GENERAL PARTNERSHIP AGREEMENT
FOR
MOBILE BAY PROCESSING PARTNERS
BETWEEN
MCNIC MOBILE BAY PROCESSING COMPANY,
OEDC PROCESSING, L.P.
AND
PANENERGY MOBILE BAY PROCESSING COMPANY
DATED AS OF NOVEMBER 6, 1996
GENERAL PARTNERSHIP AGREEMENT
OF
MOBILE BAY PROCESSING PARTNERS
THIS GENERAL PARTNERSHIP AGREEMENT ("AGREEMENT") is made and entered
into as of the 6th day of November, 1996 (the "EFFECTIVE DATE"), by and among
MCNIC MOBILE BAY PROCESSING COMPANY, a Michigan corporation ("MMBPC"), OEDC
PROCESSING, L.P., a Texas limited partnership, the general partner of which is
OEDC, INC., ("OEDCP") and PANENERGY MOBILE BAY PROCESSING COMPANY, a Delaware
corporation ("PMBPC") all of such parties for convenience being sometimes
hereinafter referred to collectively as the "PARTNERS" or individually as a
"PARTNER".
W I T N E S S E T H:
WHEREAS, Pipeline & Processing Group Inc., a Michigan corporation,
PanEnergy Field Services, Inc., a Colorado corporation, and Dauphin Island
Gathering Company, L.P., a Texas limited partnership, the general partner of
which is OEDC, Inc., a Texas corporation have entered into a Binding Term Sheet
to Form General Partnership Related to NGL Processing Facility dated June 30,
1996 (the "TERM SHEET");
WHEREAS, the Term Sheet provides that the parties thereto, or wholly
owned direct or indirect affiliates of their ultimate parent companies, shall
form a partnership; and
WHEREAS, each of the parties hereto is the entity contemplated by
the parties to the Term Sheet as the proposed partner of the partnership.
NOW, THEREFORE, in consideration of the terms and mutual covenants
set forth herein, the parties agree as follows:
ARTICLE 1.
FORMATION OF A PARTNERSHIP
1.1 FORMATION OF PARTNERSHIP. The Partners hereby agree to and do herewith
form a general partnership (the "PARTNERSHIP") under the Delaware [Revised
Partnership Act] (the "PARTNERSHIP ACT") for the limited purposes and scope set
forth herein. Each Partner's interest in the Partnership shall be deemed
personal property for all purposes herein. All real and other property owned by
the Partnership shall be deemed owned by the Partnership as an entity, and no
Partner shall individually have any direct ownership in such property.
1.2 OWNERSHIP INTERESTS. Subject to the terms hereof, the interest of the
Partners in the Partnership ("OWNERSHIP INTERESTS") shall be as follows:
At the Effective Date:
MMBPC 49.5%
PMBPC 49.5%
OEDCP 1.0%
1.3 PURPOSE OF PARTNERSHIP. The Partnership is formed for the limited
purposes of constructing, owning and operating, or providing financing for one
or more natural gas processing facilities (including, without limitations, a
slug catcher) ("PROCESSING FACILITY") onshore in Mobile County, Alabama, for the
removal of condensate and natural gas liquids (collectively "LIQUIDS") from
natural gas, including but not limited to, activities such as (a) natural gas
compression, treating, and dehydration at a Processing Facility, (b) separation,
fractionation, storage, transportation and marketing of Liquids extracted at a
Processing Facility and (c) purchase and transportation of natural gas as
necessary for the efficient operation of a Processing Facility, with all of the
preceding collectively referred to as "PARTNERSHIP OPERATIONS").
1.4 NAME OF PARTNERSHIP. The name of the Partnership shall be Mobile Bay
Processing Partners. The Managing Partner shall file the required assumed name
certificates. The business and affairs of the Partnership shall be conducted
solely under the name of Mobile Bay Processing Partners, and such name shall be
used at all times in connection with the business and affairs of the
Partnership.
1.5 PRINCIPAL PLACE OF BUSINESS. The city in which the principal place of
business of the Managing Partner is located is Denver, Colorado, which shall be
the principal place of business of the Partnership.
ARTICLE 2.
RESPONSIBILITIES OF THE PARTIES
2.1 RESPONSIBILITIES OF THE PARTIES. Each Partner is responsible for
procuring any and all authorizations which it might individually require for its
participation in the Partnership. The authority of the Partners to conduct
business on behalf of the Partnership is limited to the authority expressly
granted under this Agreement. The Partners represent and warrant that each has
the legal authority to and is not prohibited from entering into the Partnership
and pursuing the business thereof. Except as otherwise provided herein, each
Partner may own and operate and invest in any natural gas processing system not
owned or operated by the Partnership wherever located, compete with the other
Partners and the Partnership, and engage in and possess business interests in
ventures of any kind for such Partners' exclusive benefit, and the other
Partners shall have no interest therein by virtue of this Agreement.
ARTICLE 3.
MANAGEMENT AND OPERATION OF THE PARTNERSHIP
3.1 MANAGEMENT COMMITTEE.
(a) The management of the Partnership shall be by a committee of the
representatives of the Partners (the "MANAGEMENT COMMITTEE") which shall
have general discretion to manage the affairs, determine and approve the
overall objectives, policies, procedure, methods and actions of the
Partnership, including, but not limited to, the authority to perform those
acts specifically enumerated herein, and the exclusive right to make all
major policy and business development decisions. No Partner shall have
authority to act for, or to assume any obligation or responsibility on
behalf of the Partnership without the prior written approval of the
Management Committee unless otherwise specifically provided herein.
(b) It is hereby understood and agreed by the Partners that the
day-to-day business of Partnership Operations will be delegated to the
Managing Partner under the subsequent provisions of this ARTICLE 0.
3.2 ORGANIZATION AND DUTIES OF MANAGEMENT COMMITTEE.
(a) The members of the Management Committee shall consist of one
representative of each Partner. Each Partner shall from time to time
designate, by written notice to the other Partners, its representative to
serve on the Management Committee, and the representative so designated
shall be authorized to vote the Ownership Interest of the appointing
Partner. By like notice, each Partner may designate two alternate
representatives, either of whom shall have authority to act in the absence
of its representative. Any Partner may at any time, by written notice to
the other Partners, remove its representative or alternate
representative(s) on the Management Committee and designate a new
representative or alternate(s). The Management Committee representative of
each Partner shall be authorized by such Partner to take any and all
actions with respect to the Partnership and to act on such Partner's
behalf with respect to the Partnership. The resignation or removal of a
member of the Management Committee shall not invalidate any act of such
member taken prior to the giving of written notice of his or her
resignation or removal.
(b) The representative of the Managing Partner on the Management
Committee shall be the Chairman of the Management Committee.
(c) Meetings of the Management Committee shall be held at the
principal offices of the Partnership, or such other places as may be
agreed to by its members. The Chairman shall preside at all meetings of
the Management Committee and shall schedule such meetings of the
Management Committee as are necessary to resolve current items of business
with at least two (2) business days advance written notice, which notice
shall include the agenda for the meeting. Any Partner may, with at least
one business day's advance written notice add items to the agenda for the
meeting. If, however, the item of business is construction proposed by the
Managing Partner or a Partner, then the meeting to discuss such business
shall be scheduled with at least ten (10) days' advance written notice.
Unless agreed to otherwise by all of the members of the Management
Committee, only matters on the agenda provided with the notice of the
meeting (or timely noticed by a Partner) shall be considered at the
meeting. Meetings may be held by conference telephone or similar
communications equipment by means of which all persons participating in
the meeting can clearly hear each other simultaneously. Any Partner may
call a meeting of the Management Committee by notifying the Chairman of
such request and including with such notice any agenda items to be acted
upon at such meeting. The Chairman shall be responsible for maintaining
written minutes of all meetings.
(d) Members of the Management Committee, or their designated
alternates, may attend meetings and vote either in person, by telephone or
other similar communications (confirmed in writing) or through duly
authorized powers of attorney. With respect to each item of business, a
quorum of the Management Committee shall consist of representatives of two
or more Partners that are not Affiliates with more than fifty percent
(50%) of the Ownership Interests (excluding any Partners whose voting
rights have been suspended at such time or are excluded from voting
pursuant to the express provisions hereof). As used in this Agreement, the
term "AFFILIATE" shall mean any person that directly or indirectly,
through one or more intermediaries, controls, or is controlled by or is
under common control with any Partner. The term "PERSON" shall include,
without limitation, an individual, a corporation, a partnership, an
association, a joint stock company and a trust. The term "CONTROL"
(including the terms "CONTROLS", "CONTROLLED BY" and "UNDER COMMON CONTROL
WITH") means, (1) with respect to a corporation, the ownership or other
control of securities to which are attached more than fifty percent (50%)
of the voting interest of all equity securities issued by the corporation,
(2) with respect to a partnership, the ownership of more than
fifty percent (50%) interest in the partnership, and (3) with respect to
any other person, the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such
person, by contract or otherwise and (4) a "Wholly Owned Affiliate"
(hereinafter defined).
"WHOLLY OWNED AFFILIATE" shall mean with respect to a person (a) a
person that owns directly or indirectly all of the outstanding Equity
Interests of such person, or (b) a person all of the outstanding Equity
Interests of which (other than directors' qualifying shares) are owned
directly or indirectly, by either (i) a Partner or (ii) a person that owns
directly or indirectly all of the outstanding Equity Interests of a
Partner.
"EQUITY INTERESTS" shall mean capital stock of a corporation or
partnership interests or warrants, options or other rights to acquire
capital stock or partnership interests (but excluding (a) any debt
security that is convertible into, or exchangeable for, capital stock or
partnership interests, and (b) any other indebtedness.
(e) Actions taken by representatives of the required sum of the
percentage Ownership Interests of the Partners, as specified for
particular actions herein, at a Management Committee meeting at which a
quorum is present, and for which notice either is given or is waived
before or after such meeting by such representatives, shall authorize
action by the Partnership. Each representative shall have a vote equal to
the Ownership Interest percentage of the Partner he or she represents.
3.3 ACTION REQUIRING MAJORITY APPROVAL. The approval of two or more
members of the Management Committee that are not Affiliates representing
sixty-six and two-thirds percent (66b%) or more of the Ownership Interests which
are not excluded or suspended from voting under a specific provision of this
Agreement ("MAJORITY APPROVAL") shall be necessary before any of the following
actions can be taken on behalf of the Partnership:
(a) Approving any Project Plan proposed by the Managing Partner for
the construction or acquisition of a Processing Facility under ARTICLE 0
and any other proposals for expansions of a Processing Facility.
(b) Approving budgets and any revisions thereto submitted by the
Managing Partner pursuant to ARTICLE 0 and SECTION 0.
(c) Selling, transferring, or leasing any of the material assets of
the
Partnership.
(d) Approving any interim and permanent financing agreements that
are non-recourse to the Partners and the Partnership and any amendments or
restructuring thereof, and mortgaging or pledging any of the material
assets of the Partnership in connection therewith.
(e) Exercising any of the other powers granted to the Management
Committee under SECTION 0 or other provisions hereof which (1) are not
specifically enumerated elsewhere herein as requiring less or more than a
Majority Approval, or (2) not delegated to the Managing Partner under
SECTION 0.
(f) Selecting a nationally recognized firm of independent certified
public accountants to audit the books of account of the Partnership as
provided by SECTION 0 and selecting outside attorneys to represent the
Partnership (except as provided in SECTION 0).
(g) Selecting from time to time the bank or banks in which the funds
of the Partnership shall be deposited by the Managing Partner, and
approving the investment of available funds.
(h) Approving contracts with vendors for goods or services involving
more than $100,000 during the life of the contract or more than $20,000
during any one month.
(i) Approving the initiation of litigation or settlement of disputes
involving claims (1) of the Partnership against a third party which are in
excess of $25,000 (including attorneys fees of the Partnership) or (2) of
the Partnership against a Partner (provided that in the event of a
proposed action against a Partner the proposed defendant Partner shall not
be entitled to vote) and approving the employment of all attorneys
representing the Partnership in such matters.
(j) Determining the frequency, form and nature of reports required
from contractors and the Managing Partner.
(k) Approving any applications for or the acceptance of any
necessary regulatory approvals.
(l) Subject to SECTION 0, removing the Managing Partner and
selecting
a new Managing Partner.
(m) Approving, consistent with ARTICLE 0, all tax policy matters
regarding the Partnership, including, but not limited to, elections
relating to state and federal income taxes, preparation and filing of
Partnership returns and, subject to EXHIBIT E, the handling of and
participation in tax audits conducted by any governmental entity.
(n) Approving (1) the general commercial provisions applicable to
agreements for use by the Managing Partner in connection with Partnership
Operations, all of which shall be set without regard to a Partner or a
Partner's Affiliates' marketing, gas purchase or product sales activities;
and (2) any proposals by the Managing Partner for deviations from such
agreements.
(o) Consenting to certain Dispositions as provided in SECTION 0.
(p) Approving any contract or agreement with any Affiliate of a
Partner; provided, however, the vote of the Partner whose Affiliate is the
counterparty shall be excluded in determining the requisite approval.
(q) Approving agreements for the sale of Liquids that are not
terminable at will with thirty-one (31) days notice or less.
(r) Approving any contract or agreement that delegates certain or
all of the duties of the Managing Partner to any person.
3.4 ACTION REQUIRING SUPER MAJORITY APPROVAL. The approval of two or more
members of the Management Committee that are not Affiliates representing ninety
percent (90%) or more of the Ownership Interests which are not excluded or
suspended from voting under a specific provision of this Agreement ("SUPER
MAJORITY APPROVAL") shall be necessary before any of the following actions can
be taken on behalf of the Partnership:
(a) Approving any interim and permanent financing agreements that
are recourse to the Partners and/or the Partnership and any amendments or
restructuring thereof, and mortgaging or pledging any of the material
assets of the Partnership in connection therewith.
(b) Admitting new partner(s), other than as a result of a
Disposition.
(c) A merger or consolidation of the Partnership with another
entity.
(d) A sale of all of the assets of the Partnership or a sale of a
portion of the assets of the Partnership representing substantially all
the market value of the assets of the Partnership.
3.5 INDEMNIFICATION OF MANAGEMENT COMMITTEE MEMBERS. THE PARTNERSHIP SHALL
DEFEND, INDEMNIFY, HOLD HARMLESS, RELEASE AND DISCHARGE THE MEMBERS OF THE
MANAGEMENT COMMITTEE, INCLUDING THE ALTERNATES, AND MEMBERS OF ANY COMMITTEE
ESTABLISHED BY THE MANAGEMENT COMMITTEE, AGAINST ALL ACTIONS, CLAIMS, DEMANDS,
COSTS AND LIABILITIES ARISING OUT OF THE ACTS (OR FAILURE TO ACT) OF ANY SUCH
PERSONS IN GOOD FAITH WITHIN THE SCOPE OF THEIR AUTHORITY IN THE COURSE OF THE
PARTNERSHIP'S BUSINESS (INCLUDING THE NEGLIGENCE OF SUCH MEMBERS AND
ALTERNATES), AND SUCH PERSONS SHALL NOT BE LIABLE FOR ANY OBLIGATIONS,
LIABILITIES OR COMMITMENTS INCURRED BY OR ON BEHALF OF THE PARTNERSHIP AS A
RESULT OF ANY SUCH ACTS OR FAILURE TO ACT FOR WHICH THEY ARE INDEMNIFIED.
3.6 MANAGING PARTNER. The day-to-day management of the Partnership and
Partnership Operations shall be administered by a managing partner, which shall
be a Partner (the "MANAGING PARTNER"). The Managing Partner may delegate its
duties or any part thereof, as Managing Partner, to one or more persons,
pursuant to agreements approved by the requisite vote of the Management
Committee; provided, however, notwithstanding such delegation the Managing
Partner shall be liable jointly and severally with such persons for the
performance of its obligations hereunder. PMBPC is designated as the initial
Managing Partner.
3.7 REMOVAL OR RESIGNATION OF THE MANAGING PARTNER. The Managing Partner
may be discharged of its powers, duties and responsibilities as the Managing
Partner and terminated as follows:
(a) The Management Committee (without the participation of the
member representing the Managing Partner or its Affiliates) may remove the
Managing Partner if the Managing Partner has (1) performed or failed to
perform its duties under this Agreement in a manner that is grossly
negligent or in a manner that constitutes willful misconduct, as follows:
(i) If the Managing Partner agrees to its removal under this
SECTION 0, then such removal shall be accomplished by written notice
from the Management Committee (without the participation of the
member representing the Managing Partner or its Affiliates) to the
Managing Partner which shall state the name of the successor
Managing Partner and the date on which the successor Managing
Partner will assume the
responsibilities of the Managing Partner under this Agreement. The
removal shall become effective on the date that the successor
Managing Partner assumes the duties of the Managing Partner.
(ii) If the Managing Partner does not agree to removal under
this SECTION 0, then the Managing Partner's removal under this
Section shall be accomplished by written notice from the Management
Committee (without the participation of the member representing the
removed Managing Partner or its Affiliates) to the Managing Partner,
after a determination, pursuant to SECTION 0 of this Agreement or
otherwise as the Partners may agree, that the Managing Partner has
acted with gross negligence or in a manner that constitutes willful
misconduct. Such notice shall state the name of the successor
Managing Partner and the date on which the successor Managing
Partner will assume the responsibilities of the Managing Partner
under this Agreement. The removal shall become effective on the date
that the successor Managing Partner assumes the duties of the
Managing Partner.
(b) The Managing Partner shall be deemed to have resigned if (1) the
Ownership Interest of the Managing Partner and its Affiliates is reduced
to less than fifteen percent (15%) (in a single transaction or in a series
of transactions), during the time period it is acting as Managing Partner;
(2) a reduction of the Managing Partner's Ownership Interest pursuant to
SECTION 0 occurs, (3) a Change of Control occurs with respect to the
Managing Partner, (4) any of the events described in SECTIONS 0, 0, 0 OR 0
occur with respect to the Managing Partner or (5) the Managing Partner
withdraws from the Partnership. A "CHANGE OF CONTROL" shall mean a change
of more than fifty percent (50%) (in a single transaction or series of
transactions) in (1) the direct ownership of such entity (other than a
transfer to a Wholly Owned Affiliate) or (2) the ownership of an entity
that directly or indirectly owns such entity as its principal asset (other
than a transfer to a Wholly Owned Affiliate). Promptly after the
occurrence of any of such events, the Management Committee (without the
participation of the member representing the removed Managing Partner or
its Affiliates) shall provide to the Managing Partner a written notice
which shall state the name of the successor Managing Partner and the date
on which the successor Managing Partner will assume the responsibilities
of the Managing Partner under this Agreement. Such resignation shall
become effective on the date that the successor Managing Partner assumes
the duties of the Managing Partner.
(c) The Managing Partner, substantially contemporaneously with the
submission to the Management Committee of any Operating Budget, may resign
its duties as the Managing Partner by written notice to the Management
Committee. The resignation shall not become effective until the successor
Managing Partner assumes the duties and obligations of the Managing
Partner, which the Partners shall cause to occur not later than one
hundred twenty (120) days after the submission by the Managing Partner of
its resignation.
(d) In the event the Managing Partner is removed or resigns pursuant
to this SECTION 0, the Managing Partner shall submit to the Management
Committee a final accounting of its operations under this Agreement. At
the request of the Management Committee, the departing Managing Partner
shall take an inventory of all materials relating to the Processing
Facility. The departing Managing Partner shall deliver to the successor
Managing Partner all records, reports and data that are in its possession
as the Managing Partner. Upon the delivery of such records, reports and
data, the departing Managing Partner shall be released and discharged
from, and the successor Managing Partner shall assume, all duties and
obligations of the Managing Partner under this Agreement; provided that
any liability of the departing Managing Partner that accrued prior to the
effective date of the change of the Managing Partner shall,
notwithstanding the release or discharge of the departing Managing
Partner, continue to remain a liability of the departing Managing Partner.
The former Managing Partner may retain copies of all such records, reports
and data as the former Managing Partner may require, which copies will be
prepared at the expense of the former Managing Partner.
(e) If the Managing Partner is removed or resigns pursuant to this
SECTION 0, the Management Committee shall select a successor Managing
Partner by Majority Approval. The vote of the member of the Management
Committee representing the Partner that was removed as the Managing
Partner shall be excluded if such member does not vote or such member only
votes for such removed Managing Partner to succeed itself.
3.8 DUTIES OF THE MANAGING PARTNER. All of the Managing Partner's duties
shall be performed pursuant to an approved budget as provided in ARTICLE 0. The
Managing Partner will actively manage and conduct the day-to-day business of the
Partnership, devoting appropriate time and talents to such management so as to
conduct the business of the Partnership in a good and businesslike manner and in
accordance with good and prudent practice within the industry. In connection
therewith, the Managing Partner shall provide supervisory, administrative and
technical services to the Partnership and shall perform such services with the
same degree of diligence and care that it would exercise if the Partnership were
owned solely by the Managing
Partner. Absent express contrary direction from the Management Committee in the
case of SECTIONS 0, 0, 0, 0 AND 0, or unless otherwise specified in this
Agreement, the Managing Partner shall have the responsibility and authority,
without the prior or subsequent approval of the Management Committee, to take or
cause to be taken the following actions for and on behalf of the Partnership:
(a) Perform the day-to-day operations of the Partnership, including
overseeing the operation and maintenance of the Processing Facility and
overseeing all construction activities.
(b) Negotiate and execute gas processing, gas purchase Liquid
fractionation, and Liquid sales agreements under terms of service and
rates as substantially approved by the Management Committee under SECTION
0 AND 0 under which the Partnership will process gas, purchase gas,
fractionate Liquids or sell Liquids.
(c) Obtain all permits, certificates and licenses necessary for the
operation and maintenance of the Processing Facility, and perform the
administrative functions of the Partnership, including, without
limitation, providing legal, accounting (in accordance with ARTICLE 0),
engineering, planning, budgeting, reporting and other technical services,
and maintain the records of the Partnership.
(d) Perform or cause to be performed all necessary meter reading and
chart calculations.
(e) Protect and preserve the title and interests of the Partnership
with respect to a Processing Facility and other assets owned by the
Partnership.
(f) Enter into Processing Facility design and construction contracts
and purchase materials, equipment, rights-of-way and easements in
connection with any Project Plans approved by the Management Committee.
(g) Negotiate, enter into and supervise the performance of contracts
other than those contemplated in SECTIONS 3.8(B) AND (F) and amendments
thereto with third parties as may be necessary, appropriate or advisable
in furtherance of the purposes of the Partnership business.
(h) Prepare and timely make such filings with any governmental
authority as may be required to construct and operate a Processing
Facility.
(i) Maintain the assets of the Partnership in good order and repair.
(j) Prepare and furnish to governmental regulatory bodies all
reports, statements and information that they may reasonably request or to
which they are legally entitled concerning a Processing Facility or the
Partnership.
(k) Execute documents requiring execution by the Partnership (both
those requiring approval of the Management Committee and those not
requiring approval).
(l) Initiate, defend, negotiate and otherwise handle claims against
the Partnership or a Partner, the Managing Partner, or other person or
entity to be indemnified by the Partnership or claims of the Partnership
against third parties, where such claims (including attorneys' fees to be
incurred by the Partnership) are less than $25,000 in value (including
approving employment of all attorneys representing the Partnership in such
matters).
(m) Collect revenues for the Partnership (in accordance with budgets
approved by the Management Committee) and make cash calls on and
distributions to the Partners.
(n) In the event of, or reasonable anticipation of, any occurrence
or condition which might (1) threaten life, property or the environment,
(2) render a Processing Facility incapable of normal operation, (3)
jeopardize the investment of the Partnership in a Processing Facility or
(4) if required in order to comply with law or an order of a governmental
authority with jurisdiction over a Processing Facility, the Managing
Partner shall take such steps and incur such expenses and costs as in its
reasonable opinion are required to deal with such emergency or requirement
without being subject to the monetary spending limits imposed on the
Managing Partner herein. The Managing Partner shall report such an
emergency or requirement to the Management Committee as promptly as
possible.
(o) Not later than July 15th following the end of each of the
Partnership's fiscal years, furnish information necessary to prepare and
file all Partnership tax returns.
(p) Prepare Construction Budgets and Operating Budgets pursuant to
SECTIONS 0 AND 0.
(q) Provide and maintain adequate insurance coverage for the account
of the Partnership with a reliable insurance company(s) authorized to do
business in the area of the Processing Facility in accordance with the
requirements of ARTICLE 0, if reasonably available, and to charge the
Partnership for the actual cost of such insurance.
(r) Maintain the bank accounts of the Partnership, make
distributions thereunder, and pay invoices for expenses accrued by the
Partnership.
(s) Perform the functions described in the Accounting Procedures.
(t) Perform such other acts reasonably necessary, appropriate or
advisable to carry out the Managing Partner's duties under this Agreement
to the extent that such acts are not matters to be voted on by the
Management Committee as described in SECTIONS 0 OR 0 or other provisions
hereof.
3.9 AUTHORIZATION. Subject to the express restrictions and limitations set
forth in this Agreement, the Partnership authorizes the Managing Partner to
perform any and every act and duty and to exercise any and every power of the
Managing Partner as authorized by this Agreement, as follows:
(a) To act in the name of and on behalf of the Partnership.
(b) In the Partnership's name and on its behalf, to make, execute,
acknowledge and deliver all contracts, assignments, and other agreements,
instruments or documents as are contemplated in this Agreement.
(c) Generally, to take and perform any and all actions necessary,
appropriate or convenient to fulfill the obligations and duties of the
Managing Partner as authorized by this Agreement.
3.10 INDEMNIFICATION OF THE MANAGING PARTNER. THE PARTNERSHIP SHALL
DEFEND, INDEMNIFY, HOLD HARMLESS, RELEASE AND DISCHARGE THE MANAGING PARTNER AND
ITS AFFILIATES TO WHICH CERTAIN DUTIES UNDER THIS AGREEMENT HAVE BEEN DELEGATED
AND THEIR OFFICERS, DIRECTORS, AGENTS AND EMPLOYEES HARMLESS, WHEN ACTING AS OR
FOR THE MANAGING PARTNER, AGAINST ANY AND ALL CLAIMS, LOSSES, LIABILITIES,
DAMAGES AND CAUSES OF ACTION, WHETHER BASED ON TORT, BREACH OF CONTRACT OR ANY
OTHER LEGAL THEORY (TO THE EXTENT THAT SUCH CLAIMS, LOSSES, LIABILITIES, DAMAGES
AND CAUSES OF ACTION ARE NOT PAID BY INSURANCE CARRIED PURSUANT TO THIS
AGREEMENT), ON ACCOUNT OF TAXES, LIENS, DEBTS, PERSONAL INJURIES, DEATH OR
DAMAGE TO
PROPERTY AND ALL OTHER CLAIMS OR DEMANDS OF EVERY CHARACTER ARISING OUT OF, IN
CONNECTION WITH, OR AS AN INCIDENT TO, ANY ACT OR OMISSION IN CONNECTION WITH
THE MANAGING PARTNER'S OR SUCH AFFILIATES' PERFORMANCE OF ITS DUTIES AND
RESPONSIBILITIES UNDER THIS AGREEMENT AS OR FOR THE MANAGING PARTNER, INCLUDING
NEGLIGENCE (BUT NOT GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, EXCEPT WHEN SUCH
CLAIMS, LOSSES, LIABILITIES, DAMAGES AND CAUSES OF ACTION ARISE AS A RESULT OF
THE MANAGING PARTNER'S OR SUCH AFFILIATES' PERFORMANCE OR OMISSION IN ACCORDANCE
WITH THE INSTRUCTIONS OF THE MANAGEMENT COMMITTEE GIVEN SPECIFICALLY WITH
RESPECT TO THE PRECISE MANNER IN WHICH THE MANAGING PARTNER OR SUCH AFFILIATES
IS TO PERFORM THE SPECIFIED TASK) OF THE MANAGING PARTNER, SUCH AFFILIATES, OR
THEIR OFFICERS, DIRECTORS, AGENTS OR EMPLOYEES.
3.11 THE MANAGING PARTNER'S LIABILITY. THE MANAGING PARTNER, ITS
AFFILIATES AND THEIR OFFICERS, DIRECTORS, AGENTS AND EMPLOYEES SHALL NOT BE
LIABLE TO THE PARTNERSHIP OR ANY PARTNER FOR ANY LOSS OR DAMAGE SUFFERED BY THE
PARTNERSHIP OR A PARTNER RESULTING FROM THE PERFORMANCE OF THE MANAGING
PARTNER'S DUTIES AND RESPONSIBILITIES UNDER THIS AGREEMENT, EXCEPT WHEN AND TO
THE EXTENT THAT SUCH LOSS OR DAMAGE RESULTS FROM THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF THE MANAGING PARTNER OR ITS AFFILIATES OR THEIR RESPECTIVE
OFFICERS, DIRECTORS, AGENTS OR EMPLOYEES; PROVIDED THAT, WHERE SUCH LOSS OR
DAMAGE ARISES AS A RESULT OF THE MANAGING PARTNER'S PERFORMANCE OR OMISSION IN
ACCORDANCE WITH THE INSTRUCTIONS OF THE MANAGEMENT COMMITTEE GIVEN SPECIFICALLY
WITH RESPECT TO THE PRECISE MANNER IN WHICH THE MANAGING PARTNER IS TO PERFORM
THE SPECIFIED TASK, IT SHALL BE DEEMED THAT SUCH LOSS OR DAMAGE WAS NOT THE
RESULT OF GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE MANAGING PARTNER OR ITS
AFFILIATES OR THEIR RESPECTIVE OFFICERS, DIRECTORS, AGENTS OR EMPLOYEES.
3.12 EXCLUSION OF SUSPENSION OF VOTE. If a Partner is excluded or
suspended from voting under this Agreement, the percentage of Ownership
Interests required for the applicable approval shall exclude the Ownership
Interest of such Partner.
ARTICLE 4.
CONSTRUCTION/ACQUISITIONS
4.1 FACILITIES TO BE CONSTRUCTED OR ACQUIRED. From time to time hereafter,
the Partnership may agree to construct a proposed Processing Facility or acquire
an existing Processing Facility, as may be approved by the Management Committee
pursuant to SECTION 0.
4.2 ENGINEERING PLAN AND PROJECT PLANS.
(a) Prior to submission for the approval required by SECTION 0, the
Managing Partner shall complete an engineering study for feasibility of
the Processing Facility to be constructed or acquired. In connection with
the initial Processing Facility under consideration by the Partners, until
approval of a Construction Budget for the initial Processing Facility, the
Managing Partner shall be authorized to incur costs on behalf of the
Partnership as set forth in that certain Funding Agreement dated August 6,
1996 (the "FUNDING AGREEMENT"), and such costs are hereby approved by the
Management Committee.
(b) The Managing Partner shall prepare for approval by the
Management Committee, a written description of the location of the
proposed Processing Facility to be constructed or acquired, and (i) for a
construction project: the specifications for the design, engineering,
materials and equipment to be used in the construction of such Processing
Facility to be constructed by the Partnership, as well as the estimated
costs, estimated economic projections, estimated construction schedule and
date of completion of such Processing Facility, or (ii) for an acquisition
project the proposed purchase price, projected acquisition costs,
financial projections, closing schedule and material terms of the
acquisition. Upon request, the Managing Partner shall furnish to the
Management Committee all documents relating to such acquisition available
to the Managing Partner ("PROJECT PLAN").
(c) From time to time, the Managing Partner shall prepare and submit
within agreed reasonable time periods, Project Plans for projects as
requested by the Management Committee.
4.3 CONSTRUCTION/ACQUISITION BUDGETS AND APPROVALS. With respect to the
construction or acquisition of a Processing Facility, the following procedures
shall apply:
(a) If any Project Plans are approved by the Management Committee,
the Managing Partner shall submit to the Management Committee for its
approval
of a budget ("CONSTRUCTION BUDGET" or, in the case of an acquisition,
"ACQUISITION BUDGET") stating the estimated costs that the Managing
Partner expects to incur in connection with the acquisition or
construction of the proposed Processing Facility. A Construction Budget
shall be submitted at least sixty (60) days prior to commencement of
construction of the approved Processing Facility. An Acquisition Budget
shall be submitted sixty (60) days prior to the date an offer for such
acquisition is to be made (or such shorter period of time available to the
Partnership, if an offer is required in less than sixty (60) days).
(b) A Construction Budget shall set forth the estimated costs and
expenditures by quarterly periods, shall itemize the costs estimated in
the budgets by such individual line items, and shall include such
supporting documentation and data as reasonably requested by the
Management Committee. An Acquisition Budget shall set forth the
acquisition costs and related transaction costs, and shall include such
supporting documentation and data as reasonably requested by the
Management Committee.
(c) Unless otherwise authorized by the Management Committee,
construction costs or acquisition costs shall not be incurred for the
construction or acquisition of any Processing Facility until a
Construction Budget or Acquisition Budget, as applicable, has been
approved by the Management Committee.
(d) During the progress of any construction or acquisition, the
Managing Partner shall notify the Management Committee promptly of
unsatisfactory progress or of any occurrence that may cause a
substantially higher cost than was estimated and approved in the
applicable budget. If it appears that any aggregate of items not
contemplated by the applicable budget have estimated costs in excess of
five percent (5%) of the approved budget, then any such excess budgeted
cost or unbudgeted cost shall not be incurred without the prior approval
of the Management Committee. This approval may be oral in order to
expedite action, but shall be followed immediately by written approval.
4.4 COSTS AND PAYMENT. The Managing Partner shall keep a full and accurate
account of all costs and expenses incurred in connection with the planning,
design, construction, testing and placing in service or acquisition of
Partnership facilities in accordance with the Accounting Procedures. The
Partnership shall provide funds for all such costs and expenses in accordance
with this Agreement.
4.5 CONSTRUCTION. The Managing Partner shall direct all activities
necessary to design, construct, test and place in service any facilities
authorized by the Management Committee, all
of which shall meet any applicable minimum federal safety standards. All
equipment and materials and third-party contractors, as required, shall be
obtained based on competitive bids. Unless otherwise specifically authorized in
writing by the Management Committee, the Managing Partner shall require (a) a
performance bond payable to the Partnership from the contractor who actually
constructs Partnership facilities and (b) a payment bond, each in an amount
equal to the contractor's bid for performance of the construction.
4.6 PERMITS AND PROPERTY. The Managing Partner shall acquire, or cause to
be acquired, in the name of the Partnership, or for or on its behalf, all
permits, certificates, rights-of-way, leases and fee properties, and state,
county and/or federal approvals and authorizations as may be necessary for the
Partnership to construct, own and operate any approved facilities constructed by
the Partnership. Any permits, certificates, rights of-way, leases, fee
properties, approvals and authorizations acquired by the Managing Partner in its
own name pursuant to this section shall be immediately assigned to the
Partnership.
4.7 INSPECTION AND TESTING. During construction of any Partnership
facilities each Partner shall have the right of access to the construction
site(s) and the right to inspect all phases of the construction work and all
records pertaining thereto at all such times and locations as do not interfere
with such construction. The Managing Partner shall advise each Partner in
writing when installation of all or any portion of the Partnership facilities
has been completed and the date, time and place of any testing of such
Partnership facilities or any portion thereof. Each Partner shall have the
option to be present and witness any and all such testing. Upon completion of
the installation and testing of the Partnership facilities, the Managing Partner
shall provide the Partners with "as built" drawings and data relating to
engineering calculations, specifications, materials and equipment installation
and testing of the Partnership facilities, and an itemized inventory and
documentation of the Partnership facilities.
4.8 PARTICIPATION IN PROJECTS IN AMI.
(a) None of the Partners, whether directly or indirectly, through
any ownership or other interest, whether through Affiliates or otherwise,
shall participate in any AMI Project (hereinafter defined) without
complying with the provisions of this SECTION 4.8. An "AMI PROJECT" shall
mean any project included in the definition of Partnership Operations. In
the event any Partner participates in an AMI Project, whether directly or
indirectly, through any ownership or other interest, whether through
Affiliates or otherwise ("ACQUIRING PARTNER") such Acquiring Partner shall
offer, or cause to be offered, to each of the other Partners (each a
"NON-ACQUIRING PARTNER") the opportunity to participate in such AMI
Project on the same terms and conditions applicable to such Acquiring
Partner on a pro rata basis, in the proportion that the Ownership Interest
of such Partner who desires to participate in the AMI Project bears to the
Ownership Interest of all Partners (including the Acquiring Partner) who
desire to participate in the AMI Project.
(b) An Acquiring Partner who participates in an AMI Project shall
provide, subject to confidentiality or contractual restrictions, to the
Non-Acquiring Partners written notice of such participation, together with
all relevant information pertaining to the AMI Project in the possession
of the Acquiring Partner (or the person through which it is participating
in such AMI Project). If the Acquiring Partner has a right to make
available such information to the Non-Acquiring Partners, each
Non-Acquiring Partner prior to its receipt of such information shall
execute a confidentiality agreement containing the same terms as the
confidentiality agreement to which the Acquiring Partner is bound, unless
such Non-Acquiring Partner elects not to receive such information. If the
Acquiring Partner does not have the right to provide the relevant
information with respect to the AMI Project to the Non-Acquiring Partners
prior to the time the Acquiring Partner completes the transaction pursuant
to which it would participate in the AMI Project, then the obligations of
the Acquiring Partner under SECTION 4.8 to provide the Non-Acquiring
Partners the opportunity to participate in such AMI Project shall be
deferred until such time as the Acquiring Partner closes such transaction,
at which time the Acquiring Partner shall comply with the provisions of
this SECTION 4.8. Each of the Non-Acquiring Partners shall have sixty (60)
days in the case of an acquisition, and one hundred twenty (120) in the
case of construction, to notify the Acquiring Partner in writing of its
election to participate in the AMI Project. Each such notice shall
stipulate whether the Non-Acquiring Partner desires to limit its
participation to its Ownership Interest in the Partnership or would be
willing to acquire on a pro rata basis, in the ratio that its Ownership
Interest
bears to the Ownership Interests of all Partners who participate in the
AMI Project. If the terms of an acquisition require a lesser period of
time for the submission of an offer, the sixty (60) day response period
shall be reduced to a period ending three (3) days before the submission
deadline as provided by the terms as such acquisition. Failure of a
Non-Acquiring Partner to respond timely shall constitute an election by
such Non-Acquiring Partner not to participate in the AMI Project and
failure to specify in a timely response whether a Non-Acquiring Partner
elects to acquire a pro rata share of the AMI Project shall be an election
to limit participation to such Non-Acquiring Partners' Ownership Interest
in the Partnership.
If all Partners agree to participate in an AMI Project, such AMI
Project shall be pursued by the Partnership unless all of the Partners
elect otherwise. However, if an AMI Project includes persons other than
the Acquiring Partner, then such AMI Project shall be pursued pursuant to
the agreements to which the Acquiring Party is obligated or, in absence of
such agreements, agreements to form a limited liability company in form
and substance substantially similar to this Partnership Agreement unless
all the Partners otherwise agree. If less than all Partners elect to
participate in an AMI Project, such AMI Project shall be pursued pursuant
to such agreements as may be agreed by all of such Partners who
participate in such AMI Project or, in absence of such agreement,
agreements to form a limited liability company, in form and substance
substantially similar to this Partnership Agreement.
ARTICLE 5.
CAPITAL CONTRIBUTIONS/FINANCING
5.1 INITIAL CAPITAL CONTRIBUTIONS. Each Partner shall be deemed to have
contributed to the Partnership the amounts it has funded or subsequently funds
pursuant to the Funding Agreement.
5.2 OTHER CONTRIBUTIONS. In order to meet the cash requirements of the
Partnership in excess of the contributions made pursuant to SECTIONS 0, that
have been approved in a Construction Budget, Acquisition Budget or Operating
Budget, the Managing Partner may make cash calls monthly or at less frequent
intervals on the Partners for required capital contributions by each of the
Partners proportionate to its Ownership Interest. In addition, the Managing
Partner may make cash calls for costs and expenses of the Partnership approved
by the Management Committee that are not contained within an approved
Construction Budget, Acquisition Budget or Operating Budget. Each cash call made
pursuant to this SECTION 0 shall be in writing and shall contain the following
information:
(a) The total amount of contributions requested from all Partners.
(b) The amount of contribution required from each Partner, including
the amount required from the Partner to whom the request is addressed.
(c) The purpose for which the funds are to be applied in reasonable
detail.
(d) The date on which payments of the contributions shall be made by
each Partner, which shall be not less than ten (10) days and not more than
thirty (30) days, unless otherwise approved by the Management Committee,
after the date on which the cash call is received by each Partner.
5.3 FAILURE TO MAKE CONTRIBUTIONS.
(a) If a Partner shall default in any of its obligations under
SECTION 0 to make contributions to the Partnership in accordance with the
terms of any call for such contributions, the Managing Partner shall
immediately notify each of the Partners (a "DEFAULT NOTICE"). If the
contribution has not been made by the defaulting Partner within two (2)
business days after the receipt of the Default Notice, the Managing
Partner shall again notify each of the Partners. Within five (5) business
days after the receipt of the Default Notice, if the default has not been
cured by the payment of the contribution and interest thereon (calculated
as hereinafter provided) (the "DEFAULT AMOUNT"), each of the
non-defaulting Partners may, in its sole discretion, pay to the Managing
Partner its portion (based on the ratio that each non-defaulting Partner's
Ownership Interest bears to the aggregate Ownership Interests of all
non-defaulting Partners participating in such contribution (the
non-defaulting Partners that so elect are herein referenced to as the
"PARTICIPATING PARTNERS") of the Default Amount.
(b) During the continuance of any payment default by any Partner,
the Partner shall not be entitled to receive any cash distributions and
the Participating Partners will share in all cash distributions that
otherwise would have been made to the defaulting Partner on a
proportionate basis based on the ratio that each Participating Partner's
Ownership Interest bears to the aggregate Ownership Interests of all
Participating Partners. The defaulting Partner shall not be permitted to
be represented on the Management Committee or other committees, and will
have its voting rights suspended, but the defaulting Partner shall
continue to be liable for its obligations as a Partner under this
Agreement. If a defaulting Partner cures its default within the thirty
(30) day period described in SECTION 0, by paying
to the Partnership the amount of the default and the interest thereon
calculated under SECTION 0 less the amount that was distributed to the
Participating Partners from the amounts that were otherwise distributable
to the defaulting Partner, the amount paid shall be distributed to the
Participating Partners pro rata in accordance with their Ownership
Interests.
(c) Interest shall accrue on unpaid contributions from the date that
the contribution became payable until the contribution is paid at a rate
equal to the lesser of fifteen percent (15%) per annum or the maximum
lawful rate.
(d) In the event that a defaulting Partner fails to pay to the
Partnership any portion of the Default Amount as provided herein on or
prior to the thirtieth (30th) day after the due date for the contribution
or the Participating Partners have not received from the amounts that were
otherwise distributable to the defaulting Partner the Default Amount plus
interest thereon as provided herein prior to the thirtieth (30th) day
after the due date for the contribution, the Participating Partners may
elect to (x) continue receiving the benefits of SECTIONS 0 and 0 or (y)
require the Partnership to reduce the Ownership Interest of the defaulting
Partner, effective on the thirty-first (31st) day after the due date for
the contribution (the "ADJUSTMENT DATE"), to a percentage determined by
multiplying the Ownership Interest of the defaulting Partner (as
determined on the Adjustment Date) by a number equal to one minus a
fraction, the numerator of which is one hundred fifty percent (150%) of
the Default Amount less the amounts that have been distributed to the
Participating Partners prior to the adjustment Date that were otherwise
distributable to the defaulting Partner, and the denominator of which is
the product of (1) the Ownership Interest of the defaulting Partner (as
determined on the Adjustment Date) multiplied by (2) the aggregate amount
of the Capital Accounts of all Partners on the Adjustment Date. The
adjustment shall apply separately for each default on a cash call. The
Ownership Interests of the Participating Partners shall be adjusted upward
by the proportion of the amount of the downward adjustment made to the
Ownership Interest of the defaulting Partner.
(e) If the Participating Partners have elected the remedy provided
in SECTION 0(Y), the default to which such election is related will be
deemed to have been cured and the defaulting Partner will no longer be
deemed a non-defaulting Partner for this SECTION 0, except for purposes of
SECTION 0.
(f) If at anytime or over a course of time, the Ownership Interest
of a Partner is reduced by seventy-five percent (75%) or more as a result
of the provisions of this SECTION 0, the defaulting Partner shall not be
permitted to be
represented on the Management Committee or other committees and will have
its voting rights suspended, but the defaulting Partner shall continue to
be liable for its obligations as a Partner under this Agreement and shall
continue to have all other rights hereunder.
(g) Notwithstanding the foregoing, the remedies provided in SECTION
0 are cumulative and are not exclusive, and in the event of a default by a
Partner, the Partnership and the Partners shall be entitled to all
available legal or equitable remedies.
ARTICLE 6.
OPERATING COSTS AND COMPENSATION OF
THE MANAGING PARTNER AND OTHER PARTNERS
6.1 BUDGETS, APPROVALS AND AUTHORIZATIONS.
(a) Beginning within the 1997 Calendar year, each year, the
Management Committee shall approve a budget estimating costs and expenses
which will be incurred in connection with the operation and maintenance of
each Processing Facility ("OPERATING BUDGET"). On or before February 1,
1997, the Managing Partner shall prepare and submit for approval of the
Management Committee an Operating Budget for the balance of the 1997
fiscal year of the Partnership. On or before October 1 of each year
beginning with the 1997 Calendar Year, the Managing Partner shall prepare
and submit for approval of the Management Committee an Operating Budget
estimating the revenues, costs and expenses which will be received or
incurred in connection with Partnership Operations during the next
succeeding fiscal year. The Operating Budgets shall set forth the
estimated costs and expenditures by quarterly periods and shall itemize
the costs estimated in the budgets by such individual line items as
reasonably requested by the Management Committee. All Operating Budgets
shall be updated by the Managing Partner, and the Managing Partner shall
furnish a copy of the updated Operating Budget to each Partner, on or
before the tenth (10th) day of the first (1st) month of each Calendar
Quarter.
(b) The Management Committee shall notify the Managing Partner of
its approval or disapproval of the Operating Budget within fifteen (15)
days after receipt of such budget. If the Management Committee notifies or
is deemed to have notified the Managing Partner of its disapproval of all
or any portion of an Operating Budget, then, until the Management
Committee has approved a revised budget, the Managing Partner is
authorized to incur (1) costs set forth in any line
item approved by the Management Committee and (2) any additional costs in
connection with line items that were not approved by the Management
Committee up to an aggregate amount of not more than the lesser of (x)
fifty percent (50%) of the budget that was submitted by the Managing
Partner but not approved by the Management Committee, less the amounts set
forth in (1) above, and (y) the amount of the prior year's budget for such
line item. If the Management Committee fails to notify the Managing
Partner in writing of its approval or disapproval of any budget within
fifteen (15) days after receipt of such budget or revised budget, then the
Management Committee shall be deemed to have rejected such budget.
(c) If, during the period covered by an approved Operating Budget,
the Managing Partner determines that an adjustment to the estimated costs
set forth in the approved budget is necessary or appropriate, then the
Managing Partner shall submit to the Management Committee for approval an
adjusted budget setting forth such adjusted or additional line items as
are necessary or required. The same procedures set forth in SECTIONS 0 AND
0 with regard to the approval of annual Operating Budgets shall apply to
the approval of any adjusted costs budget, except that the Managing
Partner may provide for a period less than fifteen (15) days, but not less
than five (5) days, in which the Management Committee shall approve or
disapprove an adjusted budget, and the Management Committee's approval of
an adjusted budget may be oral in order to expedite action, but such
approval shall be followed immediately with written approval.
(d) The Managing Partner is authorized to incur costs in excess of
the amount budgeted in an approved budget or adjusted budget, and the
Managing Partner is authorized to incur costs in connection with an
unbudgeted item; provided that the Managing Partner may not incur such
excess or unbudgeted costs in a total amount greater than fifteen (15)
percent of the total amount set forth in the approved budget or adjusted
budget, without the approval of the Management Committee. In addition, if
any line item variance from the budgeted amount exceeds an amount equal to
the greater of fifteen percent (15%) of the budgeted cost for that item or
$50,000, or if the cost of an unbudgeted item exceeds the lesser of
fifteen percent (15%) of the total applicable budget or $50,000, then the
Managing Partner shall advise the Management Committee in the next
quarterly budget of any such variance from the approved budget, and the
Managing Partner also shall provide the Management Committee with an
explanation of the reason for such variance.
6.2 BUSINESS PLAN. Contemporaneously with the submission by the Managing
Partner
of the Operating Budget, the Managing Partner shall submit a business plan for
the next fiscal year and subsequent two (2) years that includes anticipated new
processing and fractionation activity for such years, anticipated revenues for
such years, anticipated capital expenditures for such years, anticipated cash
calls during such years, and anticipated cash distributions during such years.
6.3 COSTS AND PAYMENT. The Managing Partner shall keep a full and complete
account of all costs and expenses incurred by it in connection with the
operation and maintenance of each Processing Facility in accordance with the
Accounting Procedures included in the Construction and Operation Agreement
(hereafter defined) (the "ACCOUNTING PROCEDURES"). The Partners shall provide
funds for all costs incurred in connection with the operation and maintenance of
the Processing Facility in accordance with ARTICLE 0 of this Agreement.
6.4 PARTNERS' COOPERATION. Each Partner shall provide such documentation
as is required to perform the accounting set forth in the Accounting Procedures.
6.5 COMPENSATION OF THE MANAGING PARTNER. The Partnership shall compensate
the Managing Partner as provided in the Construction and Operation Agreement to
be executed by the Partnership, the Partners and an Affiliate of PMBPC (the
"CONSTRUCTION AND OPERATION AGREEMENT").
ARTICLE 7.
ALLOCATIONS AND DISTRIBUTIONS
7.1 REVENUE DISTRIBUTION.
(a) The Managing Partner shall deposit, or cause to be deposited,
all monies due to the Partnership and payable by third parties in a bank
account of the Partnership. Except as otherwise specifically provided in
this Agreement or in related agreements associated with the financing of
the Partnership, the Managing Partner shall pay, from those monies
received, all expenses accrued by the Partnership on a current basis. At
least monthly, by the last day of each month (commencing the first month
after the receipt by the Partnership of its first revenues), all cash
funds of the Partnership, other than funds provided by capital
contributions which shall not be distributed, that the Management
Committee reasonably determines are not needed for the payment of current
Partnership obligations or significant Partnership expenditures known by
the Managing Partner to be payable within the next ninety (90) day period
shall be distributed to the Partners in proportion to their respective
Ownership Interests.
(b) The distributions provided in this Section are subject to the
rights of the Participating Partners under SECTION 0 to receive the
distributions otherwise payable to a defaulting Partner.
(c) Notwithstanding the foregoing or any other provision contained
in this Agreement, (1) the Partnership may retain such insurance proceeds
and other amounts as the Management Committee shall reasonably determine
are necessary to pay Partnership liabilities and expenses and to restore,
preserve and protect Partnership property upon the occurrence of an
accident, catastrophe or similar event or to comply with all applicable
environmental laws, ordinances, rules and regulations, and (2) the
Partnership may retain amounts, as determined by the Management Committee,
for the purpose of creating a reserve from which to pay the remainder of
(i) the Partnership's share of the estimated cost of abandoning any
facilities owned by the Partnership minus (ii) the Partnership's share of
the estimated fair market value of any salvageable materials, supplies,
equipment and other personal property or fixtures located on or used in
connection with the Partnership's facilities in excess of the
Partnership's share of the estimated cost of salvage of such items.
(d) All Partnership distributions shall be charged to each Partner's
Capital Account.
7.2 INCOME TAX ALLOCATIONS. Subject to any special allocations required by
Treasury Regulations Sections 1.704-2(b), 1.704-2(i), and 1.704-2(j)(2)(ii),
relating to deductions and gains attributable to Nonrecourse Deductions and
Partner Nonrecourse Deductions (as those terms are defined in such Regulations),
the Partnership's items of income, gain, loss, deduction, and credit shall be
allocated among the Partners in each taxable year (or portion thereof) in the
same ratio in which Profits or Losses are allocated as provided below:
(a) Profits for any taxable year (or portion thereof) shall be
allocated in the same ratio as the Partners are entitled to distributions
from the Partnership under SECTION 0 hereof.
(b) Losses for any taxable year (or portion thereof) shall be
allocated among the Partners in proportion to their respective Ownership
Interests for such taxable year (or portion thereof).
(c) As used herein, "PROFITS" and "LOSSES" mean, for each taxable
year or other period, an amount equal to the Partnership's taxable income
or loss for such year or period, determined in accordance with Code
Section 703(a) (for this
purpose, all items of income, gain, loss, or deduction required to be
stated separately pursuant to Code Section 703(a)(1) shall be included in
taxable income or loss), with the following adjustments:
(1) Any income of the Partnership that is exempt from federal
income tax and not otherwise taken into account in computing Profits
and Losses pursuant to this definition of Profits and Losses shall
be added to such income or loss for the purpose of determining
Partner Capital Accounts;
(2) Any expenditures of the Partnership described in Code
Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B)
expenditures pursuant to Regulations Section 1.704-1(b)(2)(iv)(i),
and not otherwise taken into account in computing Profits and Losses
pursuant to this definition of Profits and Losses, shall be
subtracted from such income or loss for the purpose of determining
Partner Capital Accounts;
(3) In the event the Gross Asset Value of any Partnership
asset is adjusted as required by the terms of the definition of
Gross Asset Value hereof, the amount of such adjusted Gross Asset
Value shall be taken into account in accordance with Regulation
Section 1.704-1(b) for the purpose of determining Partner Capital
Accounts;
(4) Gain or loss resulting from any disposition of Partnership
assets with respect to which gain or loss is recognized for federal
income tax purposes shall be computed by reference to the Gross
Asset Value of the property disposed of in accordance with
Regulation Section 1.704-1(b) for the purpose of determining Partner
Capital Accounts, notwithstanding that the adjusted tax basis of
such property differs from its Gross Asset Value;
(5) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable
income or loss, for the purpose of determining Partner Capital
Accounts there shall be taken into account Depreciation for such
Fiscal Year or other period, computed in accordance with the
definition of Depreciation herein; and
(6) Notwithstanding any other provision of this definition of
Profits and Losses, any items which are specially allocated pursuant
to this SECTION 0 shall not be taken into account in computing
Profits or Losses
but shall be taken into account in computing Partner Capital
Accounts.
(d) As used herein, "GROSS ASSET VALUE" means, with respect to any
asset, the asset's adjusted basis for federal income tax purposes, except
as follows:
(1) The initial Gross Asset Value of any asset contributed by
a Partner to the Partnership shall be the gross fair market value of
such asset, as determined by the contributing Partner and the other
Partners;
(2) The Gross Asset Values of all Partnership assets shall be
adjusted to equal their respective gross fair market values, as
determined by the Partners, as of the following times: (i) the
acquisition of any additional interest in the Partnership by any new
or existing Partner in exchange for more than a DE MINIMIS Capital
Contribution; (ii) the distribution by the Partnership to a Partner
of more than a DE MINIMIS amount of Partnership assets as
consideration for an interest in the Partnership; and (iii) the
liquidation of the Partnership within the meaning of Regulations
Section 1.704-1(b)(2)(ii)(g); PROVIDED, however, that adjustments
pursuant to CLAUSES (I) AND (II) hereof shall be made only with the
consent of all the Partners;
(3) The Gross Asset Value of any Partnership asset distributed
to any Partner shall be the gross fair market value of such asset on
the date of distribution, as determined by the Partnership; and
(4) The Gross Asset Value of Partnership assets shall be
increased (or decreased) to reflect any adjustments to the adjusted
basis of such assets pursuant to Code Section 734(b) or Code Section
743(b), but only to the extent that such adjustments are taken into
account in determining Capital Accounts pursuant to Regulations
Section 1.704-1(b)(2)(iv)(m) and SECTION 0 hereof.
If the Gross Asset Value of an asset has been determined or adjusted pursuant to
the provisions of this SECTION 0, such Gross Asset Value shall thereafter be
adjusted by the Depreciation taken into account with respect to such asset for
purposes of computing Profits and Losses.
(e) As used herein, "DEPRECIATION" means, for each taxable year, or
other period, an amount equal to the depreciation, amortization, or other
cost recovery deduction allowable with respect to any asset for such year
or other
period, except that if the Gross Asset Value of an asset differs from its
adjusted basis for federal income tax purposes at the beginning of such
year or other period, Depreciation shall be an amount which bears the same
ratio to such beginning Gross Asset Value as the federal income tax
depreciation, amortization, or other cost recovery deduction for such year
or other period bears to such beginning adjusted tax basis; provided,
however, that if the federal income tax depreciation, amortization, or
other cost recovery deduction for such year is zero, Depreciation shall be
determined with reference to such beginning Gross Asset Value using any
reasonable method selected by the Partnership.
7.3 CURATIVE AMENDMENT. Notwithstanding any other provision of this
Agreement, the allocations shall affect an allocation for federal income tax
purposes in a manner consistent with Section 704(b) and the regulations
promulgated thereunder. If for any reason the allocations conflict with the
regulations under Section 704(b), the Partner designated as the Tax Matters
Partner may amend these provisions to the extent necessary to reflect
allocations consistent with the regulations.
7.4 SECTION 704(C). In accordance with Internal Revenue Code ' 704(c) and
the Treasury Regulations thereunder, income, gain, loss and deduction with
respect to any property contributed to the capital of the Partnership, shall,
solely for tax purposes, be allocated between the Partners so as to take account
of any variation between the adjusted basis to the Partnership for federal
income tax purposes and its fair market value. The Partners agree to use the
traditional method with curative allocations under Regulation Section 1.704-3(c)
for this purpose.
7.5 TRANSFERS. The allocation of items of income, gain, loss, deduction
and credit attributable to a partnership interest that is assigned during the
year will be done in accordance with Section 706(d). If more than one method is
permitted, the Tax Matters Partner can determine the method of allocation,
taking into account both the desire to match income and deductions and ease of
administration.
ARTICLE 8.
ACCOUNTING
8.1 FISCAL YEAR. The fiscal year of the Partnership shall be the calendar
year.
8.2 BOOKS OF ACCOUNT. The books of account of the Partnership shall be
kept and maintained, so far as is practicable, at the principal place of
business of the Managing Partner, or, if requested by the Managing Partner, at
such other place or places as may be approved by the Management Committee from
time to time. The books of account shall be maintained in accordance with
generally accepted accounting principles, consistently applied, and shall show
all items of investment, income and expense. Each of the Partners shall have
reasonable access to the books, records, data and information of the Partnership
(including information maintained by the Managing Partner) at any time during
normal business hours. Monthly statements of income and expense shall be
prepared by the Managing Partner and shall be furnished to the Partners along
with a statement of cash distributions made in accordance with ARTICLE 0. As
soon as practicable, but not later than July 15th following the end of each of
the Partnership's fiscal years, the Managing Partner shall cause to be delivered
to each Partner such federal, state and local income tax returns and such other
tax accounting information and schedules as shall be necessary for the
preparation by each Partner of its income tax returns for such fiscal year. As
soon as practicable, but not later than one hundred twenty (120) days following
the end of each of the Partnership's fiscal years, the Managing Partner shall
cause to be delivered to each Partner a profit and loss statement, a statement
of cash flows for such fiscal year, a balance sheet and a statement of each
Partner's capital account as of the end of such fiscal year together with an
audit report thereon by a nationally recognized firm of independent certified
public accountants selected by the Management Committee.
8.3 CAPITAL ACCOUNTS. A capital account ("CAPITAL ACCOUNT") shall be
established and maintained for each Partner. Each Partner's Capital Account
shall be maintained in the following manner:
(a) To each Partner's Capital Account there shall be credited the
amount of cash and Gross Asset Value of any asset contributed to the
Partnership by such Partner, such Partner's distributive share of Profits,
any items in the nature of income or gain which are specially allocated
pursuant to SECTION 0 hereof, and the amount of any Partnership
liabilities assumed by such Partner or which are secured by any asset of
the Partnership distributed to such Partner.
(b) To each Partner's Capital Account there shall be debited the
amount of cash and the Gross Asset Value of any Partnership asset
distributed to such Partner pursuant to any provision of this Agreement,
such Partner's distributive share of Losses, any items in the nature of
expenses or losses which are specially allocated pursuant to SECTION 0,
and the amount of any liabilities of such Partner assumed by the
Partnership or which are secured by any property contributed by such
Partner to the Partnership.
(c) In the event all or a portion of an interest in the Partnership
is transferred in accordance with the terms of this Agreement, the
transferee shall succeed to the Capital Account of the transferor to the
extent it relates to the transferred interest in the Partnership.
(d) In determining the amount of any liability for purposes of this
definition of Capital Accounts, there shall be taken into account Code
Section 752(c) and any other applicable provisions of the Code and
Regulations.
The foregoing provisions and the other provisions of this Agreement relating to
the maintenance of Capital Accounts and allocations are intended to comply with
Regulations Sections 1.704-1(b) and 1.704-2, and shall be interpreted and
applied in a manner consistent with such Regulations.
8.4 SURVIVAL OF TAX PROVISIONS. The provisions of this Agreement relating
to tax matters shall survive the termination of this Agreement and the
termination of any Partner's interest in this Partnership and shall remain
binding on the Partner for the period of time necessary to resolve with any
federal, state and local tax authorities any tax matter regarding the
Partnership.
8.5 AUDIT. Each Partner shall have the right at any time during and up to
twenty-four (24) months after the close of any fiscal year, but not more than
once in any twelve (12) month period, to audit, examine and make copies of or
extracts from the books of account or any other records of a Partner, the
Managing Partner, or the Partnership relating to the Partnership pertaining to
that fiscal year. Such right may be exercised during normal business hours
through any agent or employee of a Partner or the Managing Partner designated by
the Partner or the Managing Partner or by an independent certified public
accountant designated by the Partner or the Managing Partner. Such Partner or
the Managing Partner, as applicable, shall bear all expenses incurred in any
such examination or audit.
ARTICLE 9.
TERM AND TERMINATION
9.1 TERM. The Partnership shall continue in existence for a primary term
of thirty (30) years from the Effective Date and thereafter for successive
periods of one year; provided, that any Partner may elect to dissolve the
Partnership and this Agreement as of the end of such thirty (30) year period or
as of December 31 of each year after such 30-year period by giving the other
Partners written notice of such election not less than one year prior to the
date such termination is to take effect.
9.2 VOTE TO DISSOLVE. By Super Majority Approval, the Partners may elect
to dissolve the Partnership and terminate this Agreement at any time during the
term hereof.
9.3 OTHER REASONS FOR DISSOLUTION. The Partnership shall automatically and
without notice be dissolved upon the happening of any of the following events
(unless the applicable event is listed in SECTIONS 9.3 (A), (B), (C), (D) OR (G)
and, on or before ninety (90) days after the
occurrence of such event, all of the unaffected Partners waive such event in
writing and elect not to dissolve the Partnership).
(a) Proceedings shall be commenced by or against any of the Partners
(or general partner of a Partner) for any relief under any bankruptcy or
insolvency law, or any law relating to the relief of debtors, readjustment
of indebtedness, reorganization, arrangement, composition or extension;
and, if such proceedings have been commenced by a person other than a
Partner against any Partner (or general partner of a Partner), such
proceeding shall not have been dismissed, nullified, stayed or otherwise
rendered ineffective (but then only so long as such stay shall continue in
force or such ineffectiveness shall continue) within ninety (90) days
after such proceedings shall have been commenced.
(b) A decree or order of a court having jurisdiction in the premises
for the appointment of a receiver or liquidator or trustee or assignee in
bankruptcy or insolvency of a Partner (or general partner of a Partner) or
of a substantial part of a Partner's property, or for the winding up or
liquidation of its affairs, shall have been entered, and such decree or
order shall have remained in force undischarged and unstayed for a period
of ninety (90) days, or any substantial part of the property of a Partner
(or general partner of a Partner) shall be sequestered or attached and
shall not be returned to the possession of such Partner (or general
partner of a Partner) or released from such attachment within ninety (90)
days thereafter.
(c) A Partner (or general partner of a Partner) shall make a general
assignment for the benefit of creditors or shall admit in writing its
inability to pay its debts generally as they become due.
(d) The filing of a certificate of dissolution by a Partner (or
general partner of a Partner) under the laws of the State of its
incorporation or partnership, or the entering of a final order dissolving
any Partner by any court of competent jurisdiction.
(e) The sale or abandonment of all or substantially all of the
Partnership's business and assets.
(f) Any event which shall make it unlawful for the business of the
Partnership to be carried on or for the Partners to carry on such business
in partnership.
(g) A Partner withdraws from the Partnership.
9.4 WINDING UP.
(a) Upon a dissolution of the Partnership, the Partners shall
undertake the sale or abandonment of all of the Partnership's business and
assets, and each Partner shall bear its proportionate share (based on each
Partner's Ownership Interest) of all costs and expenses incurred in
connection with winding up the Partnership business and with abandonment
or sale of the Processing Facility. In the event of dissolution, the
Managing Partner, or if the Managing Partner caused the dissolution, then
whichever Partner chosen by the Management Committee, shall be the
liquidator of the Partnership. The Management Committee shall determine,
among other things, arrangements with creditors, the extent to which
assets should be sold or distributed in kind and the amount of any reserve
for contingent liability. After the Partnership shall be dissolved
pursuant to the provisions of this ARTICLE 0, the Managing Partner shall
continue to exercise the powers vested in it by this Agreement and
continue Partnership Operations in the normal course to the extent
appropriate for the purpose of winding up the business of the Partnership
and liquidating the assets thereof in an orderly manner, but the Managing
Partner shall engage in no new business on behalf of the Partnership
during the period of such winding up.
(b) After the payment of debts or otherwise providing for the
liabilities of the Partnership, the liquidator will distribute any
remaining assets of the Partnership as follows:
(1) Cash or cash equivalents shall be distributed (i) first,
to the Partners in proportion to their respective positive Capital
Account balances, if any, and (ii) second, to each Partner in
proportion to its Ownership Interest.
(2) Interests in the Processing Facility and other tangible
assets shall be sold by the liquidator on such terms as are approved
by the Management Committee, or if the Management Committee elects
not to sell any such assets, or if such sale is not consummated
within a period deemed reasonable by the Management Committee, such
assets shall be distributed to each Partner in proportion to its
Ownership Interest, and each Partner shall execute an operating
agreement governing operation of such assets containing operating
and economic terms substantially similar to these contained in this
Agreement.
(c) On liquidation of the Partnership or a Partnership interest
within the meaning of Treasury Regulation Section 1.704-1(b)(2)(ii)(g),
each Partner having a deficit balance in its Capital Account (after giving
effect to all contributions, distributions, and allocations for all fiscal
years, including the fiscal year of the liquidation) shall contribute to
the Partnership the amount necessary to restore the deficit balance in
such Capital Account to zero in compliance with Regulation Section
1.704-1(b)(2)(ii)(b)(3). Such contribution shall be made no later than the
end of the taxable year in which the liquidation occurred (or, if later,
within ninety (90) days after the date of liquidation). The contribution
shall not be used to pay nonrecourse liabilities but shall be used to pay
any other Partnership liabilities and then shall be distributed to the
other Partners in accordance with the positive balance in such Partners'
Capital Accounts.
(d) No dissolution of the Partnership shall relieve any Partner from
any obligation accruing or accrued prior to the date of such dissolution
or as a result of such dissolution or deprive any Partner not in default
hereunder of any remedy otherwise available to it.
The term "DISSOLUTION" as used in this Agreement shall mean "an
event requiring a winding up" as such terms are used in the Partnership
Act.
9.5 WITHDRAWAL.
(a) A Partner (herein called a "WITHDRAWING PARTNER") shall have the
right to withdraw from the Partnership at any time by giving written
notice (herein called "WITHDRAWAL NOTICE") to the other Partners and to
the Partnership. In the event of such withdrawal, the Partnership shall
retain all contributions theretofore made by the Withdrawing Partner. In
addition, such Withdrawing Partner, regardless of the time of the delivery
of the Withdrawal Notice shall pay to the Partnership its share of all
cost, expense, obligation and liability that (1) were accrued or otherwise
attributable to the period prior to the time of the giving of the
Withdrawal Notice, (2) were incurred prior to the time of the giving of
the Withdrawal Notice regardless of the periods of time to which such
cost, expense, obligation and liability relates, including any obligations
attributable to the work performed or actions taken or authorized by the
Management Committee or the Managing Partner prior to the time of the
giving of the Withdrawal Notice, and (3) are to be incurred by the
Partnership as a result of actions taken or authorized by the Management
Committee or the Managing Partner prior to the time of the giving of the
Withdrawal Notice (the "WITHDRAWING PARTNER OBLIGATIONS"). The Withdrawing
Partner shall post a deposit in an amount set by the Management
Committee (without the Withdrawing Partner voting thereon) to cover the
Withdrawing Partner's share of the estimated future demobilization costs
(including environmental clean-up costs) and Partnership liquidation
costs. The deposit will be applied to the Withdrawing Partner's actual
share of such costs when they are ultimately incurred with the Withdrawing
Partner remaining liable for its share of the ultimate costs if they are
greater than the deposit. If the deposit is greater than the Withdrawing
Partner's actual share, the difference will be refunded. Withdrawal shall
(1) be effective as of the date of giving of the Withdrawal Notice (I.E.,
latest date received by all Partners and the Partnership), (2) terminate
the Withdrawing Partner's status as a Partner, (3) forfeit all voting
rights of the Withdrawing Partner in Partnership affairs, (4) terminate
all representation of the Withdrawing Partner on the Management Committee
and other Partnership committees, and (5) result in a pro rata increase of
the remaining Partners' Ownership Interests based on the ratio of their
then present Ownership Interests. The non-Withdrawing Partners shall
indemnify and hold harmless the Withdrawing Partner, against any costs,
expenses, obligations and liabilities of the Partnership that are
attributable to periods after the effective date of the withdrawal other
than Withdrawing Partner Obligations and demobilization costs and
liquidation costs.
(b) If the Management Committee approves a Project Plan or
Construction Budget for the initial Processing Facility (other than a slug
catcher) to be constructed pursuant to this Agreement by requisite
approval, a Partner who does not vote to approve such Project Plan or
Construction Budget shall be deemed to have withdrawn from the Partnership
effective on the date of such vote and the provisions of this SECTION 0
shall be applicable to such Partner; provided, however, notwithstanding
any provision of SECTION 0 of this Agreement to the contrary, such
Withdrawing Partner shall not be entitled to reimbursement of any funds
previously contributed to the Partnership, such Partner shall not be
liable for any demobilization costs and liquidations of the Partnership,
and the Partners who approve such Project Plan or Construction Budget
shall be deemed to have elected to reconstitute the Partnership.
9.6 DEEMED DISTRIBUTION AND RECONTRIBUTION. Notwithstanding any other
provision of this ARTICLE 0, in the event the Partnership is liquidated within
the meaning of Regulation Section 1.704-1(b)(2)(ii)(g) but no actual liquidation
has occurred, the property shall not be liquidated, the Partnership's
liabilities shall not be paid or discharged, and the Partnership's affairs shall
not be wound up. Instead, the Partnership shall be deemed to have distributed
the property in kind to the Partners, who shall be deemed to have assumed and
taken subject to all Partnership liabilities, all in accordance with their
respective Capital Accounts, and if any Partner's Capital Account has a deficit
balance (after giving effect to all contributions, distributions, and
allocations for all fiscal years, including the fiscal year during which such
liquidation occurs), such Partners shall contribute to the capital of the
Partnership the amount necessary to restore such deficit balance to zero in
compliance with Regulation Section 1.704-1(b)(2)(ii)(b)(3). Immediately
thereafter, the Partners shall be deemed to have recontributed the property in
kind to the Partnership, which shall be deemed to have assumed and taken subject
to all such liabilities.
ARTICLE 10.
OPTION AND PRIOR RIGHT TO PURCHASE.
10.1 DISPOSITIONS.
(a) Each Partner agrees that it shall not sell, transfer, assign or
in any way alienate all or any portion of its Ownership Interest in the
Partnership or any right or interest therein, whether voluntarily or by
operation of law, or by gift, merger, consolidation, a Change of Control
or otherwise, (hereinafter referred to as "DISPOSE" or a "DISPOSITION"),
except for a Disposition which complies with the requirements of this
SECTION 0.
(b) Subject to the express provisions of SECTION 0 below excepting
certain Dispositions, should any Partner decide to Dispose of any portion
of its Ownership Interest in the Partnership directly or indirectly, such
Partner (the "SELLING PARTNER") shall first give written notice to the
other Partners (the "NON-SELLING PARTNERS") of its intent to Dispose of
its interest and of the quantum interest be Disposed. Each of the
Non-Selling Partners shall have the right to make an offer in writing to
purchase the Ownership Interest offered to be Disposed. Each Non-Selling
Partner shall have the right to make an offer for a portion of the
Ownership Interest offered to be Disposed in proportion that its Ownership
Interest bears to the Ownership Interest of all of the Non-Selling
Partners who elect to make such offer. Such offer must be made on or
before fifteen (15) days after the date of receipt of notification of
intent to transfer by the Selling Partner. The Selling Partner may, in its
sole discretion, elect to either accept or reject any such offer by
notifying the Non-Selling Partner of its election writing on or before
fifteen (15) days of its receipt of the written offer. If the Selling
Partner accepts the offer of one or more Non-Selling Partners, the
Non-Selling Partners whose offer have been accepted shall have forty-five
(45) days from receipt of notification of acceptance to complete their
respective purchases. Should the Selling Partner reject an offer of a
Non-Selling Partner or not receive timely an offer from a Non-Selling
Partner, the Selling Partner shall have the right for a period of one
hundred eighty (180) days following the expiration of the fifteen (15) day
period referred to above, to Dispose to a third party that portion of its
Ownership Interest covered by such offer subject, however, in the case in
which an offer had been made by a Non-selling Partner, to a minimum price
requirement equivalent to the highest rejected offer of the Non-Selling
Partners.
(c) The other provisions of this SECTION 0 shall not apply to (1) a
sale or transfer of all of Partner's Ownership Interest to a Wholly Owned
Affiliate, in which case, the Selling Partner shall be jointly and
severally liable with such Wholly Owned Affiliate for all of its
obligations under this Agreement; (2) a sale or transfer to a publicly
traded entity formed for the purpose of acquiring (directly or indirectly)
the Ownership Interest of the Selling Partner, nor (3) the acquisition of
additional Ownership Interests by OEDCP pursuant to that certain Option
Agreement executed contemporaneously with this Agreement.
(d) In cases where all or a portion of the consideration to be
received in connection with a Disposition is other than cash, (including
property, note, defined cash payment or other non-cash assets), the cash
value of that consideration shall be determined: (1) by mutual agreement
of the Selling and Non-Selling Partners involved in the transaction or (2)
failing such mutual agreement, within three (3) business days following
receipt by either the Non-Selling Partner or Selling Partner of a notice
to the other that it desires such determination to be made by independent
appraisal (to be obtained at the sole cost of the Selling Partner), by a
qualified independent appraiser selected by mutual agreement of the
Selling and Non-Selling Partners, or (3) failing mutual agreement for the
selection of an independent appraiser within three (3) business days after
the receipt of the notice referenced in (2), by independent appraisal
(obtained at the sole cost of the Selling Partner) by a qualified
appraiser selected by the Chief Judge of the United States District Court
for the Southern District of Texas, or in the event such judge
disqualifies himself or herself, the most senior judge of such court who
does not disqualify himself or herself.
(e) Any Disposition other than (1) a Disposition to a Non-Selling
Partner whose offer has been accepted as provided in SECTION 10.1(B), or
(2) those referenced in SECTION 0 shall require Majority Approval,
excluding the vote of the Selling Partner. Such Majority Approval shall
not be unreasonably withheld. A Selling Partner shall request the
Non-Selling Partners in writing to approve such Disposition. Within five
(5) business days after receipt of such notice by each Non-Selling
Partner, such Non-Selling Partner shall notify the Selling Partner in
writing whether or not it approves such Disposition. Failure by a
Non-Selling Partner to timely notify the Selling Partner shall be deemed
approval of the Disposition. If any Partner elects to not approve such
Disposition, it shall specify
the reasonable grounds upon which it is objecting to such Disposition.
Failure to specify such grounds shall be deemed an election by such
Partner to approve the Disposition.
ARTICLE 11.
TAXES
11.1 TAXES.
(a) The Managing Partner shall cause to be paid all valid applicable
taxes and fees, other than local, state and federal income taxes, levied
upon the Partnership or in connection with its operations, including but
not limited to sales, use, excise and property taxes. To the extent not
paid from Partnership funds, the Managing Partner may make cash calls on
each Partner for its proportionate share of all such payments. The
Managing Partner shall render for ad valorem taxation all property subject
to this Agreement which by law should be rendered for such taxes and pay
all such taxes assessed thereon before they become delinquent. If any tax
assessment is considered unreasonable by the Managing Partner, it may at
its discretion protest such valuation or make payment under protest within
the time and manner prescribed by law, and it may at its discretion
prosecute, or not prosecute, the protest to a final determination. When
any such protested valuation or payment shall have been finally
determined, the Managing Partner shall pay from Partnership funds the
assessment on the Partnership, if any such remains unpaid, together with
costs of protest or prosecution and any interest and penalty accrued.
(b) The Partners intend that the Partnership shall be treated as a
"partnership" for income tax purposes, and the Partners agree to take all
actions, including the amendment of this Agreement and the execution of
such other documents as may be required to qualify for and receive such
tax treatment. The Managing Partner shall be the Tax Matters Partner of
the Partnership as described in '6231(a)(7) of the Internal Revenue Code
of 1986 (the "CODE") ("TAX MATTERS PARTNER"). The Tax Matters Partner
shall prepare and file all federal, state and municipal income tax returns
to be filed on behalf of the Partnership on an accrual basis. The Tax
Matters Partner shall inform all Partners of all matters which may come to
its attention in its capacity as Tax Matters Partner by giving them notice
thereof within fifteen (15) days after becoming so informed. All
Partnership elections for federal, state and municipal tax purposes shall
be determined by the Tax Matters Partner. All Partners shall be entitled
to participate in any IRS proceedings at their expense. The Tax Matters
Partner on behalf of the
Partnership shall make the election under Section 754 of the Code. The
affairs of the Partners and the Partnership with regard to Federal income
taxes shall be subject to the terms and conditions of EXHIBIT D attached
hereto.
ARTICLE 12.
INSURANCE AND LOSSES
12.1 INSURANCE. Unless otherwise directed by the Management Committee, the
Managing Partner shall obtain and maintain for the protection and benefit of the
Partnership and itself the following minimum insurance coverage:
(a) Worker's Compensation Insurance to cover the Managing Partner's
or its Affiliates' employees performing services for the Partnership in
accordance with the requirements of the laws of the State where such
employees are performing services or other applicable state and Employer's
Liability Insurance with limits of not less than $1,000,000 aggregate for
each accident and $1,000,000 aggregate for each disease. The Managing
Partner or its parent, subsidiary or other affiliated companies shall
diligently proceed to acquire Worker's Compensation Insurance and
Employer's Liability Insurance that permit endorsement of such policies to
include alternate employer/borrowed servant coverage and shall provide
such endorsement to the Partners.
(b) Commercial General Liability Insurance with limits of not less
than $5,000,000 combined single limit for personal injury and property
damage, endorsed to provide contractual liability, completed operations,
explosion, collapse and underground damage hazards.
(c) Automobile Public Liability Insurance with limits of $1,000,000
combined single limit for personal injury and property damage.
(d) Property insurance for equipment with limits of not less than
replacement cost the insured equipment.
Each policy of insurance obtained pursuant to the provisions of SECTIONS
0, 0 AND 0 of this Section shall provide by endorsement or otherwise that the
provisions of the policy are extended to cover the interests of the parties
hereto. Each policy of insurance pursuant to the provisions of SECTIONS 0, 0 AND
0 shall contain an endorsement providing that insurance carriers shall have no
right of subrogation against the Partners, their respective parents,
subsidiaries, and affiliated companies and shall name the Managing Partner and
the Partners and their respective parents, subsidiaries and affiliated companies
as additional insureds. In the event that the Managing
Partner contracts with a third party for the provision of any service or
services for the Partnership, that third party shall be required to carry
insurance with subrogation waivers equal to or in excess of the requirements
herein and, except for the operator under the Construction and Operation
Agreement whose liability shall be governed by the provisions of the
Construction and Operation Agreement, shall be required unless waived by the
Management Committee to contractually indemnify and hold harmless the
Partnership from tort liability arising from its performance and the negligence
of the Partners, Partnership and their respective parents, subsidiaries and
affiliated companies and on all policies name the Managing Partner and the
Partners and their respective parents, subsidiaries and affiliated companies as
additional insureds. The Managing Partner shall furnish to the Partners a
certificate covering each policy of insurance required to be obtained pursuant
to this Section. The Managing Partner may settle or defend any insured or
uninsured claims on behalf of the Partnership subject to the monetary limits in
ARTICLE 0 or, if applicable, subject to approval of the Management Committee.
12.2 COST OF INSURANCE. The Managing Partner shall submit a statement to
the Partnership of insurance premium costs and expenses associated with the
insurance policies provided hereunder. The Partnership shall promptly reimburse
the Managing Partner for such costs and expenses.
12.3 INDEMNIFICATION OF PARTNERS. Except as provided in SECTION 0, (1) all
liability, loss, damage, claim or expense for which the Partnership is
responsible and not covered by insurance or in excess of insurance actually
carried shall be borne by the Partners proportionately based on their Ownership
Interests, and (2) the Partnership shall indemnify and hold harmless each
Partner against any claim made against any of them by a third party alleging
liability while acting on behalf of the Partnership in accordance with this
agreement or based on the Partner's status as a Partner, together with the costs
reasonably incurred for the defense of such claim, except with respect to such
claims that arise from gross negligence or willful misconduct. The indemnified
party shall be indemnified and reimbursed first from the assets of the
Partnership. In the event that the amount of such indemnity or reimbursement
exceeds the amount available from the assets of the Partnership, each Partner
shall severally contribute its proportionate share of the excess based on its
Ownership Interest.
12.4 LOSS OF OR DAMAGE TO PARTNERSHIP PROPERTY. The Partners shall be
responsible in proportion to their respective Ownership Interests for any
casualty loss of or damage to Partnership property for which the Partnership is
not covered by insurance, unless such loss or damage is caused by the gross
negligence or willful misconduct of a Partner, and in such case, such Partner
shall be liable therefor.
ARTICLE 13.
INVOLUNTARY DISSOLUTION AND CONTINUANCE
13.1 CONTINUANCE OF RELATIONSHIP. It is understood and agreed by each of
the Partners that the relationship among them shall be a Partnership until such
relationship is either specifically terminated by the written consent of all of
the Partners or by one of the provisions hereof. If, notwithstanding such
understanding and agreement, the Partnership may be deemed terminated or
dissolved by operation of law, each of the Partners hereby covenants and agrees
that:
(a) The business and affairs of the Partnership shall continue
without interruption and be carried out by a new partnership upon the
approval of a majority of the Partners (the "SUCCESSOR PARTNERSHIP").
(b) The Partners of the Successor Partnership shall be the Parties
who were Partners hereunder at the time of such termination or
dissolution, and the Successor Partnership and the Partners thereof shall
be governed by the terms of this Agreement as if the Successor Partnership
were the Partnership.
(c) Each of the Partners shall execute such further agreements
including notes, notations and accommodations as may be necessary to
continue the business of the Partnership and to protect and perfect any
lien or security interest granted by the Partnership.
(d) Notwithstanding the foregoing, if for any reason the business
and affairs of the Partnership cannot be carried out as a Successor
Partnership and any Partner determines to proceed with the business of the
Partnership, then the other Partners at the time of dissolution shall be
entitled to join with such Partner in such other entity or entities as may
be used to own and operate the business of the Partnership, to the same
extent and on a similar basis as provided in this Agreement, taking full
account of the respective capital contributions theretofore made by such
Partners to the Partnership.
ARTICLE 14.
MISCELLANEOUS
14.1 LAWS AND REGULATIONS. This Agreement and all operations hereunder
shall be subject to all valid and applicable federal and state laws and to the
valid and applicable orders, laws, rules and regulations of any state or federal
authority having jurisdiction, but nothing contained herein shall be construed
as a waiver of any right to question or contest any such order, law, rule or
regulation in any forum having jurisdiction in the premises.
14.2 CONTROLLING LAW. THIS AGREEMENT SHALL BE GOVERNED, INTERPRETED
AND CONSTRUED UNDER THE STATUTORY AND COMMON LAW OF THE STATE OF
DELAWARE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
14.3 FORCE MAJEURE. Performance, other than to make payments due, under
this Agreement by any party shall be excused in the event such performance is
prevented by war, blockades, insurrection, strikes or differences with workers,
riots, disorders, epidemics, landslides, lightning, earthquakes, fires, storms,
floods, washouts, civil disturbances, blowouts, explosions, breakage or accident
to machinery or lines of pipe, acts of God or of the public enemy, acts of
governmental authorities, state and federal regulations, inability or delay in
obtaining rights-of-way, permits, easements or material and, without limitation
by enumeration, any other cause or happening whether of the kind enumerated
herein or otherwise not reasonably within the control of such party; provided,
however, that performance shall be resumed within a reasonable time after such
cause has been removed; and provided further, that no party shall be required
against its will to adjust any labor dispute.
14.4 NOTICES. Unless herein provided to the contrary, any notice called
for in this Agreement shall be in writing and shall be given by personal
delivery, or by mail, overnight courier or facsimile with all postage and
charges prepaid to the Managing Partner or Partner affected by such notice at
the place designated. Notices shall be considered as duly delivered upon actual
receipt by the addressee. Normal operating instructions can be made by
telephone. Unless changed by notice in writing to the Managing Partner and all
Partners, the addresses of the parties are as follows:
MMBPC: MCNIC Mobile Bay Processing Company
c/o Pipeline & Processing Group, Inc.
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Vice President
OEDCP: OEDC Processing, L.P.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Vice President of OEDC, Inc.
PMBPC: PanEnergy Mobile Bay Processing Company
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Vice President, Offshore
Partnership: Mobile Bay Processing Partners
c/o PanEnergy Mobile Bay Processing Company
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Senior Vice President, Gulf Coast
Any notice given hereunder shall be provided to all Partners.
14.5 CONFIDENTIALITY. The Partners (including Withdrawing Partners) shall
ensure that any information regarding the business, assets, customers, processes
and methods of the Partnership or the other Partners that it may learn in the
course of negotiations for or performance under this Agreement (a) is treated by
it in strict confidence, (b) is not disclosed in any manner to any Person other
than an Affiliate of a Partner, a lender to or an accountant, attorney or
representative of such Partner or Affiliate who needs to know such information,
or as may be required by law or for tax purposes and (c) is not used by such
Partner or any of its Affiliates for any purpose other than for the exclusive
benefit of the Partnership or to comply with law, tax purposes or legal process.
In addition, such information may be disclosed by a Partner to a person only if
and to the extent that such information (a) is known to such person prior to
learning of it from the Partner, (b) is obtained, whether directly or
indirectly, by such person from a source other than such Partner (or any of its
Affiliates) that (1) did not require such person to hold such secrets or
information in confidence and (2) did not limit or restrict such person's use
thereof, (c) is disclosed for legal, regulatory or tax purposes or (d) becomes
public knowledge otherwise than through the Partner (or any of its Affiliates)
seeking to use or disclose such information. Notwithstanding the foregoing, no
Partner shall disclose any information if such disclosure would cause a breach
of, or violate the terms of, any agreement to which the Partnership is subject.
A disclosure by a Partner to its employee who is also an employee of an
Affiliate of such Partner or who performs services for an Affiliate of such
Partner shall not violate the provisions of this SECTION 14.5, provided the
information so disclosed is not used for any
purpose other than the exclusive benefit of the Partnership, or to comply with
law, tax purposes or legal process.
14.6 INURING CLAUSE. This Agreement shall inure to the benefit of and be
binding upon the parties and their respective successors and assigns.
14.7 DEFAULT. No waiver of any default shall be construed as a waiver of
any future default, whether of a like or of a different nature.
14.8 PARTITION OF PARTNERSHIP. Each Partner hereby expressly waives any
right to bring any action for an involuntary partition of the Partnership or its
assets.
14.9 TIME OF THE ESSENCE. Time is of the essence in the performance of
this Agreement.
14.10 LIMITATION ON AUTHORITY. Neither the Managing Partner nor any of the
Partners shall have authority to take any action inconsistent with the terms of
this Agreement. Except as authorized by this Agreement, no Partner shall act as
the agent of the Partnership without express written authorization to act as the
agent with respect to the particular matter involved. Such authorization shall
be obtained from the Management Committee or, to the extent authorized by this
Agreement, from the Managing Partner.
14.11 ARBITRATION.
(a) On the request of any Partner, whether made before or after the
institution of any legal proceeding but no later than forty-five (45) days
after service of legal proceedings on the Partner seeking arbitration, any
action, dispute, claim or controversy of any kind now existing or
hereafter arising between any of the parties hereto and pertaining to the
interpretation of or breach of this Agreement (a "DISPUTE") shall be
resolved by binding arbitration in accordance with the terms hereof. Any
Partner may, by summary proceedings, bring an action in court to compel
arbitration of any Dispute.
(b) Any arbitration shall be administered by the American
Arbitration Association (the "AAA") in accordance with the terms of this
SECTION 0, the Commercial Arbitration Rules of the AAA, and, to the
maximum extent applicable, the Federal Arbitration Act. Judgment on any
award rendered by an arbitrator may be entered in any court having
jurisdiction.
(c) Any arbitration shall be conducted before one arbitrator. The
arbitrator shall be an individual who is knowledgeable in the subject
matter of the Dispute selected by agreement between the Partners. If the
Partners cannot agree on an arbitrator within thirty (30) days after the
request for an arbitration, then any Partner may request the AAA to select
an arbitrator. The arbitrator may engage engineers, accountants or other
consultants that the arbitrator deems necessary to render a conclusion in
the arbitration proceeding.
(d) To the maximum extent practicable, an arbitration proceeding
hereunder shall be concluded within one hundred eighty (180) days of the
filing of the Dispute with the AAA. Arbitration proceedings shall be
conducted in Houston, Texas. Arbitrators shall be empowered to impose
sanctions and to take such other actions as the arbitrators deem necessary
to the same extent a judge could impose sanctions or take such other
actions pursuant to the Federal Rules of Civil Procedure and applicable
law. At the conclusion of any arbitration proceeding, the arbitrator shall
make specific written findings of fact and conclusions of law. The
arbitrator shall have the power to award recovery of all costs and fees to
the prevailing Partners. Each Partner agrees to keep all Disputes and
arbitration proceedings strictly confidential except for disclosure of
information required by applicable law.
(e) All fees of the arbitrator and any engineer, accountant or other
consultant engaged by the arbitrator, shall be paid by the Partners
according to their Ownership Interests unless otherwise awarded by the
arbitrator.
14.12 REPRESENTATION OF PARTNERS. Each Partner represents and warrants to
each other Partner and to the Partnership that:
(a) In cases of a corporation, it is a corporation duly organized,
validly existing and in good standing under the laws of its State of
incorporation or in a case of a partnership, it is a partnership duly
organized and validly existing under the laws of the State of its
organization.
(b) The execution and delivery of this Agreement have been, and the
performance of this Agreement shall be, at the time required to be
performed hereunder, duly and validly authorized by all requisite
corporate or partnership action on its part.
(c) It has full power and authority to carry on its business as
presently conducted, to enter into this Agreement and to perform its
obligations under this Agreement.
(d) This agreement has been duly executed and delivered on behalf of
it and constitutes the legal, valid and binding obligation of such Partner
enforceable in accordance with its terms except as enforceability may be
limited by applicable bankruptcy, reorganization or moratorium statutes,
or the similar laws affecting the rights of creditors, generally, or
equitable principles.
(e) The execution and delivery of this Agreement by such Partner
does not, and its performance of this Agreement, and ownership of its
Ownership Interest shall not, (1) violate or be in conflict with, or
require the consent of any person or entity under, any provision of such
Partner's governing documents, (2) conflict with, result in a breach of,
or constitute a default (or an event of that with a lapse of time or
notice, or both, would constitute a default) under any agreement or
instrument to which such Partner is a party or is bound or otherwise
subject to or (3) violate any provision of or require any consent,
authorization or approval under any judgment, decree, judicial or
administrative order, award, writ, injunction, statute, rule or regulation
applicable to such Partner.
(f) That such Partner has not and shall not at any time disclose to
the Partnership or the other Partners any information that such Partner is
prohibited or restricted from disclosing.
Each Partner shall be responsible for, shall pay on a current basis, shall
indemnify, save, hold harmless, discharge and release the Partnership and the
other Partners, their respective Affiliates and its and their respective
successors and permitted assigns, and all of their respective stockholders,
directors, officers, employees, agents and representatives (the "INDEMNIFIED
PARTIES") from and against any and all claims, demands, suits, actions,
proceedings, payments, charges, judgments, assessments, liabilities, damages,
penalties, fines or costs and expenses suffered, paid or incurred by the party
seeking indemnification, including any legal or other expenses reasonably
incurred in connection therewith, arising from, based upon, related to or
associated with any breach of a representation and/or warranty made by such
Partner in SECTIONS 2.1 AND 0.
14.13 SEVERABILITY. If and to the extent that any court or governmental
agency of competent jurisdiction holds any part or provision of this Agreement
to be invalid or unenforceable, the Partners shall agree upon an equitable
adjustment of the provisions of this Agreement with a view toward effecting its
purpose. Such holding shall in no way affect the validity or effectiveness of
the other provisions of this Agreement, which shall remain in full force and
effect.
14.14 REMEDIES. Each right and remedy under this Agreement is cumulative
and in
addition to other rights or remedies under this Agreement or any applicable law.
14.15 EXHIBITS. Each exhibit referred to in this Agreement is incorporated
in this Agreement by reference. All obligations of any Partner under any such
exhibit shall be considered to be obligations under this Agreement.
14.16 SPECIAL AND CONSEQUENTIAL DAMAGES. Neither the Partners, the
Managing Partner, the Partnership, nor the members of the Management Committee
or any subcommittee thereof shall be liable to the other for any exemplary or
punitive damages or for loss of profits or consequential losses arising in
connection with the Partnership Operations or this Agreement.
14.17 AMENDMENTS. This Agreement may only be amended, supplemented or
modified by written agreement duly executed by all Partners.
14.18 COUNTERPARTS. This Agreement, the Funding Agreement, may be executed
in counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one and the same instrument.
14.19 ENTIRE AGREEMENT. This Agreement and the other documents
contemplated hereunder constitute the full and complete agreement of the parties
hereto with respect to the subject matter hereof.
[SIGNATURES ON NEXT PAGE]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first written above.
MCNIC MOBILE BAY PROCESSING COMPANY
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
OEDC PROCESSING, L.P.
By: /s/ R. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Name: R. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice President
PANENERGY MOBILE BAY PROCESSING COMPANY
By: /s/ ▇. ▇. ▇▇▇▇▇
Name: ▇. ▇. ▇▇▇▇▇
Title: Vice President