THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF ONEOK PARTNERS, L.P.

Execution Copy

 

THIRD AMENDED AND RESTATED

AGREEMENT OF LIMITED PARTNERSHIP

OF

ONEOK PARTNERS, L.P.

 

TABLE OF CONTENTS

 

 

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THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED

PARTNERSHIP OF ONEOK PARTNERS, L.P.

THIS THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF ONEOK PARTNERS, L.P., dated as of September 15, 2006, is entered into by and among ONEOK Partners GP, L.L.C., a Delaware limited liability company and f/k/a Northern Plains Natural Gas Company, LLC (“ OPGP ”) in its capacity as the General Partner, and all of the Persons now or heretofore admitted as a Partner in the Partnership or parties hereto as provided herein. Capitalized terms used but not defined herein have the meanings assigned to such terms in Article II.

R E C I T A L S :

WHEREAS, effective as of the Effective Date, the limited partnership agreement of the Partnership was amended and restated in accordance with the terms of that certain Second Amended and Restated Agreement of Limited Partnership of ONEOK Partners, L.P., dated as of May 17, 2006 (the “ Prior Agreement ”); and

WHEREAS, pursuant to the terms of that certain IP Restructuring Agreement (as defined herein), the General Partner and the Partnership have agreed to restructure their ownership in the Intermediate Partnership as a result of which the Intermediate Partnership has become a wholly owned subsidiary of the Partnership and the combined General Partner Percentage Interest (as defined below) was increased to 2%; and

WHEREAS, the General Partner has determined that it is appropriate to amend and restate the Prior Agreement for the purposes, among other things, of reflecting the changes effected pursuant to the IP Restructuring Agreement, including the reorganized ownership interests of the General Partner and the Partnership in the Intermediate Partnership resulting in the Intermediate Partnership becoming a wholly owned subsidiary of the Partnership and the increased combined General Partner Percentage Interest in the Partnership to 2%, and correcting certain errors made in the Prior Agreement (the Prior Agreement as amended hereby, the “ Agreement ”);

NOW, THEREFORE, for and in consideration of the covenants, conditions and agreements contained herein, the parties hereto hereby agree as follows:

ARTICLE I

ORGANIZATION

Section 1.1 Formation and Continuation.

NPNG, PBGC, NWBPC and the Organizational Limited Partner previously formed the Partnership as a limited partnership pursuant to the provisions of the Delaware Act, and as of October 1, 1993 amended and restated the original Agreement of Limited Partnership of Northern Border Partners, L.P., and as of the Effective Date further amended and restated the Original Agreement, and as of the date of this Agreement the parties hereto hereby amend and restate the Prior Agreement in its entirety. This Agreement shall become effective on the date of this Agreement. Except as expressly

provided to the contrary in this Agreement, the parties hereto agree (a) to continue the Partnership as a limited partnership in accordance with the terms of the Delaware Act and this Agreement and (b) that the rights, duties (including fiduciary duties), liabilities 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.

Section 1.2 Name.

The name of the Partnership shall be “ONEOK Partners, L.P.” The Partnership’s business may be conducted under any other name or names as determined by the General Partner. The words “Limited Partnership,” “L.P.,” “Ltd.” or similar words or letters shall be included in the Partnership’s name where necessary for the purpose of complying with the laws of any jurisdiction that so requires. The General Partner 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 the Limited Partners.

Section 1.3 Registered Office; Registered Agent; Principal Office; Other Offices.

Unless and until changed by the General Partner, the registered office of the Partnership in the State of Delaware shall be located at 2711 Centerville Road, Suite 400, Wilmington, Delaware 19808, and the registered agent for service of process on the Partnership in the State of Delaware at such registered office shall be Corporation Service Company. The principal office of the Partnership shall be located at 100 W. 5th Street, Suite 1831, Tulsa, Oklahoma 74103-4298, or such other place as the General Partner 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 General Partner shall determine necessary or appropriate. The address of the General Partner shall be 100 W. 5th Street, Suite 1831, Tulsa, Oklahoma 74103-4298 or such other place as the General Partner may from time to time designate by notice to the Limited Partners.

Section 1.4 Power of Attorney.

(a) Each Limited Partner and each Assignee hereby constitutes and appoints the General Partner and, if a Liquidator shall have been selected pursuant to Section 14.3, the Liquidator (and any successor to the Liquidator by merger, transfer, assignment, election or otherwise) and each of their authorized officers and attorneys-in-fact, as the case may be, 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 this Agreement and the Certificate of Limited Partnership and all amendments or restatements hereof or thereof) that the General Partner or the Liquidator determines to be 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

 

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may conduct business or own property; (B) all certificates, documents and other instruments that the General Partner or the Liquidator determines to be 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 conveyances and a certificate of cancellation) that the General Partner or the Liquidator determines to be 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; (E) all certificates, documents and other instruments relating to the determination of the rights, preferences and privileges of any class or series of Partnership Securities issued pursuant to Section 4.2; and (F) all certificates, documents and other instruments (including agreements and a certificate of merger) relating to a merger, consolidation or conversion 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 that the General Partner or the Liquidator determines to be necessary or appropriate to (A) 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 (B) 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 General Partner and 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 General Partner to amend this Agreement except in accordance with Article XV or as may be otherwise expressly provided for in this Agreement.

(b) The foregoing power of attorney is hereby declared to be irrevocable and a power coupled with an interest, and it shall survive and, to the maximum extent permitted by law, 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 General Partner or the Liquidator acting in good faith pursuant to such power of attorney; and each such Limited Partner or Assignee, to the maximum extent permitted by law, hereby waives any and all defenses that may be available to contest, negate or disaffirm the action of the General Partner or the Liquidator taken in good faith under such power of attorney. Each Limited Partner or Assignee shall execute and deliver to the General Partner or the Liquidator, within 15 days after receipt of the request therefor, such further designation, powers of attorney and other instruments as the General Partner or the Liquidator may request in order to effectuate this Agreement and the purposes of the Partnership.

 

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Section 1.5 Term.

The term of 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 dissolution of the Partnership in accordance with the provisions of Article XIV. The existence of the Partnership as a separate legal entity shall continue until the cancellation of the Certificate of Limited Partnership as provided in the Delaware Act.

ARTICLE II

DEFINITIONS

Section 2.1 Definitions.

The following definitions shall be for all purposes, unless otherwise clearly indicated to the contrary, applied to the terms used in this Agreement.

“ Acquisition ” means any transaction in which any Group Member acquires (through an asset acquisition, merger, stock acquisition or other form of investment) control over all or a portion of the assets, properties or business of another Person for the purpose of increasing the operating capacity or revenues of the Partnership Group from the operating capacity or revenues of the Partnership Group existing immediately prior to such transaction.

“ 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.

“ 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” of a Partner in respect of a General Partner Percentage Interest, Common Unit, Class B Unit or any other Partnership Interest shall be the amount that such Adjusted Capital Account would be if such General Partner Percentage Interest, Common Unit, Class B Unit or other Partnership Interest was the only interest in the Partnership held by such Partner from and after the date on which such General Partner Percentage Interest, Common Unit, Class B Unit or other Partnership Interest was first issued.

 

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“ 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).

“ Affiliate ” means, with respect to any Person, any other Person that directly or indirectly through one or more intermediaries 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 General Partner. The General Partner shall use such method as it determines to be appropriate to allocate the aggregate Agreed Value of 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 Third Amended and Restated Agreement of Limited Partnership of ONEOK Partners, L.P., as it may be amended, supplemented or restated from time to time.

“ Amendment Approval ” and “ Amendment Approval Date ” have the meanings assigned to such terms in Section 4.8(f)(ii).

“ Assignee ” means a Non-citizen Assignee or a Person to whom one or more Limited Partner Interests have been transferred in a manner permitted under this Agreement and who has executed and delivered a Transfer Application, including a Citizenship Certification, as required by this Agreement, but who has not been admitted as a Substituted Limited Partner.

“ Associate ” means, when used to indicate a relationship with any Person, (a) any corporation or organization of which such Person is a director, officer or partner or is, directly or indirectly, the owner of 20% or more of any class of voting stock or other voting interest; (b) any trust or other estate in which such Person has at least a 20% beneficial interest or as to which such Person serves as trustee or in a similar fiduciary capacity; and (c) any relative or spouse of such Person, or any relative of such spouse, who has the same principal residence as such Person.

“ Audit Committee ” means a committee of the Board of Directors of the General Partner consisting of three or more members of the Board of Directors appointed by the Board of Directors who meet the independence and other standards required of directors who serve on an audit committee of a board of directors established by (a) the Securities Exchange Act and rules and regulations of the Commission thereunder, (b) the National Securities Exchange on which the Common Units are listed or admitted to trading and (c) the Board of Directors.

 

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“ Available Cash ” means, with respect to any calendar quarter ending prior to the Liquidation Date and without duplication:

(a) the sum of (i) all cash and cash equivalents of the Partnership Group (or the Partnership’s proportionate share of cash and cash equivalents in the case of Subsidiaries that are not wholly owned) on hand at the end of such calendar quarter, and (ii) all additional cash and cash equivalents of the Partnership Group (or the Partnership’s proportionate share of cash and cash equivalents in the case of Subsidiaries that are not wholly owned) on hand on the date of determination of Available Cash with respect to such calendar quarter resulting from (A) Working Capital Borrowings made subsequent to the end of such calendar quarter or (B) distributions of cash (to the extent such distributions are attributable to transactions and operations during the calendar quarter in respect of which the distribution is then being made) received by the Partnership from the Intermediate Partnership or any other Group Member 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, less

(b) the amount of any cash reserves established by the General Partner to (i) provide for the proper conduct of the business of the Partnership Group (including reserves for future capital expenditures, for anticipated future credit needs of the Partnership Group and for refunds of collected rates reasonably likely to be refunded as a result of a settlement or hearing relating to FERC rate or other proceedings) subsequent to such calendar quarter, (ii) comply with applicable law or any loan agreement, security agreement, mortgage, debt instrument or other agreement or obligation to which any Group Member is a party or by which it is bound or its assets are subject or (iii) provide funds for distributions under Section 5.4 or Section 5.5 in respect of any one or more of the next four calendar quarters; provided, however , that the General Partner may not establish cash reserves pursuant to clause (iii) above if the effect of such reserves would be that the Partnership is unable to distribute the Minimum Quarterly Distribution on all Common Units with respect to such calendar quarter; and, provided further , that disbursements made by a Group Member or cash reserves established, increased or reduced after the end of such calendar quarter but on or before the date of determination of Available Cash with respect to such calendar quarter shall be deemed to have been made, established, increased or reduced, for purposes of determining Available Cash, within such calendar quarter if the General Partner so determines.

Notwithstanding the foregoing, “ Available Cash ” with respect to the calendar quarter in which the Liquidation Date occurs and any subsequent calendar quarter shall equal zero. 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 General Partner, 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 calendar quarter).

 

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“ Board of Directors ” means, with respect to the General Partner, its board of directors or managers, as applicable, if a corporation or limited liability company or, if a limited partnership, the board of directors or board of managers of the general partner of such limited partnership.

“ 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 of America or the States of New York or Oklahoma shall not be regarded as a Business Day.

“ Capital Account ” means the capital account maintained for a Partner pursuant to Section 4.4. The “Capital Account” of a Partner in respect of the General Partner Percentage Interest, a Common Unit, a Class B Unit or any other Partnership Interest shall be the amount that such Capital Account would be if such General Partner Percentage Interest, Common Unit, Class B Unit or other Partnership Interest were the only interest in the Partnership held by such Partner from and after the date on which such General Partner Percentage Interest, Common Unit, Class B Unit or other Partnership Interest was first issued.

“ Capital Additions and Improvements ” means any (a) addition or improvement to the capital assets owned by any Group Member or (b) acquisition of existing, or the construction of new, capital assets (including pipelines, terminals, tankage, processing, gathering and other storage and distribution facilities and related assets), in each case if such addition, improvement, acquisition or construction is made to increase the throughput, deliverable capacity, storage capacity, other operating capacity or revenues of the Partnership Group from the throughput, deliverable capacity, storage capacity, other operating capacity or revenues of the Partnership Group existing immediately prior to such addition, improvement, acquisition or construction.

“ Capital Contribution ” means any cash, cash equivalents or the Net Agreed Value of Contributed Property that a Partner contributes to the Partnership.

“ 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 General Partner.

 

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“ 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(a) and (ii) constitute distributions received prior to the Effective Date by the Intermediate Partnership from Northern Border Pipeline in respect of Northern Border Interim Capital Transactions.

“ Cash from Operations ” means (a) for the period that commenced as of the Closing Date and ends on the first to occur of the close of business on the last day of the calendar quarter in which the Effective Date occurs and the close of business on the day immediately preceding the Liquidation Date, on a cumulative basis and without duplication;

(i) the sum of all cash receipts of the Partnership Group during the period since the Closing Date through such date (including (a) the cash balance of the Partnership as of the close of business on the Closing Date, and (b) 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));

(ii) less the sum of:

(A) all cash operating expenditures of the Partnership Group during such period, including, without limitation, taxes, if any, and the Partnership Group’s share of capital contributions made by the Northern Border Pipeline in respect of the Partnership Group’s share of similar expenditures of Northern Border Pipeline;

(B) all cash debt service payments of the Partnership Group during such period (other than payments or prepayments of principal and premium required by reason of loan agreements (including 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 General Partner, 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 Group’s share of capital contributions made to Northern Border Pipeline in respect of the Partnership Group’s share of any such payments made by Northern Border Pipeline;

(C) all cash capital expenditures of the Partnership Group during such period, and the Partnership Group’s shares of any capital contributions made to Northern Border Pipeline in respect of the Partnership Group’s share of any cash capital expenditures of Northern Border Pipeline during such period, including cash capital expenditures made, or the Partnership

 

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Group’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 Group’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;

(D) an amount equal to revenues, if any, collected by any member of the Partnership Group (or by Northern Border Pipeline to the extent same are distributed to a member of the Partnership Group) as a result of transportation rate increases that are subject to possible refund;

(E) any reserves outstanding as of such date that the General Partner 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 (a)(ii)(A) through (a)(ii)(D) of this sentence; and

(F) any reserves that the General Partner 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; and

(b) for the period commencing as of the first day in the calendar quarter that commences after the Effective Date and ends at the close of business on the date immediately preceding the Liquidation Date, on a cumulative basis and without duplication;

(i) the balance of Cash from Operations determined under clause (a), plus

(ii) all cash receipts of the Partnership Group (or the Partnership’s proportionate share of cash receipts in the case of Subsidiaries that are not wholly owned) for the period commencing as of the first day in the calendar quarter that begins after the Effective Date and ending on the last day of the period for which the determination is being made, but excluding cash receipts from Interim Capital Transactions (except to the extent specified in Section 5.3) and all cash receipts of the Partnership Group (or the Partnership’s proportionate share of cash receipts in the case of Subsidiaries that are not wholly owned) after the end of such period but on or before the date of determination of Cash from Operations with respect to such period resulting from (A) Working Capital Borrowings or (B) distributions of cash (to the extent such distributions are attributable to transactions and operations during the calendar quarter in respect of which the distribution is then being made) received by the Partnership from the Intermediate Partnership or any other Group Member 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, less

(iii) the sum of (A) Operating Expenditures for the period commencing as of the first day in the calendar quarter that begins after the Effective Date and ending on the last day of the period for which the determination is being made and (B) the amount of cash reserves established by the General Partner to provide funds for future Operating Expenditures; provided , however , that disbursements made (including contributions to a Group Member or disbursements on behalf of a Group Member) or cash reserves established, increased or reduced after the end of

 

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such period but on or before the date of determination of Available Cash with respect to such period shall be deemed to have been made, established, increased or reduced, for purposes of determining Cash from Operations, within such period if the General Partner so determines;

all as determined on a consolidated basis. 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 General Partner’s good faith allocation thereof between the portion made for Capital Additions and Improvements and the portion made for other purposes shall be conclusive.

Notwithstanding the foregoing, “Cash from Operations” with respect to the calendar quarter in which the Liquidation Date occurs and any subsequent calendar quarter shall equal zero.

“ Cause ” means a court of competent jurisdiction has entered a final, non-appealable judgment finding the General Partner liable for actual fraud, gross negligence or willful or wanton misconduct in its capacity as a general partner of the Partnership.

“ Certificate ” means (a) a certificate (i) issued pursuant to the Original Agreement or the Prior Agreement and substantially in the form of Exhibit A to the Original Agreement or the Prior Agreement, (ii) substantially in the form of Exhibit A to this Agreement, (iii) issued in global form in accordance with the rules and regulations of the Depositary or (iv) in such other form as may be adopted by the General Partner, issued by the Partnership evidencing ownership of one or more Common Units or (b) a certificate, in such form as may be adopted by the General Partner, issued by the Partnership evidencing ownership of one or more other Partnership Securities.

“ Certificate of Limited Partnership ” means the Certificate of Limited Partnership of the Partnership filed with the Secretary of State of the State of Delaware as referenced in Section 6.2, as amended and in effect on the date hereof, and 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 or forms as may be specified by the General Partner by which 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.

“ claim ” (as used in Section 6.13(e)) has the meaning assigned to such term in Section 6.13(e).

“ Class B Distribution Increase Date ” has the meaning assigned to such term in Section 4.9(a)(2).

“ Class B Subordination Period ” means the period commencing upon issuance of the Class B Units and ending on the earlier of (a) the Conversion Approval Date or (b) the Conversion Approval Termination Date.

 

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“ Class B Unit ” means a Unit, of which a total of 36,498,126 were Outstanding on the Effective Date, representing a fractional part of the Partnership Interests of all Limited Partners and Assignees and having the rights and obligations specified with respect to Class B Units in this Agreement. Except as otherwise provided in this Agreement, the term “Class B Unit” does not refer to a Common Unit prior to the conversion of the Class B Unit into a Common Unit pursuant to the terms hereof.

“ Class B Unit Arrearage ” means, with respect to any Class B Unit, and as to any calendar quarter within the Class B Subordination Period, the excess, if any, of (a) the Minimum Quarterly Distribution with respect to such Class B Unit (including any applicable increased amounts distributable with respect to the Minimum Quarterly Distribution following the Class B Distribution Increase Date, the Section 4.9(b) Distribution Increase Date or the GP Removal Date) over (b) the sum of all Available Cash distributed with respect to such Class B Unit in respect of such quarter pursuant to Section 4.8(b)(ii)(A) (and Section 4.9 or 4.10 following the Class B Distribution Increase Date and/or GP Removal Date, as applicable).

“ Closing Date ” means October 1, 1993.

“ 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. Any reference herein to a specific section or sections of the Code shall be deemed to include a reference to any corresponding provision of any successor law.

“ Combined Interest ” has the meaning assigned to such term in Section 13.3(a).

“ Commission ” means the United States 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. The term “Common Unit” does not refer to a Class B Unit prior to the conversion of the Class B Unit into a Common Unit pursuant to the terms hereof.

“ Common Unit Arrearage ” means, with respect to any Common Unit, whenever issued, and as to any calendar quarter within the Class B Subordination Period, the excess, if any, of (a) the Minimum Quarterly Distribution with respect to such Common Units 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).

“ Conflicts Committee ” means a committee of the Board of Directors of the General Partner composed entirely of two or more members of such Board of Directors who are not (a) security holders, officers or employees of the General Partner, (b) officers, directors or employees of any Affiliate of the General Partner or (c) holders of any ownership interest in the Partnership Group other than Common Units and who also meet the independence standards required of directors who serve on an audit committee of a board of directors established by the Securities Exchange Act and the rules and regulations of the Commission thereunder and by the National Securities Exchange on which the Common Units are listed or admitted to trading. In the absence of any designation by the Board of Directors to the contrary, the Audit Committee shall constitute the Conflicts Committee.

 

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“ 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. 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.

“ Contribution Agreement ” means the Contribution, Conveyance and Assumption Agreement, dated as of the Closing Date, among the Partnership, the Intermediate Partnership, NPNG, PBGC and NWBPC.

“ Conversion Approval ” shall have the meaning assigned to such term in Section 4.8(f)(i).

“ Conversion Approval Date ” shall have the meaning assigned to such term in Section 4.8(f)(i).

“ Conversion Approval Termination Date ” shall have the meaning assigned to such term in Section 4.11.

“ Conveyance Agreement ” means that certain Contribution, Conveyance and Assumption Agreement, dated as of the Closing Date, among the Partnership, the Intermediate Partnership, NPNG, PBGC and NWBPC.

“ Cumulative Class B Unit Arrearage ” means, with respect to any Class B Unit, and as of the end of any calendar quarter (or on the expiration of the Class B Subordination Period), the excess, if any, of (a) the sum resulting from adding together the Class B Unit Arrearage as to such Class B Unit for each of the quarters within the Class B Subordination Period over (b) the sum resulting from adding together (i) any distributions theretofore made pursuant to Section 4.8(b)(ii)(B) (and Section 4.9 or 4.10 following the Class B Distribution Increase Date and/or GP Removal Date, as applicable) with respect to such Class B Unit (including any distributions to be made in respect of the last of such quarters) and (ii) any Cumulative Common Unit Arrearage then existing upon conversion of a Class B Unit into a Common Unit pursuant to the terms hereof or the occurrence of a Termination Capital Transaction.

“ Cumulative Common Unit Arrearage ” means, with respect to any Common Units, 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 Class B Subordination Period 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)(x).

“ Current Market Price ” has the meaning assigned to such term in Section 17.1(a).

 

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“ 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 General Partner ” means a former General Partner from and after the effective date of any withdrawal or removal of such former General Partner pursuant to Section 13.1 or 13.2.

“ Depositary ” means, with respect to any Units issued in global form, The Depository Trust Company and its successors and permitted assigns.

“ Economic Risk of Loss ” has the meaning set forth in Treasury Regulation Section 1.752-2(a).

“ Effective Date ” means May 17, 2006.

“ Eligible Citizen ” means a Person qualified to own interests in real property in jurisdictions in which any member of the Partnership Group 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 any member of the Partnership Group or Northern Border Pipeline to a substantial risk of cancellation or forfeiture of any of its properties or any interest therein.

“ Event of Withdrawal ” has the meaning assigned to such term in Section 13.1(a).

“ Excess Payment ” shall have the meaning assigned to such term in Section 4.9(c).

“ FERC ” means the Federal Energy Regulatory Commission.

“ First Liquidation Target Amount ” has the meaning assigned to such term in Section 5.1(c)(i)(C).

“ First Target Distribution ” means $0.605 per Unit per calendar quarter, subject to adjustment in accordance with Sections 5.6 and 9.5.

“ General Partner ” means OPGP, in its capacity as the general partner of the Partnership, and any Person or Persons that either (i) acquires the general partner interest from any person holding same prior to the acquisition, provided that such acquisition complies 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 general partner in accordance with the terms of Section 12.3, in each case in such Person’s capacity as a general partner of the Partnership (except as the context otherwise requires).

“ General Partner Percentage Interest ” means the ownership interest of the General Partner in the Partnership (in its capacity as a general partner without reference to any Limited Partner Interest held by it), and includes any and all benefits to which such General Partner is entitled as provided in this Agreement in its capacity as such, together with all obligations of such General Partner to comply with the terms and provisions of this Agreement. Specifically,

 

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from and after the date of the IP Restructuring Agreement, the General Partner Percentage Interest of the General Partner is 2%; and further, with respect to a Departing General Partner, an amount equal to such Departing General Partner’s General Partner Percentage Interest.

“ GP Removal Event ” and “ GP Removal Date ” shall have the meanings assigned to such terms in Section 4.10(a).

“ Group ” means a Person that with or through any of its Affiliates or Associates has any contract, arrangement, understanding or relationship for the purpose of acquiring, holding, voting (except voting pursuant to a revocable proxy or consent given to such Person in response to a proxy or consent solicitation made to 10 or more Persons), exercising investment power or disposing of any Partnership Interests with any other Person that beneficially owns, or whose Affiliates or Associates beneficially own, directly or indirectly, Partnership Interests.

“ Group Member ” means a member of the Partnership Group.

“ Group Member Agreement ” means the partnership agreement of any Group Member, other than the Partnership, that is a limited or general partnership, the limited liability company agreement of any Group Member that is a limited liability company, the certificate of incorporation and bylaws or similar organizational documents of any Group Member that is a corporation, the joint venture agreement or similar governing document of any Group Member that is a joint venture and the governing or organizational or similar documents of any other Group Member that is a Person other than a limited or general partnership, limited liability company, corporation or joint venture, as such may be amended, supplemented or restated from time to time.

“ Holder ” as used in Section 6.13, has the meaning assigned to such term in Section 6.13(a).

“ Hypothetical Equity Value ” means, as of the date of determination, an amount equal to the product obtained from the following formula:

1.0101 × [TCUO] × [1/PCU] × 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.

“ Incentive Distributions ” means any amount of cash distributed to the General Partner, in its capacity as general partner of the Partnership, (i) pursuant to Sections 5.4(d), 5.4(e) or 5.4(f) of the Prior Agreement in excess of 1.0% of the aggregate amount of cash then distributed pursuant to such provisions and (ii) from and after the date of the IP Restructuring Agreement, pursuant to Sections 5.4(d), 5.4(e) and 5.4(f) of this Agreement in excess of 2% of the aggregate amount of cash then being distributed pursuant to such provisions.

“ Indemnified Persons ” has the meaning assigned to such term in Section 6.13(e).

 

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“ Indemnitee ” means (a) any General Partner, (b) any member of the Board of Directors or any committee thereof (including the Audit Committee or the Conflicts Committee), (c) any Departing General Partner, (d) any Person who is or was an Affiliate of any General Partner or any Departing General Partner, (e) any Person who is or was a member, partner, director, officer (including an Authorized Officer), employee, agent, fiduciary or trustee of any Group Member, any General Partner or any Departing General Partner or any Affiliate of any Group Member, any General Partner or any Departing General Partner, (f) any Person who is or was serving at the request of any General Partner, the General Partner, the Partnership Policy Committee, the Board of Directors or any Departing General Partner or any Affiliate of the General Partner or any Departing General Partner as an officer, director, member, partner, fiduciary or trustee of another Person or as a member of any committee appointed by the Partnership, the General Partner, the Partnership Policy Committee or the Board of Directors or pursuant to the applicable requirements of the Commission, any National Securities Exchange on which Partnership Securities are listed or admitted to trading; provided that a Person shall not be an Indemnitee by reason of providing, on a fee-for-services basis, trustee, fiduciary or custodial services, (g) any former member of the Partnership Policy Committee or of any committee of the Partnership established by the Partnership Policy Committee (including, without limitation, the members of the Audit Committee), and (h) any Person the General Partner designates as an “Indemnitee” for purposes of this Agreement.

“ Indemnity Agreement ” means the Indemnity Agreement dated as of the Closing Date among NPNG, PBGC and NWBPC.

“ Ineligible Assignee ” means a Person whom the General Partner has determined is not an Eligible Citizen.

“ Initial Common Units ” means the Common Units issued on the Closing Date.

“ Initial Limited Partners ” means NPNG, PBGC and NWBPC (with respect to the Units received by them on the Closing Date), and the Underwriters.

“ Initial Offering ” means the initial offering and sale of Common Units to the public, as described in the Registration Statement.

“ Initial Unit Price ” means (a) with respect to the Common Units, the initial public offering 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 included as part of the Registration Statement and first issued at or after the time the Registration Statement first became effective or (b) 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 General Partner, in each case adjusted as the General Partner (or, prior to the date of this Agreement, the Partnership Policy Committee) determines to be appropriate to give effect to any distribution, subdivision or combination of Units.

“ Interim Capital Transactions ” means the following transactions if they occur prior to the Liquidation Date: (a) borrowings, refinancings or refundings of indebtedness (other than Working Capital Borrowings and other than for items purchased on open account in the ordinary

 

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course of business) by any Group Member and sales of debt securities of any Group Member; (b) sales of equity interests of any Group Member; (c) sales or other voluntary or involuntary dispositions of any assets of any Group Member other than (i) sales or other dispositions of inventory, accounts receivable and other assets in the ordinary course of business, and (ii) sales or other dispositions of assets as part of normal retirements or replacements; (d) the termination of interest rate hedge or swap agreements entered into in connection with an Acquisition or a Capital Addition and Improvement; (e) gains or losses in respect of foreign currency exchange rate hedges or forward purchase or put agreements entered into to manage the risks associated with an Interim Capital Transaction or an Acquisition or a Capital Addition and Improvement; (f) capital contributions; and (g) corporate reorganizations or restructurings.

“ Intermediate Partnership ” means ONEOK Partners Intermediate Limited Partnership, a Delaware limited partnership.

“ Intermediate Partnership Agreement ” means the Second Amended and Restated Agreement of Limited Partnership of ONEOK Partners Intermediate Limited Partnership, as amended by Amendment No. 1 thereto and as it may be further amended, supplemented or restated from time to time.

“ IP Restructuring Agreement ” means that certain Reorganization Agreement, dated September 15, 2006, among the Partnership, the Intermediate Partnership, OPGP and OILP GP, LLC pursuant to which the General Partner and the Partnership agreed to restructure their ownership in the Intermediate Partnership as a result of which the Intermediate Partnership has become a wholly owned subsidiary of the Partnership and the General Partner Percentage Interest has been increased to an aggregate of 2%. Pursuant to the IP Restructuring Agreement, the Partnership has contributed to OILP GP, LLC a 0.01% general partner interest in the Intermediate Partnership and (ii) OPGP has contributed to the Partnership a 1.0101% limited partner interest in the Intermediate Partnership in exchange for an increase to an aggregate of 2% in the General Partner Percentage Interest.

“ Limited Partner ” means, unless the context otherwise requires, (a) each Initial Limited Partner, each Substituted Limited Partner, each Additional Limited Partner and any Departing General Partner upon the change of its status from General Partner to Limited Partner pursuant to Section 13.3, in each case, in such Person’s capacity as a limited partner of the Partnership or (b) solely for purposes of Articles IV, V, VI and IX and Section 14.4, each Assignee.

“ Limited Partner Interest ” means the ownership interest of a Limited Partner or Assignee in the Partnership, which may be evidenced by Common Units, Class B Units or other Partnership Securities or a combination thereof or interest therein, and includes any and all benefits to which such Limited Partner or Assignee is entitled as provided in this Agreement, together with all obligations of such Limited Partner or Assignee to comply with the terms and provisions of this Agreement.

“ 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 continue the business of the Partnership 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.

 

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“ Liquidator ” means the General Partner or one or more Persons approved pursuant to Section 14.3 to perform the functions described in Section 14.4 as liquidating trustee of the Partnership within the meaning of the Delaware Act.

“ Maintenance Capital Expenditures ” means cash capital expenditures, whether made by the Partnership or any other member of the Group Member, made to maintain, up to the level thereof that existed before such expenditures were incurred, the throughput, deliverable capacity or storage capacity (assuming normal operating conditions, including, without limitation, down-time and maintenance) of the assets of the Partnership Group, taken as a whole, and shall, therefore, not include cash capital expenditures or capital contributions to a Group Member 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 General Partner’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, subject to adjustment in accordance with Sections 5.6 and 9.5.

“ National Securities Exchange ” means an exchange registered with the Commission under Section 6(a) of the Securities Exchange Act, and any successor to such statute, or the Nasdaq National Market or any successor thereto.

“ 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 taken into account in the computation of Net Termination Gain or Net Termination Loss) for such taxable period over the Partnership’s items of loss and deduction (other than those items taken into account in the computation of Net Termination Gain or Net Termination Loss) 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); provided , that the determination of the items that have been specially allocated under Section 5.1(d) shall be made as if Section 5.1(d)(x) were not in this Agreement.

 

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“ Net Loss ” means, for any taxable period, the excess, if any, of the Partnership’s items of loss and deduction (other than those items taken into account in the computation of Net Termination Gain or Net Termination Loss) for such taxable period over the Partnership’s items of income and gain (other than those items taken into account in the computation of Net Termination Gain or Net Termination Loss) 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); provided , that the determination of the items that have been specially allocated under Section 5.1(d) shall be made as if Section 5.1(d)(x) were not in this Agreement.

“ 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 after the Liquidation Date. 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).

“ 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 after the Liquidation Date. 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).

“ Non-citizen Assignee ” means a Person who the General Partner has determined in its sole discretion does not constitute an Eligible Citizen and as to whose Partnership Interest the General Partner 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)(iii) 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 expenditure (including 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(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 the Intermediate Partnership and TCILP.

 

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“ Northern Border Pipeline Partnership Agreement ” means that certain First Amended and Restated General Partnership Agreement of Northern Border Pipeline Company dated effective as of April 6, 2006, between the Intermediate Partnership and TCILP.

“ 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.

“ Notice of Election to Purchase ” has the meaning assigned to such term in Section 17.1(b).

“ NWBPC ” means Northwest Border Pipeline Company, a Delaware corporation.

“ OILP GP, LLC ” means ONEOK ILP GP, L.L.C., a Delaware limited liability company and the entity that, after giving effect to the transactions contemplated in the IP Restructuring Agreement, serves as the general partner of the Intermediate Partnership.

“ ONEOK ” means ONEOK, Inc., an Oklahoma corporation.

“ ONEOK Contribution Agreement ” means the Contribution Agreement, dated as of February 14, 2006, by and among ONEOK, the Partnership and the Intermediate Partnership.

“ Operating Expenditures ” means all Partnership Group expenditures (or the Partnership’s proportionate share of expenditures in the case of Subsidiaries that are not wholly owned), including taxes, reimbursements of the General Partner or its Affiliates, non-Pro Rata repurchases of Units, repayment of Working Capital Borrowings, debt service payments and capital expenditures, subject to the following:

(a) payments (including prepayments) of principal of and premium on indebtedness other than Working Capital Borrowings shall not constitute Operating Expenditures;

(b) Operating Expenditures shall not include (i) capital expenditures made for Acquisitions or for Capital Additions and Improvements, (ii) payment of transaction expenses (including taxes) relating to Interim Capital Transactions or (iii) distributions to Partners; and

(c) the Partnership Group’s share of capital contributions made to Northern Border Pipeline in respect of the Partnership Group’s share of expenditures by Northern Border Pipeline that are similar to expenditures described above as constituting Operating Expenditures of the Partnership Group shall constitute Operating Expenditures. Where capital expenditures are made in part for Acquisitions or for Capital Additions and Improvements and in part for other purposes, the General Partner shall determine the allocation between the amounts paid for each, and the General Partner’s good faith allocation thereof shall be conclusive.

“ OPGP ” shall have the meaning assigned to such term in the preamble to this Agreement.

 

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“ Opinion of Counsel ” means a written opinion of counsel (who may be regular counsel to the Partnership, any of the General Partners or any of their Affiliates) acceptable to the General Partner.

“ Original Agreement ” means the Amended and Restated Agreement of Limited Partnership of the Partnership, dated as of October 1, 1993.

“ 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 Partner and its Affiliates) beneficially owns 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)(iii) (such Common Units shall not, however, be treated as a separate class of Partnership Securities for purposes of this Agreement); provided, further , that, except as provided in Sections 4.8(a), 4.8(b), 4.9(a) and 4.9(b), none of the Class B Units shall be deemed to be Outstanding for purposes of determining if any Class B Units are entitled to distributions of Available Cash unless such Class B Units shall have been reflected on the Partnership’s books and records as outstanding during such calendar quarter and on the Record Date for the determination of any distribution of Available Cash.

“ PBGC ” means Pan Border Gas Company, 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 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 Partner and the Limited Partners.

“ Partnership ” means ONEOK Partners, L.P. (f/k/a Northern Border Partners, L.P.), the Delaware limited partnership heretofore formed and continued pursuant to this Agreement.

“ Partnership Group ” means the Partnership and its Subsidiaries treated as a single consolidated entity.

“ Partnership Interest ” means an interest in the Partnership, which shall include the General Partner Percentage Interests and Limited Partner Interests.

 

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“ Partnership Minimum Gain ” means that amount determined in accordance with the principles of Treasury Regulation Section 1.704-2(d).

“ Partnership Policy Committee ” means the committee consisting of one person appointed by each of NPNG, PBGC and NWBPC that was established pursuant to, and had the rights, powers and obligations specified in, Section 6.1 of the Original Agreement.

“ Partnership Security ” means any class or series of equity interest in the Partnership (but excluding any options, rights, warrants and appreciation rights relating to an equity interest in the Partnership), including Common Units, Class B Units and the General Partner Percentage Interest.

“ Percentage Interest ” means as of any date of determination (a) as to the General Partner, its General Partner Percentage Interest, (b) as to any Unitholder or Assignee holding Units, the product obtained by multiplying (i) 100% less the sum of the percentages applicable to clauses (a) and (c) by (ii) the quotient obtained by dividing (A) the number of Units held by such Unitholder or Assignee by (B) the total number of all Outstanding Units and (c) as to the holders of other 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, limited liability company, partnership, joint venture, trust, unincorporated organization, association, government agency or political subdivision thereof or other entity.

“ 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 the General Partner or any Affiliate of the General Partner who holds Units.

“ Prior Agreement ” shall have the meaning assigned to such term in the Recitals.

“ Pro Rata ” means (a) when used with respect to Units or any class thereof, apportioned equally among all designated Units in accordance with their relative Percentage Interests and (b) when used with respect to Partners and Assignees or Record Holders, apportioned among all Partners and Assignees or Record Holders in accordance with their relative Percentage Interests.

“ Purchase Date ” means the date determined by the General Partner as the date for purchase of all Outstanding Limited Partner Interests of a certain class (other than Limited Partner Interests owned by the General Partner and its Affiliates) pursuant to Article XVII.

“ Recapture Income ” means any gain recognized by the Partnership (computed without regard to any adjustment required by Section 734 or Section 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 General Partner (or prior to the Effective Date, by the Partnership Policy Committee) or otherwise in accordance with this Agreement for determining (a) the identity of the Record Holders entitled to notice of, or to vote

 

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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 or to participate in any offer.

“ Record Holder ” means the Person in whose name a Common Unit is registered on the books of the Transfer Agent as of the opening of business on a particular Business Day, or with respect to other Partnership Interests, the Person in whose name any such other Partnership Interest is registered on the books that the General Partner has caused to be kept as of the opening of business on such Business Day.

“ Redeemable Interests ” means any Partnership Interests for which a redemption notice has been given, and has not been withdrawn, pursuant to Section 11.6.

“ Registration Statement ” means the Registration Statement on Form S-1 (SEC Registration No. 33-66158), as amended, filed by the Partnership with the Commission under the Securities Act to register the offering and sale of the Common Units in the Initial Offering.

“ Required Allocations ” means (a) any limitation imposed on any allocation of Net Losses or Net Termination Losses under Section 5.1(b) or 5.1(c)(ii) and (b) any allocation of an item of income, gain, loss or deduction pursuant to Section 5.1(d)(i), 5.1(d)(ii), 5.1(d)(iv), 5.1(d)(vii) or 5.1(d)(ix).

“ 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 Section 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)(D).

“ Second Target Distribution ” means $0.715 per Unit per calendar quarter, subject to adjustment in accordance with Sections 5.6 and 9.5.

“ Section 4.9(b) Distribution Increase Date ” shall have the meaning assigned to such term in Section 4.9(b).

“ Securities Act ” means the Securities Act of 1933, as amended, supplemented or restated from time to time and any successor to such statute.

“ Securities Exchange Act ” means the Securities Exchange Act of 1934, as amended, supplemented or restated from time to time and any successor to such statute.

“ Services Agreement ” means that certain Services Agreement, dated April 6, 2006, among ONEOK, NPNG, NBP Services, LLC, a Delaware limited liability company, the Partnership and the Intermediate Limited Partnership.

 

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“ Special Approval ” means approval by a majority of the members of the Conflicts Committee, which approval shall constitute a determination by the Conflicts Committee that the matter or transaction so approved is fair and reasonable to the Partnership and a recommendation to the Board of Directors that such matter or transaction be approved.

“ Subsidiary ” means, with respect to any Person, (a) a corporation of which more than 50% of the voting power of shares entitled (without regard to the occurrence of any contingency) to vote in the election of directors or other governing body of such corporation is owned, directly or indirectly, at the date of determination, by such Person, by one or more Subsidiaries of such Person or a combination thereof, (b) a partnership (whether general or limited) in which such Person or a Subsidiary of such Person is, at the date of determination, a general or limited partner of such partnership, but only if more than 50% of the partnership interests of such partnership (considering all of the partnership interests of the partnership as a single class) is owned, directly or indirectly, at the date of determination, by such Person, by one or more Subsidiaries of such Person, or a combination thereof, or (c) any other Person (other than a corporation or a partnership) in which such Person, one or more Subsidiaries of such Person, or a combination thereof, directly or indirectly, at the date of determination, has (i) at least a majority ownership interest or (ii) the power to elect or direct the election of a majority of the directors or other governing body of such Person.

“ 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).

“ TCILP ” means TC Pipelines Intermediate Limited Partnership, a Delaware limited partnership.

“ Termination Capital Transaction ” means any sale, transfer or other disposition of property of the Partnership Group occurring upon or incident to the liquidation and winding up of the Partnership Group pursuant to Article XIV.

“ Third Liquidation Target Amount ” has the meaning assigned to such term in Section 5.1(c)(i)(E).

“ Third Target Distribution ” means $0.935 per Unit per calendar quarter, subject to adjustment in accordance with Sections 5.6 and 9.5.

“ Trading Day ” has the meaning assigned to such term in Section 17.1(a).

“ transfer ” has the meaning assigned to such term in Section 11.1.

“ Transfer Agent ” means such bank, trust company or other Person (including the General Partner or one of its Affiliates) as shall be appointed from time to time by the General Partner to act as registrar and transfer agent for the Common Units; provided , that if no Transfer Agent is specifically designated for any other Partnership Securities, the General Partner shall act in such capacity.

 

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“ 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, which may include a Citizenship Certification.

“ Underwriter ” means each Person named as an underwriter in Schedule I to the Underwriting Agreement who purchased Common Units pursuant thereto.

“ Underwriting Agreement ” means that certain Underwriting Agreement dated as of September 23, 1993 among the Underwriters, the Partnership, NPNG, PBGC, the Intermediate Partnership and other persons parties thereto, providing for the purchase of Common Units by the Underwriters.

“ Unit ” means a Partnership Security that is designated as a “Unit” and shall include Common Units and Class B Units.

“ Unitholders ” means the holders of Units.

“ Unit Majority ” means at least a majority of the Outstanding Units, provided , that the Class B Units shall only have the voting rights specified in Sections 4.8, 4.9 and 4.10.

“ 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, 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 General Partner, 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 General Partner determines to be appropriate to give effect to any distribution, subdivision or combination of such Units.

“ U.S. GAAP ” means United States generally accepted accounting principles consistently applied.

“ Withdrawal Opinion of Counsel ” has the meaning assigned to such term in Section 13.1(b).

 

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“ Working Capital Borrowings ” means borrowings used solely for working capital purposes or to pay distributions to Partners made pursuant to a revolving or other credit facility, commercial paper facility or other financing arrangement.

Section 2.2 Construction.

Unless the context requires otherwise: (a) any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa; (b) references to Articles and Sections refer to Articles and Sections of this Agreement; (c) the terms “include”, “includes”, “including” and words of like import shall be deemed to be followed by the words “without limitation”; and (d) the terms “hereof”, “herein” and “hereunder” refer to this Agreement as a whole and not to any particular provision of this Agreement. The table of contents and headings contained in this Agreement are for reference purposes only, and shall not affect in any way the meaning or interpretation of this Agreement.

ARTICLE III

PURPOSE, BUSINESS AND POWERS

Section 3.1 Purpose and Business.

The purpose and nature of the business to be conducted by the Partnership shall be (a) to own the capital stock of OILP GP, LLC, which, after giving effect to the transactions contemplated in the IP Restructuring Agreement, owns a 0.01% general partner interest in the Intermediate Partnership and serves as its sole general partner and, in connection therewith, to exercise all of the rights and powers conferred upon OILP GP, LLC as the general partner of the Intermediate Partnership pursuant to the Intermediate Partnership Agreement and 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, directly or indirectly, in, any business activities that relate or pertain to the business of gathering, transporting by pipeline, railcar, marine vessel or other form of transportation, processing or storing natural gas (either in gaseous or liquid form), crude oil, refined petroleum products, liquefied petroleum gases, coal slurry or similar activities, that is approved by the General Partner, and in any event to conduct, directly or indirectly, any business activities that 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, (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 the General Partner 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 the making of capital contributions or loans to the Intermediate Partnership (including, without limitation,

 

25

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 General Partner 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. !

Section 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 AND ISSUANCE OF PARTNERSHIP INTERESTS

Section 4.1 Prior Contributions.

On the Closing Date, pursuant to the Conveyance Agreement, the prior general partners contributed and transferred to the Partnership a 98.9899 percentage interest in the Intermediate Partnership in exchange for continuation of each general partner’s Percentage Interest as a general partner in the Partnership and for the other Partnership Securities specified in the Conveyance Agreement. Since the Closing Date, the Partnership has issued other Partnership Securities (including the Class B Units), and the subordinated units that were originally issued on the Closing Date have converted into Common Units. In addition, pursuant to and as of the date of the IP Restructuring Agreement, OILP GP, LLC has become the general partner of the Intermediate Partnership and owns a 0.01% general partner interest in the Intermediate Partnership and the general partner interest in the Intermediate Partnership held by OPGP was converted into a limited partner interest in the Intermediate Partnership and contributed to the Partnership in consideration for an increase to 2.0% in the General Partner Percentage Interest held by OPGP. As of the date of this Agreement, the only outstanding Partnership Securities are Common Units, Class B Units and the General Partner Percentage Interest.

Section 4.2 Issuances of Additional Partnership Securities.

(a) The General Partner is hereby authorized to cause the Partnership to issue additional Partnership Securities, or classes or series thereof, and options, rights, warrants and appreciation rights relating to the Partnership Securities for any Partnership purpose at any time and from time to time to such Persons for such consideration and on such terms and conditions as the General Partner shall determine, all without the approval of any Limited Partners (subject to this Section 4.2).

(b) Each additional Partnership Security authorized to be issued by the Partnership pursuant to Section 4.2(a) may be issued in one or more classes, or one or more series of any such classes, with such designations, preferences, rights, powers and duties (which, subject to Section 4.2(d), may be senior to existing classes and series of Partnership Securities), as shall be

 

26

fixed by the General Partner, including (i) the right to share in Partnership profits and losses or items thereof; (ii) the right to share in Partnership distributions; (iii) the rights upon dissolution and liquidation of the Partnership; (iv) whether, and the terms and conditions upon which, the Partnership may or shall be required to redeem the Partnership Security (including sinking fund provisions); (v) whether such Partnership Security is issued with the privilege of conversion or exchange and, if so, the terms and conditions of such conversion or exchange; (vi) the terms and conditions upon which each Partnership Security will be issued, evidenced by certificates and assigned or transferred; (vii) the method for determining the Percentage Interest as to such Partnership Security; and (viii) the right, if any, of each such Partnership Security to vote on Partnership matters, including matters relating to the relative rights, preferences and privileges of such Partnership Security.

(c) The General Partner shall take all actions that it determines to be necessary or appropriate in connection with (i) each issuance of Partnership Securities and options, rights, warrants and appreciation rights relating to Partnership Securities pursuant to this Section 4.2, (ii) the conversion of any of the General Partner Percentage Interest into Units pursuant to the terms of this Agreement, (iii) the admission of Additional Limited Partners and (iv) all additional issuances of Partnership Securities. The General Partner shall determine the relative rights, powers and duties of the holders of the Units or other Partnership Securities being so issued. The General Partner is authorized and directed to do all things that it determines to be necessary or appropriate in connection with any future issuance of Partnership Securities or in connection with the conversion of any of the General Partner Percentage Interest into Units pursuant to the terms of this Agreement, including compliance with any statute (including the Delaware Act), 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 or admitted to trading.

(d) Notwithstanding the terms of Sections 4.2(a), 4.2(b) and 4.2(c) 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) 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; and

(ii) Upon the issuance of any Partnership Securities by the Partnership or the making of any other Capital Contributions to the Partnership, the General Partner shall be required to make additional Capital Contributions to the Partnership such that the General Partner shall at all times have a balance in its Capital Account with respect to its General Partner Percentage Interest equal to, in the aggregate, 2% of the total positive Capital Account balances of all Partners.

Section 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 the issuance of any Partnership Security, whether unissued, held in the treasury or hereafter created. The General Partner shall have the right, which it may

 

27

from time to time assign in whole or in part to any of its Affiliates, to purchase Partnership Securities from the Partnership whenever, and on the same terms that, the Partnership issues Partnership Securities to Persons other than the General Partner and its Affiliates, to the extent necessary to maintain the Percentage Interests of the General Partner and its Affiliates equal to that which existed immediately prior to the issuance of such Partnership Securities.

Section 4.4 Capital Accounts.

(a) The Partnership shall maintain for each Partner (or a beneficial owner of Partnership Interests 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 General Partner) 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 and (ii) all items of Partnership income and gain (including 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 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 which is to be allocated pursuant to Article V and is 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 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 General Partner based upon the provisions of the applicable Group Member Agreement or the Northern Border Pipeline Partnership Agreement) of all property owned by any other Group Member that is classified as a partnership for federal income tax purposes or 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 that 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. To the

 

28

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 in the Capital Accounts shall be treated as an item of gain or loss.

(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 method that the General Partner may adopt.

(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) 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.

(d) (i) In accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(f), on an issuance of additional Partnership Interests for cash or Contributed Property, the issuance of Partnership Interests as consideration for the provision of services or the conversion of a General Partner’s Combined 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

 

29

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 cash or cash equivalents) immediately prior to the issuance of additional Partnership Interests shall be determined by the General Partner using such method of valuation as it may adopt; provided , however , that the General Partner, in arriving at such valuation, must take fully into account the fair market value of the Partnership Interests of all Partners at such time. The General Partner shall allocate such aggregate value among the assets of the Partnership (in such manner as it determines) 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 all 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, in the case of a liquidating distribution pursuant to Section 14.4, be determined and allocated by the Liquidator using such reasonable method of valuation as it may adopt.

Section 4.5 Splits and Combinations.

(a) Subject to Sections 4.5(d), 5.6 and 9.5 (dealing with adjustments of distribution levels), the Partnership may make a Pro Rata distribution of Partnership Securities to all Record Holders or may effect a subdivision or combination of Partnership Securities so long as, after any such event, each Partner shall have the same Percentage Interest in the Partnership as before such event (subject to adjustment for cash paid in lieu of fractional Partnership Securities) and any amounts calculated on a per Unit basis or stated as a number of Units are proportionately adjusted.

(b) Whenever such a distribution, subdivision or combination of Partnership Securities is declared, the General Partner shall select a Record Date as of which the distribution, subdivision or combination shall be effective and shall send notice thereof at least 20 days prior to such Record Date to each Record Holder as of a date not less than 10 days prior to the date of such notice. The General Partner also may cause a firm of independent public accountants selected by it to calculate the number of Partnership Securities to be held by each Record Holder after giving effect to such distribution, subdivision or combination. The General Partner shall be entitled to rely on any certificate provided by such firm as conclusive evidence of the accuracy of such calculation.

 

30

(c) Promptly following any such distribution, subdivision or combination, the General Partner may cause Certificates to be issued to the Record Holders of Partnership Securities as of the applicable Record Date representing the new number of Partnership Securities held by such Record Holders, or the General Partner may adopt such other procedures that it determines to be necessary or appropriate to reflect such changes. If any such combination results in a smaller total number of Partnership Securities Outstanding, the General Partner 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 this Section 4.5(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).

Section 4.6 Fully Paid and Non-Assessable Nature of Limited Partner Interests.

All Limited Partner Interests issued pursuant to, and in accordance with the requirements of, this Article IV shall be fully paid and non-assessable Limited Partner Interests in the Partnership, except as such non-assessability may be affected by Section 17-607 of the Delaware Act.

Section 4.7 Interest and Withdrawal.

No interest shall be paid by the Partnership on Capital Contributions or on balances in Partners’ Capital Accounts. No Partner or Assignee shall be entitled to the withdrawal or return of its Capital Contribution, except to the extent, if any, that distributions made pursuant to this Agreement or upon termination of the Partnership may be considered as such by law and then only to the extent provided for in this Agreement. Except to the extent expressly provided in this Agreement, no Partner or Assignee shall have priority over any other Partner or Assignee either as to the return of Capital Contributions or as to profits, losses or distributions. Any such return shall be a compromise to which all Partners and Assignees agree within the meaning of Section 17-502(b) of the Delaware Act.

Section 4.8 Establishment of Class B Units .

(a) General . Prior to the Effective Date, the Partnership Policy Committee designated and created a class of Units designated as “Class B Units” and consisting of a total of 36,494,126 Class B Units, and fixed the designations, preferences and relative, participating, optional or other special rights, power and duties of holders of the Class B Units as set forth in this Section 4.8.

 

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(b) Rights Associated with Class B Units . During the period commencing upon issuance of the Class B Units and ending upon the conversion of the Class B Units as set forth in Section 4.8(f), unless amended pursuant to Section 4.9 or Section 4.10:

(i) subject to the provisions of Section 5.1(d)(iii)(A), and unless clauses (ii), (iii), or (iv) below require a different allocation pursuant to Section 5.1(c)(i) or otherwise, all items of Partnership income, gain, loss, deduction and credit shall be allocated to the Class B Units to the same extent as such items would be so allocated if such Class B Units were Common Units that were then Outstanding;

(ii) Notwithstanding anything to the contrary in Section 5.4, with respect to distributions made in accordance with Section 5.4 for calendar quarters ending on or prior to the expiration of the Class B Subordination Period, the Class B Units shall be deemed Units, but not Common Units, for such purposes and, in addition, the holders of Class B Units shall have the right to share in Partnership quarterly cash distributions in accordance with Section 5.4, provided , that following any distribution pursuant to Section 5.4(b) and prior to any distribution pursuant to Section 5.4(c), Available Cash shall be distributed as follows:

(A) 98% to the holders of Class B Units, Pro Rata, and 2% to the General Partner until there has been distributed in respect of each Class B Unit Outstanding as of the last day of such quarter an amount equal to the Minimum Quarterly Distribution; and

(B) then, 98% to the holders of Class B Units, Pro Rata, and 2% to the General Partner until there has been distributed in respect of each Class B Unit Outstanding as of the last day of such quarter an amount equal to the Cumulative Class B Unit Arrearage, if any, existing with respect to such quarter.

(iii) The holders of Class B Units shall have the right to share in Partnership quarterly cash distributions for quarters ending after the expiration of the Class B Subordination Period in accordance with Section 5.4 hereof as if such holders of Class B Units held Common Units and, in addition, notwithstanding anything to the contrary set forth in Section 5.4, if a Cumulative Class B Unit Arrearage exists on the date of the expiration of the Class B Subordination Period, prior to any distribution pursuant to Section 5.4(c), irrespective of whether any such Class B Units are then Outstanding, Available Cash shall be distributed in accordance with Section 4.8(b)(ii)(B) hereof to each holder of record of the applicable Class B Units as of the expiration of the Class B Subordination Period. This distribution shall not be deemed a distribution on a Common Unit, but the satisfaction of prior entitlements of the holders of Class B Units as of the expiration of the Class B Subordination Period. For the taxable year in which such distribution is made, if not previously allocated, each Person receiving such cash distribution shall be allocated items of gross income in an amount equal to such distribution as provided in Section 5.1(d)(iii)(A).

(iv) Notwithstanding anything to the contrary in Section 5.1(c)(i), during the Class B Subordination Period the Class B Units shall be treated as Common Units then

 

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Outstanding for purposes of Section 5.1(c)(i), and, in addition, following any allocation made pursuant to Section 5.1(c)(i)(B) and before an allocation is made pursuant to Section 5.1(c)(i)(C), any remaining Net Termination Gain shall be allocated 98% to the holders of the Class B Units, Pro Rata, and 2% to the General Partner until each such holder of a Class B Unit has been allocated Net Termination Gain equal to any then existing Cumulative Class B Unit Arrearage with respect to such Class B Unit.

(c) Voting Rights . Unless amended pursuant to Section 4.9 or Section 4.10, during the Class B Subordination Period, the Class B Units are non-voting (and solely for purposes of calculating votes and determining the presence of a quorum under this Agreement, none of the Class B Units shall be deemed Outstanding), except that the Class B Units shall be entitled to vote as a separate class on any matter that adversely affects the rights or preferences of the Class B Units in relation to other classes of Partnership Interests or as required by law. The approval of a majority of the Class B Units shall be required to approve any matter for which the holders of the Class B Units are entitled to vote as a separate class and, upon expiration of the Class B Subordination Period, the Class B Units will have such voting rights pursuant to the Partnership Agreement as such Class B Units would have if they were Common Units that were then Outstanding except that, with respect to the Conversion Approval or Amendment Approval, none of the Class B Units shall be deemed Outstanding as of the record date for such vote or be entitled to vote. Each Class B Unit will be entitled to the number of votes equal to the number of Common Units into which a Class B Unit is convertible at the time of the record date for the vote or written consent on the matter.

(d) Certificates . The Class B Units are evidenced by certificates in the form previously approved by the Partnership Policy Committee and, subject to the satisfaction of any applicable legal and regulatory requirements, may be assigned or transferred in a manner identical to the assignment and transfer of other Units. The Class B Unit Certificates include the restrictive legend set forth below:

THE UNITS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW (“ACTS”). THE UNITS HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE UNITS UNDER THE ACTS OR AN OPINION OF COUNSEL SATISFACTORY TO THE PARTNERSHIP THAT SUCH REGISTRATION IS NOT REQUIRED.

(e) Registrar and Transfer Agent . OPGP will act as registrar and transfer agent of the Class B Units.

(f) Conversion . Except as provided in this Section 4.8(f), the Class B Units are not convertible into Common Units.

(i) Optional Conversion . The General Partner shall cause the Partnership, as promptly as practicable following the issuance of any Class B Units, to take such actions as may be necessary or appropriate to submit to a vote or consent of its Unitholders the

 

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approval of a change in the terms of the Class B Units to provide that each Class B Unit shall be convertible from time to time, at the option of the holders thereof, into one Common Unit (subject to appropriate adjustment in the event of any split-up, combination or similar event affecting the Common Units that occurs prior to the conversion of the Class B Units), effective upon approval of the issuance of additional Common Units in accordance with the following sentence (the “ Conversion Approval ”). The vote or consent required for such approval will be the requisite vote required under the rules or staff interpretations of the National Securities Exchange on which the Common Units are listed or admitted for trading for the listing or addition to trading of the Common Units that would be issued upon such conversion, excluding those Units held by ONEOK and its Affiliates. Upon receipt of the required vote or consent (the date of such approval, the “ Conversion Approval Date ”), the terms of the Class B Units will be changed, automatically and without further action, so that each Class B Unit may be converted, at the option of the holder thereof, into one Common Unit (subject to appropriate adjustment in the event of any split-up, combination or similar event affecting the Common Units that occurs prior to the conversion of the Class B Units).

(ii) Automatic Conversion . The General Partner shall cause the Partnership, as promptly as practicable following the issuance of any Class B Units, to take such actions as may be necessary or appropriate to submit to a vote or consent of holders of at least 66  ² / 3 % of the Outstanding Units (excluding those Units held by ONEOK and its Affiliates) and otherwise as required by Section 15.2 of this Agreement, the amendments to the Agreement described on Annex A to this Agreement (the approval of such amendment, the “ Amendment Approval ,” and the date of obtaining the Amendment Approval, the “ Amendment Approval Date ”). Subject to Section 4.10, each Class B Unit shall automatically convert into one Common Unit (subject to appropriate adjustment in the event of any split-up, combination or similar event affecting the Common Units that occurs prior to the conversion of the Class B Units) upon receipt of:

(A) Conversion Approval as set forth above in paragraph (i); and

(B) Amendment Approval as set forth above in this paragraph (ii);

and immediately thereafter, none of the Class B Units shall be outstanding.

(iii) Quarterly Cash Distributions . Each Common Unit into which a Class B Unit has been converted as provided in this Section 4.8(f) shall have the right to share in any Partnership quarterly cash distributions made in respect of a Common Unit in accordance with Section 5.4 hereof (including, without limitation and not withstanding anything to the contrary contained in this Agreement, the right to any distributions of amounts in respect of Cumulative Common Unit Arrearages in respect of a Common Unit).

Section 4.9 Amendment of Terms of Class B Units if Unitholder Approval is not Obtained .

(a) Subject to Section 4.9(b), unless both (1) the Conversion Approval has been obtained by April 6, 2007 and (2) the Amendment Approval has been obtained by April 6, 2007

 

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then, unless the provisions of Section 4.10 shall already be in effect, effective as of April 7, 2007 (the “ Class B Distribution Increase Date ”) until amended by the provisions of Section 4.10, Sections 4.8(b) and 4.8(c) hereof will be deemed to be amended in their entirety, automatically and without further action, as follows:

 

“(b)

Rights Associated with Class B Units . Prior to the conversion of all of the Class B Units pursuant to Section 4.8(f) above:

 

(i)

subject to the provisions of Section 5.1(d)(iii)(A) and paragraphs (ii) and (iii) below, all items of Partnership income, gain, loss, deduction and credit shall be allocated to the Class B Units to the same extent such items would be allocated if such Class B Units were Common Units then Outstanding, and the allocations to Class B Units shall have the same order of priority relative to allocations on the Common Units;

 

(ii)

(A) notwithstanding anything to the contrary in Section 5.4, the Class B Units shall be deemed Units, but not Common Units, for purposes of Section 5.4 and the Class B Units shall have the right to share in Partnership quarterly cash distributions in accordance with Section 5.4 based on 115% of the amount of any Partnership distribution that would be made to each Common Unit so that the amount of any Partnership distribution to each Class B Unit will equal 115% of the amount of such distribution to each Common Unit (such additional 15% pro rated for the quarter in which the Class B Distribution Increase Date occurs), provided , however , that following any distribution pursuant to Section 5.4(b) and prior to any distribution pursuant to Section 5.4(c), Available Cash shall be distributed as follows:

 

(1)

98% to the holders of Class B Units and 2% to the General Partner, until there has been distributed in respect of each Class B Unit Outstanding as of the last day of such quarter an amount equal to 115% of the Minimum Quarterly Distribution; and

 

(2)

then, 98% to the holders of Class B Units and 2% to the General Partner, until there has been distributed in respect of each Class B Unit Outstanding as of the last day of such quarter an amount equal to the Cumulative Class B Unit Arrearage, if any, existing with respect to such quarter.

 

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(B) notwithstanding anything to the contrary contained in Section 5.4, if a Cumulative Class B Unit Arrearage exists on the date of the expiration of the Class B Subordination Period, prior to any distribution pursuant to Section 5.4(c), irrespective of whether any such Class B Units are then Outstanding, Available Cash shall be distributed 98% to the holders of record of the applicable Class B Units as of the expiration of the Class B Subordination Period and 2% to the General Partner, until there has been distributed in respect of each Class B Unit an amount equal to the Cumulative Class B Unit Arrearage, if any, existing with respect to such quarter. This distribution shall not be deemed a distribution on a Common Unit, but the satisfaction of prior entitlements of the holders of Class B Units as of the expiration of the Class B Subordination Period. For the taxable year in which such distribution is made, if not previously allocated, each Person receiving such cash distribution shall be allocated items of gross income in an amount equal to such distribution as provided in Section 5.1(d)(iii)(A); and

 

(iii)

the Class B Units shall have rights upon dissolution and liquidation of the Partnership, including the right to share in any liquidating distributions, that are based on 115% of the liquidating distributions that would be made to the Common Units so that the amount of any liquidating distribution to each Class B Unit will equal 115% of the amount of such distribution to each Common Unit, and, in addition, following any allocation made pursuant to Section 5.1(c)(i)(B) and before an allocation is made pursuant to Section 5.1(c)(i)(C), any remaining Net Termination Gain shall be allocated 98% to the holders of the Class B Units and 2% to the General Partner, until each such holder of a Class B Unit has been allocated Net Termination Gain equal to any then existing Cumulative Class B Unit Arrearage with respect to such Class B Unit, and accordingly, notwithstanding anything to the contrary in this Agreement, prior to any distribution under Section 14.4, the Capital Account of each Partner shall be adjusted to give effect to the foregoing liquidation rights.

 

(c)

Voting Rights . The Class B Units shall have such voting rights as such Class B Units would have if they were Common Units that were then Outstanding except that, with respect to the Conversion Approval or Amendment Approval, none of the Class B Units shall be deemed Outstanding as of the record date for such vote or be entitled to vote. Each Class B Unit will be entitled to the number of

 

36

votes equal to the number of Common Units into which a Class B Unit is convertible at the time of the record date for the vote or written consent on the matter.”

(b) Notwithstanding Section 4.9(a), if (1) the Conversion Approval is obtained on or before April 6, 2007, but (2) the Amendment Approval is not obtained on or before April 6, 2007;

then, unless the provisions of Section 4.10 shall already be in effect, effective as of the next succeeding day (the “ Section 4.9(b) Distribution Increase Date ”) until amended by the provisions of Section 4.4, Sections 4.8(b) and 4.8(c) hereof will be deemed to be amended in their entirety, automatically and without further action, as follows:

 

“(b)

Rights Associated with Class B Units . Prior to the conversion of all of the Class B Units pursuant to Section 4.8(f) above:

 

(i)

subject to the provisions of Section 5.1(d)(iii)(A) and paragraphs (ii) and (iii) below, all items of Partnership income, gain, loss, deduction and credit shall be allocated to the Class B Units to the same extent such items would be allocated if such Class B Units were Common Units then Outstanding, and the allocations to Class B Units shall have the same order of priority relative to allocations on the Common Units;

 

(ii)

(A) the Class B Units shall have the right to share in Partnership quarterly cash distributions based on 115% of the amount of any Partnership distribution that would be made to each Common Unit so that the amount of any Partnership distribution to each Class B Unit will equal 115% of the amount of such distribution to each Common Unit (such additional 15% pro rated for the quarter in which the Class B Distribution Increase Date occurs), and the right of holders of Class B Units to receive distributions shall have the same order of priority relative to distributions on the Common Units; and

(B) notwithstanding anything to the contrary contained in Section 5.4, if a Cumulative Class B Unit Arrearage existed on the date of the expiration of the Class B Subordination Period, prior to any distribution pursuant to Section 5.4(d), irrespective of whether any such Class B Units are then Outstanding, Available Cash shall be distributed 98% to the holders of record of the applicable Class B Units as of the expiration of the Class B Subordination Period and 2% to the General Partner, until there has been distributed in respect of each Class B Unit an amount equal to the

 

37

Cumulative Class B Unit Arrearage, if any, existing with respect to such quarter. This distribution shall not be deemed a distribution on a Common Unit, but the satisfaction of prior entitlements of the holders of Class B Units as of the expiration of the Class B Subordination Period. For the taxable year in which such distribution is made, if not previously allocated, each Person receiving such cash distribution shall be allocated items of gross income in an amount equal to such distribution as provided in Section 5.1(d)(iii)(A); and

 

(iii)

the Class B Units shall have rights upon dissolution and liquidation of the Partnership, including the right to share in any liquidating distributions, that are based on 115% of the liquidating distributions that would be made to the Common Units so that the amount of any liquidating distribution to each Class B Unit will equal 115% of the amount of such distribution to each Common Unit, and, in addition, following any allocation made pursuant to Section 5.1(c)(i)(B) and before an allocation is made pursuant to Section 5.1(c)(i)(C), any remaining Net Termination Gain shall be allocated 98% to the holders of the Class B Units and 2% to the General Partner, until each such holder of a Class B Unit has been allocated Net Termination Gain equal to any then existing Cumulative Class B Unit Arrearage with respect to such Class B Unit, and accordingly, notwithstanding anything to the contrary in this Agreement, prior to any distribution under Section 14.4, the Capital Account of each Partner shall be adjusted to give effect to the foregoing liquidation rights.

 

(c)

Voting Rights . The Class B Units will have such voting rights pursuant to the Partnership Agreement as such Class B Units would have if they were Common Units that were then Outstanding except that, with respect to the Conversion Approval or Amendment Approval, none of the Class B Units shall be deemed Outstanding as of the record date for such vote or be entitled to vote. Each Class B Unit will be entitled to the number of votes equal to the number of Common Units into which a Class B Unit is convertible.”

(c) If a Class B Distribution Increase Date or Section 4.9(b) Distribution Increase Date has occurred and the Partnership’s Unitholders thereafter either (1) obtain the Conversion Approval and the Amendment Approval, or (2) any of the Class B Units are converted into Common Units pursuant to Section 4.8(f)(i), then, unless the provisions of Section 4.10 shall already be in effect, (i) with respect to the matters described in sub-clause (1) above, as of the later of the Conversion Approval Date and the Amendment Approval Date, all Class B Units

 

38

shall automatically, and without further action of the holder(s) thereof, be converted into Common Units in accordance with Section 4.8(f)(ii), and (ii) with respect to matters described in sub-clauses (1) and (2) above for the quarter in which such conversion occurs, concurrently with the distribution made in accordance with Article V of this Agreement of Available Cash, with respect to the quarter in which the conversion of the Class B Units is effected, a distribution shall be paid to each holder of record of the applicable Class B Units as of the effective date of such conversion, with the amount of such distribution for each such Class B Unit to be equal to the product of (a) 15% of the amount to be distributed in respect of such quarter to each Common Unit times (it being agreed that each such Common Unit issued upon conversion shall be entitled to the full distribution payable to the holder of a Common Unit) and (b) a fraction, of which (A) the numerator is the number of days in such quarter up to but excluding the date of such conversion, and (B) the denominator is the total number of days in such quarter (the foregoing amount being referred to as an “ Excess Payment ”). For the taxable year in which an Excess Payment is made, each holder of a Class B Unit shall be allocated items of gross income with respect to such taxable year in an amount equal to the Excess Payment distributed to it as provided in Section 5.1(d)(iii)(A).

Section 4.10 Amendment of Terms of Class B Units Upon Removal of the General Partner .

(a) If prior to the conversion of all Class B Units, a resolution of the Limited Partners holding the requisite majority of Outstanding Units is passed approving the removal of any Affiliate of ONEOK as the general partner of the Partnership (a “ GP Removal Event ”) and the Conversion Approval has not been obtained, then notwithstanding Section 4.9, automatically and without further action and, effective as of the next succeeding day (the “ GP Removal Date ”), Section 4.8(f)(ii) shall be deemed to be deleted in its entirety, automatically and without further action, and Sections 4.8(b) and 4.8(c) hereof will be deemed to be amended in their entirety, automatically and without further action, as follows:

 

“(b)

Rights Associated with Class B Units . Prior to the conversion of the Class B Units as set forth in Section 4.8(f) hereof:

 

(i)

subject to the provisions of Section 5.1(d)(iii)(A) and paragraphs (ii) and (iii) below, all items of Partnership income, gain, loss, deduction and credit shall be allocated to the Class B Units to the same extent as such items would be allocated if such Class B Units were Common Units then Outstanding, and the allocations to Class B Units shall have the same order of priority relative to allocations on the Common Units; and

 

(ii)

(A) notwithstanding anything to the contrary in Section 5.4, the Class B Units shall be deemed Units, but not Common Units, for purposes of Section 5.4 and the Class B Units shall have the right to share in Partnership quarterly cash distributions in accordance with Section 5.4 hereof based on 125% of the amount of any Partnership distribution that would be made to each Common Unit so that the amount of

 

39

any Partnership distribution to each Class B Unit will equal 125% of the amount of such distribution to each Common Unit (such additional 25% pro rated for the quarter in which the GP Removal Date occurs), provided , however , that following any distribution pursuant to Section 5.4(b) and prior to any distribution pursuant to Section 5.4(c), Available Cash shall be distributed as follows:

 

(1)

98% to the holders of Class B Units and 2% to the General Partner, until there has been distributed in respect of each Class B Unit Outstanding as of the last day of such quarter an amount equal to 125% of the Minimum Quarterly Distribution; and

 

(2)

then, 98% to the holders of Class B Units and 2% to the General Partner, until there has been distributed in respect of each Class B Unit Outstanding as of the last day of such quarter an amount equal to the Cumulative Class B Unit Arrearage, if any, existing with respect to such quarter.

(B) notwithstanding anything to the contrary in Section 5.4, if a Cumulative Class B Unit Arrearage exists on the date of the expiration of the Class B Subordination Period, prior to any distribution pursuant to Section 5.4(c), irrespective of whether any such Class B Units are then Outstanding, Available Cash shall be distributed 98% to the holders of record of the applicable Class B Units as of the expiration of the Class B Subordination Period and 2% to the General Partner, until there has been distributed in respect of each Class B Unit an amount equal to the Cumulative Class B Unit Arrearage, if any, existing with respect to such quarter. This distribution shall not be deemed a distribution on a Common Unit, but the satisfaction of prior entitlements of the holders of Class B Units as of the expiration of the Class B Subordination Period. For the taxable year in which such distribution is made, if not previously allocated, each Person receiving such cash distribution shall be allocated items of gross income in an amount equal to such distribution as provided in Section 5.1(d)(iii)(A); and

 

(iii)

the Class B Units shall have rights upon dissolution and liquidation of the Partnership, including the right to share in any liquidating distributions, that are based on 125% of the liquidating distributions that would be made to the Common Units so that the amount of any liquidating

 

40

distribution to each Class B Unit will equal 125% of the amount of such distribution to each Common Unit, and, in addition, following any allocation made pursuant to Section 5.1(c)(i)(B) and before an allocation is made pursuant to Section 5.1(c)(i)(C), any remaining Net Termination Gain shall be allocated 98% to the holders of the Class B Units and 2% to the General Partner, until each such holder of a Class B Unit has been allocated Net Termination Gain equal to any then existing Cumulative Class B Unit Arrearage with respect to such Class B Unit, and accordingly, notwithstanding anything to the contrary in this Agreement, prior to any distribution under Section 14.4, the Capital Account of each Partner shall be adjusted to give effect to the foregoing liquidation rights.

 

(c)

Voting Rights . The Class B Units will have such voting rights pursuant to the Partnership Agreement as such Class B Units would have if they were Common Units that were then Outstanding except that, (i) for the purposes of the definition of “Outstanding” such Class B Units shall be deemed to be “Units,” but not “Common Units,” for all purposes thereof and (ii) with respect to the Conversion Approval (if not already obtained), none of the Class B Units shall be deemed Outstanding as of the record date for such vote or be entitled to vote. Each Class B Unit will be entitled to one vote on each matter with respect to which such Class B Unit is entitled to be voted.”

(b) If the Conversion Approval has been obtained and a GP Removal Event occurs, then notwithstanding Section 4.9, automatically and without further action and, effective as of the GP Removal Date, Section 4.8(f)(ii) shall be deemed to be deleted in its entirety, automatically and without further action, and Sections 4.8(b) and 4.8(c) hereof will be deemed to be amended in their entirety, automatically and without further action, as follows:

 

“(b)

Rights Associated with Class B Units . Prior to the conversion of the Class B Units as set forth in Section 4.8(f) hereof:

 

(i)

subject to the provisions of Section 5.1(d)(iii)(A) and paragraphs (ii) and (iii) below, all items of Partnership income, gain, loss, deduction and credit shall be allocated to the Class B Units to the same extent as such items would be allocated if such Class B Units were Common Units then Outstanding, and the allocations to Class B Units shall have the same order of priority relative to allocations on the Common Units; and

 

(ii)

(A) the Class B Units shall have the right to share in Partnership quarterly cash distributions based on 125% of

 

41

the amount of any Partnership distribution that would be made to each Common Unit so that the amount of any Partnership distribution to each Class B Unit will equal 125% of the amount of such distribution to each Common Unit (such additional 25% pro rated for the quarter in which the GP Removal Date occurs), and the right of holders of Class B Units to receive distributions shall have the same order of priority relative to distributions on the Common Units; and,

(B) notwithstanding anything to the contrary in Section 5.4, if a Cumulative Class B Unit Arrearage existed on the date of the expiration of the Class B Subordination Period, prior to any distribution pursuant to Section 5.4(c), irrespective of whether any such Class B Units are then Outstanding, Available Cash shall be distributed 98% to the holders of record of the applicable Class B Units as of the expiration of the Class B Subordination Period and 2% to the General Partner, until there has been distributed in respect of each Class B Unit an amount equal to the Cumulative Class B Unit Arrearage, if any, existing with respect to such quarter. This distribution shall not be deemed a distribution on a Common Unit, but the satisfaction of prior entitlements of the holders of Class B Units as of the expiration of the Class B Subordination Period. For the taxable year in which such distribution is made, if not previously allocated, each Person receiving such cash distribution shall be allocated items of gross income in an amount equal to such distribution as provided in Section 5.1(d)(iii)(A); and

 

(iii)

the Class B Units shall have rights upon dissolution and liquidation of the Partnership, including the right to share in any liquidating distributions, that are based on 125% of the liquidating distributions that would be made to the Common Units so that the amount of any liquidating distribution to each Class B Unit will equal 125% of the amount of such distribution to each Common Unit, and, in addition, following any allocation made pursuant to Section 5.1(c)(i)(B) and before an allocation is made pursuant to Section 5.1(c)(i)(C), any remaining Net Termination Gain shall be allocated 98% to the holders of the Class B Units and 2% to the General Partner, until each such holder of a Class B Unit has been allocated Net Termination Gain equal to any then existing Cumulative Class B Unit Arrearage with respect to such Class B Unit, and accordingly, notwithstanding anything to the contrary

 

42

in this Agreement, prior to any distribution under Section 14.4, the Capital Account of each Partner shall be adjusted to give effect to the foregoing liquidation rights.

 

(c)

Voting Rights . The Class B Units will have such voting rights pursuant to the Partnership Agreement as such Class B Units would have if they were Common Units that were then Outstanding except that, for the purposes of the definition of “Outstanding” such Class B Units shall be deemed to be “Units”, but not “Common Units” for all purposes thereof. Each Class B Unit will be entitled to one vote on each matter with respect to which such Class B Unit is entitled to be voted.”

(c) If a GP Removal Event has occurred and any of the Class B Units are converted into Common Units pursuant to Section 4.8(f)(i), then, for the quarter in which such conversion occurs, concurrently with the distribution made in accordance with Article V of the Partnership Agreement of Available Cash, with respect to the quarter in which the conversion of the Class B Units is effected, a distribution shall be paid to each holder of record of the applicable Class B Units as of the effective date of such conversion, with the amount of such distribution for each such Class B Unit to be equal to the product of (a) 25% of the amount to be distributed in respect of such quarter to each Common Unit times (it being agreed that each such Common Unit issued upon conversion shall be entitled to the full dividend payable to the holder of a Common Unit) (b) a fraction, of which (i) the numerator is the number of days in such quarter up to but excluding the date of such conversion, and (ii) the denominator is the total number of days in such quarter (the foregoing amount being referred to as an “ Excess Payment ”). For the taxable year in which an Excess Payment is made, each holder of a Class B Unit shall be allocated items of gross income with respect to such taxable year in an amount equal to the Excess Payment distributed to it as provided in Section 5.1(d)(iii)(A).

Section 4.11 Change of New York Stock Exchange Rules or Interpretations .

If at any time (a) the rules of the National Securities Exchange on which the Common Units are listed or admitted to trading or the staff interpretations of such rules are changed, or (b) facts and circumstances arise, in either case, so that the Conversion Approval is no longer required as a condition to the listing of the Common Units that would be issued upon any conversion of any Class B Units into Common Units as provided in Section 4.8(f)(i) hereof as determined by the General Partner (the date that the General Partner makes such determination, the “ Conversion Approval Termination Date ”) and the Amendment Approval has been obtained, then, unless the provisions of Section 4.10 shall already be in effect, the terms of such Class B Units will be changed so that each such Class B Unit is converted (without further action or any vote of any securityholders of the Partnership) into one Common Unit (subject to appropriate adjustment in the event of any split-up, combination or similar event affecting the Common Units).

 

43

ARTICLE V

ALLOCATIONS AND DISTRIBUTIONS

Section 5.1 Allocations for Capital Account Purposes.

For purposes of maintaining the Capital Accounts and 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 herein below.

(a) Net Income . After giving effect to the special allocations set forth in Section 5.1(d), Net Income for each taxable year and all items of income, gain, loss and deduction taken into account in computing Net Income for such taxable year shall be allocated as follows:

(i) First , 100% to the General Partner until the aggregate Net Income allocated 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 pursuant to Section 5.1(b)(iii) for all previous taxable years;

(ii) Second , 100% to the General Partner and the Unitholders, 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 Partner and the Unitholders, in accordance with their respective Percentage Interests.

(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 Partner and the Unitholders, 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; provided , that the Net Losses shall not be allocated pursuant to this Section 5.1(b)(i) to the extent that such allocation would cause any Unitholder to have a deficit balance in its Adjusted Capital Account at the end of such taxable year (or increase any existing deficit balance in its Adjusted Capital Account);

(ii) Second , 100% to the General Partner and the Unitholders, in proportion to, and to the extent of, the positive balances in their respective Adjusted Capital Accounts; and

 

44

(iii) Third , the balance, if any, 100% to the General Partner.

(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 Sections 5.4 and 5.5 have been made; provided , however , that solely for purposes of this Section 5.1(c), Capital Accounts shall not be adjusted for distributions made pursuant to Section 14.4.

(i) If a Net Termination Gain is recognized (or deemed recognized pursuant to Section 4.4(d)), such Net Termination Gain shall be allocated among the Partners in the following manner (and the 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 Capital Account, in the proportion that such deficit balance bears to the total deficit balances in the Capital Accounts of all Partners, until each s