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EXHIBIT 3.2
AMENDED AND RESTATED AGREEMENT
OF
LIMITED PARTNERSHIP
OF
NORTHERN BORDER PARTNERS, L.P.
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TABLE OF CONTENTS
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ARTICLE I
ORGANIZATIONAL MATTERS..........
1
1.1 Formation and
Continuation................
1
1.2
Name......................................
1
1.3 Registered Office; Principal
Office.......
1
1.4 Power of
Attorney.........................
2
1.5
Term......................................
3
1.6 Possible Restrictions on
Transfer.........
3
ARTICLE II
DEFINITIONS......................
3
"Additional Limited
Partner"..................
3
"Adjusted Capital
Account"....................
4
"Adjusted
Property"...........................
4
"Administrative Services
Agreement"...........
4
"Affiliate"...................................
4
"Agreed
Allocation"...........................
4
"Agreed
Value"................................
4
"Agreement"...................................
5
"Arbitrator"..................................
5
"Assignee"....................................
5
"Audit
Committee".............................
5
"Authorized
Officer"..........................
5
"Available
Cash"..............................
5
"Book-Tax
Disparity"..........................
6
"Business
Day"................................
6
"Buyout
Price"................................
6
"Buyout
Event"................................
6
"Capital
Account".............................
7
"Capital Additions and
Improvements"..........
7
"Capital
Contribution"........................
7
"Carrying
Value"..............................
7
"Cash from Interim Capital
Transactions"......
7
"Cash from
Operations"........................
7
"Cause".......................................
9
"Certificate".................................
9
"Certificate of Limited
Partnership"..........
9
"Citizenship
Certification"...................
9
"Closing
Date"................................
9
"Closing
Price"...............................
9
"Code"........................................
9
"Combined
Interest"...........................
9
"Commission"..................................
9
"Common
Unit".................................
9
"Common Unit
Arrearage".......................
9
"Contributed
Property"........................
10
"Conveyance
Agreement"........................
10
"Credit
Agreement"............................
10
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"Cumulative Common Unit
Arrearage"...................... 10
"Curative
Allocation"................................... 10
"Current Market
Price".................................. 10
"Delaware
Act".......................................... 10
"Departing
Partner"..................................... 10
"Economic Risk of
Loss"................................. 10
"Eligible
Citizen"...................................... 10
"Enron".................................................
10
"Event of
Withdrawal"................................... 10
"First Liquidation Target
Amount"....................... 11
"First Target
Distribution"............................. 11
"General
Partners"...................................... 11
"General Partner Percentage
Interest"................... 11
"Gross General Partner Percentage
Interest"............. 11
"Group".................................................
11
"Hypothetical Equity
Value"............................. 11
"Incentive
Distribution"................................ 11
"Indemnified
Persons"................................... 12
"Indemnitee"............................................
12
"Indemnity
Agreement"................................... 12
"Initial Common
Units".................................. 12
"Initial Limited
Partners".............................. 12
"Initial
Offering"...................................... 12
"Initial Unit
Price".................................... 12
"Interim Capital
Transactions".......................... 12
"Intermediate
Partnership".............................. 12
"Intermediate Partnership
Agreement".................... 13
"Issue
Price"........................................... 13
"Limited
Partner"....................................... 13
"Liquidation
Date"...................................... 13
"Liquidator"............................................
13
"Maintenance Capital
Expenditures"...................... 13
"Merger
Agreement"...................................... 13
"Minimum Quarterly
Distribution"........................ 13
"National Securities
Exchange".......................... 13
"Net Agreed
Value"...................................... 14
"Net
Income"............................................ 14
"Net
Loss".............................................. 14
"Net Termination
Gain".................................. 14
"Net Termination
Loss".................................. 14
"Non-citizen
Assignee".................................. 15
"Nonrecourse Built-in
Gain"............................. 15
"Nonrecourse
Deductions"................................ 15
"Nonrecourse
Liability"................................. 15
"Northern Border Interim Capital
Transactions".......... 15
"Northern Border
Pipeline".............................. 15
"Northern Border Pipeline Partnership
Agreement"........ 15
"Northern Border Termination Capital
Transactions"...... 15
"Northern
Plains"....................................... 15
"Northwest
Border"...................................... 15
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"Notice of Election to Purchase"
............. 15
"Opinion of Counsel"
......................... 16
"Organizational Limited Partner"
............. 16
"Outstanding"
................................ 16
"Overallotment Option"
....................... 16
"Pan Border"
................................. 16
"Panhandle"
.................................. 16
"Partner Nonrecourse Debt"
................... 16
"Partner Non-recourse Debt Minimum
Gain"...... 16
"Partner Non-recourse Deductions"
............ 16
"Partners"
................................... 16
"Partnership"
................................ 16
"Partnership Interest"
....................... 16
"Partnership Minimum Gain"
................... 16
"Partnership Policy Committee"
............... 17
"Partnership Securities"
..................... 17
"Per Unit Capital Amount"
.................... 17
"Percentage Interest"
........................ 17
"Person"
..................................... 17
"Pipeline System"
............................ 17
"Purchase Date"
.............................. 17
"Recapture Income"
........................... 17
"Record Date"
................................ 17
"Record Holder"
.............................. 17
"Redeemable Units"
........................... 17
"Registration Statement"
..................... 17
"Required Allocations"
....................... 18
"Residual Gain"
.............................. 18
"Residual Loss"
.............................. 18
"Second Liquidation Target Amount"
........... 18
"Second Target Distribution"
................. 18
"Securities Act"
............................. 18
"Special Approval"
........................... 18
"Subordinated Unit"
.......................... 18
"Subordination Period"
....................... 18
"Substituted Limited Partner"
................ 19
"Surviving Business Entity"
.................. 19
"Termination Capital Transactions"
........... 19
"Third Target Distribution"
.................. 19
"Trading Day"
................................ 19
"Transfer Agent"
............................. 19
"Transfer Application"
....................... 19
"Underwriter"
................................ 20
"Underwriting Agreement"
..................... 20
"Unit"
....................................... 20
"Unpaid MQD"
................................. 20
"Unrealized Gain"
............................ 20
"Unrealized Loss"
............................ 20
"Unrecovered Initial Unit Price"
............. 20
"Unrecovered Subordinated Unit Capital"
......
20
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"Williams".................................................................
21
"Withdrawal Opinion of
Counsel"............................................ 21
ARTICLE III
PURPOSE................................ 21
3.1 Purpose and
Business...................................................
21
3.2
Powers.................................................................
21
ARTICLE IV
CAPITAL CONTRIBUTIONS.......................... 21
4.1 Contributions by the General
Partners.................................. 21
4.2 Issuances of Additional Units and Other
Securities..................... 22
4.3 Limited Preemptive
Rights.............................................. 23
4.4 Capital
Accounts.......................................................
23
4.5
Interest...............................................................
26
4.6 No
Withdrawal..........................................................
26
4.7 Loans from
Partners....................................................
26
4.8 No Fractional
Units....................................................
26
4.9 Splits and
Combinations................................................
26
ARTICLE V
ALLOCATIONS AND DISTRIBUTIONS...................... 27
5.1 Allocations for Capital Account
Purposes............................... 27
(a) Net
Income.........................................................
27
(b) Net
Losses.........................................................
28
(c) Net Termination
Gains and Losses................................... 28
(d) Special
Allocations................................................
30
(i) Partnership
Minimum Gain Chargeback.......................... 30
(ii) Chargeback of
Partner Nonrecourse Debt Minimum Gain.......... 30
(iii) Priority Allocations.........................................
31
(iv) Qualified Income
Offset...................................... 31
(v) Gross Income
Allocations..................................... 31
(vi) Nonrecourse
Deductions....................................... 31
(vii) Partner Nonrecourse Deductions...............................
32
(viii)Nonrecourse Liabilities......................................
32
(ix) Code Section 754
Adjustments................................. 32
(x) Economic
Uniformity.......................................... 32
(xi) Curative
Allocation.......................................... 33
5.2 Allocations for Tax
Purposes........................................... 33
5.3 Requirement and Characterization of
Distributions...................... 35
5.4 Distributions of Cash from
Operations.................................. 36
5.5 Distributions of Cash from Interim
Capital Transactions................ 37
5.6 Adjustment of Minimum Quarterly
Distribution and Target Distribution
Levels.................................................................
37
5.7 Special Provisions Relating to the
Subordinated Units.................. 37
ARTICLE VI
MANAGEMENT AND OPERATION OF BUSINESS................ 38
6.1 Partnership Policy
Committee........................................... 38
6.2
Management.............................................................
41
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6.3 Certificate of Limited
Partnership......................................... 42
6.4 Restrictions on the Partnership
Policy Committee's Authority............... 43
6.5 Reimbursement of the General
Partners and the Partnership Policy
Committee..................................................................
44
6.6 Outside
Activities.........................................................
44
6.7 Loans to and from the General
Partners; Contracts with Affiliates.......... 45
6.8
Indemnification............................................................
47
6.9 Liability of
Indemnitees...................................................
48
6.10 Resolution of Conflicts of
Interest........................................ 49
6.11 Other Matters Concerning the General
Partners and the Partnership Policy
Committee..................................................................
50
6.12 Title to Partnership
Assets................................................ 51
6.13 Purchase or Sale of
Units..................................................
51
6.14 Registration Rights of Certain
Persons..................................... 51
6.15 Reliance by Third
Parties..................................................
54
ARTICLE VII
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS......................
55
7.1 Limitation of
Liability....................................................
55
7.2 Management of
Business.....................................................
55
7.3 Outside
Activities.........................................................
55
7.4 Return of
Capital..........................................................
55
7.5 Rights of Limited Partners
Relating to the Partnership..................... 55
ARTICLE VIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS.....................
56
8.1 Records and
Accounting.....................................................
56
8.2 Fiscal
Year................................................................
57
8.3
Reports....................................................................
57
ARTICLE IX
TAX MATTERS................................... 57
9.1 Preparation of Tax
Returns.................................................
57
9.2 Tax
Elections..............................................................
57
9.3 Tax
Controversies..........................................................
57
9.4 Organizational
Expenses....................................................
58
9.5
Withholding................................................................
58
9.6 Entity
Level-Taxation......................................................
58
9.7 Entity Level-Arrearage
Collections......................................... 58
9.8 Opinions of
Counsel........................................................
59
ARTICLE X
CERTIFICATES................................. 59
10.1
Certificates...............................................................
59
10.2 Registration, Registration of Transfer
and Exchange........................ 59
10.3 Mutilated, Destroyed, Lost or Stolen
Certificates.......................... 60
10.4 Record
Holder..............................................................
60
ARTICLE XI
TRANSFER OF INTERESTS.............................. 61
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11.1
Transfer............................................................
61
11.2 Transfer of a General Partner's
Partnership Interest................ 61
11.3 Transfer of
Units...................................................
62
11.4 Restrictions on
Transfers........................................... 62
11.5 Citizenship Certificates;
Non-citizen Assignees..................... 62
11.6 Redemption of
interests............................................. 63
11.7 Right to Make Offer; Preferential
Purchase Right; Buyout Right...... 64
ARTICLE XII
ADMISSION OF PARTNERS........................ 65
12.1 Admission of General Partners and
Underwriters as Limited Partners.. 65
12.2 Admission of Substituted Limited
Partners........................... 65
12.3 Admission of Successor General
Partner.............................. 66
12.4 Admission of Additional Limited
Partners............................ 66
12.5 Amendment of Agreement and
Certificate of Limited Partnership....... 66
ARTICLE XIII
WITHDRAWAL OR REMOVAL OF PARTNERS.................. 66
13.1 Withdrawal of a General
Partner..................................... 66
13.2 Removal of a General
Partner........................................ 68
13.3 Interest of Departing Partner and
Successor General Partner......... 68
13.4 Withdrawal of Limited
Partners...................................... 69
ARTICLE XIV
DISSOLUTION AND LIQUIDATION.................... 70
14.1
Dissolution.........................................................
70
14.2 Continuation of the Business of
the Partnership after Dissolution... 70
14.3
Liquidation.........................................................
71
14.4 Distributions in
Kind............................................... 72
14.5 Cancellation of Certificate of
Limited Partnership.................. 72
14.6 Reasonable Time for Winding
Up...................................... 72
14.7 Return of
Capital...................................................
73
14.8 No Capital Account
Restoration...................................... 73
14.9 Waiver of
Partition.................................................
73
ARTICLE XV
AMENDMENT OF PARTNERSHIP AGREEMENT;
MEETINGS; RECORD DATE........................ 73
15.1 Amendment to be Adopted Solely by
Partnership Policy Committee...... 73
15.2 Amendment
Procedures................................................
74
15.3 Amendment
Requirements..............................................
74
15.4
Meetings............................................................
75
15.5 Notice of a
Meeting.................................................
75
15.6 Record
Date.........................................................
75
15.7
Adjournment.........................................................
76
15.8 Waiver of Notice; Approval of
Meeting; Approval of Minutes.......... 76
15.9
Quorum..............................................................
76
15.10 Conduct of
Meeting..................................................
76
15.11 Action Without a
Meeting............................................ 77
15.12 Voting and Other
Rights............................................. 77
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ARTICLE XVI
MERGER..................... 78
16.1
Authority................................................
78
16.2 Procedure for Merger or
Consolidation.................... 78
16.3 Approval by Limited Partners of
Merger or Consolidation.. 79
16.4 Certificate of
Merger.................................... 79
16.5 Effect of
Merger......................................... 79
ARTICLE XVII
RIGHT TO ACQUIRE UNITS............ 80
17.1 Right to Acquire
Units.................................... 80
ARTICLE XVIII
GENERAL PROVISIONS.............. 81
18.1 Addresses and
Notices.................................... 81
18.2
References...............................................
82
18.3 Pronouns and
Plurals..................................... 82
18.4 Further
Action........................................... 82
18.5 Binding
Effect........................................... 82
18.6
Integration..............................................
82
18.7
Creditors................................................
82
18.8
Waiver...................................................
82
18.9
Counterparts.............................................
82
18.10 Applicable
Law........................................... 82
18.11 Invalidity of
Provisions................................. 83
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Exhibit A - Form of Certificate Evidencing
Common Units
viii
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AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF
NORTHERN BORDER PARTNERS, L.P.
THIS
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF
NORTHERN
BORDER PARTNERS, L.P., dated as of October
1, 1993, is entered into by and among
Northern Plains Natural Gas Company, a
Delaware corporation, Pan Border Gas
Company, a Delaware corporation, and
Northwest Border Pipeline Company, a
Delaware corporation, each in its capacity
as a General Partner, and Northwest
Border Pipeline Company, a Delaware
corporation, in its capacity as the
Organizational Limited Partner, together
with any other Persons who become
Partners in the Partnership or parties
hereto as provided herein. In
consideration of the covenants, conditions
and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE I
ORGANIZATIONAL
MATTERS
1.1
FORMATION AND CONTINUATION. (a) The General Partners and the
Organizational Limited Partner have
previously formed the Partnership as a
limited partnership pursuant to the
provisions of the Delaware Act and hereby
amend and restate the original Agreement of
Limited Partnership of Northern
Border Partners, L.P., as previously
amended, in its entirety. Subject to the
provisions of this Agreement, the General
Partners and the Organizational
Limited Partner hereby continue the
Partnership as a limited partnership
pursuant to the provisions of the Delaware
Act. Except as expressly provided to
the contrary in this Agreement, the rights
and obligations of the Partners and
the administration, dissolution and
termination of the Partnership shall be
governed by the Delaware Act. All
Partnership Interests shall constitute
personal property of the owner thereof for
all purposes.
(b) In
connection with the formation of the Partnership, Northern
Plains,
Pan Border and Northwest Border have been
admitted as general partners of the
Partnership (each owning a general partner
interest in the Partnership equal to
its General Partner Percentage Interest),
and the Organizational Limited Partner
has been admitted as a limited partner of
the Partnership. As of the Closing
Date, after giving effect to the
transactions contemplated by Section 4.1, the
interest in the Partnership of the
Organizational Limited Partner shall be
terminated and the Organizational Limited
Partner shall withdraw as a limited
partner of the Partnership.
1.2 NAME.
The name of the Partnership shall be "Northern Border Partners,
L.P." The Partnership's business may be
conducted under any other name or names
deemed necessary or appropriate by the
Partnership Policy Committee. The words
"Limited Partnership," "L.P.," "Ltd." or
similar words or letters shall be
included in the Partnership's name where
necessary for the purposes of complying
with the laws of any jurisdiction that so
requires. The Partnership Policy
Committee in its sole discretion may change
the name of the Partnership at any
time and from time to time and shall notify
the Limited Partners of such change
in the next regular communication to
Limited Partners.
1.3
REGISTERED OFFICE; PRINCIPAL OFFICE. Unless and until changed by
the
Partnership Policy Committee, the
registered office of the Partnership in the
State of Delaware shall be located at The
Corporation Trust Center, 1209 Orange
Street, New Castle County, Wilmington,
Delaware 19801, and the registered agent
for service of process on the Partnership
in the State of Delaware
1
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at such registered office shall be The
Corporation Trust Company. The principal
office of the Partnership shall be located
at 1400 Smith Street, Houston, Texas
77002, or such other place as the
Partnership Policy Committee may from time to
time designate by notice to the Limited
Partners. The Partnership may maintain
offices at such other place or places
within or outside the State of Delaware as
the Partnership Policy Committee deems
necessary or appropriate.
1.4 POWER
OF ATTORNEY. (a) Each Limited Partner and each Assignee hereby
constitutes and appoints each Authorized
Officer and, if a Liquidator shall have
been selected pursuant to Section 14.3, the
Liquidator severally (and any
successor to the Liquidator by merger,
transfer, assignment, election or
otherwise) and each authorized officer and
attorney-in-fact of the Liquidator,
with full power of substitution, as his
true and lawful agent and
attorney-in-fact, with full power and
authority in his name, place and stead,
to:
(i) execute, swear to, acknowledge, deliver, file and record in
the
appropriate public offices (A) all certificates, documents and
other
instruments (including, without limitation, this Agreement and
the
Certificate of Limited Partnership and all amendments or
restatements
thereof)
that the Partnership Policy Committee or the Liquidator deems
necessary
or appropriate to form, qualify or continue the existence or
qualification of the Partnership as a limited partnership (or a
partnership in which the limited partners have limited liability)
in the
State of
Delaware and in all other jurisdictions in which the
Partnership
may
conduct business or own property; (B) all certificates, documents
and
other
instruments that the Partnership Policy Committee or the
Liquidator
deems
necessary or appropriate to reflect, in accordance with its
terms,
any
amendment, change, modification or restatement of this Agreement;
(C)
all
certificates, documents and other instruments (including,
without
limitation, conveyances and a certificate of cancellation) that
the
Partnership Policy Committee or the Liquidator deems necessary
or
appropriate to reflect the dissolution and liquidation of the
Partnership
pursuant
to the terms of this Agreement; (D) all certificates, documents
and other
instruments relating to the admission, withdrawal, removal or
substitution of any Partner pursuant to, or other events described
in,
Article
XI, XII, XIII or XIV or the Capital Contribution of any
Partner;
(E) all
certificates, documents and other instruments relating to the
determination of the rights, preferences and privileges of any
class or
series of
Units or other Partnership Securities issued pursuant to
Section
4.2; and
(F) all certificates, documents and other instruments
(including,
without
limitation, agreements and a certificate of merger) relating to
a
merger or
consolidation of the Partnership pursuant to Article XVI; and
(ii) execute, swear to, acknowledge, deliver, file and record
all
ballots,
consents, approvals, waivers, certificates, documents and other
instruments necessary or appropriate, in the sole discretion of
the
Partnership Policy Committee or the Liquidator, to make, evidence,
give,
confirm or
ratify any vote, consent, approval, agreement or other action
that is
made or given by the Partners hereunder or is consistent with
the
terms of
this Agreement or is necessary or appropriate, in the sole
discretion
of the Partnership Policy Committee or the Liquidator, to
effectuate
the terms or intent of this Agreement; provided, that when
required
by Section 15.3 or any other provision of this Agreement that
establishes a percentage of the Limited Partners or of the
Limited
Partners
of any class or series required to take any action, the
Partnership Policy Committee or the Liquidator may exercise the
power of
attorney
made in this Section 1.4(a)(ii) only after the necessary vote,
consent or
approval of the Limited Partners or of the Limited Partners of
such class
or series, as applicable.
Nothing contained in this Section 1.4(a)
shall be construed as authorizing the
Partnership Policy Committee to amend this
Agreement except in accordance with
Article XV or as may be otherwise expressly
provided for in this Agreement.
2
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(b) The
foregoing power of attorney is hereby declared to be
irrevocable
and a power coupled with an interest, and
it shall survive and not be affected
by the subsequent death, incompetency,
disability, incapacity, dissolution,
bankruptcy or termination of any Limited
Partner or Assignee and the transfer of
all or any portion of such Limited
Partner's or Assignee's Partnership Interest
and shall extend to such Limited Partner's
or Assignee's heirs, successors,
assigns and personal representatives. Each
such Limited Partner or Assignee
hereby agrees to be bound by any
representation made by the Partnership Policy
Committee or the Liquidator acting in good
faith pursuant to such power of
attorney; and each such Limited Partner or
Assignee hereby waives any and all
defenses that may be available to contest,
negate or disaffirm the action of the
Partnership Policy Committee or the
Liquidator taken in good faith under such
power of attorney. Each Limited Partner or
Assignee shall execute and deliver to
the Partnership Policy Committee or the
Liquidator, within 15 days after receipt
of the Partnership Policy Committee's or
the Liquidator's request therefor, such
further designation, powers of attorney and
other instruments as the Partnership
Policy Committee or the Liquidator deems
necessary to effectuate this Agreement
and the purposes of the Partnership.
1.5 TERM.
The Partnership commenced upon the filing of the Certificate of
Limited Partnership in accordance with the
Delaware Act and shall continue in
existence until the close of Partnership
business on December 31, 2083, or until
the earlier termination of the Partnership
in accordance with the provisions of
Article XIV.
1.6
POSSIBLE RESTRICTIONS ON TRANSFER. Notwithstanding anything to
the
contrary contained in this Agreement, in
the event of (a) the enactment (or
imminent enactment) of any legislation, (b)
the publication of any temporary or
final regulation by the Treasury
Department, (c) any ruling by the Internal
Revenue Service or (d) any judicial
decision, that, in any such case, in the
Opinion of Counsel, would result in the
taxation of the Partnership, the
Intermediate Partnership or Northern Border
Pipeline as an association taxable
as a corporation or would otherwise result
in the Partnership, the Intermediate
Partnership or Northern Border Pipeline
being taxed as an entity for federal
income tax purposes, then, the Partnership
Policy Committee may impose such
restrictions on the transfer of Units or
Partnership Interests as may be
required, in the Opinion of Counsel, to
prevent the Partnership, the
Intermediate Partnership or Northern Border
Pipeline from being taxed as an
association taxable as a corporation or
otherwise as an entity for federal
income tax purposes, including, without
limitation, making such amendments to
this Agreement as the Partnership Policy
Committee in its sole discretion may
determine to be necessary or appropriate to
impose such restrictions, provided,
that any such amendment to this Agreement
that would result in the delisting or
suspension of trading of any class of Units
on any National Securities Exchange
on which such class of Units is then traded
must be approved by the holders of
at least two-thirds of the Outstanding
Units of such class (excluding the vote
in respect of Units held by the General
Partners and their Affiliates).
ARTICLE II
DEFINITIONS
The
following definitions shall be for all purposes, unless
otherwise
clearly indicated to the contrary, applied
to the terms used in this Agreement.
"ADDITIONAL LIMITED PARTNER" means a Person admitted to the
Partnership as a Limited Partner pursuant to Section 12.4 and who
is shown
as such on
the books and records of the Partnership.
3
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"ADJUSTED
CAPITAL ACCOUNT" means the Capital Account maintained for each
Partner as of the end of each fiscal year
of the Partnership, (a) increased by
any amounts that such Partner is obligated
to restore under the standards set by
Treasury Regulation Section 1.704-1
(b)(2)(ii)(c) (or is deemed obligated to
restore under Treasury Regulation Sections
1.704-2(g) and 1.704-2(i)(5)) and (b)
decreased by (i) the amount of all losses
and deductions that, as of the end of
such fiscal year, are reasonably expected
to be allocated to such Partner in
subsequent years under Sections 704(e)(2)
and 706(d) of the Code and Treasury
Regulation Section 1.751-1 (b)(2)(ii), and
(ii) the amount of all distributions
that, as of the end of such fiscal year,
are reasonably expected to be made to
such Partner in subsequent years in
accordance with the terms of this Agreement
or otherwise to the extent they exceed
offsetting increases to such Partner's
Capital Account that are reasonably
expected to occur during (or prior to) the
year in which such distributions are
reasonably expected to be made (other than
increases as a result of a minimum gain
chargeback pursuant to Section 5.1
(d)(i) or 5.1 (d)(ii)). The foregoing
definition of Adjusted Capital Account is
intended to comply with the provisions of
Treasury Regulation Section 1.704-1
(b)(2)(ii)(d) and shall be interpreted
consistently therewith. The "Adjusted
Capital Account" in respect of a Common
Unit, a Subordinated Unit or any other
specified interest in the Partnership shall
be the amount which such Adjusted
Capital Account would be if such Common
Unit, Subordinated Unit or other
interest in the Partnership was the only
interest in the Partnership held by a
Limited Partner.
"ADJUSTED
PROPERTY" means any property the Carrying Value of which has
been adjusted pursuant to Section 4.4(d)(i)
or 4.4(d)(ii). Once an Adjusted
Property is deemed distributed by, and
recontributed to, the Partnership for
federal income tax purposes upon a
termination thereof pursuant to Section 708
of the Code, such property shall thereafter
constitute a Contributed Property
until the Carrying Value of such property
is subsequently adjusted pursuant to
Section 4.4(d)(i) or 4.4(d)(ii).
"ADMINISTRATIVE SERVICES AGREEMENT" means that certain
Administrative
Services Agreement, dated the Closing Date,
among NBP Services Corporation, a
Delaware corporation, the Intermediate
Partnership and the Partnership.
"AFFILIATE" means, with respect to any Person, any other Person
that
directly or indirectly controls, is
controlled by or is under common control
with, the Person in question. As used
herein, the term "control" means the
possession, directly or indirectly, of the
power to direct or cause the
direction of the management and policies of
a Person, whether through ownership
of voting securities, by contract or
otherwise.
"AGREED
ALLOCATION" means any allocation, other than a Required
Allocation, of an item of income, gain,
loss or deduction pursuant to the
provisions of Section 5.1, including,
without limitation, a Curative Allocation
(if appropriate to the context in which the
term "Agreed Allocation" is used).
"AGREED
VALUE" of any Contributed Property means the fair market value
of
such property or other consideration at the
time of contribution as determined
by the Partnership Policy Committee using
such reasonable method of valuation as
it may adopt; provided, however, that the
Agreed Value of any property deemed
contributed to the Partnership for federal
income tax purposes upon termination
and reconstitution thereof pursuant to
Section 708 of the Code shall be
determined in accordance with Section
4.4(c)(i). Subject to Section 4.4(c)(i),
the Partnership Policy Committee shall, in
its sole discretion, use such method
as it deems reasonable and appropriate to
allocate the aggregate Agreed Value of
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Contributed Properties contributed to the
Partnership in a single or integrated
transaction among each separate property on
a basis proportional to the fair
market value of each Contributed
Property.
"AGREEMENT" means this
Amended and Restated Agreement of Limited
Partnership of Northern Border Partners,
L.P., as it may be amended,
supplemented or restated from time to
time.
"ARBITRATOR" has the meaning assigned to such term in Section
6.1(b)(iii)(A).
"ASSIGNEE"
means a Non-citizen Assignee or a Person to whom one or more
Units have been transferred in a manner
permitted under this Agreement and who
has executed and delivered a Transfer
Application as required by this Agreement,
but who has not become a Substituted
Limited Partner.
"AUDIT
COMMITTEE" means a committee consisting of two persons appointed
by
the Partnership Policy Committee who are
neither officers nor employees of any
General Partner or any of their
Affiliates.
"AUTHORIZED OFFICER"
means the Chief Executive Officer and the Chief
Financial and Accounting Officer and such
other officers as may be authorized
from time to time by the Partnership Policy
Committee to execute contracts,
certificates and other instruments on
behalf of the Partnership.
"AVAILABLE
CASH" means, with respect to any calendar quarter and without
duplication:
(a) the sum of:
(i) all cash receipts of the Partnership during such quarter
from all sources (including, without limitation, distributions
of
cash received from the Intermediate Partnership (other than any
such
distributions that constitute distributions received by the
Intermediate Partnership in respect of Northern Border
Termination
Capital Transactions) and cash proceeds from Interim Capital
Transactions, but excluding cash proceeds from Termination
Capital
Transactions), plus, in the case of the calendar quarter ending
December 31, 1993, the cash balance of the Partnership and the
Intermediate Partnership as of the close of business on the
Closing
Date; and
(ii) any reduction in a reserve with respect to such quarter
from the level of such reserve at the end of the prior quarter;
(b) less the sum of:
(i) all cash disbursements of the Partnership during such
quarter, including, without limitation, disbursements for
operating
expenses, taxes, if any, debt service (including, without
limitation, the payment of principal, premium and interest),
capital
expenditures and contributions, if any, to the Intermediate
Partnership (but excluding all cash distributions to Partners
and
any cash disbursements with respect to which, and to the extent
that, a reserve was established in a prior quarter); and
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(ii) any reserves established with respect to such quarter,
and any increase in reserves established with respect to prior
quarters, in such amounts as the Partnership Policy Committee
determines in its reasonable discretion to be necessary or
appropriate (x) to provide for the proper conduct of the business
of
the Partnership or the Intermediate Partnership, (y) to provide
funds for distributions with respect to Units in respect of any
one
or more of the next four calendar quarters or (z) because the
distribution of such amounts would be prohibited by applicable
law
or by any loan agreement, security agreement, mortgage, debt
instrument or other agreement or obligation to which the
Partnership
or the Intermediate Partnership is a party or by which it is
bound
or its assets are subject.
Notwithstanding the foregoing, "Available
Cash" with respect to any calendar
quarter (A) shall not include any cash
receipts or reductions in reserves or
take into account any disbursements made or
reserves established after the
Liquidation Date and (B) shall include any
distributions of cash (to the extent
such distributions are attributable to
transactions and operations during such
quarter) received by the Partnership from
the Intermediate Partnership after the
end of such quarter but on or before the
date on which the Partnership makes its
distribution of Available Cash in respect
of such quarter pursuant to Section
5.3. Taxes paid by the Partnership on
behalf of, or amounts withheld with
respect to, all or less than all of the
Partners shall not be considered cash
disbursements of the Partnership that
reduce Available Cash, but the payment or
withholding thereof shall be deemed to be a
distribution of Available Cash to
such Partners. Alternatively, in the
discretion of the Partnership Policy
Committee, such taxes (if pertaining to all
Partners) may be considered to be
cash disbursements of the Partnership which
reduce Available Cash, but the
payment or withholding thereof shall not be
deemed to be a distribution of
Available Cash to such Partners (and thus
shall not be considered for purposes
of determining whether the Partnership has
distributed an amount equal to the
Minimum Quarterly Distribution for the
applicable quarter).
"BOOK-TAX
DISPARITY" means with respect to any item of Contributed
Property or Adjusted Property, as of the
date of any determination, the
difference between the Carrying Value of
such Contributed Property or Adjusted
Property and the adjusted basis thereof for
federal income tax purposes as of
such date. A Partner's share of the
Partnership's Book-Tax Disparities in all of
its Contributed Property and Adjusted
Property will be reflected by the
difference between such Partner's Capital
Account balance as maintained pursuant
to Section 4.4 and the hypothetical balance
of such Partner's Capital Account
computed as if it had been maintained
strictly in accordance with federal income
tax accounting principles.
"BUSINESS
DAY" means Monday through Friday of each week, except that a
legal holiday recognized as such by the
government of the United States or the
states of New York or Texas shall not be
regarded as a Business Day.
"BUYOUT
PRICE" means, as of the date of determination, an amount equal
to
110% of the sum of (a) the fair market
value of the Combined Interest of the
affected General Partner as determined in
accordance with the second paragraph
of Section 13.3(a), and (b) the product of
(i) the number of Subordinated Units
owned by the affected General Partner and
(ii) the then Current Market Price of
a Common Unit.
"BUYOUT
EVENT" has the meaning assigned to such term in Section
11.7(c).
6
<PAGE>
"CAPITAL
ACCOUNT" means the capital account maintained for a Partner
pursuant to Section 4.4.
"CAPITAL
ADDITIONS AND IMPROVEMENTS" Means additions or improvements
(whether by acquisition or new
construction) to the Pipeline System (as same
existed on the Closing Date) or a newly
acquired or constructed pipeline system
(in each case, including, without
limitation, related facilities such as those
that increase the throughput, deliverable
capacity or storage capacity of the
Pipeline System from the throughput,
deliverable capacity or storage thereof
immediately prior to the making or
acquisition of such additions or
improvements), irrespective of whether such
additions or improvements serve the
same or different geographic markets than
are served by the Pipeline System
immediately prior to the making or
acquisition of such additions or
improvements.
"CAPITAL
CONTRIBUTION" means any cash, cash equivalents or the Net
Agreed
Value of Contributed Property that a
Partner contributes to the Partnership
pursuant to the Conveyance Agreement or
Sections 4.1, 4.2, 4.4(c)(i) or 13.3(c).
"CARRYING
VALUE" means (a) with respect to a Contributed Property, the
Agreed Value of such property reduced (but
not below zero) by all depreciation,
amortization and cost recovery deductions
charged to the Partners' and
Assignees' Capital Accounts in respect of
such Contributed Property, and (b)
with respect to any other Partnership
property, the adjusted basis of such
property for federal income tax purposes,
all as of the time of determination.
The Carrying Value of any property shall be
adjusted from time to time in
accordance with Sections 4.4(d)(i) and
4.4(d)(ii) and to reflect changes,
additions or other adjustments to the
Carrying Value for dispositions and
acquisitions of Partnership properties, as
deemed appropriate by the Partnership
Policy Committee.
"CASH FROM
INTERIM CAPITAL TRANSACTIONS" means, at any date, the sum of
such amounts of Available Cash as (i) are
deemed to be Cash from Interim Capital
Transactions pursuant to Section 5.3 and
(ii) constitute distributions received
by the Intermediate Partnership from
Northern Border Pipeline in respect of
Northern Border Interim Capital
Transactions.
"CASH FROM
OPERATIONS" means, at the close of any calendar quarter but
prior to the Liquidation Date, on a
cumulative basis and without duplication,
(a) the sum of all cash receipts of the Partnership and the
Intermediate
Partnership during the period since the Closing Date through
such date
(including, without limitation, (i) the cash balance of the
Partnership as of the close of business on the Closing Date, and
(ii) cash
distributions received by the Intermediate Partnership from
Northern
Border
Pipeline (other than any such distributions in respect of
Northern
Border
Interim Capital Transactions or Northern Border Termination
Capital
Transactions), but in each case excluding any cash proceeds from
any
Interim
Capital Transactions (except to the extent specified in Section
5.3) and
Termination Capital Transactions),
(b) less the sum of:
(i) all cash operating expenditures of the Partnership and the
Intermediate Partnership during such period, including, without
limitation, taxes, if any, and the Partnership's share of
capital
contributions made by the
7
<PAGE>
Intermediate Partnership to Northern Border Pipeline in respect
of
the Intermediate Partnership's share of similar expenditures of
Northern Border Pipeline,
(ii) all cash debt service payments of the Partnership and the
Intermediate Partnership during such period (other than payments
or
prepayments of principal and premium required by reason of loan
agreements (including, without limitation, covenants and
default
provisions therein) or by lenders, in each case in connection
with
sales or other dispositions of assets or made in connection
with
refinancings or refundings of indebtedness, provided, that any
payment or prepayment of principal, whether or not then due,
shall
be deemed, at the election and in the discretion of the
Partnership
Policy Committee, to be refunded or refinanced by any
indebtedness
incurred or to be incurred by the Partnership or the
Intermediate
Partnership simultaneously with or within 180 days prior to or
after
such payment or prepayment to the extent of the principal amount
of
such indebtedness so incurred) and the Partnership's share of
capital contributions made by the Intermediate Partnership to
Northern Border Pipeline in respect of the Intermediate
Partnership's share of any such payments made by Northern
Border
Pipeline,
(iii) all cash capital expenditures of the Partnership and the
Intermediate Partnership during such period, and the
Partnership's
share of any capital contributions made by the Intermediate
Partnership to Northern Border Pipeline in respect of the
Intermediate Partnership's share of any cash capital expenditures
of
Northern Border Pipeline during such period, including, without
limitation, cash capital expenditures made, or the
Partnership's
share of capital contributions to Northern Border Pipeline, in
respect of Maintenance Capital Expenditures, but excluding (A)
cash
capital expenditures made, or the Partnership's share of
capital
contributions to Northern Border Pipeline, in respect of
Capital
Additions and Improvements and (B) cash expenditures made in
payment
of transaction expenses relating to Interim Capital
Transactions,
(iv) an
amount equal to revenues, if any, collected by the
Intermediate Partnership (or by Northern Border Pipeline to the
extent same are distributed to the Intermediate Partnership) as
a
result of transportation rate increases that are subject to
possible
refund,
(v) any reserves outstanding as of such date that the
Partnership Policy Committee deems in its reasonable discretion
to
be necessary or appropriate to provide for the future cash
payment
of, or future capital contributions to Northern Border Pipeline
with
respect to, items of the type referred to in clauses (i)
through
(iv) of this sentence, and
(vi) any reserves that the Partnership Policy Committee deems
in its reasonable discretion to be necessary or appropriate to
provide funds for distributions with respect to Units in respect
of
any one or more of the next four calendar quarters,
all as determined on a consolidated basis
and after taking into account the
interest of each of the General Partners
therein attributable to their general
partner interest in the Intermediate
8
<PAGE>
Partnership. Where cash capital
expenditures, or capital contributions by the
Intermediate Partnership, are made in part
in respect of Capital Additions and
Improvements and in part for other
purposes, the Partnership Policy Committee's
good faith allocation thereof between the
portion made for Capital Additions and
Improvements and the portion made for other
purposes shall be conclusive.
"CAUSE"
means a court of competent jurisdiction has entered a final,
non-appealable judgment finding a General
Partner liable for actual fraud, gross
negligence or willful or wanton misconduct
in its capacity as general partner of
the Partnership.
"CERTIFICATE" means a certificate, substantially in the form of
Exhibit A
to this Agreement or in such other forms as
may be adopted by the Partnership
Policy Committee in its sole discretion,
issued by the Partnership evidencing
ownership of one or more Common Units, or a
certificate, in such form as may be
adopted by the Partnership Policy Committee
in its sole discretion, issued by
the Partnership evidencing ownership of one
or more other Units.
"CERTIFICATE OF LIMITED PARTNERSHIP" means the Certificate of
Limited
Partnership filed with the Secretary of
State of the State of Delaware as
referenced in Section 6.3, as such
Certificate of Limited Partnership may be
amended, supplemented or restated from time
to time.
"CITIZENSHIP CERTIFICATION" means a properly completed certificate
in such
form as may be specified by the Partnership
Policy Committee by which an
Assignee or a Limited Partner certifies
that he (and if he is a nominee holding
for the account of another Person, that to
the best of his knowledge such other
Person) is an Eligible Citizen.
"CLOSING
DATE" means the first date on which Common Units are sold by
Northern Plains and Pan Border to the
Underwriters pursuant to the provisions of
the Underwriting Agreement.
"CLOSING
PRICE" has the meaning assigned to such term in Section
17.1(a).
"CODE"
means the Internal Revenue Code of 1986, as amended and in
effect
from time to time, as interpreted by the
applicable regulations thereunder. Any
reference herein to a specific section or
sections of the Code shall be deemed
to include a reference to any corresponding
provision of future law.
"COMBINED
INTEREST" has the meaning assigned to such term in Section
13.3(a).
"COMMISSION" means the Securities and Exchange Commission.
"COMMON
UNIT" means a Unit representing a fractional part of the
Partnership Interests of all Limited
Partners and Assignees and having the
rights and obligations specified with
respect to Common Units in this Agreement.
"COMMON
UNIT ARREARAGE" means, with respect to any Common Unit,
whenever
issued, and as to any calendar quarter
within the Subordination Period, the
excess, if any, of (a) the Minimum
Quarterly Distribution with respect to such
Common Unit over (b) the sum of all
Available Cash distributed with respect to
such Common Unit in respect of such quarter
pursuant to Section 5.4(a).
9
<PAGE>
"CONTRIBUTED PROPERTY" means each property or other asset, in such
form as
may be permitted by the Delaware Act, but
excluding cash, contributed to the
Partnership (or deemed contributed to the
Partnership on termination and
reconstitution thereof pursuant to Section
708 of the Code). Once the Carrying
Value of a Contributed Property is adjusted
pursuant to Section 4.4(d), such
property shall no longer constitute a
Contributed Property, but shall be deemed
an Adjusted Property.
"CONVEYANCE AGREEMENT" means the Conveyance, Contribution and
Assumption
Agreement dated as of the Closing Date,
among the Partnership, the Intermediate
Partnership, Northern Plains, Pan Border
and Northwest Border.
"CREDIT
AGREEMENT" means the Credit Agreement dated as of October 1,
1993,
among the Intermediate Partnership, as
Borrower, Northern Plains, Pan Border and
Northwest Border, as Lenders, and NB
Services Corporation, as agent for the
Lenders.
"CUMULATIVE COMMON UNIT ARREARAGE" means, with respect to any
Common Unit,
whenever issued, and as of the end of any
calendar quarter, the excess, if any,
of (a) the sum resulting from adding
together the Common Unit Arrearage as to
such Common Unit for each of the quarters
within the Subordination Period ending
on or before the last day of such quarter
over (b) the sum of any distributions
theretofore made pursuant to Section 5.4(b)
with respect to such Common Unit
(including any distributions to be made in
respect of the last of such
quarters).
"CURATIVE
ALLOCATION" means any allocation of an item of income, gain,
deduction, loss or credit pursuant to the
provisions of Section 5.1(d)(xi).
"CURRENT
MARKET PRICE" has the meaning assigned to such term in Section
17.1(a).
"DELAWARE
ACT" means the Delaware Revised Uniform Limited Partnership
Act,
6 Del C. Section 17-101, et seq., as
amended, supplemented or restated from
time to time, and any successor to such
statute.
"DEPARTING
PARTNER" means a General Partner with respect to which an Event
of Withdrawal of the type described in
Section 13.1 has occurred.
"ECONOMIC
RISK OF LOSS" has the meaning set forth in Treasury Regulation
Section 1.752-2(a).
"ELIGIBLE
CITIZEN" means a Person qualified to own interests in real
property in jurisdictions in which the
Partnership, the Intermediate Partnership
or Northern Border Pipeline does business
or proposes to do business from time
to time, and whose status as a Limited
Partner or Assignee does not or would not
subject the Partnership, the Intermediate
Partnership or Northern Border
Pipeline to a substantial risk of
cancellation or forfeiture of any of its
properties or any interest therein.
"ENRON"
means Enron Corp., a Delaware corporation.
"EVENT OF
WITHDRAWAL" has the meaning assigned to such term in Section
13.1(a).
10
<PAGE>
"FIRST
LIQUIDATION TARGET AMOUNT" has the meaning assigned to such term
in
Section 5.1(c)(i)(D).
"FIRST
TARGET DISTRIBUTION" means $0.605 per Unit (or, with respect to
the
period commencing on the Closing Date and
ending on December 31,1993, the
product of $0.605 multiplied by a fraction
of which the numerator is the number
of days in such period and of which the
denominator is 92), subject to
adjustment in accordance with Sections 5.6
and 9.6.
"GENERAL
PARTNERS" means Northern Plains, Pan Border and Northwest
Border,
as the initial general partners of the
Partnership, and any Person or Persons
that either (i) acquires the general
partner interest of such Person in the
Partnership pursuant to and in accordance
with the terms of Section 11.2 or (ii)
is approved as a successor General Partner
pursuant to Section 13.1 or 13.2 and,
in either case, is admitted to the
Partnership as a general partner in
accordance with the terms of Section
12.3.
"GENERAL
PARTNER PERCENTAGE INTEREST" means (a) as to Northern Plains
and
its permitted successors and assigns,
0.50%, (b) as to Pan Border and its
permitted successors and assigns, 0.325%,
and (c) as to Northwest Border and its
permitted successors and assigns,
0.175%.
"GROSS
GENERAL PARTNER PERCENTAGE INTEREST" means, with respect to a
Departing Partner, an amount equal to the
sum of (a) the product of such
Departing Partner's General Partner
Percentage Interest (expressed as a decimal)
and .9899 and (b) such Departing Partner's
general partner percentage interest
in the Intermediate Partnership. By way of
example, if Northern Plains were the
Departing Partner, its Gross General
Partner Percentage Interest would be equal
to .01 ((.005 x .9899) + .0050505).
"GROUP"
means a "group" of Persons as defined in Section 13(d)(3) of
the
Securities Exchange Act of 1934, as
amended, and the rules and regulations of
the Commission promulgated thereunder.
"HYPOTHETICAL EQUITY VALUE" means, as of the date of determination,
an
amount equal to the product obtained from
the following formula:
1.0101 x [TCUO] x [1/PCU] x CMP
where such symbols have the following
meanings as of the date of determination:
(a) "TCUO" means the total number of Common
Units Outstanding, (b) "PCU" means
the product, expressed as a decimal, of (i)
the total number of Common Units
Outstanding divided by the total number of
Units Outstanding and (ii) .9899 and
(c) CMP means the Current Market Price as
of such date (as such term is defined
in Section 17.1 (a)). By way of example, if
the Current Market Price is $22.50
and the Overallotment Option is not
exercised, then the Hypothetical Equity
Value is equal to $601,529,396.91 (1.0101 x
17,200,000 x
(1/(17,200,000/26,200,000 X .9899)) X
$22.50.
"INCENTIVE
DISTRIBUTION" means any amount of cash distributed to the
General Partners, in their capacity as
general partners of the Partnership,
pursuant to Sections 5.4(e), 5.4(f) or
5.4(g) that exceeds that amount equal to
1% of the aggregate amount of cash then
being distributed pursuant to such
provisions.
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<PAGE>
"INDEMNIFIED PERSONS" has the meaning assigned to such term in
Section
6.14(h).
"INDEMNITEE" means any General Partner, any member of the
Partnership
Policy Committee, any Departing Partner,
any Person who is or was an Affiliate
of any General Partner or any Departing
Partner, any Person who is or was an
officer, director, employee, partner, agent
or trustee of any General Partner,
the Partnership or any Departing Partner or
any such Affiliate, or any Person
who is or was serving at the request of any
General Partner, the Partnership
Policy Committee or any Departing Partner
or any such Affiliate as a director,
officer, employee, partner, agent or
trustee of another Person.
"INDEMNITY
AGREEMENT" means the Indemnity Agreement dated as of September
23, 1993 among Northern Plains, Pan Border
and Northwest Border.
"INITIAL
COMMON UNITS" means any Common Units received by Northwest
Border
on the Closing Date pursuant to Section 4.1
or in connection with the exercise
by the Underwriters of the Overallotment
Option pursuant to Section 5.7.
"INITIAL
LIMITED PARTNERS" means the General Partners (with respect to
the
Common Units and Subordinated Units
received by them pursuant to Section 4.1)
and the Underwriters, in each case upon
being admitted to the Partnership in
accordance with Section 12.1.
"INITIAL
OFFERING" means the initial offering and sale of Common Units
to
the public, as described in the
Registration Statement.
"INITIAL
UNIT PRICE" means the initial price per Common Unit at which
the
Underwriters offered the Common Units to
the public for sale as set forth on the
cover page of the prospectus first issued
at or after the time the Registration
Statement first became effective and, with
respect to any other class or series
of Units, the price per unit at which such
class or series of Units is initially
sold by the Partnership, as determined by
the Partnership Policy Committee, in
each case adjusted as the Partnership
Policy Committee determines to be
appropriate to give effect to any
distribution, subdivision or combination of
Units.
"INTERIM
CAPITAL TRANSACTIONS" means (a) borrowings, refinancings or
refundings of indebtedness and sales of
debt securities (other than for working
capital purposes and other than for items
purchased on open account in the
ordinary course of business) by the
Partnership or the Intermediate Partnership,
(b) sales of equity interests (other than
sales of Common Units by the
Underwriters pursuant to the exercise of
the Overallotment Option) by the
Partnership or the Intermediate Partnership
and (c) sales or other voluntary or
involuntary dispositions of any assets of
the Partnership or the Intermediate
Partnership (other than (x) sales or other
dispositions of inventory in the
ordinary course of business, (y) sales or
other dispositions of other current
assets including, without limitation,
receivables and accounts and (z) sales or
other dispositions of assets as a part of
normal retirements or replacements),
in each case prior to the commencement of
the dissolution and liquidation of the
Partnership.
"INTERMEDIATE PARTNERSHIP" means Northern Border Intermediate
Limited
Partnership, a Delaware limited partnership
continued pursuant to the
Intermediate Partnership Agreement.
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<PAGE>
"INTERMEDIATE PARTNERSHIP AGREEMENT" means the Amended and
Restated
Agreement of Limited Partnership of
Northern Border Intermediate Limited
Partnership, as it may be amended,
supplemented or restated from time to time.
"ISSUE
PRICE" means the price at which a Unit is purchased from the
Partnership, after taking into account any
sales commission or underwriting
discount charged to the Partnership.
"LIMITED
PARTNER" means, unless the context otherwise requires, each
Substituted Limited Partner, each Initial
Limited Partner, each Additional
Limited Partner and any Departing Partner
upon the change of its status from
General Partner to Limited Partner pursuant
to Section 13.3, subject to the
provisions of Section 5.7; and solely for
purposes of Articles IV, V and VI and
Sections 14.3 and 14.4, an Assignee.
"LIQUIDATION DATE" means (a) in the case of an event giving rise to
the
dissolution of the Partnership of the type
described in clauses (a) and (b) of
the first sentence of Section 14.2, the
date on which the applicable time period
during which the holders of Outstanding
Units have the right to elect to
reconstitute the Partnership and continue
its business has expired without such
an election being made, and (b) in the case
of any other event giving rise to
the dissolution of the Partnership, the
date on which such event occurs.
"LIQUIDATOR" means the Partnership Policy Committee or other
Person
approved pursuant to Section 14.3 who
performs the functions described therein.
"MAINTENANCE CAPITAL EXPENDITURES" means cash capital
expenditures,
whether made by the Partnership, the
Intermediate Partnership or Northern Border
Pipeline, made to maintain, up to the level
thereof that existed on the Closing
Date, the throughput, deliverable capacity
or storage capacity (assuming normal
operating conditions, including, without
limitation, down-time and maintenance)
of the assets of the Partnership, the
Intermediate Partnership and Northern
Border Pipeline, taken as a whole, as such
assets existed on the Closing Date
and shall, therefore, not include cash
capital expenditures or capital
contributions to Northern Border Pipeline
made in respect of Capital Additions
and Improvements. Where cash capital
expenditures are made in part to effectuate
the capacity maintenance level referred to
in the immediately preceding sentence
and in part for other purposes, the
Partnership Policy Committee's good faith
allocation thereof between the portion used
to maintain such capacity level and
the portion used for other purposes shall
be conclusive.
"MERGER
AGREEMENT" has the meaning assigned to such term in Section
16.1.
"MINIMUM
QUARTERLY DISTRIBUTION" means $0.55 per Unit per calendar
quarter
(or, with respect to the period commencing
on the Closing Date and ending on
December 31, 1993, the product of $0.55
multiplied by a fraction of which the
numerator is the number of days in such
period and of which the denominator is
92), subject to adjustment in accordance
with Sections 5.6 and 9.6.
"NATIONAL
SECURITIES EXCHANGE" means an exchange registered with the
Securities and Exchange Commission under
Section 6(a) of the Securities Exchange
Act of 1934, as amended, supplemented or
restated from time to time, and any
successor to such statute.
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<PAGE>
"NET AGREED VALUE" means, (a) in the case of any Contributed
Property,
the Agreed Value of such property reduced by any liabilities
either
assumed by the Partnership upon such contribution or to which
such
property
is subject when contributed, and (b) in the case of any
property
distributed to a Partner or Assignee by the Partnership, the
Partnership's
Carrying Value
of such property (as adjusted pursuant to Section
4.4(d)(ii)) at the time such property is distributed, reduced by
any
indebtedness either assumed by such Partner or Assignee upon
such
distribution or to which such property is subject at the time
of
distribution, in either case, as determined under Section 752 of
the Code.
"NET INCOME" means, for any taxable period, the excess, if any,
of
the
Partnership's items of income and gain (other than those items
attributable to dispositions constituting Termination Capital
Transactions) for such taxable period over the Partnership's items
of loss
and
deduction (other than those items attributable to dispositions
constituting Termination Capital Transactions) for such taxable
period.
The items
included in the calculation of Net Income shall be determined
in
accordance
with Section 4.4(b) and shall not include any items specially
allocated
under Section 5.1 (d). Once an item of income, gain, loss or
deduction
that has been included in the initial computation of Net Income
is
subjected to a Required Allocation or a Curative Allocation, Net
Income
or Net
Loss, whichever the case may be, shall be recomputed without
regard
to such
item.
"NET LOSS" means, for any taxable period, the excess, if any, of
the
Partnership's items of loss and deduction (other than those
items
attributable to dispositions constituting Termination Capital
Transactions) for such taxable period over the Partnership's items
of
income and
gain (other than those items attributable to dispositions
constituting Termination Capital Transactions) for such taxable
period.
The items
included in the calculation of Net Loss shall be determined in
accordance
with Section 4.4(b) and shall not include any items specially
allocated
under Section 5.1(d). Once an item of income, gain, loss or
deduction
that has been included in the initial computation of Net Loss
is
subjected
to a Required Allocation or a Curative Allocation, Net Income,
or Net
Loss, whichever the case may be, shall be recomputed without
regard
to such
item.
"NET TERMINATION GAIN" means, for any taxable period, the sum,
if
positive,
of all items of income, gain, loss or deduction recognized by
the
Partnership (including, without limitation, such amounts
recognized
through
the Intermediate Partnership) from Termination Capital
Transactions occurring in such taxable period. The items included
in the
determination of Net Termination Gain shall be determined in
accordance
with
Section 4.4(b) and shall not include any items of income, gain
or
loss
specially allocated under Section 5.1 (d). Once an item of
income,
gain or
loss that has been included in the initial computation of Net
Termination Gain is subjected to a Required Allocation or a
Curative
Allocation, Net Termination Gain or Net Termination Loss, whichever
the
case may
be, shall be recomputed without regard to such item.
"NET TERMINATION LOSS" means, for any taxable period, the sum,
if
negative,
of all items of income, gain, loss or deduction recognized by
the
Partnership (including, without limitation, such amounts
recognized
through
the Intermediate Partnership) from Termination Capital
Transactions occurring in such taxable period. The items included
in the
determination of Net Termination Loss shall be determined in
accordance
with
Section 4.4(b) and shall not include any items of income, gain
or
loss
specially allocated under Section 5.1 (d). Once an item of gain
or
loss that
has been included in the initial computation of Net Termination
Loss is
subjected to a Required Allocation or a Curative Allocation,
Net
Termination
14
<PAGE>
Gain or
Net Termination Loss, whichever the case may be, shall be
recomputed
without regard to such item.
"NON-CITIZEN ASSIGNEE" means a Person who the Partnership
Policy
Committee
has determined in its sole discretion does not constitute an
Eligible
Citizen and as to whose Partnership Interest the Partnership
Policy
Committee has become the Substituted Limited Partner, pursuant
to
Section
11.5.
"NONRECOURSE BUILT-IN GAIN" means with respect to any
Contributed
Properties
or Adjusted Properties that are subject to a mortgage or pledge
securing a
Nonrecourse Liability, the amount of any taxable gain that
would be
allocated to the Partners pursuant to Sections 5.2(b)(i)(A),
5.2(b)(ii)(A) or 5.2(b)(iv) if such properties were disposed of in
a
taxable transaction in full
satisfaction of such liabilities and for no
other
consideration.
"NONRECOURSE DEDUCTIONS" means any and all items of loss,
deduction
or
expenditures (described in Section 705(a)(2)(B) of the Code) that,
in
accordance
with the principles of Treasury Regulation Section 1.704-2(b),
are
attributable to a Nonrecourse Liability.
"NONRECOURSE LIABILITY" has the meaning set forth in Treasury
Regulation
Section 1.752-1(a)(2).
"NORTHERN BORDER INTERIM CAPITAL TRANSACTIONS" means any
transaction
of the
type described in the definition of "Interim Capital
Transactions"
that is
undertaken by Northern Border Pipeline.
"NORTHERN BORDER PIPELINE" means Northern Border Pipeline Company,
a
Texas
general partnership among Northern Plains, Pan Border,
Northwest
Border,
TransCanada Border PipeLine Ltd., a Nevada corporation, and
TransCan
Northern Ltd., a Delaware corporation.
"NORTHERN BORDER PIPELINE PARTNERSHIP AGREEMENT" means that
certain
General
Partnership Agreement of Northern Border Pipeline Company dated
effective
as of March 9, 1978, among Northern Plains, Pan Border,
Northwest
Border, TransCanada Border PipeLine Ltd. and TransCan Northern
Ltd., as
amended and supplemented.
"NORTHERN BORDER TERMINATION CAPITAL TRANSACTIONS" means any
sale,
transfer
or other disposition of property of Northern Border Pipeline
occurring
upon or incident to the liquidation and winding up of Northern
Border
Pipeline.
"NORTHERN PLAINS" means Northern Plains Natural Gas Company, a
Delaware
corporation.
"NORTHWEST BORDER" means Northwest Border Pipeline Company, a
Delaware
corporation.
"NOTICE OF ELECTION TO PURCHASE" has the meaning assigned to
such
term in
Section 17.1(b).
15
<PAGE>
"OPINION OF COUNSEL" means a written opinion of counsel (who may
be
regular
counsel to any of the General Partners, their Affiliates or the
Partnership) acceptable to the Partnership Policy Committee.
"ORGANIZATIONAL LIMITED PARTNER" means Northwest Border, in its
capacity
as the organizational limited partner of the Partnership
pursuant
to this
Agreement, it being recognized that Northern Plains was such
organizational limited partner at the time of the original
Agreement of
Limited
Partnership of Northern Border Partners, L.P. but previously
has
transferred its rights in such capacity to Northwest Border.
"OUTSTANDING" means, with respect to the Units or other
Partnership
Securities, all Units or other Partnership Securities that are
issued by
the
Partnership and reflected as outstanding on the Partnership's
books
and
records as of the date of determination; provided that, if at any
time
any Person
or Group (other than the General Partners and their Affiliates)
owns beneficially 20% or
more of all Common Units, such Common Units so
owned
shall not be voted on any matter and shall not be considered to
be
Outstanding when sending notices of a meeting of Limited Partners
(unless
otherwise
required by law), calculating required votes, determining the
presence
of a quorum or for other similar purposes under this Agreement,
except
that such Common Units shall be considered to be Outstanding
for
purposes
of Section 13.1(b)(iv) (such Common Units shall not, however,
be
treated as
a separate class of Partnership Securities for purposes of this
Agreement).
"OVERALLOTMENT OPTION" means the overallotment option granted to
the
Underwriters pursuant to the Underwriting Agreement.
"PAN BORDER" means Pan Border Gas Company, a Delaware
corporation.
"PANHANDLE" means Panhandle Eastern Corporation, a Delaware
corporation.
"PARTNER NONRECOURSE DEBT" has the meaning set forth in
Treasury
Regulation
Section 1.704-2(b)(4).
"PARTNER NONRECOURSE DEBT MINIMUM GAIN" has the meaning set forth
in
Treasury
Regulation Section 1.704-2(i)(2).
"PARTNER NONRECOURSE DEDUCTIONS" means any and all items of
loss,
deduction
or expenditure (including, without limitation, any expenditure
described
in Section 705(a)(2)(B) of the Code) that, in accordance with
the
principles of Treasury Regulation Section 1.704-2(i), are
attributable
to a Partner Nonrecourse
Debt.
"PARTNERS" means the General Partners and the Limited Partners.
"PARTNERSHIP" means the limited partnership heretofore formed
and
continued
pursuant to this Agreement.
"PARTNERSHIP INTEREST" means an interest in the Partnership,
which
shall
include general partner interests, Common Units, Subordinated
Units
or other
Partnership Securities, or a combination thereof or interest
therein,
as the case may be.
"PARTNERSHIP MINIMUM GAIN" means that amount determined in
accordance
with the principles of Treasury Regulation Section 1.704-2(d).
16
<PAGE>
"PARTNERSHIP POLICY COMMITTEE" has the meaning assigned to such
term
in Section
6.1.
"PARTNERSHIP SECURITIES" has the meaning assigned to such term
in
Section
4.2(a).
"PER UNIT CAPITAL AMOUNT" means, as of any date of
determination,
the
Capital Account, stated on a per Unit basis, underlying any Unit
held
by a
Person other than a General Partner or any Affiliate of such
General
Partner
who holds Units.
"PERCENTAGE INTEREST" means as of the date of such determination
(a)
as to a
General Partner, its General Partner Percentage Interest, (b)
as
to any
Limited Partner or Assignee holding Units, the product of (i)
99%
multiplied
by (ii) the quotient of the number of Units held by such
Limited
Partner or Assignee divided by the total number of all Units
then
Outstanding; provided, however, that following any issuance of
additional
Partnership Securities by the Partnership in accordance with
Section 4.2,
proper
adjustment shall be made to the Percentage Interest represented
by
each Unit
to reflect such issuance, and (c) as to the holders of
additional
Partnership Securities issued by the Partnership in accordance
with
Section 4.2, the percentage established as a part of such
issuance.
"PERSON" means an individual or a corporation, partnership,
trust,
unincorporated organization, association or other entity.
"PIPELINE SYSTEM" means the natural gas pipeline assets and
related
facilities
that are owned by Northern Border Pipeline.
"PURCHASE DATE" means the date determined by the General Partners
as
the date
for purchase of all Outstanding Units (other than Units owned
by
the
General Partners and their Affiliates) pursuant to Article
XVII.
"RECAPTURE INCOME" means any gain recognized by the Partnership
(computed
without regard to any adjustment required by Sections 734 or
743
of the
Code) upon the disposition of any property or asset of the
Partnership, which gain is characterized as ordinary income because
it
represents
the recapture of deductions previously taken with respect to
such
property or asset.
"RECORD DATE" means the date established by the Partnership
Policy
Committee
for determining (a) the identity of the Record Holder entitled
to notice
of, or to vote at, any meeting of Limited Partners or entitled
to vote by
ballot or give approval of Partnership action in writing
without a
meeting or entitled to exercise rights in respect of any lawful
action of
Limited Partners or (b) the identity of Record Holders entitled
to receive
any report or distribution.
"RECORD HOLDER" means the Person in whose name a Unit is
registered
on the books of the
Transfer Agent as of the opening of business on a
particular
Business Day.
"REDEEMABLE UNITS" means any Units for which a redemption notice
has
been
given, and has not been withdrawn, under Section 11.6.
"REGISTRATION STATEMENT" means the Registration Statement on
Form
S-1
(Registration No. 33-66158), as it has been or as it may be amended
or
supplemented from
17
<PAGE>
time to
time, filed by the Partnership with the Securities and Exchange
Commission
under the Securities Act to register the offering and sale of
the Common
Units in the Initial Offering.
"REQUIRED ALLOCATIONS" means any allocation (or limitation
imposed
on any
allocation) of an item of income, gain, deduction or loss
pursuant
to (a)
Section 5.1 (b)(ii) or (b) Sections 5.1(d)(i), 5.1(d)(ii),
5.1(d)(iv), 5.1(d)(v), 5.1(d)(vi), 5.1(d)(vii) and 5.1(d)(ix),
such
allocations (or limitations thereon) being directly or indirectly
required
by the
Treasury regulations promulgated under Section 704(b) of the
Code.
"RESIDUAL GAIN" OR "RESIDUAL LOSS" means any item of gain or
loss,
as the
case may be, of the Partnership recognized for federal income
tax
purposes
resulting from a sale, exchange or other disposition of a
Contributed Property or Adjusted Property, to the extent such item
of gain
or loss is
not allocated pursuant to Sections 5.2(b)(i)(A) or
5.2(b)(ii)(A), respectively, to eliminate Book-Tax Disparities.
"SECOND LIQUIDATION TARGET AMOUNT" has the meaning assigned to
such
term in
Section 5.1 (c)(i)(E).
"SECOND TARGET DISTRIBUTION" means $0.715 per Unit (or, with
respect
to the
period commencing on the Closing Date and ending on December
31,
1993, the
product of $0.715 multiplied by a fraction of which the
numerator
is equal to the number of days in such period and of which the
denominator is 92), subject to adjustment in accordance with
Sections 5.6
and
9.6.
"SECURITIES ACT" means the Securities Act of 1933, as amended,
supplemented or restated from time to time and any successor to
such
statute.
"SPECIAL APPROVAL" means approval by the Audit Committee.
"SUBORDINATED UNIT" means a Unit representing a fractional part
of
the
Partnership Interests of all Limited Partners and Assignees and
having
the rights
and obligations specified with respect to Subordinated Units in
this
Agreement.
"SUBORDINATION PERIOD" means the period commencing on the
Closing
Date and
ending on the first to occur of any one of the following dates:
(a) the date on which one or more of the General Partners is
removed as a general partner of the Partnership upon the
requisite
vote by Limited Partners under circumstances where Cause does
not
exist,
(b) the first day of any calendar quarter commencing on or
after January 1, 2004, provided that the Partnership has, with
respect to each of the 20 most recently completed calendar
quarters,
distributed an amount equal to or greater than the Minimum
Quarterly
Distribution for each Common Unit and Subordinated Unit
Outstanding
during such quarter (it being agreed that the Subordination
Period
will be deemed to have ended effective as of the first day of
any
such quarter despite the fact that the distribution with respect
to
the 20th consecutive quarter will have been made during such
quarter
as contemplated by Section 5.3(a)),
(c) the first day of any calendar quarter commencing on or
after January 1, 2004, provided that both of the following
tests
have been satisfied: (i) the
18
<PAGE>
aggregate amount of capital expenditures of the Partnership,
the
Intermediate Partnership and Northern Border Pipeline (in the
case
of Northern Border Pipeline, only to the extent such capital
expenditures are attributable to the Intermediate Partnership's
interest in Northern Border Pipeline) since the Closing Date
equals
or exceeds $248,000,000, and (ii) there are no Cumulative
Common
Unit Arrearages, and
(d) the first day of any calendar quarter that commences on or
after January 1, 1999, but ends prior to January 1, 2004,
provided
that both of the following tests have been satisfied: (i) the
aggregate amount of capital expenditures of the Partnership,
the
Intermediate Partnership and Northern Border Pipeline (in the
case
of Northern Border Pipeline, only to the extent such capital
expenditures are attributable to the Intermediate Partnership's
interest in Northern Border Pipeline) since the Closing Date
equals
or exceeds $248,000,000, and (ii) the Partnership has, with
respect
to each of the eight most recently completed calendar quarters,
distributed an amount equal to or greater than the Minimum
Quarterly
Distribution for each Common Unit and Subordinated Unit
Outstanding
during such quarter (it being agreed that the Subordination
Period
will be deemed to have ended effective as of the first day of
any
such quarter despite the fact that the distribution with respect
to
the eighth consecutive quarter will have been made during such
quarter as contemplated by Section 5.3(a)).
"SUBSTITUTED LIMITED PARTNER" means a Person who is admitted as
a
Limited
Partner to the Partnership pursuant to Section 12.2 in place of
and with
all the rights of a Limited Partner and who is shown as a
Limited
Partner on
the books and records of the Partnership.
"SURVIVING BUSINESS ENTITY" has the meaning assigned to such term
in
Section
16.2(b).
"TERMINATION CAPITAL TRANSACTIONS" means any sale, transfer or
other
disposition of property of the Partnership or the Intermediate
Partnership
occurring
upon or incident to the liquidation and winding up of the
Partnership and the Intermediate Partnership pursuant to Article
XIV.
"THIRD TARGET DISTRIBUTION" means $0.935 per Unit (or, with
respect
to the period
commencing on the Closing Date and ending on December 31,
1993, the
product of $0.935 multiplied by a fraction of which the
numerator
is equal to the number of days in such period and of which the
denominator is 92), subject to adjustment in accordance with
Sections 5.6
and
9.6.
"TRADING DAY" has the meaning assigned to such term in Section
17.1(a).
"TRANSFER AGENT" means First Chicago Trust Company of New York
or
such other
bank, trust company or other Person (including, without
limitation, any General Partner or one of its Affiliates) as shall
be
appointed
from time to time by the Partnership to act as registrar and
transfer
agent for the Units.
"TRANSFER APPLICATION" means an application and agreement for
transfer
of Units in the form set forth on the back of a Certificate or
in
a form
substantially to the same effect in a separate instrument.
19
<PAGE>
"UNDERWRITER" means each Person named as an underwriter in
Schedule
I to the
Underwriting Agreement who purchases Common Units pursuant
thereto.
"UNDERWRITING AGREEMENT" means the Underwriting Agreement dated
September 23,
1993, among the Underwriters, the Partnership, Northern
Plains,
Pan Border, the Intermediate Partnership, Panhandle, and Enron
providing
for the purchase of Common Units by such Underwriters.
"UNIT" means a Partnership Interest of a Limited Partner or
Assignee
in the
Partnership representing a fractional part of the Partnership
Interests
of all Limited Partners and Assignees and shall include,
without
limitation, Common Units and Subordinated Units; provided, that
each
Common
Unit at any time Outstanding shall represent the same
fractional
part of
the Partnership Interests of all Limited Partners and Assignees
holding
Common Units as each other Common Unit and each Subordinated
Unit
at any
time Outstanding shall represent the same fractional part of
the
Partnership Interests of all Limited Partners and Assignees
holding
Subordinated Units as each other Subordinated Unit.
"UNPAID MQD" has the meaning assigned to such term in Section
5.1(c)(i)(B).
"UNREALIZED GAIN" attributable to any item of Partnership
property
means, as
of any date of determination, the excess, if any, of (a) the
fair
market value of such property as of such date (as determined
under
Section
4.4(d)) over (b) the Carrying Value of such property as of such
date
(prior to any adjustment to be made pursuant to Section 4.4(d) as
of
such
date).
"UNREALIZED LOSS" attributable to any item of Partnership
property
means, as
of any date of determination, the excess, if any, of (a) the
Carrying
Value of such property as of such date (prior to any adjustment
to be made
pursuant to Section 4.4(d) as of such date) over (b) the fair
market
value of such property as of such date (as determined under
Section
4.4(d)).
"UNRECOVERED INITIAL UNIT PRICE" means, at any time, with respect
to
a class or
series of Units (other than Subordinated Units), the price per
Unit at
which such class or series of Units was initially offered to
the
public for
sale by the Underwriters in respect of such offering, as
determined
by the Partnership Policy Committee, less the sum of all
distributions theretofore made in respect of a Unit of such class
or
series
that was sold in the initial offering of Units of said class or
series
constituting Cash from Interim Capital Transactions and any
distributions of cash (or the Net Agreed Value of any distributions
in
kind) in
connection with the dissolution and liquidation of the
Partnership theretofore made in respect of a Unit of such class or
series
that was
sold in the initial offering of Units of such class or series,
adjusted
as the Partnership Policy Committee determines to be
appropriate
to give
effect to any distribution, subdivision or combination of
Units.
"UNRECOVERED SUBORDINATED UNIT CAPITAL" means, at any time,
with
respect to
a Subordinated Unit, prior to its conversion into a Common Unit
pursuant
to Section 5.7(b), the excess, if any, of (a) the Net Agreed
Value (at
the time of conveyance) of the undivided interest in the
Contributed Property conveyed to the Partnership pursuant to
Section 4.1
(a) in
exchange for such Subordinated Unit, over (b) any distributions
of
cash (or
the Net Agreed Value of any distributions in kind) in
connection
with the
dissolution and liquidation of the Partnership, adjusted as the
Partnership Policy Committee determines to be appropriate to give
effect
to any
distribution, subdivision or combination of Units.
20
<PAGE>
"WILLIAMS" means The Williams Companies, Inc., a Delaware
corporation.
"WITHDRAWAL OPINION OF COUNSEL" has the meaning assigned to
such
term in
Section 13.1(b).
ARTICLE III
PURPOSE
3.1
PURPOSE AND BUSINESS. The purpose and nature of the business to
be
conducted by the Partnership shall be (a)
to serve as a limited partner in the
Intermediate Partnership and, in connection
therewith, to exercise all of the
rights and powers conferred upon the
Partnership as a limited partner in the
Intermediate Partnership pursuant to the
Intermediate Partnership Agreement or
otherwise, (b) to engage directly in, or to
enter into or form any corporation,
partnership, joint venture, limited
liability company or other arrangement to
engage in, any business activity that the
Intermediate Partnership is permitted
to engage in by the Intermediate
Partnership Agreement and, in connection
therewith, to exercise all of the rights
and powers conferred upon the
Partnership pursuant to the agreements
relating to such business activity
(including, without limitation, all of the
rights and powers conferred upon the
Intermediate Partnership under the Northern
Border Pipeline Partnership
Agreement), (c) to engage directly in, or
to enter or form into any corporation,
partnership, joint venture, limited
liability company or other arrangement to
engage in, any business activity that is
approved by unanimous vote of the
Partnership Policy Committee and which
lawfully may be conducted by a limited
partnership organized pursuant to the
Delaware Act and, in connection therewith,
to exercise all of the rights and powers
conferred upon the Partnership pursuant
to the agreements relating to such business
activity, and (d) to do anything
necessary or appropriate to the foregoing,
including, without limitation, the
making of capital contributions or loans to
the Intermediate Partnership
(including, without limitation, those
contributions or loans that may be
required in connection with any business
activity that may be made available to
the Intermediate Partnership in connection
with its involvement in the
activities referred to in clauses (b) and
(c) of this sentence). The Partnership
Policy Committee has no obligation or duty
to the Partnership, the Limited
Partners or the Assignees to propose or
approve, and in its sole discretion may
decline to propose or approve, the conduct
by the Partnership of any business.
3.2
POWERS. The Partnership shall be empowered to do any and all acts
and
things necessary, appropriate, proper,
advisable, incidental to or convenient
for the furtherance and accomplishment of
the purposes and business described in
Section 3.1 and for the protection and
benefit of the Partnership.
ARTICLE IV
CAPITAL CONTRIBUTIONS
4.1
CONTRIBUTIONS BY THE GENERAL PARTNERS. On the Closing Date, the
General Partners shall, in the aggregate
and as set forth in the Conveyance
Agreement, contribute, transfer, convey,
assign and deliver to the Partnership,
as a Capital Contribution, Partnership
Interests (as defined in the Intermediate
Partnership Agreement) representing, in the
aggregate, a 98.9899% Percentage
Interest (as defined in the Intermediate
Partnership Agreement) in the
Intermediate Partnership, in exchange for
the continuation of each General
Partner's Partnership Interest as a general
partner in the Partnership, subject
to all of the rights, privileges and duties
of the General Partners under this
Agreement, and (a) in the case of Northern
Plains, 8,600,000 Common Units and
4,500,000 Subordinated Units, (b) in the
case of Pan Border, 5,590,000 Common
Units and 2,925,000
21
<PAGE>
Subordinated Units and (c) in the case of
Northwest Border, 3,010,000 Common
Units and 1,575,000 Subordinated Units.
4.2
ISSUANCES OF ADDITIONAL UNITS AND OTHER SECURITIES. (a) Subject
to
Section 4.2(c), the Partnership Policy
Committee is hereby authorized to cause
the Partnership to issue, in addition to
the Partnership Interests and Units
issued pursuant to Section 4.1, such
additional Units, or classes or series
thereof, or options, rights, warrants or
appreciation rights relating thereto,
or any other type of equity security that
the Partnership may lawfully issue,
any unsecured or secured debt obligations
of the Partnership convertible into
any class or series of equity securities of
the Partnership (collectively,
"PARTNERSHIP SECURITIES"),for any
Partnership purpose, at any time or from time
to time, to the Partners or to other
Persons for such consideration and on such
terms and conditions as shall be
established by the Partnership Policy Committee
in its sole discretion, all without the
approval of any Limited Partners. The
Partnership Policy Committee shall have
sole discretion, subject to the
guidelines set forth in this Section 4.2
and the requirements of the Delaware
Act, in determining the consideration and
terms and conditions with respect to
any future issuance of Partnership
Securities.
(b)
Additional Partnership Securities to be issued by the
Partnership
pursuant to this Section 4.2 shall be
issuable from time to time in one or more
classes, or one or more series of any of
such classes, with such designations,
preferences and relative, participating,
optional or other special rights,
powers and duties, including, without
limitation, rights, powers and duties
senior to existing classes and series of
Partnership Securities (except as
provided in Section 4.2(c)), all as shall
be fixed by the Partnership Policy
Committee in the exercise of its sole
discretion, subject to Delaware law and
Section 4.2(c), including, without
limitation, (i) the allocations of items of
Partnership income, gain, loss, deduction
and credit to each such class or
series of Partnership Securities; (ii) the
right of each such class or series of
Partnership Securities to share in
Partnership distributions; (iii) the rights
of each such class or series of Partnership
Securities upon dissolution and
liquidation of the Partnership; (iv)
whether such class or series of additional
Partnership Securities is redeemable by the
Partnership and, if so, the price at
which, and the terms and conditions upon
which, such class or series of
additional Partnership Securities may be
redeemed by the Partnership; (v)
whether such class or series of additional
Partnership Securities is issued with
the privilege of conversion and, if so, the
rate at which, and the terms and
conditions upon which, such class or series
of Partnership Securities may be
converted into any other class or series of
Partnership Securities or other
property; (vi) the terms and conditions
upon which each such class or series of
Partnership Securities will be issued,
evidenced by certificates and assigned or
transferred; and (vii) the right, if any,
of each such class or series of
Partnership Securities to vote on
Partnership matters, including, without
limitation, matters relating to the
relative rights, preferences and privileges
of each such class or series.
(c)
Notwithstanding the terms of Sections 4.2(a) and 4.2(b), the
issuance
by the Partnership of any Partnership
Securities pursuant to this Section 4.2
shall be subject to the following
restrictions and limitations:
(i) For a period of
180 days following the Closing Date, the
Partnership shall not issue additional Common Units or other
Partnership
Securities
having rights to distribution or in liquidation ranking on a
parity
with the Common Units; and
(ii) During the Subordination Period, the Partnership shall not
issue an
aggregate of more than 17,200,000 additional Common Units or an
equivalent
amount of other Units having rights to distributions or in
liquidation ranking on a parity with the Common Units, without the
prior
approval
of a majority of the Outstanding Common Units (excluding Common
Units held
by the General Partners and their Affiliates);
22
<PAGE>
(iii) From and after the Closing Date, the Partnership shall
not
issue
additional Partnership Securities having rights to distributions
or
in
liquidation ranking senior to the Common Units, without the
prior
approval
of a majority of the Outstanding Common Units (excluding,
during
the
Subordination Period, Common Units held by the General Partners
and
their
Affiliates); and
(iv) Upon the issuance of any Partnership Interests by the
Partnership or the making of any other Capital Contributions to
the
Partnership, the General Partners shall be required to make
additional
Capital
Contributions to the Partnership (each in the proportion of its
General
Partner Percentage Interest) such that the General Partners
shall
at all
times have a balance in their Capital Account with respect to
their
general
partner interests equal to, in the aggregate, 1% of the total
positive
Capital Account balances of all Partners.
(d) The
Partnership Policy Committee is hereby authorized and directed
to
take all actions that it deems necessary or
appropriate in connection with each
issuance of Units or other Partnership
Securities pursuant to Section 4.2(a) and
to amend this Agreement in any manner that
it deems necessary or appropriate to
provide for each such issuance, to admit
Additional Limited Partners in
connection therewith and to specify the
relative rights, powers and duties of
the holders of the Units or other
Partnership Securities being so issued.
(e) The
Partnership Policy Committee shall do all things necessary to
comply with the Delaware Act and is
authorized and directed to do all things it
deems to be necessary or advisable in
connection with any future issuance of
Partnership Securities, including, without
limitation, compliance with any
statute, rule, regulation or guideline of
any federal, state or other
governmental agency or any National
Securities Exchange on which the Units or
other Partnership Securities are listed for
trading.
4.3
LIMITED PREEMPTIVE RIGHTS. Except as provided in this Section 4.3,
no
Person shall have any preemptive,
preferential or other similar right with
respect to (a) additional Capital
Contributions; (b) issuance or sale of any
class or series of Units or other
Partnership Securities, whether unissued, held
in the treasury or hereafter created; (c)
issuance of any obligations, evidences
of indebtedness or other securities of the
Partnership convertible into or
exchangeable for, or carrying or
accompanied by any rights to receive, purchase
or subscribe to, any such Units or other
Partnership Securities; (d) issuance of
any right of subscription to or right to
receive, or any warrant or option for
the purchase of, any such Units or other
Partnership Securities; or (e) issuance
or sale of any other securities that may be
issued or sold by the Partnership.
Each General Partner shall have the right,
which it may from time to time assign
in whole or in part to any of its
Affiliates or to any other General Partner or
its Affiliates, to purchase Units or other
Partnership Securities from the
Partnership whenever, and on the same terms
that, the Partnership issues Units
or other Partnership Securities to Persons
other than the General Partners and
their Affiliates, to the extent necessary
to maintain the Percentage Interests
of such General Partner and its Affiliates
equal to that which existed
immediately prior to the issuance of such
Units or other Partnership Securities.
4.4
CAPITAL ACCOUNTS, (a) The Partnership shall maintain for each
Partner
(or a beneficial owner of Units held by a
nominee in any case in which the
nominee has furnished the identity of such
owner to the Partnership in
accordance with Section 6031 (c) of the
Code or any other method acceptable to
the Partnership Policy Committee in its
sole discretion) owning a Partnership
Interest a separate Capital Account with
respect to such Partnership Interest in
accordance with the rules of Treasury
Regulation Section 1.704-1(b)(2)(iv). Such
Capital Account shall be increased by (i)
the amount of all Capital
Contributions made to the Partnership with
respect to such Partnership Interest
pursuant to this Agreement and (ii) all
items of Partnership income and gain
(including, without
23
<PAGE>
limitation, income and gain exempt from
tax) computed in accordance with Section
4.4(b) and allocated with respect to such
Partnership Interest pursuant to
Section 5.1, and decreased by (x) the
amount of cash or Net Agreed Value of all
actual and deemed distributions of cash or
property made with respect to such
Partnership Interest pursuant to this
Agreement and (y) all items of Partnership
deduction and loss computed in accordance
with Section 4.4(b) and allocated with
respect to such Partnership Interest
pursuant to Section 5.1.
(b) For
purposes of computing the amount of any item of income, gain,
loss
or deduction to be reflected in the
Partners' Capital Accounts, the
determination, recognition and
classification of any such item shall be the same
as its determination, recognition and
classification for federal income tax
purposes (including, without limitation,
any method of depreciation, cost
recovery or amortization used for that
purpose), provided, that:
(i) Solely for purposes of this Section 4.4, the Partnership
shall
be treated
as owning directly its proportionate share (as determined by
the
Partnership Policy Committee based upon the provisions of the
Intermediate Partnership Agreement) of all property owned by
the
Intermediate Partnership and by Northern Border Pipeline.
(ii) All fees and other expenses incurred by the Partnership to
promote
the sale of (or to sell) a Partnership Interest that can
neither
be
deducted nor amortized under Section 709 of the Code, if any,
shall,
for
purposes of Capital Account maintenance, be treated as an item
of
deduction
at the time such fees and other expenses are incurred and shall
be allocated among the
Partners pursuant to Section 5.1.
(iii) Except as otherwise provided in Treasury Regulation
Section
1.704-1
(b)(2)(iv)(m), the computation of all items of income, gain,
loss
and
deduction shall be made without regard to any election under
Section
754 of the
Code which may be made by the Partnership and, as to those
items
described in Section 705(a)(1)(B) or 705(a)(2)(B) of the Code,
without
regard to the fact that such items are not includable in gross
income or
are neither currently deductible nor capitalized for federal
income tax
purposes.
(iv) Any income, gain or loss attributable to the taxable
disposition of any Partnership property shall be determined as if
the
adjusted
basis of such property as of such date of disposition were
equal
in amount
to the Partnership's Carrying Value with respect to such
property
as of such date.
(v) In accordance with the requirements of Section 704(b) of
the
Code, any
deductions for depreciation, cost recovery or amortization
attributable to any Contributed Property shall be determined as if
the
adjusted
basis of such property on the date it was acquired by the
Partnership were equal to the Agreed Value of such property. Upon
an
adjustment
pursuant to Section 4.4(d) to the Carrying Value of any
Partnership property subject to depreciation, cost recovery or
amortization, any further deductions for such depreciation, cost
recovery
or
amortization attributable to such property shall be determined (A)
as
if the
adjusted basis of such property were equal to the Carrying Value
of
such
property immediately following such adjustment and (B) using a
rate
of
depreciation, cost recovery or amortization derived from the
same
method and
useful life (or, if applicable, the remaining useful life) as
is applied
for federal income tax purposes; provided, however, that, if
the asset
has a zero adjusted basis for federal income tax purposes,
depreciation, cost recovery or amortization deductions shall be
determined
using any
reasonable method that the Partnership Policy Committee may
adopt.
24
<PAGE>
(vi) If the Partnership's adjusted basis in a depreciable or
cost
recovery
property is reduced for federal income tax purposes pursuant to
Section
48(q)(1) or 48(q)(3) of the Code, the amount of such reduction
shall,
solely for purposes hereof, be deemed to be an additional
depreciation or cost recovery deduction in the year such property
is
placed in
service and shall be allocated among the Partners pursuant to
Section
5.1. Any restoration of such basis pursuant to Section 48(q)(2)
of
the Code
shall, to the extent possible, be allocated in the same manner
to
the
Partners to whom such deemed deduction was allocated.
(c) (i)
Except as otherwise provided in Section 4.4(c)(ii), a
transferee
of a
Partnership Interest shall succeed to a pro rata portion of the
Capital
Account of the transferor relating to the Partnership Interest
so
transferred; provided, however, that, if the transfer causes a
termination
of the
Partnership under Section 708(b)(1)(B) of the Code, the
Partnership's properties shall be deemed to have been distributed
in
liquidation of the Partnership to the Partners (including any
transferee
of a
Partnership Interest that is a party to the transfer causing
such
termination) pursuant to Sections 14.3 and 14.4 and recontributed
by such
Partners
in reconstitution of the Partnership. Any such deemed
distribution shall be treated as an actual distribution for
purposes of
this
Section 4.4. In such event, the Carrying Values of the
Partnership
properties
shall be adjusted immediately prior to such deemed distribution
pursuant
to Section 4.4(d)(ii) and such Carrying Values shall then
constitute
the Agreed Values of such properties upon such deemed
contribution to the reconstituted Partnership. The Capital Accounts
of
such
reconstituted Partnership shall be maintained in accordance with
the
principles
of this Section 4.4.
(ii) Immediately prior to the conversion of a Subordinated Unit
into a
Common
Unit pursuant to Section 5.7(b) or the sale, exchange or other
disposition of a Subordinated Unit by a holder thereof, the
Capital
Account
maintained for such Person with respect to its Subordinated
Units
will (A)
first, be allocated to the Subordinated Units to be transferred
in an
amount equal to the product of (x) the number of such
Subordinated
Units to
be transferred and (y) the Per Unit Capital Amount for a Common
Unit, and
(B) second, any remaining balance in such Capital Account will
be
retained by the transferor, regardless of whether it has retained
any
Subordinated Units. Following any such allocation, the
transferor's
Capital
Account, if any, maintained with respect to the retained
Subordinated Units, if any, will have a balance equal to the
amount
allocated
under clause (B) hereinabove, and the transferee's Capital
Account
established with respect to the transferred Subordinated Units
will have
a balance equal to the amount allocated under clause (A)
hereinabove.
(d) (i)
Consistent with the provisions of Treasury Regulation Section
1.704-1(b)(2)(iv)(f), on an issuance of additional Units for cash
or
Contributed Property or the conversion of a General Partner's
Partnership
Interest
to Common Units pursuant to Section 13.3(b), the Capital
Account
of all
Partners and the Carrying Value of each Partnership property
immediately prior to such issuance shall be adjusted upward or
downward to
reflect
any Unrealized Gain or Unrealized Loss attributable to such
Partnership property, as if such Unrealized Gain or Unrealized Loss
had
been recognized
on an actual sale of each such property immediately prior
to such
issuance and had been allocated to the Partners at such time
pursuant
to Section 5.1. In determining such Unrealized Gain or
Unrealized
Loss, the
aggregate cash amount and fair market value of all Partnership
assets
(including, without limitation, cash or cash equivalents)
immediately prior to the issuance of additional Units shall be
determined
by the
Partnership Policy Committee using such reasonable method of
valuation
as it may adopt; provided, however, the Partnership Policy
Committee,
in arriving at such valuation, must take fully into account the
fair
market value of the Partnership
25
<PAGE>
Interests
of all Partners at such time. The Partnership Policy Committee
shall
allocate such aggregate value among the assets of the
Partnership
(in such
manner as it determines in its sole discretion to be
reasonable)
to arrive
at a fair market value for individual properties.
(ii) In accordance with Treasury Regulation Section
1.704-1(b)(2)(iv)(f), immediately prior to any actual or deemed
distribution to a Partner of any Partnership property (other than
a
distribution of cash that is not in redemption or retirement of
a
Partnership Interest), the Capital Accounts of all Partners and
the
Carrying
Value of such Partnership property shall be adjusted upward or
downward
to reflect any Unrealized Gain or Unrealized Loss attributable
to
such
Partnership property, as if such Unrealized Gain or Unrealized
Loss
had been
recognized in a sale of such property immediately prior to such
distribution for an amount equal to its fair market value, and had
been
allocated
to the Partners, at such time, pursuant to Section 5.1. Any
Unrealized
Gain or Unrealized Loss attributable to such property shall be
allocated
in the same manner as Net Termination Gain or Net Termination
Loss
pursuant to Section 5.1 (c); provided, however, that, in making
any
such
allocation, Net Termination Gain or Net Termination Loss
actually
realized
shall be allocated first. In determining such Unrealized Gain
or
Unrealized
Loss the aggregate cash amount and fair market value of all
Partnership assets (including, without limitation, cash or cash
equivalents) immediately prior to a distribution shall (A) in the
case of
a deemed
distribution occurring as a result of a termination of the
Partnership pursuant to Section 708 of the Code, be determined
and
allocated
in the same manner as that provided in Section 4.4(d)(i) or (B)
in the
case of a liquidating distribution pursuant to Section 14.3 or
14.4, be
determined and allocated by the Liquidator using such
reasonable
method of
valuation as it may adopt.
4.5
INTEREST. No interest shall be paid by the Partnership on Capital
Contributions or on balances in Partners'
Capital Accounts.
4.6 NO
WITHDRAWAL. No Partner shall be entitled to withdraw any part
of
his Capital Contributions or its Capital
Account or to receive any distribution
from the Partnership, except as provided in
Section 4.2, Articles V, VII, XIII
and XIV.
4.7 LOANS
FROM PARTNERS. Loans by a Partner to the Partnership shall not
constitute Capital Contributions. If any
Partner shall advance funds to the
Partnership in excess of the amounts
required hereunder to be contributed by it
to the capital of the Partnership, the
making of such excess advances shall not
result in any increase in the amount of the
Capital Account of such Partner. The
amount of any such excess advances shall be
a debt obligation of the Partnership
to such Partner and shall be payable or
collectible only out of the Partnership
assets in accordance with the terms and
conditions upon which such advances are
made.
4.8 NO
FRACTIONAL
UNITS. No fractional
Units shall be issued by the
Partnership.
4.9 SPLITS
AND COMBINATIONS. (a) Subject to Section 4.9(d), the
Partnership Policy Committee may make a pro
rata distribution of Units or other
Partnership Securities to all Record
Holders or may effect a subdivision or
combination of Units or other Partnership
Securities; provided, however, that
after any such distribution, subdivision or
combination, each Partner shall have
the same Percentage Interest in the
Partnership as before such distribution,
subdivision or combination.
(b)
Whenever such a distribution, subdivision or combination of Units
or
other Partnership Securities is declared,
the Partnership Policy Committee shall
select a Record Date as of which the
distribution, subdivision or combination
shall be effective and shall send notice of
the distribution, subdivision or
combination at least 20 days prior to such
Record Date to each Record Holder as
of
26
<PAGE>
the date not less than 10 days prior to the
date of such notice. The Partnership
Policy Committee also may cause a firm of
independent public accountants
selected by it to calculate the number of
Units to be held by each Record Holder
after giving effect to such distribution,
subdivision or combination. The
Partnership Policy Committee shall be
entitled to rely on any certificate
provided by such firm as conclusive
evidence of the accuracy of such
calculation.
(c)
Promptly following any such distribution, subdivision or
combination,
the Partnership Policy Committee may cause
Certificates to be issued to the
Record Holders of Units as of the
applicable Record Date representing the new
number of Units held by such Record
Holders, or the Partnership Policy Committee
may adopt such other procedures as it may
deem appropriate to reflect such
distribution, subdivision or
combination;provided, however, if any such
distribution, subdivision or combination
results in a smaller total number of
Units Outstanding, the Partnership Policy
Committee shall require, as a
condition to the delivery to a Record
Holder of such new Certificate, the
surrender of any Certificate held by such
Record Holder immediately prior to
such Record Date.
(d) The
Partnership shall not issue fractional Units upon any
distribution, subdivision or combination of
Units. If a distribution,
subdivision or combination of Units would
result in the issuance of fractional
Units but for the provisions of Section 4.8
and this Section 4.9(d), each
fractional Unit shall be rounded to the
nearest whole Unit (and a 0.5 Unit shall
be rounded to the next higher Unit).
ARTICLE V
ALLOCATIONS AND DISTRIBUTIONS
5.1
ALLOCATIONS FOR CAPITAL ACCOUNT PURPOSES. For purposes of
maintaining
the Capital Accounts and in determining the
rights of the Partners among
themselves, the Partnership's items of
income, gain, loss and deduction
(computed in accordance with Section
4.4(b)) shall be allocated among the
Partners in each taxable year (or portion
thereof) as provided hereinbelow.
(a) Net Income. After giving effect to the special allocations
set
forth in
Section 5.1(d), Net Income for each taxable period and all
items
of income,
gain, loss and deduction taken into account in computing Net
Income for
such taxable period shall be allocated as follows:
(i) First, 100% to the General Partners in accordance with
their relative General Partner Percentage Interests until the
aggregate Net Income allocated to each General Partner pursuant
to
this Section 5.1 (a)(i) for the current taxable year and all
previous taxable years is equal to the aggregate Net Losses
allocated to such General Partner pursuant to Section
5.1(b)(iii)
for all
previous taxable years;
(ii) Second, 100% to the General Partners and the Limited
Partners, in the same proportion as Net Losses were allocated
pursuant to Section 5.1 (b)(ii), until the aggregate Net Income
allocated to such Partners pursuant to this Section 5.1(a)(ii)
for
the current taxable year and all previous taxable years is equal
to
the aggregate Net Losses allocated to such Partners pursuant to
Section 5.1(b)(ii) for all previous taxable years; and
(iii) Third, the balance, if any, 100% to the General Partners
and the Limited Partners in accordance with their respective
Percentage Interests.
27
<PAGE>
(b) Net Losses. After giving effect to the special allocations
set
forth in
Section 5.1(d), Net Losses for each taxable period and all
items
of income,
gain, loss and deduction taken into account in computing Net
Losses for
such taxable period shall be allocated as follows:
(i) First, 100% to the General Partners and the Limited
Partners, in accordance with their respective Percentage
Interests,
until the aggregate Net Losses allocated pursuant to this
Section
5.1 (b)(i) for the current taxable year and all previous
taxable
years is equal to the aggregate Net Income allocated to such
Partners pursuant to Section 5.1(a)(iii) for all previous
taxable
years;
(ii) Second, 100% to the General Partners and the Limited
Partners in proportion to, and to the extent of, the positive
balances in their respective Adjusted Capital Accounts; and
(iii) Third, the balance, if any, 100% to the General Partners
in accordance with their relative General Partner Percentage
Interests.
(c) Net Termination Gains and Losses. After giving effect to
the
special
allocations set forth in Section 5.1(d), all items of income
gain,
loss and
deduction taken into account in computing Net Termination Gain
or
Net
Termination Loss for such taxable period shall be allocated in
the
same
manner as such Net Termination Gain or Net Termination Loss is
allocated
hereunder. All allocations under this Section 5.1 (c) shall be
made after
Capital Account balances have been adjusted by all other
allocations provided under this Section 5.1 and after all
distributions of
Available
Cash provided under Section 5.4 have been made with respect to
the
taxable period ending on the date of the Partnership's
liquidation
pursuant
to Section 14.3.
(i) If a Net Termination Gain is recognized (or deemed
recognized pursuant to Section 4.4(d)) from Termination Capital
Transactions, such Net Termination Gain shall be allocated
between
the General Partners and the Limited Partners in the following
manner (and the Adjusted Capital Accounts of the Partners shall
be
increased by the amount so allocated in each of the following
subclauses, in the order listed, before an allocation is made
pursuant to the next succeeding subclause):
(A) First, to each Partner having a deficit balance in
its Adjusted Capital Account, in the proportion that such
deficit balance bears to the total deficit balances in the
Adjusted Capital Accounts of all Partners, until each such
Partner has been allocated Net Termination Gain equal to any
such deficit balance in its Adjusted Capital Account;
(B) Second, 99% to all Limited Partners holding Common
Units, in the proportion that the total number of Common Units
held by each such Limited Partner bears to the total number of
Common Units then Outstanding, and 1% to the General Partners,
in accordance with their relative General Partner Percentage
Interests, until the Adjusted Capital Account in respect of
each Common Unit then Outstanding is equal to the sum of (1)
its Unrecovered Initial Unit Price, plus (2) the Minimum
Quarterly Distribution for the quarter during which such Net
Termination Gain is recognized, reduced by any distribution
pursuant to Section 5.4(a) with respect to such Common
28
<PAGE>
Unit for such quarter (the amount determined pursuant to this
clause (2)
is hereinafter defined as the "UNPAID MQD"), plus
(3) any then existing Cumulative Common Unit Arrearage with
respect to a Common Unit sold by the Underwriters on the
Closing Date;
(C) Third, if such Termination Capital Transaction
occurs (or is deemed to occur) prior to the conversion of the
last Outstanding Subordinated Unit pursuant to Section 5.7(b),
99% to the Limited Partners holding Subordinated Units, in the
proportion that the total number of Subordinated Units held by
each such Limited Partner bears to the total number of
Subordinated Units then Outstanding, and 1% to the General
Partners, in accordance with their relative General Partner
Percentage Interests, in the amount which will increase the
Adjusted Capital Account of each such Limited Partner
maintained with respect to such Subordinated Units to that
amount which equals the sum of (1) the Unrecovered
Subordinated Unit Capital attributable to such Subordinated
Units, determined for the taxable year (or portion thereof) to
which this allocation of gain relates plus (2) the Minimum
Quarterly Distribution for the quarter during which such Net
Termination Gain is recognized, reduced by any distribution
pursuant to Section 5.4(c) with respect to such Subordinated
Unit for such quarter;
(D) Fourth, 99% to all Limited Partners, in accordance
with their respective Percentage Interests, and 1% to the
General Partners, in accordance with their relative General
Partner Percentage Interests, until the Adjusted Capital
Account in respect of each Common Unit then Outstanding is
equal to the sum of (1) its Unrecovered Initial Unit Price,
plus (2) the Unpaid MQD, if any, for such Common Unit with
respect to the quarter during which such Net Termination Gain
is recognized, plus (3) any then existing Cumulative Common
Unit Arrearage with respect to a Common Unit sold by the
Underwriters on the Closing Date, plus (4) the excess of (aa)
the First Target Distribution less the Minimum Quarterly
Distribution for each quarter of the Partnership's existence
over (bb) the amount of any distributions of Cash from
Operations that was distributed pursuant to Section 5.4(d)
(the sum of (1) plus (2) plus (3) plus (4) is hereinafter
defined as the "FIRST LIQUIDATION TARGET AMOUNT");
(E) Fifth, 85.8673% to all Limited Partners, in
accordance with their respective Percentage Interests, and
14.1327% to the General Partners, in accordance with their
relative General Partner Percentage Interests, until the
Adjusted Capital Account in respect of each Common Unit then
Outstanding is equal to the sum of (1) the First Liquidation
Target Amount, plus (2) the excess of (aa) the Second Target
Distribution less the First Target Distribution for each
quarter of the Partnership's existence over (bb) the amount of
any distributions of Cash from Operations that was distributed
pursuant to Section 5.4(e) (the sum of (1) plus (2) is
hereinafter defined as the "SECOND LIQUIDATION TARGET
AMOUNT");
(F) Sixth, 75.7653% to all Limited Partners, in
accordance with their respective Percentage Interests, and
24.2347% to the General Partners, in accordance with their
relative General Partner Percentage Interests, until the
Adjusted Capital Account in respect of each Common Unit then
Outstanding
29
<PAGE>
is equal to the sum of (1) the Second Liquidation Target
Amount,
plus (2) the excess of (aa) the Third Target Distribution less
the
Second Target Distribution for each quarter of the
Partnership's
existence over (bb) the amount of any distributions of Cash
from
Operations that was distributed pursuant to Section 5.4(f); and
(G) Seventh, any remaining amount 50.5102% to all Limited
Partners, in accordance with their respective Percentage
Interests,
and 49.4898% to the General Partners, in accordance with their
relative General Partner Percentage Interests.
(ii) If a Net Termination Loss is recognized (or deemed
recognized
pursuant
to Section 4.4(d)) from Termination Capital Transactions, such
Net
Termination Loss shall be allocated to the Partners in the
following
manner:
(A) First, 100% to the General Partners and the Limited
Partners in proportion to, and to the extent of, the positive
balances in their respective Adjusted Capital Accounts; and
(B) Second, the balance, if any, 100% to the General Partners,
in accordance with their relative General Partner Percentage
Interests.
(d)
Special Allocations. Notwithstanding any other provision of
this
Section 5.1, the following special
allocations shall be made for such taxable
period:
(i) Partnership Minimum Gain Chargeback. Notwithstanding any
other
provision
of this Section 5.1, if there is a net decrease in Partnership
Minimum
Gain during any Partnership taxable period, each Partner shall
be
allocated
items of Partnership income and gain for such period (and, if
necessary,
subsequent periods) in the manner and amounts provided in
Treasury
Regulation Sections 1.704-2(f)(6), 1.704-2(g)(2) and
1.704-2(j)(2)(i), or any successor provision. For purposes of this
Section
5.1 (d),
each Partner's Adjusted Capital Account balance shall be
determined, and the allocation of income or gain required hereunder
shall
be
effected, prior to the application of any other allocations
pursuant to
this
Section 5.1(d) with respect to such taxable period (other than
an
allocation
pursuant to Sections 5.1(d)(vi) and 5.1 (d)(vii)). This Section
5.1 (d)(i)
is intended to comply with the Partnership Minimum Gain
chargeback
requirement in Treasury Regulation Section 1.704-2(f) and shall
be
interpreted consistently therewith.
(ii) Chargeback of Partner Nonrecourse Debt Minimum Gain.
Notwithstanding the other provisions of this Section 5.1 (other
than
Section 5.1
(d)(i)), except as provided in Treasury Regulation Section
1.704-2(i)(4), if there is a net decrease in Partner Nonrecourse
Debt
Minimum
Gain during any Partnership taxable period, any Partner with a
share of
Partner Nonrecourse Debt Minimum Gain at the beginning of such
taxable
period shall be allocated items of Partnership income and gain
for
such
period (and, if necessary, subsequent periods) in the manner
and
amounts
provided in Treasury Regulation Sections 1.704-2(i)(4) and
1.704-2(j)(2)(ii), or any successor provisions. For purposes of
this
Section
5.1 (d), each Partner's Adjusted Capital Account balance shall
be
determined, and the allocation of income or gain required hereunder
shall
be
effected, prior to the application of any other allocations
pursuant to
this
Section 5.1 (d), other than Section 5.1 (d)(i) and other than
an
allocation
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<PAGE>
pursuant
to Sections 5.1(d)(vi) and 5.1(d)(vii), with respect to such
taxable
period. This Section 5.1(d)(ii) is intended to comply with the
chargeback
of items of income and gain requirement in Treasury Regulation
Section
1.704-2(i)(4) and shall be interpreted consistently therewith.
(iii) Priority Allocations.
(A) If the amount of cash or the Net Agreed Value of any
property distributed (except cash or property distributed
pursuant
to Section 14.3 or 14.4) to any Limited Partner with respect to
a
taxable year is greater (on a per Unit basis) than the amount
of
cash or the Net Agreed Value of property distributed to the
other
Limited Partners (on a per Unit basis), then (1) each Limited
Partner receiving such greater cash or property distribution
shall
be allocated gross income in an amount equal to the product of
(aa)
the amount by which the distribution (on a per Unit basis) to
such
Limited Partner exceeds the distribution (on a per Unit basis)
to
the Limited Partners receiving the smallest distribution and
(bb)
the number of Units owned by the Limited Partner receiving the
greater distribution; and (2) the General Partners shall be
allocated gross income in an aggregate amount equal to 1/99 of
the
sum of the amounts allocated in clause (1) above.
(B) All or a portion of the remaining items of Partnership
gross income or gain for the taxable period, if any, shall be
allocated 100% to the General Partners, in accordance with
their
relative General Partner Percentage Interests, until the
aggregate
amount of such items allocated to the General Partners under
this
paragraph (iii) for such taxable period and all previous
taxable
periods is equal to the cumulative amount of cash distributed to
the
General Partners (or their assignees) as Incentive
Distributions
with respect to the period from the Closing Date through the end
of
such taxable period.
(iv) Qualified Income Offset. In the event any Partner
unexpectedly
receives
any adjustments, allocations or distributions described in
Treasury
Regulation Sections 1.704-1 (b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5), or 1.704-1 (b)(2)(ii)(d)(6), items of
Partnership income and gain shall be specifically allocated to
such
Partner in
an amount and manner sufficient to eliminate, to the extent
required
by the Treasury Regulations promulgated under Section 704(b) of
the Code,
the deficit balance, if any, in its Adjusted Capital Account
created by
such adjustments, allocations or distributions as quickly as
possible
unless such deficit balance is otherwise eliminated pursuant to
Section
5.1(d)(i) or (ii).
(v) Gross Income Allocations. In the event any Partner has a
deficit
balance in
its Adjusted Capital Account at the end of any Partnership
taxable
period, such Partner shall be specially allocated items of
Partnership gross income and gain in the amount of such excess as
quickly
as
possible; provided, that an allocation pursuant to this Section
5.1(d)(v)
shall be made only if and to the extent that such Partner would
have a
deficit balance in its Adjusted Capital Account after all other
allocations provided for in this Section 5.1 have been tentatively
made as
if this
Section 5.1(d)(v) were not in this Agreement.
(vi) Nonrecourse Deductions. Nonrecourse Deductions for any
taxable
period
shall be allocated to the Partners in accordance with their
respective
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<PAGE>
Percentage
Interests. If the Partnership Policy Committee determines in
its good
faith discretion that the Partnership's Nonrecourse Deductions
must be
allocated in a different ratio to satisfy the safe harbor
requirements of the Treasury Regulations promulgated under Section
704(b)
of the
Code, the Partnership Policy Committee is authorized, upon
notice
to the
Limited Partners, to revise the prescribed ratio to the
numerically
closest
ratio that does satisfy such requirements.
(vii) Partner Nonrecourse Deductions. Partner Nonrecourse
Deductions
for any
taxable period shall be allocated 100% to the Partner that
bears
the
Economic Risk of Loss with respect to the Partner Nonrecourse Debt
to
which such
Partner Nonrecourse Deductions are attributable in accordance
with
Treasury Regulation Section 1.704-2(i). If more than one
Partner
bears the
Economic Risk of Loss with respect to a Partner Nonrecourse
Debt, such
Partner Nonrecourse Deductions attributable thereto shall be
allocated
between or among such Partners in accordance with the ratios in
which they
share such Economic Risk of Loss.
(viii) Nonrecourse Liabilities. For purposes of Treasury
Regulation
Section
1.752-3(a)(3), the Partners agree that Nonrecourse Liabilities
of
the
Partnership in excess of the sum of (A) the amount of
Partnership
Minimum
Gain and (B) the total amount of Nonrecourse Built-in Gain
shall
be
allocated among the Partners in accordance with their
respective
Percentage
Interests.
(ix) Code Section 754 Adjustments. To the extent an adjustment
to
the
adjusted tax basis of any Partnership asset pursuant to Section
734(b)
or 743(b)
of the Code is required, pursuant to Treasury Regulation
Section
1.704-1(b)(2)(iv)(m), to be taken into account in determining
Capital
Accounts,
the amount of such adjustment to the Capital Accounts shall be
treated as
an item of gain (if the adjustment increases the basis of the
asset) or
loss (if the adjustment decreases such basis), and such item of
gain or
loss shall be specially allocated to the Partners in a manner
consistent
with the manner in which their Capital Accounts are required to
be
adjusted pursuant to such Section of the Treasury regulations.
(x) Economic Uniformity. At the election of the Partnership
Policy
Committee
with respect to any taxable period ending upon, or after, the
termination of the Subordination Period, all or a portion of the
remaining
items of
Partnership gross income or gain for such taxable period, if
any,
shall be
allocated 100% to each Partner holding Subordinated Units in
the
proportion
of the number of Subordinated Units held by such Partner to the
total
number of Subordinated Units then Outstanding, until each such
Partner
has been allocated an amount of gross income or gain which
increases
the Capital Account maintained with respect to such
Subordinated
Units to
an amount equal to the product of (A) the number of
Subordinated
Units held
by such Partner and (B) the Per Unit Capital Amount for a
Common
Unit. The purpose of this allocation is to establish uniformity
between
the Capital Accounts underlying Subordinated Units and the
Capital
Accounts
underlying Common Units held by Persons other than the General
Partners
and their Affiliates immediately prior to the conversion of
such
Subordinated Units into Common Units. This allocation method
for
establishing such economic uniformity will only be available to
the
Partnership Policy Committee if the method for allocating the
Capital
Account
maintained with respect to the Subordinated Units between the
transferred and retained Subordinated Units pursuant to Section
4.4(c)(ii)
does not
otherwise provide such economic uniformity to the Subordinated
Units.
32
<PAGE>
(xi) Curative Allocation.
(A) Notwithstanding any other provision of this Section 5.1,
other than the Required Allocations, the Required Allocations
shall
be taken into account in making the Agreed Allocations so that,
to
the extent possible, the net amount of items of income, gain,
loss
and deduction allocated to each Partner pursuant to the
Required
Allocations and the Agreed Allocations, together, shall be equal
to
the net amount of such items that would have been allocated to
each
such Partner under the Agreed Allocations had the Required
Allocations and the related Curative Allocation not otherwise
been
provided in this Section 5.1. Notwithstanding the preceding
sentence, Required Allocations relating to (1) Nonrecourse
Deductions shall not be taken into account except to the extent
that
there has been a decrease in Partnership Minimum Gain and (2)
Partner Nonrecourse Deductions shall not be taken into account
except to the extent that there has been a decrease in Partner
Nonrecourse Debt Minimum Gain. Allocations pursuant to this
Section
5.1(d)(xi)(A) shall only be made with respect to Required
Alloca-
tions to the extent the Partnership Policy Committee reasonably
determines that such allocations will otherwise be inconsistent
with
the economic agreement among the Partners. Further, allocations
pursuant to this Section 5.1(d)(xi)(A) shall be deferred with
respect to allocations pursuant to clauses (1) and (2) hereof to
the
extent the Partnership Policy Committee reasonably determines
that
such allocations are likely to be offset by subsequent Required
Allocations.
(B) The Partnership Policy Committee shall have reasonable
discretion, with respect to each taxable period, to (1) apply
the
provisions of Section 5.1(d)(xi)(A) in whatever order is most
likely
to minimize the economic distortions that might otherwise
result
from the
Required Allocations, and (2) divide all allocations
pursuant to Section 5.1(d)(xi)(A) among the Partners in a
manner
that is likely to minimize such economic distortions.
5.2
ALLOCATIONS FOR TAX PURPOSES. (a) Except as otherwise provided
herein,
for federal income tax purposes, each item
of income, gain, loss and deduction
shall be allocated among the Partners in
the same manner as its correlative item
of "book" income, gain, loss or deduction
is allocated pursuant to Section 5.1.
(b) In an attempt to eliminate Book - Tax Disparities
attributable
to a
Contributed Property or Adjusted Property, items of income,
gain,
loss,
depreciation, amortization and cost recovery deductions shall
be
allocated for federal income tax
purposes among the Partners as follows:
(i) (A) In the case of a Contributed Property, such items
attributable thereto shall be allocated among the Partners in the
manner
provided
under Section 704(c) of the Code that takes into account the
variation
between the Agreed Value of such property and its adjusted
basis
at the
time of contribution; and (B) except as otherwise provided in
Section
5.2(b)(iv), any item of Residual Gain or Residual Loss
attributable to a Contributed Property shall be allocated among
the
Partners
in the same manner as its correlative item of "book" gain or
loss
is
allocated pursuant to Section 5.1.
(ii) (A) In the case of an Adjusted Property, such items shall
(1) first,
be allocated among the Partners in a manner consistent with the
principles
of Section 704(c) of the Code
33
<PAGE>
to take
into account the Unrealized Gain or Unrealized Loss
attributable
to such
property and the allocations thereof pursuant to Section
4.4(d)(i)
or (ii),
and (2) second, in the event such property was originally a
Contributed Property, be allocated among the Partners in a
manner
consistent
with Section 5.2(b)(i)(A);and(B) except as otherwise provided
in Section
5.2(b)(iv), any item of Residual Gain or Residual Loss
attributable to an Adjusted Property shall be allocated among the
Partners
in the
same manner as its correlative item of "book" gain or loss is
allocated
pursuant to Section 5.1.
(iii) Except as otherwise provided in Section 5.2(b)(iv), all
other
items of
income, gain, loss and deduction shall be allocated among the
Partners
in the same manner as their correlative item of "book" gain or
loss is
allocated pursuant to Section 5.1.
(iv) Any items of income, gain, loss or deduction otherwise
allocable
under Section 5.2(b)(i)(B), 5.2(b)(ii)(B) or 5.2(b)(iii) shall
be subject
to allocation by the Partnership Policy Committee in a manner
designed
to eliminate, to the maximum extent possible, Book-Tax
Disparities in a Contributed Property or Adjusted Property
otherwise
resulting
from the application of the "ceiling" limitation (under Section
704(c) of
the Code or Section 704(c) principles) to the allocations
provided
under Section 5.2(b)(i)(A) or 5.2(b)(ii)(A).
(c) For
the proper administration of the Partnership and for the
preservation of uniformity of the Units (or
any class or classes thereof), the
Partnership Policy Committee shall have
sole discretion to (i) adopt such
conventions as it deems appropriate in
determining the amount of depreciation,
amortization and cost recovery deductions;
(ii) make special allocations for
federal income tax purposes of income
(including, without limitation, gross
income) or deductions; and (iii) amend the
provisions of this Agreement as
appropriate (x) to reflect the proposal or
promulgation of Treasury regulations
under Section 704(b) or Section 704(c) of
the Code or (y) otherwise to preserve
or achieve uniformity of the Units (or any
class or classes thereof). The
Partnership Policy Committee may adopt such
conventions, make such allocations
and make such amendments to this Agreement
as provided in this Section 5.2(c)
only if such conventions, allocations or
amendments would not have a material
adverse effect on the Partners, the holders
of any class or classes of Units
issued and Outstanding or the Partnership,
and if such allocations are
consistent with the principles of Section
704 of the Code.
(d) The
Partnership Policy Committee in its sole discretion may
determine
to depreciate the portion of an adjustment
under Section 743(b) of the Code
attributable to unrealized appreciation in
any Adjusted Property (to the extent
of the unamortized Book-Tax Disparity)
using a predetermined rate derived from
the depreciation method and useful life
applied to the Partnership's common
basis of such property, despite the
inconsistency of such approach with Proposed
Treasury Regulation Section 1.168-2(n) and
Treasury Regulation Section
1.167(c)-1(a)(6). If the Partnership Policy
Committee determines that such
reporting position cannot reasonably be
taken, the Partnership Policy Committee
may adopt a depreciation convention under
which all purchasers acquiring Units
in the same month would receive
depreciation, based upon the same applicable
rate as if they had purchased a direct
interest in the Partnership's property.
If the Partnership Policy Committee chooses
not to utilize such aggregate
method, the Partnership Policy Committee
may use any other reasonable
depreciation convention to preserve the
uniformity of the intrinsic tax
characteristics of any Units that would not
have a material adverse effect on
the Limited Partners or the Record Holders
of any class or classes of Units.
(e) Any
gain allocated to the Partners upon the sale or other taxable
disposition of any Partnership asset shall,
to the extent possible, after taking
into account other required allocations of
gain pursuant to this Section 5.2, be
characterized as Recapture Income in the
same proportions and
34
<PAGE>
to the same extent as such Partners (or
their predecessors in interest) have
been allocated any deductions directly or
indirectly giving rise to the
treatment of such gains as Recapture
Income.
(f) All
items of income, gain, loss, deduction and credit recognized by
the Partnership for federal income tax
purposes and allocated to the Partners in
accordance with the provisions hereof shall
be determined without regard to any
election under Section 754 of the Code
which may be made by the Partnership;
provided, however, that such allocations,
once made, shall be adjusted as
necessary or appropriate to take into
account those adjustments permitted or
required by Sections 734 and 743 of the
Code.
(g) Each
item of Partnership income, gain, loss and deduction
attributable
to a transferred Partnership Interest of a
General Partner or to transferred
Units shall, for federal income tax
purposes, be determined on an annual basis
and prorated on a monthly basis and shall
be allocated to the Partners as of the
opening of the New York Stock Exchange on
the first Business Day of each month;
provided, however, that (i) if the
Underwriter's Overallotment Option is not
exercised, such items for the period
beginning on the Closing Date and ending on
the last day of the month in which the
Closing Date occurs shall be allocated to
Partners as of the opening of the New York
Stock Exchange on the first Business
Day of the next succeeding month or (ii) if
the Underwriters' Overallotment
Option is exercised, such items for the
period beginning on the Closing Date and
ending on the last day of the month in
which the Second Time of Delivery (as
defined in the Underwriting Agreement)
occurs shall be allocated to the Partners
as of the opening of the New York Stock
Exchange on the first Business Day of
the next succeeding month; and provided,
further, that gain or loss on a sale or
other disposition of any assets of the
Partnership other than in the ordinary
course of business shall be allocated to
the Partners as of the opening of the
New York Stock Exchange on the first
Business Day of the month in which such
gain or loss is recognized for federal
income tax purposes. The Partnership
Policy Committee may revise, alter or
otherwise modify such methods of
allocation as it determines necessary, to
the extent permitted or required by
Section 706 of the Code and the regulations
or rulings promulgated thereunder.
(h)
Allocations that would otherwise be made to a Limited Partner
under
the provisions of this Article V shall
instead be made to the beneficial owner
of Units held by a nominee in any case in
which the nominee has furnished the
identity of such owner to the Partnership
in accordance with Section 6031 (c) of
th
