exv10w4



 





Exhibit 10.4




 





GENERAL PARTNERSHIP AGREEMENT




OF




MARKET HUB PARTNERS HOLDING




July 2, 2007




 





 









 








TABLE OF CONTENTS




	 	 	 	 	 	 	 
	 	 	 	 	Page
	 
	 	 	 	 	 	 
	ARTICLE 1 DEFINITIONS	 	 	1	 
	      1.01

	 	Definitions
	 	 	1	 
	      1.02

	 	Interpretation
	 	 	8	 
	ARTICLE 2 ORGANIZATION	 	 	8	 
	      2.01

	 	Formation
	 	 	8	 
	      2.02

	 	Name
	 	 	9	 
	      2.03

	 	Registered Office; Registered Agent; Principal Office
in the United States; Other Offices
	 	 	9	 
	      2.04

	 	Purposes
	 	 	9	 
	      2.05

	 	Foreign Qualification
	 	 	9	 
	      2.06

	 	Term
	 	 	9	 
	ARTICLE 3 PARTNERSHIP; DISPOSITIONS OF INTERESTS	 	 	9	 
	      3.01

	 	Initial Partners
	 	 	9	 
	      3.02

	 	Representations, Warranties and Covenants
	 	 	9	 
	      3.03

	 	Dispositions and Encumbrances of Partnership Interests
	 	 	10	 
	      3.04

	 	Creation of Additional Partnership Interests
	 	 	11	 
	      3.05

	 	Access to Information
	 	 	11	 
	      3.06

	 	Confidential Information
	 	 	11	 
	      3.07

	 	Liability to Third Parties
	 	 	13	 
	      3.08

	 	Use of Partners’ Names and Trademarks
	 	 	13	 
	ARTICLE 4 CAPITAL CONTRIBUTIONS	 	 	13	 
	      4.01

	 	Capital Contributions
	 	 	13	 
	      4.02

	 	Loans
	 	 	13	 
	      4.03

	 	No Other Contribution Obligations
	 	 	13	 
	      4.04

	 	Return of Contributions
	 	 	13	 
	      4.05

	 	Capital Accounts
	 	 	13	 
	      4.06

	 	Failure to Make a Capital Contribution
	 	 	13	 
	ARTICLE 5 DISTRIBUTIONS AND ALLOCATIONS	 	 	13	 
	      5.01

	 	Distributions
	 	 	13	 
	      5.02

	 	Distributions on Dissolution and Winding Up
	 	 	13	 
	      5.03

	 	Allocations.
	 	 	13	 
	      5.04

	 	Varying Interests
	 	 	13	 
	ARTICLE 6 MANAGEMENT	 	 	13	 
	      6.01

	 	Generally
	 	 	13	 
	      6.02

	 	Management Committee
	 	 	13	 
	      6.03

	 	Operations and Management Agreement
	 	 	13	 
	      6.04

	 	Conflicts of Interest
	 	 	13	 
	      6.05

	 	Indemnification for Breach of Agreement
	 	 	13	 
	      6.06

	 	General Regulatory Matters
	 	 	13	 
	      6.07

	 	Disclaimer Of Duties
	 	 	13	 
	ARTICLE 7 TAXES	 	 	13	 
	      7.01

	 	Tax Returns
	 	 	13	 
	      7.02

	 	Tax Elections
	 	 	13	 






i




 









 








	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	     7.03

	 	Tax Matters Partner
	 	 	13	 
	ARTICLE 8 BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS	 	 	13	 
	      8.01

	 	Maintenance of Books; Reports
	 	 	13	 
	      8.02

	 	Reports.
	 	 	13	 
	      8.03

	 	Bank Accounts
	 	 	13	 
	ARTICLE 9 WITHDRAWAL	 	 	13	 
	      9.01

	 	No Right of Withdrawal
	 	 	13	 
	      9.02

	 	Deemed Withdrawal
	 	 	13	 
	      9.03

	 	Effect of Withdrawal
	 	 	13	 
	ARTICLE 10 DISPUTE RESOLUTION	 	 	13	 
	      10.01

	 	Disputes
	 	 	13	 
	      10.02

	 	Negotiation to Resolve Disputes
	 	 	13	 
	      10.03

	 	Selection of Arbitrator
	 	 	13	 
	      10.04

	 	Conduct of Arbitration
	 	 	13	 
	ARTICLE 11 DISSOLUTION, WINDING UP AND TERMINATION	 	 	13	 
	      11.01

	 	Dissolution
	 	 	13	 
	      11.02

	 	Winding Up and Termination
	 	 	13	 
	      11.03

	 	Deficit Capital Accounts
	 	 	13	 
	      11.04

	 	Certificate of Cancellation
	 	 	13	 
	ARTICLE 12 GENERAL PROVISIONS	 	 	13	 
	      12.01

	 	Offset
	 	 	13	 
	      12.02

	 	Notices
	 	 	13	 
	      12.03

	 	Entire Agreement; Superseding Effect
	 	 	13	 
	      12.04

	 	Effect of Waiver or Consent
	 	 	13	 
	      12.05

	 	Amendment or Restatement
	 	 	13	 
	      12.06

	 	Binding Effect
	 	 	13	 
	      12.07

	 	Governing Law; Severability
	 	 	13	 
	      12.08

	 	Further Assurances
	 	 	13	 
	      12.09

	 	Waiver of Certain Rights
	 	 	13	 
	      12.10

	 	Counterparts
	 	 	13	 






EXHIBITS:



A — Partners

B — Initial Facilities




ii





 









 








GENERAL PARTNERSHIP AGREEMENT

OF

MARKET HUB PARTNERS HOLDING




     This GENERAL PARTNERSHIP AGREEMENT OF MARKET HUB PARTNERS HOLDING, dated as of July 2, 2007
(this “Agreement”), is adopted, executed and agreed to, for good and valuable consideration, by
Spectra Energy Partners MHP Holding, LLC, a Delaware limited liability company (“SEP MHP”), Spectra
Energy Southeast MHP Holding, LLC, a Delaware limited liability company (“SEPL MHP”), and Spectra
Energy MHP Holding, LLC, a Delaware limited liability company (“SET MHP”), each as a partner of the
Partnership. Capitalized terms used in this Agreement and not defined elsewhere have the meanings
given to them in Article 1 below.



RECITALS




     The Partners hereby form a partnership pursuant to and in accordance with the Act and desire
to enter into a written agreement pursuant to the Act governing the affairs of the Partnership and
the conduct of its business. This Agreement is intended to bind all Partners from time to time and
the Partnership.



     NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Partners agree as follows:



ARTICLE 1

DEFINITIONS




          1.01 Definitions.




          (a) Certain Definitions. As used in this Agreement, the following terms have the respective
meanings set forth below or set forth in the Sections referred to below:




     AAA — Section 10.02(c).



     Act — the Delaware Revised Uniform Partnership Act (6 Del. C. §15-101, et
seq.), as amended from time to time.



     Additional Contribution — Section 4.06(a)(ii).



     Additional Contribution Partner — Section 4.06(a)(ii).



     Affiliate — with respect to any Person, (a) each entity that such Person Controls; (b) each
Person that Controls such Person, including, in the case of a Partner, the Partner’s Parent; and
(c) each entity that is under common Control with the Person, including, in the case of a Partner,
each entity that is Controlled by the Partner’s Parent; provided, with respect to any Partner, an
Affiliate shall include (y) a limited partnership or a Person Controlled by a limited partnership
if a general partner of the limited partnership is Controlled by the Partner’s Parent, or (z) a
limited liability company or a Person controlled by a limited liability company if the managing
member of the limited liability company is Controlled by such Partner’s Parent.



 









 





     Affiliate’s Outside Activities — Section 6.04(b).



     Agreement — introductory paragraph.



     Alternate Representative - Section 6.02(a)(i).



     Arbitration Notice — Section 10.02(c).



     Arbitrator — Section 10.03(a).



     Assignee — any Person that acquires a Partnership Interest or any portion of a Partnership
Interest through a Disposition; provided, however, that an Assignee shall have no right to be
admitted to the Partnership as a Partner except with the prior written approval of each of the
Partners. The Assignee of a liquidated or wound up Partner is the shareholder, partner, member or
other equity owner or owners of the liquidated or wound up Partner to which that Partner’s
Partnership Interest is assigned by the Person conducting the liquidation or winding up of that
Partner. The Assignee of a Bankrupt Partner is (a) the Person or Persons (if any) to whom such
Bankrupt Partner’s Partnership Interest is assigned by order of the bankruptcy court or other
Governmental Authority having jurisdiction over such Bankruptcy, or (b) in the event of a general
assignment for the benefit of creditors, the creditor to which such Partnership Interest is
assigned.



     Authorizations — licenses, certificates, permits, orders, approvals, determinations and
authorizations from Governmental Authorities having valid jurisdiction.



     Available Cash — with respect to any Quarter ending prior to the liquidation and winding up
of the Partnership, the excess, if any and without duplication, of:



          (a) the sum of all cash and cash equivalents of the Partnership on hand at the end of that
Quarter, over




          (b) the amount of any cash reserves that are necessary or appropriate in the reasonable
discretion of the Management Committee to (i) provide for the proper conduct of the business of the
Partnership (including reserves for future maintenance capital expenditures and for anticipated
future credit needs of the Partnership) subsequent to that Quarter or (ii) comply with applicable
Law or any loan agreement, security agreement, mortgage, debt instrument or other agreement or
obligation to which the Partnership is a party or by which it is bound or its assets are subject;
provided, however, that distributions made by the Partnership or cash reserves
established, increased or reduced after the end of that Quarter but on or before the date of
determination of Available Cash with respect to that Quarter shall be deemed to have been made,
established, increased or reduced, for purposes of determining Available Cash, within that Quarter
if the Management Committee so determines.




     Notwithstanding the foregoing, “Available Cash” with respect to the Quarter in which a
liquidation or winding up of the Partnership occurs and any subsequent Quarter shall be deemed to
equal zero.



2









 





     Bankruptcy or Bankrupt — with respect to any Person, (a) that Person (i) makes a general
assignment for the benefit of creditors; (ii) files a voluntary bankruptcy petition; (iii) becomes
the subject of an order for relief or is declared insolvent in any federal or state bankruptcy or
insolvency proceedings; (iv) files a petition or answer seeking for that Person a reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar relief under any Law;
(v) files an answer or other pleading admitting or failing to contest the material allegations of a
petition filed against that Person in a proceeding of the type described in subclauses (i) through
(iv) of this clause (a); or (vi) seeks, consents to or acquiesces in the appointment of a trustee,
receiver or liquidator of that Person or of all or any substantial part of that Person’s
properties; or (b) against that Person, a proceeding seeking reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any Law has been
commenced and 120 Days have expired without dismissal thereof or with respect to which, without
that Person’s consent or acquiescence, a trustee, receiver or liquidator of that Person or of all
or any substantial part of that Person’s properties has been appointed and 90 Days have expired
without the appointment’s having been vacated or stayed, or 90 Days have expired after the date of
expiration of a stay, if the appointment has not previously been vacated.



     Breaching Partner — a Partner that (i) has committed a failure or breach of the type
described in the definition of “Default,” (ii) has received a notice of the type described in the
definition of “Default,” and (iii) has not cured the failure or breach, but as to which the
applicable cure period set forth in the definition of “Default” has not yet expired.



     Business Day — any day other than a Saturday, a Sunday, or a holiday on which national
banking associations in the State of Texas are closed.



     Capital Account — the account maintained by the Partnership for each Partner in accordance
with this Agreement and to be maintained by the Partnership for each Partner from and after the
Effective Date in accordance with Section 4.05.



     Capital Budget - the annual capital budget for the Company that is approved (or deemed
approved) pursuant to Section 6.02(i)(iii)(B).



     Capital Call — Section 4.01(a).



     Capital Contribution — with respect to any Partner, the amount of money and the net agreed
value of any property (other than money) contributed to the Partnership by the Partner. Any
reference in this Agreement to the Capital Contribution of a Partner shall include a Capital
Contribution of its predecessors in interest.



     Certificate — Section 2.01.



     Claim — any and all judgments, claims, causes of action, demands, lawsuits, suits,
proceedings, Governmental investigations or audits, losses, assessments, fines, penalties,
administrative orders, obligations, costs, expenses, liabilities and damages (whether actual,
consequential or punitive), including interest, penalties, reasonable attorney’s fees,
disbursements and costs of investigations, deficiencies, levies, duties, imposts, remediation and
cleanup costs, and natural resources damages.



3









 





     Code — the Internal Revenue Code of 1986, as amended.



     Confidential Information — information and data (including all copies) that is furnished or
submitted by any of the Partners, their Affiliates, or the Operator, whether oral, written, or
electronic, to the other Partners, their Affiliates, or the Operator in connection with the
Facilities and the resulting information and data obtained from those studies, including market
evaluations, market proposals, service designs and pricing, pipeline system design and routing,
cost estimating, rate studies, identification of permits, strategic plans, legal documents,
environmental studies and requirements, public and governmental relations planning, identification
of regulatory issues and development of related strategies, legal analysis and documentation,
financial planning, gas reserves and deliverability data, studies of the natural gas supplies for
the Facilities, and other studies and activities to determine the potential viability of the
Facilities and their design characteristics, and identification of key issues. Notwithstanding the
foregoing, the term “Confidential Information” shall not include any information that:



          (a) is in the public domain at the time of its disclosure or thereafter, other than as a
result of a disclosure directly or indirectly by a Partner or its Affiliates or the Operator in
contravention of this Agreement;




          (b) as to any Partner or its Affiliates or the Operator, was in the possession of such Partner
or its Affiliates or Operator prior to the execution of any confidentiality agreements related to
the Facilities or this Agreement; or




          (c) has been independently acquired or developed by a Partner or its Affiliates or Operator
without violating any of the obligations of that Partner or its Affiliates or Operator under any
applicable agreement.




     Contributing Partner — Section 4.06(a).



     Control — the possession, directly or indirectly, through one or more intermediaries, of the
following:



          (a) (i) in the case of a corporation, 50% or more of the outstanding voting securities
thereof; (ii) in the case of a limited liability company, general partnership or venture, the right
to 50% or more of the distributions therefrom (including liquidating distributions); (iii) in the
case of a trust or estate, including a business trust, 50% or more of the beneficial interest
therein; and (iv) in the case of any other entity, 50% or more of the economic or beneficial
interest therein; provided, however, in the case of a limited partnership, “Control” shall mean
possession, directly or indirectly through one or more intermediaries, of, (A) in the case where
the general partner of such limited partnership is a corporation, ownership of 50% or more of the
outstanding voting securities of such corporate general partner, (B) in the case where the general
partner of such limited partnership is a partnership, limited liability company or other entity
(other than a corporation or limited partnership), the right to 50% or more of the distributions
from such general partner entity, and (C) in the case where the general partner of such limited
partnership is a limited partnership, Control of the general partner of such general partner in the
manner described under clause (A) or (B), in each case, notwithstanding that the Person with
respect to which Control is being determined does not possess, directly or indirectly through one




4









 







or more subsidiaries, the right to receive at least 50% of the distributions from such limited
partnership; and




          (b) in the case of any entity, the power or authority, through ownership of voting securities,
by contract or otherwise, to exercise predominant control over the management of the entity.




     Day — a calendar day; provided, however, that, if any period of Days referred to in this
Agreement shall end on a Day that is not a Business Day, then the expiration of that period shall
be automatically extended until the end of the first succeeding Business Day.



     Deemed Tax Disposition - any event or series of events that is treated for federal income tax
purposes as a sale or exchange of a Partner’s Partnership Interest or portion thereof for purposes
of Section 708(b)(1)(B) of the Code.



     Default — with respect to any Partner,



          (a) the failure of that Partner to contribute, on or before the 10th Day after the date
required, all or any portion of a Capital Contribution that Partner is required to make as provided
in this Agreement or




          (b) the failure of a Partner to comply in any material respect with any of its other
agreements, covenants or obligations under this Agreement, or the failure of any representation or
warranty made by a Partner in this Agreement to have been true and correct in all material respects
at the time it was made,



in each case if the breach is not cured by the applicable Partner on or before the 30th Day after
its receiving notice of such breach from any other Partner (or, if such breach is not capable of
being cured within such 30-Day period, if such Partner fails to promptly commence substantial
efforts to cure such breach or to prosecute such curative efforts to completion with continuity and
diligence). The Management Committee may, but shall have no obligation to, extend the foregoing
10-Day and 30-Day periods.




     Default Rate — a rate per annum equal to the lesser of (a) a varying rate per annum equal to
the sum of (i) the prime rate as published in The Wall Street Journal, with adjustments in that
varying rate to be made on the same date as any change in that rate is so published, plus (ii) 2%
per annum, and (b) the maximum rate permitted by Law.



     Dispose, Disposing or Disposition — with respect to any asset,, a sale, assignment, transfer,
conveyance, gift, exchange or other disposition of such asset, whether such disposition be
voluntary, involuntary or by operation of Law, including the following: (a) in the case of an
asset owned by a natural person, a transfer of such asset upon the death of its owner, whether by
will, intestate succession or otherwise; (b) in the case of an asset owned by an entity, (i) a
merger or consolidation of such entity (other than where such entity is the survivor thereof), (ii)
a conversion of such entity into another type of entity, or (iii) a distribution of such asset,
including in connection with the dissolution, liquidation, winding up or termination of such entity
(unless, in the case of dissolution, such entity’s business is continued without the commencement
of



5









 




liquidation or winding up); and (c) a disposition in connection with, or in lieu of, a
foreclosure of an Encumbrance; but such terms shall not include the creation of an Encumbrance.




     Disposing Partner — Section 3.03(a).



     Dispute — Section 10.01.



     Dispute Notice — Section 10.02.



     Disputing Partner — Section 10.01.



     Dissolution Event — Section 11.01.



     Effective Date — the date the Partnership is formed as provided in Section 2.01.



     Encumber, Encumbering or Encumbrance — the creation of a security interest, lien, pledge,
mortgage or other encumbrance, whether such encumbrance be voluntary, involuntary or by operation
of Law.



     Facilities — (a) the Initial Facilities and (b) any additions to or expansion of existing
Facilities that are approved by the Management Committee.



     FERC — the Federal Energy Regulatory Commission or any Governmental Authority succeeding to
the powers of such commission.



     Governmental Authority (or Governmental) — a federal, state, local or foreign governmental
authority; a state, province, commonwealth, territory or district thereof; a county or parish; a
city, town, township, village or other municipality; a district, ward or other subdivision of any
of the foregoing; any executive, legislative or other governing body of any of the foregoing; any
agency, authority, board, department, system, service, office, commission, committee, council or
other administrative body of any of the foregoing; including the FERC, any court or other judicial
body; and any officer, official or other representative of any of the foregoing.



     including — including, without limitation.



     Initial Facilities — means the gas storage facility and related equipment and other
infrastructure described on Exhibit B.



     Law — any applicable constitutional provision, statute, act, code (including the Code), law,
regulation, rule, ordinance, order, decree, ruling, proclamation, resolution, judgment, decision,
declaration or interpretative or advisory opinion or letter of a Governmental Authority having
valid jurisdiction.



     Majority Interest - Section 6.02(f)(i)(D).



     Management Committee - Section 6.02.



6









 





     Non-Contributing Partner — Section 4.06(a).



     O&M Agreement — Section 6.04.



     Officer — any Person designated as an officer of the Partnership as provided in Section 6.02,
but that term does not include any Person who has ceased to be an officer of the Company.



     Omnibus Agreement — that certain Omnibus Agreement dated as of July 2, 2007 by and among
Spectra Energy Corp, Spectra Energy Partners GP, LLC, Spectra Energy Partners (DE) GP, LP and
Spectra Energy Partners, LP.



     Operator — SET MHP.



     Parent — the Person that Controls a Partner and that is not itself Controlled by any other
Person.



     Partner — any Person executing this Agreement as of the date of this Agreement as a partner
or subsequently admitted to the Partnership as a partner as provided in this Agreement, but such
term does not include any Person that has ceased to be a partner in the Partnership.



     Partnership — Market Hub Partners Holding General Partnership.



     Partnership Interest — with respect to any Partner, (a) that Partner’s status as a Partner;
(b) that Partner’s share of the income, gain, loss, deduction and credits of, and the right to
receive distributions from, the Partnership; (c) any Priority Interest to which that Partner is
entitled pursuant to Section 4.06(b); (d) all other rights, benefits and privileges enjoyed by that
Partner (under the Act, this Agreement or otherwise) in its capacity as a Partner; and (e) all
obligations, duties and liabilities imposed on that Partner (under the Act, this Agreement or
otherwise) in its capacity as a Partner, including any obligations to make Capital Contributions.



     Person — the meaning assigned that term in Section 15-101(16) of the Act and also includes a
Governmental Authority and any other entity.



     Priority Interest — the special distribution rights under Section 4.06(b) received by each
Additional Contribution Partner, which rights include the right to receive the return described in
Section 4.06(b)(i) and which form part of the Additional Contribution Partner’s Partnership
Interest.



     Priority Interest Sharing Ratio — Section 4.06(b)(i).



     Quarter — unless the context requires otherwise, a fiscal quarter of the Partnership.



     Representative - Section 6.02(a)(i).



     Securities Act — the Securities Act of 1933.



     Sharing Ratio — subject in each case to adjustments in accordance with this Agreement or in
connection with Dispositions of Partnership Interests, (a) in the case of a Partner executing



7









 




this Agreement as of the date of this Agreement or a Person acquiring that Partner’s
Partnership Interest, the percentage specified for that Partner as its Sharing Ratio on Exhibit A,
and (b) in the case of Partnership Interests issued under Section 3.04, the Sharing Ratio
established in Section 3.04; provided, however, that the total of all Sharing Ratios shall always
equal 100%.




     Sole Discretion — (a) in the applicable Person’s sole and absolute discretion (b) with or
without cause, (c) subject to such conditions as it may deem appropriate, and (d) without taking
into account the interests of, and without incurring liability to, the Partnership, any Partner, or
any officer or employee of the Partnership.



     Storage Agreement —any agreement of the Partnership to store natural gas for other Persons at
any of the Facilities.



     Tax Matters Partner — Section 7.03(a).



     Term — Section 2.06.



     Treasury Regulations — the regulations (including temporary regulations) promulgated by the
United States Department of the Treasury pursuant to and in respect of provisions of the Code. All
references herein to sections of the Treasury Regulations shall include any corresponding provision
or provisions of succeeding, similar or substitute, temporary or final Treasury Regulations.



     Withdraw, Withdrawing or Withdrawal — the withdrawal, resignation or retirement of a Partner
from the Partnership as a partner. Such terms shall not include any Dispositions of Partnership
Interest (which are governed by Sections 3.03(a) and (b)), even though the Partner making a
Disposition may cease to be a Partner as a result of the Disposition.



     Withdrawn Partner — Section 9.03.



          (b) Other Terms. Terms defined elsewhere in this Agreement have the meanings so given them.




          1.02 Interpretation. Unless the context requires otherwise: (a) the gender (or lack of gender) of
all words used in this Agreement includes the masculine, feminine and neuter; (b) references to
Articles and Sections refer to Articles and Sections of this Agreement; (c) references to Exhibits
refer to the Exhibits attached to this Agreement, each of which is made a part hereof for all
purposes; (d) references to Laws refer to such Laws as they may be amended from time to time, and
references to particular provisions of a Law include any corresponding provisions of any succeeding
Law; and (e) references to money refer to legal currency of the United States of America.




ARTICLE 2

ORGANIZATION




          2.01 Formation. The Management Committee has previously formed the Partnership as a Delaware
partnership by the filing of a Certificate of Conversion of Market Hub




8









 







Partners Holding, LLC to Market Hub Partners Holding pursuant to Section 15-901 of the Act (the
“Certificate”).




          2.02 Name. The name of the Partnership is “Market Hub Partners Holding” and all Partnership
business must be conducted in that name.




          2.03 Registered Office; Registered Agent; Principal Office in the United States; Other Offices.
The registered office of the Partnership required by the Act to be maintained in the State of
Delaware shall be the office of the initial registered agent named in the Certificate or such other
office (which need not be a place of business of the Partnership) as the Management Committee may
designate in the manner provided by Law. The registered agent of the Partnership in the State of
Delaware shall be the initial registered agent named in the Certificate or such other Person or
Persons as the Management Committee may designate in the manner provided by Law. The principal
office of the Partnership in the United States shall be at such place as the Management Committee
may designate, which need not be in the State of Delaware, and the Partnership shall maintain
records there or such other place as the Management Committee shall designate and shall keep the
street address of such principal office at the registered office of the Partnership in the State of
Delaware. The Partnership may have such other offices as the Management Committee may designate.




          2.04 Purposes. The purposes of the Partnership are to plan, design, construct, acquire, own,
maintain and operate the Facilities, to market the services of the Facilities, to engage in the
storage and transmission of natural gas through the Facilities, and to engage in any activities
directly or indirectly relating to the foregoing.




          2.05 Foreign Qualification. Prior to the Partnership’s conducting business in any jurisdiction
other than Delaware, to the extent required by Law, the Management Committee shall cause the
Partnership to comply, to the extent procedures are available and those matters are reasonably
within the control of the Management Committee, with all requirements necessary to qualify the
Partnership as a foreign partnership in that jurisdiction. At the request of the Management
Committee, each Partner shall execute, acknowledge, swear to and deliver all certificates and other
instruments conforming with this Agreement that are necessary or appropriate to qualify, continue
and terminate the Partnership as a foreign partnership in all such jurisdictions in which the
Partnership may conduct business.




          2.06 Term. The period of existence of the Partnership (the “Term”) commenced with the acceptance
for filing of the Certificate by the Secretary of State of the State of Delaware and shall end at
such time as a certificate of cancellation is filed with the Secretary of State of the State of
Delaware in accordance with Section 11.04.




ARTICLE 3

PARTNERSHIP; DISPOSITIONS OF INTERESTS




          3.01 Initial Partners. As of the formation of the Partnership, SEP MHP, SEPL MHP and SET MHP are
Partners.




          3.02 Representations, Warranties and Covenants. Each Partner hereby represents, warrants and
covenants to the Partnership and each other Partner that the following




9









 




statements are true and correct as of the Effective Date and shall be true and correct at all times
that such Partner is a Partner:




          (a) that Partner is duly incorporated, organized or formed (as applicable), validly existing,
and (if applicable) in good standing under the Law of the jurisdiction of its incorporation,
organization or formation; if required by applicable Law, that Partner is duly qualified and in
good standing in the jurisdiction of its principal place of business, if different from its
jurisdiction of incorporation, organization or formation; and that Partner has full power and
authority to execute and deliver this Agreement and to perform its obligations hereunder, and all
necessary actions by the board of directors, shareholders, managers, members, partners, trustees,
beneficiaries, or other applicable Persons necessary for the due authorization, execution, delivery
and performance of this Agreement by that Partner have been duly taken;




          (b) that Partner has duly executed and delivered this Agreement and the other documents
contemplated herein, and they constitute the legal, valid and binding obligation of that Partner
enforceable against it in accordance with their terms (except as may be limited by bankruptcy,
insolvency or similar Laws of general application and by the effect of general principles of
equity, regardless of whether considered at law or in equity); and




          (c) that Partner’s authorization, execution, delivery, and performance of this Agreement does
not and will not (i) conflict with, or result in a breach, default or violation of, (A) the
organizational documents of that Partner, (B) any contract or agreement to which that Partner is a
party or is otherwise subject, or (C) any Law, order, judgment, decree, writ, injunction or
arbitral award to which that Partner is subject; or (ii) require any consent, approval or
authorization from, filing or registration with, or notice to, any Governmental Authority or other
Person, unless such requirement has already been satisfied.




          3.03 Dispositions and Encumbrances of Partnership Interests(a) .




          (a) A Partner (the “Disposing Partner”) may Dispose of or Encumber all or any portion of its
Partnership Interest only (i) to an Affiliate of the Partner making the Disposition or (ii) with
the written consent of the Management Committee. Any attempted Disposition or Encumbrance of a
Partnership Interest, other than in strict accordance with this Section 3.03, shall be, and is
hereby declared, null and void ab initio. The rights and obligations constituting a Partnership
Interest may not be separated, divided or split from the other attributes of a Partnership Interest
except with the prior written approval of the Management Committee and as contemplated by the
express provisions of this Agreement. Notwithstanding the foregoing, a Partner may not effect a
Disposition (including a Deemed Tax Disposition) if such Disposition, when added to the total of
all other Dispositions (including Deemed Tax Dispositions) with the preceding twelve months,
results in the Partnership being considered to have terminated within the meaning of Section
708(b)(1)(B) of the Code.




          (b) The Partners agree that a breach of the provisions of this Section 3.03 may cause
irreparable injury to the Partnership and to the other Partners for which monetary damages (or
other remedy at law) are inadequate in view of (i) the complexities and uncertainties in measuring
the actual damages that would be sustained by reason of the failure of a Limited Partner to comply
with such provision and (ii) the uniqueness of the Partnership business and the




10









 




relationship among the Partners. Accordingly, the Limited Partners agree that the provisions
of this Section 3.03 may be enforced by specific performance in accordance with Section 10.04(b).




          3.04 Creation of Additional Partnership Interests. Additional Partnership Interests may be created
and issued to existing Partners or to other Persons, and such other Persons may be admitted to the
Partnership as Partners, only with the consent of the Management Committee, on such terms and
conditions as the Management Committee may determine at the time of admission. The terms of
admission or issuance must specify the applicable Sharing Ratios and may provide for the creation
of different classes or groups of Partners having different rights, powers and duties. Any such
admission is effective only after the new Partner has executed and delivered to each other Partner
an instrument containing the notice address of the new Partner, the Assignee’s ratification of this
Agreement and agreement to be bound by it, and its confirmation that the representations and
warranties in Section 3.02 are true and correct with respect to it. The provisions of this Section
3.04 shall not apply to Dispositions of Partnership Interests or admissions of Assignees in
connection therewith, such matters being governed by Section 3.03.




          3.05 Access to Information. Each Partner shall be entitled to receive any information that it may
request concerning the Partnership; provided, however, that this Section 3.05 shall not obligate
the Partnership, the Management Committee, or Operator to create any information that does not
already exist at the time of such request (other than to convert existing information from one
medium to another, such as providing a printout of information that is stored in a computer
database). Each Partner shall also have the right, upon reasonable notice, and at all reasonable
times during usual business hours to inspect the properties of the Partnership and to audit,
examine and make copies of the books of account and other records of the Partnership. This right
may be exercised through any agent or employee of a Partner designated in writing by it or by an
independent public accountant, engineer, 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 on that Partner’s behalf. The Partners agree to cooperate reasonably, and to cause
their respective independent public accountants, engineers, attorneys or other consultants to
cooperate reasonably, in connection with any such request. Confidential Information obtained under
this Section 3.05 shall be subject to the provisions of Section 3.06.




          3.06 Confidential Information.




          (a) Except as permitted by Section 3.06(b), (i) each Partner shall, and shall cause its
Affiliates to, keep confidential all Confidential Information and shall not disclose any
Confidential Information to any Person, including any of its Affiliates, and (ii) each Partner
shall use the Confidential Information only in connection with the Facilities and the Partnership.




          (b) Notwithstanding Section 3.06(a), but subject to the other provisions of this Section 3.06,
a Partner or, where applicable, its Affiliates, may make the following disclosures and uses of
Confidential Information:





          (i) disclosures to another Partner, the Operator or any other Person retained by the
Partnership in connection with the Partnership;



11









 






          (ii) disclosures and uses that are approved by the Management Committee;




          (iii) disclosures that may be required from time to time to obtain requisite
Authorizations or financing for the Facilities, if the disclosures are approved by the
Management Committee;




          (iv) disclosures to an Affiliate of that Partner, including the directors, officers,
employees, agents and advisors of that Affiliate, if that Affiliate has agreed to abide by
the terms of this Section 3.06, and special care shall be taken to restrict such disclosures
in any case where that Affiliate is or may become a customer under a Storage Agreement or an
“Energy Affiliate” (as defined in the FERC’s Standards of Conduct for Transmission
Providers, 18 C.F.R. Part 358, Section 358.3(d));




          (v) disclosures to the Parent of that Partner, including the directors, officers,
employees, agents and advisors of that Parent, but that Parent shall be subject to the terms
of this Section 3.06;




          (vi) disclosures to a Person that is not a Partner or an Affiliate of a Partner, if
that Person has been retained by a Partner or an Affiliate of a Partner to provide services
in connection with the Partnership and has agreed to abide by the terms of this Section
3.06;




          (vii) disclosures to a bona-fide potential direct or indirect purchaser of that
Partner’s Partnership Interest, if that potential purchaser has agreed to abide by the terms
of this Section 3.06;




          (viii) disclosures required, with respect to a Partner or an Affiliate of a Partner,
pursuant to (A) the Securities Act and the rules and regulations promulgated thereunder, (B)
the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder, (C) any state securities Laws, (D) any national securities exchange or automated
quotation system or (E) to any tax authority as such Partner deems appropriate; and




          (ix) disclosures that a Partner is legally compelled to make by deposition,
interrogatory, request for documents, subpoena, civil investigative demand, order of a court
of competent jurisdiction or similar process or otherwise by Law; provided, however, that,
prior to any such disclosure, such Partner shall, to the extent legally permissible:




               (A) provide the Management Committee with prompt notice of such requirements so
that one or more of the Partners may seek a protective order or other appropriate
remedy or waive compliance with the terms of this Section 3.06(b)(ix);




               (B) consult with the Management Committee on the advisability of taking steps
to resist or narrow such disclosure; and



12









 






               (C) cooperate with the Management Committee and with the other Partners in any
attempt one or more of them may make to obtain a protective order or other
appropriate remedy or assurance that confidential treatment will be afforded the
Confidential Information; and in the event such protective order or other remedy is
not obtained, or the other Partners waive compliance with the provisions of this
Agreement, that Partner agrees (I) to furnish only that portion of the Confidential
Information that, in the opinion of the Partner’s counsel, the Partner is legally
required to disclose, and (II) to exercise all reasonable efforts to obtain
assurance that confidential treatment will be accorded the Confidential Information.



          (c) Each Partner shall take, and shall cause its Affiliates to take, such precautionary
measures as may be required to ensure (and such Partner shall be responsible for) compliance with
this Section 3.06 by any of its Affiliates, and its and their directors, officers, employees and
agents, and other Persons to which it may disclose Confidential Information in accordance with this
Section 3.06.




          (d) Promptly after its Withdrawal, a Withdrawn Partner shall destroy (and provide a
certificate of destruction to the Partnership with respect to), or return to the Partnership, all
Confidential Information in its possession. Notwithstanding the immediately preceding sentence,
but subject to the other provisions of this Section 3.06, a Withdrawn Partner may retain for a
stated period, but not disclose to any other Person, Confidential Information for the limited
purposes of (i) explaining that Partner’s corporate decisions with respect to the Facilities or
(ii) preparing such Partner’s tax returns and defending audits, investigations and proceedings
relating thereto; provided, however, that the Withdrawn Partner must notify the Management
Committee in advance of such retention and specify in such notice the stated period of such
retention.




          (e) The Partners agree that no adequate remedy at law exists for a breach or threatened breach
of any of the provisions of this Section 3.06, the continuation of which unremedied will cause the
Partnership and the other Partners to suffer irreparable harm. Accordingly, the Partners agree
that the Partnership and the other Partners shall be entitled, in addition to other remedies that
may be available to them, to immediate injunctive relief from any breach of any of the provisions
of this Section 3.06 and to specific performance of their rights hereunder, as well as to any other
remedies available at law or in equity, pursuant to Section 10.04.




          (f) The obligations of the Partners under this Section 3.06 (including the obligations of any
Withdrawn Partners) shall continue to bind any Person that has ceased to be a Partner and shall
terminate on the second anniversary of the end of the Term.




          3.07 Liability to Third Parties. No Limited Partner or Affiliate of a Partner shall be liable for
the debts, obligations or liabilities of the Partnership.




          3.08 Use of Partners’ Names and Trademarks. The Partnership, the Partners and their Affiliates
shall not use the name or trademark of any Partner or its Affiliates in connection with public
announcements regarding the Partnership, or marketing or financing




13









 




activities of the Partnership, without the prior consent of such Partners or Affiliate, which shall
not be unreasonably withheld.




ARTICLE 4

CAPITAL CONTRIBUTIONS




          4.01 Capital Contributions.




          (a) Except as otherwise provided in the following provisions of this Section 4.01 or 4.02, the
Management Committee may issue or cause to be issued a notice to each Partner for the making of
Capital Contributions at such times and in such amounts as the Management Committee shall determine
(a “Capital Call”). All amounts timely received by the Partnership under this Section 4.01 shall
be credited to the respective Partner’s Capital Account as of the specified date




          (b) Each Capital Call shall contain the following information:





          (i) The total amount of Capital Contributions required from all Partners;




          (ii) The amount of Capital Contribution required from the Partner to which the notice
is addressed, which amount must equal that Partner’s Sharing Ratio of the total Capital
Call;




          (iii) The purpose for which the funds are to be applied in such reasonable detail as
the Management Committee shall direct; and




          (iv) The date on which payments of the Capital Contribution shall be made (which date
shall not be sooner than the 30th Day following the date the Capital Call is given, unless a
sooner date is approved by the Management Committee) and the method of payment, provided
that the date and the method shall be the same for each of the Partners.



          (c) Each Partner agrees that it shall make payments of its respective Capital Contributions in
accordance with Capital Calls issued as provided in Section 4.01(a).




          4.02 Loans.




          (a) Rather than making a Capital Call under Section 4.01, the Management Committee by notice
may require the Partners to lend funds to the Partnership at such times, in such amounts and under
such terms and conditions as the Management Committee shall determine; provided, however, that the
Management Committee shall not call for loans rather than Capital Contributions to the extent doing
so would breach any financing or other agreement of the Partnership. All amounts received from a
Partner after the date specified in Section 4.02(b)(iv) by the Partnership under this Section 4.02
shall be accompanied by interest on such overdue amounts (and the default shall not be cured unless
such interest is also received by the Partnership), which interest shall be payable to the
Partnership and shall accrue from and after such specified date at the Default Rate. Any such
interest paid shall be credited to the respective




14









 




Capital Accounts of all the Partners on a pro rata basis in accordance with their respective
Sharing Ratios as of the date such payment is made to the Partnership, but shall not be considered
part of the principal of the loan.




          (b) Each notice issued under Section 4.02(a) shall contain the following information:





          (i) The total amount of loans required from the Partners;




          (ii) The amount of the loan required from the Partner to which the notice is addressed,
which amount must equal (A) that Partner’s Sharing Ratio of the total amount of loans
requested divided by (B) the sum of the Sharing Ratios of all Partners;




          (iii) The purpose for which the funds are to be applied in such reasonable detail as
the Management Committee shall direct;




          (iv) The date on which the loans to the Partnership shall be made (which date shall not
be sooner than the 30th Day following the date the request is given, unless a sooner date is
approved by the Management Committee) and the method of payment, provided that the date and
the method shall be the same for each of the Partners; and




          (v) All terms concerning the repayment of or otherwise relating to the loans, provided
that the terms shall be the same for each of the Partners.



          (c) Each Partner agrees that it shall make its respective loans in accordance with requests
issued as provided in Section 4.02(a).




          4.03 No Other Contribution Obligations. No Partner shall be required or permitted to make any
Capital Contributions or loans to the Partnership except as provided in this Article 4.




          4.04 Return of Contributions. Except as expressly provided in this Agreement, a Partner is not
entitled to the return of any part of its Capital Contributions or to be paid interest in respect
of either its Capital Account or its Capital Contributions. An unrepaid Capital Contribution is
not a liability of the Partnership or of any Partner. A Partner is not required to contribute or
to lend any cash or property to the Partnership to enable the Partnership to return any Partner’s
Capital Contributions.




          4.05 Capital Accounts.




          (a) The aggregate amount in each Partner’s Capital Accounts existing as of the date hereof
shall be based on the tax basis of the assets and liabilities owned by the Partnership as of the
date hereof and allocated between the Partners in proportion to their respective Sharing Ratios.
Each Partner’s Capital Account shall be increased by (i) the amount of money contributed by that
Partner to the Partnership, (ii) the fair market value of property contributed by that Partner to
the Partnership (net of liabilities secured by such contributed




15









 




property that the Partnership is considered to assume or take subject to under Section 752 of
the Code), and (iii) allocations to that Partner of Partnership income and gain (or items thereof),
including income and gain exempt from tax and income and gain described in Treasury Regulation §
1.704-1(b)(2)(iv)(g), but excluding income and gain described in Treasury Regulation §
1.704-1(b)(4)(i), and shall be decreased by (iv) the amount of money distributed to that Partner by
the Partnership, (v) the fair market value of property distributed to that Partner by the
Partnership (net of liabilities secured by such distributed property that such Partner is
considered to assume or take subject to under Section 752 of the Code), (vi) allocations to that
Partner of expenditures of the Partnership described (or treated as described) in Section
705(a)(2)(B) of the Code, and (vii) allocations of Partnership loss and deduction (or items
thereof), including loss and deduction described in Treasury Regulation § 1.704-1(b)(2)(iv)(g), but
excluding items described in (vi) above and loss or deduction described in Treasury Regulation §
1.704-1(b)(4)(i) or 1.704-1(b)(4)(iii). The Partners’ Capital Accounts shall also be maintained
and adjusted as permitted by the provisions of Treasury Regulation § 1.704-1(b)(2)(iv)(f) and as
required by the other provisions of Treasury Regulation §§ 1.704-1(b)(2)(iv) and 1.704-1(b)(4),
including adjustments to reflect the allocations to the Partners of depreciation, depletion,
amortization, and gain or loss as computed for book purposes rather than the allocation of the
corresponding items as computed for tax purposes, as required by Treasury Regulation §
1.704-1(b)(2)(iv)(g). Thus, the Partners’ Capital Accounts shall be increased or decreased to
reflect a revaluation of the Partnership’s property on its books based on the fair market value of
the Partnership’s property on the date of adjustment (as determined pursuant to Section 4.05(b)),
immediately prior to (A) the contribution of money or other property to the Partnership by a new or
existing Partner as consideration for a Partnership Interest or an increased Sharing Ratio, (B) the
distribution of money or other property by the Partnership to a Partner as consideration for a
Partnership Interest, or (C) the liquidation of the Partnership. A Partner who has more than one
Partnership Interest shall have a single Capital Account that reflects all such Partnership
Interests, regardless of the class of Partnership Interests owned by such Partner and regardless of
the time or manner in which such Partnership Interests were acquired. Upon the Disposition of all
or a portion of a Partnership Interest, the Capital Account of the Disposing Partner that is
attributable to that Partnership Interest shall carry over to the Assignee in accordance with the
provisions of Treasury Regulation § 1.704-1(b)(2)(iv)(l).




          (b) Whenever the fair market value of the Partnership’s property is required to be determined
pursuant to the third and fourth sentences of Section 4.05(a), the Management Committee shall
establish the fair market value in a notice to the Limited Partners.




          4.06 Failure to Make a Capital Contribution.




          (a) General. If any Partner fails to make a Capital Contribution when required in a Capital
Call under Section 4.01 of this Agreement, or a loan when required under Section 4.02 of this
Agreement (each such Partner being a “Non-Contributing Partner”), then, provided the failure has
not been cured, the Partners that have contributed their Capital Contributions (each, a
“Contributing Partner”) may (without limitation as to other remedies that may be available) at any
time after the 10th Day after the date the Capital Contribution was due elect to:




16









 






          (i) treat the Non-Contributing Partner’s failure to contribute as a Default by giving
notice to the Non-Contributing Partner, in which event the provisions of this Agreement
regarding the commission of a Default by a Partner shall apply; or




          (ii) pay the portion of the Capital Contribution owed and unpaid by the
Non-Contributing Partner (the “Additional Contribution”), in which event the Contributing
Partners that elect to fund the Non-Contributing Partners’ share (the “Additional
Contribution Partners”) may treat the contribution as one of: (1) a Capital Contribution
resulting in the Additional Contribution Partners receiving a Priority Interest under
Section 4.06(b), or (2) a permanent capital contribution that results in an adjustment of
Partnership Interests under Section 4.06(c), as determined by the Additional Contribution
Partners as set forth below.


No Contributing Partner shall be obligated to elect either (i) or (ii) above. The decision of the
Contributing Partners to elect (i) or (ii) above shall be made by the determination of the
Contributing Partners holding the majority of the Sharing Ratios of all Contributing Partners, but
(ii) above may not be elected unless at such time of determination there is one or more Additional
Contribution Partners. The decision of the Additional Contribution Partners to elect (ii)(1) or
(ii)(2) above shall be made by the determination of the Additional Contribution Partners holding
the majority of the Sharing Ratios of all Additional Contribution Partners. Unless and until such
election is made, payment of the Additional Contribution shall be treated as a Priority Interest
under Section 4.06(a)(ii)(1). If the Additional Contribution Partners make the election under
Section 4.06(a)(ii) to treat the contribution as a contribution for which they receive a Priority
Interest under Section 4.06(b), then the Additional Contribution Partners will have the option,
exercisable at any time thereafter (by the election of Additional Contribution Partners holding a
majority of the Sharing Ratios of all Additional Contribution Partners) upon notice to the other
Partners on or before the 30th Day beforehand, to change their election such that the amount of the
payment of the Non-Contributing Partner’s portion of the Capital Contribution (less any amounts
received by the Additional Contribution Partners as a payment of the applicable Priority Interest
(other than payment of the return amount forming a part thereof)) shall be treated as an Additional
Contribution as provided in Section 4.06(c). In that event, the accrued and unpaid return forming
part of the Priority Interest shall not be treated as an Additional Contribution but shall continue
as a Priority Interest as provided in Section 4.06(b) below (with such amount to continue to
compound return thereon).




          (b) Priority Interest. If the Additional Contribution Partners elect to treat the payment of
Additional Contribution as a contribution for which the Additional Contribution Partners receive a
Priority Interest, then the following shall apply:





          (i) Each Additional Contribution Partner shall receive a Priority Interest in the
distributions from the Partnership that would otherwise be due and payable to the
Non-Contributing Partner(s). The Priority Interest received by each Additional Contribution
Partner shall be in the proportion that the amount of the Additional Contribution paid by
that Additional Contribution Partner bears to the amount of the Additional Contributions
made by all Additional Contribution Partners (each Additional Contribution Partner’s
percentage share of the Priority Interests shall be its “Priority Interest Sharing Ratio”).
All distributions from the Partnership that would otherwise be



17









 






due and payable to the Non-Contributing Partner(s) instead shall be paid to the
Additional Contribution Partners in accordance with their respective Priority Interest
Sharing Ratio and no distribution shall be made from the Partnership to any Non-Contributing
Partner until all Priority Interests have terminated. The Priority Interest shall terminate
with respect to an Additional Contribution Partner when that Additional Contribution Partner
has received either through the distributions it receives under its Priority Interest or
through payment(s) to it by the Non-Contributing Partner(s) (which payment(s) may be made by
the Non-Contributing Partner(s) at any time) of an amount equal to the Additional
Contribution made by such Partner, plus a return thereon of fourteen percent (14%) per annum
(compounded monthly on the outstanding balance). For the purpose of making this calculation,
all amounts received by an Additional Contribution Partner shall be deemed to be applied
first against a return on, and then to the amount of, the Additional Contribution. For
purposes of maintaining Capital Accounts, any amount paid by a Non-Contributing Partner to a
Contributing Partner to reduce and/or terminate a Priority Interest shall be treated as
though such amount were contributed by the Non-Contributing Partner to the Partnership and
thereafter distributed by the Partnership to the Contributing Partner with respect to its
Priority Interest.




          (ii) The Priority Interests shall not alter the Sharing Ratios, nor shall the Priority
Interests alter any distributions to the Contributing Partners (in their capacity as
Contributing Partners, as opposed to their capacity as Additional Contribution Partners) in
accordance with their respective Sharing Ratios. Notwithstanding any provision in this
Agreement to the contrary, a Partner may not dispose of all or a portion of its Priority
Interest except to a Person to which it Disposes all or the applicable pro rata portion of
its Partnership Interest after compliance with the requirements of this Agreement for the
Disposition.




          (iii) No Partner that is a Non-Contributing Partner may Dispose of its Partnership
Interest unless, at the closing of such Disposition, either the Non-Contributing Partner or
the proposed Assignee pays the amount necessary to terminate the Priority Interest arising
from such Non-Contributing Partner’s failure to contribute. No Assignee shall be admitted
to the Partnership as a Partner until compliance with this Section 4.06(b)(iii) has
occurred.



          (c) Permanent Contribution. Subject to Section 4.06(a), if the Additional Contribution
Partners elect under Section 4.06(a) to have the Additional Contribution treated as a permanent
capital contribution, then each Additional Contribution Partner that funds a portion of the
Additional Contribution shall have its capital account increased accordingly and the Partners’
Partnership Interests and Sharing Ratios will be automatically adjusted to equal each Partner’s
total Capital Contributions when expressed as a percentage of all Partners’ Capital Contributions.




          (d) Further Assurance. In connection with this Section 4.06, each Partner shall execute and
deliver any additional documents and instruments and perform any additional acts that may be
necessary or appropriate to effectuate and perform the provisions of this Section 4.06.





18










 





ARTICLE 5

DISTRIBUTIONS AND ALLOCATIONS




          5.01 Distributions. On or before the 30th Day following the end of each Quarter, the Management
Committee shall review and determine the amount of Available Cash with respect to that Quarter, and
an amount equal to 100% of Available Cash with respect to that Quarter shall be distributed in
accordance with this Article 5 to the Partners (other than a Breaching Partner) in proportion to
their respective Sharing Ratios (at the time the amounts of such distributions are made).




          5.02 Distributions on Dissolution and Winding Up. Upon the winding up of the Partnership, after
adjusting the Capital Accounts for all distributions made under Section 5.01 and all allocations
under Article 5, all available proceeds distributable to the Partners as determined under Section
11.02 shall be distributed to all of the Partners (other than a Breaching Partner) in amounts equal
to the Partners’ positive Capital Account balances.




          5.03 Allocations.




          (a) For purposes of maintaining the Capital Accounts pursuant to Section 4.05 and for income
tax purposes, except as provided in Section 5.03(b) and (c), each item of income, gain, loss,
deduction and credit of the Partnership shall be allocated to the Partners in accordance with their
respective Sharing Ratios.




          (b) With respect to each period during which a Priority Interest is outstanding, each
Additional Contribution Partner shall be allocated items of income and gain in an amount equal to
the return that accrues with respect to that Additional Contribution Partner’s Additional
Contribution pursuant to Section 4.06(b)(i), and items of income and gain that would otherwise be
allocable to the Non-Contributing Partner(s) shall be correspondingly reduced.




          (c) For income tax purposes, income, gain, loss, and deduction with respect to property
contributed to the Partnership by a Partner or revalued pursuant to Treasury Regulation Section
1.704-1(b)(2)(iv)(f) shall be allocated among the Partners in a manner that takes into account the
variation between the adjusted tax basis of such property and its book value, as required by
Section 704(c) of the Code and Treasury Regulation Section 1.704-1(b)(4)(i), using the remedial
allocation method permitted by Treasury Regulation Section 1.704-3(d).




          5.04 Varying Interests. All items of income, gain, loss, deduction or credit shall be allocated,
and all distributions shall be made, to the Persons shown on the records of the Partnership to have
been Partners as of the last calendar day of the period for which the allocation or distribution is
to be made. Notwithstanding the foregoing, if during any taxable year there is a change in any
Partner’s Sharing Ratio, the Partners agree that their allocable shares of items for the taxable
year shall be determined on any method determined by the Management Committee to be permissible
under Code Section 706 and the related Treasury Regulations to take account of the Partners’
varying Sharing Ratios.




19









 








ARTICLE 6

MANAGEMENT




          6.01 Generally. The management of the Partnership is fully vested in the Partners. To facilitate
the orderly and efficient management of the Partnership, the Partners shall act (a) collectively as
a “committee of the whole” (named the Management Committee) pursuant to Section 6.02, and (b)
through the delegation of certain duties and authority to the Operator and the Officers. Subject
to the express provisions of this Agreement, each Partner agrees that it will not exercise its
authority under the Act to bind or commit the Partnership to agreements, transactions or other
arrangements, or to hold itself out as an agent of the Partnership.




          6.02 Management Committee. Decisions or actions taken by the Management Committee in accordance
with the provisions of this Agreement shall constitute decisions or actions by the Partnership and
shall be binding on each Partner, Representative, Officer and employee of the Partnership. The
Management Committee shall conduct its affairs in accordance with the following provisions and the
other provisions of this Agreement:




          (a) Representatives.





          (i) Designation. To facilitate the orderly and efficient conduct of Management
Committee meetings, each Partner shall notify the other Partners, from time to time, of the
identity of (A) one of its officers, employees or agents who will represent it at meetings
(a “Representative”), and (B) one of its officers, employees or agents who will represent it
at any meeting that the Partner’s Representative is unable to attend (“Alternate
Representative”). (The term “Representative” shall also refer to any Alternate
Representative that is actually performing the duties of the applicable Representative.).
The initial Representative and Alternate Representative of each Partner are set forth in
Exhibit A. A Partner may designate a different Representative or Alternate Representative
for any meeting of the Management Committee by notifying each of the other Partners on or
before the scheduled date for that meeting; provided, however, that if giving that advance
notice is not feasible, then the new Representative or Alternate Representative shall
present written evidence of his or her authority at the commencement of such meeting.




          (ii) Authority. Each Representative shall have the full authority to act on behalf of
the Partner that designated that Representative; the action of a Representative at a meeting
(or through a written consent) of the Management Committee shall bind the Partner that
designated that Representative; and the other Partners shall be entitled to rely upon such
action without further inquiry or investigation as to the actual authority (or lack thereof)
of that Representative. In addition, the act of an Alternate Representative shall be deemed
the act of the Representative for which that Alternate Representative is acting, without the
need to produce evidence of the absence or unavailability of such Representative.




          (iii) DISCLAIMER OF DUTIES; INDEMNIFICATION. EACH REPRESENTATIVE SHALL REPRESENT, AND
OWE DUTIES TO, ONLY THE PARTNER THAT DESIGNATED THE REPRESENTATIVE (THE NATURE



20









 







AND EXTENT OF SUCH DUTIES BEING AN INTERNAL AFFAIR OF THE PARTNER), AND NOT TO THE
PARTNERSHIP, ANY OTHER PARTNER OR REPRESENTATIVE OR ANY OFFICER OR EMPLOYEE OF THE
PARTNERSHIP. THE PROVISIONS OF SECTION 6.02(e)(iii) SHALL ALSO INURE TO THE BENEFIT OF EACH
PARTNER’S REPRESENTATIVE. THE PARTNERSHIP SHALL INDEMNIFY, PROTECT, DEFEND, RELEASE AND
HOLD HARMLESS EACH REPRESENTATIVE FROM AND AGAINST ANY CLAIMS ASSERTED BY OR ON BEHALF OF
ANY PERSON (INCLUDING ANOTHER PARTNER), OTHER THAN THE PARTNER THAT DESIGNATED THE
REPRESENTATIVE, THAT ARISE OUT OF, RELATE TO OR ARE OTHERWISE ATTRIBUTABLE TO, DIRECTLY OR
INDIRECTLY, THE REPRESENTATIVE’S SERVICE ON THE MANAGEMENT COMMITTEE.




          (iv) Attendance. Each Partner shall use all reasonable efforts to cause its
Representative or Alternate Representative to attend each meeting of the Management
Committee, unless its Representative is unable to do so because of a “force majeure” event
or other event beyond his reasonable control, in which event that Partner shall use all
reasonable efforts to cause its Representative or Alternate Representative to participate in
the meeting by telephone pursuant to Section 6.02(g).



          (b) Procedures. The Management Committee shall maintain written minutes of each of its
meetings, which shall be submitted for approval within a reasonable period of time after each
meeting. The Management Committee may adopt whatever rules and procedures relating to its
activities as it may deem appropriate, provided that such rules and procedures shall not be
inconsistent with or violate the provisions of this Agreement.




          (c) Time and Place of Meetings. The Management Committee shall meet quarterly, subject to
more or less frequent meetings upon approval of the Management Committee, at such times and places
as the Representatives may agree. Special meetings of the Management Committee may be called at
such times, and in such manner, as any Partner deems necessary. Any Partner calling for any such
special meeting shall notify all other Partners of the date and agenda for such meeting on or
before the fifth Day prior to the date of such meeting. This five-Day period may be shortened by
unanimous vote of the Management Committee. All meetings of the Management Committee shall be held
at such location as the Partners may agree. Attendance of a Partner’s Representative at a meeting
of the Management Committee shall constitute a waiver of notice of that meeting, except where the
Representative attends the meeting for the express purpose of objecting to the transaction of any
business on the ground that the meeting is not lawfully called or convened.




          (d) Quorum. The presence of a Majority Interest shall constitute a quorum for the transaction
of business at any meeting of the Management Committee.




          (e) Voting.





          (i) Voting by Sharing Ratios; Voting Thresholds. Except as provided otherwise in this
Agreement, voting shall be according to the Partners’ respective Sharing Ratios. Except as
otherwise provided in this Agreement, the vote of



21









 







one or more Partners holding among them at least a majority of the Sharing Ratios (a
“Majority Interest”) shall constitute the action of the Management Committee.




          (ii) DISCLAIMER OF DUTIES. WITH RESPECT TO ANY VOTE, CONSENT OR APPROVAL AT ANY
MEETING OF THE MANAGEMENT COMMITTEE OR OTHERWISE UNDER THIS AGREEMENT, EACH PARTNER OR ITS
REPRESENTATIVE MAY GRANT OR WITHHOLD ITS VOTE, CONSENT OR APPROVAL IN ITS SOLE DISCRETION.
THE PROVISIONS OF THIS SECTION 6.02(e)(ii) SHALL APPLY NOTWITHSTANDING THE NEGLIGENCE, GROSS
NEGLIGENCE, WILLFUL MISCONDUCT, STRICT LIABILITY OR OTHER FAULT OR RESPONSIBILITY OF A
PARTNER OR ITS REPRESENTATIVE.




          (iii) Exclusion of Certain Partners and Their Sharing Ratios. With respect to any
vote, consent or approval, any Breaching Partner or Withdrawn Partner shall be excluded from
such decision (as contemplated by Section 10.03(c)), and the Sharing Ratio of such Breaching
Partner or Withdrawn Partner shall be disregarded in calculating the voting thresholds in
Section 6.02(e)(i). In addition, if any other provision of this Agreement provides that a
Majority Interest is to be calculated without reference to the Sharing Ratio of a particular
Partner, then the applicable voting threshold, including the number of Partners required, in
Section 6.02(e)(i) shall be deemed adjusted accordingly.



          (f) Action by Written Consent. Any action required or permitted to be taken at a meeting of
the Management Committee may be taken without a meeting, without prior notice, and without a vote
if a consent or consents in writing, setting forth the action so taken, is signed by Partners
holding among them the requisite Sharing Ratio for approval of such action at a meeting. Notice of
any such action shall be given promptly to any Partner that has not consented to such action.




          (g) Meetings by Telephone. Partners may participate in and hold any meeting by means of
conference telephone, videoconference or similar communications equipment by means of which all
persons participating in the meeting can hear each other. Participation in a meeting shall
constitute presence in person at the meeting, except where a Partner participates in the meeting
for the express purpose of objecting to the transaction of any business on the ground that the
meeting is not lawfully called or convened.




          (h) Matters Requiring Management Committee Approval. Except as expressly provided elsewhere
in this Agreement, none of the following actions may be taken by, or on behalf of the Partnership,
without first obtaining the vote of the Management Committee described below:





          (i) Unanimous Interest. The following actions shall require the approval of all
Partners:




               (A) dissolution of the Company under Section 11.01(a) or the Partnership under Section
11.01(a) of the Partnership Agreement;



22









 






               (B) causing or permitting the Partnership to become Bankrupt (but this provision shall
not be construed to require any Partner to ensure the profitability or solvency of the
Partnership);




               (C) conducting, or authorizing the Partnership to conduct, any activity or business
that may generate income for federal income tax purposes that may not be “qualifying income”
(as such term is defined pursuant to Section 7704 of the Code);




               (D) any other action that, pursuant to an express provision of this Agreement, requires
the approval of all Partners;




               (E) the Disposition or abandonment of all or substantially all of the assets of the
Partnership; or




               (F) causing or permitting the Partnership to merge with, or consolidate or convert
into, any other entity.




          (ii) Majority Interest. A Majority Interest shall be required to approve:




               (A) causing the Partnership to take any action under the Partnership Agreement that
requires Management Committee approval other than the actions specified in Section
6.02(h)(i);




               (B) the amount of Available Cash with respect to each Quarter;




               (C) approving or amending the annual Capital Budget and Operating Budget for the
Partnership (with it being understood that the latest approved Capital Budget or Operating
Budget shall be used, and deemed approved, for any subsequent period until the new Capital
Budget or Operating Budget (as applicable) for that period is so approved), including the
parameters under which the Operator and the Officers are authorized to expend Partnership
funds without further Management Committee approval;




               (D) any Capital Call or loan under Section 4.02;




               (E) any additions to or expansion of the Facilities; or




               (F) engaging any engineer, auditor, attorney or other consultant or adviser.



          (i) Subcommittees. The Management Committee may create such subcommittees, and delegate to
such subcommittees such authority and responsibility, and rescind any such delegations, as it may
deem appropriate.




23









 








          (j) Officers. The Management Committee may designate one or more Persons to be Officers of
the Partnership. Any Officers so designated shall have such titles and, subject to the other
provisions of this Agreement, have such authority and perform such duties as the Management
Committee may delegate to them and shall serve at the pleasure of the Management Committee and
report to the Management Committee.




          6.03 Operations and Management Agreement. Promptly after the Partnership’s formation, the
Partnership shall enter into an Operations and Management Agreement with the Operator on terms as
it may find acceptable (the “O&M Agreement”). Until the O&M Agreement is executed, the Operator
may perform services, and shall be entitled to compensation, in a manner consistent with the
historical operation of the Facilities and as set forth in the Omnibus Agreement.




          6.04 Conflicts of Interest. A Partner or an Affiliate of a Partner may engage in and possess
interests in other business ventures of any and every type and description, independently or with
others, including ones in competition with the Partnership and specifically including natural gas
storage and transportation, with no obligation to offer to the Partnership, any other Partner or
any Affiliate of another Partner the right to participate therein. The Partnership may transact
business with any Partner or Affiliate of a Partner, provided the terms of those transactions are
approved by the Management Committee or expressly contemplated by this Agreement or the O&M
Agreement. Without limiting the generality of the foregoing, the Partners recognize and agree that
their respective Affiliates currently, or in the future may, engage in various activities involving
natural gas marketing and trading (including futures, options, swaps, exchanges of future positions
for physical deliveries and commodity trading), gathering, processing, storage, transportation and
distribution, development and ownership, as well as other commercial activities related to natural
gas and that these and other activities by Partners’ Affiliates may be based on natural gas that is
stored in the Facilities or otherwise made possible or more profitable by reason of the
Partnership’s activities (herein referred to as “Affiliate’s Outside Activities”). No Affiliate of
a Partner shall be restricted in its right to conduct, individually or jointly with others, for its
own account any Affiliate’s Outside Activities, and no Partner or its Affiliates shall have any
duty or obligation, express or implied, fiduciary or otherwise, to account to, or to share the
results or profits of such Affiliate’s Outside Activities with, the Partnership, any other Partner
or any Affiliate of any other Partner, by reason of such Affiliate’s Outside Activities.




          6.05 Indemnification for Breach of Agreement. Each Partner shall indemnify, protect, defend,
release and hold harmless each other Partner, its Affiliates, and its and their respective
directors, officers, trustees, employees and agents from and against any Claims asserted by or on
behalf of any Person (including another Partner) that result from a breach by the indemnifying
Partner of this Agreement; provided, however, that this Section 6.05 shall not (a) apply to any
Claim or other matter for which a Partner has no liability or duty, or is indemnified or released,
pursuant to Section 6.04 or pursuant to the terms of any Storage Agreements or (b) hold the
indemnified Person harmless from special, consequential or exemplary damages, except in the case
where the indemnified Person is legally obligated to pay such damages to another Person.




          6.06 General Regulatory Matters(a) . Each Partner shall:




24









 








          (a) cooperate fully with the Partnership, the Management Committee and the Operator in
securing appropriate Authorizations for the development, construction and operation of the
Facilities, including supporting all applications to the FERC, and in connection with any reports
prescribed by any other Governmental Authority having jurisdiction over the Partnership;




          (b) join in any eminent domain takings by the Partnership, to the extent, if any, required by
Law;




          (c) devote such efforts as shall be reasonable and necessary to develop and promote the
Facilities for the benefit of the Partnership, taking into account the Partner’s Sharing Ratio,
resources and expertise; and




          (d) cooperate fully with the Partnership, the Management Committee and the Operator to ensure
compliance with FERC Standards of Conduct, if applicable.




          6.07 Disclaimer Of Duties. WITH RESPECT TO ANY ACTION, CONSENT OR APPROVAL, EACH PARTNER MAY TAKE
OR NOT TAKE THE ACTION, OR GRANT OR WITHHOLD CONSENT OR APPROVAL, IN ITS SOLE DISCRETION. THE
PROVISIONS OF THIS SECTION 6.07 SHALL APPLY NOTWITHSTANDING THE NEGLIGENCE, GROSS NEGLIGENCE,
WILLFUL MISCONDUCT, STRICT LIABILITY OR OTHER FAULT OR RESPONSIBILITY OF ANY PARTNER.




ARTICLE 7

TAXES




          7.01 Tax Returns. The Tax Matters Partner shall prepare and timely file (on behalf of the
Partnership) all federal, state and local tax returns required to be filed by the Partnership.
Each Partner shall furnish to the Tax Matters Partner all pertinent information in its possession
relating to the Partnership’s operations that is necessary to enable the Partnership’s tax returns
to be timely prepared and filed. The Partnership shall bear the costs of the preparation and
filing of its returns.




          7.02 Tax Elections. The Partnership shall make the following elections on the appropriate tax
returns:




          (a) to adopt as the Partnership’s fiscal year the calendar year;




          (b) to adopt the accrual method of accounting;




          (c) if a distribution of the Partnership’s property as described in Code Section 734 occurs or
upon a transfer of a Partnership Interest as described in Code Section 743 occurs, on request by
notice from any Partner, to elect, pursuant to Code Section 754, to adjust the basis of the
Partnership’s properties;




          (d) to elect to amortize the organizational expenses of the Partnership ratably over the
period as permitted by Section 709(b) of the Code; and




          (e) any other election the Management Committee may deem appropriate.




25









 







Neither the Partnership nor any Partner shall make an election for the Partnership to be excluded
from the application of the provisions of subchapter K of chapter 1 of subtitle A of the Code or
any similar provisions of applicable state law and no provision of this Agreement shall be
construed to sanction or approve such an election.




          7.03 Tax Matters Partner.




          (a) The Management Committee shall designate SET MHP to serve as the “tax matters partner” of
the Partnership pursuant to Section 6231(a)(7) of the Code (the “Tax Matters Partner”). The Tax
Matters Partner shall take such action as may be necessary to cause to the extent possible each
other Partner to become a “notice partner” within the meaning of Section 6223 of the Code. The Tax
Matters Partner shall inform each other Partner of all significant matters that may come to its
attention in its capacity as Tax Matters Partner by giving notice thereof on or before the fifth
Business Day after becoming aware thereof and, within that time, shall forward to each other
Partner copies of all significant written communications it may receive in that capacity.




          (b) The Tax Matters Partner shall provide any Partner, upon request, access to accounting and
tax information and schedules as shall be necessary for the preparation by such Partner of its
income tax returns and such Partner’s tax information reporting requirements.




          (c) Any cost or expense incurred by the Tax Matters Partner in connection with its duties,
including the preparation for or pursuance of administrative or judicial proceedings, shall be paid
by the Partnership.




          (d) The Tax Matters Partner shall not bind any Partner to a settlement agreement without
obtaining the consent of such Partner. Any Partner that enters into a settlement agreement with
respect to any Partnership item (as described in Code Section 6231(a)(3)) shall notify the other
Partners of the settlement agreement and its terms on or before the 90th Day after the date of the
settlement.




          (e) No Partner shall file a request pursuant to Code Section 6227 for an administrative
adjustment of Company items for any taxable year without first notifying the other Partners. If
the Management Committee consents to the requested adjustment, the Tax Matters Partner shall file
the request for the administrative adjustment on behalf of the Partners. If such consent is not
obtained on or before the 30th Day after such notice, or within the period required to timely file
the request for administrative adjustment, if shorter, any Partner, including the Tax Matters
Partner, may file a request for administrative adjustment on its own behalf. Any Partner intending
to file a petition under Code Sections 6226, 6228 or other Code Section with respect to any item
involving the Company shall notify the other Partners of such intention and the nature of the
contemplated proceeding. In the case where the Tax Matters Partner is the Partner intending to
file such petition on behalf of the Company, such notice shall be given within a reasonable period
of time to allow the other Partners to participate in the choosing of the forum in which such
petition will be filed.




          (f) If any Partner intends to file a notice of inconsistent treatment under Code Section
6222(b), such Partner shall give reasonable notice under the circumstances to the other


26









 







           Partners of such intent and the manner in which the Partner’s intended treatment of an item is
(or may be) inconsistent with the treatment of that item by the other Partners.




ARTICLE 8

BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS




          8.01 Maintenance of Books; Reports. The Operator shall keep or cause to be kept at the principal
office of the Partnership or at such other location approved by the Management Committee complete
and accurate books and records of the Partnership, including all books and records necessary to
provide to the Partners any information required to be provided pursuant to Section 8.02,
supporting documentation of the transactions with respect to the conduct of the Partnership’s
business and minutes of the proceedings of the Partners and the Management Committee, and any other
books and records that are required to be maintained by applicable Law.




          8.02 Reports.




          (a) With respect to each calendar year, and within the time frame specified by the Management
Committee, the Operator shall prepare and deliver to each Partner:





          (i) a statement of operations and a statement of cash flows for such year, a balance
sheet and a statement of each Partner’s Capital Account as of the end of such year,
and an audited report thereon of the Certified Public Accountants; and




          (ii) such federal, state and local income tax returns and such other accounting and
tax information and schedules as shall be necessary for tax reporting purposes by
each Partner with respect to such year.



          (b) The Operator shall prepare and deliver to the Partners the following information within 30
Days after the end of such calendar year:




     (i) a discussion and analysis of the results of operations including detailed
explanations of significant variances in revenues, expenses and cash flow activities
appearing in the audited financial statements, as compared to the same periods in
the prior calendar year, and relevant operational statistics, including volumetric
data;



     (ii) a schedule of amounts due by year for contractual obligations that will
impact Available Cash including, but not limited to, notes payable, capital leases,
operating leases, and purchase obligations; and



     (iii) such forecasts as specified by the Management Committee.




          (c) Within 25 Days after the end of each calendar month, the Operator shall cause to be
prepared and delivered to each Partner with an appropriate certification of the Person authorized
to prepare the same (provided that the Management Committee may change the



27









 







financial statements required by this Section 8.02(c) to a quarterly basis or may make such other
change therein as it may deem appropriate):




          (i) A statement of operations for such month (including sufficient information to
permit the Partners to calculate their tax accruals) and for the portion of the calendar
year then ended as compared with the same periods for the prior calendar year and with the
budgeted results for the current periods; and




          (ii) A balance sheet and a statement of each Partner’s Capital Account as of the end of
such month and the portion of the calendar year then ended.



          (d) Within 25 Days after the end of each of the first three calendar quarters of each year,
the Operator shall cause to be prepared and delivered to each Partner (i) a statement of operations
for such quarter and year-to-date, a statement of cash flows and a statement of each Partner’s
Capital Account for the year-to-date period, and a balance sheet as of the end of such quarter,
(ii) a discussion and analysis of the results of operations including detailed explanations of
significant variances in revenues, expenses and cash flow activities appearing in the financial
statements (as formally reviewed by the Certified Public Accountants), as compared to the same
periods in the prior calendar year, and relevant operational statistics, including volumetric data,
and (iii) within 40 Days after the end of such quarter, a formal review report thereon of the
Certified Public Accountants.




          (e) The Operator shall also cause to be prepared and delivered to each Partner such other
reports, forecasts, studies, budgets and other information as the Management Committee may request
from time to time.




          8.03 Bank Accounts. 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 only as authorized by the Management Committee and shall be
made only by check, wire transfer, debit memorandum or other written instruction.




ARTICLE 9

WITHDRAWAL




          9.01 No Right of Withdrawal. A Partner has no power or right voluntarily to Withdraw from the
Partnership.




          9.02 Deemed Withdrawal. A Partner is deemed to have Withdrawn from the Partnership upon the
occurrence of any of the following events:




          (a) there occurs an event that makes it unlawful for the Partner to continue to be a Partner;




          (b) the Partner becomes Bankrupt;




          (c) the Partner commences liquidation or winding up; or




28









 








          (d) notice from the Management Committee if the Partner commits a Default and the Default has
not been cured.




          9.03 Effect of Withdrawal. A Partner that is deemed to have Withdrawn under Section 9.02 (a
“Withdrawn Partner”), must comply with the following requirements in connection with its
Withdrawal:




          (a) The Withdrawn Partner ceases to be a Partner immediately upon the occurrence of the
applicable Withdrawal event.




          (b) The Withdrawn Partner shall not be entitled to receive any distributions from the
Partnership except as set forth in Section 9.03(e), and it shall not be entitled to exercise any
voting or consent rights or to receive any further information (or access to information) from the
Partnership. The Sharing Ratio of that Partner shall not be taken into account in calculating the
Sharing Ratios of the Partners for any purposes. This Section 9.03(b) shall also apply to a
Breaching Partner; but if a Breaching Partner cures its breach during the applicable cure period,
then any distributions that were withheld from that Partner shall be paid to it, without interest.




          (c) The Withdrawn Partner must pay to the Partnership all amounts it owes to the Partnership.




          (d) The Withdrawn Partner shall remain obligated for all liabilities it may have under this
Agreement or otherwise with respect to the Partnership that accrue prior to the Withdrawal.




          (e) From the date of the Withdrawal to the date of the payment, the former Capital Account
balance of the Withdrawn Partner shall be recorded as a contingent obligation of the Partnership,
and not as a Capital Account, until payment is made. The rights of a Withdrawn Partner under this
Section 9.03(e) shall (i) be subordinate to the rights of any other creditor of the Partnership,
(ii) not include any right on the part of the Withdrawn Partner to receive any interest (except as
may otherwise be provided in the evidence of any indebtedness of the Partnership owed to such
Withdrawn Partner) or other amounts with respect thereto; (iii) not require the Partnership to make
any distribution (the Withdrawing Partner’s rights under this Section 9.03(e) being limited to
receiving such portion of distributions as the Management Committee may, in its Sole Discretion,
decide to cause the Partnership to make); (iv) not require any Partner to make a Capital
Contribution or a loan to permit the Partnership to make a distribution or otherwise to pay the
Withdrawing Partner; and (v) be treated as a liability of the Partnership for purposes of Section
12.02. Except as set forth in this Section 9.03(e), a Withdrawn Partner shall not be entitled to
receive any return of its Capital Contributions or other payment from the Partnership in respect of
its Partnership Interest.




          (f) The Sharing Ratio of the Withdrawn Partner shall be allocated among the remaining Partners
in the proportion that each Partner’s Sharing Ratio bears to the total Sharing Ratio of all
remaining Partners, or in such other proportion as the Partners may unanimously agree.




29









 








ARTICLE 10

DISPUTE RESOLUTION




          10.01 Disputes. This Article 10 shall apply to any dispute arising under or related to this
Agreement (whether arising in contract, tort or otherwise, and whether arising at law or in
equity), including (a) any dispute regarding the construction, interpretation, performance,
validity or enforceability of any provision of this Agreement or whether any Person is in
compliance with, or breach of, any provisions of this Agreement, and (b) the applicability of this
Article 10 to a particular dispute. Notwithstanding the foregoing, this Article 10 shall not apply
to any matters that, pursuant to the provisions of this Agreement, are to be resolved by a vote of
the Partners; provided, however, that (i) any matter that is expressly stated herein to be
determinable by arbitration may be so determined pursuant to this Article 10 and (ii) if a vote,
approval, consent, determination or other decision must, under the terms of this Agreement, be made
(or withheld) in accordance with a standard other than Sole Discretion (such as a reasonableness
standard), then the issue of whether such standard has been satisfied may be a dispute to which
this Article 10 applies. Any dispute to which this Article 10 applies is referred to herein as a
“Dispute.” With respect to a particular Dispute, each Partner that is a party to such Dispute is
referred to herein as a “Disputing Partner.” The provisions of this Article 10 shall be the
exclusive method of resolving Disputes.




          10.02 Negotiation to Resolve Disputes. If a Dispute arises, any Disputing Partner may
initiate the dispute resolution procedure under this Article 10 by notifying the other Disputing
Partners (a “Dispute Notice”), after which the Disputing Partners shall attempt to resolve such
Dispute through the following procedure:




          (a) first, within 7 Days after receipt of the Dispute Notice, the Representatives of the
Disputing Partners shall meet (whether by phone or in person) in a good faith attempt to resolve
the Dispute;




          (b) second, if the Dispute is still unresolved, then after the 20th Day following the
commencement of the negotiations described in Section 10.02(a) but in no event later than the 30th
Day after receipt of the Dispute Notice, the chief executive officer (or his designee) of the
Parent of each Disputing Partner shall meet (whether by phone or in person) in a good faith attempt
to resolve the Dispute; and




          (c) third, if the Dispute is still unresolved, then after the 10th Day following the
commencement of the negotiations described in Section 10.02(b), any Disputing Party may submit the
Dispute for resolution under the Federal Arbitration Act by binding arbitration following the
Commercial Arbitration Rules of the American Arbitration Association (or, if that Association has
ceased to exist, its principal successor) (the “AAA”) then in effect, including its evidentiary and
procedural rules (excluding rules governing the payment of arbitration, administrative or other
fees or expenses to the Arbitrator(s) or the AAA), to the extent that such rules do not conflict
with the terms of this Agreement, by notifying the other Disputing Partners (an “Arbitration
Notice”) within the applicable limitation period provided by law.




          10.03 Selection of Arbitrator.




30









 








          (a) For any case in which any claim, or combination of claims, is less than or equal to
$500,000, the arbitration shall be heard by a sole Arbitrator. Any case in which any claim, or
combination of claims, exceeds $500,000 will be subject to the AAA’s Large, Complex Case Procedures
and decided by the majority of a panel of three neutral Arbitrators. The Arbitrator(s) shall be
selected in accordance with this Section 10.03.




          (b) For arbitrations conducted by a single Arbitrator, the Disputing Partner that submits a
Dispute to arbitration shall designate a proposed neutral sole Arbitrator in its Arbitration
Notice. If any other Disputing Partner objects to a proposed sole Arbitrator, it may, on or before
the tenth Day following delivery of the Arbitration Notice, notify all of the other Disputing
Partners of its objection. All of the Disputing Partners shall attempt to agree upon a mutually
acceptable sole Arbitrator. If they have not done so, then after the 20th Day following delivery
of the notice described in the immediately preceding sentence, any Disputing Partner may request
the AAA to designate the sole Arbitrator. For arbitrations conducted by a panel of three
Arbitrators, the Disputing Partner initiating arbitration shall nominate one Arbitrator at the time
it initiates arbitration. The other Disputing Partner(s) shall collectively nominate one
Arbitrator on or before the 10th Day after receiving the Arbitration Notice. The two Arbitrators
shall appoint a third, neutral Arbitrator. All Arbitrators shall be competent and experienced in
matters involving the gas storage business in the United States, with at least ten years of legal,
engineering, or business experience in the gas industry, and shall be impartial and independent of
the Partners (and the other Arbitrators, in the case of arbitrations conducted by a panel of three
arbitrators, except for prior arbitrations). Each Disputing Partner shall pay for the expenses
incurred by the Arbitrator it appoints, if applicable, and the costs of the sole Arbitrator or the
third Arbitrator shall be divided equally among the Disputing Partners. If any Arbitrator so
chosen shall die, resign or otherwise fail or becomes unable to serve as Arbitrator, a replacement
Arbitrator shall be chosen in accordance with this Section 10.03.




          10.04 Conduct of Arbitration. The Arbitrator(s) shall expeditiously (and, if possible, on or
before the 90th Day after the Arbitrator(s)’s selection) hear and decide all matters concerning the
Dispute. Any arbitration hearing shall be held in Houston, Texas. Except as expressly provided to
the contrary in this Agreement, the Arbitrator(s) shall have the power (a) to gather such
materials, information, testimony and evidence as it deems relevant to the dispute before it (and
each Partner will provide such materials, information, testimony and evidence requested by the
Arbitrator(s), except to the extent any information so requested is proprietary, subject to a
third-party confidentiality restriction or to an attorney-client or other privilege) and (b) to
grant injunctive relief and enforce specific performance. If they deem necessary, the
Arbitrator(s) may propose to the Disputing Partners that one or more other experts be retained to
assist it in resolving the Dispute. The retention of such other experts shall require the
unanimous consent of the Disputing Partners, which shall not be unreasonably withheld. Each
Disputing Partner, the Arbitrator(s) and any proposed expert shall disclose to the other Disputing
Partners any business, personal or other relationship or affiliation that may exist or may have
existed between the Disputing Partner (or the Arbitrator(s)) and the proposed expert; and any
Disputing Partner may disapprove of the proposed expert on the basis of that relationship or
affiliation. The decision of the Arbitrator(s) (which shall be rendered in writing) shall be
final, nonappealable and binding upon the Disputing Partners and may be enforced in any court of
competent jurisdiction; provided, however, that the Partners agree that the Arbitrator(s) and any
court enforcing the award of the Arbitrator(s) shall not have the right or authority to award


31









 







punitive, special, consequential, indirect, exemplary or similar damages to any Disputing Partner.
The responsibility for paying the costs and expenses of the arbitration, including compensation to
any experts retained by the Arbitrator(s), shall be divided equally among the Disputing Partners.
Each Disputing Partner shall be responsible for the fees and expenses of its respective counsel,
consultants and witnesses, unless the Arbitrator(s) determines that compelling reasons exist for
allocating all or a portion of those costs and expenses to one or more other Disputing Partners.




ARTICLE 11

DISSOLUTION, WINDING UP AND TERMINATION




          11.01 Dissolution. The Partnership shall dissolve and its affairs shall be wound up on the first
to occur of the following events (each a “Dissolution Event”):




          (a) notice from the Management Committee to the Partners dissolving the Partnership;




          (b) entry of a decree of judicial dissolution of the Partnership under Section 15-801 of the
Act;




          (c) the Disposition or abandonment of all or substantially all of the Partnership’s business
and assets; or




          (d) an event that makes it unlawful for the business of the Partnership to be carried on.




          11.02 Winding Up and Termination.




          (a) On the occurrence of a Dissolution Event, the Operator shall serve as liquidator under the
supervision of the Management Committee. The liquidator shall proceed diligently to wind up the
affairs of the Partnership and make final distributions as provided herein and in the Act. The
costs of winding up shall be borne as a Partnership expense. Until final distribution, the
liquidator shall continue to operate the Partnership properties with all of the power and authority
of the Partners. The steps to be accomplished by the liquidator are as follows:





          (i) as promptly as possible after dissolution and again after final winding up, the
liquidator shall cause a proper accounting to be made by a recognized firm of certified
public accountants of the Partnership’s assets, liabilities and operations through the last
calendar day of the month in which the dissolution occurs or the final winding up is
completed, as applicable;




          (ii) the liquidator shall discharge from Partnership funds all of the indebtedness of
the Partnership and other debts, liabilities and obligations of the Partnership (including
all expenses incurred in winding up and any loans described in Section 4.02) or otherwise
make adequate provision for payment and discharge thereof (including the establishment of a
cash escrow fund for contingent liabilities in such amount and for such term as the
liquidator may reasonably determine); and



32









 






          (iii) all remaining assets of the Partnership shall be distributed to the Partners as
follows:




               (A) the liquidator may sell any or all Partnership property, including to
Partners, and any resulting gain or loss from each sale shall be computed and
allocated to the Capital Accounts of the Partners in accordance with the provisions
of Article 5;




               (B) with respect to all Partnership property that has not been sold, the fair
market value of that property shall be determined and the Capital Accounts of the
Partners shall be adjusted to reflect the manner in which the unrealized income,
gain, loss and deduction inherent in property that has not been reflected in the
Capital Accounts previously would be allocated among the Partners if there were a
taxable disposition of that property for the fair market value of that property on
the date of distribution; and




               (C) Partnership property (including cash) shall be distributed among the
Partners in accordance with Section 5.02; and those distributions shall be made by
the end of the taxable year of the Partnership during which the liquidation of the
Partnership occurs (or, if later, the 90th Day after the date of the liquidation).



          (b) The distribution of cash or property to a Partner in accordance with the provisions of
this Section 11.02 constitutes a complete return to the Partner of its Capital Contributions and a
complete distribution to the Partner of its Partnership Interest and all the Partner’s property.
To the extent that a Partner returns funds to the Partnership, it has no claim against any other
Partner for those funds.




          (c) No dissolution or termination of the Partnership shall relieve a Partner from any
obligation to the extent such obligation has accrued as of the date of such dissolution or
termination. Upon such termination, any books and records of the Partnership that there is a
reasonable basis for believing will ever be needed again shall be furnished to the liquidator,
which shall keep such books and records (subject to review by any Person that was a Partner at the
time of dissolution) for a period at least three years. At such time as the liquidator no longer
agrees to keep such books and records, it shall offer the Persons who were Partners at the time of
dissolution the opportunity to take over such custody, shall deliver such books and records to such
Persons if they elect to take over such custody and may destroy such books and records if they do
not so elect. Any such custody by such Persons shall be on such terms as they may agree upon among
themselves.




          11.03 Deficit Capital Accounts. No Partner will be required to pay to the Partnership, to any
other Partner or to any third party any deficit balance that may exist from time to time in another
Partner’s Capital Account.




          11.04 Certificate of Cancellation. On completion of the distribution of Partnership assets as
provided herein, the Partners (or such other Person or Persons as the Act may require or permit)
shall file a certificate of cancellation with the Secretary of State of the


33









 







State of Delaware, cancel any other filings made pursuant to Section 2.05, and take such other
actions as may be necessary to terminate the existence of the Partnership. Upon the filing of such
certificate of cancellation, the existence of the Partnership shall terminate (and the Term shall
end), except as may be otherwise provided by the Act or other applicable Law.




ARTICLE 12

GENERAL PROVISIONS




          12.01 Offset. Whenever the Partnership is to pay any sum to any Partner, any amounts that Partner
owes the Partnership may be deducted from that sum before payment.




          12.02 Notices. Except as expressly set forth to the contrary in this Agreement, all notices,
requests or consents provided for or permitted to be given under this Agreement must be in writing
and must be delivered to the recipient in person, by courier or mail or by facsimile or other
electronic transmission. A notice, request or consent given under this Agreement is effective on
receipt by the Partner to receive it; provided, however, that a facsimile or other electronic
transmission that is transmitted after the normal business hours of the recipient shall be deemed
effective on the next Business Day. All notices, requests and consents to be sent to a Partner
must be sent to or made at the addresses given for that Partner on Exhibit A or in the instrument
described in Section 3.04, or such other address as that Partner may specify by notice to the other
Partners. Any notice, request or consent to the Partnership must be given to all of the Partners.
Whenever any notice is required to be given by Law, the Certificate or this Agreement, a written
waiver thereof, signed by the Person entitled to notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice.




          12.03 Entire Agreement; Superseding Effect. This Agreement and the O&M Agreement constitute the
entire agreement of the Partners and their Affiliates relating to the Partnership and the
transactions contemplated hereby and supersede all provisions and concepts contained in all prior
agreements.




          12.04 Effect of Waiver or Consent. Except as otherwise provided in this Agreement, a waiver or
consent, express or implied, to or of any breach or default by any Partner in the performance by
that Partner of its obligations with respect to the Partnership is not a consent or waiver to or of
any other breach or default in the performance by that Partner of the same or any other obligations
of that Partner with respect to the Partnership. Except as otherwise provided in this Agreement,
failure on the part of a Partner to complain of any act of any Partner or to declare any Partner in
default with respect to the Partnership, irrespective of how long that failure continues, does not
constitute a waiver by that Partner of its rights with respect to that default until the applicable
statute-of-limitations period has run.




          12.05 Amendment or Restatement. This Agreement or the Certificate may be amended or restated only
by a written instrument executed (or, in the case of the Certificate, approved) by all Partners.




          12.06 Binding Effect. Subject to the restrictions on Dispositions set forth in this Agreement,
this Agreement is binding on and shall inure to the benefit of the Partners and their respective
successors and permitted assigns.




34









 








          12.07 Governing Law; Severability. THIS AGREEMENT IS GOVERNED BY AND SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE, EXCLUDING ANY CONFLICT-OF-LAWS RULE OR PRINCIPLE
THAT MIGHT REFER THE GOVERNANCE OR THE CONSTRUCTION OF THIS AGREEMENT TO THE LAW OF ANOTHER
JURISDICTION. WITHOUT LIMITING THE PROVISIONS OF ARTICLE 10, A PARTNER MAY BRING AN ACTION ARISING
UNDER OR RELATING TO THIS AGREEMENT, IF AT ALL, ONLY IN COURTS OF THE STATE OF DELAWARE OR (IF IT
HAS JURISDICTION) THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE. In the event of a
direct conflict between the provisions of this Agreement and any mandatory, non-waivable provision
of the Act, such provision of the Act shall control. If any provision of the Act provides that it
may be varied or superseded in a limited partnership agreement (or otherwise by agreement of the
partners of a limited partnership), that provision shall be deemed superseded and waived in its
entirety if this Agreement contains a provision addressing the same issue or subject matter. If
any provision of this Agreement or the application thereof to any Partner or circumstance is held
invalid or unenforceable to any extent, (a) the remainder of this Agreement and the application of
that provision to other Partners or circumstances is not affected thereby, and (b) the Partners
shall negotiate in good faith to replace that provision with a new provision that is valid and
enforceable and that puts the Partners in substantially the same economic, business and legal
position as they would have been in if the original provision had been valid and enforceable.




          12.08 Further Assurances. In connection with this Agreement and the transactions it contemplates,
each Partner shall execute and deliver any additional documents and instruments and perform any
additional acts that may be necessary or appropriate to effectuate and perform the provisions of
this Agreement and those transactions; provided, however, that this Section 12.08 shall not
obligate a Partner to furnish guarantees or other credit supports by such Partnership’s Parent or
other Affiliates.




          12.09 Waiver of Certain Rights. Each Partner irrevocably waives any right it may have to maintain
any action for dissolution of the Partnership or for partition of the property of the Partnership.




          12.10 Counterparts. This Agreement may be executed in any number of counterparts with the same
effect as if all signing parties had signed the same document. All counterparts shall be construed
together and constitute the same instrument.




[Signature page follows.]





35









 








          IN WITNESS WHEREOF, the Partners have executed this Agreement as of the date first set forth
above.




	 	 	 	 	 	 	 
	 	 	PARTNERS:	 	 
	 
	 	 	 	 	 	 
	 	 	Spectra Energy MHP Holding, LLC
	 
	 	 	 	 	 	 
	 

	 	By:
	 	Spectra
	 	Energy Transmission, LLC,
	 	 	 	 	its sole member
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Martha B. Wyrsch 
	 	 	 	 	 
	 

	 	 	 	Name:	 	Martha B. Wyrsch
	 

	 	 	 	Title:
	 	President and Chief Executive Officer
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	Spectra Energy Southeast MHP Holding, LLC
	 
	 	 	 	 	 	 
	 

	 	By:
	 	Spectra
	 	Energy Southeast Pipeline Corporation,
	 	 	 	 	its sole member
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ William S. Garner, Jr. 
	 	 	 	 	 
	 

	 	 	 	Name:	 	William S. Garner, Jr. 
	 

	 	 	 	Title:	 	Vice President, General Counsel and
Secretary 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	Spectra Energy Partners MHP Holding, LLC
	 
	 	 	 	 	 	 
	 

	 	By:
	 	Spectra
	 	Energy Partners OLP, LP,
	 	 	 	 	its sole member
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ C. Gregory Harper 
	 	 	 	 	 
	 

	 	 	 	Name:

Title:
	 	C. Gregory Harper

President and Chief Executive Officer






[Signature Page to General Partnership Agreement of Market Hub Partners Holding]




 









 








EXHIBIT A




PARTNERS




	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Representative and
	 	 	 	 	 	 	 	 	Alternative
	Name and Address	 	Sharing Ratio	 	Parent	 	Representative
	 
	 	 	 	 	 	 	 	 
	Spectra Energy Partners MHP Holding, LLC

5400 Westheimer Court

Houston, Texas 77056-5310

Attn: Lon C. Mitchell

Fax: (713) 627-6012

	 	 	50	%	 	Spectra Energy

Partners, LP
	 	Lon C. Mitchell —

Representative
 

C.
Gregory Harper —

Alternative

Representative
	 
	 	 	 	 	 	 	 	 
	Spectra Energy MHP Holding, LLC

5400 Westheimer Court

Houston, Texas 77056-5310

Attn: [          ]

Fax: [          ]

	 	 	49.9	%	 	Spectra Energy Corp
	 	[          ] —

Representative
 

[          ]
—
Alternative

Representative
	 
	 	 	 	 	 	 	 	 
	Spectra Energy Southeast MHP

Holding, LLC

5400 Westheimer Court

Houston, Texas 77056-5310

Attn: [          ]

Fax: [          ]


	 	 	0.1	%	 	Spectra Energy Corp
	 	[          ] —

Representative 

 

[          ]
—
Alternative

Representative






Exhibit A - Page 1









 






EXHIBIT B




INITIAL FACILITIES




     Two high deliverability salt cavern natural gas storage facilities located in Acadia Parish,
Louisiana and Liberty County, Texas. The two facilities have aggregate working gas storage capacity
of approximately 35 Bcf and interconnect with a total of 12 major natural gas pipeline systems.



     The Egan storage facility, located in Acadia Parish, Louisiana, has a working gas capacity of
approximately 20 Bcf, and includes a 38-mile pipeline system that interconnects with seven major
natural gas pipelines. Egan offers access to Gulf Coast, Midwest, Southeast and Northeast markets
served by pipeline interconnects with Tennessee Gas, Texas Eastern, Columbia Gulf, ANR, Texas Gas,
Trunkline and Florida Gas.



     The Moss Bluff storage facility, located in Liberty County, Texas, has a working gas capacity
of approximately 15 Bcf, and includes a 20-mile pipeline system that interconnects with five major
pipeline systems. Moss Bluff offers access to Texas intrastate, Northeast and Midwest markets
served by pipeline interconnects with Texas Eastern, Natural Gas Pipeline of America, Kinder Morgan
Tejas, Kinder Morgan Texas and Enterprise Intrastate.




Exhibit B - Page 1