Filed On 7/15/94 ˇ SEC File 70-08447 ˇ Accession Number 23738-94-47
As Of Filer Filing On/For/As Docs:Pgs
7/15/94 Consolidated Natural Gas Co/VA U-1 6:85
Application or Declaration ˇ Form U-1
Filing Table of Contents
Document/Exhibit Description Pages Size
1: U-1 Application or Declaration 18 52K
2: EX-99 Miscellaneous Exhibit 3 16K
3: EX-99 Miscellaneous Exhibit 26 49K
4: EX-99 Miscellaneous Exhibit 29 103K
5: EX-99 Miscellaneous Exhibit 4 18K
6: EX-99 Miscellaneous Exhibit 5 19K
EX-99 ˇ Miscellaneous Exhibit
EXHIBIT B-1
(Note: Locations of material omitted in this document under a claim for
confidential treatment pursuant to Rule 104(b) are indicated by brackets.)
GENERAL PARTNERSHIP AGREEMENT
(Effective as of June 30, 1994)
between
CNG MARKET CENTER SERVICES, INC.
and
SABINE HUB SERVICES COMPANY
Relating
to the
Formation of
CNG/SABINE CENTER
GENERAL PARTNERSHIP AGREEMENT
_____________________________
General Partnership Agreement ("Agreement") effective as of the 30th day
of June, 1994 ("Effective Date"), entered into between Sabine Hub Services
Company, a Delaware corporation, with an office at 1111 Bagby, Houston, Texas
77002 ("Sabine HSC") and CNG Market Center Services, Inc., a Delaware
corporation, with an office at 445 West Main Street, Clarksburg, West Virginia
26301.
R E C I T A L S
WHEREAS, Sabine HSC is presently a wholly-owned subsidiary of Texaco
Inc.;
WHEREAS, CNG is a wholly-owned subsidiary of CNG Energy Company, which is
a wholly-owned subsidiary of Consolidated Natural Gas Company;
WHEREAS, Sabine HSC and CNG have agreed to proceed with the formation and
operation of a general partnership subject to the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained in
this Agreement, the Partners hereby agree as follows:
1. DEFINITIONS. Capitalized terms used in this Agreement and not otherwise
defined herein shall have the respective meanings set forth below:
1.1 Affiliate. Any Person which, directly or indirectly through one
or more intermediaries, controls or is controlled by or is under common
control with any Partner, whether by virtue of contract, ownership of
equity securities, or otherwise, including, but not limited to: a Parent
of a Partner; a corporation more than fifty percent (50%) of the
outstanding voting stock of which is owned directly or indirectly by a
Partner or a Parent of a Partner; or a corporation more than fifty
percent (50%) of the outstanding voting stock of which is owned directly
or indirectly by a corporation more than fifty percent (50%) of the
outstanding voting stock of which is owned directly or indirectly by a
Partner or by a Parent of a Partner.
1.2 Agreed Value. The fair market value of any property contributed
to the Partnership on the date of such contribution determined by
agreement between the Partners.
1.3 Annual Business Plan. The written document to be prepared and
approved pursuant to Section 3.5.2(a), which shall include, among other
items, (1) a "Capital Budget" setting forth any plan of acquisition,
construction or improvement, including estimated development, general and
administrative, financing and other similar costs and expenses and (2) an
"Operating Budget" setting forth an income statement which includes
estimated revenues and expenses, including operating, general and
administrative, financing and other similar costs, a balance sheet and a
statement of sources and applications of funds.
1.4 Book Capital Account. The capital account maintained for a
Partner for financial accounting purposes pursuant to Section 8.5 of this
Agreement.
1.5 Business Day. A day other than Saturday, Sunday, or an official
state or federal holiday, including any holiday recognized by either
Partner.
1.6 Capital Contribution. All cash and the Agreed Value of other
property contributed by or on behalf of a Partner to the Partnership
pursuant to this Agreement, on or after the Formation Date.
1.7 Certified Public Accountants. A firm of independent public
accountants selected from time to time by the Management Committee.
1.8 CNG. CNG Market Center Services, Inc., a Delaware corporation.
1.9 Code. The Internal Revenue Code of 1986, as amended.
1.10. Defaulting Partner. A Partner in default of any of its material
obligations hereunder, including without limitation, its failure to make
Capital Contributions or to make available to the Partnership certain
facilities and personnel or to render certain services to the Partnership
as provided in this Agreement.
1.11 FERC. The Federal Energy Regulatory Commission or any commission,
agency or other governmental body succeeding to the powers of such
commission.
1.12 Formation Date. The date as of which the Partnership is formed as
provided in Section 2.1.
1.13 Interest of Partner or Partnership Interest. As to any Partner
all of the interests of that Partner in the Partnership, including
without limitation, its right to a distributive share of profits, losses
and cash flow and its right to participate in the management of the
affairs of the Partnership. Each Partner shall have an equal Partnership
Interest in the Partnership.
1.14 Management Committee. The Management Committee provided for in
Section 3.
1.15 Market Center Activities. Those administrative and other services
which the Management Committee determines from time to time will be
provided by the Partnership to customers or the Partners of the
CNG/Sabine Center.
1.16 Offices. Defined in Section 2.6.
1.17 Parent. Any Person which owns directly or indirectly more than
fifty percent (50%) of the outstanding voting stock of a Partner.
1.18 Partner. Each of the Persons executing this Agreement.
1.19 Partnership. The general partnership created by this Agreement.
1.20 Partnership Interest. Defined in Section 1.13.
1.21 Person. An individual, a corporation, voluntary association,
joint stock company, business trust, partnership or other entity.
1.22 PUHCA. The Public Utility Holding Company Act of 1935, as
amended.
1.23 Regulatory Approvals. The issuance of the following licenses,
certificates, permits, approvals and determinations by applicable
regulatory authorities.
1.23.1 Any approvals or actions by the SEC pursuant to the Public
Utility Holding Company Act of 1935.
1.23.2 All other federal, state, local or municipal governmental
or regulatory permits, licenses, determinations, certificates,
waivers and other approvals as may be necessary in connection with
formation and operation of the Partnership or the participation of
a Partner therein, and the rendering of Market Center Activities,
which are customarily obtained in advance of or necessary to the
rendering of such services.
1.24 Representative. The individual designated by a Partner or
Partners to serve as a member of the Management Committee.
1.25 Required Accounting Practice. The accounting rules and
regulations, if any, at the time prescribed by the regulatory body or
bodies under the jurisdiction of which the Partnership is at the time
operating and, to the extent of matters not covered by such rules and
regulations, generally accepted accounting principles ("GAAP") at the
time prevailing for companies engaged in a business similar to that of
the Partnership.
1.26 SEC. The United States Securities and Exchange Commission or any
commission, agency, or other governmental body succeeding to the powers
of such Commission.
1.27 Software License Agreement. That Software License Agreement
attached hereto and incorporated herein as Schedules A-I and A-II under
which the Partnership is provided with and authorized by Sabine HSC or
CNG, to use the software programs ("Software Programs") described in each
said Software License Agreement in the operation of the CNG/Sabine
Center.
1.28 Tax Capital Account. The capital account maintained by the
Partnership for a Partner for federal income purposes pursuant to Section
12 of this Agreement.
1.29 Tax Matters Partner. The Partner designated as such pursuant to
Section 13.2 of this Agreement.
1.30 Treasury Regulations. The Treasury Regulations promulgated under
the Code.
1.31 Working Capital. As of any date, the Partnership's cash and cash
equivalents.
2. FORMATION AND PURPOSE OF THE GENERAL PARTNERSHIP.
2.1 Formation. The parties hereby agree to associate themselves as a
general partnership pursuant to the Revised Uniform Partnership Act of
the State of Delaware. Formation shall occur on the first day of the
month following final approval or action by the SEC pursuant to the
Public Utility Holding Company Act of 1935, unless the Partners agree to
extend such date by mutual consent.
2.2 Name. The name of the Partnership is the CNG/Sabine Center and
the business of the Partnership shall be conducted in such name.
2.3 Purpose. The purpose of the Partnership is to plan, market and
provide Market Center Activities and provide such further services or
undertake such other activities as may be authorized by the Management
Committee from time to time. [ ]
2.4 Term of Agreement; Duration of Partnership. This Agreement shall
continue in effect, and the Partnership shall continue in existence from
the Formation Date, until the expiration of [ ] years from the
Formation Date (the "Primary Term") unless terminated earlier pursuant to
Section 17. The Partnership shall continue after the expiration of the
Primary Term unless either Partner provides the other Partner with
written notice of its intent not to renew the Partnership (a) not less
than ninety (90) days prior to the end of the Primary Term or (b) at any
time after the Primary Term, on not less than ninety (90) days' prior
written notice. In each such case, the Partnership shall dissolve at the
end of such ninety (90) day notice period.
Notwithstanding any of the foregoing, this Agreement shall
terminate at the option of either party upon written notice to the other
if (i) the SEC fails to grant the Regulatory Approval as provided in
Section 1.23.1; or (ii) the SEC in granting Regulatory Approval requests
or requires any change materially affecting the terms of this Agreement.
2.5 Governmental Applications. The Partners agree to cooperate in
securing any Regulatory Approvals.
2.6 Offices. The place of business of the Partnership shall be 1111
Bagby Street, Houston, Texas 77002, or at such place as the Management
Committee may from time to time designate.
3. MANAGEMENT OF THE PARTNERSHIP
3.1 Personnel. All personnel assigned to the Partnership shall remain
employees of the respective Partners or Affiliates of the Partners, as
appropriate, while on assignment to the Partnership. [
], and shall comply with all applicable rules under PUHCA.
3.2 General Management Structure.
3.2.1 The policies and activities of the Partnership, and the
Annual Business Plan, shall be established and authorized by the
Management Committee to carry out the purpose of this Agreement.
Except as may otherwise be expressly provided in this Agreement,
the Management Committee shall have exclusive authority with
respect to the affairs of the Partnership.
3.2.2 The day-to-day management of the affairs of the
Partnership, including maintenance of the financial and other
records and books of account of the Partnership, shall be the
responsibility of the persons to whom such responsibility has been
delegated, in writing, by the Management Committee.
3.2.3 The business of the Management Committee shall be
conducted at regular or special meetings as provided in Section
3.3 hereof. The Management Committee may establish one or more
subcommittees to serve in an advisory capacity without any
decision making authority or voting power.
3.2.4 Unless otherwise required in this Agreement, a unanimous
vote of the designated Representatives of the Management Committee
(as provided in Section 3.3.2) shall be required to approve any
action by the Management Committee.
3.2.5 Any action taken by a Representative of the Management
Committee in the manner provided in this Agreement shall, insofar
as the other Representatives, Partners and the Partnership are
concerned, be deemed to be duly authorized by the Partner
appointing such Representative. Each appointment of a
Representative by a Partner to the Management Committee shall
remain in effect until the Partner making such appointment shall
notify the Partnership and the other Partner of a change in such
appointment in writing pursuant to Section 3.3.2. The resignation
or removal of a Representative of the Management Committee shall
not invalidate any act of such Representative taken prior to the
giving of written notice of such removal or resignation.
3.2.6 Prior to the vote by the Management Committee, the Chief
Operating Officer shall provide notice thereof to the
Representatives in accordance with Section 3.3. If any
Representative abstains from voting on such proposed action or a
Partner is not represented by a Representative when such a vote is
taken, the proposed action will be voted on again at the next
regular meeting of the Management Committee at which each Partner
is represented by at least one Representative, and the unanimous
vote of the Representatives present and voting shall be sufficient
to approve the action.
3.3 Management Committee.
3.3.1 The Management Committee shall act only by the affirmative
vote of Representatives representing one hundred percent (100%) of
the Partnership Interests of the Partners.
3.3.2 The Representatives of the Management Committee shall be
subject to prior approval by each Partner, which approval shall
not be unreasonably withheld, and shall consist of two (2)
Representatives of each Partner designated from time to time by
such Partner by written notice to the other Partner. The most
senior Representative representing each Partner (as designated by
such Partner in writing) present at any meeting of the Management
Committee shall be entitled to cast the vote on behalf of the
Partner appointing such Representative. Any Partner may at any
time, by written notice to the other Partner, remove either of its
Representatives on the Management Committee and designate a new
Representative. Each Representative shall serve on the Management
Committee until a successor is duly designated or until death,
resignation or removal by the appointing Partner. Any action
taken by the Partnership in compliance with the direction of the
Management Committee pursuant to its authority hereunder shall be
binding on the Partnership and each Partner.
3.3.3 (a) Meetings of the Management Committee shall be held
at the Offices, or such other place as may be agreed to by the
Management Committee. Regular meetings of the Management
Committee shall be held at least quarterly. Special meetings of
the Management Committee may be called by any Representative
thereof on at least ten (10) days' advance written notice to each
Representative thereof, which notice shall state the purpose or
purposes for such meeting.
(b) The actions taken by the Management Committee at any
meeting, however called and noticed, shall be as valid as though
taken at a meeting duly held after authorized call and notice if,
either before or after the meeting, at least one Representative
present at such meeting appointed by each of the Partners shall
sign a written waiver of notice or for any Partner not present at
such meeting shall sign a consent to the actions taken at such
meeting.
(c) A vote of the Management Committee may be taken
either in a duly convened meeting of the Representatives thereof
or by a writing signed by at least one Representative appointed by
each of the Partners.
(d) A regular meeting of the Management Committee may be
dispensed with if at least one Representative appointed by each of
the Partners shall consent in writing thereto.
(e) A meeting of the Management Committee may be held by
conference telephone or similar communications equipment by means
of which all persons participating in the meeting can hear each
other.
(f) Minutes shall be kept reflecting the actions of the
Management Committee and for any advisory subcommittees as
directed by the Management Committee. Copies of draft minutes
shall be transmitted for approval by the appropriate
Representatives or subcommittees within ten (10) days after any
action taken to all Partners and to each Representative of the
Management Committee or advisory subcommittee taking the action.
3.3.4 The Management Committee shall appoint a Chief Operating
Officer who shall have the duties and responsibilities set forth
in Section 3.5 and shall serve as the agent of the Management
Committee. The Chief Operating Officer shall be responsible in
all instances to the Management Committee in carrying out the
business of the Partnership.
3.3.5 The Management Committee may adopt a business ethics
policy and such other policies as the Management Committee deems
desirable.
3.3.6 Within thirty (30) days following the Formation Date, the
Management Committee shall hold its initial meeting for the
purpose of considering and acting upon the matters set forth in
Schedule B hereto. Such matters as applicable shall be reviewed
at least annually by the Management Committee.
3.3.7 The Representatives or the Chief Operating Officer may
resign at any time by giving written notice thereof to the
Management Committee. Any resignation shall be effective at the
time stated in the notice and acceptance by the Management
Committee of any resignation shall not be necessary to make it
effective.
3.4 Delegations of Authority.
3.4.1 The Chief Operating Officer shall operate the day-to-day
business operations of the Partnership in conformity with the
delegations provided by the Management Committee and the Annual
Business Plan approved pursuant to Section 3.5.2(a) and shall have
authority to carry out ordinary business functions as agent of the
Partnership. The Management Committee may delegate to the Chief
Operating Officer such additional authority as the Management
Committee deems necessary or appropriate for the proper conduct of
the business of the Partnership. The Chief Operating Officer
shall periodically inform the Partners of the Chief Operating
Officer's actions in connection with carrying out business
functions on behalf of the Partnership.
The Chief Operating Officer's authority may include but not be
limited to executing Partnership service agreements with customers
or other third parties, promoting and marketing the Partnership
services, directing the activities of the personnel assigned to
the Partnership, purchasing materials and supplies, conducting
customer meetings, and paying Partnership bills.
3.4.2 If approved by the Management Committee, any powers
delegated by the Management Committee to the Chief Operating
Office may be redelegated to other personnel, agents or
subcommittees of the Partnership.
3.4.3 The Management Committee shall from time to time furnish
the Chief Operating Officer, personnel or agents of the
Partnership such documents or instruments evidencing their
authority as may be required by third parties with respect
thereto.
3.5 Duties of the Chief Operating Officer
3.5.1 The Chief Operating Officer shall be responsible, under
the delegation and policy direction of the Management Committee,
for the day-to-day operation and management of the affairs and
property of the Partnership. In addition to the specific
functions and duties set forth below, the Chief Operating Officer
shall perform such functions and responsibilities as are delegated
to the Chief Operating Officer from time to time by the Management
Committee. The Chief Operating Officer shall be designated by the
Management Committee for service during each fiscal year.
3.5.2 (a) The Chief Operating Officer shall prepare and
present to the Management Committee for review and approval no
later than September 1 of each year a proposed Annual Business
Plan, which shall include (i) an Operating Budget and a Capital
Budget by quarter for the ensuing fiscal year and annually for the
following two fiscal years, and (ii) a forecast of the projected
receipts and disbursements for the Partnership for the ensuing two
(2) fiscal years. The Capital Budget and/or the Operating Budget
for the ensuing fiscal year shall include a quarterly schedule of
additional capital contributions required, if any, from the
Partners. In addition, the Chief Operating Officer shall prepare
a projection for the ensuing fiscal year of all items of taxable
income (loss) and the tax benefits generated by the Partnership
and the allocation thereof to each Partner's Tax Capital Account.
The Annual Business Plan shall not become effective until
expressly approved in whole or in part by unanimous vote of the
Management Committee. If the Annual Business Plan has not been
unanimously approved by the Management Committee in its entirety
prior to the start of the fiscal year, that portion of the
Operating Budget for the previous year for which there is not
agreement in the present year shall continue until such time as
the Annual Business Plan is adopted.
(b) The Chief Operating Officer shall, not less than
quarterly, review the Annual Business Plan with the Management
Committee at a regular or special meeting designated by the Chief
Operating Officer.
(c) The Chief Operating Officer shall make no
commitments that are inconsistent with the Annual Business Plan
without the unanimous consent of the Management Committee and
shall conduct all Partnership activities in accordance with
applicable law.
3.5.3 The Chief Operating Officer shall present to the
Management Committee at its regular meetings a quarterly
Operational Review and Performance Report which shall include, in
addition to other information requested by the Management
Committee:
(a) Financial results and analysis, including a profit
and loss statement for the most recent quarter and fiscal year to
date, a sources and applications of funds statement, a balance
sheet, a statement of projected revenues and cash needs pursuant
to Section 3.5.2(a), and such other reports as the Management
Committee may request;
(b) Major issues confronting the Partnership;
(c) Expected material deviations from the Annual
Business Plan;
(d) Major actions taken or to be taken in reliance on
delegations of authority;
(e) Major undertakings and commitments, whether
completed or proposed, including progress reports on any
significant capital investments;
(f) The purpose and scope of any proposed contacts with
banks or long-term lenders;
(g) The status of any threatened or pending litigation
by or against the Partnership or either Partner affecting the
Partnership;
(h) Significant governmental actions affecting the
Partnership; and
(i) Significant commercial inquiries.
3.5.4 The Chief Operating Officer shall furnish to the
Management Committee information regarding the operation of the
Partnership and the exercise of the delegated powers as the
Management Committee may from time to time request. Any requests
for such information by a Partner shall be made first to the
Management Committee.
3.5.5 The Chief Operating Officer of the Partnership may be
removed at any time, with or without cause, by the written request
of either Partner's Representative, provided that ten (10) days'
prior written notice has been given to the Chief Operating Officer
and the Management Committee specifically stating that the removal
of such officer is requested and the reason(s) therefor and such
removal shall become effective at the expiration of such notice
period.
3.6 Deposit and Withdrawal of Funds. Funds of the Partnership shall
be deposited in such banks or other depositories as shall be designated
from time to time by the Management Committee. All withdrawals from any
such depository shall be made pursuant to the Annual Business Plan.
3.7 Restricted Activities. No Partner may, without unanimous approval
of both Partners, and no Representative of the Management Committee may,
without unanimous written approval of both Partners, engage in any act or
transaction on behalf of the other Partner or the Partnership, including,
without limitation, the following:
3.7.1 Borrow money in the Partnership's name, utilize
Partnership property as security for any loans, obligate the
Partnership as guarantor, endorser, surety or accommodation party,
or otherwise pledge the credit of the Partnership in any way or
commit the Partnership to any financial obligation whatsoever.
3.7.2 Mortgage, lease, sell, transfer, convey or exchange, or
agree to mortgage, lease, sell, transfer, convey or exchange, any
Partnership property or any interest therein.
3.7.3 Assign, transfer, pledge, compromise or release any of the
claims of, or debts due, the Partnership except on payment in
full.
3.7.4 Arbitrate, or consent to the arbitration of, any of the
disputes or controversies between the Partnership and third
parties.
3.7.5 Create change, or agree to any change in, the terms of any
mortgage, lease, pledge, security agreement or other encumbrance
affecting the assets or rights of the Partnership.
3.7.6 Commence, dismiss, settle or compromise any legal
proceeding affecting the assets or rights of the Partnership or
take, or attempt to take, any other action relating to the conduct
of such proceeding.
4. DEVELOPMENT OF THE SERVICES
4.1 Each Partner shall, in its capacity as a Partner, devote such
efforts as shall be reasonably necessary to develop and promote the
Partnership.
4.2 Sabine HSC shall enter into the Software License Agreement
(attached as Schedule A-I).
4.3 CNG shall enter into a Software License Agreement (attached as
Schedule A-II).
4.4 All licenses granted to the Partnership pursuant to Section 4.2
and 4.3 shall not be classified as a Capital Contribution by the
Partners.
5. BUSINESS RELATIONS BETWEEN PARTNERS AND BETWEEN PARTNERS AND THE
PARTNERSHIP
5.1 Upon formation, Sabine HSC shall assign to the Partnership all
contracts entered into by Sabine HSC, d.b.a. CNG/Sabine Center, during
the Pre-Formation Period. CNG shall ratify those contracts for which
Sabine HSC, during the Pre-Formation Period, shall have requested, and
received, CNG's consent (or that of CNG Energy Company) to the entering
into by Sabine HSC of such contracts. For those contracts for which
Sabine HSC has not received CNG's or CNG Energy Company's consent during
the Pre-Formation Period, Sabine HSC shall assign such contracts to the
Partnership free and clear of third party liability for all pre-existing
liabilities for breach, non-performance or other third party liability.
Such contracts shall not be considered a Capital Contribution by Sabine
HSC, but if so considered for federal or other tax purposes, shall have
an Agreed Value of zero.
5.2 The Partners expressly waive and release any right to a partition
of the Partnership property.
5.3 Each Partner acknowledges that it and/or its Affiliates are now or
may hereafter be engaged in a business or businesses which compete with,
or are related or similar to the business of the Partnership. Each
Partner acknowledges and accepts the fact that a Partner and/or its
Affiliates (a) may be a competitor, a supplier, and/or a customer of the
Partnership, and (b) may alone or in combination with another person at
any time or from time to time invest in and/or engage in a partnership or
any business competing with, relating to, or similar to the business of
the Partnership.
5.4 Each Partner acknowledges and accepts the fact that the other
Partner may act in its own right to protect or further its business
interests in any manner that is not inconsistent with its express
obligations under this Agreement.
5.5 The Partnership may from time to time employ a Partner or an
Affiliate of a Partner to perform or provide services on behalf of the
Partnership. Any Partner performing such services shall be entitled to
reasonable compensation as determined by the Management Committee.
5.6 Nothing contained in this Agreement shall be deemed to constitute
a Partner as an agent or legal representative of the other Partner or to
create any fiduciary relationship for any purpose whatsoever, apart from
such obligations between general partners in a partnership as may be
created by law. Except as otherwise expressly provided in this
Agreement, a Partner shall not have any authority to act for, or to
assume any obligation or responsibility on behalf of the other Partner or
the Partnership.
6. REPRESENTATIONS AND WARRANTIES
6.1 General Representations and Warranties. Each Partner represents
and warrants to the other Partner that at the Formation Date: (a) the
execution and delivery of this Agreement and the performance of each
Partner's obligations hereunder will not contravene or conflict with any
provision of law or the charter or bylaws of such Partner, or contravene,
conflict with or constitute a default under, any indenture, mortgage,
instrument or other agreement of such Partner or any order of any court,
commission or governmental agency applicable to such Partner, and (b) the
execution, delivery and performance of this Agreement has been duly
authorized, and such Agreement, when executed and delivered by such
Partner, will be valid, binding and enforceable in accordance with the
terms hereof. Each Partner further represents, warrants and covenants
that as of the Formation Date and during the Primary Term or any Renewal
Term of the Partnership, it will do or cause to be done all things
necessary to continue to be, a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation.
6.2 Additional General Representations And Warranties of CNG and
Sabine HSC. As of the Formation Date:
6.2.1 CNG represents and warrants that it is an Affiliate of a
registered public utility holding company and that its formation
and participation in the Partnership have been approved by the SEC
under PUHCA as of the Formation Date.
6.2.2 Sabine HSC represents and warrants that it is not a
holding company, within the meaning of PUHCA.
6.2.3 CNG represents and warrants that it will take all
reasonable actions necessary to ensure that the Partnership will
not be subject to regulation, for any purpose, under PUHCA, or
lose the benefits of the exemption under 17 C.F.R. Section 250.16
("Rule 16"), as a result of the ownership of its Partnership
Interest; and
6.2.4 CNG and Sabine HSC each represents and warrants that it is
not a marketing affiliate of an interstate natural gas pipeline as
that term is defined in FERC Order No. 497, (53 Fed. Reg. 22139
(June 14, 1988)) [
].
6.2.5 CNG and Sabine HSC each represents and warrants that it
has no contracts or business relationships with third parties that
would prevent it from entering into this Agreement.
7. COSTS INCURRED BY PARTNERS PRIOR TO FORMATION OF PARTNERSHIP
7.1 [ ]
7.2 [ ]
8. CAPITAL CONTRIBUTIONS BY THE PARTNERS
8.1 [ ]
8.2 Additional Capital. As a means of providing the Partnership with
additional capital, upon approval of the Management Committee, the
Partners shall make the following Capital Contributions in proportion to
their respective Partnership Interests:
(a) The amount of any Capital Contribution set forth in
the Annual Business Plan pursuant to Section 3.5.2(a).
(b) The amount necessary to cause the minimum Working
Capital to be the amount of cash needed for the next ninety (90)
days for operating costs as determined by the Operating Budget.
At the beginning of each quarter, the Chief
Operating Officer will prepare for approval by the Management
Committee a projection of the Working Capital needed (the "Working
Capital Projection") for the next quarter on a cumulative basis.
The Working Capital balance at the beginning of each quarter shall
be adjusted by the addition of projected cash receipts and the
subtraction of projected cash obligations for such quarter. If
Working Capital falls below the minimum required level at any time
or if the Working Capital Projection projects Working Capital to
fall below the minimum required level for any quarter in the next
succeeding quarter, the Chief Operating Officer shall so notify
the Management Committee, which may request a compensating Capital
Contribution on the basis of each Partner's respective Partnership
Interest, which shall be due and payable in sixty (60) days
following such request. The Management Committee may from time to
time decrease or increase the above mentioned required level of
Working Capital.
(c) Any other Capital Contribution approved by the
Management Committee.
8.2.1 The Partnership may establish at a bank a line of credit
in any amount not to exceed [ ] under the terms and
conditions determined by and upon unanimous approval of the
Management Committee. The line of credit may be increased or
decreased upon unanimous approval of the Management Committee.
The Management Committee may delegate to the Chief Operating
Officer authority to utilize the line of credit to maintain
Working Capital at the level required under Section 8.2(b), in
lieu of requesting Capital Contributions therefor from the
Partners.
8.2.2 Except as provided in Section 8.4, neither services
rendered to the Partnership by any Partner nor loans to the
Partnership from any Partner shall constitute Capital
Contributions.
8.2.3 No Partner shall be required to contribute any capital,
lend any funds to the Partnership or guarantee any obligations of
the Partnership except as provided in Section 8.
8.3 Voluntary Contributions; Interest. No Partnership shall make any
Capital Contributions to the Partnership except pursuant to this Section
8. No Partner shall be entitled to interest on its Capital Contribution.
8.4 Failure to Make Contributions. If any Partner shall fail to
timely make a Capital Contribution required under the provisions of
Section 8 (the "Non-paying Partner"), within five (5) Business Days after
receipt of notice of such non-payment from the Management Committee, the
remaining Partner may, at its option, pay (the "Paying Partner") the
amount of such Capital Contribution (the "Default Amount"). From the
date so paid, the Default Amount shall constitute a loan from the Paying
Partner to the Partnership and a debt payable to the Partnership by the
Non-paying Partner, with interest to accrue at an annual rate which is
two (2) percentage points above the prime lending rate as in effect from
time to time at the Chase Manhattan Bank, New York City. In the event
such debt, including interest thereon, is not paid in full within sixty
(60) days from the date incurred, the principal amount remaining unpaid,
plus any accrued and unpaid interest, shall be deemed to be a Capital
Contribution by the Paying Partner, which increases the Paying Partner's
Book Capital Account and Tax Capital Account and the Book Capital Account
and Tax Capital Account of the Paying Partner shall be increased
accordingly, and the Book Capital Account and Tax Capital Account of the
Non-paying Partner shall be reduced by the principal amount remaining
unpaid plus the amount of the accrued interest. If the Non-paying
Partner shall pay the entire amount plus accrued interest within such
sixty (60) day period, the Partnership shall treat the principal amount
so paid as a Capital Contribution by the Non-paying Partner and credit
such principal amount to such Partner's Book Capital Account and Tax
Capital Account, and the Partnership shall immediately pay to the Paying
Partner all principal and accrued interest owing and attributable to such
Default Amount.
In addition, any Paying Partner may treat such failure to timely
pay by a Non-paying Partner as an Event of Default under Section 17.3 and
upon ten (10) days written notice to the Non-Paying Partner, immediately
exercise the rights of a non-Defaulting Partner under Section 17.
8.5 Book Capital Accounts. Partnership transactions shall be recorded
in individual Book Capital Accounts established and maintained for each
Partner. Each Partner's Book Capital Account shall include its Initial
Capital Contribution to the Partnership under Section 8.1 increased by
(i) such Partner's additional Capital Contributions and (ii) its share of
Partnership revenue, income, profit, gain, as allocated to the Partners
in accordance with their respective Partnership Interests, and decreased
by its share of (i) any Partnership losses and expenses as allocated to
the Partners in accordance with their respective Partnership Interests,
(ii) any distributions by the Partnership to Partners. The Book Capital
Account may also be adjusted as provided in Section 8.4.
9. ALLOCATION OF BOOK PROFITS AND LOSSES. All items of revenue, income,
profit, gain, expense, loss, deduction and credit of the Partnership
determined in accordance with Required Accounting Practices shall be
allocated to the Partners and credited to their respective Book Capital
Accounts in accordance with their respective Partnership Interests as of
the date of the allocation. Such allocations shall be made for each
calendar quarter based upon each Partner's Partnership Interest during
such calendar quarter.
10. DISTRIBUTIONS. Available cash of the Partnership shall be allocated and
distributed to the Partners, at such times and in such amounts as the
Management Committee shall determine, after due allowance for the cash
necessary for the operation of the Partnership's business, the
requirements of any borrowings or financing, and after consideration of
the Management Committee's expectations regarding the cash needs and
projected capital expenditures of the Partnership. Except as otherwise
provided in Section 8.4 and Section 17, all distributions shall be made
according to the relative Partnership Interests of the Partners.
11. ACCOUNTING AND TAXATION.
11.1 Fiscal Year. The fiscal year of the Partnership shall be the
calendar year or such other annual period as is selected by unanimous
vote of the Management Committee.
11.2 Location of Records. The books of account for the Partnership
shall be kept and maintained at the Offices of the Partnership or at such
other place as the Partners shall determine.
11.3 Books of Account. The books of account for the Partnership shall
be:
11.3.1 Maintained on an accrual basis in accordance with
Required Accounting Practice; and
11.3.2 Audited by the Certified Public Accountants at the
end of each fiscal year.
11.4 Annual Financial Statements. As soon as practicable following the
end of each fiscal year of the Partnership, the Management Committee
shall cause to be prepared and delivered to each Partner a profit and
loss statement and a statement of changes in financial position for such
fiscal year, a balance sheet and a statement of each Partner's Capital
Account as of the end of such fiscal year, together with a report thereon
of the Certified Public Accountants.
11.5 Interim Financial Statements. As soon as practicable after the
ene of each calendar quarter, the Management Committee shall cause to be
prepared and delivered to each Partner:
11.5.1 A profit and loss statement and a statement of
changes in financial position for such quarter and for the portion
of the fiscal year then ended (such statements to include
sufficient information to permit the Partners to calculate their
tax accruals); and
11.5.2 A balance sheet and a statement of each Partner's
Book Capital Account as of the end of such quarter.
11.6 Inspection of Facilities and Records. Each Partner shall have the
right at all reasonable times during usual business hours and subject to
the confidentiality provisions of Section 18 to inspect, audit, examine
and make copies of the books of account and other records of the
Partnership. Such right may be exercised through any agent or employee
of such Partner designated in writing by it or by an independent public
accountant, attorney or other consultant so designated. The Partner
making the request shall bear all costs and expenses incurred in any
inspection, examination or audit made at such Partner's behest.
12. TAX CAPITAL ACCOUNT, ALLOCATIONS, TAX RETURNS
12.1 (a) In addition to maintaining the Book Capital Accounts as
defined in Section 8.5, the Partnership shall maintain a Federal Income
Tax Capital Account for each Partner. The Federal Income Tax Capital
Accounts shall be established and maintained in accordance with the
provisions of Section 1.704-1(b) (2) (iv) of the Treasury Regulations.
In addition, the Partnership shall adjust the Partners' Federal Income
Tax Capital Accounts in accordance with Section 1.704-1(b)(2)(iv)(f) and
(b)(2)(iv)(g) of the Treasury Regulations to reflect any revaluation of
the Partnership's assets agreed upon by the Partners upon the
contribution of assets to the Partnership by a Partner. The Partnership
shall also adjust the Partners' Federal Income Tax Capital Accounts in
accordance with said regulations to reflect any revaluation of the
Partnership's assets agreed to by the Partners upon the distribution of
any Partnership asset to a Partner.
(b) Notwithstanding anything to the contrary contained herein,
the Federal Income Tax Capital Account of each Partner shall mean the
capital account of the Partner determined in all events solely in
accordance with the rules set forth in Treasury Regulation Section
1.704-1(b)(2)(iv), as the same may be amended or revised. Subject to the
preceding sentence, "Federal Income Tax Capital Account" shall mean:
(i) The amount of the cash contributed by the Partner to
the Partnership, including the amount of the Partnership's
liabilities that are assumed by the Partner (other than
liabilities secured by property distributed to the Partner by the
Partnership or to which such property is subject and other than
increases in the Partner's share of the Partnerhip's liabilities),
increased by
(ii) The Agreed Value of property contributed by the
Partner to the Partnership (net of liabilities secured by the
property or to which the property is subject), increased by
(iii) The amount of Federal Income Tax Capital Account
Book Income allocated to the Partner, decreased by
(iv) The amount of money distributed to the Partner,
including the amount of the Partner's liabilities that are assumed
by the Partnership (other than liabilities secured by property
contributed to the Partnership by the Partner or to which such
property is subject and other than decreases in the Partner's
share of Partnership liabilities), decreased by
(v) The Agreed Value of property distributed to the
Partner by the Partnership (net of liabilities secured by the
property or to which the property is subject), decreased by
(vi) The Partner's share of expenditures of the
Partnership described in Section 705(a)(2)(B) of the Code
(including, for this purpose, losses which are nondeductible under
Section 267(a)(1) or Section 707(b) of the Code), decreased by
(vii) The Partner's share of amounts paid or incurred by
the Partnership to organize the Partnership or to promote the sale
of an interest in the Partnership (except to the extent properly
amortizable for tax purposes), decreased by
(viii) The amount of Federal Income Tax Capital
Account Book Loss allocated to the Partner.
(c) For purposes of computing the amount of "Federal Income
Tax Capital Account Book Income" or "Federal Income Tax Capital Account
Book Loss" pursuant to this Section 12, the amount of any item of income,
gain, loss or deduction to be reflected in the Federal Income Tax Capital
Accounts and the determination, recognition and classification for
federal income tax purposes, shall be determined as follows:
(i) Any deductions for depreciation, cost recovery,
amortization, or expense in lieu of depreciation, attributable to
a Partnership asset contributed to the Partnership shall be
determined as if the adjusted basis of such Partnership assets on
the date it was acquired by the Partnership was equal to the
Agreed Value of such Partnership asset;
(ii) Any income, gain, or loss attributable to the
taxable disposition of any Partnership asset contributed to the
Partnership shall be determined by the Partnership as if the
adjusted basis of such Partnership asset as of such date of
disposition was equal to the Agreed Value of such Partnership
asset, less any depreciation, cost recovery, amortization or
expense in lieu of depreciation attributable to such asset
pursuant to Section 12(c)(i);
(iii) Immediately prior to the distribution of any
Partnership assets (1) in kind to a Partner or (2) in liquidation
of the Partnership pursuant to Section 17.4.4, any unrealized gain
or unrealized loss attributable to such Partnership asset shall,
for purposes hereof, be deemed to be gain or loss recognized by
the Partnership and shall be allocated among the Partners in
accordance with this Section 12; and
(iv) The computation of all items of income, gain, loss
and deduction shall be made without regard to any Section 754 of
the Code election that may be made by the Partnership.
(d) An assumption of a Partner's unsecured liability by the
Partnership shall be treated as a distribution of money to the Partner.
An assumption of the Partnership's unsecured liability by a Partner shall
be treated as a cash contribution to the Partnership. For this purpose,
the assumption of a secured liability in excess of the fair market value
of the security shall be treated as the assumption of an unsecured
liability to the extent of the excess.
(e) Federal Income Tax Capital Account Book Income and Federal
Income Tax Capital Account Book Loss of the Partnership for any calendar
year shall be allocated to the Partners in accordance with their
respective Partnership Interests as defined in Section 1.13 except as
provided in Section 12(e)(i). Except as provided in Section 12(f)(iii),
the Partnership's taxable income or loss shall be allocated between the
Partners in the same manner as Federal Income Tax Capital Account Book
Income or Federal Income Tax Capital Account Book Loss, as the case may
be.
(i) In the event that the Internal Revenue Service upon audit
imputes income or expense to either Partner as a result of the Partner's
furnishing facilities, services or technology under this Agreement or any
agreement contemplated herein between the Partners, or between the
Partnership and a Partner, the correlative item of expense or income of
the Partnership resulting from such imputation shall be specially
allocated to the Partner to which the income or expense is imputed.
(f) (i) Except as provided in Section 12(f)(iii), for income tax
purposes the distributive share of a Partner of each specific deduction
and item of income, gain, loss deduction, and credit of the Partnership,
shall be the same as such Partner's allocable share of Federal Income Tax
Capital Account Book Income or Federal Income Tax Capital Account Book
Loss for such calendar year.
(ii) In the event that the Partnership has taxable income that
is characterized as ordinary income under the recapture provisions of the
Code, each Partner's distributive share of taxable gain or loss from the
sale or other disposition of Partnership assets (to the extent possible)
shall include a proportionate share of this recapture income equal to
that Partner's share of prior cumulative depreciation or other deductions
with respect to the assets that gave rise to the recapture income.
(iii) In accordance with Section 704(c) of the Code, income,
gain, loss and deduction with respect to any property contributed to the
Partnership by a Partner shall, solely for income tax purposes, be
allocated among the Partners so as to take account of any variation
between the adjusted basis of such property to the Partnership for
federal income tax purposes and its fair market value as of the date of
contribution.
13. CERTAIN TAX MATTERS
13.1 Except as required by law and as the Partners may otherwise agree,
the Partnership shall administer matters with respect to taxes under the
principles that (i) each Partner shall be treated equally (i.e., neither
Partner will receive preferential tax treatment to the disadvantage of
the other) and (ii) the Partnership shall administer taxes in such a
manner as to (a) minimize taxes incurred by the Partnership and each
subsidiary and (b) maximize benefits with respect to the taxes of the
Partners, based upon the assumption that the Partners are full regular
income taxpaying corporations.
13.2 Sabine HSC shall be designated as the Partnership's tax matters
partner ("Tax Matters Partner") as defined in Section 6231(a)(7) of the
Code.
Sabine HSC shall, subject to the written instructions of the Management
Committee, have all the powers and obligations of a Tax Matters Partner
pursuant to the Code or under this Agreement. The Tax Matters Partner
shall incur no liability to the Partnership or to any other Partner for
actions taken in its capacity as Tax Matters Partner including, but not
limited to, liability for any additional taxes, interest or penalties
owed by the other Partner due to adjustments of Partnership items of
income, gain, loss, deductions and credit at the Partnership level.
13.3 The Tax Matters Partner shall prepare and timely file all tax
returns and shall timely make or revoke all elections pursuant to Section
14 of this Agreement, and take all tax reporting positions, necessary or
desirable for the Partnership, so as to maximize the tax benefits to the
Partners.
13.4 The Tax Matters Partner shall take all actions which are necessary
or appropriate in dealing with any tax authorities subject to the
following:
(a) During any audit or other controversy with any tax
authority, the Tax Matters Partner shall keep the other Partner informed
of all material facts and developments on a timely basis, and shall
consult with the other Partner at such Partner's request. In general,
the Tax Matters Partner shall not take any action contemplated by
Sections 6221 through 6233 of the Code unless it has first given the
other Partner notice of the contemplated action and received the consent
of the other Partner, with such consent not being unreasonably withheld.
This provision is not intended to authorize the Tax Matters Partner to
take any action which is left to the determination of an individual
Partner under Sections 6221 through 6233 of the Code.
(b) The Tax Matters Partner shall keep the other Partner
informed of all administrative and judicial proceedings for the
adjustment at the Partnership level of partnership items in accordance
with Section 6223(g) of the Code, and shall furnish copies of
correspondence received pursuant to the provisions of the preceding
sentence to the other Partner.
(c) The Tax Matters Partner shall not enter into any extension
of the period of limitations as provided under Section 6229 of the Code
without first giving reasonable notice to the other Partner of such
intended action and obtaining the consent of the other Partner, with such
consent not being unreasonably withheld.
(d) No partner shall file, pursuant to Section 6227 of the
Code, a request for an administrative adjustment of partnership items for
any Partnership taxable year without the consent of the other Partner,
with such consent not being unreasonably withheld.
(e) The Tax Matters Partner shall not make any settlement
offers with respect to the tax treatment of partnership items without
first giving reasonable advance notice of such intended action (including
any proposal for settlement) to the other Partner. The Tax Matters
Partner shall not bind the other Partner to any agreement, settle any
outstanding audit, litigate any unsettled audit issues, choose a forum
for litigation, appeal an adverse lower court decision, make any election
with respect to federal, state or local income tax law, or take any other
actions affecting tax matters without obtaining the prior written
concurrence of the other Partner.
The Tax Matters Partner shall inform the other Partner, on a timely
basis, of any tax matters, including, but not limited to, progress of any
Internal Revenue Audit, receipt of a Revenue Agent's Report, and notice
of any Appeals conference. No Partner shall file a notice of
inconsistent treatment under Code Section 6222(b) without first notifying
all other Partners within thirty (30) days of such proposed action. A
Partner shall furnish the Tax Matters Partner within thirty (30) days of
receipt of the request, such information as the Tax Matters Partner may
reasonably request to permit it to provide the Internal Revenue Service
with sufficient information for purposes of Section 6223 and 6050K of the
Code. Unless prohibited, either Partner who enters into a settlement
agreement with the Internal Revenue Service or the Secretary of the
Treasury with respect to the treatment of any partnership items appearing
on their separate returns, shall promptly notify the other Partner of
such settlement agreement.
(f) The Tax Matters Partner shall have the right to engage
legal counsel, certified public accountants, or other assistance with
respect to any Partnership level tax audit. Any reasonable item of
expense with respect to such matters, including but not limited to fees
and expenses for legal counsel, certified public accountants and other
experts which the Tax Matters Partner incurs in connection with any
Partnership level audit, assessment, litigation or other proceedings
regarding any Partnership item shall be borne by the Partnership.
(g) The Tax Matters Partner shall provide to the other Partner
a copy of the Partnership's annual federal income tax information returns
(Forms 1065 and the accompanying Schedules K-1), as well as any similar
state income tax returns, at least 30 days prior to the due date for such
returns in order that the other Partner may review and comment on such
returns prior to the filing thereof. The Tax Matters Partner shall
consider in good faith any suggestions or comments made by the other
Partner, but shall not be required to follow such suggestions or to
incorporate such comments. In addition, the Tax Matters Partner
shall use its best efforts to provide the other Partner at least five (5)
days prior to each quarterly estimated tax payment date, with reasonable
estimates as to the net taxable income or net taxable loss which accrued
during such quarter (and all prior quarters of the year), as well as the
projected net taxable income or net taxable loss for the year.
(h) The Partnership shall indemnify and reimburse the Tax
Matters Partner for all expenses, including return preparation and legal
and accounting fees, claims, liabilities, losses and damages borne by the
Tax Matters Partner, which were incurred in connection with any
administrative or judicial proceeding with respect to any audit of the
Partnership's Tax Returns, except to the extent caused by the gross
negligence or willful misconduct of the Tax Matters Partner. Neither the
Tax Matters Partner nor the other Partner shall have any obligations to
provide funds for such purpose.
(i) The Tax Matters Partner shall use reasonable discretion in
taking any action and incurring any expense in connection with any such
proceeding, except to the extent otherwise governed by this Section 13.4.
14. TAX ELECTIONS. The Partnership shall make the following elections under
the Code and the attendant regulations thereto and under any similar
state statutes:
14.1 Adopt the calendar year as the annual accounting period;
14.2 Adopt the accrual method of accounting;
14.3 Compute the allowance for depreciation so as to maximize the
income tax benefits of deductions for the Partners;
14.4 Amortize start-up and organizational expenditures, if any, over a
sixty (60) month period in accordance with Sections 195 and 709(b)
respectively of the Code and any similar state statutes;
14.5 Make such elections as may be directed by the Management
Committee;
14.6 If requested by any Partner, make the election under Code Section
754; and
14.7 Expense research and development expenditures under Code Section
174.
15. INDEMNIFICATION
15.1 (a) Indemnification by Partnership to Partners,
Representatives, Managers, Directors, Affiliates, Officers, Employees and
Agents. The Partnership ("Indemnifying Party") shall indemnify, defend
and hold harmless each Partner and each Representative, manager, officer,
agent, Affiliate, director and representative of such Partner and the
Chief Operating Officer (the "Indemnified Parties") from and
against any and all losses, claims, damages, fines, penalties,
liabilities, and expenses (including any court costs and attorney's fees
incurred) arising out of any activities undertaken during the term of
this Agreement ("Obligation") by such Indemnified Party on behalf of the
Partnership to the extent that: (i) the activities of any such
Indemnified Party were within the scope of the actual authority of such
Indemnified Party as a Partner, Representative, manager, director,
Affiliate, officer, agent or representative while acting on behalf of a
Partner of the Partnership; (ii) such activity did not violate any
obligation of such Indemnified Party to the Partnership or the other
Partner arising out of the Partnership Agreement; and (iii) such activity
did not constitute gross negligence, fraud, willful misconduct or a
violation of applicable law on the part of such Indemnified Party.
If any Obligation (within the scope of Section 15.1(a) is
imposed on or incurred by a Partner after the termination of the
Partnership in excess of such Partner's Partnership Interest times such
amount, the other Partner shall indemnify the Partner incurring such
Obligation in an amount equal to the excess of each indemnifying
Partner's Partnership Interest times the total amount of such Obligation
(the "Total Loss") over the amount of the Total Loss previously incurred
or paid by such Indemnifying Party.
(b) Partner's Liability and Indemnification to the Other
Partner. Each Partner shall only be liable to the other Partner and its
Affiliates for any Obligation to the extent caused by such Partner's or
its Affiliates' gross negligence, willful misconduct, fraud, violation of
applicable law or by a Partner's intentional breach of such Partner's
obligations under this Agreement. Each Partner hereby releases the other
Partner, its Affiliates, and their respective directors, officers,
employees and agents from Obligations claimed or asserted by such other
Partner except to the extent caused by the Partner's or its Affiliates'
gross negligence, willful misconduct, fraud, violation of applicable law
or by a Partner's intentional breach of any obligation under this
Agreement. Each Partner shall defend, indemnify and hold harmless the
other Partner, its Affiliates, and their respective directors, officers,
employees and agents from and against Obligations claimed or asserted by
such other Partner to the extent caused by the Partner's or its
Affiliates' gross negligence, willful misconduct, fraud, violation of
applicable law or by a Partner's intentional breach of any obligation
under this Agreement.
It is the intention of the parties hereto that the release
by and indemnity obligations of the Partners to each other under this
Section 15.1(b) hold the Partners harmless from and against the
consequences of their own ordinary negligence to the extent such ordinary
negligence is the sole, concurrent, or joint cause of the Obligations.
15.2 Promptly after the receipt by an Indemnified Party of notice of
any pending or threatened action by any third party ("Third Party
Action"), such Indemnified Party shall give written notice of the Third
Party Action to the Indemnifying Party hereto, accompanied by copies of
any written documentation with respect thereto received by the notifying
Indemnified Party and stating the basis upon which indemnification is
being sought pursuant to this Agreement. Such notice shall constitute a
claim for indemnification hereunder (the "Claim").
15.3 The Indemnifying Party shall have the right, at its option, to
compromise or defend, at its own expense and with its own counsel, any
Third Party Action. The Indemnified Party shall have the right, at its
option, to participate in the settlement or defense of any such Third
Party Action, with its own counsel and at its own expense, but the
Indemnifying Party shall have the right to control such settlement or
defense. The Indemnified Party and Indemnifying Party agree to cooperate
in any such defense or settlement and to give each other reasonable
access to all information relevant thereto and will similarly cooperate
in the prosecution of any claim or lawsuit against any third party. In
the event that the Indemnifying Party fails to notify the Indemnified
Party of its intent to take any action within fifteen (15) days after
receipt of a Claim, the Indemnified Party without waiving any rights to
indemnification hereunder may defend such Third Party Action and shall
have the right to enter into any good faith settlement thereof without
the prior written consent from the Indemnifying Party. Notwithstanding
the foregoing, the Indemnifying Party shall not be entitled to assume and
control the defense of any such action, suit or proceedings if and to the
extent that, in the opinion of the Indemnified Party and its counsel,
such action, suit or proceeding involves the potential imposition of
criminal liability on the Indemnified Party or a conflict of interest
between the Indemnified Party and the Indemnifying Party, and in such
event the Indemnifying Party shall pay the reasonable expenses of the
Indemnified Party in such defense. Notwithstanding the Indemnifying
Party's rights hereunder to control certain actions, suits or
proceedings, no settlement of any such action may be made by the
Indemnifying Party without the Indemnified Party's consent; provided,
however, such consent shall not be necessary if the settlement results in
an unconditional release of the Indemnified Party without the admission
by the Indemnified Party of guilt, complicity or culpability. Any such
compromise or settlement shall be binding upon the Indemnifying Party for
purposes of this Section 15.
15.4 The indemnities contained in this Section 15 shall survive
termination, dissolution and liquidation of the Partnership.
16. NO TRANSFER OR PLEDGE OF PARTNERSHIP INTERESTS. No Partner may transfer,
assign, pledge or otherwise encumber its Partnership Interest.
17. TERMINATION, DISSOLUTION AND LIQUIDATION
17.1 Automatic Dissolution. The Partnership shall be automatically and
without notice dissolved upon the happening of any of the following
events:
17.1.1 The sale by the Partnership of all or substantially
all of the Partnership's business and assets.
17.1.2 Any event which shall make it unlawful for the
business of the Partnership to be carried on.
17.1.3 Any event which, under the Revised Uniform
Partnership Act of the State of Delaware, requires or results in
dissolution of the Partnership.
17.1.4 Any event which would: (a) cause CNG to lose its
authorization under PUHCA to participate in the Partnership; or
(b) subject the Partnership to regulation under PUHCA in a manner
which materially and adversely affects the operation of the
Partnership.
17.1.5 By mutual agreement of the Partners
17.1.6 A Partner withdraws from the Partnership during the
term hereof without the written consent of the other Partner.
17.1.7 A Partner sells, transfers or assigns or offers to
sell, transfer or assign its Partnership Interest, in whole or
part.
17.1.8 A Partner become insolvent, makes an assignment for
the benefit of creditors, becomes bankrupt, or enters into any
receivership for the benefit of creditors or if any third party
successfully petitions any judicial tribunal to effectuate any of
the foregoing against it.
17.2 [ ]
17.3 Event of Default. An Event of Default shall give rise to a right
of dissolution of the Partnership in favor of the Partner that is not
involved or subject to any of the matters referred to in Section 17.3.1
upon the giving of Notice of Dissolution by such Partner. An Event of
Default shall occur if a Partner (the "Defaulting Partner"):
17.3.1 Fails to pay a Capital Contribution pursuant to
Section 8 and a Paying Partner treats such failure to pay as an
Event of Default under the provisions of Section 8;
17.3.2 Fails to or otherwise does not perform any of its
material obligations (other than the payment of money) or fails to
observe any material restrictions under this Agreement and such
default continues for a period of thirty (30) Business Days after
written notice thereof from a Partner.
17.4 Winding Up and Liquidation.
17.4.1 [ ]
17.4.2 After the Partnership shall be dissolved pursuant to
the terms of this Agreement, the Management Committee shall
continue to exercise its powers under this Agreement for the
purpose of winding up the business of the Partnership and
liquidating its assets in an orderly manner, but the Partnership
shall engage in no new business during the period of such winding
up.
17.4.3 Notwithstanding the above Section 17.4.2, if the
Partnership is terminated for any reason prior to the termination
of any then current contracts, the winding up of the affairs of
the Partnership may include the completion of any work or services
under such contracts to the extent the Management Committee may
determine to be necessary to bring the matters in progress to
completion so as to permit a sale or transfer of the Partnership's
interest in such contracts.
17.4.4 Distributions Upon Dissolution. Upon dissolution of
the Partnership, the Partners shall take full account of the
Partnership's liabilities and property of the Partnership. The
property of the Partnership shall be liquidated as promptly as is
consistent with obtaining the fair value thereof, and the profits
and losses therefrom shall be allocated between the Partners as
provided in Sections 9, 10 and 12. In addition, upon a
liquidation of the Partnership or a termination of the Partnership
for tax purposes pursuant to Section 708(b) of the Code, if any
Partner's Federal Income Tax Capital Account has a deficit balance
(after giving effect to all contributions, distributions and
allocations for all taxable years, including the year during which
such liquidation occurs), such Partner shall contribute to the
capital of the Partnership the amount necessary to restore such
deficit balance to zero within ninety (90) days after the date of
such liquidation or termination to the extent necessary to comply
with Treasury Regulation Section 1.704-1(b)(2)(ii)(b)(3). The
proceeds from such liquidation to the extent sufficient therefor,
shall be applied and distributed in the following order.
(a) To the payment and discharge of all of the
Partnership's debts and liabilities, including the establishment
of any necessary reserves; and
(b) Distribute the balance in accordance with the
Partner's positive Tax Capital Account balances after all
appropriate adjustments thereto have been made for contributions,
distributions, and allocations for all taxable years, including
the year of dissolution.
17.4.5 No termination or dissolution of the Partnership
shall relieve a Partner from any obligation to the Partnership or
the other Partner accruing or accrued to the date of such
termination or dissolution.
17.4.6 Upon the bankruptcy of a Partner, the other Partner
shall serve as liquidator of the Partnership pursuant to the
applicable provisions of the Delaware Revised Uniform Partnership
Act.
18. CONFIDENTIALITY. Confidentiality shall be maintained pursuant to that
certain Confidentiality Agreement among CNG Market Center Services, Inc.,
Sabine Hub Services Company and CNG/Sabine Center which is incorporated
herein and attached as Schedule C ("Confidentiality Agreement"). The
Partners agree that any proprietary information supplied to the
Partnership by the Partners shall be Confidential Information as defined
by the Confidentiality Agreement. Any proprietary or commercially
sensitive information (as defined in the Confidentiality Agreement)
provided to the Partnership by a customer or potential customer in order
to receive services will be held in strict confidence by the Partners and
will not be divulged to any third parties or to any Affiliates of the
Partnership or the Partners, except as described in the Confidentiality
Agreement. Any failure by either Partner to uphold the confidentiality
of the above Information or any breach of the Confidentiality Agreement
shall be deemed a default of a material obligation pursuant to Section
17.3.2 and, therefore, an Event of Default pursuant to Section 17.3.
19. NOTICES. All notices, consents and other than routine communications
under this Agreement shall be in writing and shall be deemed to have been
duly given (i) when delivered by hand, (ii) when sent by telex or
telecopier (with receipt confirmed), provided that a copy is promptly
thereafter mailed by first class postage prepaid, registered or certified
mail, return receipt requested, (iii) when received by the addressee, if
sent by Express Mail, Federal Express, other express delivery service
(receipt requested) or by such other means as the parties may agree from
time to time or, (iv) five (5) business days after being mailed, by first
class postage prepaid, registered or certified mail, return receipt
requested, in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses, telex numbers and
telecopier numbers as a party may designate as to itself by notice to the
other party):
(A) if to Sabine HSC:
Sabine Hub Services Company
1111 Bagby
Houston, TX 77002
Attn: President
Facsimile: (713) 752-4667
(B) if to CNG:
CNG Market Center Services, Inc.
445 West Main Street
Clarksburg, WV 26301
Attn: President
Facsimile: (304) 623-8595
20. GENERAL
20.1 Effect Of Agreement. This Agreement together with the
Confidentiality Agreement and the Software License Agreements reflects
the whole and entire agreement between the Partners and supersedes and
replaces all prior agreements related to the subject matter hereof.
[ ] This Agreement may be
amended, restated or supplemented only by the written agreement of the
Partners.
20.2 Further Assurance. Each of the Partners agrees to execute and
deliver all such other and additional instruments and documents and to do
such other acts and things as may be reasonably necessary to effectuate
this Partnership and carry on the Partnership business in accordance with
this Agreement.
20.3 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS.
20.4 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
20.5 Waiver. No waiver by either Partner of any default by the other
Partner in the performance of any provision, condition or requirement
herein shall be deemed to be a waiver of, or in any manner release said
Partner from performance of any other provision, condition or requirement
herein; nor shall such waiver be deemed to be a waiver of, or in any
manner a release of, said Partner from future performance of the same
provision, condition or requirement. Any delay or omission of a Partner
to exercise any right hereunder shall not impair the exercise of any such
right, or any like right, accruing to it thereafter. The failure of a
Partner to perform its obligations hereunder shall not release the other
Partner from the performance of its respective obligations.
20.6 Severability. Should any provision of this Agreement be deemed in
contradiction with the laws of any jurisdiction in which it is to be
performed or unenforceable for any reason, such provision shall be deemed
null and void, but this Agreement shall remain in force in all other
respects. Should any provision of this Agreement be or become
ineffective because of changes in applicable laws or interpretations
thereof, or should this Agreement fail to include a provision that is
required as a matter of law, the validity of the other provisions of this
Agreement shall not be affected thereby. If such circumstances arise,
the parties hereto shall negotiate in good faith appropriate
modifications to this Agreement to reflect those changes that are
required by law.
20.7 Section Numbers. Unless otherwise indicated, references to
section numbers are to sections of this Agreement.
20.8 Third Persons. Except as expressly provided in this Agreement,
nothing herein expressed or implied is intended or shall be construed to
confer upon or to give any person not a party hereto any rights or
remedies under or by reason of this Agreement.
20.9 Schedules and Appendices. Schedules A-I, A-II, B and C attached
hereto, as may be amended or superseded from time to time, are
incorporated by reference and made a part hereof as amended and as if set
forth here in full.
20.10 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized officers as of June 30, 1994.
SABINE HUB SERVICES COMPANY CNG Market Center Services, Inc.
By: Jagit S. Yadav By: Joseph A. Curia
Title: President Title: President
Dates Referenced Herein and Documents Incorporated By Reference
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