL MATTERS
12.1 Books of Account. The Partners intend that the Partnership shall
be a partnership for federal, state and local income tax purposes and to the
extent possible for federal, state and local income tax purposes each NOARK
Related Entity will be treated as set forth in Treas. Reg. ss.
301.7701-3(b)(1)(ii). Each Partner agrees not to make the election described in
Section 761 (a) of the Code to be excluded from the application of the
provisions of Subchapter K of Chapter I of Subtitle A of the Code. Moreover,
each Partner agrees not to make an election to be excluded from the partnership
provisions of any applicable state or local taxation statute. The Management
Committee shall, to the extent permissible under existing law, for income tax
purposes, keep or cause to be kept on an accrual basis, adequate books of
account of the Partnership wherein there shall be recorded and reflected all of
the Capital Contributions and all of the expenses and transactions of the
Partnership. Such books of account shall be kept at the principal place of
business of the Partnership (or at the place where accounting services for the
Partnership are performed), and each Partner and his authorized representatives
shall have at all times, during reasonable business hours, free access to and
the right to inspect and copy such books of account and all records of the
Partnership, including the right to obtain by mail or to inspect a list of the
names and addresses and Partnership Interests owned by the Partners. All books
and records of the Partnership shall be kept on the basis of an annual
accounting period ending December 31, except for the final accounting period
which shall end on the dissolution or termination of the Partnership without
reconstitution. Accelerated methods of depreciation may be elected by the
Partnership with respect to its assets for purposes of reporting federal or
state taxes.
12.2 Reports and Financial Statements. The Partner who is maintaining
the accounting records of the Partnership shall maintain a system of accounting
established and administered in accordance with Generally Accepted Accounting
Principles and FERC system of accounts, as applicable, shall maintain a
calculation of Capital Accounts according to the terms of this Agreement, and
shall provide the following reports and financial statements to the Partners:
(a) Annual Report. Within ninety (90) days after the end of each
calendar year, (i) a balance sheet as of the end of such calendar year, together
with a statement of income or loss and a statement of changes in cash flows for
the Partnership for such year, (ii) a report summarizing the fees and other
remuneration (including reimbursable expenses) paid by the Partnership to each
of the Partners during the preceding year; and (iii) a statement showing each
Partner's estimated allocation of income, gains, losses and credits for Federal
income tax purposes. The balance sheet
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and financial statements described in clause (i) of this Section 12.2(a) shall
be audited by a nationally recognized certified public accounting firm appointed
by the Management Committee;
(b) Monthly Reports. Within thirty (30) days after the end of each
month, the balance sheet of the Partnership as of the end of such month and the
statement of income of the Partnership for such month and for the period
commencing at the end of the previous fiscal year and ending with the end of
such month, all in reasonable detail; and
(c) Income Tax Information. Within one hundred sixty-five (165) days
after the end of each calendar year, the Partnership will also furnish each
Partner (and each transferee of a Partnership Interest who shall have not become
a Substituted Partner) with the required income tax information based upon the
Partnership's tax return which will be prepared and filed with the Service and
other applicable taxing authorities. Within ninety (90) days after the end of
each calendar year, the Partnership will furnish to each Partner (and each
transferee of a Partnership Interest who shall have not become a Substituted
Partner) an estimate of the required income tax information.
12.3 Tax Returns and Other Reports. The Project Leader, at the
Partnership's expense, shall cause income tax returns for the Partnership to be
prepared and timely filed with the appropriate authorities. The Project Leader,
at Partnership expense, shall cause to be prepared and timely filed, with
appropriate federal and state regulatory and administrative bodies, all reports
required to be filed with such entities under then current applicable laws,
rules and regulations. Such reports shall be prepared on the accounting or
reporting basis required by such regulatory bodies. Any Partner shall be
provided with a copy of any such report upon request without expense to it.
12.4 Fiscal Year. The fiscal year of the Partnership shall begin with
the first day of January and end on the last day of December in each year.
12.5 Bank Accounts, Funds and Assets. The funds of the Partnership
shall be invested in such accounts and investments as described herein and such
funds shall be withdrawn only by the Project Leader or his duly authorized
agents. The Project Leader shall have fiduciary responsibility for the
safekeeping and use of all funds of the Partnership, whether or not in his
immediate possession or control, and he shall not employ such funds or assets in
any manner except for the exclusive benefit of the Partnership.
12.6 Tax Elections. The Partnership shall make the following elections
under the Code and Treasury Regulations and any similar state or local statutes
subject to modification at the direction of the Management Committee (which
modification shall be subject to any applicable Partner approvals required to be
obtained under Section 3.5):
(a) To adopt the calendar year as the annual accounting period,
unless otherwise required by law;
(b) To adopt the accrual method of accounting;
40
(c) To compute the allowance for depreciation utilizing the shortest
life and fastest method permissible under the Modified Accelerated Cost Recovery
System under Code ss. 168(j) or other applicable depreciation system;
(d) To amortize start-up expenditures, if any, over a sixty (60) month
period in accordance with Code ss. 195(b) and any similar state statute;
(e) To amortize organization expenses and syndication fees if any, over
a sixty (60) month period in accordance with Code ss. 709(b) and any similar
state statute;
(f) To make such other elections as it may deem advisable to reduce
Partnership (including the NOARK Related Entities) taxable income to the maximum
extent possible and to take deductions in the earliest taxable year possible;
and
(g) To make the election provided under Code ss. 754, upon the request
of any Partner, if there is a distribution of property as described in Code ss.
734 or if there is a transfer of an interest as described in Code ss. 743.
12.7 Other Partnership Records. The Partnership shall keep and maintain
in its principal office all records as required by Section 4-43-105 of the Act.
Such records shall include the following:
(a) A current list that states the name and mailing address of each
Partner, separately identifying in alphabetical order the General Partners and
the Limited Partners;
(b) Copies of the Partnership's federal, state and local information or
income tax returns and copies of the Partnership's financial statements for each
of the Partnership's three most recent years, if applicable;
(c) A copy of the Agreement and the Certificate of Limited Partnership,
all amendments or restatements, executed copies of any powers of attorney under
which the Agreement and the Certificate of Limited Partnership and all
amendments or restatements to the Agreement and the Certificate of Limited
Partnership have been executed; and
(d) A written statement of: (i) all Capital Contributions made to the
Partnership, including cash amounts and a description and statement of the
agreed value of any non-cash Capital Contributions, and similar information with
respect to all Capital Contributions which the Partners have agreed to make in
the future; and (ii) all capital calls issued to the Partners.
Any Partner shall have the right to inspect and, at its own expense, copy and
audit any of the books and records of the Partnership upon giving reasonable
advance notice to the other Partners.
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12.8 Survival of Tax Provision. The provisions of the Agreement
relating to tax matters shall survive the termination of the Agreement and the
termination of any Partner's Partnership Interest and shall remain binding on
that Partner for the period of time necessary to resolve any tax matters
regarding the Partnership with any federal, state and local tax authority.
12.9 Deposit of Funds. Funds of the Partnership shall be deposited in
such banks or other depositories as shall be designated by the Project Leader.
Pending the application of such funds to the cash needs of the Partnership, the
Partnership's funds shall, to the extent practicable, be continuously invested.
Funds of the Partnership may only be placed in the following types of
investments; provided, that such investments shall not preclude the timely
distribution of excess cash; and provided, further, that any investment of
working capital shall not preclude the timely payment of the Partnership's
obligations when and as due:
12.9.1 Cash in the form of U.S. currency.
12.9.2 Evidence of indebtedness, maturing not more than one
year after the date of issue, issued or guaranteed by the United States
of America, or agencies thereof.
12.9.3 Collateralized repurchase agreements in respect of the
obligations described in Section 12.9.2 with the banks in which the
Partnership maintains its operating accounts or with a related trust
company.
12.9.4 Such other investments as the members on the Management
Committee representing the General Partners shall determine by
unanimous decision.
ARTICLE XIII
DISPUTE RESOLUTION
13.1 Invoking Procedure. In the event of a dispute between the Partners
arising out of or related to this Agreement or related to the business or
affairs of the Partnership, or in the event a SuperMajority in Interest of the
Partners do not agree on a matter requiring such approval under Section 3.5 of
this Agreement and such lack of approval results in a Stalemate (as hereinafter
defined in Section 13.2), either Partner may invoke the procedures specified in
this Article by giving written notice to the other Partners. Such written notice
will describe briefly the nature of the dispute, or the matter for which
approval has not been obtained under Section 3.5, and shall identify an
individual with authority to settle such dispute or matter on behalf of that
Partner. The Partner receiving such notice shall have ten (10) days within which
to designate an individual with authority to settle such dispute or matter on
its behalf and to give written notice to the other Partner of its designation
(the individuals so designated shall be referred to as the "Authorized
Individuals"). Unless otherwise notified, the Authorized Individual of each
Partner shall be its President. For purposes of this Section 13.1, any matter
which would otherwise be a Stalemate if a meeting of the Partners had been held
and requisite SuperMajority in Interest approval not obtained, or a proposal
42
submitted pursuant to Section 3.4(e) and the requisite SuperMajority in Interest
approval not given, shall be deemed ripe for resolution under this Article XIII
if the proponent has (i) called a meeting of the Partners and has included in
the Agenda included with the notice of the meeting a full and complete
description of the proposal along with all information reasonably required for a
determination or vote by the other Partners(s) and the other Partner(s) does not
attend the meeting and does not, prior to the time scheduled therefor, request a
postponement or adjournment thereof for up to ten days, or if the Partner(s)
requests such a postponement or adjournment but does not attend the postponed
meeting or a new Partner meeting within such ten (10) day period, or (ii)
submitted such proposal to the other Partner(s) for approval pursuant to Section
3.4(e) hereof and such other Partner(s) does not provide such consent within
fifteen (15) days from the later of its receipt of such request or the date that
it shall receive all additional information regarding such proposal that it may
have reasonably requested in a written notice submitted to the proponent not
more than ten (10) days after the receipt of the proponent's request for such
consent.
13.2 Stalemate Defined. For purposes of this Article XIII, a
"Stalemate" shall mean any situation in which one or more proposals have been
submitted to the Partners relating to action reasonably considered by the
proponent to be required to be taken by the Partnership, or the Project Leader
on behalf of the Partnership, in order to avoid or substantially mitigate (i) a
cessation of, or material disruption or impediment in, the conduct of its
ongoing operations and affairs to any material extent, or (ii) potential
material harm or damage to the Partnership, its business, operations, affairs,
properties or other assets, but which proposal or proposals are not able to be
implemented because there has not been an approval thereof by a SuperMajority in
Interest of the Partners as required by Section 3.5. In this regard, the failure
to approve a Budget by the end of the first quarter of a fiscal year to which it
relates and which has been presented to the Partners in material compliance with
Section 3.6(g) hereof shall be considered to be a Stalemate and approval of the
Budget, or specific items thereof which are then in dispute, as then proposed
may be presented for dispute resolution pursuant to this Article XIII.
13.3 Investigation. The Authorized Individuals shall make whatever
investigation each deems appropriate and promptly thereafter, but no later than
thirty (30) days from the date of the original notice invoking these procedures,
shall commence discussions concerning resolution of the dispute or matter. If
the dispute or matter has not been resolved within sixty (60) days from the date
of the original notice invoking these procedures, the Partners shall submit the
dispute or matter to ADR in accordance with the following procedure.
13.4 Neutral. The Partners shall have ten (10) days from the expiration
of the sixty (60) day period referred to in Section 13.2 above, or the agreement
of the Partners, to submit the dispute or matter to ADR, whichever occurs first,
within which to agree upon a mutually acceptable person not affiliated with
either party ("Neutral"). If no Neutral has been selected within that time
period, the Partners agree jointly to request the American Arbitration
Association or other mutually agreed-upon organization, to supply within ten
(10) days a list of at least three (3) potential Neutrals with qualifications as
specified by the Partners in the joint request. Within seven (7) days of receipt
of the
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list, the Partners shall rank the proposed candidates independently, exchange
rankings and select as the Neutral the individual who received the highest
combined ranking who is available to serve.
13.5 Schedule. In consultation with the Neutral, the Partners shall
designate a mutually convenient time and place for the ADR, and unless
circumstances require otherwise, such time shall be not later than forty-five
(45) days after the selection of the Neutral.
13.6 Discovery. In the event one or both Partners have substantial need
for information in the possession of the other Partner or a need to take certain
limited depositions and/or production of principal documents in order to prepare
for the ADR, the Partners shall attempt in good faith to agree on a plan for the
expeditious exchange of such information. Should they fail to reach agreement,
either Partner may request a meeting with the Neutral who shall assist them in
reaching an accommodation.
13.7 Written Submission. One week prior to the first scheduled session
of the ADR, each Partner shall deliver to the Neutral and to the other Partner a
written summary of its views on the dispute or matter in issue. The summary
shall be no longer than twenty (20) double-spaced pages unless the Partners
agree otherwise.
13.8 Representatives. In the ADR, each Partner shall be represented by
the Authorized Individual and by counsel. In addition, each Partner may bring
additional persons as necessary to respond to questions or contribute
information as needed. The number of such additional persons to be allowed shall
be mutually agreed by the Partners with the assistance of the Neutral, if
necessary.
13.9 Structure. The Neutral is authorized to conduct joint and separate
meetings with the Partners and to help the Partners structure whatever form of
presentation of the dispute or matter in issue is most likely to facilitate
resolution. Notwithstanding the form of the presentation, it is the intent of
the Partners to provide an opportunity for their Authorized Individuals, with or
without the assistance of counsel, and with the assistance of the Neutral, to
negotiate a resolution of the dispute or matter in issue. In the event the
Neutral holds separate private caucuses with either Partner, he or she shall
keep confidential all information learned in such private caucuses unless
specifically authorized to make disclosure of the information to the other
Partner. There shall be no stenographic, visual, or audio record made of the
ADR.
13.10 Mandatory. The Partners agree to participate in the ADR to its
conclusion as designated by the Neutral and not to terminate negotiations
concerning resolution of the dispute or matter in issue until at least two (2)
weeks thereafter. Each Partner agrees not to commence arbitration or seek other
remedies prior to the conclusion of the two-week post-ADR negotiation period,
provided that either Partner may commence arbitration on any date after which
the commencement of litigation could be barred by an applicable statute of
limitations or in order to request an injunction to prevent irreparable harm. In
such event, the Partners agree (except as prohibited by court order) to continue
to participate in the ADR to its conclusion.
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13.11 Fees. The fees of, and authorized costs incurred by, the Neutral
shall be advanced by the Partnership and shared equally by the Partners who
shall reimburse the Partnership. The Neutral shall be disqualified as a witness,
consultant, expert, or counsel for any Partner with respect to the dispute or
matter in issue and any related matters.
13.12 Later Proceedings. The ADR is a compromise negotiation for
purposes of the Federal Rules of Evidence and the Rules of Evidence of the State
of Oklahoma. The entire procedure is confidential. All conduct, statements,
promises, offers, views, and opinions, whether oral or written, made in the
course of the ADR by any of the Partners, their agents, employees,
representatives, or other invitees to the ADR and by the Neutral, who is the
parties' joint agent for the purposes of these compromise negotiations, are
confidential and shall, in addition and where appropriate, be deemed to be work
product and privileged. Such conduct, statements, promises, offers, views, and
opinions shall not be discoverable or admissible for any purposes, including
impeachment, in any litigation or other proceeding involving the Partners and
shall not be disclosed to anyone not an agent, employee, expert, witness, or
representative for any of the Partners. Evidence otherwise discoverable or
admissible is not excluded from discovery or admission as a result of its use in
the ADR.
13.13 Dispute Resolution
(a) In the event the Partners are unable to resolve the dispute or
matter in issue in accordance with the foregoing provision of this Article XIII,
the dispute or matter in issue shall be submitted to final and binding
arbitration. The arbitration shall be administered by the American Arbitration
Association ("AAA") in accordance with and in the following order of priority:
(i) the terms of these arbitration provisions; (ii) the Commercial Arbitration
Rules of the AAA; (iii) the Federal Arbitration Act (Title 9 of the United
States Code); (iv) the Oklahoma Uniform Arbitration Act (15 O.S. ss. 801, et
seq.); and (v) to the extent the foregoing are inapplicable, unenforceable or
invalid, the laws of the State of Oklahoma. The validity and enforceability of
these arbitration provisions shall be determined in accordance with the same
order or priority. In the event of any inconsistency between these arbitration
provisions and such rules and statutes, these arbitration provisions shall
control. Judgment upon any award rendered hereunder shall be entered in any
court having jurisdiction thereof, and the parties' consent to the jurisdiction
of any state or federal court in Oklahoma. Commencement of and demand for
arbitration shall be made by written notice by the initiating party (claimant)
to the other party (respondent) which contains a statement of the nature of the
dispute or matter in issue, the amount involved and the relief or remedy sought
("Notice").
(b) The arbitration shall be conducted by a panel of three (3)
arbitrators (the "Arbitration Panel"). Each Partner will nominate one (1)
arbitrator, who is experienced and knowledgeable in the areas involved in the
dispute or matter in issue, within ten (10) working days of their receipt of
Notice that arbitration has been demanded and commenced, and each will notify
the other party of the name of its selected arbitrator within that same time
period. In the case of a matter which is subject to Section 3.5 which results in
a Stalemate, the arbitrator nominated by each Partner shall not be an attorney.
If a Partner refuses to name an arbitrator, application will be made to the
Chief Judge of the United States District Court for the Northern District of
Oklahoma requesting that the
45
Chief Judge appoint an arbitrator. If the Chief Judge declines to name an
arbitrator, application will be made to the AAA. The two arbitrators thus
selected will confer within ten (10) working days of their final selection and
agree upon a third arbitrator. If the two arbitrators are unable to agree on a
third arbitrator within sixty (60) working days of their first contact, the
nomination of the third arbitrator will follow the same procedure as the
nomination of a party arbitrator for a party refusing to make a selection. AAA
Rules regarding the selection, qualification, and challenge or arbitrator shall
only apply to the second or third arbitrators if those arbitrators are selected
by the AAA. No member of the Arbitration Panel may be involved in the
controversy, be or have been an officer, director, representative, employee or
agent of or for either party. The third arbitrator shall act as Chairman of the
Arbitration Panel.
(c) The costs and fees of the arbitrators selected by the Partners
shall be borne by the Partners selecting such arbitrator, unless otherwise
awarded by the Arbitration Panel. The costs and fees attributable to the third
arbitrator shall be shared equally by the Partners, unless otherwise awarded by
the Arbitration Panel.
(d) The Arbitration Panel may engage engineers, accountants or other
consultants that the Arbitration Panel deems necessary to render a decision in
the Arbitration Proceeding. All fees of any such consultants shall be borne
equally by the Partners, unless otherwise awarded by the Arbitration Panel.
(e) The arbitration will be governed by the Federal Arbitration Act, 9
U.S.C. xx.xx. et seq., and the Oklahoma Uniform Arbitration Act, 15 Okla. Stat.
xx.xx. 801 et seq. The arbitrators will establish a schedule that will result in
a final arbitration award to be rendered in written form not later than one
hundred eighty (180) days following the appointment of the third arbitrator. The
place of the arbitration shall be Tulsa, Oklahoma.
(f) The Partners agree that pre-arbitration hearing discovery is
necessary. Within twenty (20) working days after the appointment of the third
arbitrator, the Partners agree to exchange lists of the witnesses and exhibits
each then plans to call and use in the Arbitration Hearing. Within twenty (20)
working days after the exchange of witness and exhibit lists, each Partner may
request additional discovery, if any is necessary, from the other Partner. The
Partners agree to respond to any such additional request for documents from the
other Partner within thirty (30) days after receiving such request, and each
agrees to attempt in good faith to schedule the depositions of witnesses
requested by the other side by agreement. If the Partners are unable to agree on
any aspect of discovery requested, such discovery issue shall be presented to
and resolved by the Arbitration Panel.
(g) Any dispute relating to or arising under this arbitration
provision, including interpretation thereof, shall be solely and finally
resolved by submission to the Arbitration Panel.
(h) A written decision by two (2) of the arbitrators will be final and
binding on the Partners. An arbitration award will be in writing and signed by
the arbitrators. An arbitration award
46
entered herein can be confirmed by either of the Partners in the United States
District Courts for the Northern or Western Districts of Oklahoma or the Western
District of Arkansas or any state district court for the States of Oklahoma or
Arkansas, and a judgment may be entered on the arbitration award by the same
court.
(i) Punitive damages may not be awarded by the Arbitration Panel. The
Arbitration Panel shall have the power to award recovery to the prevailing party
of all or part of its costs, expenses and attorneys' fees incurred in
conjunction with such Arbitration Proceeding.
(j) The Partners, their Affiliates, employees, contractors, attorneys,
and auditors shall keep the substance of these final and binding arbitration
proceedings confidential to the extent the same is permissible, consistent with
the responsibilities of the attorneys under the pertinent Codes of Professional
Responsibility or obligations which may reasonably require disclosure to
financial institutions, consultants for evaluation purposes or as may be ordered
by the federal or state government or a court of competent jurisdiction. Under
no circumstances shall any documents memorializing the substance of any aspect
of these proceedings be disclosed or released to the newspaper or other media
absent the mutual agreement of the Partners. The Partners will use all
reasonable efforts to obtain protective orders before disclosing any terms of
these proceedings to any federal or state government or a court of competent
jurisdiction.
(k) Except for the internal costs of each party, all costs, fees and
expenses of any portion of this dispute resolution process shall be shared
equally by the Partners, unless otherwise specified herein.
ARTICLE XIV
LIMITATION OF AUTHORITY
Neither the Management Committee, the committees established by the
Management Committee, the Project Leader, nor the Partners shall have any
authority to take any action i) inconsistent with the terms of this Agreement or
ii) which will permit the Securities and Exchange Commission or any other
governmental agency to have jurisdiction with respect to the Partnership or any
Partner under the Public Utility Holding Company Act of 1935, U.S.C. Title 15,
Sections-6.
ARTICLE XV
LIMITATION OF LIABILITIES
No Partner shall be liable to third Persons for Partnership losses,
deficits, liabilities or obligations except as otherwise expressly agreed to in
writing by such Partners, unless the assets of the Partnership shall first be
exhausted; provided, however, that the Limited Partner shall not be
47
liable for any of the debts of the Partnership or any of its obligations except
to the extent provided under this Agreement or other applicable law. The
provisions of this Article XV shall not modify or alter the specific obligations
of a Partner under this Agreement or the Omnibus Agreement.
ARTICLE XVI
MISCELLANEOUS
16.1 Notices. Any notice, request, instruction, correspondence or other
document to be given hereunder by any party (herein collectively called
"Notice") shall be in writing and delivered in person or by courier service
requiring acknowledgment of receipt of delivery or mailed by certified mail,
postage prepaid and return receipt requested, or by telecopier, as follows:
if to EAPC,
Enogex Arkansas Pipeline Corporation
000 Xxxxxxx Xxxx Two
000 Xxxxxxx Xxxx Xxxxx
Xxxxxxxx Xxxx, XX 00000
Attention: President
Facsimile No.: (000) 000-0000
with copy to (which copy shall not constitute notice to):
Enogex Inc.
000 Xxxxxxx Xxxx Two
000 Xxxxxxx Xxxx Xxxxx
Xxxxxxxx Xxxx, XX 00000
Attention: General Counsel
Facsimile No.: (000) 000-0000
if to SWPL,
Southwestern Energy Pipeline Company
c/o Southwestern Energy Services Company
2200 MidContinent Tower
000 X. Xxxxxx Xxx.
Xxxxx, Xxxxxxxx 00000
Attention: Senior Vice President
Facsimile No.: (000) 000-0000
48
with copy to (which copy shall not constitute notice to):
Southwestern Energy Company
0000 Xxxx Xxxxxx
X.X. Xxx 0000
Xxxxxxxxxxxx, Xxxxxxxx 00000-0000
Attention: Executive Vice President -
Finance & Corporate Development
Facsimile No.: (000) 000-0000
if to any other Partner, addressed to the applicable address provided by such
Partner in writing to all other Partners.
Notice given by personal delivery, courier service or mail shall be effective
upon actual receipt. Notice given by telecopier shall be confirmed by
appropriate answer back and shall be effective upon actual receipt if received
during the recipient's normal business hours, or at the beginning of the
recipient's next business day after receipt if not received during the
recipient's normal business hours. All Notices by telecopier shall be confirmed
promptly after transmission in writing by certified mail or personal delivery.
All Notices by mail shall be deemed received on the fifth business day following
the date on which the same is mailed. Any party may change any address to which
Notice is to be given to it by giving Notice as provided above of such change of
address.
16.2 Captions and Pronouns. Any titles or captions or articles or
paragraphs contained in this Agreement are for convenience only and shall not be
deemed part of the context of this Agreement. All pronouns and any variations
thereof shall be deemed to refer to the masculine, feminine, neuter, singular or
plural, as the identification of the person or persons, firm or firms,
corporation or corporations may require.
16.3 Binding Effect. Except as otherwise herein provided, this
Agreement shall be binding upon and inure to the benefit of the parties hereto,
their heirs, executors, administrators, successors and all Persons hereafter
having or holding a Partnership Interest, whether as assignees, Substituted
Partners, or otherwise. Nothing in this Agreement, express or implied, is
intended to confer upon any person or entity other than the parties hereto and
their respective permitted successors and assigns, any rights, benefits or
obligations hereunder.
16.4 Amendment of the Agreement. Except as otherwise provided in this
Agreement, an amendment to this Agreement shall require the unanimous consent of
the Partners.
16.5 Governing Law. THE PROVISIONS OF THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
ARKANSAS (EXCLUDING ANY CONFLICTS-OF-LAW RULE OR PRINCIPLE THAT MIGHT REFER SAME
TO THE LAWS OF ANOTHER JURISDICTION), EXCEPT TO THE EXTENT THAT SAME ARE
MANDATORILY SUBJECT TO THE LAWS
49
OF ANOTHER JURISDICTION PURSUANT TO THE LAWS OF SUCH OTHER
JURISDICTION.
16.6 Counterparts and Execution. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original Agreement, and
all of which shall constitute one Agreement, by each of the parties hereto on
the dates respectively indicated in the signatures of said parties,
notwithstanding that all of the parties are not signatories to the original or
to the same counterpart, to be effective as of the day and year hereinabove set
forth.
16.7 Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future state or federal laws
or rules and regulations promulgated thereunder effective during the term
hereof, such provision shall be fully severable, and the Agreement shall be
construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part hereof, and the remaining provisions hereof shall
remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance herefrom. Furthermore, in
lieu of such illegal, invalid, or unenforceable provision, there shall be
automatically as a part of this Agreement a provision similar in terms to such
illegal, invalid, or unenforceable provision as may be possible and be legal,
valid and enforceable.
16.8 Waiver. None of the requirements of this Agreement may be waived
unless waived in writing by the named party or all parties to this Agreement.
Failure by any party to enforce its rights hereunder shall not subsequently act
as a waiver of those or any other rights. The waiver by any party of a breach of
any provision of this Agreement shall not operate or be construed as a waiver by
such party of any subsequent breach.
16.9 Attorneys' Fees. In any suit to enforce this Agreement, the
prevailing party shall have the right to recover its costs and reasonable
attorneys' fees and expenses, including costs, fees and expenses on appeal if
the finder of facts, including an arbitrator, determines that the non-prevailing
party's arguments were frivolous or substantially without merit.
16.10 Construction. This Agreement was drafted jointly by the Parties,
and no presumption shall operate in favor of or against any Party as a result of
any responsibility that any Party may have had in drafting this Agreement or any
part thereof.
50
IN WITNESS WHEREOF, the Partners have executed this Agreement on the
date first set forth above.
GENERAL PARTNERS:
ENOGEX ARKANSAS PIPELINE CORPORATION
By: /s/ XXXXX X. XXXXXXX
----------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President
SOUTHWESTERN ENERGY PIPELINE
COMPANY
By: /s/ XXXXXXX X. XXXXX
----------------------------
Name: Xxxxxxx X. Xxxxx
Title: Executive Vice President - Finance & Corporate
Development
LIMITED PARTNER:
ENOGEX ARKANSAS PIPELINE
CORPORATION
By: /s/ XXXXX X. XXXXXXX
----------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President
51
Exhibit A
DESCRIPTION OF
INTERCONNECTION, INTEGRATION AND EXPANSION OF PIPELINE
FACILITIES OF NOARK AND OZARK
Following are capital improvements proposed to combine and expand the
existing Ozark and NOARK systems.
Pipeline
Tie NOARK and Ozark systems together at their farthest west crossing in
Sebastian County, Arkansas. This tie-in would include approximately 600 feet of
10-inch piping, relocation of existing pigging facilities to the terminus of the
10-inch addition and conversion of the existing 10 inch Ft. Xxxxxxx suction line
to interconnect discharge service. This will give the existing NOARK compressor
station in Franklin County, Arkansas a common suction to both systems. The
improvements for this connection will also include appropriate crossover
valving, bypass valving, crossover risers and interconnection site as necessary.
Construct two, 20-inch diameter pipeline segments, approximately 4.75
miles each, to integrate the Ozark and NOARK systems through the existing NOARK
compression. One 20-inch pipeline, which will serve as a suction connection from
Ozark to the NOARK station, will span from the area of milepost 123 on the Ozark
system to the suction of the existing NOARK compression in Franklin County. The
other 20-inch pipeline will follow the same corridor and will serve as a
discharge pipeline back to the existing Ozark system near milepost 123. These
improvements will also include the appropriate block valve, crossover piping,
crossover risers and interconnect site as necessary.
Compression
Upgrade the existing Ozark Xxxxxxx compressor station to handle more volume.
Installation of between 7,000 and 11,000 horsepower of additional compression at
the Xxxxxxx station, dependent on final design and utilization of existing
turbine compression. Installation to include related station yard piping,
valving, electrical switchgear, and electric facilities as required.
Upgrade the existing NOARK compressor station to handle more volume.
Installation of approximately 13,000 horsepower of additional compression at the
NOARK station. Station manifold and yard piping will be adapted as necessary to
accept the new suction and discharge lines to the Ozark system including 20 inch
pig launcher and receiver facilities. Appropriate valving and piping will also
be added to provide flexibility to discharge into either or both systems.
A-1
Measurement
Upgrade receipt metering stations to provide additional design receipt capacity
from the existing Enogex and Transok metering points into the Ozark pipeline
system. Facilities to include additional valving, meter tubes and telemetry to
meet AGA standards.
Scada
Upgrade existing Ozark and/or NOARK Scada system(s) to provide interconnect
communication between the Ozark and NOARK pipeline systems consistent with FERC
requirements and sound operating practices.
A-2
Exhibit B
ACCOUNTING PROCEDURES
TO
AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP OF
NOARK PIPELINE SYSTEM, LIMITED PARTNERSHIP
DATED JANUARY 12, 1998
These Accounting Procedures are a part of, and are to be interpreted
and applied in conjunction with the above referenced Amended and Restated
Agreement of Limited Partnership (the "Partnership Agreement"). To the extent of
any inconsistencies in or conflicts between the provisions of these Accounting
Procedures and the Partnership Agreement, the provisions of the Partnership
Agreement will control.
I.
GENERAL PROVISIONS
1. Statements and Xxxxxxxx
Each Partner shall render all bills and statements to the Partnership
on or before the last day of each month for the costs, expenses and expenditures
for the preceding months. Such bills will be accompanied by a statement of all
charges and credits to the Partnership, including discounts, if any, summarized
by appropriate classifications indicative of the nature thereof.
2. Payment by Partnership
The Partnership shall pay all bills within fifteen (15) days after
receipt thereof. If payment is not made or cash funds are not made available to
the Partnership within such time for amounts owed, the unpaid balance shall bear
interest until paid at one (1) percentage point over the prime rate from time to
time charged by Citibank, N.A., New York, N.Y. to responsible commercial and
industrial borrowers, not in excess of the maximum lawful rate.
3. Adjustments
Payment of any xxxx shall not prejudice the right of the Partnership to
protest or question the correctness thereof; provided, however, all bills and
statements rendered to the Partnership during any calendar year shall
conclusively be presumed to be true and correct after twenty-four (24) months
following the end of such calendar year, unless prior to the end of said
twenty-four (24) month period the Partnership takes written exception thereto
and makes claim for adjustment. The provisions of this paragraph shall not
prevent adjustments resulting from a physical inventory of the assets of the
Partnership or mathematical errors.
B-1
4. Audits
Any auditor, inspector or auditing committee appointed by the
Partnership shall have the right to audit the accounts and records of each
Partner relating to the accounting hereunder after due notice and during the
usual working hours.
II.
COSTS, EXPENSES AND EXPENDITURES
Subject to the limitations hereinafter prescribed and the provisions of
the Agreement to which this Accounting Procedures is an exhibit, each Partner
shall charge the Partnership for all costs, expenses and expenditures incurred
by it and its affiliated persons and entities, collectively as though solely its
costs, in connection with the administration, accounting, legal, operation,
maintenance, upkeep, repair, replacement, development, expansion, enlargement,
improvement or abandonment of the System or the Partnership (including any NOARK
Related Entity) (hereinafter referred to as "Operation of the System"),
including the following items:
1. Rentals
All rentals paid or the portion thereof attributable to the Operation
of the System.
2. Labor Costs
A. Salaries and wages of employees engaged in connection with the
Operation of the System, and, in addition, amounts paid as salaries and wages of
others temporarily employed in connection therewith. Employees engaged less than
full time in connection with the Operation of the System shall keep an accurate
daily log of the time spent on behalf of the Partnership contemporaneously with
the work being done, including the specific services rendered. Such log shall be
delivered to the Partnership upon request. Said salaries and wages shall not
exceed the going rate for the technical expertise of the employee so engaged.
B. Costs of holiday, vacation, sickness and jury service benefits and
other customary allowances paid to persons whose salaries and wages are
chargeable under Paragraph 2A of this Part II. Costs under this Paragraph 2B
shall be charged on the basis of a percentage assessment on the amount of
salaries and wages chargeable under Paragraph 2A of this Part II.
C. Expenditures or contributions made pursuant to assessments imposed
by governmental authority which are applicable to salaries, wages and costs
chargeable under Paragraphs 2A and 2B of this Part II. Costs under this
Xxxxxxxxx 0X xxxxx xx charged on the basis of a percentage assessment on the
amount of salaries and wages chargeable under Paragraph 2A of this Part II.
B-2
D. The costs of plans for employees group life insurance,
hospitalization, disability, pension, retirement, thrift and other benefit
plans, applicable to labor costs chargeable under Paragraph 2A of this Part II.
Costs under this Paragraph 2D shall be charged on the basis of a percentage
assessment on the amount of salaries and wages chargeable under Paragraph 2A of
this Part II.
3. Reimbursable Expenses of Employees
Reasonable personal expenses of employees whose salaries and wages are
chargeable under Paragraph 2A of this Part II. Personal expenses shall include
the usual out-of-pocket expenditures incurred by employees in the performance of
their duties directly related to the Operation of the System and for which such
employees are reimbursed, including without limitation travel, hotel,
transportation and meal expenses.
4. Material, Equipment and Supplies
Material, equipment and supplies purchased or furnished from a
Partner's warehouse or other properties for use in the Operation of the System.
So far as it is reasonable, practical and consistent with efficient and
economical operation, only such material shall be obtained for the Operation of
the System as may be required for immediate use, and the accumulation of surplus
stock shall be avoided.
5. Transportation
Transportation of employees, equipment, material and supplied necessary
for the Operation of the System. However, unless otherwise previously agreed to,
the Management Committee may require that charges for transportation of
equipment, material and supplies furnished from a Partner's warehouse or other
properties be recalculated and reduced if such charges are in excess of the
transportation which would have been charged for movement of property from the
nearest reliable supply store or railroad receiving point.
6. Services
A. The cost of contract services and utilities procured from outside
sources, not to exceed $50,000 per occurrence without the approval of the
Management Committee.
B. Use and service of vehicles, equipment and facilities as
provided in Paragraph 5 of Part III.
7. Legal Expenses and Claims
All costs and expenses of handling, investigating and settling claims
arising by reason of the Operation of the System or necessary to protect or
recover any Partnership (including any
B-3
NOARK Related Entity) property, including, but not limited to, attorneys' fees,
court costs, costs of investigation or procuring evidence and any judgments paid
or amounts paid in settlement or satisfaction of any such claims. Expenditures
in excess of $50,000 for any single item of cost shall require the approval of
the Management Committee as provided in the Partnership Agreement.
8. Taxes
All taxes of every kind and nature assessed or levied upon or incurred
in connection with the Operation of the System or the Partnership (including any
NOARK Related Entity) property, and which taxes have been paid by a Partner for
the benefit of the Partnership.
9. Insurance
Premiums paid or allocated for insurance carried under this Agreement
for the benefit of the Partners and the Partnership.
10. Permits, Licenses and Bonds
Costs of permits, licenses and bond premiums necessary in the
performance of a Partner's duties.
11. Government Compliance Costs
All costs incurred in connection with the Partnership (including any
NOARK Related Entity) or the System as a result of or in compliance with
governmental or regulatory requirements, including without limitation those
relating to Federal Energy Regulatory Commission regulation and environmental,
health or safety considerations applicable to the System. Such costs may
include, but are not limited to, disposal of wastes, surveys of an ecological or
archaeological nature and pollution prevention or control as required by
applicable legal requirements.
12. Land Right Acquisition Costs
All land right acquisition costs, including those for rights-of-way,
surface leases, permits, fee purchases, etc.
13. Other Costs, Expenses and Expenditures
Any other costs, expenses and expenditures not covered or dealt with in
the foregoing provisions of this Part II which are incurred in the Operation of
the System, not to exceed $50,000 per occurrence without approval of the
Management Committee as provided in the Partnership Agreement.
B-4
14. Overhead Charges
Each Partner authorized by the Partnership to undertake a capital
project on behalf of the Partnership shall charge an amount as set forth below
as overhead.
A. In connection with all capital expenditures in excess of $50,000 per
project (except the interconnection of the NOARK and the Ozark pipeline systems
and the expansion of those pipeline systems as contemplated by the Omnibus
Agreement and Exhibit I thereto), such Partner shall charge an additional amount
equal to the sum of the amounts obtained by applying the following percentages
to the expenditures for a project monthly as they are incurred:
Project Direct Cost Overhead Percentage
$000 to $2,000,000 5.00%
Costs over $2,000,000 2.00%
The above overhead percentages for capital expenditures do not include
engineering, right-of-way, or other construction services directly attributable
to the project even though performed in the Partner's principal business office.
B. As provided in Section 3.7(d)(i), the Management Committee has
delegated to SWPL the continued performance of the accounting services for the
Partnership. In connection with the provision of those services, SWPL shall
receive an amount equal to $5,000 per month as reimbursements for all overhead
amounts related to the performance of such services. This overhead amount is in
addition to all direct or other costs incurred by SWPL in the performance of
such services and chargeable under these Accounting Procedures; provided under
no circumstances will there be any double collection of costs.
III.
BASIS OF CHARGES
l. Purchases
Material purchased and services procured shall be charged at the price
paid after deduction of all discounts actually received.
2. Material Furnished from a Partner's warehouse or other properties
A. New Material
1. Tubular goods, two inch and over, shall be priced on competitive
bids from at least three suppliers. In addition a Partner shall be permitted to
include loading and unloading costs actually sustained.
B-5
2. Other material shall be priced at the current replacement cost of
the same kind of material, effective at the date of movement by the Partner and
f.o.b. the supply store or railway receiving point nearest the System where
material of the same kind is available.
3. The Partnership shall be credited with cash discounts applicable to
prices provided for in this Paragraph 2 of Part III.
B. Used Material
1. Used material in sound and serviceable condition and suitable for
reuse shall be priced at seventy-five percent (75%) of the current price of new
material as determined in Paragraph 2A above.
2. Used material which cannot be classified as being in a sound and
serviceable condition and which is no longer suitable for its original purpose,
but usable for some other purpose, shall be priced on the basis comparable with
that of items normally used for such other purpose,
3. Premium Prices
Whenever material is not readily obtainable at the prices contemplated
by a Partner for a project (which project has received all necessary approvals
as provided in this Agreement) because of national emergencies, strikes or other
unusual causes over which such Partner has no control, such Partner may charge
for the required material at the premium price (including the cost of making it
suitable for use and of moving it to the System), provided that further approval
therefor has been obtained from the Management Committee.
4. Warranty of Material Furnished
A Partner shall not be required to warrant any material furnished
beyond, or in addition to, the warranty or guaranty of the manufacturer or its
agent. In the case of defective material, credit shall not be passed to the
Partnership until adjustment from such manufacturer or agent has been received
by the Partner.
5. Equipment and Facilities Furnished
A. A Partner shall charge for the use of its vehicles, equipment and
facilities at rates commensurate with the cost of ownership and operation. Such
rates shall include the cost of operation, maintenance, repairs, insurance,
taxes and other necessary and usual expenses and depreciation. Rates for
automotive equipment shall generally be in line with rates currently prevailing
in the area. Rates for laboratory services shall not exceed those currently
prevailing if performed by outside service laboratories. Rates for trucks and
tractors may include wages and expenses of the operators of such trucks and
tractors.
B-6
B. When requested, a Partner shall inform the Management Committee in
advance of the rates it proposes to charge.
C. Rates shall be revised and adjusted from time to time when found to
be either insufficient or excessive by the Management Committee.
Any other provision of this Article III notwithstanding, all
materials furnished from a Partner's warehouse for an amount in excess of $5,000
per item shall be billed on the basis of competitive bids obtained from at least
three (3) suppliers in the System area.
IV.
DISPOSAL OF MATERIAL
A Partner may purchase, but shall be under no obligation to purchase,
the interest of the Partnership in material which has become surplus material.
The disposition of such surplus material, if not purchased by a Partner, shall
be subject to disposition as directed by the Management Committee, provided,
that, the Project Leader shall dispose of normal accumulations of junk scrap
material. The Project Leader will give notice to the Management Committee of
surplus materials for sale. In connection with the disposal of surplus material,
the following provisions shall apply:
1. Material Purchased by a Partner
Material purchased by a Partner shall be paid for by such Partner in
the month in which the material is removed by such Partner.
2. Sales to Outsiders
Sales of material to outsiders shall be credited by the Project Leader
to the Partnership at the net amount collected by the Project Leader from
vendee. The Project Leader shall take all reasonable and necessary steps to
collect such proceeds. Any claim by vendee related to such sale shall be charged
back to the Partnership if and when paid.
V.
BASIS OF PRICING SURPLUS MATERIAL
TRANSFERRED TO A PARTNER
Material purchased by a Partner, unless otherwise agreed to between
such Partner and the Management Committee, shall be priced after taking at least
three (3) competitive bids on the following basis:
B-7
1. New Price Defined
New price as used in this Part V shall be the price determined for new
material in Part III.
2. New Material
New Material, being material procured for the System but never used -
at one hundred percent (100%) of current new price (plus sales tax, if any).
3. Used Material
A. Used material which is in sound and serviceable condition and
suitable for reuse at seventy-five percent (75%) of current new price or at such
lesser amount as is agreed upon by the parties.
B. Used material which cannot be classified as being in a sound and
serviceable condition and which is no longer suitable for its original purpose,
but usable for some other purpose - at a price comparable with that of items
normally used for such other purpose, or at such lesser amounts as is agreed
upon by the parties.
C. Junk material, being obsolete and scrap material - at prevailing
prices.
4. Temporarily Used Material
When new material has been used for less than one (1) year and its
service to the System does not justify the reduction in price contemplated by
Paragraph 3 of this Part V, such material shall be priced on a basis that will
leave a net charge to the Partner consistent with the value of the service
rendered.
B-8
Schedule 4.1
Initial Capital Account Balances
Partner Capital Account Balance
SWPL ($12,000,000)
EAPC ($ 8,000,000)
Schedule 5.4(a)
Special Revenue Allocation Base Amounts
Fiscal Year Base Amount *
1998 $1,345,800
1999 $1,284,600
2000 $1,225,750
2001 $1,164,400
2002 $1,103,050
2003 $1,045,300
2004 $ 979,100
2005 $ 919,000
2006 $ 857,700
2007 $ 796,300
2008 $ 736,750
2009 $ 672,900
* If a fiscal year is less than 12 months, the Base Amount for such
fiscal year shall be reduced proportionately. For example, if the 1998
fiscal year is 6 months, the Base Amount of $1,345,800 would be reduced
to $672,900.
Schedule 5.4(b)
Supply Receipt Points on NOARK Pipeline System
Receipt Meter Mile Post
------------- ---------
00010 Ft. Xxxxxxx 0.0
00011 SES 0.0
00020 AOG/Prairie 5.7
00021 Xxxxxx/Freedom 5.7
00022 AOG/Lavaca 0.0
00000 Xxxxxxxxx 25.3
00050 AWG 26.3
00060 Xxxx X.X. 14.4
00070 Xxxxxxxxx #5 19.5
00101 Xeric 98.6
XXXX AWG (P-282) 21.5
Schedule 5.4(d)
Example 1
Special Revenue Allocation
Year: 2001
Avg. Daily Quantity of Gas: 275,000 MMBtu per day
Firm Quantity: 175,000 MMBtu per day
Avg. Margin for all other Volume: $0.20/MMBtu
Base Amount = $1,164,400
Increased Volume Amount = (a) - (b)
(a) 275,000 - 175,000 = 100,000 MMBtu per day
times 25% x $0.20 x 365 days per year
= $1,825,000
(b) 244,000 - 175,000 = 69,000 MMBtu per day
times $0.04 x 365 days per year
= $1,007,400
Allocation Amount = $1,164,400 - ($1,825,000 - $1,007,400)
= $1,164,400 - $817,600
$346,800
Schedule 5.4(d)
Example 2
Special Revenue Allocation
Year: 1999
Avg. Daily Quantity of Gas: 275,000 MMBtu per day
Firm Quantity: 125,000 MMBtu per day
Avg. Margin for all other Volume: $0.15/MMBtu
Base Amount = $1,284,600
Increased Volume Amount = (a) - (b)
(a) 275,000 - 125,000 = 150,000 MMBtu per day
times 25% x $0.16 x 365 days per year
= $2,190,000
(b) 244,000 - 125,000 = 119,000 MMBtu per day
times $0.04 x 365 days per year
= $1,737,400
Allocation Amount = $1,284,600 - ($2,190,000 - $1,737,400)
= $1,284,600 - $452,600
$832,000
Schedule 5.4(d)
Example 3
Special Revenue Allocation
Year: 2001
Avg. Daily Quantity of Gas: 220,000 MMBtu per day
Firm Quantity: 160,000 MMBtu per day
Avg. Margin for all other Volume: $0.18/MMBtu
Base Amount = $1,164,400
Increased Volume Amount = (a) - (b)
(a) 244,000 - 160,000 = 84,000 MMBtu per day
times 25% x $0.18 x 365 days per year
= $1,379,700
(b) 244,000 - 160,000 = 84,000 MMBtu per day
times $0.04 x 365 days per year
= $1,226,400
Allocation Amount = $1,164,400 - ($1,379,700 - $1,226,400)
= $1,164,400 - $153,300
$1,011,100
Schedule 5.4(d)
Example 4
Special Revenue Allocation
Year: 1999
Avg. Daily Quantity of Gas: 300,000 MMBtu per day
Firm Quantity: 125,000 MMBtu per day
Avg. Margin for all other Volume: $0.20/MMBtu
Base Amount = $1,284,600
Increased Volume Amount = (a) - (b)
(a) 300,000 - 125,000 = 175,000 MMBtu per day
times 25% x $0.20 x 365 days per year
= $3,193,750
(b) 244,000 - 125,000 = 119,000 MMBtu per day
times $0.04 x 365 days per year
= $1,737,400
Allocation Amount = $1,284,600 - ($3,193,750 - $1,737,400)
= $1,284,600 - $1,456,350
-0-
Schedule 5.4(d)
Example 5
Special Revenue Allocation
Year: 2001
Avg. Daily Quantity of Gas: 220,000 MMBtu per day
Firm Quantity: 180,000 MMBtu per day
Avg. Margin for all other Volume: $0.14/MMBtu
Base Amount = $1,164,400
Increased Volume Amount = (a) - (b)
(a) 244,000 - 180,000 = 64,000 MMBtu per day
times 25% x $0.16 x 365 days per year
= $934,400
(b) 244,000 - 180,000 = 64,000 MMBtu per day
times $0.04 x 365 days per year
= $934,400
Allocation Amount = $1,164,400 - ($934,400 - $934,400)
= $1,164,400 - $0
$1,164,400
Schedule 6.3(d)
Insurance
Primary Insurance. Unless otherwise determined by a SuperMajority in
Interest of the Partners, the following insurance shall be carried and
maintained in force for the benefit of the Partnership, the Project Leader and
the Partners.
1. Workmen's Compensation with Statutory Limits and Employer's
Liability Insurance with $1,000,000 per accident or occupational disease
covering employees engaged in connection with the Partnership or the System, in
compliance with the laws of the State of Oklahoma and Arkansas, as applicable.
2. Comprehensive General Liability Insurance in connection with the
Partnership and the System, with bodily injury and death limits of $500,000 for
injury to or the death of one person and $1,000,000 for the death or injury of
more than one person in one occurrence and property damage limits of $1,000,000
for each occurrence.
3. Automobile Public Liability Insurance with bodily injury or death
and property damage in an amount of at least $1,000,000 combined single limit.
4. Excess Comprehensive General Liability Coverage (including
automobile) in excess of the primary limits of Paragraphs 2 and 3 with limits
which are approved by the Partnership.
5. All risk property coverage in an amount of not less than
$50,000,000.
Other Insurance. If requested by the Management Committee and if
available, the following insurance shall be procured on behalf of the
Partnership, the Project Leader and the Partners, and maintained in force for
the benefit of the Partnership, the Project Leader and the Partners; fire and
extended coverage insurance or all risk insurance and other forms of insurance
upon the Partnership and the System, upon the gas it handles and upon operations
pertaining to the Partnership or the System, in such amounts as the Management
Committee may request.
Requirements Relating to Policy. The Partnership, the Project Leader
and the Partners, shall be named insurers on all policies obtained in
satisfaction of this Schedule 6.3(d), and shall be provided with copies of the
policies. All such insurance policies shall provide for material change or
cancellation only after thirty (30) days written notice.
Waiver of Recovery. With respect to claims and losses for damage,
injury or destruction of property, which is a part of the Partnership or the
System and is covered by insurance other than insurance provided for in the
first paragraph of this Schedule 6.3(d), it is agreed that neither the
Partnership, nor the Partners, nor the insurers of either of them, shall have
any right of recovery against the other, and their rights of recovery are
mutually waived, except in cases of gross negligence or willful neglect. All
such policies of insurance purchased to cover the Partnership or the System or
any part thereof or any interest in the Partnership or the System or in any part
thereof, or the Operation of the System or any part thereof, or any gas
transported or handled therein, shall be properly endorsed to effectuate this
waiver of recovery; provided, no such endorsement shall be required if such
policies provide for such waivers if such waivers are in writing and made prior
to a claim or loss.
Schedule 6.3(d) (continued)
Insurance
Purchase of Insurance.
1. All insurance under the above headings of Primary Insurance and
Other Insurance shall be purchased by the Partnership, and not by one of the
Partners for the Partnership, unless a Partner is agreeable to purchasing such
insurance and a SuperMajority in Interest of the Partners authorizes such
Partner to acquire such insurance. In such event, such Partner shall be
reimbursed for the cost of such insurance pursuant to the Accounting Procedures.
2. Any Partner shall have the right to purchase insurance, at its
expense without reimbursement from the Partnership, to cover the System, the
Partnership and/or its interest in the Partnership.
DLG-6666.5I