EX-4.2






Exhibit 4.2




AMENDMENT NO. 2 TO




FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP




OF




TEEKAY LNG PARTNERS L.P.




     This Amendment No. 2 (this “Amendment No. 2”) to the First Amended and Restated
Agreement of Limited Partnership of Teekay LNG Partners L.P. (the “Partnership”) is hereby
adopted effective as of January 1, 2007, by Teekay GP L.L.C., a Marshall Islands limited liability
company (the “General Partner”), as general partner of the Partnership. Capitalized terms
used but not defined herein are used as defined in the Partnership Agreement (as defined below).



     WHEREAS, the General Partner, the Organizational Limited Partner and the Limited Partners of
the Partnership entered into that certain First Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of May 10, 2005 (as previously amended as of May 31, 2006,
the “Partnership Agreement”); and



     WHEREAS, acting pursuant to the power and authority granted to it under Section 13.1(d) of the
Partnership Agreement, the General Partner has determined that the following amendment to the
Partnership Agreement does not require the approval of any Limited Partner.



     NOW THEREFORE, the General Partner does hereby amend the Partnership Agreement as follows:



     Section 1. Amendment.



     (a)     Section 1.1 is hereby amended to add or amend and restate, as appropriate, the following
definitions:




     (i)     “Disposed of Adjusted Property” has the meaning assigned to such term in
Section 6.1(d)(xii)(B).




     (ii)    “Net Termination Gain” means, for any taxable year, the sum, if positive,
of all items of income, gain, loss or deduction recognized by the Partnership (a)
after the Liquidation Date or (b) upon the sale, exchange or other disposition of
all or substantially all of the assets of the Partnership Group, taken as a whole,
in a single transaction or a series of related transactions (excluding any
disposition to a member of the Partnership Group). The items included in the
determination of Net Termination Gain shall be determined in accordance with Section
5.5(b) and shall not include any items of income, gain or loss specially allocated
under Section 6.1(d).




     (iii)   “Net Termination Loss” means, for any taxable year, the sum, if negative,
of all items of income, gain, loss or deduction recognized by the



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Partnership (a) after the Liquidation Date or (b) upon the sale, exchange or other disposition of all or substantially all of the assets of the Partnership Group,
taken as a whole, in a single transaction or a series of related transactions
(excluding any disposition to a member of the Partnership Group). The items
included in the determination of Net Termination Loss shall be determined in
accordance with Section 5.5(b) and shall not include any items of income, gain or
loss specially allocated under Section 6.1(d).



     (b)     Section 5.5(d) is hereby amended and restated in its entirety as follows:




     (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 the General Partner’s Combined Interest to Common Units pursuant
to Section 11.3(b), the Capital Accounts 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 for an amount equal to its fair
market value immediately prior to such issuance and had been allocated to the
Partners at such time pursuant to Section 6.1(c) in the same manner as any item of
gain or loss actually recognized following an event giving rise to the dissolution
of the Partnership would have been allocated. 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 on an
actual sale of each 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 6.1(c) in the same manner as any item of gain or loss
actually recognized following an event giving rise to the dissolution of the
Partnership would have been allocated. 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)



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immediately prior to a distribution
shall (A) in the case of an actual distribution that is not made pursuant to Section 12.4 or in the case of a deemed
distribution, be determined and allocated in the same manner as that provided in
Section 5.5(d)(i) or (B) in the case of a liquidating distribution pursuant to
Section 12.4, be determined and allocated by the Liquidator using such method of
valuation as it may adopt



     (c)     Section 6.1(d)(xii) is hereby amended and restated in its entirety as follows:




     Corrective and Other Allocations. In the event of any allocation of Additional
Book Basis Derivative Items or any Book-Down Event or any recognition of a Net
Termination Loss, the following rules shall apply:




     (A)     Except as provided in Section 6.1(d)(xii)(B), in the case of any
allocation of Additional Book Basis Derivative Items (other than an
allocation of Unrealized Gain or Unrealized Loss under Section 5.5(d)
hereof) with respect to any Partnership property, the General Partner shall
allocate such Additional Book Basis Derivative Items (1) to (aa) the holders
of Incentive Distribution Rights and (bb) the General Partner in the same
manner that the Unrealized Gain or Unrealized Loss attributable to such
property is allocated pursuant to Section 5.5(d)(i) or Section 5.5(d)(ii)
and (2) to all Unitholders, Pro Rata, to the extent that the Unrealized Gain
or Unrealized Loss attributable to such property is allocated to any
Unitholders pursuant to Section 5.5(d)(i) or Section 5.5(d)(ii).




     (B)     In the case of any allocation of Additional Book Basis Derivative
Items (other than an allocation of Unrealized Gain or Unrealized Loss under
Section 5.5(d) hereof or an allocation of Net Termination Gain or Net
Termination Loss pursuant to Section 6.1(c) hereof) as a result of a sale or
other taxable disposition of any Partnership asset that is an Adjusted
Property (“Disposed of Adjusted Property”), the General Partner shall
allocate (1) additional items of income and gain (aa) away from the holders
of Incentive Distribution Rights and the General Partner and (bb) to the
Unitholders, or (2) additional items of deduction and loss (aa) away from
the Unitholders and (bb) to the holders of Incentive Distribution Rights and
the General Partner, to the extent that the Additional Book Basis Derivative
Items allocated to the Unitholders exceed their Share of Additional Book
Basis Derivative Items with respect to such Disposed of Adjusted Property.
For this purpose, the Unitholders shall be treated as being allocated
Additional Book Basis Derivative Items to the extent that such Additional
Book Basis Derivative Items have reduced the amount of income that would
otherwise have been allocated to the Unitholders under this Agreement (e.g.,
Additional Book Basis Derivative Items taken into account in computing cost
of goods sold would reduce the amount of book income otherwise available for
allocation among the Partners). Any allocation made pursuant to this




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Section 6.1(d)(xii)(B) shall be made after all of the other Agreed Allocations have been made as if this Section 6.1(d)(xii) were not in
this Agreement and, to the extent necessary, shall require the reallocation
of items that have been allocated pursuant to such other Agreed Allocations.




     (C)     In the case of any negative adjustments to the Capital Accounts of
the Partners resulting from a Book-Down Event or from the recognition of a
Net Termination Loss, such negative adjustment (1) shall first be allocated,
to the extent of the Aggregate Remaining Net Positive Adjustments, in such a
manner, as determined by the General Partner, that to the extent possible
the aggregate Capital Accounts of the Partners will equal the amount that
would have been the Capital Account balance of the Partners if no prior
Book-Up Events had occurred, and (2) any negative adjustment in excess of
the Aggregate Remaining Net Positive Adjustments shall be allocated pursuant
to Section 6.1(c) hereof.




     (D)     In making the allocations required under this Section 6.1(d)(xii),
the General Partner may apply whatever conventions or other methodology it
determines will satisfy the purpose of this Section 6.1(d)(xii).



     Section 2.     Ratification of Partnership Agreement. Except as expressly modified and
amended herein, all of the terms and conditions of the Partnership Agreement shall remain in full
force and effect.



     Section 3.     Governing Law. This Amendment No. 2 will be governed by and construed in
accordance with the laws of the Republic of The Marshall Islands.



     IN WITNESS WHEREOF, the General Partner has executed this Amendment No. 2 as of the date first
set forth above.



	 	 	 	 	 
	 	
GENERAL PARTNER:


TEEKAY GP L.L.C.


 	 
	 	By:  	/s/  Peter Evensen
 	 
	 	 	Name:  	Peter Evensen 	 
	 	 	Title:  	Chief Executive Officer and

Chief Financial Officer 	 
	 




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