Exhibit 10.2
NORTHERN BORDER PIPELINE COMPANY
OPERATING AGREEMENT
APRIL 6, 2006
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NORTHERN BORDER PIPELINE COMPANY
OPERATING AGREEMENT
APRIL 6, 2006
TABLE OF CONTENTS
ARTICLE 1 - DEFINITIONS......................................................... 1
1.1 DEFINITIONS............................................................ 1
ARTICLE 2 - REPRESENTATIONS AND COVENANTS....................................... 3
2.1 PARTNERSHIP'S REPRESENTATIONS AND COVENANTS............................ 3
2.2 OPERATOR'S REPRESENTATIONS............................................. 3
ARTICLE 3 - OBLIGATIONS OF OPERATOR............................................. 4
3.1 OPERATOR'S RESPONSIBILITIES............................................ 4
3.2 CONTRACT EXECUTION..................................................... 8
3.3 DAMAGES................................................................ 8
3.4 BOOKS AND RECORDS...................................................... 8
3.5 OPERATOR'S INDEMNITY................................................... 9
3.6 PARTNERSHIP'S INDEMNITY................................................ 9
3.7 INSURANCE.............................................................. 10
ARTICLE 4 - EMPLOYEES, CONTRACTORS, SUBCONTRACTORS AND CONSULTANTS.............. 11
4.1 OPERATOR'S EMPLOYEES................................................... 11
4.2 STANDARDS FOR EMPLOYEES................................................ 11
4.3 NON-DISCRIMINATION..................................................... 11
4.4 CONTRACTORS, CONSULTANTS AND SUBCONTRACTORS............................ 12
ARTICLE 5 - FINANCIAL, ACCOUNTING, BILLING AND TAX PRACTICES.................... 12
5.1 ACCOUNTING AND COMPENSATION............................................ 12
5.2 BUDGETS................................................................ 13
5.3 DISPUTED CHARGES....................................................... 13
5.4 AUDIT.................................................................. 14
5.5 CONSISTENT WITH GENERAL PARTNERSHIP AGREEMENT.......................... 15
ARTICLE 6 - INDEPENDENT CONTRACTOR.............................................. 15
6.1 INDEPENDENT CONTRACTOR................................................. 15
ARTICLE 7 - INTELLECTUAL PROPERTY............................................... 15
7.1 INVENTIONS AND COPYRIGHTS.............................................. 15
7.2 CONFIDENTIALITY........................................................ 16
ARTICLE 8 - TERM................................................................ 16
8.1 TERM................................................................... 16
8.2 UPON TERMINATION....................................................... 16
ARTICLE 9 - ARBITRATION........................................................ 17
9.1 ARBITRATION............................................................ 17
ARTICLE 10 - FORCE MAJEURE...................................................... 18
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10.1 EFFECT OF FORCE MAJEURE............................................... 18
10.2 NATURE OF FORCE MAJEURE............................................... 18
10.3 NON-FORCE MAJEURE SITUATIONS.......................................... 19
10.4 RESUMPTION OF NORMAL PERFORMANCE...................................... 19
10.5 STRIKES AND LOCKOUTS.................................................. 20
ARTICLE 11 - MISCELLANEOUS...................................................... 20
11.1 AMENDMENT............................................................. 20
11.2 WAIVERS............................................................... 20
11.3 SEVERABILITY.......................................................... 20
11.4 GOVERNMENTAL BODIES................................................... 20
11.5 ENTIRETY.............................................................. 21
11.6 RECITALS.............................................................. 21
11.7 REMEDIES CUMULATIVE................................................... 21
11.8 CONFLICTS............................................................. 21
11.9 LAW OF THE CONTRACT................................................... 21
11.9 OPERATOR'S OFFICE..................................................... 22
11.11 ATTORNEYS' FEES...................................................... 22
11.12 COUNTERPART EXECUTION................................................ 22
ARTICLE 12 - NOTICES............................................................ 22
12.1 NOTICES............................................................... 22
ARTICLE 13 - ASSIGNMENT......................................................... 23
13.1 ASSIGNABILITY......................................................... 23
13.2 SUCCESSORS AND ASSIGNS................................................ 24
13.3 EFFECTIVE DATE........................................................ 24
EXHIBIT A - ACCOUNTING PROCEDURE................................................ 1
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OPERATING AGREEMENT
THIS AGREEMENT dated this 6th day of April, 2006, by and between Northern
Border Pipeline Company, a general partnership ("Partnership"), and TransCan
Northwest Border Ltd. a Delaware Corporation ("Operator").
RECITALS
WHEREAS Partnership was formed pursuant to an agreement effective as of
March 9, 1978, as amended, supplemented or amended and restated on or before
April 6, 2006 (the "General Partnership Agreement"), as successor to all rights,
title and interests of Northern Border Pipeline Company as the Person designated
by the Presidential Report and related regulatory proceedings and orders to
construct and operate a natural Gas pipeline system in the contiguous States
pursuant to Section 7(a)(4)(B) of the Alaska Natural Gas Transportation Act of
1976; and
WHEREAS Partnership desires to engage Operator to Operate the Line (as
defined herein) in accordance with the terms and conditions set forth in this
Agreement; and
WHEREAS Operator is willing and able to Operate the Line in accordance
with the terms and conditions set forth below.
NOW THEREFORE, in consideration of the representations, covenants and
premises hereinafter set forth the parties agree as follows:
ARTICLE 1 - DEFINITIONS
1.1 Definitions
As used in this Agreement, the definitions used in the General Partnership
Agreement shall, except as specifically provided herein, have the same
meanings in this Agreement. The following words and terms shall have the
meanings set forth herein:
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(a) The word "Affiliate" means any Person which, directly or indirectly
through one or more Persons, controls or is controlled by or is
under common control with another Person. For greater clarity, TC
PipeLines, LP is an Affiliate of Operator.
(b) The word "day" shall mean a period of twenty-four (24) consecutive
hours commencing at 8:00 a.m. Central Time, except that appropriate
adjustments shall be made during the days when a time change is made
from Standard Time to Daylight Savings Time and vice versa.
(c) The word "month" shall mean a period of time beginning on the first
day of a calendar month and ending at the same time on the first day
of the next succeeding calendar month.
(d) The term "calendar year" shall mean each twelve (12) month period
beginning on the first day of a calendar year and ending on the
first day of the next calendar year, provided that the first year
hereunder shall begin on April 1, 2007, and shall end on December 31
next following and further provided that the last calendar year
shall end at the end of the term provided in Section 8.1, unless
extended by mutual agreement between Partnership and Operator. The
term "year" shall mean a period of 365 days, or 366 days if such
period includes February 29 of a leap year.
(e) The term "Accounting Procedure" shall mean the accounting procedure
set forth in Exhibit "A" hereto.
(f) The term "party" shall mean Partnership or Operator and "parties"
shall mean both Partnership and Operator.
(g) The term "Partnership" shall mean Northern Border Pipeline Company
and any successor entities thereto.
(h) The term "Line" shall mean the interstate Gas pipeline and related
facilities owned by the Partnership, extending from the United
States-
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Canada border near Port of Xxxxxx, Montana to its terminus near
North Hayden, Indiana, and any extensions, expansions, additions,
improvements or replacements thereof.
(i) The term "Operation of the Line" or "Operate the Line" shall refer
to the obligations or the performance by Operator of the obligations
related to the Line as set forth in the General Partnership
Agreement and this Agreement.
ARTICLE 2 - REPRESENTATIONS AND COVENANTS
2.1 Partnership's Representations and Covenants
(a) Partnership represents that Operator shall have all rights and
obligations of Operator as set forth in Section 8 of the General
Partnership Agreement.
(b) Partnership shall cooperate with Operator, including reimbursing
Operator on a timely basis for all reasonable and proper costs and
expenses, including overhead, administrative and general expenses
incurred by Operator and overhead, administrative and general
expenses incurred by Operator's Affiliates in rendering their
services in order to facilitate the performance of the obligations
set forth in the General Partnership Agreement and herein.
2.2 Operator's Representations
(a) Operator represents that in performing the responsibilities set
forth in Article 3, it shall carry out such responsibilities or
shall cause its Affiliates and all contractors, subcontractors and
consultants selected to carry out such responsibilities with the
same degree of diligence and care that Operator would exercise if
operating its own property in a sound, workmanlike and prudent
manner and it shall comply, and shall require its Affiliates and all
contractors, subcontractors and consultants selected to carry out
such responsibilities to comply, with all relevant laws, statutes,
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ordinances, safety codes, regulations and rules applicable to the
Operation of the Line.
(b) Operator represents that it shall comply with the provisions of the
General Partnership Agreement applicable hereto. Any reference in
this Agreement to the General Partnership Agreement refers to the
General Partnership Agreement as amended, supplemented or amended
and restated on April 6, 2006. Any subsequent amendments or
additions to the General Partnership Agreement after April 6, 2006
affecting the rights and obligations of Operator shall not revise or
amend the rights and obligations of Operator as set forth in this
Agreement, unless and until Partnership and Operator, through good
faith negotiations, mutually agree that such amendment or additions
shall revise or amend the rights and obligations of Operator.
ARTICLE 3 - OBLIGATIONS OF OPERATOR
3.1 Operator's Responsibilities
Operator, subject to budget authorizations and other specific
authorizations by the Management Committee, shall have the general
responsibility for the day-to-day management of the Line as described
below:
(a) provide the day-to-day management supervision and operating,
maintenance, administrative and related services to Partnership,
including legal, accounting, procurement, emergency response, repair
and overhaul, integrity management, replacement of plant,
construction supervision, engineering, planning, budgeting,
treasury, insurance administration, tax, industry relations,
day-to-day public affairs and human resource support and support for
general regulatory matters;
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(b) make reports to and consult with the Management Committee or Partner
in the form and at the times requested by the Management Committee
or any Partner or its designated representatives;
(c) carry out any activities related to the marketing and administration
of transportation or other services on the Line, including the
discounting of such services from tariff rates;
(d) except as otherwise provided by applicable governmental regulations,
retain all charts, records, books of account, Partnership tax
returns, plans, designs, studies and reports and other documents
related to the design, construction, operation, maintenance, repair,
extension, expansion, addition, improvement or replacement of the
Line, or any part thereof, for a period of at least three (3) years
from the date of completion of the activity to which such records
relate;
(e) purchase materials, equipment and supplies in the name of the
Partnership necessary for the design, construction, operation,
maintenance, repair, extension, expansion, addition, improvement or
replacement of the Line, or any part thereof, and sell or exchange
such materials, equipment and supplies. Operator may purchase such
materials, equipment and supplies on a cooperative basis with
Operator's Affiliates or from Operator's Affiliates, provided that
the terms of such purchase are no less favourable to Partnership
than those prevailing at the time for similar materials, equipment
and supplies from unaffiliated third parties;
(f) manage any construction of repairs, extensions, additions,
improvements or replacements of the Line, or any part thereof, as
approved by the Management Committee, including retaining any
contractors required for the design, project management and
construction of such project;
(g) purchase, option or otherwise acquire rights-of-way, land in fee and
permits in the name of Partnership necessary for construction,
operation,
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maintenance, repair, extension, expansion, addition, improvement or
replacement of the Line, or any part thereof; resist the perfection
of any liens against Partnership property and, to the extent
permitted by law, hold Partnership property free from all liens;
(h) review with and advise Partnership regarding engineering plans and
outlines for all necessary design repairs, extensions, expansions,
additions, improvements or replacements of the Line, or any part
thereof;
(i) supervise and report to Partnership regarding readings of all
measuring equipment required in connection with the Line;
(j) review the qualifications of and retain outside consultants,
contractors (including the services of Operator's Affiliates or
Partner's Affiliates, provided that the services of any such
Affiliates are utilized on terms materially no less favourable to
Partnership than those prevailing at the time for comparable
services of unaffiliated independent Persons) and other services;
(k) carry out any activities related to the financing or refinancing of
the Line;
(l) utilize, as Operator deems necessary, the services of its Affiliates
or Partner's Affiliates, provided that such services are utilized on
terms materially no less favourable to Partnership than those
prevailing at the time for comparable services of unaffiliated
independent Persons.
(m) prepare, file and prosecute applications for regulatory and
governmental authority required by Partnership and make periodic
filings required of Partnership by governmental or regulatory
agencies having jurisdiction;
(n) prepare, file and prosecute any rate case application under Sections
4 or 5 of the Natural Gas Act or any successor provision;
(o) prepare tax returns required of Partnership and pay taxes owing by
Partnership;
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(p) prepare and file all administrative forms or reports (including any
regulatory filings, safety reports, operating reports and any other
reports required) with governmental and other agencies in connection
with the Operation of the Line; all reports in connection with
emergency or unusual circumstances shall be made as expeditiously as
reasonably possible;
(q) make immediate reports to Partnership of all unusual or significant
occurrences in relation to the Line, regardless of whether or not
such reports have been required pursuant to Section 3.1(b);
(r) make recommendations to Partnership as required by the General
Partnership Agreement for the proposed budget required for the Line
the Operation of the Line for the succeeding calendar year or
portion thereof;
(s) provide an adequate number of qualified supervisory and professional
and craft personnel to perform the obligations contemplated
hereunder;
(t) require all contractors, vendors and suppliers to perform their
services in accordance with sound, prudent and workmanlike industry
practices;
(u) have or provide custody of funds, notes, drafts, acceptances,
commercial paper and other securities belonging to Partnership; keep
funds belonging to Partnership on deposit in one or more banking
institutions as approved by the Management Committee; and, subject
to direction by the Management Committee, invest available funds in
the manner provided for by the Management Committee, disburse such
funds, and keep appropriate records in connection with all the above
transactions;-
(v) make and retain records and prepare all forms and reports in
accordance with Article 5;
(w) maintain a system of internal accounting and audit controls
consistent with regulatory requirements applicable to Partnership or
any Partner;
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(x) report to the Management Committee as provided in Section 8.4.8 of
the General Partnership Agreement;
(y) review from time-to-time the rates and fees charged for
transportation services and recommend to Partnership revision in
such rates and fees as necessary to reflect increased or decreased
costs or other changes in the conditions of service in order to
assure that all costs are reflected in the tariffs of Partnership.
3.2 Contract Execution
Contracts relating to Operator's responsibilities under this Agreement may
be executed by Operator on behalf of Partnership.
3.3 Damages
Notwithstanding any other provision of this Agreement, Operator shall not
be responsible for any indirect or consequential damages, including loss
of profit, revenues or pipeline transportation capacity.
3.4 Books and Records
All of the books, records, charts and other documents prepared and
retained by Operator in connection with the Operation of the Line shall,
as provided in Section 5.4, be made available during normal business hours
to Partnership or any Partner or their respective representatives to
permit them to audit and verify the accuracy of any statement, billing,
charge or computation made by Operator in connection with this Agreement.
Operator shall obtain similar rights from contractors, subcontractors and
consultants performing services in connection with the Operation of the
Line and, to the extent reasonably possible, obtain similar rights for
Partnership and Partners.
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3.5 Operator's Indemnity
Operator shall indemnify and hold Partnership, its employees or agents
harmless from and against all actions, claims, demands, cost and
liabilities to Partnership arising from:
(a) all actions (or failures to act) by Operator which are not in
accordance with the terms of this Agreement or an express direction
by Partnership, excluding actions (or failures to act) by Operator
in good faith within the scope of its authority in the course of the
Operation of the Line; or
(b) claims for non-payment of any and all contributions, withholding
deductions or taxes measured by the wages, salaries or compensation
paid to Persons employed by Operator in connection with the
Operation of the Line.
3.6 Partnership's Indemnity
(a) Partnership shall indemnify and save harmless the Operator against
all actions, claims, demands, costs and liabilities arising out of
the acts (or failure to act) of Operator in good faith within the
scope of its authority in the course of Operation of the Line
including claims, demands, costs and liabilities arising from the
negligence of Operator, its officers, agents, employees, or
Affiliates, and Operator shall not be liable for any obligations,
liabilities, or commitments incurred by or on behalf of the
Partnership as a result of any such acts (or failure to act).
Operator shall not be indemnified for its gross negligence or wilful
misconduct.
(b) Any and all claims, damages or causes of action in favour of anyone
other than Partnership arising out of the Operation of the Line
which are not covered by insurance as per Section 3.7 shall be
settled or litigated and defended by Operator in accordance with its
best judgment and discretion when (i) the amount involved is less
than a ceiling amount to be established by the Management Committee;
(ii) no injunctive or similar
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relief is sought; and (iii) no criminal sanction is sought;
otherwise, such decision shall be made by the Management Committee,
and any settlement or defense thereof shall be controlled by the
Management Committee.
3.7 Insurance
(a) Operator shall, subject to the approval of the Management Committee,
carry and maintain insurance for the benefit of Partnership and
Operator and require contractors, subcontractors or consultants to
carry and maintain insurance deemed adequate by Operator, as
approved by the Management Committee, to protect the Partnership and
satisfy any other requirements of the law.
(b) Insurance as approved by the Management Committee maintained by the
Operator shall be a reimbursable cost pursuant to Section 5.1(b).
(c) Operator may carry and maintain such other insurance for its own
account as he may deem necessary, but in the event other insurance
is carried, Operator agrees to waive and agrees to have its insurers
waive any rights of subrogation they may have against the
Partnership and individual Partners thereof, or the Affiliates of
any of them, and/or their directors, officers, employees, servants
or agents.
(d) With respect to claims and losses for damage, injury or destruction
of property which is a part of the Line, which property is covered
by Insurance other than insurance provided for in paragraph (a) of
this Section 3.7, it is agreed that neither Operator nor Partnership
or any of its Partners shall have any rights of recovery against one
another, nor against the Affiliates of each, nor the insurers of any
of them, and their rights of recovery are mutually waived. All such
policies of insurance purchased to cover the Line or any part
thereof, or the Operation of the Line or any part thereof, or any
Gas transported or handled therein, shall be endorsed properly to
effectuate this waiver of recovery.
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ARTICLE 4 - EMPLOYEES, CONTRACTORS, SUBCONTRACTORS AND
CONSULTANTS
4.1 Operator's Employees
Operator shall employ or retain and have supervision over the persons
required by Operator to Operate the Line in an efficient and economically
prudent manner. Operator shall pay all reasonable costs and expenses in
connection therewith, including compensation, salaries, wages, overhead
and administrative and general expenses incurred by Operator's Affiliates,
and, if applicable, social security taxes, workers' compensation
insurance, retirement and insurance benefits and other such expenses.
Subject to the provisions of the General Partnership Agreement, the
compensation for Operator's employees shall be determined by Operator. All
authorized costs and expenses paid by Operator pursuant to this Section
4.1 shall be reimbursed to Operator by Partnership as provided in the
Accounting Procedure.
4.2 Standards for Employees
All employees engaged or directed by Operator in connection with the
Operation of the Line shall be duly qualified and experienced to perform
such obligations. Operator shall at all times enforce strict discipline
and maintain good order among such employees, and shall require such
employees to comply with all relevant laws, statutes, ordinances, safety
codes, regulations and rules applicable to the Operation of the Line.
4.3 Non-Discrimination
In performing under this Agreement, Operator will not discriminate against
any employee or applicant for employment because of race, creed, color,
religion, sex, national origin, age or handicap, and will comply with all
provisions of Executive Order 11246, as amended; Section 503 of the
Rehabilitation Act of 1983, as amended and the Vietnam Era Veterans'
Readjustment Assistance Act of 1974, as amended.
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4.4 Contractors, Consultants and Subcontractors
The provisions of Sections 4.1, 4.2 and 4.3 shall be applicable to any
contractors, subcontractors and/or consultants retained in connection with
the Operation of the Line.
ARTICLE 5 - FINANCIAL, ACCOUNTING, BILLING AND TAX PRACTICES
5.1 Accounting and Compensation
(a) Operator shall keep a full and complete account of all costs and
expenses incurred by it in connection with the Operation of the Line
in the manner set forth in the Accounting Procedure.
(b) Operator shall be reimbursed, in the manner set forth in the
Accounting Procedure, by Partnership for all costs and expenses
authorized by the Management Committee and all reasonable and proper
costs and expenses paid by it for Partnership in connection with the
Operation of the Line; provided, however, that costs and expenses
incurred by Operator under Section 3.5 shall not be reimbursed by
Partnership. It is the intent of the parties that Operator shall
Operate the Line on a fully reimbursed basis without profit or loss.
To the extent that a deviation from this standard occurs,
appropriate adjustments will promptly be made.
(c) Upon termination of this Agreement, Operator shall be reimbursed by
Partnership for all reasonable and proper costs and expenses
incurred by Operator in winding up its duties under this Agreement
and transferring its duties to the succeeding operator. The parties
agree to negotiate in good faith and reach mutual agreement
regarding such costs and expenses prior to incurring such costs and
expenses. If, following such negotiation, the parties are unable to
reach agreement, Operator may incur such costs and expenses and the
amount of reasonable and proper compensation shall be referred to
binding arbitration in accordance with Article 9.
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(d) To the extent that Operator enters into activities other than the
Operation of the Line, Operator shall separately account for all
such costs and expenses and Partnership shall not be billed for such
costs or expenses.
5.2 Budgets
On or before each October 1, Operator shall provide to the Management
Committee an indicative estimate of capital expenditures and operating
income and expenses which Operator anticipates for the ensuing calendar
year. On or before each November 1 Operator shall prepare and submit for
approval of the Management Committee a final budget including estimated
capital expenditures and operating income and expenses. Except as the
Management Committee may otherwise direct, the budget approved by
Partnership and then in effect shall constitute authorization of Operator
to incur the expenditures contained in such budget. The budget approved by
the Partnership shall be adequate for Operator to meet its current
responsibilities under this Agreement, including the performance standard
set out in Section 2.2(a).
5.3 Disputed Charges
Partnership may, in the manner set forth in the Accounting Procedure, take
written exception to any xxxx, statement or other accounting rendered by
Operator for any expenditure or any part thereof, on the ground that the
same was not a cost or expense authorized by the Management Committee or a
reasonable and proper cost or expense incurred by Operator in connection
with the Operation of the Line. Partnership shall nevertheless pay in full
when due the amount of all bills, statements or accountings submitted by
Operator. Such payment shall not be deemed a waiver of the right of
Partnership to recoup any contested portion of any xxxx, statement or
accounting. However, if the amount as to which such written exception is
taken or any part thereof is ultimately determined in accordance with
Article 9 not to be a cost or expense authorized by the Management
Committee or a reasonable and proper expense incurred by Operator in
connection with the Operation of the Line, such amount or portion thereof
(as the case may be) shall
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be refunded by Operator to Partnership together with interest thereon at a
rate (which in no event shall be higher than the maximum rate permitted by
applicable law) equal to the prime rate charged by Citibank of New York,
or its successor, from time to time to responsible commercial and
industrial borrowers during the period from the date of payment by
Partnership to the date of refund by Operator.
5.4 Audit
In addition to the audit responsibilities assigned by the General
Partnership Agreement to Operator and the Audit Committee, Partnership or
its designated representatives (including representatives from each
Partner) and any Partner or its designated representatives, after fifteen
(15) days' prior written notice to Operator, shall have the right during
normal business hours to audit, at its own expense, all books and records
of Operator as well as the relevant books of account of Operator's
contractors relating to the Operation of the Line, provided that neither
this section nor Section 3.4 allows Partnership or a Partner to: (a)
review any books and records of Operator's Affiliates which do not
directly relate to the provision of services under this Agreement and the
construction and Operation of the Line; or (b) challenge the basis of
allocations made pursuant to the Allocation Policy (as defined below)
unless there is a material increase in the total overhead costs from prior
levels. Such audits shall not be commenced by the same party more often
than once each calendar year. Partnership shall have two (2) years after
the close of a calendar year in which to make an audit of Operator's
records for such calendar year. Absent fraud or intentional concealment or
misrepresentation by Operator or its employees, and except for any
adjustments which may arise from Federal Energy Regulatory Commission
("FERC") compliance audits, Operator shall neither be required nor
permitted to adjust any item unless a claim therefore is presented or
adjustment is initiated within two (2) years after the close of the
calendar year in which the xxxx, statement or accounting therefore is
rendered, and in the absence of such timely claims or adjustments, the
bills, statements and accountings rendered shall be conclusively
established as correct.
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5.5 Consistent with General Partnership Agreement
The accounting and tax service provided by Operator shall be consistent
with the applicable provisions of Section 7 of the General Partnership
Agreement which are incorporated by reference herein as if set forth in
full. Matters of tax policy for Partnership shall be the responsibility
of, and ultimately determined by the Management Committee.
ARTICLE 6 - INDEPENDENT CONTRACTOR
6.1 Independent Contractor
(a) In performing services pursuant to this Agreement, Operator shall be
an independent contractor and not an employee, agent or servant of
Partnership and this Agreement does not create any partnership or
joint venture between Partnership and Operator.
(b) Operator shall comply with all relevant laws, statutes, ordinances,
safety codes, regulations and rules applicable to the Operation of
the Line.
ARTICLE 7 - INTELLECTUAL PROPERTY
7.1 Inventions and Copyrights
Any (i) inventions, whether patentable or not, developed or invented or
(ii) copyrightable material (collectively, "Intellectual Property"),
developed by Operator or its employees and used for the Operation of the
Line shall remain the exclusive property of Operator; provided that, if
the Partnership authorizes expenditure of funds to develop equipment or
operating procedures specifically for the Line, such equipment or
operating procedures are developed through resources and employees
dedicated to the Line, and such equipment or operating procedures includes
Intellectual Property, such Intellectual Property shall be the exclusive
property of Partnership.
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7.2 Confidentiality
Because the information and knowledge gained during the performance of
services hereunder may consist of valuable proprietary information, the
misuse or disclosure of which could cause substantial damage to
Partnership, any and all information obtained by Operator in performance
of its obligations hereunder shall be held in strict confidence by
Operator, its employees or agents except as needed to comply with the
purposes of this Agreement. Any contracts entered into by Operator related
to its obligations under this Agreement shall contain a provision which
similarly restricts the use and disclosure of such information.
ARTICLE 8 - TERM
8.1 Term
This agreement shall be effective as of April 6, 2006 and subject to the
provisions of the General Partnership Agreement, shall continue until
April 1, 2018, and thereafter on a year-to-year basis unless terminated on
six (6) months' prior written notice by either party hereto, provided
that, Operator shall not commence its responsibilities as Operator until
April 1, 2007, provided that, if Operator is no longer an Affiliate of at
least one Partner included in the Partnership ("Partnership Termination")
this Agreement shall terminate six (6) months from the date of Partnership
Termination.
8.2 Upon Termination
Termination of this Agreement shall not relieve either party from paying
amounts of money due hereunder which (a) were due prior to or (b) become
due after or as a result of such termination.
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ARTICLE 9 - ARBITRATION
9.1 Arbitration
(a) If a dispute arises between Operator and Partnership regarding the
application or interpretation of any provision of this Agreement,
the aggrieved party will promptly provide notice of the dispute to
the other party. A meeting will be held promptly between the
parties, attended by parties with management authority over the
disputed matter, to attempt in good faith to negotiate a resolution
of the dispute. If the parties do not succeed in negotiating a
resolution of the dispute within thirty (30) days or within such
further period agreed by the parties, one party may terminate the
negotiation by giving Notice to the other party. Either party may
thereafter upon written notice call for submission of such matter to
arbitration. The party requesting arbitration shall set forth in
such notice in adequate detail the issues to be arbitrated, and
within ten (10) days from the receipt of such notice, the other
party may set forth in adequate detail additional related issues to
be arbitrated. If arbitration is invoked by either party, the
decision of the arbitrators shall be final and binding upon all
parties.
(b) Such binding arbitration shall be conducted by a person or entity
knowledgeable and experienced in pipeline design, construction and
operations matters. In the event the parties are unable to agree
upon such person or entity, they shall then each select a person or
entity having the qualifications set forth above, and such persons
or entities selected shall mutually agree upon a similarly qualified
third person or entity to complete the arbitration panel. In the
event that the persons selected by the parties are unable to agree
on a third member of the panel within sixty (60) days after their
selection, such person shall be designated by the American
Arbitration Association or such other person the parties mutually
agree upon. Upon final selection of the entire panel, such panel
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shall, as expeditiously as possible, render a decision on the matter
submitted for arbitration.
(c) Upon the determination of any such dispute, the arbitrators shall
xxxx the costs attributable to such binding arbitration to the party
whose position they determine is farthest away from the actual
decision rendered; provided, however, that the arbitrators shall be
empowered to apportion such costs between the parties if they deem
it appropriate.
(d) It is the intent of the parties that the matters agreed upon to be
arbitrated be decided as set forth herein and they shall not seek to
have this Article 9 rendered unenforceable or to have such matter
decided in any other way.
ARTICLE 10 - FORCE MAJEURE
10.1 Effect of Force Majeure
In the event that either Partnership or Operator is rendered unable, by
reason of an event of force majeure, to perform, wholly or in part, any
obligation or commitment set forth in this contract, then upon such
party's giving written notice and full particulars of such event as soon
as practicable after the occurrence thereof, the obligations of both
parties, except for unpaid financial obligations arising prior to such
event of force majeure, shall be suspended to the extent and for the
period of such force majeure condition.
10.2 Nature of Force Majeure
The term "force majeure" as employed in this Agreement shall mean acts of
God, strikes, lockouts or industrial disputes or disturbances, civil
disturbances, arrests and restraint from rulers of people, interruptions
by government or court orders, present and future valid orders, decisions
or rulings of any governmental entity having proper jurisdiction, acts of
the public enemy, wars, riots, blockades, insurrections, inability to
secure labour or inability to secure materials, including inability to
secure materials by reason of allocations promulgated by authorized
18
governmental agencies, epidemics, landslides, lightning, earthquakes,
fire, storms, floods, washouts, inclement weather which necessitates
extraordinary measures and expense to construct facilities and/or maintain
operations, explosions, breakage or accident to machinery or lines of
pipe, freezing of xxxxx or pipelines, inability to obtain or delays in
obtaining easements or rights-of-way, the making of repairs or alterations
to xxxxx, pipelines or plants, partial or entire failure of gas supply or
any other cause, whether of the kind herein enumerated or otherwise, not
reasonably within the control of the party claiming force majeure.
10.3 Non-Force Majeure Situations
Neither Operator nor Partnership shall be entitled to the benefit of the
provisions of Section 10.1 under the following circumstances:
(a) To the extent that the failure was caused by the party claiming
suspension having failed to remedy the condition by taking all
reasonable acts, short of litigation, if such remedy requires
litigation, and having failed to resume performance of such
commitments or obligations with reasonable dispatch;
(b) If the failure was caused by lack of funds, or with respect to the
payment of any amount or amounts then due hereunder;
(c) To the extent that the failure was caused or contributed to by the
negligence of Operator or Partnership and such negligence was the
cause of such failure.
10.4 Resumption of Normal Performance
Should there be an event of force majeure affecting performance hereunder,
such events shall be remedied with all reasonable dispatch to insure
resumption of normal performance.
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10.5 Strikes and Lockouts
Settlement of strikes and lockouts shall be entirely within the discretion
of the party affected, and the requirement in Section 10.4 that any event
of force majeure shall be remedied with all reasonable dispatch shall not
require the settlement of strikes or lockouts by acceding to the demands
of the parties directly or indirectly involved in such strikes or lockouts
when such course is inadvisable in the discretion of the party having such
difficulty.
ARTICLE 11 - MISCELLANEOUS
11.1 Amendment
This Agreement shall only be amended by an instrument in writing executed
by both parties.
11.2 Waivers
A waiver by a party at any time of its rights with respect to a default
under this Agreement, or with respect to any other matter in connection
with this Agreement, shall not be deemed a waiver with respect to any
other or subsequent default or matter.
11.3 Severability
If any provision of this Agreement shall be invalid or unenforceable to
any extent, the remainder of this Agreement shall not be affected thereby
and shall be enforced to the greatest extent permitted by law.
11.4 Governmental Bodies
This Agreement is subject to all valid orders, rules and regulations of
any governmental body having jurisdiction over the parties hereto, or this
Agreement.
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11.5 Entirety
In addition to the obligations of the Operator set forth in Article 3,
this Agreement is also intended to include as an obligation of the
Operator any duty, responsibility, or requirement assigned to the Operator
by the terms of the General Partnership Agreement, including Section 8.4
thereof, not specifically detailed in Article 3 herein. This Agreement and
the General Partnership Agreement contain the entire agreement between the
parties and except as stated herein there are no oral promises, agreements
or warranties affecting it.
11.6 Recitals
For the purpose of interpreting this Agreement, the Recitals shall be
considered incorporated herein as if set forth in full.
11.7 Remedies Cumulative
Remedies provided under the provisions of this Agreement shall be
cumulative and, except as to the agreement for binding arbitration
contained in Article 9 hereof, shall be in addition to the remedies
provided by law or in equity.
11.8 Conflicts
In the event there is any conflict between this Agreement and any schedule
or subsequent agreement referred to herein, the provisions hereof shall be
deemed controlling, except in the event of a conflict with the General
Partnership Agreement, in which event the General Partnership Agreement
shall be deemed controlling.
11.9 Law of the Contract
This Agreement and all other agreements relating thereto shall be
construed and interpreted under the laws of the State of Texas.
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11.10 Operator's Office
Operator may select the location of its office or offices to perform its
obligation hereunder.
11.11 Attorneys' Fees
Should any litigation be commenced between the parties concerning any
provision of this Agreement or the rights and duties hereunder, the party
prevailing in such litigation shall be entitled, in addition to such other
relief as may be granted in such proceeding, to a reasonable sum as and
for their attorneys' fees in such litigation, which sum shall be
determined in such litigation or in a separate action for such purpose.
11.12 Counterpart Execution
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which together constitute one and
the same instrument.
ARTICLE 12 - NOTICES
12.1 Notices
Unless otherwise specifically provided in this Agreement, any written
notice or other communication shall be sufficiently given or shall be
deemed given on the fifth business day following the date on which the
same is mailed by registered or certified mail, postage prepaid, or on the
next business day following the date on which the same is sent via a
nationally recognized courier service or by telecommunication, in each
case addressed:
If to Operator, to:
TransCan Northwest Border Ltd.
000, 0xx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx, Xxxxxx
00
X0X 0X0
Fax: (000) 000.0000
Attention: Secretary
or such other person or address as may be designated from time to time by
written notice to Operator.
If to Partnership, to:
Northern Border Pipeline Company
00000 XXX Xxxxxxx
Xxxxx, XX 00000
Fax: (000) 000-0000
Attention: Vice-President and General Counsel
or such other person or address as may be designated from time to time by
written notice to Partnership.
ARTICLE 13 - ASSIGNMENT
13.1 Assignability
As to the assignment of this Agreement:
(a) This Agreement shall not be assigned by either Partnership or
Operator without the written consent of the other except that
Operator may assign this agreement to its Affiliate without such
consent, and such assignment shall not release Operator from its
obligations under this Agreement.
(b) Consent to assignment hereunder shall not be unreasonably withheld
by either party hereto.
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(c) Successors and Assigns
This Agreement and all of the obligations and rights herein established
shall extend to and be binding upon and shall inure to the benefit of the
respective successors and assigns of the respective parties hereto.
13.2 Effective Date
Any assignment hereunder shall be effective on the first day of the month
following the month during which the assignment is completed.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first written.
TRANSCAN NORTHWEST BORDER LTD.
Per: /s/ Xxxx X. Xxxxxx
-----------------------------
Name: Xxxx X. Xxxxxx
Title: President
Per: /s/ Xxxxxx X. Xxxxxxxx
-----------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Vice-President and Treasurer
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NORTHERN BORDER PIPELINE
COMPANY
a Texas general partnership
By: NORTHERN BORDER By: TC PIPELINES INTERMEDIATE
INTERMEDIATE LIMITED PARTNERSHIP, General Partner
LIMITED PARTNERSHIP, General Partner By: TC PIPELINES GP, INC., ITS GENERAL
PARTNER
Per: /s/ Xxxxx X. Xxxxxx Per: /s/ Xxxxxx X. Xxxxxxxx
----------------------------- -----------------------------
Name: Xxxxx X. Xxxxxx Name: Xxxxxx X. Xxxxxxxx
Title: Chief Financial and Accounting Officer Title: Vice-President and Treasurer
Per: /s/ Xxx Xxxxx
-----------------------------
Name: Xxx Xxxxx
Title: Controller
25
EXHIBIT A
TO
OPERATING AGREEMENT
ACCOUNTING PROCEDURE
ARTICLE I. GENERAL PROVISIONS
1.01 Statements and Xxxxxxxx. Operator may submit a xxxx, statement or
otherwise provide an accounting to Partnership on the first day of each
month for the estimated costs and expenses for the month and any
adjustment which may be necessary to correct prior estimated xxxxxxxx to
actual. Such bills, statements or accountings will be summarized by
appropriate classifications indicative of the nature thereof.
1.02 Payment by Partnership. Partnership shall pay all bills, statements or
accountings presented pursuant to the terms and conditions of the
Operating Agreement on or before the 15th day after the billing date. If
payment is not made within such time, the unpaid balance shall bear
interest until paid at a rate (which in no event shall be higher than the
maximum rate or rates permitted by applicable law) equal to the prime rate
charged by the Citibank of New York, or its successor, from time to time
to responsible commercial and industrial borrowers; provided, however,
that if employees of Operator are responsible for processing Partnership's
payments and Partnership has sufficient funds to make payment no interest
charge shall be imposed for late payment. Payment by or on behalf of
Partnership shall not be deemed a waiver of the right to recoup any amount
in question.
1.03 Adjustments. Payment of any such bills, statements or accountings shall
not prejudice the right of Partnership to protest or question the
correctness thereof; provided however, all bills, statements and
accountings rendered to Partnership by
1
Operator during any calendar year shall conclusively be presumed to be
true and correct after 24 months following the end of any such calendar
year, unless prior to the end of said 24-month period Partnership takes
written exception thereto and makes claim on Operator for adjustment. No
adjustment favourable to Operator shall be made unless it is made within
the same prescribed period. None of the time limits set out in this
Section 1.03 shall apply to adjustments resulting from FERC Compliance
Audits.
1.04 Financial Records. Operator shall maintain accurate books and records in
accordance with the FERC Uniform System of Accounts for Class A and B
natural gas companies or any successor system thereto covering all of
Operator's actions under this Operating Agreement.
ARTICLE II. CAPITAL ITEMS
Except for real or personal property (i) included in a previously approved
budget or (ii) costing less than the ceiling amount established by the
Management Committee, Operator shall prepare and submit to Partnership a
forecast of the cost of such property it proposes to acquire in the name of
Partnership which, under any applicable accounting rules and regulations, might
be capitalized. Upon approval of such forecast by Partnership, Operator shall
have authority to purchase such property in Partnership's name without further
approval or action by Partnership. To the extent that (i) Operator owns property
necessary or desirable for the operation and maintenance of the Line which under
any applicable accounting rules and regulations, might be capitalized, (ii)
Operator in its sole discretion is willing to transfer such property for
consideration to Partnership, (iii) such property can be transferred by Operator
to Partnership free and clear of all prior liens and encumbrances, and (iv)
Partnership approves of such transfer Operator may so transfer such property to
Partnership and charge Partnership the fair market value thereof on the date of
transfer.
2
ARTICLE III. COSTS, EXPENSES AND EXPENDITURES
Subject to the limitations hereinafter prescribed and the provisions of
the Operating Agreement to which this Accounting Procedure is an exhibit,
Operator shall charge Partnership for all reasonable and proper costs and
expenses incurred by Operator (except those costs incurred under Section 3.5 of
the Operating Agreement) in connection with the Operation of the Line, including
but not limited to the following items:
3.01 Rentals. All rentals paid by Operator.
3.02 Labour Costs.
(a) Salaries, wages and related benefits of Operator's employees or its
Affiliates employees directly engaged in connection with the Operation of
the Line and, in addition, amounts paid as salaries and wages of others
temporarily employed in connection therewith. Related benefits include
Operator's cost of holiday, vacation, sickness, jury service and other
fringe benefits and customary allowances paid to persons whose salaries
and wages are chargeable under this paragraph (a).
(b) Expenditures or contributions made pursuant to assessments imposed by
governmental authority which are applicable to salaries, wages and costs
chargeable under paragraph (a) above. The reasonable cost of plans for
employees' group life insurance, hospitalization, disability, pension,
retirement, savings and other benefit plans, applicable to labour costs
chargeable under paragraph (a) above.
(c) Amounts billed to Partnership for services performed by Operator's
Affiliates in connection with the Operation of the Line will include an
amount to cover the overhead costs of that Affiliate. The method of
allocating the overhead charge shall be consistent with the TransCanada
PipeLines Limited Operating Cost Allocation Policy ("Allocation Policy")
attached hereto as Schedule 1, unless such method is found to be
inconsistent with FERC rules and regulations. If the cost allocation
methodology is found to be inconsistent with FERC rules and
3
regulations following a FERC regulatory decision which is applicable to
the Partnership, Operator will revise the method of allocation with
respect to the Line accordingly and such revised method of allocation
shall be used prospectively. Changes and amendments to the Allocation
Policy shall apply to charges under this section, provided such changes or
amendments do not result in a material change in costs allocated under
this Agreement unless otherwise approved by the Management Committee.
3.03 Reimbursable Expenses of Employees. Reasonable personal expenses of
employees whose salaries and wages are chargeable under Section 3.02(a)
hereof. As used herein, the term "personal expenses" shall mean the usual
out-of-pocket expenditures incurred by employees in the performance of
their duties and for which such employees are reimbursed. Operator shall
maintain documentation for such expenses in accordance with the standards
of the Internal Revenue Service.
3.04 Material, Equipment and Supplies. It is contemplated that all material,
equipment and supplies will be owned by Partnership and purchased or
furnished for its account. So far as is reasonably practical and
consistent with efficient and economical operation, only such material
shall be obtained for the Line as may be required for immediate use, and
the accumulation of surplus stock shall be avoided. To the extent
reasonably possible, Operator shall take advantage of discounts available
by early payments and pass such benefits on to Partnership. Material,
equipment and supplies furnished by Operator, if any, shall be priced at
cost plus carrying costs to be established by Operator based on actual
experience.
3.05 Transportation. Transportation of employees, equipment and material and
supplies necessary for the Operation of the Line. It is anticipated that
all transportation equipment will be owned by Partnership; provided,
however, any automobiles, airplanes and trucks owned or obtained from
Operator's Affiliates by Operator and approved for use for the Operation
of the Line will be billed to Partnership at reasonable rates based on
Operator's actual costs.
4
3.06 Services
(a) The cost of contract services and utilities procured from outside sources.
(b) Use and services of vehicles, equipment and facilities furnished by
Operator as provided in Section 3.05 hereof.
3.07 Legal Expenses and Claims. All costs and expenses of handling,
investigating and settling litigation or claims arising by reason of the
Operation of the Line or necessary to protect or recover any Line
property, including, but not limited to, attorney's fees, court cost, cost
of investigation or procuring evidence and any judgements paid or amounts
paid in settlement or satisfaction of any such litigation or claims.
Operator shall credit Partnership for judgements received or amounts
received in settlement of litigation, with respect to any claim asserted
on behalf of Partnership.
3.08 Taxes. All taxes (except those measured by income) of every kind and
nature assessed or levied upon or incurred in connection with the
Operation of the Line or on the Line or other property of Partnership and
which taxes have been paid by the Operator for the benefit of Partnership,
including charges for late payment arising from extensions of the time for
filing which is caused by Partnership.
3.09 Insurance. Net of any returns, refunds, or dividends, all premiums paid
and expenses incurred for insurance required to be carried under the
Operating Agreement for the benefit of Operator and Partnership.
3.10 Permits, Licenses and Bond. Cost of permits, licenses and bond premiums
required for the Operation of the Line.
3.11 Overhead, Administrative and General Expense. All administrative and
general expenditures, including salaries and related benefits and expenses
of personnel other than those referred to in Section 3.02, who render
services to Operator, including, but not limited to, Accounting,
Administrative, Public Relations, Personnel, Purchasing, Legal and
Treasury, will be charged on the basis of costs
5
incurred. Overhead costs related to the provision of such services shall
be charged pursuant to the Allocation Policy. Operator shall, subject to
the provisions of the General Partnership Agreement, also xxxx such
administrative and general expenditures incurred by its Affiliates in
connection with the Operation of the Line.
6
