SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____ TO _____
Commission File No. 0-14147
QUESTAR PIPELINE COMPANY
(Exact name of registrant as specified in its charter)
STATE OF UTAH 87-0307414
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 11450, 79 South State Street, Salt Lake City, Utah 84147
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (801) 530-2400
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding as of April 30, 1995
Common Stock, $1.00 par value 6,550,843 shares
Registrant meets the conditions set forth in General Instruction H(a)(1) and
(b) of Form 10-Q and is filing this Form 10-Q with the reduced disclosure
format.
<PAGE>
QUESTAR PIPELINE COMPANY
STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
3 Months Ended 12 Months Ended
March 31, March 31,
1995 1994 1995 1994
(In Thousands)
<S> <C> <C> <C> <C>
REVENUES $29,565 $27,750 $117,423 $121,227
OPERATING EXPENSES
Natural gas purchases 10,853
Operating and maintenance 11,364 11,279 42,863 45,890
Depreciation 4,114 3,674 15,893 14,302
Other taxes 1,234 1,134 4,599 4,006
TOTAL OPERATING EXPENSES 16,712 16,087 63,355 75,051
OPERATING INCOME 12,853 11,663 54,068 46,176
INTEREST AND OTHER
INCOME (EXPENSE) (44) 226 (1,394) 2
INCOME FROM UNCONSOLIDATED
AFFILIATES 85 69 245 179
DEBT EXPENSE (3,406) (3,203) (13,310) (13,003)
INCOME BEFORE INCOME TAXES 9,488 8,755 39,609 33,354
INCOME TAXES 3,214 3,247 13,014 11,953
NET INCOME $6,274 $5,508 $26,595 $21,401
</TABLE>
<PAGE>
QUESTAR PIPELINE COMPANY
CONDENSED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994 1994
(In Thousands)
<S> <C> <C> <C>
ASSETS
Current assets
Cash and short-term investments $2,004 $1,448
Accounts receivable $18,837 11,221 15,236
Federal income tax receivable 1,080
Inventories 2,569 2,730 2,583
Other current assets 2,523 1,989 2,809
Total current assets 23,929 17,944 23,156
Property, plant and equipment 618,240 566,191 615,313
Less allowances for depreciation 207,407 193,365 203,008
Net property, plant and
equipment 410,833 372,826 412,305
Investment in unconsolidated
affiliates 8,208 7,214 7,988
Other assets 11,024 10,127 11,594
$453,994 $408,111 $455,043
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities
Checks outstanding in excess of
cash balances $2,652
Notes payable to Questar
Corporation 7,800 $300 $14,600
Accounts payable and
accrued expenses 14,751 17,224 13,305
Total current liabilities 25,203 17,524 27,905
Long-term debt 134,511 134,492 134,506
Deferred credits 4,812 1,485 4,861
Deferred income taxes 68,987 67,474 68,814
Common shareholder's equity
Common stock 6,551 6,551 6,551
Additional paid-in capital 82,034 57,034 82,034
Retained earnings 131,896 123,551 130,372
Total common shareholder's
equity 220,481 187,136 218,957
$453,994 $408,111 $455,043
</TABLE>
<PAGE>
QUESTAR PIPELINE COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
3 Months Ended
March 31,
1995 1994
(In Thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $6,274 $5,508
Depreciation 4,523 4,091
Deferred income taxes 173 139
Income from unconsolidated affiliates (85) (69)
10,885 9,669
Change in operating assets and liabilities (249) 3,282
NET CASH PROVIDED FROM
OPERATING ACTIVITIES 10,636 12,951
INVESTING ACTIVITIES
Capital expenditures
Purchase of property, plant and equipment (3,036) (5,089)
Other investments (135)
Total capital expenditures (3,171) (5,089)
Proceeds from (cost of) disposition of
property, plant and equipment (15) 1
CASH USED IN INVESTING
ACTIVITIES (3,186) (5,088)
FINANCING ACTIVITIES
Decrease in notes payable
to Questar Corporation (6,800) (2,700)
Checks outstanding in excess of
cash balances 2,652
Payment of dividends (4,750) (4,500)
CASH USED IN FINANCING
ACTIVITIES (8,898) (7,200)
CHANGE IN CASH AND SHORT-TERM
INVESTMENTS ($1,448) $663
</TABLE>
<PAGE>
QUESTAR PIPELINE COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
March 31, 1995
(Unaudited)
Note A - Basis of Presentation
The interim financial statements furnished reflect all adjustments which
are, in the opinion of management, necessary for a fair presentation of
the results for the interim periods presented. All such adjustments are
of a normal recurring nature. Due to the seasonal nature of the
business, the results of operations for the three-month period ended
March 31, 1995, are not necessarily indicative of the results that may
be expected for the year ending December 31, 1995. For further
information refer to the financial statements and footnotes thereto
included in the Company's annual report on Form 10-K for the year ended
December 31, 1994.
<PAGE>
QUESTAR PIPELINE COMPANY
MANAGEMENT'S ANALYSIS
March 31, 1995
Operating Results --
Following is a summary of operating information for the Company:
<TABLE>
<CAPTION>
3 Months Ended 12 Months Ended
March 31, March 31,
1995 1994 1995 1994
<S > <C> <C> <C> <C>
Natural gas volumes (in thousands of
decatherms)
Transportation
For unaffiliated customers 38,569 24,538 143,281 107,880
For Mountain Fuel 29,199 34,510 70,630 86,312
For other affiliated
customers 6,226 9,015 42,304 35,990
Total transportation 73,994 68,063 256,215 230,182
Sales for resale to
Mountain Fuel 3,298
Total system throughput 73,994 68,063 256,215 233,480
Gathering
For unaffiliated customers 9,621 10,199 39,222 38,091
For Mountain Fuel 9,390 10,564 30,924 34,007
For other affiliated
customers 1,280 3,085 10,280 15,939
Total gathering 20,291 23,848 80,426 88,037
Natural gas revenues (per decatherm)
Transportation $0.21 $0.23 $0.24 $0.24
Gathering 0.28 0.23 0.29 0.22
Sales for resale 7.57
</TABLE>
Revenues were higher in the first quarter of 1995 when compared to the
first quarter of 1994 due primarily to increased firm-storage service at
Questar Pipeline's Clay Basin storage reservoir. This increased storage
service was responsible for $1,782,000 of the improvement in revenues.
Working gas storage capacity increased from 31 Bcf to 41.8 Bcf in May
1994 and contracts are in place to increase capacity to 46.3 Bcf
beginning May 1995. Storage capacity is fully subscribed.
Revenues reported for the 12-month period of 1995 were lower than was
reported in the comparable 1994 period due largely to the discontinuance
of sales for resale effective September 1, 1993 with the adoption of
FERC Order No. 636.
Transportation revenues were slightly lower in the first quarter of 1995
because of lower interruptible- transportation volumes. Most of
Questar Pipeline's transportation capacity is reserved by
firm-transportation customers.
Volumes gathered in the 1995 periods were lower than the quantities
gathered in the same periods of 1994 primarily because of imputed
volumes used for rate design and warmer weather. Billings for gas
gathered for Mountain Fuel in 1993 and 1992 were based on imputed
volumes, which were substantially higher than volumes gathered. Higher
average gathering rates more than offset the decrease in volumes and
resulted in higher revenues in the 1995 periods. The higher revenues
were the product of a shift in rates to the usage component. Under
current gathering agreements about 55% of revenues are collected through
the usage component of rates and about 45% in the reservation component.
Questar Pipeline currently plans to file a general rate case in either
the second quarter or third quarter of 1995 because of its capital
expenditure program, recent adoption of new accounting rules for
postretirement and postemployment costs, and loss of
interruptible-transportation revenues.
Operating and maintenance expenses increased less than 1% in the first
quarter of 1995 compared with the same quarter in 1994. Operating and
maintenance expenses were 7% lower in the 12-month period ended March
31, 1995, because of the transfer of activities to Mountain Fuel
associated with the gas-purchase function in the last half of 1993.
Depreciation expense was higher in the periods ended March 31, 1995,
because of capital spending for gathering, transmission and storage
activities.
The effective income tax rate of 33.9% in the first quarter of 1995 was
lower than the 37.1% in the first quarter of 1994 after a downward
revision of tax expense estimates.
Interest and other income (expense) was an expense in the 1995 periods
presented. The first quarter of 1995 was lower because of less AFUDC
(cost of capital) capitalized and lower interest income. The 12-month
period ended March 31, 1995 includes the reduction in value of certain
investments.
Liquidity and Capital Resources --
Operating Activities:
Net cash provided from operating activities was $10,636,000 for the
first three months of 1995 compared with $12,951,000 for the same period
of 1994. An increase in cash flow from income and depreciation was
more than offset by an increase in construction costs receivable from
the Blacks Fork Plant partnership.
Investing Activities:
Capital expenditures were $3,171,000 in the first three months of 1995,
compared with $5,089,000 in the corresponding 1994 period. Capital
expenditures for calendar year 1995 are estimated at $41,000,000.
Financing Activities:
The Company has a short-term line-of-credit arrangement with a bank
totaling $200,000. In addition, Questar Corporation, its parent
company, loans funds to the Company under a short-term arrangement. As
of March 31, amounts borrowed from Questar Corporation were $7,800,000
in 1995 and $300,000 in 1994. No amounts were borrowed under the
short-term line-of-credit arrangement at March 31, 1995. First quarter
financing activities in 1995 and 1994 included repayments of a portion
of the Company's loans from Questar Corporation. 1995 capital
expenditures are expected to be financed from cash flow provided from
operations and amounts borrowed from Questar Corporation.
<PAGE>
PART II
OTHER INFORMATION
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
The following exhibit is filed as part of this report.
Exhibit No. Exhibit
10.10. Partnership Agreement for the Blacks Fork Gas Processing
Company dated May 1, 1994, between Questar Gas Management
Company (a wholly owned subsidiary of Questar Pipeline
Company) and Coastal Gas Gathering and Processing Company
(an indirect wholly owned subsidiary of The Coastal
Corporation).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
QUESTAR PIPELINE COMPANY
(Registrant)
May 12, 1995 /s/ A. J. Marushack
(Date) A. J. Marushack
President and Chief
Executive Officer
May 12, 1995 /s/ W. F. Edwards
(Date) W. F. Edwards
Vice President and Chief
Financial Officer
Exhibit - 10.10
BLACKS FORK GAS PROCESSING COMPANY
PARTNERSHIP AGREEMENT
TABLE OF CONTENTS
1. Preliminary Agreement Superseded -1-
2. Definitions -1-
3. Formation and Purpose of General Partnership -4-
3.1 Formation -4-
3.2 Treatment -4-
3.3 Name -4-
3.4 Purposes -5-
3.5 Principal Office -5-
3.6 Conduct of Business -5-
3.7 Cooperation and Further Assurances -5-
3.8 Representations, Warranties and Covenants of the Partners-5-
4. Capitalization -7-
4.1 Initial Capital Contributions and Partner
Loans -7-
4.2 Subsequent Capital Contributions and Partner Loans -7-
4.2.1 Construction Phase -7-
4.2.2 Operating Phase -7-
4.3 Making of Capital Contributions and Partner Loans -7-
4.4 General Provisions Concerning Capital Contributions
and Partner Loans -8-
4.5 Failure to Contribute or Loan -8-
4.6 Grant of Security Interest -9-
4.7 Project Financing Loans -10-
4.8 No Personal Liability -10-
5. Capital Account -10-
6. Allocations and Distributions -10-
6.1 Allocations for Capital Account Purposes -10-
6.2 Distributions of Excess Cash -11-
7. Accounting Practices and Taxation -11-
7.1 Accounting Practices and Procedures -11-
7.2 Preparation of Financial Statements; Custody of Books and
Records; Certified Public Accountants -11-
7.3 Annual Financial Statements -12-
7.4 Interim Financial Statements -12-
7.5 Taxation -12-
7.6 Governmental Reports -13-
7.7 Inspection of Facilities and Records -13-
7.8 Bank Accounts -13-
7.9 Permitted Investments -14-
7.10 Information and Reports -14-
8. Management -14-
8.1 Plant Management -14-
8.2 Management Committee -14-
(i) Disposition -15-
(ii) Leasing -15-
(iii) Contracts -15-
(iv) Loans -15-
(v) Construction Budget -15-
(vi) Construction Funding Schedule -15-
(vii) Operating Budget; Capital Expenditures -16-
(viii) Insurance -16-
(ix) Acquisitions -16-
(x) Contractors -16-
(xi) Plant Shutdown -16-
(xii) Fractionation -16-
(xiii) Modification of Agreements -16-
(xiv) Approval by Partnership -16-
8.3 Management Committee Members -16-
8.4 Management Committee Meetings; Action without a Meeting-17-
8.5 Management Committee Quorum and Voting
Requirements -17-
8.6 Secretary; Records -18-
9. Plant Constructor and Plant Operator -18-
9.1 Selection of the Plant Constructor and the Plant Operator-18-
9.2 Successor Plant Operator -18-
10. Limitation of Liabilities; Indemnity -18-
10.1 Contracts to Limit Partners' Liabilities -18-
10.2 Limitation of Liabilities; Indemnity -18-
10.3 No Liability for Profits -19-
11. Transfer or Pledge of Ownership Interest -19-
11.1 Transfers of Ownership Interest to Non-Affiliates -19-
11.1.1 Notice and Election -19-
11.1.2 Failure to Give Notice or Fulfill Purchase
Obligations -20-
11.2 Transfers to Affiliates -20-
11.3 Conditions to Transfer -21-
(i) Transferee Bound by Agreement -21-
(ii) Transferee Assumes All Obligations of Transferor-21-
(iii) Transfer Complies with This Section -21-
(iv) Indemnity -21-
(v) Contracts; Permits -21-
(vi) Regulatory and Other Approvals -22-
(vii) Application of Laws and Regulations -22-
(viii) General -22-
11.4 Other Provisions Applicable to Transfers -22-
11.4.1 Reinstatement of Right of First Refusal -22-
11.4.2 Specific Performance -22-
11.4.3 Nominees -22-
11.4.4 Admission of Transferee -23-
11.5 Effect of Permitted Transfers -23-
11.6 Mortgages, Pledges, and Hypothecations -23-
11.7 Admission of New Partner -23-
12. Events of Default -23-
12.1 Nature of Events -23-
(i) Capital Contribution; Partner Loan -23-
(ii) Voluntary or Involuntary Transfer -23-
(iii) Representations and Warranties -23-
(iv) Breach of Agreement -24-
(v) Withdrawal -24-
12.2 Default Remedies -24-
13. Dissolution and Liquidation -24-
13.1 Term of Partnership -24-
13.2 Dissolution Upon Occurrence of Certain Events -24-
13.2.1 Events -24-
13.2.2 Effect -25-
13.3 Dissolution Upon Occurrence of Certain Other Events -25-
13.3.1 Events. -25-
13.3.2 Effect -26-
13.3.3 Redemption of Interest; Settlement of Loans -27-
13.3.4 Purchase of Interest -29-
13.3.5 Reinstatement -29-
13.4 Winding Up and Liquidation -29-
13.4.1 Management Committee Powers -29-
13.4.2 Allocation of Income, etc. -30-
13.4.3 Proceeds of Liquidation -30-
13.4.4 Priority of Liquidation; Distribution -30-
13.4.5 Reserves -31-
13.4.6 Restoration of Deficit Capital Accounts -31-
13.5 Termination Subject to Laws and Regulations -31-
14. General -32-
14.1 Notices -32-
14.2 Amendment -32-
14.3 Applicable Law -32-
14.4 Conformity -32-
14.5 Counterparts -32-
14.6 Captions -32-
14.7 Section Numbers -33-
14.8 Entire Agreement -33-
14.9 Waiver -33-
14.10Parties Bound and Benefitted -33-
14.11Disclosure -33-
14.12Outside Interests -33-
14.13Waiver of Partition -34-
14.14Right of Offset -34-
14.15Fair Market Value of Ownership Interest -34-
14.16Mediation of Business Disputes -34-
14.17Conflict of Documents -35-
BLACKS FORK GAS PROCESSING COMPANY
PARTNERSHIP AGREEMENT
THIS PARTNERSHIP AGREEMENT ("Agreement") is by and among the
Partners (as defined below).
W I T N E S S E T H:
WHEREAS, pursuant to a certain Preliminary Agreement dated May 11,
1994 (the "Preliminary Agreement"), Coastal Gas Gathering and Processing
Company ("Coastal Partner"), a Delaware corporation and an indirect
wholly-owned subsidiary of The Coastal Corporation, and Questar Pipeline
Company ("QPC"), a Utah corporation and a wholly-owned subsidiary of
Questar Corporation, formed, effective as of May 1, 1994, Blacks Fork
Gas Processing Company, a Wyoming general partnership (the
"Partnership"); and
WHEREAS, effective as of May 1, 1994, QPC assigned its entire
interest in the Partnership to Questar Gas Management Company ("Questar
Partner"), a Utah corporation and a wholly-owned subsidiary of QPC, and
Questar Partner accepted such assignment and assumed all of QPC's
obligations as a Partner relating thereto; and
WHEREAS, the Partners desire to enter into this Agreement which
shall constitute the formal partnership agreement contemplated in the
Preliminary Agreement;
NOW, THEREFORE, the Partners agree as follows:
1. Preliminary Agreement Superseded. The terms of this Agreement
supersede and replace the terms set forth in paragraphs 1, 2 and 7
of the Preliminary Agreement. The assignment of QPC's interest in
the Partnership to Questar Partner was permitted pursuant to
paragraph 8 of the Preliminary Agreement. The terms of the
Construction and Operating Agreement (as defined below) and the
QPC Processing Agreement (as defined below) supersede and replace
the terms of paragraphs 3 through 6 of the Preliminary Agreement.
2. Definitions. In addition to the terms defined elsewhere in this
Agreement, the terms defined in this Section 2 shall, for all
purposes of this Agreement, have the respective meanings set forth
below (such definitions to be equally applicable to the singular
and plural forms of such terms):
Affiliate. As to any Person, any corporation or other entity
which, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with such
Person. As used in this definition "control" means (i) with
respect to any corporation or other entity having voting shares or
the equivalent and elected directors, managers, or persons
performing similar functions, the ownership or power to vote,
either directly or indirectly through one or more intermediaries
so controlled, more than 50% of the voting interest in the
election of directors, managers or persons performing similar
functions, and (ii) with respect to any other entity, the
ownership or possession, either directly or through one or more
intermediaries so controlled, of the right to receive 50% or more
of the profits, or upon liquidation, the assets, of such entity.
Alternate Representative. An individual designated from time to
time by a Partner to act in the absence or unavailability of such
Partner's Representative.
Capital Account. An account maintained for each Partner pursuant
to which Capital Contributions, profits, losses, distributions,
income, gain, deductions and credits shall be credited (or
debited, as the case may be) in accordance with the Code
(including the Treasury Regulations promulgated thereunder) and
this Agreement.
Capital Contribution. A contribution by a Partner to the capital
of the Partnership.
Certified Public Accountants. A nationally recognized firm of
certified public accountants designated or selected in accordance
with Section 7.2.
Code. Internal Revenue Code of 1986, as amended.
Construction and Operating Agreement. That certain Construction
and Operating Agreement dated as of January 27, 1995, between the
Partnership, Coastal Partner and Questar Partner relating to the
construction and operation of the Plant.
Construction Budget. The budget setting forth the amounts
estimated to be required to complete construction of the Plant
and cause the Plant to become operational; the Construction
Budget as of March 1, 1995 being set forth in Schedule 4.2-1
attached hereto.
Construction Funding Schedule. The schedule setting forth the
amount and timing of funds estimated to be required pursuant to
the Construction Budget, the amount anticipated to be from any
Project Financing Loans, and the amounts to be funded by the
Partners as Capital Contributions or Partner Loans; the
Construction Funding Schedule as of January 31, 1995 being set
forth in Schedule 4.2-2 attached hereto.
Construction Period. The period defined as the "Construction
Period" in the Construction and Operating Agreement.
Effective Date. May 1, 1994.
Gas. "gas" as such term is defined in the Construction and
Operating Agreement.
Interest Rate. An annual rate of interest equal to two (2)
percentage points over the Prime Rate.
Loan. Any Project Financing Loan, Partner Loan or any other loan
obtained by the Partnership, either unsecured or secured, from one
or more lenders.
Management Committee. The Management Committee provided for in
Section 8.
Operating Budget. The annual budget for any given year setting
forth the amounts estimated to be required in connection with
operating the Plant, conducting the Partnership's activities and
making any capital improvements after the Construction Period.
Ownership Interest. The interest of a Partner in the Partnership,
including, without limitation, rights (i) to distributions and
allocations and information, and (ii) to consent and approve of
Partnership matters, including representation on the Management
Committee. For all purposes of this Agreement, as of the
Effective Date and until such time as (i) a Partner shall transfer
its interest in the Partnership to another Partner or third party
in accordance with this Agreement, or (ii) an additional Partner
is admitted to the Partnership, or (iii) a Partner's interest is
redeemed, Coastal Partner's Ownership Interest and Questar
Partner's Ownership Interest shall each be fifty percent (50%).
Partner. Each of the parties executing this Agreement or any
Person substituted or admitted as a partner in the Partnership
pursuant to Section 11.
Partner Default Loan. A Loan made as defined in Section 4.5.2.
Partner Loan. A Loan as defined in Section 4.
Partnership. The partnership initially formed pursuant to the
Preliminary Agreement and now existing pursuant to the provisions
of this Agreement.
Partnership Act. The Wyoming Uniform Partnership Act and any
successor statute, as amended from time to time.
Person. An individual, corporation, limited liability company,
voluntary association, joint stock company, business trust,
partnership or other entity.
Plant. The "Plant" as defined in the Construction and Operating
Agreement and the QPC Processing Agreement.
Plant Constructor. The Person designated as such as provided in
the Construction and Operating Agreement and Section 9.
Plant Operator. The Person designated as such as provided in the
Construction and Operating Agreement and Section 9.
Prime Rate. The short-term base lending rate announced from time
to time by Citibank, N.A. of New York, or the base or prime rate
announced by any successor thereto.
Processing Agreement. A "Processing Agreement" as defined in the
Construction and Operating Agreement.
Products. "Products" as defined in the Construction and Operating
Agreement.
Project Financing Loan. Any Loan or Loans (other than Partner
Loans) obtained by or on behalf of the Partnership for the
construction and/or financing of the Plant.
QPC Processing Agreement. That certain Processing Agreement dated
as of January 27, 1995, between the Partnership and QPC with
respect to, among other things, the processing of certain
quantities of gas as provided therein.
Representative. An individual designated from time to time by a
Partner to serve as a member of the Management Committee.
Section 13.3 Event. An event described in Section 13.3.1.
Signature Date. The date set forth below as the date as of which
this Agreement has been executed by the Partners.
3. Formation and Purpose of General Partnership.
3.1 Formation. The Partnership was formed as of the Effective
Date pursuant to the Partnership Act, and at all times
thereafter the Partnership has continued to exist as a
Wyoming general partnership. The Partnership's business and
affairs are governed by this Agreement. Except as expressly
provided herein to the contrary, the rights and obligations
of the Partners and the administration and termination of the
Partnership are governed by the Partnership Act.
3.2 Treatment. The Partnership is intended as, and shall be, a
Wyoming general partnership for federal, state, and local
income and franchise tax, contract, tort, and for every other
purpose whatsoever. The Partners shall take all actions as
may be necessary or appropriate to qualify for, receive, and
maintain such treatment as a Wyoming general partnership,
including, but not limited to, the execution of any required
amendment to this Agreement.
3.3 Name. The name of the Partnership is "Blacks Fork Gas
Processing Company". The business of the Partnership shall
be conducted under such name or such other name as the
Management Committee may from time to time determine.
3.4 Purposes. The purposes of the Partnership shall be the
acquisition, planning, design, engineering, construction,
ownership and operation of the Plant, and engaging in any
other business or activity that now or in the future may be
necessary, incidental, proper, advisable or convenient to
accomplish the foregoing purposes (including, without
limitation, obtaining appropriate financing) and that is not
forbidden by the Partnership Act.
3.5 Principal Office. The principal business office of the
Partnership shall be located at the principal office of the
Plant Operator, or at such other place as the Management
Committee shall from time to time determine; provided,
however, that for purposes of Section 17-21-106 of the
Partnership Act, the Partnership's chief executive office
shall be located at the site of the Plant in Uinta and
Sweetwater Counties, Wyoming.
3.6 Conduct of Business. The business of the Partnership shall
be managed and conducted in accordance with the provisions of
this Agreement and the Construction and Operating Agreement.
3.7 Cooperation and Further Assurances.
3.7.1 The Partners shall cooperate with each other and with
the Partnership in (i) applying for any license,
permit, approval, or certificate from any regulatory
authority necessary, desirable, or convenient for the
establishment and operation of the Plant, (ii) the
acquisition of any real property or right-of-way
through the exercise of any right of condemnation or
power of eminent domain or any other rights to which
any Partner or the Partnership is entitled to
exercise, and (iii) engaging in any other activities
reasonably necessary, desirable or convenient for the
establishment and operation of the Plant.
3.7.2 To the extent that any law, rule, order, or
regulation requires any license, permit, approval, or
certificate necessary, desirable, or convenient for
the establishment of the Plant or its operation to be
applied for and issued under the name of any Partner
or all Partners as distinct from the Partnership, the
Partner, or Partners as the case may be, shall apply
therefor and shall, to the extent allowed by law,
hold the same for the benefit and use of the
Partnership.
3.8 Representations, Warranties and Covenants of the Partners.
Each Partner represents and warrants to, and agrees with, the
other Partner that:
(i) It is a corporation duly organized, validly existing
and in good standing under the laws of the
jurisdiction in which it is incorporated with full
corporate power and authority to own its property and
assets and transact the business in which it is
engaged and has duly qualified and is authorized to
conduct business and is in good standing as a foreign
corporation in the State of Wyoming;
(ii) It will not cause a dissolution or termination of the
Partnership by reason of its failure to maintain its
corporate existence;
(iii) The execution, delivery and performance of this
Agreement and the Construction and Operating
Agreement have been duly authorized by all necessary
corporate action, and no order, consent, approval,
license, authorization or validation of, or filing,
recording or registration with, or exemption by, any
governmental authority or public agency is required
to authorize, or is required in connection with the
execution, delivery, and performance by it of this
Agreement or the Construction and Operating
Agreement, or the legality, validity, binding effect,
or enforceability of this Agreement or the
Construction and Operating Agreement;
(iv) It has the corporate power to execute, deliver and
carry out the terms of this Agreement and the
Construction and Operating Agreement;
(v) This Agreement and the Construction and Operating
Agreement constitute its legal, valid and binding
obligation, enforceable against it in accordance with
their respective terms, except to the extent that
enforcement may be limited by applicable bankruptcy,
insolvency, reorganization or similar laws affecting
creditors' rights generally and by equitable
principles, regardless of whether enforcement is
sought in equity or at law;
(vi) The execution, delivery and performance of this
Agreement and the Construction and Operating
Agreement and compliance with the terms and
provisions hereof and thereof do not contravene,
violate or conflict with any provision of, constitute
a default under or result in a breach of, its
certificate (or articles) of incorporation or bylaws,
or any indenture, mortgage, deed of trust or other
instrument, any contractual covenant or any
restriction by which it or its property or assets is
bound or to which it may be subject, or any permit,
license, law, regulation, rule, ordinance, judgment
or decree applicable to it, the Partnership or the
business or properties of either of them;
(vii) It is not a "foreign person" within the meaning of
the Foreign Investment in Real Property Tax Act of
1980, with respect to the ten percent (10%)
withholding requirement effective January 1, 1985.
4. Capitalization. The Partners shall make Capital Contributions as
hereinafter provided in this Section 4. In lieu of making one or
more Capital Contributions, the Management Committee may determine
that the Partners shall make loans (each a "Partner Loan" and
collectively, "Partner Loans") to the Partnership in such amounts
and on such terms (which terms shall be the same for each Partner
and may include, if required by the terms of any Project Financing
Loan, terms of subordination to such Project Financing Loan) as
determined by the Management Committee. Capital Contributions and
Partner Loans shall be made by the Partners in proportion to their
respective Ownership Interests.
4.1 Initial Capital Contributions and Partner Loans. As of
January 31, 1995, each Partner had made the Capital
Contributions and/or Partner Loans as are set forth for such
Partner on Schedule 4.1 attached hereto.
4.2 Subsequent Capital Contributions and Partner Loans.
4.2.1 Construction Phase. The Partners shall from time to
time make Capital Contributions or, if so determined
by the Management Committee, Partner Loans, in
amounts required to fund construction of the Plant
pursuant to the Construction Budget and Construction
Funding Schedule, after giving effect to any amounts
to be provided by Project Financing Loans.
4.2.2 Operating Phase. The Plant Operator shall initiate
the preparation of each annual Operating Budget for
review, comment and approval by the Management
Committee. The Partners shall from time to time make
Capital Contributions or, if so determined by the
Management Committee, Partner Loans, in proportion to
their respective Ownership Interests, in amounts
necessary, as determined by the Management Committee,
to fund operations pursuant to the Operating Budgets
after giving effect to the Partnership's operating
revenues and other sources of funds, if any,
available to the Partnership.
4.3 Making of Capital Contributions and Partner Loans. Except as
may be otherwise determined by the Management Committee:
4.3.1 During the Construction Period, the Plant Constructor
shall issue a written request for payment of each
Capital Contribution or Partner Loan to be made in
accordance with the Construction Budget, and the
Construction Funding Schedule (as such budget and
schedule may be amended in accordance with this
Agreement). After the Construction Period, the Plant
Operator shall issue a written request for payment of
each Capital Contribution or Partner Loan to be made
in accordance with each Operating Budget (as such
budget may be amended in accordance with this
Agreement). All amounts received by the Partnership
from a Partner pursuant to this Section 4.3.1 on or
before the date specified pursuant to clause (iii) of
Section 4.3.2 shall be credited to such Partner's
Capital Account (or in the case of a Partner Loan,
shall be deemed loaned) as of such specified date,
and all amounts received by the Partnership from a
Partner pursuant to this Section 4.3.1 after the date
specified pursuant to clause (iii) of Section 4.3.2
shall be credited to such Partner's Capital Account
(or in the case of a Partner Loan, shall be deemed
loaned) as of the date of receipt thereof. Capital
Contributions and Partner Loans shall be paid to the
Partnership in immediately available funds.
4.3.2 Each written request issued pursuant to Section 4.3.1
shall contain the following information:
(i) The amount of the Capital Contribution or
Partner Loan requested from each Partner,
such amounts to be in proportion to each
Partner's Ownership Interest;
(ii) The purpose for which the Capital
Contributions or Partner Loans are to be
applied in such reasonable detail as the
Management Committee shall direct; and
(iii) The date on which the Partnership must
receive the Capital Contributions or Partner
Loans (which date shall not be less than
five (5) days following the date the request
is given), such date to be the same for each
of the Partners.
4.4 General Provisions Concerning Capital Contributions and
Partner Loans.
4.4.1 The obligation of each Partner to make Capital
Contributions and Partner Loans hereunder shall not
inure to the benefit of, or be enforceable by, any
Person other than the Partnership and the Partners.
No interest, except as otherwise set forth herein,
shall be paid on any Capital Contribution by any
Partner.
4.4.2 No Partner shall make any Capital Contributions or
Partner Loans to the Partnership except pursuant to a
request of the Plant Constructor or the Plant
Operator, as the case may be, under the direction of
the Management Committee pursuant to Section 4.3.
4.5 Failure to Contribute or Loan. If a Partner (the "defaulting
Partner") does not make when due all or any portion of a
Capital Contribution or Partner Loan that the defaulting
Partner is required to make as provided in this Agreement,
the other Partner (the "non-defaulting Partner") may, on
notice to the defaulting Partner, exercise one or more of the
following remedies:
4.5.1 Taking such action (including, without limitation,
court proceedings) as the non-defaulting Partner may
deem appropriate to obtain payment by the defaulting
Partner of the portion of the Capital Contribution or
Partner Loan that is in default, together with
interest on that amount (which, if such interest is
on a Partner Loan, shall not be deemed a part of such
Partner Loan or repaid to the defaulting Partner) at
the Interest Rate from the date that the Capital
Contribution or Partner Loan was due until the date
that it is made, all at the cost and expense of the
defaulting Partner;
4.5.2 Advancing the portion of the defaulting Partner's
Capital Contribution or Partner Loan that is in
default with the following results:
(i) the sum advanced constitutes a loan
("Partner Default Loan") to the defaulting
Partner and, as applicable, a Capital
Contribution or Partner Loan of that sum to
the Partnership by the defaulting Partner
under the applicable provisions of this
Agreement;
(ii) the principal balance of the Partner Default
Loan and all accrued interest is due and
payable by the defaulting Partner on written
demand sent by the non-defaulting Partner;
(iii) the amount lent bears interest at the
Interest Rate from time to time in effect
from the day the advance is deemed made
until the date that the Partner Default
Loan, together with all interest accrued
thereon, is repaid to the Lending Partner;
(iv) all distributions from the Partnership, and
all repayments of Partner Loans, that
otherwise would be made to the defaulting
Partner (whether before or after dissolution
of the Partnership) instead shall be paid to
the non-defaulting Partner (all such
repayments of Partner Loans being credited
toward payment of the defaulting Partner's
Partner Loans notwithstanding their payment
to the non-defaulting Partner) until the
Partner Default Loan and all interest
accrued on it have been paid in full to the
non-defaulting Partner (with payments being
applied first to accrued and unpaid interest
and then to principal);
4.5.3 Exercising the rights of a secured party under the
Uniform Commercial Code of the State of Wyoming, as
more fully set forth in Section 4.6; or
4.5.4 Exercising any other rights or remedies available at
law or in equity.
4.6 Grant of Security Interest. Each Partner grants to the
Partnership, and to each non-defaulting Partner with respect
to any Partner Default Loans made as described in Section
4.5.2, as security for (i) the payment of all Capital
Contributions and Partner Loans that Partner has agreed to
make and (ii) the payment of all Partner Default Loans and
interest accrued on them, a security interest in and a
general lien on its Ownership Interest and the proceeds of
that Ownership Interest, all under the Uniform Commercial
Code of the State of Wyoming. On any default in the payment
of a Capital Contribution or Partner Loan or in the payment
of such a Partner Default Loan or interest accrued on it, the
Partnership or the non-defaulting Partner, as applicable, is
entitled to all the rights and remedies of a secured party
under the Uniform Commercial Code of the State of Wyoming
with respect to the security interest granted in this Section
4.6. Each defaulting Partner shall execute and deliver to
the Partnership and the other Partners all financing
statements and other instruments that the non-defaulting
Partner may request to effectuate and carry out the preceding
provisions of this Section 4.6. At the option of the
non-defaulting Partner, this Agreement or a carbon,
photographic, or other copy of this Agreement may serve as a
financing statement.
4.7 Project Financing Loans. Coastal Partner has obtained
proposals from potential lenders with respect to Project
Financing Loan(s) and the Partners have conducted
negotiations with one or more of such lenders. After the
Signature Date, the Partnership may borrow such Project
Financing Loans if so directed by the Management Committee.
4.8 No Personal Liability. No Partner shall be personally liable
for repayment of any indebtedness (and costs of collection
thereof) owed by the Partnership to another Partner. The
sole recourse of such lending Partner for payment of such
Loans shall be limited to the Partnership and its property.
5. Capital Accounts. A Capital Account shall be maintained for each
Partner in accordance with the Code and the Treasury Regulations
promulgated thereunder.
6. Allocations and Distributions.
6.1 Allocations for Capital Account Purposes.
6.1.1 For purposes of maintaining the Capital Accounts and
determining the rights of the Partners among
themselves, all items of income, gain, loss, credit
and deduction of the Partnership, shall be allocated
among the Partners in proportion to their respective
Ownership Interests except as otherwise provided in
this Section 6.1.
6.1.2 Pursuant to Section 704(b) of the Code, each of the
Partners shall share in all net profits and net
losses of the Partnership in proportion to its
Ownership Interest, and the amount allocated to each
Partner shall be debited or credited, as the case may
be, to the Capital Account of the Partner as provided
in Section 6.1.1 Except as provided below, all items
of income, gain, loss (including depreciation
recapture), deduction or credit for federal income
tax purposes shall be allocated in accordance with
the allocation of net profits and net losses and are
not subject to any special allocation. However,
income, gain, loss and deduction for federal income
tax purposes that are attributable to any property
contributed to the Partnership by a Partner shall be
allocated to the Partners in the manner provided
under Section 704(c) of the Code and any regulations
issued under that section.
6.1.3 The Partnership shall allocate items of income, gain,
loss, deduction and credit attributable to a
Partnership interest that is assigned during a year
between the assignor and assignee of such Partnership
interest in accordance with the method that the
Management Committee determines is required by the
Code, and if the Management Committee determines that
more than one method is permitted, then by the method
that the Management Committee determines is best,
taking into account both the desire to match income
and distributions and the ease of administration.
6.2 Distributions of Excess Cash. From time to time, but at
least annually following approval of the Operating Budget for
the ensuing fiscal year, the Management Committee will
determine if any cash is available for distribution to the
Partners. Distributions of any excess cash shall be made
only to all Partners simultaneously in proportion to their
respective Ownership Interests at the time thereof.
7. Accounting Practices and Taxation.
7.1 Accounting Practices and Procedures. The fiscal year of the
Partnership shall be the calendar year. Unless otherwise
determined by the Management Committee or except as otherwise
provided in this Agreement or the Construction and Operating
Agreement, the books of account of the Partnership shall be
maintained in accordance with, and all accounting practices
and procedures of the Partnership shall conform with,
generally accepted accounting principles at the time
prevailing for companies engaged in a business similar to
that of the Partnership.
7.2 Preparation of Financial Statements; Custody of Books and
Records; Certified Public Accountants. The books of account,
monthly and annual financial statements and other records of
the Partnership shall be prepared by, and shall be kept and
maintained at the principal office of the Plant Operator.
Upon request, any Partner may examine, audit, and copy the
books and records of the Partnership in accordance with
Section 7.7. The Partnership's books of account shall be
audited by the Certified Public Accountants. Unless
otherwise determined by the Management Committee, the
Certified Public Accountants shall be Ernst & Young.
7.3 Annual Financial Statements. The Plant Operator shall
prepare and deliver or cause to be prepared and delivered to
each Partner as soon as practicable, but in any event within
ninety (90) days following the end of each of the
Partnership's fiscal years, an audited profit and loss
statement and an audited statement of cash flows for such
fiscal year and an audited balance sheet and a statement of
each Partner's Capital Account as of the end of such current
fiscal year and, if applicable, as of the end of the
preceding fiscal year, together with the related notes
thereto, as certified by the Certified Public Accountants.
7.4 Interim Financial Statements. As soon as practicable, but in
any event within thirty (30) days after the end of each
calendar month, the Plant Operator shall prepare and deliver,
or cause to be prepared and delivered, to each Partner,
together with an appropriate certificate of the Person who
prepared the same:
(i) A profit and loss statement and a statement of cash
flows for such month and for the year to date for the
current fiscal year (and such information as may be
reasonably requested by the Partners to permit
calculation of their tax accruals);
(ii) A balance sheet and a statement of each Partner's
Capital Account as of the end of such month and such
year to date period for each Partner's Capital
Account; and
(iii) Beginning with the first calendar month following the
Construction Period, a statement comparing the actual
financial results of the Partnership for such month
and for the portion of the fiscal year then ended
with the budgeted results for such respective periods
and an explanation of any significant variances.
7.5 Taxation.
7.5.1 The Partners intend that the Partnership shall be
treated as a partnership for federal and state income
tax purposes and the Partners agree to take all
action, including the amendment of this Agreement and
the execution of other documents, as may be required
to qualify for and receive such tax treatment. All
of the Partnership's elections for federal and state
income tax purposes, except for those elections
specifically reserved by the Code or any applicable
state income tax statute to be made by the individual
Partners, shall be determined by the Management
Committee.
7.5.2 The Plant Operator shall be the tax matters partner
of the Partnership pursuant to Section 6231(a)(7) of
the Code. The tax matters partner shall prepare, or
cause to be prepared, the Partnership's federal and
state partnership returns for each year as soon as
practicable after the end of each fiscal year. The
tax matters partner shall provide each Partner with a
draft copy of each Partnership return to be filed and
make available such tax workpapers as may be
reasonably requested by any Partner to afford a
review of such returns fifteen (15) days prior to
their being filed. All tax returns shall be filed by
the tax matters partner on a timely basis
notwithstanding any disagreement or dispute between
the Partners regarding any such return, or election
included therein, and notwithstanding any other
provision of this Agreement to the contrary.
7.5.3 Tax books and records shall be maintained and
determined in accordance with Treasury Regulation
Section 1.704-1(b)(2)(iv) promulgated under the Code.
Such books and records will be adjusted, if
necessary, to take into account any changes required
by the regulations under Section 704(c) of the Code,
when such regulations are issued.
7.6 Governmental Reports. During the Construction Period, the
Plant Constructor shall prepare and file on behalf of the
Partnership all reports prescribed by any commission or
governmental agency having jurisdiction. Following the
Construction Period, the Plant Operator shall prepare and
file on behalf of the Partnership all reports prescribed by
any commission or governmental agency having jurisdiction.
7.7 Inspection of Facilities and Records. Each Partner shall
have the right at reasonable times during usual business
hours to inspect the facilities of the Partnership, to
observe the Partnership's operations (including, without
limitation, the construction, operation and maintenance of
the Plant) and, within the time periods previously described
in this paragraph, to examine, audit and make copies of the
books of account and other books and records of the
Partnership and other books and records relating to the cash
reserves, assets and expenses of the Partnership and
expenditures by the Plant Constructor, the Plant Operator or
any Partner pursuant to this Agreement or the Construction
and Operating Agreement. Such right may be exercised through
any agent or employee of a Partner designated in writing by
it or by an independent public accountant, engineer,
attorney, or other consultant so designated. The Partner
making the request shall bear all expenses incurred in any
inspection, audit or examination made at such Partner's
behest. Should any inspection, audit or examination disclose
any undisputed errors or improper charges, the Plant Operator
shall promptly make, or cause to be made, appropriate
adjustments therefor. Disputed errors or improper charges
shall be resolved in accordance with Section 14.16.
7.8 Bank Accounts. Funds of the Partnership shall be deposited
in such bank or banks as shall be designated by the
Management Committee from time to time. Unless otherwise
determined by the Management Committee, funds of the
Partnership may be commingled with funds of the Plant
Constructor, the Plant Operator, any Partner or any of their
respective Affiliates provided that such commingling does not
adversely affect a Partner's rights set forth in Section 7.7.
7.9 Permitted Investments. The Partnership may only make the
types of investments as the Management Committee may from
time to time determine, provided that such investments shall
not preclude the timely distribution of excess cash as set
forth in Section 6, and provided further that any investment
of working capital shall not preclude the timely payment of
Partnership obligations when and as due.
7.10 Information and Reports. The Plant Constructor and/or the
Plant Operator, as appropriate, shall prepare and deliver, or
cause to be prepared and delivered, to each Partner budgets,
forecasts, cash flow projections and financial and operating
reports with respect to the Partnership in accordance with
the provisions of the Construction and Operating Agreement.
Whenever under the Construction and Operating Agreement any
such items are required to be delivered to the Plant Owner,
copies of such items shall be delivered to each Partner. All
statements rendered to the Partners by the Plant Constructor
or the Plant Operator during any calendar year shall
conclusively be presumed to be true and correct after twenty
four (24) months following the end of any such calendar year,
unless within such twenty four (24) month period any Partner
takes written exception thereto and makes claim on the Plant
Constructor or the Plant Operator, as applicable, for
adjustment. Failure on the part of any Partner to make claim
on the Plant Constructor or the Plant Operator, as
applicable, for adjustment within such period shall
establish the correctness thereof and preclude the filing of
exceptions thereto or making of claims for adjustment
thereon. The provision of this paragraph shall not prevent
adjustments resulting from physical inventory of property as
provided for in Section VI, Inventories, of Exhibit "B" to
the Construction and Operating Agreement.
8. Management.
8.1 Plant Management. Subject to the limitations set forth below
in Section 8.2, the Plant shall be constructed and operated
pursuant to the Construction and Operating Agreement. The
Plant Constructor and the Plant Operator shall perform such
other services and have such power and authority as provided
in this Agreement and in the Construction and Operating
Agreement.
8.2 Management Committee. On and after the Signature Date, the
Partners shall act for all purposes in determining the
actions or policies of the Partnership by and through the
Management Committee, except as otherwise expressly provided
herein or in the Construction and Operating Agreement. Each
Partner shall have the right to review the Plant
Constructor's and the Plant Operator's performance of their
respective obligations to the Partnership and to exercise the
additional rights specified in Section 7.7, but no Partner
shall have authority to act for, or to assume any obligation
or responsibility on behalf of, the Partnership, other than
the Plant Constructor and the Plant Operator as provided in
this Agreement and the Construction and Operating Agreement,
unless it is with the approval of the Management Committee.
Notwithstanding anything herein to the contrary, on and after
the Signature Date, the following actions may be taken by or
on behalf of the Partnership only with the approval of the
Management Committee:
(i) Disposition. Sell, convey, hypothecate, encumber or
otherwise dispose of all or any portion of or any
interest in the Plant or other Partnership property
(a) to any Partner or an Affiliate of any Partner, or
(b) having a fair market value in excess of $20,000.
(ii) Leasing. Lease to any Person all or any portion of
the Plant or any other Partnership property, or enter
into any lease if such lease commitment (a) is with
any Partner or an Affiliate of any Partner, or (b)
exceeds $50,000 over the term of the lease, including
any renewal terms.
(iii) Contracts. Enter into any Processing Agreements or
gas supply contracts with third parties, or enter
into any Processing Agreements or gas supply
contracts or any contract (whether or not of a type
mentioned above) with a term that exceeds one month;
however, the Plant Operator may make emergency
purchases of gas and emergency deliveries of Product
if the Plant Operator determines in good faith that
such purchases or deliveries are required for the
prudent operation of the Plant, provided that the
Plant Operator uses its best efforts to give prior
written notice to the other Partners, and failing
such notice, thereafter promptly notifies the other
Partners of any such emergency purchases or
deliveries.
(iv) Loans. Incur any Project Financing Loan or any other
Loan or modify the terms of any such Loans, or make
any optional permanent prepayments, or reduce any
commitments on any such Loans.
(v) Construction Budget. Approve any amendments to the
Construction Budget which would result in an increase
thereof in the aggregate of more than two percent
(2%) over the initial Construction Budget set forth
in Schedule 4.2-1; the Plant Constructor may increase
the Construction Budget so long as all such increases
do not exceed such initial Construction Budget by
more than two percent (2%) in the aggregate.
(vi) Construction Funding Schedule. Approve any change in
the Construction Funding Schedule which would
accelerate by more than thirty (30) days the date on
which a Capital Contribution or Partner Loan is due;
the Plant Constructor may change the Construction
Funding Schedule so long as the change would not
accelerate by more than thirty (30) days the date on
which a Capital Contribution or Partner Loan is due.
(vii) Operating Budget; Capital Expenditures. After the
Construction Period, approve the annual Operating
Budget and, to the extent provided for in the
Construction and Operating Agreement, subsequent
variances thereto.
(viii) Insurance. Select or change the types or amounts of
insurance covering the Plant or interests in
Partnership property, or select or change insurers
therefor, except, however, the Plant Operator may
settle claims with respect to losses or liabilities
amounting to less than $35,000 and may determine
whether or not to apply insurance proceeds amounting
to less than $35,000 to the rebuilding of the Plant
or any part thereof (except as such determination may
be governed by the terms of any Loan).
(ix) Acquisitions. Acquire any easement, right-of-way or
other interest in real property.
(x) Contractors. Select engineering and construction
contractors and vendors supplying major items of
equipment in connection with the construction of the
Plant other than those contractors and venders that
were selected prior to the Signature Date, select any
contractor for operating the Plant, and approve the
terms and provisions of the contracts to be entered
into with such contractors and vendors selected on or
after the Signature Date for construction and/or
operation of the Plant.
(xi) Plant Shutdown. Temporarily or permanently shut down
the Plant.
(xii) Fractionation. Permit the fractionation of Products
other than those derived from gas processed in the
Plant.
(xiii) Modification of Agreements. Agree on behalf of the
Partnership to any modification, amendment or
termination of the Construction and Operating
Agreement or the QPC Processing Agreement.
(xiv) Approval by Partnership. Approve, on behalf of the
Partnership, any action requiring the consent or
approval of the Partnership pursuant to the
Construction and Operating Agreement or the QPC
Processing Agreement.
8.3 Management Committee Members. The regular members of the
Management Committee shall consist of one Representative of
each Partner. Each Partner may also designate an Alternate
Representative who may act in the absence or unavailability
of such Partner's Representative. Each Partner shall give
written notice to the other Partners of its designation of
its Representative and any Alternate Representative. Any
action taken in compliance with the direction of the
Management Committee shall be binding on the Partnership and
each Partner, whether such direction was approved by the
Representatives or their respective Alternate
Representatives. The participation and acts (including the
execution of any papers) of a Partner's Representative, or
Alternate Representative as the case may be, acting in such
capacity shall be the participation and act of the Partner.
The participation and acts (including the execution of any
papers) by any Alternate Representative of a Partner shall be
deemed to be the act of the Representative for whom such
Alternate Representative is acting without any evidence of
the absence or unavailability of such Representative. Each
Partner may at any time remove a Representative or Alternate
Representative previously appointed by such Partner and
designate a new Representative or Alternate Representative,
as the case may be, in the manner described in this Section
8.3.
8.4 Management Committee Meetings; Action without a Meeting.
Meetings of the Management Committee shall be held whenever
called by the Management Committee or by any Representative
(or Alternate Representative as the case may be) representing
a Partner entitled to vote, at such place and hour and on
such day as stated in the notice of the meeting. Notice of
the time and place of, and general nature of the business to
be transacted at (and notice of any change in the time or
place of holding) meetings of the Management Committee shall
be given to each Representative (with a copy to each
Alternate Representative), and to the Plant Operator if it is
not a Partner, at least five (5) business days before the
date of the meeting; provided, however, that notice of any
meeting need not be given to any Representative if waived by
the Representative in writing either before or after that
time of the action for which notice is required, or if such
Representative is present at such meeting; such waiver or
attendance shall be deemed the equivalent of notice. Any
action which may be taken at a meeting of the Management
Committee may be taken without a meeting if a consent in
writing setting forth the action so taken, or a counterpart
thereof, shall be signed by the Representative (or Alternate
Representative) representing all of the aggregate Ownership
Interests entitled to vote.
8.5 Management Committee Quorum and Voting Requirements.
Attendance by the Representative or Alternate Representative
of each Partner entitled to vote shall be necessary to
constitute a quorum at any meeting of the Management
Committee for the transaction of business, but a lesser
number may adjourn until a quorum is present. Subject to the
provisions relating to mediation of disputes set forth in
Section 14.16, the Management Committee shall act only upon
the approval of the Representatives and/or Alternate
Representatives, as the case may be, representing all of the
aggregate Ownership Interests entitled to vote.
Representatives (and Alternate Representatives as the case
may be) may participate in any meeting of the Management
Committee by means of conference telephone or similar
communications equipment by means of which all persons
participating in the meeting can hear each other, and such
participation shall constitute presence in person at any such
meeting.
8.6 Secretary; Records. The Management Committee shall designate
an individual as Secretary who shall attend meetings of the
Management Committee and prepare and retain custody of
minutes of all meetings, notices, written consents, written
confirmations, certificates, and, as the Management Committee
shall direct, all other documents and communications relating
to the Management Committee. The Secretary shall provide
copies of all signed written consents to each Representative.
9. Plant Constructor and Plant Operator.
9.1 Selection of the Plant Constructor and the Plant Operator.
Coastal Partner shall be the Plant Constructor and Questar
Partner shall be the Plant Operator, all as provided for in
the Construction and Operating Agreement; each shall serve
pursuant to the terms and conditions of this Agreement and
the Construction and Operating Agreement.
9.2 Successor Plant Operator. If the Partner then serving as
Plant Operator is removed from such capacity pursuant to the
Construction and Operating Agreement, the other Partner, in
its sole discretion, shall serve as or designate another
Person to serve as Plant Operator in accordance with the
Construction and Operating Agreement.
10. Limitation of Liabilities; Indemnity.
10.1 Contracts to Limit Partners' Liabilities. Except with the
approval of the Management Committee, the Partnership shall
not enter into any material contract, lease, sublease, note,
or other agreement unless there is contained therein an
appropriate provision limiting the claims of all parties to
such instrument and other beneficiaries thereunder to the
assets of the Partnership and expressly waiving any rights of
such parties and other beneficiaries to proceed against the
Partners and their directors, officers, employees, agents and
shareholders individually. As used in this Section 10.1
only, the term "material" shall mean (a) in the case of any
Loan, note or other agreement for borrowed money, any such
agreement, and (b) in the case of any other contract, lease,
sublease or other agreement, any agreement (or series of
related agreements) involving Partnership obligations
aggregating in excess of $10,000.
10.2 Limitation of Liabilities; Indemnity. All obligations,
liabilities and commitments incurred and all acts or
omissions of, the Partners, the Plant Constructor and the
Plant Operator and their respective officers, directors,
employees and agents (the "Indemnified Parties"), on behalf
of the Partnership and within the scope of their respective
authority and responsibility to act for or on behalf of the
Partnership, shall be for the sole account, benefit and risk
of the Partnership, and the Partnership shall indemnify and
hold harmless each Indemnified Party from and against any
losses, claims, damages, liabilities, costs or expenses
(including reasonable attorneys fees) to which the
Indemnified Parties may become subject in connection with any
such obligations, liability, or commitment, or act or
omission; provided, however, that no Indemnified Party shall
be indemnified hereunder against any loss, claim, damage,
liability, cost or expense arising out of its own gross
negligence or willful misconduct, or that of its Affiliates,
or of their respective officers, directors, employees,
Representatives, Alternate Representatives, agents, employers
or principals.
10.3 No Liability for Profits. No Partner shall be obligated to
account to the Partnership or the other Partner (or any
person claiming by, through or under any of them) for any
income, profit or other benefit derived by such Partner from
any contract entered into between the Partnership and such
Partner in accordance with this Agreement, the Construction
and Operating Agreement or the QPC Processing Agreement;
provided, however, that this Section 10.3 shall not be
construed to waive any right or remedy otherwise available to
the Partnership as a result of any breach or default under
any such contract.
11. Transfer or Pledge of Ownership Interest. No Partner may sell,
assign, pledge, hypothecate or otherwise transfer all or any part
of its Ownership Interest or any interest therein or permit any
such transfer by operation of law except as otherwise permitted
pursuant to this Section 11. For the purposes of this Section 11
and Section 12.1(ii), any change in the identity, ownership or
control of any Partner such that such Partner (a) in the case of
Questar Partner, ceases to be an Affiliate of Questar Corporation
or (b) in the case of Coastal Partner, ceases to be an Affiliate
of The Coastal Corporation, shall be deemed to be a transfer of
such Partner's Ownership Interest that would require the prior
written consent of the remaining Partner(s).
11.1 Transfers of Ownership Interest to Non-Affiliates. Subject
to the right of first refusal herein provided, and subject to
the provisions of Section 11.3, a Partner ("Transferor
Partner") may sell, assign, or otherwise transfer all, but
not less than all (unless the other Partner consents), of its
Ownership Interest to any Person ("Transferee") solely for
cash or cash equivalents.
11.1.1 Notice and Election. The Transferor Partner shall
give notice (the "Section 11.1 Notice") in writing to
the other Partner (the "Non-transferor Partner") that
it desires to so sell, assign or otherwise transfer
all of its Ownership Interest with a description of
the proposed transaction setting forth the complete
terms and conditions of such proposed transaction,
including without limitation the purchase price,
method and terms of payment, the proposed date of
closing for such sale, assignment or other transfer
(which shall not be less than sixty (60) days after
the date such Section 11.1 Notice is delivered to
each Partner), the identity of the Transferee, a copy
of any proposed purchase agreement and a copy of the
Transferee's most recent quarterly and annual
financial statements, which annual statements shall
be audited, if such are available. No offer
complying with this Section 11.1.1 shall contain any
term or condition (a) which is not usual or customary
in agreements for the purchase and sale of
partnership interests of a type similar to an
Ownership Interest, or (b) which has the effect of
making a Partner's exercise of its right of first
refusal hereunder materially more onerous to such
Partner than to the Transferee. The Non-transferor
Partner shall have thirty (30) days from the receipt
of the Section 11.1 Notice to give written notice to
the Transferor Partner of its election either:
(i) to consent to the transfer to the Transferee
on the same terms contained in the Section
11.1 Notice and to the Transferee's
admission as a Partner; or
(ii) to acquire the Transferor Partner's
Ownership Interest on substantially the same
terms set forth in the Section 11.1 Notice,
net of any commission payable by the
Transferor Partner to a third party. If the
Non-transferor Partner elects to purchase
the Ownership Interest of the Transferor
Partner, such sale shall be closed on the
date specified in the Section 11.1 Notice
or, at the election of the Non-transferor
Partner, such other date not more than
thirty (30) days thereafter as the
Non-transferor Partner shall specify.
11.1.2 Failure to Give Notice or Fulfill Purchase
Obligations. If the Non-transferor Partner fails to
give timely written notice of its election under
Section 11.1.1 within the applicable period, the
Non-transferor Partner shall be deemed to have
consented to the transfer of the Transferor Partner's
Ownership Interest to the Transferee and to the
Transferee's admission as a Partner.
11.2 Transfers to Affiliates. Notwithstanding anything in Section
11.1 to the contrary, and subject to the provisions of
Section 11.3, a Partner may transfer all, but not less than
all (unless the other Partner consents), of its Ownership
Interest in the Partnership to an Affiliate without
compliance with the terms of Section 11.1, so long as no
Section 13.3 Event then exists with respect to the Transferor
Partner; provided however, that unless and until the
Non-transferor Partner shall consent to such transfer (which
consent shall not be unreasonably withheld), a Transferor
Partner shall remain primarily liable to the Non-transferor
Partner and the Partnership for the obligations and
liabilities of its transferee hereunder.
11.3 Conditions to Transfer. Any sale, assignment, or other
transfer of a Partner's Ownership Interest in the Partnership
shall be void, unless the Transferor Partner and the
transferee comply to the reasonable satisfaction of the other
Partner with the following:
(i) Transferee Bound by Agreement. The transferee of an
Ownership Interest agrees in writing on or prior to
the date of transfer to become a Partner in the
Partnership bound by all of the terms and conditions
of this Agreement and the Construction and Operating
Agreement;
(ii) Transferee Assumes All Obligations of Transferor.
The transferee of an Ownership Interest agrees in
writing on or prior to the date of transfer to assume
all obligations and liabilities of the Transferor
Partner with respect to the transferred Ownership
Interest;
(iii) Transfer Complies with This Section. Such transfer
is completed in accordance with all the provisions of
this Section 11;
(iv) Indemnity. The Transferor Partner shall indemnify
and hold harmless the remaining Partner(s) from and
against any and all incremental state and federal tax
liability and recapture to the remaining Partner(s)
or the Partnership as a result of the transfer, and,
anything in any Section 11.1 Notice (or any final
form of purchase or other agreement relating to the
sale, transfer or other disposition of an Ownership
Interest) to the contrary notwithstanding, a Partner
transferring its Ownership Interest to the remaining
Partner(s) pursuant to Section 11.1 hereof hereby
agrees to pay, discharge, make the remaining
Partner(s) whole for, and indemnify and hold harmless
the remaining Partner(s) from and against such
Transferor Partner's proportionate share of all
liabilities, obligations or claims arising from,
relating to or incident to the use or operation of
the Plant, the business or operations of the
Partnership or the acts or omissions of the
Transferor Partner in connection therewith, during
the period prior to the closing of such transfer;
provided, however, that such Transferor Partner shall
have no obligation hereunder for any liability,
obligation or claim arising out of the gross
negligence or willful misconduct of such remaining
Partner(s), its officers, employees, Representative,
Alternate Representative or agents.
(v) Contracts; Permits. The transfer shall be in
compliance in all material respects with all
provisions of contracts and agreements (including,
without limitation, the terms of any Project
Financing Loan) to which the Partnership is a party
and with all regulatory permits, licenses and
certificates issued to the Partnership (or consents
or waivers with respect thereto shall have been
obtained by the Transferor Partner), and shall not
materially and adversely affect the interests of the
Partnership with respect to any of them;
(vi) Regulatory and Other Approvals. Any necessary
approvals and consents or waivers of regulatory
agencies and other parties shall have been obtained;
(vii) Application of Laws and Regulations. Unless
consented to by the remaining Partner(s) in its sole
discretion, a transfer of an Ownership Interest is
not permitted if it would subject the Partnership or
any Partner to any law or regulation to which the
Partner or Partnership would not otherwise be
subject, including, without limitation, the Public
Utility Holding Company Act of 1935; and
(viii) General. Any transfer made pursuant to this Section
11 shall include the respective Partner's interest in
and to the Partnership, the Plant and all other
assets of the Partnership.
11.4 Other Provisions Applicable to Transfers.
11.4.1 Reinstatement of Right of First Refusal. If a
transfer to which the Non-transferor Partner has
consented or has been deemed to have consented is not
completed within the time periods provided for
herein, or if there is any change in the identity of
the Transferee or in any material terms or conditions
set forth in the Section 11.1 Notice, the Transferor
Partner shall again comply with the provisions of
Section 11.1 and the Non-transferor Partner shall
again have the option to purchase the Ownership
Interest of the Transferor Partner as provided
herein.
11.4.2 Specific Performance. Any Partner may, in addition
to any other available remedies, enforce its rights
under Section 11.1 by a suit for specific
performance.
11.4.3 Nominees. Any Partner may designate an Affiliate to
exercise the right of first refusal provided in
Section 11.1; provided however, that such Affiliate
complies with each and every provision of Section
11.1.
11.4.4 Admission of Transferee. Upon the transfer of an
Ownership Interest to a Transferee pursuant to
Section 11.1, or an Affiliate pursuant to Section
11.2 or 11.4.3, the Partners shall take all such
actions as may be required to admit the Transferee or
Affiliate as a Partner.
11.5 Effect of Permitted Transfers. No assignment, pledge or
other transfer pursuant to Section 11 shall give rise to a
right in any Partner to dissolve and liquidate the
Partnership. Except as provided in Section 11, no assignment
or other transfer shall give rise to a right in any
transferee to become a partner in the Partnership, unless
agreed to by the other Partner.
11.6 Mortgages, Pledges, and Hypothecations. A Partner may not
mortgage, pledge, or create a security interest in all or any
part of its Ownership Interest without the prior written
consent of the other Partner.
11.7 Admission of New Partner. Except as provided in Section 11.1
and 11.2, additional Persons may become parties to this
Agreement and Partners in the Partnership only upon execution
of an amendment to this Agreement in form and substance
acceptable to the continuing Partners.
12. Events of Default.
12.1 Nature of Events. An "Event of Default" exists if any of the
following occurs with respect to any Partner and is
continuing beyond any period of time provided for cure:
(i) Capital Contribution; Partner Loan. A Partner fails
to make any Capital Contribution or fails to advance
a Partner Loan when and as due and such failure shall
continue for five business (5) days; or
(ii) Voluntary or Involuntary Transfer. A Partner's
Ownership Interest is sold, assigned or otherwise
transferred, in whole or in part, voluntarily or
involuntarily, to a third party in violation of
Section 11; or
(iii) Representations and Warranties. A Partner has made
any representation or warranty in, or in connection
with, this Agreement or the Construction and
Operating Agreement which when made was false or
misleading in any material respect. For purposes of
this Section 12.1 (iii), a representation or warranty
shall be deemed false or misleading in a material
respect if, and only if, the Partnership or another
Partner has been or is reasonably expected to be
materially and adversely affected as a result
thereof; or
(iv) Breach of Agreement. A Partner breaches or fails to
comply in any material respect with any other
provision of this Agreement or the Construction and
Operating Agreement (including, without limitation,
the occurrence of any of the events set forth in
Section 6.5 of the Construction and Operating
Agreement) and such failure continues for (a) more
than sixty (60) days following written notice thereof
from the other Partner, or (b) if such breach or
failure can upon diligent effort be cured only upon a
longer period than sixty (60) days, such Partner
fails following receipt of such notice to diligently
pursue cure of such breach or failure and to give
monthly reports of the steps being taken to cure such
breach or failure to the other Partner or in any
event such breach or failure continues uncured for
more than six (6) months; or
(v) Withdrawal. A Partner withdraws from the Partnership
without the consent of the other Partner prior to the
end of the term provided for the Partnership in
Section 13.1.
12.2 Default Remedies. Upon the occurrence of an Event of Default
by a Partner, the other Partner may exercise, in its own
right and on behalf of the Partnership, any right, power, or
remedy permitted to it by law or at equity, including the
remedy of specific performance. In addition, the
non-defaulting Partner (i) may, suspend performance of all or
any of its obligations hereunder, including the obligation to
make Capital Contributions and Partner Loans, and (ii) shall
have all the rights set forth in Section 13.3; provided,
however, that the occurrence of an Event of Default shall not
serve as a basis for the Plant Operator to suspend or curtail
operations unless the non-defaulting Partner otherwise
determines.
13. Dissolution and Liquidation.
13.1 Term of Partnership. Unless otherwise dissolved and
liquidated pursuant to the terms of this Section 13, the
Partnership shall continue for a primary term of twenty-five
(25) years after the Effective Date and thereafter from year
to year; provided, however that, after the end of the primary
term, any Partner may dissolve the Partnership pursuant to
this Agreement by giving the other Partner written notice of
such election not less than one hundred eighty (180) days
prior to the date such dissolution is to take effect.
13.2 Dissolution Upon Occurrence of Certain Events.
13.2.1 Events. The occurrence of any of following events
shall result in the dissolution of the Partnership:
(i) The occurrence of any event which makes it
unlawful for the business of the Partnership
to be carried on or for the Partners to
carry it on in the Partnership; or
(ii) The determination by the Management
Committee to dissolve the Partnership.
13.2.2 Effect. Upon the occurrence of an event of
dissolution set forth in Section 13.2.1, the
Partnership shall be dissolved, its business wound up
and all of its assets sold or distributed in
accordance with Section 13.4.
13.3 Dissolution Upon Occurrence of Certain Other Events.
13.3.1 Events. The following events are referred to herein
as "Section 13.3 Events":
(i) The dissolution or other termination of
existence of a Partner, or the filing of a
certificate of dissolution by a Partner, or
the failure of a Partner to maintain its
corporate existence, or the occurrence of
any other event which results in the
manifest inability of a Partner to continue
in such capacity;
(ii) Any Partner shall commence a voluntary case
concerning itself under Title 11 of the
United States Code entitled "Bankruptcy" as
now or hereafter in effect, or any successor
thereto (the "Bankruptcy Code"); or an
involuntary case is commenced against any
Partner, and the petition is not
controverted within ten (10) days, or is not
dismissed within sixty (60) days, after
commencement of the case; or a custodian (as
defined in the Bankruptcy Code) is appointed
for, or takes charge of, all or
substantially all of the property of any
Partner, or any Partner commences any other
proceeding under any reorganization,
arrangement, adjustment of debt, relief of
debtors, dissolution, insolvency or
liquidation or similar law of any
jurisdiction whether now or hereafter in
effect relating to such Partner, or there is
commenced against any Partner any such
proceeding which remains undismissed for a
period of sixty (60) days, or any Partner is
adjudicated insolvent or bankrupt; or any
order of relief or other order approving any
such case or proceeding is entered and is
not dismissed within sixty (60) days from
the entry thereof; or any partner suffers
any appointment of any custodian or the like
for it or any substantial part of its
property to continue undischarged or
unstayed for a period of sixty (60) days, or
any Partner makes a general assignment for
the benefit of creditors; or any corporate
action is taken by any Partner for the
purpose of effecting any of the foregoing;
(iii) The occurrence of an Event of Default as
defined in Section 12.1, parts (i), (iii) or
(iv) with respect to any Partner, provided
that the other Partner reasonably
determines, and written notice thereof is
given to the defaulting Partner, that such
default could reasonably be expected to
materially and adversely affect the
financial condition, operations or prospects
of the Partnership or of such non-defaulting
Partner; and
(iv) The occurrence of an Event of Default as
defined in Section 12.1, parts (ii) or (v)
with respect to any Partner.
Each Partner shall give prompt notice to the other Partner of
the occurrence of any Section 13.3 Event of which it has
knowledge.
13.3.2 Effect. Upon the occurrence of a Section 13.3 Event,
the Partner with respect to whom the Section 13.3
Event has occurred (the "defaulting Partner") shall
thereupon be suspended (unless already so suspended)
from the following:
(i) the right to participate in the management
of the Partnership, including, without
limitation, the right of its Representative
or Alternate Representative to vote or take
any other action with respect to any matter
determined or to be determined by the
Management Committee, and any officer of the
Partnership who is an employee, agent, or
representative of or otherwise affiliated
with the defaulting Partner shall be
automatically terminated in such capacity;
(ii) the right to receive profits, proceeds and
distributions of the Partnership; and
(iii) the right to receive payments of principal
or interest on any Loan the defaulting
Partner has made to the Partnership.
Such suspension shall remain in effect from
the date of occurrence of the Section 13.3 Event
until such rights are reinstated in accordance
with Section 13.3.5 (the "Suspension Period").
During the Suspension Period, any amounts which
otherwise would have been paid or distributed to a
defaulting Partner from time to time (including,
without limitation repayments of Partner Loans to
such defaulting Partner) shall be first applied in
the manner provided in Section 4.5, if applicable,
with the balance, if any, placed in an interest
bearing reserve account (the "Reserve Account")
for application to future calls from time to time
toward Partner Default Loans, Capital
Contributions, Partner Loans and the
administration fee described below and for
compensation of the Partnership and the other
Partner (the "non-defaulting Partner") for any
loss, cost or expense arising from, resulting from
or otherwise in connection with the Section 13.3
Event that has occurred or continues to occur from
time to time with respect to a defaulting Partner,
all as the non-defaulting Partner determines. The
defaulting Partner shall only be entitled to
receive the balance in its Reserve Account, if
any, after its rights are reinstated as provided
in Section 13.3.5 or when the Partnership is
liquidated, whichever occurs first. The
defaulting Partner shall pay the Partnership, so
long as a Suspension Period is in effect with
respect to such Partner, an administrative fee in
such amount as is reasonably determined by the
non-defaulting Partner to reimburse the
Partnership for its expenses of administration in
connection with such default. The non-defaulting
Partner and the Partnership shall also have any
other rights or remedies, including the remedy of
specific performance, provided at law or in
equity, and shall have the rights of a
non-defaulting Partner set forth in Section 12.2.
During the period in which the defaulting
Partner's right to vote is suspended, the act of
the non-defaulting Partner, either in its own name
or through its Representative or Alternate
Representative, shall be the act of the
Partnership. Any amounts owed by a defaulting
Partner to the Partnership or any Partner pursuant
to this Agreement for any reason shall bear
interest at the Interest Rate from time to time in
effect, compounded monthly. While any Suspension
Period exists, the non-defaulting Partner may
suspend or modify performance of all or any of the
obligations of the non-defaulting Partner,
including any obligation to make Capital
Contributions or Partner Loans.
13.3.3 Redemption of Interest; Settlement of Loans. At any
time during the Suspension Period, the non-defaulting
Partner may elect to have the Partnership redeem all
of the defaulting Partner's Ownership Interest. The
effective date of such redemption shall be determined
by the non-defaulting Partner. In the event of such
election, the defaulting Partner shall be entitled to
receive from the Partnership payment for redemption
of its Ownership Interest and for settlement of all
Loans made by such defaulting Partner to the
Partnership, which payment shall be (subject to
claims and adjustments pursuant to this Agreement and
claims of the Partnership and the non-defaulting
Partner for those matters described in Section
13.3.5) an aggregate amount equal to the lesser of
(i) the book value of its Capital Account as of the
effective date of the election or (ii) the fair
market value of its Ownership Interest on such date.
If the Management Committee and the defaulting
Partner disagree on the fair market value and at
least one of the values claimed is less than the
amount described in part (i) above, then fair market
value shall be determined in accordance with Section
14.15. Subject to the provisions of Section 4.5, if
applicable, such payment shall be made in
installments from time to time, concurrently with and
in proportion to any distributions to the
non-defaulting Partner. Unless the non-defaulting
Partner shall determine otherwise in its sole
discretion to pay a greater amount, each such
installment shall equal, and such defaulting Partner
shall be entitled to receive upon any such
distribution date (until paid in full), an amount
equal to its former Ownership Interest multiplied by
the aggregate amount available for distribution. The
Partnership shall not be required to sell assets,
borrow funds or modify in any respect its operations
or planned operations in order to finance such
payments, and shall be entitled to establish, fund
and maintain all reserves deemed necessary or
appropriate by the non-defaulting Partner in its sole
discretion for the ongoing or planned operations,
debt service requirements and other expenditures of
the Partnership. From and after the effective date
of redemption, the defaulting Partner's right of
payment shall be pari passu with the right of the
non-defaulting Partner to receive periodic
Partnership distributions and distributions upon
liquidation or winding up of the business of the
Partnership but shall in all events be subordinate to
the rights of all creditors of the Partnership
(whether a Partner or a third party) and non-recourse
against the non-defaulting Partner. The amount due
but unpaid to any defaulting Partner hereunder shall
bear interest at the Prime Rate from time to time in
effect. Each Partner hereby waives to the extent
permitted by applicable law any statutory requirement
that the payment of the foregoing amount be secured
by bond or otherwise. Upon the effective date of
such redemption, all obligations for repayment of any
Loans made by the defaulting Partner to the
Partnership shall be terminated and any notes
representing such Loans shall be deemed for all
purposes to be cancelled without any further act of
the defaulting Partner. Nothing herein shall
preclude the non-defaulting Partner from admitting a
new Partner pursuant to Section 11.7 or dissolving
the Partnership pursuant to Section 13.2.1.
13.3.4 Purchase of Interest. At any time during the
Suspension Period and so long as a determination has
not been made by the non-defaulting Partner to elect
to redeem the defaulting Partner's Ownership Interest
pursuant to Section 13.3.3, a defaulting Partner may
sell all of its Ownership Interest in accordance with
Section 11; provided, however, that on or prior to
the date of transfer, all obligations of the
defaulting Partner to the Partnership and other
Partner have been fully satisfied and paid,
including, without limitation, all Partner Default
Loans, calls for Capital Contributions and Partner
Loans and all claims of the Partnership and
non-defaulting Partner for losses, costs, damages and
expenses arising from, resulting from or otherwise in
connection with the Section 13.3 Event in respect of
the defaulting Partner.
13.3.5 Reinstatement. Unless its Ownership Interest has
been sold or redeemed in accordance with this
Agreement, a defaulting Partner's rights to
participate in management, receive distributions and
receive payments in regard to its Loans shall be
reinstated only after the following have occurred as
reasonably determined by non-defaulting Partner:
(i) All obligations of the defaulting Partner to
the Partnership and the non-defaulting
Partner, including, without limitation, all
Partner Default Loans and accrued interest
on such Loans, have been paid;
(ii) All losses, costs, damages and expenses of
the Partnership and the non-defaulting
Partner arising from, resulting from, or
otherwise in connection with the Section
13.3 Event in respect of the defaulting
Partner have been paid or satisfactorily
settled;
(iii) All Section 13.3 Events in respect of the
defaulting Partner have been fully cured by
the defaulting Partner without any material
adverse effect to the non-defaulting Partner
or the Partnership; and
(iv) Satisfactory provision has been made by the
defaulting Partner with respect to providing
assurance of performance of future
obligations of the Partner under this
Agreement, which provision may include,
without limitation, satisfactory guaranties,
bonds or irrevocable letters of credit.
13.4 Winding Up and Liquidation.
13.4.1 Management Committee Powers. If the Partnership is
dissolved and liquidated pursuant to the provisions
of Section 13.1 or 13.2, the Management Committee
shall continue to exercise its powers under this
Agreement for the purpose of winding up the business
of the Partnership and liquidating its assets in an
orderly manner. If the Partnership is dissolved and
liquidated while there exists a Suspension Period
with respect to a defaulting Partner, the
non-defaulting Partner shall act in place and with
full power of the Management Committee for the
purpose of winding up the business of the Partnership
and liquidating its assets in an orderly manner,
including, without limitation, the power of sale or
other disposition of the Plant in whole or in parts
as determined by the non-defaulting Partner in its
sole discretion.
13.4.2 Allocation of Income, etc. All income, gains,
losses, deductions and credits of the Partnership
arising during any period of liquidation shall be
allocated to the Capital Accounts of the Partners,
including, if applicable, any defaulting Partner, in
proportion to their respective Ownership Interests
immediately preceding the occurrence of the Section
13.3 Event or other event leading to such
liquidation.
13.4.3 Proceeds of Liquidation. The proceeds from
liquidation of the Partnership shall be applied in
the order of priority set forth in Section 13.4.4.
Any Partnership assets which are not sold and which
are distributed in-kind shall be valued and treated
as though such assets were sold at fair market value
and the imputed gain or loss shall be allocated to
the Capital Accounts of the Partners in accordance
with Section 13.4.2. The Partnership shall engage in
no new business during the period of winding up and
liquidation. A reasonable time shall be allowed for
the orderly winding up of the business and affairs of
the Partnership and the liquidation of its assets to
minimize any losses otherwise attendant upon such
winding up.
13.4.4 Priority of Liquidation; Distribution. Upon winding
up and liquidation of the Partnership pursuant to
this Section 13.4, the Partnership's property (i.e.,
the cash proceeds of liquidation and any unliquidated
or noncash assets), including amounts received
pursuant to Section 13.4.6, shall be distributed in
the following order of priority, unless otherwise
required by applicable law:
(i) the payment to creditors of the Partnership,
other than Partners, in order of priority
provided by law, including the establishment
of reserves for the payment thereof;
(ii) pro rata payment to Partners for Loans or
other amounts owed to them by the
Partnership; and
(iii) to the Partners in payment of the credit
balance in their Capital Accounts after all
adjustments and allocations required
pursuant to this Agreement have been made,
in the proportion that such Capital Accounts
bear to each other until such Capital
Accounts are reduced to zero (0), and
thereafter, pro-rata in accordance with
their respective Ownership Interests.
13.4.5 Reserves. Any reserves established in the course of
such distribution shall be held for so long as the
Management Committee or the non-defaulting Partner,
as the case may be, shall deem necessary in a special
account maintained by the Partnership for the purpose
of paying contingent or unforeseen liabilities or
obligations, and shall thereafter be distributed in
the order of priority established in this Section
13.4. For purposes of Section 13.4, expenses of
dissolution and liquidation shall be treated as debts
and obligations of the Partnership and shall have
priority over distributions to the Partners.
13.4.6 Restoration of Deficit Capital Accounts.
Notwithstanding the provisions of Section 4.8 hereof,
upon final liquidation and dissolution of the
Partnership, or upon liquidation of a Partner's
interest in the Partnership, if the balance in such
Partner's Capital Account is less than zero (0)
(after taking into account all Capital Account
adjustments for the Partnership taxable year during
which final liquidation and dissolution occurs, other
than the adjustment set forth herein), such Partner
shall contribute cash to the Partnership upon demand
(or, if no demand is made, on the date of such
liquidation) in an amount equal to the deficit in its
Capital Account. This amount shall be distributed
pursuant to Section 13.4.4.
13.5 Termination Subject to Laws and Regulations. The right and
power to terminate the Partnership shall at all times be
subject to the obligations and duties of the Partnership
under any applicable laws and regulations, and no termination
shall be effected unless such laws and regulations shall have
been complied with in all material respects and any transfer
of the Partnership's business and assets, including all
applicable certificates, shall have been validly consummated
under the provisions of such laws and regulations.
14. General.
14.1 Notices. Any notice or other communication required or
permitted under this Agreement shall be in writing and shall
be deemed to have been duly given upon hand delivery or on
the first day following delivery to a nationally recognized
overnight courier service, fee prepaid, return receipt or
other confirmation of delivery requested, or on the fifth day
following delivery to the U.S. Postal Service as certified or
registered mail, return receipt requested, postage prepaid,
if addressed to a Partner at the address set forth under the
name of such Partner on the signature page hereto, or at such
other addresses and to such other Persons as may be
designated from time to time by such Partner by written
notice to the other Partner. Notice to all Partners shall be
deemed to be notice to the Partnership. Notice to a
Partner's Representative or Alternate Representative shall be
deemed to be notice to such Partner.
14.2 Amendment. This Agreement may be amended, supplemented or
restated only in writing signed by all Partners.
14.3 Applicable Law. This Agreement will be governed by and
interpreted in accordance with the laws of the state of
Wyoming.
14.4 Conformity. Any provision of this Agreement which is in
conflict with the laws of the State of Wyoming is hereby
amended to conform to and comply with such laws to the
fullest extent permitted thereunder, each such amendment
being hereinafter referred to as a "Conforming Amendment".
In the event a court is unable to give effect to a Conforming
Amendment agreed to herein, then, in the alternative, if any
term, obligation, right, condition, or provision hereof, or
application or enforcement thereof, is held invalid,
inoperative, void, or unenforceable, the remaining provisions
hereof or other applications thereof shall (i) remain in full
force; (ii) in no way be altered, affected, impaired,
invalidated, or otherwise changed thereby; and (iii) be
interpreted, construed, applied as though such offensive
provision(s) was not in the first instance contained herein.
14.5 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed original, but
all of which together shall constitute but one and the same
instrument.
14.6 Captions. The titles, headings and captions (collectively
"Captions") contained in this Agreement have been inserted
solely as a means of reference and convenience. Such
Captions shall not affect the interpretation or construction
of this Agreement and shall not define, limit, extend, or
otherwise describe the scope of this Agreement or the intent
of any provision hereof.
14.7 Section Numbers. Unless otherwise indicated, reference to
Section numbers are to Sections of this Agreement.
14.8 Entire Agreement. This Agreement and the Construction and
Operating Agreement, together with any exhibits hereto and
thereto, constitute the entire and integrated agreement
between the Partners concerning the subject matter hereof and
thereof and supersede any prior or contemporaneous
arrangements, understandings or written or oral agreements
relative to said subject matter.
14.9 Waiver. No waiver by a Partner of any default by the other
Partner in the performance of any provision, condition or
requirements herein shall be deemed to be a waiver of, or in
any manner release the other Partner from, performance of any
other provision, condition or requirement herein, nor shall
such waiver be deemed to be a waiver of, or in any manner a
release of, the other Partner from future performance of the
same provision, condition or requirement. Any delay or
omission of any Partner in exercising any right hereunder
shall not impair the exercise of any such right, or any like
right, accruing to it thereafter. No waiver of a right
created by this Agreement by a Partner shall constitute a
waiver of such right by the other Partner except as may
otherwise be required by law with respect to Persons not
parties hereto. The failure of a Partner to perform its
obligations hereunder shall not release the other Partner
from the performance of their obligations, except as is
expressly provided herein.
14.10 Parties Bound and Benefitted. This Agreement shall be
binding upon and inure to the benefit of the parties
hereto and their permitted successors and assigns, and
nothing in this Agreement is intended to confer any
right or impose any obligation upon any other Person.
14.11 Disclosure. No Partner shall disclose the terms of this
Agreement or information about the Partnership's plans,
business, proprietary processes or operations to any
third party other than to the Partnership's or a
Partner's accountants, counsel, and other agents,
lenders, investment bankers and underwriters, and
regulatory authorities having jurisdiction over the
Partnership, the Plant or any Partner or as required
under any of the contracts to which the Partnership is a
party or as any Partner may reasonably determine to be
necessary to comply with any applicable law, rule,
regulation or order of any governmental authority,
agency or tribunal.
14.12 Outside Interests. No Partner shall be required to
devote more of its time to Partnership affairs than
reasonably may be required by the Partnership's
business. A Partner and its Affiliates may acquire
property for its own account or jointly with others or
in other capacities and may enter into joint ventures,
partnerships or other relationships organized for
purposes of engaging in any other activities whether or
not similar to the activities of the Partnership, and
neither the Partnership nor any other Partner shall have
any rights in and to such independent ventures or the
income or profits derived therefrom.
14.13 Waiver of Partition. The Partners expressly waive and
release any right to have their interests in the Plant
partitioned or sold for the purpose of dividing the
proceeds of such sale for the period during which this
Agreement shall remain in effect.
14.14 Right of Offset. The Partnership shall have the right
to deduct from amounts which are due and payable to each
Partner by the Partnership any amounts which are due and
payable by such Partner to the Partnership.
14.15 Fair Market Value of Ownership Interest. For purposes
of this Agreement, the fair market value of a Partner's
Ownership Interest shall be determined as provided in
this Section 14.15 unless the Partners agree otherwise.
The Partners shall determine by mutual agreement the
fair market value of the assets and business of the
Partnership as of the last day of the preceding calendar
month, and the purchase price for the Ownership Interest
of a Partner shall be equal to the amount which would be
distributed to such Partner upon liquidation of the
Partnership if the Plant and such other assets were sold
at such fair market value and the proceeds distributed
in accordance with Section 13.4.4. If the Partners do
not agree as to such fair market value, the fair market
value shall be determined in the following manner:
(i) each Partner shall send an "Appraisal Notice" to the
other Partner setting forth its opinion as to the fair
market value of the assets and business of the
Partnership as of the date set forth above, and
(ii) if the Partners fail to agree upon a valuation within
thirty (30) days following receipt of each other's
Appraisal Notice, the dispute shall be settled by
arbitration in accordance with the Real Estate
Valuation Arbitration Rules of the American Arbitration
Association or any successor thereto and judgment upon
the award rendered by the arbitrator(s) may be entered
in any court having jurisdiction thereof, provided,
however, that the valuation shall be selected by the
arbitrator(s) from one and only one of the Appraisal
Notices, which such valuation may not be modified in
any manner by the arbitrator(s).
14.16 Mediation of Business Disputes. Except as provided for
in Section 14.15 with respect to the fair market value
of a Partner's Ownership Interest, the Partners shall
attempt in good faith to resolve any dispute arising
out of or relating to this Agreement, including,
without limitation, any item before the Management
Committee that is not resolved by the concurrence of
the Representatives and/or Alternate Representatives of
both Partners, by negotiations as hereinafter provided.
14.16.1 Any Partner may give the other Partner notice of
any dispute not resolved in the normal course of
business. Executives of both Partners superior to
the personnel who have been involved previously in
the dispute shall meet at a mutually acceptable
time and place within ten (10) days after delivery
of such notice, and thereafter as often as they
reasonably deem necessary, to exchange relevant
information and to attempt to resolve the dispute.
If the matter has not been resolved by these
persons within thirty (30) days of the disputing
Partner's notice, or if the Partners fail to meet
within ten (10) days, the dispute shall be
referred to senior executives of both Partners who
have authority to settle the dispute and who shall
similarly meet to attempt to resolve the dispute.
If the matter has not been resolved within thirty
(30) days from the referral of the dispute to
senior executives or if no meeting of senior
executives has taken place within fifteen (15)
days after such referral, either Partner may
initiate mediation as hereinafter provided.
14.16.2 All negotiations pursuant hereto are confidential
and shall be treated as compromise and settlement
negotiations for the purposes of federal rules of
evidence and state rules of evidence.
14.16.3 If the dispute has not been resolved by
negotiation as heretofore provided, the Partners
shall endeavor to settle the dispute by mediation
under the then current Center for Public Resources
Model Procedure for Mediation of Business
Disputes. The mutual third party will be selected
by the Partners from appropriate industry
neutrals.
14.17 Conflict of Documents. In the event of any conflict
between provisions of this Agreement and provisions of
the Construction and Operating Agreement, the
provisions of this Agreement shall control to the
extent of such conflict.
IN WITNESS WHEREOF, the Partners have caused this Agreement to be
executed by their duly authorized officers as of January 27, 1995, to be
effective as of the Effective Date.
COASTAL GAS GATHERING AND
PROCESSING COMPANY
Nine Greenway Plaza
Houston, Texas 77046
By:
Michael A. Heim
Executive Vice President
Address:
Nine Greenway Plaza
Houston, Texas 77046-0995
Attention: Gas Gathering and Processing
Facsimile: (713) 877-3067
QUESTAR GAS MANAGEMENT COMPANY
79 South State Street
Salt Lake City, Utah 84111
By: A. J. Marushack
President
Address:
79 South State Street (84111)
P. O. Box 11450
Salt Lake City, Utah 84147
Attention: Gas Supply and Marketing
Facsimile: (801) 530-2570
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summarized financial information extracted from the
Questar Pipeline Company Statements of Income and Balance Sheet for the
period ended March 31, 1995, and is qualified in its entirety by reference
to such unaudited financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> $18,837
<ALLOWANCES> 0
<INVENTORY> 2,569
<CURRENT-ASSETS> 23,929
<PP&E> 618,240
<DEPRECIATION> 207,407
<TOTAL-ASSETS> 453,994
<CURRENT-LIABILITIES> 25,203
<BONDS> 134,511
<COMMON> 6,551
0
0
<OTHER-SE> 213,930
<TOTAL-LIABILITY-AND-EQUITY> 453,994
<SALES> 0
<TOTAL-REVENUES> 29,565
<CGS> 0
<TOTAL-COSTS> 11,364
<OTHER-EXPENSES> 5,348
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,406
<INCOME-PRETAX> 9,488
<INCOME-TAX> 3,214
<INCOME-CONTINUING> 6,274
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> $6,274
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
