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EXHIBIT 10.16
LIMITED LIABILITY COMPANY AGREEMENT
OF
OCEAN BREEZE PIPELINE COMPANY, L.L.C.
(A DELAWARE LIMITED LIABILITY COMPANY)
(DATED AS OF JANUARY 17, 1997)
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TABLE OF CONTENTS
ARTICLE I. DEFINITIONS............................................................................................1
1.1 SPECIFIC DEFINITIONS.............................................................................1
1.2 OTHER TERMS.....................................................................................16
1.3 CONSTRUCTION....................................................................................16
ARTICLE II. ORGANIZATION.........................................................................................17
2.1 FORMATION.......................................................................................17
2.2 NAME............................................................................................17
2.3 PRINCIPAL OFFICE IN THE UNITED STATES; OTHER OFFICES............................................17
2.4 PURPOSE.........................................................................................17
2.5 FOREIGN QUALIFICATION...........................................................................17
2.6 TERM............................................................................................17
2.7 MERGERS AND EXCHANGES...........................................................................17
2.8 BUSINESS OPPORTUNITIES--NO IMPLIED DUTY OR OBLIGATION...........................................17
ARTICLE III. MEMBERSHIP INTERESTS AND TRANSFERS..................................................................18
3.1 INITIAL MEMBERS.................................................................................18
3.2 NUMBER OF MEMBERS...............................................................................18
3.3 MEMBERSHIP INTERESTS............................................................................18
3.4 REPRESENTATIONS AND WARRANTIES..................................................................18
3.5 RESTRICTIONS ON THE TRANSFER OF A MEMBERSHIP INTEREST...........................................19
3.6 TRANSFER RESTRICTIONS...........................................................................21
3.7 DOCUMENTATION; VALIDITY OF TRANSFER.............................................................24
3.8 [RESERVED]......................................................................................24
3.9 POSSIBLE ADDITIONAL RESTRICTIONS ON TRANSFER....................................................24
3.10 ADDITIONAL MEMBERSHIP INTERESTS.................................................................24
3.11 CODE SECTION 708 TRANSFERS......................................................................25
3.12 INFORMATION.....................................................................................25
3.13 LIABILITY TO THIRD PARTIES......................................................................26
3.14 RESIGNATION.....................................................................................26
3.15 LACK OF MEMBER AUTHORITY........................................................................26
3.16 [RESERVED]......................................................................................26
3.17 FAILURE TO ACCEPT NAUTILUS CONSTRUCTION CERTIFICATE.............................................26
3.18 OTHER CONTINGENCIES.............................................................................27
ARTICLE IV. CAPITAL CONTRIBUTIONS................................................................................30
4.1 INITIAL CAPITAL CONTRIBUTIONS...................................................................30
4.2 SUBSEQUENT CONTRIBUTIONS........................................................................30
4.3 FAILURE TO CONTRIBUTE...........................................................................30
4.4 RETURN OF CONTRIBUTIONS.........................................................................33
4.5 CAPITAL ACCOUNTS................................................................................33
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ARTICLE V. ALLOCATIONS AND DISTRIBUTIONS.........................................................................36
5.1 ALLOCATIONS FOR CAPITAL ACCOUNT PURPOSES........................................................36
5.2 ALLOCATIONS FOR TAX PURPOSES....................................................................38
5.3 REQUIREMENT OF DISTRIBUTIONS....................................................................40
5.4 PRO RATA DISTRIBUTIONS..........................................................................40
5.5 RESERVES........................................................................................40
5.6 DISTRIBUTION RESTRICTIONS.......................................................................40
5.7 SPECIAL DISTRIBUTIONS AND CONTRIBUTIONS.........................................................40
ARTICLE VI. MANAGEMENT OF THE COMPANY............................................................................41
6.1 MANAGEMENT BY THE MEMBERS AND DELEGATION OF AUTHORITY...........................................41
6.2 COMMITTEES......................................................................................41
6.3 AUTHORITY OF MEMBERS AND COMMITTEES.............................................................41
6.4 OFFICERS........................................................................................43
6.5 DUTIES OF OFFICERS..............................................................................45
6.6 NO DUTY TO CONSULT..............................................................................45
6.7 REIMBURSEMENT...................................................................................45
6.8 MEMBERS AND AFFILIATES DEALING WITH THE COMPANY.................................................45
6.9 INSURANCE.......................................................................................45
ARTICLE VII. MEETINGS............................................................................................46
7.1 MEETINGS OF MEMBERS AND COMMITTEES..............................................................46
7.2 SPECIAL ACTIONS.................................................................................47
7.3 VOTING LIST.....................................................................................50
7.4 PROXIES.........................................................................................50
7.5 VOTES...........................................................................................51
7.6 CONDUCT OF MEETINGS.............................................................................51
7.7 ACTION BY WRITTEN CONSENT.......................................................................51
7.8 RECORDS.........................................................................................52
ARTICLE VIII. INDEMNIFICATION....................................................................................52
8.1 RIGHT TO INDEMNIFICATION........................................................................52
8.2 INDEMNIFICATION OF OFFICERS, EMPLOYEES AND AGENTS...............................................53
8.3 ADVANCE PAYMENT.................................................................................53
8.4 APPEARANCE AS A WITNESS.........................................................................53
8.5 NONEXCLUSIVITY OF RIGHTS........................................................................53
8.6 INSURANCE.......................................................................................53
8.7 MEMBER NOTIFICATION.............................................................................53
8.8 SAVINGS CLAUSE..................................................................................54
8.9 SCOPE OF INDEMNITY..............................................................................54
ARTICLE IX. TAXES................................................................................................54
9.1 TAX RETURNS.....................................................................................54
9.2 TAX ELECTIONS...................................................................................54
9.3 TAX MATTERS MEMBER..............................................................................54
ARTICLE X. BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS............................................................55
10.1 MAINTENANCE OF BOOKS............................................................................55
10.2 FINANCIAL STATEMENTS............................................................................55
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10.3 TAX STATEMENTS..................................................................................55
10.4 ACCOUNTS........................................................................................55
ARTICLE XI. BANKRUPTCY OF A MEMBER...............................................................................56
11.1 BANKRUPT MEMBERS................................................................................56
ARTICLE XII. DISSOLUTION, LIQUIDATION, AND TERMINATION...........................................................57
12.1 DISSOLUTION.....................................................................................57
12.2 LIQUIDATION AND TERMINATION.....................................................................57
12.3 PROVISION FOR CONTINGENT CLAIMS.................................................................59
12.4 DEFICIT CAPITAL ACCOUNTS........................................................................59
ARTICLE XIII. AMENDMENT OF THE AGREEMENT.........................................................................60
13.1 AMENDMENTS TO BE ADOPTED BY THE COMPANY.........................................................60
13.2 AMENDMENT PROCEDURES............................................................................60
ARTICLE XIV. CERTIFICATED MEMBERSHIP INTERESTS...................................................................61
14.1 ENTITLEMENT TO CERTIFICATES.....................................................................61
14.2 MULTIPLE CLASSES OF INTEREST....................................................................61
14.3 SIGNATURES......................................................................................61
14.4 ISSUANCE AND PAYMENT............................................................................61
14.5 RESTRICTIVE LEGEND..............................................................................61
14.6 LOST, STOLEN OR DESTROYED CERTIFICATES..........................................................62
14.7 TRANSFER OF MEMBERSHIP INTEREST.................................................................62
14.8 REGISTERED HOLDERS..............................................................................62
ARTICLE XV. OTHER MEMBER AGREEMENTS AND OBLIGATIONS..............................................................62
15.1 LATERAL OPPORTUNITIES...........................................................................62
15.2 EXPANSIONS......................................................................................64
15.3 CERTAIN PROPERTIES..............................................................................66
ARTICLE XVI. GENERAL PROVISIONS..................................................................................67
16.1 OFFSET..........................................................................................67
16.2 ENTIRE AGREEMENT; SUPERSEDURE...................................................................67
16.3 WAIVERS.........................................................................................67
16.4 BINDING EFFECT..................................................................................67
16.5 MEMBER DEADLOCKS; NEGOTIATIONS AND MEDIATION....................................................67
16.6 GOVERNING LAW; SEVERABILITY.....................................................................68
16.7 FURTHER ASSURANCES..............................................................................69
16.8 EXERCISE OF CERTAIN RIGHTS......................................................................69
16.9 NOTICE TO MEMBERS OF PROVISIONS OF THIS AGREEMENT...............................................70
16.10 COUNTERPARTS....................................................................................70
16.11 ATTENDANCE VIA COMMUNICATIONS EQUIPMENT.........................................................70
16.12 REPORTS TO MEMBERS..............................................................................70
16.13 CHECKS, NOTES AND CONTRACTS.....................................................................70
16.14 SEAL............................................................................................70
16.15 BOOKS AND RECORDS...............................................................................70
16.16 SURETY BONDS....................................................................................71
16.17 AUDIT RIGHTS OF MEMBERS.........................................................................71
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16.18 NO THIRD PARTY BENEFICIARIES....................................................................71
16.19 NOTICES.........................................................................................71
16.20 REMEDIES........................................................................................72
16.21 DISPUTES........................................................................................72
16.22 NO SHOP.........................................................................................75
16.23 MEMBER TRADEMARKS...............................................................................76
16.24 HOLDING-OUT.....................................................................................76
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LIMITED LIABILITY COMPANY AGREEMENT
OF
OCEAN BREEZE PIPELINE COMPANY, L.L.C.
(A DELAWARE LIMITED LIABILITY COMPANY)
This Limited Liability Company Agreement of Ocean Breeze Pipeline
Company, L.L.C., dated as of January 17, 1997 (the "Formation Date"), is (a)
adopted by the Members (as defined below) and (b) executed and agreed to, for
good and valuable consideration, by the Members.
WHEREAS, the Members desire to form the Company (defined below) in
connection with the acquisition, construction, ownership and operation of
certain pipelines;
WHEREAS, the Company will own interests in Manta Ray Offshore Gathering
Company, L.L.C. ("Manta Ray") and Nautilus Pipeline Company, L.L.C.
("Nautilus"); and
WHEREAS, Manta Ray and Nautilus will acquire, construct, own and
operate the Manta Ray System and the Nautilus System (each defined below),
respectively.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements contained herein and other good and valuable
consideration (the receipt and sufficiency of which are hereby confirmed and
acknowledged), the parties hereto hereby stipulate and agree as follows:
ARTICLE I.
DEFINITIONS
1.1 SPECIFIC DEFINITIONS. As used in this Agreement, the following
terms have the following meanings:
"Accelerated Volumes" means the increment of natural gas
volumes produced from existing, flowing Dedicated Leases which require
a Major Expansion Project pursuant to Section 15.2, provided that such
volumes, for the purposes of this definition, shall be limited to
Dedicated Leases from which the increases in volume are attributable to
an acceleration of reserves production, and not an increase in overall
reserves.
"Accessible Capacity" means that portion of the Base Capacity
which is commercially useable for gas gathering or transportation
taking into consideration hydraulics, geographic proximity and other
similar factors to transport relevant Expansion Property Production.
"Act" means the Delaware Limited Liability Company Act and any
successor statute, as amended from time to time.
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"Adjusted Capital Account" means the Capital Account
maintained for each Member as of the end of each taxable year of the
Company, (a) increased by any amounts that such Member is obligated to
restore under the standards set by Treasury Regulation section
1.704-1(b)(2)(ii)(c) (or is deemed obligated to restore pursuant to the
penultimate sentences of Treasury Regulation sections 1.704-2(g)(1) and
1.704-2(i)(5)), and (b) decreased by (i) the amount of all losses and
deductions that, as of the end of such taxable year, are reasonably
expected to be allocated to such Member in subsequent years under
sections 704(e)(2) and 706(d) of the Code and Treasury Regulation
section 1.751-1(b)(2)(ii), and (ii) the amount of all distributions
that, as of the end of such taxable year, are reasonably expected to be
made to such Member in subsequent years in accordance with the terms of
this Agreement or otherwise to the extent they exceed offsetting
increases to such Member's Capital Account that are reasonably expected
to occur during (or prior to) the year in which such distributions are
reasonably expected to be made (other than increases as a result of a
minimum chargeback pursuant to Section 5.1(d) or 5.1(e)). The foregoing
definition of Adjusted Capital Account is intended to comply with the
provisions of Treasury Regulation section 1.704-1(b)(2)(ii)(d) and
shall be interpreted consistently therewith.
"Adjusted Property" means any property, the Carrying Value of
which has been adjusted pursuant to Section 4.5(a) and (d). Once an
Adjusted Property is deemed distributed by, and recontributed to, the
Company for federal income tax purposes upon a termination thereof
pursuant to section 708 of the Code, such property shall thereafter
constitute a Contributed Property until the Carrying Value of such
property is further adjusted pursuant to Section 4.5.
"Affiliate" means, with respect to any relevant Person, any
other Person that directly or indirectly controls, is controlled by, or
is under common control with, such relevant Person in question. As used
herein, the term "control" (including its derivatives and similar
terms) means owning, directly or indirectly, the power (i) to vote ten
percent (10%) or more of the Voting Stock of any such relevant Person
or (ii) to direct or cause the direction of the management and policies
of any such relevant Person.
"Agreement" means this Limited Liability Company Agreement
(including any schedules, exhibits or attachments hereto), as amended,
supplemented or modified from time to time.
"Arbitrator" has the meaning given that term in Section 16.21.
"Arbitration Notice" has the meaning given that term in
Section 16.21.
"Asset Value" of any Contributed Property means the fair
market value of such property or other consideration at the time of
contribution as determined by the Company using such reasonable method
of valuation as it may adopt. The Company shall, in its sole
discretion, use such method as it deems reasonable and appropriate to
allocate the aggregate Asset Value of Contributed Properties in a
single or integrated transaction among such properties on a basis
proportional to their fair market value. The fair market
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value of the Contributed Properties described on Exhibit A shall be
deemed to be the Asset Value of such Contributed Properties set forth
therein.
"Available Cash" means unrestricted cash and cash equivalents
of the Company less reasonable cash reserves, including, without
limitation, those necessary for working capital and obligations or
other contingencies of the Company. Available Cash shall not include
any Initial Capital Contributions except to the extent that all of the
Members agree that the applicable portion of any such Initial Capital
Contribution is no longer needed to finance the construction of the
Manta Ray Initial Facilities and the Nautilus Initial Facilities.
"Bankrupt Member" means any Member:
(a) that (i) makes a general assignment for the benefit of
creditors; (ii) files a voluntary bankruptcy petition; (iii) becomes
the subject of an order for relief or is declared insolvent in any
federal or state bankruptcy or insolvency proceeding; (iv) files a
petition or answer seeking for the Member a reorganization,
arrangement, composition, readjustment, liquidation, dissolution, or
similar relief under any law; (v) files an answer or other pleading
admitting or failing to contest the material allegations of a petition
filed against the Member in a proceeding of the type described in
subclauses (i) through (iv) of this clause (a); or (vi) seeks,
consents, or acquiesces to the appointment of a trustee, receiver, or
liquidator of the Member or of all or any substantial part of the
Member's properties; or
(b) against which a proceeding seeking reorganization,
arrangement, composition, readjustment, liquidation, dissolution, or
similar relief under any law has been commenced and 90 days have
expired without dismissal thereof or with respect to which, without the
Member's consent or acquiescence, a trustee, receiver, or liquidator of
the Member or of all or any substantial part of the Member's properties
has been appointed and 60 days have expired without such appointments
having been vacated or stayed, or 60 days have expired after the date
of expiration of a stay, if the appointment has not previously been
vacated.
"Base Capacity" means the maximum throughput capacity on the
Manta Ray System or the Nautilus System, as applicable, immediately
before the commencement of the relevant Major Expansion Project and any
additional capacity thereafter created by any succeeding Major
Expansion Project approved by Members holding at least the applicable
Required Interest or, pursuant to Section 15.2, for which payout has
occurred.
"Book-Tax Disparity" means with respect to any item of
Contributed Property or Adjusted Property, as of the date of any
determination, the difference between the Carrying Value of such
Contributed Property or Adjusted Property and the adjusted basis
thereof for federal income tax purposes as of such date. A Member's
share of the Company's Book-Tax Disparities in all of its Contributed
Property and Adjusted Property will be reflected by the difference
between such Member's Capital Account balance as
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maintained pursuant to Section 4.5 and the hypothetical balance of such
Member's Capital Account computed as if it had been maintained strictly
in accordance with federal income tax accounting principles. The
determination of Book-Tax disparity and a Member's share thereof shall
be determined consistently with section 1.704-3(c) of the Treasury
Regulations.
"Boxer Line" means a 12 inch pipeline owned by Shell Holding
or its Affiliate running approximately eight miles from Green Canyon
Block 65 to Green Canyon Block 19, and all related facilities,
including, but not limited to, platform risers.
"Boxer Line Special Condition" means any condition, occurrence
or event which is (i) caused by the gross negligence or willful
misconduct of the Company, Neptune, Manta Ray or any Persons selected
to operate the Boxer Line or (ii) covered by Manta Ray's insurance.
"Boxer Line Stub Period Income" means, with respect to the
period beginning on the date hereof and ending on the Reconciliation
Date, all Boxer Line Stub Period Revenues less all Boxer Line Stub
Period Expenses.
"Boxer Line Stub Period Revenues" means, with respect to the
period beginning on the date hereof and ending on the Reconciliation
Date and without duplication, 100% of all operating revenues, gains and
income from all operations attributable to the Boxer Line to the extent
derived from any contract, agreement or similar arrangement in
existence prior to the Formation Date.
"Boxer Line Stub Period Expenses" means, with respect to the
period beginning on the date hereof and ending on the Reconciliation
Date and without duplication, 100% of all cash operating expenses
(including, without limitation, the cost of insurance), non-cash
expenses, such as depreciation and amortization and the cost of repairs
(including Shell Major Repairs) from all operations attributable to the
Boxer Line except to the extent attributable to a Boxer Line Special
Condition.
"Business Day" means Monday through Friday of each week,
except that a legal holiday recognized as such by the government of the
United States or the State of Texas shall not be regarded as a Business
Day.
"Capacity Request" has the meaning given that term in Section
15.2.
"Capital Account" means the capital account maintained for
each Member pursuant to Section 4.5 herein.
"Capital Contribution" means any contribution by a Member to
the capital of the Company, as contemplated by Section 4.5(a).
"Carrying Value" means (a) with respect to Contributed
Property, the Asset Value of such property reduced (but not below zero)
by all depreciation, amortization and cost recovery deductions relating
to such property charged to the Members' Capital Accounts,
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and (b) with respect to any other Company property, the adjusted basis
of such property for federal income tax purposes, all as of the time of
determination. The Carrying Value of any property shall be adjusted
from time to time in accordance with Sections 4.5(d)(i), (d)(ii), and
(d)(iii) and to reflect changes, additions or other adjustments to the
Carrying Value for dispositions and acquisitions of Company properties,
as deemed appropriate by the Company.
"Certificate" has the meaning given that term in Section 2.1.
"Code" means the Internal Revenue Code of 1986 and any
successor statute, as amended from time to time.
"Company" means Ocean Breeze Pipeline Company, L.L.C., a
Delaware limited liability company.
"Company Minimum Gain" means the amount determined pursuant to
Treasury Regulation section 1.704-2(d).
"Construction Agreements" means (i) the Construction
Management Agreement between Shell Holding and Manta Ray, (ii) the
Construction Management Agreement between Marathon Holding and Manta
Ray, and (iii) the Construction Management Agreement between Marathon
Holding, and Nautilus.
"Construction Certificate" has the meaning given that term in
Section 3.17.
"Contribution Agreement" means each Contribution Agreement of
even date herewith between the Company, on the one hand, and the
Members or their Affiliates, on the other hand.
"Contributed Property" means each property or other asset, in
such form as may be permitted by the Act, but excluding cash or cash
equivalents, contributed to the Company (or deemed contributed to the
Company on termination and reconstitution thereof pursuant to section
708 of the Code). Once the Carrying Value of a Contributed Property is
adjusted pursuant to Section 4.5(d), such property shall no longer
constitute a Contributed Property for purposes of Section 5.2, but
shall be deemed an Adjusted Property for such purposes.
"Costs" has the meaning given that term in Section
4.3(a)(ii)(3).
"CPR Institute" has the meaning given that term in Section
3.6(e).
"Dedication Agreements" means, collectively, (a) the Gas
Gathering Agreements between (i) Shell Offshore Inc., Shell Deepwater
Development Inc., and Shell Deepwater Production Inc. and Manta Ray,
(ii) Marathon Oil Company and Manta Ray, (b) the Precedent Agreements
relating to the Dedicated Leases, each dated as of even date herewith,
between (i) Shell Offshore Inc., Shell Deepwater Development Inc., and
Shell Deepwater Production Inc. and Nautilus, (ii) Marathon Oil Company
and
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Nautilus, (c) the Service Agreements for Firm Transportation Service
Under Rate Schedule FT-2 related to the Precedent Agreements described
in (b) above, and (d) the Reserve Dedication and Discount Rate
Agreements, each dated as of even date herewith, between (i) Shell
Offshore Inc., Shell Deepwater Development Inc., Shell Deepwater
Production Inc. and Nautilus and (ii) Marathon Oil Company and Nautilus
each individually a "Dedication Agreement."
"Dedicated Leases" means all oil, gas and mineral leases
certain of the production from which is dedicated pursuant to any
Dedication Agreement.
"Default" means, in respect of any Member, upon the occurrence
and during the continuation of any of the following events:
(a) the failure to remedy, within seven Business Days
of such Member's receipt of written notice thereof from the
Company or any other Member, a Member's delinquency in making
any Capital Contribution to the Company as required pursuant
to Section 4.1 or 4.2;
(b) the occurrence of any event that causes such
Member to become a Bankrupt Member; or
(c) the failure to remedy, within ten Business Days
of receipt of written notice thereof from the Company or any
other Member, the non-performance of or non-compliance with
any other material agreements, obligations or undertakings of
such Member contained in this Agreement or of such Member or
any of its Affiliates contained in any Contribution Agreement
if such non-performance or non-compliance with such
Contribution Agreement could reasonably be expected to result
in Losses to the Company of at least $1,000,000, in the
aggregate.
"Default Interest Rate" means a rate per annum, compounded
monthly, equal to the lesser of (a) 4% plus the one year LIBOR rate
quoted in the Wall Street Journal (or, in its absence, a similar
publication) on the first day of the applicable month, and (b) the
maximum rate permitted by applicable laws.
"Delinquent Member" has the meaning given that term in Section
4.3(a).
"Dispute" has the meaning given that term in Section 16.21.
"Disputing Party" has the meaning given that term in Section
16.21.
"Economic Risk of Loss" has the meaning set forth in Treasury
Regulation section 1.752-2(a).
"Eligible Citizen" means a Person qualified to hold leases,
rights-of-way, permits, licenses or other similar agreements or
documents issued by or entered into with the United States government,
and whose status as a Member or Transferee does not or
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would not subject the Company to a substantial risk of cancellation or
forfeiture of any such lease, right-of-way, permit, license or other
similar agreement or document issued by or entered into with the United
States government. As of the date hereof, "Eligible Citizen" means (a)
a citizen of the United States, (b) an association (including a
partnership, joint tenancy in common) organized or existing under the
Laws of the United States or any state or territory thereof, all of the
members of which are citizens of the United States (c) a corporation
organized under the Laws of the United States or of any state or
territory thereof, or (d) a limited liability company organized under
the Laws of the United States or any state or territory thereof, not
more than five percent of the voting stock, or of all the stock, of
which corporation, to the best of its knowledge, is owned or controlled
by citizens of countries that deny to United States citizens privileges
to own stock in corporations holding oil and gas leases similar to the
privileges of non-United States citizens to own stock in corporations
holding an interest in oil and gas leases on federal lands.
"Exercising Member" has the meaning given that term in Section
15.2.
"Expanded Capacity" means, with respect to a relevant Major
Expansion Project, the additional throughput capacity created on the
Manta Ray System or the Nautilus System, as applicable, as a result of
such relevant Major Expansion Project built pursuant to Section 15.2.
"Expanded Capacity Revenues" means revenues from gathering
services, if such expansion relates to the Manta Ray System, or from
transportation services, if such expansion relates to the Nautilus
System, and from any other services provided by the relevant Subsidiary
of the Company attributable to the Expanded Capacity Volumes.
"Expanded Capacity Volumes" means, for the relevant month, the
lesser of (i) the Expanded Capacity or (ii) the sum of Expansion
Property Production and Incremental Volumes.
"Expansion Liquidation Value" has the meaning given that term
in Section 12.2(c).
"Expansion Option" has the meaning given that term in Section
15.2.
"Expansion Option Notice" has the meaning given that term in
Section 15.2.
"Expansion Option Period" has the meaning given that term in
Section 15.2.
"Expansion Property" has the meaning given that term in
Section 15.2.
"Expansion Property Production" has the meaning given that
term in Section 15.2.
"FERC" means the Federal Energy Regulatory Commission or any
successor or replacement Person.
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"FERC Certificate" means the initial Certificate of Public
Convenience and Necessity authorizing Nautilus to provide
transportation services on the Nautilus System and approving the
initial rates, terms and conditions of service.
"Foreclosure Transfer" means any Transfer resulting from any
judicial or non-judicial foreclosure by the holder of a Security
Interest or any Transfer to the holder of a Security Interest in
connection with a workout or similar arrangement or any transfer from
the holder of a Security Interest.
"Formation Date" has the meaning given that term in the
preamble.
"GAAP" means generally accepted accounting principles,
consistently applied.
"Gas Contract" means any contract, agreement or other
obligation of any of the Company, Manta Ray or Nautilus to purchase
fuel gas, buy or sell linepack gas or transport, exchange, gather,
process or otherwise handle natural gas.
"General Interest Rate" means a rate per annum, compounded
monthly, equal to the lesser of (a) the sum of the one year LIBOR rate
quoted in the Wall Street Journal (or, in its absence, a similar
publication) on the first day of the applicable month plus one percent
and (b) the maximum rate permitted by applicable laws.
"Incremental Volumes" means, with respect to a relevant month,
the aggregate volumes gathered or transported by the Manta Ray System
or the Nautilus System, as applicable, in excess of the Base Capacity,
plus the relevant Expansion Property Production; provided, however,
that the Incremental Volumes shall be applied to Major Expansion
Projects which have not paid out pursuant to Section 15.2 in
chronological order of completion.
"Initial Capital Contribution" has the meaning given that term
in Section 4.1 herein.
"Lateral" means any newly constructed natural gas pipeline,
lateral, segment or extension that directly connects or is proposed to
directly connect to the Company's (or any of its Subsidiaries') then
existing natural gas pipelines, laterals, segments or extensions.
"Lateral Connection Point" means, (i) with respect to any
proposed natural gas pipeline, lateral, segment or extension that is
proposed to connect one or more ▇▇▇▇▇ to the Company's (or its
Subsidiary's) existing pipelines, laterals, segments or extensions, the
closest and most practical connection point or points, taking into
account the location of the relevant well or ▇▇▇▇▇ and the Company's
(or its Subsidiaries') existing pipelines, laterals or segments, where
sufficient capacity for gas to be produced from ▇▇▇▇▇ connected to such
proposed pipeline, lateral or segment is available (or could be made
available by acquiring, constructing or otherwise obtaining additional
facilities in accordance with the terms of Section 7.2 or Section 15.2)
or (ii) any other mutually agreeable interconnection point.
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"Lateral Opportunity" has the meaning given that term in
Section 15.1.
"Lateral Opportunity Notice" has the meaning given that term
in Section 15.1.
"Laws" means the laws, rules, regulations, decrees and orders
of the United States of America and all other governmental authorities
having jurisdiction, whether such Laws now exist or hereafter come into
effect.
"Leviathan Gas Pipeline Companies" means Leviathan Gas
Pipeline Partners, L.P. and any direct or indirect Subsidiary thereof.
"Leviathan Holding" means Sailfish Pipeline Company, L.L.C.
"Leviathan Major Repairs" means all repairs resulting from
Losses to the Manta Ray Phase I Facilities prior to the Reconciliation
Date, except to the extent such Losses result from or constitute a
Manta Ray Special Condition.
"Leviathan Reconciliation Date Income" has the meaning given
that term in Section 4.5(c)(iii).
"Lending Member" has the meaning given that term in Section
4.3(a)(ii).
"Liquidator" has the meaning given that term in Section 12.2.
"Loss" or "Losses" means, subject to the limitations set forth
in Section 16.20, any actions, claims, settlements, judgments, demands,
liens, losses, damages, fines, penalties, interest, costs, expenses
(including, without limitation, expenses attributable to the defense of
any actions or claims), attorneys' fees and liabilities.
"Major Expansion Project" means, other than a Lateral which
connects at a Lateral Connection Point, any physical enhancement or
series of physical enhancements which would increase the Base Capacity
of any then existing pipeline, lateral, segment, extension or other
significant natural gas handling facility owned, leased or otherwise
controlled by the Company, Nautilus or Manta Ray, including, without
limitation, adding compression to one or more existing pipelines,
laterals, segments or extensions or constructing a new pipeline,
lateral, segment or extension (which does not constitute a Lateral
which connects at a Lateral Connection Point).
"Majority Interest" means, subject to and in accordance with
Section 7.5, any Member (together with its Affiliated Members) and at
least one other non-Affiliated Member having among them more than 50%
of the Membership Interests of all Members; provided, however, any
single Member (together with its Affiliated Members) shall constitute a
"Majority Interest" only if such Member (together with its Affiliated
Members) owns at least 76% of the Membership Interest of all of the
Members.
"Manta Ray" means Manta Ray Offshore Gathering Company, L.L.C.
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"Manta Ray Initial Facilities" means the Manta Ray Phase I
Facilities, the Manta Ray Phase II Facilities and the Boxer Line.
"Manta Ray Phase I Facilities" means those assets, other than
cash, contributed as of even date herewith by Poseidon Pipeline
Company, L.L.C. and Manta Ray Gathering Company, L.L.C., as more
particularly described in part I.A. of "Exhibit B."
"Manta Ray Phase II Facilities" means the natural gas
pipelines and related facilities described in Part I.B. of Exhibit B
and to be constructed pursuant to that certain Construction Agreement
dated as of even date herewith between Manta Ray and Shell Holding and
the Construction Agreement between Marathon Holding and Manta Ray.
"Manta Ray Special Condition" means any condition, occurrence
or event which is (i) caused by the gross negligence or willful
misconduct of the Company, Neptune, Manta Ray or any Person selected to
operate the Manta Ray Phase I Facilities or (ii) covered by Manta Ray's
insurance.
"Manta Ray Stub Period Income" means, with respect to the
period beginning on the date hereof and ending on the Reconciliation
Date, all Manta Ray Stub Period Revenues less all Manta Ray Stub Period
Expenses.
"Manta Ray Stub Period Revenues" means, with respect to the
period beginning on the date hereof and ending on the Reconciliation
Date and without duplication, 100% of all operating revenues, gains and
income from all operations attributable to the Manta Ray Phase I
Facilities except to the extent related to New Business.
"Manta Ray Stub Period Expenses" means, with respect to the
period beginning on the date hereof and ending on the Reconciliation
Date and without duplication, 100% of all cash operating expenses
(including, without limitation, the cost of insurance), non-cash
expenses, such as depreciation and amortization and the cost of repairs
(including Leviathan Major Repairs) from all operations attributable to
the Manta Ray Phase I Facilities except to the extent attributable to
(i) New Business or (ii) a Manta Ray Special Condition.
"Manta Ray System" means the Manta Ray Initial Facilities and
any other natural gas pipelines and related facilities constructed,
purchased or otherwise acquired by Manta Ray in accordance with the
terms and conditions of this Agreement and Manta Ray's Limited
Liability Company Agreement.
"Marathon Gas Pipeline Companies" means (i) Marathon Pipe Line
Company, (ii) Marathon Holding and (iii) any direct or indirect
Subsidiaries of (i) and (ii).
"Marathon Holding" means Marathon Gas Transmission Inc.
"Member" means any Person executing this Agreement as of even
date herewith as a Member or any Person hereafter admitted to the
Company as an additional Member
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or Substituted Member as provided in this Agreement, but does not
include any Person who has ceased to be a Member in the Company.
"Membership Interest" means, subject to and in accordance with
Section 7.5, the ownership interest (on a percentage basis) of a Member
in the Company, including, without limitation, rights to distributions
(liquidating or otherwise), allocations, information, and to consent or
approve, which ownership interest is more particularly described and
identified in Article III and Exhibit A.
"Minimum Gain Attributable to Member Nonrecourse Debt" means
that amount determined in accordance with the principles of Treasury
Regulation section 1.704 2(i)(3).
"NGA" means the Natural Gas Act of 1938, as amended from time
to time.
"Nautilus" means Nautilus Pipeline Company, L.L.C.
"Nautilus Initial Facilities" means the natural gas pipelines
and related facilities as more particularly described in Part II of
Exhibit B and to be constructed pursuant to that certain Construction
Agreement dated as of even date herewith between Nautilus and Marathon
Holding.
"Nautilus System" means the Nautilus Initial Facilities, and
any other natural gas pipelines and related facilities constructed,
purchased or otherwise acquired by Nautilus in accordance with the
terms and conditions of this Agreement and Nautilus' Limited Liability
Company Agreement.
"Neptune" means Neptune Pipeline Company, L.L.C.
"Net Asset Value" means (a) in the case of any Contributed
Property, the fair market value of such property reduced by any
liabilities either assumed by the Company upon such contribution or to
which such property is subject when contributed; provided, however, the
fair market value of the Contributed Property described on Exhibit A
shall be deemed to be the Asset Value of such Contributed Property set
forth therein, and (b) in the case of any property distributed to a
Member or Transferee by the Company, the Company's Carrying Value of
such property at the time such property is distributed, reduced by any
indebtedness either assumed by such Member or Transferee upon such
distribution or to which such property is subject at the time of
distribution as determined under section 752 of the Code.
"Net Income" means, for any taxable period, the excess, if
any, of the Company's items of income and gain for such taxable period
over the Company's items of loss and deduction for such taxable period.
The items included in the calculation of Net Income shall be determined
in accordance with Section 4.5(b) and shall not include any items
specifically allocated under Sections 5.1(c) through 5.1(j). For
purposes of Sections 5.1(a) and (b), in determining whether Net Income
has been allocated to any Member for any previous taxable period, any
Unrealized Gain or Unrealized Loss allocated pursuant
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to Section 4.5(d)(i), (d)(ii) and (d)(iii) shall be treated as an item
of gain or loss in computing Net Income.
"Net Loss" means, for any taxable period, the excess, if any,
of the Company's items of loss and deduction for such taxable period
over the Company's items of income and gain for such taxable period.
The items included in the calculation of Net Loss shall be determined
in accordance with Section 4.5(b) and shall not include any items
specifically allocated under Sections 5.1(c) through 5.1(j). For
purposes of Sections 5.1(a) and (b), in determining whether Net Loss
has been allocated to any Member for any previous taxable period, any
Unrealized Gain or Unrealized Loss allocated pursuant to Section
4.5(d)(i), (d)(ii) and (d)(iii) shall be treated as an item of gain or
loss in computing Net Loss.
"New Business" means, without duplication, (a) all revenues,
expenses, repair costs and net cash flows resulting from gas volumes
produced from the Dedicated Leases that flow on the Manta Ray Phase I
Facilities pursuant to the Dedication Agreements, (b) all revenues,
expenses, repair costs and net cash flows resulting from gas volumes
flowing into the Manta Ray Phase II Facilities and then into the Manta
Ray Phase I Facilities, (c) all revenues, expenses, repair costs and
net cash flows resulting from gas volumes flowing solely on the Manta
Ray Phase II Facilities and/or the Nautilus System, but not flowing on
the Manta Ray Phase I Facilities, and (d) all revenues, expenses,
repair costs and net cash flows relating to gas processing contracts or
any operations other than gathering or transporting natural gas.
"Non-Cash Consideration" has the meaning given that term in
Section 3.6(e) herein.
"Nonrecourse Built-in Gain" means with respect to any
Contributed Properties or Adjusted Properties that are subject to a
mortgage or negative pledge securing a Nonrecourse Liability, the
amount of any taxable gain that would be allocated to the Members
pursuant to Section 5.2(b)(i)(A), 5.2(b)(ii)(A) or 5.2(b)(iii) if such
properties were disposed of in a taxable transaction in full
satisfaction of such liabilities and for no other consideration.
"Nonrecourse Debt" has the meaning set forth in Treasury
Regulation section 1.704-2(b)(4).
"Nonrecourse Deductions" means any and all items of loss,
deduction, or expenditure (described in section 705(a)(2)(B) of the
Code) that, in accordance with the principles of Treasury Regulation
section 1.704-2(b)(1), are attributable to a Nonrecourse Liability.
"Nonrecourse Liability" has the meaning assigned to such term
in Treasury Regulation section 1.704-2(b)(3).
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"Non-Transferring Members" has the meaning given that term in
Section 3.6(e) herein.
"Obligation" has the meaning given that term in Section
4.3(a)(ii)(2).
"Offer Notice" has the meaning given that term in Section
3.6(e).
"Operating Agreements" means collectively the Operating
Agreement between Shell Holding and Manta Ray, the Operating Agreement
between Manta Ray Gathering Company, L.L.C. and Manta Ray, the
Operating Agreement between Marathon Holding and Manta Ray, the
Operating Agreement between Marathon Holding and Nautilus, the
Operating Agreement between Nautilus and Shell Holding, the Operating
Agreement between the Company and Shell Holding.
"Option Period" has the meaning given that term in Section
3.6(e) herein.
"Payout Amount" means an amount of money equal to 150% of the
amount of the actual out-of-pocket capital cost of the relevant Major
Expansion Project; provided, however that to the extent the Company,
Neptune, Nautilus or Manta Ray, as applicable, elects to prepay all or
any portion of the unamortized portion of the principal amount of the
Payout Balance in accordance with Section 15.2, such Payout Amount
shall be reduced as described in Section 15.2(c).
"Person" means any individual or entity, including, without
limitation, any corporation, limited liability company, partnership
(general or limited), joint venture, association, joint stock company,
trust, unincorporated organization or government (including any board,
agency, political subdivision or other body thereof).
"Proceeding" has the meaning given that term in Section 8.1.
"PUHCA" means the Public Utility Holding Company Act of 1935,
as amended, and the rules and regulations promulgated thereunder.
"Recapture Income" means any gain recognized by the Company
(computed without regard to any adjustment required by section 734 or
743 of the Code) upon the disposition of any property or asset of the
Company, which gain is characterized as ordinary income because it
represents the recapture of deductions previously taken with respect to
such property or asset.
"Reconciliation Adjustment" means, with respect to each
relevant Capital Contribution, an additional amount to be credited to
the contributing Member's Capital Account as of the Reconciliation Date
in an amount equal to a carrying charge on such Capital Contribution
calculated from the first day of the calendar month in which the
Company actually spends the contributed capital to the Reconciliation
Date at a rate per annum, compounded monthly, equal to 8.28%.
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"Reconciliation Date" means the first day of the calendar
month immediately following the calendar month in which any of the
following events first occurs: (i) production from the Troika Field
(Green Canyon Blocks 244 et al.) first flows on the Manta Ray System
and the Nautilus System, (ii) the Nautilus System and Manta Ray System
are each transporting from the Dedicated Leases an average of at least
140,000,000 cubic feet of natural gas per day pursuant to the
Dedication Agreements during any consecutive 60 day period or (iii)
December 1, 1999.
"Record Date" means the date established by the Company for
determining (a) the identity of Members (or Transferees, if applicable)
entitled to notice of, or to vote at, any meeting of Members or
entitled to vote by ballot or give approval of Company action in
writing without a meeting or entitled to exercise rights in respect of
any lawful action of Members or (b) the identity of Record Holders
entitled to receive any report or distribution.
"Record Holder" means the Person in whose name a Membership
Interest is registered on the books of the Company as of the opening of
business on a particular Business Day.
"Rejected Lateral Opportunity" has the meaning given that term
in Section 15.1.
"Relevant Area" means the ▇▇▇▇▇▇ Island, Rabbit Island, Ship
Shoal, South Timbalier, Grand Isle, ▇▇▇▇▇ Bank, Green Canyon areas of
the Gulf of Mexico, offshore state waters adjacent to St. ▇▇▇▇ ▇▇▇▇▇▇,
Louisiana and onshore St. ▇▇▇▇ ▇▇▇▇▇▇, Louisiana from the coast to
Garden City and such other offshore areas of the Gulf of Mexico or
onshore areas into which the Nautilus System or Manta Ray System
expands.
"Required Interest" means, subject to and in accordance with
Section 7.5, the applicable percentage of Membership Interests of all
Members required to authorize or approve a relevant act of the Company,
including, without limitation, a Majority Interest, a Super-Majority
Interest or all Membership Interests, as applicable.
"Residual Gain" or "Residual Loss" means any item of gain or
loss, as the case may be, of the Company recognized for federal income
tax purposes resulting from a sale, exchange or other disposition of a
Contributed Property or Adjusted Property, to the extent such item of
gain or loss is not allocated pursuant to Section 5.2(b)(i)(A) or
5.2(b)(ii)(A), to eliminate Book Tax Disparities.
"Security Interest" means any security interest, lien,
mortgage, encumbrance, hypothecation, pledge, or other obligation,
whether created by operation of law or otherwise, created by any Person
in any of its property or rights as part of a bona fide arms-length
securitization transaction.
"Service" means the Internal Revenue Service.
"Shell Gas Pipeline Companies" means (i) Shell Gas Pipeline
Company, (ii) Shell Holding and (iii) any direct or indirect Subsidiary
of either (i) or (ii).
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"Shell Holding" means Shell Seahorse Company.
"Shell Major Repairs" means all repairs resulting from Losses
to the Boxer Line prior to the Reconciliation Date, except to the
extent such Losses result from or constitute a Boxer Line Special
Condition.
"Shell Reconciliation Date Income" has the meaning given that
term in Section 4.5(c)(iii).
"Subject Interest" has the meaning given that term in Section
3.6(e).
"Subsidiary" means, with respect to any relevant Person, any
other Person that is controlled (directly or indirectly) and more than
50%-owned (directly or indirectly) by the relevant Person. For purposes
of this definition, the term control means the ability to direct the
management or policies of such Person by ownership of voting interest,
contract or otherwise.
"Substituted Member" means a Person who is admitted as a
Member of the Company at such time as such Person has complied with the
requirements of Section 3.5, in place of and with all the rights of a
Transferor and who is shown as a Member on the books and records of the
Company.
"Super-Majority Interest" means , subject to and in accordance
with Section 7.5, any Member (together with its Affiliated Members) and
at least one other non-Affiliated Member having among them more than
74% of the Membership Interests of all Members.
"Tax Matters Member" has the meaning given that term in
Section 9.3.
"Termination Right" has the meaning given that term in Section
3.17.
"Termination Time" has the meaning given that term in Section
3.17.
"Transfer" or "Transferred" means, other than granting a
Security Interest, (i) a voluntary or involuntary sale, assignment,
transfer, conveyance, exchange, bequest, devise, gift or any other
alienation (in each case, with or without consideration) of any rights,
interests or obligations with respect to all or any portion of any
Membership Interest including, without limitation, a Foreclosure
Transfer, or (ii) (A) the sale of all or substantially all of a
Member's assets to a Person that is not an Affiliate of such Member
prior to such sale, (B) a merger or consolidation involving a Member
and a Person that is not an Affiliate of such Member prior to such
merger or consolidation, or (C) a transfer, directly or indirectly, in
one or more transactions, of a majority of the equity interests in a
Member to a Person that is not an Affiliate of such Member prior to
such transfer; provided, however, that a transfer, directly or
indirectly, of the equity ownership (including, without limitation, a
merger, consolidation, share exchange or similar transaction) or of all
or substantially all of the assets of the direct or indirect parent of
any Member shall not be considered a Transfer hereunder.
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"Transferee" means a Person who receives all or part of a
Member's Membership Interest through a Transfer but who has not become
a Substituted Member.
"Transferor" means a Member, Substituted Member or a
predecessor Transferor who Transfers a Membership Interest.
"Transferring Member" has the meaning given that term in
Section 3.6(e) herein.
"Treasury Regulation" shall have the meaning set forth in
Section 3.9.
"Unrealized Gain" attributable to any item of Company property
means, as of any date of determination, the excess, if any, of (a) the
fair market value of such property as of such date over (b) the
Carrying Value of such property as of such date (prior to any
adjustment to be made pursuant to Section 4.5(d) as of such date). In
determining such Unrealized Gain, the aggregate cash amount and fair
market value of a Company asset (including cash or cash equivalents)
shall be determined by the Company using such reasonable method of
valuation as it may adopt.
"Unrealized Loss" attributable to any item of Company property
means, as of any date of determination, the excess, if any, of (a) the
Carrying Value of such property as of such date (prior to any
adjustment to be made pursuant to Section 4.5(d) as of such date) over
(b) the fair market value of such property as of such date. In
determining such Unrealized Loss, the aggregate cash amount and fair
market value of a Company asset (including cash or cash equivalents)
shall be determined by the Company using such reasonable method of
valuation as it may adopt.
"Voting Stock" means capital stock issued by a corporation, or
equivalent interests in any other Person, the holders of which are
ordinarily, in the absence of contingencies, entitled to vote for the
election of directors (or Persons with management authority performing
similar functions) of such Person.
"Withdrawing Member" shall have the meaning given that term in
Section 12.2(d).
1.2 OTHER TERMS. Other terms may be defined elsewhere in the text of
this Agreement and shall have the meaning so given. Whenever the context
requires, the singular shall include the plural, and the plural, shall include
the singular.
1.3 CONSTRUCTION. Whenever the context requires, the gender of all
words used in this Agreement includes the masculine, feminine, and neuter. All
references to Articles and Sections refer to articles and sections of this
Agreement, and all references to Exhibits are to exhibits attached hereto, each
of which is incorporated herein for all purposes. Articles and other titles or
headings are for convenience only and neither limit nor amplify the provisions
of the Agreement itself, and all references herein to articles, sections or
subdivisions thereof shall refer to the corresponding article, section or
subdivision thereof of this Agreement unless specific reference is made to such
articles, sections or subdivisions of another document or instrument.
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ARTICLE II.
ORGANIZATION
2.1 FORMATION. The Company has been organized as a Delaware limited
liability Company by the filing of a Certificate of Formation (the
"Certificate") with the Secretary of State of the State of Delaware pursuant to
the Act.
2.2 NAME. The name of the Company is Ocean Breeze Pipeline Company,
L.L.C. and all Company business must be conducted in that name or such other
names that comply with applicable law as the Company may select from time to
time.
2.3 PRINCIPAL OFFICE IN THE UNITED STATES; OTHER OFFICES. The principal
office of the Company in the United States shall be at ▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, or at such other place as the Company may designate from
time to time, which need not be in the State of Delaware. The Company may have
such other offices as the Members may designate from time to time.
2.4 PURPOSE. The sole purpose of the Company is to own interests in
Manta Ray and Nautilus, which shall acquire, construct, own and operate the
Manta Ray System and the Nautilus System, respectively. Except for activities
related to such purposes, there are no other authorized business purposes of the
Company. The Company shall not engage in any activity or conduct inconsistent
with such purposes, including, without limitation, entering into any hedging,
futures, derivatives or similar transaction.
2.5 FOREIGN QUALIFICATION. Prior to the Company's conducting business
in any jurisdiction other than Delaware, the Company shall comply, to the extent
procedures are available and those matters are reasonably within the control of
the Company, with all requirements necessary to qualify the Company as a foreign
limited liability company, and, if necessary, keep the Company in good standing,
in that jurisdiction.
2.6 TERM. Subject to earlier termination pursuant to other provisions
of this Agreement (including those contained in Article XII), the term of the
Company shall be from the date of this Agreement through and including December
31, 2046.
2.7 MERGERS AND EXCHANGES. Except as otherwise provided in this
Agreement or by applicable Laws, the Company may be a party to any (i) merger,
(ii) consolidation, (iii) exchange or acquisition or (iv) any other type of
reorganization.
2.8 BUSINESS OPPORTUNITIES--NO IMPLIED DUTY OR OBLIGATION. Except to
the extent expressly provided in this Section 2.8 or Article XV, the Members and
their respective Affiliates may engage, directly or indirectly, without the
consent of the other Members or the Company, in other business opportunities,
transactions, ventures or other arrangements of any nature or description,
independently or with others, including without limitation, business of a nature
which may be competitive with or the same as or similar to the business of the
Company, regardless of the geographic location of such business, and without any
duty or obligation to account to the other Members or the Company in connection
therewith; provided,
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however, that each Member (or any Affiliate thereof) shall jointly solicit on
behalf of, and offer to, Manta Ray any opportunity to acquire or otherwise
obtain the gas processing rights of Persons who are not Members (or Affiliates
of Members) with respect to the gas shipped by such Person on the Nautilus
System for delivery to the Garden City Gas Plant for processing, if capacity
exists or can be obtained under the Processing Agreement, before such Member (or
applicable Affiliate) shall be entitled to acquire or otherwise obtain such gas
processing rights and no Member (or any Affiliate thereof) shall compete with
Manta Ray or otherwise participate in processing arrangements with respect to
such gas; provided, however, that if any Member or any Affiliate thereof has
purchased the Garden City Gas Plant and subsequently expands such plant's
capacity in excess of that contemplated by the Processing Agreement, any
obligation of such Member (including its Affiliates) created by this Section 2.8
shall be waived and extinguished to the extent such obligation relates to
capacity created by such expansion; and provided, further, that if any Members
or any Affiliates thereof have acquired interests which sum to less that 100% of
the interests in the Garden City Gas Plant, any obligation of such Members
(including its Affiliates) created by this Section 2.8 shall be waived and
extinguished to the extent inconsistent with the duties and obligations of such
Members (including its Affiliates) to the other interest owners in the Garden
City Gas Plant. Nothing herein is intended to create a partnership, joint
venture, agency or other relationship creating fiduciary or quasi-fiduciary
duties or similar duties and obligations or subject the Members to joint and
several or vicarious liability or to impose any duty, obligation or liability
that would arise therefrom with respect to any or all of the Members or the
Company.
ARTICLE III.
MEMBERSHIP INTERESTS AND TRANSFERS
3.1 INITIAL MEMBERS. The initial Members of the Company are the Persons
executing this Agreement as of the date hereof in such capacity, each of which
is admitted to the Company as a Member effective contemporaneously with the
execution by such Person of this Agreement.
3.2 NUMBER OF MEMBERS. The number of Members of the Company shall never
be fewer than two.
3.3 MEMBERSHIP INTERESTS. The Members agree that each Member's
ownership in the Company shall be that which is set forth in Exhibit A, as
amended from time to time in accordance with the terms of this Agreement.
3.4 REPRESENTATIONS AND WARRANTIES. Each Member hereby represents and
warrants to the Company and each other Member that (a) it is duly formed,
validly existing and (if applicable) in good standing under the Laws of the
state of its formation, and if required by Laws is duly qualified to do business
and (if applicable) is in good standing in the jurisdiction of its principal
place of business (if not formed therein); (b) that Member has full corporate,
limited liability company, partnership, trust, or other applicable power and
authority to execute and agree to this Agreement and to perform its obligations
hereunder and all necessary actions by the board of directors, shareholders,
managers, members, partners, trustees, beneficiaries, or other Persons
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necessary for the due authorization, execution, delivery, and performance of
this Agreement by that Member have been duly taken; (c) that Member has duly
executed and delivered this Agreement and it is enforceable against such Member
in accordance with its terms, subject to bankruptcy, moratorium, insolvency and
other Laws generally affecting creditors' rights and general principles of
equity (whether applied in a proceeding in a court of law or equity); (d) that
Member's authorization, execution, delivery, and performance of this Agreement
does not conflict with any material obligation under any other material
agreement or arrangement to which that Member is a party or by which it is
bound; (e) that Member is an Eligible Citizen and will remain an Eligible
Citizen for so long as such Member remains a Member of the Company; (f) neither
that Member nor any of its Affiliates or Subsidiaries nor any Person in which it
owns an equity interest is a "holding company," a "subsidiary company" of a
"holding company" or of a "subsidiary company" of a "holding company," or a
"public utility" as each of such terms is defined in PUHCA (unless such Member,
Affiliate, Subsidiary, or Person has received an exemption from registering
under the PUHCA), and the ownership of a Membership Interest by such Member does
not, and, for so long as such Member owns a Membership Interest, will not, cause
the Company, its Subsidiaries or the other Members to be subject to or adversely
affected by PUHCA (including any approval requirements arising under Section
9(a)(2) of PUHCA); and (g) it (i) has been furnished with or given adequate
access to such information about the Company and the Membership Interest as the
Member has requested, (ii) has made its own independent inquiry and
investigation into, and based thereon has formed an independent judgment
concerning, the Company and that Member's Membership Interest therein, (iii) has
adequate means of providing for its current needs and possible individual
contingencies and is able to bear the economic risks of this investment and has
a sufficient net worth to sustain a loss of its entire investment in the Company
in the event such loss should occur, (iv) has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of an investment in the Company, (v) is an "accredited investor" within
the meaning of "accredited investor" under Regulation D of the Securities Act of
1933, as amended, and (vi) understands and agrees that its Membership Interest
shall not be sold, pledged, hypothecated or otherwise transferred except in
accordance with the terms of this Agreement and pursuant to an applicable
exemption from registration under the Securities Act of 1933 and other
applicable securities Laws. Upon the occurrence and during the continuation of
any event or condition which would cause a Member to be in breach of a
representation or warranty contained in Section 3.4(e) or (f), the breaching
Person shall be treated as a Transferee who has not become a Substituted Member
in accordance with the terms of Section 3.5(c).
3.5 RESTRICTIONS ON THE TRANSFER OF A MEMBERSHIP INTEREST. A Member may
Transfer all or part of a Membership Interest only in accordance with applicable
Laws and the provisions of this Agreement, including the following provisions of
this Section. Any purported Transfer in breach of the terms of this Agreement
shall be null and void ab initio, and the Company shall not recognize any such
prohibited Transfer.
(a) A Membership Interest shall not be Transferred except pursuant to
an applicable exemption from registration under the Securities Act of 1933 and
other applicable securities Laws;
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(b) Except as otherwise provided in this Agreement or by applicable
Laws, a Transfer of a Membership Interest shall be effective only to give the
Transferee the right to receive the share of allocations and distributions to
which the Transferor would otherwise be entitled, and no Transferee of a
Membership Interest shall have the right to become a Substituted Member;
(c) Unless and until a Transferee is admitted as a Substituted Member,
(i) the Transferee shall have no right to exercise any of the powers, rights and
privileges of a Member hereunder other than to receive its share of allocations
and distributions pursuant to Section 3.5(b), and (ii) the Member who has
Transferred all or any part of its Membership Interest to such Transferee shall
cease to be a Member with respect to such Membership Interest upon Transfer of
such Membership Interest and thereafter shall have no further powers, rights and
privileges as a Member hereunder with respect to such Membership Interest (to
the extent so Transferred), but shall, unless otherwise relieved of such
obligations, remain liable for all obligations and duties as a Member with
respect to such Membership Interest; provided, however, that if the Transferee
reconveys such Membership Interest to the Transferor within ten days after the
Transferor becomes aware that the Transferee will not become a Substituted
Member, the Transferor shall once again be entitled to all of the powers, rights
and privileges of a Member hereunder;
(d) Subject to compliance with the terms and conditions of Section 3.6,
a Transferee may become a Substituted Member if the Transferee agrees in writing
to be bound by all the terms and conditions, as then in effect, of this
Agreement;
(e) At the time all of the provisions of Sections 3.5, 3.6 and 3.7 are
complied with, (i) a Substituted Member shall have all of the powers, rights,
privileges, duties, obligations and liabilities of a Member, as provided in this
Agreement and by applicable Laws to the extent of the Membership Interest so
Transferred and (ii) the Member who Transferred the Membership Interest shall be
relieved of all of the obligations and liabilities with respect to such
Membership Interest; provided that such Member shall remain fully liable for all
liabilities and obligations relating to such Membership Interest that accrued
prior to such Transfer;
(f) The Company may, in its reasonable discretion, charge a Member a
reasonable fee to cover administrative expenses necessary to effect the Transfer
of all or part of such Member's Membership Interest;
(g) In the absence of the substitution (as provided herein) of a
Transferee for a Transferor, any payment by the Company to the Transferor shall
acquit the Company and the Members of all liability to any other Persons who may
be interested in such payment by reason of a Transfer by such Member;
(h) Notwithstanding any term or condition contained in Sections 3.5,
3.6 and 3.7, any Person shall have the right to grant a Security Interest in any
rights or obligations such Person may have arising from or related to this
Agreement, the Company or any interest therein and make a Transfer in connection
with any such Security Interest; provided that such Security Interest is not
created in violation of Sections 3.5(a) and (i) of this Agreement and any other
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provisions contained in this Agreement and the Company is promptly notified in
writing of such Security Interest; and
(i) Each Member or Transferee agrees not to Transfer all or any part of
its Membership Interest (or take or omit any action, filing, election, or other
action which could result in a deemed Transfer) if such Transfer (either
considered alone or in the aggregate with prior Transfers by the same Member or
any other Members or Transferees) would result in the termination of the Company
for federal income tax purposes. Such an attempted Transfer is void ab initio.
(j) Notwithstanding any contrary provision contained in this Agreement,
no Person shall Transfer to any other Person such Person's rights or obligations
arising from or related to this Agreement, the Company or any interest therein
if such Transfer would result in violation of the Act or any other Laws. Any
such attempted Transfers are void ab initio.
3.6 TRANSFER RESTRICTIONS.
(a) Neither the Company nor any of the Members shall be bound or
otherwise affected by any Transfer of Membership Interest of which such Person
has not received notice pursuant to Section 3.7.
(b) Any Member's Membership Interest may be Transferred to an Affiliate
of such Member; provided, that, if the Transferor's Membership Interest is
subject to a guaranty, the guaranty shall apply to the Transferee and its
Membership Interest. Notwithstanding the foregoing, any such Transfer shall be
void and have no effect unless such Transfer is made simultaneously with an
equal and proportionate transfer of membership interest in Neptune Pipeline
Company, L.L.C.
(c) Subject to the right of first refusal set forth in Section 3.6(e),
a Member may Transfer all or any portion of its Membership Interest to any
Person that has a net worth calculated in accordance with GAAP of not less than
$150,000,000 immediately prior to the Transfer; provided that such net worth
requirement shall not apply in the case of a Foreclosure Transfer.
Notwithstanding the foregoing, any such Transfer shall be void and have no
effect unless such Transfer is made simultaneously with an equal and
proportionate transfer of membership interest in Neptune.
(d) Except with respect to a Foreclosure Transfer, a Member in Default
shall not Transfer its Membership Interest.
(e) Except with respect to Transfers according to the terms of Section
3.6(b), any Member who desires to Transfer all or any portion of its Membership
Interest ("Transferring Member") to a ready, willing and able Transferee shall
first offer to transfer such Membership Interest and the related membership
interest in Neptune (collectively, the "Subject Interest") to the other Members
(the "Non-Transferring-Members") as a group. Such offer shall be made by an
irrevocable written offer (the "Offer Notice") to transfer all of the Subject
Interest which the Transferring Member desires to Transfer and shall contain a
complete description of the
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transaction in which the Transferring Member proposes to Transfer the Subject
Interest, including, without limitation, the name of the ready, willing and able
Transferee and the consideration specified. The Non-Transferring Members shall
have 45 days (the "Option Period") after actual receipt of the Offer Notice
within which to advise the Transferring Member whether or not they will acquire
all of such Subject Interest upon the terms and conditions contained in the
Offer Notice. If, within the Option Period, one or more Non-Transferring Members
elect to acquire such Subject Interest, then such Non-Transferring Member or
Members shall close such transaction in accordance with Section 3.6(f) no later
than the later to occur of (i) the closing date set forth in the Notice Offer or
(ii) 60 days after the last day of the Option Period.
If any Non-Transferring Member does not elect to acquire its
proportionate share of the Subject Interest being transferred, the remaining
Non-Transferring Members shall have the right to acquire an equal and undivided
portion of the remaining Subject Interest based on the relation of their
Membership Interest to the Membership Interest of all Non-Transferring Members
desiring to acquire a portion of such Membership Interest. The right herein
created in favor of the Non-Transferring Members as a group is an option to
acquire all, or none, of the Subject Interest offered for sale by the
Transferring Member. If the Non-Transferring Members as a group decline to
acquire all of the Subject Interest of the Transferring Member in accordance
with this Section 3.6(e), the Transferring Member may Transfer such Subject
Interest to the Transferee named in the Offer Notice delivered to the
Non-Transferring Members upon the terms described in such Offer Notice. If such
Transfer does not occur in accordance with the terms of such Offer Notice, the
Transferring Member shall again be subject to the provisions of this Section
3.6(e).
Upon consummation of any such Transfer (whether to a Member or
any other Person), such Transferee and its Membership Interest shall
automatically become a party to and be bound by this Agreement and shall
thereafter have all of the rights and obligations of a Member hereunder.
Notwithstanding the foregoing, all Transfers pursuant to this Section 3.6(e)
must also comply with and be governed by this Agreement, including any
restrictions on Transfers therein and on any Transferee becoming a Substituted
Member.
If any portion of the consideration set forth in the Offer
Notice is to be paid in a form other than cash or cash equivalents (including
real or personal property, promissory notes, securities, contractual benefits,
assumption of liabilities or anything else of value) ("Non-Cash Consideration"),
the Transferring Member shall state in its Offer Notice its determination of the
aggregate fair market value of such Non-Cash Consideration (which, in the case
of marketable securities, shall be the market price of such securities). If a
majority in interest of the Non-Transferring Members (calculated without
reference to the Membership Interest of the Transferring Member) disagree with
such determination, they shall notify the Transferring Member of such
disagreement within 5 Business Days of receiving the Offer Notice. If such
dispute is not resolved within 5 Business Days after such notice, any Member may
submit such dispute to binding arbitration by delivering an arbitration notice
to the other Members and the Company. The Member initiating arbitration shall
also simultaneously file duplicate copies of its notice of arbitration with the
regional office of the CPR Institute for Dispute Resolution (the "CPR
Institute") covering Houston, Texas, together with the appropriate fee as
provided in the
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CPR Institute's administrative fee schedule. The notice of arbitration shall
contain a brief description of the nature of the dispute to be arbitrated. With
respect to any such arbitration, the Members hereby agree that: (i) the single
arbitrator shall be an appraiser or investment banking firm having expertise in
the valuation of the types of assets represented by the Non-Cash Consideration;
(ii) the arbitration proceedings shall be held in Houston, Texas at such
location selected by the arbitrator; (iii) all arbitration proceedings under
this Section shall be conducted in accordance with the Commercial Arbitration
Rules of the CPR Institute, as then amended and in effect; and such rules shall
be interpreted and applied and questions regarding the arbitration process not
resolved under such rules shall be determined in accordance with the Uniform
Arbitration Act, as enacted in the State of Delaware; provided, however, that
the arbitrator shall resolve such dispute with respect to the application and/or
interpretation of such rule or rules within ten days from the day a Member
submitted its notice of arbitration to the other Members, the Company and the
CPR Institute; (iv) within 5 Business Days following the receipt of the initial
arbitration notice by the Company, the Transferring Member and a designee of the
majority in interest of the Non-Transferring Members shall each submit to each
of the other Members, the Company and the CPR Institute a response in which it
proposes a single determination of the fair market value; and (v) the arbitrator
shall be required to select either the determination of the Transferring Member
or the determination of the designee of such majority in interest. The
consideration shall then be an amount of money, payable in cash, equal to the
total consideration stated in the Offer Notice, including the Fair Market Value
of any Non-Cash Consideration as determined in accordance with this Section.
(f) At the closing of the Transfer of a Membership Interest pursuant to
this Agreement, the Transferee shall deliver to the Transferor the full
consideration agreed upon. Any membership interest transfer or similar taxes
involved in such sale shall be paid by the Transferor, and the Transferor shall
provide the Transferee with such evidence of the Transferor's authority to
Transfer hereunder and such tax lien waivers and similar instruments as the
Transferee may reasonably request.
(g) If any governmental consent or approval is required with respect to
any Transfer, the Transferee shall have a reasonable amount of time (not to
exceed 60 days from the date upon which such Transfer would have been otherwise
consummated in accordance with the terms of this Agreement) to obtain such
consent or approval. All Members shall use reasonable, good faith efforts to
cooperate with the Transferee attempting to obtain, and to assist in timely
obtaining, such consent or approval; provided that no Member shall be required
to incur any out-of-pocket costs in connection with such cooperation and
assistance. After the expiration of such waiting period, such Transferee shall
forfeit its rights to acquire the Subject Interest with respect to such specific
transaction; provided, however, that such forfeiture shall not limit or
otherwise affect the forfeiting Transferee's rights with respect to any
subsequent proposed Transfer.
(h) No Transfer of a Membership Interest shall effect a release of the
Transferor from any liabilities or obligations to the Company or the other
Members that accrued prior to the Transfer.
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3.7 DOCUMENTATION; VALIDITY OF TRANSFER. The Company may not recognize
for any purpose any purported Transfer of all or any part of a Membership
Interest unless and until the applicable provisions of Sections 3.5 and 3.6 have
been satisfied and the Company has received, on behalf of the Company, a
document in a form acceptable to the Company executed by both the Transferor (or
if the Transfer is on account of the death, incapacity, or liquidation of the
Member, its representative) and the Transferee. Such document shall (i) include
the notice address of any Person to be admitted to the Company as a Substituted
Member and such Person's agreement to be bound by this Agreement with respect to
the Membership Interest or part thereof being obtained, (ii) set forth the
Membership Interest after the Transfer of the Transferor and the Person to which
the Membership Interest or part thereof is Transferred (which together must
total the Membership Interest of the Transferor before the Transfer), (iii)
contain a representation and warranty that the Transfer was made in accordance
with all applicable Laws (including state and federal securities Laws) and the
terms and conditions of this Agreement, and (iv) if the Person to which the
Membership Interest or part thereof is Transferred is to be admitted to the
Company as a Substituted Member, its representation and warranty that the
representations and warranties in Section 3.4 are true and correct with respect
to such Person. Each Transfer and, if applicable, admission complying with the
provisions of this Section 3.7 and Sections 3.5 and 3.6 is effective against the
Company as of the first business day of the calendar month immediately
succeeding the month in which (y) the Company receives the document required by
this Section 3.7 reflecting such Transfer, and (z) the other requirements of
Sections 3.5 and 3.6 have been met.
3.8 [RESERVED].
3.9 POSSIBLE ADDITIONAL RESTRICTIONS ON TRANSFER. Notwithstanding
anything to the contrary contained in this Agreement, in the event of (i) the
enactment (or imminent enactment) of any legislation, (ii) the publication of
any temporary or final regulation by the Treasury Department ("Treasury
Regulation"), (iii) any ruling by the Service or (iv) any judicial decision that
in any such case, in the opinion of counsel to the Company, would result in the
taxation of the Company for federal income tax purposes as a corporation or
would otherwise subject the Company to being taxed as an entity for federal
income tax purposes, this Agreement shall be deemed to impose such restrictions
on the Transfer of a Membership Interest as may be required, in the opinion of
counsel to the Company, to prevent the Company from being taxed as a corporation
or otherwise being taxed as an entity for federal income tax purposes, and the
Members thereafter shall amend this Agreement as necessary or appropriate to
impose such restrictions.
3.10 ADDITIONAL MEMBERSHIP INTERESTS. Additional Persons may be
admitted to the Company as Members, and Membership Interests may be created and
issued to those Persons and to existing Members upon a unanimous vote by the
Members and subject to the terms and conditions of this Agreement. Such
admission must comply with any additional terms and conditions the Members may
in their sole discretion determine at the time of admission. A document, in a
form acceptable to the Company, shall specify the terms of admission or issuance
and shall include, among other things, the Membership Interest applicable
thereto. Any such admission of a new Member also must comply with the provisions
of Section 3.5(d). The provisions of this Section 3.10 shall not apply to
Transfers of Membership Interests.
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3.11 CODE SECTION 708 TRANSFERS.
(a) A Member that is not a natural person may not cause or permit an
interest, direct or indirect, in itself to be Transferred such that, after the
Transfer, the Company would be considered to have terminated within the meaning
of section 708 of the Code.
(b) On any breach of the provisions of Section 3.11(a), the Company
shall have (i) the right to consent to such Transfer or (ii) the option to buy,
and, on exercise of that option, the breaching Member shall sell, the breaching
Member's Membership Interest, all in accordance with Section 11.1, as if the
breaching Member were a Bankrupt Member.
3.12 INFORMATION.
(a) In addition to the other rights specifically set forth in this
Agreement, each Member is entitled to all information to which that Member is
entitled to have access pursuant to the Act under the circumstances and subject
to the conditions therein stated.
(b) The Members acknowledge that, from time to time, they may receive
information from or regarding the Company, its customers or any other Member or
its Affiliates in the nature of trade secrets or secret or proprietary
information or information that is otherwise confidential, the release of which
may be damaging to the Company or the Member or its Affiliates, as applicable,
or Persons with which they do business. Each Member shall hold in strict
confidence any such information it receives and may not disclose such
information to any Person other than another Member, except for disclosures (i)
to comply with any Laws, (ii) to Affiliates, advisers or representatives of the
Member or Persons to which that Member's Membership Interest may be Transferred
as permitted by this Agreement, but only if the recipients of such information
have agreed to be bound by the provisions of this Section 3.12(b), (iii) of
information that a Member also has received from a source independent of the
Company and that such Member reasonably believes such source obtained such
information without breach of any obligation of confidentiality, (iv) of
information obtained prior to the formation of the Company, provided that this
clause (iv) shall not relieve any Member or any of its Affiliates from any
obligations it may have to any other Member or any of its Affiliates under any
existing confidentiality agreement, (v) to lenders, accountants and other
representatives of the disclosing Member with a need to know such information,
provided that the disclosing Member shall be responsible for such
representatives' use and disclosure of any such information, or (vi) of public
information. The Members acknowledge that a breach of the provisions of this
Section 3.12(b) may cause irreparable injury to the Company or another Member
for which monetary damages are inadequate, difficult to compute, or both.
Accordingly, the Members agree that the provisions of this Section 3.12(b) may
be enforced by injunctive action or specific performance.
(c) The Members acknowledge that, from time to time, the Company may
need information from any or all of such Members for various reasons, including,
without limitation, for complying with various federal and state regulations.
Each Member shall provide to the Company all information reasonably requested by
the Company within a reasonable amount of time from the date such Member
receives such request; provided, however, that no Member shall be obligated to
provide such information to the Company to the extent such disclosure (i)
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could reasonably be expected to result in the breach or violation of any
contractual obligation (if a waiver of such restriction cannot reasonably be
obtained) or Law or (ii) involves secret, confidential or proprietary
information.
3.13 LIABILITY TO THIRD PARTIES. Except as required by the Act, no
Member shall be liable to any Person (including any third party or to another
Member) (i) as the result of any act or omission of another Member or (ii) for
Company losses, liabilities or obligations (except as otherwise expressly agreed
to in writing by such Member).
3.14 RESIGNATION. Except to the extent expressly permitted by Section
3.17, each Member hereby covenants and agrees that it will not resign from the
Company as a Member.
3.15 LACK OF MEMBER AUTHORITY. No Member has the authority or power to
act for or on behalf of the Company, do any act that would be binding on the
Company, or incur any expenditures on behalf of the Company, unless expressly
authorized to do so in writing by the Company.
3.16 [RESERVED.]
3.17 FAILURE TO ACCEPT NAUTILUS CONSTRUCTION CERTIFICATE. Except for
Section 3.18, notwithstanding any provision of this Agreement to the contrary,
the Members hereby agree that, subject to the terms and conditions of this
Section, any Member shall have the right (the "Termination Right") to cause the
prompt dissolution and liquidation of the Company and its Subsidiaries if the
construction authorization requested by Nautilus in its Application for
Certificates of Public Convenience and Necessity and Request for Expedited
Action (FERC Docket No. CP96-790 et al.) (the "Construction Certificate") is not
acceptable to such Member for any reason. The Termination Right may be exercised
only by voting to reject the Construction Certificate at the meeting at which
such vote is considered, which meeting shall be held on the first Business Day
immediately following the 12th day after the date on which the Construction
Certificate is issued (the "Termination Time"). Each Member which either votes
to accept the Construction Certificate or abstains on such vote or fails to
attend such meeting shall be deemed to have voted in favor of acceptance of the
Construction Certificate and shall have waived its right to exercise the
Termination Right. At least five days prior to such meeting, the Members shall
convene to discuss issues and positions related to the Construction Certificate.
At such time as the Company has voted to accept the Construction Certificate,
the rights and obligations created by this Section shall automatically and
permanently terminate. If any Member exercises the Termination Right in
accordance with the terms and conditions of this Section, and subject to the
rights created by Section 3.17(d) to acquire Manta Ray and/or Nautilus after all
liabilities have been discharged or for which firm arrangements have been made
and all assets (other than rights of way and regulatory certificates or
approval(s)) have been distributed to the Members, the Company and its
Subsidiaries shall be dissolved and liquidated promptly using the general
procedures set forth in Article XII subject to the following:
(a) The intent of the dissolution and liquidation is, to the
extent practicable, for each Member (including its affiliates) to be
returned to substantially the same
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position which it held prior to the Formation Date, which intent
includes (i) returning to each Member (including its affiliates) the
assets and liabilities which it contributed, (ii) having Leviathan
Holding own and control, and bear the risk and receive any gain or
assume any loss associated with the Manta Ray Phase I Facilities
(including the related compressor), (iii) having Shell Holding and
Marathon Holding own and control the new pipe and related materials on
terms and conditions substantially similar to those set forth in the
August 15th, 1996 Letter Agreement between Marathon Oil Company and
Shell Gas Pipeline Company, and bear the risk and receive any gain or
assume any loss associated with the purchase and holding of new pipe
and the related construction activities and (iv) having each Member
share any other gains and losses from the sale of all remaining assets
and all remaining liabilities of the Company and its Subsidiaries in
proportion to its Membership Interest.
(b) All of the non-cash assets contributed to the Company or
the applicable Subsidiary shall be reconveyed, free and clear of all
liens and encumbrances (other than liens or encumbrances created prior
to the conveyance of such assets to the Company or the applicable
Subsidiary), to the Person which conveyed such non-cash assets to the
Company or such Subsidiary in exchange for such assignee assuming any
obligations related to such assets.
(c) [RESERVED]
(d) If any Member exercises the Termination Right, any one or
more Members (including their Affiliates) which (i) voted in favor of
accepting the Construction Certificate and (ii) desire to proceed with
all or any portion of the Manta Ray System and/or the Nautilus System,
shall have the right, until 1:00 p.m. (Central Time) on the
twenty-fifth day following issuance of the Construction Certificate to
be conveyed, as soon as reasonably practicable, all of the membership
interest in Nautilus and/or Manta Ray, as applicable, in lieu of
dissolving Nautilus and/or Manta Ray, as applicable, free and clear of
all liens or encumbrances, immediately following the liquidation of all
of the other assets and liabilities pursuant to Section 3.17(a) and
3.17(b)(or after other firm provisions have been made with respect to
such liabilities). The conveyance will be made without payment of
additional consideration, except that the proceeding Members shall be
obligated to repay to the other Members any amounts expended to acquire
any right of way or regulatory permit or approval retained by Nautilus
or Manta Ray, as applicable. Any such right of way or regulatory permit
or approval retained by Nautilus or Manta Ray, as applicable, shall be
owned by such Company free and clear of all liens and encumbrances
(other than liens or encumbrances created prior to the conveyance of
such assets to the Company or the applicable Subsidiary).
3.18 OTHER CONTINGENCIES. Notwithstanding any rights set forth in
Section 3.17, the Members shall have the following rights and obligations
created by, and for the periods set forth in, this Section 3.18.
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(a) If the declaratory order respecting the non-jurisdictional
status of the Manta Ray Phase II Facilities or, in the alternative, a
certificate of public convenience and necessity under the NGA
authorizing the construction of the Manta Ray Phase II Facilities has
been issued on or before April 1, 1997 then the Members agree to
promptly proceed with the construction of the Manta Ray Phase II
Facilities. If such facilities are constructed as facilities not
subject to the NGA, they will be owned by Manta Ray; otherwise they
will be owned by Nautilus or such entity as the Members unanimously
agree upon.
(b) If either the declaratory order or the certificate of
public convenience and necessity referred to in (a) above has been
issued on or before April 1, 1997 but the Construction Certificate has
not been issued on or before April 1, 1997, any Member which reasonably
believes that the Construction Certificate will not be issued by June
1, 1997 shall have the right, until April 10, 1997, to eliminate the
obligations of the Members to proceed with the construction of the
Nautilus Initial Facilities and to cause the Membership Interests to be
adjusted in accordance with Section 3.18(e); however, no Membership
Interest adjustment shall be made if two or more Members elect to
promptly reconstitute Nautilus and proceed with the Nautilus Initial
Facilities and such reconstituting Members have both (x) received a
Construction Certificate and (y) begun Nautilus Initial Facilities
construction, by December 31, 1998, otherwise by December 31, 1998 the
Membership Interests shall be adjusted in accordance with Section
3.18(e) and Leviathan Holding, if it is not one of the reconstituting
Members, shall be reimbursed an amount equal to the value Leviathan
Holding would have realized had the Reconciliation Adjustment under
Section 3.18(e) been made on the Reconciliation Date plus a cost of
capital adjustment equal to ten and one-half percent (10.5%). If the
reconstituting Members construct the Nautilus Initial Facilities, such
Members agree to use good faith reasonable efforts to maintain the
transport rates on the Nautilus System agreed to in the Precedent
Agreements between (i) Shell Offshore Inc., Shell Deepwater Development
Inc., Shell Deepwater Production Inc., and Nautilus, and (ii) Marathon
Oil Company and Nautilus subject to the other terms and provisions of
such Precedent Agreement.
(c) If neither the declaratory order nor the certificate of
public convenience and necessity referred to in (a) above has been
issued on or before April 1, 1997 but the Construction Certificate has
been issued on or before April 1, 1997, then the Members shall use
commercially reasonable good faith efforts to construct alternative
facilities in lieu of the Manta Ray Phase II Facilities, which
facilities would be designed to achieve, as nearly as possible, the
same practical benefits anticipated to be derived from the Manta Ray
Phase II Facilities and the decision as to the alternative facilities
shall be made by a Majority Interest.
(d) If neither the declaratory order nor the certificate of
public convenience and necessity referred to in (a) above has been
issued on or before April 1, 1997 and the Construction Certificate has
not been issued on or before April 1, 1997, then each Member shall have
the right to elect, until April 10, 1997, to cause the prompt
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dissolution and liquidation of the Company, Nautilus and Manta Ray on
terms and conditions substantially similar to those set forth in
Section 3.17.
(e) If any Member properly exercises its rights to adjust the
Membership Interests pursuant to this Section 3.18(e), such adjustment
shall be made in accordance with the following general procedures:
(i) If only the Manta Ray Phase II Facilities are
built and such facilities are constructed pursuant to a
Certificate of Public Convenience and Necessity under the NGA,
such facilities will be owned by Nautilus, and the Members
agree they will promptly vote to cause Nautilus or Manta Ray,
as applicable, to promptly reconvey any excess pipe and other
assets which were purchased for the Nautilus Initial
Facilities to Shell Holding and Marathon Holding free of any
liens or encumbrances (other than liens or encumbrances
created prior to the conveyance of such assets to the Company,
Neptune, or the applicable Subsidiary);
(ii) Subject to Section 3.18(e)(vii) if the Manta Ray
Phase II Facilities are not subject to regulation under the
NGA, such facilities will be owned by Manta Ray, and the
Members agree they will vote to cause Nautilus to be dissolved
and its assets to be liquidated pursuant to Section 3.17(a);
(iii) [RESERVED]
(iv) [RESERVED]
(v) Once the actions contemplated in Section
3.18(e)(i-iv) have been taken, all references in this
Agreement to the Manta Ray System and the Nautilus System
shall be amended accordingly;
(vi) On the Reconciliation Date, the Membership
Interests of the Members will be adjusted to equal the new
ownership interests of Shell Holding equal to 45%, Leviathan
Holding equal to 35%, and Marathon Holding equal to 20%. Upon
the adjustment of the Membership Interests in the manner set
forth in the preceding sentence, (i) the definition of
"Majority Interest" in Section 1.1 will be amended to replace
each reference to "50%" with a reference to "55%," (ii) the
definition of "Super-Majority Interest" in Section 1.1. shall
be deemed to be amended to replace each reference to "74%"
with a reference to "64%" and (iii) Exhibit A shall be deemed
to be amended to reflect the adjusted Membership Interests set
forth above; and
(vii) In lieu of the Members causing the dissolution
and liquidation of Nautilus in accordance with this Section
3.18 and subject to Section 3.17(a)(iii), the Members which
desire to continue to seek the Construction Certificate shall
have the right to be conveyed, as soon as reasonably
practicable, all of the membership interest in Nautilus free
and clear of all liens and encumbrances immediately following
the liquidation of all of the other assets and liabilities
pursuant to Section 3.18 (or after firm provisions have been
made with respect to such liabilities). The conveyance will be
made without
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payment of additional consideration, except that the
proceeding Members shall be obligated to repay to the other
Members any amounts expended to acquire any right of way or
regulatory permit or approval retained by Nautilus. Any such
right of way or regulatory permit or approval retained by
Nautilus shall be owned free and clear of all liens or
encumbrances (other than liens and encumbrances created prior
to the conveyance of such assets to Neptune or Nautilus, as
applicable).
ARTICLE IV.
CAPITAL CONTRIBUTIONS
4.1 INITIAL CAPITAL CONTRIBUTIONS. The Members shall make the following
Capital Contributions as further described in Exhibit A (the "Initial Capital
Contributions"):
(a) Contributions by each Member of amounts equal to 1% of such
Member's membership interest in Nautilus and Manta Ray as set forth on Exhibit
A.
(b) [Reserved].
(c) [Reserved].
(d) [Reserved].
(e) Reconciling contributions from or distributions to the applicable
Member or Members paid within 15 Business Days following the Reconciliation Date
to the extent necessary to adjust each Member's Capital Account balance as of
the Reconciliation Date, after all other Reconciliation Date adjustments have
been made, by an amount equal to the difference, if any, between (i) the product
of (a) the aggregate Capital Accounts on the Reconciliation Date multiplied by
(b) such Member's Membership Interest as set forth on Exhibit A, or if
applicable in Section 3.18(e) minus (ii) such Member's Capital Account balance.
Any such positive difference shall result in a contribution, and any such
negative difference shall result in a distribution, such that, after all such
contributions and distributions, the Capital Accounts in the aggregate, shall
remain unchanged; and
(f) [Reserved].
4.2 SUBSEQUENT CONTRIBUTIONS. Unless unanimously agreed to in writing
by the Members, no Member shall be required to make any Capital Contributions
other than the Initial Capital Contributions as contemplated by Section 4.1;
provided, that, notwithstanding any provisions in this Agreement to the
contrary, no Member shall be required to make any Capital Contribution, other
than an Initial Capital Contribution, if such Member did not vote to approve
such Capital Contribution.
4.3 FAILURE TO CONTRIBUTE.
(a) If a Member does not contribute by the time required all or any
portion of a Capital Contribution such Member ("Delinquent Member") is required
to make as provided in this Agreement, any one or more non-Delinquent Members
may advance the entire amount of the
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Delinquent Member's Capital Contribution that is in Default, with each
non-Delinquent Member electing to participate making its share of such advance
in proportion to its Membership Interest or in such other percentages as the
participating Members may agree. Each non-Delinquent Member who makes such an
advance on behalf of a Delinquent Member shall have the right to designate the
extent to which such advance will (x) constitute a loan to the Delinquent Member
and/or (y) result in an immediate adjustment of the Membership Interests of the
Delinquent Member and the non-Delinquent Member making such election; provided,
however, that if the advancing non-Delinquent Member does not notify the Company
of its election to have all, or any portion of such advance treated as a loan to
the Delinquent Member, in writing, at the time the advance is made then such
advance shall automatically result in an immediate adjustment of the Membership
Interests:
(i) To the extent one or more non-Delinquent Members does not
elect to have an advance pursuant to Section 4.3(a) treated as a loan
to the Delinquent Member, or affirmatively elects to have such advance
result in an adjustment of the Membership Interests, the Company shall
automatically adjust the Membership Interest for each Member to equal
the percentage obtained by dividing (A) the Capital Account of such
Member (including any Capital Contribution made by such Member under
this Section by (B) the aggregate Capital Accounts of all Members
(including all Capital Contributions made under this Section). Upon the
adjustment of the Membership Interests in the manner set forth in the
preceding sentence, Exhibit A shall be deemed to be amended to reflect
such adjusted Membership Interests. Notwithstanding the foregoing, the
Delinquent Member shall have the right to re-acquire the interest in
question from the advancing non-Delinquent Member within 30 days
following the date on which such Membership Interest adjustment is made
by paying the entire amount advanced by such non-Delinquent Member in
return for such adjustment, plus 12 percent per annum.
(ii) To the extent one or more non-Delinquent Members (the
"Lending Member," whether one or more) does elect to have an advance
pursuant to Section 4.3(a) constitute a loan to the Delinquent Member,
such advance shall have the following results:
(1) the sum advanced shall constitute a loan from the
Lending Member to the Delinquent Member and a Capital
Contribution of that sum to the Company by the Delinquent
Member pursuant to the applicable provisions of this
Agreement,
(2) the principal balance of the loan and all accrued
unpaid interest thereon (collectively, the "Obligation") shall
be due and payable in whole on the tenth Business Day after
the day written demand requesting payment of the Obligation is
made by the Lending Member to the Delinquent Member; provided,
however that the Delinquent Member may prepay the Obligation
in whole or in part at any time prior to the date due.
(3) the amount lent shall bear interest at the
Default Interest Rate from the date on which the advance is
deemed made until the date that the loan,
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together with all interest accrued thereon and all costs and
expenses associated therewith ("Costs"), is repaid to the
Lending Member,
(4) all distributions from the Company that otherwise
would be made to the Delinquent Member (whether before or
after dissolution of the Company) instead shall be paid to the
Lending Member until the Obligation and any Costs have been
paid in full to the Lending Member (with payments being
applied first to accrued and unpaid interest, second to Costs,
and finally to principal),
(5) [Reserved.]
(6) the Lending Member shall have the right, in
addition to the other rights and remedies granted to it
pursuant to this Agreement or available to it at law or in
equity, to take any action (including, without limitation,
court proceedings and exercising the rights of a secured party
under the Uniform Commercial Code of the State of Texas) that
the Lending Member may deem appropriate to obtain payment from
the Delinquent Member of the Obligation and all Costs; and
(7) initially, a loan by any Member to another Member
as contemplated by this Section 4.3(a)(ii) shall not be
considered a Capital Contribution by the Lending Member and
shall not increase the Capital Account balance of the Lending
Member. Notwithstanding the foregoing, in the event the
principal and interest of any such loan have not been repaid
within one year from the date of the loan, the Lending Member,
at any time thereafter by giving written notice to the
Company, may elect to have the unpaid principal and interest
balance of such loan transferred to and increase such Lending
Member's Capital Account with a corresponding decrease in the
Capital Account of the Member on whose behalf such loan was
made. Upon such transfer, the loan shall be treated as a
Capital Contribution and the Membership Interest for each
Member shall be automatically adjusted to equal the percentage
obtained by dividing (A) the Capital Account of such Member
(including any Capital Contribution made on behalf of another
Member) by (B) the aggregate Capital Accounts of all Members
(including all Capital Contributions made on behalf of other
Members). Upon the adjustment of the Membership Interests in
the manner set forth in the preceding sentence, Exhibit A
shall be deemed to be amended to reflect such adjusted
Membership Interests.
(b) If the non-Delinquent Members do not exercise the rights granted by
Section 4.3(a) within 14 days after the Delinquent Member fails to make its
Capital Contribution when due, then the Company, by a vote of a majority in
interest of the non-Delinquent Members, shall have the right to exercise the
following remedies:
(i) the Company may at any time take such action (including,
without limitation, court proceedings) as the Company may deem
appropriate to obtain payment by the Delinquent Member of the portion
of the Delinquent Member's Capital
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Contribution that is in Default, along with all Costs and expenses
associated with the collection of such Delinquent Member's Capital
Contribution; and
(ii) the Company may at any time exercise any other rights and
remedies available at law or in equity.
4.4 RETURN OF CONTRIBUTIONS. A Member is not entitled (i) to the return
of any part of any Capital Contributions other than any preferential or
disproportionate distributions to the extent such distributions are expressly
required to be returned by this Agreement or (ii) to be paid interest in respect
of either its Capital Account or its Capital Contributions. An unrepaid Capital
Contribution is not a liability of the Company or of any Member. A Member is not
required to contribute or to lend any cash or property to the Company to enable
the Company to return any other Member's Capital Contributions.
4.5 CAPITAL ACCOUNTS. A separate capital account ("Capital Account")
shall be established and maintained for each Member in accordance with the rules
of Treasury Regulation section 1.704-1(b)(2)(iv) and the following terms and
conditions:
INCREASES AND DECREASES
(a) Each Member's Capital Account shall be (i) increased by (A) the
amount of cash or cash equivalents contributed by that Member to the Company as
capital, (B) the Net Asset Value of property contributed by that Member to the
Company as capital, (C) the amount of any loans transferred by such Member to
its Capital Account pursuant to Section 4.3(a)(ii)(7) (contributions
contemplated by subparagraphs (A) and (B) shall be referred to as "Capital
Contributions"), and (D) allocations to that Member of Company income and gain
(or items thereof), including, without limitation, income and gain exempt from
tax and income and gain described in Treasury Regulation section
1.704-1(b)(2)(iv)(g), but excluding income and gain described in Treasury
Regulation section 1.704-1(b)(4)(i); and (ii) shall be decreased by (A) the
amount of cash or cash equivalents distributed to that Member by the Company,
(B) the Net Asset Value of property distributed to that Member by the Company,
and (C) allocations of Company losses and deductions (or items thereof),
including losses and deductions described in Treasury Regulation section
1.704-1(b)(2)(iv)(g) (but excluding losses or deductions described in Treasury
Regulation section 1.704-1(b)(4)(i) or (iii));
METHOD FOR DETERMINING INCOME, GAIN OR LOSS AND DEDUCTIONS
(b) For purposes of computing the amount of any item of income, gain,
loss or deduction to be reflected in the Members' Capital Accounts, the
determination, recognition and classification of any such item shall be the same
as its determination, recognition and classification for federal income tax
purposes (including, without limitation, any method of depreciation, cost
recovery or amortization used for that purpose), provided that:
(i) All fees and other expenses incurred by the Company to
promote the sale of (or to sell) any interest that can neither be
deducted nor amortized under section 709 of
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the Code, if any, shall, for purposes of Capital Account maintenance,
be treated as an item of deduction at the time such fees and other
expenses are incurred and shall be allocated among the Members pursuant
to Sections 5.1 and 5.2;
(ii) Except as otherwise provided in Treasury Regulation
section 1.704 1(b)(2)(iv)(m), the computation of all items of income,
gain, loss and deduction shall be made without regard to any election
under section 754 of the Code which may be made by the Company and, as
to those items described in section 705(a)(1)(B) or 705(a)(2)(B) of the
Code, without regard to the fact that such items are not includable in
gross income or are neither currently deductible nor capitalized for
federal income tax purposes;
(iii) Any income, gain or loss attributable to the taxable
disposition of any Company property shall be determined as if the
adjusted basis of such property as of such date of disposition were
equal in amount to the Company's Carrying Value with respect to such
property as of such date;
(iv) In accordance with the requirements of section 704(b) of
the Code, any deductions for depreciation, cost recovery or
amortization attributable to any Contributed Property shall be
determined as if the adjusted basis of such property on the date it was
acquired by the Company was equal to the Asset Value of such property
on the date it was acquired by the Company. Upon an adjustment pursuant
to Section 4.5(d) to the Carrying Value of any Company property subject
to depreciation, cost recovery or amortization, any further deductions
for such depreciation, cost recovery or amortization attributable to
such property shall be determined (A) as if the adjusted basis of such
property were equal to the Carrying Value of such property immediately
following such adjustment and (B) using a rate of depreciation, cost
recovery or amortization derived from the same method and useful life
(or, if applicable, the remaining useful life) as is applied for
federal income tax purposes; provided, however, that if the asset has a
zero adjusted basis for federal income tax purposes, depreciation, cost
recovery or amortization deductions shall be determined using any
reasonable method that the Company may adopt; and
(v) any income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing Net Income
or Net Loss shall be added to such taxable income or loss.
IMPACT OF AND ADJUSTMENTS FOR SUCCESSION IN INTERESTS
(c) A Transferee shall succeed to the Capital Account of the Transferor
relating to the Membership Interest so Transferred; provided, however, that if
the Transfer causes a termination of the Company under section 708(b)(1)(B) of
the Code, the Company's properties shall be deemed to have been distributed in
liquidation of the Company to the Members (including any Transferee of a
Membership Interest that is a party to the Transfer causing such termination)
pursuant to Section 12.2 and recontributed by such Members in reconstitution of
the Company. Any such deemed distribution shall be treated as an actual
distribution for purposes of this Section 4.5. In such event the Carrying Values
of the Company properties shall be adjusted
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immediately prior to such deemed distribution pursuant to Section 4.5(d)(ii) and
such Carrying Values shall then constitute the fair market values of such
properties upon such deemed contribution to the reconstituted Company for the
purposes of determining the Asset Value and otherwise. The Capital Accounts of
such reconstituted Company shall be maintained in accordance with the principles
of this Section 4.5.
ADDITIONAL MEMBERSHIP INTERESTS
(d) (i) Consistent with the provisions of Treasury Regulation section
1.7041(b)(2)(iv)(f), on an issuance of additional Membership Interests for cash
or Contributed Property, the Capital Accounts of all Members and the Carrying
Value of each Company property immediately prior to such issuance shall be
adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss
attributable to such Company property, as if such Unrealized Gain or Unrealized
Loss had been recognized on an actual sale of each such property immediately
prior to such issuance and had been allocated to the Members at such time
pursuant to Section 5.1.
ADJUSTMENTS PRIOR TO A DISTRIBUTION
(ii) In accordance with Treasury Regulation section
1.704-1(b)(2)(iv)(f), immediately prior to any distribution to a Member of any
Company property (other than a distribution of cash or cash equivalents that are
not in redemption or retirement of a Membership Interest), the Capital Accounts
of all Members and the Carrying Value of each Company property shall be adjusted
upward or downward to reflect any Unrealized Gain or Unrealized Loss
attributable to such Company property, as if such Unrealized Gain or Unrealized
Loss had been recognized in a sale of such property immediately prior to such
distribution for an amount equal to its fair market value (which shall be
determined by the Company using any valuation method it deems reasonable under
the circumstances), and had been allocated to the Members at such time, pursuant
to Section 5.1.
(iii) Upon the Reconciliation Date and in accordance with Treasury
Regulation Section 1.704-1(b)(2)(iv)(f), the Carrying Value of the Manta Ray
Phase I Facilities and the Boxer Line shall be adjudged to equal $50.3 million
and $4.1 million respectively. The excess of the Manta Ray Phase I Facilities'
adjudged value over the Carrying Value of the Manta Ray Phase I Facilities
immediately before the Reconciliation Date (the "Leviathan Reconciliation Date
Income") and the excess of the Boxer Line's adjudged value over the Carrying
Value of the Boxer Line immediately before the Reconciliation Date (the "Shell
Reconciliation Date Income") shall be allocated in accordance with Section
5.1(c).
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ARTICLE V.
ALLOCATIONS AND DISTRIBUTIONS
5.1 ALLOCATIONS FOR CAPITAL ACCOUNT PURPOSES. In order to properly
reflect the business agreement by and among the Members, the intent of the
allocations in this Section 5.1 is to (i) treat each Member as if the Capital
Contributions of the Manta Ray Phase I Facilities and the Boxer Line were made
on the Reconciliation Date and (ii) solely for Capital Account maintenance and
federal income tax purposes income received from Manta Ray and Nautilus shall be
allocated as if derived from the operations of the Company. Therefore, for
purposes of maintaining the Capital Accounts and in determining the rights of
the Members among themselves, the Company's items of income, gain, loss and
deduction (computed in accordance with Section 4.5(b)) shall be allocated among
the Members in each taxable year (or portion thereof) as provided herein below.
(a) Net Income. All items of income, gain, loss and deduction taken
into account in computing Net Income for such taxable period shall be allocated
to each of the Members in accordance with its respective Membership Interests;
provided, however, that, during the period beginning on the date hereof and
ending on the Reconciliation Date, (i) 100% of all income, gain, loss and
deduction taken into account in computing that portion of Net Income
attributable to Manta Ray Stub Period Income shall be specially allocated to
Leviathan Holding and (ii) 100% of all income, gain, loss and deduction taken
into account in computing that portion of Net Income attributable to Boxer Line
Stub Period Income shall be specially allocated to Shell Holding.
(b) Net Losses. All items of income, gain, loss and deduction taken
into account in computing Net Losses for such taxable period shall be allocated
to each Member in accordance with its respective Membership Interests; provided,
however that, during the period beginning on the date hereof and ending on the
Reconciliation Date, (i) 100% of all income, gain, loss and deduction taken into
account in calculating Net Losses attributable to Manta Ray Stub Period Income
shall be specially allocated to Leviathan Holding and (ii) 100% of all income,
gain, loss and deduction taken into account in calculating Net Losses
attributable to Boxer Line Stub Period Income shall be specially allocated to
Shell Holding.
(c) Special Allocation of Income. Notwithstanding the other provisions
of this Section 5.1,
(i) the Leviathan Reconciliation Date Income shall be
allocated solely to Leviathan Holding; and
(ii) the Shell Reconciliation Date Income shall be allocated
solely to Shell Holding.
(d) Nonrecourse Liabilities. For purposes of Treasury Regulation
section 1.752-3(a)(3), the Members agree that Nonrecourse Liabilities of the
Company in excess of the sum of (A) the amount of Company Minimum Gain and (B)
the total amount of Nonrecourse Built-in
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Gain shall be allocated among the Members in accordance with their respective
Membership Interests.
(e) Company Minimum Gain Chargeback. Notwithstanding the other
provisions of this Section 5.1, except as provided in Treasury Regulation
section 1.704-2(f)(2) through (5), if there is a net decrease in Company Minimum
Gain during any Company taxable period, each Member shall be allocated items of
Company income and gain for such period (and, if necessary, subsequent periods)
in the manner and amounts provided in Treasury Regulation sections 1.704-2(f)(6)
and (g)(2) and section 1.704-2(j)(2)(i), or any successor provisions. For
purposes of this Section 5.1(d), each Member's Adjusted Capital Account balance
shall be determined, and the allocation of income or gain required hereunder
shall be effected, prior to the application of any other allocations pursuant to
this Section 5.1 with respect to such taxable period (other than an allocation
pursuant to Section 5.1(h) or (i)).
(f) Chargeback of Minimum Gain Attributable to Member Nonrecourse Debt.
Notwithstanding the other provisions of this Section 5.1 (other than Section
5.1(d), except as provided in Treasury Regulation section 1.704-2(i)(4)), if
there is a net decrease in Minimum Gain Attributable to Member Nonrecourse Debt
during any Company taxable period, any Member with a share of Minimum Gain
Attributable to Member Nonrecourse Debt at the beginning of such taxable period
shall be allocated items of Company income and gain for such period (and, if
necessary, subsequent periods) in the manner and amounts provided in Treasury
Regulation sections 1.704-2(i)(4) and 1.704-2(j)(2)(ii), or any successor
provisions. For purposes of this Section 5.1, each Member's Adjusted Capital
Account balance shall be determined and the allocation of income or gain
required hereunder shall be effected, prior to the application of any other
allocations pursuant to this Section 5.1, other than Sections 5.1(d), (h) and
(i), with respect to such taxable period.
(g) Qualified Income Offset. In the event any Member unexpectedly
receives adjustments, allocations or distributions described in Treasury
Regulation section 1.704-1(b)(2)(ii)(d)(4) through (6) (or any successor
provisions), items of Company income and gain shall be specifically allocated to
such Member in an amount and manner sufficient to eliminate, to the extent
required by the Treasury Regulations promulgated under section 704(b) of the
Code, the deficit balance, if any, in its Adjusted Capital Account created by
such adjustments, allocations or distributions as quickly as possible unless
such deficit balance is otherwise eliminated pursuant to Section 5.1(d) or
5.1(e).
(h) Gross Income Allocations. In the event any Member has a deficit
balance in its Adjusted Capital Account at the end of any Company taxable period
which is in excess of the sum of (i) the amount such Member is obligated to
restore pursuant to any provision of this Agreement and (ii) the amount such
Member is deemed obligated to restore pursuant to the penultimate sentences of
Treasury Regulations sections 1.704-2(g)(1) and 1.704-2(i)(5), such Member shall
be specifically allocated items of Company gross income and gain in the amount
of such excess as quickly as possible; provided that an allocation pursuant to
this Section 5.1(g) shall be made only if and to the extent that such Member
would have a deficit balance in its Adjusted Capital Account after all other
allocations provided in this Section 5.1 have been tentatively made as if this
Section 5.1(g) was not in the Agreement.
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(i) Nonrecourse Deductions. Nonrecourse Deductions for any taxable
period shall be allocated to the Members in accordance with their respective
Membership Interests. If the Company determines in its good faith discretion
that the Company's Nonrecourse Deductions must be allocated in a different ratio
to satisfy the safe harbor requirements of the Treasury Regulations promulgated
under section 704(b) of the Code, the Company is authorized, upon notice to the
Members, to revise the prescribed ratio to the numerically closest ratio which
does satisfy such requirements.
(j) Member Nonrecourse Deductions. Member Nonrecourse Deductions for
any taxable period shall be allocated 100% to the Member that bears the Economic
Risk of Loss for such Member Nonrecourse Debt to which such Member Nonrecourse
Deductions are attributable in accordance with Treasury Regulation section
1.704-2(i) (or any successor provision). If more than one Member bears the
Economic Risk of Loss with respect to a Member Nonrecourse Debt, such Member
Nonrecourse Deductions attributable thereto shall be allocated between or among
such Members ratably in proportion to their respective shares of such Economic
Risk of Loss.
5.2 ALLOCATIONS FOR TAX PURPOSES.
(a) Except as otherwise provided herein, for federal income tax
purposes, each item of income, gain, loss and deduction which is recognized by
the Company for federal income tax purposes shall be allocated among the Members
in the same manner as its correlative item of "book" income, gain, loss or
deduction is allocated pursuant to Section 5.1 hereof.
(b) In an attempt to eliminate Book-Tax Disparities attributable to a
Contributed Property or Adjusted Property, items of income, gain, loss,
depreciation, amortization and cost recovery deductions shall be allocated for
federal income tax purposes among the Members as follows:
(i) (A) In the case of a Contributed Property, such items
attributable thereto shall be allocated among the Members in the manner
provided under section 704(c) of the Code and section 1.704-3(b) of the
Treasury Regulations (i.e. the "traditional method") that takes into
account the variation between the Asset Value of such property and its
adjusted basis at the time of contribution; and (B) except as otherwise
provided in Section 5.2(b)(iii), any item of Residual Gain or Residual
Loss attributable to a Contributed Property shall be allocated among
the Members in the same manner as its correlative item of "book" gain
or loss is allocated pursuant to Section 5.1.
(ii) (A) In the case of an Adjusted Property, such items shall
(1) first, be allocated among the Members in a manner consistent with
the principles of section 704(c) of the Code and section 1.704-3(b) of
the Treasury Regulations (i.e. the "traditional method") to take into
account the Unrealized Gain or Unrealized Loss attributable to such
property and the allocations thereof pursuant to Section 4.5(d)(i),
(ii), or (iii) and (2) second, in the event such property was
originally a Contributed Property, be allocated among the Members in a
manner consistent with Section 5.2(b)(i); and (B) except as otherwise
provided in Section 5.2(b)(iii), any item of Residual Gain or Residual
Loss
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attributable to an Adjusted Property shall be allocated among the
Members in the same manner as its correlative item of "book" gain or
loss is allocated pursuant to Section 5.1.
(iii) Any items of income, gain, loss or deduction otherwise
allocable under Section 5.2(b)(i)(B) or 5.2(b)(ii)(B) shall be subject
to allocation by the Company in a manner designed to eliminate, to the
maximum extent possible, Book-Tax Disparities in a Contributed Property
or Adjusted Property otherwise resulting from the application of the
"ceiling" limitation (under section 704(c) of the Code or section
704(c) principles) to the allocations provided under Sections
5.2(b)(i)(A) and 5.2(b)(ii)(A).
(c) For the proper administration of the Company, the Company shall (i)
adopt such conventions as it deems appropriate in determining the amount of
depreciation, amortization and cost recovery deductions; provided, that such
depreciation, amortization and cost recovery methods shall be the most
accelerated methods allowed under federal tax laws]; (ii) make special curative
allocations for federal income tax purposes of income (including, without
limitation, gross income) or deductions pursuant to section 1.704-3(c) of the
Treasury Regulations to eliminate the impact of the "ceiling" limitation (under
section 704(c) of the Code and section 704 principles) to the allocations
provided in Section 5.2(b); and (iii) amend the provisions of this Agreement as
appropriate to reflect the proposal or promulgation of Treasury Regulations
under section 704(b) or section 704(c) of the Code. The Company may adopt such
conventions, make such allocations and make such amendments to this Agreement as
provided in this Section 5.2(c) only if such conventions, allocations or
amendments are consistent with the principles of section 704 of the Code.
(d) The Company may determine to depreciate the portion of an
adjustment under section 743(b) of the Code attributable to unrealized
appreciation in any Adjusted Property (to the extent of the unamortized Book-Tax
Disparity) using a predetermined rate derived from the depreciation method and
useful life applied to the Company's common basis of such property, despite the
inconsistency of such with Proposed Treasury Regulation section 1.168-2(n) and
Treasury Regulation section 1.167(c)-1(a)(6), or any successor provisions. If
the Company determines that such reporting position cannot reasonably be taken,
the Company may adopt any reasonable depreciation convention that would not have
a material adverse effect on the Members.
(e) Any gain allocated to the Members upon the sale or other taxable
disposition of any Company asset shall, to the extent possible, after taking
into account other required allocations of gain pursuant to this Section 5.2 be
characterized as Recapture Income in the same proportions and the same extent as
such Members (or their predecessors in interest) have been allocated any
deductions directly or indirectly giving rise to the treatment of such gains as
Recapture Income.
(f) All items of income, gain, loss, deduction and credit recognized by
the Company for federal income tax purposes and allocated to the Members in
accordance with the provisions hereof shall be determined without regard to any
election under section 754 of the Code which may be made by the Company;
provided, however, that such allocations, once made, shall be
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adjusted as necessary or appropriate to take into account those adjustments
permitted or required by sections 734 and 743 of the Code.
5.3 REQUIREMENT OF DISTRIBUTIONS. Subject to the provisions of Sections
5.6 and 7.2, and less the amount of the cash reserves, if any, set aside
pursuant to Section 5.5, the Company shall distribute (within 30 days following
the end of each calendar month) such amount of Available Cash, as determined by
the Members, to the Members who were Record Holders as of the Record Date in
accordance with their respective Membership Interests (except as otherwise
provided in Section 5.7).
5.4 PRO RATA DISTRIBUTIONS. Except for preferential or disproportionate
distributions to the extent expressly provided for in this Agreement (including
those set forth in Section 12.2), any distributions attributable to the
Membership Interests of the Company paid in cash, property, or equity ownership
of the Company shall be allocated pro rata according to Membership Interest.
5.5 RESERVES. Before payment of any Distributions, there may be set
aside out of any funds of the Company available for distributions such sum or
sums as the Members from time to time, in their absolute discretion, think
proper as a cash reserve or reserves to meet contingencies, for repairing or
maintaining any property of the Company, or for such other purpose as the
Members shall determine to be in the best interest of the Company; and the
Company may modify or abolish any such cash reserve in the manner in which it
was created. Any reserves established by Manta Ray or Nautilus shall be
considered in determining the appropriate reserve for the Company.
5.6 DISTRIBUTION RESTRICTIONS. Unless unanimously agreed to in writing
by the Members, and subject to the provisions of Section 4.3, the Company shall
not distribute (i) any of the Initial Capital Contributions until the completion
of the construction of the Manta Ray Phase II Facilities and the Nautilus
Initial Facilities, except to the extent that all of the Members agree that the
applicable portion of such Initial Capital Contributions is no longer needed to
finance such construction or the operations of the Company, or (ii) any amounts
that would cause the Company, Manta Ray or Nautilus to materially breach, or
would create a material default under, any debt agreements or instruments to
which the Company, Manta Ray or Nautilus is a party.
5.7 SPECIAL DISTRIBUTIONS AND CONTRIBUTIONS. Notwithstanding anything
herein to the contrary, including the provisions of this Article V, on or before
the fifteenth Business Day of each calendar month, Company shall deliver to
Shell Holding and Leviathan Holding a statement setting forth in detail the
amounts specially allocated to Shell Holding or Leviathan Holding as Boxer Line
Stub Period Income or Manta Ray Stub Period Income, as the case may be, pursuant
to Section 5.1(a) and (b). If the Boxer Line Stub Period Income or the Manta Ray
Stub Period Income for the preceding calendar month (exclusive of non-cash items
such as depreciation and amortization) is a positive number, then the Company
will make a special distribution of such net amount to Shell Holding and/or
Leviathan Holding, as applicable, on or before the 25th day of the calendar
month in which the statement is delivered. If the Boxer Line Stub Period Income
or Manta Ray Stub Period Income for the preceding calendar month (exclusive of
non-cash items such as depreciation and amortization) is a negative number, then
Shell Holding or Leviathan
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Holding, as applicable, will make an additional Capital Contribution to the
Company of such net amount on or before the 25th day of the calendar month in
which the statement is delivered. Any such distribution or contribution shall
not prejudice the right of the paying party to an adjustment of any statement.
Shell Holding and Leviathan Holding and its authorized representatives shall
have the right to inspect any records of the Company forming the basis for a
statement delivered to it, and the Company agrees to retain such records, for 36
months from the end of the calendar year in which the applicable statement was
delivered.
ARTICLE VI.
MANAGEMENT OF THE COMPANY
6.1 MANAGEMENT BY THE MEMBERS AND DELEGATION OF AUTHORITY. The Members
hereby unanimously agree that the business and affairs of the Company shall be
managed by or under the authority of the Members in accordance with the Act,
which Members may act through their directors, officers, employees,
representatives, agents and designees. Except for situations in which the
approval of the Members is required by this Agreement or by nonwaivable
provisions of applicable Laws, the Members shall have broad discretion to
authorize any committee constituted pursuant to Section 6.2 or any officer or
other agent to act on behalf of the Company.
6.2 COMMITTEES. For organizational purposes, the Members may form one
or more committees of the Members. Each Member shall appoint one (or more) of
its duly authorized agents to act for the Member on any committee of the
Company. Such agents of each Member shall be given the authority by such Member
to vote on behalf of the Member on any issue within the committee's
responsibility and the agent(s) of each Member shall have the right to vote on
behalf of such Member in proportion to such Member's Membership Interest.
6.3 AUTHORITY OF MEMBERS AND COMMITTEES.
(a) With respect to conflicts or disagreements between and among any
committees, the Members shall have ultimate decision making authority. The
Members and the committees shall act through the Company's officers, employees,
representatives, agents and designees to whom authority has been expressly
delegated. All action of the Members shall be taken pursuant to resolutions
approved by the Members in accordance with Article VII of this Agreement.
(b) Unless otherwise expressly delegated in writing or provided by this
Agreement, the Members hereby reserve to the Members as a group the authority,
with respect to the Company, to authorize and approve the following, or, with
respect to matters to be authorized or approved by Subsidiaries of the Company,
to determine how the Company will vote as a member of such Subsidiary, with
respect to the following:
(i) authorizing Gas Contracts the term of which could be
longer than one year after the date of execution thereof; provided,
however, that, with respect to the Manta Ray System, Leviathan Holding
shall have the right to override and reverse any vote by the Members
made on or before the expiration of the Termination Time so long as
Leviathan Holding does not obligate Manta Ray to incur any construction
costs;
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(ii) authorizing any contract, agreement or other undertaking
involving more than $500,000 in any year or $1,000,000 in the
aggregate;
(iii) authorizing a transaction involving the acquisition or
construction of any pipeline, lateral or extension, including a Lateral
in accordance with Article XV, or any compression, expansion or other
significant facilities;
(iv) authorizing a transaction involving a lease or similar
arrangement which either (A) involves an asset with a fair market value
of more than $500,000 or (B) could reasonably be expected to result in
payments in excess of $500,000;
(v) approving any operating and capital expenditures budgets;
(vi) authorizing any transaction, including, without
limitation, any purchase, sale, lease or exchange of property or the
rendering of any service, involving the Company or its Subsidiaries and
any Member or any Affiliate of any Member (which transaction, once
approved by all of the Members, shall be presumed to be fair to the
Company or such Subsidiary, as the case may be);
(vii) authorizing borrowing money;
(viii) authorizing transactions not in the ordinary course of
business;
(ix) determining the cash reserve applicable to distributions
of cash and other property as provided in Sections 5.3, 5.5 and 5.6;
(x) utilizing for other than company purposes, acquiring, or
disposing of any material asset of the Company or its Subsidiaries;
(xi) permitting a member of the Company or any of its
Subsidiaries to resign;
(xii) permitting the merger, consolidation, participation in a
share exchange or other statutory reorganization with, or sale of all
or substantially all of the assets of the Company or its Subsidiaries
to, or the sale or other transfer or alienation of any interest in
Manta Ray or Nautilus to, any Person;
(xiii) permitting dissolution and liquidation;
(xiv) approving the Construction Certificate, the Nautilus
FERC tariff, the applications for the Construction Certificate, the
FERC Certificate and any subsequent FERC certificate, including any
amendment or modifications of any FERC certificate, approving any
material amendments or other material modifications to the Construction
Certificate, the Nautilus FERC tariff, the FERC Certificate or any
subsequent FERC certificate, including, without limitation, the general
terms and conditions and the rates and the basis upon which such rates
are calculated, or accepting the Construction Certificate, the FERC
Certificate or any subsequent FERC certificate;
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(xv) instituting litigation, arbitration, or similar
proceedings at a cost to the Company which could reasonably be expected
to exceed $250,000; provided, however, that if any Member or any
Affiliate of a Member is an adverse party thereto, then all of the
remaining Members which are not Affiliates of the affected Member shall
be entitled to cause the Company to institute such action, but once
such action has been instituted, all of such remaining Members must
agree prior to the settlement of any such action. Such non-Affiliate
Members' vote shall be sufficient to take such actions under this
Section even if such Membership Interest is less than a Majority
Interest;
(xvi) changing the name of the Company or its Subsidiaries;
(xvii) approval, waiver, amendment or other modification
(other than termination) of any Operating Agreement or any other
operating agreement with respect to the operation of the Manta Ray
System or the Nautilus System or any management or similar agreement
with respect to the operation of the Company; and
(xviii) termination (other than by expiration of the term
thereof) of any Operating Agreement or any other operating agreement
with respect to the operation of the Manta Ray System or the Nautilus
System or of the Company; provided, however that for purposes of this
Section 6.3(b)(xviii), if any Member or its Affiliate (as such term is
defined in the Operating Agreements or Construction Agreements in
question) which would be replaced as an operator as a result of such
termination, such Member shall not be entitled to vote on such
termination. The vote of such non-replaced Members shall be sufficient
to take such actions under this Section even if such Membership
Interest is less than a Majority Interest;
With respect to each matter described in (i) - (xviii) above, the
exercise of Member authority shall occur only by the affirmative vote of the
applicable Required Interest specified elsewhere in this Agreement, including,
without limitation, the unanimous voting requirements set forth in Section
7.2(b); the Super-Majority Interest voting requirements set forth in Section
7.2(a), and the Majority Interest voting requirements set forth in Section
7.1(a). Member approval or disapproval of any matter requiring Member approval
(including, without limitation, the matters set forth in this Section 6.3(b) and
Sections 7.2(a) and (b)) may be based on any reason whatsoever, in each Member's
sole and absolute discretion.
6.4 OFFICERS.
(a) The Members may designate one or more Persons to fill one or more
officer positions of the Company. Such officers may include, without limitation,
Chief Executive Officer, Chief Financial Officer, President, Vice President,
Treasurer, Assistant Treasurer, Secretary and Assistant Secretary. No officer
need be a resident of the State of Delaware. The Members may assign titles to
particular officers. Each officer shall hold office until his successor shall be
duly designated and shall qualify to hold such office, or until his death or
until he shall resign or shall have been removed in the manner hereinafter
provided. Any number of offices may be held by the same Person. The salaries or
other compensation, if any, of the officers and agents of the Company may be
fixed from time to time by the Members. Notwithstanding any
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other provisions of this Agreement, the authority of any officers, employees or
agents of the Company shall be restricted to the carrying on of the day-to-day
affairs of the Company and any such authority shall be subject to the
supervisory control of the Members. Only Members or their duly authorized agents
shall have the authority to make policy decisions for the Company. Unless the
Members decide otherwise, the assignment of such title shall constitute the
delegation to such officer of the authority and duties set forth below:
(i) President. Unless otherwise specified by the Members, the
President shall be the chief operating officer of the Company and have
general executive powers to manage the operations of the Company, and
such other powers and duties under this Agreement as the Members may
from time to time prescribe.
(ii) Vice Presidents. In the absence of the President, or in
the event of his inability to act, the Vice President (or in the event
there be more than one Vice President, the Vice Presidents in the order
designated by the Members, or in the absence of any such designation,
then in the order of their election or appointment) shall perform the
duties of the President, and when so acting, shall have all the powers
of and be subject to all the restrictions upon the President.
(iii) Secretary. The Secretary shall keep the minutes of the
meetings of the Company and shall exercise general supervision over the
files of the Company. The Secretary shall give notice of meetings and
shall perform other duties commonly incident to such office.
(iv) Assistant Secretary. At the request of the Secretary or
in the Secretary's absence or inability to act, the Assistant Secretary
shall perform part or all of the Secretary's duties.
(v) Treasurer. The Treasurer shall have general supervision of
the funds, securities, notes, drafts, acceptances, and other commercial
paper and evidences of indebtedness of the Company and he shall
determine that funds belonging to the Company are kept on deposit in
such banking institutions as the Members may from time to time direct.
The Treasurer shall determine that accurate accounting records are
kept, and the Treasurer shall render reports of the same and of the
financial condition of the Company to the Members at any time upon
request. The Treasurer shall perform other duties commonly incident to
such office, including, but not limited to, the execution of tax
returns.
(vi) Assistant Treasurer. At the request of the Treasurer or
in the Treasurer's absence or inability to act, the Assistant Treasurer
shall perform part or all of the Treasurer's duties.
(b) Any officer may resign as such at any time. Such resignation shall
be made in writing and shall take effect at the time specified therein, or if no
time be specified, at the time of its receipt by the Company. The acceptance of
a resignation shall not be necessary to make it effective, unless expressly so
provided in the resignation. Any officer may be removed as such,
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either with or without cause, by the Members; provided, however, that such
removal shall be without prejudice to the contract rights, if any, of the
officer so removed. Designation of an officer shall not of itself create
contract rights. Any vacancy occurring in any office of the Company may be
filled by the Members.
6.5 DUTIES OF OFFICERS. Each officer shall devote such time, effort,
and skill to the Company's business affairs as he deems necessary and proper for
the Company's welfare and success. The Members expressly recognize that the
officers have substantial other business relationships and activities with
Persons other than the Company.
6.6 NO DUTY TO CONSULT. Except as otherwise provided herein or by
applicable law, neither the Company nor its duly appointed agents, designees or
representatives or the officers of the Company shall have a duty or obligation
to consult with or seek advice of the Members on any matter relating to the
day-to-day business affairs of the Company duly delegated to such Persons;
provided, however, that such Persons shall not be restricted from consulting
with or seeking the advice of the Members.
6.7 REIMBURSEMENT. Except for pre-formation expenses paid by each
respective Member and treated as a Capital Contribution pursuant to Section
4.1(a), all expenses incurred with respect to the organization, operation and
management of the Company shall be borne by the Company.
6.8 MEMBERS AND AFFILIATES DEALING WITH THE COMPANY. Subject to
obtaining any consent expressly required hereunder, the Company may appoint,
employ, contract, or otherwise deal with any Person, including Affiliates of the
Members, individuals with whom the Members are otherwise related, and with
business entities which have a financial interest in a Member or in which a
Member has a financial interest, for transacting Company business, including any
acts or services for the Company as the members of any committee, officer or
other representative with the proper authority may approve.
6.9 INSURANCE. Neptune shall make available to the Company the full
amount of Neptune's insurance program described on "Exhibit C.I.A. through D" of
the Neptune Limited Liability Company Agreement as if the Company was an
additional insured.
The Company shall provide the insurance coverage as outlined on
"Exhibit C" of this Agreement.
All insurance policies shall provide that the insurers waive their
right of subrogation against the Company, Neptune, Manta Ray, Nautilus,
Leviathan Holding, Marathon Holding and Shell Holding, any of their Affiliates,
or any other party indemnified by Company.
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ARTICLE VII.
MEETINGS
7.1 MEETINGS OF MEMBERS AND COMMITTEES.
(a) A quorum shall be present at a meeting of Members or any committee
of the Company if the holders of at least a Majority Interest are represented at
the meeting in person or by proxy. At a meeting of the Members at which a quorum
is present with respect to any matter (except for any matter expressly requiring
the affirmative vote of a Required Interest greater than a Majority Interest
pursuant to this Agreement), the affirmative vote of the Majority Interest shall
be the act of the Members.
(b) All meetings of the Members or any committee of the Company shall
be held at the principal place of business of the Company or at such other place
within or without the State of Delaware as shall be specified or fixed in the
notices or waivers of notice thereof; provided that any or all Members or their
representatives may participate in any such meeting by means of conference
telephone or similar communications equipment pursuant to Section 16.11. No
Member shall willfully be absent from any meeting of the Members or any
committee of the Company.
(c) Notwithstanding the other provisions of this Agreement, the holders
of at least a majority of the Membership Interest represented (in person or by
proxy) at a meeting at which a quorum is present shall have the power to adjourn
such meeting from time to time, without any notice other than an announcement at
the meeting of the time and place of the resumption of the adjourned meeting.
The time and place of such adjournment shall be determined by a vote of such
Membership Interest. Upon the resumption of such adjourned meeting, any business
may be transacted that might have been transacted at the meeting as originally
called.
(d) Unless otherwise expressly provided in a written notice issued by
the Members, an annual meeting of the Members for the transaction of such
business as may properly come before such meeting shall be held at the principal
office of the Company at 10:00 a.m. on the second Tuesday which is a Business
Day in the month of April. Regularly scheduled, periodic meetings of the Members
or any committee of the Company may be held without notice to the Members or
Member representatives at such times and places as shall from time to time be
determined by resolution of the Members or such Member representatives and
communicated to all Members or their representatives. Each Member, or its
representatives in the case of committee meetings, shall use reasonable efforts
to inform the other Members or committee representatives of any business matters
that it intends to raise at any regular meeting of the Members or any committee
of the Company within a reasonable time prior to such meeting.
(e) Special meetings of the Members or any committee of the Company,
for any purpose or purposes, unless otherwise prescribed by law, shall be called
by (i) the President or Secretary (if any), (ii) any one or more Members holding
at least 20% of the Membership Interests of the Company in the aggregate or
(iii) any two or more non-Affiliated Members. Such request of the President,
Secretary or Member(s) shall state the purpose or purposes of the proposed
meeting.
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(f) Except as provided otherwise by this Agreement or applicable law,
written or printed notice stating the place, day and hour of the meeting and the
purpose or purposes for which such meeting is called, shall be delivered not
less than ten (10) nor more than sixty (60) days (including Saturdays, Sundays
and holidays) before the date of the proposed meeting, either personally, by
certified mail (return receipt requested) or by telecopy (with a copy delivered
via United States mail), by or at the direction of the Person calling the
meeting, to each Member or Member representative, as the case may be, entitled
to vote thereat. If mailed, any such notice shall be deemed to be delivered when
deposited in the United States mail, addressed to the Member, or Member
representative, at its address provided for in Section 16.19, with postage
thereon prepaid.
(g) The date on which notice of a meeting of the Members or any
committee of the Company is mailed shall be the Record Date for the
determination of the Members or Member representatives entitled to notice of or
to vote at such meeting, including any adjournment thereof, or the Members or
Member representatives entitled to receive such notice.
7.2 SPECIAL ACTIONS.
(a) The approval of the holders of a Super-Majority Interest of the
Members shall be required to authorize and approve the following, or, with
respect to matters to be authorized or approved by Subsidiaries of the Company,
to determine how the Company will vote as a member of such Subsidiary with
respect to the following:
(i) except with respect to cash reserves consistent with
historical practices, determining the cash reserves applicable to
distributions of cash and other property as provided in Sections 5.3,
5.5 and 5.6, other than (A) cash reserves relating to acquiring,
constructing or otherwise obtaining (including, without limitation,
pursuant to a lease or similar arrangement approved in accordance with
Section 7.2(a)(v)) any pipeline, lateral or extension, including any
Lateral or any compression, expansion or other significant facilities
if such reserve exceeds, at any one time $500,000, but is less than or
equal to $5,000,000 (the authorization for which requires at least a
Majority Interest) or (B) cash reserves described in Section 7.2(a)(ii)
(requiring at least a Super Majority Interest) or Section 7.2(b)(xv)
(requiring unanimity);
(ii) determining the cash reserves applicable to distributions
of cash and other property as provided in Sections 5.3, 5.5 and 5.6, to
the extent such cash reserves (A) relate to acquiring, constructing,
leasing or otherwise obtaining any pipeline, lateral or extension,
including any Lateral or any compression, expansion or other
significant facilities and (B) exceed, at any one time, $5,000,000, but
is less than or equal to $15,000,000;
(iii) (A)entering into any credit agreement, indenture or
similar agreement or (B) borrowing money or making draws under any such
previously approved credit agreement, indenture or similar agreement
for the purpose of funding authorized transactions with an approved
cost to the Company of more than $5,000,000, but less than or equal to
$15,000,000;
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(iv) utilizing other than for Company purposes, acquiring or
disposing of any asset of the Company or its Subsidiaries having a then
existing fair market value or GAAP net book value (after deducting
accumulated depreciation, depletion, amortization and impairment) of
more than $5,000,000 but less than or equal to $15,000,000;
(v) authorizing a transaction involving a lease or similar
arrangement which either (A) involves an asset with a fair market value
of more than $5,000,000 but less than or equal to $15,000,000 or (B)
could reasonably be expected to result in payments of more than
$5,000,000 but less than or equal to $15,000,000;
(vi) authorizing a transaction which involves acquiring,
constructing or otherwise obtaining any pipeline, lateral or extension,
including any Lateral, or any compression, expansion or other
significant facilities, which could reasonably be expected to have a
cost to the Company or any Subsidiary of more than $5,000,000 but less
than or equal to $15,000,000.
(b) The approval of the holders of all of the Membership Interest of
the Members shall be required to authorize and approve the following, or, with
respect to matters to be authorized or approved by Subsidiaries of the Company,
to determine how the Company will vote as a member of such Subsidiary with
respect to the following:
(i) approving the Nautilus FERC tariff, the applications for
the FERC Certificate or any subsequent FERC certificate, including any
amendment or modifications of any FERC certificate and approving any
material amendments or other material modifications to the Nautilus
FERC tariff, the FERC Certificate or any subsequent FERC certificate,
including, without limitation, the general terms and conditions and the
rates and the basis upon which such rates are calculated;
(ii) accepting the Construction Certificate (which approval
shall also be deemed to be an approval of the FERC Certificate, unless,
at the time Nautilus receives the FERC Certificate, all of the Members
agree that such FERC Certificate should be rejected);
(iii) approval, waiver, amendment or other modification (other
than termination) of any Construction Agreement or Operating Agreement
or any other operating agreement with respect to the operation of the
Manta Ray System or the Nautilus System;
(iv) termination (other than by expiration of the term
thereof) of any Construction Agreement or Operating Agreement or any
other operating agreement with respect to the operation of the Manta
Ray System or the Nautilus System or of the Company; provided, however
that for purposes of this Section 7.2(b)(iv), if any Member or its
Affiliate (as such term is defined in the Operating Agreement or
Construction Agreement in question) would be replaced as an operator as
a result of such termination, such Member shall not be entitled to vote
on such termination. The vote of such Members
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not terminated shall be sufficient to take such actions under this
Section even if such Membership Interest is less than a Majority
Interest;
(v) changing the name of the Company or any of its
Subsidiaries;
(vi) instituting litigation, arbitration, or similar
proceedings against Persons other than any Member or any Affiliate of
any Member at a cost to the Company which could reasonably be expected
to exceed $250,000;
(vii) making draws under any credit agreement, indenture or
similar agreement approved in accordance with the terms of Section
7.2(a)(iii)(A), for the purpose of funding authorized transactions with
an approved cost to the Company of more than $15,000,000;
(viii) utilizing other than for company purposes, acquiring or
disposing of any asset of the Company or its Subsidiaries, having a
then existing fair market value or GAAP net book value (after deducting
accumulated depreciation, depletion, amortization and impairment) of
more than $15,000,000;
(ix) authorizing a transaction which involves acquiring,
constructing or otherwise obtaining any pipeline, lateral or extension,
including any Lateral, or any compression, expansion or other
significant facilities, which could reasonably be expected to have a
cost to the Company or any Subsidiary of more than $15,000,000;
(x) authorizing a transaction involving a lease or similar
arrangement which either (A) involves an asset with a fair market value
of more than $15,000,000 or (B) could reasonably be expected to result
in payments of more than $15,000,000;
(xi) authorizing any transaction or any amendment thereto,
including, without limitation, any purchase, sale, lease or exchange of
property or the rendering of any service involving the Company or any
of its Subsidiaries and any Member or any Affiliate of any Member
(which transaction, once approved by all of the Members, shall be
presumed to be fair to the Company); and
(xii) authorizing material transactions the nature of which
are not in the ordinary course of business;
(xiii) permitting the merger, consolidation, or participation
in a share exchange or other statutory reorganization with, or sale of
all or substantially all of the assets of Manta Ray, Nautilus or the
Company to, or the sale or other transfer or alienation (other than
granting a lien or other Security Interest) of any interest in Manta
Ray or Nautilus to, any Person;
(xiv) approving the operating and capital expenditure budgets
of the Company or any of its Subsidiaries covering the period from the
date hereof until the first anniversary of such date;
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(xv) approving any cash reserve applicable to distributions of
cash and other property as provided in Sections 5.3, 5.5 and 5.6, to
the extent such cash reserve (A) relates to acquiring, constructing or
otherwise obtaining (including, without limitation, pursuant to a lease
or similar arrangement approved in accordance with Section 7.2(b)(x))
any pipeline, lateral or extension, including any Lateral, or any
compression, expansion or other significant facilities and (B) exceeds,
at any one time, $15,000,000;
(xvi) hiring any employees of the Company;
(xvii) admitting any new Member to any Subsidiary of the
Company; and
(xviii) actions for which this Agreement otherwise expressly
requires unanimous approval, including, without limitation, any of the
actions set forth in Sections 3.10 (creation of additional Membership
Interests), 3.14 (Resignation), 4.2 (subsequent Capital Contributions),
5.6 (distribution of Initial Capital Contributions), 12.1(a)
(Dissolution and Liquidation) and 13.2 (Amendments).
7.3 VOTING LIST. The officer of the Company or the designated Member
who is responsible for the maintenance of the Company's records shall make, at
least ten days before each meeting of Members, a complete list of the Members or
their representatives, as the case may be, entitled to vote thereat or any
adjournment thereof, arranged in alphabetical order, with the address of and the
Membership Interest held or represented by each, which list, for a period of ten
days prior to such meeting, shall be kept on file at the registered office or
principal place of business of the Company and shall be subject to inspection by
any Member or Member representative at any time during usual business hours.
Such list shall also be produced and kept open at the time and place of the
meeting and shall be subject to the inspection of any Member or Member
representative during the whole time of the meeting. The original Company
records shall be prima facie evidence as to who are the Members or their
representatives entitled to examine such list or transfer records or to vote at
any meeting of Members. Failure to comply with the requirements of this Section
shall not affect the validity of any action taken at the meeting.
7.4 PROXIES. A Member or Member representative may vote either in
person or by proxy executed in writing by the Member or Member representative. A
telegram, telex, cablegram or similar transmission by the Member or Member
representative or a photographic, photostatic, facsimile or similar reproduction
of writing executed by the Member or Member representative shall be treated as
an execution in writing for purposes of this Section. Proxies for use at any
meeting of the Members or committee of the Company or in connection with the
taking of any action by written consent shall be filed with the Company before
or at the time of the meeting or execution of the written consent, as the case
may be. All proxies shall be received and taken charge of and all ballots shall
be received and canvassed by an inspector or inspectors appointed by the
President or a Vice President of the Company who shall decide all questions
touching upon the qualification of voters, the validity of the proxies, and the
acceptance or rejection of votes.
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7.5 VOTES. Each Member or Member representative shall be entitled to
one vote (or a fraction thereof) per percent (or fraction thereof) of Membership
Interest held by such Member, as reflected in the transfer records of the
Company; provided, however, that for purposes of determining a quorum or a
Required Interest the Membership Interest of any Member shall not be counted and
such interest shall be apportioned by interest among the remaining Members as
applicable if the Member is not permitted to vote under this Agreement for any
reason, including, without limitation, the relevant Member is in Default, is not
deemed to be a Substituted Member or is in breach of certain representations and
warranties; provided, however, that no Member shall be required to make any
Capital Contribution, other than an Initial Capital Contribution, if such Member
did not vote to approve such Capital Contribution in accordance with Section
4.2.
7.6 CONDUCT OF MEETINGS. All meetings of the Members or committees of
the Company shall be presided over by the chairman of the meeting, who shall be
designated by, in order of priority, the President, the Vice President or other
appropriate officer of the Company. The chairman of any meeting of Members or
committee of the Company shall determine the order of business and the procedure
at the meeting, including regulation of the manner of voting and the conduct of
discussion.
7.7 ACTION BY WRITTEN CONSENT.
(a) Except as otherwise provided by applicable Laws, any action
required or permitted to be taken at any meeting of Members or committee of the
Company may be taken without a meeting, and without a vote, if a consent or
consents in writing, setting forth the action so taken, shall be signed by the
holder or holders or representatives of not less than the minimum of Membership
Interests that would be necessary to take such action at a meeting at which the
holders of all Membership Interests entitled to vote on the action were present
and voted; provided, however, that no such written consent shall be effective
unless each Member has been provided with at least 3 Business Days prior written
notice of such consent to be sought or has waived the requirement of such
notice. To the extent required by law, every written consent shall bear the date
of signature of each Member or Member representative who signs the consent. To
the extent required by law, no written consent shall be effective to take the
action that is the subject of such consent unless, within 60 days after the date
of the earliest dated consent delivered to the Company in the manner required by
this Section 7.7, a consent or consents signed by the holder or holders of not
less than the minimum Membership Interests that would be necessary to take the
action that is the subject of the consent are delivered to the Company by
delivery to its registered office or its principal place of business. Delivery
shall be by hand or certified or registered mail (return receipt requested) to
the Company's principal place of business and shall be addressed to the
Secretary of the Company. A telegram, telex, cablegram or similar transmission
by a Member or Member representative, or a photographic, photostatic, facsimile
or similar reproduction of a writing signed by a Member or Member
representative, shall be regarded as signed by the Member or Member
representative for purposes of this Section 7.7. In addition to the prior
written notice described above, prompt written notice of the taking of any
action by the Members or committees of the Company without a meeting by less
than unanimous written consent shall be given to those Members or Member
representatives who did not consent in writing to the action.
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(b) The Record Date for determining Members or their representatives
entitled to consent to an action in writing without a meeting shall be the first
date on which a signed written consent setting forth the action taken or
proposed to be taken is delivered to the Company. Delivery of such written
consent shall be by hand or by certified or registered mail (return receipt
requested) to the Company's principal place of business and shall be addressed
to the Secretary of the Company.
7.8 RECORDS. An officer of the Company or a designated Member
representative shall be responsible for maintaining the records of the Company,
including keeping minutes at the meetings of the Members or committees of the
Company and the filing of consents in the records of the Company.
ARTICLE VIII.
INDEMNIFICATION
8.1 RIGHT TO INDEMNIFICATION. Subject to the limitations and conditions
as provided herein or by applicable Laws, each Person who was or is made a party
or is threatened to be made a party to or is involved in any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative, arbitrative or investigative (hereinafter a "Proceeding"), or
any appeal in such a Proceeding or any inquiry or investigation that could lead
to such a Proceeding, by reason of the fact that he or she, or a Person of whom
he or she is the legal representative, is or was a Member of the Company, a
member of a committee of the Company or an officer of the Company, or while such
a Person is or was serving at the request of the Company as a director, officer,
partner, venturer, member, trustee, employee, agent or similar functionary of
another foreign or domestic general partnership, corporation, limited
partnership, joint venture, limited liability company, trust, employee benefit
plan or other enterprise, shall be indemnified by the Company to the extent such
Proceeding or other above-described process relates to any such above-described
relationships with, status with respect to, or representation of any such Person
to the fullest extent permitted by the Act, as the same exists or may hereafter
be amended (but, in the case of any such amendment, only to the extent that such
amendment permits the Company to provide broader indemnification rights than
said Laws permitted the Company to provide prior to such amendment) against
judgments, penalties (including excise and similar taxes and punitive damages),
fines, settlements and reasonable expenses (including, without limitation,
attorneys' fees) actually incurred by such Person in connection with such
Proceeding, and indemnification under this Article VIII shall continue as to a
Person who has ceased to serve in the capacity which initially entitled such
Person to indemnity hereunder for any and all liabilities and damages related to
and arising from such Person's activities while acting in such capacity;
provided, however, that no Person shall be entitled to indemnification under
this Section 8.1 in the event the Proceeding involves acts or omissions of such
Person which constitute an intentional breach of this Agreement or gross
negligence or willful misconduct on the part of such Person. The rights granted
pursuant to this Article VIII shall be deemed contract rights, and no amendment,
modification or repeal of this Article VIII shall have the effect of limiting or
denying any such rights with respect to actions taken or Proceedings arising
prior to any such amendment, modification or repeal. It is expressly
acknowledged that the indemnification provided in this Article VIII could
involve indemnification for negligence or under theories of strict liability.
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8.2 INDEMNIFICATION OF OFFICERS, EMPLOYEES AND AGENTS. The Company may
indemnify, and advance expenses to, Persons who are not or were not a Member,
including officers, employees or agents of the Company, and those Persons who
are or were serving at the request of the Company as a manager, director,
officer, partner, venturer, member, trustee, employee, agent or similar
functionary of another foreign or domestic general partnership, corporation,
limited partnership, joint venture, limited liability company, trust, employee
benefit plan or other enterprise against any liability asserted against such
Person and incurred by such Person in such a capacity or arising out of his
status as such a Person to the same extent that it may indemnify and advance
expenses to a Member under this Article VIII.
8.3 ADVANCE PAYMENT. Any right to indemnification conferred in this
Article VIII shall include a limited right to be paid or reimbursed by the
Company for any and all reasonable expenses as they are incurred by a Person
entitled to be indemnified under Sections 8.1 and 8.2 who was, or is threatened,
to be made a named defendant or respondent in a Proceeding in advance of the
final disposition of the Proceeding and without any determination as to such
Person's ultimate entitlement to indemnification; provided, however, that the
payment of such expenses incurred by any such Person in advance of final
disposition of a Proceeding shall be made only upon delivery to the Company of a
written affirmation by such Person of his good faith belief that he has met the
requirements necessary for indemnification under this Article VIII and a written
undertaking, by or on behalf of such Person, to repay all amounts so advanced if
it shall ultimately be determined that such indemnified Person is not entitled
to be indemnified under this Article VIII or otherwise.
8.4 APPEARANCE AS A WITNESS. Notwithstanding any other provision of
this Article VIII, the Company may pay or reimburse expenses incurred by any
Person entitled to be indemnified pursuant to this Article VIII in connection
with such Person's appearance as a witness or other participation in a
Proceeding at a time when he is not a named defendant or respondent in the
Proceeding.
8.5 NONEXCLUSIVITY OF RIGHTS. The right to indemnification and the
advancement and payment of expenses conferred in this Article VIII shall not be
exclusive of any other right which a Person indemnified pursuant to Sections 8.1
and 8.2 may have or hereafter acquire under any Laws, this Agreement, or any
other agreement, vote of Members or otherwise.
8.6 INSURANCE. The Company may purchase and maintain indemnification
insurance, at its expense, to protect itself and any Person from any expenses,
liabilities, or losses that may be indemnified under this Article VIII.
8.7 MEMBER NOTIFICATION. Any indemnification of or advance of expenses
to any Person entitled to be indemnified under this Article VIII shall be
reported in writing to the Members with or before the notice or waiver of notice
of the next Members' meeting or with or before the next submission to Members of
a consent to action without a meeting and, in any case, within the 12 month
period immediately following the date the indemnification or advance was made.
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8.8 SAVINGS CLAUSE. If this Article VIII or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Company shall nevertheless indemnify and hold harmless any Person entitled to be
indemnified pursuant to this Article VIII as to costs, charges and expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
with respect to any action, suit or proceeding, whether civil, criminal,
administrative or investigative to the full extent permitted by any applicable
portion of this Article VIII that shall not have been invalidated and to the
fullest extent permitted by applicable Laws.
8.9 SCOPE OF INDEMNITY. For the purposes of this Article VIII,
references to the "Company" include all constituent entities, whether
corporations or otherwise, absorbed in a consolidation or merger as well as the
resulting or surviving entity. Thus, any Person entitled to be indemnified or
receive advances under this Article VIII shall stand in the same position under
the provisions of this Article VIII with respect to the resulting or surviving
entity as he would have if such merger, consolidation, or other reorganization
never occurred.
ARTICLE IX.
TAXES
9.1 TAX RETURNS. The Company shall cause to be prepared and filed all
necessary federal and state income tax returns for the Company, including making
the elections described in Section 9.2. Upon written request by the Company,
each Member shall furnish to the Company all pertinent information in its
possession relating to Company operations that is necessary to enable the
Company's income tax returns to be prepared and filed.
9.2 TAX ELECTIONS. The Company shall make the following elections on
the appropriate tax returns:
(a) to adopt the accrual method of accounting;
(b) an election pursuant to section 754 of the Code;
(c) to elect to amortize the organizational expenses of the Company and
the start-up expenditures of the Company under section 195 of the Code ratably
over a period of 60 months as permitted by section 709(b) of the Code; and
(d) any other election that the Company may deem appropriate and in the
best interests of the Company or Members, as the case may be.
Neither the Company nor any Member may make an election for
the Company to be excluded from the application of the provisions of subchapter
K of chapter 1 of subtitle A of the Code or any similar provisions of applicable
state law, and no provision of this Agreement shall be construed to sanction or
approve such an election.
9.3 TAX MATTERS MEMBER. The Company shall select one of the Members as
the "Tax Matters Member" of the Company pursuant to section 6231(a)(7) of the
Code. The Tax Matters Member shall take such action as may be necessary to cause
each Member to become a
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"notice partner" within the meaning of section 6223 of the Code and shall inform
each Member of all significant matters that may come to its attention in its
capacity as Tax Matters Member by giving notice thereof on or before the fifth
Business Day after becoming aware thereof and, within that time, shall forward
to each other Member copies of all significant written communications it may
receive in that capacity. The Tax Matters Member may not take any action
contemplated by sections 6222 through 6232 of the Code without the consent of a
Majority Interest, but this sentence does not authorize the Tax Matters Member
to take any action left to the determination of an individual Member under
sections 6222 through 6232 of the Code. The initial Tax Matters Member shall be
the Member so indicated on Exhibit A.
ARTICLE X.
BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS
10.1 MAINTENANCE OF BOOKS. The Company shall keep books and records of
accounts and shall keep minutes of the proceedings of its Members. The books of
account for the Company shall be maintained on an accrual basis in accordance
with the terms of this Agreement and GAAP, except that the Capital Accounts of
the Members shall be maintained in accordance with Section 4.5. The accounting
year of the Company shall be determined by the Company. The initial custodian of
the company records shall be the Tax Matters Member.
10.2 FINANCIAL STATEMENTS. On or before the last day of each calendar
month during the existence of the Company, the Company shall cause each Member
to be furnished with an income statement for the calendar month immediately
preceding such calendar month. On or before the last day of each January, April,
July and October during the existence of the Company, the Company shall cause
each Member to be furnished with a balance sheet and a statement of cash flows
for, or as of the end of, the fiscal quarter immediately preceding such calendar
month. On or before the last day of each April during the existence of the
Company, the Company shall cause each Member to be furnished with audited
financial statements, including, a balance sheet, an income statement, a
statement of cash flows, and a statement of changes in each Member's Capital
Account for the immediately preceding calendar year. Annual financial statements
must be prepared in accordance with GAAP. The Company also may cause to be
prepared or delivered such other reports as it may deem, in its sole judgment,
appropriate. The Company shall bear the costs of all such reports and financial
statements.
10.3 TAX STATEMENTS. On or before the last day of July during the
existence of the Company, the Company shall cause each Member to be furnished
with all information reasonably necessary or appropriate to file their
appropriate tax reports, including a schedule of Company book-tax differences
for, or as of the end of, the immediately preceding tax year. In addition, to
the extent reasonably possible, the Company will cause each Member to be
provided with estimates of all such information on or before the first day of
February each year.
10.4 ACCOUNTS. The officers or designated Members of the Company shall
establish and maintain one or more separate bank and investment accounts and
arrangements for Company funds in the Company's name with financial institutions
and firms that officers or designated Members of the Company may determine. The
Company may not commingle the Company's funds with the funds of any other
Person. All such accounts shall be and remain the property of
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the Company and all funds shall be received, held and disbursed for the purposes
specified in this Agreement. The officers or designated Members of the Company
may invest the Company funds only in (i) readily marketable securities issued by
the United States or any agency or instrumentality thereof and backed by the
full faith and credit of the United States maturing within three months or less
from the date of acquisition, (ii) readily marketable securities issued by any
state or municipality within the United States of America or any political
subdivision, agency or instrumentality thereof, maturing within three months or
less from the date of acquisition and rated "A" or better by any recognized
rating agency, (iii) readily marketable commercial paper rated "Prime 1" by
Moody's or "A 1" by Standard and Poor's (or comparably rated by such
organizations or any successors thereto if the rating system is changed or there
are such successors) and maturing in not more than three months after the date
of acquisition or (iv) certificates of deposit or time deposits issued by any
incorporated bank organized and doing business under the Laws of the United
States of America which is rated at least "A" or "A2" by Standard and Poor's or
Moody's, which is not in excess of federally insured amounts, and which matures
within three months or less from the date of acquisition.
ARTICLE XI.
BANKRUPTCY OF A MEMBER
11.1 BANKRUPT MEMBERS. If any Member becomes a Bankrupt Member, the
Company, by approval of at least a majority in interest of the Members excluding
any Bankrupt Member or, if the Company does not exercise the relevant option,
the non-Bankrupt Members which desire to participate, shall have the option,
exercisable by notice from the Company or the Members, as the case may be, to
the Bankrupt Member (or its representative) at any time prior to the 180th day
after receipt of notice of the occurrence of the event causing it to become a
Bankrupt Member, to buy, and, on the exercise of this option, the Bankrupt
Member or its representative shall sell, its Membership Interest. The purchase
price shall be an amount equal to the fair market value thereof determined by
agreement by the Bankrupt Member (or its representative) and the potential
purchaser; however, if those Persons do not agree on the fair market value on or
before the 90th day following the date of receipt by such potential purchaser of
notice of the occurrence of the event causing the Member to become a Bankrupt
Member, either such Person, by written notice to the other, may require the
determination of fair market value to be made by an independent appraiser
specified in such notice. If the Person receiving that notice objects on or
before the tenth day following receipt to the independent appraiser designated
in that notice, and those Persons otherwise fail to agree on an independent
appraiser, either such Person may petition the United States District Judge for
the Southern District of Texas then senior in active service to designate an
independent appraiser, whose determination of the independent appraiser, however
designated, is final and binding on all parties. The Bankrupt Member and the
potential purchaser each shall pay one-half of the costs of the appraisal and
court costs in appointing an appraiser (if any). If the potential purchaser then
elects, within ten days after the fair market value has been decided by
agreement or by an independent appraiser, to exercise the purchase option, the
purchasing Person shall pay the fair market value as so determined in cash on
closing. The payment to be made to the Bankrupt Member or its representative
pursuant to this Section 11.1 is in complete liquidation and satisfaction of all
the rights and interest of the Bankrupt Member and its representative (and of
all Persons claiming by, through, or under the Bankrupt Member and its
representative) in and in respect of the Company,
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including, without limitation, any Membership Interest, any rights in specific
Company property, and any rights against the Company and its officers, agents,
and representatives and (insofar as the affairs of the Company are concerned)
against the Members.
ARTICLE XII.
DISSOLUTION, LIQUIDATION, AND TERMINATION
12.1 DISSOLUTION. Subject to the provisions of Section 12.2 and any
applicable Laws, the Company shall dissolve and its affairs shall be wound up on
the first to occur of the following:
(a) the consent of all of the Membership Interests or as expressly
provided in Section 3.17 and Section 3.18;
(b) the expiration of the period fixed for the duration of the Company
as set forth in this Agreement;
(c) entry of a decree of judicial dissolution of the Company under
section 18-802 of the Act in accordance with Section 16.8; and
(d) the bankruptcy or dissolution of a Member or other event described
in section 18-801 of the Act (other than a Transfer of Membership Interest in
accordance with the terms of this Agreement).
12.2 LIQUIDATION AND TERMINATION. Subject to Section 7.5 and Section
12.2(d), and except as expressly provided for to the contrary in Section 3.17
and Section 3.18, upon dissolution of the Company, a representative of the
Company selected by a Majority Interest (not including any Member in Default at
the time of dissolution) shall act as a liquidator or may appoint one or more
Members as liquidator ("Liquidator"). The Liquidator shall proceed diligently to
wind up the affairs of the Company and make final distributions as provided
herein and in the Act. The costs of liquidation shall be borne as a Company
expense. Until final distribution, the Liquidator shall continue to operate the
Company properties for a reasonable period of time to allow for the sale of all
or a part of the assets thereof with all of the power and authority of the
Members. The steps to be accomplished by the Liquidator are as follows:
(a) as promptly as possible after dissolution and again after final
liquidation, the Liquidator shall cause a proper accounting to be made of the
Company's assets, liabilities, and operations through the last day of the
calendar month in which the dissolution occurs or the final liquidation is
completed, as applicable;
(b) the Liquidator shall cause any notices required by law to be mailed
to each known creditor of and claimant against the Company in the manner
described by such law;
(c) subject to the terms and conditions of this Agreement and the Act
(especially section 18-803), the Liquidator shall distribute the assets of the
Company in the following order:
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(i) the Liquidator shall pay, satisfy or discharge from
Company funds all of the debts, liabilities and obligations of the
Company, including, without limitation, all expenses incurred in
liquidation or otherwise make adequate provision for payment and
discharge thereof (including, without limitation, the establishment of
a cash escrow fund for contingent liabilities in such amount and for
such term as the Liquidator may reasonably determine); provided,
however, such payments shall not include any Capital Contributions
described in Article IV or any other obligations in favor of the
Members created by this Agreement other than a loan made pursuant to
any provision other than Section 15.2; and
(ii) all remaining assets of the Company shall be distributed
to the Members as follows:
(A) the Liquidator may sell any or all Company
property, including to one or more of the Members (other than
any Member in Default at the time of dissolution), provided
(x) any such sale to a Member is made on an arms length basis
under terms which are in the best interest of the Company and
(y) to the extent that any Member has participated in an
Expansion Option under Section 15.2(b), the Liquidator shall
hire an independent consultant to attribute (on the basis of
the then existing fair market value) the proceeds from the
sale of the Company property between each respective Major
Expansion Project, and all other assets of the Company (such
value for each respective Major Expansion Project the
"Expansion Liquidation Value") and the Liquidator shall repay
any Members' Expansion Option loan pursuant to Section
15.2(e), but only to the extent that there is any Expansion
Liquidation Value allocated to the corresponding Major
Expansion Project;
(B) with respect to all Company property that has not
been sold, the fair market value of that property (as
determined by the Liquidator using any method of valuation as
it, using its best judgment, deems reasonable) shall be
determined and the Capital Accounts of the Members shall be
adjusted to reflect the manner in which the unrealized income,
gain, loss, and deduction inherent in property that has not
been reflected in the Capital Accounts previously would be
allocated among the Members if there were a taxable
disposition of that property for the fair market value of that
property on the date of distribution; and
(C) Company property shall be distributed among the
Members ratably in proportion to each Member's Capital Account
balances, as determined after taking into account all Capital
Account adjustments for the taxable year of the Company during
which the liquidation of the Company occurs (other than those
made by reason of this clause (C)).
All distributions in kind to the Members shall be made subject
to the liability of each distributee for costs, expenses, and liabilities
theretofore incurred or for which the Company has committed prior to the date of
termination and those costs, expenses, and liabilities shall be allocated to the
distributee pursuant to this Section 12.2. The distribution of cash and/or
property
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to a Member in accordance with the provisions of this Section 12.2 constitutes a
complete return to the Member of its Capital Contributions and a complete
distribution to the Member of its Membership Interest and all the Company's
property.
(d) Upon dissolution of the Company upon an event occurring to a Member
(the "Withdrawing Member") described in Section 12.1(d), then within 30 days
after the Company delivers notice of such event to the Members, at least 50% of
such other Members (by Membership Interest and excluding the Membership Interest
of the Withdrawing Member) may elect to reconstitute the Company and continue
its business on the same terms and conditions set forth in this Agreement by
forming a new company on terms identical to those set forth in this Agreement
and, as necessary, admitting an additional Member chosen by such other Members.
Such non-Withdrawing Members shall be deemed to have voted for and consented to
such reconstitution unless a written statement objecting to the reconstitution
shall have been received by the Company within 30 days after notice of
dissolution was made to such Member. Upon any such election to reconstitute by
at least 50% of such other Members (by Membership Interest), all Members and
their successors shall be bound thereby and shall be deemed to have approved
thereof. Unless such an election to reconstitute is made within the applicable
time period as set forth above, the Company shall conduct only activities
necessary to wind up its affairs. If such an election is so made, then:
(i) the reconstituted Company shall continue until the end of
the term set forth in Section 2.6 unless earlier dissolved in
accordance with this Article XII; and
(ii) the interest of the Withdrawing Member shall be treated
thenceforth as the interest of a Transferee that has not been admitted
as a Substitute Member hereunder.
12.3 PROVISION FOR CONTINGENT CLAIMS.
(a) The Liquidator shall make a reasonable provision to pay all claims
and obligations, including all contingent, conditional or unmatured claims and
obligations, actually known to the Company but for which the identity of the
claimant is unknown; and
(b) If there are insufficient assets to both pay the creditors pursuant
to Section 12.2(c)(i) and to establish the provision contemplated by Section
12.3(a), the claims shall be paid as provided for in accordance to their
priority, and, among claims of equal priority, ratably to the extent of assets
therefor.
12.4 DEFICIT CAPITAL ACCOUNTS. Notwithstanding anything to the contrary
contained in this Agreement, and notwithstanding any custom or rule of law to
the contrary, to the extent that the deficit, if any, in the Capital Account of
any Member results from or is attributable to deductions and losses of the
Company (including non-cash items such as depreciation), or distributions of
money pursuant to this Agreement to all Members ratably in proportion to their
respective Membership Interests, upon dissolution of the Company such deficit
shall not be an asset of the Company and such Members shall not be obligated to
contribute any amounts to the Company to bring the balance of such Member's
capital account to zero.
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ARTICLE XIII.
AMENDMENT OF THE AGREEMENT
13.1 AMENDMENTS TO BE ADOPTED BY THE COMPANY. Each Member agrees that
the appropriate officer of the Company, in accordance with and subject to the
limitations contained in Article VII, may execute, swear to, acknowledge,
deliver, file and record whatever documents may be required to reflect:
(a) a change in the name of the Company, the location of the principal
place of business of the Company or the registered agent or office of the
Company;
(b) admission or substitution of Members effected in accordance with
this Agreement;
(c) a change that the Members believe is reasonable and necessary or
appropriate to qualify or continue the qualification of the Company as a limited
liability company under the Laws of any state or that is necessary or advisable
in the opinion of the Company to ensure that the Company will not be taxable as
a corporation or otherwise taxed as an entity for federal income tax purposes;
(d) a change that is necessary or appropriate for the Company to
satisfy any requirements, conditions, guidelines or interpretations contained in
any opinion, interpretative release, directive, order, ruling or regulation of
any federal or state agency or judicial authority (including, without
limitation, the Act);
(e) an amendment that is necessary, in the opinion of counsel, to
prevent the Company or its officers from in any manner being subjected to the
provisions of the Investment Company Act of 1940, as amended, or "plan asset"
regulations adopted under the Employee Retirement Income Security Act of 1974,
as amended, whether or not substantially similar to plan asset regulations
currently applied or proposed by the United States Department of Labor; and
(f) subject to the terms of Section 3.10, an amendment that the Company
determines in its sole discretion to be necessary or appropriate in connection
with the authorization for issuance of any Membership Interest pursuant to
Section 3.10.
13.2 AMENDMENT PROCEDURES. Except as provided in Section 13.1, all
amendments to this Agreement shall be made in accordance with the following
requirements. Amendments to this Agreement may be proposed by any Member. Each
such proposal shall contain the text of the proposed amendment. If an amendment
is proposed, the Company shall seek the written approval of the holders of the
requisite percentage of Membership Interests or call a meeting of the Members to
consider and vote on such proposed amendment. A proposed amendment shall be
effective upon its approval by the holders of all of the Membership Interests,
unless a different percentage is expressly required under this Agreement. Any
amendment that would materially and adversely affect the rights of any type or
class of Membership Interests in relation to other types or classes of
Membership Interests requires the approval of the holders of at least a
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majority of the Membership Interests of such class or type of Membership
Interest. The Company shall notify all Record Holders upon final adoption of any
proposed amendment.
ARTICLE XIV.
CERTIFICATED MEMBERSHIP INTERESTS
14.1 ENTITLEMENT TO CERTIFICATES. Every owner of a Membership Interest
in the Company, unless and to the extent the Company elects otherwise, shall be
entitled to have a certificate, in such form as is approved by the Company and
conforms with applicable law, certifying the Membership Interest owned by it.
14.2 MULTIPLE CLASSES OF INTEREST. If the Company shall be authorized
to issue more than one class of Membership Interest or more than one series of
any Membership Interest, a statement of the powers, designations, preferences
and relative, participating, optional or other special rights of each class of
membership interest or series thereof and the qualification, limitations or
restrictions of such preferences and/or rights shall, unless the Members shall
by resolution provide that such class or series of Membership Interest shall be
uncertificated, be set forth in full or summarized on the face or back of the
certificate which the Company shall issue to represent such class or series of
Membership Interest; provided that, to the extent allowed by law, in lieu of
such statement, the face or back of such certificate may state that the Company
will furnish a copy of such statement without charge to each requesting Member.
14.3 SIGNATURES. Each certificate representing a Membership Interest in
the Company shall be signed by or in the name of the Company by (1) the
President or any Vice President of the Company and (2) the Treasurer, any
Assistant Treasurer, the Secretary or any Assistant Secretary of the Company.
The signature of the officers of the Company may be facsimiles. In case any
officer who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to hold such office before such certificate is
issued, it may be issued by the Company with the same effect as if he held such
office on the date of issue.
14.4 ISSUANCE AND PAYMENT. Subject to the provisions of the Act and
this Agreement, including, without limitation, Section 3.10, Membership
Interests may be issued for such consideration and to such persons as the
Company may determine from time to time.
14.5 RESTRICTIVE LEGEND. In the absence of a more restrictive legend,
all certificates which evidence Membership Interests shall be stamped or typed
in a conspicuous place with the following legend:
THE INTEREST REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE LIMITED
LIABILITY AGREEMENT OF THE COMPANY DATED AS OF JANUARY 17, 1997, AS IT
EXISTS FROM TIME TO TIME, WHICH RESTRICTS ANY SALE, ASSIGNMENT,
TRANSFER, CONVEYANCE, ENCUMBRANCE, PLEDGE OR OTHER TRANSFER OR
ALIENATION (WITH OR WITHOUT CONSIDERATION) OF SUCH INTEREST. THE
COMPANY WILL FURNISH TO THE RECORD HOLDER OF THIS CERTIFICATE, WITHOUT
CHARGE, UPON WRITTEN REQUEST TO THE
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COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS, A COPY OF SUCH LIMITED
LIABILITY AGREEMENT. THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE. WITHOUT SUCH REGISTRATION, SUCH SECURITIES MAY NOT BE SOLD,
ASSIGNED, TRANSFERRED, CONVEYED, PLEDGED, HYPOTHECATED, OR OTHERWISE
TRANSFERRED, EXCEPT UPON DELIVERY TO THE COMPANY OF AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED FOR SUCH TRANSFER.
Such legend shall also be placed on all Certificates which are hereafter issued
to any Member.
14.6 LOST, STOLEN OR DESTROYED CERTIFICATES. The Company may direct a
new certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Company alleged to have been lost, stolen
or destroyed upon the making of an affidavit of that fact by the Person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the Company may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require and/or
to give the Company a bond in such sum as it may direct as indemnity against any
claim that may be made against the Company with respect to the certificate
alleged to have been lost, stolen or destroyed.
14.7 TRANSFER OF MEMBERSHIP INTEREST. Upon surrender to the Company or
its transfer agent, if any, of a certificate representing Membership Interests
duly endorsed or accompanied by proper evidence of succession, assignation or
authority to Transfer in accordance with this Agreement and of the payment of
all taxes applicable to the Transfer of said Membership Interest, the Company
shall be obligated to issue a new certificate to the Person entitled thereto,
cancel the old certificate and record the transaction upon its books, provided,
however, that the Company shall not be so obligated unless such Transfer was
made in compliance with the provisions of this Agreement and any applicable
state and federal Laws.
14.8 REGISTERED HOLDERS. The Company shall be entitled to recognize the
exclusive right of a Person registered on its books as the owner of the
indicated Membership Interest and shall not be bound to recognize any equitable
or other claim to or interest in such Membership Interest on the part of any
Person other than such registered owner, whether or not it shall have express or
other notice thereof, except as otherwise provided by Law.
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ARTICLE XV.
OTHER MEMBER AGREEMENTS AND OBLIGATIONS
15.1 LATERAL OPPORTUNITIES.
(a) Limitation on Lateral Opportunities. Except as otherwise provided
in this Section 15.1(a) no constituent of the Shell Gas Pipeline Companies,
Marathon Gas Pipeline Companies or Leviathan Gas Pipeline Companies, will,
directly or indirectly, enter into any agreement to construct or otherwise
consummate transactions involving construction of any Lateral in which such
constituent would own an interest (a "Lateral Opportunity") until such Lateral
Opportunity has been rejected or otherwise forfeited by Manta Ray or Nautilus,
as applicable. Any constituent of the Shell Gas Pipeline Companies, Marathon Gas
Pipeline Companies, or Leviathan Gas Pipeline Companies may enter into an
agreement, which may be amended from time to time, with their respective
Affiliates involving a Lateral Opportunity and, if applicable, the terms and
conditions of such agreement or agreements will be offered to Nautilus or Manta
Ray as applicable pursuant to the terms and conditions of Section 15.1(b).
Notwithstanding the foregoing, any constituent of the Shell Gas Pipeline
Companies, Marathon Gas Pipeline Companies or Leviathan Gas Pipeline Companies
may, without complying with the provisions of this Section 15.1, construct a
Lateral (i) designed solely for the purpose of gathering or transporting natural
gas produced from a commercial property in which such constructing constituent
of the Shell Gas Pipeline Companies, Marathon Gas Pipeline Companies or
Leviathan Gas Pipeline Companies, as the case may be, or any Affiliate thereof,
owns an interest; provided that (x) such interest in the natural gas to be
gathered or transported by such Lateral was acquired by the relevant Person
primarily for a purpose other than the avoidance of the provisions of this
Section and (y) such exception shall not apply to any Lateral sized in such a
manner that it would accommodate production from (a) any lease or commercial
property in which Shell Holding, Marathon Holding or Leviathan Holding, or their
Affiliate does not have an interest or (b) any lease owned by Shell Holding,
Marathon Holding, or Leviathan Holding, or their Affiliate, which is not a
commercial property; or (ii) in which any constituent of the Shell Gas Pipeline
Companies, Marathon Gas Pipeline Companies, or Leviathan Gas Pipeline Companies
would own an interest of less than 100% of the Lateral or of less than 100% of
the entity owning the Lateral because an Affiliate does not own one hundred
percent (100%) of the production.
(b) Delivery of Lateral Opportunity Notice. Any Member may propose that
Manta Ray or Nautilus, as applicable, undertake a Lateral Opportunity by
delivering written notice (a "Lateral Opportunity Notice") to Manta Ray or
Nautilus, as applicable, and each of the Members. (A) A Lateral Opportunity
Notice involving the connection solely of third party production shall include
the proposed terms and conditions of such transactions, which terms shall, at
minimum, (x) reflect an arms length transaction on reasonably fair terms,
independent of any other transaction, and (y) be no less favorable to Nautilus
or Manta Ray as applicable than the Lateral Opportunity offered to such Member.
The Lateral Opportunity Notice shall also contain reasonably sufficient
operational and financial information and other details to allow the Members to
make a reasonably informed decision with respect to such Lateral Opportunity.
Such Lateral Opportunity Notice shall (i) state whether such Lateral Opportunity
is, directly or indirectly, related in any way to any past, current or
contemplated transaction involving the Member delivering such notice (including
its
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Affiliates), (ii) contain a statement, if true, that the Member is not aware of
any undisclosed benefits expected to accrue to the Member or its Affiliates as a
result of such Lateral Opportunity or, if the delivering Member is unable to
make such statement, the notice shall disclose the existence, but not the
details of such other benefits, and (iii) contain only financial projections
prepared in good faith based upon assumptions relating to such Lateral
Opportunity believed by the Member to be reasonable. (B) A Lateral Opportunity
Notice involving the connection of any production of a Member or its Affiliates
that must be offered to Nautilus or Manta Ray, as applicable, under the terms of
Section 15.1(a) shall include the proposed terms and conditions of such
transactions, which terms shall be no less favorable to the Company than the
Lateral Opportunity offered to such Member. The Lateral Opportunity Notice shall
also contain reasonably sufficient operational and financial information and
other details to allow the Members to make a reasonably informed decision with
respect to such Lateral Opportunity.
(c) Rejected Lateral Opportunities. If Nautilus or Manta Ray, as
applicable, do not vote to accept the Lateral Opportunity and deliver notice
accordingly in writing within 30 days after Manta Ray or Nautilus, as
applicable, receives the Lateral Opportunity Notice that Manta Ray or Nautilus,
as applicable, should undertake such project on the terms and conditions set
forth in the applicable Lateral Opportunity Notice, then the Member (and/or its
Affiliates) who provided and voted in favor of the Lateral Opportunity Notice
shall have the right to pursue such project (a "Rejected Lateral Opportunity")
on the terms and conditions set forth in the applicable Lateral Opportunity
Notice and own any assets related thereto. In such event, the Member who
provided the Lateral Opportunity Notice (and/or its Affiliates) shall be free
for a period of 120 days to enter into definitive agreements, if any, or
otherwise consummate the transactions contemplated by the applicable Lateral
Opportunity Notice on the same terms and conditions set forth in the applicable
Lateral Opportunity Notice without further obligation to any Members or Manta
Ray or Nautilus, as applicable; provided that following such 120 day period such
Member or its Affiliates may not enter into definitive agreements, if any, or
otherwise consummate the transactions with respect to a Rejected Lateral
Opportunity without again offering the same to Manta Ray or Nautilus, as
applicable, in accordance with this Article. No Member shall have any obligation
or duty to Manta Ray or Nautilus, as applicable, or the other Members with
respect to any Rejected Lateral Opportunity to the extent it is covered by
definitive agreements entered into, or otherwise consummated, by such Member or
its Affiliates after compliance with this Section 15.1 or with respect to any
modification, renewal or extension of the terms of such definitive agreements
with respect to any such Rejected Lateral Opportunity. Except as set forth in
this Section, the construction, acquisition, operation, maintenance and
ownership of each such Rejected Lateral Opportunity project shall not be
governed or affected by this Agreement.
15.2 EXPANSIONS.
(a) Expansion Option. Any Member (the "Exercising Member") shall have
the right to require the Company to cause Manta Ray or Nautilus, as applicable,
to construct, own and operate a particular Major Expansion Project (the
"Expansion Option") if (i) the Exercising Member or an Affiliate of the
Exercising Member has delivered written notice (the
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"Capacity Request") to Manta Ray or Nautilus, as applicable, requesting,
pursuant to a Dedication Agreement, firm capacity on the Manta Ray System or the
Nautilus System, whichever is applicable, to gather or transport gas (including
gas which is not owned by the Exercising Member or its Affiliate) from one or
more leases dedicated pursuant to the relevant Dedication Agreement (the
"Expansion Property") to the extent the expected volume (including increases in
volume from existing properties of which some or all of the volumes could be
Accelerated Volumes) of the production from which (the "Expansion Property
Production") at the time of such notice is not being delivered into the Manta
Ray System or the Nautilus System, whichever is applicable, (ii) the Accessible
Capacity is not sufficient to practically handle substantially all of the
Expansion Property Production, (iii) the relevant Major Expansion Project is
necessary to increase the Base Capacity to a level adequate to allow Manta Ray
or Nautilus, as applicable, to handle the Expansion Property Production, (iv)
within 60 days from the latest date on which Manta Ray or Nautilus, as
applicable, has the right to respond to the Capacity Request (the "Expansion
Option Period"), each of the Company and Manta Ray or Nautilus, as applicable,
have held a meeting and voted against the relevant Major Expansion Project, (v)
the Exercising Member voted in favor of the relevant Major Expansion Project at
such meeting and (vi) the Expansion Option is exercised in accordance with the
requirements of Section 15.2(b) below.
(b) Exercise. The Exercising Member shall exercise the Expansion Option
by delivering, at any time after such Major Expansion Project has been rejected
by each of the Company Manta Ray or Nautilus, as applicable, but before the end
of the Expansion Option Period, written notice of such exercise (the "Expansion
Option Notice") to the Company and each Member. Such notice shall include an
irrevocable commitment to timely fund the relevant Major Expansion Project and,
if appropriate, assurances reasonably satisfactory to the Company that such
Member has the ability to fund such Major Expansion Project; provided, however,
that no such additional assurances will be required of Shell Holding, Marathon
Holding or Leviathan Holding as long as their respective funding obligations are
subject to a relevant parent-company guaranty that provides the same practical
benefits to the Company as the guaranty entered into as of the date hereof.
Whenever an Exercising Member delivers an Expansion Option Notice, every other
Member which voted in favor of the relevant Major Expansion Project at the last
meeting during which such project was voted on (together with the Exercising
Member, the "Expansion Participants") shall have the right to participate,
proportionately (based on the relationship of its Membership Interest to the
Membership Interests of all of the Expansion Participants), in such project on
the same basis as the Exercising Member, including the right to receive the
Payout Amount out of 80% of the Expanded Capacity Revenues and the obligation to
fund such project. Any Member which desires to exercise its right to participate
in such project must deliver a notice substantially similar to that delivered by
the original Exercising Member in accordance with the terms of this subsection,
within 30 days after it receives the Expansion Option Notice. If any Expansion
Participant pays any amount to the Company in excess of the amount needed to
fund the Expansion Project, the Company shall immediately return such excess
amount to the Expansion Participant.
(c) Repayment. Until the Expansion Participants have (i) received
payment with respect to 80% of the Expanded Capacity Revenues in an amount equal
to the Payout Amount
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or (ii) the Company, by a unanimous vote of all Members other than the Expansion
Participants, has otherwise paid the unamortized portion of the Payout Amount to
the Expansion Participants as described below, the Expansion Participants shall
be paid monthly amounts equal to 80% of the Expanded Capacity Revenues. Such
amounts shall be allocated among the Expansion Participants in proportion to the
Membership Interests of each such Expansion Participant to the Membership
Interests of all such Expansion Participants. The remaining 20% of the Expanded
Capacity Revenues shall be retained by the Company and allocated to all of the
Members based on their respective Membership Interests. After recovery of the
Payout Amount or payment by the Company of the unamortized portion of the Payout
Amount to the Expansion Participants as described below, all of the Expansion
Capacity Revenues shall be retained by the Company and allocated to all of the
Members based on their respective Membership Interests. If, at any time the
Company, by a unanimous vote of all Members other than the Expansion
Participants, elects to pay off the unamortized amount of the Payout Amount, the
Company shall promptly pay an amount equal to the then-remaining unpaid
principal amount of the Payout Amount to the Expansion Participants, which
remaining unpaid principal amount shall be calculated by treating as principal
payments 10/15 of all amounts received by the Expansion Participants prior to
such time in satisfaction of the Payout Amount.
(d) Capacity. Prior to proceeding with any Major Expansion Project in
accordance with this Section, all of the Members shall cooperate to establish
(i) the Accessible Capacity, using the lesser of (x) the maximum approved
operating pressure, (y) the then existing contractual operating pressure or (z)
the maximum physical pressure at which the line can operate, in each case
determined at the inlet of each relevant point of receipt and the pressure
(averaged over the last three months) at the relevant points of delivery and
(ii) an expansion design to handle the Expansion Property Production. If the
Members cannot agree on any such matter, the Company shall engage an independent
consultant (of national prominence with experience in the relevant geographical
area) to resolve each such matter.
(e) Treatment as Loan. Any amount paid by one or more Members pursuant
to Section 15.2(b) shall be considered to be a limited recourse, partially
secured loan from the advancing Members to the Company, with such loan payable
only from, and secured only by a security interest granted by the Company in,
80% of the Expanded Capacity Revenues until such loan is paid in full. Except
for such security interest in 80% of the Expanded Capacity Revenues, such loan
shall be without recourse against the Company. The Company shall have no
obligation to repay such loan other than to the extent that 80% of the Expanded
Capacity Revenues are available.
15.3 CERTAIN PROPERTIES. Notwithstanding anything contained in this
Agreement to the contrary, Leviathan Holding and any of its Affiliates shall
have the right, at their sole cost, expense and risk, to construct pipeline
laterals or extensions or related facilities to connect the Manta Ray System to
gas produced from Blocks 871, 914, 915, 916, 958, 959, 1002 and 1003 in the
▇▇▇▇▇ Bank Area, Gulf of Mexico pursuant to any agreement existing on the
Formation Date. Such right shall be absolute and unconditional and shall be free
and clear of any obligation to offer the Company or any Member the right to
participate therein.
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ARTICLE XVI.
GENERAL PROVISIONS
16.1. OFFSET. Whenever the Company is to pay any sum to any Member, any
amounts that a Member owes the Company may be deducted from that sum before
payment.
16.2. ENTIRE AGREEMENT; SUPERSEDURE. This Agreement constitutes the
entire agreement and supersedes (i) all prior oral or written proposals or
agreements (ii) all contemporaneous oral proposals or agreements and (iii) all
previous negotiations and all other communications or understandings between the
Parties with respect to the subject matter hereof, including, without
limitation, that certain Letter of Intent dated June 24, 1996 between Leviathan
Gas Pipeline Partners, L.P., Shell Offshore Inc., and Marathon Oil Company,
among others, and the related Letter of Intent dated September 10, 1996, but
excluding any confidentiality agreement between or among any Members or their
Affiliates and the letter agreement referred in Section 3.17(a)(iii).
16.3. WAIVERS. Neither action taken (including, without limitation, any
investigation by or on behalf of any Party) nor inaction pursuant to this
Agreement, shall be deemed to constitute a waiver of compliance with any
representation, warranty, covenant or agreement contained herein by the Party
not committing such action or inaction. A waiver by any Party of a particular
right, including, without limitation, breach of any provision of this Agreement,
shall not operate or be construed as a subsequent waiver of that same right or a
waiver of any other right.
16.4. BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the Members and their respective heirs, legal representatives,
successors and assigns.
16.5. MEMBER DEADLOCKS; NEGOTIATIONS AND MEDIATION.
(a) Member Deadlocks. Except for any matter or proposal covered by the
immediately succeeding sentence, Member approval or disapproval of any matter
shall not be subject to the provisions of this Section 16.5. If any matter or
proposal covered by Sections 6.3(b)(i)-(iv) or relating to an operating budget
described in Section 6.3(b)(v), requiring the vote of less than all of the
Membership Interest for approval thereof is brought before the Members and
receives neither (x) at least the Required Interest voting for such matter or
proposal nor (y) at least the Required Interest voting against (not including
abstentions or other non-votes) such matter or proposal, then any Member, by
written notice to the other Members given within three Business Days after the
initial vote on such matter or proposal, may call a meeting of the Members to
reconsider such matter or proposal, such meeting to be held when, where and as
reasonably specified in said notice, but not less than three Business Days nor
more than seven Business Days after the date of such vote. If such meeting is
called and held as herein provided and the matter or proposal is offered at such
meeting again and (x) does not receive at least the Required Interest voting for
such matter or proposal or (y) does not receive at least the Required Interest
voting against (not including abstentions or other non-votes) such matter or
proposal, then any Member may within three Business Days thereafter submit the
matter to further negotiation, and, if applicable, non-binding mediation, in
accordance with this Section. If no Member calls such a meeting within the first
three Business Day period herein provided for or if
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further negotiation is not requested within the three Business Day period after
the second meeting, no Member shall thereafter have any right to request further
negotiation or non-binding mediation regarding such matter or proposal.
(b) Further Negotiation. Any Member wishing to submit a matter or
proposal to further negotiation as permitted above or pursuant to Section 16.8
shall do so by giving written notice of further negotiation to the other Members
containing a brief description of the nature of the dispute to be further
negotiated and the position of the Member initiating further negotiation. Upon
receipt of such notice, each Member shall appoint a representative for such
further negotiations, which representative shall hold a position with the Person
owning such Member of equal or superior status to the prior representative of
such Member with respect to the proposal in question. The respective
representatives shall meet at the principal office of the Company at 10:00 a.m.
local time on the third Business Day after the date of receiving the notice of
further negotiations.
(c) Non-Binding Mediation. If within ten Business Days following
initial receipt by the Members of the notice of further negotiations neither (x)
at least the Required Interest votes for such matter or proposal nor (y) at
least the Required Interest votes against (not including abstentions or other
non-votes) such matter or proposal, then any Member may subject the matter or
proposal to non-binding mediation by giving written notice of mediation to the
other Members within five Business Days thereafter. The notice of mediation
shall state the identity of the single mediator selected by the Member
initiating mediation and contain a detailed statement of the nature of the
dispute to be mediated and the remedy or resolution sought by the Member
initiating mediation. Neither the Members nor the mediator will have the right
to conduct any further discovery relating to such mediation. The Member or
Members initiating mediation shall pay the fees of the mediator; provided,
however, that if the vote of the Members changes as a result of such mediation,
then the Company shall pay all such fees and each of the Members' costs related
to such mediation. Unless otherwise agreed by all of the Members, the mediation
proceedings shall be held in Houston, Texas at such location selected by the
mediator and shall begin as soon as practicable, but not less than five Business
Days following the mailing of the initiating Member's notice of mediation. If
within five Business Days following initiation of mediation proceedings neither
(x) at least the Required Interest votes for such matter or proposal nor (y) at
least the Required Interest votes against (not including abstentions or other
non-votes) such matter or proposal, then such mediation shall terminate and such
matter or proposal will no longer be subject to further negotiation or
mediation. Except with respect to the matters expressly specified in Section
16.5(a) and Section 16.8, no Member shall have the right to demand mediation
with respect to any dispute, difference or question arising between any of the
Members themselves or any Member and the Company.
16.6. GOVERNING LAW; SEVERABILITY.
(a) THIS AGREEMENT HAS BEEN EXECUTED AND DELIVERED AND SHALL BE
CONSTRUED, INTERPRETED AND GOVERNED PURSUANT TO AND IN ACCORDANCE WITH THE LAWS
OF THE STATE OF DELAWARE, WITHOUT REGARD TO ANY CONFLICT OF LAWS PRINCIPLES
WHICH, IF APPLIED, MIGHT PERMIT OR REQUIRE THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION.
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(b) In the event of a direct conflict between the provisions of this
Agreement and any mandatory provision of the Act or applicable Laws, the
applicable provision of the Act or other applicable Laws, as the case may be,
shall control. If any provision of this Agreement, or the application thereof to
any Person or circumstance, is held invalid or unenforceable to any extent, the
remainder of this Agreement and the application of that provision to other
Persons or circumstances shall not be affected thereby and that provision shall
be enforced to the greatest extent permitted by the Act or other applicable
Laws, as the case may be.
16.7. FURTHER ASSURANCES. Subject to the terms and conditions set forth
in this Agreement, each of the Parties agrees to use all reasonable efforts to
take, or to cause to be taken, all actions, and to do, or to cause to be done,
all things necessary, proper or advisable under applicable Laws and regulations
to consummate and make effective the transactions contemplated by this
Agreement. In case, at any time after the execution of this Agreement, any
further action is necessary or desirable to carry out its purposes, the proper
officers or directors of the Parties shall take or cause to be taken all such
necessary action.
16.8. EXERCISE OF CERTAIN RIGHTS. No Member may maintain any action for
partition of the property of the Company. No Member may maintain any action for
dissolution and liquidation of the Company unless such Member has submitted the
dispute giving rise to such possible action to further negotiation and
non-binding mediation, which further negotiation and mediation shall be
conducted in accordance with the time periods and procedures set forth in
Section 16.5(b) and (c), to the extent applicable. If such dispute is still
unresolved after the conclusion of such further negotiation and non-binding
mediation, such Member shall offer to sell its Membership Interest (free and
clear of all liens and encumbrances) to the other Members for an amount of cash
equal to the fair market value of the selling Member's Membership Interest,
determined by multiplying such selling Member's Membership Interest by the fair
market value of the Company, as a whole, without regard to any discounts or
premiums related to minority interest, controlling interest, liquidity or
related matters. If such Members do not agree on the fair market value thereof,
such value shall be determined by an arbitrator in accordance with the
arbitration procedures set forth in Section 3.6(e). If the non-selling Members
do not exercise the option to purchase such Membership Interest within 60 days
after the fair market value is determined, then the selling Member shall have
the right for a period of 30 days after such 60-day period to initiate an action
for such dissolution and liquidation pursuant to section 18-802 of the Act or
any similar applicable statutory or common law dissolution right. If no Member
has brought such action for dissolution within such 30 day period, then any
Member may maintain an action for dissolution and liquidation only after again
following the procedures set forth in this Section. Upon the institution of, and
during the pendency of, any such dissolution proceeding, the Members agree to
use commercially reasonable efforts to employ procedures and experts to ensure
that such dissolution process will result in the Company and/or its assets being
disposed of at fair market value; provided that such cooperative efforts shall
not constitute a waiver or limitation of any such Member's right to contest such
dissolution. Such procedures shall include soliciting likely potential
purchasers, establishing a data room and other information sharing procedures
and, if appropriate, engaging an investment banker, consultant or
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other expert to facilitate and enhance the marketing efforts. The terms and
conditions of this Section 16.8 are intended to preserve any right to
dissolution created by statute or common law (such as by section 18-802 of the
Act), but do not create any contractual right to dissolution.
16.9. NOTICE TO MEMBERS OF PROVISIONS OF THIS AGREEMENT. By executing
this Agreement, each Member acknowledges that it has actual notice of all of the
provisions of this Agreement. Each Member hereby agrees that this Agreement
constitutes adequate notice of all such provisions.
16.10. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which, when executed, shall be deemed an original, and all
of which shall constitute but one and the same instrument.
16.11. ATTENDANCE VIA COMMUNICATIONS EQUIPMENT. Unless otherwise
restricted by law or this Agreement, the Members or committees may hold meetings
by means of telephone conference or other communications equipment by means of
which all Persons participating in the meeting can effectively communicate with
each other. Such participation in a meeting shall constitute presence in person
at the meeting, except where a Person participates in the meeting for the
express purpose of objecting to the transaction of any business on the ground
that the meeting is not lawfully called or convened.
16.12. REPORTS TO MEMBERS. The officers of the Company shall present at
each annual meeting of Members, and at any special meeting of Members, a
statement of the business and condition of the Company.
16.13. CHECKS, NOTES AND CONTRACTS. Checks and other orders for the
payment of money shall be signed by such Person or Persons as the Company shall
from time to time by resolution determine. Contracts and other instruments or
documents may be signed in the name of the Company by any Person or Persons as
the Company shall from time to time by resolution determine authorized to sign
such contract, instrument or document by the Company, and such authority may be
general or confined to specific instances. Checks and other orders for the
payment of money made payable to the Company may be endorsed for deposit to the
credit of the Company, with a depositary authorized by resolution of the
Company, by the Chief Financial Officer or Treasurer or such other Persons as
the Company may from time to time by resolution determine.
16.14. SEAL. The seal of the Company shall be in such form as shall
from time to time be adopted by the Company. The seal may be used by causing it
or a facsimile thereof to be impressed, affixed or otherwise reproduced.
16.15. BOOKS AND RECORDS. The officers of the Company shall keep
correct and complete books and records of account, including the names and
addresses of all Members and the number and class of the interest held by each,
and minutes of the proceedings of the Members at its registered office or
principal place of business, or at the office of its transfer agent or
registrar.
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16.16. SURETY BONDS. Such officers and agents of the Company (if any)
as the Company may direct, from time to time, shall be bonded for the faithful
performance of their duties and for the restoration to the Company, in case of
their death, resignation, retirement, disqualification or removal from office,
of all books, papers, vouchers, money and other property of whatever kind in
their possession or under their control belonging to the Company, in such
amounts and by such surety companies as the Company may determine. The premiums
on such bonds shall be paid by the Company and the bonds so furnished shall be
in the custody of the Secretary.
16.17. AUDIT RIGHTS OF MEMBERS. (a) Each Member shall have the right to
inspect and audit the books and records of the Company to the extent necessary
to determine the accuracy of the financial statements delivered to the Members
pursuant to Section 10.2 of this Agreement. Such audits shall be conducted at
the cost of the Member(s) requesting same. The audit rights with respect to any
calendar year or any portion of such year shall terminate on and as of the last
day of the second calendar year immediately following the year in question. A
Member may exercise its audit rights hereunder by giving at least 30 days
written notice to the Company of the desire to perform such audit, which notice
shall include the estimated timing and other particulars related to such audit.
The audit shall be conducted during normal business hours of the Company. The
audit shall not unreasonably interfere with the operation of the Company. If any
financial statement is not challenged within 3 years, then it shall be presumed
to be accurate.
(b) Any Member shall have the right to cause the Company or a
Subsidiary of the Company to exercise its inspection and audit rights, if any,
under any Construction Agreement or Operating Agreement. The costs related
thereto shall be paid by the Member(s) requesting same.
16.18. NO THIRD PARTY BENEFICIARIES. Except to the extent a third party
is expressly given rights herein, any agreement herein contained, expressed or
implied, shall be only for the benefit of the Parties and their respective legal
representatives, successors, and assigns, and such agreements shall not inure to
the benefit of any other Person whomsoever, it being the intention of the
parties hereto that no Person shall be deemed a third party beneficiary of this
Agreement except to the extent a third party is expressly given rights herein.
16.19. NOTICES. Except as otherwise expressly provided in this
Agreement to the contrary (including in the definition of the term Default), any
notice required or permitted to be given under this Agreement shall be in
writing (including telex, facsimile, telecopier or similar writing) and sent to
the address of the Party set forth below, or to such other more recent address
of which the sending Party actually has received written notice:
(a) if to the Company, to:
Ocean Breeze Pipeline Company, L.L.C.
Attn: ▇▇. ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy (▇▇▇) ▇▇▇-▇▇▇▇
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(b) if to the Members, to each of the Members listed on Exhibit A at
the address set forth therein.
Each such notice, demand or other communication shall be effective, if given by
registered or certified mail, return receipt requested, as of the third day
after the date indicated on the mailing certificate, or if given by any other
means, when delivered at the address specified in this Section.
16.20. REMEDIES. Except as expressly provided herein, the rights,
obligations and remedies created by this Agreement are cumulative and in
addition to any other rights, obligations or remedies otherwise available at law
or in equity. Other than the obligation to arbitrate pursuant to Section 16.21,
in lieu of seeking judicial remedies, nothing herein shall be considered an
election of remedies. In addition, any successful Party is entitled to costs
related to enforcing this Agreement, including, without limitation, attorneys'
fees, and arbitration expenses. NOTWITHSTANDING ANYTHING TO THE CONTRARY, THE
PARTIES WAIVE ANY AND ALL RIGHTS, CLAIMS OR CAUSES OF ACTION ARISING UNDER THIS
AGREEMENT FOR INCIDENTAL, CONSEQUENTIAL, PUNITIVE OR EXEMPLARY DAMAGES. A PARTY
MAY RECOVER FROM THE OTHER PARTY ALL COSTS, EXPENSES OR DAMAGES INCLUDING,
WITHOUT LIMITATION, INDIRECT, SPECIAL, CONSEQUENTIAL, INCIDENTAL, EXEMPLARY,
PUNITIVE AND OTHER DAMAGES PAID OR OWED TO ANY THIRD PARTY FOR WHICH SUCH PARTY
HAS A RIGHT TO RECOVER FROM THE OTHER PARTY.
16.21. DISPUTES.
(a) Applicability. Any controversy or claim, whether based on contract,
tort, statute or other legal or equitable theory (including but not limited to
any claim of fraud, misrepresentation or fraudulent inducement or any question
of validity or effect of this Agreement including this clause) arising out of or
related to this Agreement (including any amendments or extensions), or the
breach or termination thereof shall be settled by arbitration in accordance with
the then current CPR Institute Rules for Non-Administered Arbitration of
Business Disputes, and this provision. The arbitration shall be governed by the
United States Arbitration Act, 9 U.S.C. ▇▇.▇▇. 1-16 to the exclusion of any
provision of Law inconsistent therewith or which would produce a different
result, and judgment upon the award rendered by the arbitrator may be entered by
any court having jurisdiction. Notwithstanding the foregoing, this Section shall
not apply to (x) any matters that, pursuant to the provisions of this Agreement,
are to be resolved by a vote of the Members or (y) any of the rights of
non-defaulting Members set forth in Section 4.3. Any dispute to which this
Section applies is referred to herein as a "Dispute." With respect to a
particular Dispute, each Person that is a party to such Dispute is referred to
herein as a "Disputing Party." The provisions of this Section shall be the
exclusive method of resolving Disputes.
(b) Negotiation to Resolve Disputes. If a Dispute arises, the Disputing
Parties shall attempt to resolve such Dispute through the following procedure:
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(i) first, each of the Disputing Parties shall promptly meet
(whether by phone or in person) in a good faith attempt to resolve the
Dispute.
(ii) second, if the Dispute is still unresolved after ten
Business Days following the commencement of the negotiations described
in Section 16.21(b)(i), then the chief executive officer (or his
designee) of the direct parent of each Disputing Party shall meet
(whether by phone or in person) in a good faith attempt to resolve the
Dispute; and
(iii) third, if the Dispute is still unresolved after ten
Business Days following the commencement of the negotiations described
in Section 16.21(b)(ii), then any Disputing Party may submit such
Dispute to binding arbitration under this Section by written notice to
the other Disputing Parties (an "Arbitration Notice") delivered within
thirty Business Days thereafter.
(iv) At the same time that the Disputing Member sends an
Arbitration Notice to the other Disputing Members, it shall also send
an Arbitration Notice to the regional office of the CPR Institute
covering Houston, Texas. The Arbitration Notice shall contain a brief
description of the nature of the dispute and the name of an Arbitrator
proposed by the Disputing Member.
(c) Selection of Arbitrator.
(i) Any arbitration conducted under this Section shall be
heard by a sole arbitrator (the "Arbitrator") qualified by his or her
education, experience and training to resolve the disputed matters and
shall be selected in accordance with this Section. Each Disputing Party
and each proposed Arbitrator shall disclose to the other Disputing
Parties any business, personal or other relationship or affiliation
that may exist between such Disputing Party and such proposed
Arbitrator within ten Business Days following delivery of the
Arbitration Notice.
(ii) The Disputing Party that submits a Dispute to arbitration
shall designate a proposed Arbitrator in its Arbitration Notice. If any
other Disputing Party objects for any reason to such proposed
Arbitrator, it may, on or before the tenth Business Day following
delivery of the Arbitration Notice, notify all of the other Disputing
Parties of such objection. All of the Disputing Parties shall attempt
to agree upon a mutually acceptable Arbitrator. If they are unable to
do so within seven Business Days following delivery of the notice
described in the immediately-preceding sentence, any Disputing Party
may request the regional office of the CPR Institute covering Houston,
Texas to designate the Arbitrator who shall be qualified by his or her
education, experience and training to resolve the disputed matters.
Failing designation by the regional office of the CPR Institute
covering Houston, Texas, any Disputing Party may in writing request the
judge of the United States District Court for the Southern District of
Texas senior in term of service to appoint an Arbitrator qualified by
his or her education, experience and training to resolve the disputed
matters. If the Arbitrator so chosen shall die, resign or otherwise
fail or becomes unable to serve as Arbitrator, a replacement Arbitrator
shall be chosen in accordance with this Section.
73
79
(d) Conduct of Arbitration.
(i) Any arbitration hearing shall be held in Houston, Texas.
The Arbitrator shall fix a reasonable time and place for the hearing
and shall determine the matters submitted to it pursuant to the
provisions of this Agreement in a timely manner; provided, however, if
the Arbitrator shall fail to hold the hearing to determine the issue in
dispute within sixty (60) days after the selection of the Arbitrator,
then any Disputing Member shall have the right to require a new
Arbitrator be selected under this Section.
(ii) Except as expressly provided to the contrary in this
Agreement, the Arbitrator shall have the power (i) to gather such
materials, information, testimony and evidence as it deems relevant to
the dispute before it (and each member will provide such materials,
information, testimony and evidence requested by the Arbitrator, except
to the extent any information so requested is, subject to an
attorney-client or other privilege); (ii) to grant injunctive relief
and enforce specific performance; and (iii) to issue or cause to be
issued subpoenas (including subpoenas directed to third-parties) for
the attendance of witnesses and for the production of books, records,
documents and other evidence. Subpoenas so issued shall be served, and
upon application to the Court by a party or the Arbitrator, enforced,
in the manner provided by law for the service and enforcement of
subpoenas in a civil action; and (iv) to administer oaths.
(iii) In advance of the arbitration hearing, the Disputing
Members may conduct discovery in accordance with the Texas Rules of
Civil Procedure. Such discovery may include, but is not limited to, 1)
the taking of oral and videotaped depositions and depositions on
written questions; 2) serving interrogatories, document requests and
requests for admission; and 3) any other form and/or method of
discovery provided for under the Texas Rules of Civil Procedure. The
Arbitrator shall order the parties to promptly exchange copies of all
exhibits and witness lists, and, if requested by a party, to produce
other relevant documents, to answer up to ten interrogatories
(including subparts), to respond to up to ten requests for admissions
(which shall be deemed admitted if not denied) and to produce for
deposition and, if requested, at the hearing all witnesses that such
party has listed and up to four other persons within such party's
control. Any additional discovery shall only occur by agreement of the
parties or as ordered by the Arbitrator upon a finding of good cause.
Any objections and/or responses to such discovery shall be due on or
before fifteen (15) days after service. The Disputing Members shall
attempt in good faith to resolve any discovery disputes that may arise.
If the Disputing Members are unable to resolve any such disputes, the
Disputing Members may present their objections to the Arbitrator who
shall resolve the objections in accordance with the Texas Rules of
Civil Procedure. The Arbitrator may, if requested by a party, order
that a trade secret or other confidential research, development or
commercial information not be revealed or be revealed only in a
designated way.
(iv) The Disputing Members may also retain, with the consent
of the arbitrator, one or more experts to assist the Arbitrator in
resolving the Dispute. The Disputing Members shall identify and produce
a report from any experts who will give testimony and/or evidence at
the arbitration hearing. Any testifying experts identified shall be
made available for deposition in advance of any arbitration hearing.
74
80
(v) The Arbitrator shall render its decision in writing within
fifteen (15) days of the conclusion of the hearing. The arbitrator
shall have jurisdiction and authority to interpret and apply the
provisions of this Agreement only insofar as shall be necessary in the
determination of the dispute before it, but it shall not have
jurisdiction or authority to add to or alter in any way the provisions
of this Agreement. The Arbitrator's decision shall govern and shall be
final, nonappealable (except to the extent provided in the Federal
Arbitration Act) and binding on the Disputing Members hereto and its
written decision may be entered in any court having appropriate
jurisdiction. Pending resolution of any dispute hereunder, performance
by Disputing Members shall continue so as to maintain the status quo
prior to notice of such dispute and service of notice of arbitration by
any Disputing Member shall not divest a court of competent jurisdiction
of the right and power to grant a decree compelling specific
performance or injunctive relief in an action brought by the Disputing
Members. THE ARBITRATOR AND ANY COURT ENFORCING THE AWARD OF THE
ARBITRATOR SHALL NOT HAVE THE RIGHT OR AUTHORITY TO AWARD
CONSEQUENTIAL, INCIDENTAL, INDIRECT, SPECIAL, PUNITIVE OR EXEMPLARY
DAMAGES TO THE COMPANY OR ANY DISPUTING MEMBERS. PROVIDED, HOWEVER,
THAT THE ARBITRATOR MAY AWARD ALL COSTS, EXPENSES OR DAMAGES INCLUDING,
WITHOUT LIMITATION, INDIRECT, SPECIAL CONSEQUENTIAL, INCIDENTAL,
EXEMPLARY, PUNITIVE AND OTHER DAMAGES PAID OR OWED TO ANY THIRD PARTY
FOR WHICH A PARTY HAS A RIGHT TO RECOVER FROM THE OTHER PARTY.
(vi) The responsibility for paying the costs and expenses of
the arbitration, including compensation to the Arbitrator, shall be
allocated among the Disputing Members in a manner determined by the
Arbitrator to be fair and reasonable under the circumstances. Each
Disputing Member shall be responsible for the fees and expenses of its
respective counsel, consultants and witnesses, unless the Arbitrator
determines that compelling reasons exist for allocating all or a
portion of such costs and expenses to one or more other Disputing
Members.
16.22. NO SHOP. Prior to the date on which the Members vote to accept
or reject the Construction Certificate as contemplated by Section 3.17, no
Member (including its Affiliates) shall directly or indirectly solicit, initiate
or encourage submission of or participate in negotiations or take any action
with respect to, proposals or offers (including any from any third party) to
participate jointly in constructing, operating or owning pipelines or related
facilities of the type described herein (or any similar facilities) to gather or
transport gas from the Dedicated Leases which was not committed pursuant to a
written gathering or transportation agreement executed prior to December 1,
1995, or engage in any other transaction contemplated by this Agreement. Each
Member hereto agrees to advise the other Members in writing with respect to any
solicitation, indications of interest or other inquiries (of the type described
in the immediately preceding sentence) initiated by any party hereto or any
third party pertaining to the subject matter of this Agreement. Notwithstanding
anything to the contrary contained in this paragraph, it shall not be a
violation of the exclusivity provisions of this Agreement if (i) due to the size
of its respective operations, a representative of a Member or its Affiliates,
which representative is not aware of this Agreement, inadvertently violates the
exclusivity provisions of
75
81
this Agreement and (ii) such violation is ceased and notice thereof delivered to
the other Members promptly upon discovery of same by such Member, nor shall it
be a violation to engage in such undertakings solely as they pertain to gas
excepted from the dedication provisions of the Dedication Agreements.
16.23. MEMBER TRADEMARKS. Neither the Company nor any Member shall be
permitted to use any trademark owned by any other Member or its Affiliates,
including, without limitation, the Shell "Pecten" trademark, without the express
written consent of such Member or its Affiliate or as otherwise required by Law.
16.24. HOLDING-OUT. Except as required by Law, the Company shall not
publicly indicate that it is affiliated with Shell Oil Company or any of its
Affiliates, without the express written consent of Shell Holding or an Affiliate
thereof.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
76
82
IN WITNESS WHEREOF, the Members have executed this Agreement as of the
date first set forth in this Agreement.
MEMBERS:
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------
Printed Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------
Title: President
----------------------------------
MARATHON GAS TRANSMISSION INC.
By: /s/ ▇. ▇. ▇▇▇▇▇▇
-------------------------------------
Printed Name: ▇. ▇. ▇▇▇▇▇▇
---------------------------
Title: President
----------------------------------
SHELL SEAHORSE COMPANY
By: /s/ ▇.▇. ▇▇▇▇▇
-------------------------------------
Printed Name: ▇.▇. ▇▇▇▇▇
---------------------------
Title: President
----------------------------------
EXHIBITS:
Exhibit A: Ownership Information
Exhibit B: Description of Initial Facilities
Exhibit C: Insurance
77
83
EXHIBIT A
OWNERSHIP INFORMATION
----------------------------------------------------------------------------------------------------------
NAME AND INITIAL CAPITAL INITIAL CAPITAL MEMBERSHIP
CONTRIBUTION OF EACH MEMBER CONTRIBUTIONS INTEREST
----------------------------------------------------------------------------------------------------------
1) Leviathan Holding: (1) 25.67%
Sailfish Pipeline Company, L.L.C.
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇
7200 Texas Commerce Tower
▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: 713/▇▇▇-▇▇▇▇
Facsimile: 713/547-5151
----------------------------------------------------------------------------------------------------------
2) Shell Holding:(4) (2) 50.00%
Shell Seahorse Company
Attention: ▇▇. ▇▇▇▇ ▇▇▇▇▇, President
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
----------------------------------------------------------------------------------------------------------
3) Marathon Holding: (3) 24.33%
Marathon Gas Transmission Inc.
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
----------------------------------------------------------------------------------------------------------
(1) Leviathan Holding shall make or cause to be made Initial Capital
Contributions equal to:
(a) Contribution of amounts equal to the cash paid by Leviathan Holding on
behalf of the Company for certain costs and expenses related to the
formation of the Company and incurred by Leviathan Holding prior to
the date hereof.
(b) Contribution of 1% of Leviathan Holding's membership interest in
Nautilus and Manta Ray of 25.67%;
(2) Shell Holding shall make or cause to be made Initial Capital Contributions
equal to:
(a) Contribution of amounts equal to the cash paid by Shell Holding on
behalf of the Company for certain costs and expenses related to the
formation of the Company and incurred by Shell Holding prior to the
date hereof;
A-1
84
(b) Contribution of 1% of Shell Holding's membership interest in Nautilus
and Manta Ray of 50.00%
(3) Marathon Holding shall make or cause to be made Initial Capital
Contributions equal to:
(a) Contribution of amounts equal to the cash paid by Marathon Holding and
its Affiliates on behalf of the Company for certain costs and expenses
related to the formation of the Company and incurred by Marathon
Holding and its Affiliates prior to the date hereof;
(b) Contribution of 1% of Marathon Holding's membership interest in a
Nautilus and Manta Ray of 24.33%
(4) Initial Tax Matters Member.
A-2
85
EXHIBIT B
CERTAIN MANTA RAY AND NAUTILUS FACILITIES
I. Manta Ray Initial Facilities
A. Manta Ray Phase I Facilities
1. Pipeline Segments
a. Approximately 51 miles of 16" pipeline from Green Canyon
Block 29 to Ship Shoal Block 207.
b. Approximately 32 miles of 14" pipeline from South Timbalier
Block 301 to Ship Shoal Block 207.
c. Approximately 1 mile of 10" pipeline within Ship Shoal Block
240.
d. Approximately 3 miles of 12" pipeline from Ship Shoal Block
259 to Ship Shoal Block 261.
e. Approximately 6 miles of 16" pipeline from Ship Shoal Block
207 to Ship Shoal Block 181, to be contributed to the
Company by Poseidon Pipeline Company, L.L.C.
f. Approximately 6 miles of 12" pipeline from South Timbalier
Block 277 to South Timbalier Block 292.
g. Approximately 4 miles of 12" pipeline from South Timbalier
Block 292 to South Timbalier Block 280.
h. Approximately 18 miles of 24" pipeline from South Timbalier
Block 292 to South Timbalier Block 300.
i. Approximately 7 miles of 14" pipeline from Ship ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ 301.
j. Approximately 7 miles of 16" pipeline from Ship Shoal Block
332 to South Timbalier Block 301.
k. Approximately 17 miles of 16" pipeline from Green Canyon
Block 19 to Ship Shoal Block 332.
l. Approximately 9 miles of 16" pipeline from Ship Shoal Block
349 to ▇▇▇▇▇ Bank Block 990.
B-1
86
2. Pipeline Related Facilities shall include:
▇. ▇▇▇▇▇ CANYON 19A
(1) 24" x 0.688" Riser with a 24" - 900# SDV
(2) 20" x 16" Pig Launcher
(3) Corrosion Inhibitor Injection Skid with Sidewinder pump
(4) Dual 6" Orifice Meter Skid
Design 1,720 psig @ 130 Degrees F
(5) Standard Gas Metering Station EFM Equipment
▇. ▇▇▇▇▇ CANYON 18A
(1) Standard Gas Metering Station EFM Equipment
▇. ▇▇▇▇▇ CANYON 65A
(1) Standard Gas Metering Station EFM Equipment
▇. ▇▇▇▇▇ BANK 947A
(1) Standard Gas Metering Station EFM Equipment
e. SHIP SHOAL 349A
(1) 16" x 0.688" Riser with a 16" - 900# SDV
(2) 18" x 16" Pig Launcher
(3) Corrosion Inhibitor Injection Skid with Sidewinder pump
(4) Dual 10" Orifice Meter Skid
Design 1,550 psig @ 250 Degrees F
(5) Standard Gas Metering System EFM Equipment
f. SHIP SHOAL 240A
SS240 Lateral is owned 51% by Manta Ray Gathering Company,
L.L.C. and 49% by ANR.
(1) 10.75" x 0.594" Riser with 10" - 900# SDV
(2) 12" x 10" Pig Launcher
(3) Corrosion Inhibitor Injection Skid with Sidewinder pump
(4) Dual 8" Orifice Meter Skid
Design = 2,220 psig @ 100 Degrees F
(5) Standard Gas Metering Station EFM Equipment
Manta Ray Offshore ownership is everything downstream of 6"
- 900# flange at inlet of Gas Meter Skid.
▇-▇
▇▇
▇. ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
(1) 12.75" x 0.688" Riser with 12" - 900# SDV
(2) Corrosion Inhibitor Injection with Sidewinder pump
(3) Dual 10" Orifice Meter Skid
Design = 1,480 psig @ 120 Degrees F
Manta Ray Offshore ownership is everything downstream of 10"
- 600# flange at inlet of Gas Meter Skid.
Note: No pig launcher.
EFM equipment is owned by ▇▇▇▇▇▇▇ ▇▇▇▇▇ Services, who
provide a monthly calibration service for a fee ($1,000).
h. SOUTH TIMBALIER 295A
Manta Ray Offshore presently owns nothing on this platform.
The Riser and Meter Station are owned by Shell Offshore
Inc.. The EFM equipment is owned by ▇▇▇▇▇▇▇▇ Field Services
who provides monthly calibration services for a fee
($1,000). When the 24" pipeline which originates at ST 292
is extended to SS 332 in 1997, Manta Ray will install its
EFM equipment and remove ▇▇▇▇▇▇▇▇'. This will eliminate the
fee.
i. SOUTH TIMBALIER 277A
(1) 12.75" x 0.500" Riser
(2) 14" x 12" Pig Launcher
(3) Corrosion Inhibitor Injection Skid with Sidewinder pump
(4) Single 8" Orifice Meter
(5) ▇▇▇▇▇▇ Model 202E Chart Recorder
(6) ▇▇▇▇▇▇ Model GS-4 Composite Gas Sampler
j. SOUTH TIMBALIER 300A
(1) 24" x 0.625" Riser (inbound) with 24" - 900# SDV
(2) 30" x 24" Pig Receiver
(3) Miscellaneous valves and fittings
k. SOUTH TIMBALIER 292A
(1) 24" x 0.625" Riser (outbound) with a 24" - 900# SDV
(2) 30" x 24" Pig Launcher
(3) Corrosion Inhibitor Injection Skid with Sidewinder Pump
(4) Dual 8" Orifice Meter
(5) 12.75" x 0.500' Riser (outbound) with 12" - 600# SDV
B-3
88
(6) Corrosion Inhibitor Injection Skid with Sidewinder Pump
(7) Dual 10" Orifice Meter
(8) ▇▇▇▇▇▇ Model GS-4 Composite Gas Sampler
(9) 12.75" x 0.500" Riser (incoming) with 12" - 600# SDV
(10) 14" x 12" Pig Receiver
l. SHIP SHOAL 207 DWPF
(1) 8 Pile Platform
(2) 16" x 0.625" Riser (inbound gas) with 16" - 900# SDV
(3) 18" x 16" Pig Receiver
(4) H.P. Relief Scrubber
(5) L.P. Relief Scrubber
(6) Platform Sump System
(7) 14" - 600# Check Valve, 14" - 600# FCV and (2) 14" 600#
Block Valves
(8) (2) Bad Oil Tanks. Capacity = 1,200 BBL each
(9) (2) Waukesha - ▇▇▇▇▇▇ Generators 550 KW each
(10) 14" x 0.625" Riser (inbound) with 14" - 900# SDV
(11) 16" x 14" Pig Receiver
(12) 16" x 0.406" Riser (outbound) with 16" - 600# SDV
(13) 18" x 16" Pig Launcher
(14) PECO Instrument Fuel Gas Filter
(15) EFM Equipment (SS 207)
(16) 8" Oil line which crosses bridge to platform
(17) Seaking Series 42 Model SK 1900 Crane
(18) 15' x 15' Parts Building
Note: Oil Metering Skid and Prover Loop are property of
Poseidon Pipeline Company, L.L.C.
m. SHIP SHOAL 332A
(1) 16" x 0.562" Riser (inbound) with 16" - 900# SDV
(2) 18" x -16" Pig Receiver
(3) 12" - 1500# FCV, (2) 12" - 1500# Block Valves and 12" -
1500# Check valve allocated on Sub-Cellar Deck; 12" -
900# FCV and 12" - 600# Check valve located on
Sub-Cellar Deck; (2) 12" - 600# FCVs located on Cellar
deck.
(4) 20" Pipeline Manifold
(5) 8" - 900# FCV
(6) Dual 12" and 10" Orifice Meter (to TGPL)
(7) 18" x 16" Pig Launcher
(8) 16" x 0.625" Riser (outbound) with 16" - 900# SDV
(9) 16" x 14" Pig Launcher
(10) 14" x 0.438" Riser (outbound) with 14" - 900# SDV
B-4
89
(11) EFM Equipment (SS 332)
(12) Certain Dehydration Facilities (as described in the
relevant contribution agreement)
n. PARTS LISTS FOR METERING STATIONS
(1) Typical Gas Metering Station Installation (See
Attachment 1.)
(2) Platform SS 207 (See Attachment 2.)
(3) Platform SS 332 (See Attachment 3.)
B. Manta Ray Phase II Facilities
1. Pipeline Segments
a. Approximately 47 miles of 24" pipeline from Green
Canyon Block 65 to Ship Shoal Block 207.
b. Approximately 7 miles of 24" pipeline from South
Timbalier Block 300 to Ship Shoal Block 332.
2. Pipeline Related Facilities
a. A 24" export riser located on Shell Offshore Inc.'s
platform in Green Canyon Block 65.
b. A 24" import riser located on Manta Ray Offshore
Gathering Company L.L.C.'s Ship Shoal 207 platforms.
c. A 24" import riser located on Manta Ray Gathering
Company, L.L.C.'s Ship Shoal 332 platforms ("SS332
platforms").
d. A slug catcher and related facilities located on the
SS207 platforms.
e. A slug catcher and related facilities located at the
inlet of Exxon U.S.A's Garden City Gas Plant.
II. Nautilus Initial Facilities
A. Pipeline Segments
A 30" Pipeline from SS207 to the inlet of the Garden City Gas
Plant, including a lateral to the ▇▇▇▇▇ Point Gas Plant, risers,
and other appurtenant facilities.
B. Pipeline Related Facilities
A 30" export riser located on the Ship Shoal 207
platform.
B-5
90
EXHIBIT C
INSURANCE
Coverage Per Occurrence Per Occurrence
-------- Limit of Liability Deductible
------------------ ----------
I. To be carried by the Company, if applicable
1. Workers' Compensation Per statute None
Employers Liability/ $ 1,000,000 None
Maritime E.L.
2. Automobile Liability $ 1,000,000 $250,000
II. If the Company owns or bareboat charters watercraft these coverages will be carried by the Company:
▇. ▇▇▇▇/Machinery, including $10,000,000 $250,000
Collision Liability
B. Protection & Indemnity, $ 1,000,000 $250,000
including crew coverage
and Excess Collision Liability
C-1