Document:

exv10w3

Exhibit 10.3

AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

OF

SOUTHERN LNG COMPANY, L.L.C.

A DELAWARE LIMITED LIABILITY COMPANY

March 30, 2010

PREAMBLE

     THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT of Southern LNG Company, L.L.C.
(the “Company”) is made on the 30th day of March, 2010 (the “Effective Date”), by El Paso
Corporation (“El Paso”), and El Paso Pipeline Partners Operating Company, L.L.C. (“Opco”), as
members of this Company.

     WHEREAS, the Company was formed as a limited liability company under the Act (as hereinafter
defined) on February 4, 2010, pursuant to the filing of the Certificate of Formation of the Company
on February 4, 2010 and the execution of that certain Limited Liability Company Agreement dated as
of February 4, 2010 (the “Original Agreement”) by El Paso;

     WHEREAS, El Paso and Opco desire to amend and restate the Original Agreement in its entirety
for the purposes and upon the terms and conditions hereinafter set forth.

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

ARTICLE I.

DEFINITIONS AND TERMS

     SECTION 1.01 Definitions. Unless the context otherwise requires, the following terms
shall have the following meanings for the purposes of this Agreement:

          “AAA” shall have the meaning assigned to such term in Section 12.02(c).

          “Acquisition Proposal” shall have the meaning assigned to such term in Section
8.01(a).

          “Act” means the Delaware Limited Liability Company Act, 6 Del C. §§ 18-101, et seq., as
amended from time to time (or any corresponding provisions of succeeding law).

          “Additional Contributing Members” shall have the meaning assigned to such term in Section
3.06(a).

          “Additional Contribution” shall have the meaning assigned to such term in Section
3.06(a).

 

 

          “Adjusted Capital Account” means, with respect to any Member, the balance, if any, in such
Member’s Capital Account as of the end of the relevant fiscal year, after giving effect to the
following adjustments:

	 	i)	 	Credit to such Capital Account any amounts which such
Member is obligated to restore pursuant to any provision of this Agreement
or pursuant to Treasury Regulation §1.704-1(b)(2)(ii)(c) or is deemed to be
obligated to restore pursuant to the penultimate sentences of Treasury
Regulations §1.704-2(g)(1) and §1.704-2(i)(5);
	 
	 	ii)	 	Debit to such Capital Account the items described in
Treasury Regulation §§1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and
1.704-1(b)(2)(ii)(d)(6).

     The foregoing definition of Adjusted Capital Account is intended to comply with the provisions
of Treasury Regulations §1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

          “Affiliate” means, with respect to any Person, any other Person that directly or indirectly
controls, is controlled by or is under common control with, the Person in question. As used in
this definition of “Affiliate,” the term “control” means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a Person, whether
through ownership of voting securities, by contract or otherwise.

          “Affiliate’s Outside Activities” shall have the meaning assigned to such term in Section
7.03(d).

          “Agreement” means this Amended and Restated Limited Liability Company Agreement of the
Company, as the same may be amended from time to time.

          “Allocation Regulations” shall mean Treasury Regulation §§1.704-1(b), 1.704-2 and 1.704-3
(including any temporary regulations) as such regulations may be amended and in effect from time to
time and any corresponding provision of succeeding regulations.

          “Alternate Representative” shall have the meaning assigned to such term in Section
7.02(a)(ii).

          “Arbitration Notice” shall have the meaning assigned to such term in Section 12.02(c).

          “Arbitrator” shall have the meaning assigned to such term in Section 12.03(a).

          “Assignee” means any Person that acquires a Membership Interest or any portion of a Membership
Interest through a Disposition; provided, however, that an Assignee shall have no right to be
admitted to the Company as a Member except with the prior written approval of the Management
Committee. The Assignee of a liquidated or wound up Member is the stockholder, partner, member or
other equity owner or owners of the liquidated or wound up

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Member to which that Member’s Membership Interest is assigned by the Person conducting the
liquidation or winding up of that Member. The Assignee of a Bankrupt Member is (a) the Person or
Persons (if any) to whom such Bankrupt Member’s Membership 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
Membership Interest is assigned.

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

          “Available Cash” means, with respect to any Quarter ending prior to the Liquidation Date, the
following, without duplication:

	 	b)	 	the sum of (i) all cash and cash equivalents of the Company and its
Subsidiaries: (or the Company’s proportionate share of cash and cash equivalents in the
case of Subsidiaries that are not wholly owned) on hand at the end of such Quarter, and
(ii) if the Management Committee so determines, all or any portion of any additional
cash and cash equivalents of the Company and its Subsidiaries (or the Company’s
proportionate share of cash and cash equivalents in the case of Subsidiaries that are
not wholly owned) on hand on the date of determination of Available Cash with respect
to such Quarter resulting from Working Capital Borrowings made subsequent to the end of
such Quarter, less
	 
	 	c)	 	the amount of any cash reserves established by the Management Committee (or the
Company’s proportionate share of cash reserves in the case of Subsidiaries that are not
wholly owned) to (i) provide for the proper conduct of the business of the Company and
its Subsidiaries (including reserves for any of the following of the Company and its
Subsidiaries: (A) future maintenance capital expenditures, (B) anticipated future
credit needs and (C) possible refunds of collected rates subject to refund or
reasonably likely to be refunded as a result of a settlement or hearing relating to
FERC rate proceedings) subsequent to such Quarter or (ii) comply with applicable Law or
any loan agreement, security agreement, mortgage, debt instrument or other agreement or
obligation to which the Company or any Subsidiary is a party or by which it is bound or
its assets are subject;

provided, however, that disbursements made by the Company or any Subsidiary or cash reserves
established, increased or reduced by the Company or any Subsidiary after the end of such Quarter
but on or before the date of the determination of Available Cash with respect to such Quarter shall
be deemed to have been made, established, increased or reduced, for purposes of determining
Available Cash, within such Quarter if the Management Committee so determines.

     Notwithstanding the foregoing, “Available Cash” with respect to the Quarter in which the
Liquidation Date occurs and any subsequent Quarter shall equal zero.

          “Bankruptcy” or “Bankrupt” means the filing of any insolvency or reorganization case or
proceeding, instituting proceedings to have the Company or any Member, as applicable, adjudicated
bankrupt or insolvent, instituting proceedings under any applicable

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insolvency law, seeking any relief under any law relating to relief from debts or the protection of
debtors, consenting to the filing or institution of bankruptcy or insolvency proceedings against
the Company or any Member, as applicable, filing a petition seeking or consenting to
reorganization, liquidation or relief with respect to the Company or any Member, as applicable,
under any applicable federal or state law relating to bankruptcy, reorganization or insolvency,
seeking or consenting to the appointment of a receiver, liquidator, assignee, trustee,
sequestrator, custodian, or any similar official for the Company or any Member, as applicable, or a
substantial part of its property, making any assignment for the benefit of creditors, admitting in
writing the inability of the Company or any Member, as applicable, to pay its debts as they become
due, or taking action in furtherance of any of the foregoing. The foregoing definition of
“Bankruptcy” is intended to replace and shall supersede and replace the definition of “Bankruptcy”
set forth in Sections 18-101(1) and 18-304 of the Act.

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

          “Business Day” means Monday through Friday of each week, except that a legal holiday
recognized as such by the government of the United States or the State of Alabama, New York or
Texas shall not be regarded as a Business Day.

          “Capital Account” means the capital account maintained by the Company for each Member in
accordance with Section 3.05.

          “Capital Budget” means the annual capital budget for the Company that is approved (or deemed
approved) pursuant to Section 7.02(h)(ii)(C).

          “Capital Call” shall have the meaning assigned to such term in Section 3.01(a).

          “Capital Contribution” means any cash, cash equivalents or property that a Member contributes
to the Company. Any reference in this Agreement to the Capital Contribution of a Member shall
include a Capital Contribution of its predecessors in interest.

          “Carrying Value” means (a) with respect to property contributed to the Company, the fair
market value of such property at the time of contribution reduced (but not below zero) by all
depreciation, depletion (computed as a separate item of deduction), amortization and cost recovery
deductions charged to the Members’ Capital Accounts, (b) with respect to any property whose value
is adjusted pursuant to the Allocation Regulations, the adjusted value of such property reduced
(but not below zero) by all depreciation and cost recovery deductions charged to the Member’s
Capital Accounts and (c) with respect to any other Company property, the adjusted basis of such
property for federal income tax purposes, all as of the time of determination.

          “Certificate” means the Certificate of Formation filed with the Secretary of State of the
State of Delaware on February 4, 2010, to form the Company pursuant to the Act, as originally
executed by Joyce Allen-Dennis (as an authorized person within the meaning of the

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Act) and as amended, modified, supplemented or restated from time to time, as the context requires.

          “Claim” means any and all losses, claims, damages, liabilities (joint or several), expenses
(including reasonable legal fees and expenses), judgments, penalties, interest, settlements or
other amounts arising from any and all claims, demands, actions, suits or proceedings (whether
civil, criminal, administrative or investigative), deficiencies, levies, duties, imposts,
remediation and cleanup costs and natural resources damages.

          “Code” means the Internal Revenue Code of 1986, as amended and in effect from time to time.
Any reference herein to a specific section or sections of the Code shall be deemed to include a
reference to any corresponding provision of any successor law.

          “Contributing Member” shall have the meaning assigned to such term in Section 3.06(a).

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

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

          “Default” means with respect to any Member, the failure of a Member to comply in any material
respect with any of its other agreements, covenants or obligations under this Agreement (provided
that the failure of a Member to make a Capital Contribution when required in response to a Capital
Call shall not constitute a Default), or the failure of any representation or warranty made by a
Member 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 Member on or before the 30th Day
after its receiving written notice of such breach from any other Member (or, if such breach is not
capable of being cured within such 30-Day period, if such Member fails to promptly commence
substantial efforts to cure such breach or to prosecute such curative efforts to completion with
continuity and diligence). The Management Committee may, but shall have no obligation to, extend
the foregoing 30-Day period.

          “Default Rate” means 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)
1% per annum, and (b) the maximum rate permitted by Law.

          “Dispose,” “Disposing” or “Disposition” means, with respect to any asset, a sale, assignment,
transfer, conveyance, gift, exchange or other disposition of such asset, whether such disposition
be voluntary, involuntary or by operation of Law, including the following: (a) in the case of an
asset owned by a natural person, a transfer of such asset upon the death of its owner, whether by
will, intestate succession or otherwise; (b) in the case of an asset owned by an entity, (i) a
merger or consolidation of such entity (other than where such entity is the survivor thereof), (ii)
a conversion of such entity into another type of entity, or (iii) a distribution of such asset,

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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; provided, however, that such terms shall not include (i) the
creation of an Encumbrance or (ii) the sale or other transfer (directly or indirectly and whether
by merger, consolidation, conversion, sale of assets or otherwise) of all or any portion of the
capital stock, member interests or other equity interests in any Member.

          “Disposing Member” shall have the meaning assigned to such term in Section 8.01(a).

          “Dispute” shall have the meaning assigned to such term in Section 12.01.

          “Dispute Notice” shall have the meaning assigned to such term in Section 12.02.

          “Disputing Member” shall have the meaning assigned to such term in Section 12.01.

          “Dissolution Event” shall have the meaning assigned to such term in Section 9.01.

          “Effective Date” means the date of this Agreement as specified in the preamble.

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

          “Exercise Period” shall have the meaning assigned to such term in Section 8.01(a).

          “FERC” means the Federal Energy Regulatory Commission or any Governmental Authority succeeding
to powers that, as of the date of this Agreement, are exercised by such Commission over the rates,
terms and conditions of the Company.

          “Governmental Authority” means 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.

          “Interest Certificate” shall have the meaning assigned to such term in Section 8.02.

          “Law” means any applicable constitutional provision, statute, act, code (including the Code),
law, regulation, rule, ordinance, order, decree, ruling, proclamation, notice, resolution,

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judgment, decision, declaration, policy statement or interpretative or advisory opinion or letter
of a Governmental Authority having valid jurisdiction.

          “Liquidation Date” means in the case of any event giving rise to the dissolution of the
Company, the date on which such event occurs.

          “Liquidator” means such Person(s) selected by the Management Committee to perform the
functions described in Section 9.02 as liquidating trustee of the Company and to wind up
the business and affairs of the Company within the meaning of the Act.

          “Loan Notice” shall have the meaning assigned to such term in Section 3.02(a).

          “Majority Interest” shall have the meaning assigned to such term in Section 7.02(e).

          “Management Committee” means the committee comprised of the individuals designated by the
Members in accordance with Section 7.02 and all other individuals designated by the Members
to serve as a representative on such committee in accordance with Article VII; and
references in this Agreement to the Management Committee shall refer to such individuals
collectively in their capacity as representatives on such committee.

          “Member” means El Paso, Opco, and any other member or members admitted to the Company in
accordance with this Agreement or any amendment or restatement hereof.

          “Membership Interest” means the ownership interest of a Member in the Company at any time,
including the right of such Member to any and all benefits to which such Member may be entitled as
provided in this Agreement, together with the obligations of such Member to comply with all the
terms and provisions of this Agreement.

          “NGA” means the Natural Gas Act of 1938, 15 U.S.C.A. §717 et. seq. (1997), as amended from
time to time. A reference herein to a specific section or sections of the NGA shall be deemed to
include a reference to any corresponding provision of any successor law.

          “Non-Contributing Member” shall have the meaning assigned to such term in Section
3.06(a).

          “Officer” means any Person designated as an officer of the Company as provided in Section
7.02, but from and after the time any Person ceases to be an officer of the Company the term
“Officer” does not include such Person who has ceased to be an officer of the Company.

          “Operating Budget” means the annual operating budget established by the Management Committee
from time to time as the budget for the Company’s operations for a calendar year, as same may be
modified or amended by the Management Committee.

          “Percentage Interest” means, subject in each case to adjustments in accordance with this
Agreement or in connection with any Disposition of a Membership Interest, with respect to a Member,
the percentage set forth opposite such Member’s name in Annex I

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representing such Member’s Units divided by the total number of Units issued to all Members,
provided, however, that the total of all Percentage Interests shall always equal 100%.

          “Permitted Transferee” means any Person that is an Affiliate of a Member.

          “Person” has the meaning set forth in the Act.

          “Priority Interest” means the special distribution rights under Section 3.06(b)
received by each Additional Contributing Member, which rights include the right to receive the
return described in Section 3.06(b)(i) and which form part of the Additional Contributing
Member’s Interest.

          “Priority Interest Sharing Ratio” shall have the meaning assigned to such term in Section
3.06(b)(i).

          “Quarter” means unless the context requires otherwise, a fiscal quarter of the Company.

          “Regulatory Allocations” shall have the meaning assigned to such term in Section
5.02(c).

          “Representative” shall have the meaning assigned to such term in Section 7.02(a)(ii).

          “ROFR Acceptance” shall have the meaning assigned to such term in Section 8.01(a).

          “ROFR Buyer” shall have the meaning assigned to such term in Section 8.01(a).

          “Sole Discretion” means the following: (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) to the fullest extent permitted by law, without taking into account the interests of, and
without incurring liability to, the Company, any Member, any member of the Management Committee or
any officer or employee of the Company.

          “Subject Interest” shall have the meaning assigned to such term in Section 8.01(a).

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

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than a corporation or a partnership) in which such Person, one or more Subsidiaries of such
Person, or a combination thereof, directly or indirectly, at the date of determination, has (i) at
least a majority ownership interest or (ii) the power to elect or direct the election of a majority
of the directors or other governing body of such Person.

          “Tax Matters Member” shall have the meaning assigned to such term in Section 10.03(a).

          “Transfer Notice” shall have the meaning assigned to such term in Section 8.01(a).

          “Treasury Regulations” means 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.

          “Units” shall have the meaning assigned to such term in Section 4.02(a).

          “Uniform Commercial Code” means the Uniform Commercial Code as in effect from time to time in
the state of Delaware.

          “Withdraw,” “Withdrawing” or “Withdrawal” means the disassociation of a Member from the
Company as a member as provided in Section 11.02 and Section 11.03. Such terms
shall not include any Dispositions of a Membership Interest (which are governed by Sections
8.01(a) and (b)), even though the Member making a Disposition may cease to be a Member
as a result of the Disposition.

          “Withdrawn Member” shall have the meaning assigned to such term in Section 11.03.

          “Working Capital Borrowings” means borrowings used for working capital purposes or to pay
distributions to Members that are made pursuant to a credit facility, commercial paper facility or
other similar financing arrangements.

     SECTION 1.02 Terms Generally. Unless the context requires otherwise: (a) any pronoun
used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the
singular form of nouns, pronouns and verbs shall include the plural, and vice-versa, (b) the gender
(or lack of gender) of all words used in this Agreement includes the masculine, feminine and
neuter; (c) references to Articles and Sections refer to Articles and Sections of this Agreement;
(d) references to Exhibits or Annexes refer to the Exhibits or Annexes attached to this Agreement,
each of which is made a part hereof for all purposes; (e) 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; (f) the term “include”, “includes”, “including” or
words of like report shall be deemed to be followed by the words “without limitation”; (g) the
terms “hereof”, “herein” or “hereunder” refer to this Agreement as a whole and not to any
particular provision of this Agreement; and (h)

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references to money refer to legal currency of the United States of America. The table of
contents and headings contained in this Agreement are for reference purposes only, and shall not
affect in any way the meaning or interpretation of this Agreement.

ARTICLE II.

FORMATION

     SECTION 2.01 Name. The name of the Company shall be as set forth in the Preamble
hereof. All business of the Company shall be conducted under such name and title to all property,
real, personal, or mixed, owned by or leased to the Company shall be held in such name.
Notwithstanding the preceding sentence, the Management Committee may change the name of the Company
or adopt such trade or fictitious names as it may determine.

     SECTION 2.02 Term. The term of the Company commenced on the date of filing of the
Certificate of Formation of the Company in the Office of the Secretary of State of the State of
Delaware and the execution of the Original Agreement. The term of the Company shall continue until
terminated as provided in Article IX hereof.

     SECTION 2.03 Purposes of the Company. The Company has been organized to engage in any
lawful act or activity for which a Delaware limited liability company may be formed.

     SECTION 2.04 Powers. In furtherance of its purposes, but subject to all of the
provisions of this Agreement, the Company shall have and may exercise all the powers now or
hereafter conferred by Delaware law on limited liability companies formed under the Act. The
Company shall have the power to do any and all acts necessary, appropriate, proper, advisable,
incidental or convenient to or for the protection and benefit of the Company, and shall have,
without limitation, any and all of the powers that may be exercised on behalf of the Company by the
Management Committee.

     SECTION
2.05 Principal Place of Business. The principal place of business of the
Company shall be located at 1001 Louisiana, Houston, Texas 77002. The Management Committee may
establish other offices at other locations.

     SECTION 2.06 Agent for Service of Process. The Corporation Trust Company shall be the
registered agent of the Company upon whom process against it may be served. The address of such
agent within the State of Delaware is: Corporation Trust Center, 1209 Orange Street, City of
Wilmington, County of New Castle, Delaware 19801.

     SECTION 2.07 Business Opportunities; No Implied Duty or Obligation. Notwithstanding any
duty otherwise existing at law or in equity, each Member, its Representative(s) and Affiliates may
engage, directly or indirectly, without the consent of the other Member(s), the Company, the
Management Committee or any member of the Management Committee in other business opportunities,
transactions or other arrangements of any nature or description, independently or with others,
including any business of a nature that may compete or be competitive with or the same as or
similar to the business of the Company, regardless of the

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geographic location of such business, and without any duty or obligation to account to the other
Member, the Company or the Management Committee in connection therewith.

ARTICLE III.

CAPITAL CONTRIBUTIONS

     SECTION 3.01 Capital Contributions.

	 	a)	 	Except as otherwise provided in the following provisions of this Section
3.01 or Section 3.02, the Management Committee may issue or cause to be
issued a notice to each Member for the making of Capital Contributions at such times
and in such amounts as the Management Committee shall determine (a “Capital Call”),
such determination to be made in accordance with Article VII. All amounts
timely received by the Company under this Section 3.01 shall be credited to the
respective Member’s Capital Account as of the specified date.
	 
	 	b)	 	Each Capital Call shall contain the following information:

	 	i)	 	The total amount of Capital Contributions required from
all Members;
	 
	 	ii)	 	The amount of Capital Contribution required from the
Member to which the notice is addressed, which amount must equal that
Member’s Percentage Interest of the total Capital Call;
	 
	 	iii)	 	The purpose for which the funds are to be applied in such
reasonable detail as the Management Committee shall direct; and
	 
	 	iv)	 	The date on which payments of the Capital Contribution
shall be made (which date shall not be earlier than the 30th Day following
the date the Capital Call is given, unless an earlier date is approved by
the Management Committee) and the method of payment, provided that the date
and the method shall be the same for each of the Members.

	 	c)	 	Each Member agrees that it shall make payments of its respective Capital
Contributions in accordance with Capital Calls issued as provided in this Section
3.01.

     SECTION 3.02 Loans.

	 	a)	 	Instead of making a Capital Call under Section 3.01, the Management
Committee by notice in writing (the “Loan Notice”) submitted to the Members may request
the Members to lend funds to the Company at such times, in such amounts and under such
terms and conditions as the Management Committee shall determine; provided, however,
that the Management Committee shall not issue any such Loan Notice to the extent that
incurring any such loan would breach or violate any financing or other agreement of the
Company.

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	 	b)	 	Each Loan Notice issued under Section 3.02(a) shall contain the
following information:

	 	i)	 	The total amount of loans requested from the Members;
	 
	 	ii)	 	The amount of the loan requested from the Member to which
the notice is addressed, which amount must equal (A) that Member’s
Percentage Interest of the total amount of loans requested in the Loan
Notice;
	 
	 	iii)	 	The purpose for which the funds are to be applied in such
reasonable detail as the Management Committee shall direct;
	 
	 	iv)	 	The date on which the loans to the Company are to be made
(which date shall not be earlier than the 30th Day following the date the
Loan Notice is given, unless an earlier date is approved by the Management
Committee) and the method of payment, provided that the date and the method
shall be the same for each of the Members; 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 Members.

	 	c)	 	No Member shall be obligated to make a loan or advance to the Company following
its receipt of a Loan Notice unless all Members agree to do so.

     SECTION 3.03 No Other Contribution Obligations. No Member shall be required or
permitted to make any Capital Contributions or loans to the Company except as provided in this
Article III.

     SECTION 3.04 Return of Contributions. Except as expressly provided in this Agreement,
a Member 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 Company or of any Member. None of the Members are
required to contribute or to lend any cash or property to the Company to enable the Company to
return any Member’s Capital Contributions.

     SECTION 3.05 Capital Accounts.

	 	a)	 	The Company shall maintain for each Member (or a beneficial owner of Membership
Interests held by a nominee in any case in which the nominee has furnished the identity
of such owner to the Company in accordance with Section 6031(c) of the Code or any
other method acceptable to the Management Committee) owning a Membership Interest a
separate Capital Account with respect to such Membership Interest in accordance with
the rules of Treasury Regulation §1.704-1(b)(2)(iv). The aggregate amount in the
Capital Accounts existing as of the Effective Date hereof shall be based on the assets
and liabilities owned by the Company as of the Effective Date hereof and allocated
between the Members in accordance with their Percentage Interests. Each Member’s Capital Account shall be increased by (i) the amount of money
contributed by that Member to the Company, (ii) the fair market value of 

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	 	 	 	property
contributed by that Member to the Company (net of liabilities secured by such
contributed property that the Company is considered to assume or take subject to under
Section 752 of the Code), and (iii) allocations to that Member of Company 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 Member by the Company, (v) the fair market value of
property distributed to that Member by the Company (net of liabilities secured by such
distributed property that such Member is considered to assume or take subject to under
Section 752 of the Code), (vi) allocations to that Member of expenditures of the
Company described (or treated as described) in Section 705(a)(2)(B) of the Code, and
(vii) allocations of Company loss and deduction (or items thereof), including loss and
deduction described in Treasury Regulation §1.704-1(b)(2)(iv)(g), but excluding items
described in (vi) above and loss or deduction described in Treasury Regulation
§1.704-1(b)(4)(i) or 1.704-1(b)(4)(iii). The Members’ 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 Members 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
Members’ Capital Accounts shall be increased or decreased to reflect a revaluation of
the Company’s property on its books based on the fair market value of the Company’s
property on the date of adjustment (as determined pursuant to Section 3.05(b)),
immediately prior to (A) the contribution of money or other property to the Company by
a new or existing Member as consideration for a Membership Interest or an increased
Percentage Interest, (B) the distribution of money or other property by the Company to
a Member as consideration for a Membership Interest, or (C) the liquidation of the
Company. A Member who has more than one Membership Interest shall have a single
Capital Account that reflects all such Membership Interests, regardless of the class of
Membership Interests owned by such Member and regardless of the time or manner in which
such Membership Interests were acquired. Upon the Disposition of all or a portion of a
Membership Interest, the Capital Account of the Disposing Member that is attributable
to that Membership 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 Company
under the NGA.
	 
	 	b)	 	Whenever the fair market value of the Company’s property is required to be
determined pursuant to the third and fourth sentences of Section 3.05(a), the
Management Committee shall establish the fair market value in a notice to the Members.

     SECTION 3.06 Failure to Make a Capital Contribution.

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	 	a)	 	General. If any Member fails to make a Capital Contribution when required in a
Capital Call under Section 3.01 of this Agreement (each such Member being a
“Non-Contributing Member”), then, provided the failure has not been cured, the Members
that have contributed their Capital Contributions in response to such Capital Call
(each, a “Contributing Member”) may (without limitation as to other remedies that may
be available) at any time following the 10th Day following the date the Capital
Contribution was due elect to pay the portion of the Capital Contribution owed and
unpaid by the Non-Contributing Member (the “Additional Contribution”), in which event
the Contributing Member(s) that elect to fund the Non-Contributing Members’ share (the
“Additional Contributing Members”) may treat the contribution as either: (i) a Capital
Contribution resulting in the Additional Contributing Members receiving a Priority
Interest under Section 3.06(b), or (ii) a permanent capital contribution that
results in an adjustment of Membership Interests under Section 3.06(c), as
determined by the Additional Contributing Members as set forth below.

No Contributing Member shall be obligated to elect to take the actions specified in the preceding
paragraph of this Section 3.06(a). The decision of the Contributing Members to elect to
take the action described in the preceding paragraph shall be made by the determination of the
Contributing Members holding the majority of the Percentage Interests of all Contributing Members,
provided that such treatment may not be elected unless at such time of determination there is one
or more Additional Contributing Members. The decision of the Additional Contributing Members to
elect the treatment described in the preceding paragraph of this Section 3.06(a) shall be
made by the determination of the Additional Contributing Members holding the majority of the
Percentage Interests of all Additional Contributing Members. Unless and until such election is
made, payment of the Additional Contribution shall be treated as a Priority Interest under
Section 3.06(a)(i). If the Additional Contributing Members make the election under
Section 3.06(a) to treat the contribution as a contribution for which they receive a
Priority Interest under Section 3.06(b), then the Additional Contributing Members will have
the option, exercisable at any time thereafter (by the election of Additional Contributing Members
holding a majority of the Percentage Interests of all Additional Contributing Members) upon notice
furnished to the other Members not less than 30 Days before the proposed effective time of the
option exercise, to change their election such that the amount of the payment of the
Non-Contributing Member’s portion of the Capital Contribution (less any amounts received by the
Additional Contributing Members as a payment of the applicable Priority Interest (other than
payment of the return amount forming a part thereof)) shall be treated as an Additional
Contribution as provided in Section 3.06(c). In that event, the accrued and unpaid return
forming part of the Priority Interest shall not be treated as an Additional Contribution but shall
continue as a Priority Interest as provided in Section 3.06(b) below (with such amount to
continue to compound return thereon).

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

	 	i)	 	Each Additional Contributing Member shall receive a
Priority Interest in the distributions from the Company that would otherwise
be due and payable to the Non-Contributing Member(s). The Priority Interest

14

 

	 	 	 	received by each Additional Contributing Member shall be in the proportion
that the amount of the Additional Contribution paid by such Additional
Contributing Member bears to the amount of the Additional Contributions made
by all Additional Contributing Members (each Additional Contributing
Member’s percentage share of the Priority Interests shall be its “Priority
Interest Sharing Ratio”). All distributions from the Company that would
otherwise be due and payable to the Non-Contributing Member(s) instead shall
be paid to the Additional Contributing Members in accordance with their
respective Priority Interest Sharing Ratio and no distribution shall be made
from the Company to any Non-Contributing Member until all Priority Interests
have terminated. The Priority Interest shall terminate with respect to an
Additional Contributing Member when that Additional Contributing Member has
received either through the distributions it receives in respect of its
Priority Interest or through payment(s) to it by the Non-Contributing
Member(s) (which payment(s) may be made by the Non-Contributing Member(s) at
any time) of an amount equal to the Additional Contribution made by such
Additional Contributing Member, plus a return thereon of twelve percent
(12%) per annum (compounded quarterly on the outstanding balance). For
purposes of making this calculation, all amounts received by an Additional
Contributing Member 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 Member
to a Contributing Member to reduce and/or terminate a Priority Interest
shall be treated as though such amount were contributed by the
Non-Contributing Member to the Company and thereafter distributed by the
Company to the Contributing Member with respect to its Priority Interest.
	 
	 	ii)	 	The Priority Interests shall not alter the Percentage
Interests, nor shall the Priority Interests alter any distributions to the
Contributing Members (in their capacity as Contributing Members, as opposed
to their capacity as Additional Contributing Members) in accordance with
their respective Percentage Interests. Notwithstanding any provision in
this Agreement to the contrary, a Member may not dispose of all or a portion
of its Priority Interest except to a Person to which it Disposes of all or
the applicable pro rata portion of its Membership Interest after compliance
with the requirements of this Agreement for the Disposition.
	 
	 	iii)	 	No Member that is a Non-Contributing Member may Dispose
of its Membership Interest unless, at the closing of such Disposition,
either the Non-Contributing Member or the proposed Assignee pays the amount
necessary to terminate the Priority Interest arising from such
Non-Contributing Member’s failure to contribute. No such transferee shall be
admitted to the Company as a Member until compliance with this Section
3.06(b)(iii) has occurred.

15

 

	 	c)	 	Permanent Contribution. Subject to Section 3.06(a), if the Additional
Contributing Members elect under Section 3.06(a) to have the Additional
Contribution treated as a permanent capital contribution, then each Additional
Contributing Member that funds a portion of the Additional Contribution shall have its
Capital Account increased accordingly and the Members’ Membership Interests and
Percentage Interests will be automatically adjusted to equal each Member’s total
Capital Contributions when expressed as a percentage of all Members’ Capital
Contributions.
	 
	 	d)	 	Further Assurance. In connection with this Section 3.06, each Member
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 3.06.

ARTICLE IV.

MEMBERS

     SECTION 4.01 Members. The members of the Company are the Members listed on Annex
I, and any other Person hereafter admitted to the Company as a Member.

     SECTION 4.02 Membership Interests.

	 	a)	 	Units. The Membership Interests of the Company shall be comprised of
one class of interests (the “Units”). The Units will have the rights, designations and
preferences as provided in this Agreement.
	 
	 	b)	 	Units Authorized. There shall be 100 Units authorized.
	 
	 	c)	 	Certificated Units. All Units shall be certificated and issued as
provided in Section 8.02. Persons holding Units shall be admitted to the Company as
Members and such ownership shall be recorded by amendment to Annex I hereto,
which shall not be considered an amendment to this Agreement.

     SECTION 4.03 Representations, Warranties and Covenants. Each of El Paso and Opco
hereby represents, warrants and covenants to the Company and each other that the following
statements are true and correct as of the Effective Date and shall be true and correct at all times
that such Person remains a Member of the Company:

	 	a)	 	such Member 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, such Member 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 such Member has full power and authority to execute and deliver this
Agreement and to perform its obligations hereunder, and all necessary actions by the

16

 

	 	 	 	board of directors, stockholders, managers, members, partners, trustees, beneficiaries,
or other applicable Persons necessary for the due authorization, execution, delivery
and performance of this Agreement by such Member have been duly taken;

	 	b)	 	such Member has duly executed and delivered this Agreement and this Agreement
constitutes the legal, valid and binding obligation of such Member enforceable against
it in accordance with its terms, except as may be limited by bankruptcy, insolvency or
similar Laws of general application and by the effect of general principles of equity,
regardless of whether considered at law or in equity; and
	 
	 	c)	 	such Member’s authorization, execution, delivery or 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 Member, (B) any contract or
agreement to which such Member is a party or is otherwise subject, or (C) any Law,
order, judgment, decree, writ, injunction or arbitral award to which such Member 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.

     SECTION 4.04 Bankruptcy of a Member. Notwithstanding any other provision of this
Agreement, the occurrence or continuation of a Bankruptcy of a Member shall not cause such Member
to cease to be a member of the Company, and upon the occurrence of such an event, the business of
the Company shall continue without dissolution.

ARTICLE V.

DISTRIBUTIONS AND ALLOCATIONS

     SECTION 5.01 Distributions.

	 	a)	 	On or before the final Business Day of the calendar month immediately following
the end of each Quarter (commencing with the Quarter ending March 31, 2010), the
Management Committee shall review and determine the amount of Available Cash with
respect to that Quarter, and, subject to the terms of Section 3.06(b), an
amount equal to 100% of Available Cash with respect to that Quarter shall be
distributed in accordance with this Article V to the Members (other than a
Breaching Member) in proportion to their respective Percentage Interests (at the time
the amounts of such distributions are made); provided, however, that the amount of
Available Cash required to be distributed for the Quarter in which the Effective Date
occurs, shall be pro rated based upon a fraction, of which the numerator is the number
of days in the
period that commences on the Effective Date and ends on March 31, 2010 and of which the
denominator is 92.

17

 

	 	b)	 	Notwithstanding Section 5.01(a), in the event of the dissolution and
winding up of the Company, all receipts of the Company received during or after the
Quarter in which the Liquidation Date occurs shall be applied and distributed solely in
accordance with, and subject to the terms and conditions of Section
9.02(a)(iii)(C).
	 
	 	c)	 	Notwithstanding any provision to the contrary contained in this Agreement, the
Company shall not be required to make a distribution to a Member on account of its
interest in the Company if such distribution would violate the Act or any applicable
Law.

     SECTION 5.02 Allocations for Capital Account Purposes.

	 	a)	 	For purposes of maintaining the Capital Accounts pursuant to Section
3.05, except as provided in Section 5.02(b) and (c), each item of
income, gain, loss, expense, deduction and credit of the Company shall be allocated to
the Members in accordance with their respective Percentage Interests.
	 
	 	b)	 	With respect to each period during which a Priority Interest is outstanding,
each Additional Contributing Member shall be allocated items of income and gain in an
amount equal to the return that accrues with respect to that Additional Contributing
Member’s Additional Contribution pursuant to Section 3.06(b)(i), and items of
income and gain that would otherwise be allocable to the Non-Contributing Member(s)
shall be correspondingly reduced.
	 
	 	c)	 	Notwithstanding any other provision of this Section 5.02, the following
special allocations shall be made in the following order:

	 	i)	 	Minimum Gain Chargeback. Notwithstanding any other
provision hereof to the contrary, if there is a net decrease in Minimum Gain
(as generally defined under Treasury Regulation Section §1.704-1 or
§1.704-2) for a taxable year (or if there was a net decrease in Minimum Gain
for a prior taxable year and the Company did not have sufficient amounts of
income and gain during prior years to allocate among the Members under this
Section 5.02(c)(i), then items of income and gain shall be allocated
to each Member in an amount equal to such Member’s share of the net decrease
in such Minimum Gain (as determined pursuant to Treasury Regulation
§1.704-2(g)(2)). It is the intent of the Members that any allocation
pursuant to this Section 5.02(c)(i) shall constitute a “minimum gain
chargeback” under Treasury Regulations §1.704-2(f) and shall be interpreted
consistently therewith.
	 
	 	ii)	 	Member Nonrecourse Debt Minimum Gain Chargeback.
Notwithstanding any other provision of this Article V, except
Section 5.02(c)(i), if there is a net decrease in Member Nonrecourse
Debt Minimum Gain (as generally defined under Treasury Regulation §1.704-1
or §1.704-2), during any
taxable year, any Member who has a share of the Member Nonrecourse Debt
Minimum Gain shall be allocated such amount of income and gain 

18

 

	 	 	 	for such year
(and subsequent years, if necessary) determined in the manner required by
Treasury Regulation §1.704-2(i)(4) as is necessary to meet the requirements
for a chargeback of Member Nonrecourse Debt Minimum Gain.

	 	iii)	 	Qualified Income Offset. Except as provided in
Section 5.02(c)(i) and (ii) hereof, in the event any Member
unexpectedly receives any adjustments, allocations or distributions
described in Treasury Regulation §1.704-1(b)(2)(ii)(d)(4),
§1.704-1(b)(2)(ii)(d)(5), or §1.704-1(b)(2)(ii)(d)(6), items of Company
income and gain shall be specially allocated to such Member in an amount and
manner sufficient to eliminate, to the extent required by the Allocation
Regulations, the deficit balance, if any, in its Adjusted Capital Account
created by such adjustments, allocations or distributions as quickly as
possible.
	 
	 	iv)	 	Gross Income Allocations. In the event any Member has a
deficit balance in its Adjusted Capital Account at the end of any Company
taxable period in excess of the sum of the amount such Member is obligated
to restore pursuant to any provision of this Agreement or pursuant to
Treasury Regulation §1.704-1(b)(2)(ii)(c) or is deemed to be obligated to
restore pursuant to the penultimate sentences of Treasury Regulations
§§1.704-2(g)(1) and 1.704-2(i)(5), such Member shall be specially allocated
items of Company gross income and gain in the amount of such excess as
quickly as possible; provided, that an allocation pursuant to this
Section 5.02(c)(iv) shall be made only if and to the extent that
such Member would have a deficit balance in its Adjusted Capital Account
after all other allocations provided in this Section 5.02 have been
tentatively made as if Section 5.02(c)(iv) were not in the
Agreement.
	 
	 	v)	 	Company Nonrecourse Deductions. Company Nonrecourse
Deductions (as determined under Treasury Regulation §1.704-2(c)) for any
fiscal year shall be allocated among the Members in proportion to their
Percentage Interests.
	 
	 	vi)	 	Member Nonrecourse Deductions. Any Member Nonrecourse
Deductions (as defined under Treasury Regulation §1.704-2(i)(2)) shall be
allocated pursuant to Treasury Regulation Section 1.704-2(i) to the Member
who bears the economic risk of loss with respect to the partner nonrecourse
debt to which it is attributable. Provided, however, that if more than one
Member bears the economic risk of loss for such debt, the Member Nonrecourse
Deductions attributable to such partner nonrecourse debt shall be allocated
to and among the Members in the same proportion that they bear the economic
risk of loss for such partner nonrecourse debt. This Section
5.02(c)(vi) is intended to comply with the provision of
Treasury Regulation §1.704-2(i) and shall be interpreted consistently
therewith.

19

 

	 	vii)	 	Code Section 754 Adjustment. To the extent an adjustment
to the adjusted tax basis of any Company asset pursuant to Section 734(b) or
743(b) of the Code is required, pursuant to the Allocation Regulations, to
be taken into account in determining Capital Accounts, the amount of such
adjustment to the Capital Accounts shall be treated as an item of gain (if
the adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis), and such item of gain or loss shall be specially
allocated to the Members in a manner consistent with the manner in which
their Capital Accounts are required to be adjusted pursuant to the
Allocation Regulations.
	 
	 	viii)	 	Curative Allocation. The special allocations set forth
in Sections 5.02(c)(i)-(vii) (the “Regulatory Allocations”) are
intended to comply with the Allocation Regulations. Notwithstanding any
other provisions of this Section 5.02, the Regulatory Allocations
shall be taken into account in allocating items of income, gain, loss and
deduction among the Members such that, to the extent possible, the net
amount of allocations of such items and the Regulatory Allocations to each
Member shall be equal to the net amount that would have been allocated to
each Member if the Regulatory Allocations had not occurred.

     SECTION 5.03 Allocations for Tax Purposes.

	 	a)	 	Except as otherwise provided herein, for federal income tax purposes
each item of income, gain, loss and deduction shall be allocated among the Members in
the same manner as its correlative item of “book” income, gain, loss and deduction is
allocated pursuant to Section 5.02.
	 
	 	b)	 	Notwithstanding any provisions contained herein to the contrary, for income tax
purposes, income, gain, loss, and deduction with respect to property contributed to the
Company by a Member or revalued pursuant to Treasury Regulation §1.704-1(b)(2)(iv)(f)
shall be allocated among the Members in a manner that takes into account the variation
between the adjusted tax basis of such property and its Carrying Value, as required by
Section 704(c) of the Code and Treasury Regulation §1.704-1(b)(4)(i), using the
remedial allocation method permitted by Treasury Regulation §1.704-3(d).

     SECTION 5.04 Varying Interests. All items of income, gain, loss, deduction or credit shall be allocated, and all
distributions shall be made, to the Persons shown on the records of the Company to have been
Members 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 Member’s
Percentage Interest, the Members agree that their allocable shares of items for the taxable year
shall be determined on any method determined by the Management Committee to be permissible under
Code Section 706 and the related Treasury Regulations to take account of the Members’ varying
Percentage Interests.

20

 

ARTICLE VI.

BOOKS AND RECORDS, REPORTS, AND BANK ACCOUNTS

     SECTION 6.01 Books and Records. The Management Committee shall cause to be kept at
the principal office of the Company or at such other location approved by the Management Committee
complete and accurate books and records of the Company, including all books and records necessary
to provide to the Members any information required to be provided pursuant to Section 6.02,
supporting documentation of the transactions with respect to the conduct of the Company’s business
and minutes of the proceedings of the Members and the Management Committee, and any other books,
records and information that are required to be maintained by applicable Law.

     SECTION 6.02 Reports. With respect to each calendar year, and within the time frame
specified by the Management Committee, the Management Committee or any duly authorized Officer(s)
shall cause to be prepared and delivered to each Member such reports, financial statements,
forecasts, studies, budgets and other information as the Management Committee may request from time
to time.

     SECTION 6.03 Bank Accounts. Funds of the Company shall be deposited in such banks or
other depositories as shall be designated from time to time by the Management Committee, which may
include the El Paso Corporation cash management program.

ARTICLE VII.

MANAGEMENT OF THE COMPANY

     SECTION 7.01 Management. The business and affairs of the Company shall be managed
under the direction of the Members acting through the Management Committee. To facilitate the
orderly and efficient management of the business and affairs of the Company, the Members shall act
(a) collectively as a “committee of the whole” (such committee to be referred
to as the Management Committee) pursuant to Section 7.02, and (b) through the
delegation by the Management Committee of certain duties and authority to the Officers.

     SECTION 7.02 Management Committee. Decisions or actions taken by the Management
Committee in accordance with the provisions of this Agreement shall constitute decisions or actions
by the Company and shall be binding on each Member, Representative, Officer and employee of the
Company. The Management Committee shall conduct its affairs in accordance with the following
provisions and the other provisions of this Agreement:

	 	a)	 	Representatives.

21

 

	 	i)	 	Composition. The Management Committee shall be composed
of 4 Representatives designated as provided below by the Members. Each of
El Paso and Opco shall be entitled to designate the number of
Representatives and Alternate Representatives set forth opposite such
Member’s name in Annex I under the column entitled “Number of
Representatives and Alternate Representatives.”
	 
	 	ii)	 	Designation. To facilitate the orderly and efficient
conduct of Management Committee meetings, each Member shall notify the other
Members in writing, from time to time, of the identity of (A) one or more of
its officers, employees or agents who will represent it at meetings (each, a
“Representative”), such number of Persons so identified at any time not to
exceed the number of Representatives to be designated by such Member in
accordance with Section 7.02(a)(i), and (B) one or more of its
officers, employees or agents who will represent it at any meeting that any
one or more of that Member’s Representatives is unable to attend (each an
“Alternate Representative”; if an Alternate Representative is to be an
alternate for more than one Representative of a Member, the Member’s
notification shall specify same), such number of Persons so identified at
any time not to exceed the number of Alternate Representatives to be
designated by such Member in accordance with Section 7.02(a)(i).
(The term “Representative” shall also refer to any Alternate Representative
that is actually performing the duties of the applicable Representative.).
The initial Representatives and Alternate Representatives designated by each
Member are set forth in Annex I. A Member may designate different
Representatives or Alternate Representatives for any meeting of the
Management Committee by notifying each of the other Members on or before the
date scheduled for that meeting; provided, however, that if giving that
advance notice is not feasible, then any new Representative or Alternate
Representative shall present written evidence of his or her authority at the
commencement of such meeting. Alternate Representatives may attend all
Management Committee meetings but shall have no vote at any such meeting
attended except in the absence of the Representative for whom such Person is
the Alternate Representative. Upon the death, resignation or removal for any reason of any Representative
of a Member, such Member shall promptly designate a successor as provided
herein.
	 
	 	iii)	 	Authority. Each Representative shall have the full
authority to act on behalf of the Member that designated such
Representative; the action of the Representative(s) at a meeting (or through
a written consent) of the Management Committee shall bind the Member that
designated that Representative(s); and the other Member shall be entitled to
rely upon such action without further inquiry or investigation as to the
actual authority (or lack thereof) of such Representative(s). In addition,
the act of an Alternate Representative shall be deemed the act of the
Representative for which that Alternate Representative is acting, without

22

 

	 	 	 	the need to produce evidence of the absence or unavailability of such
Representative.

	 	iv)	 	DISCLAIMER OF DUTIES; INDEMNIFICATION. NOTWITHSTANDING
ANY OTHER PROVISION OF THIS AGREEMENT AND ANY DUTY OTHERWISE EXISTING AT
LAW, IN EQUITY, OR OTHERWISE, WITH RESPECT TO ANY VOTE, CONSENT OR APPROVAL
AT ANY MEETING OF THE MANAGEMENT COMMITTEE, OR ANY ACTION OTHERWISE TAKEN BY
A REPRESENTATIVE UNDER THIS AGREEMENT, THE ACT OR OTHERWISE, EACH
REPRESENTATIVE MAY ACT, AND GRANT OR WITHHOLD ITS VOTE, CONSENT OR APPROVAL,
IN ITS SOLE DISCRETION, FREE FROM ANY DUTY, FIDUCIARY OR OTHERWISE, TO THE
COMPANY OR ANY MEMBER (OTHER THAN TO THE MEMBER THAT APPOINTED SUCH
REPRESENTATIVE), OTHER THAN THE DUTY TO ACT IN ACCORDANCE WITH THE IMPLIED
CONTRACTUAL COVENANT OF GOOD FAITH AND FAIR DEALING. THE PROVISIONS OF THIS
SECTION 7.02(a)(iv) SHALL APPLY NOTWITHSTANDING THE NEGLIGENCE,
GROSS NEGLIGENCE, WILLFUL MISCONDUCT, STRICT LIABILITY OR OTHER FAULT OR
RESPONSIBILITY OF A MEMBER OR ITS REPRESENTATIVE (OTHER THAN SUCH THAT WOULD
CONSTITUTE A VIOLATION OF THE IMPLIED CONTRACTUAL COVENANT OF GOOD FAITH AND
FAIR DEALING).
	 
	 	v)	 	Attendance. Each Member shall use all reasonable efforts
to cause its Representative(s) or Alternate Representative(s) to attend each
meeting of the Management Committee, unless its Representative(s) is unable
to do so because of a “force majeure” event or other event beyond such
Person’s reasonable control, in which event such Member shall use all
reasonable efforts to cause its Representative(s) or Alternate
Representative to participate in the meeting by telephone or other
electronic communication pursuant to Section 7.02(g).

	 	b)	 	Procedures. The Management Committee shall maintain (or cause to be
maintained) written minutes of each of its meetings, which shall be submitted for
approval within a reasonable period of time after each meeting. The Management
Committee may adopt such rules and procedures relating to its activities as the
Management Committee may deem appropriate, provided that such rules and procedures
shall not be inconsistent with or violate the provisions of this Agreement.
	 
	 	c)	 	Time and Place of Meetings. The Management Committee shall meet no
less often than once each Quarter; provided, however, that in lieu of any such meeting
the Management Committee may elect to act by written consent. The time, date and
location of meetings of the Management Committee, and the agenda for each such meeting,
shall be as determined by the Management Committee from time to time.

23

 

	 	 	 	Special meetings
of the Management Committee may be called at such times, and in such manner, as any
Representative or Member determines to be necessary or appropriate. Any Representative
or Member calling for any such special meeting shall notify all other Representatives
and Members of the date and agenda for such meeting on or before the third Business Day
prior to the date of such meeting, provided that such three (3) Business Day period may
be waived by agreement of the other Representatives. Attendance of a Member’s
Representative at a meeting of the Management Committee shall constitute a waiver of
notice of that meeting, except where the Representative attends the meeting for the
express purpose of objecting to the transaction of any business on the ground that the
meeting was not properly called or convened in accordance with this Agreement.

	 	d)	 	Quorum. The presence, in person, by telephone or by other form of
two-way electronic communication permitted by Section 7.02(g), of a majority of
the Representatives (including, in the absence of a Representative, the Alternate
Representative of such Person) shall constitute a quorum for the transaction of
business at any meeting of the Management Committee, provided that such majority
includes at least one Representative (or Alternate Representative) of each Member,
unless any Member is a Breaching Member, in which case a Representative (or Alternate
Representative) of such Breaching Member will not be required for a quorum.
	 
	 	e)	 	Voting. Except as provided otherwise in this Agreement, each
Representative (or Alternate Representative, as the case may be) present and acting at
a meeting of the Management Committee shall be entitled to one vote on each matter
submitted to the Management Committee for its approval, consent or determination.
Except as otherwise provided in this Agreement, the affirmative vote of a majority of
the Representatives in attendance at a meeting of the Management Committee at which a
quorum is present (a “Majority Interest”) shall constitute the action of the Management
Committee.
	 
	 	f)	 	Action by Written Consent. Any action required or permitted to be
taken at a regular or special meeting of the Management Committee may be taken without
a meeting, without prior notice, and without a vote if a consent or consents in
writing, setting forth the action so taken, is signed either by all of the
Representatives (or if a
Representative is unavailable, the Alternate Representative for that unavailable
Representative). Such written consents shall be filed with the minutes of the Company
proceedings and shall have the same force and effect as a vote at a meeting.
	 
	 	g)	 	Meetings by Telephone or Other Communications Devices. Representatives
(including any Alternate Representative) may participate in and hold any meeting by
means of conference telephone, videoconference or similar communications equipment by
means of which all persons participating in the meeting can communicate with and hear
each other. Participation in a meeting shall constitute presence in person at the
meeting, except where a Member participates in the 

24

 

	 	 	 	meeting for the express purpose of
objecting to the transaction of any business on the ground that the meeting is not
lawfully called or convened.

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

	 	i)	 	Unanimous Interest. The following actions shall require
the approval of all Representatives or Members:

     (A) to the fullest extent permitted by law, dissolution of the
Company under Section 9.01(a);

     (B) to the fullest extent permitted by law, causing or
permitting the Company to become Bankrupt (but this provision is not
intended to require, nor shall it be construed to require, any
Member to ensure the profitability or solvency of the Company);

     (C) causing the Company to mortgage or pledge any of its
properties or assets with a value exceeding a total of $225 million
to secure the payment or performance of any obligation for the
repayment of borrowed money or any guarantee of such repayment;

     (D) the commencement before the FERC, or the resolution through
settlement, stipulation or other consensual means, in whole or in
part, before the FERC (or before any United States Court of Appeals
on an appeal of an order of the FERC), of any proceeding or
controversy, including any NGA Section 4 (15 U.S.C. Section 717(c))
general rate case, or an appeal of any order thereof, the outcome of
which would cause either:

     (i) the Company’s revenues to be reduced by a total of $50
million or more annually;

     (ii) the Company to pay penalties, refunds or interest of a
total of $50 million or more; or

     (iii) to agree to any
criminal penalty;

     (E) the creation of any additional Membership Interests of any
class and specifying the rights, class(es) and duties thereof, or
the proposed admission of any Person as a member of the Company,
whether as a result of the Disposition by a Member of all or any
part of its Membership Interest or otherwise, provided, however,
that the Disposition by a Member of all or any part of its

25

 

Membership Interest to a Permitted Transferee shall not require the
prior approval of the Management Committee;

     (F) any proposal to sell or otherwise Dispose of assets of the
Company, whether in a single transaction or any series of
transactions, outside the ordinary course of the Company’s business
with a value exceeding a total of $225 million in any calendar year;

     (G) the Disposition or abandonment of all or substantially all
of the assets of the Company, and any Disposition (including a
Deemed Tax Disposition, if such Disposition, when added to the total
of all other Dispositions (including Deemed Tax Dispositions) within
the preceding twelve months, results in the Company being considered
to have terminated within the meaning of Section 708(b)(1)(B) of the
Code;

     (H) causing or permitting the Company to merge with, or
consolidate or convert into, any other entity; or

     (I) entering into, conducting, or authorizing the Company to
conduct, any new activity or business that may cause the Company to
generate income for federal income tax purposes which will not
constitute “qualifying income” (as such term is defined pursuant to
Section 7704 of the Code).

	 	ii)	 	Majority Interest. Except for matters that are covered
by Section 7.02(h)(i) or matters that the law otherwise requires
approval by a greater percentage, a Majority Interest shall be required to
approve any action that requires approval of the Members or the
Representatives, including the following matters:

     (A) causing the Company to take any action under this Agreement
that requires Management Committee approval other than the actions
specified in Section 7.02(h)(i);

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

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

26

 

     (D) issuing or causing to be issued any Capital Call under
Section 3.01 or Loan Notice under Section 3.02;

     (E) any additions to (by acquisition, development, construction
or otherwise) or expansions or extensions of the Company’s
facilities, provided that any additions, expansions or extensions to
the facilities approved by any duly authorized Officer(s) pursuant
to authority delegated by the Management Committee shall be deemed
approved by the Management Committee for purposes hereof and shall
not require separate approval;

     (F) appointing Officers of the Company and determining their
authority to act on behalf of the Company;

     (G) designating Officers or employees to serve on the audit
committee of the Company, if one shall be established by the
Management Committee;

     (H) any change in the Company’s name;

     (I) causing the Company to enter into any short-term or
long-term indebtedness, but Working Capital Borrowings made from
time-to-time under an agreement previously approved as contemplated
herein need not be further approved by the Management Committee;

     (J) except for any commencement or resolution that requires the
unanimous approval of the Management Committee pursuant to
Section 7.02(i)(D) above, the commencement before the FERC,
or the resolution through settlement, stipulation or other
consensual means of any matter brought under the NGA Section 4 (15
U.S.C. Section 717(c)) or Section 5 (15 U.S.C. Section 717(d));
provided that the Management Committee may delegate to any duly
authorized Officer(s) the right(s) to commence or resolve any such
proceeding involving $25 million or less;

     (K) making any tax elections under the Code; or

     (L) except for any mortgage or pledge of any properties or
assets that requires the unanimous approval of the Management
Committee pursuant to Section 7.02(i)(C) above, causing the
Company to mortgage or pledge any of its properties or assets to
secure the payment or performance of any obligation for the
repayment of borrowed money or any guarantee of such repayment.

27

 

	 	i)	 	Subcommittees. The Management Committee shall have the power and
authority to create such subcommittees, and delegate to such subcommittees such
authority and responsibility, and rescind any such delegations, as it may deem
appropriate.
	 
	 	j)	 	Officers.

     (A) The Management Committee shall have the power and authority
to appoint one or more Persons to be Officers of the Company. Any
Officers so designated shall have such titles and, subject to the
other provisions of this Agreement, have such authority and perform
such duties as the Management Committee may delegate to them and
shall serve at the pleasure of the Management Committee and report
to the Management Committee. Except as otherwise specifically
provided in this Agreement or by the Management Committee, the
authority and functions of the Officers shall be identical to the
authority and functions of the officers of a corporation organized
under the General Corporation Law of the State of Delaware. The
Management Committee shall have full power and authority to direct
the Officers to do all things and on such terms as it determines to
be necessary or appropriate to conduct the business of the Company.
In addition, the Management Committee shall have full power and
authority to select and dismiss Officers, employees, agents, outside
attorneys, accountants, consultants and contractors and to determine
their compensation and other terms of employment or hire, create and
operate employee benefit plans, employee programs and employee
practices.

     (B) The Officers may include a Chief Executive Officer, a
President and a Secretary, and may also include a Chief Operating
Officer, Chief Financial Officer, Treasurer, one or more Vice
Presidents (who may be further classified by such descriptions as
“executive,” “senior,” “assistant” or otherwise, as the Management
Committee shall determine), one or more Assistant Secretaries and
one or more Assistant Treasurers. If Officers are appointed, each
Officer shall hold office until his or her successor is elected and
qualified or until his or her earlier death, resignation or removal.
Any number of offices may be held
by the same Person. The compensation of Officers shall be
fixed from time to time by the Management Committee or by such
Officers as may be designated by the Management Committee.

     (C) Any Officer may resign at any time upon written notice to
the Company. Any Officer may be removed by the Management Committee
with or without cause at any time. The Management Committee may
delegate the power of removal of Officers to any Officer. Such
removal shall be without prejudice

28

 

to a Person’s contract rights, if
any, but the appointment of any Person as an Officer shall not of
itself create contract rights.

     (D) Unless otherwise directed by the Management Committee or
specified in an employment or other agreement to which an Officer is
a party, a Person appointed as an Officer of the Company shall be
required to devote to the business affairs of the Company only the
portion of such Person’s full productive time as is required to
perform the duties delegated to such Person by the Management
Committee. In addition, it shall not constitute a breach or
violation of any duty owed to the Company or to any Member by a
Person appointed as an Officer for such Person to be a director,
manager, officer or employee of any Affiliate of the Company
provided that the Management Committee is advised of such Person’s
positions with such Affiliate(s) and does not object to same in a
timely manner.

     SECTION 7.03 Conflicts of Interest; Outside Activities.

	 	a)	 	Each Member agrees to the terms of Section 2.07.
	 
	 	b)	 	In addition to the rights set forth in Section 2.07, any Member or
Affiliate or Affiliates of a Member (including any Subsidiary of a Member) shall have
the right to engage in businesses of every type and description and other activities
for profit and to engage in and possess an interest in other business ventures of any
and every type or description, whether in businesses engaged in or anticipated to be
engaged in by the Company or any Subsidiary, independently or with others, including
business interests and activities in direct competition with the business and
activities of the Company or any Subsidiary, and none of the same shall constitute a
breach of this Agreement or any duty otherwise existing at law, in equity or otherwise
to the Company, any Subsidiary or any Member. None of the Company, any Subsidiary or
any other Person shall have any rights by virtue of this Agreement or the relationship
established hereby in any business ventures of any Member or any Affiliate of a Member
(including any Subsidiary of a Member).
	 
	 	c)	 	Notwithstanding anything to the contrary in this Agreement, (i) the engaging in
competitive activities by any Person (including any Member or any Subsidiary or other
Affiliate of a Member) in accordance with the provisions of this Section 7.03
is
hereby approved by the Company and all Members, (ii) it shall be deemed not to be a
breach of any Member’s or any other Person’s duties to the Company or any Member or any
other obligation of any type whatsoever of a Member or any other Person to the Company
or any Member for any such Person to engage in such business interests and activities
in preference to or to the exclusion of the Company or any Subsidiary, (iii) none of
the Members or any other Person shall have any obligation hereunder or as a result of
any duty otherwise existing at law, in equity or otherwise to present business
opportunities to the Company or any Subsidiary and 

29

 

	 	 	 	(iv) the doctrine of “corporate
opportunity” or other analogous doctrine shall not apply to any Member or other Person.
	 
	 	d)	 	The Company may transact business with any Member or Affiliate of a Member,
provided the terms of those transactions are approved by the Management Committee or
expressly contemplated by this Agreement or involve transportation agreements on the
Facilities with an Affiliate of a Member incurred in the ordinary course of the
Company’s business. Without limiting the generality of the foregoing, the Members
recognize and agree that their respective Affiliates currently, or in the future may,
engage in various activities involving natural gas marketing and trading (including
futures, options, swaps, exchanges of future positions for physical deliveries and
commodity trading), transportation, gathering, processing, storage, distribution,
development and ownership, as well as other commercial activities related to natural
gas and other hydrocarbons and that these and other activities by Members’ Affiliates
may be based on natural gas that is transported in the Facilities or otherwise made
possible or more profitable by reason of the Company’s activities (herein referred to
as “Affiliate’s Outside Activities”). No Affiliate of a Member shall be restricted in
its right to conduct, individually or jointly with others, for its own account any
Affiliate’s Outside Activities, and no Member 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 Company, any other
Member or any Affiliate of any other Member, by reason of such Affiliate’s Outside
Activities.
	 
	 	e)	 	To the extent permitted by Law, the provisions of this Agreement, including
this Section 7.03 and Sections 7.02(a)(iv), 7.02(e)(ii),
7.06 and 7.07, constitute an agreement to modify or eliminate fiduciary
duties pursuant to the provisions of the Act.

     SECTION 7.04 Indemnification for Breach of Agreement. To the fullest extent
permitted by Law, each Member shall indemnify, protect, defend, release and hold harmless each
other Member, 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
Member) that result from a breach by the indemnifying Member of this Agreement; provided, however,
that this Section 7.04 shall not (a) apply to any Claim or other matter for which a Member
has no liability or duty, or is indemnified or released, pursuant to Section 7.03 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.

     SECTION 7.05 General Regulatory Matters. Each Member shall:

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

30

 

	 	b)	 	join in any eminent domain takings by the Company, 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 Company, taking into account the Member’s
Percentage Interest, resources and expertise; and

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

     SECTION 7.06 Disclaimer Of Duties. NOTWITHSTANDING ANY OTHER PROVISION OF THIS
AGREEMENT AND ANY DUTY OTHERWISE EXISTING AT LAW, IN EQUITY OR OTHERWISE, WITH RESPECT TO ANY
ACTION, CONSENT OR APPROVAL, EACH MEMBER MAY TAKE OR NOT TAKE THE ACTION, OR GRANT OR WITHHOLD
CONSENT OR APPROVAL, IN ITS SOLE DISCRETION, FREE FROM ANY DUTY, FIDUCIARY OR OTHERWISE, TO THE
COMPANY OR ANY MEMBER OTHER THAN THE DUTY TO ACT IN ACCORDANCE WITH THE IMPLIED CONTRACTED COVENANT
OF GOOD FAITH AND FAIR DEALING. THE PROVISIONS OF THIS SECTION 7.06 SHALL APPLY
NOTWITHSTANDING THE NEGLIGENCE, GROSS NEGLIGENCE, WILLFUL MISCONDUCT, STRICT LIABILITY OR OTHER
FAULT OR RESPONSIBILITY OF ANY MEMBER (OTHER THAN SUCH THAT WOULD CONSTITUTE A BAD FAITH VIOLATION
OF THE IMPLIED CONTRACTUAL COVENANT OF GOOD FAITH AND FAIR DEALING).

     SECTION 7.07 Sole Discretion. To the fullest extent permitted by law and
notwithstanding any other provision of this Agreement or in any other agreement contemplated herein
or any duty otherwise existing at law, in equity or otherwise, whenever in this Agreement any
Person is permitted or required to make a decision (a) in its Sole Discretion, such Person shall be
entitled to consider only such interests and factors as it desires, including its own interests,
and shall have no duty (including any fiduciary duty) or obligation to give any consideration to
any interest of or factors affecting the Company or any other Person or (b) in its “good faith” or
under another express standard, such Person shall act under such express standard and shall not be
subject to any other or different standard.

ARTICLE VIII.

DISPOSITIONS OF MEMBERSHIP INTERESTS

     SECTION 8.01 Dispositions and Encumbrances of Membership Interests.

	 	a)	 	Except to the extent permitted by this Section 8.01, a Member (the
“Disposing Member”) may not Dispose of all or any portion of its Membership Interest
(the “Subject Interest”) to a Person who is not a Permitted Transferee of such Member
unless and until (i) the other terms and conditions set forth in this Section
8.01 have been satisfied and (ii) such Disposition has been approved by the
requisite approval of the Management Committee. If any Disposing Member intends to
dispose of its Membership Interest pursuant to a bona fide offer (“Acquisition
Proposal”) from a 

31

 

	 	 	 	Person who is not a Permitted Transferee, such Disposing Member shall
notify the Management Committee and the other Members in writing (“Transfer Notice”),
which Transfer Notice shall specify the identity of the proposed transferee and the
terms and conditions (including the cash and a description of the non-cash
consideration constituting the purchase price) of the proposed Disposition and shall
include a complete copy of the Acquisition Proposal. Except with respect to a proposed
Disposition to a Permitted Transferee, the Members (other than the Disposing Member)
shall have the right, at any time during the period (the “Exercise Period”) that ends
at 5:00 p.m. Houston, Texas time on the 30th day after receipt of the Transfer Notice
to elect to purchase the Subject Interest at the price and on the terms and conditions
set forth in the Acquisition Proposal. Any Member(s) who elect to purchase the Subject
Interest (each, a “ROFR Buyer”) must furnish written notice (each, a
“ROFR Acceptance”)
to the Disposing Member prior to termination of the Exercise Period.

	 	b)	 	The Disposing Member shall not be bound to Dispose of any portion of the
Subject Interest to any ROFR Buyer(s) unless all of such Subject Interest is accepted
for purchase by ROFR Buyers in accordance with this Section 8.01. If there is
more than one ROFR Buyer who timely delivers a ROFR Acceptance, each such ROFR Buyer
shall be entitled to purchase its pro rata portion of the Subject Interest, based upon
the ratio that each such ROFR Buyer’s Percentage Interest bears to the total Percentage
Interests of all such ROFR Buyers. The ROFR Buyer(s) may substitute the cash
equivalent for any portion of the consideration specified in the Acquisition Proposal
which was other than cash or a promissory note payable in cash; provided, however, that
if the ROFR Buyer(s) desire to so substitute cash for any such non-cash consideration,
and if the ROFR Buyer(s)’ determination of the fair market value of such non-cash
consideration is less than the fair market value that was given for such consideration
by the Disposing Member in the Transfer Notice, the ROFR Buyer(s) shall state their
determination of such value in the ROFR Acceptance; and if the Disposing Member and the
ROFR Buyer(s) are unable to mutually agree upon the fair market value of such non-cash
consideration within five Business Days after the delivery of the ROFR Acceptance, then
the Disposing Member and the ROFR Buyer(s) shall promptly cause such value to be
determined through appraisal in the manner provided in Section 8.01(e). Such
appraisal procedure shall delay, if necessary, any closing of the sale of the Subject
Interest. Any delayed closing shall
occur, subject to the next sentence, within 15 days after delivery to the parties of
the appraiser’s determination of the value of the non-cash consideration. The cash
equivalent of any such non-cash consideration that is to be paid at the closing of the
purchase and sale of the Subject Interest shall in such event be the amount determined
by the appraisal.
	 
	 	c)	 	The closing of the Disposition of the Subject Interest pursuant to the exercise
of the rights of first refusal granted in Section 8.01(a) shall be at 9:00 a.m.
Houston, Texas time on the 45th day following the end of the Exercise Period at the
Company’s principal office, or such other place as agreed by the Disposing Member and
ROFR Buyer(s), subject to any delay in the closing provided for below or in connection
with any appraisal conducted as contemplated in Section 8.01(e), unless the

32

 

	 	 	 	Disposing Member and the ROFR Buyer(s) otherwise agree. At the closing, the
consideration to be paid by the ROFR Buyer(s) shall be delivered by the ROFR Buyer(s)
to the Disposing Member (by wire transfer in immediately available funds to the extent
such consideration is cash), and the Disposing Member shall deliver to the ROFR
Buyer(s) an instrument of assignment of the Subject Interest accompanied by the
Interest Certificate evidencing same, free and clear of all liens, encumbrances and
adverse claims with respect thereto. The ROFR Buyer(s) shall be entitled to pay for
the Subject Interest in cash or with cash and a promissory note on substantially
similar terms to that set forth in the Transfer Notice. The Disposing Member and the
ROFR Buyer(s) shall cooperate in good faith in obtaining all necessary governmental and
other third Person approvals, waivers and consents required for the closing. Any such
closing shall be delayed, to the extent required, until the next succeeding Business
Day following the obtaining of all necessary governmental approvals or the expiration
of all government waiting periods; provided, however, that in the case of such delay,
the purchase price shall be increased by interest at the Default Rate from the date
that the closing would have otherwise occurred.

	 	d)	 	If, after completion of the foregoing procedures under this Section
8.01, the Members (other than the Disposing Member) fail to elect to purchase all
of the Subject Interest, the Disposing Member may, at any time within 120 days after
the expiration of the Exercise Period or after the decision of the appraisers, if
longer, Dispose of all (but not less than all) of the Subject Interest to the proposed
acquirer under the Acquisition Proposal on terms no more favorable to such acquirer
than those set forth in said Acquisition Proposal (and the Transfer Notice) and offered
to the Members (other than the Disposing Members). After the expiration of such
120-day period, the Disposing Member may not Dispose of the Subject Interest described
in the Transfer Notice without complying again with the provisions of this Section
8.01 if and to the extent then applicable.
	 
	 	e)	 	If the Disposing Member and the ROFR Buyer(s) are unable to agree within 30
days after the Transfer Notice is given upon one independent appraiser who will
determine the value of any non-cash consideration proposed as all or part of the
purchase price for any Subject Interest, then within 30 days after the Transfer Notice
is given, the Disposing Member, on the one hand, and the ROFR Buyer(s), collectively,
on the other, shall each appoint an independent appraiser who has at
least 10 years’ experience in valuing interstate pipeline business activities similar
to those conducted by the Company. If the two parties each timely appoint an
independent appraiser and such appraisers are unable to agree upon the value of any
non-cash consideration proposed as all or part of the purchase price for the Subject
Interest, then a third appraiser shall be appointed by the two appraisers. The third
appraiser shall value the non-cash consideration proposed in the Acquisition Proposal
for the Subject Interest within 30 days of appointment. If such appraisal is less than
the lower of the two initial appraisers’ valuation of such consideration, then the
value shall equal the average of the lowest two of the three appraisers’ valuations.
If such appraisal exceeds the higher of the two initial appraisers’ valuations of such
consideration, then the value shall equal the average of the two highest appraisers’
valuations. The appraisers shall employ such persons and incur 

33

 

	 	 	 	such expenses as are
necessary to reach such determination. The Disposing Member shall bear 50% of all fees
and expenses incurred by the appraisers in making such valuation determination, and the
ROFR Buyer(s), collectively, shall bear the other 50% of all such fees and expenses.
The determination of the appraisers shall be final and binding upon the parties.

	 	f)	 	Except for a Disposition to a Permitted Transferee or a Disposition effect in
accordance with and subject to the procedures in Sections 8.01(a)-(e) above, a
Member may not Dispose of a Membership Interest without the prior written approval of
the Management Committee. Any attempted Disposition of a Membership Interest, other
than in strict accordance with this Section 8.01, shall be, and is hereby
declared, null and void to the fullest extent permitted by law. The rights and
obligations constituting a Membership Interest may not be separated, divided, split off
or otherwise separated from the other attributes of a Membership Interest except with
the express prior written approval of the Management Committee and as contemplated by
the express provisions of this Agreement. Notwithstanding the foregoing, a Member may
not effect a Disposition (including a Deemed Tax Disposition) if such Disposition, when
added to the total of all other Dispositions (including Deemed Tax Dispositions) within
the preceding twelve months, results in the Company being considered to have terminated
within the meaning of Section 708(b)(1)(B) of the Code, unless such Disposition has
been approved in accordance with Section 7.02(h)(i)(G).
	 
	 	g)	 	Each Interest Certificate shall bear a legend as specified in Section
8.02(f).

     SECTION 8.02 Membership Interests and Interest Certificates.

	 	a)	 	Each Membership Interest shall constitute a “security” within the meaning of,
and shall be governed by, (i) Article 8 of the Uniform Commercial Code (including
Section 8-102(a)(15) thereof) as in effect from time to time in the State of Delaware
and in the State of New York and (ii) Article 8 of the Uniform Commercial Code of any
other applicable jurisdiction that now or hereafter substantially includes the 1994
revisions to Article 8 thereof as adopted by the American Law Institute and the
National Conference of Commissioners on Uniform State Laws and approved by the American
Bar Association on February 14, 1995.
	 
	 	b)	 	Upon the issuance of Membership Interests to any Member in accordance with the
provisions of this Agreement, the Company may issue one or more Interest Certificates
(as defined herein) in the name of such Member. Each such Interest Certificate shall
be denominated in terms of the percentage of Membership Interests evidenced by such
Interest Certificate and shall be signed by an Officer on behalf of the Company.
“Interest Certificate” means a certificate issued by the Company substantially in the
form of Exhibit A hereto, which evidences the ownership of Membership
Interests. Each Interest Certificate shall bear, in effect, the following legend:
“The Interest shall constitute “securities” within the meaning of, and shall be
governed by, (i) Article 8 of the Uniform Commercial Code (including Section
8-

34

 

	 	 	 	102(a)(15) thereof) as in effect from time to time in the State of Delaware and in
the State of New York and (ii) Article 8 of the Uniform Commercial Code of any other
applicable jurisdiction that now or hereafter substantially includes the 1994 revisions
to Article 8 thereof as adopted by the American Law Institute and the National
Conference of Commissioners on Uniform State Laws and approved by the American Bar
Association on February 14, 1995.”

	 	c)	 	Upon a Member’s Disposition in accordance with the provisions of this
Agreement, including Section 8.01 hereof, of any or all Membership Interests in
the Company represented by a Interest Certificate, the transferee of such Membership
Interests shall deliver such endorsed Interest Certificate to the Company for
cancellation, and the Company shall thereupon issue a new Interest Certificate to such
transferee for the percentage of Membership Interests that is the subject of such
Disposition and, if applicable, cause to be issued to such Member a new Interest
Certificate for that percentage of Membership Interests that were represented by the
canceled Interest Certificate and that are not the subject of such Disposition.
	 
	 	d)	 	The Company shall maintain books for the purpose of registering the Disposition
of Membership Interests. Notwithstanding any other provision of this Agreement, a
Disposition of Membership Interests in the Company requires delivery of an endorsed
Interest Certificate and shall be effective upon registration of such Disposition in
the books of the Company.
	 
	 	e)	 	The Company shall issue a new Interest Certificate in place of any Interest
Certificate previously issued if the holder of the Membership Interests represented by
such Interest Certificate, as reflected on the books and records of the Company:

	 	i)	 	makes proof by affidavit, in form and substance
satisfactory to the Company, that such previously issued Interest
Certificate has been lost, stolen or destroyed;
	 
	 	ii)	 	requests the issuance of a new Interest Certificate
before the Company has notice that such previously issued Interest
Certificate has been acquired by a purchaser for value in good faith and
without notice of an adverse claim;
	 
	 	iii)	 	if requested by the Company, delivers to the Company a
bond, in form and substance satisfactory to the Company, with such surety or
sureties as the Company may direct, to indemnify the Company against any
claim that may be made on account of the alleged loss, destruction or theft
of the previously issued Interest Certificate; and
	 
	 	iv)	 	satisfies any other reasonable requirements imposed by
the Company.

	 	f)	 	In addition to the legend referred to in Section 8.02(b), each Interest
Certificate that is issued shall bear the following legend:

35

 

“TO THE FULLEST EXTENT PERMITTED BY LAW, MEMBER’S LIMITED LIABILITY
COMPANY INTEREST (THE “INTEREST”) IN THE COMPANY IS NOT
TRANSFERABLE EXCEPT AS PROVIDED IN THE AGREEMENT, AND IS OTHERWISE
SUBJECT TO THE TERMS AND CONDITIONS OF THE AGREEMENT AND THE
RESTRICTIONS ON TRANSFER SET FORTH IN THE AGREEMENT, INCLUDING THOSE
IN SECTION 8.01 THEREOF. ”

	 	g)	 	Notwithstanding any provision of this Agreement to the contrary, to the extent
that any provision of this Agreement is inconsistent with any non-waivable provision of
Article 8 of the Uniform Commercial Code, such provision of Article 8 of the Uniform
Commercial Code shall control.

     SECTION 8.03 Creation of Additional Membership Interests. Additional Membership
Interests may be created and issued to existing Members or to other Persons, and such other Persons
may be admitted to the Company as Members, only with the express prior approval of the Management
Committee or all the Members, and without the consent of any Member or any other Person being
required, and, if so approved, only on such terms and conditions as the Management Committee may
determine at the time of such approval or admission. The terms of admission or issuance must
specify the applicable Percentage Interests of the new and existing Members and may provide for the
creation of different classes or groups of Members having different rights, powers and duties,
including rights, powers and duties that are senior in preference to existing Members. Any such
admission shall be effective only after the new Member has executed and delivered to each other
Member an instrument containing the notice address of the new Member, the new Member’s ratification
of this Agreement and agreement to be bound by it, and its confirmation that the representations
and warranties in Section 4.03 are true and correct with respect to it. The provisions of
this Section 8.03 shall not apply to Dispositions of Membership Interests or admissions of
Assignees in connection therewith, such matters being governed by Section 8.01.

     SECTION 8.04 Limitation of Liabilities of Members.

	 	a)	 	Except as otherwise expressly provided by the Act, the debts, obligations and
liabilities of the Company, whether arising in contract, tort or otherwise, shall be
the debts, obligations and liabilities solely of the Company, and the Members shall not
be obligated personally for any such debt, obligation or liability of the Company
solely by reason of being a member of the Company.
	 
	 	b)	 	After the Effective Date, the Management Committee shall, and shall cause the
Officers to, use their respective reasonable efforts to prevent the Company from
entering into any contract, lease, sublease, note, indebtedness, deed of trust or
agreement or document that creates any liability, indebtedness or other obligation
unless there is contained therein an appropriate provision expressly limiting the
claims of all parties to such instruments or agreements and other beneficiaries

36

 

	 	 	 	thereunder to the assets of the Company and expressly waiving any rights of such
parties and other beneficiaries to proceed against any Members for any such Company
obligation, without the prior written consent of all Members.

     SECTION 8.05 Use
of Names and Trademarks. The Company, the Members and
their Affiliates shall not use the name or trademark of any Member or its Affiliates in connection
with public announcements regarding the Company, or marketing or financing activities of the
Company, without the prior consent of such Members or Affiliate, which shall not be unreasonably
withheld.

ARTICLE IX.

DISSOLUTION, WINDING UP AND TERMINATION

     SECTION 9.01 Dissolution. The Company shall dissolve and its affairs shall be wound
up on the first to occur of the following events (each a “Dissolution Event”):

	 	a)	 	notice from the Management Committee to the Members dissolving the Company;
	 
	 	b)	 	entry of a decree of judicial dissolution of the Company under Section 18-802
of the Act;
	 
	 	c)	 	an event that makes it unlawful for all or substantially all of the business or
affairs of the Company to be carried on; or
	 
	 	d)	 	the termination of the legal existence of the last remaining member of the
Company or the occurrence of any other event which terminates the continued membership
of the last remaining member of the Company in the Company, unless the Company is
continued without dissolution in a manner permitted by this Agreement or the Act.

     SECTION 9.02 Winding Up and Termination.

	 	a)	 	On the occurrence of a Dissolution Event, the Liquidator shall, under the
supervision of the Management Committee, proceed diligently to wind up the affairs of
the Company and make final distributions as provided herein and in the Act. The costs
of winding up shall be borne as a Company expense. Until final distribution, the
liquidator shall continue to operate the Company properties with all of the power and
authority of the Members. 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 independent certified public accountants of the
Company’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;

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	 	ii)	 	the Liquidator shall discharge from Company funds all of
the indebtedness of the Company and other debts, liabilities and obligations
of the Company (including liabilities to Members, to the extent permitted by
law); and all expenses incurred in winding up and any loans described in
Section 3.02 or otherwise make reasonable provision for payment and
discharge thereof (including the establishment of a cash escrow fund for
contingent, conditional or unmatured liabilities in such amount and for such
term as the liquidator may reasonably determine in accordance with Section
18-804 of the Act); and
	 
	 	iii)	 	all remaining assets of the Company shall be distributed
to the Members as follows:

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

     (B) with respect to all Company property that has not been sold, the
fair market value of that property shall be determined and the Capital
Accounts of the Members 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 Members if there were a taxable disposition of that property for
the fair market value of that property on the date of distribution; and

     (C) all Company property and all cash in excess of that required to
discharge liabilities or obligations as provided in Section
9.02(a)(ii) shall be distributed to the Members in accordance with, and
to the extent of, the positive balances in their respective Capital
Accounts, as determined after making all Capital Account adjustments
required herein. Distributions pursuant to this Section
9.02(a)(iii)(C) shall be made by the end of the taxable year of the Company during which the liquidation of
the Company occurs (or, if later, the 90th Day after the date of the
liquidation).

	 	b)	 	The distribution of cash or property to a Member in accordance with the
provisions of this Section 9.02 constitutes a complete return to the Member of
its Capital Contributions and a complete distribution to the Member of its Company
Membership Interest and all the Member’s property. To the extent that a Member returns
funds to the Company, it has no claim against any other Member for those funds.
	 
	 	c)	 	No dissolution or termination of the Company shall relieve a Member 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 Company that there
is a reasonable basis for believing will ever be needed again shall be furnished 

38

 

	 	 	 	to the
Liquidator, which shall keep such books and records (subject to review by any Person
that was a Member at the time of dissolution) for a period of 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 Members 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.

     SECTION 9.03 Deficit Capital Accounts. No Member will be required to pay to the
Company, to any other Member or to any third party any deficit balance that may exist from time to
time in another Member’s Capital Account.

     SECTION 9.04 Certificate of Cancellation. On completion of the winding up of the Company
as provided herein and the Act, the Members (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 and take such other actions as may be necessary to terminate the existence of the Company.
Upon the filing of such certificate of cancellation, the existence of the Company shall terminate
(and the term of the Company shall end), except as may be otherwise provided by the Act or other
applicable Law.

ARTICLE X.

TAXES

     SECTION 10.01 Tax Returns. The Tax Matters Member shall prepare and timely file (on
behalf of the Company) all federal, state and local tax returns required to be filed by the Company
and provide all Members, upon request, access to accounting and tax information and schedules as
shall be necessary for the preparation of such Member of its income tax returns and such Member’s
tax information reporting requirements, and provide all Members with a draft of the return for
their review and comment no later than February 15th of the year following. Each Member shall
furnish to the Tax Matters Member all pertinent information in its possession relating to the Company’s
operations that is necessary to enable the Company’s tax returns to be timely prepared and filed.
The Company shall bear the costs of the preparation and filing of its returns.

     SECTION 10.02 Tax Elections. The Company shall make the following elections on the
appropriate tax returns:

	 	a)	 	to adopt as the Company’s fiscal year the calendar year;
	 
	 	b)	 	to adopt the accrual method of accounting;
	 
	 	c)	 	to elect, pursuant to Section 754 of the Code in accordance with the applicable
Treasury Regulations thereunder, to adjust the basis of the Company’s properties;
	 
	 	d)	 	to elect to amortize the organizational expenses of the Company ratably over
the period as permitted by Section 709(b) of the Code; and

39

 

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

The Company intends to be classified as a partnership for federal income tax purposes. Neither the
Company nor any Member shall make an election for the Company 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.

     SECTION 10.03 Tax Matters Member.

	 	a)	 	The Management Committee shall designate El Paso to serve as the “tax matters
partner” of the Company pursuant to Section 6231(a)(7) of the Code (the “Tax Matters
Member”). The Tax Matters Member shall take such action as may be necessary to cause
to the extent possible each other Member to become a “notice partner” within the
meaning of Section 6223 of the Code. The Tax Matters Member shall inform each other
Member of all significant matters that may come to its attention in its capacity as Tax
Matters Member by giving notice thereof on or before the fifth Business Day after
becoming aware thereof and, within that time, shall forward to each other Member copies
of all significant written communications it may receive in that capacity.
	 
	 	b)	 	The Tax Matters Member shall provide any Member, upon request, access to
accounting and tax information and schedules as shall be necessary for the preparation
by such Member of its income tax returns and such Member’s tax information reporting
requirements.
	 
	 	c)	 	Any cost or expense incurred by the Tax Matters Member in connection with its
duties, including the preparation for or pursuance of administrative or judicial
proceedings, shall be reimbursed by the Company.
	 
	 	d)	 	The Tax Matters Member shall not bind any Member to a settlement agreement
without obtaining the consent of such Member. Any Member that enters into a settlement
agreement with respect to any Company item (as described in Code Section 6231(a)(3))
shall notify the other Members of the settlement agreement and its terms on or before
the 90th Day after the date of the settlement.
	 
	 	e)	 	No Member shall file a request pursuant to Code Section 6227 for an
administrative adjustment of Company items for any taxable year without first notifying
the other Members. If the Management Committee consents to the requested adjustment,
the Tax Matters Member shall file the request for the administrative adjustment on
behalf of the Members. 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 Member, including the Tax Matters Member,
may file a request for administrative adjustment on its own behalf. Any Member
intending to file a petition under Code Sections 6226, 6228 or other Code Section with
respect to any item involving the Company shall notify the other Members of such
intention and the nature of the contemplated proceeding. In the case where the Tax
Matters Member is the Member intending to file such petition on 

40

 

	 	 	 	behalf of the Company,
such notice shall be given within a reasonable period of time to allow the other
Members to participate in the selection of the forum in which such petition will be
filed.
	 
	 	f)	 	If any Member intends to file a notice of inconsistent treatment under Code
Section 6222(b), such Member shall give reasonable notice under the circumstances to
the other Members of such intent and the manner in which the Member’s intended
treatment of an item is (or may be) inconsistent with the treatment of that item by the
other Members.

     SECTION 10.04 Amounts Withheld. All amounts required to be withheld pursuant to federal,
state, local, or foreign tax laws shall be treated as amounts actually distributed to the affected
Members for all purposes under this Agreement. The Management Committee is hereby authorized to
withhold from distributions, or with respect to allocations, to the Members and to pay over to any
federal, state, local, or foreign government any amounts required to be so withheld pursuant to
federal, state, local or foreign law.

ARTICLE XI. WITHDRAWAL

     SECTION 11.01 No Right of Withdrawal. No Member shall voluntarily Withdraw from the
Company.

     SECTION 11.02 Deemed Withdrawal. A Member is deemed to have Withdrawn from the
Company upon the occurrence of any of the following events:

	 	a)	 	there occurs an event that makes it unlawful for the Member to continue to be a
Member;
	 
	 	b)	 	the Member commences liquidation or winding up; or
	 
	 	c)	 	notice from the Management Committee if the Member commits a Default and the
Default has not been cured.

     SECTION 11.03 Effect of Withdrawal. A Member that is deemed to have Withdrawn under
Section 11.02 (a “Withdrawn Member”), must comply with the following requirements in
connection with its Withdrawal:

	 	a)	 	The Withdrawn Member ceases to be a Member immediately upon the occurrence of
the applicable Withdrawal event.
	 
	 	b)	 	The Withdrawn Member shall not be entitled to receive any distributions from
the Company except as set forth in Section 11.03(e), and it shall not be
entitled to exercise any right of a Member, including any voting or consent rights or
to receive any further information (or access to information) from the Company. The
Percentage Interest of that Member shall not be taken into account in calculating the
Percentage Interests of the Members for any purposes. This Section 11.03(b)
shall also apply to a Breaching Member; but if a Breaching Member cures its breach

41

 

	 	 	 	during the applicable cure period, then any distributions that were withheld from that
Member shall be paid to it, without interest.
	 
	 	c)	 	The Withdrawn Member must pay to the Company all amounts, if any, that it owes
to the Company.
	 
	 	d)	 	The Withdrawn Member shall remain obligated for all liabilities it may have
under this Agreement or otherwise with respect to the Company 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 Member shall be recorded as a contingent obligation of
the Company, and not as a Capital Account, until payment is made. The rights of a
Withdrawn Member under this Section 11.03(e) shall (i) be subordinate to the
rights of any other creditor of the Company, (ii) not include any right on the part of
the Withdrawn Member to receive any interest (except as may otherwise be provided in
the evidence of any indebtedness of the Company owed to such Withdrawn Member) or other
amounts with respect thereto; (iii) not require the Company to make any distribution
(the Withdrawn Member’s rights under this Section 11.03(e) being limited to
receiving such portion of distributions as the Management Committee may, in its Sole
Discretion, decide to cause the Company to make); (iv) not require any Member to make a
Capital Contribution or a loan to permit the Company to make a distribution or
otherwise to pay the Withdrawn Member; and (v) be treated as a liability of the Company
for purposes of Section 14.03. Except as set forth in this Section
11.03(e), a Withdrawn Member shall not be
entitled to receive any return of its Capital Contributions or other payment from the
Company in respect of its Membership Interest.
	 
	 	f)	 	The Percentage Interest of the Withdrawn Member shall be allocated among the
remaining Members in the proportion that each Member’s Percentage Interest bears to the
total Percentage Interest of all remaining Members, or in such other proportion as the
Members may unanimously agree.
	 
	 	g)	 	Any Representative(s) and Alternate Representative(s) of such Member on the
Management Committee shall cease to be a member of the Management Committee immediately
upon the occurrence of the applicable Withdrawal event.

ARTICLE XII. DISPUTE RESOLUTION

     SECTION 12.01 Disputes. This Article XII 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 XII to a particular dispute. Notwithstanding the foregoing, this Article
XII shall not apply to any matters that, pursuant to the provisions of this Agreement, are to
be resolved by a vote of the Members or a determination by the Management Committee; provided,
however, that

42

 

(i) any matter that is expressly stated herein to be determinable by arbitration may
be so determined pursuant to this Article XII and (ii) if a vote, approval, consent,
determination or other decision must, under the terms of this Agreement, be made (or withheld) in
accordance with a standard other than Sole Discretion (such as a reasonableness standard), then the
issue of whether such standard has been satisfied may be a dispute to which this Article
XII applies. Any dispute to which this Article XII applies is referred to herein as a
“Dispute.” With respect to a particular Dispute, each Member that is a party to such Dispute is
referred to herein as a “Disputing Member.” The provisions of this Article XII shall be
the exclusive method of resolving Disputes.

     SECTION 12.02 Negotiation to Resolve Disputes. If a Dispute arises, any
Disputing Member may initiate the dispute resolution procedure under this Article XII by
notifying the other Disputing Members (a “Dispute Notice”), after which the Disputing Members shall
attempt to resolve such Dispute through the following procedure:

	 	a)	 	first, within 10 Days after receipt of the Dispute Notice, one representative
selected by each Disputing Member 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 efforts to resolve the matter described in Section
12.02(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
Member 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 efforts to resolve the matter described in Section
12.02(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 Members (an “Arbitration Notice”) within the applicable limitation
period provided by law.

     SECTION 12.03 Selection of Arbitrator.

	 	a)	 	For any case in which any claim, or combination of claims, is less than or
equal to $1,000,000, the arbitration shall be heard by a sole Arbitrator. Any case in
which any claim, or combination of claims, exceeds $1,000,000 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 12.03.

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	 	b)	 	For arbitrations conducted by a single Arbitrator, the Disputing Member that
submits a Dispute to arbitration shall designate a proposed neutral sole Arbitrator in
its Arbitration Notice. If any other Disputing Member 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 Members of its objection. All of the
Disputing Members 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 Member may request the
AAA to designate the sole Arbitrator. For arbitrations conducted by a panel of three
Arbitrators, the Disputing Member initiating arbitration shall nominate one Arbitrator
at the time it initiates arbitration. The other Disputing Member(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 interstate
natural gas transportation business in the United States, with at least 10 years of
legal, engineering, or business experience in the gas transportation industry, and
shall be impartial and independent of the Members (and the other Arbitrators, in the
case of arbitrations conducted by a panel of three arbitrators, except for prior
arbitrations). Each Disputing Member 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 Members. 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 12.03.

     SECTION 12.04 Conduct of Arbitration. The Arbitrator(s) shall expeditiously (and, if
possible, on or before the 90th Day after the Arbitrator(s)’s selection) hear and decide all
matters concerning the Dispute. Any arbitration hearing shall be held in Houston, Texas or such
other location as the Disputing Members may mutually agree. 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 Member
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 Members 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 Members, which shall not be unreasonably withheld. Each Disputing Member, the
Arbitrator(s) and any proposed expert shall disclose to the other Disputing Members any business,
personal or other relationship or affiliation that may exist or may have existed between the
Disputing Member (or the Arbitrator(s)) and the proposed expert; and any Disputing Member 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 Members and may be enforced in any court of competent jurisdiction; provided,
however, that the Members 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 Member. The responsibility for paying the
costs and expenses of the arbitration, including compensation to any

44

 

experts retained by the
Arbitrator(s), shall be divided equally among the Disputing Members. Each Disputing Member 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 Members.

ARTICLE XIII.

INDEMNIFICATION

     SECTION 13.01 General. Except to the extent expressly prohibited by the Act, the
Company shall indemnify each Person made or threatened to be made a party to any action or
proceeding, whether civil or criminal, by reason of the fact that such Person or such Person’s
testator or intestate administrator is or was a member, any of their respective Affiliates or
attorneys, or an Officer of the Company, against judgments, fines (including excise taxes assessed
on a Person with respect to an employee benefit plan), penalties, amounts paid in settlement and
reasonable expenses, including reasonable attorneys’ fees, actually and necessarily incurred in
connection with such action or proceeding, or any appeal therefrom; provided that no such
indemnification shall be made if a judgment or other final adjudication adverse to such Person
establishes that his conduct constituted bad faith, fraud, gross negligence or willful misconduct
constituted; and provided, further, that no such indemnification shall be required in connection
with any settlement or other non-adjudicated disposition of any threatened or pending action or
proceeding unless the Company has given its prior consent to such settlement or such other
disposition, which consent shall not be unreasonably withheld.

     SECTION 13.02 Reimbursement. The Company shall advance or promptly reimburse, upon
request, any Person entitled to indemnification hereunder for all expenses, including reasonable
attorneys’ fees, reasonably incurred in defending any action or proceeding in advance of the final
disposition thereof upon receipt of an undertaking by or on behalf of such Person (in form and
substance satisfactory to the Company) to repay such amount if such Person is ultimately found not
to be entitled to indemnification or, where indemnification is granted, to the extent the expenses
so advanced or reimbursed exceed the amount to which such Person is entitled; provided that such
Person shall cooperate in good faith with any request by the Company that common counsel be
utilized by the parties to an action or proceeding who are similarly situated unless to do so would
be inappropriate due to actual or potential conflicts of interest between or among such parties;
and provided, further, that the Company shall only advance attorneys’ fees in
respect of legal counsel approved by the Company, such approval not to be unreasonably withheld.

     SECTION 13.03 Availability. The right to indemnification and advancement of expenses
under this provision is intended to be retroactive and shall be available with respect to any
action or proceeding which relates to events prior to the effective date of this provision.

     SECTION 13.04 Indemnification Agreement. The Company is authorized to enter into
agreements with any of its members, officers, or members of the Management Committee extending
rights to indemnification and advancement of expenses to such Person to the fullest extent
permitted by applicable law, but the failure to enter into any such agreement shall not affect or
limit the rights of such Person pursuant to this provision.

45

 

     SECTION 13.05 Enforceability. In case any provision in this Article XIII
shall be determined at any time to be unenforceable in any respect, the other provisions shall not
in any way be affected or impaired thereby, and the affected provisions shall be given the fullest
possible enforcement in the circumstances, it being the intention of the Company to provide
indemnification and advancement of expenses to its members and officers, acting in such capacities,
to the fullest extent permitted by law.

     SECTION 13.06 No Amendments. No amendment or repeal of this provision shall apply to
or have any effect on the indemnification of, or advancement of expenses to, the Members,
Management Committee or any officer of the Company for, or with respect to, acts or omissions of
such Person or officer occurring prior to such amendment or repeal.

     SECTION 13.07 Not Exclusive. The foregoing shall not be exclusive of any other rights
to which the Members, Management Committee or any officer may be entitled as a matter of law and
shall not affect any rights to indemnification to which Company personnel other than the Management
Committee or officers may be entitled by contract or otherwise.

ARTICLE XIV.

MISCELLANEOUS

     SECTION 14.01 Amendments and Consents. Unless otherwise provided herein this
Agreement may be modified or amended only by a written instrument executed by such Member or
Members holding a Majority Interest.

     SECTION 14.02 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, mail,
facsimile, email or other electronic transmission. A notice, request or consent given under this
Agreement is effective on receipt by the Member or other Person 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 Member must be sent to or made at the addresses given for that Member
on Annex I or in the instrument described in Section 8.02, or such other address as
that Member may specify by notice to the other Members. Any notice, request or consent to the
Company must be given to all of the Members. 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.

     SECTION 14.03 Offset. Whenever the Company is to pay any sum to any Member, any
amounts that Member owes the Company may be deducted from that sum before payment.

     SECTION 14.04 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 Member in the
performance by that Member of its obligations with respect to the Company is not

46

 

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

     SECTION 14.05 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 Members and
their respective successors and permitted assigns.

     SECTION 14.06 Benefits of Agreement. None of the provisions of this Agreement shall
be for the benefit of or enforceable by any creditor of the Company or any Member.

     SECTION 14.07 Integration. This Agreement constitutes the entire agreement pertaining
to the subject matter hereof and supersedes all prior and contemporaneous agreements in connection
therewith. No covenant, representation or condition not expressed in this Agreement shall affect,
or be effective to interpret, change or restrict, the express provisions of this Agreement.

     SECTION 14.08 Headings. The titles of Articles and Sections of this Agreement are for
convenience only and shall not be interpreted to limit or amplify the provisions of this Agreement.

     SECTION 14.09 Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original and all of which, taken together, shall constitute one
and the same instrument, which may be sufficiently evidenced by one counterpart.

     SECTION 14.10 Governing Law; Severability. THIS AGREEMENT IS GOVERNED BY AND SHALL
BE CONSTRUED IN ACCORDANCE WITH THE NGA AND THE RULES AND REGULATIONS OF THE FERC (TO THE EXTENT
APPLICABLE) AND 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; PROVIDED, HOWEVER, THAT, NOTWITHSTANDING THE FOREGOING, ANY MATTERS RELATING TO THE
INTERNAL AFFAIRS OF THE COMPANY (INCLUDING THE FORMATION, MANAGEMENT AND TERMINATION OF THE
COMPANY) SHALL BE GOVERNED BY THE LAWS OF THE STATE OF DELAWARE. WITHOUT LIMITING THE PROVISIONS OF
ARTICLE XII AND SUBJECT TO THE TERMS OF SECTION 12.04 REGARDING THE ENFORCEMENT OF
ANY ARBITRATOR(S)’ DECISION IN ANY COURT OF COMPETENT JURISDICTION, 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

47

 

provides
that it may be varied or superseded in a limited liability company agreement (or otherwise by
agreement of the members of a limited liability company), 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 Member or
circumstance is held invalid or unenforceable to any extent, (a) the remainder of this Agreement
and the application of that provision to other Members or circumstances is not affected thereby,
and (b) the Members shall negotiate in good faith to replace that provision with a new provision
that is valid and enforceable and that puts the Members in substantially the same economic,
business and legal position as they would have been in if the original provision had been valid and
enforceable.

[Remainder of page intentionally left blank; signature follows.]

48

 

     IN WITNESS WHEREOF, this Agreement has been duly executed by the Members effective as of the
date first set forth above.

	 	 	 	 	 
	 	Members:

EL PASO CORPORATION

 	 
	 	By:  	/s/ D. Mark Leland
 	 
	 	 	D. Mark Leland 	 
	 	 	Executive Vice President 	 
	 
	 	EL PASO PIPELINE PARTNERS OPERATING

COMPANY, L.L.C.

 	 
	 	By:  	/s/ John J. Hopper
 	 
	 	 	John J. Hopper 	 
	 	 	Vice President and Treasurer 	 
	 

[SIGNATURE PAGE TO A&R LLC AGREEMENT OF SOUTHERN LNG]

 

 

Exhibit A

FORM OF LLC INTEREST CERTIFICATE

[See attached.]

 

 

Exhibit A

FORM OF

LLC INTEREST CERTIFICATE

SOUTHERN LNG COMPANY, L.L.C.,

a Delaware limited liability company

[______ __], 2010

No. ________

     THIS CERTIFIES THAT (a) [___] (the “Member”) is the owner of [___]Units of
Southern LNG Company, L.L.C., a Delaware limited liability company (the “Company”) and (b)
the Member is entitled to all the rights and privileges and subject to all the obligations,
restrictions, and limitations of a Member of the Company in accordance with the provisions of the
Amended and Restated Limited Liability Company Agreement of the Company, dated as of March [___],
2010, as amended from time to time (the “Agreement”). TO THE FULLEST EXTENT PERMITTED BY
LAW, MEMBER’S LIMITED LIABILITY COMPANY INTEREST (THE “INTEREST”) IN THE COMPANY IS NOT
TRANSFERABLE EXCEPT AS PROVIDED IN THE AGREEMENT, AND IS OTHERWISE SUBJECT TO THE TERMS AND
CONDITIONS OF THE AGREEMENT AND THE RESTRICTIONS ON TRANSFER SET FORTH IN THE AGREEMENT, INCLUDING
THOSE IN SECTION 8.01 THEREOF. Capitalized terms used and not otherwise defined herein
shall have the respective meanings ascribed thereto in the Agreement.

     The Interest shall constitute “securities” within the meaning of, and governed by, (i) Article
8 of the Uniform Commercial Code (including Section 8-102(a)(15) thereof) as in effect from time to
time in the State of Delaware and in the State of New York and (ii) Article 8 of the Uniform
Commercial Code of any other applicable jurisdiction that now or hereafter substantially includes
the 1994 revisions to Article 8 thereof as adopted by the American Law Institute and the National
Conference of Commissioners on Uniform State Laws and approved by the American Bar Association on
February 14, 1995.

     This Interest Certificate shall be governed by the laws of the State of Delaware (without
reference to conflicts of laws).

[Remainder of page intentionally left blank; signature page follows.]

3

 

     IN WITNESS WHEREOF, the Company has caused this Interest Certificate to be signed by a duly
authorized officer and the issuance recorded in its limited liability company books as of the date
first set forth above.

	 	 	 	 	 
	 	SOUTHERN LNG COMPANY, L.L.C.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

THE INTEREST REPRESENTED BY THIS INTEREST CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED PURSUANT
TO THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY BE OFFERED
AND SOLD ONLY IF SO REGISTERED AND QUALIFIED OR IF AN EXEMPTION FROM SUCH REGISTRATION AND
QUALIFICATION EXISTS.

4

 

ANNEX I

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Number of	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Representatives and	 	 	 	Identity of
	Member Identity	 	 	 	 	 	Percentage	 	Alternate	 	Identity of	 	Alternate
	and Address	 	Number of  Units	 	Interest	 	Representatives	 	Representatives	 	Representatives
	El Paso Corporation

	 	 	49	 	 	 	49	%	 	1 Representatives
	 	Daniel B. Martin	 	 
	1001 Louisiana

	 	 	 	 	 	 	 	 	 	and up to 1	 	 	 	 
	Houston, Texas 

77002

	 	 	 	 	 	 	 	 	 	Alternate	 	 	 	 
	Attention: ______
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	El Paso Pipeline

	 	 	51	 	 	 	51	%	 	3 Representatives
	 	James C. Yardley	 	 
	Partners Operating

	 	 	 	 	 	 	 	 	 	and up to
	 	Norman G. Holmes	 	 
	Company, L.L.C.

	 	 	 	 	 	 	 	 	 	3 Alternates
	 	Michael J. Varagona	 	 
	El Paso Building
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	1001 Louisiana
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Houston, Texas 

77002
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Attention: ______exv10w1

Exhibit 10.1

AMENDMENT

TO

EMPLOYMENT OFFER LETTER

(Bhaskar Chaudhuri)

     AMENDMENT TO EMPLOYMENT OFFER LETTER, dated as of March 31, 2010 (the “Amendment”),
between Valeant Pharmaceuticals International (the “Company”) and Bhaskar Chaudhuri (the
“Executive”).

RECITALS

     WHEREAS, the Company and Executive previously entered into that certain employment offer
letter, dated as of March 10, 2009 (the “Effective Date”), which sets forth the terms and
conditions of Executive’s employment with the Company (the “Employment Letter”);

     WHEREAS, the Company and Executive desire to amend the Employment Letter as set forth herein;
and

     NOW, THEREFORE, the Company and Executive hereby agree that, effective as of the date set
forth above, the Employment Letter shall be amended as follows:

     A. Severance Benefits. The first two bullet points of the Section entitled
“Severance Benefits” are amended and restated to read as follows:

	 	•	 	The Company will pay you an amount equal to 1.6 times your annual salary as of the
date of your termination, provided that, if your termination occurs either in
contemplation of a Change in Control or at any time within twelve (12) months following
a Change in Control, the Company shall instead pay you an amount equal to two times the
sum of (A) your annual salary as of the date of termination, plus (B) your annual
target bonus as of the date of your termination.
	 
	 	•	 	The Company will pay you any accrued but unpaid salary or vacation pay and any
deferred compensation. In addition, the Company will pay you any bonus earned but
unpaid in respect of any fiscal year preceding the termination date. The Company will
also pay you a bonus in respect of the fiscal year in which the termination date
occurs, as though you had continued in employment until the payment of bonuses by the
Company to its executives for such fiscal year, in an amount equal to the product of
(A) the lesser of (x) the bonus that you would have been entitled to receive based on
actual achievement against the stated performance objectives or (y) the bonus that you
would have been entitled to receive assuming that the applicable performance objectives
for such fiscal year were achieved at “target”, and (B) a fraction (i) the numerator of
which is the number of days in such fiscal year through termination date and (ii) the
denominator of which is 365; provided that, if your termination occurs either in
contemplation of a Change in Control or at any time within twelve (12) months following
a Change in Control, then in the foregoing calculation the amount under

 

 

(A) shall be equal to (y). Any bonus payable to you under this bullet shall be paid
in no event later than March 15 of the calendar year following the calendar year in
which the termination date occurs.

     B. Performance Restricted Share Units. The Section entitled “Performance Restricted
Share Units” is amended by adding a new subsection (8) that reads as follows:

	 	8.	 	Notwithstanding the foregoing vesting provisions of the 2009 Performance Units,
if the financial performance-based goal approved by the Compensation Committee prior to
April 1, 2010 for the service and performance period beginning on or after April 1,
2010 (the “Performance Goal”) is achieved as certified by the Compensation
Committee following the end of the performance period for such goal, then you shall
vest in the first tranche of 77,839 2009 Performance Units that could have been earned
under subsection (1) above; provided that you are employed by the Company on such
vesting date; and provided further that vesting under this subsection (8) shall reduce
by 77,839 the number of 2009 Performance Units that you could vest in under subsections
(2) and (3) above, and eliminate the first tranche of 77,839 2009 Performance Units
that you could vest in under subsection (1) above; and provided further that any
vesting under this subsection (8) shall be conditioned on issuance by the Internal
Revenue Service on or before March 5, 2011 of a favorable private letter ruling that
such vesting upon the achievement of the Performance Goal will meet the requirements
for the 2009 Performance Units to qualify as other performance-based compensation
exempt from the limitations applicable under Section 162(m) of the Internal Revenue
Code (the “Private Letter Ruling”). The Company shall distribute to you a
number of shares of its common stock equal to the number of 2009 Performance Units that
become vested under this subsection within 10 days of the later to occur of (A) the
vesting date of such 2009 Performance Units and (B) receipt of such Private Letter
Ruling, but in no event later than March 15, 2011. Notwithstanding anything else in
this subsection (8), if the Internal Revenue Service does not issue the Private Letter
Ruling on or before March 5, 2011: (x) this subsection (8) shall be rendered void and
without effect (other than subclause (y) which follows), and no vesting of the related
2009 Performance Units shall be deemed to have occurred due to achievement of the
Performance Goal and (y) the multiplier in first bullet point of the Section entitled
“Severance Benefits” shall be increased from “1.6” to “2.1”.

     C. Release. The following new paragraph shall be added at the end of the Section
entitled “Severance Benefits:”

	 	 	 	Notwithstanding anything herein to the contrary, in no event shall the timing of
your execution of the general release, directly or indirectly, result in you
designating the calendar year of payment, and if a payment that is subject to
execution of the general release could be made in more than one taxable year,
payment shall be made in the later taxable year.

2

 

     D. This Amendment may be signed in counterparts and a signed fax or PDF shall be treated as an
original.

     E. In all respects not modified by this Amendment, the Employment Letter is hereby ratified
and confirmed.

     IN WITNESS WHEREOF, the Company and the Executive agree to the terms of this Amendment to
Employment Offer Letter, effective as of the date set forth above.

	 	 	 	 	 
	 	VALEANT PHARMACEUTICALS INTERNATIONAL

 	 
	 	By:  	/s/ J. Michael Pearson
 	 
	 	 	Name:  	J. Michael Pearson 	 
	 	 	Title:  	Chairman and Chief Executive Officer 	 
	 
	 	EXECUTIVE

 	 
	 	/s/ Bhaskar Chaudhuri
 	 
	 	Bhaskar Chaudhuri 	 
	 	 	 
	 

3

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