EXHIBIT 3.2
AMENDED AND RESTATED AGREEMENT
OF
LIMITED PARTNERSHIP
OF
NORTHERN BORDER PARTNERS, L.P.
TABLE OF CONTENTS
ARTICLE I
ORGANIZATIONAL MATTERS.......... 1
1.1 Formation and Continuation................ 1
1.2 Name...................................... 1
1.3 Registered Office; Principal Office....... 1
1.4 Power of Attorney......................... 2
1.5 Term...................................... 3
1.6 Possible Restrictions on Transfer......... 3
ARTICLE II
DEFINITIONS...................... 3
"Additional Limited Partner".................. 3
"Adjusted Capital Account".................... 4
"Adjusted Property"........................... 4
"Administrative Services Agreement"........... 4
"Affiliate"................................... 4
"Agreed Allocation"........................... 4
"Agreed Value"................................ 4
"Agreement"................................... 5
"Arbitrator".................................. 5
"Assignee".................................... 5
"Audit Committee"............................. 5
"Authorized Officer".......................... 5
"Available Cash".............................. 5
"Book-Tax Disparity".......................... 6
"Business Day"................................ 6
"Buyout Price"................................ 6
"Buyout Event"................................ 6
"Capital Account"............................. 7
"Capital Additions and Improvements".......... 7
"Capital Contribution"........................ 7
"Carrying Value".............................. 7
"Cash from Interim Capital Transactions"...... 7
"Cash from Operations"........................ 7
"Cause"....................................... 9
"Certificate"................................. 9
"Certificate of Limited Partnership".......... 9
"Citizenship Certification"................... 9
"Closing Date"................................ 9
"Closing Price"............................... 9
"Code"........................................ 9
"Combined Interest"........................... 9
"Commission".................................. 9
"Common Unit"................................. 9
"Common Unit Arrearage"....................... 9
"Contributed Property"........................ 10
"Conveyance Agreement"........................ 10
"Credit Agreement"............................ 10
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"Cumulative Common Unit Arrearage"...................... 10
"Curative Allocation"................................... 10
"Current Market Price".................................. 10
"Delaware Act".......................................... 10
"Departing Partner"..................................... 10
"Economic Risk of Loss"................................. 10
"Eligible Citizen"...................................... 10
"Enron"................................................. 10
"Event of Withdrawal"................................... 10
"First Liquidation Target Amount"....................... 11
"First Target Distribution"............................. 11
"General Partners"...................................... 11
"General Partner Percentage Interest"................... 11
"Gross General Partner Percentage Interest"............. 11
"Group"................................................. 11
"Hypothetical Equity Value"............................. 11
"Incentive Distribution"................................ 11
"Indemnified Persons"................................... 12
"Indemnitee"............................................ 12
"Indemnity Agreement"................................... 12
"Initial Common Units".................................. 12
"Initial Limited Partners".............................. 12
"Initial Offering"...................................... 12
"Initial Unit Price".................................... 12
"Interim Capital Transactions".......................... 12
"Intermediate Partnership".............................. 12
"Intermediate Partnership Agreement".................... 13
"Issue Price"........................................... 13
"Limited Partner"....................................... 13
"Liquidation Date"...................................... 13
"Liquidator"............................................ 13
"Maintenance Capital Expenditures"...................... 13
"Merger Agreement"...................................... 13
"Minimum Quarterly Distribution"........................ 13
"National Securities Exchange".......................... 13
"Net Agreed Value"...................................... 14
"Net Income"............................................ 14
"Net Loss".............................................. 14
"Net Termination Gain".................................. 14
"Net Termination Loss".................................. 14
"Non-citizen Assignee".................................. 15
"Nonrecourse Built-in Gain"............................. 15
"Nonrecourse Deductions"................................ 15
"Nonrecourse Liability"................................. 15
"Northern Border Interim Capital Transactions".......... 15
"Northern Border Pipeline".............................. 15
"Northern Border Pipeline Partnership Agreement"........ 15
"Northern Border Termination Capital Transactions"...... 15
"Northern Plains"....................................... 15
"Northwest Border"...................................... 15
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"Notice of Election to Purchase" ............. 15
"Opinion of Counsel" ......................... 16
"Organizational Limited Partner" ............. 16
"Outstanding" ................................ 16
"Overallotment Option" ....................... 16
"Pan Border" ................................. 16
"Panhandle" .................................. 16
"Partner Nonrecourse Debt" ................... 16
"Partner Non-recourse Debt Minimum Gain"...... 16
"Partner Non-recourse Deductions" ............ 16
"Partners" ................................... 16
"Partnership" ................................ 16
"Partnership Interest" ....................... 16
"Partnership Minimum Gain" ................... 16
"Partnership Policy Committee" ............... 17
"Partnership Securities" ..................... 17
"Per Unit Capital Amount" .................... 17
"Percentage Interest" ........................ 17
"Person" ..................................... 17
"Pipeline System" ............................ 17
"Purchase Date" .............................. 17
"Recapture Income" ........................... 17
"Record Date" ................................ 17
"Record Holder" .............................. 17
"Redeemable Units" ........................... 17
"Registration Statement" ..................... 17
"Required Allocations" ....................... 18
"Residual Gain" .............................. 18
"Residual Loss" .............................. 18
"Second Liquidation Target Amount" ........... 18
"Second Target Distribution" ................. 18
"Securities Act" ............................. 18
"Special Approval" ........................... 18
"Subordinated Unit" .......................... 18
"Subordination Period" ....................... 18
"Substituted Limited Partner" ................ 19
"Surviving Business Entity" .................. 19
"Termination Capital Transactions" ........... 19
"Third Target Distribution" .................. 19
"Trading Day" ................................ 19
"Transfer Agent" ............................. 19
"Transfer Application" ....................... 19
"Underwriter" ................................ 20
"Underwriting Agreement" ..................... 20
"Unit" ....................................... 20
"Unpaid MQD" ................................. 20
"Unrealized Gain" ............................ 20
"Unrealized Loss" ............................ 20
"Unrecovered Initial Unit Price" ............. 20
"Unrecovered Subordinated Unit Capital" ...... 20
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"▇▇▇▇▇▇▇▇"................................................................. 21
"Withdrawal Opinion of Counsel"............................................ 21
ARTICLE III
PURPOSE................................ 21
3.1 Purpose and Business................................................... 21
3.2 Powers................................................................. 21
ARTICLE IV
CAPITAL CONTRIBUTIONS.......................... 21
4.1 Contributions by the General Partners.................................. 21
4.2 Issuances of Additional Units and Other Securities..................... 22
4.3 Limited Preemptive Rights.............................................. 23
4.4 Capital Accounts....................................................... 23
4.5 Interest............................................................... 26
4.6 No Withdrawal.......................................................... 26
4.7 Loans from Partners.................................................... 26
4.8 No Fractional Units.................................................... 26
4.9 Splits and Combinations................................................ 26
ARTICLE V
ALLOCATIONS AND DISTRIBUTIONS...................... 27
5.1 Allocations for Capital Account Purposes............................... 27
(a) Net Income......................................................... 27
(b) Net Losses......................................................... 28
(c) Net Termination Gains and Losses................................... 28
(d) Special Allocations................................................ 30
(i) Partnership Minimum Gain Chargeback.......................... 30
(ii) Chargeback of Partner Nonrecourse Debt Minimum Gain.......... 30
(iii) Priority Allocations......................................... 31
(iv) Qualified Income Offset...................................... 31
(v) Gross Income Allocations..................................... 31
(vi) Nonrecourse Deductions....................................... 31
(vii) Partner Nonrecourse Deductions............................... 32
(viii)Nonrecourse Liabilities...................................... 32
(ix) Code Section 754 Adjustments................................. 32
(x) Economic Uniformity.......................................... 32
(xi) Curative Allocation.......................................... 33
5.2 Allocations for Tax Purposes........................................... 33
5.3 Requirement and Characterization of Distributions...................... 35
5.4 Distributions of Cash from Operations.................................. 36
5.5 Distributions of Cash from Interim Capital Transactions................ 37
5.6 Adjustment of Minimum Quarterly Distribution and Target Distribution
Levels................................................................. 37
5.7 Special Provisions Relating to the Subordinated Units.................. 37
ARTICLE VI
MANAGEMENT AND OPERATION OF BUSINESS................ 38
6.1 Partnership Policy Committee........................................... 38
6.2 Management............................................................. 41
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6.3 Certificate of Limited Partnership......................................... 42
6.4 Restrictions on the Partnership Policy Committee's Authority............... 43
6.5 Reimbursement of the General Partners and the Partnership Policy
Committee.................................................................. 44
6.6 Outside Activities......................................................... 44
6.7 Loans to and from the General Partners; Contracts with Affiliates.......... 45
6.8 Indemnification............................................................ 47
6.9 Liability of Indemnitees................................................... 48
6.10 Resolution of Conflicts of Interest........................................ 49
6.11 Other Matters Concerning the General Partners and the Partnership Policy
Committee.................................................................. 50
6.12 Title to Partnership Assets................................................ 51
6.13 Purchase or Sale of Units.................................................. 51
6.14 Registration Rights of Certain Persons..................................... 51
6.15 Reliance by Third Parties.................................................. 54
ARTICLE VII
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS...................... 55
7.1 Limitation of Liability.................................................... 55
7.2 Management of Business..................................................... 55
7.3 Outside Activities......................................................... 55
7.4 Return of Capital.......................................................... 55
7.5 Rights of Limited Partners Relating to the Partnership..................... 55
ARTICLE VIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS..................... 56
8.1 Records and Accounting..................................................... 56
8.2 Fiscal Year................................................................ 57
8.3 Reports.................................................................... 57
ARTICLE IX
TAX MATTERS................................... 57
9.1 Preparation of Tax Returns................................................. 57
9.2 Tax Elections.............................................................. 57
9.3 Tax Controversies.......................................................... 57
9.4 Organizational Expenses.................................................... 58
9.5 Withholding................................................................ 58
9.6 Entity Level-Taxation...................................................... 58
9.7 Entity Level-Arrearage Collections......................................... 58
9.8 Opinions of Counsel........................................................ 59
ARTICLE X
CERTIFICATES................................. 59
10.1 Certificates............................................................... 59
10.2 Registration, Registration of Transfer and Exchange........................ 59
10.3 Mutilated, Destroyed, Lost or Stolen Certificates.......................... 60
10.4 Record Holder.............................................................. 60
ARTICLE XI
TRANSFER OF INTERESTS.............................. 61
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11.1 Transfer............................................................ 61
11.2 Transfer of a General Partner's Partnership Interest................ 61
11.3 Transfer of Units................................................... 62
11.4 Restrictions on Transfers........................................... 62
11.5 Citizenship Certificates; Non-citizen Assignees..................... 62
11.6 Redemption of interests............................................. 63
11.7 Right to Make Offer; Preferential Purchase Right; Buyout Right...... 64
ARTICLE XII
ADMISSION OF PARTNERS........................ 65
12.1 Admission of General Partners and Underwriters as Limited Partners.. 65
12.2 Admission of Substituted Limited Partners........................... 65
12.3 Admission of Successor General Partner.............................. 66
12.4 Admission of Additional Limited Partners............................ 66
12.5 Amendment of Agreement and Certificate of Limited Partnership....... 66
ARTICLE XIII
WITHDRAWAL OR REMOVAL OF PARTNERS.................. 66
13.1 Withdrawal of a General Partner..................................... 66
13.2 Removal of a General Partner........................................ 68
13.3 Interest of Departing Partner and Successor General Partner......... 68
13.4 Withdrawal of Limited Partners...................................... 69
ARTICLE XIV
DISSOLUTION AND LIQUIDATION.................... 70
14.1 Dissolution......................................................... 70
14.2 Continuation of the Business of the Partnership after Dissolution... 70
14.3 Liquidation......................................................... 71
14.4 Distributions in Kind............................................... 72
14.5 Cancellation of Certificate of Limited Partnership.................. 72
14.6 Reasonable Time for Winding Up...................................... 72
14.7 Return of Capital................................................... 73
14.8 No Capital Account Restoration...................................... 73
14.9 Waiver of Partition................................................. 73
ARTICLE XV
AMENDMENT OF PARTNERSHIP AGREEMENT;
MEETINGS; RECORD DATE........................ 73
15.1 Amendment to be Adopted Solely by Partnership Policy Committee...... 73
15.2 Amendment Procedures................................................ 74
15.3 Amendment Requirements.............................................. 74
15.4 Meetings............................................................ 75
15.5 Notice of a Meeting................................................. 75
15.6 Record Date......................................................... 75
15.7 Adjournment......................................................... 76
15.8 Waiver of Notice; Approval of Meeting; Approval of Minutes.......... 76
15.9 Quorum.............................................................. 76
15.10 Conduct of Meeting.................................................. 76
15.11 Action Without a Meeting............................................ 77
15.12 Voting and Other Rights............................................. 77
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ARTICLE XVI
MERGER..................... 78
16.1 Authority................................................ 78
16.2 Procedure for Merger or Consolidation.................... 78
16.3 Approval by Limited Partners of Merger or Consolidation.. 79
16.4 Certificate of Merger.................................... 79
16.5 Effect of Merger......................................... 79
ARTICLE XVII
RIGHT TO ACQUIRE UNITS............ 80
17.1 Right to Acquire Units.................................... 80
ARTICLE XVIII
GENERAL PROVISIONS.............. 81
18.1 Addresses and Notices.................................... 81
18.2 References............................................... 82
18.3 Pronouns and Plurals..................................... 82
18.4 Further Action........................................... 82
18.5 Binding Effect........................................... 82
18.6 Integration.............................................. 82
18.7 Creditors................................................ 82
18.8 Waiver................................................... 82
18.9 Counterparts............................................. 82
18.10 Applicable Law........................................... 82
18.11 Invalidity of Provisions................................. 83
Exhibit A - Form of Certificate Evidencing Common Units
viii
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF
NORTHERN BORDER PARTNERS, L.P.
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF NORTHERN
BORDER PARTNERS, L.P., dated as of October 1, 1993, is entered into by and among
Northern Plains Natural Gas Company, a Delaware corporation, Pan Border Gas
Company, a Delaware corporation, and Northwest Border Pipeline Company, a
Delaware corporation, each in its capacity as a General Partner, and Northwest
Border Pipeline Company, a Delaware corporation, in its capacity as the
Organizational Limited Partner, together with any other Persons who become
Partners in the Partnership or parties hereto as provided herein. In
consideration of the covenants, conditions and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE I
ORGANIZATIONAL MATTERS
1.1 FORMATION AND CONTINUATION. (a) The General Partners and the
Organizational Limited Partner have previously formed the Partnership as a
limited partnership pursuant to the provisions of the Delaware Act and hereby
amend and restate the original Agreement of Limited Partnership of Northern
Border Partners, L.P., as previously amended, in its entirety. Subject to the
provisions of this Agreement, the General Partners and the Organizational
Limited Partner hereby continue the Partnership as a limited partnership
pursuant to the provisions of the Delaware Act. Except as expressly provided to
the contrary in this Agreement, the rights and obligations of the Partners and
the administration, dissolution and termination of the Partnership shall be
governed by the Delaware Act. All Partnership Interests shall constitute
personal property of the owner thereof for all purposes.
(b) In connection with the formation of the Partnership, Northern Plains,
Pan Border and Northwest Border have been admitted as general partners of the
Partnership (each owning a general partner interest in the Partnership equal to
its General Partner Percentage Interest), and the Organizational Limited Partner
has been admitted as a limited partner of the Partnership. As of the Closing
Date, after giving effect to the transactions contemplated by Section 4.1, the
interest in the Partnership of the Organizational Limited Partner shall be
terminated and the Organizational Limited Partner shall withdraw as a limited
partner of the Partnership.
1.2 NAME. The name of the Partnership shall be "Northern Border Partners,
L.P." The Partnership's business may be conducted under any other name or names
deemed necessary or appropriate by the Partnership Policy Committee. The words
"Limited Partnership," "L.P.," "Ltd." or similar words or letters shall be
included in the Partnership's name where necessary for the purposes of complying
with the laws of any jurisdiction that so requires. The Partnership Policy
Committee in its sole discretion may change the name of the Partnership at any
time and from time to time and shall notify the Limited Partners of such change
in the next regular communication to Limited Partners.
1.3 REGISTERED OFFICE; PRINCIPAL OFFICE. Unless and until changed by the
Partnership Policy Committee, the registered office of the Partnership in the
State of Delaware shall be located at The Corporation Trust Center, 1209 Orange
Street, New Castle County, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and the registered agent
for service of process on the Partnership in the State of Delaware
1
at such registered office shall be The Corporation Trust Company. The principal
office of the Partnership shall be located at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇, or such other place as the Partnership Policy Committee may from time to
time designate by notice to the Limited Partners. The Partnership may maintain
offices at such other place or places within or outside the State of Delaware as
the Partnership Policy Committee deems necessary or appropriate.
1.4 POWER OF ATTORNEY. (a) Each Limited Partner and each Assignee hereby
constitutes and appoints each Authorized Officer and, if a Liquidator shall have
been selected pursuant to Section 14.3, the Liquidator severally (and any
successor to the Liquidator by merger, transfer, assignment, election or
otherwise) and each authorized officer and attorney-in-fact of the Liquidator,
with full power of substitution, as his true and lawful agent and
attorney-in-fact, with full power and authority in his name, place and ▇▇▇▇▇,
to:
(i) execute, swear to, acknowledge, deliver, file and record in the
appropriate public offices (A) all certificates, documents and other
instruments (including, without limitation, this Agreement and the
Certificate of Limited Partnership and all amendments or restatements
thereof) that the Partnership Policy Committee or the Liquidator deems
necessary or appropriate to form, qualify or continue the existence or
qualification of the Partnership as a limited partnership (or a
partnership in which the limited partners have limited liability) in the
State of Delaware and in all other jurisdictions in which the Partnership
may conduct business or own property; (B) all certificates, documents and
other instruments that the Partnership Policy Committee or the Liquidator
deems necessary or appropriate to reflect, in accordance with its terms,
any amendment, change, modification or restatement of this Agreement; (C)
all certificates, documents and other instruments (including, without
limitation, conveyances and a certificate of cancellation) that the
Partnership Policy Committee or the Liquidator deems necessary or
appropriate to reflect the dissolution and liquidation of the Partnership
pursuant to the terms of this Agreement; (D) all certificates, documents
and other instruments relating to the admission, withdrawal, removal or
substitution of any Partner pursuant to, or other events described in,
Article XI, XII, XIII or XIV or the Capital Contribution of any Partner;
(E) all certificates, documents and other instruments relating to the
determination of the rights, preferences and privileges of any class or
series of Units or other Partnership Securities issued pursuant to Section
4.2; and (F) all certificates, documents and other instruments (including,
without limitation, agreements and a certificate of merger) relating to a
merger or consolidation of the Partnership pursuant to Article XVI; and
(ii) execute, swear to, acknowledge, deliver, file and record all
ballots, consents, approvals, waivers, certificates, documents and other
instruments necessary or appropriate, in the sole discretion of the
Partnership Policy Committee or the Liquidator, to make, evidence, give,
confirm or ratify any vote, consent, approval, agreement or other action
that is made or given by the Partners hereunder or is consistent with the
terms of this Agreement or is necessary or appropriate, in the sole
discretion of the Partnership Policy Committee or the Liquidator, to
effectuate the terms or intent of this Agreement; provided, that when
required by Section 15.3 or any other provision of this Agreement that
establishes a percentage of the Limited Partners or of the Limited
Partners of any class or series required to take any action, the
Partnership Policy Committee or the Liquidator may exercise the power of
attorney made in this Section 1.4(a)(ii) only after the necessary vote,
consent or approval of the Limited Partners or of the Limited Partners of
such class or series, as applicable.
Nothing contained in this Section 1.4(a) shall be construed as authorizing the
Partnership Policy Committee to amend this Agreement except in accordance with
Article XV or as may be otherwise expressly provided for in this Agreement.
2
(b) The foregoing power of attorney is hereby declared to be irrevocable
and a power coupled with an interest, and it shall survive and not be affected
by the subsequent death, incompetency, disability, incapacity, dissolution,
bankruptcy or termination of any Limited Partner or Assignee and the transfer of
all or any portion of such Limited Partner's or Assignee's Partnership Interest
and shall extend to such Limited Partner's or Assignee's heirs, successors,
assigns and personal representatives. Each such Limited Partner or Assignee
hereby agrees to be bound by any representation made by the Partnership Policy
Committee or the Liquidator acting in good faith pursuant to such power of
attorney; and each such Limited Partner or Assignee hereby waives any and all
defenses that may be available to contest, negate or disaffirm the action of the
Partnership Policy Committee or the Liquidator taken in good faith under such
power of attorney. Each Limited Partner or Assignee shall execute and deliver to
the Partnership Policy Committee or the Liquidator, within 15 days after receipt
of the Partnership Policy Committee's or the Liquidator's request therefor, such
further designation, powers of attorney and other instruments as the Partnership
Policy Committee or the Liquidator deems necessary to effectuate this Agreement
and the purposes of the Partnership.
1.5 TERM. The Partnership commenced upon the filing of the Certificate of
Limited Partnership in accordance with the Delaware Act and shall continue in
existence until the close of Partnership business on December 31, 2083, or until
the earlier termination of the Partnership in accordance with the provisions of
Article XIV.
1.6 POSSIBLE RESTRICTIONS ON TRANSFER. Notwithstanding anything to the
contrary contained in this Agreement, in the event of (a) the enactment (or
imminent enactment) of any legislation, (b) the publication of any temporary or
final regulation by the Treasury Department, (c) any ruling by the Internal
Revenue Service or (d) any judicial decision, that, in any such case, in the
Opinion of Counsel, would result in the taxation of the Partnership, the
Intermediate Partnership or Northern Border Pipeline as an association taxable
as a corporation or would otherwise result in the Partnership, the Intermediate
Partnership or Northern Border Pipeline being taxed as an entity for federal
income tax purposes, then, the Partnership Policy Committee may impose such
restrictions on the transfer of Units or Partnership Interests as may be
required, in the Opinion of Counsel, to prevent the Partnership, the
Intermediate Partnership or Northern Border Pipeline from being taxed as an
association taxable as a corporation or otherwise as an entity for federal
income tax purposes, including, without limitation, making such amendments to
this Agreement as the Partnership Policy Committee in its sole discretion may
determine to be necessary or appropriate to impose such restrictions, provided,
that any such amendment to this Agreement that would result in the delisting or
suspension of trading of any class of Units on any National Securities Exchange
on which such class of Units is then traded must be approved by the holders of
at least two-thirds of the Outstanding Units of such class (excluding the vote
in respect of Units held by the General Partners and their Affiliates).
ARTICLE II
DEFINITIONS
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"ADDITIONAL LIMITED PARTNER" means a Person admitted to the
Partnership as a Limited Partner pursuant to Section 12.4 and who is shown
as such on the books and records of the Partnership.
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"ADJUSTED CAPITAL ACCOUNT" means the Capital Account maintained for each
Partner as of the end of each fiscal year of the Partnership, (a) increased by
any amounts that such Partner is obligated to restore under the standards set by
Treasury Regulation Section 1.704-1 (b)(2)(ii)(c) (or is deemed obligated to
restore under Treasury Regulation Sections 1.704-2(g) and 1.704-2(i)(5)) and (b)
decreased by (i) the amount of all losses and deductions that, as of the end of
such fiscal year, are reasonably expected to be allocated to such Partner in
subsequent years under Sections 704(e)(2) and 706(d) of the Code and Treasury
Regulation Section 1.751-1 (b)(2)(ii), and (ii) the amount of all distributions
that, as of the end of such fiscal year, are reasonably expected to be made to
such Partner in subsequent years in accordance with the terms of this Agreement
or otherwise to the extent they exceed offsetting increases to such Partner's
Capital Account that are reasonably expected to occur during (or prior to) the
year in which such distributions are reasonably expected to be made (other than
increases as a result of a minimum gain chargeback pursuant to Section 5.1
(d)(i) or 5.1 (d)(ii)). The foregoing definition of Adjusted Capital Account is
intended to comply with the provisions of Treasury Regulation Section 1.704-1
(b)(2)(ii)(d) and shall be interpreted consistently therewith. The "Adjusted
Capital Account" in respect of a Common Unit, a Subordinated Unit or any other
specified interest in the Partnership shall be the amount which such Adjusted
Capital Account would be if such Common Unit, Subordinated Unit or other
interest in the Partnership was the only interest in the Partnership held by a
Limited Partner.
"ADJUSTED PROPERTY" means any property the Carrying Value of which has
been adjusted pursuant to Section 4.4(d)(i) or 4.4(d)(ii). Once an Adjusted
Property is deemed distributed by, and recontributed to, the Partnership for
federal income tax purposes upon a termination thereof pursuant to Section 708
of the Code, such property shall thereafter constitute a Contributed Property
until the Carrying Value of such property is subsequently adjusted pursuant to
Section 4.4(d)(i) or 4.4(d)(ii).
"ADMINISTRATIVE SERVICES AGREEMENT" means that certain Administrative
Services Agreement, dated the Closing Date, among NBP Services Corporation, a
Delaware corporation, the Intermediate Partnership and the Partnership.
"AFFILIATE" means, with respect to any Person, any other Person that
directly or indirectly controls, is controlled by or is under common control
with, the Person in question. As used herein, the term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through ownership
of voting securities, by contract or otherwise.
"AGREED ALLOCATION" means any allocation, other than a Required
Allocation, of an item of income, gain, loss or deduction pursuant to the
provisions of Section 5.1, including, without limitation, a Curative Allocation
(if appropriate to the context in which the term "Agreed Allocation" is used).
"AGREED VALUE" of any Contributed Property means the fair market value of
such property or other consideration at the time of contribution as determined
by the Partnership Policy Committee using such reasonable method of valuation as
it may adopt; provided, however, that the Agreed Value of any property deemed
contributed to the Partnership for federal income tax purposes upon termination
and reconstitution thereof pursuant to Section 708 of the Code shall be
determined in accordance with Section 4.4(c)(i). Subject to Section 4.4(c)(i),
the Partnership Policy Committee shall, in its sole discretion, use such method
as it deems reasonable and appropriate to allocate the aggregate Agreed Value of
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Contributed Properties contributed to the Partnership in a single or integrated
transaction among each separate property on a basis proportional to the fair
market value of each Contributed Property.
"AGREEMENT" means this Amended and Restated Agreement of Limited
Partnership of Northern Border Partners, L.P., as it may be amended,
supplemented or restated from time to time.
"ARBITRATOR" has the meaning assigned to such term in Section
6.1(b)(iii)(A).
"ASSIGNEE" means a Non-citizen Assignee or a Person to whom one or more
Units have been transferred in a manner permitted under this Agreement and who
has executed and delivered a Transfer Application as required by this Agreement,
but who has not become a Substituted Limited Partner.
"AUDIT COMMITTEE" means a committee consisting of two persons appointed by
the Partnership Policy Committee who are neither officers nor employees of any
General Partner or any of their Affiliates.
"AUTHORIZED OFFICER" means the Chief Executive Officer and the Chief
Financial and Accounting Officer and such other officers as may be authorized
from time to time by the Partnership Policy Committee to execute contracts,
certificates and other instruments on behalf of the Partnership.
"AVAILABLE CASH" means, with respect to any calendar quarter and without
duplication:
(a) the sum of:
(i) all cash receipts of the Partnership during such quarter
from all sources (including, without limitation, distributions of
cash received from the Intermediate Partnership (other than any such
distributions that constitute distributions received by the
Intermediate Partnership in respect of Northern Border Termination
Capital Transactions) and cash proceeds from Interim Capital
Transactions, but excluding cash proceeds from Termination Capital
Transactions), plus, in the case of the calendar quarter ending
December 31, 1993, the cash balance of the Partnership and the
Intermediate Partnership as of the close of business on the Closing
Date; and
(ii) any reduction in a reserve with respect to such quarter
from the level of such reserve at the end of the prior quarter;
(b) less the sum of:
(i) all cash disbursements of the Partnership during such
quarter, including, without limitation, disbursements for operating
expenses, taxes, if any, debt service (including, without
limitation, the payment of principal, premium and interest), capital
expenditures and contributions, if any, to the Intermediate
Partnership (but excluding all cash distributions to Partners and
any cash disbursements with respect to which, and to the extent
that, a reserve was established in a prior quarter); and
5
(ii) any reserves established with respect to such quarter,
and any increase in reserves established with respect to prior
quarters, in such amounts as the Partnership Policy Committee
determines in its reasonable discretion to be necessary or
appropriate (x) to provide for the proper conduct of the business of
the Partnership or the Intermediate Partnership, (y) to provide
funds for distributions with respect to Units in respect of any one
or more of the next four calendar quarters or (z) because the
distribution of such amounts would be prohibited by applicable law
or by any loan agreement, security agreement, mortgage, debt
instrument or other agreement or obligation to which the Partnership
or the Intermediate Partnership is a party or by which it is bound
or its assets are subject.
Notwithstanding the foregoing, "Available Cash" with respect to any calendar
quarter (A) shall not include any cash receipts or reductions in reserves or
take into account any disbursements made or reserves established after the
Liquidation Date and (B) shall include any distributions of cash (to the extent
such distributions are attributable to transactions and operations during such
quarter) received by the Partnership from the Intermediate Partnership after the
end of such quarter but on or before the date on which the Partnership makes its
distribution of Available Cash in respect of such quarter pursuant to Section
5.3. Taxes paid by the Partnership on behalf of, or amounts withheld with
respect to, all or less than all of the Partners shall not be considered cash
disbursements of the Partnership that reduce Available Cash, but the payment or
withholding thereof shall be deemed to be a distribution of Available Cash to
such Partners. Alternatively, in the discretion of the Partnership Policy
Committee, such taxes (if pertaining to all Partners) may be considered to be
cash disbursements of the Partnership which reduce Available Cash, but the
payment or withholding thereof shall not be deemed to be a distribution of
Available Cash to such Partners (and thus shall not be considered for purposes
of determining whether the Partnership has distributed an amount equal to the
Minimum Quarterly Distribution for the applicable quarter).
"BOOK-TAX DISPARITY" means with respect to any item of Contributed
Property or Adjusted Property, as of the date of any determination, the
difference between the Carrying Value of such Contributed Property or Adjusted
Property and the adjusted basis thereof for federal income tax purposes as of
such date. A Partner's share of the Partnership's Book-Tax Disparities in all of
its Contributed Property and Adjusted Property will be reflected by the
difference between such Partner's Capital Account balance as maintained pursuant
to Section 4.4 and the hypothetical balance of such Partner's Capital Account
computed as if it had been maintained strictly in accordance with federal income
tax accounting principles.
"BUSINESS DAY" means Monday through Friday of each week, except that a
legal holiday recognized as such by the government of the United States or the
states of New York or Texas shall not be regarded as a Business Day.
"BUYOUT PRICE" means, as of the date of determination, an amount equal to
110% of the sum of (a) the fair market value of the Combined Interest of the
affected General Partner as determined in accordance with the second paragraph
of Section 13.3(a), and (b) the product of (i) the number of Subordinated Units
owned by the affected General Partner and (ii) the then Current Market Price of
a Common Unit.
"BUYOUT EVENT" has the meaning assigned to such term in Section 11.7(c).
6
"CAPITAL ACCOUNT" means the capital account maintained for a Partner
pursuant to Section 4.4.
"CAPITAL ADDITIONS AND IMPROVEMENTS" Means additions or improvements
(whether by acquisition or new construction) to the Pipeline System (as same
existed on the Closing Date) or a newly acquired or constructed pipeline system
(in each case, including, without limitation, related facilities such as those
that increase the throughput, deliverable capacity or storage capacity of the
Pipeline System from the throughput, deliverable capacity or storage thereof
immediately prior to the making or acquisition of such additions or
improvements), irrespective of whether such additions or improvements serve the
same or different geographic markets than are served by the Pipeline System
immediately prior to the making or acquisition of such additions or
improvements.
"CAPITAL CONTRIBUTION" means any cash, cash equivalents or the Net Agreed
Value of Contributed Property that a Partner contributes to the Partnership
pursuant to the Conveyance Agreement or Sections 4.1, 4.2, 4.4(c)(i) or 13.3(c).
"CARRYING VALUE" means (a) with respect to a Contributed Property, the
Agreed Value of such property reduced (but not below zero) by all depreciation,
amortization and cost recovery deductions charged to the Partners' and
Assignees' Capital Accounts in respect of such Contributed Property, and (b)
with respect to any other Partnership property, the adjusted basis of such
property for federal income tax purposes, all as of the time of determination.
The Carrying Value of any property shall be adjusted from time to time in
accordance with Sections 4.4(d)(i) and 4.4(d)(ii) and to reflect changes,
additions or other adjustments to the Carrying Value for dispositions and
acquisitions of Partnership properties, as deemed appropriate by the Partnership
Policy Committee.
"CASH FROM INTERIM CAPITAL TRANSACTIONS" means, at any date, the sum of
such amounts of Available Cash as (i) are deemed to be Cash from Interim Capital
Transactions pursuant to Section 5.3 and (ii) constitute distributions received
by the Intermediate Partnership from Northern Border Pipeline in respect of
Northern Border Interim Capital Transactions.
"CASH FROM OPERATIONS" means, at the close of any calendar quarter but
prior to the Liquidation Date, on a cumulative basis and without duplication,
(a) the sum of all cash receipts of the Partnership and the
Intermediate Partnership during the period since the Closing Date through
such date (including, without limitation, (i) the cash balance of the
Partnership as of the close of business on the Closing Date, and (ii) cash
distributions received by the Intermediate Partnership from Northern
Border Pipeline (other than any such distributions in respect of Northern
Border Interim Capital Transactions or Northern Border Termination Capital
Transactions), but in each case excluding any cash proceeds from any
Interim Capital Transactions (except to the extent specified in Section
5.3) and Termination Capital Transactions),
(b) less the sum of:
(i) all cash operating expenditures of the Partnership and the
Intermediate Partnership during such period, including, without
limitation, taxes, if any, and the Partnership's share of capital
contributions made by the
7
Intermediate Partnership to Northern Border Pipeline in respect of
the Intermediate Partnership's share of similar expenditures of
Northern Border Pipeline,
(ii) all cash debt service payments of the Partnership and the
Intermediate Partnership during such period (other than payments or
prepayments of principal and premium required by reason of loan
agreements (including, without limitation, covenants and default
provisions therein) or by lenders, in each case in connection with
sales or other dispositions of assets or made in connection with
refinancings or refundings of indebtedness, provided, that any
payment or prepayment of principal, whether or not then due, shall
be deemed, at the election and in the discretion of the Partnership
Policy Committee, to be refunded or refinanced by any indebtedness
incurred or to be incurred by the Partnership or the Intermediate
Partnership simultaneously with or within 180 days prior to or after
such payment or prepayment to the extent of the principal amount of
such indebtedness so incurred) and the Partnership's share of
capital contributions made by the Intermediate Partnership to
Northern Border Pipeline in respect of the Intermediate
Partnership's share of any such payments made by Northern Border
Pipeline,
(iii) all cash capital expenditures of the Partnership and the
Intermediate Partnership during such period, and the Partnership's
share of any capital contributions made by the Intermediate
Partnership to Northern Border Pipeline in respect of the
Intermediate Partnership's share of any cash capital expenditures of
Northern Border Pipeline during such period, including, without
limitation, cash capital expenditures made, or the Partnership's
share of capital contributions to Northern Border Pipeline, in
respect of Maintenance Capital Expenditures, but excluding (A) cash
capital expenditures made, or the Partnership's share of capital
contributions to Northern Border Pipeline, in respect of Capital
Additions and Improvements and (B) cash expenditures made in payment
of transaction expenses relating to Interim Capital Transactions,
(iv) an amount equal to revenues, if any, collected by the
Intermediate Partnership (or by Northern Border Pipeline to the
extent same are distributed to the Intermediate Partnership) as a
result of transportation rate increases that are subject to possible
refund,
(v) any reserves outstanding as of such date that the
Partnership Policy Committee deems in its reasonable discretion to
be necessary or appropriate to provide for the future cash payment
of, or future capital contributions to Northern Border Pipeline with
respect to, items of the type referred to in clauses (i) through
(iv) of this sentence, and
(vi) any reserves that the Partnership Policy Committee deems
in its reasonable discretion to be necessary or appropriate to
provide funds for distributions with respect to Units in respect of
any one or more of the next four calendar quarters,
all as determined on a consolidated basis and after taking into account the
interest of each of the General Partners therein attributable to their general
partner interest in the Intermediate
8
Partnership. Where cash capital expenditures, or capital contributions by the
Intermediate Partnership, are made in part in respect of Capital Additions and
Improvements and in part for other purposes, the Partnership Policy Committee's
good faith allocation thereof between the portion made for Capital Additions and
Improvements and the portion made for other purposes shall be conclusive.
"CAUSE" means a court of competent jurisdiction has entered a final,
non-appealable judgment finding a General Partner liable for actual fraud, gross
negligence or willful or wanton misconduct in its capacity as general partner of
the Partnership.
"CERTIFICATE" means a certificate, substantially in the form of Exhibit A
to this Agreement or in such other forms as may be adopted by the Partnership
Policy Committee in its sole discretion, issued by the Partnership evidencing
ownership of one or more Common Units, or a certificate, in such form as may be
adopted by the Partnership Policy Committee in its sole discretion, issued by
the Partnership evidencing ownership of one or more other Units.
"CERTIFICATE OF LIMITED PARTNERSHIP" means the Certificate of Limited
Partnership filed with the Secretary of State of the State of Delaware as
referenced in Section 6.3, as such Certificate of Limited Partnership may be
amended, supplemented or restated from time to time.
"CITIZENSHIP CERTIFICATION" means a properly completed certificate in such
form as may be specified by the Partnership Policy Committee by which an
Assignee or a Limited Partner certifies that he (and if he is a nominee holding
for the account of another Person, that to the best of his knowledge such other
Person) is an Eligible Citizen.
"CLOSING DATE" means the first date on which Common Units are sold by
Northern Plains and Pan Border to the Underwriters pursuant to the provisions of
the Underwriting Agreement.
"CLOSING PRICE" has the meaning assigned to such term in Section 17.1(a).
"CODE" means the Internal Revenue Code of 1986, as amended and in effect
from time to time, as interpreted by the applicable regulations thereunder. Any
reference herein to a specific section or sections of the Code shall be deemed
to include a reference to any corresponding provision of future law.
"COMBINED INTEREST" has the meaning assigned to such term in Section
13.3(a).
"COMMISSION" means the Securities and Exchange Commission.
"COMMON UNIT" means a Unit representing a fractional part of the
Partnership Interests of all Limited Partners and Assignees and having the
rights and obligations specified with respect to Common Units in this Agreement.
"COMMON UNIT ARREARAGE" means, with respect to any Common Unit, whenever
issued, and as to any calendar quarter within the Subordination Period, the
excess, if any, of (a) the Minimum Quarterly Distribution with respect to such
Common Unit over (b) the sum of all Available Cash distributed with respect to
such Common Unit in respect of such quarter pursuant to Section 5.4(a).
9
"CONTRIBUTED PROPERTY" means each property or other asset, in such form as
may be permitted by the Delaware Act, but excluding cash, contributed to the
Partnership (or deemed contributed to the Partnership on termination and
reconstitution thereof pursuant to Section 708 of the Code). Once the Carrying
Value of a Contributed Property is adjusted pursuant to Section 4.4(d), such
property shall no longer constitute a Contributed Property, but shall be deemed
an Adjusted Property.
"CONVEYANCE AGREEMENT" means the Conveyance, Contribution and Assumption
Agreement dated as of the Closing Date, among the Partnership, the Intermediate
Partnership, Northern Plains, Pan Border and Northwest Border.
"CREDIT AGREEMENT" means the Credit Agreement dated as of October 1, 1993,
among the Intermediate Partnership, as Borrower, Northern Plains, Pan Border and
Northwest Border, as Lenders, and NB Services Corporation, as agent for the
Lenders.
"CUMULATIVE COMMON UNIT ARREARAGE" means, with respect to any Common Unit,
whenever issued, and as of the end of any calendar quarter, the excess, if any,
of (a) the sum resulting from adding together the Common Unit Arrearage as to
such Common Unit for each of the quarters within the Subordination Period ending
on or before the last day of such quarter over (b) the sum of any distributions
theretofore made pursuant to Section 5.4(b) with respect to such Common Unit
(including any distributions to be made in respect of the last of such
quarters).
"CURATIVE ALLOCATION" means any allocation of an item of income, gain,
deduction, loss or credit pursuant to the provisions of Section 5.1(d)(xi).
"CURRENT MARKET PRICE" has the meaning assigned to such term in Section
17.1(a).
"DELAWARE ACT" means the Delaware Revised Uniform Limited Partnership Act,
6 Del C. Section 17-101, et seq., as amended, supplemented or restated from
time to time, and any successor to such statute.
"DEPARTING PARTNER" means a General Partner with respect to which an Event
of Withdrawal of the type described in Section 13.1 has occurred.
"ECONOMIC RISK OF LOSS" has the meaning set forth in Treasury Regulation
Section 1.752-2(a).
"ELIGIBLE CITIZEN" means a Person qualified to own interests in real
property in jurisdictions in which the Partnership, the Intermediate Partnership
or Northern Border Pipeline does business or proposes to do business from time
to time, and whose status as a Limited Partner or Assignee does not or would not
subject the Partnership, the Intermediate Partnership or Northern Border
Pipeline to a substantial risk of cancellation or forfeiture of any of its
properties or any interest therein.
"ENRON" means Enron Corp., a Delaware corporation.
"EVENT OF WITHDRAWAL" has the meaning assigned to such term in Section
13.1(a).
10
"FIRST LIQUIDATION TARGET AMOUNT" has the meaning assigned to such term in
Section 5.1(c)(i)(D).
"FIRST TARGET DISTRIBUTION" means $0.605 per Unit (or, with respect to the
period commencing on the Closing Date and ending on December 31,1993, the
product of $0.605 multiplied by a fraction of which the numerator is the number
of days in such period and of which the denominator is 92), subject to
adjustment in accordance with Sections 5.6 and 9.6.
"GENERAL PARTNERS" means Northern Plains, Pan Border and Northwest Border,
as the initial general partners of the Partnership, and any Person or Persons
that either (i) acquires the general partner interest of such Person in the
Partnership pursuant to and in accordance with the terms of Section 11.2 or (ii)
is approved as a successor General Partner pursuant to Section 13.1 or 13.2 and,
in either case, is admitted to the Partnership as a general partner in
accordance with the terms of Section 12.3.
"GENERAL PARTNER PERCENTAGE INTEREST" means (a) as to Northern Plains and
its permitted successors and assigns, 0.50%, (b) as to Pan Border and its
permitted successors and assigns, 0.325%, and (c) as to Northwest Border and its
permitted successors and assigns, 0.175%.
"GROSS GENERAL PARTNER PERCENTAGE INTEREST" means, with respect to a
Departing Partner, an amount equal to the sum of (a) the product of such
Departing Partner's General Partner Percentage Interest (expressed as a decimal)
and .9899 and (b) such Departing Partner's general partner percentage interest
in the Intermediate Partnership. By way of example, if Northern Plains were the
Departing Partner, its Gross General Partner Percentage Interest would be equal
to .01 ((.005 x .9899) + .0050505).
"GROUP" means a "group" of Persons as defined in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended, and the rules and regulations of
the Commission promulgated thereunder.
"HYPOTHETICAL EQUITY VALUE" means, as of the date of determination, an
amount equal to the product obtained from the following formula:
1.0101 x [TCUO] x [1/PCU] x CMP
where such symbols have the following meanings as of the date of determination:
(a) "TCUO" means the total number of Common Units Outstanding, (b) "PCU" means
the product, expressed as a decimal, of (i) the total number of Common Units
Outstanding divided by the total number of Units Outstanding and (ii) .9899 and
(c) CMP means the Current Market Price as of such date (as such term is defined
in Section 17.1 (a)). By way of example, if the Current Market Price is $22.50
and the Overallotment Option is not exercised, then the Hypothetical Equity
Value is equal to $601,529,396.91 (1.0101 x 17,200,000 x
(1/(17,200,000/26,200,000 X .9899)) X $22.50.
"INCENTIVE DISTRIBUTION" means any amount of cash distributed to the
General Partners, in their capacity as general partners of the Partnership,
pursuant to Sections 5.4(e), 5.4(f) or 5.4(g) that exceeds that amount equal to
1% of the aggregate amount of cash then being distributed pursuant to such
provisions.
11
"INDEMNIFIED PERSONS" has the meaning assigned to such term in Section
6.14(h).
"INDEMNITEE" means any General Partner, any member of the Partnership
Policy Committee, any Departing Partner, any Person who is or was an Affiliate
of any General Partner or any Departing Partner, any Person who is or was an
officer, director, employee, partner, agent or trustee of any General Partner,
the Partnership or any Departing Partner or any such Affiliate, or any Person
who is or was serving at the request of any General Partner, the Partnership
Policy Committee or any Departing Partner or any such Affiliate as a director,
officer, employee, partner, agent or trustee of another Person.
"INDEMNITY AGREEMENT" means the Indemnity Agreement dated as of September
23, 1993 among Northern Plains, Pan Border and Northwest Border.
"INITIAL COMMON UNITS" means any Common Units received by Northwest Border
on the Closing Date pursuant to Section 4.1 or in connection with the exercise
by the Underwriters of the Overallotment Option pursuant to Section 5.7.
"INITIAL LIMITED PARTNERS" means the General Partners (with respect to the
Common Units and Subordinated Units received by them pursuant to Section 4.1)
and the Underwriters, in each case upon being admitted to the Partnership in
accordance with Section 12.1.
"INITIAL OFFERING" means the initial offering and sale of Common Units to
the public, as described in the Registration Statement.
"INITIAL UNIT PRICE" means the initial price per Common Unit at which the
Underwriters offered the Common Units to the public for sale as set forth on the
cover page of the prospectus first issued at or after the time the Registration
Statement first became effective and, with respect to any other class or series
of Units, the price per unit at which such class or series of Units is initially
sold by the Partnership, as determined by the Partnership Policy Committee, in
each case adjusted as the Partnership Policy Committee determines to be
appropriate to give effect to any distribution, subdivision or combination of
Units.
"INTERIM CAPITAL TRANSACTIONS" means (a) borrowings, refinancings or
refundings of indebtedness and sales of debt securities (other than for working
capital purposes and other than for items purchased on open account in the
ordinary course of business) by the Partnership or the Intermediate Partnership,
(b) sales of equity interests (other than sales of Common Units by the
Underwriters pursuant to the exercise of the Overallotment Option) by the
Partnership or the Intermediate Partnership and (c) sales or other voluntary or
involuntary dispositions of any assets of the Partnership or the Intermediate
Partnership (other than (x) sales or other dispositions of inventory in the
ordinary course of business, (y) sales or other dispositions of other current
assets including, without limitation, receivables and accounts and (z) sales or
other dispositions of assets as a part of normal retirements or replacements),
in each case prior to the commencement of the dissolution and liquidation of the
Partnership.
"INTERMEDIATE PARTNERSHIP" means Northern Border Intermediate Limited
Partnership, a Delaware limited partnership continued pursuant to the
Intermediate Partnership Agreement.
12
"INTERMEDIATE PARTNERSHIP AGREEMENT" means the Amended and Restated
Agreement of Limited Partnership of Northern Border Intermediate Limited
Partnership, as it may be amended, supplemented or restated from time to time.
"ISSUE PRICE" means the price at which a Unit is purchased from the
Partnership, after taking into account any sales commission or underwriting
discount charged to the Partnership.
"LIMITED PARTNER" means, unless the context otherwise requires, each
Substituted Limited Partner, each Initial Limited Partner, each Additional
Limited Partner and any Departing Partner upon the change of its status from
General Partner to Limited Partner pursuant to Section 13.3, subject to the
provisions of Section 5.7; and solely for purposes of Articles IV, V and VI and
Sections 14.3 and 14.4, an Assignee.
"LIQUIDATION DATE" means (a) in the case of an event giving rise to the
dissolution of the Partnership of the type described in clauses (a) and (b) of
the first sentence of Section 14.2, the date on which the applicable time period
during which the holders of Outstanding Units have the right to elect to
reconstitute the Partnership and continue its business has expired without such
an election being made, and (b) in the case of any other event giving rise to
the dissolution of the Partnership, the date on which such event occurs.
"LIQUIDATOR" means the Partnership Policy Committee or other Person
approved pursuant to Section 14.3 who performs the functions described therein.
"MAINTENANCE CAPITAL EXPENDITURES" means cash capital expenditures,
whether made by the Partnership, the Intermediate Partnership or Northern Border
Pipeline, made to maintain, up to the level thereof that existed on the Closing
Date, the throughput, deliverable capacity or storage capacity (assuming normal
operating conditions, including, without limitation, down-time and maintenance)
of the assets of the Partnership, the Intermediate Partnership and Northern
Border Pipeline, taken as a whole, as such assets existed on the Closing Date
and shall, therefore, not include cash capital expenditures or capital
contributions to Northern Border Pipeline made in respect of Capital Additions
and Improvements. Where cash capital expenditures are made in part to effectuate
the capacity maintenance level referred to in the immediately preceding sentence
and in part for other purposes, the Partnership Policy Committee's good faith
allocation thereof between the portion used to maintain such capacity level and
the portion used for other purposes shall be conclusive.
"MERGER AGREEMENT" has the meaning assigned to such term in Section 16.1.
"MINIMUM QUARTERLY DISTRIBUTION" means $0.55 per Unit per calendar quarter
(or, with respect to the period commencing on the Closing Date and ending on
December 31, 1993, the product of $0.55 multiplied by a fraction of which the
numerator is the number of days in such period and of which the denominator is
92), subject to adjustment in accordance with Sections 5.6 and 9.6.
"NATIONAL SECURITIES EXCHANGE" means an exchange registered with the
Securities and Exchange Commission under Section 6(a) of the Securities Exchange
Act of 1934, as amended, supplemented or restated from time to time, and any
successor to such statute.
13
"NET AGREED VALUE" means, (a) in the case of any Contributed
Property, the Agreed Value of such property reduced by any liabilities
either assumed by the Partnership upon such contribution or to which such
property is subject when contributed, and (b) in the case of any property
distributed to a Partner or Assignee by the Partnership, the Partnership's
Carrying Value of such property (as adjusted pursuant to Section
4.4(d)(ii)) at the time such property is distributed, reduced by any
indebtedness either assumed by such Partner or Assignee upon such
distribution or to which such property is subject at the time of
distribution, in either case, as determined under Section 752 of the Code.
"NET INCOME" means, for any taxable period, the excess, if any, of
the Partnership's items of income and gain (other than those items
attributable to dispositions constituting Termination Capital
Transactions) for such taxable period over the Partnership's items of loss
and deduction (other than those items attributable to dispositions
constituting Termination Capital Transactions) for such taxable period.
The items included in the calculation of Net Income shall be determined in
accordance with Section 4.4(b) and shall not include any items specially
allocated under Section 5.1 (d). Once an item of income, gain, loss or
deduction that has been included in the initial computation of Net Income
is subjected to a Required Allocation or a Curative Allocation, Net Income
or Net Loss, whichever the case may be, shall be recomputed without regard
to such item.
"NET LOSS" means, for any taxable period, the excess, if any, of the
Partnership's items of loss and deduction (other than those items
attributable to dispositions constituting Termination Capital
Transactions) for such taxable period over the Partnership's items of
income and gain (other than those items attributable to dispositions
constituting Termination Capital Transactions) for such taxable period.
The items included in the calculation of Net Loss shall be determined in
accordance with Section 4.4(b) and shall not include any items specially
allocated under Section 5.1(d). Once an item of income, gain, loss or
deduction that has been included in the initial computation of Net Loss is
subjected to a Required Allocation or a Curative Allocation, Net Income,
or Net Loss, whichever the case may be, shall be recomputed without regard
to such item.
"NET TERMINATION GAIN" means, for any taxable period, the sum, if
positive, of all items of income, gain, loss or deduction recognized by
the Partnership (including, without limitation, such amounts recognized
through the Intermediate Partnership) from Termination Capital
Transactions occurring in such taxable period. The items included in the
determination of Net Termination Gain shall be determined in accordance
with Section 4.4(b) and shall not include any items of income, gain or
loss specially allocated under Section 5.1 (d). Once an item of income,
gain or loss that has been included in the initial computation of Net
Termination Gain is subjected to a Required Allocation or a Curative
Allocation, Net Termination Gain or Net Termination Loss, whichever the
case may be, shall be recomputed without regard to such item.
"NET TERMINATION LOSS" means, for any taxable period, the sum, if
negative, of all items of income, gain, loss or deduction recognized by
the Partnership (including, without limitation, such amounts recognized
through the Intermediate Partnership) from Termination Capital
Transactions occurring in such taxable period. The items included in the
determination of Net Termination Loss shall be determined in accordance
with Section 4.4(b) and shall not include any items of income, gain or
loss specially allocated under Section 5.1 (d). Once an item of gain or
loss that has been included in the initial computation of Net Termination
Loss is subjected to a Required Allocation or a Curative Allocation, Net
Termination
14
Gain or Net Termination Loss, whichever the case may be, shall be
recomputed without regard to such item.
"NON-CITIZEN ASSIGNEE" means a Person who the Partnership Policy
Committee has determined in its sole discretion does not constitute an
Eligible Citizen and as to whose Partnership Interest the Partnership
Policy Committee has become the Substituted Limited Partner, pursuant to
Section 11.5.
"NONRECOURSE BUILT-IN GAIN" means with respect to any Contributed
Properties or Adjusted Properties that are subject to a mortgage or pledge
securing a Nonrecourse Liability, the amount of any taxable gain that
would be allocated to the Partners pursuant to Sections 5.2(b)(i)(A),
5.2(b)(ii)(A) or 5.2(b)(iv) if such properties were disposed of in a
taxable transaction in full satisfaction of such liabilities and for no
other consideration.
"NONRECOURSE DEDUCTIONS" means any and all items of loss, deduction
or expenditures (described in Section 705(a)(2)(B) of the Code) that, in
accordance with the principles of Treasury Regulation Section 1.704-2(b),
are attributable to a Nonrecourse Liability.
"NONRECOURSE LIABILITY" has the meaning set forth in Treasury
Regulation Section 1.752-1(a)(2).
"NORTHERN BORDER INTERIM CAPITAL TRANSACTIONS" means any transaction
of the type described in the definition of "Interim Capital Transactions"
that is undertaken by Northern Border Pipeline.
"NORTHERN BORDER PIPELINE" means Northern Border Pipeline Company, a
Texas general partnership among Northern Plains, Pan Border, Northwest
Border, TransCanada Border PipeLine Ltd., a Nevada corporation, and
TransCan Northern Ltd., a Delaware corporation.
"NORTHERN BORDER PIPELINE PARTNERSHIP AGREEMENT" means that certain
General Partnership Agreement of Northern Border Pipeline Company dated
effective as of March 9, 1978, among Northern Plains, Pan Border,
Northwest Border, TransCanada Border PipeLine Ltd. and TransCan Northern
Ltd., as amended and supplemented.
"NORTHERN BORDER TERMINATION CAPITAL TRANSACTIONS" means any sale,
transfer or other disposition of property of Northern Border Pipeline
occurring upon or incident to the liquidation and winding up of Northern
Border Pipeline.
"NORTHERN PLAINS" means Northern Plains Natural Gas Company, a
Delaware corporation.
"NORTHWEST BORDER" means Northwest Border Pipeline Company, a
Delaware corporation.
"NOTICE OF ELECTION TO PURCHASE" has the meaning assigned to such
term in Section 17.1(b).
15
"OPINION OF COUNSEL" means a written opinion of counsel (who may be
regular counsel to any of the General Partners, their Affiliates or the
Partnership) acceptable to the Partnership Policy Committee.
"ORGANIZATIONAL LIMITED PARTNER" means Northwest Border, in its
capacity as the organizational limited partner of the Partnership pursuant
to this Agreement, it being recognized that Northern Plains was such
organizational limited partner at the time of the original Agreement of
Limited Partnership of Northern Border Partners, L.P. but previously has
transferred its rights in such capacity to Northwest Border.
"OUTSTANDING" means, with respect to the Units or other Partnership
Securities, all Units or other Partnership Securities that are issued by
the Partnership and reflected as outstanding on the Partnership's books
and records as of the date of determination; provided that, if at any time
any Person or Group (other than the General Partners and their Affiliates)
owns beneficially 20% or more of all Common Units, such Common Units so
owned shall not be voted on any matter and shall not be considered to be
Outstanding when sending notices of a meeting of Limited Partners (unless
otherwise required by law), calculating required votes, determining the
presence of a quorum or for other similar purposes under this Agreement,
except that such Common Units shall be considered to be Outstanding for
purposes of Section 13.1(b)(iv) (such Common Units shall not, however, be
treated as a separate class of Partnership Securities for purposes of this
Agreement).
"OVERALLOTMENT OPTION" means the overallotment option granted to the
Underwriters pursuant to the Underwriting Agreement.
"PAN BORDER" means Pan Border Gas Company, a Delaware corporation.
"PANHANDLE" means Panhandle Eastern Corporation, a Delaware
corporation.
"PARTNER NONRECOURSE DEBT" has the meaning set forth in Treasury
Regulation Section 1.704-2(b)(4).
"PARTNER NONRECOURSE DEBT MINIMUM GAIN" has the meaning set forth in
Treasury Regulation Section 1.704-2(i)(2).
"PARTNER NONRECOURSE DEDUCTIONS" means any and all items of loss,
deduction or expenditure (including, without limitation, any expenditure
described in Section 705(a)(2)(B) of the Code) that, in accordance with
the principles of Treasury Regulation Section 1.704-2(i), are attributable
to a Partner Nonrecourse Debt.
"PARTNERS" means the General Partners and the Limited Partners.
"PARTNERSHIP" means the limited partnership heretofore formed and
continued pursuant to this Agreement.
"PARTNERSHIP INTEREST" means an interest in the Partnership, which
shall include general partner interests, Common Units, Subordinated Units
or other Partnership Securities, or a combination thereof or interest
therein, as the case may be.
"PARTNERSHIP MINIMUM GAIN" means that amount determined in
accordance with the principles of Treasury Regulation Section 1.704-2(d).
16
"PARTNERSHIP POLICY COMMITTEE" has the meaning assigned to such term
in Section 6.1.
"PARTNERSHIP SECURITIES" has the meaning assigned to such term in
Section 4.2(a).
"PER UNIT CAPITAL AMOUNT" means, as of any date of determination,
the Capital Account, stated on a per Unit basis, underlying any Unit held
by a Person other than a General Partner or any Affiliate of such General
Partner who holds Units.
"PERCENTAGE INTEREST" means as of the date of such determination (a)
as to a General Partner, its General Partner Percentage Interest, (b) as
to any Limited Partner or Assignee holding Units, the product of (i) 99%
multiplied by (ii) the quotient of the number of Units held by such
Limited Partner or Assignee divided by the total number of all Units then
Outstanding; provided, however, that following any issuance of additional
Partnership Securities by the Partnership in accordance with Section 4.2,
proper adjustment shall be made to the Percentage Interest represented by
each Unit to reflect such issuance, and (c) as to the holders of
additional Partnership Securities issued by the Partnership in accordance
with Section 4.2, the percentage established as a part of such issuance.
"PERSON" means an individual or a corporation, partnership, trust,
unincorporated organization, association or other entity.
"PIPELINE SYSTEM" means the natural gas pipeline assets and related
facilities that are owned by Northern Border Pipeline.
"PURCHASE DATE" means the date determined by the General Partners as
the date for purchase of all Outstanding Units (other than Units owned by
the General Partners and their Affiliates) pursuant to Article XVII.
"RECAPTURE INCOME" means any gain recognized by the Partnership
(computed without regard to any adjustment required by Sections 734 or 743
of the Code) upon the disposition of any property or asset of the
Partnership, which gain is characterized as ordinary income because it
represents the recapture of deductions previously taken with respect to
such property or asset.
"RECORD DATE" means the date established by the Partnership Policy
Committee for determining (a) the identity of the Record Holder entitled
to notice of, or to vote at, any meeting of Limited Partners or entitled
to vote by ballot or give approval of Partnership action in writing
without a meeting or entitled to exercise rights in respect of any lawful
action of Limited Partners or (b) the identity of Record Holders entitled
to receive any report or distribution.
"RECORD HOLDER" means the Person in whose name a Unit is registered
on the books of the Transfer Agent as of the opening of business on a
particular Business Day.
"REDEEMABLE UNITS" means any Units for which a redemption notice has
been given, and has not been withdrawn, under Section 11.6.
"REGISTRATION STATEMENT" means the Registration Statement on Form
S-1 (Registration No. 33-66158), as it has been or as it may be amended or
supplemented from
17
time to time, filed by the Partnership with the Securities and Exchange
Commission under the Securities Act to register the offering and sale of
the Common Units in the Initial Offering.
"REQUIRED ALLOCATIONS" means any allocation (or limitation imposed
on any allocation) of an item of income, gain, deduction or loss pursuant
to (a) Section 5.1 (b)(ii) or (b) Sections 5.1(d)(i), 5.1(d)(ii),
5.1(d)(iv), 5.1(d)(v), 5.1(d)(vi), 5.1(d)(vii) and 5.1(d)(ix), such
allocations (or limitations thereon) being directly or indirectly required
by the Treasury regulations promulgated under Section 704(b) of the Code.
"RESIDUAL GAIN" OR "RESIDUAL LOSS" means any item of gain or loss,
as the case may be, of the Partnership recognized for federal income tax
purposes resulting from a sale, exchange or other disposition of a
Contributed Property or Adjusted Property, to the extent such item of gain
or loss is not allocated pursuant to Sections 5.2(b)(i)(A) or
5.2(b)(ii)(A), respectively, to eliminate Book-Tax Disparities.
"SECOND LIQUIDATION TARGET AMOUNT" has the meaning assigned to such
term in Section 5.1 (c)(i)(E).
"SECOND TARGET DISTRIBUTION" means $0.715 per Unit (or, with respect
to the period commencing on the Closing Date and ending on December 31,
1993, the product of $0.715 multiplied by a fraction of which the
numerator is equal to the number of days in such period and of which the
denominator is 92), subject to adjustment in accordance with Sections 5.6
and 9.6.
"SECURITIES ACT" means the Securities Act of 1933, as amended,
supplemented or restated from time to time and any successor to such
statute.
"SPECIAL APPROVAL" means approval by the Audit Committee.
"SUBORDINATED UNIT" means a Unit representing a fractional part of
the Partnership Interests of all Limited Partners and Assignees and having
the rights and obligations specified with respect to Subordinated Units in
this Agreement.
"SUBORDINATION PERIOD" means the period commencing on the Closing
Date and ending on the first to occur of any one of the following dates:
(a) the date on which one or more of the General Partners is
removed as a general partner of the Partnership upon the requisite
vote by Limited Partners under circumstances where Cause does not
exist,
(b) the first day of any calendar quarter commencing on or
after January 1, 2004, provided that the Partnership has, with
respect to each of the 20 most recently completed calendar quarters,
distributed an amount equal to or greater than the Minimum Quarterly
Distribution for each Common Unit and Subordinated Unit Outstanding
during such quarter (it being agreed that the Subordination Period
will be deemed to have ended effective as of the first day of any
such quarter despite the fact that the distribution with respect to
the 20th consecutive quarter will have been made during such quarter
as contemplated by Section 5.3(a)),
(c) the first day of any calendar quarter commencing on or
after January 1, 2004, provided that both of the following tests
have been satisfied: (i) the
18
aggregate amount of capital expenditures of the Partnership, the
Intermediate Partnership and Northern Border Pipeline (in the case
of Northern Border Pipeline, only to the extent such capital
expenditures are attributable to the Intermediate Partnership's
interest in Northern Border Pipeline) since the Closing Date equals
or exceeds $248,000,000, and (ii) there are no Cumulative Common
Unit Arrearages, and
(d) the first day of any calendar quarter that commences on or
after January 1, 1999, but ends prior to January 1, 2004, provided
that both of the following tests have been satisfied: (i) the
aggregate amount of capital expenditures of the Partnership, the
Intermediate Partnership and Northern Border Pipeline (in the case
of Northern Border Pipeline, only to the extent such capital
expenditures are attributable to the Intermediate Partnership's
interest in Northern Border Pipeline) since the Closing Date equals
or exceeds $248,000,000, and (ii) the Partnership has, with respect
to each of the eight most recently completed calendar quarters,
distributed an amount equal to or greater than the Minimum Quarterly
Distribution for each Common Unit and Subordinated Unit Outstanding
during such quarter (it being agreed that the Subordination Period
will be deemed to have ended effective as of the first day of any
such quarter despite the fact that the distribution with respect to
the eighth consecutive quarter will have been made during such
quarter as contemplated by Section 5.3(a)).
"SUBSTITUTED LIMITED PARTNER" means a Person who is admitted as a
Limited Partner to the Partnership pursuant to Section 12.2 in place of
and with all the rights of a Limited Partner and who is shown as a Limited
Partner on the books and records of the Partnership.
"SURVIVING BUSINESS ENTITY" has the meaning assigned to such term in
Section 16.2(b).
"TERMINATION CAPITAL TRANSACTIONS" means any sale, transfer or other
disposition of property of the Partnership or the Intermediate Partnership
occurring upon or incident to the liquidation and winding up of the
Partnership and the Intermediate Partnership pursuant to Article XIV.
"THIRD TARGET DISTRIBUTION" means $0.935 per Unit (or, with respect
to the period commencing on the Closing Date and ending on December 31,
1993, the product of $0.935 multiplied by a fraction of which the
numerator is equal to the number of days in such period and of which the
denominator is 92), subject to adjustment in accordance with Sections 5.6
and 9.6.
"TRADING DAY" has the meaning assigned to such term in Section
17.1(a).
"TRANSFER AGENT" means First Chicago Trust Company of New York or
such other bank, trust company or other Person (including, without
limitation, any General Partner or one of its Affiliates) as shall be
appointed from time to time by the Partnership to act as registrar and
transfer agent for the Units.
"TRANSFER APPLICATION" means an application and agreement for
transfer of Units in the form set forth on the back of a Certificate or in
a form substantially to the same effect in a separate instrument.
19
"UNDERWRITER" means each Person named as an underwriter in Schedule
I to the Underwriting Agreement who purchases Common Units pursuant
thereto.
"UNDERWRITING AGREEMENT" means the Underwriting Agreement dated
September 23, 1993, among the Underwriters, the Partnership, Northern
Plains, Pan Border, the Intermediate Partnership, Panhandle, and Enron
providing for the purchase of Common Units by such Underwriters.
"UNIT" means a Partnership Interest of a Limited Partner or Assignee
in the Partnership representing a fractional part of the Partnership
Interests of all Limited Partners and Assignees and shall include, without
limitation, Common Units and Subordinated Units; provided, that each
Common Unit at any time Outstanding shall represent the same fractional
part of the Partnership Interests of all Limited Partners and Assignees
holding Common Units as each other Common Unit and each Subordinated Unit
at any time Outstanding shall represent the same fractional part of the
Partnership Interests of all Limited Partners and Assignees holding
Subordinated Units as each other Subordinated Unit.
"UNPAID MQD" has the meaning assigned to such term in Section
5.1(c)(i)(B).
"UNREALIZED GAIN" attributable to any item of Partnership property
means, as of any date of determination, the excess, if any, of (a) the
fair market value of such property as of such date (as determined under
Section 4.4(d)) over (b) the Carrying Value of such property as of such
date (prior to any adjustment to be made pursuant to Section 4.4(d) as of
such date).
"UNREALIZED LOSS" attributable to any item of Partnership property
means, as of any date of determination, the excess, if any, of (a) the
Carrying Value of such property as of such date (prior to any adjustment
to be made pursuant to Section 4.4(d) as of such date) over (b) the fair
market value of such property as of such date (as determined under Section
4.4(d)).
"UNRECOVERED INITIAL UNIT PRICE" means, at any time, with respect to
a class or series of Units (other than Subordinated Units), the price per
Unit at which such class or series of Units was initially offered to the
public for sale by the Underwriters in respect of such offering, as
determined by the Partnership Policy Committee, less the sum of all
distributions theretofore made in respect of a Unit of such class or
series that was sold in the initial offering of Units of said class or
series constituting Cash from Interim Capital Transactions and any
distributions of cash (or the Net Agreed Value of any distributions in
kind) in connection with the dissolution and liquidation of the
Partnership theretofore made in respect of a Unit of such class or series
that was sold in the initial offering of Units of such class or series,
adjusted as the Partnership Policy Committee determines to be appropriate
to give effect to any distribution, subdivision or combination of Units.
"UNRECOVERED SUBORDINATED UNIT CAPITAL" means, at any time, with
respect to a Subordinated Unit, prior to its conversion into a Common Unit
pursuant to Section 5.7(b), the excess, if any, of (a) the Net Agreed
Value (at the time of conveyance) of the undivided interest in the
Contributed Property conveyed to the Partnership pursuant to Section 4.1
(a) in exchange for such Subordinated Unit, over (b) any distributions of
cash (or the Net Agreed Value of any distributions in kind) in connection
with the dissolution and liquidation of the Partnership, adjusted as the
Partnership Policy Committee determines to be appropriate to give effect
to any distribution, subdivision or combination of Units.
20
"▇▇▇▇▇▇▇▇" means The ▇▇▇▇▇▇▇▇ Companies, Inc., a Delaware
corporation.
"WITHDRAWAL OPINION OF COUNSEL" has the meaning assigned to such
term in Section 13.1(b).
ARTICLE III
PURPOSE
3.1 PURPOSE AND BUSINESS. The purpose and nature of the business to be
conducted by the Partnership shall be (a) to serve as a limited partner in the
Intermediate Partnership and, in connection therewith, to exercise all of the
rights and powers conferred upon the Partnership as a limited partner in the
Intermediate Partnership pursuant to the Intermediate Partnership Agreement or
otherwise, (b) to engage directly in, or to enter into or form any corporation,
partnership, joint venture, limited liability company or other arrangement to
engage in, any business activity that the Intermediate Partnership is permitted
to engage in by the Intermediate Partnership Agreement and, in connection
therewith, to exercise all of the rights and powers conferred upon the
Partnership pursuant to the agreements relating to such business activity
(including, without limitation, all of the rights and powers conferred upon the
Intermediate Partnership under the Northern Border Pipeline Partnership
Agreement), (c) to engage directly in, or to enter or form into any corporation,
partnership, joint venture, limited liability company or other arrangement to
engage in, any business activity that is approved by unanimous vote of the
Partnership Policy Committee and which lawfully may be conducted by a limited
partnership organized pursuant to the Delaware Act and, in connection therewith,
to exercise all of the rights and powers conferred upon the Partnership pursuant
to the agreements relating to such business activity, and (d) to do anything
necessary or appropriate to the foregoing, including, without limitation, the
making of capital contributions or loans to the Intermediate Partnership
(including, without limitation, those contributions or loans that may be
required in connection with any business activity that may be made available to
the Intermediate Partnership in connection with its involvement in the
activities referred to in clauses (b) and (c) of this sentence). The Partnership
Policy Committee has no obligation or duty to the Partnership, the Limited
Partners or the Assignees to propose or approve, and in its sole discretion may
decline to propose or approve, the conduct by the Partnership of any business.
3.2 POWERS. The Partnership shall be empowered to do any and all acts and
things necessary, appropriate, proper, advisable, incidental to or convenient
for the furtherance and accomplishment of the purposes and business described in
Section 3.1 and for the protection and benefit of the Partnership.
ARTICLE IV
CAPITAL CONTRIBUTIONS
4.1 CONTRIBUTIONS BY THE GENERAL PARTNERS. On the Closing Date, the
General Partners shall, in the aggregate and as set forth in the Conveyance
Agreement, contribute, transfer, convey, assign and deliver to the Partnership,
as a Capital Contribution, Partnership Interests (as defined in the Intermediate
Partnership Agreement) representing, in the aggregate, a 98.9899% Percentage
Interest (as defined in the Intermediate Partnership Agreement) in the
Intermediate Partnership, in exchange for the continuation of each General
Partner's Partnership Interest as a general partner in the Partnership, subject
to all of the rights, privileges and duties of the General Partners under this
Agreement, and (a) in the case of Northern Plains, 8,600,000 Common Units and
4,500,000 Subordinated Units, (b) in the case of Pan Border, 5,590,000 Common
Units and 2,925,000
21
Subordinated Units and (c) in the case of Northwest Border, 3,010,000 Common
Units and 1,575,000 Subordinated Units.
4.2 ISSUANCES OF ADDITIONAL UNITS AND OTHER SECURITIES. (a) Subject to
Section 4.2(c), the Partnership Policy Committee is hereby authorized to cause
the Partnership to issue, in addition to the Partnership Interests and Units
issued pursuant to Section 4.1, such additional Units, or classes or series
thereof, or options, rights, warrants or appreciation rights relating thereto,
or any other type of equity security that the Partnership may lawfully issue,
any unsecured or secured debt obligations of the Partnership convertible into
any class or series of equity securities of the Partnership (collectively,
"PARTNERSHIP SECURITIES"),for any Partnership purpose, at any time or from time
to time, to the Partners or to other Persons for such consideration and on such
terms and conditions as shall be established by the Partnership Policy Committee
in its sole discretion, all without the approval of any Limited Partners. The
Partnership Policy Committee shall have sole discretion, subject to the
guidelines set forth in this Section 4.2 and the requirements of the Delaware
Act, in determining the consideration and terms and conditions with respect to
any future issuance of Partnership Securities.
(b) Additional Partnership Securities to be issued by the Partnership
pursuant to this Section 4.2 shall be issuable from time to time in one or more
classes, or one or more series of any of such classes, with such designations,
preferences and relative, participating, optional or other special rights,
powers and duties, including, without limitation, rights, powers and duties
senior to existing classes and series of Partnership Securities (except as
provided in Section 4.2(c)), all as shall be fixed by the Partnership Policy
Committee in the exercise of its sole discretion, subject to Delaware law and
Section 4.2(c), including, without limitation, (i) the allocations of items of
Partnership income, gain, loss, deduction and credit to each such class or
series of Partnership Securities; (ii) the right of each such class or series of
Partnership Securities to share in Partnership distributions; (iii) the rights
of each such class or series of Partnership Securities upon dissolution and
liquidation of the Partnership; (iv) whether such class or series of additional
Partnership Securities is redeemable by the Partnership and, if so, the price at
which, and the terms and conditions upon which, such class or series of
additional Partnership Securities may be redeemed by the Partnership; (v)
whether such class or series of additional Partnership Securities is issued with
the privilege of conversion and, if so, the rate at which, and the terms and
conditions upon which, such class or series of Partnership Securities may be
converted into any other class or series of Partnership Securities or other
property; (vi) the terms and conditions upon which each such class or series of
Partnership Securities will be issued, evidenced by certificates and assigned or
transferred; and (vii) the right, if any, of each such class or series of
Partnership Securities to vote on Partnership matters, including, without
limitation, matters relating to the relative rights, preferences and privileges
of each such class or series.
(c) Notwithstanding the terms of Sections 4.2(a) and 4.2(b), the issuance
by the Partnership of any Partnership Securities pursuant to this Section 4.2
shall be subject to the following restrictions and limitations:
(i) For a period of 180 days following the Closing Date, the
Partnership shall not issue additional Common Units or other Partnership
Securities having rights to distribution or in liquidation ranking on a
parity with the Common Units; and
(ii) During the Subordination Period, the Partnership shall not
issue an aggregate of more than 17,200,000 additional Common Units or an
equivalent amount of other Units having rights to distributions or in
liquidation ranking on a parity with the Common Units, without the prior
approval of a majority of the Outstanding Common Units (excluding Common
Units held by the General Partners and their Affiliates);
22
(iii) From and after the Closing Date, the Partnership shall not
issue additional Partnership Securities having rights to distributions or
in liquidation ranking senior to the Common Units, without the prior
approval of a majority of the Outstanding Common Units (excluding, during
the Subordination Period, Common Units held by the General Partners and
their Affiliates); and
(iv) Upon the issuance of any Partnership Interests by the
Partnership or the making of any other Capital Contributions to the
Partnership, the General Partners shall be required to make additional
Capital Contributions to the Partnership (each in the proportion of its
General Partner Percentage Interest) such that the General Partners shall
at all times have a balance in their Capital Account with respect to their
general partner interests equal to, in the aggregate, 1% of the total
positive Capital Account balances of all Partners.
(d) The Partnership Policy Committee is hereby authorized and directed to
take all actions that it deems necessary or appropriate in connection with each
issuance of Units or other Partnership Securities pursuant to Section 4.2(a) and
to amend this Agreement in any manner that it deems necessary or appropriate to
provide for each such issuance, to admit Additional Limited Partners in
connection therewith and to specify the relative rights, powers and duties of
the holders of the Units or other Partnership Securities being so issued.
(e) The Partnership Policy Committee shall do all things necessary to
comply with the Delaware Act and is authorized and directed to do all things it
deems to be necessary or advisable in connection with any future issuance of
Partnership Securities, including, without limitation, compliance with any
statute, rule, regulation or guideline of any federal, state or other
governmental agency or any National Securities Exchange on which the Units or
other Partnership Securities are listed for trading.
4.3 LIMITED PREEMPTIVE RIGHTS. Except as provided in this Section 4.3, no
Person shall have any preemptive, preferential or other similar right with
respect to (a) additional Capital Contributions; (b) issuance or sale of any
class or series of Units or other Partnership Securities, whether unissued, held
in the treasury or hereafter created; (c) issuance of any obligations, evidences
of indebtedness or other securities of the Partnership convertible into or
exchangeable for, or carrying or accompanied by any rights to receive, purchase
or subscribe to, any such Units or other Partnership Securities; (d) issuance of
any right of subscription to or right to receive, or any warrant or option for
the purchase of, any such Units or other Partnership Securities; or (e) issuance
or sale of any other securities that may be issued or sold by the Partnership.
Each General Partner shall have the right, which it may from time to time assign
in whole or in part to any of its Affiliates or to any other General Partner or
its Affiliates, to purchase Units or other Partnership Securities from the
Partnership whenever, and on the same terms that, the Partnership issues Units
or other Partnership Securities to Persons other than the General Partners and
their Affiliates, to the extent necessary to maintain the Percentage Interests
of such General Partner and its Affiliates equal to that which existed
immediately prior to the issuance of such Units or other Partnership Securities.
4.4 CAPITAL ACCOUNTS, (a) The Partnership shall maintain for each Partner
(or a beneficial owner of Units held by a nominee in any case in which the
nominee has furnished the identity of such owner to the Partnership in
accordance with Section 6031 (c) of the Code or any other method acceptable to
the Partnership Policy Committee in its sole discretion) owning a Partnership
Interest a separate Capital Account with respect to such Partnership Interest in
accordance with the rules of Treasury Regulation Section 1.704-1(b)(2)(iv). Such
Capital Account shall be increased by (i) the amount of all Capital
Contributions made to the Partnership with respect to such Partnership Interest
pursuant to this Agreement and (ii) all items of Partnership income and gain
(including, without
23
limitation, income and gain exempt from tax) computed in accordance with Section
4.4(b) and allocated with respect to such Partnership Interest pursuant to
Section 5.1, and decreased by (x) the amount of cash or Net Agreed Value of all
actual and deemed distributions of cash or property made with respect to such
Partnership Interest pursuant to this Agreement and (y) all items of Partnership
deduction and loss computed in accordance with Section 4.4(b) and allocated with
respect to such Partnership Interest pursuant to Section 5.1.
(b) For purposes of computing the amount of any item of income, gain, loss
or deduction to be reflected in the Partners' Capital Accounts, the
determination, recognition and classification of any such item shall be the same
as its determination, recognition and classification for federal income tax
purposes (including, without limitation, any method of depreciation, cost
recovery or amortization used for that purpose), provided, that:
(i) Solely for purposes of this Section 4.4, the Partnership shall
be treated as owning directly its proportionate share (as determined by
the Partnership Policy Committee based upon the provisions of the
Intermediate Partnership Agreement) of all property owned by the
Intermediate Partnership and by Northern Border Pipeline.
(ii) All fees and other expenses incurred by the Partnership to
promote the sale of (or to sell) a Partnership Interest that can neither
be deducted nor amortized under Section 709 of the Code, if any, shall,
for purposes of Capital Account maintenance, be treated as an item of
deduction at the time such fees and other expenses are incurred and shall
be allocated among the Partners pursuant to Section 5.1.
(iii) Except as otherwise provided in Treasury Regulation Section
1.704-1 (b)(2)(iv)(m), the computation of all items of income, gain, loss
and deduction shall be made without regard to any election under Section
754 of the Code which may be made by the Partnership and, as to those
items described in Section 705(a)(1)(B) or 705(a)(2)(B) of the Code,
without regard to the fact that such items are not includable in gross
income or are neither currently deductible nor capitalized for federal
income tax purposes.
(iv) Any income, gain or loss attributable to the taxable
disposition of any Partnership property shall be determined as if the
adjusted basis of such property as of such date of disposition were equal
in amount to the Partnership's Carrying Value with respect to such
property as of such date.
(v) In accordance with the requirements of Section 704(b) of the
Code, any deductions for depreciation, cost recovery or amortization
attributable to any Contributed Property shall be determined as if the
adjusted basis of such property on the date it was acquired by the
Partnership were equal to the Agreed Value of such property. Upon an
adjustment pursuant to Section 4.4(d) to the Carrying Value of any
Partnership property subject to depreciation, cost recovery or
amortization, any further deductions for such depreciation, cost recovery
or amortization attributable to such property shall be determined (A) as
if the adjusted basis of such property were equal to the Carrying Value of
such property immediately following such adjustment and (B) using a rate
of depreciation, cost recovery or amortization derived from the same
method and useful life (or, if applicable, the remaining useful life) as
is applied for federal income tax purposes; provided, however, that, if
the asset has a zero adjusted basis for federal income tax purposes,
depreciation, cost recovery or amortization deductions shall be determined
using any reasonable method that the Partnership Policy Committee may
adopt.
24
(vi) If the Partnership's adjusted basis in a depreciable or cost
recovery property is reduced for federal income tax purposes pursuant to
Section 48(q)(1) or 48(q)(3) of the Code, the amount of such reduction
shall, solely for purposes hereof, be deemed to be an additional
depreciation or cost recovery deduction in the year such property is
placed in service and shall be allocated among the Partners pursuant to
Section 5.1. Any restoration of such basis pursuant to Section 48(q)(2) of
the Code shall, to the extent possible, be allocated in the same manner to
the Partners to whom such deemed deduction was allocated.
(c) (i) Except as otherwise provided in Section 4.4(c)(ii), a transferee
of a Partnership Interest shall succeed to a pro rata portion of the
Capital Account of the transferor relating to the Partnership Interest so
transferred; provided, however, that, if the transfer causes a termination
of the Partnership under Section 708(b)(1)(B) of the Code, the
Partnership's properties shall be deemed to have been distributed in
liquidation of the Partnership to the Partners (including any transferee
of a Partnership Interest that is a party to the transfer causing such
termination) pursuant to Sections 14.3 and 14.4 and recontributed by such
Partners in reconstitution of the Partnership. Any such deemed
distribution shall be treated as an actual distribution for purposes of
this Section 4.4. In such event, the Carrying Values of the Partnership
properties shall be adjusted immediately prior to such deemed distribution
pursuant to Section 4.4(d)(ii) and such Carrying Values shall then
constitute the Agreed Values of such properties upon such deemed
contribution to the reconstituted Partnership. The Capital Accounts of
such reconstituted Partnership shall be maintained in accordance with the
principles of this Section 4.4.
(ii) Immediately prior to the conversion of a Subordinated Unit into a
Common Unit pursuant to Section 5.7(b) or the sale, exchange or other
disposition of a Subordinated Unit by a holder thereof, the Capital
Account maintained for such Person with respect to its Subordinated Units
will (A) first, be allocated to the Subordinated Units to be transferred
in an amount equal to the product of (x) the number of such Subordinated
Units to be transferred and (y) the Per Unit Capital Amount for a Common
Unit, and (B) second, any remaining balance in such Capital Account will
be retained by the transferor, regardless of whether it has retained any
Subordinated Units. Following any such allocation, the transferor's
Capital Account, if any, maintained with respect to the retained
Subordinated Units, if any, will have a balance equal to the amount
allocated under clause (B) hereinabove, and the transferee's Capital
Account established with respect to the transferred Subordinated Units
will have a balance equal to the amount allocated under clause (A)
hereinabove.
(d) (i) Consistent with the provisions of Treasury Regulation Section
1.704-1(b)(2)(iv)(f), on an issuance of additional Units for cash or
Contributed Property or the conversion of a General Partner's Partnership
Interest to Common Units pursuant to Section 13.3(b), the Capital Account
of all Partners and the Carrying Value of each Partnership property
immediately prior to such issuance shall be adjusted upward or downward to
reflect any Unrealized Gain or Unrealized Loss attributable to such
Partnership property, as if such Unrealized Gain or Unrealized Loss had
been recognized on an actual sale of each such property immediately prior
to such issuance and had been allocated to the Partners at such time
pursuant to Section 5.1. In determining such Unrealized Gain or Unrealized
Loss, the aggregate cash amount and fair market value of all Partnership
assets (including, without limitation, cash or cash equivalents)
immediately prior to the issuance of additional Units shall be determined
by the Partnership Policy Committee using such reasonable method of
valuation as it may adopt; provided, however, the Partnership Policy
Committee, in arriving at such valuation, must take fully into account the
fair market value of the Partnership
25
Interests of all Partners at such time. The Partnership Policy Committee
shall allocate such aggregate value among the assets of the Partnership
(in such manner as it determines in its sole discretion to be reasonable)
to arrive at a fair market value for individual properties.
(ii) In accordance with Treasury Regulation Section
1.704-1(b)(2)(iv)(f), immediately prior to any actual or deemed
distribution to a Partner of any Partnership property (other than a
distribution of cash that is not in redemption or retirement of a
Partnership Interest), the Capital Accounts of all Partners and the
Carrying Value of such Partnership property shall be adjusted upward or
downward to reflect any Unrealized Gain or Unrealized Loss attributable to
such Partnership property, as if such Unrealized Gain or Unrealized Loss
had been recognized in a sale of such property immediately prior to such
distribution for an amount equal to its fair market value, and had been
allocated to the Partners, at such time, pursuant to Section 5.1. Any
Unrealized Gain or Unrealized Loss attributable to such property shall be
allocated in the same manner as Net Termination Gain or Net Termination
Loss pursuant to Section 5.1 (c); provided, however, that, in making any
such allocation, Net Termination Gain or Net Termination Loss actually
realized shall be allocated first. In determining such Unrealized Gain or
Unrealized Loss the aggregate cash amount and fair market value of all
Partnership assets (including, without limitation, cash or cash
equivalents) immediately prior to a distribution shall (A) in the case of
a deemed distribution occurring as a result of a termination of the
Partnership pursuant to Section 708 of the Code, be determined and
allocated in the same manner as that provided in Section 4.4(d)(i) or (B)
in the case of a liquidating distribution pursuant to Section 14.3 or
14.4, be determined and allocated by the Liquidator using such reasonable
method of valuation as it may adopt.
4.5 INTEREST. No interest shall be paid by the Partnership on Capital
Contributions or on balances in Partners' Capital Accounts.
4.6 NO WITHDRAWAL. No Partner shall be entitled to withdraw any part of
his Capital Contributions or its Capital Account or to receive any distribution
from the Partnership, except as provided in Section 4.2, Articles V, VII, XIII
and XIV.
4.7 LOANS FROM PARTNERS. Loans by a Partner to the Partnership shall not
constitute Capital Contributions. If any Partner shall advance funds to the
Partnership in excess of the amounts required hereunder to be contributed by it
to the capital of the Partnership, the making of such excess advances shall not
result in any increase in the amount of the Capital Account of such Partner. The
amount of any such excess advances shall be a debt obligation of the Partnership
to such Partner and shall be payable or collectible only out of the Partnership
assets in accordance with the terms and conditions upon which such advances are
made.
4.8 NO FRACTIONAL UNITS. No fractional Units shall be issued by the
Partnership.
4.9 SPLITS AND COMBINATIONS. (a) Subject to Section 4.9(d), the
Partnership Policy Committee may make a pro rata distribution of Units or other
Partnership Securities to all Record Holders or may effect a subdivision or
combination of Units or other Partnership Securities; provided, however, that
after any such distribution, subdivision or combination, each Partner shall have
the same Percentage Interest in the Partnership as before such distribution,
subdivision or combination.
(b) Whenever such a distribution, subdivision or combination of Units or
other Partnership Securities is declared, the Partnership Policy Committee shall
select a Record Date as of which the distribution, subdivision or combination
shall be effective and shall send notice of the distribution, subdivision or
combination at least 20 days prior to such Record Date to each Record Holder as
of
26
the date not less than 10 days prior to the date of such notice. The Partnership
Policy Committee also may cause a firm of independent public accountants
selected by it to calculate the number of Units to be held by each Record Holder
after giving effect to such distribution, subdivision or combination. The
Partnership Policy Committee shall be entitled to rely on any certificate
provided by such firm as conclusive evidence of the accuracy of such
calculation.
(c) Promptly following any such distribution, subdivision or combination,
the Partnership Policy Committee may cause Certificates to be issued to the
Record Holders of Units as of the applicable Record Date representing the new
number of Units held by such Record Holders, or the Partnership Policy Committee
may adopt such other procedures as it may deem appropriate to reflect such
distribution, subdivision or combination;provided, however, if any such
distribution, subdivision or combination results in a smaller total number of
Units Outstanding, the Partnership Policy Committee shall require, as a
condition to the delivery to a Record Holder of such new Certificate, the
surrender of any Certificate held by such Record Holder immediately prior to
such Record Date.
(d) The Partnership shall not issue fractional Units upon any
distribution, subdivision or combination of Units. If a distribution,
subdivision or combination of Units would result in the issuance of fractional
Units but for the provisions of Section 4.8 and this Section 4.9(d), each
fractional Unit shall be rounded to the nearest whole Unit (and a 0.5 Unit shall
be rounded to the next higher Unit).
ARTICLE V
ALLOCATIONS AND DISTRIBUTIONS
5.1 ALLOCATIONS FOR CAPITAL ACCOUNT PURPOSES. For purposes of maintaining
the Capital Accounts and in determining the rights of the Partners among
themselves, the Partnership's items of income, gain, loss and deduction
(computed in accordance with Section 4.4(b)) shall be allocated among the
Partners in each taxable year (or portion thereof) as provided hereinbelow.
(a) Net Income. After giving effect to the special allocations set
forth in Section 5.1(d), Net Income for each taxable period and all items
of income, gain, loss and deduction taken into account in computing Net
Income for such taxable period shall be allocated as follows:
(i) First, 100% to the General Partners in accordance with
their relative General Partner Percentage Interests until the
aggregate Net Income allocated to each General Partner pursuant to
this Section 5.1 (a)(i) for the current taxable year and all
previous taxable years is equal to the aggregate Net Losses
allocated to such General Partner pursuant to Section 5.1(b)(iii)
for all previous taxable years;
(ii) Second, 100% to the General Partners and the Limited
Partners, in the same proportion as Net Losses were allocated
pursuant to Section 5.1 (b)(ii), until the aggregate Net Income
allocated to such Partners pursuant to this Section 5.1(a)(ii) for
the current taxable year and all previous taxable years is equal to
the aggregate Net Losses allocated to such Partners pursuant to
Section 5.1(b)(ii) for all previous taxable years; and
(iii) Third, the balance, if any, 100% to the General Partners
and the Limited Partners in accordance with their respective
Percentage Interests.
27
(b) Net Losses. After giving effect to the special allocations set
forth in Section 5.1(d), Net Losses for each taxable period and all items
of income, gain, loss and deduction taken into account in computing Net
Losses for such taxable period shall be allocated as follows:
(i) First, 100% to the General Partners and the Limited
Partners, in accordance with their respective Percentage Interests,
until the aggregate Net Losses allocated pursuant to this Section
5.1 (b)(i) for the current taxable year and all previous taxable
years is equal to the aggregate Net Income allocated to such
Partners pursuant to Section 5.1(a)(iii) for all previous taxable
years;
(ii) Second, 100% to the General Partners and the Limited
Partners in proportion to, and to the extent of, the positive
balances in their respective Adjusted Capital Accounts; and
(iii) Third, the balance, if any, 100% to the General Partners
in accordance with their relative General Partner Percentage
Interests.
(c) Net Termination Gains and Losses. After giving effect to the
special allocations set forth in Section 5.1(d), all items of income gain,
loss and deduction taken into account in computing Net Termination Gain or
Net Termination Loss for such taxable period shall be allocated in the
same manner as such Net Termination Gain or Net Termination Loss is
allocated hereunder. All allocations under this Section 5.1 (c) shall be
made after Capital Account balances have been adjusted by all other
allocations provided under this Section 5.1 and after all distributions of
Available Cash provided under Section 5.4 have been made with respect to
the taxable period ending on the date of the Partnership's liquidation
pursuant to Section 14.3.
(i) If a Net Termination Gain is recognized (or deemed
recognized pursuant to Section 4.4(d)) from Termination Capital
Transactions, such Net Termination Gain shall be allocated between
the General Partners and the Limited Partners in the following
manner (and the Adjusted Capital Accounts of the Partners shall be
increased by the amount so allocated in each of the following
subclauses, in the order listed, before an allocation is made
pursuant to the next succeeding subclause):
(A) First, to each Partner having a deficit balance in
its Adjusted Capital Account, in the proportion that such
deficit balance bears to the total deficit balances in the
Adjusted Capital Accounts of all Partners, until each such
Partner has been allocated Net Termination Gain equal to any
such deficit balance in its Adjusted Capital Account;
(B) Second, 99% to all Limited Partners holding Common
Units, in the proportion that the total number of Common Units
held by each such Limited Partner bears to the total number of
Common Units then Outstanding, and 1% to the General Partners,
in accordance with their relative General Partner Percentage
Interests, until the Adjusted Capital Account in respect of
each Common Unit then Outstanding is equal to the sum of (1)
its Unrecovered Initial Unit Price, plus (2) the Minimum
Quarterly Distribution for the quarter during which such Net
Termination Gain is recognized, reduced by any distribution
pursuant to Section 5.4(a) with respect to such Common
28
Unit for such quarter (the amount determined pursuant to this
clause (2) is hereinafter defined as the "UNPAID MQD"), plus
(3) any then existing Cumulative Common Unit Arrearage with
respect to a Common Unit sold by the Underwriters on the
Closing Date;
(C) Third, if such Termination Capital Transaction
occurs (or is deemed to occur) prior to the conversion of the
last Outstanding Subordinated Unit pursuant to Section 5.7(b),
99% to the Limited Partners holding Subordinated Units, in the
proportion that the total number of Subordinated Units held by
each such Limited Partner bears to the total number of
Subordinated Units then Outstanding, and 1% to the General
Partners, in accordance with their relative General Partner
Percentage Interests, in the amount which will increase the
Adjusted Capital Account of each such Limited Partner
maintained with respect to such Subordinated Units to that
amount which equals the sum of (1) the Unrecovered
Subordinated Unit Capital attributable to such Subordinated
Units, determined for the taxable year (or portion thereof) to
which this allocation of gain relates plus (2) the Minimum
Quarterly Distribution for the quarter during which such Net
Termination Gain is recognized, reduced by any distribution
pursuant to Section 5.4(c) with respect to such Subordinated
Unit for such quarter;
(D) Fourth, 99% to all Limited Partners, in accordance
with their respective Percentage Interests, and 1% to the
General Partners, in accordance with their relative General
Partner Percentage Interests, until the Adjusted Capital
Account in respect of each Common Unit then Outstanding is
equal to the sum of (1) its Unrecovered Initial Unit Price,
plus (2) the Unpaid MQD, if any, for such Common Unit with
respect to the quarter during which such Net Termination Gain
is recognized, plus (3) any then existing Cumulative Common
Unit Arrearage with respect to a Common Unit sold by the
Underwriters on the Closing Date, plus (4) the excess of (aa)
the First Target Distribution less the Minimum Quarterly
Distribution for each quarter of the Partnership's existence
over (bb) the amount of any distributions of Cash from
Operations that was distributed pursuant to Section 5.4(d)
(the sum of (1) plus (2) plus (3) plus (4) is hereinafter
defined as the "FIRST LIQUIDATION TARGET AMOUNT");
(E) Fifth, 85.8673% to all Limited Partners, in
accordance with their respective Percentage Interests, and
14.1327% to the General Partners, in accordance with their
relative General Partner Percentage Interests, until the
Adjusted Capital Account in respect of each Common Unit then
Outstanding is equal to the sum of (1) the First Liquidation
Target Amount, plus (2) the excess of (aa) the Second Target
Distribution less the First Target Distribution for each
quarter of the Partnership's existence over (bb) the amount of
any distributions of Cash from Operations that was distributed
pursuant to Section 5.4(e) (the sum of (1) plus (2) is
hereinafter defined as the "SECOND LIQUIDATION TARGET
AMOUNT");
(F) Sixth, 75.7653% to all Limited Partners, in
accordance with their respective Percentage Interests, and
24.2347% to the General Partners, in accordance with their
relative General Partner Percentage Interests, until the
Adjusted Capital Account in respect of each Common Unit then
Outstanding
29
is equal to the sum of (1) the Second Liquidation Target Amount,
plus (2) the excess of (aa) the Third Target Distribution less the
Second Target Distribution for each quarter of the Partnership's
existence over (bb) the amount of any distributions of Cash from
Operations that was distributed pursuant to Section 5.4(f); and
(G) Seventh, any remaining amount 50.5102% to all Limited
Partners, in accordance with their respective Percentage Interests,
and 49.4898% to the General Partners, in accordance with their
relative General Partner Percentage Interests.
(ii) If a Net Termination Loss is recognized (or deemed recognized
pursuant to Section 4.4(d)) from Termination Capital Transactions, such
Net Termination Loss shall be allocated to the Partners in the following
manner:
(A) First, 100% to the General Partners and the Limited
Partners in proportion to, and to the extent of, the positive
balances in their respective Adjusted Capital Accounts; and
(B) Second, the balance, if any, 100% to the General Partners,
in accordance with their relative General Partner Percentage
Interests.
(d) Special Allocations. Notwithstanding any other provision of this
Section 5.1, the following special allocations shall be made for such taxable
period:
(i) Partnership Minimum Gain Chargeback. Notwithstanding any other
provision of this Section 5.1, if there is a net decrease in Partnership
Minimum Gain during any Partnership taxable period, each Partner shall be
allocated items of Partnership income and gain for such period (and, if
necessary, subsequent periods) in the manner and amounts provided in
Treasury Regulation Sections 1.704-2(f)(6), 1.704-2(g)(2) and
1.704-2(j)(2)(i), or any successor provision. For purposes of this Section
5.1 (d), each Partner's Adjusted Capital Account balance shall be
determined, and the allocation of income or gain required hereunder shall
be effected, prior to the application of any other allocations pursuant to
this Section 5.1(d) with respect to such taxable period (other than an
allocation pursuant to Sections 5.1(d)(vi) and 5.1 (d)(vii)). This Section
5.1 (d)(i) is intended to comply with the Partnership Minimum Gain
chargeback requirement in Treasury Regulation Section 1.704-2(f) and shall
be interpreted consistently therewith.
(ii) Chargeback of Partner Nonrecourse Debt Minimum Gain.
Notwithstanding the other provisions of this Section 5.1 (other than
Section 5.1 (d)(i)), except as provided in Treasury Regulation Section
1.704-2(i)(4), if there is a net decrease in Partner Nonrecourse Debt
Minimum Gain during any Partnership taxable period, any Partner with a
share of Partner Nonrecourse Debt Minimum Gain at the beginning of such
taxable period shall be allocated items of Partnership income and gain for
such period (and, if necessary, subsequent periods) in the manner and
amounts provided in Treasury Regulation Sections 1.704-2(i)(4) and
1.704-2(j)(2)(ii), or any successor provisions. For purposes of this
Section 5.1 (d), each Partner's Adjusted Capital Account balance shall be
determined, and the allocation of income or gain required hereunder shall
be effected, prior to the application of any other allocations pursuant to
this Section 5.1 (d), other than Section 5.1 (d)(i) and other than an
allocation
30
pursuant to Sections 5.1(d)(vi) and 5.1(d)(vii), with respect to such
taxable period. This Section 5.1(d)(ii) is intended to comply with the
chargeback of items of income and gain requirement in Treasury Regulation
Section 1.704-2(i)(4) and shall be interpreted consistently therewith.
(iii) Priority Allocations.
(A) If the amount of cash or the Net Agreed Value of any
property distributed (except cash or property distributed pursuant
to Section 14.3 or 14.4) to any Limited Partner with respect to a
taxable year is greater (on a per Unit basis) than the amount of
cash or the Net Agreed Value of property distributed to the other
Limited Partners (on a per Unit basis), then (1) each Limited
Partner receiving such greater cash or property distribution shall
be allocated gross income in an amount equal to the product of (aa)
the amount by which the distribution (on a per Unit basis) to such
Limited Partner exceeds the distribution (on a per Unit basis) to
the Limited Partners receiving the smallest distribution and (bb)
the number of Units owned by the Limited Partner receiving the
greater distribution; and (2) the General Partners shall be
allocated gross income in an aggregate amount equal to 1/99 of the
sum of the amounts allocated in clause (1) above.
(B) All or a portion of the remaining items of Partnership
gross income or gain for the taxable period, if any, shall be
allocated 100% to the General Partners, in accordance with their
relative General Partner Percentage Interests, until the aggregate
amount of such items allocated to the General Partners under this
paragraph (iii) for such taxable period and all previous taxable
periods is equal to the cumulative amount of cash distributed to the
General Partners (or their assignees) as Incentive Distributions
with respect to the period from the Closing Date through the end of
such taxable period.
(iv) Qualified Income Offset. In the event any Partner unexpectedly
receives any adjustments, allocations or distributions described in
Treasury Regulation Sections 1.704-1 (b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5), or 1.704-1 (b)(2)(ii)(d)(6), items of
Partnership income and gain shall be specifically allocated to such
Partner in an amount and manner sufficient to eliminate, to the extent
required by the Treasury Regulations promulgated under Section 704(b) of
the Code, the deficit balance, if any, in its Adjusted Capital Account
created by such adjustments, allocations or distributions as quickly as
possible unless such deficit balance is otherwise eliminated pursuant to
Section 5.1(d)(i) or (ii).
(v) Gross Income Allocations. In the event any Partner has a deficit
balance in its Adjusted Capital Account at the end of any Partnership
taxable period, such Partner shall be specially allocated items of
Partnership gross income and gain in the amount of such excess as quickly
as possible; provided, that an allocation pursuant to this Section
5.1(d)(v) shall be made only if and to the extent that such Partner would
have a deficit balance in its Adjusted Capital Account after all other
allocations provided for in this Section 5.1 have been tentatively made as
if this Section 5.1(d)(v) were not in this Agreement.
(vi) Nonrecourse Deductions. Nonrecourse Deductions for any taxable
period shall be allocated to the Partners in accordance with their
respective
31
Percentage Interests. If the Partnership Policy Committee determines in
its good faith discretion that the Partnership's Nonrecourse Deductions
must be allocated in a different ratio to satisfy the safe harbor
requirements of the Treasury Regulations promulgated under Section 704(b)
of the Code, the Partnership Policy Committee is authorized, upon notice
to the Limited Partners, to revise the prescribed ratio to the numerically
closest ratio that does satisfy such requirements.
(vii) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions
for any taxable period shall be allocated 100% to the Partner that bears
the Economic Risk of Loss with respect to the Partner Nonrecourse Debt to
which such Partner Nonrecourse Deductions are attributable in accordance
with Treasury Regulation Section 1.704-2(i). If more than one Partner
bears the Economic Risk of Loss with respect to a Partner Nonrecourse
Debt, such Partner Nonrecourse Deductions attributable thereto shall be
allocated between or among such Partners in accordance with the ratios in
which they share such Economic Risk of Loss.
(viii) Nonrecourse Liabilities. For purposes of Treasury Regulation
Section 1.752-3(a)(3), the Partners agree that Nonrecourse Liabilities of
the Partnership in excess of the sum of (A) the amount of Partnership
Minimum Gain and (B) the total amount of Nonrecourse Built-in Gain shall
be allocated among the Partners in accordance with their respective
Percentage Interests.
(ix) Code Section 754 Adjustments. To the extent an adjustment to
the adjusted tax basis of any Partnership asset pursuant to Section 734(b)
or 743(b) of the Code is required, pursuant to Treasury Regulation Section
1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital
Accounts, the amount of such adjustment to the Capital Accounts shall be
treated as an item of gain (if the adjustment increases the basis of the
asset) or loss (if the adjustment decreases such basis), and such item of
gain or loss shall be specially allocated to the Partners in a manner
consistent with the manner in which their Capital Accounts are required to
be adjusted pursuant to such Section of the Treasury regulations.
(x) Economic Uniformity. At the election of the Partnership Policy
Committee with respect to any taxable period ending upon, or after, the
termination of the Subordination Period, all or a portion of the remaining
items of Partnership gross income or gain for such taxable period, if any,
shall be allocated 100% to each Partner holding Subordinated Units in the
proportion of the number of Subordinated Units held by such Partner to the
total number of Subordinated Units then Outstanding, until each such
Partner has been allocated an amount of gross income or gain which
increases the Capital Account maintained with respect to such Subordinated
Units to an amount equal to the product of (A) the number of Subordinated
Units held by such Partner and (B) the Per Unit Capital Amount for a
Common Unit. The purpose of this allocation is to establish uniformity
between the Capital Accounts underlying Subordinated Units and the Capital
Accounts underlying Common Units held by Persons other than the General
Partners and their Affiliates immediately prior to the conversion of such
Subordinated Units into Common Units. This allocation method for
establishing such economic uniformity will only be available to the
Partnership Policy Committee if the method for allocating the Capital
Account maintained with respect to the Subordinated Units between the
transferred and retained Subordinated Units pursuant to Section 4.4(c)(ii)
does not otherwise provide such economic uniformity to the Subordinated
Units.
32
(xi) Curative Allocation.
(A) Notwithstanding any other provision of this Section 5.1,
other than the Required Allocations, the Required Allocations shall
be taken into account in making the Agreed Allocations so that, to
the extent possible, the net amount of items of income, gain, loss
and deduction allocated to each Partner pursuant to the Required
Allocations and the Agreed Allocations, together, shall be equal to
the net amount of such items that would have been allocated to each
such Partner under the Agreed Allocations had the Required
Allocations and the related Curative Allocation not otherwise been
provided in this Section 5.1. Notwithstanding the preceding
sentence, Required Allocations relating to (1) Nonrecourse
Deductions shall not be taken into account except to the extent that
there has been a decrease in Partnership Minimum Gain and (2)
Partner Nonrecourse Deductions shall not be taken into account
except to the extent that there has been a decrease in Partner
Nonrecourse Debt Minimum Gain. Allocations pursuant to this Section
5.1(d)(xi)(A) shall only be made with respect to Required Alloca-
tions to the extent the Partnership Policy Committee reasonably
determines that such allocations will otherwise be inconsistent with
the economic agreement among the Partners. Further, allocations
pursuant to this Section 5.1(d)(xi)(A) shall be deferred with
respect to allocations pursuant to clauses (1) and (2) hereof to the
extent the Partnership Policy Committee reasonably determines that
such allocations are likely to be offset by subsequent Required
Allocations.
(B) The Partnership Policy Committee shall have reasonable
discretion, with respect to each taxable period, to (1) apply the
provisions of Section 5.1(d)(xi)(A) in whatever order is most likely
to minimize the economic distortions that might otherwise result
from the Required Allocations, and (2) divide all allocations
pursuant to Section 5.1(d)(xi)(A) among the Partners in a manner
that is likely to minimize such economic distortions.
5.2 ALLOCATIONS FOR TAX PURPOSES. (a) Except as otherwise provided herein,
for federal income tax purposes, each item of income, gain, loss and deduction
shall be allocated among the Partners in the same manner as its correlative item
of "book" income, gain, loss or deduction is allocated pursuant to Section 5.1.
(b) In an attempt to eliminate Book - Tax Disparities attributable
to a Contributed Property or Adjusted Property, items of income, gain,
loss, depreciation, amortization and cost recovery deductions shall be
allocated for federal income tax purposes among the Partners as follows:
(i) (A) In the case of a Contributed Property, such items
attributable thereto shall be allocated among the Partners in the manner
provided under Section 704(c) of the Code that takes into account the
variation between the Agreed Value of such property and its adjusted basis
at the time of contribution; and (B) except as otherwise provided in
Section 5.2(b)(iv), any item of Residual Gain or Residual Loss
attributable to a Contributed Property shall be allocated among the
Partners in the same manner as its correlative item of "book" gain or loss
is allocated pursuant to Section 5.1.
(ii) (A) In the case of an Adjusted Property, such items shall
(1) first, be allocated among the Partners in a manner consistent with the
principles of Section 704(c) of the Code
33
to take into account the Unrealized Gain or Unrealized Loss attributable
to such property and the allocations thereof pursuant to Section 4.4(d)(i)
or (ii), and (2) second, in the event such property was originally a
Contributed Property, be allocated among the Partners in a manner
consistent with Section 5.2(b)(i)(A);and(B) except as otherwise provided
in Section 5.2(b)(iv), any item of Residual Gain or Residual Loss
attributable to an Adjusted Property shall be allocated among the Partners
in the same manner as its correlative item of "book" gain or loss is
allocated pursuant to Section 5.1.
(iii) Except as otherwise provided in Section 5.2(b)(iv), all other
items of income, gain, loss and deduction shall be allocated among the
Partners in the same manner as their correlative item of "book" gain or
loss is allocated pursuant to Section 5.1.
(iv) Any items of income, gain, loss or deduction otherwise
allocable under Section 5.2(b)(i)(B), 5.2(b)(ii)(B) or 5.2(b)(iii) shall
be subject to allocation by the Partnership Policy Committee in a manner
designed to eliminate, to the maximum extent possible, Book-Tax
Disparities in a Contributed Property or Adjusted Property otherwise
resulting from the application of the "ceiling" limitation (under Section
704(c) of the Code or Section 704(c) principles) to the allocations
provided under Section 5.2(b)(i)(A) or 5.2(b)(ii)(A).
(c) For the proper administration of the Partnership and for the
preservation of uniformity of the Units (or any class or classes thereof), the
Partnership Policy Committee shall have sole discretion to (i) adopt such
conventions as it deems appropriate in determining the amount of depreciation,
amortization and cost recovery deductions; (ii) make special allocations for
federal income tax purposes of income (including, without limitation, gross
income) or deductions; and (iii) amend the provisions of this Agreement as
appropriate (x) to reflect the proposal or promulgation of Treasury regulations
under Section 704(b) or Section 704(c) of the Code or (y) otherwise to preserve
or achieve uniformity of the Units (or any class or classes thereof). The
Partnership Policy Committee may adopt such conventions, make such allocations
and make such amendments to this Agreement as provided in this Section 5.2(c)
only if such conventions, allocations or amendments would not have a material
adverse effect on the Partners, the holders of any class or classes of Units
issued and Outstanding or the Partnership, and if such allocations are
consistent with the principles of Section 704 of the Code.
(d) The Partnership Policy Committee in its sole discretion may determine
to depreciate the portion of an adjustment under Section 743(b) of the Code
attributable to unrealized appreciation in any Adjusted Property (to the extent
of the unamortized Book-Tax Disparity) using a predetermined rate derived from
the depreciation method and useful life applied to the Partnership's common
basis of such property, despite the inconsistency of such approach with Proposed
Treasury Regulation Section 1.168-2(n) and Treasury Regulation Section
1.167(c)-1(a)(6). If the Partnership Policy Committee determines that such
reporting position cannot reasonably be taken, the Partnership Policy Committee
may adopt a depreciation convention under which all purchasers acquiring Units
in the same month would receive depreciation, based upon the same applicable
rate as if they had purchased a direct interest in the Partnership's property.
If the Partnership Policy Committee chooses not to utilize such aggregate
method, the Partnership Policy Committee may use any other reasonable
depreciation convention to preserve the uniformity of the intrinsic tax
characteristics of any Units that would not have a material adverse effect on
the Limited Partners or the Record Holders of any class or classes of Units.
(e) Any gain allocated to the Partners upon the sale or other taxable
disposition of any Partnership asset shall, to the extent possible, after taking
into account other required allocations of gain pursuant to this Section 5.2, be
characterized as Recapture Income in the same proportions and
34
to the same extent as such Partners (or their predecessors in interest) have
been allocated any deductions directly or indirectly giving rise to the
treatment of such gains as Recapture Income.
(f) All items of income, gain, loss, deduction and credit recognized by
the Partnership for federal income tax purposes and allocated to the Partners in
accordance with the provisions hereof shall be determined without regard to any
election under Section 754 of the Code which may be made by the Partnership;
provided, however, that such allocations, once made, shall be adjusted as
necessary or appropriate to take into account those adjustments permitted or
required by Sections 734 and 743 of the Code.
(g) Each item of Partnership income, gain, loss and deduction attributable
to a transferred Partnership Interest of a General Partner or to transferred
Units shall, for federal income tax purposes, be determined on an annual basis
and prorated on a monthly basis and shall be allocated to the Partners as of the
opening of the New York Stock Exchange on the first Business Day of each month;
provided, however, that (i) if the Underwriter's Overallotment Option is not
exercised, such items for the period beginning on the Closing Date and ending on
the last day of the month in which the Closing Date occurs shall be allocated to
Partners as of the opening of the New York Stock Exchange on the first Business
Day of the next succeeding month or (ii) if the Underwriters' Overallotment
Option is exercised, such items for the period beginning on the Closing Date and
ending on the last day of the month in which the Second Time of Delivery (as
defined in the Underwriting Agreement) occurs shall be allocated to the Partners
as of the opening of the New York Stock Exchange on the first Business Day of
the next succeeding month; and provided, further, that gain or loss on a sale or
other disposition of any assets of the Partnership other than in the ordinary
course of business shall be allocated to the Partners as of the opening of the
New York Stock Exchange on the first Business Day of the month in which such
gain or loss is recognized for federal income tax purposes. The Partnership
Policy Committee may revise, alter or otherwise modify such methods of
allocation as it determines necessary, to the extent permitted or required by
Section 706 of the Code and the regulations or rulings promulgated thereunder.
(h) Allocations that would otherwise be made to a Limited Partner under
the provisions of this Article V shall instead be made to the beneficial owner
of Units held by a nominee in any case in which the nominee has furnished the
identity of such owner to the Partnership in accordance with Section 6031 (c) of
the Code or any other method acceptable to the Partnership Policy Committee in
its sole discretion.
5.3 REQUIREMENT AND CHARACTERIZATION OF DISTRIBUTIONS. (a) Within 45 days
following the end of each calendar quarter (or following the period from the
Closing Date to December 31, 1993) an amount equal to 100% of Available Cash
with respect to such quarter (or period) shall be distributed in accordance with
this Article V by the Partnership to the Partners, as of the Record Date
selected by the Partnership Policy Committee in its reasonable discretion. All
amounts of Available Cash distributed by the Partnership on any date from any
source shall be deemed to be Cash from Operations until the sum of all amounts
of Available Cash theretofore distributed by the Partnership to Partners
pursuant to Section 5.4 equals the aggregate amount of all Cash from Operations
generated by the Partnership since the Closing Date through the close of the
immediately preceding calendar quarter. Any remaining amounts of Available Cash
distributed by the Partnership on such date shall, except as otherwise provided
in Section 5.5, be deemed to be Cash from Interim Capital Transactions.
(b) Notwithstanding the definitions of Available Cash and Cash from
Operations contained herein, disbursements (including, without limitation,
contributions to the Intermediate Partnership or disbursements on behalf of the
Intermediate Partnership) made or reserves established after the end
35
of any quarter shall be deemed to have been made or established, for purposes of
determining Available Cash and Cash from Operations, within such quarter if the
Partnership Policy Committee so determines. Notwithstanding the foregoing, in
the event of the dissolution and liquidation of the Partnership, all proceeds of
such liquidation shall be applied and distributed in accordance with, and
subject to the terms and conditions of, Sections 14.3 and 14.4.
5.4 DISTRIBUTIONS OF CASH FROM OPERATIONS. Available Cash with respect to
any calendar quarter that is deemed to be Cash from Operations pursuant to the
provisions of Section 5.3 or 5.5 shall be distributed as follows, except as
otherwise required in respect of additional Partnership Securities issued
pursuant to Section 4.2(b):
(a) First, 99% to the Limited Partners holding Common Units, in the
proportion that the number of Common Units held by each such Limited
Partner bears to the total number of Common Units Outstanding as of the
last day of such quarter, and 1% to the General Partners, in accordance
with their relative General Partner Percentage Interests, until there has
been distributed in respect of each Common Unit Outstanding as of the last
day of such quarter an amount equal to the Minimum Quarterly Distribution;
(b) Second, 99% to the Limited Partners holding Common Units, in the
proportion that the number of Common Units held by each such Limited
Partner bears to the total number of Common Units Outstanding as of the
last day of such quarter, and 1% to the General Partners, in accordance
with their relative General Partner Percentage Interests, until there has
been distributed in respect of each Common Unit Outstanding as of the last
day of such quarter an amount equal to the Cumulative Common Unit
Arrearage, if any, existing with respect to such quarter;
(c) Third, 99% to the Partners holding Subordinated Units, in the
proportion that the number of Subordinated Units held by each such Partner
bears to the total number of Subordinated Units Outstanding as of the last
day of such quarter, and 1% to the General Partners, in accordance with
their relative General Partner Percentage Interests, until there has been
distributed in respect of each Subordinated Unit Outstanding as of the
last day of such quarter an amount equal to the Minimum Quarterly
Distribution;
(d) Fourth, 99% to all Limited Partners holding Units, in the
proportion that the total number of Units held by each such Limited
Partner bears to the total number of Units Outstanding as of the last day
of such quarter, and 1% to the General Partners, in accordance with their
relative General Partner Percentage Interests, until there has been
distributed in respect of each Unit Outstanding as of the last day of such
quarter an amount equal to the excess of the First Target Distribution
over the Minimum Quarterly Distribution;
(e) Fifth, 85.8673% to all Limited Partners holding Units, in the
proportion that the total number of Units held by each such Limited
Partner bears to the total number of Units Outstanding as of the last day
of such quarter, and 14.1327% to the General Partners, in accordance with
their relative General Partner Percentage Interests, until there has been
distributed in respect of each Unit Outstanding as of the last day of such
quarter an amount equal to the excess of the Second Target Distribution
over the First Target Distribution;
(f) Sixth, 75.7653% to all Limited Partners holding Units, in the
proportion that the total number of Units held by each such Limited
Partner bears to the total number of Units Outstanding as of the last day
of such quarter, and 24.2347% to the General Partners, in accordance with
their relative General Partner Percentage Interests, until there has been
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distributed in respect of each Unit Outstanding as of the last day of such
quarter an amount equal to the excess of the Third Target Distribution
over the Second Target Distribution; and
(g) Thereafter, 50.5102% to all Limited Partners holding Units, in
the proportion that the total number of Units held by each such Limited
Partner bears to the total number of Units Outstanding as of the last day
of such quarter, and 49.4898% to the General Partners, in accordance with
their relative General Partner Percentage Interests;
provided, however, if the Minimum Quarterly Distribution, the First Target
Distribution, the Second Target Distribution and the Third Target Distribution
have been reduced to zero pursuant to the second sentence of Section 5.6, the
distributions of Available Cash that is deemed to be Cash from Operations with
respect to any quarter will be made in accordance with Section 5.4(g).
5.5 Distributions of Cash from Interim Capital Transactions. Available
Cash that constitutes Cash from Interim Capital Transactions shall be
distributed, unless the provisions of Section 5.3 require otherwise, 99% to all
Limited Partners, in accordance with their respective Percentage Interests, and
1% to the General Partners, in accordance with their relative General Partner
Percentage Interests, until a hypothetical holder of a Common Unit acquired on
the Closing Date has received with respect to such Common Unit, during the
period since the Closing Date through such date, distributions of Available Cash
that are deemed to be Cash from Interim Capital Transactions in an aggregate
amount equal to the Initial Unit Price. Thereafter, all Available Cash shall be
distributed as if it were Cash from Operations and shall be distributed in
accordance with Section 5.4.
5.6 Adjustment of Minimum Quarterly Distribution and Target Distribution
Levels. (a) The Minimum Quarterly Distribution, First Target Distribution,
Second Target Distribution and Third Target Distribution shall be
proportionately adjusted in the event of any distribution, combination or
subdivision (whether effected by a distribution payable in Units or otherwise)
of Units or other Partnership Securities in accordance with Section 4.9. In the
event of a distribution of Available Cash that is deemed to be Cash from Interim
Capital Transactions, the Minimum Quarterly Distribution, First Target
Distribution, Second Target Distribution and Third Target Distribution shall be
adjusted proportionately downward to equal the product obtained by multiplying
the otherwise applicable Minimum Quarterly Distribution, First Target
Distribution, Second Target Distribution and Third Target Distribution, as the
case may be, by a fraction of which the numerator is the Unrecovered Initial
Unit Price of the Common Units immediately after giving effect to such
distribution and of which the denominator is the Unrecovered Initial Unit Price
of the Common Units immediately prior to giving effect to such distribution.
(b) The Minimum Quarterly Distribution, First Target Distribution, Second
Target Distribution and Third Target Distribution shall also be subject to
adjustment pursuant to Section 9.6.
5.7 Special Provisions Relating to the Subordinated Units.
(a) Except with respect to the right to vote on or approve matters
requiring the vote or approval of a percentage of the holders of Outstanding
Common Units and the right to participate in allocations of income, gain, loss
and deduction and distributions of cash made with respect to Common Units
pursuant to this Article V, the holder of a Subordinated Unit shall have all of
the rights and obligations of a Limited Partner holding Common Units hereunder;
provided, however, that immediately upon the end of the Subordination Period or
upon the exercise by the Underwriters of the Overallotment Option (to the extent
of any Subordinated Units affected thereby as provided in subparagraph (b)
below), the holder of a Subordinated Unit shall possess all of the rights and
obligations of a Limited Partner holding Common Units hereunder, including,
without limitation, the
37
right to participate in allocations of income, gain, loss and deduction and
distributions of cash made with respect to Common Units pursuant to this Article
V (but such Subordinated Units shall remain subject to the provisions of
Sections 4.4(c)(ii), 5.1(d)(x) and 11.7).
(b) Upon exercise by the Underwriters of the Overallotment Option,
Subordinated Units owned by Northern Plains and Pan Border shall be sold by them
to the Underwriters, and upon such sale such Subordinated Units shall be
converted (automatically, without any action on the part of Northern Plains or
Pan Border and subject to subparagraph (c) immediately below) into Common Units
in the hands of the Underwriters, and for each 33 Units so purchased by the
Underwriters pursuant to exercise of the Overallotment Option, (i) 20
Subordinated Units sold by Northern Plains shall be converted into 20 Common
Units in the hands of the Underwriters, and (ii) 13 Subordinated Units sold by
Pan Border shall be converted into 13 Common Units in the hands of the
Underwriters. Simultaneously with the purchase of Units by the Underwriters
pursuant to exercise of the Overallotment Option, for each 33 Units so purchased
by the Underwriters from Northern Plains and Pan Border, 7 Subordinated Units
owned by Northwest Border shall be converted (automatically, without any action
on the part of Northwest Border and subject to subparagraph (c) immediately
below) into 7 Common Units in the hands of Northwest Border.
(c) After the end of the Subordination Period or upon the exercise by the
Underwriters of the Overallotment Option (to the extent of any Subordinated
Units affected by such exercise of the Overallotment Option as provided in
subparagraph (b) immediately above), once the Partnership Policy Committee
determines, based on advice of counsel, that a Subordinated Unit has, as a
substantive matter, like intrinsic economic and federal income tax
characteristics, in all material respects, to the intrinsic economic and federal
income tax characteristics of a Common Unit then Outstanding, then the
Subordinated Unit shall be converted to a Common Unit (on a one-for-one basis)
and from that time forward (which time shall, except as provided in subparagraph
(b) above, in no event commence before the first day following the end of the
Subordination Period) shall constitute a Common Unit for all purposes under this
Agreement. In connection with the condition set forth above, it is understood
that the Partnership Policy Committee may take whatever reasonable steps are
required to provide economic uniformity to the Common Units in preparation for a
conversion into Common Units, including the application of Sections 4.4(c) and
5.1 (d)(x); provided, however, that no such steps may be taken that would have a
material adverse effect on the Limited Partners holding Common Units or the
Record Holders of any class of Units.
ARTICLE VI
MANAGEMENT AND OPERATION OF BUSINESS
6.1 Partnership Policy Committee, (a) As provided in Section 6.2, the
powers of the Partnership shall be exercised by or under authority of, and the
business and affairs of the Partnership shall be managed by or under the
direction of, a committee (the "Partnership Policy Committee") consisting of one
person appointed by each General Partner. Each member of the Partnership Policy
Committee shall serve in such capacity until his successor or replacement shall
have been appointed by the General Partner that originally appointed such
member. The appointment of any such successor or replacement, which decision may
be made in the sole discretion of the appointing General Partner from time to
time, shall become effective upon the delivery by the appointing General Partner
of written notice to each other General Partner. As of the date hereof, the
General Partners have notified each other of their respective initial
appointments to the Partnership Policy Committee. The Chairman of the
Partnership Policy Committee shall be the appointee of Northern Plains, who
shall preside at all meetings of the Partnership Policy Committee.
38
(b) Voting; Quorum; Required Vote for Action. Unless otherwise required by
law or the provisions hereof,
(i) each member of the Partnership Policy Committee shall have a
number of votes that corresponds to the General Partner Percentage
Interest of the General Partner that appointed such member (if the
Combined Interest of a General Partner is purchased by another General
Partner or General Partners pursuant to the terms hereof, the voting power
of the Departing Partner shall be reallocated to such purchasing General
Partner(s) based on the portion of the Departing Partner's General Partner
Percentage Interest purchased by such General Partner(s));
(ii) the presence at a meeting of members of the Partnership Policy
Committee that in the aggregate represent a majority of the total number
of votes held by all members of the Partnership Policy Committee shall
constitute a quorum at any such meeting for the transaction of business;
and
(iii) the act of members of the Partnership Policy Committee that in
the aggregate represent a majority of the total number of votes held by
all members of the Partnership Policy Committee shall be deemed to
constitute the act of the Partnership Policy Committee. In the event of a
50-50 split in voting with respect to any matter before the Partnership
Policy Committee, any member of the Partnership Policy Committee shall
have the right, exercisable by delivery of written notice to the other
members of the Partnership Policy Committee within 30 days after such
vote, to cause such matter to be submitted to binding arbitration in
accordance with the following procedures:
(A) The members of the Partnership Policy Committee shall,
within 15 Business Days following the receipt by each non-submitting
member of the notice referred to above, attempt to agree upon an
independent expert qualified to decide on the particular matter with
respect to which a 50-50 split in voting has occurred (the expert so
selected being herein referred to as the "Arbitrator"); provided,
however, that if such agreement cannot be reached within such
period, the member(s) of the Partnership Policy Committee voting
affirmatively on such matter shall select a qualified independent
expert within 15 days thereafter, the member(s) of the Partnership
Policy Committee voting against such matter shall select a qualified
independent expert, and the two experts so selected shall, within
ten days following the selection of the latter of the two, select a
third qualified independent expert, and the three experts so
selected shall constitute the Arbitrator;
(B) The Arbitrator shall promptly gather all materials,
information, testimony and evidence it deems relevant to the
particular matter before it (and each member of the Partnership
Policy Committee will provide any such materials, information,
testimony and evidence requested by the Arbitrator, except to the
extent any information so requested is proprietary, subject to a
third party confidentiality agreement or subject to an
attorney-client or other privilege);
(C) The sole consideration of the Arbitrator in determining
its decision with respect to any matter submitted to it shall be the
best interests of the Partnership;
(D) All decisions of the Arbitrator, including the final
decision of the Arbitrator with respect to any matters submitted to
it, shall be final and binding on the
39
General Partners and the Partnership Policy Committee; if the
Arbitrator consists of three experts as contemplated by clause (A)
above, all decisions of such experts, including the final decision
of such experts as the Arbitrator, shall be made by approval of a
majority of such experts;
(E) The Arbitrator shall use all reasonable efforts to render
its decision with respect to any matter submitted to it as soon as
practicable, but in any event on or before the 30th Business Day
following the date on which the identity of the Arbitrator is
finally determined pursuant to clause (A) above;
(F) The costs and expenses of any such arbitration shall be
borne by the Partnership; and
(G) To the extent not inconsistent with the terms of this
Agreement, any such arbitration shall be conducted in Houston, Texas
in accordance with the then current rules of the American
Arbitration Association.
(c) Meetings. Regular meetings of the Partnership Policy Committee shall
be held at least once each calendar quarter on such date(s) and at such time(s)
as may be determined by the Chairman of the Partnership Policy Committee.
Written notice stating the place, day and hour of each regular meeting of the
Partnership Policy Committee shall be delivered by the Chairman to every other
member not less than 10 nor more than 60 days prior to the date of the meeting.
Special meetings of the Partnership Policy Committee may be called by written
request of any member of the Partnership Policy Committee, on at least 48 hours
prior written notice to the other members (which notice may be personally
delivered or sent by telecopy, with confirmation of receipt by return telecopy).
Any such notice, or waiver thereof, need not state the purpose of such meeting.
Attendance of a member at a meeting shall constitute a waiver of notice of such
meeting, unless such member attends for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
was not properly called or convened. Unless otherwise agreed upon by all
members, all meetings of the Partnership Policy Committee shall be held at the
principal office of the Partnership.
(d) Action Without a Meeting; Telephone Conference Meeting. Any action
required or permitted to be taken at any meeting of the Partnership Policy
Committee may be taken without a meeting, and without prior notice, if a consent
or consents in writing, setting forth the action so taken, shall be signed by
all members of the Partnership Policy Committee. Any such consent shall be filed
with the minutes of proceedings of the Partnership Policy Committee and shall
have the same force and effect as a unanimous vote at a meeting. Subject to the
requirement for notice of such meetings, members of the Partnership Policy
Committee may participate in a meeting of the Partnership Policy Committee by
means of a conference telephone or similar communications equipment, by means of
which all persons participating in the meeting can hear each other, and
participation in such meetings shall constitute presence in person at the
meeting, except where a person participates in the meeting for the express
purpose of objecting to the transaction of any business on the ground that the
meeting is not properly called or convened.
(e) Designation; Powers. The Partnership Policy Committee may delegate to
one or more Persons, or designate one or more committees, that shall have and
may exercise such of the powers and authority of the Partnership Policy
Committee with respect to the management of the business and affairs of the
Partnership as may be provided in a written resolution of the Partnership Policy
Committee. Pursuant to such authority and as set forth in the Administrative
Services Agreement, the Partnership Policy Committee has delegated the
performance of certain administrative services
40
in connection with the day-to-day business and affairs of the Partnership to NBP
Services Corporation, a Delaware corporation.
(f) Substitution of Members. Each member of the Partnership Policy
Committee may designate one or more persons to act as alternate members of the
Partnership Policy Committee, who may replace such member at any meeting of the
Partnership Policy Committee.
6.2 MANAGEMENT. (a) Except as otherwise expressly provided in this
Agreement, all management powers over the business and affairs of the
Partnership shall be exclusively vested in the Partnership Policy Committee, and
no General Partner, Limited Partner or Assignee shall have any management power
over the business and affairs of the Partnership. In addition to the powers now
or hereafter granted a general partner of a limited partnership under applicable
law or which are granted to the Partnership Policy Committee under any other
provision of this Agreement, the Partnership Policy Committee, subject to
Section 6.4, shall have full power and authority to do all things and on such
terms as it, in its sole discretion, may deem necessary or appropriate to
conduct the business of the Partnership, to exercise all powers set forth in
Section 3.2 and to effectuate the purposes set forth in Section 3.1, including,
without limitation, (i) the making of any expenditures, the lending or borrowing
of money, the assumption or guarantee of, or other contracting for, indebtedness
and other liabilities, the issuance of evidences of indebtedness and the
incurring of any other obligations; (ii) the making of tax, regulatory and other
filings, or rendering of periodic or other reports to governmental or other
agencies having jurisdiction over the business or assets of the Partnership;
(iii) the acquisition, disposition, mortgage, pledge, encumbrance, hypothecation
or exchange of any or all of the assets of the Partnership or the merger or
other combination of the Partnership with or into another Person (the matters
described in this clause (iii) being subject, however, to any prior approval
that may be required by Section 6.4); (iv) the use of the assets of the
Partnership (including, without limitation, cash on hand) for any purpose
consistent with the terms of this Agreement, including, without limitation, the
financing of the conduct of the operations of the Partnership, the Intermediate
Partnership or Northern Border Pipeline, the lending of funds to other Persons
(including, without limitation, the Intermediate Partnership and Northern Border
Pipeline) and the repayment of obligations of the Partnership, the Intermediate
Partnership or Northern Border Pipeline and the making of capital contributions
to the Intermediate Partnership; (v) the negotiation, execution and performance
of any contracts, conveyances or other instruments (including, without
limitation, instruments that limit the liability of the Partnership under
contractual arrangements to all or particular assets of the Partnership, with
the other party to the contract to have no recourse against the General Partners
or their assets other than its interest in the Partnership, even if same results
in the terms of the transaction being less favorable to the Partnership than
would otherwise be the case); (vi) the distribution of Partnership cash; (vii)
the selection and dismissal of officers, employees and agents (including,
without limitation, officers having titles such as "president," "chief executive
officer," "vice president," "chief financial and accounting officer,"
"secretary" and "treasurer"), outside attorneys, accountants, consultants and
contractors and the determination of their compensation and other terms of
employment or hiring; (viii) the maintenance of such insurance for the benefit
of the Partnership, the Intermediate Partnership and the Partners as it deems
necessary or appropriate; (ix) the formation of, or acquisition of an interest
in, and the contribution of property to, any further limited or general
partnerships, joint ventures, corporations or other relationships (including,
without limitation, the acquisition of interests in, and the contributions of
property to, the Intermediate Partnership from time to time); (x) the control of
any matters affecting the rights and obligations of the Partnership, including,
without limitation, the bringing and defending of actions at law or in equity
and otherwise engaging in the conduct of litigation and the incurring of legal
expense and the settlement of claims and litigation; (xi) the indemnification of
any Person against liabilities and contingencies to the extent permitted by law;
(xii) the entering into of listing agreements with the New York Stock Exchange
and any other securities exchange and the delisting of some or all of the Units
41
from, or requesting that trading be suspended on, any such exchange (subject to
any prior approval that may be required under Section 1.6); (xiii) the purchase,
sale or other acquisition or disposition of Units; and (xiv) the undertaking of
any action in connection with the Partnership's participation in the
Intermediate Partnership as a limited partner (including, without limitation,
contributions or loans of funds by the Partnership to the Intermediate
Partnership).
(b) Notwithstanding any other provision of this Agreement, the
Intermediate Partnership Agreement, the Delaware Act or any applicable law, rule
or regulation, each of the Partners and Assignees and each other Person who may
acquire an interest in Units or any other Partnership Interest hereby (i)
approves, ratifies and confirms the execution, delivery and performance by the
parties thereto of this Agreement, the Intermediate Partnership Agreement, the
Underwriting Agreement, the Conveyance Agreement, the Credit Agreement and the
Administrative Services Agreement, and the engaging by any Affiliate of a
General Partner in the transportation of natural gas and related activities,
including, without limitation, the expansion of existing facilities owned or
operated by such Affiliate, the acquisition of additional facilities or the
construction of new facilities, even if such activities are in direct
competition with the business and activities of the Partnership, the
Intermediate Partnership or Northern Border Pipeline; (ii) agrees that the
Partnership Policy Committee (on its own or through any officer selected as the
chief executive officer, chief financial and accounting officer, president or
any vice-president of the Partnership pursuant to Section 6.2(a)(vii)) is
authorized to execute, deliver and perform the agreements referred to in clause
(i) of this sentence and the other agreements, acts, transactions and matters
described in the Registration Statement on behalf of the Partnership without any
further act, approval or vote of the Partners or the Assignees or the other
Persons who may acquire an interest in Units; (iii) agrees that the execution,
delivery or performance by the General Partners, the Partnership Policy
Committee, the Partnership, the Intermediate Partnership or any Affiliate of any
of them of this Agreement or any agreement authorized or permitted under this
Agreement (including, without limitation, the exercise by a General Partner or
any Affiliate of a General Partner of the rights accorded pursuant to Article
XVII), or the engaging by any Affiliate of a General Partner in any of the
activities specified in clause (i) above, even if such activities are in direct
competition with the business and activities of the Partnership, the
Intermediate Partnership or Northern Border Pipeline, shall not constitute a
breach by the General Partners, the members of the Partnership Policy Committee,
any officers of the Partnership or any such Affiliate of any duty that such
Persons may owe the Partnership, the General Partners, the Limited Partners, the
Assignees or any other Persons under this Agreement (or any other agreements) or
of any duty stated or implied by law or equity; and (iv) agrees that each
General Partner and its designated representative on the management committee
for Northern Border Pipeline shall not be in breach of any standard of care or
duty imposed by this Agreement or under the Delaware Act or any applicable law,
rule or regulation with respect to the voting of the Intermediate Partnership's
interest on the management committee for Northern Border Pipeline if such
designated representative acted in good faith and in a manner reasonably
believed by such person to be in, or not inconsistent with, the best interests
of the Partnership and the Intermediate Partnership.
6.3 CERTIFICATE OF LIMITED PARTNERSHIP. The General Partners have caused
the Certificate of Limited Partnership to be filed with the Secretary of State
of the State of Delaware as required by the Delaware Act, and the Partnership
Policy Committee shall use all reasonable efforts to cause to be filed such
other certificates or documents as may be determined by the Partnership Policy
Committee in its sole discretion to be reasonable and necessary or appropriate
for the formation, continuation, qualification and operation of a limited
partnership (or a partnership in which the limited partners have limited
liability) in the State of Delaware or any other state in which the Partnership
may elect to do business or own property. To the extent that such action is
determined by the Partnership Policy Committee in its sole discretion to be
reasonable and necessary or appropriate, the Partnership Policy Committee shall
file amendments to and restatements of the Certificate of Limited
42
Partnership and do all things to maintain the Partnership as a limited
partnership (or a partnership in which the limited partners have limited
liability) under the laws of the State of Delaware or of any other state in
which the Partnership may elect to do business or own property. Subject to the
terms of Section 7.5(a), the Partnership Policy Committee shall not be required,
before or after filing, to deliver or mail a copy of the Certificate of Limited
Partnership, any qualification document or any amendment thereto to any Limited
Partner or Assignee.
6.4 RESTRICTIONS ON THE PARTNERSHIP POLICY COMMITTEE'S AUTHORITY. (a) The
Partnership Policy Committee may not, without written approval of the specific
act by all of the Outstanding Units or by other written instrument executed and
delivered by all of the Outstanding Units subsequent to the date of this
Agreement, take any action in contravention of this Agreement, including,
without limitation, (i) any act that would make it impossible to carry on the
ordinary business of the Partnership, except as otherwise provided in this
Agreement; (ii) possess Partnership property, or assign any rights in specific
Partnership property, for other than a Partnership purpose; (iii) admit a Person
as a Partner, except as otherwise provided in this Agreement; or (iv) amend this
Agreement in any manner, except as otherwise provided in this Agreement.
(b) Except as provided in Articles XIV and XVI, the Partnership Policy
Committee may not (i) sell, exchange or otherwise dispose of all or
substantially all of the Partnership's assets in a single transaction or a
series of related transactions, (ii) approve on behalf of the Partnership the
sale, exchange or other disposition of all or substantially all of the assets of
the Intermediate Partnership, or (iii) vote the interest of the Partnership as a
limited partner of the Intermediate Partnership in favor of the voting by the
representatives of the Intermediate Partnership on the Northern Border
Management Committee in favor of (A) the sale, exchange or other disposition of
all or substantially all of Northern Border Pipeline's assets in a single
transaction or in a series of related transactions or (B) the liquidation or
merger, consolidation or other combination of Northern Border Pipeline with or
into another entity, in any such case without the approval of at least
two-thirds of the Outstanding Units during the Subordination Period and
thereafter without the approval of at least a majority of the Outstanding Units;
provided, however, that this provision shall not preclude or limit the
Partnership Policy Committee's ability to mortgage, pledge, hypothecate or grant
a security interest in all or substantially all of the Partnership's assets and
shall not apply to any forced sale of any or all of the Partnership's assets
pursuant to the foreclosure of, or other realization upon, any such encumbrance.
Without the approval of at least two-thirds of the Outstanding Units, the
Partnership Policy Committee shall not, on behalf of the Partnership, (aa)
consent to any amendment to the Intermediate Partnership Agreement or, except as
expressly permitted by Section 6.10(d), take any action permitted to be taken by
a partner of the Intermediate Partnership, in either case, that would have a
material adverse effect on the Partnership as a partner of the Intermediate
Partnership or (bb) except as permitted under Sections 11.2,13.1 and 13.2, elect
or cause the Partnership to elect a successor general partner of the
Intermediate Partnership.
(c) Unless approved by the affirmative vote of the holders of at least
two-thirds of each class of Outstanding Units, including two-thirds of Common
Units (excluding for purposes of such determination, during the Subordination
Period, Common Units owned by the General Partners and their Affiliates), the
Partnership Policy Committee shall not take any action or refuse to take any
reasonable action the effect of which, if taken or not taken, as the case may
be, would be to cause the Partnership, the Intermediate Partnership or Northern
Border Pipeline to be treated as an association taxable as a corporation or
otherwise to be taxed as an entity for federal income tax purposes; provided
that this Section 6.4(c) shall not be construed to apply to amendments to this
Agreement (which are governed by Article XV) or mergers or consolidations of the
Partnership with any Person (which, in the case of mergers or consolidations of
the Partnership, the Intermediate Partnership or Northern Border Pipeline with
any Person, are governed by Article XVI).
43
(d) Each General Partner agrees that, at all times while serving as a
general partner of the Partnership, it will not make any dividend or
distribution on, or repurchase any shares of, its stock or take any other action
within its control if the effect of such dividend, distribution, repurchase or
other action would be to reduce its net worth below an amount necessary to
receive an Opinion of Counsel that the Partnership will be treated as a
partnership for federal income tax purposes.
6.5 REIMBURSEMENT OF THE GENERAL PARTNERS AND THE PARTNERSHIP POLICY
COMMITTEE. (a) Except as provided in this Section 6.5 and elsewhere in this
Agreement or in the Intermediate Partnership Agreement, neither the General
Partners nor the members of the Partnership Policy Committee shall be
compensated for their services as general partners of the Partnership or the
Intermediate Partnership or as members of the Partnership Policy Committee,
respectively.
(b) Each of the General Partners and the members of the Partnership Policy
Committee shall be reimbursed on a monthly basis, or such other basis as the
Partnership Policy Committee may determine in its reasonable discretion, for (i)
all direct and indirect expenses it incurs or payments it makes on behalf of the
Partnership (including, without limitation, amounts paid to any Person to
perform services for the Partnership or for the General Partners or the
Partnership Policy Committee in the discharge of their duties to the
Partnership), and (ii) all other necessary or appropriate expenses allocable to
the Partnership or otherwise reasonably incurred by such Person in connection
with operating the Partnership's business (including, without limitation,
expenses allocated to such Person by its Affiliates); provided, however, that
(A) NBP Services Corporation and its Affiliates, including Northern Plains,
shall not be reimbursed hereunder for any amounts that are duplicative of
amounts paid by the Partnership or the Intermediate Partnership to NBP Services
Corporation pursuant to the Administrative Services Agreement, (B) Northern
Plains shall not be reimbursed for any amounts that are duplicative of amounts
paid to it by Northern Border Pipeline pursuant to that certain Operating
Agreement dated February 28,1980, as amended, by and between Northern Plains and
Northern Border Pipeline and (C) nothing herein shall be construed to grant to
any of the General Partners the power or authority to operate the Partnership's
business (it being understood that the business and affairs of the Partnership
shall be managed by or under the direction of the Partnership Policy Committee).
The Partnership Policy Committee shall determine the fees and expenses that are
allocable to the Partnership in any reasonable manner determined by the
Partnership Policy Committee in its sole discretion. Reimbursements pursuant to
this Section 6.5 shall be in addition to any reimbursement to such Persons as a
result of indemnification pursuant to Section 6.8.
(c) Subject to Section 4.2(c), the Partnership Policy Committee in its
sole discretion and without the approval of the Limited Partners may propose and
adopt on behalf of the Partnership employee benefit and incentive plans
(including, without limitation, plans involving the issuance of Units), or issue
Partnership Securities pursuant to any employee benefit or incentive plan
maintained or sponsored by a General Partner or one of its Affiliates, the
Partnership or the Intermediate Partnership, in each case for the benefit of
employees of the General Partners, the Partnership, the Intermediate Partnership
or any Affiliate of any of them in respect of services performed, directly or
indirectly, for the benefit of the Partnership or the Intermediate Partnership.
6.6 OUTSIDE ACTIVITIES. (a) After the Closing Date, each General Partner,
for so long as it is a general partner of the Partnership, (i) agrees that its
sole business will be to act as a general partner of the Partnership and the
Intermediate Partnership and to undertake activities that are ancillary or
related thereto (including being a limited partner in the Partnership) and to
take such other action and conduct such other activities permitted to be taken
or conducted by a general partner of Northern Border Pipeline pursuant to the
terms of the Northern Border Pipeline Partnership
44
Agreement (including, in the case of Northern Plains, acting as operator of the
Pipeline System pursuant to the Operating Agreement), and (ii) shall not enter
into or conduct any business or incur any debts or liabilities except (A) in
connection with or incidental to (Y) its performance of the activities required
or authorized by the Intermediate Partnership Agreement or this Agreement or
described in or contemplated by the Registration Statement and (Z) the
acquisition, ownership or disposition of partnership interests in the
Partnership and the Intermediate Partnership (except that, notwithstanding the
foregoing, employees of each General Partner may perform services for Affiliates
of such General Partner) and (B) any business, debts or liabilities permitted of
a general partner of Northern Border Pipeline pursuant to the terms of the
Northern Border Pipeline Partnership Agreement.
(b) Except as described in the Registration Statement or Section 6.6(a),
no Indemnitee shall be expressly or implicitly restricted or proscribed pursuant
to this Agreement, the Intermediate Partnership Agreement, the Northern Border
Pipeline Partnership Agreement or the partnership relationship established
hereby or thereby from engaging in other activities for profit, whether in the
businesses engaged in by the Partnership, the Intermediate Partnership or
Northern Border Pipeline or anticipated to be engaged in by the Partnership, the
Intermediate Partnership, Northern Border Pipeline or otherwise, including,
without limitation, in the case of any Affiliates of the General Partners, those
businesses and activities described in or contemplated by Section 6.2(b)(i) and
by the Registration Statement. Without limitation of and subject to the
foregoing, each Indemnitee (other than a General Partner) shall have the right
to engage in businesses of every type and description and to engage in and
possess an interest in other business ventures of any and every type or
description, independently or with others, including, without limitation, in the
case of any Affiliates of the General Partners, business interests and
activities of the type described in Section 6.2(b)(i), and none of the same
shall constitute a breach of this Agreement, the Intermediate Partnership
Agreement or any duty to the Partnership, the Intermediate Partnership or any
Partners. Neither the Partnership, the Intermediate Partnership, any Limited
Partner nor any other Person shall have any rights by virtue of this Agreement,
the Intermediate Partnership Agreement, the Northern Border Pipeline Partnership
Agreement or the partnership relationship established hereby or thereby in any
business ventures of any Indemnitee (subject, in the case of a General Partner,
to compliance with Section 6.6(a)), and such Indemnitees shall have no
obligation to offer any interest in any such business ventures to the
Partnership, the Intermediate Partnership, Northern Border Pipeline, any Limited
Partner or any other Person. The General Partners and any other Persons
affiliated with the General Partners may acquire Units or other Partnership
Securities, in addition to those acquired by any of such Persons on the Closing
Date, and shall be entitled to exercise all rights of an Assignee or Limited
Partner, as applicable, relating to such Units or Partnership Securities, as the
case may be.
(c) Without limitation of Sections 6.6(a) and 6.6(b), and notwithstanding
anything to the contrary in this Agreement, the competitive activities of any
Indemnitees are hereby approved by all Partners, and it shall not be deemed to
be a breach of the fiduciary duties of the General Partners and the members of
the Partnership Policy Committee for such Persons to permit an Indemnitee to
engage in a business opportunity in preference to or to the exclusion of the
Partnership, if such activities are permitted by this Agreement or the
Intermediate Partnership Agreement.
6.7 LOANS TO AND FROM THE GENERAL PARTNERS; CONTRACTS WITH AFFILIATES. (a)
(i) Each General Partner or any Affiliate thereof may lend to the Partnership or
the Intermediate Partnership, and the Partnership and the Intermediate
Partnership may borrow, funds needed or desired by the Partnership and the
Intermediate Partnership for such periods of time as the Partnership Policy
Committee may determine and (ii) each General Partner or any Affiliate thereof
may borrow from the Partnership or the Intermediate Partnership, and the
Partnership and the Intermediate Partnership
45
may lend to such General Partner or such Affiliate, excess funds of the
Partnership and the Intermediate Partnership for such periods of time and in
such amounts as the Partnership Policy Committee may determine; provided,
however, that in either such case the lending party may not charge the borrowing
party interest at a rate greater than the rate that would be charged the
borrowing party (without reference to the lending party's financial abilities or
guarantees), by unrelated lenders on comparable loans. The borrowing party shall
reimburse the lending party for any costs (other than any additional interest
costs) incurred by the lending party in connection with the borrowing of such
funds. For purposes of this Section 6.7(a) and Section 6.7(b), the term
"Partnership" shall include any Affiliate of the Partnership that is controlled
by the Partnership and the term "Intermediate Partnership" shall include any
Affiliate of the Intermediate Partnership that is controlled by the Intermediate
Partnership.
(b) The Partnership may lend or contribute to the Intermediate
Partnership, and the Intermediate Partnership may borrow, funds on terms and
conditions established in the sole discretion of the Partnership Policy
Committee; provided, however, that the Partnership may not charge the
Intermediate Partnership interest at a rate greater than the rate that would be
charged to the Intermediate Partnership (without reference to the financial
abilities or guarantees of the General Partners), by unrelated lenders on
comparable loans. The foregoing authority shall be exercised by the Partnership
Policy Committee in its sole discretion and shall not create any right or
benefit in favor of the Intermediate Partnership or any other Person.
(c) The Partnership Policy Committee may permit the Partnership to enter
into one or more agreements, in addition to the Administrative Services
Agreement, with one or more of the General Partners and their Affiliates to
render services to the Partnership or to the Partnership Policy Committee in the
discharge of its duties to the Partnership. Any services rendered to the
Partnership by a General Partner or any of its Affiliates shall be on terms that
are fair and reasonable to the Partnership; provided, however, that the
requirements of this Section 6.7(c) shall be deemed satisfied as to (i) any
transaction approved by Special Approval, (ii) any transaction, the terms of
which are no less favorable to the Partnership than those generally being
provided to or available from unrelated third parties or (iii) any transaction
that, taking into account the totality of the relationships between the parties
involved (including other transactions that may be particularly favorable or
advantageous to the Partnership), is equitable to the Partnership. The
provisions of Section 6.5 shall apply to the rendering of services described in
this Section 6.7(c).
(d) The Partnership Policy Committee may cause the Partnership to transfer
assets to joint ventures, other partnerships, corporations, limited liability
companies, or other business entities in which it is or thereby becomes a
participant upon such terms and subject to such conditions as are consistent
with this Agreement and applicable law.
(e) Neither the General Partners nor any of their Affiliates shall sell,
transfer or convey any property to, or purchase any property from, the
Partnership, directly or indirectly, except pursuant to transactions that are
fair and reasonable to the Partnership; provided, however, that the requirements
of this Section 6.7(e) shall be deemed to be satisfied as to (i) the
transactions effected pursuant to Sections 4.2 and 4.1, the Conveyance Agreement
and any other transactions described in or contemplated by the Registration
Statement, (ii) any transaction approved by Special Approval, (iii) any
transaction, the terms of which are no less favorable to the Partnership than
those generally being provided to or available from unrelated third parties, or
(iv) any transaction that, taking into account the totality of the relationships
between the parties involved (including other transactions that may be
particularly favorable or advantageous to the Partnership), is equitable to the
Partnership.
46
(f) The General Partners and their Affiliates will have no obligation to
permit the Partnership, the Intermediate Partnership or Northern Border Pipeline
to use any facilities or assets of the General Partners and their Affiliates,
except as may be provided in contracts entered into from time to time
specifically dealing with such use, nor shall there be any obligation on the
part of the General Partners or their Affiliates to enter into such contracts.
(g) Without limitation of Sections 6.7(a) through 6.7(f), and
notwithstanding anything to the contrary in this Agreement, the existence of the
conflicts of interest described in the Registration Statement are hereby
approved by all Partners.
6.8 INDEMNIFICATION. (a) To the fullest extent permitted by law but
subject to the limitations expressly provided in this Agreement, each General
Partner, the members of the Partnership Policy Committee, any Departing Partner,
any Person who is or was an officer or director of the Partnership, a General
Partner or any Departing Partner and all other Indemnitees shall be indemnified
and held harmless by the Partnership from and against any and all losses,
claims, damages, liabilities, joint or several, expenses (including, without
limitation, legal fees and expenses), judgments, fines, penalties, interest,
settlements and other amounts arising from any and all claims, demands, actions,
suits or proceedings, whether civil, criminal, administrative or investigative,
in which any Indemnitee may be involved, or is threatened to be involved, as a
party or otherwise, by reason of its status as (i) a General Partner, a member
of the Partnership Policy Committee, a Departing Partner or any of their
Affiliates, (ii) an officer, director, employee, partner, agent or trustee of
the Partnership, a General Partner, any Departing Partner or any of their
Affiliates or (iii) a Person serving at the request of the Partnership in
another entity in a similar capacity, provided, that in each case the Indemnitee
acted in good faith and in a manner which such Indemnitee believed to be in, or
not opposed to, the best interests of the Partnership and, with respect to any
criminal proceeding, had no reasonable cause to believe its conduct was
unlawful; provided, further, no indemnification pursuant to this Section 6.8
shall be available to the General Partners with respect to their obligations
incurred pursuant to the Indemnity Agreement, the Underwriting Agreement or the
Conveyance Agreement (other than obligations incurred by the General Partners on
behalf of the Partnership or the Intermediate Partnership). The termination of
any action, suit or proceeding by judgment, order, settlement, conviction or
upon a plea of nolo contendere, or its equivalent, shall not create a
presumption that the Indemnitee acted in a manner contrary to that specified
above. Any indemnification pursuant to this Section 6.8 shall be made only out
of the assets of the Partnership, it being agreed that the General Partners
shall not be personally liable for such indemnification and shall have no
obligation to contribute or loan any monies or property to the Partnership to
enable it to effectuate such indemnification.
(b) To the fullest extent permitted by law, expenses (including, without
limitation, legal fees and expenses) incurred by an Indemnitee who is
indemnified pursuant to Section 6.8(a) in defending any claim, demand, action,
suit or proceeding shall, from time to time, be advanced by the Partnership
prior to the final disposition of such claim, demand, action, suit or proceeding
upon receipt by the Partnership of an undertaking by or on behalf of the
Indemnitee to repay such amount if it shall be determined that the Indemnitee is
not entitled to be indemnified as authorized in this Section 6.8.
(c) The indemnification provided by this Section 6.8 shall be in addition
to any other rights to which an Indemnitee may be entitled under any agreement,
pursuant to any vote of the holders of Outstanding Units, as a matter of law or
otherwise, both as to actions in the Indemnitee's capacity as (i) a General
Partner, a member of the Partnership Policy Committee, a Departing Partner or an
Affiliate thereof, (ii) an officer, director, employee, partner, agent or
trustee of the Partnership, a General Partner, any Departing Partner or an
Affiliate thereof or (iii) a Person serving at the request
47
of the Partnership in another entity in a similar capacity, and as to actions in
any other capacity (including, without limitation, any capacity under the
Underwriting Agreement), and shall continue as to an Indemnitee who has ceased
to serve in such capacity and shall inure to the benefit of the heirs,
successors, assigns and administrators of the Indemnitee.
(d) The Partnership may purchase and maintain (or reimburse the General
Partners or their Affiliates for the cost of) insurance, on behalf of the
General Partners, the members of the Partnership Policy Committee and such other
Persons as the Partnership Policy Committee shall determine, against any
liability that may be asserted against or expense that may be incurred by such
Person in connection with the Partnership's activities, regardless of whether
the Partnership would have the power to indemnify such Person against such
liability under the provisions of this Agreement.
(e) For purposes of this Section 6.8, the Partnership shall be deemed to
have requested an Indemnitee to serve as fiduciary of an employee benefit plan
whenever the performance by it of its duties to the Partnership also imposes
duties on, or otherwise involves services by, it to the plan or participants or
beneficiaries of the plan; excise taxes assessed on an indemnitee with respect
to an employee benefit plan pursuant to applicable law shall constitute "fines"
within the meaning of Section 6.8(a); and action taken or omitted by it with
respect to an employee benefit plan in the performance of its duties for a
purpose reasonably believed by it to be in the interest of the participants and
beneficiaries of the plan shall be deemed to be for a purpose which is in, or
not opposed to, the best interests of the Partnership.
(f) In no event may an Indemnitee subject the Limited Partners to personal
liability by reason of the indemnification provisions set forth in this
Agreement.
(g) An Indemnitee shall not be denied indemnification in whole or in part
under this Section 6.8 because the Indemnitee had an interest in the transaction
with respect to which the indemnification applies if the transaction was
otherwise permitted by the terms of this Agreement.
(h) The provisions of this Section 6.8 are for the benefit of the
Indemnitees, their heirs, successors, assigns and administrators and shall not
be deemed to create any rights for the benefit of any other Persons.
(i) No amendment, modification or repeal of this Section 6.8 or any
provision hereof shall in any manner terminate, reduce or impair the right of
any past, present or future Indemnitee to be indemnified by the Partnership, nor
the obligation of the Partnership to indemnify any such Indemnitee under and in
accordance with the provisions of this Section 6.8 as in effect immediately
prior to such amendment, modification or repeal with respect to claims arising
from or relating to matters occurring, in whole or in part, prior to such
amendment, modification or repeal, regardless of when such claims may arise or
be asserted.
6.9 LIABILITY OF INDEMNITEES. (a) Notwithstanding anything to the contrary
set forth in this Agreement, no Indemnitee shall be liable for monetary damages
to the Partnership, the Limited Partners, the Assignees or any other Persons who
have acquired interests in the Units, for losses sustained or liabilities
incurred as a result of any act or omission if such Indemnitee acted in good
faith.
(b) Subject to its obligations and duties as set forth in Section 6.2, the
Partnership Policy Committee may exercise any of the powers granted to it by
this Agreement and perform any of the duties imposed upon it hereunder either
directly or by or through its agents, and the General Partners
48
and the Partnership Policy Committee shall not be responsible for any misconduct
or negligence on the part of any such agent appointed by the Partnership Policy
Committee in good faith.
(c) Any amendment, modification or repeal of this Section 6.9 or any
provision hereof shall be prospective only and shall not in any way affect the
limitations on the liability to the Partnership and the Limited Partners of the
members of the Partnership Policy Committee, the General Partners, their
directors, officers and employees under this Section 6.9 as in effect
immediately prior to such amendment, modification or repeal with respect to
claims arising from or relating to matters occurring, in whole or in part, prior
to such amendment, modification or repeal, regardless of when such claims may
arise or be asserted.
6.10 RESOLUTION OF CONFLICTS OF INTEREST. (a) Unless otherwise expressly
provided in this Agreement or the Intermediate Partnership Agreement, whenever a
potential conflict of interest exists or arises between a General Partner or any
of its Affiliates or the member of the Partnership Policy Committee designated
by it, on the one hand, and the Partnership, the Intermediate Partnership, any
Partner or any Assignee, on the other hand, any resolution or course of action
in respect of such conflict of interest shall be permitted and deemed approved
by all Partners, and shall not constitute a breach of this Agreement, of the
Intermediate Partnership Agreement, of any agreement contemplated herein or
therein, or of any duty stated or implied by law or equity, if the resolution or
course of action is or, by operation of this Agreement is deemed to be, fair and
reasonable to the Partnership. Each General Partner and Partnership Policy
Committee Member shall be authorized but not required in connection with its
resolution of such conflict of interest to seek Special Approval of a resolution
of such conflict or course of action. Any conflict of interest and any
resolution of such conflict of interest shall be conclusively deemed fair and
reasonable to the Partnership if such conflict of interest or resolution is (i)
approved by Special Approval, (ii) on terms no less favorable to the Partnership
than those generally being provided to or available from unrelated third parties
or (iii) fair to the Partnership, taking into account the totality of the
relationships between the parties involved (including other transactions that
may be particularly favorable or advantageous to the Partnership). A General
Partner or Partnership Policy Committee Member may also adopt a resolution or
course of action that has not received Special Approval. Each General Partner
and Partnership Policy Committee member (and the Audit Committee in connection
with Special Approval) shall be authorized in connection with its determination
of what is "fair and reasonable" to the Partnership and in connection with its
resolution of any conflict of interest to consider (A) the relative interests of
any party to such conflict, agreement, transaction or situation and the benefits
and burdens relating to such interest; (B) any customary or accepted industry
practices and any customary or historical dealings with a particular Person; (C)
any applicable generally accepted accounting or engineering practices or
principles; and (D) such additional factors as such General Partner or
Partnership Policy Committee member (and, if applicable, the Audit Committee)
determines in its sole discretion to be relevant, reasonable or appropriate
under the circumstances. Nothing contained in this Agreement, however, is
intended to nor shall it be construed to require a General Partner or
Partnership Policy Committee member (or the Audit Committee) to consider the
interests of any Person other than the Partnership. In the absence of bad faith
by a General Partner or Partnership Policy Committee member, the resolution,
action or terms so made, taken or provided by such General Partner or
Partnership Policy Committee member with respect to such matter shall not
constitute a breach of this Agreement or any other agreement contemplated herein
or a breach of any standard of care or duty imposed herein or therein or under
the Delaware Act or any other law, rule or regulation.
(b) Whenever this Agreement or any other agreement contemplated hereby
provides that the Partnership Policy Committee, or a General Partner or any of
its Affiliates, is permitted or required to make a decision (i) in its "sole
discretion" or "discretion," that it deems "necessary or appropriate"
49
or under a grant of similar authority or latitude, the Partnership Policy
Committee, such General Partner or such Affiliate shall be entitled to consider
only such interests and factors as it desires and shall have no duty or
obligation to give any consideration to any interest of, or factors affecting,
the Partnership, the Intermediate Partnership, any Limited Partner or any
Assignee, (ii) it may make such decision in its sole discretion (regardless of
whether there is a reference to "sole discretion" or "discretion") unless
another express standard is provided for, or (iii) in "good faith" or under
another express standard, the Partnership Policy Committee, such General Partner
or such Affiliate shall act under such express standard and shall not be subject
to any other or different standards imposed by this Agreement, the Intermediate
Partnership Agreement, any other agreement contemplated hereby or under the
Delaware Act or any other law, rule or regulation. In addition, any actions
taken by the Partnership Policy Committee, a General Partner or such Affiliate
consistent with the standards of "reasonable discretion" set forth in the
definitions of Available Cash or Cash from Operations shall not constitute a
breach of any duty of the members of the Partnership Policy Committee, or a
General Partner to the Partnership or the Limited Partners. The Partnership
Policy Committee and the General Partners shall have no duty, express or
implied, to sell or otherwise dispose of any asset of the Intermediate
Partnership or of the Partnership, other than in the ordinary course of
business. No borrowing by the Partnership or the Intermediate Partnership or the
approval thereof by the Partnership Policy Committee shall be deemed to
constitute a breach of any duty of the Partnership Policy Committee or a General
Partner to the Partnership or the Limited Partners by reason of the fact that
the purpose or effect of such borrowing is directly or indirectly to (A) enable
a General Partner to receive or increase the amount of Incentive Distributions
or (B) shorten the Subordination Period.
(c) Whenever a particular transaction, arrangement or resolution of a
conflict of interest is required under this Agreement to be "fair and
reasonable" to any Person, the fair and reasonable nature of such transaction,
arrangement or resolution shall be considered in the context of all similar or
related transactions.
(d) Subject to the terms of Section 6.4, the Limited Partners hereby
authorize the Partnership Policy Committee, on behalf of the Partnership as a
partner of the Intermediate Partnership, to approve of actions by the
partnership policy committee or general partners of the Intermediate Partnership
similar to those actions permitted to be taken by the Partnership Policy
Committee pursuant to this Section 6.10.
6.11 OTHER MATTERS CONCERNING THE GENERAL PARTNERS AND THE PARTNERSHIP
POLICY COMMITTEE. (a) The General Partners and the Partnership Policy Committee
may rely and shall be protected in acting or refraining from acting upon any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, bond, debenture, or other paper or document believed by
it to be genuine and to have been signed or presented by the proper party or
parties.
(b) The General Partners and the Partnership Policy Committee may consult
with legal counsel, accountants, appraisers, management consultants, investment
bankers and other consultants and advisers selected by it, and any act taken or
omitted to be taken in reliance upon the opinion (including, without limitation,
an Opinion of Counsel) of such Persons as to matters that the General Partners
and the Partnership Policy Committee reasonably believe to be within such
Person's professional or expert competence shall be conclusively presumed to
have been done or omitted in good faith and in accordance with such opinion.
(c) The Partnership Policy Committee shall have the right, in respect of
any of its powers or obligations hereunder, to act through any of the duly
authorized officers of the Partnership or the General Partners and their duly
appointed attorney or attorneys-in-fact. Each such attorney shall, to the extent
provided by the Partnership Policy Committee in the power of attorney, have full
power and
50
authority to do and perform each and every act and duty that is permitted or
required to be done by the Partnership Policy Committee hereunder.
(d) Any standard of care and duty imposed by this Agreement or under the
Delaware Act or any applicable law, rule or regulation shall be modified, waived
or limited as required to permit the General Partners and the members of the
Partnership Policy Committee to act under this Agreement or any other agreement
contemplated by this Agreement and to make any decision pursuant to the
authority prescribed in this Agreement so long as such action is reasonably
believed by the General Partners or the members of the Partnership Policy
Committee, as applicable, to be in, or not inconsistent with, the best interests
of the Partnership.
6.12 TITLE TO PARTNERSHIP ASSETS. Title to Partnership assets, whether
real, personal or mixed and whether tangible or intangible, shall be deemed to
be owned by the Partnership as an entity, and no Partner or Assignee,
individually or collectively, shall have any ownership interest in such
Partnership assets or any portion thereof. Title to any or all of the
Partnership assets may be held in the name of the Partnership, the General
Partners, one or more of their Affiliates or one or more nominees, as the
Partnership Policy Committee may determine. Each General Partner hereby declares
and warrants that any Partnership assets for which record title is held in the
name of such General Partner or one or more of its Affiliates or one or more
nominees shall be held by such General Partner or such Affiliate or nominee for
the use and benefit of the Partnership in accordance with the provisions of this
Agreement; provided, however, that such General Partner shall use its reasonable
efforts to cause record title to such assets (other than those assets in respect
of which such General Partner determines that the expense and difficulty of
conveyancing makes transfer of record title to the Partnership impracticable) to
be vested in the Partnership as soon as reasonably practicable; provided that,
prior to the withdrawal or removal of such General Partner or as soon thereafter
as practicable, such General Partner shall use reasonable efforts to effect the
transfer of record title to the Partnership and, prior to any such transfer,
will provide for the use of such assets in a manner satisfactory to the
Partnership. All Partnership assets shall be recorded as the property of the
Partnership in its books and records, irrespective of the name in which record
title to such Partnership assets is held.
6.13 PURCHASE OR SALE OF UNITS. The Partnership Policy Committee may cause
the Partnership to purchase or otherwise acquire Units; provided that the
Partnership Policy Committee may not cause the Partnership to purchase
Subordinated Units during the Subordination Period. As long as Units are held by
the Partnership or the Intermediate Partnership, such Units shall not be
considered Outstanding for any purpose, except as otherwise provided herein.
Each General Partner or any Affiliate of such General Partner may also purchase
or otherwise acquire and sell or otherwise dispose of Units for its own account,
subject to the provisions of Articles XI and XII.
6.14 REGISTRATION RIGHTS OF CERTAIN PERSONS. (a) Prior to the end of the
Subordination Period, if Northwest Border desires to sell any of its Initial
Common Units, then upon the request of Northwest Border (which request may not
be made more than once during any twelve month period without the approval of
the Partnership Policy Committee), the Partnership shall file with the
Commission as promptly as practicable after receiving such request, and use all
reasonable efforts to cause to become effective and remain effective for a
period of not more than six months following its effective date, a registration
statement under the Securities Act registering the offering and sale of the
number of Initial Common Units specified by Northwest Border; provided, however,
that the Partnership shall not be required to effect more than three
registrations pursuant to this Section 6.14(a).
51
(b) At any time following the Closing Date, if (i) Northern Plains, Pan
Border, Northwest Border or any Affiliate of any such Person (including, without
limitation, for purposes of this Section 6.14, any Person that is an Affiliate
at the date hereof notwithstanding that it may later cease to be an Affiliate)
holds Units or other Partnership Securities that it desires to sell (excluding,
in the case of Northwest Border and only during the Subordination Period, its
Initial Common Units) and (ii) Rule 144 of the Securities Act (or any successor
rule or regulation to Rule 144) or another exemption from registration is not
available to enable such Person to dispose of such Units or other Partnership
Securities (in the amount such person desires to sell and in accordance with
such Person's intended method of disposition) without registration under the
Securities Act, then upon the request of Northern Plains, Pan Border or
Northwest Border (in each case for its own account and/or on behalf of one or
more of its Affiliates), which request may, without the prior approval of the
Partnership Policy Committee, only be made once during any 12 month period
following the Closing Date (it being agreed that such limitation shall apply to
such parties as a group and not individually), the Partnership shall file with
the Commission as promptly as practicable after receiving such request, and use
all reasonable efforts to cause to become effective and remain effective for a
period of not more than six months following its effective date, a registration
statement under the Securities Act registering the offering and sale of the
number of Units or other Partnership Securities specified by the requesting
party, subject to the terms of Section 6.14(c); provided, however, that each of
Northern Plains, Pan Border and Northwest Border shall not have the right to
request more than three registrations pursuant to this Section 6.14(b).
(c) If Northern Plains, Pan Border or Northwest Border requests that the
Partnership register Units or other Partnership Securities on its or its
Affiliates behalf pursuant to Section 6.14(b), such requesting party shall
simultaneously send a copy of such request to the other two parties, and each
such other party, by delivery of written notice to the Partnership and the
requesting party on or before the 15th day following receipt of the requesting
parry's notice to the Partnership, shall have the right to participate in such
registered offering in accordance with the terms of this Section 6.14(c) and
subject to the other provisions of this Section 6.14. The requesting party and
each party that sends timely notice of its desire to participate in a
registration requested pursuant to Section 6.14(b) shall have the right to
participate to the full extent of any Units or Partnership Securities that it
desires to sell; provided, however, that if the managing underwriter for such
registered offering advises the Partnership that the purchase of all or some of
the such parties' Units or other Partnership Securities would adversely and
materially affect the success of the proposed offering, the requesting party and
such additional participating parties shall have the right to include their
Units or other Partnership Securities (and/or those of any Affiliates on whose
behalf a request or notice of intent to participate was sent by such party) in
such registered offering on a pro rata basis according to their relative General
Partner Percentage Interests, to the extent such managing underwriter deems
advisable. No priority shall be given to the Units or other Partnership
Securities of the party that first made a request for registration pursuant to
Section 6.14(b).
(d) With respect to any registrations requested pursuant to Sections
6.14(a) or (b), if the Partnership Policy Committee determines in its good faith
judgment that a postponement of a requested registration for up to six months
would be in the best interests of the Partnership and its Partners due to a
pending transaction, investigation or other event, the filing of such
registration statement or the effectiveness thereof may be deferred for up to
six months, but not thereafter.
(e) In connection with any registration requested pursuant to Sections
6.14(a) or (b), subject to the terms of Section 6.14(d), the Partnership shall
promptly prepare and file (x) such documents as may be necessary to register or
qualify the securities subject to such registration under the securities laws of
such states as the participating party or parties shall reasonably request;
provided, however, that no such qualification shall be required in any
jurisdiction where, as a result
52
thereof, the Partnership or any General Partner (other than a General Partner
that consents thereto) would become subject to general service of process or to
taxation or qualification to do business as a foreign corporation or partnership
doing business in such jurisdiction, and (y) such documents as may be necessary
to apply for listing or to list the securities subject to such registration on
such National Securities Exchange as the participating party or parties shall
reasonably request, and do any and all other acts and things that may reasonably
be necessary or advisable to enable the participating party or parties to
consummate a public sale of such securities in such states.
(f) Except as set forth in the remaining provisions of this Section
6.14(f), all costs and expenses of any registration and offering undertaken by
the Partnership pursuant to Sections 6.14(a), (b) or (g) shall be paid by the
Partnership, without reimbursement from the Persons whose Units or other
Partnership Securities are included in such registration and offering, except
that all underwriting discounts and commissions attributable to any Units or
other Partnership Securities of a Person that are included in such registration
and offering shall be borne by such Person. With respect to any registration and
offering of Initial Common Units by Northwest Border pursuant to Section
6.14(a), Northwest Border shall pay or reimburse the Partnership for all costs
and expenses (including underwriting discounts and commissions) incurred by the
Partnership in connection with such registration and offering. If Northwest
Border participates in any registration and offering pursuant to Sections
6.14(b) or (g), any Common Units offered for inclusion in such registration and
offering by Northwest Border shall be deemed to include its Initial Common Units
(to the extent same have not already been sold by Northwest Border to a
non-Affiliate pursuant to a transaction exempt from registration under the
Securities Act or otherwise pursuant to a registration and offering under
Section 6.14(a)), and Northwest Border shall pay or reimburse the Partnership
for a portion of the costs and expenses (including underwriting discounts and
commissions) incurred by the Partnership in connection with such registration
and offering based on the ratio that the number of Initial Common Units of
Northwest Border deemed to be included in such registration bears to the total
number of Units or other Partnership Securities included in such registration
and offering.
(g) If the Partnership shall at any time propose to file a registration
statement under the Securities Act for an offering of equity securities of the
Partnership for cash (other than an offering relating solely to an employee
benefit or incentive plan), the Partnership shall so notify Northern Plains, Pan
Border and Northwest Border and shall use all reasonable efforts to include in
such registration statement such number or amount of securities as such Persons
(or their Affiliates) may notify the Partnership that they desire to include in
such registration statement. If the proposed offering pursuant to this Section
6.14(g) shall be an underwritten offering, then, in the event that the managing
underwriter of such offering advises the Partnership and such Persons (to the
extent they desire to participate) in writing that in its opinion the inclusion
of all or some of such Persons' securities would adversely and materially affect
the success of the offering, the Partnership shall include in such offering only
that number or amount, if any, of securities held by such Persons which, in the
opinion of the managing underwriter, will not so adversely and materially affect
the offering. Such number or amount of such Persons' securities that the
managing underwriter allows to be included in such registration and offering
shall be allocated among the participating Persons in accordance with the
principles set forth in the proviso clause of section 6.14(c).
(h) If underwriters are engaged in connection with any registration
referred to in this Section 6.14, the Partnership shall provide indemnification,
representations, covenants, opinions and other assurance to the underwriters in
form and substance reasonably satisfactory to such under writers. Further, in
addition to and not in limitation of the Partnership's obligation under Section
6.8, the Partnership shall, to the fullest extent permitted by law, indemnify
and hold harmless any Person participating in a registration and offering
pursuant to Sections 6.14(a), (b) or (g), its officers, directors and each
Person who controls such Person (within the meaning of the Securities Act) and
any agent
53
thereof (collectively, "INDEMNIFIED PERSONS") against any losses, claims,
demands, actions, causes of action, assessments, damages, liabilities (joint or
several), costs and expenses (including, without limitation, interest, penalties
and reasonable attorneys' fees and disbursements), resulting to, imposed upon,
or incurred by the Indemnified Persons, directly or indirectly, under the
Securities Act or otherwise (hereinafter referred to in this Section 6.14(c) as
A "CLAIM" and in the plural as "CLAIMS"), based upon, arising out of, or
resulting from any untrue statement or alleged untrue statement of any material
fact contained in any registration statement under which any Units were
registered under the Securities Act or any state securities or Blue Sky laws, in
any preliminary prospectus (if used prior to the effective date of such
registration statement), or in any summary or final prospectus or in any
amendment or supplement thereto (if used during the period the Partnership is
required to keep the registration statement current), or arising out of, based
upon or resulting from the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
made therein not misleading; provided, however, that the Partnership shall not
be liable to any Indemnified Person to the extent that any such claim arises out
of, is based upon or results from an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
such preliminary, summary or final prospectus or such amendment or supplement,
in reliance upon and in conformity with written information furnished to the
Partnership by or on behalf of such Indemnified Person specifically for use in
the preparation thereof. To the extent any of the indemnification provisions set
forth in this Section 6.14(h) are inconsistent or in conflict with the
indemnification provisions set forth in the Indemnity Agreement, the
indemnification provisions set forth in such Indemnity Agreement shall control.
(i) The provisions of Sections 6.14(a), (b) and (g) shall continue to be
applicable with respect to each of Northern Plains, Pan Border and Northwest
Border (and any of their Affiliates) after such Person ceases to be a General
Partner of the Partnership, during a period of three years subsequent to the
effective date of such cessation and for so long thereafter as is required for
such Person to sell all of the Units or other Partnership Securities with
respect to which it has requested during such three-year period that a
registration statement be filed; provided, however, that the Partnership shall
not be required to file successive registration statements covering the same
securities for which registration was demanded during such three-year period.
The provisions of Section 6.14(h) shall continue in effect thereafter.
(j) Any request to register Partnership Securities pursuant to this
Section 6.14 shall (i) specify the Partnership Securities intended to be offered
and sold by the Person making the request, (ii) express such Person's present
intent to offer such Partnership Securities for distribution, (iii) describe the
nature or method of the proposed offer and sale of Partnership Securities, and
(iv) contain the undertaking of such Person to provide all such information and
materials and take all action as may be required in order to permit the
Partnership to comply with all applicable requirements in connection with the
registration of such Partnership Securities.
6.15 RELIANCE BY THIRD PARTIES. Notwithstanding anything to the contrary
in this Agreement, any Person dealing with the Partnership shall be entitled to
assume that the Partnership Policy Committee and any officer of the Partnership
authorized by the Partnership Policy Committee to act on behalf and in the name
of the Partnership has full power and authority to encumber, sell or otherwise
use in any manner any and all assets of the Partnership and to enter into any
contracts on behalf of the Partnership, and such Person shall be entitled to
deal with the Partnership Policy Committee or any such officer as if it were the
Partnership's sole party in interest, both legally and beneficially. Each
Limited Partner hereby waives any and all defenses or other remedies that may be
available against such Person to contest, negate or disaffirm any action of the
Partnership Policy Committee or any such officer in connection with any such
dealing. In no event shall any Person dealing with the Partnership Policy
Committee or any such officer be obligated to ascertain that the
54
terms of this Agreement have been complied with or to inquire into the necessity
or expedience of any act or action of the Partnership Policy Committee or any
such officer. Each and every certificate, document or other instrument executed
on behalf of the Partnership by the Partnership Policy Committee or any such
officer shall be conclusive evidence in favor of any and every Person relying
thereon or claiming thereunder that (a) at the time of the execution and
delivery of such certificate, document or instrument, this Agreement was in full
force and effect, (b) the Person executing and delivering such certificate,
document or instrument was duly authorized and empowered to do so for and on
behalf of the Partnership and (c) such certificate, document or instrument was
duly executed and delivered in accordance with the terms and provisions of this
Agreement and is binding upon the Partnership.
ARTICLE VII
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
7.1 LIMITATION OF LIABILITY. The Limited Partners, the Organizational
Limited Partner and the Assignees shall have no liability under this Agreement
except as expressly provided in this Agreement or the Delaware Act.
7.2 MANAGEMENT OF BUSINESS. No Limited Partner or Assignee (other than the
General Partners, any of their Affiliates or any officer, director, employee,
partner, agent or trustee of the Partnership, General Partners or any of their
Affiliates, in its capacity as such, if such Person shall also be a Limited
Partner or Assignee) shall participate in the operation, management or control
(within the meaning of the Delaware Act) of the Partnership's business, transact
any business in the Partnership's name or have the power to sign documents for
or otherwise bind the Partnership. The transaction of any such business by the
Partnership Policy Committee, the General Partners, any of their Affiliates or
any officer, director, employee, partner, agent or trustee of the Partnership,
the General Partners or any of its Affiliates, in its capacity as such, shall
not affect, impair or eliminate the limitations on the liability of the Limited
Partners or Assignees under this Agreement.
7.3 OUTSIDE ACTIVITIES. Subject to the provisions of Section 6.6, which
shall continue to be applicable to the Persons referred to therein, regardless
of whether such Persons shall also be Limited Partners or Assignees, any Limited
Partner or Assignee shall be entitled to and may have business interests and
engage in business activities in addition to those relating to the Partnership,
including, without limitation, business interests and activities in direct
competition with the Partnership or the Intermediate Partnership. Neither the
Partnership nor any of the other Partners or Assignees shall have any rights by
virtue of this Agreement in any business ventures of any Limited Partner or
Assignee.
7.4 RETURN OF CAPITAL. No Limited Partner or Assignee shall be entitled to
the withdrawal or return of his Capital Contribution, except to the extent, if
any, that distributions made pursuant to this Agreement or upon termination of
the Partnership may be considered as such by law and then only to the extent
provided for in this Agreement. Except to the extent provided by Article V or as
otherwise expressly provided in this Agreement, no Limited Partner or Assignee
shall have priority over any other Limited Partner or Assignee either as to the
return of Capital Contributions or as to profits, losses or distributions. Any
such return shall be a compromise to which all Partners and Assignees agree
within the meaning of section. 17-502(b) of the Delaware Act.
7.5 RIGHTS OF LIMITED PARTNERS RELATING TO THE PARTNERSHIP. (a) In
addition to other rights provided by this Agreement or by applicable law, and
except as limited by Section 7.5(b), each Limited Partner shall have the right,
for a purpose reasonably related to such Limited Partner's
55
interest as a limited partner in the Partnership, upon reasonable demand and at
such Limited Partner's own expense:
(i) to obtain true and full information regarding the status of the
business and financial condition of the Partnership;
(ii) promptly after becoming available, to obtain a copy of the
Partnership's federal, state and local tax returns for each year;
(iii) to have furnished to him, upon notification to the
Partnership, a current list of the name and last known business, residence
or mailing address of each Partner;
(iv) to have furnished to him, upon notification to the Partnership,
a copy of this Agreement, the Administrative Services Agreement and the
Certificate of Limited Partnership and all amendments thereto, together
with a copy of the executed copies of all powers of attorney pursuant to
which this Agreement, the Certificate of Limited Partnership and all
amendments thereto have been executed;
(v) to obtain true and full information regarding the amount of cash
and description and statement of the Agreed Value of any other Capital
Contribution by each Partner and which each Partner has agreed to
contribute in the future, and the date on which each became a Partner; and
(vi) to obtain such other information regarding the affairs of the
Partnership as is just and reasonable.
(b) Notwithstanding any other provision of this Agreement, the Partnership
Policy Committee may keep confidential from the Limited Partners and Assignees,
for such period of time as the Partnership Policy Committee deems reasonable,
any information that the Partnership Policy Committee reasonably believes to be
in the nature of trade secrets or other information the disclosure of which the
Partnership Policy Committee in good faith believes is not in the best interests
of the Partnership, the Intermediate Partnership or Northern Border Pipeline or
could damage the Partnership, the Intermediate Partnership or Northern Border
Pipeline or that the Partnership, the Intermediate Partnership or Northern
Border Pipeline is required by law or by agreements with third parties to keep
confidential (other than agreements with Affiliates of the General Partners the
primary purpose of which is to circumvent the obligations set forth in this
Section 7.5).
ARTICLE VIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS
8.1 RECORDS AND ACCOUNTING. The Partnership Policy Committee shall keep or
cause to be kept at the principal office of the Partnership appropriate books
and records with respect to the Partnership's business, including, without
limitation, all books and records necessary to provide to the Limited Partners
any information, lists and copies of documents required to be provided pursuant
to Section 7.5(a). Any books and records maintained by or on behalf of the
Partnership in the regular course of its business, including, without
limitation, the record of the Record Holders and Assignees of Units or other
Partnership Securities, books of account and records of Partnership proceedings,
may be kept on, or be in the form of, computer disks, hard disks, punch cards,
magnetic tape, photographs, micrographics or any other information storage
device, provided, that the books and records so maintained are convertible into
clearly legible written form within a reasonable period of
56
time. The books of the Partnership shall be maintained, for financial reporting
purposes, on an accrual basis in accordance with generally accepted accounting
principles.
8.2 FISCAL YEAR. The fiscal year of the Partnership shall be the calendar
year.
8.3 REPORTS. (a) As soon as practicable, but in no event later than 120
days after the close of each fiscal year of the Partnership, the Partnership
Policy Committee shall cause to be mailed to each Record Holder of a Unit as of
a date selected by the Partnership Policy Committee in its sole discretion, an
annual report containing financial statements of the Partnership for such fiscal
year of the Partnership, presented in accordance with generally accepted
accounting principles, including a balance sheet and statements of operations,
Partners' equity and cash flows, such statements to be audited by a firm of
independent public accountants selected by the Partnership Policy Committee.
(b) As soon as practicable, but in no event later than 90 days after the
close of each calendar quarter except the last calendar quarter of each year,
the Partnership Policy Committee shall cause to be mailed to each Record Holder
of a Unit, as of a date selected by the Partnership Policy Committee in its sole
discretion, a report containing unaudited financial statements of the
Partnership and such other information as may be required by applicable law,
regulation or rule of any National Securities Exchange on which the Units are
listed for trading, or as the Partnership Policy Committee determines to be
necessary or appropriate.
ARTICLE IX
TAX MATTERS
9.1 PREPARATION OF TAX RETURNS. The Partnership Policy Committee shall
arrange for the preparation and timely filing of all returns of Partnership
income, gains, deductions, losses and other items required of the Partnership
for federal and state income tax purposes and shall use all reasonable efforts
to furnish, within 90 days of the close of each taxable year of the Partnership,
the tax information reasonably required by holders of Outstanding Units for
federal and state income tax reporting purposes. The classification, realization
and recognition of income, gain, losses and deductions and other items shall be
on the accrual method of accounting for federal income tax purposes. The taxable
year of the Partnership shall be the calendar year.
9.2 TAX ELECTIONS. Except as otherwise provided herein, the Partnership
Policy Committee shall, in its sole discretion, determine whether to make any
available election pursuant to the Code; provided, however, that the Partnership
Policy Committee shall make the election under Section 754 of the Code in
accordance with applicable regulations thereunder. The Partnership Policy
Committee shall have the right to seek to revoke any such election (including,
without limitation, the election under Section 754 of the Code) upon the
Partnership Policy Committee's determination in its sole discretion that such
revocation is in the best interests of the Limited Partners and Assignees. For
purposes of computing the adjustments under Section 743(b) of the Code, the
Partnership Policy Committee shall be authorized (but not required) to adopt a
convention whereby the price paid by a transferee of Units will be deemed to be
the lowest quoted closing price of the Units on any National Securities Exchange
on which such Units are traded during the calendar month in which such transfer
is deemed to occur pursuant to Section 5.2(g) without regard to the actual
price paid by such transferee.
9.3 TAX CONTROVERSIES. Subject to the provisions hereof, Northern Plains
is designated the Tax Matters Partner (as defined in Section 6231 of the Code),
and is authorized and required to
57
represent the Partnership (at the Partnership's expense) in connection with all
examinations of the Partnership's affairs by tax authorities, including,
without limitation, resulting administrative and judicial proceedings, and to
expend Partnership funds for professional services and costs associated
therewith. Each Partner and Assignee agrees to cooperate with the Partnership
Policy Committee and to do or refrain from doing any or all things reasonably
required by the Partnership Policy Committee to conduct such proceedings.
9.4 ORGANIZATIONAL EXPENSES. The Partnership shall elect to deduct
expenses, if any, incurred by it in organizing the Partnership ratably over a
60-month period as provided in Section 709 of the Code.
9.5 WITHHOLDING. Notwithstanding any other provision of this Agreement,
the Partnership Policy Committee is authorized to take any action that it
determines in its sole discretion to be necessary or appropriate to cause the
Partnership and the Intermediate Partnership to comply with any withholding
requirements established under the Code or any other federal, state or local law
including, without limitation, pursuant to Sections 1441, 1442, 1445 and 1446 of
the Code. To the extent that the Partnership is required to withhold and pay
over to any taxing authority any amount resulting from the allocation or
distribution of income to any Partner or Assignee (including, without
limitation, by reason of Section 1446 of the Code), the amount withheld shall be
treated as a distribution of cash pursuant to Section 5.3 in the amount of such
withholding from such Partner.
9.6 ENTITY-LEVEL TAXATION. If legislation is enacted or the interpretation
of existing legislation is modified which causes the Partnership, the
Intermediate Partnership or Northern Border Pipeline to be treated as an
association taxable as a corporation or otherwise subjects the Partnership, the
Intermediate Partnership or Northern Border Pipeline to entity-level taxation
for federal, state or local income tax purposes, the Minimum Quarterly
Distribution, First Target Distribution, Second Target Distribution or Third
Target Distribution, as the case may be, shall be equal to the product obtained
by multiplying (a) the amount thereof by (b) 1 minus the sum of (i) the highest
marginal federal corporate (or other entity, as applicable) income tax rate of
the Partnership (directly or through its interest in Northern Border Pipeline)
for the fiscal year of the Partnership in which such quarter occurs (expressed
as a percentage) plus (ii) the effective overall state and local income tax rate
(expressed as a percentage) applicable to the Partnership (directly or through
its interest in Northern Border Pipeline) for the calendar year next preceding
the calendar year in which such quarter occurs (after taking into account the
benefit of any deduction allowable for federal income tax purposes with respect
to the payment of state and local income taxes), but only to the extent of the
increase in such rates resulting from such legislation or interpretation. Such
effective overall state and local income tax rate shall be determined for the
calendar year next preceding the first calendar year during which the
Partnership, the Intermediate Partnership or Northern Border Pipeline is taxable
for federal income tax purposes as an association taxable as a corporation or is
otherwise subject to entity-level taxation by determining such rate as if the
Partnership, the Intermediate Partnership or Northern Border Pipeline had been
subject to such state and local taxes during such preceding calendar year.
9.7 ENTITY-LEVEL ARREARAGE COLLECTIONS. If the Partnership is required by
applicable law to pay any federal, state or local income tax on behalf of, or
withhold such amount with respect to, any Partner or Assignee or any former
Partner or Assignee (a) the Partnership Policy Committee shall cause the
Partnership to pay such tax on behalf of such Partner or Assignee or former
Partner or Assignee from the funds of the Partnership; (b) any amount so paid on
behalf of, or withheld with respect to, any Partner or Assignee shall constitute
a distribution out of Available Cash to such Partner or Assignee pursuant to
Section 5.3; and (c) to the extent any such Partner or Assignee (but not a
former Partner or Assignee) is not then entitled to such distribution under this
Agreement, the
58
Partnership Policy Committee shall be authorized, without the approval of any
Partner or Assignee, to amend this Agreement insofar as is necessary to maintain
the uniformity of intrinsic tax characteristics as to all Units and to make
subsequent adjustments to distributions in a manner which, in the reasonable
judgment of the Partnership Policy Committee, will make as little alteration as
practicable in the priority and amount of distributions otherwise applicable
under this Agreement, and will not otherwise alter the distributions to which
Partners and Assignees are entitled under this Agreement. If the Partnership is
permitted (but not required) by applicable law to pay any such tax on behalf of,
or withhold such amount with respect to, any Partner or Assignee or former
Partner or Assignee, the Partnership Policy Committee shall be authorized (but
not required) to cause the Partnership to pay such tax from the funds of the
Partnership and to take any action consistent with this Section 9.7. The
Partnership Policy Committee shall be authorized (but not required) to take all
necessary or appropriate actions to collect all or any portion of a deficiency
in the payment of any such tax that relates to prior periods and that is
attributable to Persons who were Limited Partners or Assignees when such
deficiencies arose, from such Persons.
9.8 OPINIONS OF COUNSEL. Notwithstanding any other provision of this
Agreement, if the Partnership, the Intermediate Partnership or Northern Border
Pipeline is treated as an association taxable as a corporation at any time or is
otherwise taxable for federal income tax purposes as an entity at any time and,
pursuant to the provisions of this Agreement, an Opinion of Counsel would
otherwise be required to the effect that an action will not cause the
Partnership, the Intermediate Partnership or Northern Border Pipeline to become
so treated as an association taxable as a corporation or otherwise taxable as an
entity for federal income tax purposes, such requirement for an Opinion of
Counsel shall be deemed automatically waived.
ARTICLE X
CERTIFICATES
10.1 CERTIFICATES. Upon the Partnership's issuance of Common Units or
Subordinated Units to any Person, the Partnership shall issue one or more
Certificates in the name of such Person evidencing the number of such Units
being so issued. Certificates shall be executed on behalf of the Partnership by
an Authorized Officer. No Common Unit Certificate shall be valid for any purpose
until it has been countersigned by the Transfer Agent and by an Authorized
Officer of the Partnership. The Partners holding Certificates evidencing
Subordinated Units may exchange such Certificates for Certificates evidencing
Common Units on or after the date on which such Subordinated Units are converted
into Common Units pursuant to the terms of Section 5.7(c).
10.2 REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE. (a) The
Partnership Policy Committee shall cause to be kept on behalf of the Partnership
a register in which, subject to such reasonable regulations as it may prescribe
and subject to the provisions of Section 10.2(b), the Partnership Policy
Committee will provide for the registration and transfer of Units. The Transfer
Agent is hereby appointed registrar and transfer agent for the purpose of
registering Units and transfers of such Units as herein provided. The
Partnership shall not recognize transfers of Certificates representing Units
unless same are effected in the manner described in this Section 10.2. Upon
surrender for registration of transfer of any Units evidenced by a Certificate,
and subject to the provisions of Section 10.2(b), an Authorized Officer on
behalf of the Partnership shall execute, and the Transfer Agent shall
countersign and deliver, in the name of the holder or the designated transferee
or transferees, as required pursuant to the holder's instructions, one or more
new Certificates evidencing the same aggregate number of Units as was evidenced
by the Certificate so surrendered.
59
(b) Except as otherwise provided in Section 11.5, the Partnership shall
not recognize any transfer of Units until the Certificates evidencing such Units
are surrendered for registration of transfer and such Certificates are
accompanied by a Transfer Application duly executed by the transferee (or the
transferee's attorney-in-fact duly authorized in writing). No charge shall be
imposed by the Partnership for such transfer, provided, that, as a condition to
the issuance of any new Certificate under this Section 10.2, the Partnership
Policy Committee may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed with respect thereto.
10.3 MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES. (a) If any
mutilated Certificate is surrendered to the Transfer Agent, an Authorized
Officer on behalf of the Partnership shall execute, and upon its request the
Transfer Agent shall countersign and deliver in exchange therefor, a new
Certificate evidencing the same number of Units as the Certificate so
surrendered.
(b) An Authorized Officer on behalf of the Partnership shall execute, and
upon its request the Transfer Agent shall countersign and deliver a new
Certificate in place of any Certificate previously issued if the Record Holder
of the Certificate:
(i) makes proof by affidavit, in form and substance satisfactory to
the Partnership Policy Committee, that a previously issued Certificate has
been lost, destroyed or stolen;
(ii) requests the issuance of a new Certificate before the
Partnership has notice that the Certificate has been acquired by a
purchaser for value in good faith and without notice of an adverse claim;
(iii) if requested by an Authorized Officer, delivers to the
Partnership a bond, in form and substance satisfactory to the Authorized
Officer, with surety or sureties and with fixed or open penalty as an
Authorized Officer may reasonably direct, in its sole discretion, to
indemnify the General Partners, the Partnership, the Partnership Policy
Committee and the Transfer Agent against any claim that may be made on
account of the alleged loss, destruction or theft of the Certificate; and
(iv) satisfies any other reasonable requirements imposed by the
Partnership Policy Committee.
If a Limited Partner or Assignee fails to notify the Partnership within a
reasonable time after he has notice of the loss, destruction or theft of a
Certificate, and a transfer of the Units represented by the Certificate is
registered before the Partnership, the Partnership Policy Committee or the
Transfer Agent receives such notification, the Limited Partner or Assignee shall
be precluded from making any claim against the Partnership, the General
Partners, the Partnership Policy Committee, the General Partners or the Transfer
Agent for such transfer or for a new Certificate.
(c) As a condition to the issuance of any new Certificate under this
Section 10.3, the Partnership Policy Committee may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and any other expenses (including, without limitation, the fees
and expenses of the Transfer Agent) reasonably connected therewith.
10.4 RECORD HOLDER. In accordance with Section 10.2(b), the Partnership
shall be entitled to recognize the Record Holder as the Limited Partner or
Assignee with respect to any Units and, accordingly, shall not be bound to
recognize any equitable or other claim to or interest in such Units on the part
of any other Person, whether or not the Partnership shall have actual or other
notice thereof, except as otherwise provided by law or any applicable rule,
regulation, guideline or requirement
60
of any National Securities Exchange on which the Units are listed for
trading. Without limiting the foregoing, when a Person (such as a broker,
dealer, bank, trust company or clearing corporation or an agent of any of the
foregoing) is acting as nominee, agent or in some other representative capacity
for another Person in acquiring and/or holding Units, as between the Partnership
on the one hand and such other Persons on the other hand, such representative
Person (a) shall be the Limited Partner or Assignee (as the case may be) of
record and beneficially, (b) must execute and deliver a Transfer Application and
(c) shall be bound by this Agreement and shall have the rights and obligations
of a Limited Partner or Assignee (as the case may be) hereunder and as provided
for herein.
ARTICLE XI
TRANSFER OF INTERESTS
11.1 TRANSFER. (a) The term "TRANSFER," when used in this Article XI with
respect to a Partnership Interest, shall be deemed to refer to a transaction by
which a General Partner assigns its Partnership Interest as a general partner in
the Partnership to another Person or by which the holder of a Unit assigns such
Unit to another Person who is or becomes an Assignee, and includes a sale,
assignment, gift, pledge, encumbrance, hypothecation, mortgage, exchange or any
other disposition by law or otherwise.
(b) No Partnership Interest shall be transferred, in whole or in part,
except in accordance with the terms and conditions set forth in this Article XI.
Any transfer or purported transfer of a Partnership Interest not made in
accordance with this Article XI shall be null and void.
(c) Nothing contained in this Article XI shall be construed to prevent a
disposition by the parent entity of a General Partner of all of the issued and
outstanding capital stock of such General Partner.
(d) Nothing contained in this Article XI, or elsewhere in this Partnership
Agreement, shall preclude the settlement of any transactions involving Common
Units entered into through the facilities of the New York Stock Exchange.
11.2 TRANSFER OF A GENERAL PARTNER'S PARTNERSHIP INTEREST. Except for a
transfer by a General Partner of all or any part of its Partnership Interest as
a general partner in the Partnership to an Affiliate of such General Partner or
to another General Partner pursuant to the terms of Section 11.7(b) or (c), the
transfer by a General Partner of all or any part of its Partnership Interest as
a general partner in the Partnership to another Person shall be subject to the
following restrictions:
(i) compliance with the notice requirements of Section
11.7(a);
(ii) in the case of such a transfer by Northern Plains or Pan
Border prior to December 31, 2003, the prior approval of at least a
majority of the Outstanding Units (excluding for purposes of such
determination Common Units owned by Northern Plains or Pan Border, as
applicable, and its Affiliates); and
(iii) in the case of a transfer by a General Partner of less
than all of its Partnership Interest as a general partner in the
Partnership, the prior written consent of every other General Partner (it
being agreed by the General Partners that the consent of the
non-transferring General Partners shall not be required if a General
Partner transfers all of its Partnership Interest as a general partner in
the Partnership to another Person).
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Notwithstanding anything herein to the contrary, no transfer by a General
Partner of all or any part of its Partnership Interest as a general partner in
the Partnership to another Person shall be permitted unless (i) the transferee
agrees to assume and be bound by the provisions of this Agreement and
Intermediate Partnership Agreement, (ii) the Partnership receives an Opinion of
Counsel that such transfer would not result in the loss of limited liability of
any Limited Partner or of any limited partner of the Intermediate Partnership or
cause the Partnership, the Intermediate Partnership or Northern Border Pipeline
to be treated as an association taxable as a corporation or otherwise to be
taxed as an entity for federal income tax purposes and (iii) such transferee
also agrees to purchase all (or the appropriate portion thereof, if applicable)
of the partnership interest of such General Partner as a general partner of the
Intermediate Partnership. In the case of a transfer pursuant to and in
compliance with this Section 11.2, the transferee or successor (as the case may
be) shall, subject to compliance with the terms of Section 12.3, be admitted to
the Partnership as a General Partner immediately prior to the transfer of the
Partnership Interest, and the business of the Partnership shall continue without
dissolution.
11.3 TRANSFER OF UNITS. (a) Units may be transferred only in the manner
described in Section 10.2. The transfer of any Units and the admission of any
new Partner shall not constitute an amendment to this Agreement.
(b) Until admitted as a Substituted Limited Partner pursuant to Article
XII, the Record Holder of a Unit shall be an Assignee in respect of such Unit.
Limited Partners may include custodians, nominees, or any other individual or
entity in its own or any representative capacity.
(c) Each distribution in respect of Units shall be paid by the
Partnership, directly or through the Transfer Agent or through any other Person
or agent, only to the Record Holders thereof as of the Record Date set for the
distribution. Such payment shall constitute full payment and satisfaction of the
Partnership's liability in respect of such payment, regardless of any claim of
any Person who may have an interest in such payment by reason of an assignment
or otherwise.
(d) A transferee who has completed and delivered a Transfer Application
shall be deemed to have (i) requested admission as a Substituted Limited
Partner, (ii) agreed to comply with and be bound by and to have executed this
Agreement, (iii) represented and warranted that such transferee has the right,
power and authority and, if an individual, the capacity to enter into this
Agreement, (iv) made the powers of attorney set forth in this Agreement and (v)
given the consents and approvals and made the waivers contained in this
Agreement.
11.4 RESTRICTIONS ON TRANSFERS. Notwithstanding the other provisions of
this Article XI, no transfer of any Unit or interest therein of any Limited
Partner or Assignee shall be made if such transfer would (a) violate the then
applicable federal or state securities laws or rules and regulations of the
Securities and Exchange Commission, any state securities commission or any other
governmental authorities with jurisdiction over such transfer, (b) result in
the taxation of the Partnership, the Intermediate Partnership or Northern Border
Pipeline as an association taxable as a corporation or otherwise subject the
Partnership, the Intermediate Partnership or Northern Border Pipeline to entity-
level taxation for federal income tax purposes or (c) affect the Partnership's
or the Intermediate Partnership's existence or qualification as a limited
partnership under the Delaware Act.
11.5 CITIZENSHIP CERTIFICATES; NON-CITIZEN ASSIGNEES. (a) If the
Partnership, the Intermediate Partnership or Northern Border Pipeline is or
becomes subject to any federal, state or local law or regulation that, in the
reasonable determination of the Partnership Policy Committee provides for the
cancellation or forfeiture of any property in which the Partnership, the
Intermediate Partnership or Northern Border Pipeline has an interest based on
the nationality, citizenship or other related
62
status of a Limited Partner or Assignee, the Partnership Policy Committee may
request any Limited Partner or Assignee to furnish to the Partnership Policy
Committee, within 30 days after receipt of such request, an executed Citizenship
Certification or such other information concerning his nationality, citizenship
or other related status (or, if the Limited Partner or Assignee is a nominee
holding for the account of another Person, the nationality, citizenship or other
related status of such Person) as the Partnership Policy Committee may request.
If a Limited Partner or Assignee fails to furnish to the Partnership Policy
Committee within the aforementioned 30-day period such Citizenship Certification
or other requested information or if upon receipt of such Citizenship
Certification or other requested information the Partnership Policy Committee
determines, with the advice of counsel, that a Limited Partner or Assignee is
not an Eligible Citizen, the Units owned by such Limited Partner or Assignee
shall be subject to redemption in accordance with the provisions of Section
11.6. In addition, the Partnership Policy Committee may require that the status
of any such Limited Partner or Assignee be changed to that of a Non-citizen
Assignee, and, thereupon, the Partnership Policy Committee or its designee shall
be substituted for such Non-citizen Assignee as the Limited Partner in respect
of his Units.
(b) The Partnership Policy Committee or its designee shall, in exercising
voting rights in respect of Units held by it on behalf of Non-citizen Assignees,
distribute the votes in the same ratios as the votes of Limited Partners in
respect of Units other than those of Non-citizen Assignees are cast, either for,
against or abstaining as to the matter.
(c) Upon dissolution of the Partnership, a Non-citizen Assignee shall have
no right to receive a distribution in kind pursuant to Section 14.4 but shall be
entitled to the cash equivalent thereof, and the Partnership Policy Committee
shall provide cash in exchange for an assignment of the Non-citizen Assignee's
share of the distribution in kind. Such payment and assignment shall be treated
for Partnership purposes as a purchase by the Partnership Policy Committee from
the Non- citizen Assignee of his Partnership Interest (representing his right to
receive his share of such distribution in kind).
(d) At any time after he can and does certify that he has become an
Eligible Citizen, a Non-citizen Assignee may, upon application to the
Partnership Policy Committee, request admission as a Substituted Limited Partner
with respect to any Units of such Non-citizen Assignee not redeemed pursuant to
Section 11.6, and upon his admission pursuant to Section 12.2 the Partnership
Policy Committee shall cease to be deemed to be the Limited Partner in respect
of the Non-citizen Assignee's Units.
11.6 REDEMPTION OF INTERESTS. (a) If at any time a Limited Partner or
Assignee fails to furnish a Citizenship Certification or other information
requested within the 30-day period specified in Section 11.5(a), or if upon
receipt of such Citizenship Certification or other information the Partnership
Policy Committee determines, with the advice of counsel, that a Limited Partner
or Assignee is not an Eligible Citizen, the Partnership may, unless the Limited
Partner or Assignee establishes to the satisfaction of the Partnership Policy
Committee that such Limited Partner or Assignee is an Eligible Citizen or has
transferred his Units to a Person who furnishes a Citizenship Certification to
the Partnership Policy Committee prior to the date fixed for redemption as
provided below, redeem the Partnership Interest of such Limited Partner or
Assignee as follows:
(i) The Partnership Policy Committee shall, not later than the 30th
day before the date fixed for redemption, give notice of redemption to the
Limited Partner or Assignee, at his last address designated on the records
of the Partnership or the Transfer Agent, by registered or certified mail,
postage prepaid. The notice shall be deemed to have been given when so
mailed. The notice shall specify the Redeemable Units, the date fixed for
redemption, the
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place of payment, that payment of the redemption price will be made upon
surrender of the Certificate evidencing the Redeemable Units and that on
and after the date fixed for redemption no further allocations or
distributions to which the Limited Partner or Assignee would otherwise be
entitled in respect of the Redeemable Units will accrue or be made.
(ii) The aggregate redemption price for Redeemable Units shall be an
amount equal to the Current Market Price (the date of determination of
which shall be the dated fixed for redemption) of Units of the class to be
so redeemed multiplied by the number of Units of each such class included
among the Redeemable Units. The redemption price shall be paid, in the
sole discretion of the Partnership Policy Committee, in cash or by
delivery of a promissory note of the Partnership in the principal amount
of the redemption price, bearing interest at the rate of 10% annually and
payable in three equal annual installments of principal together with
accrued interest, commencing one year after the redemption date.
(iii) Upon surrender by or on behalf of the Limited Partner or
Assignee, at the place specified in the notice of redemption, of the
Certificate evidencing the Redeemable Units, duly endorsed in blank or
accompanied by an assignment duly executed in blank, the Limited Partner
or Assignee or his duly authorized representative shall be entitled to
receive the payment therefor.
(iv) After the redemption date, Redeemable Units shall no longer
constitute issued and Outstanding Units.
(b) The provisions of this Section 11.6 shall also be applicable to Units
held by a Limited Partner or Assignee as nominee of a Person determined to be
other than an Eligible Citizen.
(c) Nothing in this Section 11.6 shall prevent the recipient of a notice
of redemption from transferring his Units before the redemption date if such
transfer is otherwise permitted under this Agreement. Upon receipt of notice of
such a transfer, the Partnership Policy Committee shall withdraw the notice of
redemption, provided, the transferee of such Units certifies in the Transfer
Application that he is an Eligible Citizen. If the transferee fails to make such
certification, such redemption shall be effected from the transferee on the
original redemption date.
11.7 RIGHT TO MAKE OFFER; PREFERENTIAL PURCHASE RIGHT; BUYOUT RIGHT. (a)
If a General Partner desires to transfer all of its Combined Interest to a party
other than an Affiliate of such General Partner, such selling General Partner
must first provide every other General Partner with notice of such intent to
transfer and for a period of 30 days following the receipt by each non-selling
General Partner of such notice, each non-selling General Partner shall have the
right to submit an offer for the Combined Interest of such selling General
Partner (and any other interests in the Partnership proposed to be sold by such
selling General Partner). Such selling General Partner shall have no obligation
to consider or accept any offers received from the non-selling General Partners,
and from and after such 30 day period, such selling General Partner shall be
free to consummate the proposed transaction referred to in its notices to the
non-selling General Partners.
(b) If any of the following events occurs: (i) the removal of a General
Partner is approved by the requisite percentage of Limited Partners pursuant to
Section 13.2; or (ii) an Event of Withdrawal of the type described in Sections
13.1(a)(i), (iv), (v) or (vi) occurs with respect to a General Partner; upon
written notice to the Partnership and the Departing Partner, the remaining
General Partners shall have the right, exercisable on a pro rata basis according
to their relative General Partner Percentage Interests or on such other basis as
may be agreed upon, to purchase all (but not less than all) of the Combined
Interest of the Departing Partner for an amount equal to
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the fair market value of such Combined Interest, as such fair market value is
determined in accordance with the second paragraph of Section 13.3(a). If such
remaining General Partners fail to send such notice to the Partnership and the
Departing Partner on or before the 30th day following the date on which all of
the remaining General Partners had received written or actual notice of the
occurrence of such event, such remaining General Partners shall be deemed to
have waived the right to purchase set forth in this Section 11.7(b).
(c) If at any time during the Subordination Period a General Partner
ceases to own at least 250,000 Subordinated Units, such General Partner shall
promptly notify every other General Partner of such fact (the occurrence of such
event being herein referenced to as a "BUYOUT EVENT"). At any time following the
occurrence of a Buyout Event, the General Partners that did not suffer such
Buyout Event shall have the right, exercisable by the delivery of written notice
to the Partnership and the General Partner suffering such Buyout Event, to
purchase all (but not less than all) of the Combined Interest of such General
Partner and any Subordinated Units owned by such General Partner (on a pro-rata
basis according to their relative General Partner Percentage Interests or on
such other basis as may be agreed upon) for an amount equal to the Buyout Price
(which amount shall be calculated using as the date of determination the date on
which the General Partner(s) exercising such buyout right notified the
Partnership and the affected General Partner of the desire to exercise such
buyout right).
ARTICLE XII
ADMISSION OF PARTNERS
12.1 ADMISSION OF GENERAL PARTNERS AND UNDERWRITERS AS LIMITED PARTNERS.
Upon the issuance by the Partnership of Common Units and Subordinated Units to
the General Partners as described in Section 4.1(b) and the execution by each
such party of a Transfer Application, the Partnership Policy Committee shall
admit the General Partners to the Partnership as Limited Partners in respect of
the Common Units and Subordinated Units issued to them. Upon the transfer by
Northern Plains and Pan Border of Common Units to the Underwriters in connection
with the Initial Offering (and the exercise by the Underwriters of the
Overallotment Option, if applicable) and the execution by each Underwriter of a
Transfer Application, the Partnership Policy Committee shall admit the
Underwriters to the Partnership as Limited Partners in respect of the Common
Units purchased by them.
12.2 ADMISSION OF SUBSTITUTED LIMITED PARTNERS. By transfer of a Unit in
accordance with Article XI, the transferor shall be deemed to have given the
transferee the right to seek admission as a Substituted Limited Partner subject
to the conditions of, and in the manner permitted under, this Agreement. A
transferor of a Certificate shall, however, only have the authority to convey to
a purchaser or other transferee who does not execute and deliver a Transfer
Application (a) the right to negotiate such Certificate to a purchaser or other
transferee and (b) the right to transfer the right to request admission as a
Substituted Limited Partner to such purchaser or other transferee in respect of
the transferred Units. Each transferee of a Unit (including, without limitation,
any nominee holder or an agent acquiring such Unit for the account of another
Person) who executes and delivers a Transfer Application shall, by virtue of
such execution and delivery, be an Assignee and be deemed to have applied to
become a Substituted Limited Partner with respect to the Units so transferred to
such Person. Such Assignee shall become a Substituted Limited Partner (x) at
such time as the Partnership Policy Committee consents thereto, which consent
may be given or withheld in the Partnership Policy Committee's sole discretion,
and (y) when any such admission is shown on the books and records of the
Partnership. If such consent is withheld, such transferee shall be an Assignee.
An Assignee shall have an interest in the Partnership equivalent to that of a
Limited Partner with respect to allocations and distributions, including,
without limitation, liquidating distributions, of the Partnership. With respect
to voting rights attributable to Units that are held by Assignees, the
Partnership Policy Committee shall
65
be deemed to be the Limited Partner with respect thereto and shall, in
exercising the voting rights in respect of such Units on any matter, vote such
Units at the written direction of the Assignee who is the Record Holder of such
Units. If no such written direction is received, such Units will not be voted.
An Assignee shall have no other rights of a Limited Partner.
12.3 ADMISSION OF SUCCESSOR GENERAL PARTNER. A successor General Partner
approved pursuant to Section 13.1 or 13.2 or the transferee of or successor to
all of a General Partner's Partnership Interest as a general partner in the
Partnership pursuant to Section 11.2 who is proposed to be admitted as a
successor General Partner shall be admitted to the Partnership as a General
Partner, effective immediately prior to the withdrawal or removal of such
General Partner pursuant to Section 13.1 or 13.2 or the transfer of a General
Partner's Partnership Interest as a general partner in the Partnership pursuant
to Section 11.2; provided, however, that no such successor shall be admitted to
the Partnership until compliance with the terms of Section 11.2 has occurred and
such successor has executed and delivered such other documents or instruments as
may be required to effect such admission. Any such successor, together with any
remaining General Partner, shall, subject to the terms hereof, carry on the
business of the Partnership and the Intermediate Partnership without
dissolution.
12.4 ADMISSION OF ADDITIONAL LIMITED PARTNERS. (a) A Person (other than a
General Partner or a Substituted Limited Partner) who makes a Capital
Contribution to the Partnership in accordance with this Agreement shall be
admitted to the Partnership as an Additional Limited Partner only upon
furnishing to the Partnership Policy Committee (i) evidence of acceptance in
form satisfactory to the Partnership Policy Committee of all of the terms and
conditions of this Agreement, including, without limitation, the power of
attorney granted in Section 1.4, and (ii) such other documents or instruments as
may be required in the discretion of the Partnership Policy Committee to effect
such Person's admission as an Additional Limited Partner.
(b) Notwithstanding anything to the contrary in this Section 12.4, no
Person shall be admitted as an Additional Limited Partner without the consent of
the Partnership Policy Committee, which consent may be given or withheld in the
Partnership Policy Committee's sole discretion. The admission of any Person as
an Additional Limited Partner shall become effective on the date upon which the
name of such Person is recorded as such in the books and records of the
Partnership, following the consent of the Partnership Policy Committee to such
admission.
12.5 AMENDMENT OF AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP. To
effect the admission to the Partnership of any Partner, the Partnership Policy
Committee shall take all steps necessary and appropriate under the Delaware Act
to amend the records of the Partnership to reflect such admission and, if
necessary, to prepare as soon as practical an amendment of this Agreement and,
if required by law, to prepare and file an amendment to the Certificate of
Limited Partnership and may for this purpose, among others, exercise the power
of attorney granted pursuant to Section 1.4.
ARTICLE XIII
WITHDRAWAL OR REMOVAL OF PARTNERS
13.1 WITHDRAWAL OF A GENERAL PARTNER. (a) A General Partner shall be
deemed to have withdrawn from the Partnership upon the occurrence of any one of
the following events (each such event herein referred to as an "EVENT OF
WITHDRAWAL");
(i) a General Partner voluntarily withdraws from the Partnership by
giving written notice to the other Partners (and it shall be deemed that a
General Partner has given notice of withdrawal pursuant to this Section
13.1(a)(i) if a General Partner voluntarily withdraws as general partner
of the Intermediate Partnership);
66
(ii) a General Partner notifies the other General Partners that it
desires to transfer all of its rights as General Partner pursuant to
Section 11.2;
(iii) a General Partner is removed pursuant to Section 13.2;
(iv) a General Partner (A) makes a general assignment for the
benefit of creditors; (B) files a voluntary bankruptcy petition; (C) files
a petition or answer seeking for itself a reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief
under any law; (D) files an answer or other pleading admitting or failing
to contest the material allegations of a petition filed against such
General Partner in a proceeding of the type described in clauses (A)-(C)
of this Section 13.1(a)(iv); or (E) seeks, consents to or acquiesces in
the appointment of a trustee, receiver or liquidator of such General
Partner or of all or any substantial part of its properties;
(v) a final and non-appealable judgment is entered by a court with
appropriate jurisdiction ruling that a General Partner is bankrupt or
insolvent, or a final and non-appealable order for relief is entered by a
court with appropriate jurisdiction against a General Partner, in each
case under any federal or state bankruptcy or insolvency laws as now or
hereafter in effect; or
(vi) a certificate of dissolution or its equivalent is filed for a
General Partner, or 90 days expire after the date of notice to a General
Partner of revocation of its charter without a reinstatement of its
charter, under the laws of its state of incorporation.
If an Event of Withdrawal specified in Section 13.1(a)(iv), (v) or (vi) occurs,
the withdrawing General Partner shall give notice to the Limited Partners within
30 days after such occurrence. The Partners hereby agree that only the Events of
Withdrawal described in this Section 13.1 shall result in the withdrawal of a
General Partner from the Partnership.
(b) Withdrawal of a General Partner from the Partnership upon the
occurrence of an Event of Withdrawal shall not constitute a breach of this
Agreement under the following circumstances: (i) at any time during the period
beginning on the Closing Date and ending at 12:00 Midnight, Central Standard
Time, on December 31, 2003, a General Partner voluntarily withdraws by giving at
least 90 days' advance notice of its intention to withdraw to the Limited
Partners, provided, that prior to the effective date of such withdrawal the
withdrawal is approved by Limited Partners holding at least two-thirds of the
Outstanding Units (excluding for purposes of such determination Units owned by
the Departing Partner and its Affiliates) and such General Partner delivers to
the Partnership an Opinion of Counsel (" WITHDRAWAL OPINION OF COUNSEL") that
such withdrawal (following the purchase by one or more of the remaining General
Partners of the Combined Interest of such Departing Partner pursuant to Section
11.7(b) or the selection of a successor General Partner, as applicable) would
not result in the loss of the limited liability of any Limited Partner or of the
limited partner of the Intermediate Partnership or cause the Partnership, the
Intermediate Partnership or Northern Border Pipeline to be treated as an
association taxable as a corporation or otherwise to be taxed as an entity for
federal income tax purposes; (ii) at any time after 12:00 Midnight, Central
Standard Time, on December 31, 2003, a General Partner voluntarily withdraws by
giving at least 90 days' advance notice to the Limited Partners, such withdrawal
to take effect on the date specified in such notice; (iii) at any time that a
General Partner ceases to be a General Partner pursuant to Section 13.1(a)(ii)
or is removed pursuant to Section 13.2; or (iv) notwithstanding clause (i) of
this sentence, at any time that a General Partner voluntarily withdraws by
giving at least 90 days' advance notice of its intention to withdraw to the
Limited Partners, such withdrawal to take effect on the date specified in the
notice, if at the time such notice is given one Person and its Affiliates (other
than such General Partner and
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its Affiliates) own beneficially or of record or control at least 50% of the
Outstanding Units. The withdrawal of a General Partner from the Partnership upon
the occurrence of an Event of Withdrawal shall also constitute the withdrawal of
such General Partner as a general partner of the Intermediate Partnership. If a
General Partner gives a notice of withdrawal pursuant to Section 13.1(a)(i) or
an Event of Withdrawal of the type described in Sections 13.1(a)(iv)-(vi)
occurs, and in any such case one or more of the remaining General Partners do
not elect to purchase the Combined Interest of such Departing Partner pursuant
to Section 11.7(b), holders of at least a majority of the Outstanding Units
(excluding for purposes of such determination Units owned by the Departing
Partner and its Affiliates) may, prior to the effective date of such withdrawal,
elect a successor General Partner. The Person so elected as successor General
Partner shall automatically become a successor general partner of the
Intermediate Partnership, as provided in Intermediate Partnership Agreement. If,
prior to the effective date of a General Partner's withdrawal, one or more of
the remaining General Partners have not elected to purchase the Combined
Interest of such Departing Partner pursuant to Section 11.7(b) and a successor
is not selected by the Limited Partners as provided herein, or the Partnership
does not receive a Withdrawal Opinion of Counsel, the Partnership shall be
dissolved in accordance with Section 14.1. Any successor General Partner elected
in accordance with the terms of this Section 13.1 shall be subject to the
provisions of Section 12.3.
13.2 REMOVAL OF A GENERAL PARTNER. A General Partner may be removed if
such removal is approved by Limited Partners holding at least two-thirds of the
Outstanding Units (excluding for purposes of such determination Units owned by
the General Partners and their Affiliates). Any such action by such Limited
Partners for removal of a General Partner must, if one or more of the remaining
General Partners do not elect to purchase all of the Combined Interest of such
Departing Partner pursuant to Section 11.7(b), also provide for the election of
a successor General Partner by Limited Partners holding at least a majority of
the Outstanding Units (excluding for purposes of such determination Units owned
by such Departing Partner and its Affiliates). Such removal shall be effective
immediately following the purchase by one or more of the remaining General
Partners of such Departing Partner's Combined Interest pursuant to Section
11.7(b) or the admission of a successor General Partner pursuant to Article XII,
as applicable. The removal of a General Partner shall also automatically
constitute the removal of such General Partner as general partner of the
Intermediate Partnership, as provided in the Intermediate Partnership Agreement.
If a person is elected as a successor General Partner in accordance with the
terms of this Section 13.2, such person shall, upon admission pursuant to
Article XII, automatically become a successor general partner of the
Intermediate Partnership, as provided in the Intermediate Partnership Agreement.
The right of the Limited Partners holding Outstanding Units to remove a General
Partner shall not exist or be exercised unless the Partnership has received an
opinion opining as to the matters covered by a Withdrawal Opinion of Counsel.
Any successor General Partner elected in accordance with the terms of this
Section 13.2 shall be subject to the provisions of Section 12.3.
13.3 INTEREST OF DEPARTING PARTNER AND SUCCESSOR GENERAL PARTNER. (a) In
the event of (i) the withdrawal of a General Partner under circumstances where
such withdrawal does not violate this Agreement or (ii) removal of a General
Partner by the Limited Partners under circumstances where Cause does not exist,
if a successor General Partner is elected in accordance with the terms of
Section 13.1 or 13.2, the Departing Partner shall, at its option exercisable
prior to the effective date of the departure of such Departing Partner, promptly
receive from its successor in exchange for its Partnership Interest as a general
partner in the Partnership and its partnership interest as a general partner of
the Intermediate Partnership (collectively, the "COMBINED INTEREST") an amount
in cash equal to the fair market value of such Combined Interest, such amount to
be determined and payable as of the effective date of its departure. If a
General Partner is removed by the Limited Partners under circumstances where
Cause exists or if a General Partner withdraws under circumstances where such
withdrawal violates this Agreement or the Intermediate Partnership Agreement,
and if a successor
68
General Partner is elected in accordance with the terms of Section 13.1 or 13.2,
such successor shall have the option, exercisable prior to the effective date of
the departure of such Departing Partner, to purchase the Combined Interest of
the Departing Partner for such fair market value of such Combined Interest. In
either event, the Departing Partner shall be entitled to receive all
reimbursements due such Departing Partner pursuant to Section 6.5, including,
without limitation, any employee-related liabilities (including, without
limitation, severance liabilities), incurred in connection with the termination
of any employees employed by such General Partner for the benefit of the
Partnership or the Intermediate Partnership. Subject to Section 13.3(b), the
Departing Partner shall, as of the effective date of its departure, cease to
share in any allocations or distributions with respect to its Partnership
Interest as a general partner in the Partnership and Partnership income, gain,
loss, deduction and credit will be prorated and allocated as set forth in
Section 5.2(g).
For purposes of this Section 13.3(a) and Section 11.7(b), the fair market
value of a Departing Partner's Combined Interest shall be deemed to equal the
product of (x) such Departing Partner's Gross General Partner Percentage
Interest and (y) an amount equal to the Hypothetical Equity Value of the
Partnership as of the effective date of the departure of such Departing Partner.
(b) If the Combined Interest of a Departing Partner is not acquired by one
or more of the remaining General Partners pursuant to Section 11.7(b) or by a
successor in the manner set forth in Section 13.3(a), the Departing Partner
shall become a Limited Partner and the Combined Interest shall be converted into
Common Units based on the fair market value of such Combined Interest as
calculated pursuant to Section 13.3(a), without reduction in such Partnership
Interest (but subject to proportionate dilution by reason of the admission of
its successor). Any successor General Partner shall indemnify the Departing
Partner as to all debts and liabilities of the Partnership arising on or after
the date on which the Departing Partner becomes a Limited Partner. For purposes
of this Agreement, conversion of a General Partner's Partnership Interest as a
general partner in the Partnership to Common Units will be characterized as if
such General Partner contributed its Partnership Interest to the Partnership in
exchange for the newly-issued Common Units.
(c) If one or more of the remaining General Partners do not elect to
purchase the Departing Partner's Combined Interest pursuant to Section 11.7(b),
a successor General Partner is elected in accordance with the terms of Section
13.1 or 13.2, and the option described in Section 13.3(a) is not exercised by
the party entitled to do so, a successor General Partner shall, at the effective
date of its admission to the Partnership, contribute to the capital of the
Partnership cash in an amount such that its Capital Account, after giving effect
to such contribution and any adjustments made to the Capital Accounts of all
Partners pursuant to Section 4.4(d)(i), shall be equal to that percentage of the
Capital Accounts of all Partners that is equal to its Percentage Interest as a
General Partner. In such event, each successor General Partner shall, subject to
the following sentence, be entitled to such Percentage Interest of all
Partnership allocations and distributions and any other allocations and
distributions to which the Departing Partner was entitled. In addition, the
Partnership Policy Committee shall cause this Agreement to be amended to reflect
that, from and after the date of such successor General Partner's admission, the
aggregate interest of all remaining General Partners and such successor General
Partner in all Partnership distributions and allocations shall be 1%, and that
of the holders of Outstanding Units shall be 99%.
13.4 WITHDRAWAL OF LIMITED PARTNERS. No Limited Partner shall have any
right to withdraw from the Partnership; provided, however, that when a
transferee of a Limited Partner's Units becomes a Record Holder, such
transferring Limited Partner shall cease to be a Limited Partner with respect to
the Units so transferred.
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ARTICLE XIV
DISSOLUTION AND LIQUIDATION
14.1 DISSOLUTION. The Partnership shall not be dissolved by the admission
of Substituted Limited Partners or Additional Limited Partners or by the
admission of a successor General Partner in accordance with the terms of this
Agreement. Upon the removal or withdrawal of a General Partner, if one or more
of the remaining General Partners agrees to purchase the Combined Interest of
such Departing Partner pursuant to Section 11.7, or if a successor General
Partner is elected pursuant to Section 13.1 or 13.2, the Partnership shall not
be dissolved and the remaining General Partners and/or such successor General
Partner shall continue the business of the Partnership. The Partnership shall
dissolve, and (subject to Section 14.2) its affairs should be wound up, upon:
(a) the expiration of its term as provided in Section 1.5;
(b) an Event of Withdrawal of a General Partner as provided in
Section 13.1(a)(other than Section 13.1(a)(ii)), unless (i) one or more
of the remaining General Partners agree to purchase the Combined Interest
of such Departing Partner pursuant to Section 11.7(b) or (ii) a successor
is elected and an Opinion of Counsel is received as provided in Section
13.1 (b) or 13.2 and such successor is admitted to the Partnership
pursuant to Section 12.3;
(c) an election by the Partnership Policy Committee to dissolve the
Partnership that is approved by at least two-thirds of the Outstanding
Units during the Subordination Period and at least a majority of the
Outstanding Units thereafter (and all Limited Partners hereby expressly
consent that such approval may be effected upon written consent of said
applicable percentage of the Outstanding Units);
(d) entry of a decree of judicial dissolution of the Partnership
pursuant to the provisions of the Delaware Act; or
(e) the sale of all or substantially all of the assets and
properties of the Partnership and the Intermediate Partnership.
14.2 CONTINUATION OF THE BUSINESS OF THE PARTNERSHIP AFTER DISSOLUTION.
Upon (a) dissolution of the Partnership following an Event of Withdrawal caused
by the withdrawal or removal of a General Partner as provided in Section 13.1
(a)(i) or (iii) and the failure to occur of either (i) the purchase by one or
more of the remaining General Partners of such Departing Partner's Combined
Interest pursuant to Section 11.7(b) or (ii) the selection of a successor to
such Departing Partner pursuant to Section 13.1 or 13.2, then within 90 days
thereafter or (b) dissolution of the Partnership upon an event constituting an
Event of Withdrawal as defined in Section 13.1(a)(iv), (v) or (vi) and the
failure to occur of either (i) the purchase by one or more of the remaining
General Partners of such Departing Partner's Combined Interest pursuant to
Section 11.7(b) or (ii) the selection of a successor to such Departing Partner
pursuant to Section 13.1 or 13.2, then within 180 days thereafter, a majority of
the Outstanding Units may elect to reconstitute the Partnership and continue its
business on the same terms and conditions set forth in this Agreement by forming
a new limited partnership on terms identical to those set forth in this
Agreement and having as the successor general partners the remaining General
Partners (if they desire to continue in such capacity) and/or a Person approved
by a majority of the Outstanding Units. Upon any such election by a majority of
the Outstanding Units, all Partners shall be bound thereby and shall be deemed
to have approved same. Unless such an election is made within the applicable
time period as set forth
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above, the Partnership shall conduct only activities necessary to wind up its
affairs. If such an election is so made, then:
(i) the reconstituted Partnership shall continue until the end of
the term set forth in Section 1.5 unless earlier dissolved in accordance
with this Article XIV;
(ii) if one or more of the successor General Partners is not a
former General Partner, or if one or more of the remaining General
Partners does not desire to continue as a General Partner, then the
interest of such former General Partner and/or such remaining General
Partners shall be treated thenceforth as interests of a Limited Partner
and converted into Common Units in the manner provided in Section 13.3(b);
and
(iii) all necessary steps shall be taken to cancel this Agreement
and the Certificate of Limited Partnership and to enter into and, as
necessary, to file a new partnership agreement and certificate of limited
partnership, and the remaining General Partner(s) and such successor
general partner may for this purpose exercise the powers of attorney
granted the members of the Partnership Policy Committee pursuant to
Section 1.4; provided, that the right of a majority of Outstanding Units
to approve a successor General Partner and to reconstitute and to continue
the business of the Partnership shall not exist and may not be exercised
unless the Partnership has received an Opinion of Counsel that (x) the
exercise of the right would not result in the loss of limited liability of
any Limited Partner and (y) neither the Partnership, the reconstituted
limited partnership, the Intermediate Partnership nor Northern Border
Pipeline would be treated as an association taxable as a corporation or
otherwise be taxable as an entity for federal income tax purposes upon the
exercise of such right to continue.
14.3 LIQUIDATION. Upon dissolution of the Partnership, unless the
Partnership is continued under an election to reconstitute and continue the
Partnership pursuant to Section 14.2, the Partnership Policy Committee or its
designee, or if it fails to act, a liquidator or liquidating committee approved
by a majority of the Outstanding Units, shall be the Liquidator. The Liquidator
(if other than the Partnership Policy Committee or its designee) shall be
entitled to receive such compensation for its services as may be approved by a
majority of the Outstanding Units. The Liquidator shall agree not to resign at
any time without 15 days' prior notice and (if other than the Partnership Policy
Committee or its designee) may be removed at any time, with or without cause, by
notice of removal approved by a majority of the Outstanding Units. Upon
dissolution, removal or resignation of the Liquidator, a successor and
substitute Liquidator (who shall have and succeed to all rights, powers and
duties of the original Liquidator) shall within 30 days thereafter be approved
by a majority of the Outstanding Units. The right to approve a successor or
substitute Liquidator in the manner provided herein shall be deemed to refer
also to any such successor or substitute Liquidator approved in the manner
herein provided. Except as expressly provided in this Article XIV, the
Liquidator approved in the manner provided herein shall have and may exercise,
without further authorization or consent of any of the parties hereto, all of
the powers conferred upon the Partnership Policy Committee and the General
Partners under the terms of this Agreement (but subject to all of the applicable
limitations, contractual and otherwise, upon the exercise of such powers, other
than the limitation on sale set forth in Section 6.4(b)) to the extent necessary
or desirable in the good faith judgment of the Liquidator to carry out the
duties and functions of the Liquidator hereunder for and during such period of
time as shall be reasonably required in the good faith judgment of the
Liquidator to complete the winding-up and liquidation of the Partnership as
provided for herein. The Liquidator shall liquidate the assets of the
Partnership, and apply and distribute the proceeds of such liquidation in the
following order of priority, unless otherwise required by mandatory provisions
of applicable law:
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(a) the payment to creditors of the Partnership, including, without
limitation, Partners who are creditors, in the order of priority provided
by law; and the creation of a reserve of cash or other assets of the
Partnership for contingent liabilities in an amount, if any, determined by
the Liquidator to be appropriate for such purposes; and
(b) to all Partners in accordance with, and to the extent of, the
positive balances in their respective Capital Accounts, as determined
after taking into account all Capital Account adjustments (other than
those made by reason of this clause) for the taxable year of the
Partnership during which the liquidation of the Partnership occurs (with
the date of such occurrence being determined pursuant to Treasury
Regulation Section 1.704-1(b)(2)(ii)(g)); and such distribution shall be
made by the end of such taxable year (or, if later, within 90 days after
said date of such occurrence).
14.4 DISTRIBUTIONS IN KIND. (a) Notwithstanding the provisions of Section
14.3, which require the liquidation of the assets of the Partnership, but
subject to the order of priorities set forth therein, if prior to or upon
dissolution of the Partnership the Liquidator determines that an immediate sale
of part or all of the Partnership's assets would be impractical or would cause
undue loss to the Partners, the Liquidator may, in its absolute discretion,
defer for a reasonable time the liquidation of any assets except those necessary
to satisfy liabilities of the Partnership (including, without limitation, those
to Partners as creditors) and/or distribute to the Partners or to specific
classes of Partners, in lieu of cash, as tenants in common and in accordance
with the provisions of Section 14.3, undivided interests in such Partnership
assets as the Liquidator deems not suitable for liquidation. Any such
distributions in kind shall be made only if, in the good faith judgment of the
Liquidator, such distributions in kind are in the best interest of the Limited
Partners, and shall be subject to such conditions relating to the disposition
and management of such properties as the Liquidator deems reasonable and
equitable and to any agreements governing the operation of such properties at
such time. The Liquidator shall determine the fair market value of any property
distributed in kind using such reasonable method of valuation as it may adopt.
(b) In accordance with Section 704(c)(1)(B) of the Code, in the case of
any deemed distribution occurring as a result of a termination of the
Partnership pursuant to Section 708(b)(1)(B) of the Code, to the maximum extent
possible consistent with the priorities of Section 14.3, the Partnership Policy
Committee shall have sole discretion to treat the deemed distribution of
Partnership assets to Partners as occurring in a manner that will not cause a
shift of the Book-Tax Disparity attributable to a Partnership asset existing
immediately prior to the deemed distribution to another asset upon the deemed
contribution of assets to the reconstituted Partnership, including, without
limitation, deeming the distribution of any Partnership assets to be made either
to the Partner who contributed such assets or to the transferee of such Partner.
14.5 CANCELLATION OF CERTIFICATE OF LIMITED PARTNERSHIP. Upon the
completion of the distribution of Partnership cash and property as provided in
Sections 14.3 and 14.4 in connection with the liquidation of the Partnership,
the Partnership shall be terminated and the Certificate of Limited Partnership
and all qualifications of the Partnership as a foreign limited partnership in
jurisdictions other than the State of Delaware shall be cancelled and such other
actions as may be necessary to terminate the Partnership shall be taken.
14.6 REASONABLE TIME FOR WINDING UP. A reasonable time shall be allowed
for the orderly winding up of business and affairs of the Partnership and the
liquidation of its assets pursuant to Section 14.3 in order to minimize any
losses otherwise attendant upon such winding up, and the provisions of this
Agreement shall remain in effect between the Partners during the period of
liquidation.
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14.7 RETURN OF CAPITAL. The General Partners shall not be personally
liable for, and shall have no obligation to contribute or loan any monies or
property to the Partnership to enable it to effectuate, the return of the
Capital Contributions of the Limited Partners, or any portion thereof, it being
expressly understood that any such return shall be made solely from Partnership
assets.
14.8 NO CAPITAL ACCOUNT RESTORATION. No Partner shall have any obligation
to restore any negative balance in its Capital Account upon liquidation of the
Partnership.
14.9 WAIVER OF PARTITION. Each Partner hereby waives any right to
partition of the Partnership property.
ARTICLE XV
AMENDMENT OF PARTNERSHIP AGREEMENT;
MEETINGS; RECORD DATE
15.1 AMENDMENT TO BE ADOPTED SOLELY BY PARTNERSHIP POLICY COMMITTEE. Each
Limited Partner agrees that the Partnership Policy Committee (pursuant to its
powers of attorney from the Limited Partners and Assignees), without the
approval of any Limited Partner or Assignee, may amend any provision of this
Agreement, and execute, swear to, acknowledge, deliver, file and record whatever
documents may be required in connection therewith, to reflect:
(a) a change in the name of the Partnership, the location of the
principal place of business of the Partnership, the registered agent of
the Partnership or the registered office of the Partnership;
(b) admission, substitution, withdrawal or removal of Partners in
accordance with this Agreement;
(c) a change that, in the sole discretion of the Partnership Policy
Committee, is reasonable and necessary or appropriate to qualify or
continue the qualification of the Partnership as a limited partnership or
a partnership in which the limited partners have limited liability under
the laws of any state or that is necessary or advisable in the opinion of
the Partnership Policy Committee to ensure that none of the Partnership,
the Intermediate Partnership or Northern Border Pipeline will be treated
as an association taxable as a corporation or otherwise taxed as an entity
for federal income tax purposes;
(d) a change (i) that, in the sole discretion of the Partnership
Policy Committee, does not adversely affect the Limited Partners in any
material respect, (ii) that is necessary or desirable to satisfy any
requirements, conditions or guidelines contained in any opinion,
directive, order, ruling or regulation of any federal or state agency or
judicial authority or contained in any federal or state statute
(including, without limitation, the Delaware Act) or that is necessary or
desirable to facilitate the trading of the Units (including, without
limitation, the division of Outstanding Units into different classes to
facilitate uniformity of tax consequences within such classes of Units) or
comply with any rule, regulation, guideline or requirement of any National
Securities Exchange on which the Units are or will be listed for trading,
compliance with any of which the Partnership Policy Committee determines
in its sole discretion to be in the best interests of the Partnership and
the Limited Partners or (iii) that is required to effect the intent of the
provisions of this Agreement or is otherwise contemplated by this
Agreement;
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(e) an amendment that is necessary, in the Opinion of Counsel, to
prevent the Partnership or the General Partners or their directors or
officers from in any manner being subjected to the provisions of the
Investment Company Act of 1940, as amended, the Investment Advisers Act
of 1940, as amended, or "plan asset" regulations adopted under the
Employee Retirement Income Security Act of 1974, as amended, whether or
not substantially similar to plan asset regulations currently applied or
proposed by the United States Department of Labor;
(f) subject to the terms of Section 4.2, an amendment that the
Partnership Policy Committee determines in its sole discretion to be
necessary or appropriate in connection with the authorization for issuance
of any class or series of Partnership Securities pursuant to Section 4.2;
(g) any amendment expressly permitted in this Agreement to be made
by the Partnership Policy Committee acting alone;
(h) an amendment effected, necessitated or contemplated by a Merger
Agreement approved in accordance with Section 16.3;
(i) an amendment that, in the sole discretion of the Partnership
Policy Committee, is necessary or desirable to reflect, account for and
deal with appropriately the formation by the Partnership of, or investment
by the Partnership in, any corporation, partnership, joint venture,
limited liability company or other entity other than the Intermediate
Partnership, in connection with the conduct by the Partnership of
activities permitted by the terms of Section 3.1; or
(j) any other amendments substantially similar to the foregoing.
15.2 AMENDMENT PROCEDURES. Except as provided in Sections 15.1 and 15.3,
all amendments to this Agreement shall be made in accordance with the following
requirements. Amendments to this Agreement may be proposed only by or with the
consent of the Partnership Policy Committee. Each such proposal shall contain
the text of the proposed amendment. If an amendment is proposed, the Partnership
Policy Committee shall seek the written approval of the requisite percentage of
Outstanding Units or call a meeting of the Limited Partners to consider and vote
on such proposed amendment. A proposed amendment shall be effective upon its
approval by the holders of at least two-thirds of the Outstanding Units unless a
greater or different percentage is required under this Agreement. The
Partnership Policy Committee shall notify all Record Holders upon final adoption
of any proposed amendment, including both amendments proposed and voted upon in
accordance with this Section 15.2 and those proposed and voted upon under the
special requirements of Section 15.3.
15.3 AMENDMENT REQUIREMENTS. (a) Notwithstanding the provisions of
Sections 15.1 and 15.2, no provision of this Agreement that establishes a
percentage of Outstanding Units required to take any action shall be amended,
altered, changed, repealed or rescinded in any respect that would have the
effect of reducing such voting requirement unless such amendment is approved by
the written consent or the affirmative vote of holders of Outstanding Units
whose aggregate Outstanding Units constitute not less than the voting
requirement sought to be reduced.
(b) Notwithstanding the provisions of Sections 15.1 and 15.2, no amendment
to this Agreement may (i) enlarge the obligations of any Limited Partner without
its consent, (ii) enlarge the obligations of any General Partner without its
consent, which may be given or withheld in such General Partner's sole
discretion, (iii) modify the amounts distributable, reimbursable or otherwise
payable to a General Partner by the Partnership, (iv) change Section 14.1 (a) or
(c), (v) restrict in any way any action by or rights of the General Partners or
the Partnership Policy Committee as set forth in this Agreement or (vi) change
the term of the Partnership or, except as set forth in Section 14.1(c), give any
Person the right to dissolve the Partnership.
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(c) Except as otherwise provided, and without limitation of the
Partnership Policy Committee's authority to adopt amendments to this Agreement
as contemplated in Section 15.1, the Partnership Policy Committee may amend the
Partnership Agreement without the approval of holders of Outstanding Units,
except that any amendment that would have a material adverse effect on the
rights or preferences of any class of Outstanding Units in relation to other
classes of Units must be approved by the holders of not less than two-thirds of
the Outstanding Units of the class affected.
(d) Notwithstanding any other provision of this Agreement, except for
amendments pursuant to Section 6.4 or 15.1 and except as otherwise provided by
Section 16.3(b), no amendments shall become effective without the approval of
the holders of at least 95% of the Outstanding Units unless the Partnership
obtains an Opinion of Counsel to the effects that (a) such amendment will not
cause the Partnership, the Intermediate Partnership or Northern Border Pipeline
to be treated as an association taxable as a corporation or otherwise taxable as
an entity for federal income tax purposes and (b) such amendment will not affect
the limited liability of any Limited Partner or any limited partner of the
Intermediate Partnership under applicable law.
(e) This Section 15.3 shall only be amended with the approval of the
holders of not less than 95% of the Outstanding Units.
15.4 MEETINGS. All acts of Limited Partners to be taken hereunder shall be
taken in the manner provided in this Article XV. Meetings of the Limited
Partners may be called by the Partnership Policy Committee or by Limited
Partners owning 20% or more of the Outstanding Units of the class or classes for
which a meeting is proposed. Limited Partners shall call a meeting by delivering
to the Partnership Policy Committee of one or more requests in writing stating
that the signing Limited Partners wish to call a meeting and indicating the
general or specific purposes for which the meeting is to be called. Within 60
days after receipt of such a call from Limited Partners or within such greater
time as may be reasonably necessary for the Partnership to comply with any
statutes, rules, regulations, listing agreements or similar requirements
governing the holding of a meeting or the solicitation of proxies for use at
such a meeting, the Partnership Policy Committee shall send a notice of the
meeting to the Limited Partners either directly or indirectly through the
Transfer Agent. A meeting shall be held at a time and place determined by the
Partnership Policy Committee on a date not more than 60 days after the mailing
of notice of the meeting. Limited Partners shall not vote on matters that would
cause the Limited Partners to be deemed to be taking part in the management and
control of the business and affairs of the Partnership so as to jeopardize the
Limited Partners' limited liability under the Delaware Act or the law of any
other state in which the Partnership is qualified to do business.
15.5 NOTICE OF A MEETING. Notice of a meeting called pursuant to Section
15.4 shall be given to the Record Holders in writing by mail or other means of
written communication in accordance with Section 17.1. The notice shall be
deemed to have been given at the time when deposited in the mail or sent by
other means of written communication.
15.6 RECORD DATE. For purposes of determining the Limited Partners
entitled to notice of or to vote at a meeting of the Limited Partners or to give
approvals without a meeting as provided in Section 15.11, the Partnership Policy
Committee may set a Record Date, which shall not be less than 10 nor more than
60 days before (a) the date of the meeting (unless such requirement conflicts
with any rule, regulation, guideline or requirement of any National Securities
Exchange on which the Units are listed for trading, in which case the rule,
regulation, guideline or requirement of such exchange shall govern) or (b) in
the event that approvals are sought without a meeting, the date by which Limited
Partners are requested in writing by the Partnership Policy Committee to give
such approvals.
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15.7 ADJOURNMENT. When a meeting is adjourned to another time or place,
notice need not be given of the adjourned meeting and a new Record Date need not
be fixed, if the time and place thereof are announced at the meeting at which
the adjournment is taken, unless such adjournment shall be for more than 45
days. At the adjourned meeting, the Partnership may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than 45 days or if a new Record Date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given in accordance with this Article
XV.
15.8 WAIVER OF NOTICE; APPROVAL OF MEETING; APPROVAL OF MINUTES. The
transactions of any meeting of Limited Partners, however called and noticed, and
whenever held, shall be as valid as if had at a meeting duly held after regular
call and notice, if a quorum is present either in person or by proxy, and if,
either before or after the meeting, Limited Partners representing such quorum
who were present in person or by proxy and entitled to vote, sign a written
waiver of notice or an approval of the holding of the meeting or an approval of
the minutes thereof. All waivers and approvals shall be filed with the
Partnership records or made a part of the minutes of the meeting. Attendance of
a Limited Partner at a meeting shall constitute a waiver of notice of the
meeting, except when the Limited Partner does not approve, at the beginning of
the meeting, of the transaction of any business because the meeting is not
lawfully called or convened; and except that attendance at a meeting is not a
waiver of any right to disapprove the consideration of matters required to be
included in the notice of the meeting, but not so included, if the disapproval
is expressly made at the meeting.
15.9 QUORUM. The holders of two-thirds of the Outstanding Units of the
class or classes for which a meeting has been called represented in person or by
proxy shall constitute a quorum at a meeting of Limited Partners of such class
or classes unless any such action by the Limited Partners requires approval by
holders of a majority in interest of such Units, in which case the quorum shall
be a majority (excluding, in either case, if such are to be excluded from the
vote, Outstanding Units owned by the General Partners and their Affiliates). At
any meeting of the Limited Partners duly called and held in accordance with this
Agreement at which a quorum is present, the act of Limited Partners holding
Outstanding Units that in the aggregate represent a majority of the Outstanding
Units entitled to vote and be present in person or by proxy at such meeting
shall be deemed to constitute the act of all Limited Partners, unless a greater
or different percentage is required with respect to such action under the
provisions of this Agreement, in which case the act of the Limited Partners
holding Outstanding Units that in the aggregate represent at least such greater
or different percentage shall be required. The Limited Partners present at a
duly called or held meeting at which a quorum is present may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
Limited Partners to leave less than a quorum, if any action taken (other than
adjournment) is approved by the required percentage of Outstanding Units
specified in this Agreement. In the absence of a quorum, any meeting of Limited
Partners may be adjourned from time to time by the affirmative vote of a
majority of the Outstanding Units represented either in person or by proxy, but
no other business may be transacted, except as provided in Section 15.7.
15.10 CONDUCT OF MEETING. The Chairman of the Partnership Policy Committee
or, in the absence of the Chairman, such other person as may be selected by the
Partnership Policy Committee shall have full power and authority concerning the
manner of conducting any meeting of the Limited Partners or solicitation of
approvals in writing, including, without limitation, the determination of
Persons entitled to vote, the existence of a quorum, the satisfaction of the
requirements of Section 15.4, the conduct of voting, the validity and effect of
any proxies and the determination of any controversies, votes or challenges
arising in connection with or during the meeting or voting. The Chairman of the
Partnership Policy Committee or such other person shall serve as chairman of any
meeting and shall designate a Person to take the minutes of any meeting.
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All minutes shall be kept with the records of the Partnership maintained by the
Partnership Policy Committee. The Partnership Policy Committee may make such
other regulations consistent with applicable law and this Agreement as it may
deem advisable concerning the conduct of any meeting of the Limited Partners or
solicitation of approvals in writing, including, without limitation, regulations
in regard to the appointment of proxies, the appointment and duties of
inspectors of votes and approvals, the submission and examination of proxies and
other evidence of the right to vote, and the revocation of approvals in writing.
15.11 ACTION WITHOUT A MEETING. Any action that may be taken at a meeting
of the Limited Partners may be taken without a meeting if an approval in writing
setting forth the action so taken is signed by Limited Partners owning not less
than the minimum percentage of the Outstanding Units that would be necessary to
authorize or take such action at a meeting at which all the Limited Partners
were present and voted. Prompt notice of the taking of action without a meeting
shall be given to the Limited Partners who have not approved in writing. The
Partnership Policy Committee may specify that any written ballot submitted to
Limited Partners for the purpose of taking any action without a meeting shall be
returned to the Partnership within the time period, which shall be not less than
20 days, specified by the Partnership Policy Committee. If a ballot returned to
the Partnership does not vote all of the Units held by the Limited Partner, the
Partnership shall be deemed to have failed to receive a ballot for the Units
that were not voted. If approval of the taking of any action by the Limited
Partners is solicited by any Person other than by or on behalf of the
Partnership Policy Committee, the written approvals shall have no force and
effect unless and until (a) they are deposited with the Partnership in care of
the Partnership Policy Committee, (b) approvals sufficient to take the action
proposed are dated as of a date not more than 90 days prior to the date
sufficient approvals are deposited with the Partnership and (c) an Opinion of
Counsel is delivered to the Partnership Policy Committee to the effect that the
exercise of such right and the action proposed to be taken with respect to any
particular matter (i) will not cause the Limited Partners to be deemed to be
taking part in the management and control of the business and affairs of the
Partnership so as to jeopardize the Limited Partners' limited liability, (ii)
will not jeopardize the status of the Partnership as a partnership under
applicable tax laws and regulations and (iii) is otherwise permissible under the
state statutes then governing the rights, duties and liabilities of the
Partnership and the Partners.
15.12 VOTING AND OTHER RIGHTS. (a) Only those Record Holders of Units on
the Record Date set pursuant to Section 15.6 (and also subject to the
limitations contained in the definition of "Outstanding") shall be entitled to
notice of, and to vote at, a meeting of Limited Partners or to act with respect
to matters as to which the holders of the Outstanding Units have the right to
vote or to act. All references in this Agreement to votes of, or other acts that
may be taken by, the Outstanding Units shall be deemed to be references to the
votes or acts of the Record Holders of such Outstanding Units.
(b) With respect to Units that are held for a Person's account by another
Person (such as a broker, dealer, bank, trust company or clearing corporation,
or an agent of any of the foregoing), in whose name such Units are registered,
such broker, dealer or other agent shall, in exercising the voting rights in
respect of such Units on any matter, and unless the arrangement between such
Persons provides otherwise, vote such Units in favor of, and at the direction
of, the Person who is the beneficial owner, and the Partnership shall be
entitled to assume it is so acting without further inquiry. The provisions of
this Section 15.12(b) (as well as all other provisions of this Agreement) are
subject to the provisions of Section 10.4.
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ARTICLE XVI
MERGER
16.1 AUTHORITY. The Partnership may merge or consolidate with one or more
corporations, business trusts or associations, real estate investment trusts,
common law trusts or unincorporated businesses, including, without limitation, a
general partnership or limited partnership, formed under the laws of the State
of Delaware or any other state of the United States of America, pursuant to a
written agreement of merger or consolidation ("MERGER AGREEMENT") in accordance
with this Article.
16.2 PROCEDURE FOR MERGER OR CONSOLIDATION. Merger or consolidation of the
Partnership pursuant to this Article requires the prior approval of the
Partnership Policy Committee. If the Partnership Policy Committee shall
determine, in the exercise of its sole discretion, to consent to the merger or
consolidation, the Partnership Policy Committee shall approve the Merger
Agreement, which shall set forth:
(a) The names and jurisdictions of formation or organization of each
of the business entities proposing to merge or consolidate;
(b) The name and jurisdictions of formation or organization of the
business entity that is to survive the proposed merger or consolidation
(the "SURVIVING BUSINESS ENTITY");
(c) The terms and conditions of the proposed merger or
consolidation;
(d) The manner and basis of exchanging or converting the equity
securities of each constituent business entity for, or into, cash,
property or general or limited partnership interests, rights, securities
or obligations of the Surviving Business Entity; and (i) if any general or
limited partnership interests, securities or rights of any constituent
business entity are not to be exchanged or converted solely for, or into,
cash, property or general or limited partnership interests, rights,
securities or obligations of the Surviving Business Entity, the cash,
property or general or limited partnership interests, rights, securities
or obligations of any limited partnership, corporation, trust or other
entity (other than the Surviving Business Entity) which the holders of
such general or limited partnership interest are to receive in exchange
for, or upon conversion of, their securities or rights, and (ii) in the
case of securities represented by certificates, upon the surrender of such
certificates, which cash, property or general or limited partnership
interests, rights, securities or obligations of the Surviving Business
Entity or any limited partnership, corporation, trust or other entity
(other than the Surviving Business Entity), or evidences thereof, are to
be delivered;
(e) A statement of any changes in the constituent documents or the
adoption of new constituent documents (the articles or certificate of
incorporation, articles of trust, declaration of trust, certificate or
agreement of limited partnership or other similar charter or governing
document) of the Surviving Business Entity to be effected by such merger
or consolidation;
(f) The effective time of the merger, which may be the date of the
filing of the certificate of merger pursuant to Section 16.4 or a later
date specified in or determinable in accordance with the Merger Agreement
(provided, that if the effective time of the merger is to be later than
the date of the filing of the certificate of merger, the effective time
shall be fixed no later than the time of the filing of the certificate of
merger and stated therein); and
78
(g) Such other provisions with respect to the proposed merger or
consolidation as are deemed necessary or appropriate by the Partnership
Policy Committee.
16.3 APPROVAL BY LIMITED PARTNERS OF MERGER OR CONSOLIDATION. (a) The
Partnership Policy Committee of the Partnership, upon its approval of the Merger
Agreement, shall direct that the Merger Agreement be submitted to a vote of
Limited Partners whether at a meeting or by written consent, in either case in
accordance with the requirements of Article XV. A copy or a summary of the
Merger Agreement shall be included in or enclosed with the notice of a meeting
or the written consent.
(b) The Merger Agreement shall be approved upon receiving the affirmative
vote or consent of the holders of at least two-thirds of the Outstanding Units
during the Subordination Period and at least a majority of the Outstanding Units
thereafter unless the Merger Agreement contains any provision which, if
contained in an amendment to this Agreement, the provisions of this Agreement or
the Delaware Act would require the vote or consent of a greater percentage of
the Outstanding Units or of any class of Limited Partners, in which case such
greater percentage vote or consent shall be required for approval of the Merger
Agreement; provided that, in the case of a merger or consolidation in which the
surviving entity is a corporation or other entity intended to be treated as an
association taxable as a corporation or otherwise taxable as an entity for
federal income tax purposes, if in the opinion of the Partnership Policy
Committee it is necessary to effect, in contemplation of such merger or
consolidation, an amendment that would otherwise require a vote pursuant to
Section 15.3(d), no such vote pursuant to Section 15.3(d) shall be required
unless such amendment by its terms will be applicable to the Partnership in the
event the merger or consolidation is abandoned or unless such amendment will be
applicable to the Partnership during a period in excess of ten days prior to the
merger or consolidation.
(c) After such approval by vote or consent of the Limited Partners, and at
any time prior to the filing of the certificate of merger pursuant to Section
16.4, the merger or consolidation may be abandoned pursuant to provisions
therefor, if any, set forth in the Merger Agreement.
16.4 CERTIFICATE OF MERGER. Upon the required approval by the Partnership
Policy Committee and the Limited Partners of a Merger Agreement, a certificate
of merger shall be executed and filed with the Secretary of State of the State
of Delaware in conformity with the requirements of the Delaware Act.
16.5 EFFECT OF MERGER. (a) At the effective time of the certificate of
merger:
(i) all of the rights, privileges and powers of each of the business
entities that has merged or consolidated, and all property, real, personal
and mixed, and all debts due to any of those business entities and all
other things and causes of action belonging to each of those business
entities shall be vested in the Surviving Business Entity and after the
merger or consolidation shall be the property of the Surviving Business
Entity to the extent they were of each constituent business entity;
(ii) the title to any real property vested by deed or otherwise in
any of those constituent business entities shall not revert and is not in
any way impaired because of the merger or consolidation;
(iii) all rights of creditors and all liens on or security interest
in property of any of those constituent business entities shall be
preserved unimpaired; and
79
(iv) all debts, liabilities and duties of those constituent business
entities shall attach to the Surviving Business Entity, and may be
enforced against it to the same extent as if the debts, liabilities and
duties had been incurred or contracted by it.
(b) A merger or consolidation effected pursuant to this Article shall not
be deemed to result in a transfer or assignment of assets or liabilities from
one entity to another having occurred.
ARTICLE XVII
RIGHT TO ACQUIRE UNITS
17.1 RIGHT TO ACQUIRE UNITS. (a) Notwithstanding any other provision of
this Agreement, if at any time not more than 20% of the total Units of any class
then Outstanding are held by Persons other than the General Partners and their
Affiliates, the General Partners shall then have the right (exercisable in the
sole discretion of the General Partners and on a pro rata basis in accordance
with their relative General Partner Percentage Interests, or as otherwise
agreed), which right each General Partner may assign and transfer to the
Partnership, any other General Partner, or any Affiliate of such General Partner
or any other General Partner, exercisable in its sole discretion, to purchase
all, but not less than all, of the Units of such class then Outstanding held by
Persons other than the General Partners and their Affiliates, at the greater of
(x) the Current Market Price as of the date five days prior to the date that the
notice described in Section 17.1(b) is mailed, and (y) the highest cash price
paid by a General Partner or any of its Affiliates for any such Unit purchased
during the 90-day period preceding the date that the notice described in Section
17.1 (b) is mailed. As used in this Agreement, (i) "CURRENT MARKET PRICE" as of
any date of any class of Units listed or admitted to trading on any National
Securities Exchange means the average of the daily Closing Prices (as
hereinafter defined) per Unit of such class for the 20 consecutive Trading Days
(as hereinafter defined) immediately prior to such date; (ii) "CLOSING PRICE"
for any day means the last sale price on such day, regular way, or in case no
such sale takes place on such day, the average of the closing bid and asked
prices on such day, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal National Securities Exchange on which the Units of such class are
listed or admitted to trading or if the Units of such class are not listed or
admitted to trading on any National Securities Exchange, the last quoted price
on such day or, if not so quoted, the average of the high bid and low asked
prices on such day in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc. Automated Quotation System or such other
system then in use, or if on any such day the Units of such class are not quoted
by any such organization, the average of the closing bid and asked prices on
such day as furnished by a professional market maker making a market in the
Units of such class selected by the Partnership Policy Committee, or if on any
such day no market maker is making a market in the Units of such class, the fair
value of such Units on such day as determined reasonably and in good faith by
the Partnership Policy Committee; and (iii) "TRADING DAY" means a day on which
the principal National Securities Exchange on which the Units' of any class are
listed or admitted to trading is open for the transaction of business or, if
Units of a class are not listed or admitted to trading on any National
Securities Exchange, a day on which banking institutions in New York City
generally are open.
(b) If a General Partner, any Affiliate of a General Partner or the
Partnership elects to exercise the right to purchase Units granted pursuant to
Section 17.1 (a), the exercising party or parties shall deliver to the Transfer
Agent notice of such election to purchase (the "NOTICE OF ELECTION TO PURCHASE")
and shall cause the Transfer Agent to mail a copy of such Notice of Election to
Purchase to the Record Holders of Units (as of a Record Date selected by the
Partnership Policy Committee) at least 10, but not more than 60, days prior to
the Purchase Date. Such Notice of
80
Election to Purchase shall also be published for a period of at least three
consecutive days in at least two daily newspapers of general circulation printed
in the English language and published in the Borough of Manhattan, New York. The
Notice of Election to Purchase shall specify the Purchase Date and the price
(determined in accordance with Section 17.1 (a) at which Units will be purchased
and state that the General Partner(s), its Affiliate(s) or the Partnership, as
the case may be, elects to purchase such Units, upon surrender of Certificates
representing such Units in exchange for payment, at such office or offices of
the Transfer Agent as the Transfer Agent may specify, or as may be required by
any National Securities Exchange on which the Units are listed or admitted to
trading. Any such Notice of Election to Purchase mailed to a Record Holder of
Units at his address as reflected in the records of the Transfer Agent shall be
conclusively presumed to have been given whether or not the owner receives such
notice. On or prior to the Purchase Date, such General Partner(s), its
Affiliate(s) or the Partnership, as the case may be, shall deposit with the
Transfer Agent cash in an amount sufficient to pay the aggregate purchase price
of all of the Units to be purchased in accordance with this Section 17.1. If the
Notice of Election to Purchase shall have been duly given as aforesaid at least
10 days prior to the Purchase Date, and if on or prior to the Purchase Date the
deposit described in the preceding sentence has been made for the benefit of the
holders of Units subject to purchase as provided herein, then from and after the
Purchase Date, notwithstanding that any Certificate shall not have been
surrendered for purchase, all rights of the holders of such Units (including,
without limitation, any rights pursuant to Articles IV, V and XIV) shall
thereupon cease, except the right to receive the purchase price (determined in
accordance with Section 17.1 (a)) for Units therefor, without interest, upon
surrender to the Transfer Agent of the Certificates representing such Units, and
such Units shall thereupon be deemed to be transferred to the General
Partner(s), its Affiliate(s) or the Partnership, as the case may be, on the
record books of the Transfer Agent and the Partnership, and such exercising
party or parties shall be deemed to be the owner of all such Units from and
after the Purchase Date and shall have all rights as the owner of such Units
(including, without limitation, all rights as owner of such Units pursuant to
Articles IV, V and XIV).
(c) At any time from and after the Purchase Date, a holder of an
Outstanding Unit subject to purchase as provided in this Section 17.1 may
surrender his Certificate, as the case may be, evidencing such Unit to the
Transfer Agent in exchange for payment of the amount described in Section 17.1
(a), therefor, without interest thereon.
ARTICLE XVIII
GENERAL PROVISIONS
18.1 ADDRESSES AND NOTICES. Any notice, demand, request, report or proxy
materials required or permitted to be given or made to a Partner or Assignee
under this Agreement shall be in writing and shall be deemed given or made when
delivered in person or when sent by first-class United States mail or by other
means of written communication to the Partner or Assignee at the address
described below. Any notice, payment or report to be given or made to a Partner
or Assignee hereunder shall be deemed conclusively to have been given or made,
and the obligation to give such notice or report or to make such payment shall
be deemed conclusively to have been fully satisfied, upon sending of such
notice, payment or report to the Record Holder of such Unit at his address as
shown on the records of the Transfer Agent or as otherwise shown on the records
of the Partnership, regardless of any claim of any Person who may have an
interest in such Unit or the Partnership Interest of a General Partner by reason
of any assignment or otherwise. An affidavit or certificate of making of any
notice, payment or report in accordance with the provisions of this Section 18.1
executed by a General Partner, a member of the Partnership Policy Committee, the
Transfer Agent or the mailing organization shall be prima facie evidence of the
giving or making of such notice, payment or report. If any notice, payment or
report addressed to a Record Holder at
81
the address of such Record Holder appearing on the books and records of the
Transfer Agent or the Partnership is returned by the United States Post Office
marked to indicate that the United States Postal Service is unable to deliver
it, such notice, payment or report and any subsequent notices, payments and
reports shall be deemed to have been duly given or made without further mailing
(until such time as such Record Holder or another Person notifies the Transfer
Agent or the Partnership of a change in his address) if they are available for
the Partner or Assignee at the principal office of the Partnership for a period
of one year from the date of the giving or making of such notice, payment or
report to the other Partners and Assignees. Any notice to the Partnership or the
Partnership Policy Committee shall be deemed given if received by the Chairman
of the Partnership Policy Committee at the principal office of the Partnership
designated pursuant to Section 1.3. The General Partners and the Partnership
Policy Committee may rely and shall be protected in relying on any notice or
other document from a Partner, Assignee or other Person if believed by it to be
genuine.
18.2 REFERENCES. Except as specifically provided otherwise, references to
"Articles" and "Sections" are to Articles and Sections of this Agreement.
18.3 PRONOUNS AND PLURALS. Whenever the context may require, any pronoun
used in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns, pronouns and verbs shall include
the plural and vice versa.
18.4 FURTHER ACTION. The parties shall execute and deliver all documents,
provide all information and take or refrain from taking action as may be
necessary or appropriate to achieve the purposes of this Agreement.
18.5 BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their heirs, executors, administrators,
successors, legal representatives and permitted assigns.
18.6 INTEGRATION. This Agreement constitutes the entire agreement among
the parties hereto pertaining to the subject matter hereof and supersedes all
prior agreements and understandings pertaining thereto.
18.7 CREDITORS. None of the provisions of this Agreement shall be for the
benefit of, or shall be enforceable by, any creditor of the Partnership.
18.8 WAIVER. No failure by any party to insist upon the strict performance
of any covenant, duty, agreement or condition of this Agreement or to exercise
any right or remedy consequent upon a breach thereof shall constitute waiver of
any such breach or any other covenant, duty, agreement or condition.
18.9 COUNTERPARTS. This Agreement may be executed in counterparts, all of
which together shall constitute an agreement binding on all the parties hereto,
notwithstanding that all such parties are not signatories to the original or the
same counterpart. Each party shall become bound by this Agreement immediately
upon affixing its signature hereto or, in the case of a Person acquiring a Unit,
upon accepting the certificate evidencing such Unit or executing and delivering
a Transfer Application as herein described, independently of the signature of
any other party.
18.10 APPLICABLE LAW. This Agreement shall be construed in accordance with
and governed by the laws of the State of Delaware, without regard to the
principles of conflicts of law.
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18.11 INVALIDITY OF PROVISIONS. If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein shall not be
affected thereby.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
GENERAL PARTNERS:
NORTHERN PLAINS NATURAL GAS COMPANY
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: PRESIDENT
NORTHWEST BORDER PIPELINE COMPANY
By: /s/ G. L. Best
---------------
Name: G. L. BEST
Title: VICE PRESIDENT
PAN BORDER GAS COMPANY
By: /s/ ▇. ▇. ▇▇▇▇▇▇
---------------
Name: ▇. ▇.▇▇▇▇▇▇
Title: TREASURER
ORGANIZATIONAL LIMITED PARTNER:
NORTHWEST BORDER PIPELINE COMPANY
By: /s/ G. L. Best
-----------------
Name: G. L. Best
Title: VICE PRESIDENT
83
LIMITED PARTNERS:
All Limited Partners now and hereafter
admitted as limited partners of the
Partnership, pursuant to Powers of
Attorney now and hereafter executed in
favor of, and granted and delivered to,
the Members of the Partnership Policy
Committee.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
Chairman of Partnership Policy
Committee, as attorney-in-fact for
all Limited Partners pursuant to
the Powers of Attorney granted
pursuant to Section 1.4.
84
EXHIBIT A
to the Amended and Restated Agreement of
Limited Partnership of
NORTHERN BORDER PARTNERS, L.P.
CERTIFICATE EVIDENCING COMMON UNITS
REPRESENTING LIMITED PARTNER INTERESTS
NORTHERN BORDER PARTNERS, L.P.
No.__________ __________ Common Units
The undersigned officers of NORTHERN BORDER PARTNERS, L.P., a Delaware
limited partnership (the "PARTNERSHIP"), hereby certifies
that__________________________________ (the "HOLDER") is the registered owner
of__________ Common Units representing limited partner interests in the
Partnership (the "COMMON UNITS") transferable on the books of the Partnership,
in person or by duly authorized attorney, upon surrender of this Certificate
properly endorsed and accompanied by a properly executed application for
transfer of the Common Units represented by this Certificate. The rights,
preferences and limitations of the Common Units are set forth in, and this
Certificate and the Common Units represented hereby are issued and shall in all
respects be subject to the terms and provisions of, the Amended and Restated
Agreement of Limited Partnership of NORTHERN BORDER PARTNERS, L.P., as amended,
supplemented or restated from time to time (the "PARTNERSHIP AGREEMENT"). Copies
of the Partnership Agreement are on file at, and will be furnished without
charge on delivery of written request to the Partnership at, the principal
office of the Partnership located at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇.
Capitalized terms used herein but not defined shall have the meaning given them
in the Partnership Agreement.
The Holder, by accepting this Certificate, is deemed to have (i) requested
admission as, and agreed to become, a Limited Partner and to have agreed to
comply with and be bound by and to have executed the Partnership Agreement, (ii)
represented and warranted that the Holder has all right, power and authority
and, if an individual, the capacity necessary to enter into the Partnership
Agreement, (iii) given the powers of attorney provided for in the Partnership
Agreement and (iv) made the waivers and given the consents and approvals
contained in the Partnership Agreement.
This Certificate shall not be valid for any purpose unless it has been
countersigned and registered by the Transfer Agent and Registrar.
Dated: __________________
NORTHERN BORDER PARTNERS, LP.
By: ______________________________________
Countersigned and Registered by: Chief Executive Officer
_______________________________, By: ______________________________________
as Transfer Agent and Registrar Chief Financial and Accounting Officer
By: ___________________________
Authorized Signature
Exhibit A-Page 1
[Reverse of Certificate]
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as follows according to applicable laws or
regulations:
TEN COM- as tenants in common UNIF GIFT MIN ACT-.......Custodian.....
TEN ENT- as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as Act.......................
tenants in common (State)
Additional abbreviations, though not in the above list, may also be used.
ASSIGNMENT OF COMMON UNITS
in
NORTHERN BORDER PARTNERS, L.P.
IMPORTANT NOTICE REGARDING INVESTOR RESPONSIBILITIES
DUE TO TAX SHELTER STATUS OF NORTHERN BORDER PARTNERS, L.P.
You have acquired an interest in Northern Border Partners, L.P., ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, whose taxpayer identification number
is______________. The Internal Revenue Service has issued Northern Border
Partners, L.P. the following tax shelter registration number:______________
YOU MUST REPORT THIS REGISTRATION NUMBER TO THE INTERNAL REVENUE SERVICE
IF YOU CLAIM ANY DEDUCTION, LOSS, CREDIT, OR OTHER TAX BENEFIT OR REPORT ANY
INCOME BY REASON OF YOUR INVESTMENT IN NORTHERN BORDER PARTNERS, L.P.
You must report the registration number as well as the name and taxpayer
identification number of Northern Border Partners, L.P. on Form 8271. FORM 8271
MUST BE ATTACHED TO THE RETURN ON WHICH YOU CLAIM THE DEDUCTION, LOSS, CREDIT,
OR OTHER TAX BENEFIT OR REPORT ANY INCOME BY REASON OF YOUR INVESTMENT IN
NORTHERN BORDER PARTNERS, L.P.
If you transfer your interest in Northern Border Partners, L.P. to another
person, you are required by the Internal Revenue Service to keep a list
containing (a) that person's name, address and taxpayer identification number,
(b) the date on which you transferred the interest and (c) the name, address and
tax shelter registration number of Northern Border Partners, L.P. If you do not
want to keep such a list, you must (1) send the information specified above to
the Partnership, which will keep the list for this tax shelter, and (2) give a
copy of this notice to the person to whom you transfer your interest. Your
failure to comply with any of the above-described responsibilities could result
in the imposition of a penalty under Section 6707(b) or 6708(a) of the Internal
Revenue Service Code of 1986, as amended, unless such failure is shown to be due
to reasonable cause.
ISSUANCE OF A REGISTRATION NUMBER DOES NOT INDICATE THAT THIS INVESTMENT
OR THE CLAIMED TAX BENEFITS HAVE BEEN REVIEWED, EXAMINED, OR APPROVED BY THE
INTERNAL REVENUE SERVICE.
Exhibit A-Page 2
FOR VALUE RECEIVED, ____________________________________ hereby assigns,
conveys, sells and transfers unto____________________________________________
____________________________________ ______________________________________
(Please print or typewrite name (Please insert Social Security or
and address of Assignee) other identifying number of Assignee)
_________________________________________Common Units representing limited
partner interests evidenced by this Certificate, subject to the Partnership
Agreement, and does hereby irrevocably constitute and appoint _________________
as its attorney-in-fact with full power of substitution to transfer the same on
the books of Northern Border Partners, L.P.
Date: __________________________ NOTE: The signature to any endorsement
hereon must correspond with the name as
written upon the face of this
Certificate in every particular,
without alteration, enlargement or
change.
SIGNATURE(S) MUST BE GUARANTEED
BY A MEMBER FIRM OF THE NATIONAL ________________________________________
ASSOCIATION OF SECURITIES DEALERS, (Signature)
INC. OR BY A COMMERCIAL BANK OR
TRUST COMPANY ________________________________________
(Signature)
SIGNATURE(S) GUARANTEED
No transfer of the Common Units evidenced hereby will be registered on the
books of the Partnership, unless the Certificate evidencing the Common Units to
be transferred is surrendered for registration or transfer and an Application
for Transfer of Common Units has been executed by a transferee either (a) on the
form set forth below or (b) on a separate application that the Partnership will
furnish on request without charge. A transferor of the Common Units shall have
no duty to the transferee with respect to execution of the transfer application
in order for such transferee to obtain registration of the transfer of the
Common Units.
____________________________________________________________________________
APPLICATION FOR TRANSFER OF COMMON UNITS
The undersigned ("ASSIGNEE") hereby applies for transfer to the name of
the Assignee of the Common Units evidenced hereby.
The Assignee (a) requests admission as a Substituted Limited Partner and
agrees to comply with and be bound by, and hereby executes, the Amended and
Restated Agreement of Limited Partnership of Northern Border Partners, L.P. (the
"Partnership"), as amended, supplemented or restated to the date hereof (the
"PARTNERSHIP AGREEMENT"), (b) represents and warrants that the Assignee has all
right, power and authority and, if an individual, the capacity necessary to
enter into the Partnership Agreement, (c) gives the powers of attorney provided
for in the Partnership Agreement and (d) makes the waivers and gives the
consents and approvals contained in the Partnership Agreement.
Capitalized terms not defined herein have the meanings assigned to such
terms in the Partnership Agreement.
Exhibit A-Page 3
Date:___________________________ __________________________________
Signature of Assignee
_________________________________ __________________________________
Social Security or other Name and Address of Assignee
identifying number of Assignee
_________________________________
Purchase Price
including commissions, if any
Type of Entity (check one)
________________Individual_______________Partnership________________Corporation
________________Trust____________________Other (specify)______________________
Nationality (Check One):
___________U.S. Citizen, Resident or Domestic Entity
___________Foreign Corporation, or____________Non-resident alien
If the U.S. Citizen, Resident or Domestic Entity box is checked, the
following certification must be completed.
Under Section 1445(e) of the Internal Revenue Code of 1986, as amended
(the "CODE"), the Partnership must withhold tax with respect to certain
transfers of property if a holder of an interest in the Partnership is a foreign
person. To inform the Partnership that no withholding is required with respect
to the undersigned interest-holder's interest in it, the undersigned hereby
certifies the following (or, if applicable, certifies the following on behalf of
the interest-holder).
Complete Either A or B:
A. Individual Interest-Holder
1. I am not a non-resident alien for purposes of U.S. income
taxation.
2. My U.S. taxpayer identifying number (Social Security Number)
is _______________________________________________________.
3. My home address is_________________________________________.
B. Partnership, Corporate or Other Interest-Holder
1. _____________________________________________ is not a foreign
(Name of Interest-Holder)
corporation, foreign partnership, foreign trust or foreign
estate (as those terms are defined in the Code and Treasury
Regulations).
2. The interest-holder's U.S. employer identification number is
__________________________________________________________.
3. The interest-holder's office address and place of
incorporation (if applicable) is____________________________.
Exhibit A-Page 4
The interest-holder agrees to notify the Partnership within 60 days of the
date the interest-holder becomes a foreign person.
The interest-holder understands that this certificate may be disclosed to
the Internal Revenue Service by the Partnership and that any false statement
contained herein could be punishable by fine, imprisonment or both.
Under penalties of perjury, I declare that I have examined this
certification and to the best of my knowledge and belief it is true, correct and
complete and, if applicable, I further declare that I have authority to sign
this document on behalf of
____________________________________________________________________________
(Name of Interest-Holder)
____________________________________________________________________________
Signature and Date
____________________________________________________________________________
Title (if applicable)
Note: If the Assignee is a broker, dealer, bank, trust company, clearing
corporation, other nominee holder or an agent of any of the foregoing, and is
holding for the account of any other person, this application should be
completed by an officer thereof or, in the case of a broker or dealer, by a
registered representative who is a member of a registered national securities
exchange or a member of the National Association of Securities Dealers, Inc.,
or, in the case of any other nominee holder, a person performing a similar
function. If the Assignee is a broker, dealer, bank trust company, clearing
corporation, other nominee owner or an agent of any of the foregoing, the above
certification as to any Person for whom the Assignee will hold the Common Units
shall be made to the best of the Assignee's knowledge.
Exhibit A-Page 5