Document:

Steckman Ridge LP

    

      

      

      

      

       

      
        
          

        

      

      

      

      LIMITED
        PARTNERSHIP AGREEMENT

      

      

      OF

      

      

      STECKMAN
        RIDGE, LP

      

      A
        Delaware Limited Partnership

      

      

      

      

      

      March
        2, 2007

      

      

      
        
          

        

      

      
        
          
            

          

          
          

        

        
          
          

          
          

        

        
          
          

          
          

        

      

      TABLE
        OF CONTENTS

      

      
        	 	
                Page

              
	
                ARTICLE
                  1

              	
                DEFINITIONS

              	
                1

              
	 	
                1.01

              	
                Definitions

              	
                1

              
	 	
                1.02

              	
                Interpretation

              	
                7

              
	
                ARTICLE
                  2

              	
                ORGANIZATION

              	
                7

              
	 	
                2.01

              	
                Formation

              	
                7
                  

              
	 	
                2.02

              	
                Name

              	
                7

              
	 	
                2.03

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

              	
                7

              
	 	
                2.04

              	
                Purposes

              	
                7

              
	 	
                2.05

              	
                Foreign
                  Qualification

              	
                8

              
	 	
                2.06

              	
                PSA

              	
                8

              
	 	
                2.07

              	
                Term

              	
                8

              
	
                ARTICLE
                  3

              	
                PARTNERSHIP;
                  DISPOSITIONS OF INTERESTS

              	
                8

              
	 	
                3.01

              	
                Initial
                  Partners

              	
                8

              
	 	
                3.02

              	
                Representations,
                  Warranties and Covenants

              	
                8

              
	 	
                3.03

              	
                Dispositions
                  and Encumbrances of LP Interests

              	
                9

              
	 	
                3.04

              	
                Creation
                  of Additional Partnership Interests

              	
                10

              
	 	
                3.05

              	
                Access
                  to Information

              	
                10

              
	 	
                3.06

              	
                Confidential
                  Information

              	
                10

              
	 	
                3.07

              	
                Liability
                  to Third Parties

              	
                12

              
	 	
                3.08

              	
                Use
                  of Partners’ Names and Trademarks

              	
                12

              
	
                ARTICLE
                  4

              	
                CAPITAL
                  CONTRIBUTIONS

              	
                12

              
	 	
                4.01

              	
                Capital
                  Contributions

              	
                12

              
	 	
                4.02

              	
                Loans

              	
                12

              
	 	
                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

              	
                14

              
	
                ARTICLE
                  5

              	
                DISTRIBUTIONS
                  AND ALLOCATIONS

              	
                15

              
	 	
                5.01

              	
                Distributions

              	
                15

              
	 	
                5.02

              	
                Distributions
                  on Dissolution and Winding Up

              	
                16

              
	 	
                5.03

              	
                Withholding

              	
                16

              
	 	
                5.04

              	
                Allocations

              	
                16

              
	 	
                5.05

              	
                Special
                  Allocations

              	
                16

              
	 	
                5.06

              	
                Curative
                  Allocations

              	
                17

              
	 	
                5.07

              	
                Varying
                  Interests

              	
                17

              
	
                ARTICLE
                  6

              	
                MANAGEMENT

              	
                18

              
	 	
                6.01

              	
                Generally

              	
                18

              
	 	
                6.02

              	
                Officers

              	
                18

              
	 	
                6.03

              	
                Operations
                  and Management Agreement

              	
                18

              
	 	
                6.04

              	
                Conflicts
                  of Interest

              	
                18

              
	 	
                6.05

              	
                Indemnification
                  for Breach of Agreement

              	
                19

              
	 	
                6.06

              	
                General
                  Regulatory Matters

              	
                19

              
	 	
                6.07

              	
                Disclaimer
                  of Duties

              	
                19

              

      

       

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                ARTICLE
                  7

              	
                TAXES

              	
                19

              
	 	
                7.01

              	
                Tax
                  Returns

              	
                19

              
	 	
                7.02

              	
                Tax
                  Elections

              	
                19

              
	 	
                7.03

              	
                Tax
                  Matters Partner

              	
                19

              
	
                ARTICLE
                  8

              	
                BOOKS,
                  RECORDS, REPORTS, AND BANK ACCOUNTS

              	
                20

              
	 	
                8.01

              	
                Maintenance
                  of Books; Reports

              	
                20

              
	 	
                8.02

              	
                Bank
                  Accounts

              	
                21

              
	
                ARTICLE
                  9

              	
                WITHDRAWAL

              	
                21

              
	 	
                9.01

              	
                No
                  Right of Withdrawal

              	
                21

              
	 	
                9.02

              	
                Deemed
                  Withdrawal

              	
                21

              
	 	
                9.03

              	
                Effect
                  of Withdrawal

              	
                21

              
	
                ARTICLE
                  10

              	
                DISPUTE
                  RESOLUTION

              	
                22

              
	 	
                10.01

              	
                Disputes

              	
                22

              
	 	
                10.02

              	
                Negotiation
                  to Resolve Disputes

              	
                22

              
	 	
                10.03

              	
                Selection
                  of Arbitrator

              	
                22

              
	 	
                10.04

              	
                Conduct
                  of Arbitration

              	
                23

              
	 	
                10.05

              	
                Consolidation

              	
                23

              
	
                ARTICLE
                  11

              	
                DISSOLUTION,
                  WINDING UP AND TERMINATION

              	
                23

              
	 	
                11.01

              	
                Dissolution

              	
                23

              
	 	
                11.02

              	
                Winding
                  Up and Termination

              	
                24

              
	 	
                11.03

              	
                Deficit
                  Capital Accounts

              	
                25

              
	 	
                11.04

              	
                Certificate
                  of Cancellation

              	
                25

              
	
                ARTICLE
                  12

              	
                GENERAL
                  PROVISIONS

              	
                25

              
	 	
                12.01

              	
                Offset

              	
                25

              
	 	
                12.02

              	
                Notices

              	
                25

              
	 	
                12.03

              	
                Entire
                  Agreement; Superseding Effect

              	
                25

              
	 	
                12.04

              	
                Effect
                  of Waiver or Consent

              	
                25

              
	 	
                12.05

              	
                Amendment
                  or Restatement

              	
                25

              
	 	
                12.06

              	
                Binding
                  Effect

              	
                25

              
	 	
                12.07

              	
                Governing
                  Law; Severability

              	
                26

              
	 	
                12.08

              	
                Further
                  Assurances

              	
                26

              
	 	
                12.09

              	
                Waiver
                  of Certain Rights

              	
                26

              
	 	
                12.10

              	
                Counterparts

              	
                26

              

      

      

      

      EXHIBITS:

      

      A
        -
        Partners

      B
        -
        Initial Facilities

      C
        -
        Non-Competition Area

      D
        -
        O&M Agreement

      

      ii

      

      

      

      
        
          
            

          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
          

        

      

      LIMITED
        PARTNERSHIP AGREEMENT

      OF

      STECKMAN
        RIDGE, LP

      A
        Delaware Limited Partnership

      

      This
        LIMITED PARTNERSHIP AGREEMENT OF STECKMAN RIDGE, LP (this “Agreement”), dated as
        of March 2, 2007, is adopted, executed and agreed to, for good and valuable
        consideration, by STECKMAN RIDGE GP, LLC, a Delaware limited liability company
        (the “General Partner”), as the initial general partner and SPECTRA ENERGY
        TRANSMISSION RESOURCE, LLC, a Delaware limited liability company (“Spectra”),
        and NJR STECKMAN RIDGE STORAGE COMPANY, a Delaware corporation (“NJR”), as the
        initial limited partners. Capitalized terms used in this Agreement and not
        defined elsewhere have the meanings given to them in Article 1
        below.

      

      RECITALS

      

      The
        Persons executing this Agreement as of the date of this Agreement are becoming
        partners of the Partnership 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 Limited Partnership Act.

      

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

      

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

      

      Adjusted
        Capital Account Deficit
        - with
        respect to any Partner, the deficit balance, if any, in such Partner’s Capital
        Account as of the end of the relevant Fiscal Year after giving effect to
        the
        following adjustments: (a) credit to such Capital Account any amounts that
        such
        Partner is obligated to restore pursuant to the penultimate sentences of
        Treasury Regulation Sections 1.704-2(g)(1) and 1.704-2(i)(5) and (b) debit
        to
        such Capital Account such Partner’s share of the items described in Treasury
        Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6). This definition
        of
        Adjusted Capital Account Deficit is intended to comply with the provisions
        of
        Treasury Regulation Section 1.704-1(b)(2)(ii)(d) and shall be interpreted
        consistently therewith.

      

      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 partner of the limited liability
        company is Controlled by such Partner’s Parent; provided further, for purposes
        of this Agreement the Partnership and its subsidiaries (if any) shall not
        be an
        Affiliate of any Partner. 

       

      
         

        
          1

          
            

          

        

        
          
          

        

      

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

      

      Agreement
        -
        introductory paragraph.

      

      Arbitration
        Notice
        -
        Section 10.02(c).

      

      Arbitrator
        -
        Section
        10.03(b).

      

      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 the General Partner. The Assignee of a liquidated or
        wound
        up Partner is the shareholder, partner, partner 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 Sole
        Discretion of the General Partner 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 General Partner 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.

      

      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.

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      Breaching
        Partner
        - a
        Partner (a) 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 or (b) that is, or any Affiliate of which is, a “Breaching
        Partner” as defined in the GP LLC Agreement.

      

      Business
        Day
        - any
        day other than a Saturday, a Sunday, or a U.S. federal holiday.

      

      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
        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.

      

      Code
        -
        the
        Internal Revenue Code of 1986.

      

      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).

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

      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 25% 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 the limited
        partnership is a corporation, ownership of 50% or more of the outstanding
        voting
        securities of the corporate general partner, (B) in the case where the general
        partner of the limited partnership is a partnership, limited liability company
        or other entity (other than a corporation or limited partnership), the right
        to
        25% or more of the distributions from the general partner entity, and (C)
        in the
        case where the general partner of the limited partnership is a limited
        partnership, Control of the general partner of the 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 or more subsidiaries, the right to receive at least
        25%
        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.

      

      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 General Partner 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 (including an LP Interest or any portion of an LP
        Interest), 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 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).

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      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 General Partner.

      

      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.

      

      GP
        LLC Agreement
        - the
        Limited Liability Company Agreement of the General Partner, dated as of March
        2,
        2007, as amended from time to time.

      

      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.

      

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

      

      LP
        Interest
        - the
        Partnership Interest of a Limited Partner in its capacity as such. 

      

      Non-Contributing
        Partner
        -
        Section 4.06(a).

       

      Nonrecourse
        Debt
        - the
        meaning set forth in Treasury Regulation Section 1.704-2(b)(3).

       

      Nonrecourse
        Deductions
        - the
        meaning, and the amount thereof shall be, as set forth in Treasury Regulation
        Sections 1.704-2(b) and 1.704-2(c).

      

      O&M
        Agreement
        -
        Section 6.03.

      

      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
        Partnership.

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

      Operator
        -
        Spectra Energy Transmission Services, LLC, a Delaware limited liability
        company.

      

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

      

      Partner
        - the
        General Partner or any Limited Partner.

      

      Partnership
        -
        Steckman Ridge, LP, a Delaware limited 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.

       

      Partnership
        Minimum Gain
        -
“partnership minimum gain” set forth in Treasury Regulation Sections
        1.704-2(b)(2) and 1.704-2(d).

       

      Partner
        Minimum Gain
        -
“partner nonrecourse debt minimum gain” as determined under Treasury Regulation
        Section 1.704-2(i)(2).

       

      Partner
        Nonrecourse Debt
        -
“partner nonrecourse debt” as set forth in Treasury Regulation Section
        1.704-2(b)(4).

      Partner
        Nonrecourse Deductions
        -
“partner nonrecourse deductions,” and the amount thereof shall be, as set forth
        in Treasury Regulation Section 1.704-2(i).

      

      Person
        - the
        meaning assigned that term in Section 17-101(14) 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).

      

      PSA
        -
        the
        Purchase and Sale Agreement dated as of February 9, 2007, between Pennsylvania
        General Energy Company, L.L.C. and Spectra Energy Transmission,
        LLC.

      

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

      

      Regulatory
        Allocations
        -
        Section 5.06.

      

      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 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.

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

      Storage
        Agreement
        - any
        agreement of the Partnership to store natural gas or to perform other services
        under applicable tariffs for other Persons at any of the
        Facilities.

      

      Tax
        Matters Partner
        -
        Section 7.03(a).

      

      Term
        -
        Section
        2.07.

      

      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
        General Partner shall form the Partnership as a Delaware limited partnership
        by
        the filing of a Certificate of Limited Partnership (the “Certificate”) promptly
        following the execution and delivery of this Agreement.

       

      2.02 Name.
        The
        name of the Partnership is “Steckman Ridge, LP” and all Partnership business
        must be conducted in that name or such other names that comply with Law as
        the
        General Partner may select.

       

      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 General Partner 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 General Partner 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 General Partner may designate, which need not be in the State of
        Delaware, and the Partnership shall maintain records there or such other
        place
        as the General Partner 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 General Partner
        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 of natural gas through the Facilities, and to engage
        in
        any activities directly or indirectly relating to the
        foregoing.

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

      2.05 Foreign
        Qualification.
        Prior to
        the Partnership’s conducting business in any jurisdiction other than Delaware,
        the General Partner shall cause the Partnership to comply, to the extent
        procedures are available and those matters are reasonably within the control
        of
        the General Partner, with all requirements necessary to qualify the Partnership
        as a foreign limited partnership in that jurisdiction. At the request of
        the
        General Partner, 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 limited partnership in all such jurisdictions in which the Partnership
        may conduct business.

       

      2.06 PSA.
        Immediately following the formation of the Partnership, the Partners, pro
        rata
        to their Sharing Ratios, shall contribute to the Partnership, and the General
        Partner shall cause the Partnership to accept and assume, all of the rights
        and
        obligations set forth for Spectra Energy Transmission, LLC under the
        PSA.

       

      2.07 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, the General Partner is admitted to the
        Partnership as the general partner and Spectra and NJR are admitted to the
        Partnership as limited partners.

       

      3.02 Representations,
        Warranties and Covenants.
        Each
        Limited Partner hereby represents, warrants and covenants to the Partnership
        and
        each other Partner that the following statements are true and correct as
        of the
        Effective Date and shall be true and correct at all times that such Limited
        Partner is a Partner:

      

      (a) that
        Limited 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 Limited 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 Limited
        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, partners, partners, trustees, beneficiaries,
        or other applicable Persons necessary for the due authorization, execution,
        delivery and performance of this Agreement by that Limited Partner have been
        duly taken;

      

      (b) that
        Limited 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 Limited 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);

      

      (c) that
        Limited 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 Limited
        Partner, (B) any contract or agreement to which that Limited Partner is a
        party
        or is otherwise subject, or (C) any Law, order, judgment, decree, writ,
        injunction or arbitral award to which that Limited 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;

      

      (d) that
        Limited Partner’s Parent is the Person identified as such on Exhibit
        A;

      

      (e) that
        Limited Partner is acquiring its LP Interest solely for investment for its
        own
        account and not for distribution or sale to others in connection with any
        distribution or public offering;

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

      (f) that
        Limited Partner understands that there will not be any public market for
        the LP
        Interests and that it must bear the economic risk of an investment in the
        Partnership for an indefinite period of time because (i) its LP Interest
        has not
        been registered under the Securities Act or any applicable state securities
        laws
        and (ii) it may Dispose or Encumber, in whole or in part, its LP Interest
        only
        in accordance with this Agreement and then only if its LP Interest is
        subsequently registered in accordance with the provisions of the Securities
        Act
        and applicable state securities laws, unless registration is not
        required;

      

      (g) that
        Limited Partner understands that the Partnership is not obligated to register
        the LP Interests for resale under the Securities Act or any applicable state
        securities laws;

      

      (h) that
        Limited Partner is a “qualified institutional buyer” within the meaning of rule
        144A of the Securities and Exchange Commission or an “accredited investor”
within the meaning of Regulation D of the Securities and Exchange Commission
        and
        is able to bear the economic risk of such an investment in the Partnership
        for
        an indefinite period of time, and it has no need for liquidity of this
        investment and it could bear a complete loss of this investment; if it is
        either
        a “qualified purchaser” within the meaning of the Investment Company Act of 1940
        or is an entity formed and is being utilized primarily for the purpose of
        making
        an investment in the Partnership, each of the shareholders, partners, partners
        or other holders of equity or beneficial interests in that Partner is such
        a
        qualified purchaser; and

      

      (i) that
        Limited Partner has the knowledge and sophistication to evaluate the risks
        of
        investing in the Partnership; it has conducted its own investigation and
        due
        diligence into the Partnership and is satisfied that its investment in the
        Partnership is appropriate; it understands and agrees that none of the other
        Partners or their Affiliates, or the Partnership, has made nor will make
        any
        representation or warranty with respect to the worthiness, terms, value,
        or any
        other aspect of the Partnership or the LP Interests, and it explicitly disclaims
        any warranty, express or implied, with respect to such matters; and it
        specifically acknowledges, represents, and warrants that it is not relying
        on
        any other Partner or its Affiliates (i) for its investigation or due diligence
        concerning, or evaluation of, the Partnership or any related transaction
        or (ii)
        with respect to tax and other economic considerations involved in an investment
        in the Partnership.

       

      3.03 Dispositions
        and Encumbrances of LP Interests.

      

      (a) A
        Limited
        Partner (the “Disposing Partner”) may Dispose of or Encumber all or any portion
        of its LP Interest only (i) to an Affiliate of the Partner making the
        Disposition or (ii) with the written consent of the General Partner. Any
        attempted Disposition or Encumbrance of an LP 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 an 

      

      (b) LP
        Interest may not be separated, divided or split from the other attributes
        of an
        LP Interest except with the prior written approval of the General Partner
        and as
        contemplated by the express provisions of this Agreement.

      LP
        Interests may be diluted as provided in the GP LLC Agreement.

      

      (c) Each
        Limited Partner agrees that it will include its LP Interest in any sale when
        required under Section 3.03(b)(iv) of the GP LLC Agreement.

      

      (d) No
        Disposition of a Partnership Interest shall effect a release of the Disposing
        Partner from any liabilities to the Partnership or the other Partners arising
        from events occurring prior to the Disposition.

      

      (e) 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
        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).

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

      (f) Notwithstanding
        anything to the contrary in this Agreement, a direct or indirect Disposition
        of
        a Partnership Interest shall be made only with the consent of all Partners
        if
        the Disposition would (a) cause a termination of the Partnership under Section
        708 of the Code or (b) adversely affect the tax consequences of the Partnership
        or any Partner.

       

      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 General Partner, on such terms
        and
        conditions as the General Partner 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 the General 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 General Partner, 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
        or the General Partner in connection with the Partnership;

      

      (ii) disclosures
        and uses that are approved by the General Partner;

      

      (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 General
        Partner;

      

      (iv) disclosures
        to an Affiliate of that Partner, including the directors, officers, employees,
        agents and advisors of that Affiliate, provided the Partner shall cause that
        Affiliate 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 “Marketing Affiliate” (as
        defined in the FERC’s Standards of Conduct for Transmission Providers, 18 C.F.R.
        Part 358, Section 358.3(k));

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

      (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 or (D) any national
        securities exchange or automated quotation system; 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 General Partner 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 General Partner on the advisability of taking steps to resist or
        narrow
        such disclosure; and

      

      (C) cooperate
        with the General Partner 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 General Partner 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.

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

      (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 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) On
        the
        formation of the Partnership, each Partner will make a Capital Contribution
        (i)
        in cash equal to its Sharing Ratio times $104,000,000 and (ii) of the interest
        in the PSA described in Section 2.06. After that time, except as otherwise
        provided in the following provisions of this Section 4.01 or 4.02, the General
        Partner 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 General
        Partner shall determine (a “Capital Call”); provided, however, that the
        aggregate of the Capital Contributions under Section 4.01(a)(i) plus all
        Capital
        Calls and all loans under Section 4.02 may not exceed $250,000,000. 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. Each Partner
        is entitled to a credit to its Capital Account equal to its Sharing Ratio
        times
        $5,000,000 on account of its contribution under Section
        4.01(a)(ii).

      

      (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
        General Partner 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 General Partner) 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 General Partner by notice
        may
        require the Limited Partners to lend funds to the Partnership at such times,
        in
        such amounts and under such terms and conditions as the General Partner shall
        determine; provided, however, that (i) the General Partner shall not call
        for
        loans rather than Capital Contributions to the extent doing so would breach
        any
        financing or other agreement of the Partnership and (ii) the aggregate of
        the
        cash Capital Contributions under Section 4.01(a)(i) plus all Capital Calls
        

      
        
          
          

        

        
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      and
        all
        loans under this Section 4.02 may not exceed $250,000,000. All amounts received
        from a Limited 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 Capital Accounts of
        all
        the Limited 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 Limited Partners;

      

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

      

      (iii) The
        purpose for which the funds are to be applied in such reasonable detail as
        the
        General Partner 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 General Partner) and the method of payment,
        provided that the date and the method shall be the same for each of the Limited
        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 Limited Partners.

      

      (c) Each
        Limited 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) 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 Partners to the Partnership (net of liabilities
        secured by such contributed 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 

      
        
          
          

        

        
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      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 (including any contribution
        under Section 4.06(c)), (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). The Capital
        Accounts shall not be deemed to be, nor have the same meaning as, the capital
        account of the Partnership under the Natural Gas Act.

      

      (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 General
        Partner 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
        Limited 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 Limited Partners that
        have
        contributed their Capital Contributions and that are not, and none of whose
        Affiliates are, Non-Contributing Partners under the GP LLC Agreement (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:

      

      (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: (A) a
        Capital Contribution resulting in the Additional Contribution Partners receiving
        a Priority Interest under Section 4.06(b), or (B) 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. The decision of the Additional
        Contribution Partners to elect (ii)(A) or (ii)(B) above shall be made by
        the
        determination of the Additional Contribution Partners holding the majority
        of
        the Sharing Ratios of all Additional Contribution Partners. If the election
        has
        not been made on or before the 30th Day after the date the funds were paid
        by
        the Non-Contributing Partner(s), payment of the Additional Contribution shall
        be
        treated as a Priority Interest under Section 4.06(a)(ii)(A). 

      

      (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:

      
        
          
          

        

        
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      (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 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.

      

      ARTICLE
        5

      DISTRIBUTIONS
        AND ALLOCATIONS

       

      5.01 Distributions.
        On or
        before the 30th Day following the end of each Quarter, the General Partner
        shall
        review and determine the amount of Available Cash with respect to that Quarter,
        and shall direct that the Partnership distribute an amount equal to 100%
        of
        Available Cash with respect to that Quarter. That amount shall, subject to
        Section 17-607 of the Act, 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 distributions are made).

      
        
          
          

        

        
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      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) pro rata in accordance with the Partners’ positive Capital Account
        balances.

       

      5.03 Withholding.
        The
        Partnership is authorized to withhold from distributions to a Partner and
        to pay
        over to a federal, state, local or non-United States government, any amounts
        required to be withheld pursuant to the Code, or any provisions of any other
        federal, state, local or non-United States law. Any amounts so withheld shall
        be
        treated as having been distributed to the applicable Partner for all purposes
        of
        this Agreement and shall be offset against the current or next amounts otherwise
        distributable to the applicable Partner.

      5.04 Allocations.

      

      (a) After
        giving effect to the special allocations set forth in Sections 5.05 and 5.06,
        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). These allocations shall be
        made in
        such manner and utilizing such permissible tax elections as are determined
        by
        the Tax Matters Partner.

       

      5.05 Special
        Allocations.
        The
        following special allocations shall be made in the following order:

      

      (a) Partnership
        Minimum Gain Chargeback.
        Except
        as otherwise provided in Treasury Regulation Section 1.704-2(f), notwithstanding
        any other provision of this Article 5, if there is a net decrease in Partnership
        Minimum Gain during any fiscal year, each Partner shall be specially allocated
        items of Partnership income and gain for such fiscal year (and, if necessary,
        subsequent fiscal years) in an amount equal to such Partner’s share of the net
        decrease in Partnership Minimum Gain, determined in accordance with Treasury
        Regulation Section 1.704-2(g). Allocations pursuant to the previous sentence
        shall be made in proportion to the respective amounts required to be allocated
        to each Partner pursuant thereto. The items to be so allocated shall be
        determined in accordance with Treasury Regulation Sections 1.704-2(f)(6)
        and
        1.704-2(j)(2). This Section 5.05(a) is intended to comply with the partnership
        minimum gain chargeback requirement in Treasury Regulation Section 1.704-2(f)
        and shall be interpreted and applied consistently therewith.

      

      (b) Partner
        Minimum Gain Chargeback.
        Except
        as otherwise provided in Treasury Regulation Section 1.704-2(i)(4),
        notwithstanding any other provision of this Article 5, if there is a net
        decrease in Partner Minimum Gain attributable to a Partner Nonrecourse Debt
        during any fiscal year, any Partner with a share of that Partner Minimum
        Gain
        attributable to such a Partner Nonrecourse Debt (as determined under Treasury
        Regulation Section 1.704-2(i)(5)) as of the beginning of the year shall be
        allocated items of Partnership income and gain for such fiscal year (and,
        if
        necessary, subsequent fiscal years) in an amount equal to such Partner’s share
        of the net decrease in Partner Minimum Gain, determined in accordance with
        Treasury Regulation Section 1.704-2(i)(4). Allocations pursuant to the previous
        sentence shall be made in proportion to the respective amounts required to
        be

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

      allocated
        to each Partner pursuant thereto. The items to be so allocated shall be
        determined in accordance with Treasury Regulation Sections 1.704-2(f)(6)
        and
        1.704-2(j)(2). This Section 5.05(b) is intended to comply with the partner
        minimum gain chargeback requirements in the Treasury Regulations and shall
        be
        interpreted and applied consistently therewith.

      

      (c) Qualified
        Income Offset.
        In the
        event any Partner unexpectedly receives any adjustments, allocations, or
        distributions described in Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4),
        (5), or (6), items of Partnership income and gain shall be specially allocated
        to such Partner in an amount and manner sufficient to eliminate, to the extent
        required by the Treasury Regulations, the Adjusted Capital Account Deficit
        as
        quickly as possible; provided, however, that an allocation pursuant to this
        Section 5.05(c) shall be made only if and to the extent that such Partner
        would
        have an Adjusted Capital Account Deficit after all other allocations provided
        in
        this Article 5 have been tentatively made as if this Section 5.05(c) were
        not in
        this Agreement. This Section 5.05(c) is intended to comply with the qualified
        income offset provision in Treasury Regulation Section 1.704-1(b)(2)(ii)(d)
        and
        shall be interpreted and applied consistently therewith.

      

      (d) Gross
        Income Allocation.
        In the
        event any Partner has a deficit Capital Account at the end of any fiscal
        year
        that is in excess of the amount that such Partner is deemed to be obligated
        to
        restore pursuant to the penultimate sentences of Treasury Regulation Sections
        1.704-2(g)(1) and 1.704-2(i)(5), each such Partner shall be specially allocated
        items of Partnership income and gain in an amount and manner sufficient to
        eliminate such deficit as quickly as possible; provided, however, that an
        allocation pursuant to this Section 5.05(d) shall be made only if and to
        the
        extent that such Partner would have a deficit Capital Account in excess of
        such
        sum after all other allocations provided in this Article 5 have been tentatively
        made as if Section 5.05(c) and this Section 5.05(d) were not in this
        Agreement.

      

      (e) Nonrecourse
        Deductions.
        Nonrecourse Deductions for any fiscal year shall be specially allocated to
        the
        Partners in the manner determined by the Tax Matters Partner and each Partner’s
        share of excess Nonrecourse Debt shall be in the same manner.

      

      (f) Partner
        Nonrecourse Deductions.
        Partner
        Nonrecourse Deductions for any fiscal year shall be specially allocated to
        the
        Partner who bears the economic risk of loss with respect to the Partner
        Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable
        in accordance with Treasury Regulation Section 1.752-2. If more than one
        Partner
        bears the economic risk of loss for a Partner Nonrecourse Debt, any Partner
        Nonrecourse Deductions attributable to that Partner Nonrecourse Debt shall
        be
        allocated among the Partners according to the ratio in which they bear the
        economic risk of loss.

       

      5.06 Curative
        Allocations.
        The
        allocations set forth in Section 5.05 (the “Regulatory Allocations”) are
        intended to comply with certain requirements of the Treasury Regulations.
        It is
        the intent of the Partners that, to the extent possible, all Regulatory
        Allocations shall be offset either with other Regulatory Allocations or with
        special allocations of other items of Partnership income, gain, loss or
        deduction pursuant to this Section 5.06. Therefore, notwithstanding any other
        provision of this Agreement, the Regulatory Allocations shall be taken into
        account in allocating items of Partnership income, gain, loss and deduction
        among the Partners so that, to the extent possible, the net amount of such
        allocations of other items and the Regulatory Allocations to each Partner
        shall
        be equal to the net amount that would have been allocated to each such Partner
        pursuant to Section 5.01 if the Regulatory Allocations had not
        occurred.

       

      5.07 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 General Partner
        to be
        permissible under Code Section 706 and the related Treasury Regulations to
        take
        account of the Partners’ varying Sharing Ratios.

      
        
          
          

        

        
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      ARTICLE
        6

      MANAGEMENT

       

      6.01 Generally.
        The
        management of the Partnership is fully vested in the General Partner. The
        General Partner has full power and authority to cause the Partnership to
        take
        any action, enter into any contract, borrow money, or do any thing else the
        General Partner determines, subject to the other provisions of this
        Agreement.

       

      6.02 Officers.
        The
        General Partner 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 General Partner may delegate to them and shall serve at the
        pleasure of the General Partner and report to the General Partner.

       

      6.03 Operations
        and Management Agreement.
        Promptly
        after the Partnership’s formation, the General Partner shall cause the
        Partnership to enter into an Operations and Management Agreement with the
        Operator on substantially similar terms to those on Exhibit C or such other
        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, on the terms set forth on Exhibit D to this
        Agreement.

       

      6.04 Conflicts
        of Interest.

      

      (a) Until
        the
        end of the Term, the Partners shall not, and shall cause their Affiliates
        not
        to, develop, construct, own, acquire or operate natural gas storage facilities
        or oil or gas exploration or production within the area identified in Exhibit
        C
        to this Agreement. The provisions of this Section 6.04(a) shall continue
        to bind
        a Withdrawn Partner and its Affiliates until the third anniversary of such
        Withdrawal, but not thereafter. The Partners agree that the provisions of
        this
        Section 6.04(a) are necessary (A) to further the purposes, business and
        activities of the Partnership, and (B) to protect confidential and proprietary
        information regarding the Partnership, to which the Partners will have access
        pursuant to this Agreement. The Partners agree that no adequate remedy at
        law
        exists for a breach or threatened breach of any of the provisions of this
        Section 6.04(a), 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 6.04(a) 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.

      

      (b) Subject
        to Sections 6.04(a), 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 oil and
        gas
        exploration and production, with no obligation to offer to the Partnership,
        any
        other Partner or any Affiliate of another Partner the right to participate
        therein. Subject to Sections 6.04(a), the Partnership may transact business
        with
        any Partner or Affiliate of a Partner, provided the terms of those transactions
        are approved by the General Partner 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 and
        electricity marketing and trading (including futures, options, swaps, exchanges
        of future positions for physical deliveries and commodity trading), gathering,
        processing, storage, transportation and distribution, electric generation,
        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”). Subject to Sections 6.04(a), (i) 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 (ii) 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. The provisions of this Section 6.04(b) constitute an
        agreement to modify or eliminate fiduciary duties pursuant to the provisions
        of
        Section 17-1101 of the Act. 

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

      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.
        Each
        Partner shall:

      

      (a) cooperate
        fully with the Partnership, the General Partner 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 General Partner 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, INCLUDING THE GENERAL
        PARTNER AND THE “REPRESENTATIVES” (AS DEFINED IN THE GP LLC AGREEMENT), 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 NOTWITH-STANDING
        THE
        NEGLIGENCE, GROSS NEGLIGENCE, WILLFUL MISCONDUCT, STRICT LIABILITY OR OTHER
        FAULT OR RESPONSIBILITY OF ANY PARTNER AND THE “REPRESENTATIVES” (AS DEFINED IN
        THE GP LLC AGREEMENT).

      

      ARTICLE
        7

      TAXES

       

      7.01 Tax
        Returns.
        In
        accordance with the O&M Agreement, the Operator is to 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
        Operator 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 a
        period
        of 60 months as permitted by Section 709(b) of the Code; 

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

      (e) to
        elect
        to depreciate or amortize the assets of the Partnership using the most rapid
        means available; and

      

      (f) any
        other
        election the General Partner may deem appropriate.

      

      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
        General Partner shall 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 Partnership items for any taxable year without first notifying
        the
        other Partners. If the General Partner 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 Partnership
        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 Partnership, 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), that Partner shall give reasonable notice under the circumstances
        to
        the other Partners of its 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
        Partners acknowledge that the O&M Agreement will include provisions for the
        maintenance of the Partnership’s books and records and the preparation of
        various reports.

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

      8.02 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 General Partner. All withdrawals from
        any
        such depository shall be made only as authorized by the General Partner 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
        Limited 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 Limited Partner to continue
        to be
        a Partner;

      

      (b) the
        Limited Partner becomes Bankrupt;

      

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

      

      (d) notice
        from the General Partner if the Limited Partner commits a Default and the
        Default has not been cured; or

      

      (e) the
        Limited Partner and/or any of its Affiliates has withdrawn as a Partner of
        the
        General Partner under the GP LLC Agreement.

       

      9.03 Effect
        of Withdrawal.
        A
        Limited 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 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 General Partner may, in its Sole Discretion, decide
        to
        cause the Partnership to make); (iv) not 

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

      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 11.02.
        Subject
        to the foregoing, payment to the Withdrawn Partner of its Capital Account
        balance shall be made upon the earliest of: (A) such time as the General
        Partner
        determines in its Sole Discretion to make such payment, (B) the later of
        (I) two
        years from the date of Withdrawal, and (II) ten years from the date that
        the
        Initial Facilities are placed into commercial operation, and (C) the dissolution
        of the Partnership. 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.

      

      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. Any matter that is expressly stated herein to be
        determinable by arbitration may be so determined pursuant to this Article
        10 and
        if 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.

      

      (a) For
        any
        case in which any claim, or combination of claims, is less than or equal
        to
        $2,000,000, the arbitration shall be heard by a sole Arbitrator. Any case
        in
        which any claim, or combination of claims, exceeds $2,000,000 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. 

      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

      

      (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 an “Arbitrator”). 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 Wilmington, Delaware. 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 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.

       

      10.05 Consolidation.
        While
        any matter is before the Arbitrator under this Article 10, if any of the
        Disputing Partners party to the arbitration, or, if applicable, their Affiliates
        desire to bring a matter before an arbitrator under the GP LLC Agreement,
        the
        matter shall be consolidated with the matter under this Agreement if, but
        only
        if, the Disputing Partners under this Agreement and the Persons bringing
        the
        matter before an arbitrator under the GP LLC Agreement are the same Persons
        or
        Affiliates of those Persons.

      

      ARTILCE
        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”):

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      

      (a) notice
        from the General Partner to the Limited Partners dissolving the Partnership;
        

      

      (b) entry
        of
        a decree of judicial dissolution of the Partnership under Section 17-802
        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 General Partner. 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

      

      (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 and constitutes a compromise
        to which all Partners have consented pursuant to Section 17-502(b) of the
        Act.
        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 

      
        
          
          

        

        
          24

          
            

          

        

        
          
          

        

      

      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
        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, the GP LLC 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.

      
        
          
          

        

        
          25

          
            

          

        

        
          
          

        

      

      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.

      

      

      

      [Remainder
        of page intentionally left blank. Signature page follows.]

       

      

       

      

      
        
          
            

          

          
          

        

        
          26

          
            

          

        

        
          
          

          
          

        

      

       

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

       

      

         

        PARTNERS:

         

        GENERAL
          PARTNER

         

        STECKMAN
          RIDGE GP, LLC

        

        By:
          Spectra Energy Transmission Services, LLC, partner

        

        By:  /s/
          Mark
          Fiedorek

        Name:
           Mark
          Fiedorek

        Title:   
          Vice
          President

        

        By:
          NJR
          Steckman Ridge Storage Company, partner

        

        By: /s/ 
          Richard R. Gardner

        Name: 
          Richard
          R. Gardner 

        Title:   
          Vice
          President

         

        LIMITED
          PARTNERS:

         

        SPECTRA
          ENERGY TRANSMISSION RESOURCE, LLC

         

        
          By:  /s/
            Mark
            Fiedorek

          Name:
             Mark
            Fiedorek

          Title:   
            Vice
            President

        

           

         

        NJR
          STECKMAN RIDGE STORAGE COMPANY

        

        By: /s/ 
          Glenn C.Lockwood

        Name:  
          Glenn
          C. Lockwood_

        Title:    
          Senior
          Vice President and

                      
          Chief Financial Officer

         

        

         

        

         

        

      

      

       

      

      
        
          
            [Signature
              page to Limited Partnership Agreement of Steckman Ridge, LP]

            

            

          

          
          

        

        
          27

          
            

          

        

        
          
          

          
          

        

      

       

      EXHIBIT
        A

       

      PARTNERS

       

      

      
        	
                Name
                  and Address

              	
                Sharing
                  Ratio

              	
                Parent

              
	
                Steckman
                  Ridge GP, LLC

                5400
                  Westheimer Court

                Houston,
                  Texas 77056-5310

                Attn:
                  Christine M. Pallenik

                Fax:
                  (713) 386-4694

                 

                With
                  a copy to:

                 

                1415
                  Wyckoff Road

                Wall,
                  NJ 07719

                Attn:
                  William P. Scharfenberg

                Fax:
                  (732) 938-1226

              	
                1%

              	
                N/A

              
	
                Spectra
                  Energy Transmission Resource, LLC

                5400
                  Westheimer Court

                Houston,
                  Texas 77056-5310

                Attn:
                  Christine M. Pallenik

                Fax:
                  (713) 386-4694

              	
                49.5%

              	
                Spectra
                  Energy Corp

              
	
                NJR
                  Steckman Ridge Storage Company

                1415
                  Wyckoff Road

                Wall,
                  NJ 07719

                Attn:
                  William P. Scharfenberg

                Fax:
                  (732) 938-1226

              	
                49.5%

              	
                New
                  Jersey Resources Corporation

              

      

       

      

      
        
          
            

            

            

          

          
          

        

        
          28

          
            

          

        

        
          
          

          
          

        

      

       

      EXHIBIT
        B

       

      INITIAL
        FACILITIES

       

      

       

      A
        natural
        gas storage facility with an expected working capacity of approximately 10.3
        billion cubic feet, located within the area defined on Exhibit C to this
        Agreement, which facility will include:

       

      	·  	
              New
                wells and the conversion of 5 existing wells to injection and withdrawal
                wells 

            

       

      	·  	
              A
                gathering system comprised of primarily of NPS 6, 8 and 16 pipe.
                

            

       

      	·  	
              A
                station comprised of a driver and compression, dehydration, separator,
                heater, cooler, slug catcher, buildings, measurement and regulation.
                

            

       

      	·  	
              Base
                gas

            

       

      

       

      

      
        
          
            

            

            

          

          
          

        

        
          29

          
            

          

        

        
          
          

          
          

        

      

       

      EXHIBIT
        C

       

      NON-COMPETITION
        AREA

       

      

      The
        following areas, from the surface to all depths:

       

      	·  	
              The
                area inside the brown line on Exhibit F to the
                PSA

            

      

      	·  	
              Any
                shaded tracts on Exhibit F to the PSA

            

      

      	·  	
              Any
                other leases conveyed to the Partnership at the Closing under the
                PSA

            

      

       

      

      
        
          
            

            

            

          

          
          

        

        
          30

          
            

          

        

        
          
          

          
          

        

      

       

      EXHIBIT
        D

       

      O&M
        AGREEMENT

       

      

      

      
        	
                 

                Parties

                 

              	
                 

                The
                  Partnership, the General Partner, and the Operator

                 

              
	
                 

                Term

                 

              	
                 

                Through
                  the Term of the Partnership subject to early termination as provided
                  below

                 

              
	
                 

                Summary
                  of Services

                 

              	
                 

                ·  Development
                  of the Initial Facilities

                 

                 

                ·  Direct
                  Operation and Maintenance of Facilities

                 

                 

                ·  Gas
                  Control and Regulatory Services

                 

                 

                ·  Business
                  Development and Marketing

                 

                 

                ·  Accounting
                  Services

                 

                 

                ·  FERC
                  Regulatory Requirements and Filings

                 

              
	
                 

                Development
                  of the Initial Facilities

                 

              	
                 

                The
                  Operator shall manage the development, application and agency/commission
                  approval process for the construction and operation of the Initial
                  Facilities

                 

                 

                The
                  Operator may enter into design, construction, equipment procurement,
                  maintenance, and service agreements in the name of the Partnership
                  within
                  such guidelines as the Partnership may establish from time to time
                  or as
                  the Partnership otherwise may approve.

                 

              
	
                 

                Direct
                  Operation and Maintenance Services

                 

              	
                 

                The
                  Operator shall manage the day-to-day direct operation and maintenance
                  of
                  the Facilities, including managing supplies and consumables; property
                  and
                  lease commitments; communications; and insurance.

                 

                 

                In
                  conducting operations and maintenance, the Operator may change
                  the
                  physical Facilities; provided, however, the Partnership must approve
                  any
                  significant reconfiguration of the Facilities. 

                 

                 

                The
                  Operator may enter into design, construction, equipment procurement,
                  maintenance, and service agreements in the name of the Partnership
                  within
                  such guidelines as the Partnership may establish from time to time
                  or as
                  the Partnership otherwise may approve.

                 

              
	
                 

                Gas
                  Control and Regulatory Services

                 

              	
                 

                The
                  Operator shall manage the gas control operations of the Facilities
                  including Gas Control and Gas Management Services; Legal; and Regulatory.
                  This
                  will also include managing nominations and allocations; planning
                  and
                  scheduling withdrawals and injections as well as managing the FERC
                  posting
                  requirements on Operator’s LINK system.
                  Regulatory strategies and tariff filings will be completed within
                  such
                  guidelines as the Partnership may establish from time to time or
                  as the
                  Partnership otherwise may approve.

                 

              
	
                 

                Business
                  Development and Marketing 

                 

              	
                 

                The
                  Operator shall negotiate and, on behalf of the Partnership, execute
                  and
                  deliver Storage Agreements within such guidelines as the Partnership
                  may
                  establish from time to time or as the Partnership otherwise may
                  approve.
                  The Operator also shall oversee the performance of Storage Agreement
                  and,
                  on behalf of the Partnership, exercise the Partnership’s rights under
                  Storage Agreements.

                 

              
	
                 

                Accounting
                  Services

                 

              	
                 

                The
                  Operator shall prepare the following reports and other materials
                  for the
                  Partnership and, where applicable, the General Partner:

                 

                 

                ·  Monthly
                  balance sheets, income statements, and cash flow statements

                 

                 

                ·  Quarterly
                  balance sheets, income statements, and cash flow statements

                 

                 

                ·  Annual
                  balance sheets, income statements, and cash flow statements (NJR
                  shall coordinate the audit of those statements)

                 

                 

                ·  Federal,
                  state and local income tax returns as appropriate

                 

                 

                ·  Proposed
                  capital and operating budgets for the Partnership, to be approved
                  by the
                  General Partner as provided in the GP LLC Agreement

                 

                 

                The
                  Operator also shall receive all funds
                  in
                  the name of the Partnership,
                  deposit them in bank or other accounts of the Partnership or the
                  General
                  Partner (as applicable), and from those funds pay all amounts the
                  Partnership or the General Partner (as applicable) owes to third
                  parties.

                 

              
	
                 

                Fees
                  for Services; Cost Reimbursement

                 

              	
                 

                The
                  Operator shall be paid the following fees for its services:

                 

                 

                ·  The
                  Partnership shall pay the Operator a fixed monthly fee (for
                  reimbursement of reasonable overhead costs) plus
                  reimbursement for particular services or expenses .
                  Requests for reimbursement shall be supported with appropriate
                  detail.

                 

                 

                ·  On
                  behalf of the General Partner the Operator will prepare an analysis
                  of
                  fair market value of these services in support of a review of the
                  fees
                  every 3 years.
                  This analysis will be subject to review and comment by NJR. Service
                  fees
                  shall be subject to change based on the results of such
                  analysis.

                 

                 

                ·  NJR
                  shall have the right to audit Operator’s accounts and records relating to
                  the Partnership.

                 

                 

                The
                  Operator is not responsible for the fees or expenses of the Partnership’s
                  or the General Partner’s auditors, legal counsel, engineering or design
                  firms or other third parties providing services [except to the
                  extent
                  explicitly noted above].

                 

              
	
                 

                Partnership
                  Decisions

                 

              	
                 

                The
                  General Partner is authorized to make all decisions on behalf of
                  the
                  Partnership under the O&M Agreement.

                 

              
	
                 

                Early
                  Termination

                 

              	
                 

                The
                  Operator on the one hand, and the Partnership and the General Partner
                  on
                  the other, may terminate the Agreement:

                 

                 

                ·  If
                  the other party has failed to make payments of more than $1,000,000
                  in the
                  aggregate and those amounts have been outstanding more than 30
                  days

                 

                 

                ·  If
                  the other party fails to perform any material obligations and that
                  failure
                  remains unremedied more than 30 days after notice from the terminating
                  party

                 

                 

                ·  Sale
                  of the Partnership or its assets, or the dissolution of the
                  Partnership

                 

                 

                ·  Other
                  standard termination events, such as bankruptcy or insolvency of
                  the
                  Operator

                 

              
	
                 

                Nature
                  of Services

                 

              	
                 

                The
                  Operator is performing its services as an independent contractor
                  and
                  (other than as specifically authorized) not as an agent of the
                  Partnership
                  or the Company. The O&M
                  Agreement shall obligate the Operator to perform its services in
                  accordance with budgetary and other guidelines specified by the
                  Partnership. The Operator
                  shall operate the Facilities as a reasonable and prudent
                  operator.
                  Provided the Operator conducts its activities as just
                  described
                  and has otherwise complied with the O&M Agreement,
                  the Partnership shall indemnify the Operator, its Affiliates, and
                  their
                  respective officers, employees, and agents from and against all
                  liabilities they may incur in connection with or arising out of
                  the
                  O&M Agreement. In
                  the absence of intentional misconduct, the
                  Operator’s liability is limited to the amount of fees for its
                  services.

                 

              
	
                 

                Miscellaneous

                 

              	
                 

                The
                  O&M Agreement will include confidentiality, conflicts, dispute
                  resolution and other provisions similar to those in Sections 3.06
                  and 6.04
                  and Articles 10 and 12 of the Limited Partnership Agreement of
                  the
                  Partnership.Exhibit 10.1

    Exhibit
      10.1

     

    EMPLOYMENT
      AGREEMENT

     

    This
      Employment Agreement (the "Agreement") is made and entered into this
      1st
      day of
      May, 2007, by and between First Mid-Illinois Bancshares, Inc. ("the Company"),
      a
      corporation with its principal place of business located in Mattoon, Illinois,
      and Laurel G. Allenbaugh (“Manager”).

     

    In
      consideration of the promises and mutual covenants and agreements contained
      herein, the parties hereto acknowledge and agree as follows:

     

    ARTICLE
      ONE

    TERM
      AND NATURE OF AGREEMENT

     

    1.01  Term
      of Agreement.
      The
      term of this Agreement shall commence as of May 1, 2007 and shall continue
      for
      three (3) years, until April 30, 2010. Thereafter, unless Manager’s employment
      with the Company has been previously terminated, Manager shall continue her
      employment with the Company on an at will basis and, except as provided in
      Articles Five, Six and Seven, this Agreement shall terminate unless extended
      by
      mutual written agreement.

     

    1.02  Employment.
      The
      Company agrees to employ Manager as Senior Vice President and Manager accepts
      such employment by the Company on the terms and conditions herein set forth.
      The
      duties of Manager shall be determined by the Company’s Chief Executive Officer
      and shall adhere to the policies and procedures of the Company and shall follow
      the supervision and direction of the Chief Executive Officer or his designee
      in
      the performance of such duties. During the term of her employment, Manager
      agrees to devote her full working time, attention and energies to the diligent
      and satisfactory performance of her duties hereunder. Manager shall not, while
      she is employed by the Company, engage in any activity which would (a) interfere
      with, or have an adverse effect on, the reputation, goodwill or any business
      relationship of the Company or any of its subsidiaries; (b) result in economic
      harm to the Company or any of its subsidiaries; or (c) result in a breach of
      Section Six of the Agreement.

     

    ARTICLE
      TWO

    COMPENSATION
      AND BENEFITS

     

    While
      Manager is employed with the Company during the term of this Agreement, the
      Company shall provide Manager with the following compensation and
      benefits:

     

    2.01  Base
      Salary.
      The
      Company shall pay Manager an annual base salary of $103,000 per fiscal year,
      payable in accordance with the Company’s customary payroll practices for
      management employees. The Chief Executive Officer or his designee may review
      and
      adjust Manager's base salary from year to year; provided, however, that during
      the term of Manager's employment, the Company shall not decrease Manager's
      base
      salary.

     

    2.02  Incentive
      Compensation Plan.
      Manager
      shall continue to participate in the First Mid-Illinois Bancshares, Inc.
      Incentive Compensation Plan in accordance with the terms and conditions of
      such
      Plan. Pursuant to the Plan, Manager shall have an opportunity to receive
      incentive compensation of up to a maximum of 20% of Manager's annual base
      salary. The incentive compensation payable for a particular fiscal year will
      be
      based upon the attainment of the performance goals in effect under the Plan
      for
      such year and will be paid in accordance with the terms of the Plan and at
      the
      sole discretion of the Board.

     

    2.03  Deferred
      Compensation Plan.
      Manager
      shall be eligible to participate in the First Mid-Illinois Bancshares, Inc.
      Deferred Compensation Plan in accordance with the terms and conditions of such
      Plan.

     

    2.04  Vacation.
      Manager
      shall be entitled to four (4) weeks of paid vacation each year during the term
      of this Agreement.

     

    2.05  Other
      Benefits.
      Manager
      shall be eligible (to the extent she qualifies) to participate in any other
      retirement, health, accident and disability insurance, or similar employee
      benefit plans as may be maintained from time to time by the Company for its
      other management employees subject to and on a consistent basis with the terms,
      conditions and overall administration of such plans.

     

    2.06  Business
      Expenses.
      Manager
      shall be entitled to reimbursement by the Company for all reasonable expenses
      actually and necessarily incurred by her on its behalf in the course of her
      employment hereunder and in accordance with expense reimbursement plans and
      policies of the Company from time to time in effect for management
      employees.

     

    2.07  Withholding.
      All
      salary, incentive compensation and other benefits provided to Manager pursuant
      to this Agreement shall be subject to withholding for federal, state or local
      taxes, amounts withheld under applicable employee benefit plans, policies or
      programs, and any other amounts that may be required to be withheld by law,
      judicial order or otherwise or by agreement with, or consent of,
      Manager.

     

    ARTICLE
      THREE

    DEATH
      OF MANAGER

     

    This
      Agreement shall terminate prior to the end of the term described in Section
      1.01
      upon Manager’s termination of employment with the Company due to her death. Upon
      Manager’s termination due to death, the Company shall pay Manager’s estate the
      amount of Manager’s base salary plus her accrued but unused vacation time earned
      through the date of such death and any incentive compensation earned for the
      preceding fiscal year that is not yet paid as of the date of such
      death.

     

    ARTICLE
      FOUR

    TERMINATION
      OF EMPLOYMENT

     

    Manager’s
      employment with the Company may be terminated by Manager or by the Company
      at
      any time for any reason. Upon Manager’s termination of employment prior to the
      end of the term of the Agreement, the Company shall pay Manager as
      follows:

     

    4.01  Termination
      by the Company for Other than Cause.
      If the
      Company terminates Manager’s employment for any reason other than Cause, the
      Company shall pay Manager the following:

     

    (a)  An
      amount
      equal to Manager’s monthly base salary in effect at the time of such termination
      of employment for a period of twelve (12) months thereafter. Such amount shall
      be paid to Manager periodically in accordance with the Company’s customary
      payroll practices for management employees.

    (b)  The
      base
      salary and accrued but unused paid vacation time earned through the date of
      termination and any incentive compensation earned for the preceding fiscal
      year
      that is not yet paid.

    (c)  Continued
      coverage for Manager and/or Manager’s family under the Company’s health plan
      pursuant to Title I, Part 6 of the Employee Retirement Income Security Act
      of
      1974 (“COBRA”) and for such purpose the date of Manager’s termination of
      employment shall be considered the date of the “qualifying event” as such term
      is defined by COBRA. During the period beginning on the date of such termination
      and ending at the end of the period described in Section 4.01(a), Manager shall
      be charged for such coverage in the amount that he would have paid for such
      coverage had he remained employed by the Company, and for the duration of the
      COBRA period, Manager shall be charged for such coverage in accordance with
      the
      provisions of COBRA.

    For
      purposes of this Agreement, “Cause” shall mean Manager’s (i) conviction in a
      court of law of (or entering a plea of guilty or no contest to) any crime or
      offense involving fraud, dishonesty or breach of trust or involving a felony;
      (ii) performance of any act which, if known to the customers, clients,
      stockholders or regulators of the Company, would materially and adversely impact
      the business of the Company; (iii) act or omission that causes a regulatory
      body
      with jurisdiction over the Company to demand, request, or recommend that Manager
      be suspended or removed from any position in which Manager serves with the
      Company; (iv) substantial nonperformance of any of his obligations under this
      Agreement; (v) misappropriation of or intentional material damage to the
      property or business of the Company or any affiliate; or (vi) breach of Article
      Five or Six of this Agreement.

     

    4.02  Termination
      Following a Change in Control.
      Notwithstanding Section 4.01, if, following a Change in Control, and prior
      to
      the end of the term of this Agreement, Manager’s employment is terminated by the
      Company (or any successor thereto) for any reason other than Cause, or if
      Manager terminates his employment because of a decrease in his then current
      base
      salary or a substantial diminution in his position and responsibilities, the
      Company (or any successor thereto) shall pay Manager the following:

     

    (a)  An
      amount
      equal to Manager’s monthly base salary in effect at the time of such termination
      for a period of twelve (12) months thereafter. Such amount shall be paid in
      accordance with the Company’s customary payroll practices for
      employees.

    (b)  An
      amount
      equal to the incentive compensation earned by or paid to Manager for the fiscal
      year immediately preceding the year in which Manager’s termination of employment
      occurs. Such amount shall be paid to Manager in a lump sum as soon as
      practicable after the date of his termination.

    (c)  The
      base
      salary and accrued but unused paid vacation time earned through the date of
      termination and any incentive compensation earned for the preceding fiscal
      year
      that is not yet paid.

    (d)  Continued
      coverage for Manager and/or Manager’s family under the Company’s health plan
      pursuant to Title I, Part 6 of the Employee Retirement Income Security Act
      of
      1974 (“COBRA”) and for such purpose the date of Manager’s termination of
      employment shall be considered the date of the “qualifying event” as such term
      is defined by COBRA. During the period beginning on the date of such termination
      and ending at the end of the period described in Section 4.02(a), Manager shall
      be charged for such coverage in the amount that he would have paid for such
      coverage had he remained employed by the Company, and for the duration of the
      COBRA period, Manager shall be charged for such coverage in accordance with
      the
      provisions of COBRA.

     

    For
      purposes of this Agreement, “Change in Control” shall have the meaning as set
      forth in the First Mid-Illinois Bancshares, Inc. 1997 Stock Incentive Plan
      (or
      successor stock incentive plan maintained by the Company).

     

    4.03  Other
      Termination of Employment.
      If,
      prior to the end of the term of this Agreement, the Company terminates Manager’s
      employment for Cause, or if Manager terminates his employment for any reason
      other than as described in Section 4.02 above, the Company shall pay Manager
      the
      base salary and accrued but unused paid vacation time earned through the date
      of
      such termination and any incentive compensation earned for the preceding fiscal
      year that is not yet paid.

     

    4.04  Key
      Employee Status.
      If at
      the time of such termination of employment Manager is a “Key Employee” as
      defined in Section 416(i) of the Internal Revenue Code (without reference to
      paragraph 5 thereof), and the amounts payable to Manager pursuant to Article
      Four are subject to Section 409A of the Internal Revenue Code, payment of such
      amounts shall not commence until six months following Manager’s termination of
      employment, with the first payment to include the payments that otherwise would
      have been made during such six-month period.

     

    ARTICLE
      FIVE

    CONFIDENTIAL
      INFORMATION

     

    5.01  Non-Disclosure
      of Confidential Information.
      During
      his employment with the Company, and after his termination of such employment
      with the Company, Manager shall not, in any form or manner, directly or
      indirectly, use, divulge, disclose or communicate to any person, entity, firm,
      corporation or any other third party, any Confidential Information, except
      as
      required in the performance of Manager’s duties hereunder, as required by law or
      as necessary in conjunction with legal proceedings.

     

    5.02  Definition
      of Confidential Information.
      For the
      purposes of this Agreement, the term "Confidential Information" shall mean
      any
      and all information either developed by Manager during his employment with
      the
      Company and used by the Company or its affiliates or developed by or for the
      Company or its affiliates of which Manager gained knowledge by reason of his
      employment with the Company that is not readily available in or known to the
      general public or the industry in which the Company or any affiliate is or
      becomes engaged. Such Confidential Information shall include, but shall not
      be
      limited to, any technical or non-technical data, formulae, compilations,
      programs, devices, methods, techniques, procedures, manuals, financial data,
      business plans, lists of actual or potential customers, lists of employees
      and
      any information regarding the Company's or any affiliate’s products, marketing
      or database. The Company and Manager acknowledge and agree that such
      Confidential Information is extremely valuable to the Company and may constitute
      trade secret information under applicable law. In the event that any part of
      the
      Confidential Information becomes generally known to the public through
      legitimate origins (other than by the breach of this Agreement by Manager or
      by
      other misappropriation of the Confidential Information), that part of the
      Confidential Information shall no longer be deemed Confidential Information
      for
      the purposes of this Agreement, but Manager shall continue to be bound by the
      terms of this Agreement as to all other Confidential Information.

     

    5.03  Delivery
      upon Termination.
      Upon
      termination of Manager's employment with the Company for any reason, Manager
      shall promptly deliver to the Company all correspondence, files, manuals,
      letters, notes, notebooks, reports, programs, plans, proposals, financial
      documents, and any other documents or data concerning the Company's or any
      affiliate’s customers, database, business plan, marketing strategies, processes
      or other materials which contain Confidential Information, together with all
      other property of the Company or any affiliate in Manager's possession, custody
      or control.

     

    ARTICLE
      SIX

    NON-COMPETE
      AND NON-SOLICITATION COVENANTS

     

    6.01  Covenant
      Not to Compete.
      During
      the term of this Agreement and for a period of one (1) year following the later
      of the termination of Manager's employment for any reason or the last day of
      the
      term of the Agreement, Manager shall not, on behalf of himself or on behalf
      of
      another person, corporation, partnership, trust or other entity, within the
      counties of Coles, Moultrie, Douglas, Cumberland, Effingham, Champaign,
      Christian, Madison, Macon, Bond or Piatt, Illinois, or any other county in
      which
      the Company or any affiliate conducts business:

     

    (a)  Directly
      or indirectly own, manage, operate, control, participate in the ownership,
      management, operation or control of, be connected with or have any financial
      interest in, or serve as an officer, employee, advisor, consultant, agent or
      otherwise to any person, firm, partnership, corporation, trust or other entity
      which owns or operates a business similar to that of the Company or its
      affiliates.

    (b)  Solicit
      for sale, represent, and/or sell Competing Products to any person or entity
      who
      or which was the Company’s customer or client during the last year of Manager's
      employment. "Competing Products," for purposes of this Agreement, means products
      or services which are similar to, compete with, or can be used for the same
      purposes as products or services sold or offered for sale by the Company or
      any
      affiliate or which were in development by the Company or any affiliate within
      the last year of Manager's employment.

     

    6.02  Covenant
      Not to Solicit.
      For a
      period of one year following the later of the termination of Manager’s
      employment for any reason or the last day of the term of this Agreement, Manager
      shall not:

     

    (a)  Attempt
      in any manner to solicit from any client or customer business of the type
      performed by the Company or any affiliate or persuade any client or customer
      of
      the Company or any affiliate to cease to do such business or to reduce the
      amount of such business which any such client or customer has customarily done
      or contemplates doing with the Company or any affiliate, whether or not the
      relationship between the Company or affiliate and such client or customer was
      originally established in whole or in part through Manager’s efforts.

    (b)  Render
      any services of the type rendered by the Company or any affiliate for any client
      or customer of the Company. 

    (c)  Solicit
      or encourage, or assist any other person to solicit or encourage, any employees,
      agents or representatives of the Company or an affiliate to terminate or alter
      their relationship with the Company or any affiliate.

    (d)  Do
      or
      cause to be done, directly or indirectly, any acts which may impair the
      relationship between the Company or any affiliate with their respective clients,
      customers or employees.

     

    ARTICLE
      SEVEN

    REMEDIES

     

    Manager
      acknowledges that compliance with the provisions of Articles Five and Six herein
      is necessary to protect the business, goodwill and proprietary information
      of
      the Company and that a breach of these covenants will irreparably and
      continually damage the Company for which money damages may be inadequate.
      Consequently, Manager agrees that, in the event that he breaches or threatens
      to
      breach any of these provisions, the Company shall be entitled to both (a) a
      temporary, preliminary or permanent injunction in order to prevent the
      continuation of such harm; and (b) money damages insofar as they can be
      determined. In addition, the Company will cease payment of all compensation
      and
      benefits under Articles Three and Four hereof. In the event that any of the
      provisions, covenants, warranties or agreements in this Agreement are held
      to be
      in any respect an unreasonable restriction upon Manager or are otherwise
      invalid, for whatsoever cause, then the court so holding shall reduce, and
      is so
      authorized to reduce, the territory to which it pertains and/or the period
      of
      time in which it operates, or the scope of activity to which it pertains or
      effect any other change to the extent necessary to render any of the
      restrictions of this Agreement enforceable.

     

    ARTICLE
      EIGHT

    MISCELLANEOUS

     

    8.01  Successors
      and Assignability.

     

    (a)  No
      rights
      or obligations of the Company under this Agreement may be assigned or
      transferred except that the Company will require any successor (whether direct
      or indirect, by purchase, merger, consolidation or otherwise) to all or
      substantially all of the business and/or assets of the Company to expressly
      assume and agree to perform this Agreement in the same manner and to the same
      extent that the Company would be required to perform it if no such succession
      had taken place.

    (b)  No
      rights
      or obligations of Manager under this Agreement may be assigned or transferred
      by
      Manager other than his rights to payments or benefits hereunder which may be
      transferred only by will or the laws of descent and distribution. 

     

    8.02  Entire
      Agreement.
      This
      Agreement contains the entire agreement between the parties with respect to
      the
      subject matter hereof and may not be modified except in writing by the parties
      hereto. Furthermore, the parties hereto specifically agree that all prior
      agreements, whether written or oral, relating to Manager's employment by the
      Company shall be of no further force or effect from and after the date
      hereof.

     

    8.03  Severability.
      If any
      phrase, clause or provision of this Agreement is deemed invalid or
      unenforceable, such phrase, clause or provision shall be deemed severed from
      this Agreement, but will not affect any other provisions of this Agreement,
      which shall otherwise remain in full force and effect. If any restriction or
      limitation in this Agreement is deemed to be unreasonable, onerous or unduly
      restrictive, it shall not be stricken in its entirety and held totally void
      and
      unenforceable, but shall be deemed rewritten and shall remain effective to
      the
      maximum extent permissible within reasonable bounds.

     

    8.04  Controlling
      Law and Jurisdiction.
      This
      Agreement shall be governed by and interpreted and construed according to the
      laws of the State of Illinois. The parties hereby consent to the jurisdiction
      of
      the state and federal courts in the State of Illinois in the event that any
      disputes arise under this Agreement.

     

    8.05  Notices.
      All
      notices, requests, demands and other communications under this Agreement shall
      be in writing and shall be deemed to have been duly given (a) on the date of
      service if served personally on the party to whom notice is to be given; (b)
      on
      the day after delivery to an overnight courier service; (c) on the day of
      transmission if sent via facsimile to the facsimile number given below; or
      (d)
      on the third day after mailing, if mailed to the party to whom notice is to
      be
      given, by first class mail, registered or certified, postage prepaid and
      properly addressed, to the party as follows:

    

    If
      to
      Manager:  Laurel
      G.
      Allenbaugh

    3015
      Western Ave.

    Mattoon,
      IL 61938

    

    

    If
      to the
      Company: First
      Mid-Illinois Bancshares, Inc.

    1515
      Charleston Avenue

    Mattoon,
      Illinois 61938

    

    Facsimile:
      217-258-0485

    

    Attention:
      Chairman and Chief Executive Officer

    

    Any
      party
      may change its address for the purpose of this Section by giving the other
      party
      written notice of its new address in the manner set forth above.

    IN
      WITNESS WHEREOF,
      the
      parties hereto have executed this Agreement as of the date first written
      above.

    

    
      	 	 	 	 	
              FIRST
                MID-ILLINOIS BANCSHARES,
                INC.

            

    

    

    

    
      	 	 	 	 	
              By:
                /s/ William S. Rowland

            

    

    
      	 	 	 	 	
              Title:
                Chairman and Chief Executive
                Officer

            

    

    

    

    
      	 	 	 	 	
              MANAGER:

            

    

    

    

    
      	 	 	 	 	/s/
              Laurel G.
              Allenbaugh

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