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Exhibit 99.2
AGREEMENT OF LIMITED PARTNERSHIP
OF
TC TUSCARORA INTERMEDIATE LIMITED PARTNERSHIP
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TABLE OF CONTENTS
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ARTICLE I..................................................................................4
SECTION 1.1 DEFINITIONS...........................................................4
SECTION 1.2 CONSTRUCTION.........................................................14
ARTICLE II................................................................................14
SECTION 2.1 FORMATION............................................................14
SECTION 2.2 NAME.................................................................14
SECTION 2.3 REGISTERED OFFICE; REGISTERED AGENT; PRINCIPAL OFFICE;
OTHER OFFICES........................................................14
SECTION 2.4 PURPOSE AND BUSINESS.................................................15
SECTION 2.5 POWERS...............................................................15
SECTION 2.6 POWER OF ATTORNEY....................................................16
SECTION 2.7 TERM.................................................................17
SECTION 2.8 TITLE TO PARTNERSHIP ASSETS..........................................17
ARTICLE III...............................................................................18
SECTION 3.1 LIMITATION OF LIABILITY..............................................18
SECTION 3.2 MANAGEMENT OF BUSINESS...............................................18
SECTION 3.3 OUTSIDE ACTIVITIES OF THE LIMITED PARTNERS...........................18
SECTION 3.4 RIGHTS OF LIMITED PARTNERS...........................................18
ARTICLE IV................................................................................19
SECTION 4.1 TRANSFER GENERALLY...................................................19
SECTION 4.2 TRANSFER OF GENERAL PARTNER'S PARTNERSHIP INTEREST...................20
SECTION 4.3 TRANSFER OF A LIMITED PARTNER'S PARTNERSHIP INTEREST.................20
SECTION 4.4 RESTRICTIONS ON TRANSFERS............................................20
ARTICLE V.................................................................................21
SECTION 5.1 INITIAL CONTRIBUTIONS................................................21
SECTION 5.2 ADDITIONAL CAPITAL CONTRIBUTIONS.....................................21
SECTION 5.3 INTEREST AND WITHDRAWAL..............................................21
SECTION 5.4 CAPITAL ACCOUNTS.....................................................21
SECTION 5.5 LOANS FROM PARTNERS..................................................24
SECTION 5.6 LIMITED PREEMPTIVE RIGHTS............................................24
SECTION 5.7 FULLY PAID AND NON-ASSESSABLE NATURE OF PARTNERSHIP INTERESTS........25
ARTICLE VI................................................................................25
SECTION 6.1 ALLOCATIONS FOR CAPITAL ACCOUNT PURPOSES.............................25
SECTION 6.2 ALLOCATIONS FOR TAX PURPOSES.........................................29
SECTION 6.3 DISTRIBUTIONS........................................................31
ARTICLE VII...............................................................................32
SECTION 7.1 MANAGEMENT...........................................................32
SECTION 7.2 CERTIFICATE OF LIMITED PARTNERSHIP...................................34
SECTION 7.3 RESTRICTIONS ON GENERAL PARTNER'S AUTHORITY..........................34
SECTION 7.4 REIMBURSEMENT OF THE GENERAL PARTNER.................................35
SECTION 7.5 OUTSIDE ACTIVITIES...................................................36
SECTION 7.6 LOANS FROM THE GENERAL PARTNER; LOANS OR CONTRIBUTIONS FROM
THE PARTNERSHIP; CONTRACTS WITH AFFILIATES; CERTAIN RESTRICTIONS
ON THE GENERAL PARTNER...............................................37
SECTION 7.7 INDEMNIFICATION......................................................38
SECTION 7.8 LIABILITY OF INDEMNITEES.............................................40
SECTION 7.9 RESOLUTION OF CONFLICTS OF INTEREST..................................41
SECTION 7.10 OTHER MATTERS CONCERNING THE GENERAL PARTNER.........................42
SECTION 7.11 RELIANCE BY THIRD PARTIES............................................43
ARTICLE VIII..............................................................................44
SECTION 8.1 RECORDS AND ACCOUNTING...............................................44
SECTION 8.2 FISCAL YEAR..........................................................44
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ARTICLE IX................................................................................44
SECTION 9.1 TAX RETURNS AND INFORMATION..........................................44
SECTION 9.2 TAX ELECTIONS........................................................44
SECTION 9.3 TAX CONTROVERSIES....................................................45
SECTION 9.4 WITHHOLDING..........................................................45
ARTICLE X.................................................................................45
SECTION 10.1 ADMISSION OF PARTNERS................................................45
SECTION 10.2 ADMISSION OF SUBSTITUTED LIMITED PARTNER.............................45
SECTION 10.3 ADMISSION OF ADDITIONAL LIMITED PARTNER..............................46
SECTION 10.4 ADMISSION OF SUCCESSOR OR TRANSFEREE GENERAL PARTNER.................46
SECTION 10.5 AMENDMENT OF AGREEMENT AND CERTIFICATE OF
LIMITED PARTNERSHIP..................................................47
ARTICLE XI................................................................................47
SECTION 11.1 WITHDRAWAL OF THE GENERAL PARTNER....................................47
SECTION 11.2 REMOVAL OF THE GENERAL PARTNER.......................................48
SECTION 11.3 INTEREST OF DEPARTING PARTNER........................................49
SECTION 11.4 WITHDRAWAL OF A LIMITED PARTNER......................................49
ARTICLE XII...............................................................................49
SECTION 12.1 DISSOLUTION..........................................................49
SECTION 12.2 CONTINUATION OF THE BUSINESS OF THE PARTNERSHIP
AFTER DISSOLUTION....................................................50
SECTION 12.3 LIQUIDATOR...........................................................51
SECTION 12.4 LIQUIDATION..........................................................51
SECTION 12.5 CANCELLATION OF CERTIFICATE OF LIMITED PARTNERSHIP...................52
SECTION 12.6 RETURN OF CONTRIBUTIONS..............................................52
SECTION 12.7 WAIVER OF PARTITION..................................................53
SECTION 12.8 CAPITAL ACCOUNT RESTORATIOn..........................................53
ARTICLE XIII..............................................................................53
SECTION 13.1 AMENDMENT TO BE ADOPTED SOLELY BY THE GENERAL PARTNER................53
SECTION 13.2 AMENDMENT PROCEDURES.................................................54
ARTICLE XIV...............................................................................55
SECTION 14.1 AUTHORITY............................................................55
SECTION 14.2 PROCEDURE FOR MERGER OR CONSOLIDATION................................55
SECTION 14.3 APPROVAL BY LIMILED PARTNERS OF MERGER OR CONSOLIDATION..............56
SECTION 14.4 CERTIFICATE OF MERGER................................................57
SECTION 14.5 EFFECT OF MERGER.....................................................57
ARTICLE XV................................................................................57
SECTION 15.1 ADDRESSES AND NOTICES................................................57
SECTION 15.2 FURTHER ACTION.......................................................58
SECTION 15.3 BINDING EFFECT.......................................................58
SECTION 15.4 INTEGRATION..........................................................58
SECTION 15.5 CREDITORS............................................................58
SECTION 15.6 WAIVER...............................................................58
SECTION 15.7 COUNTERPARTS.........................................................58
SECTION 15.8 APPLICABLE LAW.......................................................59
SECTION 15.9 INVALIDITY OF PROVISION..............................................58
SECTION 15.10 CONSENT OF PARTNERS..................................................59
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AGREEMENT OF LIMITED PARTNERSHIP
OF
TC TUSCARORA INTERMEDIATE LIMITED PARTNERSHIP
THIS AGREEMENT OF LIMITED PARTNERSHIP of TC TUSCARORA INTERMEDIATE
LIMITED PARTNERSHIP, dated as of July 19, 2000 is entered into by and between
TC PipeLines GP, Inc., a Delaware corporation, as the General Partner, and TC
PipeLines, LP, a Delaware limited partnership, as the Limited Partner,
together with any other Persons who hereafter become Partners in the
Partnership or parties hereto as provided herein.
RECITALS:
WHEREAS, TC PipeLines GP, Inc. formed the Partnership pursuant to the
certificate of Limited Partnership of TC Tuscarora Intermediate Limited
Partnership filed with the Secretary of State of the State of Delaware on
July 19, 2000 date; and
WHEREAS, the Partners of the Partnership now desire to enter into a
partnership agreement to reflect contributions by the Partners and certain
other matters.
NOW, THEREFORE, in consideration of the covenants, conditions and
agreements contained herein, the parties hereto hereby agree with each other
as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this
Agreement. Capitalized terms used herein but otherwise defined shall have the
meaning assigned to such term in the MLP Agreement (as defined below).
"ADDITIONAL LIMITED PARTNER" means a Person admitted to the
Partnership as a Limited Partner pursuant to Section 10.4 and who is shown as
such on the books and records of the Partnership.
"ADJUSTED CAPITAL ACCOUNT" means the Capital Account maintained for
each Partner as of the end of each taxable period of the Partnership, (a)
increased by any amounts that such Partner is obligated to restore under the
standards set by Treasury Regulation Section 1.704-1(b)(2)(ii)(c) (or is
deemed obligated to restore under Treasury Regulation Sections 1.704-2(g) and
1.704-2(i)(5)) and (b) decreased by (i) the amount of all losses and
deductions that, as of the end of such period, are reasonably expected to be
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allocated to such Partner in subsequent years under Sections 704(e)(2) and
706(d) of the Code and Treasury Regulation Section 1.751-1(b)(2)(ii), and
(ii)the amount of all distributions that, as of the end of such period, are
reasonably expected to be made to such Partner in subsequent years in
accordance with the terms of this Agreement or otherwise to the extent they
exceed offsetting increases to such Partner's Capital Account that are
reasonably expected to occur during (or prior to) the year in which such
distributions are reasonably expected to be made (other than increases as a
result of a minimum gain chargeback pursuant to Section 6.1(d)(i) or
6.1(d)(ii)). The foregoing definition of Adjusted Capital Account is intended
to comply with the provisions of Treasury Regulation Section
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith. The
"Adjusted Capital Account" of a Partner in respect of a General Partner
Interest or any other specified interest in the Partnership shall be the
amount which such Adjusted Capital Account would be if such General Partner
Interest, Limited Partner Interest or other interest in the Partnership were
the only interest in the Partnership held by a Partner from and after the
date on which such interest was first issued.
"ADJUSTED PROPERTY" means any property the Carrying Value of which
has been adjusted pursuant to Section 5.4(d)(i) or 5.4(d)(ii).
"AFFILIATE" means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with, the Person in question. As
used herein, the term "CONTROL" means the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of
a Person, whether through ownership of voting securities, by contract or
otherwise.
"AGREED ALLOCATION" means any allocation, other than a Required
Allocation, of an item of income, gain, loss or deduction pursuant to the
provisions of Section 6.1, including, without limitation, a Curative
Allocation (if appropriate to the context in which the term "AGREED
ALLOCATION" is used).
"AGREED VALUE" of any Contributed Property means the fair market
value of such property or other consideration at the time of contribution as
determined by the General Partner using such reasonable method of valuation
as it may adopt. The General Partner shall, in its discretion, use such
method as it deems reasonable and appropriate to allocate the aggregate
Agreed Value of Contributed Properties contributed to the Partnership in a
single or integrated transaction among each separate property on a basis
proportional to the fair market value of each Contributed Property.
"AGREEMENT" means this Agreement of Limited Partnership of TC
Tuscarora Intermediate Limited Partnership, as it may be amended,
supplemented or restated from time to time.
"ASSETS" means the assets being conveyed to the Partnership on the
Closing Date pursuant to the Purchase and Sale Agreement.
"ASSIGNEE" means a Person to whom one or more Partnership Interests
have been transferred in a manner permitted under this Agreement, but who has
not been admitted as a Substituted Limited Partner.
"ASSOCIATE" means, when used to indicate a relationship with any
Person, (a) any corporation or organization of which such Person is a
director, officer or partner or is,
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directly or indirectly, the owner of 20% or more of any class of voting stock
or other voting interest; (b) any trust or other estate in which such Person
has at least a 20% beneficial interest or as to which such Person serves as
trustee or in a similar fiduciary capacity; and (c) any relative or spouse of
such Person, or any relative of such spouse, who has the same principal
residence as such Person.
"AVAILABLE CASH" means, with respect to any Quarter ending prior to
the Liquidation Date,
(a) the sum of (i) all cash and cash equivalents of the
Partnership on hand at the end of such Quarter, and (ii) all additional cash
and cash equivalents of the Partnership on hand on the date of determination
of Available Cash with respect to such quarter resulting from Working Capital
Borrowings made subsequent to the end of such Quarter, less
(b) the amount of any cash reserves that is necessary or
appropriate in the reasonable discretion of the General Partner to (i)
provide for the proper conduct of the business of the Partnership (including
reserves for future capital expenditures and for anticipated future credit
needs of the Partnership Group) subsequent to such Quarter, (ii) comply with
applicable law or any loan agreement, security agreement, mortgage, debt
instrument or other agreement or obligation to which any Group Member or any
JV Entity is a party or by which it is bound or its assets are subject or
(iii) provide funds for distributions under Section 6.4 or 6.5 of the MLP
Agreement in respect of any one or more of the next four Quarters; provided,
however, that the General Partner may not establish cash reserves pursuant to
(iii) above if the effect of such reserves would be that the MLP is unable to
distribute the Minimum Quarterly Distribution on all Common Units, plus any
Cumulative Common Unit Arrearage on all Common Units, with respect to such
Quarter; and provided further that disbursements made by the Partnership or
cash reserves established, increased or reduced after the end of such Quarter
but on or before the date of determination of Available Cash with respect to
such Quarter shall be deemed to have been made, established, increased or
reduced, for purposes of determining Available Cash, within such Quarter if
the General Partner so determines.
Notwithstanding the foregoing, "AVAILABLE CASH" with respect
to the Quarter in which the Liquidation Date occurs and any subsequent
Quarter shall equal zero.
"BOOK-TAX DISPARITY" means with respect to any item of Contributed
Property or Adjusted Property, as-of the date of any determination, the
difference between the Carrying Value of such Contributed Property or
Adjusted Property and the adjusted basis thereof for federal income tax
purposes as of such date. A Partner's share of the Partnership's Book-Tax
Disparities in all of its Contributed Property and Adjusted Property will be
reflected by the difference between such Partner's Capital Account balance as
maintained pursuant to Section 5.4 and the hypothetical balance of such
Partner's Capital Account computed as if it had been maintained strictly in
accordance with federal income tax accounting principles.
"BUSINESS DAY" means Monday through Friday of each week, except that
a legal holiday recognized as such by the government of the United States of
America, the State of New York, Canada or the Province of Alberta shall not
be regarded as a Business Day.
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"CAPITAL ACCOUNT" means the capital account maintained for a
Partner pursuant to Section 5.4. The "Capital Account" of a Partner in
respect of a General Partner Interest, Limited Partner Interest or any other
specified interest in the Partnership shall be the amount which such Capital
Account would be if such General Partner Interest, Limited Partner Interest
or other specified interest in the Partnership were the only interest in the
Partnership held by a Partner from and after the date on which such interest
in the Partnership was first issued.
"CAPITAL CONTRIBUTION" means any cash, cash equivalents or the Net
Agreed Value of Contributed Property that a Partner contributes to the
Partnership pursuant to this Agreement or the Contribution and Conveyance
Agreement.
"CARRYING VALUE" means (a) with respect to a Contributed Property,
the Agreed Value of such property reduced (but not below zero) by all
depreciation, amortization and cost recovery deductions charged to the
Partners' Capital Accounts in respect of such Contributed Property, and (b)
with respect to any other Partnership property, the adjusted basis of such
property for federal income tax purposes, all as of the time of
determination. The Carrying Value of any property shall be adjusted from time
to time in accordance with Sections 5.4(d)(i) and 5.4(d)(ii) and to reflect
changes, additions or other adjustments to the Carrying Value for
dispositions and acquisitions of Partnership properties, as deemed
appropriate by the General Partner.
"CERTIFICATE OF LIMITED PARTNERSHIP" means the Certificate of
Limited Partnership of the Partnership filed with the Secretary of State of
the State of Delaware as referenced in Section 2.1, as such Certificate of
Limited Partnership may be amended, supplemented or restated from time to
time.
"CLOSING DATE" means the date on which the 49% general partnership
interest is sold by TCPL Tuscarora Ltd. to the Partnership pursuant to the
provisions of the Purchase and Sale Agreement.
"CODE" means the Internal Revenue Code of 1986, as amended and in
effect from time to time. Any reference herein to a specific section or
sections of the Code shall be deemed to include a reference to any
corresponding provision of successor law.
"COMMISSION" means the United States Securities and Exchange
Commission.
"COMMON UNIT" has the meaning assigned to such term in the MLP
Agreement.
"CONTRIBUTED PROPERTY" means each property or other asset, in such
form as may be permitted by the Delaware Act, but excluding cash, contributed
to the Partnership. Once the Carrying Value of a Contributed Property is
adjusted pursuant to Section 5.4(d), such property shall no longer constitute
a Contributed Property, but shall be deemed an Adjusted Property.
"CURATIVE ALLOCATION " means any allocation of an item of
income, gain, deduction, loss or credit pursuant to the provisions of
Section 6.1(d)(ix).
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"DELAWARE ACT" means the Delaware Revised Uniform Limited
Partnership Act, 6 Del. C. Section 17-101, ET SEQ., as amended, supplemented or
restated from time to time, and any successor to such statute.
"DEPARTING PARTNER" means a former General Partner from and after
the effective date of any withdrawal or removal of such former General
Partner pursuant to Section 11.1 or 11.2.
"ECONOMIC RISK OF LOSS" has the meaning set forth in Treasury
Regulation Section 1.752-2(a).
"EVENT OF WITHDRAWAL" has the meaning assigned to such term in
Section 11.1(a).
"GENERAL PARTNER" means TC PipeLines GP, Inc. and its successors
and permitted assigns as general partner of the Partnership.
"GENERAL PARTNER INTEREST" means the ownership interest of the
General Partner in the Partnership (in its capacity as a general partner) and
includes any and all benefits to which the General Partner is entitled as
provided in this Agreement, together with all obligations of the General
Partner to comply with the terms and provisions of this Agreement.
"GROUP" means a Person that with or through any of its Affiliates
or Associates has any agreement, arrangement or understanding for the purpose
of acquiring, holding, voting (except voting pursuant to a revocable proxy or
consent given to such Person in response to a proxy or consent solicitation
made to 10 or more Persons) or disposing of any MLP Securities with any other
Person that beneficially owns, or whose Affiliates or Associates beneficially
own, directly or indirectly, MLP Securities.
"GROUP MEMBER" means a member of the Partnership Group.
"ILP SUBSIDIARY" means a Subsidiary of the Partnership.
"INCENTIVE DISTRIBUTION RIGHT" has the meaning assigned to such
term in the MLP Agreement.
"INDEMNITEE" means (a) the General Partner, (b) any Departing
Partner, (c) any Person who is or was an Affiliate of the General Partner or
any Departing Partner, (d) any Person who is or was a member, partner,
officer, director, employee, agent or trustee of any Group Member, the
General Partner or any Departing Partner or any Affiliate of any Group
Member, the General Partner or any Departing Partner, and (e) any Person who
is or was serving at the request of the General Partner or any Departing
Partner or any Affiliate of the General Partner or any Departing Partner as
an officer, director, employee, member, partner, agent or trustee of another
Person; provided, that a Person shall not be an Indemnitee by reason of
providing, on a fee-for-services basis, trustee, fiduciary or custodial
services.
"INITIAL OFFERING" means the initial offering and sale of Common
Units to the public, as described in the Registration Statement.
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"JV ENTITY" means a Person other than an individual in which a
Group Member holds an interest but which does not constitute a Subsidiary,
including, without limitation, Northern Border Pipeline and Tuscarora.
"LIMITED PARTNER" means any Person that is admitted to the
Partnership as a limited partner pursuant to the terms and conditions of this
Agreement; but the term Limited Partner shall not include any Person from and
after the time such Person withdraws as a Limited Partner from the
Partnership.
"LIMITED PARTNER INTEREST" means the ownership interest of a Limited
Partner or Assignee in the Partnership and includes any and all benefits to
which such Limited Partner or Assignee is entitled as provided in this
Agreement, together with all obligations of such Limited Partner or Assignee
to comply with the terms and provisions of this Agreement.
"LIQUIDATION DATE" means (a) in the case of an event giving rise to
the dissolution of the Partnership of the type described in clauses (a) and
(b) of the first sentence of Section 12.2, the date on which the applicable
time period during which the Partners have the right to elect to reconstitute
the Partnership and continue its business has expired without such an
election being made, and (b) in the case of any other event giving rise to
the dissolution of the Partnership, the date on which such event occurs.
"LIQUIDATOR" means one or more Persons selected by the General
Partner to perform the functions described in Section 12.3 as liquidating
trustee of the Partnership within the meaning of the Delaware Act.
"MERGER AGREEMENT" has the meaning assigned to such term in Section
14.1.
"MINIMUM QUARTERLY DISTRIBUTION" has the meaning assigned to such
term in the MLP Agreement.
"MLP" means TC PipeLines, LP.
"MLP AGREEMENT" means the Amended and Restated Agreement of Limited
Partnership of TC PipeLines, LP dated May 28, 1999, as it may be amended,
supplemented or restated from time to time.
"MLP SECURITY" has the meaning assigned to the term "Partnership
Security" in the MLP Agreement.
"NET AGREED VALUE" means, (a) in the case of any Contributed
Property, the Agreed Value of such property reduced by any liabilities either
assumed by the Partnership upon such contribution or to which such property
is subject when contributed, and (b) in the case of any property distributed
to a Partner or Assignee by the Partnership, the Partnership's Carrying Value
of such property (as adjusted pursuant to Section 5.4(d)(ii)) at the time
such property is distributed, reduced by any liabilities either assumed by
such Partner or Assignee upon such distribution or to which such property is
subject at the time of distribution, in either case, as determined under
Section 752 of the Code.
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"NET INCOME" means, for any taxable period, the excess, if any, of the
Partnership's items of income and gain (other than those items taken into
account in the computation of Net Termination Gain or Net Termination Loss) for
such taxable period over the Partnership's items of loss and deduction (other
than those items taken into account in the computation of Net Termination Gain
or Net Termination Loss) for such taxable period. The items included in the
calculation of Net Income shall be determined in accordance with Section 5.4(b)
and shall not include any items specially allocated under Section 6.1(d).
"NET LOSS" means, for any taxable period, the excess, if any, of the
Partnership's items of loss and deduction (other than those items taken into
account in the computation of Net Termination Gain or Net Termination Loss) for
such taxable period, over the Partnership's items of income and gain (other than
those items taken into account in the computation of Net Termination Gain or Net
Termination Loss) for such taxable period. The items included in the calculation
of Net Loss shall be determined in accordance with Section 5.5(b) and shall not
include any items specially allocated under Section 6.1(d).
"NET TERMINATION GAIN" means, for any taxable period, the sum, if
positive, of all items of income, gain, loss or deduction recognized by the
Partnership after the Liquidation Date. The items included in the determination
of Net Termination Gain shall be determined in accordance with Section 5.4(b)
and shall not include any items of income, gain, loss or deduction specially
allocated under Section 6.1(d).
"NET TERMINATION LOSS" means, for any taxable period, the sum, if
negative, of all items of income, gain, loss or deduction recognized by the
Partnership after the adopt; provided, however, that the General Partner, in
arriving at such valuation, must take fully into account the fair market value
of the Partnership Interests of all Partners at such time. The General Partner
shall allocate such aggregate value among the assets of the Partnership (in such
manner as it determines in its discretion to be reasonable) to arrive at a fair
market value for individual properties.
"NONRECOURSE BUILT-IN GAIN" means with respect to any Contributed
Properties or Adjusted Properties that are subject to a mortgage, pledge or
other lien securing a Nonrecourse Liability, the amount of any taxable gain that
would be allocated to the Partners pursuant to Sections 6.2(b)(i)(A),
6.2(b)(ii)(A) and 6.2(b)(iii) if such properties were disposed of in a taxable
transaction in full satisfaction of such liabilities and for no other
consideration.
"NONRECOURSE DEDUCTIONS" means any and all items of loss, deduction or
expenditures (described in Section 705(a)(2)(B) of the Code) that, in accordance
with the principles of Treasury Regulation Section 1.704-2(b), are attributable
to a Nonrecourse Liability.
"NONRECOURSE LIABILITY" has the meaning set forth in Treasury
Regulation Section 1.752-1(a)(2)
"NORTHERN BORDER PIPELINE" means Northern Border Pipeline Company, a
Texas general partnership.
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"OPINION OF COUNSEL" means a written opinion of counsel (who may be
regular counsel to the Partnership or the General Partner or any of its
Affiliates) acceptable to the General Partner in its reasonable discretion.
"PARTNER NONRECOURSE DEBT" has the meaning set forth in Treasury
Regulation Section 1.704-2(b)(4).
"PARTNER NONRECOURSE DEBT MINIMUM GAIN" has the meaning set forth in
Treasury Regulation Section 1.704-2(i)(2).
"PARTNER NONRECOURSE DEDUCTIONS" means any and all items of loss,
deduction or expenditure (including, without limitation, any expenditure
described in Section 705(a)(2)(B) of the Code) that, in accordance with the
principles of Treasury Regulation Section 1.704-2(i), are attributable to a
Partner Nonrecourse Debt.
"PARTNERSHIP" means TC Tuscarora Intermediate Limited Partnership, a
Delaware limited partnership, and any successors thereto.
"PARTNERS" means the General Partner and the Limited Partners.
"PARTNERSHIP GROUP" means the Partnership, TCILP, the MLP and any
Subsidiary of any such entity, treated as a single consolidated entity.
"PARTNERSHIP INTEREST" means an ownership interest of a Partner in the
Partnership, which shall include the General Partner Interest and the Limited
Partner Interest(s).
"PARTNERSHIP MINIMUM GAIN" means that amount determined in accordance
with the principles of Treasury Regulation Section 1.704-2(d).
"PERCENTAGE INTEREST" means the percentage interest in the Partnership
held by each Partner and shall mean, (a) as to the General Partner, an aggregate
1.0101% and (b) as to the MLP, 98.9899%.
"PERSON" means an individual or a corporation, limited liability
company, partnership, joint venture, trust, unincorporated organization,
association, government agency or political subdivision thereof or other entity.
"PRO RATA" means, when modifying Partners and Assignees, apportioned
among all Partners and Assignees in accordance with their relative Percentage
Interests.
"PURCHASE AND SALE AGREEMENT" means that certain Purchase and Sale
Agreement, dated as of July 19, 2000, among the General Partner, the
Partnership, TCPL Tuscarora Ltd, TransCanada PipeLines Limited and TranscCanada
PipeLine USA Ltd. together with the additional documents and instruments
contemplated or referenced thereunder.
"QUARTER" means, unless the context requires otherwise, a fiscal
quarter of the Partnership.
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"RECAPTURE INCOME" means any gain recognized by the Partnership
(computed without regard to any adjustment required by Section 734 or Section
743 of the Code) upon the disposition of any property or asset of the
Partnership, which gain is characterized as ordinary income because it
represents the recapture of deductions previously taken with respect to such
property or asset.
"REGISTRATION STATEMENT" means the Registration Statement on Form S-1
(Registration No. 333-69947) as it has been or as it may be amended or
supplemented from time to time, filed by the MLP with the Commission under the
Securities Act to register the offering and sale of the Common Units in the
Initial Offering.
"REQUIRED ALLOCATIONS" means (a) any limitation imposed on any
allocation of Net Losses or Net Termination Losses under Section 6.1(b) or
6.1(c)(ii) and (b) any allocation of an item of income, gain, loss or deduction
pursuant to Section 6.1(d)(i), 6.1(d)(ii), 6.1(d)(iv), 6.1(d)(vii) or
6.1(d)(viii).
"RESIDUAL GAIN" or "RESIDUAL LOSS" means any item of gain or loss, as
the case may be, of the Partnership recognized for federal income tax purposes
resulting from a sale, exchange or other disposition of a Contributed Property
or Adjusted Property, to the extent such item of gain or loss is not allocated
pursuant to Section 6.2(b)(i)(A) or 6.2(b)(ii)(A), respectively, to eliminate
Book-Tax Disparities.
"SECURITIES ACT" means the Securities Act of 1933, as amended,
supplemented or restated from time to time and any successor to such statute.
"SPECIAL APPROVAL" has the meaning assigned to such term in the MLP
Agreement.
"SUBORDINATED UNIT" has the meaning assigned to such term in the MLP
Agreement.
"SUBSIDIARY" means, with respect to any Person, (a) a corporation of
which more than 50% of the voting power of shares entitled (without regard to
the occurrence of any contingency) to vote in the election of directors or other
governing body of such corporation is owned, directly or indirectly, at the date
of determination, by such Person, by one or more Subsidiaries of such Person or
a combination thereof, (b) a partnership (whether general or limited) in which
such Person or a Subsidiary of such Person is, at the date of determination, a
general or limited partner of such partnership, but only if more than 50% of the
partnership interests of such partnership (considering all of the partnership
interests of the partnership as a single class) is owned, directly or
indirectly, at the date of determination, by such Person, by one or more
Subsidiaries of such Person, or a combination thereof, or (c) any other Person
(other than a corporation or a partnership) in which such Person, one or more
Subsidiaries of such Person, or a combination thereof, directly or indirectly,
at the date of determination, has (i) at least a majority ownership interest or
(ii) the power to elect or direct the election of a majority of the directors or
other governing body of such Person. The foregoing definition shall not include
any JV Entity, including, without limitation, Northern Border Pipeline and
Tuscarora.
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"SUBSTITUTED LIMITED PARTNER" means a Person who is admitted as a
Limited Partner to the Partnership pursuant to Section 10.2 in place of and with
all the rights of a Limited Partner and who is shown as a Limited Partner on the
books and records of the Partnership.
"SURVIVING BUSINESS ENTITY" has the meaning assigned to such term in
Section 14.2(b).
"TCILP" means TC PipeLines Intermediate Limited Partnership, a
Delaware limited partnership.
"TRANSCANADA" means TransCanada PipeLines Limited, a Canadian
corporation.
"TREASURY REGULATIONS" means the permanent, temporary or proposed
regulations of the United States Department of the Treasury promulgated under
the Code, as such regulations may be amended and in effect from time to time.
Any reference herein to a specific section or sections of the Treasury
Regulations shall be deemed to include a reference to any corresponding
provision of successor law.
"TRANSFER" has the meaning assigned to such term in Section 4.4(a).
"TUSCARORA" means Tuscarora Gas Transmission Company, a Nevada general
partnership.
"UNIT" has the meaning assigned to such term in the MLP Agreement.
"UNIT MAJORITY" has the meaning assigned to such term in the MLP
Agreement.
"UNREALIZED GAIN" attributable to any item of Partnership property
means, as of any date of determination, the excess, if any, of (a) the fair
market value of such property as of such date (as determined under Section
5.4(d)) over (b) the Carrying Value of such property as of such date (prior to
any adjustment to be made pursuant to Section 5.4(d) as of such date).
"UNREALIZED LOSS" attributable to any item of Partnership property
means, as of any date of determination, the excess, if any, of (a) the Carrying
Value of such property as of such date (prior to any adjustment to be made
pursuant to Section 5.4(d) as of such date) over (b) the fair market value of
such property as of such date (as determined under Section 5.4(d)).
"U.S. GAAP" means United States Generally Accepted Accounting
Principles consistently applied.
"WORKING CAPITAL BORROWINGS" means borrowings exclusively for working
capital purposes. Amounts drawn from a credit facility to enable the Partnership
to pay distributions to partners of the Partnership or partners of the MLP if
there has been a
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temporary interruption or delay in receipt of distributions from Tuscarora
shall also constitute Working Capital Borrowings.
SECTION 1.2 CONSTRUCTION
Unless the context requires otherwise: (a) any pronoun used in this
Agreement shall include the corresponding masculine, feminine or neuter
forms, and the singular form of nouns, pronouns and verbs shall include the
plural and vice versa; (b) references to Articles and Sections refer to
Articles and Sections of this Agreement; and (c) the term "include" or
"includes" means includes, without limitation, and "including" means
including, without limitation.
ARTICLE II
ORGANIZATION
SECTION 2.1 FORMATION
The Partnership was previously formed as a limited partnership pursuant
to the provisions of the Delaware Act. This Agreement shall become effective
on the date written above. Except as expressly provided to the contrary in
this Agreement, the rights, duties (including fiduciary duties), liabilities
and obligations of the Partners and the administration, dissolution and
termination of the Partnership shall be governed by the Delaware Act. All
Partnership Interests shall constitute personal property of the owner thereof
for all purposes and a Partner has no interest in specific Partnership
property.
SECTION 2.2 NAME
The name of the Partnership shall be "TC TUSCARORA INTERMEDIATE LIMITED
PARTNERSHIP." The Partnership's business may be conducted under any other
name or names deemed necessary or appropriate by the General Partner in its
sole discretion, including the name of the General Partner. The words
"Limited Partnership," "L.P." or "Ltd." or similar words or letters shall be
included in the Partnership's name where necessary for the purpose of
complying with the laws of any jurisdiction that so requires. The General
Partner in its discretion may change the name of the Partnership at any time
and from time to time and shall notify the other Partner(s) of such change in
the next regular communication to the Partners.
SECTION 2.3 REGISTERED OFFICE; REGISTERED AGENT; PRINCIPAL OFFICE;
OTHER OFFICES
Unless and until changed by the General Partner, the registered office
of the Partnership in the State of Delaware shall be located at Corporation
Trust Center, 1209 Orange Street, Wilmington, Delaware 19801, and the
registered agent for service of process on the Partnership in the State of
Delaware at such registered office shall be The Corporation Trust Company.
The principal office of the Partnership shall be located at 203, 110 Turnpike
Road, Westborough, Massachusetts 01581 or such other place as the
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General Partner may from time to time designate by notice to the Limited
Partners. The Partnership may maintain offices at such other place or places
within or outside the State of Delaware as the General Partner deems
necessary or appropriate. The address of the General Partner shall be 203,
110 Turnpike Road, Westborough, Massachusetts 01581 or such other place as
the General Partner may from time to time designate by notice to the Limited
Partners.
SECTION 2.4 PURPOSE AND BUSINESS
The purpose and nature of the business to be conducted by the
Partnership shall be to (a) acquire, manage, operate and sell the Assets, (b)
serve as a general partner of Tuscarora and, in connection therewith,
exercise all the rights and powers conferred upon the Partnership as a
partner of Tuscarora pursuant to the partnership agreement of Tuscarora or
otherwise, (c) (i) acquire, manage, operate and sell any assets or properties
similar to the Assets now or hereafter acquired by the Partnership, (ii)
engage directly in, or enter into or form any corporation, partnership, joint
venture, limited liability company or other arrangement to engage indirectly
in, any business activity that the Partnership is permitted to engage in, or
any type of business or activity engaged in by the General Partner and, in
connection therewith, to exercise all of the rights and powers conferred upon
the Partnership pursuant-to the agreements relating to such business
activity, and (iii) engage directly in, or enter into or form any
corporation, partnership, joint venture, limited liability company or other
arrangement to engage indirectly in, any business activity that is approved
by the General Partner and which lawfully may be conducted by a limited
partnership organized pursuant to the Delaware Act and, in connection
therewith, to exercise all of the rights and powers conferred upon the
Partnership pursuant to the agreements relating to such business activity;
provided, however, that in the case of any activity described in this
subsection (c), the General Partner reasonably determines, as of the date of
the acquisition or commencement of such activity, that such activity (A)
generates "QUALIFYING INCOME" (as-such term is defined pursuant to Section
7704 of the Code) or (B) enhances the operations of an activity of the
Partnership that generates qualifying income, and (d) do anything necessary
or appropriate to the foregoing, including the making of capital
contributions or loans to a Group Member, a JV Entity, the MLP or any
Subsidiary of the MLP. The General Partner has no obligation or duty to the
Partnership, the Limited Partners or the Assignees to propose or approve, and
in its discretion may decline to propose or approve, the conduct by the
Partnership of any business.
SECTION 2.5 POWERS
The Partnership shall be empowered to do any and all acts and things
necessary, appropriate, proper, advisable, incidental to or convenient for the
furtherance and accomplishment of the purposes and business described in
Section 2.4.
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SECTION 2.6 POWER OF ATTORNEY
(a) Each Limited Partner and each Assignee hereby constitutes and
appoints the General Partner and, if a Liquidator shall have been selected
pursuant to Section 12.3, the Liquidator (and any successor to the Liquidator by
merger, transfer, assignment, election or otherwise) and each of their
authorized officers and attorneys-in-fact, as the case may be, with full power
of substitution, as its true and lawful agent and attorney-in-fact, with full
power and authority in his name, place and stead, to:
(i) execute, swear to, acknowledge, deliver, file and record
in the appropriate public offices (A) all certificates, documents
and other instruments (including this Agreement and the Certificate
of Limited Partnership and all amendments or restatements hereof or
thereof) that the General Partner or the Liquidator deems necessary
or appropriate to form, qualify or continue the existence or
qualification of the Partnership as a limited partnership (or a
partnership in which the limited partners have limited liability)
in the State of Delaware and in all other jurisdictions in which
the Partnership may conduct business or own property; (B) all
certificates, documents and other instruments that the General
Partner or the Liquidator deems necessary or appropriate to
reflect, in accordance with its terms, any amendment, change,
modification or restatement of this Agreement; (C) all
certificates, documents and other instruments (including
conveyances and a certificate of cancellation) that the General
Partner or the Liquidator deems necessary or appropriate to reflect
the dissolution and liquidation of the Partnership pursuant to the
terms of this Agreement; (D) all certificates, documents and other
instruments relating to the admission, withdrawal, removal or
substitution of any Partner pursuant to, or other events described
in, Article IV, X, XI or XII; (E) all certificates, documents and
other instruments relating to the determination of the preferences,
rights, powers, privileges and duties of any class or series of
Partnership Interests issued pursuant hereto; and (F) all
certificates, documents and other instruments (including agreements
and a certificate of merger) relating to a merger or consolidation
of the Partnership pursuant to Article XIV; and
(ii) execute, swear to, acknowledge, deliver, file and record
all ballots, consents, approvals, waivers, certificates, documents
and other instruments necessary or appropriate, in the discretion
of the General Partner or the Liquidator, to make, evidence, give,
confirm or ratify any vote, consent, approval, agreement or other
action that is made or given by the Partners hereunder or is
consistent with the terms of this Agreement or is necessary or
appropriate, in the discretion of the General Partner or the
Liquidator, to effectuate the terms or intent of this Agreement;
provided, that when required by any provision of this Agreement
that establishes a percentage of the Limited Partners or of the
Limited Partners of any class or series required to take any
action, the General Partner and the Liquidator may exercise the
power of attorney made in this Section 2.6(a)(ii) only after the
necessary vote, consent or approval of the Limited Partners or of
the Limited Partners of such class or series, as applicable.
Nothing contained in this Section 2.6(a) shall be construed as authorizing
the General Partner to amend this Agreement except in accordance with Article
XIII or as may be otherwise expressly provided for in this Agreement.
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(b) The foregoing power of attorney is hereby declared to be
irrevocable and a power coupled with an interest, and it shall survive and, to
the maximum extent permitted by law, not be affected by the subsequent death,
incompetence, disability, incapacity, dissolution, bankruptcy or termination of
any Limited Partner or Assignee and the transfer of all or any portion of such
Limited Partner's or Assignee's Partnership Interest and shall extend to such
Limited Partner's or Assignee's heirs, successors, assigns and personal
representatives. Each such Limited Partner or Assignee hereby agrees to be bound
by any representation made by the General Partner or the Liquidator acting in
good faith pursuant to such power of attorney; and each such Limited Partner or
Assignee, to the maximum extent permitted by law, hereby waives any and all
defenses that may be available to contest, negate or disaffirm the action of the
General Partner or the Liquidator taken in good faith under such power of
attorney. Each Limited Partner or Assignee shall execute and deliver to the
General Partner or the Liquidator, within 15 days after receipt of the request
therefor, such further designation, powers of attorney and other instruments as
the General Partner or the Liquidator deems necessary to effectuate this
Agreement and the purposes of the Partnership.
SECTION 2.7 TERM
The term of the Partnership commenced upon the filing of the Certificate
of Limited Partnership in accordance with the Delaware Act and shall continue
in existence until the close of Partnership business on December 31, 2097 or
until the earlier dissolution of the Partnership in accordance with the
provisions of Article XII. The existence of the Partnership as a separate
legal entity shall continue until the cancellation of the Certificate of
Limited Partnership as provided in the Delaware Act.
SECTION 2.8 TITLE TO PARTNERSHIP ASSETS
Title to Partnership assets, whether real, personal or mixed and whether
tangible or intangible, shall be deemed to be owned by the Partnership as an
entity, and no Partner or Assignee, individually or collectively, shall have
any ownership interest in such Partnership assets or any portion thereof
Title to any or all of the Partnership assets may be held in the name of the
Partnership, the General Partner, one or more of its Affiliates or one or
more nominees, as the General Partner may determine. The General Partner
hereby declares and warrants that any Partnership assets for which record
title is held in the name of the General Partner or one or more of its
Affiliates or one or more nominees shall be held by the General Partner or
such Affiliate or nominee for the use and benefit of the Partnership in
accordance with the provisions of this Agreement; provided, however, that the
General Partner shall use reasonable efforts to cause record title to such
assets (other than those assets in respect of which the General Partner
determines that the expense and difficulty of conveyancing makes transfer of
record title to the Partnership impracticable) to be vested in the
Partnership as soon as reasonably practicable; provided, further, that, prior
to the withdrawal or removal of the General Partner or as soon thereafter as
practicable, the General Partner shall use reasonable efforts to effect the
transfer of record title to the Partnership and, prior to any such transfer,
will provide for the use of such assets in a manner satisfactory to the
General Partner. All Partnership
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assets shall be recorded as the property of the Partnership in its
books and records, irrespective of the name in which record title to such
Partnership assets is held.
ARTICLE III
RIGHTS OF LIMITED PARTNERS
SECTION 3.1 LIMITATION OF LIABILITY
The Limited Partners and the Assignees shall have no liability under
this Agreement except as expressly provided in this Agreement or in the
Delaware Act.
SECTION 3.2 MANAGEMENT OF BUSINESS
No Limited Partner or Assignee, in its capacity as such, shall
participate in the operation, management or control (within the meaning of
the Delaware Act) of the Partnership's business, transact any business in the
Partnership's name or have the power to sign documents for or otherwise bind
the Partnership. Any action taken by any Affiliate of the General Partner or
any officer, director, employee, member, general partner, agent or trustee of
the General Partner or any of its Affiliates, or any officer, director,
employee, member, general partner, agent or trustee of a Group Member, in its
capacity as such, shall not be deemed to be participation in the control of
the business of the Partnership by a limited partner of the Partnership
(within the meaning of Section 17-303(a) of the Delaware Act) and shall not
affect, impair or eliminate the limitations on the liability of the Limited
Partners or Assignees under this Agreement.
SECTION 3.3 OUTSIDE ACTIVITIES OF THE LIMITED PARTNERS
Subject to the provisions of Section 7.5, which shall continue to be
applicable to the Persons referred to therein, regardless of whether such
Persons shall also be Limited Partners or Assignees, any Limited Partner or
Assignee shall be entitled to and may have business interests and engage in
business activities in addition to those relating to the Partnership,
including business interests and activities in direct competition with any
Group Member or JV Entity. Neither the Partnership nor any of the other
Partners or Assignees shall have any rights by virtue of this Agreement in
any business ventures of any Limited Partner or Assignee.
SECTION 3.4 RIGHTS OF LIMITED PARTNERS
(a) In addition to other rights provided by this Agreement or by
applicable law, and except as limited by Section 3.4(b), each Limited Partner
shall have the right, for a purpose reasonably related to such Limited Partner's
interest as a limited partner in the Partnership, upon reasonable written demand
and at such Limited Partner's own expense:
(i) to obtain true and full information regarding the status
of the business and financial condition of the Partnership;
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(ii) promptly are becoming available, to obtain a copy of the
Partnership s federal, state and local income tax returns for each
year;
(iii) to have furnished to him a current list of the name and
last known business, residence or mailing address of each Partner;
(iv) to have furnished to him a copy of this Agreement and
the Certificate of Limited Partnership and all amendments thereto,
together with a copy of the executed copies of all powers of
attorney pursuant to which this Agreement, the Certificate of
Limited Partnership and all amendments thereto have been executed;
(v) to obtain true and full information regarding the amount
of cash and a description and statement of the Net Agreed Value of
any other Capital Contribution by each Partner and which each
Partner has agreed to contribute in the future, and the date on
which each became a Partner; and
(vi) to obtain such other information regarding the affairs
of the Partnership as is just and reasonable.
(b) The General Partner may keep confidential from the Limited
Partners and Assignees, for such period of time as the General Partner deems
reasonable, (i) any information that the General Partner reasonably believes
to be in the nature of trade secrets or (ii) other information the disclosure
of which the General Partner in good faith believes (A) is not in the best
interests of any Group Member or JV Entity, (B) could damage any Group Member
or JV Entity or (C) that any Group Member or JV Entity is required by law or
by agreement with any third party to keep confidential (other than agreements
with Affiliates of the Partnership the primary purpose of which is to
circumvent the obligations set forth in this Section 3.4).
ARTICLE IV
TRANSFERS OF PARTNERSHIP INTERESTS
SECTION 4.1 TRANSFER GENERALLY
(a) The term "TRANSFER," when used in this Agreement with respect
to a Partnership Interest, shall be deemed to refer to a transaction by which
the General Partner assigns its General Partner Interest to another Person
who becomes the General Partner (or an Assignee) or by which the holder of a
Limited Partner Interest assigns such Limited Partner Interest to another
Person who is or becomes a Limited Partner (or an Assignee), and includes a
sale, assignment, gift, pledge, encumbrance, hypothecation, mortgage,
exchange or any other disposition by law or otherwise.
(b) No Partnership Interest shall be transferred, in whole or in
part, except in accordance with the terms and conditions set forth in this
Article IV. Any transfer or purported transfer of a Partnership Interest not
made in accordance with this Article IV shall be null and void.
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(c) Nothing contained in this Agreement shall be construed to prevent
a disposition by any stockholder of the General Partner of any or all of the
issued and outstanding capital stock of the General Partner.
SECTION 4.2 TRANSFER OF GENERAL PARTNER'S PARTNERSHIP INTEREST
If the General Partner transfers its interest as the general partner of
the MLP to any Person in accordance with the provisions of the MLP Agreement,
the General Partner shall contemporaneously therewith transfer all, but not
less than all, of its General Partner Interest herein to such Person, and the
Limited Partners and Assignees, if any, hereby expressly consent to such
transfer. Except as set forth in the immediately preceding sentence, a
General Partner may not transfer all or any part of its Partnership Interest
as the General Partner.
SECTION 4.3 TRANSFER OF A LIMITED PARTNER'S PARTNERSHIP INTEREST
A Limited Partner may transfer all, but not less than all, of its
Partnership Interest as a Limited Partner in connection with the merger,
consolidation or other combination of such Limited Partner with or into any
other Person or the transfer by such Limited Partner of all or substantially
all of its assets to another Person, and following any such transfer such
Person may become a Substituted Limited Partner pursuant to Article X. Except
as set forth in the immediately preceding sentence, or in connection with any
pledge of (or any related foreclosure on) a Partnership Interest as a Limited
Partner solely for the purpose of securing, directly or indirectly,
indebtedness of the Partnership or the MLP, a Limited Partner may not
transfer all or any part of its Partnership Interest or withdraw from the
Partnership.
SECTION 4.4 RESTRICTIONS ON TRANSFERS
(a) Notwithstanding the other provisions of this Article IV, no
transfer of any Partnership Interest shall be made if such transfer would (i)
violate the then applicable federal or state securities laws or rules and
regulations of the Commission, any state securities commission or any other
governmental authority with jurisdiction over such transfer, (ii) terminate
the existence or qualification of the Partnership or the MLP under the laws
of the jurisdiction of its formation or (iii) cause the Partnership or the
MLP to be treated as an association taxable as a corporation or otherwise to
be taxed as an entity for federal income tax purposes (to the extent not
already so treated or taxed).
(b) The General Partner may impose restrictions on the transfer of
Partnership Interests if it determines based upon a subsequent Opinion of
Counsel that such restrictions are necessary to avoid a significant risk of
the Partnership or the MLP being treated as an association taxable as a
corporation or otherwise being taxed as an entity for federal income tax
purposes. The restrictions may be imposed by making such amendments to this
Agreement as the General Partner may determine to be necessary or appropriate
to impose such restrictions.
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ARTICLE V
CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS
SECTION 5.1 CONTRIBUTIONS
In connection with the formation of the Partnership under the Delaware
Act, the General Partner made an initial Capital Contribution to the
Partnership in the amount of $10.10 in exchange for an interest in the
Partnership and was admitted as General Partner, and the MLP made an initial
Capital Contribution to the Partnership in the amount of $989.90 in exchange
for an interest in the Partnership and was admitted as a Limited Partner.
Following the foregoing transactions, the General Partner holds a 1.0101%
Partnership Interest as the General Partner and the MLP holds a 98.9899%
Partnership Interest as the Limited Partner.
SECTION 5.2 ADDITIONAL CAPITAL CONTRIBUTIONS
With the consent of the General Partner, any Limited Partner may, but
shall not be obligated to, make additional Capital Contributions to the
Partnership. Contemporaneously with the making of any Capital Contributions
by a Limited Partner, in addition to those provided in Sections 5.1, the
General Partner shall be required to make an additional Capital Contribution
to the Partnership in an amount equal to 1.0101 divided by 98.9899 times the
amount of the additional Capital Contribution then made by such Limited
Partner. Except, as set forth in the immediately preceding sentence and in
Article XII, the General Partner shall not be obligated to make any
additional Capital Contributions to the Partnership.
SECTION 5.3 INTEREST AND WITHDRAWAL
No interest shall be paid by the Partnership on Capital Contributions.
No Partner or Assignee shall be entitled to the withdrawal or return of its
Capital Contribution, except to the extent, if any, that distributions made
pursuant to this Agreement or upon termination of the Partnership may be
considered as such by law and then only to the extent provided for in this
Agreement. Except to the extent expressly provided in this Agreement, no
Partner or Assignee shall have priority over any other Partner or Assignee
either as to the return of Capital Contributions or as to profits, losses or
distributions. Any such return shall be a compromise to which all Partners
and Assignees agree within the meaning of Section 17-502(b) of the Delaware
Act.
SECTION 5.4 CAPITAL ACCOUNTS
(a) The Partnership shall maintain for each Partner (or a
beneficial owner of Partnership Interests held by a nominee in any case in
which the nominee has furnished the identity of such owner to the Partnership
in accordance with Section 6031(c) of the Code or any other method
acceptable to the General Partner in its sole discretion) holding a
Partnership Interest a separate Capital Account with respect to such
Partnership Interest in accordance with the rules of Treasury Regulation
Section
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1.704-1(b)(2)(iv). Such Capital Account shall be increased by (i) the amount
of all Capital Contributions made to the Partnership with respect to such
Partnership Interest pursuant to this Agreement and (ii) all items of
Partnership income and gain (including, without limitation, income and gain
exempt from tax) computed in accordance with Section 5.5(b) and allocated
with respect to such Partnership Interest pursuant to Section 6.1, and
decreased by (x) the amount of cash or Net Agreed Value of all actual and
deemed distributions of cash or property made with respect to such
Partnership Interest pursuant to this Agreement and (y) all items of
Partnership deduction and loss computed in accordance with Section 5.4(b) and
allocated with respect to such Partnership Interest pursuant to Section 6.1.
(b) For purposes of computing the amount of any item of income,
gain, loss or deduction which is to be allocated pursuant to Article VI and
is to be reflected in the Partners' Capital Accounts, the determination,
recognition and classification of any such item shall be the same as its
determination, recognition and classification for federal income tax purposes
(including, without limitation, any method of depreciation, cost recovery or
amortization used for that purpose), provided, that:
(i) Solely for purposes of this Section 5.4, the Partnership
shall be treated as owning directly its proportionate share (as
determined by the General Partner) of all property owned by any ILP
Subsidiary or JV Entity that is classified as a partnership for
federal income tax purposes.
(ii) All fees and other expenses incurred by the Partnership
to promote the sale of (or to sell) a Partnership Interest that can
neither be deducted nor amortized under Section 709 of the Code, if
any, shall, for purposes of Capital Account maintenance, be treated
as an item of deduction at the time such fees and other expenses
are incurred and shall be allocated among the Partners pursuant to
Section 6.1.
(iii) Except as otherwise provided in Treasury Regulation
Section 1.704-1(b)(2)(iv)(m), computation of all items of income,
gain, loss and deduction shall be made without regard to any
election under Section 754 of the Code which may be made by the
Partnership and, as to those items described in Section
705(a)(1)(B) or 705(a)(2)(B) of the Code, without regard to the
fact that such items are not includable in gross income or are
neither currently deductible nor capitalized for federal income tax
purposes. To the extent an adjustment to the adjusted tax basis of
any Partnership asset pursuant to Section 734(b) or 743(b) of the
Code is required, pursuant to Treasury Regulation Section
1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital
Accounts, the amount of such adjustment in the Capital Accounts
shall be treated as an item of gain or loss.
(iv) Any income, gain or loss attributable to the taxable
disposition of any Partnership property shall be determined as if
the adjusted basis of such property as of such date of disposition
were equal in amount to the Partnership's Carrying Value with
respect to such property as of such date.
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(v) In accordance with the requirements of Section 704(b) of
the Code, any deductions for depreciation, cost recovery or
amortization attributable to any Contributed Property shall be
determined as if the adjusted basis of such property on the date it
was acquired by the Partnership were equal to the Agreed Value of
such property. Upon an adjustment pursuant to Section 5.4(d) to the
Carrying Value of any Partnership property subject to depreciation,
cost recovery or amortization, any further deductions for such
depreciation, cost recovery or amortization attributable to such
property shall be determined (A) as if the adjusted basis of such
property were equal to the Carrying Value of such property
immediately following such adjustment and (B) using a rate of
depreciation, cost recovery or amortization derived from the same
method and useful life (or, if applicable, the remaining useful
life) as is applied for federal income tax purposes; provided,
however, that, if the asset has a zero adjusted basis for federal
income tax purposes, depreciation, cost recovery or amortization
deductions shall be determined using any reasonable method that the
General Partner may adopt.
(vi) If the Partnership's adjusted basis in a depreciable or
cost recovery property is reduced for federal income tax purposes
pursuant to Section 48(q)(1) or 48(q)(3) of the Code, the amount of
such reduction shall, solely for purposes hereof, be deemed to be
an additional depreciation or cost recovery deduction in the year
such property is placed in service and shall be allocated among the
Partners pursuant to Section 6.1. Any restoration of such basis
pursuant to Section 48(q)(2) of the Code shall, to the extent
possible, be allocated in the same manner to the Partners to whom
such deemed deduction was allocated.
(c) A transferee of a Partnership Interest shall succeed to a pro
rata portion of the Capital Account of the transferor relating to the
Partnership Interest so transferred.
(d) (i) In accordance with Treasury Regulation Section
1.704-1(b)(2)(iv)(f), on an issuance of additional Partnership Interests for
cash or Contributed Property or the conversion of the General Partner's
Partnership Interest to Common Units pursuant to Section 11.3(a), the Capital
Accounts of all Partners and the Carrying Value of each Partnership property
immediately prior to such issuance shall be adjusted upward or downward to
reflect any Unrealized Gain or Unrealized Loss attributable to such
Partnership property, as if such Unrealized Gain or Unrealized Loss had been
recognized on an actual sale of each such property immediately prior to such
issuance and had been allocated to the Partners at such time pursuant to
Section 6.1(c) in the same manner as any item of gain or loss actually
recognized during such period would have been allocated. In determining such
Unrealized Gain or Unrealized Loss, the aggregate cash amount and fair market
value of all Partnership assets (including, without limitation, cash or cash
equivalents) immediately prior to the issuance of additional Partnership
Interests shall be determined by the General Partner using such reasonable
method of valuation as it may adopt; provided, however, that the General
Partner, in arriving at such valuation, must take fully into account the fair
market value of the Partnership Interests of all Partners at such time. The
General Partner shall allocate such value among the assets of the Partnership
(in such manner as it
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determines in its discretion to be reasonable) to arrive at a fair market
value for individual properties.
(ii) In accordance with Treasury Regulation Section
1.704-1(b)(2)(iv)(f), immediately prior to any actual or deemed
distribution to a Partner of any Partnership property (other than a
distribution of cash that is not in redemption or retirement of a
Partnership Interest), the Capital Accounts of all Partners and the
Carrying Value of all Partnership property shall be adjusted upward
or downward to reflect any Unrealized Gain or Unrealized Loss
attributable to such Partnership property, as if such Unrealized
Gain or Unrealized Loss had been recognized in a sale of such
property immediately prior to such distribution for an amount equal
to its fair market value, and had been allocated to the Partners, at
such time, pursuant to Section 6.1(c) in the same manner as any item
of gain or loss actually recognized during such period would have
been allocated. In determining such Unrealized Gain or Unrealized
Loss the aggregate cash amount and fair market value of all
Partnership assets (including, without limitation, cash or cash
equivalents) immediately prior to a distribution shall (A) in the
case of an actual distribution which is not made pursuant to Section
12.4 or in the case of a deemed distribution be determined and
allocated in the same manner as that provided in Section 5.4(d)(i)
or (B) in the case of a liquidating distribution pursuant to Section
12.4, be determined and allocated by the Liquidator using such
reasonable method of valuation as it may adopt.
SECTION 5.5 LOANS FROM PARTNERS
Loans by a Partner to the Partnership shall not constitute Capital
Contributions. If any Partner shall advance funds to the Partnership in
excess of the amounts required hereunder to be contributed by it to the
capital of the Partnership, the making of such excess advances shall not
result in any increase in the amount of the Capital Account of such Partner.
The amount of any such excess advances shall be a debt obligation of the
Partnership to such Partner and shall be payable or collectible only out of
the Partnership assets in accordance with the terms and conditions upon which
such advances are made.
SECTION 5.6 LIMITED PREEMPTIVE RIGHTS
Except as provided in Section 5.2, no Person shall have preemptive,
preferential or other similar rights with respect to (a) additional Capital
Contributions; (b) issuance or sale of any class or series of Partnership
Interests, whether unissued, held in the treasury or hereafter created; (c)
issuance of any obligations, evidences of indebtedness or other securities of
the Partnership convertible into or exchangeable for, or carrying or
accompanied by any rights to receive, purchase or subscribe to, any such
Partnership Interests; (d) issuance of any right of subscription to or right
to receive, or any warrant or option for the purchase of, any such
Partnership Interests; or (e) issuance or sale of any other securities that
may be issued or sold by the Partnership.
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SECTION 5.7 FULLY PAID AND NON-ASSESSABLE NATURE OF PARTNERSHIP INTERESTS
All Partnership Interests issued to Limited Partners pursuant to,
and in accordance with the requirements of, this Article V shall be fully
paid and non-assessable Partnership Interests, except as such
non-accessibility may be affected by Section 17-607 of the Delaware Act.
ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS
SECTION 6.1 ALLOCATIONS FOR CAPITAL ACCOUNT PURPOSES
For purposes of maintaining the Capital Accounts and in determining the
rights of the Partners among themselves, the Partnership's items of income,
gain, loss and deduction (computed in accordance with Section 5.4(b)) shall
be allocated among the Partners in each taxable period (or portion thereof)
as provided herein below.
(a) NET INCOME. After giving effect to the special allocations set
forth in Section 6.1(d), Net Income for each taxable period and all items of
income, gain, loss and deduction taken into account in computing Net Income
for such taxable period shall be allocated among the Partners as follows:
(i) First, 100% to the General Partner, until the aggregate
Net Income allocated to the General Partner pursuant to this
Section 6.1(a)(i) for the current taxable period and all previous
taxable periods is equal to the aggregate Net Losses allocated to
the General Partner pursuant to Section 6.1(b)(ii)(B) for all
previous taxable periods; and
(ii) Second, 1.0101% to the General Partner and 98.9899% to
the Limited Partners.
(b) NET LOSSES. After giving effect to the special allocations set
forth in Section 6.1(d), Net Losses for each taxable period and all items of
income, gain, loss and deduction taken into account in computing Net Losses
for such taxable period shall be allocated among the Partners as follows:
(i) For taxable years 2000, 2001 and 2002, 100% to the
General Partner; and
(ii) For taxable years after 2002:
(A) First, 1.0101% to the General Partner and 98.9899%
to the Limited Partners; provided, however, that Net Losses
shall not be allocated to a Limited Partner pursuant to this
Section 6.1(b)(i) to the extent that such allocation would
cause a Limited Partner to have a deficit balance in its
Adjusted Capital Account at the end of such taxable period (or
increase any existing deficit balance in such Limited
Partner's Adjusted Capital Account); and
(B) Second, the balance, if any, 100% to the General
Partner.
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(c) NET TERMINATION GAINS AND LOSSES. After giving effect to the
special allocations set forth in Section 6.1(d), all items of income, gain,
loss and deduction taken into account in computing Net Termination Gain or
Net Termination Loss for each taxable period shall be allocated in the same
manner as such Net Termination Gain or Net Termination Loss is allocated
hereunder. All allocations under this Section 6.1(c) shall be made after
Capital Account balances have been adjusted by all other allocations provided
under this Section 6.1 and after all distributions of Available Cash provided
under Section 6.4 have been made with respect to the taxable period ending on
or before the Liquidation Date; provided, however, that solely for purposes
of this Section 6.1(c), Capital Accounts shall not be adjusted for
distributions made pursuant to Section 12.4.
(i) If a Net Termination Gain is recognized (or deemed
recognized pursuant to Section 5.4(d)), such Net Termination Gain
shall be allocated among the Partners in the following manner (and
the Capital Accounts of the Partners shall be increased by the
amount so allocated in each of the following subclauses, in the
order listed, before an allocation is made pursuant to the next
succeeding subclause):
(A) First, 100% to the General Partner until the General
Partner has been allocated Net Termination Gain under this
Section 6.1(c)(i)(A) equal to the aggregate amount of Net
Losses previously allocated to the General Partner under
Section 6.1(b)(i); provided, however, that no amount of Net
Termination Gain shall be allocated to the General Partner
under this Section 6.1(c)(i)(A) to the extent that such
allocation would cause the General Partner's Capital Account
balance as a percentage of the total Capital Account balances
of the Partners to exceed the Percentage Interest of the
General Partner;
(B) Second, to each Partner having a deficit balance in
its Capital Account, in the proportion that such deficit
balance bears to the total deficit balances in the Capital
Accounts of all Partners, until each such Partner has been
allocated Net Termination Gain equal to any such deficit
balance in its Capital Account; and
(C) Third, 1.0101% to the General Partner and 98.9899%
to the Limited Partners.
(ii) If a Net Termination Loss is recognized (or deemed
recognized pursuant to Section 5.4(d)), such Net Termination Loss
shall be allocated among the Partners in the following manner (and
the Capital Accounts of the Partners shall be decreased by the
amount so allocated in each of the following subclauses, in the
order listed, before an allocation is made pursuant to the next
succeeding subclause):
(A) First, to the General Partner and the Limited
Partners in proportion to, and to the extent of, the positive
balances in their respective Capital Accounts; and
(B) Second, the balance, if any, 100% to the General
Partner.
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(d) SPECIAL ALLOCATIONS Notwithstanding any other provision of
this Section 6.1, the following special allocations shall be made for such
taxable period:
(i) PARTNERSHIP MINIMUM GAIN CHARGEBACK. Notwithstanding any
other provision of this Section 6.1, if there is a net decrease in
Partnership Minimum Gain during any Partnership taxable period,
each Partner shall be allocated items of Partnership income and
gain for such period (and, if necessary, subsequent periods) in the
manner and amounts provided in Treasury Regulation Sections
1.704-2(f)(6), 1.704-2(g)(2) and 1.704-2(j)(2)(i). For purposes of
this Section 6.1(d), each Partner's Adjusted Capital Account
balance shall be determined, and the allocation of income or gain
required hereunder shall be effected, prior to the application of
any other allocations pursuant to this Section 6.1(d) with respect
to such taxable period (other than an allocation pursuant to
Sections 6.1(d)(v) and 6.1(d)(vi)). This Section 6.1(d)(i) is
intended to comply with the Partnership Minimum Gain chargeback
requirement in Treasury Regulation Section 1.704-2(f) and shall be
interpreted consistently therewith.
(ii) CHARGEBACK OF PARTNER NONRECOURSE DEBT MINIMUM GAIN.
Notwithstanding any other provision of this Section 6.1 (other than
Section 6.1(d)(i)), except as provided in Treasury Regulation
Section 1.704-2(i)(4), if there is a net decrease in Partner
Nonrecourse Debt Minimum Gain during any Partnership taxable
period, any Partner with a share of Partner Nonrecourse Debt
Minimum Gain at the beginning of such taxable period shall be
allocated items of Partnership income and gain for such period
(and, if necessary, subsequent periods) in the manner and amounts
provided in Treasury Regulation Sections 1.704-2(i)(4) and
1.704-20)(2)(ii). For purposes of this Section 6.1(d), each
Partner's Adjusted Capital Account balance shall be determined, and
the allocation of income or gain required hereunder shall be
effected, prior to the application of any other allocations
pursuant to this Section 6.1(d), other than Section 6.1(d)(i) and
other than an allocation pursuant to Sections 6.1(d)(v) and
6.1(d)(vi), with respect to such taxable period. This Section
6.1(d)(ii) is intended to comply with the chargeback of items of
income and gain requirement in Treasury Regulation Section
1.704-2(i)(4) and shall be interpreted consistently therewith.
(iii) QUALIFIED INCOME OFFSET. In the event any Partner
unexpectedly receives any adjustments, allocations or distributions
described in Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), items of
Partnership income and gain shall be specially allocated to such
Partner in an amount and manner sufficient to eliminate, to the
extent required by the Treasury Regulations promulgated under
Section 704(b) of the Code, the deficit balance, if any, in its
Adjusted Capital Account created by such adjustments, allocations
or distributions as quickly as possible unless such deficit balance
is otherwise eliminated pursuant to Section 6.1(d)(i) or (ii).
(iv) GROSS INCOME ALLOCATIONS. In the event any Partner has a
deficit balance in its Capital Account at the end of any Partnership
taxable period in excess of the sum of (A) the amount such Partner is
required to restore pursuant to
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the provisions of this Agreement and (B) the amount such Partner is
deemed obligated to restore pursuant to Treasury Regulation
Sections 1.704-2(g) and 1.704-2(i)(5), such Partner shall be
specially allocated items of Partnership gross income and gain in
the amount of such excess as quickly as possible; provided, that an
allocation pursuant to this Section 6.1(d)(iv) shall be made only
if and to the extent that such Partner would have a deficit balance
in its Capital Account as adjusted after all other allocations
provided for in this Section 6.1 have been tentatively made as if
this Section 6.1(d)(iv) were not in this Agreement.
(v) NONRECOURSE DEDUCTIONS. Nonrecourse Deductions for any
taxable period shall be allocated to the Partners in accordance
with their respective Percentage Interests. If the General Partner
determines in its good faith discretion that the Partnership's
Nonrecourse Deductions must be allocated in a different ratio to
satisfy the safe harbor requirements of the Treasury Regulations
promulgated under Section 704(b) of the Code, the General Partner
is authorized, upon notice to the other Partners, to revise the
prescribed ratio to the numerically closest ratio that does satisfy
such requirements.
(vii) PARTNER NONRECOURSE DEDUCTIONS. Partner Nonrecourse
Deductions for any taxable period shall be allocated 100% to the
Partner that bears the Economic Risk of Loss with respect to the
Partner Nonrecourse Debt to which such Partner Nonrecourse
Deductions are attributable in accordance with Treasury Regulation
Section 1.704-2(i). If more than one Partner bears the Economic
Risk of Loss with respect to a Partner Nonrecourse Debt, such
Partner Nonrecourse Deductions attributable thereto shall be
allocated between or among such Partners in accordance with the
ratios in which they share such Economic Risk of Loss.
(vii) NONRECOURSE LIABILITIES. For purposes of Treasury
Regulation Section 1.752-3(a)(3), the Partners agree that
Nonrecourse Liabilities of the Partnership in excess of the sum of
(A) the amount of Partnership Minimum Gain and (B) the total amount
of Nonrecourse Built-in Gain shall be allocated among the Partners
in accordance with their respective Percentage Interests.
(viii) CODE SECTION 754 ADJUSTMENTS. To the extent an
adjustment to the adjusted tax basis of any Partnership asset
pursuant to Section 734(b) or 743(c) of the Code is required,
pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(m), to
be taken into account in determining Capital Accounts, the amount
of such adjustment to the Capital Accounts shall be treated as an
item of gain (if the adjustment increases the basis of the asset)
or loss (if the adjustment decreases such basis), and such item of
gain or loss shall be specially allocated to the Partners in a
manner consistent with the manner in which their Capital Accounts
are required to be adjusted pursuant to such Section of the
Treasury Regulations.
(ix) CURATIVE ALLOCATION.
(A) Notwithstanding any other provision of this Section
6.1, other than the Required Allocations, the Required
Allocations shall be taken into account in
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making the Agreed Allocations so that, to the extent possible,
the net amount of items of income, gain, loss and deduction
allocated to each Partner pursuant to the Required Allocations
and the Agreed Allocations, together, shall be equal to the
net amount of such items that would have been allocated to
each such Partner under the Agreed Allocations had the
Required Allocations and the related Curative Allocation not
otherwise been provided in this Section 6.1. Notwithstanding
the preceding sentence, Required Allocations relating to (1)
Nonrecourse Deductions shall not be taken into account except
to the extent that there has been a decrease in Partnership
Minimum Gain and (2) Partner Nonrecourse Deductions shall not
be taken into account except to the extent that there has been
a decrease in Partner Nonrecourse Debt Minimum Gain.
Allocations pursuant to this Section 6.1(d)(ix)(A) shall only
be made with respect to Required Allocations to the extent the
General Partner reasonably determines that such allocations
will otherwise be inconsistent with the economic agreement
among the Partners. Further, allocations pursuant to this
Section 6.1(d)(ix)(A) shall be deferred with respect to
allocations pursuant to Sections 6.1(d)(ix)(A)(1) and (2) to
the extent the General Partner reasonably determines that such
allocations are likely to be offset by subsequent Required
Allocations.
(B) The General Partner shall have reasonable
discretion, with respect to each taxable period, to (1) apply
the provisions of Section 6.1(d)(ix)(A) in whatever order is
most likely to minimize the economic distortions that might
otherwise result from the Required Allocations, and (2) divide
all allocations pursuant to Section 6.1(d)(ix)(A) among the
Partners in a manner that is likely to minimize such economic
distortions.
SECTION 6.2 ALLOCATIONS FOR TAX PURPOSES
(a) Except as otherwise provided herein, for federal income tax
purposes, each item of income, gain, loss and deduction shall be allocated among
the Partners in the same manner as its correlative item of "book" income, gain,
loss or deduction is allocated pursuant to Section 6.1.
(b) In an attempt to eliminate Book-Tax Disparities attributable to
a Contributed Property or Adjusted Property, items of income, gain, loss,
depreciation, amortization and cost recovery deductions shall be allocated for
federal income tax among the Partners as follows:
(i) (A) In the case of a Contributed Property, such items
attributable thereto shall be allocated among the Partners in the
manner provided under Section 704(c) of the Code that takes into
account the variation between the Agreed Value of such property and
its adjusted basis at the time of contribution; and (B) any item
of Residual Gain or Residual Loss attributable to a Contributed
Property shall be allocated among the Partners in the same manner
as its correlative item of "book" gain or loss is allocated
pursuant to Section 6.1.
(ii) (A) In the case of an Adjusted Property, such items shall
(1) first, be allocated among the Partners in a manner consistent with
the principles of
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Section 704(c) of the Code to take into account the Unrealized Gain
or Unrealized Loss attributable to such property and the
allocations thereof pursuant to Section 5.4(d)(i) or 5.4(d)(ii),
and (2) second, in the event such property was originally a
Contributed Property, be allocated among the Partners in a manner
consistent with Section 6.2(b)(i)(A); and (B) any item of Residual
Gain or Residual Loss attributable to an Adjusted Property shall be
allocated among the Partners in the same manner as its correlative
item of "book" gain or loss is allocated pursuant to Section 6.1.
(iii) The General Partner shall apply the principles of
Treasury Regulation Section 1.704-3(d) to eliminate Book-Tax
Disparities.
(c) For the proper administration of the Partnership and for the
preservation of uniformity of the Units or other limited partner interests of
the MLP (or any class or classes thereof), the General Partner shall have
sole discretion to (i) adopt such conventions as it deems appropriate in
determining the amount of depreciation, amortization and cost recovery
deductions; (ii) make special allocations for federal income tax purposes of
income (including, without limitation, gross income) or deductions; and (iii)
amend the provisions of this Agreement as appropriate (x) to reflect the
proposal or promulgation of Treasury Regulations under Section 704(b) or
Section 704(c) of the Code or (y) otherwise to preserve or achieve uniformity
of the Units or other limited partner interests of the MLP (or any class or
classes thereof). The General Partner may adopt such conventions, make such
allocations and make such amendments to this Agreement as provided in this
Section 6.2(c) only if such conventions, allocations or amendments would not
have a material adverse effect on the Partners, the holders of any class or
classes of Units or other limited partner interests of the MLP issued and
outstanding or the Partnership and if such allocations are consistent with
the principles of Section 704 of the Code.
(d) The General Partner in its discretion may determine to
depreciate or amortize the portion of an adjustment under Section 743(b) of
the Code attributable to unrealized appreciation in any Adjusted Property (to
the extent of the unamortized Book-Tax Disparity) using a predetermined rate
derived from the depreciation or amortization method and useful life applied
to the Partnership's common basis of such property, despite any inconsistency
of such approach with Treasury Regulation Section 1.167(c)-1(a)(6), Proposed
Treasury Regulation Section 1.197-2(g)(3), or any successor regulations
thereto. If the General Partner determines that such reporting position
cannot reasonably be taken, the General Partner may adopt depreciation and
amortization conventions under which all purchasers acquiring limited partner
interests of the MLP in the same month would receive depreciation and
amortization deductions, based upon the same applicable rate as if they had
purchased a direct interest in the Partnership's property. If the General
Partner chooses not to utilize such aggregate method, the General Partner may
use any other reasonable depreciation and amortization conventions to
preserve the uniformity of the intrinsic tax characteristics of any limited
partner interests of the MLP that would not have a material adverse effect on
the Partners or the holders of any class or classes of limited partner
interests of the MLP.
(e) Any gain allocated to the Partners upon the sale or other
taxable disposition of any Partnership asset shall, to the extent possible,
after taking into account
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other required allocations of gain pursuant to this Section 6.2, be
characterized as Recapture Income in the same proportions and to the same
extent as such Partners (or their predecessors in interest) have been
allocated any deductions directly or indirectly giving rise to the treatment
of such gains as Recapture Income.
(f) All items of income, gain, loss, deduction and credit
recognized by the Partnership for federal income tax purposes and allocated
to the Partners in accordance with the provisions hereof shall be determined
without regard to any election under Section 754 of the Code which may be
made by the Partnership; provided, however, that such allocations, once made,
shall be adjusted as necessary or appropriate to take into account those
adjustments permitted or required by Sections 734 and 743 of the Code.
(g) The General Partner may adopt such methods of allocation of
income, gain, loss or deduction between a transferor and a transferee of a
Partnership Interest as it determines necessary, to the extent permitted or
required by Section 706 of the Code and the regulations or rulings
promulgated thereunder.
(h) Allocations that would otherwise be made to a Partner under
the provisions of this Article VI shall instead be made to the beneficial
owner of Partnership Interests held by a nominee in any case in which the
nominee has furnished the identity of such owner to the Partnership in
accordance with Section 6031(c) of the Code or any other method acceptable to
the General Partner in its sole discretion.
SECTION 6.3 DISTRIBUTIONS
(a) Within 45 days following the end of each Quarter commencing with
the Quarter ending on September 30, 2000, an amount equal to 100% of Available
Cash with respect to such Quarter shall, subject to Section 17-607 of the
Delaware Act, be distributed in accordance with this Article VI by the
Partnership to the Partners in accordance with their respective Percentage
Interests. The immediately preceding sentence shall not require any distribution
of cash if and to the extent such distribution would be prohibited by applicable
law or by any loan agreement, security agreement, mortgage, debt instrument or
other agreement or obligation to which the Partnership is a party or by which it
is bound or its assets are subject. All distributions required to be made under
this Agreement shall be made subject to Section 17-607 of the Delaware Act.
(b) Notwithstanding Section 6.3(a), in the event of the dissolution
and liquidation of the Partnership, all receipts received during or after the
Quarter in which the Liquidation Date occurs, other than from borrowings
described in (a)(ii) of the definition of Available Cash, shall be applied and
distributed solely in accordance with, and subject to the terms and conditions
of, Section 12.4.
(c) The General Partner shall have the discretion to treat taxes paid
by the Partnership on behalf of, or amounts withheld with respect to, all or
less than all of the Partners, as a distribution of Available Cash to such
Partners.
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ARTICLE VII
MANAGEMENT AND OPERATION OF BUSINESS
SECTION 7.1 MANAGEMENT
(a) The General Partner shall conduct, direct and manage all
activities of the Partnership. Except as otherwise expressly provided in this
Agreement, all management powers over the business and affairs of the
Partnership shall be exclusively vested in the General Partner and no Limited
Partner or Assignee shall have any management power over the business and
affairs of the Partnership. In addition to the powers now or hereafter granted a
general partner of a limited partnership under applicable law or which are
granted to the General Partner under any other provision of this Agreement, the
General Partner, subject to Section 7.3, shall have full power and authority to
do all things and on such terms as it, in its sole discretion, may deem
necessary or appropriate to conduct the business of the Partnership, to exercise
all powers set forth in Section 2.5 and to effectuate the purposes set forth in
Section 2.4, including the following:
(i) the making of any expenditures, the lending or borrowing
of money, the assumption or guarantee of, or other contracting for,
indebtedness and other liabilities, the issuance of evidences of
indebtedness, including indebtedness that is convertible into a
Partnership Interest, and the incurring of any other obligations;
(ii) the making of tax, regulatory and other filings, or
rendering of periodic or other reports to governmental or other
agencies having jurisdiction over the business or assets of the
Partnership;
(iii) the acquisition, disposition, mortgage, pledge,
encumbrance, hypothecation or exchange of any or all of the assets
of the Partnership or the merger or other combination of the
Partnership with or into another Person (the matters described in
this clause (iii) being subject, however, to any prior approval
that may be required by Section 7.3);
(iv) the use of the assets of the Partnership (including cash
on hand) for any purpose consistent with the terms of this
Agreement, including the financing of the conduct of the operations
of the Partnership Group, including investments in and any
contributions to JV Entities, subject to Section 7.6, the lending
of funds to other Persons (including the MLP and any member of the
Partnership Group), the repayment of obligations of the MLP or any
member of the Partnership Group or any JV Entity and the making of
capital contributions to any Group Member or JV Entity;
(v) the negotiation, execution and performance of any
contracts, conveyances or other instruments (including contracts,
conveyances or instruments that limit the liability of the
Partnership under contractual arrangements to all or particular
assets of the Partnership, with the other party to the contract to
have no recourse against the General Partner or its assets other
than its interest in the Partnership, even if these arrangements
result in the terms of the
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transaction being less favorable to the Partnership than would
otherwise be the case);
(vi) the distribution of Partnership cash;
(vii) the selection and dismissal of employees (including
employees having titles such as "president," "vice president,"
"secretary" and "treasurer") and agents, outside attorneys,
accountants, consultants and contractors and the determination of
their compensation and other terms of employment or hiring;
(viii) the maintenance of such insurance for the benefit of
the Partnership Group and the Partners as it deems necessary or
appropriate;
(ix) the formation of, or acquisition of an interest in, and
the contribution of property and the making of loans to, any
further limited or general partnerships, joint ventures, corporations
or other relationships subject to the restrictions set forth in
Section 2.4;
(x) the control of any matters affecting the rights and
obligations of the Partnership, including the bringing and
defending of actions at law or in equity and otherwise engaging in
the conduct of litigation and the incurring of legal expense and
the settlement of claims and litigation; and
(xi) the indemnification of any Person against liabilities
and contingencies to the extent permitted by law.
(b) Notwithstanding any other provision of this Agreement, the MLP
Agreement the Delaware Act or any applicable law, rule or regulation, each of
the Partners and Assignees and each other Person who may acquire an interest in
the Partnership hereby (i) approves, ratifies and confirms the execution,
delivery and performance by the parties thereto of this Agreement, the Purchase
and Sale Agreement and the other agreements, documents and instruments described
in or Purchase and Sale that are related to the transactions contemplated by the
Purchase and Sale Agreement; (ii) agrees that the General Partner (on its own or
through any officer or attorney-in-fact of the Partnership) is authorized to
execute, deliver and perform the agreements referred to in clause (i) of this
sentence and the other agreements, acts, transactions and matters described in
or contemplated by the Purchase and Sale Agreement on behalf of the Partnership
without any further act, approval or vote of the Partners or the Assignees or
the other Persons who may acquire an interest in the Partnership; and (iii)
agrees that the execution, delivery or performance by the General Partner, the
MLP, any Group Member or any Affiliate of any of them, of this Agreement or any
agreement authorized or permitted under this Agreement (including the exercise
by the General Partner or any Affiliate of the General Partner of the rights
accorded pursuant to Article XV), shall not constitute a breach by the General
Partner of any duty that the General Partner may owe the Partnership or the
Limited Partners or any other Persons under this Agreement (or any other
agreements) or of any duty stated or implied by law or equity.
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SECTION 7.2 CERTIFICATE OF LIMITED PARTNERSHIP
The General Partner has caused the Certificate of Limited Partnership
to be filed with the Secretary of State of the State of Delaware as required by
the Delaware Act and shall use all reasonable efforts to cause to be filed such
other certificates or documents as may be determined by the General Partner in
its sole discretion to be reasonable and necessary or appropriate for the
formation, continuation, qualification and operation of a limited partnership
(or a partnership in which the limited partners have limited liability) in the
State of Delaware or any other state in which the Partnership may elect to do
business or own property. To the extent that such action is determined by the
General Partner in its sole discretion to be reasonable and necessary or
appropriate, the General Partner shall file amendments to and restatements of
the Certificate of Limited Partnership and do all things to maintain the
Partnership as a limited partnership (or a partnership or other entity in which
the limited partners have limited liability) under the laws of the State of
Delaware or of any other state in which the Partnership may elect to do business
or own property. Subject to the terms of Section 3.4(a), the General Partner
shall not be required, before or after filing, to deliver or mail a copy of the
Certificate of Limited Partnership, any qualification document or any amendment
thereto to any Limited Partner or Assignee.
SECTION 7.3 RESTRICTIONS ON GENERAL PARTNER'S AUTHORITY
(a) The General Partner may not, without written approval of the
specific act by the Limited Partners or by other written instrument executed and
delivered by the Limited Partners subsequent to the date of this Agreement, take
any action in contravention of this Agreement, including, except as otherwise
provided in this Agreement, (i) committing any act that would make it impossible
to carry on the ordinary business of the Partnership; (ii) possessing
Partnership property, or assigning any rights in specific Partnership property,
for other than a Partnership purpose; (iii) admitting a Person as a Partner;
(iv) amending this Agreement in any manner or (v) transferring its General
Partner Interest.
(b) Except as provided in Articles XII and MV, the General Partner
may not sell, exchange or otherwise dispose of all or substantially all of
the Partnership's assets in a single transaction or a series of related
transactions (including by way of merger, consolidation or other combination)
or approve on behalf of the Partnership the sale, exchange or other
disposition of all or substantially all of the assets of the Partnership,
without the approval of the Limited Partners; provided, however, that this
provision shall not preclude or limit the General Partner's ability to
mortgage, pledge, hypothecate or grant a security interest in all or
substantially all of the assets of the Partnership and shall not apply to any
sale of any or all of the assets of the Partnership pursuant to the
foreclosure of, or other realization upon, any such encumbrance. Without the
approval of at least a Unit Majority, the General Partner shall not, on
behalf of the MLP, (i) consent to any amendment to this Agreement or, except
as expressly permitted by Section 7.9(d) of the MLP Agreement, take any
action permitted to be taken by a Partner, in either case, that would have a
material adverse effect on the MLP as a Partner or (ii) except as permitted
under Section 4.6, 11.1 or 11.2 of the MLP Agreement, elect or cause the MLP
to elect a successor general partner of the Partnership.
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(c) The General Partner may not approve or consent to the conversion
of Tuscarora or any other JV Entity that is not then taxable as an entity for
federal income tax purposes to corporate form without first obtaining the
approval of the holders of at least 66 2/3% of the Outstanding Units during the
Subordination Period and at least a majority of the Outstanding Units
thereafter.
SECTION 7.4 REIMBURSEMENT OF THE GENERAL PARTNER
(a) Except as provided in this Section 7.4 and elsewhere in this
Agreement or in the MLP Agreement, the General Partner shall not be compensated
for its services as General Partner, general partner of the MLP or as general
partner or managing member of any Group Member.
(b) The General Partner shall be reimbursed on a monthly basis, or
such other reasonable basis as the General Partner may determine in its sole
discretion, for (I) all direct and indirect expenses it incurs or payments it
makes on behalf of the Partnership (including salary, bonus, incentive
compensation and other amounts paid to any Person including Affiliates of the
General Partner to perform services for the Partnership or for the General
Partner in the discharge of its duties to the Partnership), and (ii) all other
necessary or appropriate expenses allocable to the Partnership or otherwise
reasonably incurred by the General Partner in connection with operating the
Partnership's business (including expenses allocated to the General Partner by
its Affiliates). The General Partner shall determine the expenses that are
allocable to the Partnership in any reasonable manner determined by the General
Partner in its sole discretion. Reimbursements pursuant to this Section 7.4
shall be in addition to any reimbursement to the General Partner as a result of
indemnification pursuant to Section 7.7.
(c) Subject to Section 5.6, the General Partner, in its sole
discretion and without the approval of the Limited Partners (who shall have no
right to vote in respect thereof), may propose and adopt on behalf of the
Partnership employee benefit plans, employee programs and employee practices, or
cause the Partnership to issue Partnership Interests, in connection with or
pursuant to any employee benefit plan, employee program or employee practice
maintained or sponsored by the General Partner or any of its Affiliates, in each
case for the benefit of employees of the General Partner, any Group Member or
any Affiliate, or any of them, in respect of services performed, directly or
indirectly, for the benefit of the Partnership Group. Expenses incurred by the
General Partner in connection with any such plans, programs and practices shall
be reimbursed in accordance with Section 7.4(b). Any and all obligations of the
General Partner under any employee benefit plans, employee programs or employee
practices adopted by the General Partner as permitted by this Section 7.4(c)
shall constitute obligations of the General Partner hereunder and shall be
assumed by any successor General Partner approved pursuant to Section 11.1 or
11.2 or the transferee of or successor to all of the General Partner's General
Partner Interest pursuant to Section 4.2.
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SECTION 7.5 OUTSIDE ACTIVITIES
(a) The General Partner, for so long as it is the General Partner of
the Partnership (i) agrees that its sole business will be to act as the General
Partner of the Partnership, the general partner of TCILP, the general partner of
the MLP, and a general partner or managing member of any other partnership or
limited liability company of which the Partnership or the MLP is, directly or
indirectly, a partner or member and to undertake activities that are ancillary
or related thereto (including being a limited partner in the MLP) and (ii) shall
not engage in any business or activity or incur any debts or liabilities except
in connection with or incidental to (A) its performance as general partner or
managing member of the Partnership, the TCILP, the MLP or one or more Group
Members or as described in or contemplated by the Registration Statement or (B)
the acquiring, owning or disposing of debt or equity securities or interests in
any Group Member.
(b) Except as specifically restricted by Section 7.5(a), each
Indemnitee (other than the General Partner) shall have the right to engage in
businesses of any and every type and description and other activities for profit
and to engage in and possess an interest in other business ventures of any and
every type or description, whether in businesses engaged in or anticipated to be
engaged in by any Group Member or JV Entity, independently or with others,
including business interests and activities in direct competition with the
business and activities of any Group Member or JV Entity, and none of the same
shall constitute a breach of this Agreement or any duty express or implied by
law to the MLP or any Group Member or any Partner or Assignee. Neither any Group
Member, any JV Entity, any Limited Partner, nor any other Person shall have any
rights by virtue of this Agreement, the TCILP partnership agreement, the MLP
Agreement or the partnership relationship established hereby or thereby in any
business ventures of any Indemnitee.
(c) Subject to the terms of Section 7.5(a) and Section 7.5(b), but
otherwise notwithstanding anything to the contrary in this Agreement, (i) the
engaging in competitive activities by any Indemnitees (other than the General
Partner) in accordance with the provisions of this Section 7.5 is hereby
approved by the Partnership and all Partners, (ii) it shall be deemed not to be
a breach of the General Partner's fiduciary duty or any other obligation of any
type whatsoever of the General Partner for the Indemnitees (other than the
General Partner) to engage in such business interests and activities in
preference to or to the exclusion of the Partnership and (iii) the General
Partner and the Indemnities shall have no obligation to present business
opportunities to the Partnership.
(d) The General Partner and any of its Affiliates may acquire
Units or other MLP Securities and, except as otherwise provided in this
Agreement, shall be entitled to exercise all rights, powers and privileges
(as General Partner, Limited Partner or Assignee, as applicable) relating to
such Units or MLP Securities.
(e) The term "Affiliates" when used in Section 7.5(a) and Section
7.5(d) with respect to the General Partner shall not include any Group Member or
any Subsidiary of a Group Member.
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(f) Anything in this Agreement to the contrary notwithstanding, to
the extent that provisions of Sections 7.7, 7.8, 7.9, 7.10 or other Sections
of this Agreement purport or are interpreted to have the effect of
restricting the fiduciary duties that might otherwise, as a result of
Delaware or other applicable law, be owed by the General Partner to the
Partnership and its Limited Partners, or to constitute a waiver or consent by
the Limited Partners to any such restriction, such provisions shall be
inapplicable and have no effect in determining whether the General Partner
has complied with its fiduciary duties in connection with determinations made
by it under Section 7.5(a).
SECTION 7.6 LOANS FROM THE GENERAL PARTNER; LOANS OR CONTRIBUTIONS FROM
THE PARTNERSHIP; CONTRACTS WITH AFFILIATES; CERTAIN
RESTRICTIONS ON THE GENERAL PARTNER
(a) The General Partner or its Affiliates may lend to any Group
Member or JV Entity, and any Group Member or JV Entity may borrow from the
General Partner or any of its Affiliates, funds needed or desired by the
Group Member or the JV Entity for such periods of time and in such amounts as
the General Partner may determine; provided, however, that in any such case
the lending party may not charge the borrowing party interest at a rate
greater than the rate that would be charged the borrowing party or impose
terms less favorable to the borrowing party than would be charged or imposed
on the borrowing party by unrelated lenders on comparable loans made on an
arm's-length basis (without reference to the lending party's financial
abilities or guarantees). The borrowing party shall reimburse the lending
party for any costs (other than any additional interest costs) incurred by
the lending party in connection with the borrowing of such funds. For
purposes of this Section 7.6(a) and Section 7.6(b), the term "Group Member"
shall include any Affiliate of a Group Member that is controlled by the Group
Member. No Group Member may lend funds to the General Partner or any of its
Affiliates (other than the MLP, a Subsidiary of the MLP or a Subsidiary of
another Group Member).
(b) The Partnership may lend or contribute to any Group Member or
JV Entity, and any Group Member or JV Entity may borrow from the Partnership,
funds on terms and conditions established in the sole discretion of the
General Partner; provided, however, that the Partnership may not charge the
Group Member or JV Entity interest at a rate less than the rate that would be
charged to the Group Member or JV Entity (without reference to the General
Partner's financial abilities or guarantees) by unrelated lenders on
comparable loans. The foregoing authority shall be exercised by the General
Partner in its sole discretion and shall not create any right or benefit in
favor of any Group Member, JV Entity or any other Person.
(c) The General Partner may itself, or may enter into an agreement
with any of its Affiliates to, render services to a Group Member, JV Entity
or to the General Partner in the discharge of its duties as general partner
of the Partnership. Any services rendered to a Group Member or JV Entity by
the General Partner or any of its Affiliates shall be on terms that are fair
and reasonable to the Partnership; provided, however, that the requirements
of this Section 7.6(c) shall be deemed satisfied as to (i) any transaction
approved by Special Approval, (ii) any transaction, the terms of which are no
less favorable to such Group Member or JV Entity than those generally being
provided to or available from unrelated third parties or (iii) any
transaction that, taking
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into account the totality of the relationships between the parties involved
(including other transactions that may be particularly favorable or
advantageous to such Group Member or JV Entity), is equitable to such Group
Member or JV Entity. The provisions of Section 7.4 shall apply to the
rendering of services described in this Section 7.6(c).
(d) The Partnership Group may transfer assets to joint ventures,
other partnerships, corporations, limited liability companies or other
business entities in which it is or thereby becomes a participant upon such
terms and subject to such conditions as are consistent with this Agreement
and applicable law.
(e) Neither the General Partner nor any of its Affiliates shall
sell, transfer or convey any property to, or purchase any property from, the
Partnership, any other Group Member or any JV Entity, directly or indirectly,
except pursuant to transactions that are fair and reasonable to the
Partnership, provided, however, that the requirements of this Section 7.6(e)
shall be deemed to be satisfied as to (i) the transactions effected pursuant
to Section 5.2, the Purchase and Sale Agreement and any other transactions
described in or contemplated by the Purchase and Sale Agreement, (ii) any
transaction approved by Special Approval, (iii) any transaction, the terms of
which are no less favorable to the Partnership than those generally being
provided to or available from unrelated third parties, or (iv) any
transaction that, taking into account the totality of the relationships
between the parties involved (including other transactions that may be
particularly favorable or advantageous to the (Partnership), is equitable to
the Partnership.
(f) The General Partner and its Affiliates will have no obligation
to permit any Group Member or JV Entity to use any facilities or assets of
the General Partner and its Affiliates, except as may be provided in
contracts entered into from time to time specifically dealing with such use,
nor shall there be any obligation on the part of the General Partner or its
Affiliates to enter into such contracts.
(g) Without limitation of Sections 7.6(a) through 7.6(f), and
notwithstanding anything to the contrary in this Agreement (including
Sections 7.6(a) through 7.6(f)), (i) the existence of the conflicts of
interest described in the Registration Statement as may be applicable,
MUTATIS MUTANDIS, to the Partners of the Partnership, (ii) the Revolving
Credit Facility described in the Registration Statement and any extension,
refunding or replacement on substantially similar terms, including interest
rate, and (iii) the Credit Agreement with Bank One, NA relating to the three
year US$30 million loan to the MLP, are hereby approved by all Partners.
SECTION 7.7 INDEMNIFICATION
(a) To the fullest extent permitted by law but subject to the
limitations expressly provided in this Agreement, all Indemnitees shall be
indemnified and held harmless by the Partnership from and against any and all
losses, claims, damages, liabilities, joint or several, expenses (including
legal fees and expenses), judgments, fines, penalties, interest, settlements
or other amounts arising from any and all claims, demands, actions, suits or
proceedings, whether civil, criminal, administrative or investigative, in
which any Indemnitee may be involved, or is threatened to be involved, as a
party or
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otherwise, by reason of its status as an Indemnitee; provided, that in each
case the Indemnitee acted in good faith and in a manner that such Indemnitee
reasonably believed to be in, or (in the case of a Person other than the
General Partner) not opposed to, the best interests of the Partnership and,
with respect to any criminal proceeding, had no reasonable cause to believe
its conduct was unlawful; provided, further, no indemnification pursuant to
this Section 7.7 shall be available to the General Partner with respect to
its obligations incurred pursuant to the Purchase and Sale Agreement (other
than obligations incurred by the General Partner on behalf of the MLP or the
Partnership). The termination of any action, suit or proceeding by judgment,
order, settlement, conviction or upon a plea of nolo contendere, or its
equivalent, shall not create a presumption that the Indemnitee acted in a
manner contrary to that specified above. Any indemnification pursuant to this
Section 7.7 shall be made only out of the assets of the Partnership, it being
agreed that the General Partner shall not be personally liable for such
indemnification and shall have no obligation to contribute or loan any monies
or property to the Partnership to enable it to effectuate such
indemnification.
(b) To the fullest extent permitted by law, expenses (including
legal fees and expenses) incurred by an Indemnitee who is indemnified
pursuant to Section 7.7(a) in defending any claim, demand, action, suit or
proceeding shall, from time to time, be advanced by the Partnership prior to
the final disposition of such claim, demand, action, suit or proceeding upon
receipt by the Partnership of any undertaking by or on behalf of the
Indemnitee to repay such amount if it shall be determined that the Indemnitee
is not entitled to be indemnified as authorized in this Section 7.7.
(c) The indemnification provided by this Section 7.7 shall be in
addition to any other rights to which an Indemnitee may be entitled under any
agreement, pursuant to any vote of the Partners, as a matter of law or
otherwise, both as to actions in the Indemnitee's capacity as an Indemnitee
and as to actions in any other capacity (including any capacity under the
Underwriting Agreement), and shall continue as to an Indemnitee who has
ceased to serve in such capacity and shall inure to the benefit of the heirs,
successors, assigns and administrators of the Indemnitee.
(d) The Partnership may purchase and maintain (or reimburse the
General Partner or its Affiliates for the cost of) insurance, on behalf of
the General Partner, its Affiliates and such other Persons as the General
Partner shall determine, against any liability that may be asserted against
or expense that may be incurred by such Person in connection with the
Partnership's activities or such Person's activities on behalf of the
Partnership, regardless of whether the Partnership would have the power to
indemnify such Person against such liability under the provisions of this
Agreement.
(e) For purposes of this Section 7.7, the Partnership shall be
deemed to have requested an Indemnitee to serve as fiduciary of an employee
benefit plan whenever the performance by it of its duties to the Partnership
also imposes duties on, or otherwise involves services by, it to the plan or
participants or beneficiaries of the plan; excise taxes assessed on an
Indemnitee with respect to an employee benefit plan pursuant to applicable
law shall constitute "fines" within the meaning of Section 7.7(a); and action
taken or omitted by it with respect to any employee benefit plan in the
performance of its duties for a purpose reasonably believed by it to be in
the interest of the participants and
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beneficiaries of the plan shall be deemed to be for a purpose which is in, or
not opposed to, the best interests of the Partnership.
(f) In no event may an Indemnitee subject the Limited Partners to
personal liability by reason of the indemnification provisions set forth in
this Agreement.
(g) An Indemnitee shall not be denied indemnification in whole or
in part under this Section 7.7 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the
transaction was otherwise permitted by the terms of this Agreement.
(h) The provisions of this Section 7.7 are for the benefit of the
Indemnitees, their heirs, successors, assigns and administrators and shall
not be deemed to create any rights for the benefit of any other Persons.
(i) No amendment, modification or repeal of this Section 7.7 or
any provision hereof shall in any manner terminate, reduce or impair the
right of any past, present or future Indemnitee to be indemnified by the
Partnership, nor the obligations of the Partnership to indemnify any such
Indemnitee under and in accordance with the provisions of this Section 7.7 as
in effect immediately prior to such amendment, modification or repeal with
respect to claims arising from or relating to matters occurring, in whole or
in part, prior to such amendment, modification or repeal, regardless of when
such claims may arise or be asserted.
SECTION 7.8 LIABILITY OF INDEMNITEES
(a) Notwithstanding anything to the contrary set forth in this
Agreement, no Indemnitee shall be liable for monetary damages to the
Partnership, the Limited Partners, the Assignees or any other Persons who
have acquired interests in the Units or other MLP Securities, for losses
sustained or liabilities incurred as a result of any act or omission if such
Indemnitee acted in good faith.
(b) Subject to its obligations and duties as General Partner set
forth in Section 7.1(a), the General Partner may exercise any of the powers
granted to it by this Agreement and perform any of the duties imposed upon it
hereunder either directly or by or through its agents, and the General
Partner shall not be responsible for any misconduct or negligence on the part
of any such agent appointed by the General Partner in good faith.
(c) To the extent that, at law or in equity, an Indemnitee has
duties (including fiduciary duties) and liabilities relating thereto to the
Partnership or to the Limited Partners, the General Partner and any other
Indemnitee acting in connection with the Partnership's business or affairs
shall not be liable to the Partnership or to any Partner for its good faith
reliance on the provisions of this Agreement. The provisions of this
Agreement, to the extent that they restrict or otherwise modify the duties
and liabilities of an Indemnitee otherwise existing at law or in equity, are
agreed by the Partners to replace such other duties and liabilities of such
Indemnitee.
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(d) Any amendment, modification or repeal of this Section 7.8 or
any provision hereof shall be prospective only and shall not in any way
affect the limitations on the liability to the Partnership, the Limited
Partners, the General Partner, and the Partnership's and General Partner's
directors, officers and employees under this Section 7.8 as in effect
immediately prior to such amendment, modification or repeal with respect to
claims arising from or relating to matters occurring, in whole or in part,
prior to such amendment, modification or repeal, regardless of when such
claims may arise or be asserted.
SECTION 7.9 RESOLUTION OF CONFLICTS OF INTEREST
(a) Unless otherwise expressly provided in this Agreement or the
MLP Agreement, whenever a potential conflict of interest exists or arises
between the General Partner or any of its Affiliates, on the one hand, and
the Partnership, the MLP, any Partner or any Assignee, on the other, any
resolution or course of action by the General Partner or its Affiliates in
respect of such conflict of interest shall be permitted and deemed approved
by all Partners, and shall not constitute a breach of this Agreement or the
MLP Agreement, of any agreement contemplated herein or therein, or of any
duty stated or implied by law or equity, if the resolution or course of
action is, or by operation of this Agreement is deemed to be, fair and
reasonable to the Partnership. The General Partner shall be authorized but
not required in connection with its resolution of such conflict of interest
to seek Special Approval of such resolution. Any conflict of interest and any
resolution of such conflict of interest shall be conclusively deemed fair and
reasonable to the Partnership if such conflict of interest or resolution is
(i) approved by Special Approval (as long as the material facts known to the
General Partner or any of its Affiliates regarding any proposed transaction
were disclosed to the Conflicts Committee at the time it gave its approval),
(ii) on terms no less favorable to the Partnership than those generally being
provided to or available from unrelated third parties or (iii) fair to the
Partnership, taking into account the totality of the relationships between
the parties involved (including other transactions that may be particularly
favorable or advantageous to the Partnership). The General Partner may also
adopt a resolution or course of action that has not received Special
Approval. The General Partner (including the Conflicts Committee in
connection with Special Approval) shall be authorized in connection with its
determination of what is "fair and reasonable" to the Partnership and in
connection with its resolution of any conflict of interest to consider (A)
the relative interests of any party to such conflict, agreement, transaction
or situation and the benefits and burdens relating to such interest; (B) any
customary or accepted industry practices and any customary or historical
dealings with a particular Person; (C) any applicable generally accepted
accounting practices or principles; and (D) such additional factors as the
General Partner (including the Conflicts Committee) determines in its sole
discretion to be relevant, reasonable or appropriate under the circumstances.
Nothing contained in this Agreement, however, is intended to nor shall it be
construed to require the General Partner (including the Conflicts Committee)
to consider the interests of any Person other than the Partnership. In the
absence of bad faith by the General Partner, the resolution, action or terms
so made, taken or provided by the General Partner with respect to such matter
shall not constitute a breach of this Agreement or any other agreement
contemplated herein or a breach of any standard of care or duty imposed
herein or therein or, to the extent permitted by law, under the Delaware Act
or any other law, rule or regulation.
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(b) Whenever this Agreement or any other agreement contemplated
hereby provides that the General Partner or any of its Affiliates is
permitted or required to make a decision (i) in its "sole discretion" or
"discretion," that it deems "necessary or appropriate" or "necessary or
advisable" or under a grant of similar authority or latitude, except as
otherwise provided herein, the General Partner or such Affiliate shall be
entitled to consider only such interests and factors as it desires and shall
have no duty or obligation to give any consideration to any interest of, or
factors affecting, the Partnership, any other Group Member or JV Entity, any
Limited Partner or any Assignee, (ii) it may make such decision in its sole
discretion (regardless of whether there is a reference to "sole discretion"
or "discretion") unless another express standard is provided for, or (iii) in
"good faith" or under another express standard, the General Partner or such
Affiliate shall act under such express standard and shall not be subject to
any other or different standards imposed by this Agreement, the MLP
Agreement, any other agreement contemplated hereby or under the Delaware Act
or any other law, rule or regulation. In addition, any actions taken by the
General Partner or such Affiliate consistent with the standards of
"reasonable discretion" set forth in the definition of Available Cash shall
not constitute a breach of any duty of the General Partner to the Partnership
or the Limited Partners. The General Partner shall have no duty, express or
implied, to sell or otherwise dispose of any asset of the Partnership Group
other than in the ordinary course of business. No borrowing by any Group
Member or the approval thereof by the General Partner shall be deemed to
constitute a breach of any duty of the General Partner to the Partnership or
the Limited Partners by reason of the fact that the purpose or effect of such
borrowing is directly or indirectly to (A) enable distributions to the
General Partner or its Affiliates to exceed 1.0101% of the total amount
distributed to all Partners or (B) hasten the expiration of the Subordination
Period or the conversion of any Subordinated Units into Common Units.
(c) Whenever a particular transaction, arrangement or resolution
of a conflict of interest is required under this Agreement to be "fair and
reasonable" to any Person, the fair and reasonable nature of such
transaction, arrangement or resolution shall be considered in the context of
all similar or related transactions.
(d) The Limited Partner hereby authorizes the General Partner, on
behalf of the Partnership as a partner or member of a Group Member, to
approve of actions by the general partner or managing member of such Group
Member similar to those actions permitted to be taken by the General Partner
pursuant to this Section 7.9.
SECTION 7.10 OTHER MATTERS CONCERNING THE GENERAL PARTNER
(a) The General Partner may rely and shall be protected in acting
or refraining, from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, bond, debenture
or other paper or document believed by it to be genuine and to have been
signed or presented by the proper party or parties.
(b) The General Partner may consult with legal counsel,
accountants, appraisers, management consultants, investment bankers and other
consultants and advisers selected by it, and any act taken or omitted to be
taken in reliance upon the opinion (including an Opinion of Counsel) of such
Persons as to matters that the General
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Partner reasonably believes to be within such Person's professional or expert
competence and in accordance with such opinion shall be conclusively presumed
to have been done or omitted in good faith.
(c) The General Partner shall have the right, in respect of any of
its rights, powers or obligations hereunder, to act through any of its duly
authorized officers, a duly appointed attorney or attorneys-in-fact or the
duly authorized officers of the Partnership.
(d) Any standard of care and duty imposed by this Agreement or
under the Delaware Act or any applicable law, rule or regulation shall be
modified, waived or limited, to the extent permitted by law, as required to
permit the General Partner to act under this Agreement or any other agreement
contemplated by this Agreement and to make any decision pursuant to the
authority prescribed in this Agreement, so long as such action is reasonably
believed by the General Partner to be in, or not inconsistent with, the best
interests of the Partnership.
SECTION 7.11 RELIANCE BY THIRD PARTIES
Notwithstanding anything to the contrary in this Agreement, any Person
dealing with the Partnership shall be entitled to assume that (i) the General
Partner and (ii) any officer or attorney in-fact of the General Partner
authorized by the General Partner to act on behalf of and in the name of the
Partnership has full power and authority to encumber, sell or otherwise use
in any manner any and all assets of the Partnership and to enter into any
authorized contracts on behalf of the Partnership, and such Person shall be
entitled to deal with the General Partner or any such officer or
attorney-in-fact as if it were the Partnership's sole party in interest, both
legally and beneficially. Each Limited Partner hereby waives any and all
defenses or other remedies that may be available against such Person to
contest, negate or disaffirm any action of the General Partner or any such
officer or attorney-in-fact in connection with any such dealing. In no event
shall any Person dealing with the General Partner or any such officer or
attorney-in-fact be obligated to ascertain that the terms of the Agreement
have been complied with or to inquire into the necessity or expedience of any
act or action of the General Partner or any such officer or attorney-in-fact.
Each and every certificate, document or other instrument executed on behalf
of the Partnership by the General Partner or any such officer or
attorney-in-fact shall be conclusive evidence in favor of any and every
Person relying thereon or claiming thereunder that (a) at the time of the
execution and delivery of such certificate, document or instrument, this
Agreement was in full force and effect, (b) the Person executing and
delivering such certificate, document or instrument was duly authorized and
empowered to do so for and on behalf of the Partnership and (c) such
certificate, document or instrument was duly executed and delivered in
accordance with the terms and provisions of this Agreement and is binding
upon the Partnership.
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ARTICLE VIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS
SECTION 8.1 RECORDS AND ACCOUNTING
The General Partner shall keep or cause to be kept at the principal
office of the Partnership appropriate books and records with respect to the
Partnership's business, including all books and records necessary to provide
to the Limited Partners any information required to be provided pursuant to
Section 3.4(a). Any books and records maintained by or on behalf of the
Partnership in the regular course of its business, including books of account
and records of Partnership proceedings, may be kept on, or be in the form of,
computer disks, hard drives, punch cards, magnetic tape, photographs,
micrographics or any other information storage device; provided, that the
books and records so maintained are convertible into clearly legible written
form within a reasonable period of time. The books of the Partnership shall
be maintained, for financial reporting purposes, on an accrual basis in
accordance with U.S. GAAP.
SECTION 8.2 FISCAL YEAR
The fiscal year of the Partnership shall be a fiscal year ending
December 31.
ARTICLE IX
TAX MATTERS
SECTION 9.1 TAX RETURNS AND INFORMATION
The Partnership shall timely file all returns of the Partnership that
are required for federal, state and local income tax purposes on the basis of
the accrual method and a taxable year ending on December 31. The tax
information reasonably required by the Partners for federal and state income
tax reporting purposes with respect to a taxable year shall be furnished to
them within 90 days of the close of the calendar year in which the
Partnership's taxable year ends. The classification, realization and
recognition of income, gain, losses and deductions and other items shall be
on the accrual method of accounting for federal income tax purposes.
SECTION 9.2 TAX ELECTIONS
(a) The Partnership shall make the election under Section 754 of
the Code in accordance with applicable regulations thereunder, subject to the
reservation of the right to seek to revoke any such election upon the General
Partner's determination that such revocation is in the best interests of the
Limited Partners.
(b) The Partnership shall elect to deduct expenses incurred in
organizing the Partnership ratably over a sixty-month period as provided in
Section 709 of the Code.
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(c) Except as otherwise provided herein, the General Partner shall
determine whether the Partnership should make any other elections permitted
by the Code.
SECTION 9.3 TAX CONTROVERSIES
Subject to the provisions hereof, the General Partner is designated as
the Tax Matters Partner (as defined in the Code) and is authorized and
required to represent the Partnership (at the Partnership's expense) in
connection with all examinations of the Partnership's affairs by tax
authorities, including resulting administrative and judicial proceedings, and
to expend Partnership funds for professional services and costs associated
therewith. Each Partner agrees to cooperate with the General Partner and to
do or refrain from doing any or all things reasonably required by the General
Partner to conduct such proceedings.
SECTION 9.4 WITHHOLDING
Notwithstanding any other provision of this Agreement, the General
Partner is authorized to take any action that it determines in its discretion
to be necessary or appropriate to cause the Partnership to comply with any
withholding requirements established under the Code or any other federal,
state or local law including, without limitation, pursuant to Sections 1441,
1442, 1445 and 1446 of the Code. To the extent that the Partnership is
required or elects to withhold and pay over to any taxing authority any
amount resulting from the allocation or distribution of income to any Partner
or Assignee (including, without limitation, by reason of Section 1446 of the
Code), the amount withheld may at the discretion of the General Partner be
treated by the Partnership as a distribution of cash pursuant to Section 6.3
in the amount of such withholding from such Partner.
ARTICLE X
ADMISSION OF PARTNERS
SECTION 10.1 ADMISSION OF PARTNERS
The General Partner shall be the sole general partner of the Partnership
and the MLP shall be the sole limited partner of the Partnership.
SECTION 10.2 ADMISSION OF SUBSTITUTED LIMITED PARTNER
By transfer of a Limited Partner Interest in accordance with Article IV,
the transferor shall be deemed to have given the transferee the right to seek
admission as a Substituted Limited Partner subject to the conditions of, and
in the manner permitted under, this Agreement. A transferor of a Limited
Partner Interest shall, however, only have the authority to convey to a
purchaser or other transferee (a) the right to negotiate such Limited Partner
Interest to a purchaser or other transferee and (b) the right to request
admission as a Substituted Limited Partner to such purchaser or other
transferee in
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respect of the transferred Limited Partner Interests. Each transferee of a
Limited Partner Interest shall be an Assignee and be deemed to have applied
to become a Substituted Limited Partner with respect to the Limited Partner
Interests so transferred to such Person. Such Assignee shall become a
Substituted Limited Partner (x) at such time as the General Partner consents
thereto, which consent may be given or withheld in the General Partner's
discretion, and (y) when any such admission is shown on the books and records
of the Partnership. If such consent is withheld, such transferee shall remain
an Assignee. An Assignee shall have an interest in the Partnership equivalent
to that of a Limited Partner with respect to allocations and distributions,
including liquidating distributions, of the Partnership. With respect to
voting rights attributable to Limited Partner Interests that are held by
Assignees, the General Partner shall be deemed to be the Limited Partner with
respect thereto and shall, in exercising the voting rights in respect of such
Limited Partner Interests op any matter, vote such Limited Partner Interests
at the written direction of the Assignee who is the holder of such Limited
Partner Interests. If no such written direction is received, such Partnership
Interests will not be voted. An Assignee shall have no other rights of a
Limited Partner.
SECTION 10.3 ADMISSION OF ADDITIONAL LIMITED PARTNER
(a) A Person (other than the General Partner, the MLP or a
Substituted Limited Partner) who makes a Capital Contribution to the
Partnership in accordance with this Agreement shall be admitted to the
Partnership as an Additional Limited Partner only upon furnishing to the
General Partner (i) evidence of acceptance in form satisfactory to the
General Partner of all of the terms and conditions of this Agreement,
including the power of attorney granted in Section 2.6, and (ii) such other
documents or instruments as may be required in the discretion of the General
Partner to effect such Person's admission as an Additional Limited Partner.
(b) Notwithstanding anything to the contrary in this Section 10.3,
no Person shall be admitted as an Additional Limited Partner without the
consent of the General Partner, which consent may be given or withheld in the
General Partner's discretion. The admission of any Person as an Additional
Limited Partner shall become effective on the date upon which the name of
such Person is recorded as such in the books and records of the Partnership,
following the consent of the General Partner to such admission.
SECTION 10.4 ADMISSION OF SUCCESSOR OR TRANSFEREE GENERAL PARTNER
A successor General Partner approved pursuant to Section 1.11 or 11.2 or
the transferee of or successor to all of the General Partner's Partnership
Interest pursuant to Section 4.2 who is proposed to be admitted as a
successor General Partner shall, subject to compliance with the terms of
Section 11.3, if applicable, be admitted to the Partnership as the General
Partner, effective immediately prior to the withdrawal or removal of the
predecessor or transferring General Partner pursuant to Section 11.1 or 11.2
or the transfer of the General Partner Interest pursuant to Section 4.2,
provided, however, that no such successor shall be admitted to the
Partnership until compliance with the terms of Section 4.2 has occurred and
such successor has executed and delivered such other documents or instruments
as may be required to effect such admission. Any such
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successor shall, subject to the terms hereof, carry on the business of the
members of the Partnership Group without dissolution.
SECTION 10.5 AMENDMENT OF AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP
To effect the admission to the Partnership of any Partner, the General
Partner shall take all steps necessary and appropriate under the Delaware Act
to amend the records of the Partnership to reflect such admission and, if
necessary, to prepare as soon as practicable an amendment to this Agreement
and, if required by law, the General Partner shall prepare and file an
amendment to the Certificate of Limited Partnership, and the General Partner
may for this purpose, among others, exercise the power of attorney granted
pursuant to Section 2.6.
ARTICLE XI
WITHDRAWAL OR REMOVAL OF PARTNERS
SECTION 11.1 WITHDRAWAL OF THE GENERAL PARTNER
(a) The General Partner shall be deemed to have withdrawn from the
Partnership upon the occurrence of any one of the following events (each such
event herein referred to as an "Event of Withdrawal");
(i) The General Partner voluntarily withdraws from the
Partnership by giving written notice to the other Partners;
(ii) The General Partner transfers all of its rights as
General Partner pursuant to Section 4.2;
(iii) The General Partner is removed pursuant to Section 11.2;
(iv) The General Partner withdraws from, or is removed as the
General Partner of, the MLP;
(v) The General Partner (A) makes a general assignment for
the benefit of creditors; (B) files a voluntary bankruptcy petition
for relief under Chapter 7 of the United States Bankruptcy Code;
(C) files a petition or answer seeking for itself a liquidation,
dissolution or similar relief (but not a reorganization) under any
law; (D) files an answer or other pleading admitting or failing to
contest the material allegations of a petition filed against the
General Partner in a proceeding of the type described in clauses
(A)-(C) of this Section 11.1(a)(v); or (E) seeks, consents to or
acquiesces in the appointment of a trustee (but not a debtor in
possession), receiver or liquidator of the General Partner or of
all or any substantial part of its properties;
(vi) A final and non-appealable order of relief under Chapter
7 of the United States Bankruptcy Code is entered by a court with
appropriate jurisdiction pursuant to a voluntary or involuntary
petition by or against the General Partner; or
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(vii) (A) in the event the General Partner is a corporation, a
certificate of dissolution or its equivalent is filed for the
General Partner, or 90 days expire after the date of notice to the
General Partner of revocation of its charter without a
reinstatement of its charter, under the laws of its state of
incorporation; (B) in the event the General Partner is a
partnership or limited liability company, the dissolution and
commencement of winding up of the General Partner; (C) in the event
the General Partner is acting in such capacity by virtue of being a
trustee of a trust, the termination of the trust; (D) in the event
the General Partner is a natural person, his death or adjudication
of incompetence; and (E) otherwise in the event of the termination
of the General Partner.
If an Event of Withdrawal specified in Section 11.1(a)(iv) (with respect
to withdrawal), (v), (vi) or (vii)(A), (B), (C) or (E) occurs, the
withdrawing General Partner shall give notice to the Limited Partners within
30 days after such occurrence. The Partners hereby agree that only the Events
of Withdrawal described in this Section 11.1 shall result in the withdrawal
of the General Partner from the Partnership.
(b) Withdrawal of the General Partner from the Partnership upon
the occurrence of an Event of Withdrawal shall not constitute a breach of
this Agreement under the following circumstances: (i) at any time during the
period beginning on the date of this agreement and ending at 12:00 midnight,
Eastern Standard Time, on June 30, 2009, the General Partner voluntarily
withdraws by giving at least 90 days' advance notice of its intention to
withdraw to the Limited Partners; provided that prior to the effective date
of such withdrawal, the withdrawal is approved by the Limited Partners and
the General Partner delivers to the Partnership an Opinion of Counsel
("WITHDRAWAL OPINION OF COUNSEL") that such withdrawal (following the
selection of the successor General Partner) would not result in the loss of
the limited liability of any Limited Partner or of the limited partners of
the MLP or cause the Partnership or the MLP to be treated as an association
taxable as a corporation or otherwise to be taxed as an entity for federal
income tax purposes (to the extent not previously treated as such); (ii) at
any time after 12:00 midnight, Eastern Standard Time, on June 30, 2009, the
General Partner voluntarily withdraws by giving at least 90 days' advance
notice to the Limited Partners, such withdrawal to take effect on the date
specified in such notice; (iii) at any time that the General Partner ceases
to be the General Partner pursuant to Section 11.1(a)(ii)(iii) or (iv). If
the General Partner gives a notice of withdrawal pursuant to Section
11.1(a)(i) hereof or Section 11.1(a)(i) of the MLP Agreement, the Limited
Partners may, prior to the effective date of such withdrawal, elect a
successor General Partner; provided, however, that such successor shall be
the same person, if any, that is elected by the limited partners of the MLP
pursuant to Section 11.1 of the MLP Agreement as the successor to the general
partner of the MLP. If, prior to the effective date of the General Partner's
withdrawal, a successor is not selected by the Limited Partners as provided
herein or the Partnership does not receive a Withdrawal Opinion of Counsel,
the Partnership shall be dissolved in accordance with Section 12.1. Any
successor General Partner elected in accordance with the terms of this
Section 11.1 shall be subject to the provisions of Section 10.3.
SECTION 11.2 REMOVAL OF THE GENERAL PARTNER
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The General Partner shall be removed if the General Partner is removed
as the general partner of the MLP pursuant to Section 11.2 of the MLP
Agreement. Such removal shall be effective concurrently with the
effectiveness of the removal of the General Partner as the general partner of
the MLP pursuant to the terms of the MLP Agreement. If a successor general
partner for the MLP is elected in connection with the removal of the General
Partner, such successor general partner for the MLP shall, upon admission
pursuant to Article X of the MLP Agreement, automatically become the
successor General Partner of the Partnership. The admission of any such
successor General Partner to the Partnership shall be subject to the
provisions of Section 10.3.
SECTION 11.3 INTEREST OF DEPARTING PARTNER
(a) The Partnership Interest of the Departing Partner departing as
a result of withdrawal or removal pursuant to Section 11.1 or 11.2 shall
(unless it is otherwise required to be converted into Common Units pursuant
to Section 11.3(b) of the MLP Agreement) be purchased by the successor to the
Departing Partner for cash in the manner specified in the MLP Agreement. Such
purchase (or conversion into Common Units, as applicable) shall be a
condition to the admission to the Partnership of the successor as the General
Partner. Any successor General Partner shall indemnify the Departing Partner
as to all debts and liabilities of the Partnership arising on or after the
effective date of the withdrawal or removal of the Departing Partner.
(b) The Departing Partner shall be entitled to receive all
reimbursements due such Departing Partner pursuant to Section 7.4, including
any employee-related liabilities (including severance liabilities), incurred
in connection with the termination of any employees employed by such
Departing Partner for the benefit of the Partnership.
SECTION 11.4 WITHDRAWAL OF A LIMITED PARTNER
Without the prior written consent of the General Partner, which may be
granted or withheld in its sole discretion, and except as provided in Section
10.1, no Limited Partner shall have the right to withdraw from the
Partnership.
ARTICLE XII
DISSOLUTION AND LIQUIDATION
SECTION 12.1 DISSOLUTION
The Partnership shall not be dissolved by the admission of Substituted
Limited Partners or Additional Limited Partners or by the admission of a
successor General Partner in accordance with the terms of this Agreement.
Upon the removal or withdrawal of the General Partner, if a successor General
Partner is elected pursuant to Section 11.1 or 11.2, the Partnership shall
not be dissolved and such successor General Partner shall continue the
business of the Partnership. The Partnership shall dissolve, and (subject to
Section 12.2) its affairs shall be wound up, upon:
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(a) the expiration of its term as provided in Section 2.7;
(b) an Event of Withdrawal of the General Partner as provided in
Section 11.1(a) (other than Section 11.1(a)(ii)), unless a successor is
elected and an Opinion of Counsel is received as provided in Section 11.1(b)
or 11.2 and such successor is admitted to the Partnership pursuant to
Section 10.3;
(c) an election to dissolve the Partnership by the General Partner
that is approved by all of the Limited Partners;
(d) the entry of a decree of judicial dissolution of the
Partnership the provisions of the Delaware Act;
(e) the sale of all or substantially all of the assets and
properties of the Partnership Group; or
(f) the dissolution of the MLP.
SECTION 12.2 CONTINUATION OF THE BUSINESS OF THE PARTNERSHIP AFTER DISSOLUTION
Upon (a) dissolution of the Partnership following an Event of Withdrawal
caused by the withdrawal or removal of the General Partner as provided in
Section 11.1(a)(i) or (iii) and the failure of the Partners to select a
successor to such Departing Partner pursuant to Section 11.1 or 11.2, then
within 90 days thereafter, or (b) dissolution of the Partnership upon an
event constituting an Event of Withdrawal as defined in Section 11.1(a)(iv),
(v) or (vi), then, to the maximum extent permitted by law, within 180 days
thereafter, all of the Limited Partners may elect to reconstitute the
Partnership and continue its business on the same terms and conditions set
forth in this Agreement by forming a new limited partnership on terms
identical to those set forth in this Agreement and having as a general
partner a Person approved by a majority in interest of the Limited Partners
(subject to the proviso in the last sentence of this Section 12.2). In
addition, upon dissolution of the Partnership pursuant to Section 12.1(f), if
the MLP is reconstituted pursuant to Section 12.2 of the MLP Agreement, the
reconstituted MLP may, within 180 days after such event of dissolution,
acting alone, regardless of whether there are any other Limited Partners,
elect to reconstitute the Partnership in accordance with the immediately
preceding sentence. Upon any such election by the Limited Partners or the
MLP, as the case may be, all Partners shall be bound thereby and shall be
deemed to have approved same. Unless such an election is made within the
applicable time period as set forth above, the Partnership shall conduct only
activities necessary to wind up its affairs. If such an election is so made,
then:
(a) the reconstituted Partnership shall continue until the end of
the term set forth in Section 2.7 unless earlier dissolved in accordance with
this Article XII;
(b) if the successor General Partner is not the former General
Partner, then the interest of the former General Partner shall be purchased
by the successor General Partner or converted into Common Units as provided
in the MLP Agreement; and
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(c) all necessary steps shall be taken to cancel this Agreement
and the Certificate of Limited Partnership and to enter into and, as
necessary, to file a new partnership agreement and certificate of limited
partnership, and the successor General Partner may for this purpose exercise
the power of attorney granted the General Partner pursuant to Section 2.6;
provided, that the right of the Limited Partners to approve a successor
General Partner and to reconstitute and to continue the business of the
Partnership shall not exist and may not be exercised unless the Partnership
has received an Opinion of Counsel that (x) the exercise of the right would
not result in the loss of limited liability of the Limited Partners or any
limited partner of the MLP and (y) neither the Partnership, the reconstituted
limited partnership, the MLP nor any Group Member would be treated as an
association taxable as a corporation or otherwise be taxable as an entity for
federal income tax purposes upon the exercise of such right to continue.
SECTION 12.3 LIQUIDATOR
Upon dissolution of the Partnership, unless the Partnership is continued
under an election to reconstitute and continue the Partnership pursuant to
Section 12.2, the General Partner shall select one or more Persons to act as
Liquidator. The Liquidator (if other than the General Partner) shall be
entitled to receive such compensation for its services as may be approved by
a majority in interest of the Limited Partners. The Liquidator (if other than
the General Partner) shall agree not to resign at any time without 15 days'
prior notice and may be removed at any time, with or without, cause, by
notice of removal approved by a majority in interest of the Limited Partners.
Upon dissolution, removal or resignation of the Liquidator, a successor and
substitute Liquidator (who shall have and succeed to all rights, powers and
duties of the original Liquidator) shall within 30 days thereafter be
approved by at least a majority in interest of the Limited Partners, who
shall also approve the compensation payable to such Liquidator. The right to
approve a successor or substitute Liquidator in the manner provided herein
shall be deemed to refer also to any such successor or substitute Liquidator
approved in the manner herein provided. Except as expressly provided in this
Article XII, the Liquidator approved in the manner provided herein shall have
and may exercise, without further authorization or consent of any of the
parties hereto, all of the powers conferred upon the General Partner under
the terms of this Agreement (but subject to all of the applicable
limitations, contractual and otherwise, upon the exercise of such powers,
other than the limitation on sale or other disposition set forth in Section
7.3(b)) to the extent necessary or desirable in the good faith judgment of
the Liquidator to carry out the duties and functions of the Liquidator
hereunder for and during such period of time as shall be reasonably required
in the good faith judgment of the Liquidator to complete the winding up and
liquidation of the Partnership as provided for herein.
SECTION 12.4 LIQUIDATION
The Liquidator shall proceed to dispose of the assets of the
Partnership, discharge its liabilities, and otherwise wind up its affairs in
such manner and over such period as the Liquidator determines to be in the
best interest of the Partners, subject to Section 17-804 of the Delaware Act
and the following:
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(a) DISPOSITION OF ASSETS. The assets may be disposed of by
public or private sale or by distribution in kind to one or more Partners on
such terms as the Liquidator and such Partner or Partners may agree. If any
property is distributed in kind, the Partner receiving the property shall be
deemed for purposes of Section 12.4(c) to have received cash equal to its
fair market value; and contemporaneously therewith, appropriate cash
distributions must be made to the other Partners. The Liquidator may, in its
absolute discretion, defer liquidation or distribution of the Partnership's
assets for a reasonable time if it determines that an immediate sale or
distribution of all or some of the Partnership's assets would be impractical
or would cause undue loss to the Partners. The Liquidator may, in its
absolute discretion, distribute the Partnership's assets, in whole or in
part, in kind if it determines that a sale would be impractical or would
cause undue loss to the Partners.
(b) DISCHARGE OF LIABILITIES. Liabilities of the Partnership
include amounts owed to Partners otherwise than in respect of their
distribution rights under Article VI. With respect to any liability that is
contingent, conditional or unmatured or is otherwise not yet due and payable,
the Liquidator shall either settle such claim for such amount as it thinks
appropriate or establish a reserve of cash or other assets to provide for its
payment. When paid, any unused portion of the reserve shall be distributed as
additional liquidation proceeds.
(c) LIQUIDATION DISTRIBUTIONS. All property and all cash in
excess of that required to discharge liabilities as provided in Section
12.4(b) shall be distributed to the Partners in accordance with, and to the
extent of, the positive balances in their respective Capital Accounts, as
determined after taking into account all Capital Account adjustments (other
than those made by reason of distributions pursuant to this Section 12.4(c))
for the taxable period during which the liquidation of the Partnership occurs
(with such date of occurrence being determined pursuant to Treasury
Regulation Section 1.704-1(b)(2)(ii)(g)), and such distribution shall be made
by the end of such taxable period (or, if later, within 90 days after said
date of such occurrence).
SECTION 12.5 CANCELLATION OF CERTIFICATE OF LIMITED PARTNERSHIP
Upon the completion of the distribution of Partnership cash and property
as provided in Section 12.4 in connection with the liquidation of the
Partnership, the Partnership shall be terminated and the Certificate of
Limited Partnership, and all qualifications of the Partnership as a foreign
limited partnership in jurisdictions other than the State of Delaware, shall
be canceled and such other actions as may be necessary to terminate the
Partnership shall be taken.
SECTION 12.6 RETURN OF CONTRIBUTIONS
The General Partner shall not be personally liable for, and shall have
no obligation to contribute or loan any monies or property to the Partnership
to enable it to effectuate, the return of the Capital Contributions of the
Limited Partners, or any portion thereof, it being expressly understood that
any such return shall be made solely from Partnership assets.
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SECTION 12.7 WAIVER OF PARTITION
To the maximum extent permitted by law, each Partner hereby waives any
right to partition of the Partnership property.
SECTION 12.8 CAPITAL ACCOUNT RESTORATION
No Limited Partner shall have any obligation to restore any negative
balance in its Capital Account upon liquidation of the Partnership. The
General Partner shall be obligated to restore any negative balance in its
Capital Account upon liquidation of its interest in the Partnership by the
end of the taxable period during which such liquidation occurs, or, if later,
within 90 days after the date of such liquidation.
ARTICLE XIII
AMENDMENT OF PARTNERSHIP AGREEMENT
SECTION 13.1 AMENDMENT TO BE ADOPTED SOLELY BY THE GENERAL PARTNER
Each Partner agrees that the General Partner, without the approval of
any Partner or Assignee, may amend any provision of this Agreement and
execute, swear to, acknowledge, deliver, file and record whatever documents
may be required in connection therewith, to reflect:
(a) a change in the name of the Partnership, the location of the
principal place of business of the Partnership, the registered agent of the
Partnership or the registered office of the Partnership;
(b) admission, substitution, withdrawal or removal of Partners in
accordance with this Agreement;
(c) a change that, in the sole discretion of the General Partner,
is necessary or advisable to qualify or continue the qualification of the
Partnership as a limited partnership or a partnership in which the Limited
Partners have limited liability under the laws of any state or to ensure that
no Group Member will be treated as an association taxable as a corporation or
otherwise taxed as an entity for federal income tax purposes;
(d) a change that, in the discretion of the General Partner, (i)
does not adversely affect the Limited Partners in any material respect, (ii)
is necessary or advisable to (A) satisfy any requirements, conditions or
guidelines contained in any opinion, directive, order, ruling or regulation
of any federal or state agency or judicial authority or contained in any
federal or state statute (including the Delaware Act) or (B) facilitate the
trading of limited partner interests of the MLP (including the division of
any class or
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classes of outstanding limited partner interests of the MLP into different
classes to facilitate uniformity of tax consequences within such classes of
limited partner interests of the MLP) or comply with any rule, regulation,
guideline or requirement of any National Securities Exchange on which such
limited partner interests are or will be listed for trading, compliance with
any of which the General Partner determines in its discretion to be in the
best interests of the MLP and the limited partners of the MLP, (iii) is
required to effect the intent expressed in the Registration Statement or the
intent of the provisions of this Agreement or is otherwise contemplated by
this Agreement or (iv) is required to conform the provisions of this
Agreement with the provisions of the MLP Agreement as the provisions of the
MLP Agreement may be amended, supplemented or restated from time to time;
(e) a change in the fiscal year or taxable year of the Partnership
and any changes that, in the discretion of the General Partner, are necessary
or advisable as a result of a change in the fiscal year or taxable year of
the Partnership including, if the General Partner shall so determine, a
change in the definition of "Quarter" and the dates on which distributions
are to be made by the Partnership;
(f) an amendment that is necessary, in the Opinion of Counsel, to
prevent the Partnership, or the General Partner or its directors, officers,
trustees or agents from in any manner being subjected to the provisions of
the Investment Company Act of 1940, as amended, the Investment Advisers Act
of 1940, as amended, or "plan asset" regulations adopted under the Employee
Retirement Income Security Act of 1974, as amended, regardless of whether
such are substantially similar to plan asset regulations currently applied or
proposed by the United States Department of Labor;
(g) any amendment expressly permitted in this Agreement to be made
by the General Partner acting alone;
(h) an amendment effected, necessitated or contemplated by a
Merger Agreement approved in accordance with Section 14.3;
(i) an amendment that, in the discretion of the General Partner,
is necessary or advisable to reflect, account for and deal with appropriately
the formation by the Partnership of, or investment by the Partnership in, any
corporation, partnership, joint venture, limited liability company or other
entity, in connection with the conduct by the Partnership of activities
permitted by the terms of Section 2.4;
(j) a merger or conveyance pursuant to Section 14.3(d); or
(k) any other amendments substantially similar to the forgoing.
SECTION 13.2 AMENDMENT PROCEDURES
Except with respect to amendments of the type described in Section 13.1,
all amendments to this Agreement shall be made in accordance with the
following requirements. Amendments to this Agreement may be proposed only by
or with the consent of the General Partner which consent may be given or
withheld in its sole
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discretion. A proposed amendment shall be effective upon its approval by the
Limited Partners.
ARTICLE XIV
MERGER
SECTION 14.1 AUTHORITY
The Partnership may merge or consolidate with one or more corporations,
limited liability companies, business trusts or associations, real estate
investment trusts, common law trusts or unincorporated businesses, including
a general partnership or limited partnership, formed under the laws of the
State of Delaware or any other state of the United States of America,
pursuant to a written agreement of merger or consolidation (a "MERGER
AGREEMENT") in accordance with this Article XIV.
SECTION 14.2 PROCEDURE FOR MERGER OR CONSOLIDATION
Merger or consolidation of the Partnership pursuant to this Article XIV
requires the prior approval of the General Partner. If the General Partner
shall determine, in the exercise of its discretion, to consent to the merger
or consolidation, the General Partner shall approve the Merger Agreement,
which shall set forth:
(a) The names and jurisdictions of formation or organization of
each of the business entities proposing to merge or consolidate;
(b) The name and jurisdiction of formation or organization of the
business entity that is to survive the proposed merger or consolidation (the
"SURVIVING BUSINESS ENTITY");
(c) The terms and conditions of the proposed merger or
consolidation;
(d) The manner and basis of exchanging or converting the equity
securities of each constituent business entity for, or into, cash, property
or general or limited partner interests, rights, securities or obligations of
the Surviving Business Entity; and (i) if any general or limited partner
interests, securities or rights of any constituent business entity are not to
be exchanged or converted solely for, or into, cash, property or general or
limited partner interests, rights, securities or obligations of the Surviving
Business Entity, the cash, property or general or limited partner interests,
rights, securities or obligations of any limited partnership, corporation,
trust or other entity (other than the Surviving Business Entity) which the
holders of such general or limited partner interests, securities or rights
are to receive in exchange for, or upon conversion of their general or
limited partner interests, securities or rights, and (ii) in the case of
securities represented by certificates, upon the surrender of such
certificates, which cash, property or general or limited partner interests,
rights, securities or obligations of the Surviving Business Entity or any
general or limited partnership, corporation, trust or other entity (other
than the Surviving Business Entity), or evidences thereof, are to be
delivered;
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(e) A statement of any changes in the constituent documents or the
adoption of new constituent documents (the articles or certificate of
incorporation, articles of trust, declaration of trust, certificate or
agreement of limited partnership or other similar charter or governing
document) of the Surviving Business consolidation;
(f) The effective time of the merger, which may be the date of the
filing of the certificate of merger pursuant to Section 14.4 or a later date
specified in or determinable in accordance with the Merger Agreement
(provided, that if the effective time of the merger is to be later than the
date of the filing of the certificate of merger, the effective time shall be
fixed no later than the time of the filing of the certificate of merger and
stated therein); and
(g) Such other provisions with respect to the proposed merger or
consolidation as are deemed necessary or appropriate by the General Partner.
SECTION 14.3 APPROVAL BY LIMITED PARTNERS OF MERGER OR CONSOLIDATION
(a) Except as provided in Section 14.3(d), the General Partner,
upon its approval of the Merger Agreement, shall direct that the Merger
Agreement be submitted to a vote of the Limited Partners, whether at a
special meeting or by written consent. A copy or a summary of the Merger
Agreement shall be included in or enclosed with the notice of a special
meeting or the written consent.
(b) Except as provided in Section 14.3(d), the Merger Agreement
shall be approved upon receiving the affirmative vote or consent of the
Limited Partners.
(c) Except as provided in Section 14.3(d), after such approval by
vote or consent of the Limited Partners, and at any time prior to the filing
of the certificate of merger pursuant to Section 14.4, the merger or
consolidation may be abandoned pursuant to provisions therefor, if any, set
forth in the Merger Agreement.
(d) Notwithstanding anything else contained in this Article XIV or
in this Agreement, the General Partner is permitted, in its discretion,
without Limited Partner approval, to merge the Partnership or any Group
Member into, or convey all of the Partnership's assets to, another limited
liability entity which shall be newly formed and shall have no assets,
liabilities or operations at the time of such Merger other than those it
receives from the Partnership or other Group Member if (i) the General
Partner has received an Opinion of Counsel that the merger or conveyance, as
the case may be, would not result in the loss of the limited liability of any
Limited Partner or any limited partner in the MLP or cause the Partnership or
the MLP to be treated as an association taxable as a corporation or otherwise
to be taxed as an entity for federal income tax purposes (to the extent not
previously treated as such), (ii) the sole purpose of such merger or
conveyance is to effect a mere change in the legal form of the Partnership
into another limited liability entity and (iii) the governing instruments of
the new entity provide the Limited Partners and the General Partner with the
same rights and obligations as are herein contained.
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SECTION 14.4 CERTIFICATE OF MERGER
Upon the required approval by the General Partner and the Limited
Partners of a merger Agreement, a certificate of merger shall be executed and
filed with the Secretary of State of the State of Delaware in conformity with
the requirements of the Delaware Act.
SECTION 14.5 EFFECT OF MERGER
(a) At the effective time of the certificate of merger:
(i) all of the rights, privileges and powers of each of the
business entities that has merged or consolidated, and all
property, real, personal and mixed, and all debts due to any of
those business entities and all other things and causes of action
belonging to each of those business entities, shall be vested in
the Surviving Business Entity and after the merger or consolidation
shall be the property of the Surviving Business Entity to the
extent they were property of each constituent business entity;
(ii) the title to any real property vested by deed or
otherwise in any of those constituent business entities shall not
revert and shall not in any way be impaired because of the merger
or consolidation;
(iii) all rights of creditors and all liens on or security
interests in property of any of those constituent business entities
shall be preserved unimpaired; and
(iv) all debts, liabilities and duties of those constituent
business entities shall attach to the Surviving Business Entity and
may be enforced against it to the same extent as if the debts,
liabilities and duties had been incurred or contracted by it.
(b) A merger or consolidation effected pursuant to this Article
shall not be deemed to result in a transfer or assignment of assets or
liabilities from one entity to another.
ARTICLE XV
GENERAL PROVISIONS
SECTION 15.1 ADDRESSES AND NOTICES
Any notice, demand, request, report or proxy materials required or
permitted to be given or made to a Partner or Assignee under this Agreement
shall be in writing and shall be deemed given or made when delivered in
person or when sent by first class United States mail or by other means of
written communication to the Partner at the address described below. Any
notice to the Partnership shall be deemed given if received by the General
Partner at the principal office of the Partnership designated pursuant to
Section 2.3. The General Partner may rely and shall be protected in relying
on any notice or other document from a Partner, Assignee or other Person if
believed by it to be genuine.
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SECTION 15.2 FURTHER ACTION
The parties hereto shall execute and deliver all documents, provide all
information and take or refrain from taking action as may be necessary or
appropriate to achieve the purposes of this Agreement.
SECTION 15.3 BINDING EFFECT
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.
SECTION 15.4 INTEGRATION
This Agreement constitutes the entire agreement among the parties hereto
pertaining to the subject matter hereof and supersedes all prior agreements
and understandings pertaining thereto.
SECTION 15.5 CREDITORS
None of the provisions of this Agreement shall be for the benefit of, or
shall be enforceable by, any creditor of the Partnership.
SECTION 15.6 WAIVER
No failure by any party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute a waiver of
any subsequent breach or any breach of any other covenant, duty, agreement or
condition.
SECTION 15.7 COUNTERPARTS
This Agreement may be executed in counterparts, all of which together
shall constitute an agreement binding on all the parties hereto,
notwithstanding that all such parties are not signatories to the original or
the same counterpart. Each party shall become bound by this Agreement
immediately upon affixing its signature hereto, independently of the
signature of any other party.
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SECTION 15.8 APPLICABLE LAW
This Agreement shall be construed in accordance with and governed by the
laws of the State of Delaware, without regard to the principles of conflicts
of law.
SECTION 15.9 INVALIDITY OF PROVISION
If any provision of this Agreement is or becomes invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of
the remaining provisions contained herein shall not be affected thereby.
SECTION 15.10 CONSENT OF PARTNERS
Each Partner hereby expressly consents and agrees that, whenever in this
Agreement it is specified that an action may be taken upon the affirmative
vote or consent of less than all of the Partners, such action may be so taken
upon the concurrence of less than all of the Partners and each Partner shall
be bound by the results of such action.
[REST OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
GENERAL PARTNER
TC PIPELINES GP, INC.
By: /s/ Garry P. Mihaichuk
-----------------------------------------
Name: Garry P. Mihaichuk
Title: President and Chief Executive
Officer
By: /s/ Paul F. Macgregor
-----------------------------------------
Name: Paul F. MacGregor
Title: Vice-President, Business
Department
LIMITED PARTNER:
TC PIPELINES, LP
By: TC PipeLines Gp, Inc.
Its: General Partner
By: /s/ Garry P. Mihaichuk
-----------------------------------------
Name: Garry P. Mihaichuk
Title: President and Chief Executive
Officer
By: /s/ Paul F. MacGregor
-----------------------------------------
Name: Paul F. MacGregor
Title: Vice-President, Business
Department
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