Table of Contents


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 _________________________
FORM 6-K
 _________________________
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2020
Commission file number 1- 12874
 _________________________
TEEKAY CORPORATION
(Exact name of Registrant as specified in its charter)
 _________________________
Suite 2000, Bentall 5
550 Burrard Street
Vancouver, BC, V6C 2K2, Canada
(Address of principal executive office)
 _________________________
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F  ý            Form 40- F  ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1).
Yes  ¨            No   ý
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7).
Yes  ¨            No   ý







 

Page 1

Table of Contents


TEEKAY CORPORATION AND SUBSIDIARIES
REPORT ON FORM 6-K FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2020
INDEX

 
PAGE
 
 


Page 2

Table of Contents



ITEM 1 – FINANCIAL STATEMENTS
TEEKAY CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(in thousands of U.S. Dollars, except share and per share amounts)
 
 
Three Months Ended March 31,
 
2020
 
2019
 
$
 
$
Revenues (note 3)
574,054

 
486,873

Voyage expenses
(121,564
)
 
(108,783
)
Vessel operating expenses
(153,293
)
 
(156,992
)
Time-charter hire expenses (note 6)
(27,056
)
 
(29,838
)
Depreciation and amortization
(72,917
)
 
(72,107
)
General and administrative expenses
(18,277
)
 
(22,972
)
Write-down and loss on sale (note 7)
(94,606
)
 
(3,328
)
Gain on commencement of sales-type lease (note 3)
44,943

 

Restructuring charges (note 14)
(2,388
)
 
(8,621
)
Income from vessel operations
128,896


84,232

Interest expense
(62,520
)

(73,671
)
Interest income
2,803

 
2,689

Realized and unrealized losses on non-designated derivative instruments (note 16)
(21,663
)
 
(5,423
)
Equity income (loss) (note 4 and 13b)
2,313

 
(61,653
)
Foreign exchange gain (loss) (notes 10 and 16)
6,646

 
(2,630
)
Other (loss) income
(681
)

28

Income (loss) before income taxes
55,794

 
(56,428
)
Income tax expense (note 17)
(3,792
)
 
(5,036
)
Net income (loss)
52,002

 
(61,464
)
Net income attributable to non-controlling interests
(101,807
)
 
(22,793
)
Net loss attributable to the shareholders of Teekay Corporation
(49,805
)
 
(84,257
)
Per common share of Teekay Corporation (note 18)
 
 
 
•  Basic loss attributable to shareholders of Teekay Corporation
(0.49
)
 
(0.84
)
•  Diluted loss attributable to shareholders of Teekay Corporation
(0.49
)
 
(0.84
)
Weighted average number of common shares outstanding (note 18)
 
 
 
•  Basic and Diluted
100,887,551

 
100,520,421


The accompanying notes are an integral part of the unaudited consolidated financial statements.

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TEEKAY CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands of U.S. Dollars)
 
 
Three Months Ended March 31,
 
2020
 
2019
 
$
 
$
Net income (loss)
52,002

 
(61,464
)
Other comprehensive loss:
 
 
 
Other comprehensive loss before reclassifications
 
 
 
Unrealized loss on qualifying cash flow hedging instruments
(57,552
)
 
(21,509
)
Pension adjustments, net of taxes
(15
)
 
(87
)
Amounts reclassified from accumulated other comprehensive loss relating to:
 
 
 
Realized loss (gain) on qualifying cash flow hedging instruments
 
 
 
To interest expense (note 16)
152

 
(251
)
To equity income (loss)
3,504

 
(500
)
Other comprehensive loss
(53,911
)
 
(22,347
)
Comprehensive loss
(1,909
)
 
(83,811
)
Comprehensive income attributable to non-controlling interests
(65,520
)
 
(7,693
)
Comprehensive loss attributable to shareholders of Teekay Corporation
(67,429
)
 
(91,504
)
The accompanying notes are an integral part of the unaudited consolidated financial statements.

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TEEKAY CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(in thousands of U.S. Dollars, except share amounts)
 
 
As at
March 31,
2020
 
As at
December 31,
2019
 
$
 
$
ASSETS

 
 
Current

 
 
Cash and cash equivalents (note 10 and 19)
564,401

 
353,241

Restricted cash – current (note 19)
40,444

 
56,777

Accounts receivable, including non-trade of $7,590 (2019 – $12,793)
205,548

 
199,957

Accrued revenue
66,900

 
107,111

Prepaid expenses and other (notes 3 and 16)
87,257

 
86,338

Current portion of net investments in direct financing and sales-type leases

80,720

 
273,986

Assets held for sale (note 20b)
50,818

 
65,458

Total current assets
1,096,088

 
1,142,868

Restricted cash – non-current (note 19)
83,408

 
44,849

Vessels and equipment (note 10)


 
 
At cost, less accumulated depreciation of $1,229,094 (2019 – $1,259,404) (notes 7 and 13)
2,448,226

 
2,654,466

Vessels related to finance leases, at cost, less accumulated amortization of $272,807 (2019 – $253,553) (note 6)
2,205,845

 
2,219,026

Operating lease right-of-use assets (note 6)
91,624

 
159,638

Total vessels and equipment
4,745,695

 
5,033,130

Net investment in direct financing and sales-type leases – non-current (notes 3 and 13b)
544,821

 
544,823

Investment in and loans to equity-accounted investments (notes 4,12a and 13b)
1,083,741

 
1,173,728

Goodwill, intangibles and other non-current assets (note 16)
130,051

 
133,466

Total assets
7,683,804

 
8,072,864

LIABILITIES AND EQUITY


 
 
Current


 
 
Accounts payable
133,215

 
135,496

Accrued liabilities and other (notes 8, 14 and 16)
294,425

 
295,001

Short-term debt (note 9)
55,000

 
50,000

Current portion of long-term debt (note 10)
418,293

 
523,312

Current obligations related to finance leases (note 6)
96,231

 
95,339

Current portion of operating lease liabilities (note 6)
36,879

 
61,431

Liabilities related to assets held for sale (note 20b)
2,535

 
2,980

Total current liabilities
1,036,578

 
1,163,559

Long-term debt (note 10)
2,155,125

 
2,303,840

Long-term obligations related to finance leases (note 6)
1,705,975

 
1,730,353

Long-term operating lease liabilities (note 6)
46,577

 
87,171

Other long-term liabilities (notes 8 and 16)
252,885

 
216,348

Total liabilities
5,197,140

 
5,501,271

Commitments and contingencies (notes 6, 9, 10, 12, and 16)


 


Equity


 
 
Common stock and additional paid-in capital ($0.001 par value; 725,000,000 shares authorized; 101,108,033 shares outstanding and issued (2019 – 100,784,422)) (note 11)
1,053,522

 
1,052,284

Accumulated deficit
(610,793
)
 
(546,684
)
Non-controlling interest
2,085,617

 
2,089,730

Accumulated other comprehensive loss (note 15)
(41,682
)
 
(23,737
)
Total equity
2,486,664

 
2,571,593

Total liabilities and equity
7,683,804

 
8,072,864

The accompanying notes are an integral part of the unaudited consolidated financial statements.

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TEEKAY CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of U.S. Dollars)
 
Three Months Ended March 31,
 
2020
 
2019
 
$
 
$
Cash, cash equivalents and restricted cash provided by (used for)
 
 
 
OPERATING ACTIVITIES
 
 
 
Net income (loss)
52,002

 
(61,464
)
Non-cash and non-operating items:
 
 
 
Depreciation and amortization
72,917

 
72,107

Unrealized loss on derivative instruments (note 16)
68,236

 
5,642

Write-down and loss on sale (note 7)
94,606

 
3,328

Gain on commencement of sales-type lease (note 3)
(44,943
)
 

Equity loss, net of dividends received
4,187

 
68,661

Income tax expense (note 17)
3,792

 
5,036

Foreign currency exchange gain and other
(55,086
)
 
7,236

Direct financing lease payments received
264,072

 
3,025

Change in operating assets and liabilities
(18,525
)
 
16,295

Expenditures for dry docking
(2,299
)
 
(14,712
)
Net operating cash flow
438,959

 
105,154

FINANCING ACTIVITIES
 
 
 
Proceeds from issuance of long-term debt, net of issuance costs
870,639

 
138,082

Prepayments of long-term debt
(1,002,414
)
 
(176,581
)
Scheduled repayments of long-term debt (note 10)
(70,225
)
 
(54,877
)
Proceeds from short-term debt
135,000

 

Prepayment of short-term debt
(130,000
)
 

Proceeds from financing related to sale-leaseback of vessels

 
158,680

Repayments of obligations related to finance leases
(23,488
)
 
(23,199
)
Repurchase of Teekay LNG common units
(15,635
)
 
(9,497
)
Distributions paid from subsidiaries to non-controlling interests
(16,353
)
 
(13,892
)
Cash dividends paid

 
(5,523
)
Other financing activities

 
(24
)
Net financing cash flow
(252,476
)
 
13,169

INVESTING ACTIVITIES
 
 
 
Expenditures for vessels and equipment

(8,685
)
 
(124,540
)
Proceeds from sale of vessels and equipment (note 7)
60,915

 

Investment in equity-accounted investments

 
(2,864
)
Loan repayment by joint venture
2,000

 

Other investing activities
(6,430
)
 
(255
)
Net investing cash flow
47,800

 
(127,659
)
Increase (decrease) in cash, cash equivalents, restricted cash and cash held for sale
234,283

 
(9,336
)
Cash, cash equivalents, restricted cash and cash held for sale, beginning of the period
456,325

 
505,639

Cash, cash equivalents, restricted cash and cash held for sale, end of the period
690,608

 
496,303

Supplemental cash flow information (note 19)
 
 
 
The accompanying notes are an integral part of the unaudited consolidated financial statements.

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TEEKAY CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN TOTAL EQUITY
(in thousands of U.S. Dollars, except share amounts)
 
TOTAL EQUITY
 
Thousands
of Shares
of Common
Stock
Outstanding
#
 
Common
Stock and
Additional
Paid-in
Capital
$
 
Accumulated
Deficit
$
 
Accumulated
Other
Compre-
hensive
Loss
$
 
Non-
controlling
Interests
$
 
Total
$
Balance as at December 31, 2019
100,784

 
1,052,284

 
(546,684
)
 
(23,737
)
 
2,089,730

 
2,571,593

Net (loss) income

 

 
(49,805
)
 

 
101,807

 
52,002

Other comprehensive loss

 

 

 
(17,624
)
 
(36,287
)
 
(53,911
)
Dividends declared:
 
 
 
 
 
 
 
 
 
 
 
Other dividends

 

 

 

 
(16,353
)
 
(16,353
)
Employee stock compensation and other (note 11)
324

 
1,238

 

 

 

 
1,238

Change in accounting policy (note 2)

 

 
(17,216
)
 

 
(36,084
)
 
(53,300
)
Changes to non-controlling interest from equity contributions and other

 

 
2,912

 
(321
)
 
(17,196
)
 
(14,605
)
Balance as at March 31, 2020
101,108

 
1,053,522

 
(610,793
)
 
(41,682
)
 
2,085,617

 
2,486,664



 
TOTAL EQUITY
 
Thousands
of Shares
of Common
Stock
Outstanding
#
 
Common
Stock and
Additional
Paid-in
Capital
$
 
Accumulated
Deficit
$
 
Accumulated
Other
Compre-
hensive
Loss
$
 
Non-
controlling
Interests
$
 
Total
$
Balance as at December 31, 2018
100,435

 
1,045,659

 
(234,395
)
 
(2,273
)
 
2,058,037

 
2,867,028

Net (loss) income

 

 
(84,257
)
 

 
22,793

 
(61,464
)
Other comprehensive loss

 

 

 
(7,247
)
 
(15,100
)
 
(22,347
)
Dividends declared:
 
 
 
 
 
 
 
 
 
 
 
Common stock ($0.055 per share)

 

 
(5,385
)
 

 

 
(5,385
)
Other dividends

 

 

 

 
(13,892
)
 
(13,892
)
Employee stock compensation and other (note 11)
264

 
2,964

 

 

 

 
2,964

Change in accounting policy

 

 
606

 
(1,604
)
 
(1,993
)
 
(2,991
)
Changes to non-controlling interest from equity contributions and other

 

 
1,526

 

 
(9,349
)
 
(7,823
)
Balance as at March 31, 2019
100,699

 
1,048,623

 
(321,905
)
 
(11,124
)
 
2,040,496

 
2,756,090

The accompanying notes are an integral part of the unaudited consolidated financial statements.












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Table of Contents
TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, other than share and per share data)


1.
Basis of Presentation
The unaudited interim consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (or GAAP). They include the accounts of Teekay Corporation (or Teekay), which is incorporated under the laws of the Republic of the Marshall Islands, its wholly-owned or controlled subsidiaries and any variable interest entities (or VIEs) of which Teekay is the primary beneficiary (collectively, the Company).

Certain of Teekay’s significant non-wholly owned subsidiaries are consolidated in these financial statements even though Teekay owns less than a 50% ownership interest in the subsidiaries. These significant subsidiaries include the publicly-traded subsidiaries Teekay LNG Partners L.P. (or Teekay LNG) and Teekay Tankers Ltd. (or Teekay Tankers).
 
Certain information and footnote disclosures required by GAAP for complete annual financial statements have been omitted from these unaudited interim consolidated financial statements and, therefore, these financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2019, included in the Company’s Annual Report on Form 20-F, filed with the U.S. Securities and Exchange Commission (or SEC) on April 8, 2020. In the opinion of management, these unaudited interim consolidated financial statements reflect all adjustments, consisting of a normal recurring nature, necessary to present fairly, in all material respects, the Company’s consolidated financial position, results of operations, cash flows and changes in total equity for the interim periods presented. The results of operations for the three months ended March 31, 2020, are not necessarily indicative of those for a full fiscal year. Significant intercompany balances and transactions have been eliminated upon consolidation.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. It is possible that the amounts recorded as derivative assets and liabilities could vary by material amounts prior to their settlement.

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (or COVID-19) as a pandemic. Given the dynamic nature of these circumstances, the full extent to which the COVID-19 pandemic may have direct or indirect impact on the Company's business and the related financial reporting implications cannot be reasonably estimated at this time, though could materially affect the Company's business, results of operations and financial condition in the future. At this time, the Company has not yet experienced any material negative impacts to its business, results of operations, or financial position as a result of COVID-19, other than it being a contributing factor to the write-down of six of Teekay LNG's multi-gas vessels and one FPSO unit as described in Note 7 - Write-down and Loss on Sale.

Voyage expenses incurred that are recoverable from the Teekay Tankers' customers in connection with its voyage charter contracts are reflected in voyage charter revenues and voyage expenses. The Company recast prior periods to reflect this presentation. This had the impact of increasing both voyage charter revenues and voyage expenses by $5.7 million for the quarter ended March 31, 2019.
2. Recent Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board (or FASB) issued Accounting Standards Update 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (or ASU 2016-13). ASU 2016-13 introduces a new credit loss methodology, which requires earlier recognition of potential credit losses, while also providing additional transparency about credit risk. This new credit loss methodology utilizes a lifetime “expected credit loss” measurement objective for the recognition of credit losses for loans, held-to-maturity debt securities and other receivables at the time the financial asset is originated or acquired. The expected credit losses are subsequently adjusted each period for changes in expected lifetime credit losses. This methodology replaces multiple impairment methods under previous GAAP for these type of assets, which generally required that a loss be incurred before it was recognized.

The Company adopted this update on January 1, 2020 with a modified-retrospective approach, whereby a cumulative-effect adjustment was made to reduce retained earnings on January 1, 2020 without any retroactive application to prior periods. The Company's net investment in direct financing and sales-type leases, loans to equity-accounted investments, guarantees of indebtedness of equity-accounted investments and receivables related to non-operating lease revenue arrangements are subject to ASU 2016-13. On adoption, the Company decreased the carrying value of investment in and loans to equity-accounted investments by $40.0 million, non-controlling interest by $36.1 million, retained earnings by $17.2 million and net investment in direct financing and sales-type leases by $11.2 million, and increased its other long-term liabilities by $2.1 million. The cumulative adjustment recorded on initial adoption of this update does not reflect an increase in credit risk exposure to the Company compared to previous periods presented.

In December 2019, the FASB issued ASU 2019-12 - Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes (or ASU 2019-12), as part of its initiative to reduce complexity in the accounting standards. The amendments in ASU 2019-12 eliminate certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences, among other changes. The guidance becomes effective for annual reporting periods beginning after December 15, 2020 and interim periods within those fiscal years with early adoption permitted, including adoption in any interim period. The Company is currently evaluating the effect of adopting this new guidance.


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Table of Contents
TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, other than share and per share data)

3. Revenues
The Company’s primary source of revenue is chartering its vessels and offshore units to its customers. The Company utilizes four primary forms of contracts, consisting of time-charter contracts, voyage charter contracts, bareboat charter contracts and contracts for FPSO units. The Company also generates revenue from the management and operation of vessels owned by third parties and by equity-accounted investments as well as by providing corporate management services to such third-party entities. For a description of these contracts, see "Item 18 – Financial Statements: Note 2" in the Company’s Annual Report on Form 20-F for the year ended December 31, 2019.

Revenue Table
The following tables contain the Company’s revenue for the three months ended March 31, 2020 and 2019, by contract type, by segment and by business lines within segments.
 
Three Months Ended March 31, 2020
 
Teekay LNG
Liquefied
Gas
Carriers
Teekay LNG
Conventional
Tankers
Teekay
Tankers
Conventional
Tankers
Teekay
Parent
Offshore
Production
Teekay
Parent
Other
Eliminations
and Other
Total
 
 
 
$
$
$
$
$
$
$
Time charters
130,545


15,567


4,957



151,069

Voyage charters
7,317


317,478




324,795

FPSO contracts



45,933



45,933

Management fees and other
2,025


8,855


41,377


52,257

 
139,887


341,900

45,933

46,334


574,054


 
Three Months Ended March 31, 2019
 
Teekay LNG
Liquefied
Gas
Carriers
Teekay LNG
Conventional
Tankers
Teekay
Tankers
Conventional
Tankers
Teekay
Parent
Offshore
Production
Teekay
Parent
Other
Eliminations
and Other
Total
 
 
 
$
$
$
$
$
$
$
Time charters
130,775

2,762

3,410


6,269


143,216

Voyage charters
9,160


222,077




231,237

Bareboat charters
6,062






6,062

FPSO contracts



49,438



49,438

Management fees and other
985


12,674


44,390

(1,129
)
56,920

 
146,982

2,762

238,161

49,438

50,659

(1,129
)
486,873


The following table contains the Company's total revenue for the three months ended March 31, 2020 and 2019, by those contracts or components of contracts accounted for as leases and by those contracts or components not accounted for as leases.
 
 
Three Months Ended March 31,
 
 
 
2020
 
2019
 
 
 
$
 
$
 
Lease revenue
 
 
 
 
 
Lease revenue from lease payments of operating leases
 
486,183

 
388,794

 
Interest income on lease receivables
 
12,666

 
12,794

 
Variable lease payments  cost reimbursements (1)
 
13,190

 
12,008

 
Variable lease payments – other (2)
 
5,218

 
10,832

 
 
 
517,257

 
424,428

 
Non-lease revenue
 
 
 
 
 
Non-lease revenue  related to sales-type or direct financing leases
 
4,540

 
5,525

 
Management fees and other income
 
52,257

 
56,920

 
 
 
56,797

 
62,445

 
Total
 
574,054

 
486,873

 
(1)
Reimbursement for vessel operating expenditures and dry-docking expenditures received from the Company's customers relating to such costs incurred by the Company to operate the vessel for the customer.

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Table of Contents
TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, other than share and per share data)

(2)
Compensation from time-charter contracts based on spot market rates in excess of a base daily hire amount, production tariffs based on the volume of oil produced, the price of oil, and other monthly or annual operational performance measures.
Operating Leases

As at March 31, 2020, the minimum scheduled future rentals to be received by the Company in each of the next five years for the lease and non-lease elements related to time-charters, bareboat charters and FPSO contracts that were accounted for as operating leases were approximately $465.1 million (remainder of 2020), $545.1 million (2021), $442.0 million (2022), $334.9 million (2023) and $259.3 million (2024).

Minimum scheduled future revenues should not be construed to reflect total charter hire revenues for any of the years. Minimum scheduled future revenues do not include revenue generated from new contracts entered into after March 31, 2020, revenue from unexercised option periods of contracts that existed on March 31, 2020, revenue from vessels in the Company’s equity-accounted investments, or variable or contingent revenues accounted for under ASC 842 Leases. In addition, minimum scheduled future operating lease revenues presented in this paragraph have been reduced by estimated off-hire time for any periodic maintenance. The amounts may vary given unscheduled future events such as vessel maintenance.

The net carrying amount of the vessels employed on time-charter contracts, bareboat charter contracts and FPSO contracts that have been accounted for as operating leases at March 31, 2020 was $3.0 billion (December 31, 2019$3.1 billion). At March 31, 2020, the cost and accumulated depreciation of such vessels were $3.8 billion (December 31, 2019$3.9 billion) and $0.8 billion (December 31, 2019$0.8 billion), respectively.

Net Investment in Direct Financing Leases and Sales-Type Leases
On March 27, 2020, the Company entered into a bareboat charter with Britoil Limited (or BP) a subsidiary of BP p.l.c. for the Petrojarl Foinaven FPSO for a period up to December 2030. BP may cancel the charter on six-months notice. Under the terms of this charter, Teekay received a cash payment of approximately $67 million in April 2020 and will receive a nominal per day rate over the life of the contract and a lump sum payment at the end of the contract period, which is expected to cover the costs of recycling the FPSO unit in accordance with the EU ship recycling regulations. The charter was classified and accounted for as a sales-type lease. Consequently, the Company recognized a net investment in sales-type lease of $81.9 million and an asset retirement obligation of $6.1 million, derecognized the carrying value of the Petrojarl Foinaven FPSO and related customer contract, and recognized a gain of $44.9 million in the three months ended March 31, 2020.

As at March 31, 2020, Teekay LNG had three liquefied natural gas (or LNG) carriers, excluding vessels in its equity-accounted joint ventures, which are accounted for as direct financing leases. For a description of Teekay LNG's LNG carriers accounted for as direct financing leases, see "Item 18 – Financial Statements: Note 2" to the Company's Annual Report on Form 20-F for the year ended December 31, 2019.

As at December 31, 2019, Teekay LNG had two additional LNG carriers, the WilForce and the WilPride, that were chartered to Awilco LNG ASA (or Awilco) and were accounted for as sales-type leases. In January 2020, Awilco purchased both carriers from Teekay LNG and paid Teekay LNG the associated purchase obligation and deferred hire amounts totaling over $260 million relating to these two vessels.

As at March 31, 2020, estimated minimum lease payments to be received related to direct financing and sales-type leases in each of the next five years were approximately $115.6 million (remainder of 2020), $64.6 million (2021), $64.6 million (2022), $64.4 million (2023), $64.7 million (2024) and an aggregate of $522.3 million thereafter. The leases are scheduled to end between 2025 and 2039.
Contract Liabilities

The Company enters into certain customer contracts that result in situations where the customer will pay consideration upfront for performance to be provided in the following month or months. These receipts are contract liabilities and are presented as deferred revenue until performance is provided. As at March 31, 2020, December 31, 2019, March 31, 2019 and January 1, 2019, there were contract liabilities of $28.1 million, $32.4 million, $22.4 million and $26.4 million, respectively. During the three months ended March 31, 2020 and March 31, 2019, the Company recognized $32.4 million and $26.4 million of revenue, respectively, that was recognized as a contract liability at the beginning of such three-month periods.
4. Related Party Transactions
On May 8, 2019, Teekay sold to Brookfield Business Partners L.P. (or Brookfield) all of the Company’s remaining interests in Altera Infrastructure L.P. (or Altera) (previously known as Teekay Offshore Partners L.P (or Teekay Offshore)), which included the Company’s 49% general partner interest, common units, warrants, and an outstanding $25 million loan from the Company to Altera (described below), for total cash proceeds of $100 million (or the 2019 Brookfield Transaction). Subsequent to the 2019 Brookfield Transaction, Altera is no longer a related party of Teekay.


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Table of Contents
TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, other than share and per share data)

Subsequent to the deconsolidation of Altera in September 2017 and prior to the 2019 Brookfield Transaction, the Company accounted for its investment in Altera's general partner and common units under the equity method of accounting. Based on the 2019 Brookfield Transaction, the Company remeasured its investment in Altera to fair value at March 31, 2019 based on the Altera publicly-traded unit price at that date, resulting in a write-down of $64.9 million reflected in equity loss on the Company's unaudited consolidated statements of income (loss) for the three months ended March 31, 2019. The Company recognized a loss on sale of $8.9 million upon completion of the 2019 Brookfield Transaction in May 2019.

In March 2018, Altera entered into a loan agreement for a $125.0 million senior unsecured revolving credit facility, of which up to $25.0 million was provided by Teekay and up to $100.0 million was provided by Brookfield. Teekay’s $25.0 million loan to Altera was among the assets sold by Teekay to Brookfield in the 2019 Brookfield Transaction.

On September 25, 2017, Teekay, Altera and Brookfield completed a strategic partnership (or the 2017 Brookfield Transaction), which resulted in the deconsolidation of Altera as of that date. Until December 31, 2017, Teekay and its wholly-owned subsidiaries directly and indirectly provided substantially all of Altera’s ship management, commercial, technical, strategic, business development and administrative service needs. On January 1, 2018, as part of the 2017 Brookfield Transaction, Altera acquired a 100% ownership interest in seven subsidiaries (or the Transferred Subsidiaries) of Teekay at carrying value.

Subsequent to their transfer to Altera, the Transferred Subsidiaries continue to provide ship management, commercial, technical, strategic, business development and administrative services to Teekay, primarily related to Teekay's FPSO units. Teekay and certain of its subsidiaries, other than the Transferred Subsidiaries, continue to provide certain other ship management, commercial, technical, strategic and administrative services to Altera.

Revenues recognized by the Company for services provided to Altera during the period that Altera was a related party to the Company from January 1, 2019 to May 8, 2019 was $7.6 million (three months ended March 31, 2019 – $5.3 million), which were recorded in revenues on the Company's unaudited consolidated statements of income (loss). Fees paid by the Company to Altera for services provided by Altera to the Company during the period that Altera was a related party to the Company from January 1, 2019 to May 8, 2019 was $9.6 million (three months ended March 31, 2019 – $6.3 million), which were recorded in vessel operating expenses and general and administrative expenses on the Company's unaudited consolidated statements of income (loss).

As at March 31, 2019, two shuttle tankers and three FSO units of Altera were employed on long-term time-charter-out or bareboat contracts to subsidiaries of Teekay. Time-charter hire expenses paid by the Company to Altera during the period that Altera was a related party to the Company from January 1, 2019 to May 8, 2019 was $20.8 million (three months ended March 31, 2019$14.7 million).

In September 2018, Teekay LNG entered into an agreement with its 52%-owned joint venture with Marubeni Corporation (or the MALT Joint Venture) to charter in one of the MALT Joint Venture's LNG carriers, the Magellan Spirit, for a period of two years at a fixed-rate. Time-charter hire expenses for the three months ended March 31, 2020 was $5.9 million (three months ended March 31, 2019$5.6 million).

The Company provides ship management and corporate services to certain of its equity-accounted joint ventures that own and operate LNG carriers on long-term charters. In addition, the Company is reimbursed for costs incurred by the Company for its seafarers operating these LNG carriers. During the three months ended March 31, 2020, the Company earned $17.6 million (three months ended March 31, 2019$15.8 million) of fees pursuant to these management agreements and reimbursement of costs.
5. Segment Reporting
The Company’s segments are described in "Item 18 – Financial Statements: Note 3" to the Company’s Annual Report on Form 20-F for the year ended December 31, 2019. The Company allocates capital and assesses performance from the separate perspectives of its two publicly-traded subsidiaries Teekay LNG and Teekay Tankers (together, the Daughter Entities), Teekay and its remaining subsidiaries (or Teekay Parent), and, prior to the completion of the 2019 Brookfield Transaction, its equity-accounted investment in Altera, as well as from the perspective of the Company's lines of business. The primary focus of the Company’s organizational structure, internal reporting and allocation of resources by the chief operating decision maker is on the Daughter Entities, Teekay Parent and, prior to the completion of the 2019 Brookfield Transaction, its equity-accounted investment in Altera, and its segments are presented accordingly on this basis. The Company (which excludes Altera) has three primary lines of business: (1) offshore production (FPSO units), (2) LNG and liquefied petroleum gas (or LPG) carriers, and (3) conventional tankers. The Company manages these businesses for the benefit of all stakeholders. The Company incorporates the primary lines of business within its segments, as in certain cases there is more than one line of business in each Daughter Entity and the Company believes this information allows a better understanding of the Company’s performance and prospects for future net cash flows.


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Table of Contents
TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, other than share and per share data)

The following table includes the Company’s revenues by segment for the three months ended March 31, 2020 and 2019:
 
Three Months Ended March 31,
 
2020
2019
 
$
$
Teekay LNG
 
 
Liquefied Gas Carriers
139,887

146,982

Conventional Tankers

2,762

 
139,887

149,744

 
 
 
Teekay Tankers
 
 
Conventional Tankers(1)
341,900

238,161

 
 
 
Teekay Parent
 
 
Offshore Production
45,933

49,438

Other
46,334

50,659

 
92,267

100,097

 
 
 
Eliminations and other(1)

(1,129
)
 
574,054

486,873


(1)
During 2019, Teekay Tankers' ship-to-ship transfer business provided operational and maintenance services to Teekay LNG Bahrain Operations L.L.C., an entity wholly-owned by Teekay LNG, for the LNG receiving and regasification terminal in Bahrain.

The following table includes the Company’s income (loss) from vessel operations by segment for the three months ended March 31, 2020 and 2019:
 
Income (Loss) from Vessel Operations(1)
 
Three Months Ended March 31,
 
2020
2019
 
$
$
Teekay LNG
 
 
Liquefied Gas Carriers
21,738

70,443

Conventional Tankers

(1,082
)
 
21,738

69,361

 
 
 
Teekay Tankers
 
 
Conventional Tankers
120,126

32,097

 
 
 
Teekay Parent
 
 
Offshore Production
(12,268
)
(12,557
)
Other
(700
)
(4,669
)
 
(12,968
)
(17,226
)
 
 
 
 
128,896

84,232


(1)
Includes direct general and administrative expenses and indirect general and administrative expenses (allocated to each segment based on estimated use of corporate resources).
Prior to its sale in May 2019, the Company accounted for its investment in Altera's general partner and common units using the equity method and recognized an equity loss of $68.0 million in respect of Altera for the three months ended March 31, 2019, primarily as a result of the write-down of the Altera investment to its publicly-traded unit price as described above.
A reconciliation of total segment assets to total assets presented in the accompanying unaudited consolidated balance sheets is as follows:

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Table of Contents
TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, other than share and per share data)

 
March 31, 2020
December 31, 2019
 
$
$
Teekay LNG – Liquefied Gas Carriers
4,828,794

5,249,465

Teekay Tankers – Conventional Tankers
2,021,563

2,140,652

Teekay Parent – Offshore Production
108,664

161,096

Teekay Parent – Other
73,820

80,455

Cash and cash equivalents
564,401

353,241

Other assets not allocated
97,217

102,701

Eliminations
(10,655
)
(14,746
)
Consolidated total assets
7,683,804

8,072,864


6. Leases
Obligations Related to Finance Leases

March 31, 2020

December 31, 2019

$

$
Teekay LNG
 
 
 
LNG Carriers
1,393,524

 
1,410,904

Teekay Tankers
 
 
 
Suezmax Tankers
213,364

 
216,546

Aframax Tankers
170,663

 
173,284

LR2 Product Tanker
24,655

 
24,958

Total obligations related to finance leases
1,802,206

 
1,825,692

Less current portion
(96,231
)
 
(95,339
)
Long-term obligations related to finance leases
1,705,975

 
1,730,353


Teekay LNG

As at March 31, 2020, Teekay LNG was a party to finance leases on nine LNG carriers (December 31, 2019nine LNG carriers). These nine LNG carriers were sold by Teekay LNG to third parties (or Lessors) and leased back under 7.5- to 15-year bareboat charter contracts ending in 2026 through 2034. At the inception of these leases, the weighted-average interest rate implicit in these leases was 5.1%. The bareboat charter contracts are presented as obligations related to finance leases on the Company's unaudited consolidated balance sheets and have purchase obligations at the end of the lease terms.

The obligations of Teekay LNG under the bareboat charter contracts for the nine LNG carriers are guaranteed by Teekay LNG. In addition, the guarantee agreements require Teekay LNG to maintain minimum levels of tangible net worth and aggregate liquidity, and not to exceed a maximum amount of leverage. As at March 31, 2020, Teekay LNG was in compliance with all covenants in respect of the obligations related to its finance leases.

As at March 31, 2020, the remaining commitments related to the financial liabilities of these nine LNG carriers, including the amounts to be paid for the related purchase obligations, approximated $1.8 billion, including imputed interest of $453.0 million, repayable for the remainder of 2020 through 2034, as indicated below:


Commitments
 
 
At March 31, 2020
Year

$
Remainder of 2019

105,096
2021

138,601
2022

136,959
2023

135,459
2024

132,011
Thereafter

1,198,366


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Table of Contents
TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, other than share and per share data)

Teekay Tankers

From 2017 to 2019, Teekay Tankers completed sale-leaseback financing transactions with financial institutions relating to 16 of Teekay Tankers' vessels. Under these arrangements, Teekay Tankers transferred the vessels to subsidiaries of the financial institutions (collectively, the Lessors), and leased the vessels back from the Lessors on bareboat charters ranging from 9- to 12-year terms. Teekay Tankers is obligated to purchase eight of the vessels upon maturity of their respective bareboat charters. Teekay Tankers also has the option to purchase each of the 16 vessels at various times starting between July 2020 and November 2021 until the end of their respective lease terms.

The bareboat charters related to these vessels require that Teekay Tankers maintain minimum liquidity (cash, cash equivalents and undrawn committed revolving credit lines with at least six months to maturity) of $35.0 million and at least 5.0% of Teekay Tankers' consolidated debt and obligations related to finance leases (excluding applicable security deposits reflected in restricted cash – non-current on the Company's unaudited consolidated balance sheets).

Four of the bareboat charters require Teekay Tankers to maintain, for each vessel, a hull coverage ratio of 90% of the total outstanding principal balance during the first three years of the lease period and 100% of the total outstanding principal balance thereafter. As at March 31, 2020, this ratio was approximately 127% (December 31, 2019122%).
 
Six of the bareboat charters require Teekay Tankers to maintain, for each vessel, a hull coverage ratio of 78% of the total outstanding principal balance during the first two years of the lease period, 80% for the following two years and 90% of the total outstanding principal balance thereafter. As at March 31, 2020, this ratio was approximately 115% (December 31, 2019115%).
 
Four of the bareboat charters require Teekay Tankers to maintain, for each vessel, a hull overage ratio of 100% of the total outstanding principal balance. As at March 31, 2020, this ratio was approximately 161% (December 31, 2019158%).

The remaining two bareboat charters also require Teekay Tankers to maintain, for each vessel, a minimum hull coverage ratio of 75% of the total outstanding principal balance during the first year of the lease period, 78% for the second year, 80% for the following two years and 90% of the total outstanding principal balance thereafter. As at March 31, 2020, this ratio was approximately 111% (December 31, 2019109%).

Such requirements are assessed annually with reference to vessel valuations compiled by one or more agreed upon third parties. As of the date these unaudited consolidated financial statements were issued, Teekay Tankers is in compliance with all covenants in respect of its obligations related to finance leases.

The weighted average interest rate on Teekay Tankers’ obligations related to finance leases as at March 31, 2020 was 7.6% (December 31, 20197.6%).

As at March 31, 2020, the total remaining commitments related to the financial liabilities of Teekay Tankers' Suezmax tankers, Aframax tankers and LR2 product tankers, including the amounts to be paid for the related purchase obligations, approximated $587.7 million, including imputed interest of $179.0 million, repayable from 2020 through 2030, as indicated below:


Commitments
 
 
At March 31, 2020
Year

$



2020

42,364
2021

56,202
2022

56,193
2023

56,184
2024
 
56,328
Thereafter

320,388
Operating Lease Liabilities

The Company charters-in vessels from other vessel owners on time-charter-in and bareboat charter contracts, whereby the vessel owner provides use of the vessel to the Company, and, in the case of time-charter-in contracts, also operates the vessel for the Company. A time-charter-in contract is typically for a fixed period of time, although in certain cases the Company may have the option to extend the charter. The Company typically pays the owner a daily hire rate that is fixed over the duration of the charter. The Company is generally not required to pay the daily hire rate for time-charters during periods the vessel is not able to operate.

On March 27, 2020, concurrently with the Petrojarl Foinaven FPSO transaction with BP described in Note 3, the Company sold its subsidiary Golar-Nor (UK) Limited (or Golar-Nor) to Altera for a nominal amount plus outstanding working capital. Golar Nor was in-chartering the Petroatlantic and Petronordic shuttle tankers. This transaction resulted in the Company derecognizing right-of-use assets and lease liabilities totaling $50.7 million and $50.7 million, respectively.


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Table of Contents
TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, other than share and per share data)

As at March 31, 2020, minimum commitments to be incurred by the Company under time-charter-in and bareboat charter contracts were approximately $53.7 million (remainder of 2020), $39.5 million (2021), $20.3 million (2022), $9.2 million (2023) and $5.7 million (2024).
7. Write-down and Loss on Sale
The Company's write-downs and vessel sales generally relate to vessels approaching the end of their useful lives as well as other vessels it strategically sells, or is attempting to sell, to reduce exposure to a certain vessel class.

The following table contains the write-downs and losses on sales of vessels for the three months ended March 31, 2020 and 2019:
 
 
 
 
 
 
Three Months Ended March 31,
Segment

Asset Type

Completion of sale date

2020
$

2019
$
Teekay Parent Segment – Offshore Production (1)
 
1 FPSO unit
 
N/A
 

 
(3,328
)
Teekay Parent Segment - Offshore Production (2)
 
2 FPSO units
 
N/A
 
(46,519
)
 

Teekay LNG Segment - Liquefied Gas Carriers (3)
 
6 Multi-gas Carriers
 
N/A
 
(45,000
)
 

Teekay Tankers Segment – Conventional Tankers

 
3 Suezmaxes
 
Feb/Mar-2020
 
(2,627
)
 

Teekay Tankers Segment – Conventional Tankers

 
1 Suezmax
 
N/A
 
(460
)
 

Total
 
 
 
 
 
(94,606
)
 
(3,328
)
 
 
 
 
 
 
 
(1)
On March 27, 2020, the Company entered into a bareboat charter agreement for Petrojarl Foinaven FPSO unit which was accounted for as a sales-type lease. See Note 3.
(2)
During the first quarter of 2020, Teekay Parent recognized impairment charges of $46.5 million in respect of two of its FPSO units. In the first quarter of 2020, CNR International (U.K.) Limited (or CNR) provided formal notice to Teekay of its intention to cease production in June 2020 and decommission the Banff field shortly thereafter. As such, the Company expects to remove the Banff FPSO and Apollo FSO from the Banff field in 2020 and the subsea equipment in 2021. The Company expects to scrap the FPSO unit and subsea equipment and redeliver the FSO unit to its owner following removal from the field. Accordingly, the capitalized asset retirement obligation for the Petrojarl Banff FPSO unit was increased based on recent changes to cost estimates and the carrying value of the unit was then written down to its estimated residual value. The Company also made changes to its expected cash flows from the Hummingbird FPSO unit based on the current market environment and oil prices, and recent discussions with a potential buyer about the possible sale of the unit. This led to the write-down of the unit to its estimated fair value, using a discounted cash flow approach. See Note 13.
(3)
In March 2020, the carrying values for six of Teekay LNG's seven wholly-owned multi-gas carriers, were written down to their estimated fair values, using appraised values, primarily due to the lower near-term outlook for these type of vessels as a result of the current economic environment as well as Teekay LNG receiving notification that its commercial management agreement with a third-party commercial manager will dissolve in September 2020.
8. Accrued Liabilities and Other and Other Long-Term Liabilities
Accrued Liabilities and Other
 
March 31, 2020
 
December 31, 2019
 
$
 
$
Accrued liabilities
 
 
 
Voyage and vessel expenses
97,764

 
121,937

Interest
30,757

 
29,371

Payroll and related liabilities
28,706

 
33,494

Distributions payable and other
6,487

 
6,487

Deferred revenues – current
31,910

 
36,242

In-process revenue contracts – current

 
5,933

Current portion of derivative liabilities (note 16)

68,192

 
39,263

Office lease liability – current
3,130

 
3,627

Loans from equity-accounted investments

8,479

 
18,647

Asset retirement obligation - current
19,000

 

 
294,425

 
295,001



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Table of Contents
TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, other than share and per share data)

Other Long-Term Liabilities
 
March 31, 2020
 
December 31, 2019
 
$
 
$
Deferred revenues and gains
27,856

 
28,612

Guarantee liabilities
12,804

 
10,113

Asset retirement obligation
30,782

 
31,068

Pension liabilities
6,842

 
7,238

In-process revenue contracts

 
11,866

Derivative liabilities (note 16)
97,546

 
51,914

Unrecognized tax benefits (note 17)
65,492

 
62,958

Office lease liability – long-term
9,630

 
10,254

Other
1,933

 
2,325

 
252,885

 
216,348

9. Short-Term Debt

In November 2018, Teekay Tankers Chartering Pte. Ltd. (or TTCL) a wholly-owned subsidiary of Teekay Tankers, entered into a working capital revolving loan facility (or the Working Capital Loan), which initially provided available aggregate borrowings of up to $40.0 million for TTCL, and had an initial maturity date in May 2019, subject to extension as described below. The aggregate borrowings were subsequently increased to $80.0 million, effective December 2019, with the next maturity date in May 2020. Proceeds of the Working Capital Loan are used to provide working capital in relation to certain vessels subject to revenue sharing agreements (or RSAs). The Working Capital Loan maturity date is continually extended for further periods of six months thereafter unless and until the lender gives notice in writing that no further extensions shall occur. Interest payments are based on LIBOR plus a margin of 3.5%.

The Working Capital Loan is collateralized by the assets of TTCL. The Working Capital Loan requires Teekay Tankers to maintain its paid-in capital contribution under the RSAs and the retained distributions of the RSA participants in an amount equal to the greater of (a) an amount equal to the minimum average capital contributed by the RSA counterparties per vessel in respect of the RSA (including cash, bunkers or other working capital contributions and amounts accrued to the RSA counterparties but unpaid) and (b) a minimum capital contribution ranging from $20.0 million to $30.0 million based on the amount borrowed. As at March 31, 2020, $55.0 million (December 31, 2019$50.0 million) was owing under this facility, and the average interest rate on the facility was 3.6% (December 31, 20195.0%). As of the date these consolidated financial statements were issued, Teekay Tankers was in compliance with all covenants in respect of this facility.
10. Long-Term Debt
 
March 31, 2020
 
December 31, 2019
 
$
 
$
Revolving Credit Facilities
761,594

 
603,132

Senior Notes (8.5%) due January 15, 2020

 
36,712

Senior Notes (9.25%) due November 15, 2022
250,000

 
250,000

Convertible Senior Notes (5%) due January 15, 2023
125,000

 
125,000

Norwegian Krone-denominated Bonds due through August 2023
293,191

 
347,163

U.S. Dollar-denominated Term Loans due through 2030
1,026,519

 
1,336,437

Euro-denominated Term Loans due through 2024
160,292

 
165,376

Other U.S. Dollar-denominated loan
420

 
3,300

Total principal
2,617,016

 
2,867,120

Less unamortized discount and debt issuance costs
(43,598
)
 
(39,968
)
Total debt
2,573,418

 
2,827,152

Less current portion
(418,293
)
 
(523,312
)
Long-term portion
2,155,125

 
2,303,840



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Table of Contents
TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, other than share and per share data)

As of March 31, 2020, the Company had four revolving credit facilities (collectively, the Revolvers) available. The four credit facilities, as at such date, provided for aggregate borrowings of up to $998.1 million, of which $236.5 million was undrawn. Interest payments are based on LIBOR plus a margin. The margins ranged between 1.40% and 3.95% at March 31, 2020 and at December 31, 2019. The aggregate amount available under the Revolvers is scheduled to decrease by $204.9 million (remainder of 2020), $115.8 million (2021), $410.8 million (2022), $65.3 million (2023) and $201.3 million (2024). The Revolvers are collateralized by first-priority mortgages granted on 33 of the Company’s vessels, together with other related security, and include a guarantee from Teekay or its subsidiaries for all but one of the Revolvers' outstanding amounts. Included in other related security are 25.2 million common units in Teekay LNG and 5.0 million Class A common shares in Teekay Tankers to secure a $150 million credit facility.

The Company’s 8.5% senior unsecured notes were due January 15, 2020 with an original aggregate principal amount of $450 million (the Original Notes). In November 2015, the Company issued an aggregate principal amount of $200 million of the Company’s 8.5% senior unsecured notes which were due on January 15, 2020 (or the Additional Notes) at 99.0% of face value, plus accrued interest from July 15, 2015. Prior to 2020, the Company repurchased $613.3 million in aggregate principal amount and in January 2020, the Company repaid all remaining 2020 Notes at maturity.

In May 2019, the Company issued $250.0 million in aggregate principal amount of 9.25% senior secured notes at par due November 2022 (or the 2022 Notes). The 2022 Notes are guaranteed on a senior secured basis by certain of our subsidiaries and are secured by first-priority liens on two of Teekay's FPSO units, a pledge of the equity interests in Teekay's subsidiary that owns all of Teekay's common units of Teekay LNG Partners L.P. and all of Teekay’s Class A common shares of Teekay Tankers Ltd. and a pledge of the equity interests in Teekay's subsidiaries that own Teekay Parent's three FPSO units.

The Company may redeem the 2022 Notes in whole or in part at any time prior to November 15, 2020 at a redemption price equal to 100% of the principal amount of the 2022 Notes to be redeemed, plus the greater of (i) 1.0% of the principal amount of such 2022 Notes and (ii) the excess, if any, of the sum of the present values of the remaining scheduled payments of principal and interest on the 2022 Notes to be redeemed (excluding accrued interest), discounted to the redemption date on a semi-annual basis, at the treasury yield plus 50 basis points over the principal amount of such 2022 Notes, plus accrued and unpaid interest to, but excluding, the redemption date.

The Company may redeem the 2022 Notes in whole or in part at a redemption price equal to a percentage of the principal amount of the 2022 Notes to be redeemed plus accrued and unpaid interest to, but excluding, the redemption date, as follows: 104.625% at any time on or after November 15, 2020, but prior to November 15, 2021; 102.313% at any time on or after November 15, 2021, but prior to August 15, 2022; and 100% at any time on or after August 15, 2022.

On January 26, 2018, Teekay Parent completed a private offering of $125.0 million in aggregate principal amount of 5% Convertible Senior Notes due January 15, 2023 (the Convertible Notes). The Convertible Notes are convertible into Teekay’s common stock, initially at a rate of 85.4701 shares of common stock per $1,000 principal amount of Convertible Notes. This represents an initial effective conversion price of $11.70 per share of common stock. The initial conversion price represents a premium of 20% to the concurrent common stock offering price of $9.75 per share. On issuance of the Convertible Notes, $104.6 million of the net proceeds was reflected in long-term debt, including unamortized discount, and is being accreted to $125.0 million over its five-year term through interest expense. The remaining amount of the net proceeds of $16.1 million was allocated to the conversion feature and reflected in additional paid-in capital.

As at March 31, 2020, Teekay LNG had a total of Norwegian Krone (or NOK) 3.1 billion in senior unsecured bonds issued in the Norwegian bond market that mature through August 2023. As of March 31, 2020, the total carrying amount of the senior unsecured bonds was $293.2 million (December 31, 2019$347.2 million). The bonds are listed on the Oslo Stock Exchange. The interest payments on the bonds are based on NIBOR plus a margin, which ranges from 3.70% to 6.00%. The Company entered into cross currency rate swaps to swap all interest and principal payments of the bonds into U.S. Dollars, with the interest payments fixed at rates ranging from 5.92% to 7.89%, and the transfer of the principal amount fixed at $382.5 million upon maturity in exchange for NOK 3.1 billion (see Note 16).

As of March 31, 2020, the Company had six U.S. Dollar-denominated term loans outstanding, which totaled $1.0 billion in aggregate principal amount (December 31, 2019$1.3 billion). Interest payments on the term loans are based on LIBOR plus a margin, of which two of the term loans have additional tranches with a weighted average fixed rate of 4.47%. At March 31, 2020, the margins ranged between 0.30% and 3.25% and at December 31, 2019, the margins ranged between 0.30% and 3.25%. Term loans require payments in quarterly or semi-annual installments commencing three or six months after delivery of each newbuilding vessel financed thereby, and five of the term loans have balloon or bullet repayments due at maturity. The term loans are collateralized by first-priority mortgages on 20 (December 31, 201924) of the Company’s vessels, together with certain other security.
 
Teekay LNG has two Euro-denominated term loans outstanding, which, as at March 31, 2020, totaled 145.3 million Euros ($160.3 million) (December 31, 2019147.5 million Euros ($165.4 million)). Teekay LNG is servicing the loans with funds generated by two Euro-denominated, long-term time-charter contracts. Interest payments on the loans are based on EURIBOR plus a margin. At March 31, 2020 and December 31, 2019, the margins ranged between 0.60% and 1.95%. The Euro-denominated term loans reduce in monthly and semi-annual payments with varying maturities through 2024, are collateralized by first-priority mortgages on two of Teekay LNG's vessels, together with certain other security, and are guaranteed by Teekay LNG and one of its subsidiaries.

Both Euro-denominated term loans and NOK-denominated bonds are revalued at the end of each period using the then-prevailing U.S. Dollar exchange rate. Due primarily to the revaluation of the Company’s NOK-denominated bonds, the Company’s Euro-denominated term loans and restricted cash, and the change in the valuation of the Company’s cross currency swaps, the Company recognized a foreign exchange gain of $6.6 million (2019 – loss of $2.6 million) during the three months ended March 31, 2020 and 2019, respectively.

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Table of Contents
TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, other than share and per share data)


The weighted-average interest rate on the Company’s aggregate long-term debt as at March 31, 2020 was 4.4% (December 31, 20194.6%). This rate does not include the effect of the Company’s interest rate swap agreements (see Note 16).

Teekay has guaranteed obligations pursuant to a certain credit facility of Teekay Tankers. As at March 31, 2020, the outstanding balance on such credit facility was $89.8 million.

The aggregate annual long-term debt principal repayments required to be made by the Company subsequent to March 31, 2020 are $271.0 million (remainder of 2020), $545.8 million (2021), $686.8 million (2022), $384.7 million (2023), $302.9 million (2024) and $425.8 million (thereafter).

The Company’s long-term debt agreements generally provide for maintenance of minimum consolidated financial covenants and four loan agreements require the maintenance of vessel market value to loan ratios. As at March 31, 2020, these ratios ranged from 136% to 225% compared to their minimum required ratios of 115% to 135%. The vessel values used in these ratios are the appraised values provided by third parties where available or prepared by the Company based on second-hand sale and purchase market data. Changes in the LNG/LPG carrier and conventional tanker markets could negatively affect the Company's compliance with these ratios.

Teekay Tankers’ term loan, which is scheduled to mature between January 2021 and August 2021, is guaranteed by Teekay. This term loan contains covenants that require Teekay Parent and Teekay Tankers collectively to maintain the greater of (a) free cash (cash and cash equivalents) of at least $100.0 million and (b) an aggregate of free cash and undrawn committed revolving credit lines with at least six months to maturity of at least 7.5% of Teekay's total consolidated debt and obligations related to finance leases (excluding the debt of Teekay LNG). In addition, certain loan agreements require Teekay Tankers to maintain minimum liquidity (cash, cash equivalents and undrawn committed revolving credit lines with at least six months to maturity) of $35.0 million and at least 5.0% of Teekay Tankers' total consolidated debt and obligations related to finance leases. Certain loan agreements require Teekay LNG to maintain a minimum level of tangible net worth, and minimum liquidity (cash, cash equivalents and undrawn committed revolving credit lines with at least six months to maturity) of $35.0 million, and not to exceed a maximum level of financial leverage.

As of the date these unaudited consolidated financial statements were issued, the Company is in compliance with all covenants under its credit facilities and other long-term debt.
11. Capital Stock
The authorized capital stock of Teekay at March 31, 2020 and December 31, 2019 was 25 million shares of preferred stock, with a par value of $1 per share, and 725 million shares of common stock, with a par value of $0.001 per share. As at March 31, 2020, Teekay had no shares of preferred stock issued.

In April 2019, Teekay filed a continuous offering program (or COP) under which Teekay may issue shares of its common stock, at market prices up to a maximum aggregate amount of $63.0 million. No shares of common stock have been issued under this COP as of March 31, 2020.

The Company did not grant any stock options or restricted stock awards to employees and directors during the three months ended March 31, 2020.
12. Commitments and Contingencies
a)
Vessels Under Construction and Upgrades

Teekay LNG's share of commitments to fund newbuilding and other construction contract costs as at March 31, 2020 are as follows:
 
Total
$
Remainder of
2020
$
2021
$
2022
$
Certain consolidated LNG carriers (i)
43,091

5,764

22,169

15,158

Bahrain LNG Joint Venture (ii)
11,351

11,351



 
54,442

17,115

22,169

15,158


(i)
In June 2019, Teekay LNG entered into an agreement with a contractor to supply equipment on certain of Teekay LNG's LNG carriers in 2021 and 2022, for an estimated installed cost of $60.6 million. As at March 31, 2020, the estimated remaining cost of this installation is $43.1 million.

(ii)
Teekay LNG has a 30% ownership interest in the Bahrain LNG Joint Venture which has an LNG receiving and regasification terminal in Bahrain. As at March 31, 2020, Teekay LNG's proportionate share of the estimated remaining cost of $11.4 million relates to the final construction installment on the LNG terminal. The Bahrain LNG Joint Venture has remaining debt financing of $24 million, which is undrawn, of which $7 million relates to Teekay LNG's proportionate share of the construction commitments included in the table above.



Page 18

Table of Contents
TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, other than share and per share data)

b)
Liquidity

Management is required to assess whether the Company will have sufficient liquidity to continue as a going concern for the one-year period following the issuance of its financial statements. The Company had a consolidated net income of $52.0 million and consolidated cash flows from operating activities of $439.0 million during the three months ended March 31, 2020 and had a working capital surplus of $59.5 million as at March 31, 2020.

Based on the Company’s liquidity at the date these unaudited consolidated financial statements were issued, the liquidity the Company expects to generate from operations over the following year and the dividends it expects to receive from its equity-accounted joint ventures, the Company expects that it will have sufficient liquidity to continue as a going concern for at least the one-year period following the issuance of these unaudited consolidated financial statements.

c)
Legal Proceedings and Claims

The Company may, from time to time, be involved in legal proceedings and claims that arise in the ordinary course of business. The Company believes that any adverse outcome of existing claims, individually or in the aggregate, would not have a material effect on its financial position, results of operations or cash flows, when taking into account its insurance coverage and indemnifications from charterers.

d)
Other

The Company enters into indemnification agreements with certain officers and directors. In addition, the Company enters into other indemnification agreements in the ordinary course of business. The maximum potential amount of future payments required under these indemnification agreements is unlimited. However, the Company maintains what it believes is appropriate liability insurance that reduces its exposure and enables the Company to recover future amounts paid up to the maximum amount of the insurance coverage, less any deductible amounts pursuant to the terms of the respective policies, the amounts of which are not considered material.

Teekay LNG guarantees its proportionate share of certain loan facilities and obligations on interest rate swaps for its equity-accounted joint ventures for which the aggregate principal amount of the loan facilities and fair value of the interest rate swaps as at March 31, 2020 was $1.5 billion. As of the date these consolidated financial statements were issued, Teekay LNG's equity-accounted joint ventures were in compliance with all covenants relating to these loan facilities that Teekay LNG guarantees.
13. Financial Instruments
a)
Fair Value Measurements

For a description of how the Company estimates fair value and for a description of the fair value hierarchy levels, see "Item 18 – Financial Statements: Note 12" in the Company’s Annual Report on Form 20-F for the year ended December 31, 2019.

The following table includes the estimated fair value and carrying value of those assets and liabilities that are measured at fair value on a recurring and non-recurring basis, as well as the estimated fair value of the Company’s financial instruments that are not accounted for at fair value on a recurring basis.

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Table of Contents
TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, other than share and per share data)

 
 
 
March 31, 2020
 
December 31, 2019
 
Fair
Value
Hierarchy
Level
 
Carrying
Amount
Asset
(Liability)
$
 
Fair
Value
Asset
(Liability)
$
 
Carrying
Amount
Asset
(Liability)
$
 
Fair
Value
Asset
(Liability)
$
Recurring
 
 
 
 
 
 
 
 
 
Cash, cash equivalents and restricted cash (note 19)
Level 1
 
688,253

 
688,253

 
454,867

 
454,867

Derivative instruments (note 16)
 
 
 
 
 
 
 
 
 
Interest rate swap agreements – assets (1)
Level 2
 

 

 
3,099

 
3,099

Interest rate swap agreements – liabilities (1)
Level 2
 
(76,519
)
 
(76,519
)
 
(52,453
)
 
(52,453
)
Cross currency interest swap agreements – liabilities(1)
Level 2
 
(92,153
)
 
(92,153
)
 
(42,104
)
 
(42,104
)
Foreign currency contracts
Level 2
 

 

 
(202
)
 
(202
)
Forward freight agreements
Level 2
 
(174
)
 
(174
)
 
(86
)
 
(86
)
Non-recurring
 
 
 
 
 
 
 
 
 
Vessels and equipment (note 7)
Level 3
 
15,719

 
15,719

 

 

Vessels and equipment (note 7)
Level 2
 
101,085

 
101,085

 

 

Vessels held for sale (note 7)
Level 2
 
22,400

 
22,400

 
37,240

 
37,240

Other (2)
 
 
 
 
 
 
 
 
 
Short-term debt (note 9)
Level 2
 
(55,000
)
 
(55,016
)
 
(50,000
)
 
(50,000
)
Long-term debt – public (note 10)
Level 1
 
(531,139
)
 
(523,243
)
 
(619,794
)
 
(655,977
)
Long-term debt – non-public (note 10)
Level 2
 
(2,042,279
)
 
(1,981,686
)
 
(2,207,358
)
 
(2,180,440
)
Obligations related to finance leases, including current portion (note 6)
Level 2
 
(1,802,206
)
 
(1,882,207
)
 
(1,825,692
)
 
(1,877,558
)
 
(1)
The fair value of the Company's interest rate swap and cross currency swap agreements at March 31, 2020 includes $3.1 million (December 31, 2019 $3.4 million) accrued interest expense which is recorded in accrued liabilities on the unaudited consolidated balance sheets.

(2)
In the unaudited interim consolidated financial statements, the Company’s loans to and investments in equity-accounted investments form the aggregate carrying value of the Company’s interests in entities accounted for by the equity method. The fair value of the individual components of such aggregate interests is not determinable.

Vessels and equipment – Includes six multi-gas vessels which were written down to their estimated fair values, using appraised values, and one FPSO unit written down to scrap value, which was determined based on the price of steel, the light-weight tonnage of the vessel and selling costs. Also includes one FPSO unit which was written down its estimated fair value, using a discounted cash flow approach. The discounted cash flow approach used includes scenarios consisting of sale of the unit for scrap following expiration or early termination of the existing customer contract, and sale of the unit during 2020, weighted based on the likelihood of them occurring. Cash flow projections have been discounted at an estimated market participant rate of 9.8%. Cash flow projections are based on current and projected charter rates and operating costs. Estimated proceeds from the potential sale of the unit are based on prior discussions with potential buyers of the Company's FPSO units.

b) Credit Losses

The Company's exposure to potential credit losses includes Teekay Parent's one direct financing and sales-type leases (the Foinaven FPSO - see Note 3) and Teekay LNG's three direct financing and sales-type leases, its two loans to equity-accounted joint ventures and its guarantee of its proportionate share of secured loan facilities and finance leases of five of its equity-accounted joint ventures. Teekay LNG's three direct financing leases consist of a 70% ownership interest in two LNG carriers which commenced their 20-year time-charter contracts in 2009 and a 100% ownership interest in the Bahrain Spirit floating storage unit (or FSU) which commenced a 21-year time charter to Bahrain LNG in September 2018. Teekay LNG has loaned funds to two of its equity-accounted joint ventures, the Exmar LPG Joint Venture and the Bahrain LNG Joint Venture. Teekay LNG has guaranteed its share of secured loan facilities and finance leases of five equity-accounted joint ventures, the Exmar LPG Joint Venture, the Excalibur Joint Venture, the MALT Joint Venture, the Yamal LNG Joint Venture and the Angola Joint Venture.

In addition, Teekay LNG's exposure to potential credit losses includes direct financing and sales-types leases for 18 LNG carriers, one FSU and an LNG regasification terminal within five of its equity-accounted joint ventures, consisting of the Yamal LNG Joint Venture, the Bahrain LNG Joint Venture, the Pan Union Joint Venture, the RasGas III Joint Venture and the Angola Joint Venture. For a description of these equity-accounted investments, see "Item 18 – Financial Statements: Note 23" in the Company’s Annual Report on Form 20-F for the year ended December 31, 2019.

The following table includes the amortized cost basis of the Company's direct interests in financing receivables and net investment in direct financing leases by class of financing receivables and by period of origination and their associated credit quality.

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Table of Contents
TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, other than share and per share data)

 
 
Amortized Cost Basis by Origination Year
 
 
 
 
Credit Quality Grade (1)
 
2020
 
2018
 
2016
 
Prior to 2016
 
Total (2)(3)
As at March 31, 2020
 
 
$
 
$
 
$
 
$
 
$
Direct financing and sales-type leases - Teekay Parent

 
 
 
 
 
 
 
 
 
 
 
 
  Foinaven FPSO
 
Performing
 
81,843

 

 

 

 
81,843

 
 
 
 
 
 
 
 
 
 
 
 
 
Direct financing and sales-type leases - Teekay LNG
 
 
 
 
 
 
 
 
 
 
 
 
  Tangguh Hiri and Tangguh Sago
 
Performing
 

 

 

 
341,181

 
341,181

  Bahrain Spirit
 
Performing
 

 
213,557

 

 

 
213,557


 
 
 

 
213,557

 

 
341,181

 
554,738

Loans to equity-accounted joint ventures
 
 
 
 
 


 


 


 


  Exmar LPG Joint Venture
 
Performing
 

 

 

 
52,266

 
52,266

  Bahrain LNG Joint Venture
 
Performing
 

 

 
73,375

 

 
73,375

 
 
 
 

 

 
73,375

 
52,266

 
125,641

 
 
 
 
81,843

 
213,557

 
73,375

 
393,447

 
762,222


(1)
The Company's credit quality grades are based on internal risk credit ratings whereby a credit quality grade of performing is consistent with a low likelihood of loss. The Company assesses the credit quality of its direct financing and sales-type leases and loan to the Exmar LPG Joint Venture on whether there are no past due payments, no concessions granted to the counterparties and whether the Company is aware of any other information that would indicate that there is a material increase of likelihood of loss. The same policy is applied by the equity-accounted joint ventures. As at March 31, 2020, all direct financing and sales-type leases held by Teekay LNG's equity-accounted joint ventures had a credit quality grade of performing. Teekay LNG assesses the credit quality of its loan to the Bahrain LNG Joint Venture based on whether there are any past due payments from the Bahrain LNG Joint Venture's primary customer, whether the Bahrain LNG Joint Venture has granted any concessions to its primary customer and whether Teekay LNG is aware of any other information that would indicate that there is a material increase of likelihood of loss.
(2)
The Company considers a financial asset to be past due when payment is not made with 30 days of it being owed, assuming there is no dispute or other uncertainty regarding the amount owing. As at and for the three months ended March 31, 2020, none of Teekay LNG's direct financing and sales-type leases and loans to equity-accounted joint ventures were past due.
(3)
The Company discontinues accrual of interest if collection of required payments is no longer probable, and in those situations recognizes payments received on non-accrual assets on a cash basis method, until collection of required payments becomes probable. As at and for the three months ended March 31, 2020, none of the Company's direct financing and sales-type leases and loans to equity-accounted joint ventures were on non-accrual status.
Changes in the allowance for credit losses of the Company's direct interest in direct financing and sales-type leases, loans to equity-accounted joint ventures, its guarantees of debt that are not otherwise accounted for at fair value each period end, and any such instruments or similar instruments that are held by Teekay LNG's equity-accounted investments for three months ended March 31, 2020 are as follows:
 
Direct financing and sales-type leases (1)
$
 
Direct financing and sales-type leases and other within equity-accounted joint ventures (1)
$
 
Loans to equity-accounted joint ventures (2)
$
 
Guarantees of debt (3)
$
 
Total
$
As at January 1, 2020

11,155

 
36,292

 
3,714

 
2,139

 
53,300

Provision for expected credit losses

(100
)
 
8,980

 

 

 
8,880

As at March 31, 2020

11,055

 
45,272

 
3,714

 
2,139


62,180


(1)
The credit loss provision related to the lease receivable component of the net investment in direct financing and sales-type leases is based on an internal historical loss rate, as adjusted when asset specific risk characteristics of the existing lease receivables at the reporting date are not consistent with those used to measure the internal historical loss rate and as further adjusted when management expects current conditions and reasonable and supportable forecasts to differ from the conditions that existed to measure the internal historical loss rate. As at January 1, 2020 and March 31, 2020, the internal historical loss rate was adjusted downwards on two LNG projects to reflect that the counterparties had investment grade credit ratings. In addition, the internal historical loss rate was adjusted upwards for one LNG project to reflect a lower credit rating for the counterparty, including consideration of the critical infrastructure nature of assets, and a second LNG project to reflect a larger risk of loss given default as the vessels servicing this project have fewer opportunities for redeployment compared to Teekay LNG's other LNG carriers. The credit loss provision for the residual value component is based on a reversion like methodology whereby the current estimated fair value of the vessel as depreciated to the end of the charter contract as compared to the expected carrying value, with such potential gain or loss on maturity being included in the credit loss provision in increasing magnitude on a straight-line basis the closer the contract is to its maturity. Risks related to the net investments in direct financing and sales-type leases consist of risks related to the underlying LNG projects and demand for LNG carriers at the end of the contracts. The provision for expected credit loss as at January 1, 2020 and March 31, 2020 has been developed in part based on Teekay LNG's understanding that LNG production is critical infrastructure.

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Table of Contents
TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, other than share and per share data)

In addition, the provision for expected credit loss as at March 31, 2020, within Teekay LNG's equity-accounted joint ventures reflects the commencement of the sales-type lease for the Bahrain regasification terminal and associated FSU in January 2020. The credit loss provision of $9.0 million for the three months ended March 31, 2020 relating to the direct financing and sales-type leases and other within Teekay LNG's equity-accounted joint ventures are included in equity income. The credit loss provision recorded for Teekay LNG's direct financing and sale-type leases of $0.1 million for the three months ended March 31, 2020 are included in other (loss) income.
(2)
The determination of the credit loss provision for such loans is based an internal historical loss rate of Teekay LNG and its affiliates, as adjusted when asset specific risk characteristics of the existing loans at the reporting date are not consistent with those used to measure the internal historical loss rate and as further adjusted when management expects current conditions and reasonable and supportable forecasts to differ from the conditions that existed to measure the internal historical loss rate. These two loans rank behind secured debt in each equity-accounted joint venture. As such, they are similar to equity in terms of risk. The Exmar LPG Joint Venture owns and charters-in LPG carriers with a primary focus on mid-size gas carriers. Their vessels are trading on the spot market or short-term charters. Adverse changes in the spot market for mid-size LPG carriers, as well as operating costs for such vessels, may impact the ability of the Exmar LPG Joint Venture to repay its loan to Teekay LNG. The Bahrain LNG Joint Venture owns an LNG receiving and regasification terminal in Bahrain. The ability of Bahrain LNG Joint Venture to repay its loan to Teekay LNG is primarily dependent upon the Bahrain LNG Joint Venture’s customer, a company owned by the Kingdom of Bahrain, fulfilling its obligations under the 20-year agreement, as well as Bahrain LNG Joint Venture’s ability to operate the terminal in accordance with the agreed upon operating criteria.
(3)
The determination of the credit loss provision for such guarantees was based on a probability of default and loss given default methodology. The overall estimated loss from default as a percentage of the outstanding guaranteed share of secured loan facilities and finance leases considers current and future operational performance of the vessels securing the loan facilities and finance leases and current and future expectations of the proceeds that could be received from sale of the vessels securing the loan facilities and finance leases in comparison to the outstanding principal amount if Teekay LNG was called on its guarantees.
14. Restructuring Charges
During the three months ended March 31, 2020, the Company recorded restructuring charges of $2.4 million. The restructuring charges primarily related to severance costs resulting from the reorganization and realignment of resources of the Company's shared service function of which a portion of the costs were recovered from the customer, Altera (see Note 4), and the recovery is presented in revenue. The restructuring charges also relate to the termination of the contract for the Banff FPSO.

During the three months ended March 31, 2019, the Company recorded restructuring charges of $8.6 million. The restructuring charges primarily related to severance costs resulting from the termination of certain management contracts in Teekay Parent of which the costs were fully recovered from the customer and the recovery is presented in revenue, as well as from the termination of the charter contract for the Toledo Spirit Suezmax tanker in Teekay LNG upon the sale of the vessel in January 2019.

At March 31, 2020 and December 31, 2019, $2.9 million and $0.8 million, respectively, of restructuring liabilities were recorded in accrued liabilities and other on the unaudited consolidated balance sheets.

15. Accumulated Other Comprehensive Loss
As at March 31, 2020 and December 31, 2019, the Company’s accumulated other comprehensive loss consisted of the following components:
 
March 31,
 
December 31,
 
2020
 
2019
 
$
 
$
Unrealized loss on qualifying cash flow hedging instruments
(37,343
)
 
(19,408
)
Pension adjustments, net of tax recoveries
(4,339
)
 
(4,329
)
 
(41,682
)
 
(23,737
)

16. Derivative Instruments and Hedging Activities
The Company uses derivative instruments to manage certain risks in accordance with its overall risk management policies.

Foreign Exchange Risk

From time to time, the Company economically hedges portions of its forecasted expenditures denominated in foreign currencies with foreign currency forward contracts. As at March 31, 2020, the Company was not committed to any foreign currency forward contracts.


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Table of Contents
TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, other than share and per share data)

The Company enters into cross currency swaps, and pursuant to these swaps the Company receives the principal amount in NOK on the maturity dates of the swaps, in exchange for payment of a fixed U.S. Dollar amount. In addition, the cross currency swaps exchange a receipt of floating interest in NOK based on NIBOR plus a margin for a payment of U.S. Dollar fixed interest. The purpose of the cross currency swaps is to economically hedge the foreign currency exposure on the payment of interest and principal amounts of the Company’s NOK-denominated bonds due in 2020, 2021 and 2023. In addition, the cross currency swaps economically hedge the interest rate exposure on the NOK bonds due in 2020, 2021 and 2023. The Company has not designated, for accounting purposes, these cross currency swaps as cash flow hedges of its NOK-denominated bonds due in 2020, 2021 and 2023. As at March 31, 2020, the Company was committed to the following cross currency swaps:
 
 
 
 
 
 
 
 
 
 
Fair Value /
Carrying
Amount of
Asset /
(Liability)
$
 
 
Notional
Amount
NOK
 
Notional
Amount
USD
 
Floating Rate Receivable
 
 
 
 
 
 
 
Reference
Rate
 
Margin
 
Fixed Rate
Payable
 
 
Remaining
Term (years)
1,000,000
 
134,000

 
NIBOR
 
3.70%
 
5.92%
 
(37,785
)
 
0.1
1,200,000
 
146,500

 
NIBOR
 
6.00%
 
7.72%
 
(30,806
)
 
1.6
850,000
 
102,000

 
NIBOR
 
4.60%
 
7.89%
 
(23,562
)
 
3.4
 
 
 
 
 
 
 
 
 
 
(92,153
)
 
 

Interest Rate Risk

The Company enters into interest rate swap agreements, which exchange a receipt of floating interest for a payment of fixed interest, to reduce the Company’s exposure to interest rate variability on its outstanding floating-rate debt. The Company designates certain of its interest rate swap agreements as cash flow hedges for accounting purposes.
 
As at March 31, 2020, the Company was committed to the following interest rate swap agreements related to its LIBOR-based debt and EURIBOR-based debt, whereby certain of the Company’s floating-rate debts were swapped with fixed-rate obligations: 
 
Interest
Rate
Index
 
Principal
Amount
 
Fair Value /
Carrying
Amount of
Asset /
(Liability)
$
 
Weighted-
Average
Remaining
Term
(years)
 
Fixed
Interest
Rate
(%)(1)
LIBOR-Based Debt:
 
 
 
 
 
 
 
 
 
U.S. Dollar-denominated interest rate swaps (2)
LIBOR
 
857,862

 
(69,278
)
 
3.9
 
2.9

EURIBOR-Based Debt:
 
 
 
 
 
 
 
 
 
Euro-denominated interest rate swaps
EURIBOR
 
71,449

 
(7,241
)
 
3.4
 
3.8

 
 
 
 
 
(76,519
)
 
 
 
 

(1)
Excludes the margins the Company pays on its variable-rate debt, which, as of March 31, 2020, ranged from 0.3% to 3.95%.
(2)
Includes interest rate swaps with the notional amount reducing quarterly or semi-annually. Four interest rate swaps are subject to mandatory early termination in 2020, 2021 and 2024, at which time the swaps will be settled based on their fair value.
Stock Purchase Warrants

Prior to the 2019 Brookfield Transaction, Teekay held 15.5 million Brookfield Transaction Warrants and 1,755,000 Series D Warrants of Teekay Offshore (see Note 4). As part of the 2019 Brookfield Transaction, Teekay sold to Brookfield all of the Company’s remaining interests in Teekay Offshore, which included, among other things, both the Brookfield Transaction Warrants and Series D Warrants.


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TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, other than share and per share data)

Tabular Disclosure

The following tables present the location and fair value amounts of derivative instruments, segregated by type of contract, on the Company’s unaudited consolidated balance sheets.
 
Prepaid Expenses and Other
 
Other Non-Current Assets
 
Accrued Liabilities and Other (1)
 
Accrued Liabilities and Other (2)
 
Other Long-Term Liabilities
 
$
 
$
 
$
 
$
 
$
As at March 31, 2020
 
 
 
 
 
 
 
 
 
Derivatives designated as a cash flow hedge:
 
 
 
 
 
 
 
 
 
Interest rate swap agreements

 

 
(40
)
 
(2,622
)
 
(10,861
)
Derivatives not designated as a cash flow hedge:
 
 
 
 
 
 
 
 
 
Interest rate swap agreements

 

 
(2,103
)
 
(22,055
)
 
(38,838
)
Cross currency swap agreements

 

 
(965
)
 
(43,341
)
 
(47,847
)
Forward freight agreements

 

 

 
(174
)
 

 

 

 
(3,108
)
 
(68,192
)
 
(97,546
)
 
 
Prepaid Expenses and Other
 
Other Non-Current Assets
 
Accrued Liabilities and Other (1)
 
Accrued Liabilities and Other (2)
 
Other Long-Term Liabilities
 
$
 
$
 
$
 
$
 
$
As at December 31, 2019
 
 
 
 
 
 
 
 
 
Derivatives designated as a cash flow hedge:
 
 
 
 
 
 
 
 
 
Interest rate swap agreements

 

 
(13
)
 
(836
)
 
(3,475
)
Derivatives not designated as a cash flow hedge:
 
 
 
 
 
 
 
 
 
Foreign currency forward contracts

 

 

 
(202
)
 

Interest rate swap agreements
932

 
1,916

 
(2,948
)
 
(15,478
)
 
(29,452
)
Cross currency swap agreements

 

 
(456
)
 
(22,661
)
 
(18,987
)
Forward freight agreements

 

 

 
(86
)
 

 
932

 
1,916

 
(3,417
)
 
(39,263
)
 
(51,914
)
(1)
Represents accrued interest related to derivative instruments recorded in accrued liabilities and other on the consolidated balance sheets (see Note 8).
(2)
Represents the current portion of derivative liabilities recorded in accrued liabilities and other on the consolidated balance sheets (see Note 8).

As at March 31, 2020, the Company had multiple interest rate swaps and cross currency swaps with the same counterparty that are subject to the same master agreements. Each of these master agreements provides for the net settlement of all derivatives subject to that master agreement through a single payment in the event of default or termination of any one derivative. The fair value of these derivatives is presented on a gross basis in the Company’s unaudited consolidated balance sheets. As at March 31, 2020, these derivatives had an aggregate fair value asset amount of nil and an aggregate fair value liability amount of $145.0 million. As at March 31, 2020, the Company had $72.1 million on deposit with the relevant counterparties as security for swap liabilities under certain master agreements. The deposit is presented in restricted cash – current and long-term on the consolidated balance sheets.

For the periods indicated, the following tables present the gains (losses) on interest rate swap agreements designated and qualifying as cash flow hedges (excluding such agreements in equity-accounted investments):

Three Months Ended March 31, 2020
 
Three Months Ended March 31, 2019
Amount of Loss Recognized in OCI
 
Amount of Loss Reclassified from Accumulated OCI to Interest Expense
 
Amount of Loss Recognized in OCI
 
Amount of Gain Reclassified from Accumulated OCI to Interest Expense
 
(9,171)
 
(152)
 
(2,832)
 
251
 


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TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, other than share and per share data)


Realized and unrealized (losses) gains from derivative instruments that are not designated for accounting purposes as cash flow hedges are recognized in earnings and reported in realized and unrealized (losses) gains on non-designated derivatives in the unaudited consolidated statements of income (loss) as follows:
 
Three Months Ended March 31,
 
2020

2019
 
$
 
$
Realized (losses) relating to:
 
 
 
Interest rate swap agreements
(2,677
)

(1,688
)
Foreign currency forward contracts
(241
)


Forward freight agreements
(49
)

(13
)
 
(2,967
)

(1,701
)
Unrealized (losses) gains relating to:
 
 
 
Interest rate swap agreements
(18,812
)

(6,021
)
Foreign currency forward contracts
202



Stock purchase warrants


2,316

Forward freight agreements
(86
)

(17
)
 
(18,696
)

(3,722
)
Total realized and unrealized (losses) on derivative instruments
(21,663
)

(5,423
)

Realized and unrealized (losses) gains from cross currency swaps are recognized in earnings and reported in foreign exchange gain (loss) in the unaudited consolidated statements of income (loss) as follows:
 
Three Months Ended March 31,
 
2020
 
2019
 
$
 
$
Realized (losses)
(1,817
)
 
(1,434
)
Unrealized (losses)
(49,540
)
 
(1,920
)
Total realized and unrealized (losses) on cross currency swaps
(51,357
)
 
(3,354
)

The Company is exposed to credit loss to the extent the fair value represents an asset in the event of non-performance by the counterparties to the cross currency and interest rate swap agreements; however, the Company does not anticipate non-performance by any of the counterparties. In order to minimize counterparty risk, the Company only enters into derivative transactions with counterparties that are rated A- or better by Standard & Poor’s or A3 or better by Moody’s at the time of the transaction. In addition, to the extent possible and practical, interest rate swaps are entered into with different counterparties to reduce concentration risk.
17. Income Tax Expense
The components of the provision for income tax expense are as follows:
 
Three Months Ended March 31,
 
 
2020
 
2019
 
 
$
 
$
 
Current
(3,786
)
 
(4,853
)
 
Deferred
(6
)
 
(183
)
 
Income tax expense
(3,792
)
 
(5,036
)
 


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TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, other than share and per share data)

The following table reflects changes in uncertain tax positions relating to freight tax liabilities, which are recorded in other long-term liabilities on the Company's unaudited consolidated balance sheets:
 
Three Months Ended March 31,
 
2020
 
2019
 
$
 
$
Balance of unrecognized tax benefits as at January 1
62,958

 
40,556

Increases for positions related to the current year
1,645

 
1,599

Changes for positions taken in prior periods
1,419

 
2,816

Decrease related to statute limitations
(530
)
 

Balance of unrecognized tax benefits as at March 31
65,492

 
44,971

Included in the Company's current income tax expense are provisions for uncertain tax positions relating to freight taxes. The Company does not presently anticipate that its provisions for these uncertain tax positions will significantly increase in the next 12 months; however, this is dependent on the jurisdictions in which vessel trading activity occurs. The Company reviews its freight tax obligations on a regular basis and may update its assessment of its tax positions based on available information at the time. Such information may include legal advice as to the applicability of freight taxes in relevant jurisdictions. Freight tax regulations are subject to change and interpretation; therefore, the amounts recorded by the Company may change accordingly. The tax years 2008 through 2020 remain open to examination by some of the major jurisdictions in which the Company is subject to tax.
18. Net Loss Per Share
 
Three Months Ended March 31,
 
 
2020
 
2019
 
 
$
 
$
 
Net loss attributable to the shareholders of Teekay Corporation – basic and diluted
(49,805
)
 
(84,257
)
 
Weighted average number of common shares
100,887,551

 
100,520,421

 
Common stock and common stock equivalents
100,887,551

 
100,520,421

 
Loss per common share – basic and diluted
(0.49
)
 
(0.84
)
 

The Company intends to settle the principal of the Convertible Notes in cash on conversion and calculates diluted earnings per share using the treasury-stock method. Stock-based awards and the conversion feature on the Convertible Notes that have an anti-dilutive effect on the calculation of diluted loss per common share, are excluded from this calculation. For the three months ended March 31, 2020, options to acquire 6.1 million shares of Teekay Common Stock had an anti-dilutive effect on the calculation of diluted income per common share (three months ended March 31, 20196.1 million). In periods where a loss attributable to shareholders of Teekay has been incurred, all stock-based awards and the conversion feature on the Convertible Notes are anti-dilutive.
19. Supplemental Cash Flow Information
Total cash, cash equivalents, restricted cash, and cash and restricted cash held for sale are as follows:
 
March 31, 2020
 
December 31, 2019
 
March 31, 2019
 
December 31, 2018
 
$
 
$
 
$
 
$
Cash and cash equivalents
564,401

 
353,241

 
410,724

 
424,169

Restricted cash – current
40,444

 
56,777

 
47,424

 
40,493

Restricted cash – non-current
83,408

 
44,849

 
38,155

 
40,977

Assets held for sale - cash
2,018

 
1,121

 

 

Assets held for sale - restricted cash
337

 
337

 

 

 
690,608

 
456,325

 
496,303

 
505,639


The Company maintains restricted cash deposits relating to certain term loans, collateral for cross currency swaps (see Note 16), leasing arrangements, project tenders and amounts received from charterers to be used only for dry-docking expenditures and emergency repairs.

On March 27, 2020, Teekay Parent sold Golar Nor to Altera (see Note 6). Among the assets and liabilities of Golar Nor that were deconsolidated concurrent with the sale were Golar Nor's operating lease right-of-use assets and operating lease liabilities relating to the Petroatlantic and Petronordic shuttle tankers totaling $50.7 million and $50.7 million, respectively.


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TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, other than share and per share data)

The sale of the Toledo Spirit by its owner during the three months ended March 31, 2019, resulted in the vessel being returned to its owner with the obligation related to finance lease being concurrently extinguished. As a result, the sale of the vessel and the concurrent extinguishment of the corresponding obligation related to finance lease of $23.6 million for the three months ended March 31, 2019, was treated as a non-cash transaction in the Company's unaudited consolidated statements of cash flows.
20. Subsequent Events
a)
On May 11, 2020, Teekay and Teekay LNG eliminated all of Teekay LNG's incentive distribution rights held by Teekay in exchange for 10.75 million newly-issued common units of Teekay LNG. Following the completion of this transaction on May 11, 2020, Teekay now owns approximately 36 million common units of Teekay LNG and remains the sole owner of its general partner, which together represents an economic interest of approximately 42% in Teekay LNG.

b)
On April 30, 2020, Teekay Tankers finalized the sale of the non-U.S. portion of its ship-to-ship support services business, as well its LNG terminal management business for $26 million plus an adjustment for the final amounts of cash and other working capital present on the closing date. Teekay Tankers received $14.3 million in May 2020, which is 50% of the $26 million plus estimated cash and other working capital at closing. The remaining balance is due to Teekay Tankers by August 31, 2020.

c)
In May 2020, Teekay Tankers agreed to sell one Aframax tanker for $14 million, which is expected to be delivered to its buyer in the third quarter of 2020.



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ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the unaudited consolidated financial statements and accompanying notes contained in “Item 1 – Financial Statements” of this Report on Form 6-K and with our audited consolidated financial statements contained in “Item 18 – Financial Statements” and with Management’s Discussion and Analysis of Financial Condition and Results of Operations in “Item 5 – Operating and Financial Review and Prospects” in our Annual Report on Form 20-F for the year ended December 31, 2019. Included in our Annual Report on Form 20-F is important information about items that you should consider when evaluating our results, an explanation of our organizational structure, information about the types of contracts we enter into and certain non-GAAP measures we utilize to measure our performance. Unless otherwise indicated, references in this Report to “Teekay,” the “Company,” “we,” “us” and “our” and similar terms refer to Teekay Corporation and its subsidiaries.

Overview

Teekay Corporation (or Teekay) is an operational leader and project developer in the marine midstream space. Teekay provides a comprehensive set of marine services to the world's leading oil and gas companies. We have a 100% general partnership interest in one publicly-listed master limited partnership, Teekay LNG Partners L.P. (or Teekay LNG), and a controlling interest in publicly-listed Teekay Tankers Ltd. (or Teekay Tankers), and we directly own three floating production storage and offloading (or FPSO) units. Until May 2019, when we sold our remaining interest, we had a 49% general partnership interest and other equity and debt interests in another publicly-listed master limited partnership, Altera Infrastructure L.P., (or Altera) previously known as Teekay Offshore Partners L.P. (or Teekay Offshore). Teekay and its subsidiaries, other than Teekay LNG and Teekay Tankers, are referred to herein as Teekay Parent.
ITEMS YOU SHOULD CONSIDER WHEN EVALUATING OUR RESULTS
There are a number of factors that should be considered when evaluating our historical financial performance and assessing our future prospects and we use a variety of financial and operational terms and concepts when analyzing our results of operations. These items can be found in "Item 5 – Operating and Financial Review and Prospects” in our Annual Report on Form 20-F for the year ended December 31, 2019.

Novel Coronavirus (COVID-19) Pandemic

The novel coronavirus pandemic is dynamic, and its ultimate scope, duration and effects on us, our customers and suppliers and our industry are uncertain.

COVID-19 is anticipated to result in a significant decline in global demand for LNG, LPG and crude oil. As our business includes the transportation of LNG, LPG and oil on behalf of our customers, any significant decrease in demand for the cargo we transport could adversely affect demand for our vessels and services.

In the first quarter of 2020 we did not experience any material business interruptions or negative impact on our cash flows as a result of the COVID-19 pandemic. We are monitoring the potential impact of the pandemic on us, including monitoring counterparty risk associated with our vessels under contract, and we have introduced a number of measures intended to protect the health and safety of our crews on our vessels, as well as our onshore staff.

Effects of the current pandemic may include, among others: deterioration of worldwide, regional or national economic conditions and activity and of demand for LNG, LPG and oil; operational disruptions to us or our customers due to worker health risks and the effects of new regulations, directives or practices implemented in response to the pandemic (such as travel restrictions for individuals and vessels and quarantining and physical distancing); potential delays in (a) the loading and discharging of cargo on or from our vessels, (b) vessel inspections and related certifications by class societies, customers or government agencies and (c) maintenance, modifications or repairs to, or dry docking of, our existing vessels due to worker health or other business disruptions; reduced cash flow and financial condition, including potential liquidity constraints; potential reduced access to capital as a result of any credit tightening generally or due to continued declines in global financial markets; potential reduced ability to opportunistically sell any of our vessels on the second-hand market, either as a result of a lack of buyers or a general decline in the value of second-hand vessels; potential decreases in the market values of our vessels and any related impairment charges or breaches relating to vessel-to-loan financial covenants; potential disruptions, delays or cancellations in the construction of new conventional tankers or LNG projects (including production, liquefaction, regasification, storage and distribution facilities), which could reduce future growth opportunities; and potential deterioration in the financial condition and prospects of our customers or business partners.

Although disruption and effects from the novel coronavirus pandemic may be temporary, given the dynamic nature of these circumstances, the duration of any potential business disruption and the related financial impact cannot be reasonably estimated at this time, but could materially affect our business, results of operations and financial condition. Please read “Item 3. Key Information - Risk Factors” in our Annual Report on Form 20-F for the year ended December 31, 2019 for additional information about the potential risks of COVID-19 on our business.


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IMO 2020 Low Sulfur Fuel Regulation

Effective January 1, 2020, the International Maritime Organization (or IMO) imposed a 0.50% m/m (mass by mass), global limit for sulfur in fuel oil used onboard ships. To comply with this new regulatory standard, ships may utilize different fuels containing low or zero sulfur or utilize exhaust gas cleaning systems, known as “scrubbers”. To date, neither Teekay LNG nor Teekay Tankers has installed any scrubbers on their existing fleets, but each has taken and continues to take steps to comply with the 2020 sulfur limit. Detailed plans to address this changeover have been successfully implemented. 

Teekay LNG communicated with its charterers in seeking to promote the use of LNG as the primary fuel whenever possible. All charterers accepted the rationale as a logical means of compliance. Vessels are supplied with compliant low-sulfur heavy fuel oil and low-sulfur marine gas oil which are used as pilot fuels, maneuvering or heel out situations, or in the case of heavy fuel oil-only vessels, as the primary fuel. Under Teekay LNG’s time charters, as both the LNG and compliant fuel is supplied by the charterers, there has been minimal impact on net voyage revenues for its fleet.

Teekay Tankers transitioned to burning compliant low sulfur fuel on January 1, 2020, which transition did not have a significant impact on its operating results.  The future fuel price spread between high sulfur fuel and low sulfur fuel is uncertain; however, the use of compliant low sulfur fuel is anticipated to result in an increase in voyage expenses. We expect that Teekay Tankers will be able to recover fuel price increases from the charterers of its vessels through higher rates for voyage charters.
RECENT DEVELOPMENTS AND RESULTS OF OPERATIONS
The following table (a) presents revenues and income (loss) from vessel operations for Teekay LNG, Teekay Tankers and Teekay Parent, and (b) reconciles these amounts to our unaudited consolidated financial statements. Please read "Item 1 – Financial Statements: Note 5 – Segment Reporting" for information about our lines of business and segments.
 
Revenues
 
Income (Loss) from Vessel Operations
Three Months Ended
 
Three Months Ended
 
March 31,
 
March 31,
(in thousands of U.S. dollars)
2020
 
2019
 
2020
 
2019
Teekay LNG
139,887

 
149,744

 
21,738

 
69,361

Teekay Tankers
341,900

 
238,161

 
120,126

 
32,097

Teekay Parent
92,267

 
100,097

 
(12,968
)
 
(17,226
)
Elimination of intercompany

 
(1,129
)
 

 

Teekay Corporation Consolidated
574,054

 
486,873

 
128,896

 
84,232


SUMMARY
Teekay's consolidated income from vessel operations increased to $128.9 million for the three months ended March 31, 2020 compared to $84.2 million for the same period last year. The primary reasons for this increase in our consolidated results are as follows:


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an increase in income from vessel operations in Teekay Tankers of $88.0 million primarily due to higher overall average realized spot TCE rates earned by its Suezmax, Aframax and LR2 product tankers in the first quarter of 2020; and
a decrease in loss from vessel operations in Teekay Parent of $4.3 million primarily due to lower operating expenses in the first quarter of 2020, and a gain on commencement of sales-type lease relating to the Petrojarl Foinaven FPSO unit, partially offset by the write-down of two FPSO units in the first quarter of 2020;
partially offset by
a decrease in income from vessel operations in Teekay LNG of $47.6 million primarily due to a $45.0 million write-down of six multi-gas carriers during the first quarter of 2020.
Teekay LNG

As at March 31, 2020, Teekay LNG’s liquefied gas fleet consisted of a controlling interest in 22 LNG carriers and seven multi-gas carriers. In addition, Teekay LNG also has interests ranging from 20% to 52% in 25 LNG carriers, 23 LPG carriers and one LNG regasification terminal in Bahrain that are accounted for using the equity method.

Recent Developments in Teekay LNG
During April and May 2020, the MALT Joint Venture secured the following charter contracts: a one-year, fixed-rate charter contract, with a one-year option, for the Arwa Spirit which commenced in May 2020 after its prior charter contract ended; and a six-month charter contract for the Marib Spirit which is expected to commence in mid-June 2020 after its current charter contract ends in early-June 2020. The MALT Joint Venture also secured an eight-month charter contract for the Methane Spirit, which is expected to commence concurrently after its current charter contract ends in July 2020.

Teekay LNG received notice from its third-party commercial manager (or the Manager), which commercially manages its seven wholly-owned multi-gas vessels, that the Manager will dissolve the pool in which these seven multi-gas vessels are being managed, effective September 2020, in accordance with its rights in the commercial management agreement. Teekay LNG is currently evaluating alternatives with respect to the future commercial activities of these vessels after the agreement with the Manager ends in September 2020. This notice, along with the lower near-term outlook for these types of vessels as a result of the current economic environment, impacted Teekay LNG's assessment of the expected earnings for these vessels which resulted in a write-down of six of its multi-gas carriers. See "Item 1 - Financial Statements: Note 7 - Write-down and Loss on Sale".

On January 3 and January 7, 2020, Awilco LNG ASA repurchased the WilPride and WilForce LNG Carriers, respectively, and paid Teekay LNG the associated vessel purchase obligations, deferred hire amounts and interest on deferred hire amounts totaling over $260 million relating to these two vessels. Teekay LNG used the proceeds from the sales to repay $157 million of term loans that were collateralized by these vessels and to fund working capital requirements.

In November 2019, Teekay LNG's joint venture with National Oil & Gas Authority (or NOGA), Gulf Investment Corporation and Samsung C&T (or the Bahrain LNG Joint Venture), in which Teekay LNG has a 30% interest, completed the mechanical construction and commissioning of the LNG receiving and regasification terminal in Bahrain. The project began receiving terminal use payments in January 2020 under its terminal use agreement with NOGA which ends in February 2039.


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Operating Results – Teekay LNG
The following table compares Teekay LNG’s operating results, equity income and number of calendar-ship-days for its vessels for the three months ended March 31, 2020 and 2019. Please read "Item 1 – Financial Statements: Note 5 – Segment Reporting" for information about our lines of business and segments.
(in thousands of U.S. Dollars, except calendar-ship-days)
Three Months Ended March 31,
 
2020

2019

Revenues
139,887

 
149,744

 
Voyage expenses
(2,317
)
 
(5,775
)
 
Vessel operating expenses
(26,104
)
 
(26,101
)
 
Time-charter hire expenses
(5,922
)
 
(5,591
)
 
Depreciation and amortization
(32,639
)
 
(34,126
)
 
General and administrative expenses (1)
(6,167
)
 
(6,632
)
 
Write-down of vessels
(45,000
)
 

 
Restructuring charges

 
(2,158
)
 
Income from vessel operations
21,738

 
69,361

 
 
 
 
 
 
Liquefied Gas Carriers (1)
21,738

 
70,443

 
Conventional Tankers (1)(2)

 
(1,082
)
 
 
21,738

 
69,361

 
 


 


 
Equity Income – Liquefied Gas Carriers
373

 
5,578

 
 
 
 
 
 
Calendar-Ship-Days (3)
 
 
 
 
Liquefied Gas Carriers
2,740

 
2,850

 
Conventional Tankers

 
113

 

(1)
Includes direct general and administrative expenses and indirect general and administrative expenses allocated to the liquefied gas carriers and conventional tankers based on estimated use of corporate resources.
(2)
Further information on Teekay LNG’s conventional tanker results can be found in “Item 1 – “Financial Statements: Note 5 – Segment Reporting.” Teekay LNG sold its two remaining conventional tankers, the Toledo Spirit and the Alexander Spirit, in January and October 2019, respectively.
(3)
Calendar-ship-days presented relate to consolidated vessels.

Income from vessel operations for Teekay LNG decreased to $21.7 million for the three months ended March 31, 2020, compared to $69.4 million for the same period in the prior year, primarily as a result of:

a decrease of $45.0 million for the three months ended March 31, 2020, due to the write-down of six multi-gas carriers during the first quarter of 2020 to their estimated fair values as described above in "Recent Developments in Teekay LNG";
a decrease of $3.8 million due to higher performance claims on certain of Teekay LNG's LNG vessels;
a decrease of $3.1 million for the three months ended March 31, 2020, due to the sales of the Toledo Spirit, Alexander Spirit, WilPride, and WilForce between January 2019 and January 2020, partially offset by the restructuring expense incurred during the first quarter of 2019 upon the sale of the Toledo Spirit; and
a decrease of $1.8 million for the three months ended March 31, 2020, due to lower rates earned upon the redeployment of the Magellan Spirit in May 2019;
partially offset by
an increase of $4.1 million for the three months ended March 31, 2020, due to the scheduled dry docking of the Galicia Spirit for 37 days and the Madrid Spirit being off-hire for 20 days during the first quarter of 2019;
an increase of $1.7 million for the three months ended March 31, 2020, due to the seven multi-gas carriers being fully operational in the first quarter of 2020, compared to these vessels being off-hire for 51 days for scheduled dry dockings and repairs during the same period in 2019; and
an increase of $1.2 million for the three months ended March 31, 2020, due to the delivery of the Yamal Spirit in January 2019.


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Equity income related to Teekay LNG’s liquefied gas carriers was $0.4 million for the three months ended March 31, 2020, compared to equity income of $5.6 million for the same period in the prior year. The changes were primarily as a result of:

a decrease of $23.1 million for the three months ended March 31, 2020, from the Bahrain LNG Joint Venture, primarily due to an increase in unrealized losses in its interest rate swaps due to a larger decrease in long-term LIBOR benchmark interest rates relative to the beginning of 2020 compared to the same period in the prior year and the recognition of a credit loss provision in the first quarter of 2020 upon the adoption of the new Accounting Standards Update, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (or ASU 2016-13). These decreases were partially offset by an increase in operating income in the Bahrain LNG Joint Venture due to the commencement of the terminal use agreement in January 2020;

partially offset by
an increase of $10.4 million for the three months ended March 31, 2020, from Teekay LNG's 50%-owned investment in the six ARC7 LNG carriers (or the Yamal LNG Carriers) relating to the Yamal LNG Joint Venture, primarily due to the delivery of four of ARC7 LNG carrier newbuildings, the Nikolay Yevgenov, the Vladimir Voronin, the Georgiy Ushakov, and the Yakov Gakkel in June 2019, August 2019, November 2019, and December 2019, respectively;

an increase of $4.7 million for the three months ended March 31, 2020, in Teekay LNG's 52%-owned investment in the LNG carriers relating to its Teekay LNG-Marubeni Joint Venture (or the MALT LNG Carriers), primarily due to higher charter rates earned for the Arwa Spirit and Marib Spirit in the first quarter of 2020 as the vessels commenced one-year, fixed-rate charter contracts in June and July 2019, respectively; and

an increase of $2.1 million for the three months ended March 31, 2020, from Teekay LNG's 50%-ownership interest in Exmar LPG BVBA (or the Exmar LPG Joint Venture), primarily due to higher LPG charter rates earned during the first quarter of 2020, a new in-charter commencing in October 2019, and fewer off-hire days compared to the same period in 2019.
Teekay Tankers
As at March 31, 2020, Teekay Tankers owned 52 double-hulled conventional oil and product tankers, time chartered-in two Aframax and two LR2 tankers, and owned a 50% interest in one Very Large Crude Carrier (or VLCC).

Recent Developments in Teekay Tankers
Between March and May 2020, Teekay Tankers entered into time charter-out contracts for five Suezmax tankers and one LR2 tanker with one-year terms at average daily rates of $45,600 and $29,000 respectively, and two Aframax tankers with one to two-year terms at an average daily rate of $25,600. All charter-out contracts, except for one Aframax charter, commenced between April 2020 and May 2020.

In January 2020, Teekay Tankers reached an agreement to sell the non-U.S. portion of its ship-to-ship transfer business, as well as its LNG terminal management business for $26 million, with an adjustment for the final amounts of cash and other working capital present on the closing date. The sale closed on April 30, 2020.

During the fourth quarter of 2019 and the first quarter of 2020, Teekay Tankers agreed to sell three Suezmax tankers in separate transactions for a combined sales price of approximately $59.8 million. Two vessels were delivered in February 2020 and the remaining vessel was delivered in March 2020.


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Operating Results – Teekay Tankers
The following table compares Teekay Tankers’ operating results, equity income and number of calendar-ship-days for its vessels for the three months ended March 31, 2020 and 2019.
(in thousands of U.S. Dollars, except calendar-ship-days)
Three Months Ended March 31,
2020
 
2019
Revenues
341,900

 
238,161

Voyage expenses
(119,241
)
 
(102,999
)
Vessel operating expenses
(50,649
)
 
(54,587
)
Time-charter hire expense
(9,879
)
 
(9,448
)
Depreciation and amortization
(29,632
)
 
(29,865
)
General and administrative
(9,286
)
 
(9,165
)
Loss on sale of vessels
(3,087
)
 

Income from vessel operations
120,126

 
32,097

 
 
 
 
Equity income
1,940

 
753

 
 
 
 
Calendar-Ship-Days (1)
 
 
 
Conventional Tankers
5,302

 
5,459


(1)
Calendar-ship-days presented relate to owned and in-chartered consolidated vessels.

Tanker Market
The first quarter of 2020 started on a relatively strong note, as positive supply and demand fundamentals existing during the fourth quarter of 2019 continued into the early part of the year. However, crude tanker spot rates gradually softened through the course of January 2020 due to lower demand ahead of Chinese New Year, and weakened further during February 2020 as the COVID-19 outbreak began to impact Asian crude oil imports.

The tanker market improved quickly during March 2020 with the collapse of the OPEC+ supply agreement and subsequent price war waged by Saudi Arabia and Russia. Both countries increased production substantially during March and April 2020, resulting in higher crude oil exports and increased shipping demand. At the same time, global oil demand plummeted as lockdown restrictions were implemented in many parts of the world in order to halt the spread of the COVID-19 virus. This led to a significant mismatch between global oil supply and demand and a historic build in global oil inventories. The rapid build in inventories drove oil prices to multi-year lows and pushed the crude oil futures curve into a steep contango, which encouraged oil traders to charter ships for floating storage. The increasing number of tankers being utilized for storage led to a tightening of available fleet supply which, in combination with healthy cargo supply, resulted in increased tanker fleet utilization. As a result, mid-size tanker spot rates during the first quarter of 2020 were the highest since 2008.

Crude tanker spot rates have remained firm at the beginning of the second quarter of 2020. However, the outlook for spot rates has become more uncertain. In the near-term, global oil supply is expected to decline substantially, which should result in fewer spot cargoes. The OPEC+ group of producers have announced record supply cuts of 9.7 million barrels per day (or mb/d) starting in May 2020, with Saudi Arabia subsequently pledging to cut supply by a further 1 mb/d in June 2020, while production in several non-OPEC countries is also starting to decline in response to lower oil prices. However, these supply cuts may be insufficient to offset the expected drop in oil demand in the near-term, potentially resulting in a further build in global oil inventories and more floating storage demand. The strength of the crude spot tanker market is likely to be determined by the relative balance between a decline in spot cargoes on one hand, and any rise in floating storage demand on the other, and we anticipate that the spot market will remain volatile in the near-term.

Looking further ahead, global oil demand is expected to begin a recovery as lockdown restrictions start to be lifted across the globe from May 2020 onwards. However, the pace and strength of this recovery is highly uncertain. OPEC+ supply cuts are expected to remain in place throughout 2020 and 2021, although OPEC+ has indicated the cuts may reduce over time. As global oil supply and demand adjust, Teekay Tankers may see a period of oil inventory destocking emerge, which may dampen tanker demand in the medium-term. The redelivery of vessels from floating storage into the spot trading fleet may also negatively impact crude tanker spot rates later in 2020 and into 2021.


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Against the uncertainty around tanker demand, the tanker supply fundamentals offer a clear, positive counterbalance, with a much lower tanker orderbook than in previous cycles. The tanker orderbook, when measured as a percentage of the existing fleet, is currently at a 23-year low of around 8%. This compares to an orderbook of around 20% at the peak of the last market cycle in 2015 and just under 50% in 2008. New vessel ordering remains low due to financing constraints and uncertainty over what type of fuel and propulsion system to choose given new technology developments and future environmental legislation, such as IMO 2030. Finally, the global tanker fleet is aging with 370 mid-size tankers, or 19% of the fleet, currently 15 years of age or older, and thus likely to face scrapping in the coming years. When taking all of these factors into account, net tanker fleet growth is expected to be very low for at least the next two years.

In summary, the extraordinary upheaval in global oil markets at the start of 2020 has driven crude tanker spot rates to the highest level in more than 10 years. In the near-term, Teekay Tankers anticipates that rates will remain volatile due to a continued mismatch between oil supply and demand and an ongoing need for floating storage. The medium-term outlook is far less certain, and a period of lower oil supply coupled with inventory destocking may weigh on tanker demand. However, very low tanker fleet growth due to a small orderbook and high scrapping may lead to a faster rebalancing than in previous market cycles.

Income from vessel operations was $120.1 million for the three months ended March 31, 2020, compared to $32.1 million for the same period in the prior year, primarily as a result of:

an increase of $83.1 million for the three months ended March 31, 2020, due to higher overall average realized spot TCE rates earned by Suezmax, Aframax and LR2 product tankers, as well as as a higher extension rate from one time-charter out contract;
an increase of $12.0 million for the three months ended March 31, 2020, due to a lower number of off-hire days related to dry dockings and off-hire bunker expenses compared to the same period in the prior year; and
a net increase of $4.1 million due to a higher number of vessels on time-charter out contracts earning higher rates compared to spot rates for the first quarter of 2019, partially offset by decrease in spot voyage charter days resulting from a higher amount of FSL voyage days;
partially offset by

a decrease of $8.7 million for the three months ended March 31, 2020, due to the sale of one Suezmax tanker in the fourth quarter of 2019 and three Suezmax tankers in the first quarter of 2020 and the write-down of another Suezmax tanker classified as held for sale as of March 31, 2020; and
a decrease of $2.5 million for the three months ended March 31, 2020, primarily due to the amortization of dry-dock costs for various former Tanker Investments Limited (or TIL) vessels incurred for the first time subsequent to Teekay Tankers' acquisition of TIL in late 2017.
Teekay Parent
As at March 31, 2020, Teekay Parent had direct interests in three 100%-owned operating FPSO units, and in-chartered one FSO unit from Altera, all of which are included in Teekay Parent’s Offshore Production business. In addition, included in Teekay Parent’s Other and Corporate G&A segment were one FSO unit in-chartered from Altera, and one bunker barge in-chartered from a third party. Teekay Parent redelivered two shuttle tankers to Altera in March 2020, and one FSO unit to Altera in April 2019.

Recent Developments in Teekay Parent

In March 2020, Teekay Parent entered into a new bareboat charter contract with the existing charterer of the Petrojarl Foinaven FPSO, which contract extends up to December 2030. Under the terms of the new contract, Teekay Parent received a cash payment of $67 million in April 2020 and will receive a nominal per day rate over the life of the contract and a lump sum payment at the end of the contract period, which is expected to cover the costs of recycling the FPSO unit in accordance with the EU ship recycling regulations.

In the first quarter of 2020, CNR International (U.K.) Limited (or CNR) provided formal notice to Teekay of its intention to decommission the Banff field and remove the Banff FPSO and the Apollo FSO from the field in June 2020. The oil production under the existing contract for the Petrojarl Banff FPSO unit is expected to cease in mid-2020, at which time Teekay Parent expects to incur decommissioning/asset retirement costs. Accordingly, the capitalized asset retirement obligation for the Petrojarl Banff FPSO unit was increased based on recent changes to cost estimates and the carrying value of the unit was then written down to its estimated residual value.

During the first quarter of 2020, Teekay Parent revised its expected cash flows from the Sevan Hummingbird FPSO unit based on the recent changes in oil prices and the offshore market, and recent discussions with potential buyers of the unit. This led to the write-down of the unit to its estimated fair value using a discounted cash flow approach.






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Operating Results – Teekay Parent

The following tables compare Teekay Parent’s operating results, and the number of calendar-ship-days for its vessels for the three months ended March 31, 2020 and 2019.
(in thousands of U.S. Dollars, except calendar-ship-days)
Offshore
 
Other and
 
Teekay Parent
Production
 
Corporate G&A
 
Total
 
Three Months Ended March 31,
 
2020

2019

2020

2019

2020

2019
Revenues
45,933

 
49,438

 
46,334

 
50,659

 
92,267

 
100,097

Voyage expenses
(6
)
 
(9
)
 

 

 
(6
)
 
(9
)
Vessel operating expenses
(36,270
)
 
(36,925
)
 
(40,270
)
 
(40,508
)
 
(76,540
)
 
(77,433
)
Time-charter hire expenses
(7,950
)
 
(11,102
)
 
(3,305
)
 
(3,697
)
 
(11,255
)
 
(14,799
)
Depreciation and amortization
(10,646
)
 
(8,036
)
 

 
(80
)
 
(10,646
)
 
(8,116
)
General and administrative expenses (1)
(699
)
 
(2,595
)
 
(2,125
)
 
(4,580
)
 
(2,824
)
 
(7,175
)
Write-down of vessels
(46,519
)
 
(3,328
)
 

 

 
(46,519
)
 
(3,328
)
Gain on commencement of sales-type lease
44,943

 

 

 

 
44,943



Restructuring charges
(1,054
)
 

 
(1,334
)
 
(6,463
)
 
(2,388
)
 
(6,463
)
Loss from vessel operations
(12,268
)
 
(12,557
)
 
(700
)
 
(4,669
)
 
(12,968
)
 
(17,226
)
 
 
 
 
 
 
 
 
 


 


Calendar-Ship-Days (2)
 
 
 
 
 
 
 
 
 
 
 
FPSO Units
273

 
270

 

 

 
273

 
270

FSO Units
91

 
90

 
91

 
180

 
182

 
270

Shuttle Tankers
113

 
180

 

 

 
113

 
180


(1)
Includes direct general and administrative expenses and indirect general and administrative expenses allocated to offshore production, and other and corporate G&A based on estimated use of corporate resources.
(2)
Apart from three FPSO units, all remaining calendar-ship-days presented relate to in-chartered vessels.
Teekay Parent – Offshore Production
Loss from vessel operations for Teekay Parent’s Offshore Production business was $12.3 million for the three months ended March 31, 2020, compared to loss from vessel operations of $12.6 million for the same period in the prior year. The change is primarily as a result of:
a decrease in loss of $44.9 million for the three months ended March 31, 2020, relating to the gain on the derecognition of the Petrojarl Foinaven FPSO unit as a result of a new bareboat charter agreement that was classified as a sales-type lease; and
a decrease in loss of $5.3 million for the three months ended March 31, 2020, related to the Sevan Hummingbird FPSO unit, primarily due to lower depreciation as a result of a write-down of the unit to its estimated fair value in the third quarter of 2019, and lower operating expenses as a result of the COVID-19 outbreak that occurred during the first quarter of 2020, which placed restrictions on the mobilization of vendors towards the end of the quarter;
partially offset by
an increase in loss of $43.2 million for the three months ended March 31, 2020, due to write-down of two of Teekay Parent's FPSO units in the first quarter of 2020, compared to impairment of one of Teekay Parent's FPSO units in the first quarter of 2019;
an increase in loss of $5.6 million for the three months ended March 31, 2020, related to the Petrojarl Banff FPSO unit, primarily due to an increase in depreciation in the first quarter of 2020 upon receiving notice of decommissioning of the Banff field that resulted in a shorter useful life of the FPSO unit.
Teekay Parent – Other and Corporate G&A
Loss from vessel operations for Teekay Parent’s Other and Corporate G&A segment was $0.7 million for the three months ended March 31, 2020, compared to losses from vessel operations of $4.7 million in the same period in the prior year. The decrease in loss for the three months ended March 31, 2020 was primarily due to a decrease in corporate expenses.


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Equity-Accounted Investment in Altera

During the three months ended March 31, 2019, we recognized an equity loss of $68.0 million in respect of Altera, which included a $64.9 million write-down of our investments in Altera related to the sale thereof to Brookfield Business Partners L.P. (or Brookfield), which occurred in May 2019.
Other Consolidated Operating Results
The following table compares our other consolidated operating results for the three months ended March 31, 2020 and 2019:
 
Three Months Ended
March 31,
(in thousands of U.S. dollars)
2020
 
2019
 
$
 
$
Interest expense
(62,520
)
 
(73,671
)
Interest income
2,803

 
2,689

Realized and unrealized losses on non-designated derivative instruments
(21,663
)
 
(5,423
)
Foreign exchange gain (loss)
6,646

 
(2,630
)
Other (loss) income
(681
)
 
28

Income tax expense
(3,792
)
 
(5,036
)
Interest Expense. Interest expense decreased to $62.5 million for the three months ended March 31, 2020, from $73.7 million for the same period in the prior year, primarily due to:
a decrease of $4.3 million for the three months ended March 31, 2020 in Teekay Parent as a result of the repurchase in 2019 and maturity in January 2020 of the 8.5% senior notes (or the 2020 Notes), partially offset by an increase in debt issuance cost amortization, and the higher interest rate for the 9.25% senior secured notes due November 2022 (or the 2022 Notes) issued by Teekay Parent in May 2019;
a decrease of $2.3 million for the three months ended March 31, 2020, as the proceeds from the sales of the WilForce and WilPride were used to the repay Teekay LNG's term loans that were collateralized by these vessels;
a decrease of $2.0 million for the three months ended March 31, 2020 relating to Teekay LNG's extinguishment of debt issuance costs upon completion of the debt refinancing in January 2019 of the Sean Spirit; and
a decrease of $1.8 million for the three months ended March 31, 2020 in Teekay Tankers primarily due to the debt refinancing completed in the first quarter of 2020, which resulted in a lower principal balance and interest rates in comparison to those under the refinanced credit facilities.
Realized and unrealized gains (losses) on non-designated derivative instruments. For the three months ended March 31, 2020 and 2019, we had interest rate swap agreements with aggregate average net outstanding notional amounts of approximately $1.0 billion and $1.2 billion, respectively, with average fixed rates of approximately 2.9% and 3.0%, respectively. Short-term variable benchmark interest rates during these periods were generally less than 2.9% and, as such, we incurred realized losses of $2.7 million during the three months ended March 31, 2020, compared to realized losses of $1.7 million for the same period in the prior year under the interest rate swap agreements.
Primarily as a result of significant changes in the long-term benchmark interest rates during the three months ended March 31, 2020, compared with the same periods in 2019, we recognized unrealized losses of $18.8 million in the three months ended March 31, 2020, compared to unrealized losses of $6.0 million for the same period in the prior year under the interest rate swap agreements.

Prior to the 2019 Brookfield Transaction, Teekay held 15.5 million Brookfield Transaction Warrants and 1,755,000 Series D Warrants of Teekay Offshore. Please read “Item 1 – Financial Statements: Note 16 – Derivative Instruments and Hedging Activities”. During the three months ended March 31, 2019, we recognized unrealized gains of $1.9 million and $0.4 million on these warrants. As part of the 2019 Brookfield Transaction, Teekay sold to Brookfield all of the Company’s remaining interests in Teekay Offshore, which included, among other things, both the Brookfield Transaction Warrants and Series D Warrants.
Foreign Exchange Gain (Loss). Foreign currency exchange gain was $6.6 million for the three months ended March 31, 2020, compared to a loss of $2.6 million for the same period in the prior year. Our foreign currency exchange gains and losses, substantially all of which are unrealized, are due primarily to the relevant period-end revaluation of our NOK-denominated debt and our Euro-denominated term loans, finance leases and restricted cash for financial reporting purposes and the realized and unrealized (losses) gains on our cross currency swaps. Gains on NOK-denominated and Euro-denominated monetary liabilities reflect a stronger U.S. Dollar against the NOK and Euro on the date of revaluation or settlement compared to the rate in effect at the beginning of the period. Losses on NOK-denominated and Euro-denominated monetary liabilities reflect a weaker U.S. Dollar against the NOK and Euro on the date of revaluation or settlement compared to the rate in effect at the beginning of the period.
For the three months ended March 31, 2020, foreign currency exchange gains (losses) included realized losses of $1.8 million (2019$1.4 million) and unrealized losses of $49.5 million (2019 – loss of $1.9 million), respectively, on our cross currency swaps, and unrealized gains of $54.0 million (2019 – loss of $0.6 million), on the revaluation of our NOK-denominated debt.

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Income Tax Expense. Income tax expense decreased to $3.8 million for the three months ended March 31, 2020, compared to $5.0 million for the same period in the prior year, primarily due to decreases in freight tax accruals in the first quarter of 2020.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity and Cash Needs
Teekay Corporation – Consolidated
Overall, our consolidated operations are capital intensive. We finance the purchase of our vessels primarily through a combination of borrowings from commercial banks or our joint venture partners, the issuance of equity and debt securities (primarily by our publicly-traded subsidiaries) and cash generated from operations. In addition, we may use sale and leaseback arrangements as a source of long-term liquidity. We use certain of our revolving credit facilities to temporarily finance capital expenditures until longer-term financing is obtained, at which time we typically use all or a portion of the proceeds from the longer-term financings to prepay outstanding amounts under revolving credit facilities. As at March 31, 2020, Teekay Corporation’s total consolidated cash and cash equivalents (including cash presented in assets held for sale) were $566.4 million, compared to $354.4 million at December 31, 2019. Teekay Corporation’s total consolidated liquidity, including cash, cash equivalents, undrawn credit facilities and the undrawn portion of a loan, which is determined based on certain borrowing criteria, to finance Teekay Tankers' pool management operations, was $827.9 million as at March 31, 2020 and $672.0 million as at December 31, 2019.

Our revolving credit facilities and term loans are described in “Item 1 – Financial Statements: Note 10 – Long-Term Debt.” They contain covenants and other restrictions typical of debt financing secured by vessels that restrict our ship-owning subsidiaries from, among other things: incurring or guaranteeing indebtedness; changing ownership or structure, including mergers, consolidations, liquidations and dissolutions; making dividends or distributions if we are in default; making capital expenditures in excess of specified levels; making certain negative pledges and granting certain liens; selling, transferring, assigning or conveying assets; making certain loans and investments; or entering into new lines of business.
 
Our long-term debt agreements generally provide for maintenance of minimum consolidated financial covenants and four of our loan agreements require the maintenance of vessel market value to loan ratios. As at March 31, 2020, these vessel market value to loan ratios ranged from 136% to 225% compared to their minimum required ratios of 115% to 135%. Our long-term debt agreements contain other covenants that are discussed in this section and in “Item 5 – Operating and Financial Review and Prospects” in our Annual Report on Form 20-F for the year ended December 31, 2019. As of the date these unaudited consolidated financial statements were issued, the Company is in compliance with all covenants under its credit facilities and other long-term debt.

The indenture that governs our 2022 Notes (further described in the Teekay Parent section below) contains covenants that, among other things, restrict our and the guarantors’ ability to: incur additional indebtedness and guarantee indebtedness; pay dividends or make other distributions or repurchase or redeem our equity interests; prepay, redeem or repurchase certain debt; issue certain preferred stock or similar equity securities; make investments; sell assets; incur liens, including the granting of any lien on any of the 2022 Note collateral, or further pledging any of the 2022 Note collateral as security, subject to permitted liens; enter into transactions with affiliates; and consolidate, merge or sell all or substantially all of our assets. The indenture also provides that under specific circumstances we may be required to offer to use all or a portion of the net proceeds of sales of our FPSO units or sales of Class B common stock of Teekay Tankers consummated prior to a specified date to repurchase 2022 Notes at a premium. The indenture further provides that we may be required, under certain circumstances, to offer to use all or a portion of the net proceeds of certain asset sales (other than a sale of an FPSO unit or shares of Class B common stock of Teekay Tankers prior to the specified date) to repurchase 2022 Notes.

We are exposed to market risk from foreign currency fluctuations and changes in interest rates, spot tanker market rates for vessels and bunker fuel prices. We use foreign currency forward contracts, cross currency and interest rate swaps and forward freight agreements to manage currency, interest rate and spot tanker rates.

Teekay Parent
Teekay Parent primarily owns an equity ownership interest in the Daughter Entities, 100% ownership interests in the general partner of Teekay LNG and three FPSO units, provides management services to the Daughter Entities and third-parties, and in-charters a small number of vessels. Teekay Parent’s primary short-term liquidity needs are the payment of operating expenses, debt servicing costs and scheduled repayments of long-term debt, as well as funding its other working capital requirements. Teekay Parent’s primary sources of liquidity are cash and cash equivalents, cash flows provided by operations, dividends/distributions and management fees received from the Daughter Entities and other investments, its undrawn credit facilities and proceeds from the sale of vessels to external parties (and in the past, to Teekay LNG, Teekay Tankers and Altera). As at March 31, 2020, Teekay Parent’s total cash and cash equivalents was $48.4 million, compared to $104.2 million at December 31, 2019. Teekay Parent’s total liquidity, including cash, cash equivalents and undrawn credit facilities, was $87.0 million as at March 31, 2020, compared to $195.3 million as at December 31, 2019. Giving pro forma effect for the $67 million upfront payment received in early April 2020 relating to the new Foinaven FPSO bareboat charter contract, Teekay Parent's total liquidity would have been approximately $154 million as of March 31, 2020.

On May 11, 2020, Teekay Parent and Teekay LNG eliminated all of Teekay LNG’s incentive distribution rights in exchange for 10.75 million newly-issued Teekay LNG common units (the IDR Transaction). Following the completion of this transaction on May 11, 2020, Teekay Parent now owns approximately 36 million common units of Teekay LNG and remains the sole owner of its general partner, which together represents an economic interest of approximately 42% in Teekay LNG.

In January 2020, the Company used $36.7 million to repay all remaining 2020 Notes at maturity.

Our Board of Directors approved the elimination of the quarterly dividend on Teekay’s common stock commencing with the first quarter of 2019. 


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In April 2019, Teekay filed a continuous offering program (or COP) under which Teekay may issue shares of its common stock, at market prices up to a maximum aggregate amount of $63.0 million. No shares of common stock have been issued under this COP as of March 31, 2020.

Teekay Parent's equity margin revolving credit facility provides for aggregate potential borrowings of up to $150 million, is secured by common units of Teekay LNG and shares of Class A common stock of Teekay Tankers that are owned by Teekay Parent and matures in December 2020. As of March 31, 2020, Teekay Parent had drawn $60.0 million on its equity margin revolving credit facility and had $38.7 million available to be drawn based on the value of the collateral as of that date.

Teekay Parent has guaranteed obligations of Teekay Tankers pursuant to one of its credit facilities. As at March 31, 2020, the aggregate outstanding balance on such credit facilities was $89.8 million.

We believe that Teekay Parent’s existing cash and cash equivalents and undrawn long-term borrowings following the transactions described above, in addition to all other sources of cash including cash from operations, will be sufficient to meet its existing liquidity needs for at least the next 12 months.

Teekay LNG
Teekay LNG's primary liquidity needs for the remainder of 2020 through 2021 include payment of operating expenditures, dry-docking expenditures, the funding of general working capital requirements, scheduled repayments and maturities of long-term debt and obligations related to finance leases, debt service costs, committed capital expenditures, its quarterly distributions, including payments of distributions on its Series A and Series B Preferred Units and common units and funding any common unit repurchases it may undertake. Teekay LNG anticipates that its primary sources of funds for its short-term liquidity needs will be cash flows from operations, proceeds from debt financings and dividends that it expects to receive from its equity-accounted joint ventures.

Teekay LNG's ability to continue to expand the size of its fleet over the long-term is dependent upon its ability to generate operating cash flow, obtain long-term bank borrowings, sale-leaseback financing and other debt, as well as its ability to raise debt or equity financing through public or private offerings.

As at March 31, 2020, Teekay LNG's consolidated cash and cash equivalents were $312.7 million, compared to $160.2 million at December 31, 2019. The increase in cash is primarily from receipts from sales-type leases upon the sale of the WilForce and WilPride in January 2020. Teekay LNG's total liquidity, which consists of cash, cash equivalents and undrawn credit facilities, was $372.7 million as at March 31, 2020, compared to $326.4 million as at December 31, 2019.

As at March 31, 2020, Teekay LNG had a working capital deficit of $204.3 million. This working capital deficit primarily arose from $328.4 million of long-term debt being classified as current at March 31, 2020 relating to scheduled maturities and repayments in the 12 months following March 31, 2020. Scheduled maturities include $96.1 million for Teekay LNG's NOK bonds maturing in May 2020 (taking into account Teekay LNG's associated cross currency swap with a notional amount of $134 million, net of $26 million cash held as collateral, the amount owing is $108.0 million) and $90.7 million of debt maturing in February 2021. Teekay LNG expects to manage its remaining working capital deficit primarily with net operating cash flow and expected dividends from its equity-accounted joint ventures, debt refinancings, and, to a lesser extent, existing undrawn revolving credit facilities. As at March 31, 2020, Teekay LNG had available liquidity from undrawn revolving credit facilities of $60.0 million. Teekay LNG does not have control over the operations of, nor does it have any legal claim to the revenue and expenses of its investments in, its equity-accounted joint ventures. Consequently, the cash flow generated by its investments in equity-accounted joint ventures may not be available for use by Teekay LNG in the period that such cash flows are generated.

Teekay LNG also guarantees its proportionate share of certain loan facilities and obligations on interest rate swaps for its equity-accounted joint ventures for which the aggregate principal amount of the loan facilities and fair value of the interest rate swaps as at March 31, 2020 was $1.5 billion. As of the date these consolidated financial statements were issued, Teekay LNG's equity-accounted joint ventures were in compliance with all covenants relating to these loan facilities that Teekay LNG guarantees.

In December 2018, Teekay LNG announced that its general partner's board of directors had authorized a repurchase program for the repurchase of up to $100 million of Teekay LNG's common units. During the three months ended March 31, 2020, Teekay LNG repurchased 1.4 million common units for $15.3 million and associated 2% general partnership interest of $0.3 million. As at May 29, 2020, the remaining dollar value of units that may be purchased under the program is approximately $55.8 million.

On May 11, 2020, Teekay Parent and Teekay LNG eliminated all of Teekay LNG’s incentive distribution rights in exchange for 10.75 million newly-issued Teekay LNG common units. Following the completion of this transaction on May 11, 2020, Teekay Parent now owns approximately 36 million common units of Teekay LNG and remains the sole owner of its general partner, which together represents an economic interest of approximately 42% in Teekay LNG. The conflicts committee of the board of directors of Teekay LNG’s general partner negotiated and approved the transaction, with the assistance of independent legal and financial advisors.

As part of its balanced capital allocation strategy, Teekay LNG increased its quarterly cash distributions on common units by 32% in 2020 from $0.19 per common unit to $0.25 per common unit commencing with the quarterly distribution paid in May 2020.

Teekay LNG believes that its existing cash and cash equivalents and undrawn long-term borrowings, in addition to other sources of cash including cash from operations and dividends from its equity accounted joint ventures, will be sufficient to meet its existing liquidity needs for at least the next 12 months.


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Teekay Tankers
Teekay Tankers' primary sources of liquidity are cash and cash equivalents, cash flows provided by its operations, its undrawn credit facilities, and capital raised through financing transactions.

As at March 31, 2020, Teekay Tankers' total consolidated cash and cash equivalents and cash held for sale were $205.3 million, compared to $89.9 million at December 31, 2019. Teekay Tankers' cash balance as at March 31, 2020 increased primarily as a result of net operating cash flow and net proceeds received from the sale of three Suezmax vessels. Teekay Tankers' total liquidity, including cash, cash equivalents and cash held for sale and undrawn credit facilities that was determined on certain borrowing criteria, was $368.1 million as at March 31, 2020, compared to $150.3 million as at December 31, 2019.

In January 2020, Teekay Tankers entered into a $532.8 million long-term revolving credit facility (or the 2020 Revolver), which is scheduled to mature in December 2024, and which had an outstanding balance of $395.0 million as at March 31, 2020. Teekay Tankers used the proceeds from the 2020 Revolver to repay a portion of the $455.3 million then outstanding under Teekay Tankers' prior two revolving facilities, which were scheduled to mature between 2021 and 2022, and two term loan facilities, which were scheduled to mature between 2020 and 2021.

In November 2019, Teekay Tankers made the determination to transition away from its previous formulaic dividend policy, which was based on a payout of 30 to 50 percent of its quarterly adjusted net income, to primarily focus on building net asset value through balance sheet delevering and reducing its cost of capital.

Teekay Tankers anticipates that its primary sources of funds for its short-term liquidity needs will be cash flows from operations, existing cash and cash equivalents and undrawn short-term and long-term borrowings, which Teekay Tankers believes will be sufficient to meet its existing liquidity needs for at least the next 12 months.

Teekay Tankers' short-term charters and spot market tanker operations contribute to the volatility of its net operating cash flow, and thus impact its ability to generate sufficient cash flows to meet its short-term liquidity needs. Historically, the tanker industry has been cyclical, experiencing volatility in profitability and asset values resulting from changes in the supply of, and demand for, vessel capacity. In addition, tanker spot markets historically have exhibited seasonal variations in charter rates. Tanker spot markets are typically stronger in the winter months as a result of increased oil consumption in the northern hemisphere and unpredictable weather patterns that tend to disrupt vessel scheduling.

Cash Flows
The following table summarizes our consolidated cash and cash equivalents provided by (used for) operating, financing and investing activities for the periods presented:

(in thousands of U.S. Dollars)
Three months ended March 31,
 
2020
 
2019
 
$
 
$
Net operating cash flows
438,959

 
105,154

Net financing cash flows
(252,476
)
 
13,169

Net investing cash flows
47,800

 
(127,659
)

Operating Cash Flows
Our consolidated net cash flow from operating activities fluctuates primarily as a result of changes in vessel utilization and TCE rates, changes in interest rates, fluctuations in working capital balances, the timing and amount of dry-docking expenditures, repairs and maintenance activities, vessel additions and dispositions, and foreign currency rates. Our exposure to the spot tanker market has contributed significantly to fluctuations in operating cash flows historically as a result of highly cyclical spot tanker rates. In addition, the production performance of certain of our FPSO units that operate under contracts with a production-based compensation component has contributed to fluctuations in operating cash flows. As the charter contracts of some of our FPSO units include incentives based on oil prices, changes in global oil prices during recent years have also impacted our operating cash flows.

Consolidated net cash flow from operating activities increased to $439.0 million for the three months ended March 31, 2020, from $105.2 million for the three months ended March 31, 2019. This increase was primarily due to a $261.0 million increase in direct financing lease payments received, which mainly related to payments received by Teekay LNG upon the sale of the WilForce and WilPride LNG carriers in January 2020. There was also a $91.8 million increase in income from operations (before depreciation, amortization, write-downs and gain on commencement of sales-type lease) of our businesses. For a further discussion of changes in income from operations from our businesses, please read “Results of Operations.” In addition, expenditures for dry docking decreased $12.4 million, and interest expense, including realized losses on interest rate swaps and cross currency swaps, decreased by a net amount of $9.9 million, compared to the corresponding period of 2019. These increases were partially offset by a $34.8 million decrease in cash flows from changes to non-cash working capital.


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Financing Cash Flows
We use our credit facilities to partially finance capital expenditures. Occasionally, we will use revolving credit facilities to finance these expenditures until longer-term financing is obtained, at which time we typically use all or a portion of the proceeds from the longer-term financings to prepay outstanding amounts under the revolving credit facilities. We actively manage the maturity profile of our outstanding financing arrangements. Our net payments on long-term debt, which are the proceeds from the issuance of long-term debt, net of debt issuance costs and prepayments of long-term debt, were $131.8 million in the three months ended March 31, 2020 compared to $38.5 million in the same period last year. Scheduled debt repayments increased by $15.3 million in the three months ended March 31, 2020, compared to the same period last year.

Teekay LNG received $158.7 million during the three months ended March 31, 2019 from the sale-leaseback financing transaction completed for the Yamal Spirit.

Teekay LNG used $15.6 million to repurchase common units during the three months ended March 31, 2020, compared to $9.5 million used for repurchases in the same period last year.

Investing Cash Flows
During the three months ended March 31, 2020, we incurred capital expenditures for vessels and equipment of $8.7 million, primarily for capitalized vessel modifications. Teekay Tankers received proceeds on the sale of three Suezmax tankers of $60.9 million.

During the three months ended March 31, 2019, we incurred capital expenditures for vessels and equipment of $124.5 million, primarily for capitalized vessel modifications and shipyard construction installment payments related to Teekay LNG's final LNG carrier newbuilding, the Yamal Spirit. Teekay LNG contributed $2.9 million to its equity-accounted joint ventures, primarily to fund project expenditures in the Yamal LNG Joint Venture, the Bahrain LNG project, and the Pan Union Joint Venture, and for working capital requirements for the Teekay LNG-Marubeni Joint Venture.
CONTRACTUAL OBLIGATIONS AND CONTINGENCIES
The following table summarizes our long-term contractual obligations as at March 31, 2020, excluding expected interest payments where applicable:
 
 
 
Remainder of
 
 
 
 
 
 
 
 
 
Beyond
 
Total
 
2020
 
2021
 
2022
 
2023
 
2024
 
2024
 
In millions of U.S. Dollars
Teekay LNG
 
 
 
 
 
 
 
 
 
 
 
 
 
Bond repayments (1)(2)
293.2

 
96.1

 
115.4

 

 
81.7

 

 

Scheduled repayments of long-term debt (1)(2)
648.7

 
105.2

 
121.6

 
111.4

 
112.7

 
46.9

 
150.9

Repayments on maturity of long-term debt (1)(2)
755.4

 
0.4

 
180.2

 
245.0

 

 
54.8

 
275.0

Scheduled repayments of obligations related to finance leases (3)
1,846.6

 
105.1

 
138.6

 
137.0

 
135.5

 
132.0

 
1,198.4

Commitments under operating leases (4)
267.7

 
35.8

 
47.6

 
34.9

 
23.9

 
23.9

 
101.6

Equipment and other construction contract costs(5)
54.4

 
17.1

 
22.2

 
15.1

 

 

 

 
3,866.0

 
359.7


625.6


543.4


353.8


257.6


1,725.9

Teekay Tankers
 
 
 
 
 
 
 
 
 
 
 
 
 
Scheduled repayments of long-term and other debt (2)
265.5

 
9.3

 
57.4

 
80.4

 
65.3

 
53.1

 

Repayments on maturity of long-term and other debt (2)
219.3

 

 
71.1

 

 

 
148.2

 

Scheduled repayments of obligations related to finance leases (2)
408.7

 
19.3

 
27.3

 
29.5

 
31.9

 
34.6

 
266.1

Chartered-in vessels (operating leases) (6)
33.1

 
26.6

 
6.5

 

 

 

 

 
926.6

 
55.2

 
162.3

 
109.9

 
97.2

 
235.9

 
266.1

Teekay Parent
 
 
 
 
 
 
 
 
 
 
 
 
 
Bond repayments (2)
375.0

 

 

 
250.0

 
125.0

 

 

Repayments on maturity of long-term debt (2)
60.0

 
60.0

 

 

 

 

 

Chartered-in vessels (operating leases) (7)
42.5

 
9.2

 
9.2

 
9.2

 
9.2

 
5.7

 

Asset retirement obligations (8)(9)
49.7

 
19.0

 
24.6

 

 

 

 
6.1

 
527.2

 
88.2

 
33.8

 
259.2

 
134.2

 
5.7

 
6.1

Total
5,319.8

 
503.1

 
821.7

 
912.5

 
585.2

 
499.2

 
1,998.1


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(1)
Euro-denominated and NOK-denominated obligations are presented in U.S. Dollars and have been converted using the prevailing exchange rate as of March 31, 2020.

(2)
Our interest-bearing obligations include bonds, commercial bank debt and obligations related to finance leases. Please read “Item 1 Financial Statements: Note 6 – Leases" and “Item 1 Financial Statements: Note 10 – Long-Term Debt” for the terms upon which future interest payments are determined as well as “Item 1 Financial Statements: Note 16 – Derivative Instruments and Hedging Activities" for a summary of the terms of our derivative instruments which hedge certain of our floating rate interest-bearing obligations.

(3)
Includes, in addition to lease payments, amounts Teekay LNG is required to pay to purchase the leased assets at the end of their respective lease terms.

(4)
Teekay LNG has corresponding leases whereby it is the lessor and expects to receive approximately $191.3 million under those leases from the remainder of 2020 to 2029.

(5)
The Bahrain LNG Joint Venture, in which Teekay LNG has a 30% ownership interest, has receiving and regasification terminal in Bahrain. The Bahrain LNG Joint Venture completed the mechanical construction and commissioning of the Bahrain terminal in late-2019 and began receiving terminal use payments in early-2020 under its 20-year agreement with NOGA. As at March 31, 2020, its 30% share of the estimated remaining costs included in the table above is $11.4 million, of which the Bahrain LNG Joint Venture has secured undrawn debt financing of $7 million related to its proportionate share.
In June 2019, Teekay LNG entered into an agreement with a contractor to supply equipment on certain of Teekay LNG's LNG carriers in 2021 and 2022, for an estimated installed cost of $60.6 million. As at March 31, 2020, Teekay LNG's estimated remaining costs of this installation was $43.1 million.
(6)
Excludes payments required if Teekay Tankers execute options to extend the terms of in-chartered leases signed as of March 31, 2020. If Teekay Tankers exercise all options to extend the terms of signed in-chartered leases, Teekay Tankers would expect total payments of $27.3 million (remainder of 2020), $25.5 million (2021), and $4.8 million (2022).
(7)
Teekay Parent in-charters two FSO units from Altera. One of the FSO units are on a back-to-back out-charter to a third party. One of the FSO units are part of the service contract of the Petrojarl Banff FPSO unit.
(8)
Teekay Parent has an asset retirement obligation (or ARO) relating to the sub-sea production facility associated with the Petrojarl Banff FPSO unit operating in the North Sea. The obligation generally involves the costs associated with the restoration of the environment surrounding the facility and removal and disposal of all production equipment. We expect that the ARO will be covered in part by contractual payments of approximately $8.0 million, presented in other non-current assets on our balance sheets, to be received from FPSO contract counterparty.
(9)
Teekay Parent recognized an ARO relating to the clean-up and disposal of the Petrojarl Foinaven FPSO unit. This obligation is expected to be settled at the end of the bareboat charter, currently assumed to be in March 2025. Teekay Parent is entitled to receive an amount from the charterer at the end of the bareboat charter that is currently expected to cover the costs of the ARO. The $6.1 million amount is the present value of the estimated Petrojarl Foinaven ARO as at March 31, 2020.
CRITICAL ACCOUNTING ESTIMATES
Accounting estimates and assumptions that we consider to be the most critical to an understanding of our consolidated financial statements because they inherently involve significant judgments and uncertainties, are discussed in “Item 5 – Operating and Financial Review and Prospects” in our Annual Report on Form 20-F for the year ended December 31, 2019. There were no significant changes in accounting estimates or assumptions from those discussed in such Annual Report on Form 20-F except relating to the impairment of Teekay Parent's two FPSOs and the impairment of six of Teekay LNG's seven wholly-owned multi-gas carriers during the three months ended March 31, 2020, as discussed in "Item 1 – Financial Statements: Note 7 – Write-down and Loss on Sale" and the following "Credit Losses" section.

Credit Losses

In June 2016, the Financial Accounting Standards Board (or FASB) issued Accounting Standards Update 2016-13, Financial Instruments Credit Losses: Measurement of Credit Losses on Financial Instruments (or ASU 2016-13). ASU 2016-13 introduces a new credit loss methodology, which requires earlier recognition of credit losses, while providing additional transparency about credit risk. This new credit loss methodology utilizes a lifetime “expected credit loss” measurement objective for the recognition of credit losses for loans, held-to-maturity debt securities and other receivables at the time the financial asset is originated or acquired. The expected credit losses are subsequently adjusted each period for changes in expected lifetime credit losses. This methodology replaces multiple impairment methods under previous GAAP for these types of assets, which generally required that a loss be incurred before it was recognized. The Company adopted ASU 2016-13 on January 1, 2020.

A substantial majority of our exposure to potential credit losses relates to Teekay LNG's direct financing and sales-type leases, including those within its equity-accounted joint ventures. See "Item 18 – Financial Statements: Note 13 - Financial Instruments" for a description of these direct financing and sales-type leases.

Judgments and Uncertainties. ASU 2016-13 gives entities the flexibility to select an appropriate method to measure the estimate of expected credit losses. That is, entities are permitted to use estimation techniques that are practical and relevant to their circumstances, as long as they are applied consistently over time and aim to faithfully estimate expected credit losses. We have determined the credit loss provision related to the lease receivable component of the net investment in direct financing and sales-type leases using an internal historical loss rate method. We concluded that using a loss rate method which is primarily based on internal historical data is inherently more representative than primarily using external data, which may include all industries, or all oil and gas or all marine transportation, which are not as comparable. In addition, a substantial majority of our customers are private single-purpose entities or subsidiaries or joint ventures of larger listed-entities that do not publish financial information nor do they have published credit ratings determined by credit rating agencies. In the limited circumstances where relevant and reliable external data is available, we have considered such data in making adjustments to our internally derived loss rate, in those circumstances where judged

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to be appropriate. Judgment is required to determine the applicability and reliability of the external data used. The credit loss provision for the residual value component is based on the current estimated fair value of the vessel as depreciated to the end of the charter contract as compared to the expected carrying value, with such potential gain or loss on maturity being included in the credit loss provision in increasing magnitude on a straight-line basis the closer the contract is to its maturity. Given the volatility in vessel values, the selection of the method to estimate the credit loss provision for the residual value component involves judgment.

In addition to the judgment used in selecting the methods to measure the credit loss provision, there is also judgment used in applying the methods. We have used judgment in determining whether or not the risk characteristics of a specific direct financing lease or sales-type lease at the measurement date are consistent with those used to measure the internal historical loss rate, and to determine whether we expect current conditions and reasonable and supportable forecasts to differ from the conditions that existed to measure the internal historical loss rate. In addition, judgment has been used to determine the internal historical loss rate, as it is based in part on estimates of the occurrence or non-occurrence of future events which will dictate the amount of recoveries earned or additional losses incurred associated with known losses incurred to date. Judgment has also been used to determine the adjustment required to the internal historical loss rate, in those circumstances where relevant and reliable external data was identified. Furthermore, the current estimated fair value of the vessels used in our estimate of expected credit losses for direct financing and sales-type leases has been determined based on second-hand market comparable values. Judgment is used when vessels sold are different in age, size and technical specifications compared to our vessels. Since vessel values can be volatile, our estimates may not be indicative of either the current or future prices we could obtain if we sold any of the vessels.

Effect if Actual Results Differ from Assumptions. To the extent the methods, and judgments used in applying these methods, that we use to measure our estimate of expected credit losses results in a credit loss provision that is different from actual results, our credit loss provision at the end of each period and the change in the credit loss provision in each period will be different than what would have otherwise been. More specifically, if the judgments used in determining our adjusted historical loss rate for one or more direct financing and sales-type leases results in an adjusted historical loss rate that results in a credit loss provision that is lower (higher) than actual results, our earnings in one or more periods would be overstated (understated) and our total equity in one or more periods would be overstated (understated). In addition, if our estimates of the residual value of the vessels is understated (overstated) and actual results are higher (lower), our earnings in one or more periods may be understated (overstated) and our total equity in one or more periods would be understated (overstated).

FORWARD-LOOKING STATEMENTS
This Report on Form 6-K for the three months ended March 31, 2020, contains certain forward-looking statements (as such term is defined in Section 21A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended) concerning future events and our operations, performance and financial condition, including, among others, statements regarding:

the expected scope, duration and effects of the novel coronavirus pandemic;
our expectations regarding the effects of the COVID-19 pandemic on our industry and business, including our liquidity;
conditions and fundamentals of the markets in which we operate, including the balance of supply and demand in these markets and spot tanker charter rates and volatility and oil production and competition for providing services;
the impact of future changes in the demand for and price of oil, and the related effects on the demand for and price of natural gas;
forecasts of worldwide tanker fleet growth or contraction and newbuilding tanker deliveries and vessel scrapping;
OPEC+ oil production or oil supply cuts and floating storage demand;
meeting our going concern requirements and our liquidity needs, and the liquidity needs of Teekay LNG and Teekay Tankers, anticipated funds and sources of financing for liquidity needs and the sufficiency of cash flows, and our estimation that we will have sufficient liquidity for at least the next 12 months;
our future financial condition and results of operations and our future revenues, expenses and capital expenditures, and our expected financial flexibility to pursue capital expenditures, acquisitions and other expansion opportunities, including vessel acquisitions;
our future growth prospects;
our business strategy and other plans and objectives for future operations;
expected uses of proceeds from vessel or securities transactions;
our ability and plans to obtain financing for new and existing projects, refinance existing debt obligations and fulfill our debt obligations;
compliance with financing agreements and the expected effect of restrictive covenants in such agreements;
our expectations regarding our ability to settle the asset retirement obligations related to the sub-sea production facility associated with the Petrojarl Banff FPSO unit operating in the North Sea and the asset retirement obligations related to the clean-up and disposal of the Petrojarl Foinaven FPSO unit also operating in the North Sea;
the expected dissolution of the pool in which Teekay LNG's seven wholly-owned multi-gas vessels are being managed;
the expected timing and cost relating to the additional equipment to be installed for certain of Teekay LNG's LNG carriers;
the impact and expected cost of, and our ability to comply with, new and existing governmental regulations and maritime self-regulatory organization standards applicable to our business and the effect of IMO 2020;
our expectation of being able to pass along the higher cost of low sulphur fuel to our customers;
expected costs, capabilities, acquisitions and conversions, and the commencement of any related charters or other contracts;

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our ability to maximize the use of our vessels, including the re-deployment or disposition of vessels no longer under long-term time charter or on a short-term charter contract;
the expectations as to the chartering of unchartered vessels;
the expected commencement of certain charter contracts;
our expectations and estimates regarding future charter business, with respect to minimum charter hire payments, revenues and our vessels' ability to perform to specifications and maintain their hire rates in the future;
the expected timing and completion of dry docking activities;
operating expenses, availability of crew and crewing costs, number of off-hire days, dry-docking requirements and durations and the adequacy and cost of insurance;
our expectations regarding the ability of our other customers to make charter payments to us;
the effectiveness of our risk management policies and procedures and the ability of the counterparties to our derivative and other contracts to fulfill their contractual obligations;
our hedging activities relating to foreign exchange, interest rate and spot market risks, and the effects of fluctuations in foreign exchange, interest rate and spot market rates on our business and results of operations;
our expectations regarding tax positions, liabilities and classifications;
our expectations regarding accounting estimates and the level of expected changes in our provisions for uncertain tax positions relating to freight taxes in the next 12 months;
the future valuation or impairment of our assets, including our FPSO units and goodwill;
our expectations as to the useful lives of our vessels;
our expectations regarding pattern of expense recognition of chartered-in vessels; and
the potential impact of proposed accounting treatment or new accounting guidance.
Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain the words “believe”, “anticipate”, “expect”, “estimate”, “project”, “will be”, “will continue”, “will likely result”, or words or phrases of similar meanings. These statements involve known and unknown risks and are based upon a number of assumptions and estimates that are inherently subject to significant uncertainties and contingencies, many of which are beyond our control. Actual results may differ materially from those expressed or implied by such forward-looking statements. The following factors are among those that could cause actual results to differ materially from the forward-looking statements, which involve risks and uncertainties, and that should be considered in evaluating any such statement: failure to achieve or the delay in achieving expected benefits of our financing initiatives; changes in oil prices; changes in vessel values; changes in production of or demand for oil, petroleum products, LNG and LPG, either generally or in particular regions; changes in anticipated improvements to pipeline capacity to the U.S. Gulf coast and its effect on U.S. crude exports; changes in anticipated levels of vessel newbuilding orders or rates of vessel scrapping; OPEC+ production and supply levels; oil contango levels; the duration and extent of the COVID-19 outbreak and any resulting effects on the markets in which we operate; the impact of the COVID-19 outbreak on our ability to maintain safe and efficient operations; competitive factors in the markets in which we operate; loss of any customer, time-charter or vessel; potential delays or cancellations of anticipated vessel delivery; changes in the financial stability of our charterers; changes in trading patterns significantly affecting overall vessel tonnage requirements; the timing of implementation of new laws and regulations; political, governmental and economic instability in the regions and markets in which we operate; the application of sanctions to us or any of our counterparties or joint venture parties; the effects of the effectiveness of the IMO's 2020 fuel regulations; spot tanker market rate fluctuations; changes in the typical seasonal variations in tanker charter rates; changes in the offshore production of oil or demand for FPSOs, LNG or LPG carriers; effects of the issuance of additional shares of common stock and other equity securities on cash distributions by Teekay LNG and Teekay Tankers; the outcome of discussions or legal action with third parties relating to existing or potential disputes or claims; potential inability to obtain charters; decreases in oil production by or increased operating expenses for FPSO units; trends in prevailing charter rates for FPSO contract renewals; the potential for early termination of long-term contracts and our ability to renew or replace long-term contracts or complete existing contract negotiations; cost overruns; our exposure to interest rate and currency exchange rate fluctuations; changes in our expenses; changes in tax regulations or the outcome of tax positions; our future capital expenditure requirements and the inability to secure financing for such requirements; our potential inability to raise financing to refinance debt maturities; Teekay LNG's ability to secure commercial alternatives for its seven wholly-owned multi-gas vessels after its agreement with the Manager ends; conditions in the capital markets and lending markets; potential inability to implement our growth strategy; the duration and impacts of the COVID-19 pandemic; and other factors discussed in our filings from time to time with the SEC, including in our Annual Report on Form 20-F for the fiscal year ended December 31, 2019. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with respect thereto or any change in events, conditions or circumstances on which any such statement is based.

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TEEKAY CORPORATION AND SUBSIDIARIES
MARCH 31, 2020
PART II – OTHER INFORMATION
Item 1 – Legal Proceedings
See “Part I – Item 1 – Financial Statements: Note 12c – Commitments and Contingencies – Legal Proceedings and Claims” in this Report.
Item 1A – Risk Factors
In addition to the other information set forth in this Report on Form 6-K, you should carefully consider the risk factors discussed in Part I, “Item 3. Key Information – Risk Factors” in our Annual Report on Form 20-F for the year ended December 31, 2019, which could materially affect our business, financial condition or results of operations and the price and value of our securities.
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds
None
Item 3 – Defaults Upon Senior Securities
None    
Item 4 – Mine Safety Disclosures
Not applicable
Item 5 – Other Information
None
Item 6 – Exhibits
The following exhibits are filed as part of this Report:  
Fifth Amended and Restated Agreement of Limited Partnership of Teekay LNG Partners L.P., dated as of May 11, 2020.
Exchange Agreement, dated as of May 9, 2020, by and between Teekay LNG Partners L.P. and Teekay GP L.L.C.

THIS REPORT ON FORM 6-K IS HEREBY INCORPORATED BY REFERENCE INTO THE FOLLOWING REGISTRATION STATEMENTS OF THE COMPANY:
 
REGISTRATION STATEMENT ON FORM F-3 (FILE NO. 033-97746) FILED WITH THE SEC ON OCTOBER 4, 1995;
REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-42434) FILED WITH THE SEC ON JULY 28, 2000;
REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-119564) FILED WITH THE SEC ON OCTOBER 6, 2004;
REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-147683) FILED WITH THE SEC ON NOVEMBER 28, 2007;
REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-166523) FILED WITH THE SEC ON MAY 5, 2010;
REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-187142) FILED WITH THE SEC ON MARCH 8, 2013;
REGISTRATION STATEMENT ON FORM F-3 (FILE NO. 333-212787) FILED WITH THE SEC ON JULY 29, 2016;
REGISTRATION STATEMENT ON FORM F-3 (FILE NO. 333-221806) FILED WITH THE SEC ON NOVEMBER 29, 2017; AND
REGISTRATION STATEMENT ON FORM F-3 (FILE NO. 333-231003) FILED WITH THE SEC ON APRIL 24, 2019.


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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
TEEKAY CORPORATION
 
 
 
 
Date: May 29, 2020
By:
 
/s/ Vincent Lok
 
 
 
Vincent Lok
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)

Page 45
Exhibit
Execution Version


FIFTH AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
TEEKAY LNG PARTNERS L.P.


TABLE OF CONTENTS
Article I

DEFINITIONS
Definitions.    1
Construction.    14
Article II

ORGANIZATION
Formation.    15
Name.    15
Registered Office; Registered Agent; Principal Office; Other Offices    15
Purpose and Business.    15
Powers.    16
Power of Attorney.    16
Term.    17
Title to Partnership Assets.    17
Article III

RIGHTS OF LIMITED PARTNERS
Limitation of Liability.    18
Management of Business.    18
Outside Activities of the Limited Partners.    18
Rights of Limited Partners.    19
Article IV

CERTIFICATES; RECORD HOLDERS; TRANSFER OF PARTNERSHIP INTERESTS;

REDEMPTION OF PARTNERSHIP INTERESTS
Certificates.    19
Mutilated, Destroyed, Lost or Stolen Certificates.    20
Record Holders.    21
Transfer Generally.    21
Registration and Transfer of Limited Partner Interests.    21
Transfer of the General Partner’s General Partner Interest.    22
[Reserved].    22
Restrictions on Transfers.    22
Article V

CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS
Exchange of Incentive Distribution Rights.    23
[Reserved].    23
[Reserved].    23
Interest and Withdrawal.    23
[Reserved].    23
Issuances of Additional Partnership Securities.    24
Limitations on Issuance of Additional Partnership Securities.    24
Limited Preemptive Right.    24
Splits and Combinations.    25
Fully Paid and Non-Assessable Nature of Limited Partner Interests.    26
Article VI

DISTRIBUTIONS
Allocations.    26
[Reserved].    26
Distributions to Record Holders.    26
[Reserved].    27
[Reserved].    27
[Reserved].    27
[Reserved].    27
[Reserved].    27
Article VII

MANAGEMENT AND OPERATION OF BUSINESS
Management.    27
Certificate of Limited Partnership.    29
Restrictions on the General Partner’s Authority.    29
Reimbursement of the General Partner.    30
Outside Activities.    31
Loans from the General Partner; Loans or Contributions from the Partnership or Group Members.    32
Indemnification.    33
Liability of Indemnitees.    34
Resolution of Conflicts of Interest; Standards of Conduct and Modification of Duties.    35
Other Matters Concerning the General Partner.    37
Purchase or Sale of Partnership Securities.    37
Registration Rights of the General Partner and its Affiliates.    37
Reliance by Third Parties.    40
Article VIII

BOOKS, RECORDS, ACCOUNTING AND REPORTS
Records and Accounting.    40
Fiscal Year.    40
Reports.    41
Article IX

TAX MATTERS
Tax Returns and Information.    41
Tax Elections.    41
Tax Controversies.    41
Withholding.    42
Conduct of Operations.    42
Article X

ADMISSION OF PARTNERS
[Reserved].    42
Admission of Additional Limited Partners.    42
Admission of Successor General Partner.    43
Amendment of Agreement and Certificate of Limited Partnership.    43
Article XI

WITHDRAWAL OR REMOVAL OF PARTNERS
Withdrawal of the General Partner.    44
Removal of the General Partner.    45
Interest of Departing Partner and Successor General Partner.    45
Withdrawal of Limited Partners.    47
Article XII

DISSOLUTION AND LIQUIDATION
Dissolution.    47
Continuation of the Business of the Partnership After Dissolution.    47
Liquidator.    48
Liquidation.    49
Cancellation of Certificate of Limited Partnership.    49
Return of Contributions.    50
Waiver of Partition.    50
Article XIII

AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE
Amendments to be Adopted Solely by the General Partner.    50
Amendment Procedures.    51
Amendment Requirements.    52
Special Meetings.    52
Notice of a Meeting.    53
Record Date.    53
Adjournment.    53
Waiver of Notice; Approval of Meeting; Approval of Minutes.    53
Quorum and Voting.    54
Conduct of a Meeting.    54
Action Without a Meeting.    55
Right to Vote and Related Matters.    55
Article XIV

MERGER
Authority.    56
Procedure for Merger or Consolidation.    56
Approval by Limited Partners of Merger or Consolidation.    57
Certificate of Merger.    58
Amendment of Partnership Agreement.    58
Effect of Merger.    58
Article XV

RIGHT TO ACQUIRE LIMITED PARTNER INTERESTS
Right to Acquire Limited Partner Interests.    59
Article XVI

PREFERRED UNITS
Designation.    61
Units.    61
Distributions.    61
[Reserved].    63
Voting Rights.    63
Optional Redemption.    65
Rank.    67
No Sinking Fund.    68
Record Holders.    68
Notices.    68
Other Rights; Fiduciary Duties.    68
Article XVII

GENERAL PROVISIONS
Addresses and Notices.    69
Further Action.    69
Binding Effect.    69
Integration.    69
Creditors.    70
Waiver.    70
Counterparts.    70
Applicable Law.    70
Invalidity of Provisions.    70
Consent of Partners.    70
Facsimile Signatures.    70



FIFTH AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP OF TEEKAY LNG PARTNERS L.P.
THIS FIFTH AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF TEEKAY LNG PARTNERS L.P. dated as of May 11, 2020 (the “Effective Date”), is entered into by Teekay GP L.L.C., a Marshall Islands limited liability company, as the General Partner, and, solely with respect to Section 16.5(b), Teekay Holdings Limited, a Bermuda company, together with any other Persons who become Partners in the Partnership or parties hereto as provided herein. In consideration of the covenants, conditions and agreements contained herein, the parties hereto hereby agree as follows:
Article I

DEFINITIONS
Section 1.1
Definitions.
The following definitions shall be for all purposes, unless otherwise clearly indicated to the contrary, applied to the terms used in this Agreement.
Affiliate” means, with respect to any Person, any other Person that directly or indirectly through one or more intermediaries’ controls, is controlled by or is under common control with, the Person in question. As used herein, the term “control” means the possession, direct or indirect, 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.
Agreed Value” of any Contributed Property or distributed property means the fair market value of such property or other consideration at the time of contribution or distribution as determined by the General Partner. The General Partner shall use such method as it determines to be appropriate to allocate the aggregate Agreed Value of Contributed Properties contributed to or distributed by the Partnership in a single or integrated transaction among each separate property on a basis proportional to the fair market value of each Contributed Property or distributed property.
Agreement” means this Fifth Amended and Restated Agreement of Limited Partnership of Teekay LNG Partners L.P., as it may be amended, supplemented or restated from time to time.
arrears means, with respect to Preferred Unit Distributions for a particular series of Preferred Units for any applicable Preferred Unit Distribution Period, that the full cumulative Preferred Unit Distributions for such series to and including the last day of the most recently completed Preferred Unit Distribution Period of such series through the most recent Preferred Unit Distribution Payment Date for such series have not been paid on all Outstanding Preferred Units of such series.
Associate” means, when used to indicate a relationship with any Person, (a) any corporation or organization of which such Person is a director, officer or partner or is, directly or indirectly, the owner of 20% or more of any class of voting stock or other voting interest; (b) any trust or other estate in which such Person has at least a 20% beneficial interest or as to which such Person serves as trustee or in a similar fiduciary capacity; and (c) any relative or spouse of such Person, or any relative of such spouse, who has the same principal residence as such Person.
Available Cash” means, with respect to any Quarter ending prior to the Liquidation Date:
(a)the sum of (i) all cash and cash equivalents of the Partnership Group (or the Partnership’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) all additional cash and cash equivalents of the Partnership Group (or the Partnership’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
(b)    the amount of any cash reserves (or the Partnership’s proportionate share of cash reserves in the case of Subsidiaries that are not wholly owned) established by the General Partner to (i) provide for the proper conduct of the business of the Partnership Group (including reserves for future capital expenditures and for anticipated future credit needs of the Partnership Group) subsequent to such Quarter, (ii) comply with applicable law or any loan agreement, security agreement, mortgage, debt instrument or other agreement or obligation to which any Group Member is a party or by which it is bound or its assets are subject, or (iii) provide funds for Preferred Unit Payments; provided, however, that disbursements made by a Group Member or cash reserves established, increased or reduced after the end of such Quarter but on or before the date of 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 General Partner so determines.
Board of Directors” means the board of directors or managers of a corporation or limited liability company, as applicable, or if a limited partnership, the board of directors or board of managers of the general partner of such limited partnership.
Business Day” means Monday through Friday of each week, except that a legal holiday recognized as such by the government of the United States of America or the State of New York shall not be regarded as a Business Day.
Calculation Agent” means a calculation agent appointed by the General Partner prior to the commencement of the Series B Floating Rate Period. If the General Partner is unable to obtain a third-party to serve as calculation agent, the calculation agent may be the General Partner or an Affiliate of the General Partner.
Capital Contribution” means any cash, cash equivalents or the Net Agreed Value of Contributed Property that a Partner contributes to the Partnership.
Cause” means a court of competent jurisdiction has entered a final, non-appealable judgment finding the General Partner liable for actual fraud, gross negligence or willful or wanton misconduct in its capacity as a general partner of the Partnership.
Certificate” means a certificate (i) substantially in the form of Exhibit A with respect to Common Units, Exhibit B with respect to Series A Preferred Units or Exhibit C with respect to Series B Preferred Units, to this Agreement, (ii) issued in global or book entry form in accordance with the rules and regulations of the Depository or (iii) in such other form as may be adopted by the General Partner, issued by the Partnership evidencing ownership of one or more Common Units or Preferred Units, or a certificate, in such form as may be adopted by the General Partner, issued by the Partnership evidencing ownership of one or more other Partnership Securities.
Certificate of Limited Partnership” means the Certificate of Limited Partnership of the Partnership filed with the Registrar of Corporations of the Marshall Islands as referenced in Section 7.2 as such Certificate of Limited Partnership may be amended, supplemented or restated from time to time.
claim” (as used in Section 7.12(c)) has the meaning assigned to such term in Section 7.12(c).
Closing Date” means the first date on which Common Units are sold by the Partnership to the Underwriters pursuant to the provisions of the Underwriting Agreement.
Closing Price” has the meaning assigned to such term in Section 15.1(a).
Code” means the United States 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.
Combined Interest” has the meaning assigned to such term in Section 11.3(a).
Commission” means the United States Securities and Exchange Commission.
Common Unit” means a Partnership Security having the rights and obligations specified with respect to Common Units in this Agreement.
Conflicts Committee” means a committee of the Board of Directors of the General Partner composed entirely of two or more directors who are not (a) security holders, officers or employees of the General Partner, (b) officers, directors or employees of any Affiliate of the General Partner or (c) holders of any ownership interest in the Partnership Group other than Common Units and who also meet the independence standards required of directors who serve on an audit committee of a board of directors established by the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission thereunder and by the National Securities Exchange on which the Common Units are listed.
Contributed Property” means each property or other asset, in such form as may be permitted by the Marshall Islands Act, but excluding cash, contributed to the Partnership.
Contribution Agreement” means that certain Contribution, Conveyance and Assumption Agreement, dated as of the Closing Date, among the General Partner, the Partnership, the Operating Company, Teekay Corporation and the other parties named therein, together with the additional conveyance documents and instruments contemplated or referenced thereunder.
Current Market Price” has the meaning assigned to such term in Section 15.1(a).
Departing Partner” means a former General Partner from and after the effective date of any withdrawal or removal of such former General Partner pursuant to Section 11.1 or 11.2.
Depository” means, with respect to any Partnership Securities issued in global form, The Depository Trust Company and its successors and permitted assigns.
Effective Date” has the meaning assigned to such term in the preamble.
Event of Withdrawal” has the meaning assigned to such term in Section 11.1(a).
Exchange Agreement” means that certain Exchange Agreement, dated as of the Effective Date, by and between the Partnership and the General Partner, pursuant to which (i) the Incentive Distribution Rights held by the General Partner were contributed to the Partnership in exchange for Common Units and (ii) the Incentive Distribution Rights were cancelled.
General Partner” means Teekay GP L.L.C., a Marshall Islands limited liability company, and its successors and permitted assigns as general partner of the Partnership.
General Partner Interest” means the ownership interest of the General Partner in the Partnership (in its capacity as a general partner without reference to any Limited Partner Interest held by it) which may be evidenced by Partnership Securities or a combination thereof or interest therein, and includes any and all benefits to which the General Partner is entitled as provided in this Agreement, together with all obligations of the General Partner to comply with the terms and provisions of this Agreement.
Group” means a Person that with or through any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting (except voting pursuant to a revocable proxy or consent given to such Person in response to a proxy or consent solicitation made to 10 or more Persons) or disposing of any Partnership Securities with any other Person that beneficially owns, or whose Affiliates or Associates beneficially own, directly or indirectly, Partnership Securities.
Group Member” means a member of the Partnership Group.
Group Member Agreement” means the partnership agreement of any Group Member, other than the Partnership, that is a limited or general partnership, the limited liability company agreement of any Group Member that is a limited liability company, the certificate of incorporation and bylaws or similar organizational documents of any Group Member that is a corporation, the joint venture agreement or similar governing document of any Group Member that is a joint venture and the governing or organizational or similar documents of any other Group Member that is a Person other than a limited or general partnership, limited liability company, corporation or joint venture, in each case as such may be amended, supplemented or restated from time to time.
Holder” as used in Section 7.12, has the meaning assigned to such term in Section 7.12(a).
Incentive Distribution Right” means a non-voting Limited Partner Interest that, prior to the effectiveness of the transactions contemplated by the Exchange Agreement and this Agreement, was held by the General Partner and pursuant to which the General Partner was entitled to certain incentive distributions under the Prior Agreement.
Indemnified Persons” has the meaning assigned to such term in Section 7.12(c).
Indemnitee” means (a) the General Partner, (b) any Departing Partner, (c) any Person who is or was an Affiliate of the General Partner or any Departing Partner, (d) any Person who is or was a member, partner, director, officer, fiduciary or trustee of any Person which any of the preceding clauses of this definition describes, (e) any Person who is or was serving at the request of the General Partner or any Departing Partner or any Affiliate of the General Partner or any Departing Partner as an officer, director, member, partner, fiduciary or trustee of another Person, provided that that Person shall not be an Indemnitee by reason of providing, on a fee-for-services basis, trustee, fiduciary or custodial services, and (f) any Person the General Partner designates as an “Indemnitee” for purposes of this Agreement.
Initial Offering” means the initial offering and sale of Common Units to the public, as described in the Registration Statement.
Junior Securities” has the meaning assigned to such term in Section 16.7.
Limited Partner” means, unless the context otherwise requires, each Person that is a Limited Partner as of the Effective Date, each additional Person that becomes a Limited Partner pursuant to the terms of this Agreement, and any Departing Partner upon the change of its status from General Partner to Limited Partner pursuant to Section 11.3. Limited Partners may include custodians, nominees or any other individual entity in its own or any representative capacity.
Limited Partner Interest” means the ownership interest of a Limited Partner in the Partnership, which may be evidenced by Common Units, Preferred Units or other Partnership Securities or a combination thereof or interest therein, and includes any and all benefits to which such Limited Partner is entitled as provided in this Agreement, together with all obligations of such Limited Partner to comply with the terms and provisions of this Agreement.
Liquidation Date” means (a) in the case of an event giving rise to the dissolution of the Partnership of the type described in clauses (a) and (b) of the first sentence of Section 12.2, the date on which the applicable time period during which the holders of Outstanding Common Units have the right to elect to continue the business of the Partnership has expired without such an election being made, and (b) in the case of any other event giving rise to the dissolution of the Partnership, the date on which such event occurs.
Liquidator” means one or more Persons selected by the General Partner to perform the functions described in Section 12.4.
London Business Day” means any day on which dealings in deposits in U.S. dollars are transacted in the London interbank market.
Marshall Islands Act means the Limited Partnership Act of the Republic of the Marshall Islands, as amended, supplemented or restated from time to time, and any successor to such statute.
Merger Agreement” has the meaning assigned to such term in Section 14.1.
National Securities Exchange” means an exchange registered with the Commission under Section 6(a) of the Securities Exchange Act of 1934, as amended, supplemented or restated from time to time, and any successor to such statute.
Net Agreed Value” means, (a) in the case of any Contributed Property, the Agreed Value of such property reduced by any liabilities either assumed by the Partnership upon such contribution or to which such property is subject when contributed, and (b) in the case of any property distributed to a Partner by the Partnership, the Partnership’s Agreed Value of such property at the time such property is distributed, reduced by any indebtedness either assumed by such Partner upon such distribution or to which such property is subject at the time of distribution.
Notice of Election to Purchase” has the meaning assigned to such term in Section 15.1(b).
Notional General Partner Units” means notional units used solely to calculate the General Partner’s Percentage Interest. Notional General Partner Units shall not constitute “Units” for any purpose of this Agreement. As of the Effective Date there are 1,554,525 Notional General Partner Units (resulting in the General Partner’s Percentage Interest being 1.76% as of such date). If a Pro Rata distribution or a subdivision or combination of Units is made in accordance with Section 5.9, the number of Notional General Partner Units shall be proportionally increased or decreased, as applicable, to reflect the maintenance of such Percentage Interest.
Omnibus Agreement” means that Amended and Restated Omnibus Agreement, dated as of December 19, 2006, among Teekay Corporation, the General Partner, the Partnership, the Operating Company, Teekay Offshore GP, L.L.C., Altera Infrastructure L.P. (formerly known as Teekay Offshore Partners L.P.), and Teekay Offshore Operating L.P.
Operating Company” means Teekay LNG Operating L.L.C., a Marshall Islands limited liability company, and any successors thereto.
Operating Company Agreement” means the Second Amended and Restated Limited Liability Company Agreement of the Operating Company, as it may be amended, supplemented or restated from time to time.
Opinion of Counsel” means a written opinion of counsel (who may be regular counsel to the Partnership or the General Partner or any of its Affiliates) acceptable to the General Partner.
Organizational Limited Partner” means Teekay Corporation in its capacity as the organizational limited partner of the Partnership pursuant to this Agreement.
Outstanding” means, with respect to Partnership Securities, all Partnership Securities that are issued by the Partnership and reflected as outstanding on the Partnership’s books and records as of the date of determination; provided, however, that if at any time any Person or Group (other than the General Partner or its Affiliates) beneficially owns 20% or more of any Outstanding Partnership Securities of any class or series then Outstanding, all Partnership Securities owned by such Person or Group shall not be voted on any matter and shall not be considered to be Outstanding when sending notices of a meeting of Limited Partners to vote on any matter (unless otherwise required by law), calculating required votes, determining the presence of a quorum or for other similar purposes under this Agreement; provided, further, that the foregoing limitation shall not apply (i) to any Person or Group who acquired 20% or more of any Outstanding Partnership Securities of any class or series then Outstanding directly from the General Partner or its Affiliates, (ii) to any Person or Group who acquired 20% or more of any Outstanding Partnership Securities of any class or series then Outstanding directly or indirectly from a Person or Group described in clause (i) provided that the General Partner shall have notified such Person or Group in writing that such limitation shall not apply, (iii) to any Person or Group who acquired 20% or more of any Partnership Securities issued by the Partnership with the prior approval of the Board of Directors of the General Partner or (iv) with respect to any voting rights thereof, Preferred Units.
Parity Securities has the meaning assigned to such term in Section 16.7(b).
Partners” means the General Partner and the Limited Partners.
Partnership” means Teekay LNG Partners L.P., a Marshall Islands limited partnership, and any successors thereto.
Partnership Group” means the Partnership and its Subsidiaries treated as a single consolidated entity.
Partnership Interest” means an interest in the Partnership, which shall include the General Partner Interest and Limited Partner Interests.
Partnership Representative” has the meaning assigned to such term in Section 9.3.
Partnership Security” means any class or series of equity interest in the Partnership (but excluding any options, rights, warrants and appreciation rights relating to an equity interest in the Partnership), including without limitation, Common Units and Preferred Units.
Paying Agent means Computershare, acting in its capacity as paying agent for the particular series of Preferred Units, and its respective successors and assigns or any other payment agent appointed by the General Partner; provided, however, that if no paying agent is specifically designated for the particular series of Preferred Units, the General Partner shall act in such capacity.
Percentage Interest” means as of any date of determination as to the General Partner with respect to the General Partner Interest (in its capacity as General Partner without reference to any Limited Partner Interests held by it and calculated based upon the number of Notional General Partner Units then deemed held by the General Partner), which General Partner Interest as of the Effective Date and immediately prior to giving effect to the transactions contemplated by the Exchange Agreement was 2.0%, and as to any Unitholder holding Units (other than Preferred Units), the quotient obtained by dividing (a) the number of Notional General Partner Units deemed held by the General Partner or the number of Units (other than Preferred Units) held by such Unitholder, as the case may be, by (b) the total number of Notional General Partner Units deemed held by the General Partner and all Outstanding Units (other than Preferred Units). The Percentage Interest with respect to a Preferred Unit shall at all times be zero.
Person” means an individual or a corporation, firm, limited liability company, partnership, joint venture, trust, unincorporated organization, association, governmental agency or political subdivision thereof or other entity.
Preferred Unit Distribution Payment Date” means the Series A Distribution Payment Date or Series B Distribution Payment Date, as applicable.
Preferred Unit Distribution Period” means the Series A Distribution Period and/or the Series B Distribution Period, as applicable.
Preferred Unit Distributions” means Series A Distributions and/or Series B Distributions, as applicable.
Preferred Unit Holders” means Series A Holders and/or Series B Holders, as applicable.
Preferred Unit Liquidation Preference” means the Series A Liquidation Preference or the Series B Liquidation Preference, as applicable.
Preferred Unit Payments” means Series A Payments and/or Series B Payments, as applicable.
Preferred Units means a Partnership Security, designated as a “Preferred Unit, which entitles the holder thereof to a preference with respect to distributions over Common Units, including the Series A Preferred Units and the Series B Preferred Units.
Prior Agreement” means the Fourth Amended and Restated Agreement of Limited Partnership of the Partnership dated as of January 1, 2019.
Pro Rata” means (a) when modifying Units (other than Preferred Units) or any class or series thereof, apportioned equally among all designated Units (other than Preferred Units) in accordance with their relative Percentage Interests, (b) when modifying Partners or Record Holders, apportioned among all Partners or Record Holders in accordance with their relative Percentage Interests and (c) when modifying holders of Preferred Units (or a particular series thereof), apportioned equally among all holders of Preferred Units (or such series thereof) in accordance with the relative number or percentage of Preferred Units (or such series thereof), as applicable, held by such holder.
Purchase Date” means the date determined by the General Partner as the date for purchase of all Outstanding Limited Partner Interests of a certain class or series (other than Limited Partner Interests owned by the General Partner and its Affiliates) pursuant to Article XV.
Quarter” means, unless the context requires otherwise, a fiscal quarter of the Partnership.
Record Date” means the date established by the General Partner for determining (a) the identity of the Record Holders entitled to notice of, or to vote at, any meeting of Limited Partners or entitled to vote by ballot or give approval of Partnership action in writing without a meeting or entitled to exercise rights in respect of any lawful action of Limited Partners or (b) the identity of Record Holders entitled to receive any report or distribution or to participate in any offer.
Record Holder” means (a) the Person in whose name a Common Unit is registered on the books of the Transfer Agent as of the opening of business on a particular Business Day, (b) the Person in whose name a Preferred Unit is registered on the books of the Transfer Agent as of, unless otherwise set forth in Article XVI, the opening of business on a particular Business Day, or (c) with respect to other Partnership Securities, the Person in whose name any such other Partnership Security is registered on the books that the General Partner has caused to be kept as of the opening of business on such Business Day.
Registrar” means the Registrar of Corporations as defined in Section 4 of the Marshall Islands Business Corporations Act.
Registration Statement” means the Registration Statement on Form F-1 (Registration No. 333-120727) as it has been or as it may be amended or supplemented from time to time, filed by the Partnership with the Commission under the Securities Act to register the offering and sale of the Common Units in the Initial Offering.
Reuters Page LIBOR01” means the display so designated on the Reuters 3000 Xtra (or such other page as may succeed or replace the LIBOR01 page on that service).
Securities Act” means the Securities Act of 1933, as amended, supplemented or restated from time to time and any successor to such statute.
Senior Securities has the meaning assigned to such term in Section 16.7(c).
Series A Distribution Payment Date means each January 15, April 15, July 15 and October 15, commencing January 15, 2017; provided, however, that if any Series A Distribution Payment Date would otherwise occur on a day that is not a Business Day, such Series A Distribution Payment Date shall instead be on the immediately succeeding Business Day.
Series A Distribution Period means (i) the period commencing on (and including) the Series A Original Issue Date and ending on (and including) December 31, 2016, and (ii) any subsequent three-month period commencing on (and including) any January 1, April 1, July 1 or October 1 and ending on (and including) the last day in March, June, September and December, respectively.
Series A Distribution Rate means a rate equal to 9.00% per annum of the Stated Series A Liquidation Preference per Series A Preferred Unit.
Series A Distribution Record Date has the meaning assigned to such term in Section 16.3(b).
Series A Distributions means distributions with respect to Series A Preferred Units pursuant to Section 16.3.
Series A Holder means a Record Holder of the Series A Preferred Units.
Series A Liquidation Preference means an amount for each Series A Preferred Unit initially equal to $25.00 per share, which amount shall be subject to increase by the per Series A Preferred Unit amount of any accumulated and unpaid distributions (whether or not such distributions shall have been declared).
Series A Original Issue Date means October 5, 2016.
Series A Payments means, collectively, Series A Distributions and Series A Redemption Payments.
Series A Preferred Unit means a Preferred Unit having the designations, preferences, rights, powers and duties set forth in Article XVI.
Series A Redemption Date has the meaning assigned to such term in Section 16.6.
Series A Redemption Notice has the meaning assigned to such term in Section 16.6(c).
Series A Redemption Payments means payments to be made to the holders of Series A Preferred Units to redeem Series A Preferred Units in accordance with Section 16.6.
Series A Redemption Price has the meaning assigned to such term in Section 16.6(a).
Series B Distribution Payment Date means each January 15, April 15, July 15 and October 15, commencing January 15, 2018; provided, however, that if any Series B Distribution Payment Date during the Series B Fixed Rate Period would otherwise occur on a day that is not a Business Day, such Series B Distribution Payment Date shall instead be on the immediately succeeding Business Day.
Series B Distribution Period means (i) the period commencing on (and including) the Series B Original Issue Date and ending on (and including) December 31, 2017, and (ii) any subsequent three-month period commencing on (and including) any January 1, April 1, July 1 or October 1 and ending on (and including) the last day in March, June, September and December, respectively.
Series B Distribution Rate means a rate equal to (a) during the Series B Fixed Rate Period, 8.50% per annum of the Stated Series B Liquidation Preference per Series B Preferred Unit and (b) during the Series B Floating Rate Period, a percentage per annum of the Series B Stated Liquidation Preference per Series B Preferred Unit equal to the sum of (i) Series B Three-Month LIBOR, as calculated on each applicable Series B LIBOR Determination Date, and (ii) 6.241%.
Series B Distribution Record Date has the meaning assigned to such term in Section 16.3(b).
Series B Distributions means distributions with respect to Series B Preferred Units pursuant to Section 16.3.
Series B Fixed Rate Period” means the period from and including the Series B Original Issue Date to, but not including, October 15, 2027.
Series B Floating Rate Period” means the period from and including October 15, 2027 to, but not including, the date that all of the Series B Preferred Units are redeemed in full in accordance with Section 16.6 below.
Series B Holder means a Record Holder of the Series B Preferred Units.
Series B LIBOR Determination Date” means the London Business Day immediately preceding the first date of the applicable Series B Distribution Period during the Series B Floating Rate Period (or for the period from and including October 15, 2027 and ending on and including December 31, 2027, the London Business Day immediately preceding October 15, 2027).
Series B Liquidation Preference means an amount for each Series B Preferred Unit initially equal to $25.00 per share, which amount shall be subject to increase by the per Series B Preferred Unit amount of any accumulated and unpaid distributions (whether or not such distributions shall have been declared).
Series B Original Issue Date means October 23, 2017.
Series B Payments means, collectively, Series B Distributions and Series B Redemption Payments.
Series B Preferred Unit means a Preferred Unit having the designations, preferences, rights, powers and duties set forth in Article XVI.
Series B Redemption Date has the meaning assigned to such term in Section 16.6.
Series B Redemption Notice has the meaning assigned to such term in Section 16.6(c).
Series B Redemption Payments means payments to be made to the holders of Series B Preferred Units to redeem Series B Preferred Units in accordance with Section 16.6.
Series B Redemption Price has the meaning assigned to such term in Section 16.6(a).
Series B Three-Month LIBOR” means, in respect of each Series B Distribution Period during the Series B Floating Rate Period (or, for the period from and including October 15, 2027 and ending on and including December 31, 2027), the following rate determined by the Calculation Agent, as of the applicable Series B LIBOR Determination Date in accordance with the following provisions:
(a)    the rate (expressed as a percentage per year) for deposits in U.S. dollars for a three-month period commencing on the first day of such period that appears on Reuters Page LIBOR01 as of 11:00 a.m. (London time) on the applicable Series B LIBOR Determination Date; or
(b)    If the Calculation Agent determines that three-month LIBOR (as contemplated by the immediately preceding clause (a)) has been discontinued, then it will determine whether to use a substitute or successor base rate that it has determined in its sole discretion is most comparable to three-month LIBOR, provided that if the Calculation Agent determines there is an industry accepted successor base rate, the Calculation Agent shall use such successor base rate. If the Calculation Agent has determined a substitute or successor base rate in accordance with the foregoing, the Calculation Agent in its sole discretion may also implement changes to the business day convention, the definition of business day, the Series B LIBOR Determination Date and any method for obtaining the substitute or successor base rate if such rate is unavailable on the relevant business day, in a manner that is consistent with industry accepted practices for such substitute or successor base rate. Unless the Calculation Agent determines to use a substitute or successor base rate as so provided, the following will apply: if the rate described in the immediately preceding clause (a) is not so published, the Calculation Agent shall select four major banks in the London interbank market and request that the principal London offices of those four selected banks provide their offered quotations for deposits in U.S. dollars for a period of three months, commencing on the first day of the applicable period, to prime banks in the London interbank market at approximately 11:00 a.m. (London time) on the Series B LIBOR Determination Date for such period. Offered quotations must be based on a principal amount equal to an amount that, in the Calculation Agent’s judgment, is representative of a single transaction in U.S. dollars in the London interbank market at the time. If two or more quotations are provided, Series B Three-Month LIBOR for such period will be the arithmetic mean of the quotations. If fewer than two quotations are provided, Series B Three-Month LIBOR for such period will be the arithmetic mean of the rates quoted on the Series B LIBOR Determination Date for such period by three major banks in New York City selected by the Calculation Agent, for loans in U.S. dollars to leading European banks for a three-month period commencing on the first day of such period. The rates quoted must be based on an amount that, in the Calculation Agent’s judgment, is representative of a single transaction in U.S. dollars in that market at the time. If fewer than three New York City banks selected by the Calculation Agent are quoting rates in the manner described above, Series B Three-Month LIBOR for the applicable period will be the same as for the immediately preceding period or, if the immediately preceding period was within the Series B Fixed Rate Period, the same as for the most recent quarter for which Series B Three-Month LIBOR can be determined.
All percentages resulting from any of the calculations described in the immediately preceding clauses (a) and (b) will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point (with five one-millionths of a percentage point rounded upwards) and all dollar amounts used in or resulting from such calculations will be rounded, if necessary, to the nearest cent (with one-half cent being rounded upwards).
Special Approval” means approval by a majority of the members of the Conflicts Committee.
Stated Preferred Unit Liquidation Preference” means the Stated Series A Liquidation Preference or the Stated Series B Liquidation Preference, as applicable.
Stated Series A Liquidation Preference means an amount equal to $25.00 per Series A Preferred Unit.
Stated Series B Liquidation Preference means an amount equal to $25.00 per Series B Preferred Unit.
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 (as defined, but excluding subsection (d) of the definition) of such Person or a combination thereof, (b) a partnership (whether general or limited) in which such Person or a Subsidiary (as defined, but excluding subsection (d) of the definition) 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 (as defined, but excluding subsection (d) of the definition) of such Person, or a combination thereof, or (c) any other Person (other 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) 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, or (d) any other Person in which such Person, one or more Subsidiaries (as defined, but excluding subsection (d) of the definition) of such Person, or a combination thereof, directly or indirectly, at the date of determination, has (i) less than a majority ownership interest or (ii) less than the power to elect or direct the election of a majority of the directors or other governing body of such Person, provided that (A) such Person, one or more Subsidiaries (as defined, but excluding subsection (d) of the definition) of such Person, or a combination thereof, directly or indirectly, at the date of the determination, has at least a 20% ownership interest in such other Person, (B) such Person accounts for such other Person (under U.S. GAAP, as in effect on the later of the date of investment in such other Person or material expansion of the operations of such other Person) on a consolidated or equity accounting basis, (C) such Person has directly or indirectly material negative control rights regarding such other Person including over such other Person’s ability to materially expand its operations beyond that contemplated at the date of investment in such other Person, and (D) such other Person is (i) formed and maintained for the sole purpose of owning or leasing, operating and chartering no more than 10 vessels for a period of no more than 40 years, and (ii) obligated under its constituent documents, or as a result of a unanimous agreement of its owners, to distribute to its owners all of its income on at least an annual basis (less any cash reserves that are approved by such Person).
Surviving Business Entity” has the meaning assigned to such term in Section 14.2(b).
Tax Election” has the meaning assigned to such term in Section 9.2(a).
Tax Matters Partner” has the meaning assigned to such term in Section 9.3.
Trading Day” has the meaning assigned to such term in Section 15.1(a).
Transfer” has the meaning assigned to such term in Section 4.4(a).
Transfer Agent” means such bank, trust company or other Person (including the General Partner or one of its Affiliates) as shall be appointed from time to time by the Partnership to act as registrar and transfer agent for the Common Units and the Preferred Units; provided, that if no transfer agent is specifically designated for any other Partnership Securities, the General Partner shall act in such capacity.
Underwriter” means each Person named as an underwriter in Schedule I to the Underwriting Agreement who purchases Common Units pursuant thereto.
Underwriting Agreement” means the Underwriting Agreement dated May 4, 2005 among the Underwriters, the Partnership, the General Partner, the Operating Company, and Teekay Corporation, providing for the purchase of Common Units by such Underwriters.
Unit” means a Partnership Security that is designated as a “Unit” and shall include Common Units and Preferred Units, but shall not include the General Partner Interest or Notional General Partner Units.
Unitholders” means the holders of Units.
Unit Majority” means a majority of the Outstanding Common Units, voting as a class.
U.S. GAAP” means United States generally accepted accounting principles consistently applied.
Working Capital Borrowings” means borrowings used solely for working capital purposes or to pay distributions to Partners made pursuant to a credit facility or other arrangement to the extent such borrowings are required to be reduced to a relatively small amount each year for an economically meaningful period of time.
Section 1.2
Construction.
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) references to Articles and Sections refer to Articles and Sections of this Agreement; and (c) the term “include” or “includes” means includes, without limitation, and “including” means including, without limitation.
ARTICLE II    

ORGANIZATION
Section 2.1
Formation.
The General Partner and the Organizational Limited Partner previously formed the Partnership as a limited partnership pursuant to the provisions of the Marshall Islands Act and hereby amend and restate the Prior Agreement in its entirety. This amendment and restatement shall become effective on the Effective Date simultaneously with the effectiveness of the transactions contemplated by the Exchange Agreement. Except as expressly provided to the contrary in this Agreement, the rights, duties (including fiduciary duties), liabilities and obligations of the Partners and the administration, dissolution and termination of the Partnership shall be governed by the Marshall Islands Act. All Partnership Interests shall constitute personal property of the owner thereof for all purposes and a Partner has no interest in specific Partnership property.
Section 2.2
Name.
The name of the Partnership shall be “Teekay LNG Partners L.P.” The Partnership’s business may be conducted under any other name or names as determined by the General Partner, including the name of the General Partner. The words “Limited Partnership” or the letters “L.P.” or similar words or letters shall be included in the Partnership’s name where necessary for the purpose of complying with the laws of any jurisdiction that so requires. The General Partner may change the name of the Partnership at any time and from time to time and shall notify the Limited Partners of such change in the next regular communication to the Limited Partners.
Section 2.3
Registered Office; Registered Agent; Principal Office; Other Offices
Unless and until changed by the General Partner, the registered office of the Partnership in the Marshall Islands shall be located at Trust Company Complex, Ajeltake Island, Ajeltake Road, Majuro, Marshall Islands MH 96960, and the registered agent for service of process on the Partnership in the Marshall Islands at such registered office shall be The Trust Company of the Marshall Islands, Inc. The principal office of the Partnership shall be located at 4th Floor, Belvedere Building, 69 Pitts Bay Road, Hamilton HM 08, Bermuda or such other place as the General Partner may from time to time designate by notice to the Limited Partners. The Partnership may maintain offices at such other place or places within or outside the Marshall Islands as the General Partner determines to be necessary or appropriate. The address of the General Partner shall be 4th Floor, Belvedere Building, 69 Pitts Bay Road, Hamilton HM 08, Bermuda or such other place as the General Partner may from time to time designate by notice to the Limited Partners.
Section 2.4
Purpose and Business.
The purpose and nature of the business to be conducted by the Partnership shall be to (a) engage directly in, or enter into or form any corporation, partnership, joint venture, limited liability company or other arrangement to engage indirectly in, any business activity that is approved by the General Partner and that lawfully may be conducted by a limited partnership organized pursuant to the Marshall Islands Act and, in connection therewith, to exercise all of the rights and powers conferred upon the Partnership pursuant to the agreements relating to such business activity, and (b) do anything necessary or appropriate to the foregoing, including the making of capital contributions or loans to a Group Member. The General Partner shall have no duty or obligation to propose or approve, and may decline to propose or approve, the conduct by the Partnership of any business free of any fiduciary duty or obligation whatsoever to the Partnership or any Limited Partner and, in declining to so propose or approve, shall not be required to act in good faith or pursuant to any other standard imposed by this Agreement, any Group Member Agreement, any other agreement contemplated hereby or under the Marshall Islands Act or any other law, rule or regulation.
Section 2.5
Powers.
The Partnership shall be empowered to do any and all acts and things necessary and appropriate for the furtherance and accomplishment of the purposes and business described in Section 2.4 and for the protection and benefit of the Partnership.
Section 2.6
Power of Attorney.
(a)    Each Limited Partner hereby constitutes and appoints the General Partner and, if a Liquidator shall have been selected pursuant to Section 12.3, the Liquidator (and any successor to the Liquidator by merger, transfer, assignment, election or otherwise) and each of their authorized officers and attorneys-in-fact, as the case may be, with full power of substitution, as his true and lawful agent and attorney-in-fact, with full power and authority in his name, place and stead, to:
(i)    execute, swear to, acknowledge, deliver, file and record in the appropriate public offices (A) all certificates, documents and other instruments (including this Agreement and the Certificate of Limited Partnership and all amendments or restatements hereof or thereof) that the General Partner or the Liquidator determines to be necessary or appropriate to form, qualify or continue the existence or qualification of the Partnership as a limited partnership (or a partnership in which the limited partners have limited liability) in the Marshall Islands and in all other jurisdictions in which the Partnership may conduct business or own property; (B) all certificates, documents and other instruments that the General Partner or the Liquidator determines to be necessary or appropriate to reflect, in accordance with its terms, any amendment, change, modification or restatement of this Agreement; (C) all certificates, documents and other instruments (including conveyances and a certificate of cancellation) that the General Partner or the Liquidator determines to be necessary or appropriate to reflect the dissolution and liquidation of the Partnership pursuant to the terms of this Agreement; (D) all certificates, documents and other instruments relating to the admission, withdrawal, removal or substitution of any Partner pursuant to, or other events described in, Articles IV, X, XI or XII; (E) all certificates, documents and other instruments relating to the determination of the rights, preferences and privileges of any class or series of Partnership Securities issued pursuant to Section 5.6; and (F) all certificates, documents and other instruments (including agreements and a certificate of merger) relating to a merger, consolidation or conversion of the Partnership pursuant to Article XIV; and
(ii)    execute, swear to, acknowledge, deliver, file and record all ballots, consents, approvals, waivers, certificates, documents and other instruments that the General Partner or the Liquidator determines to be necessary or appropriate to (A) make, evidence, give, confirm or ratify any vote, consent, approval, agreement or other action that is made or given by the Partners hereunder or is consistent with the terms of this Agreement or (B) effectuate the terms or intent of this Agreement; provided, that when required by Section 13.3 or any other provision of this Agreement that establishes a percentage of the Limited Partners or of the Limited Partners of any class or series required to take any action, the General Partner and the Liquidator may exercise the power of attorney made in this Section 2.6(a)(ii) only after the necessary vote, consent or approval of the Limited Partners or of the Limited Partners of such class or series, as applicable.
Nothing contained in this Section 2.6(a) shall be construed as authorizing the General Partner to amend this Agreement except in accordance with Article XIII or as may be otherwise expressly provided for in this Agreement.
(b)    The foregoing power of attorney is hereby declared to be irrevocable and a power coupled with an interest, and it shall survive and, to the maximum extent permitted by law, not be affected by the subsequent death, incompetency, disability, incapacity, dissolution, bankruptcy or termination of any Limited Partner and the transfer of all or any portion of such Limited Partner’s Partnership Interest and shall extend to such Limited Partner’s heirs, successors, assigns and personal representatives. Each such Limited Partner hereby agrees to be bound by any representation made by the General Partner or the Liquidator acting in good faith pursuant to such power of attorney; and each such Limited Partner, to the maximum extent permitted by law, hereby waives any and all defenses that may be available to contest, negate or disaffirm the action of the General Partner or the Liquidator taken in good faith under such power of attorney. Each Limited Partner shall execute and deliver to the General Partner or the Liquidator, within 15 days after receipt of the request therefor, such further designation, powers of attorney and other instruments as the General Partner or the Liquidator determines to be necessary or appropriate to effectuate this Agreement and the purposes of the Partnership.
Section 2.7
Term.
The term of the Partnership commenced upon the filing of the Certificate of Limited Partnership in accordance with the Marshall Islands Act and shall continue in existence until the dissolution of the Partnership in accordance with the provisions of Article XII. The existence of the Partnership as a separate legal entity shall continue until the cancellation of the Certificate of Limited Partnership as provided in the Marshall Islands Act.
Section 2.8
Title to Partnership Assets.
Title to Partnership assets, whether real, personal or mixed and whether tangible or intangible, shall be deemed to be owned by the Partnership as an entity, and no Partner, individually or collectively, shall have any ownership interest in such Partnership assets or any portion thereof. Title to any or all of the Partnership assets may be held in the name of the Partnership, the General Partner, one or more of its Affiliates or one or more nominees, as the General Partner may determine. The General Partner hereby declares and warrants that any Partnership assets for which record title is held in the name of the General Partner or one or more of its Affiliates or one or more nominees shall be held by the General Partner or such Affiliate or nominee for the use and benefit of the Partnership in accordance with the provisions of this Agreement; provided, however, that the General Partner shall use reasonable efforts to cause record title to such assets (other than those assets in respect of which the General Partner determines that the expense and difficulty of conveyancing makes transfer of record title to the Partnership impracticable) to be vested in the Partnership as soon as reasonably practicable; provided, further, that, prior to the withdrawal or removal of the General Partner or as soon thereafter as practicable, the General Partner shall use reasonable efforts to effect the transfer of record title to the Partnership and, prior to any such transfer, will provide for the use of such assets in a manner satisfactory to the General Partner. All Partnership assets shall be recorded as the property of the Partnership in its books and records, irrespective of the name in which record title to such Partnership assets is held.
ARTICLE III    

RIGHTS OF LIMITED PARTNERS
Section 3.1
Limitation of Liability.
The Limited Partners shall have no liability under this Agreement except as expressly provided in this Agreement or the Marshall Islands Act.
Section 3.2
Management of Business.
No Limited Partner, in its capacity as such, shall participate in the operation, management or control (within the meaning of the Marshall Islands Act) of the Partnership’s business, transact any business in the Partnership’s name or have the power to sign documents for or otherwise bind the Partnership. Any action taken by any Affiliate of the General Partner or any officer, director, employee, manager, member, general partner, agent or trustee of the General Partner or any of its Affiliates, or any officer, director, employee, member, general partner, agent or trustee of a Group Member, in its capacity as such, shall not be deemed to be participation in the control of the business of the Partnership by a limited partner of the Partnership (within the meaning of Section 30 of the Marshall Islands Act) and shall not affect, impair or eliminate the limitations on the liability of the Limited Partners under this Agreement.
Section 3.3
Outside Activities of the Limited Partners.
Subject to the provisions of Section 7.5 and the Omnibus Agreement, which shall continue to be applicable to the Persons referred to therein, regardless of whether such Persons shall also be Limited Partners, any Limited Partner shall be entitled to and may have business interests and engage in business activities in addition to those relating to the Partnership, including business interests and activities in direct competition with the Partnership Group. Neither the Partnership nor any of the other Partners shall have any rights by virtue of this Agreement in any business ventures of any Limited Partner.
Section 3.4
Rights of Limited Partners.
(a)    In addition to other rights provided by this Agreement or by applicable law, and except as limited by Section 3.4(b), each Limited Partner shall have the right, for a purpose reasonably related to such Limited Partner’s interest as a Limited Partner in the Partnership, upon reasonable written demand and at such Limited Partner’s own expense:
(i)    for taxable years ending on or prior to date immediately prior to the Effective Date, promptly after becoming available, to obtain a copy of the Partnership’s foreign, federal, state and local income tax returns for each year;
(ii)    to have furnished to him a current list of the name and last known business, residence or mailing address of each Partner;
(iii)    to obtain true and full information regarding the amount of cash and a description and statement of the Net Agreed Value of any other Capital Contribution by each Partner and which each Partner has agreed to contribute in the future, and the date on which each became a Partner;
(iv)    to have furnished to him a copy of this Agreement and the Certificate of Limited Partnership and all amendments thereto, together with a copy of the executed copies of all powers of attorney pursuant to which this Agreement, the Certificate of Limited Partnership and all amendments thereto have been executed;
(v)    to obtain true and full information regarding the status of the business and financial condition of the Partnership Group; and
(vi)    to obtain such other information regarding the affairs of the Partnership as is just and reasonable.
(b)    The General Partner may keep confidential from the Limited Partners, for such period of time as the General Partner deems reasonable, (i) any information that the General Partner reasonably believes to be in the nature of trade secrets or (ii) other information the disclosure of which the General Partner in good faith believes (A) is not in the best interests of the Partnership Group, (B) could damage the Partnership Group or (C) that any Group Member is required by law or by agreement with any third party to keep confidential (other than agreements with Affiliates of the Partnership the primary purpose of which is to circumvent the obligations set forth in this Section 3.4).
ARTICLE IV    

CERTIFICATES; RECORD HOLDERS; TRANSFER OF PARTNERSHIP INTERESTS;
REDEMPTION OF PARTNERSHIP INTERESTS
Section 4.1
Certificates.
Upon the Partnership’s issuance of Common Units or Preferred Units to any Person and subject to Section 16.2(b) with respect to any series of Preferred Units described therein, the Partnership shall issue, upon the request of such Person, one or more Certificates in the name of such Person evidencing the number of such Units being so issued. In addition, (a) upon the General Partner’s request, the Partnership shall issue to it one or more Certificates in the name of the General Partner evidencing its interests in the Partnership and (b) upon the request of any Person owning any Partnership Securities other than Common Units or Preferred Units, the Partnership shall issue to such Person one or more certificates evidencing such Partnership Securities other than Common Units or Preferred Units. Certificates shall be executed on behalf of the Partnership by the Chairman of the Board, President or any Executive Vice President or Vice President and the Chief Financial Officer or the Secretary or any Assistant Secretary of the General Partner. No Common Unit Certificate or Preferred Unit Certificate shall be valid for any purpose until it has been countersigned by the Transfer Agent; provided, however, that if the General Partner elects to issue Common Units or Preferred Units in global form, the Common Unit Certificates or the Preferred Unit Certificates shall be valid upon receipt of a certificate from the Transfer Agent certifying that the Common Units or Preferred Units have been duly registered in accordance with the directions of the Partnership.
Section 4.2
Mutilated, Destroyed, Lost or Stolen Certificates.
(a)    If any mutilated Certificate is surrendered to the Transfer Agent, the appropriate officers of the General Partner on behalf of the Partnership shall execute, and the Transfer Agent shall countersign and deliver in exchange therefor, a new Certificate evidencing the same number and type of Partnership Securities as the Certificate so surrendered.
(b)    The appropriate officers of the General Partner on behalf of the Partnership shall execute and deliver, and the Transfer Agent shall countersign, a new Certificate in place of any Certificate previously issued if the Record Holder of the Certificate:
(i)    makes proof by affidavit, in form and substance satisfactory to the General Partner, that a previously issued Certificate has been lost, destroyed or stolen;
(ii)    requests the issuance of a new Certificate before the General Partner has notice that the Certificate has been acquired by a purchaser for value in good faith and without notice of an adverse claim;
(iii)    if requested by the General Partner, delivers to the General Partner a bond, in form and substance satisfactory to the General Partner, with surety or sureties and with fixed or open penalty as the General Partner may direct to indemnify the Partnership, the Partners, the General Partner and the Transfer Agent against any claim that may be made on account of the alleged loss, destruction or theft of the Certificate; and
(iv)    satisfies any other reasonable requirements imposed by the General Partner.
If a Limited Partner fails to notify the General Partner within a reasonable period of time after he has notice of the loss, destruction or theft of a Certificate, and a transfer of the Limited Partner Interests represented by the Certificate is registered before the Partnership, the General Partner or the Transfer Agent receives such notification, the Limited Partner shall be precluded from making any claim against the Partnership, the General Partner or the Transfer Agent for such transfer or for a new Certificate.
(c)    As a condition to the issuance of any new Certificate under this Section 4.2, the General Partner may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Transfer Agent) reasonably connected therewith.
Section 4.3
Record Holders.
The Partnership shall be entitled to recognize the applicable Record Holder as the Partner with respect to any Partnership Interest and, accordingly, shall not be bound to recognize any equitable or other claim to, or interest in, such Partnership Interest on the part of any other Person, regardless of whether the Partnership shall have actual or other notice thereof, except as otherwise provided by law or any applicable rule, regulation, guideline or requirement of any National Securities Exchange on which such Partnership Interests are listed. Without limiting the foregoing, when a Person (such as a broker, dealer, bank, trust company or clearing corporation or an agent of any of the foregoing) is acting as nominee, agent or in some other representative capacity for another Person in acquiring and/or holding Partnership Interests, as between the Partnership on the one hand, and such other Persons on the other hand, such representative shall be the Record Holder of such Partnership Interest.
Section 4.4
Transfer Generally.
(a)    The term “transfer,” when used in this Agreement with respect to a Partnership Interest, shall be deemed to refer to a transaction (i) by which the General Partner assigns its General Partner Interest to another Person, and includes a sale, assignment, gift, pledge, encumbrance, hypothecation, mortgage, exchange or any other disposition by law or otherwise or (ii) by which the holder of a Limited Partner Interest assigns such Limited Partner Interest to another Person who is or becomes a Limited Partner, and includes a sale, assignment, gift, exchange or any other disposition by law or otherwise, including any transfer upon foreclosure of any pledge, encumbrance, hypothecation or mortgage.
(b)    No Partnership Interest shall be transferred, in whole or in part, except in accordance with the terms and conditions set forth in this Article IV. Any transfer or purported transfer of a Partnership Interest not made in accordance with this Article IV shall be null and void.
(c)    Nothing contained in this Agreement shall be construed to prevent a disposition by any stockholder, member, partner or other owner of the General Partner of any or all of the shares of stock, membership interests, partnership interests or other ownership interests in the General Partner.
Section 4.5
Registration and Transfer of Limited Partner Interests.
(a)    The General Partner shall keep or cause to be kept on behalf of the Partnership a register in which, subject to such reasonable regulations as it may prescribe and subject to the provisions of Section 4.5(b), the Partnership will provide for the registration and transfer of Limited Partner Interests. The Transfer Agent is hereby appointed registrar and transfer agent for the purpose of registering Common Units and Preferred Units and transfers of such Common Units and Preferred Units as herein provided. The Partnership shall not recognize transfers of Certificates evidencing Limited Partner Interests unless such transfers are effected in the manner described in this Section 4.5. Upon surrender of a Certificate for registration of transfer of any Limited Partner Interests evidenced by a Certificate, and subject to the provisions of Section 4.5(b), the appropriate officers of the General Partner on behalf of the Partnership shall execute and deliver, and in the case of Common Units, the Transfer Agent shall countersign and deliver, in the name of the holder or the designated transferee or transferees, as required pursuant to the holder’s instructions, one or more new Certificates evidencing the same aggregate number and type of Limited Partner Interests as was evidenced by the Certificate so surrendered.
(b)    The General Partner shall not recognize any transfer of Limited Partner Interests until the Certificates evidencing such Limited Partner Interests are surrendered for registration of transfer. No charge shall be imposed by the General Partner for such transfer; provided, that as a condition to the issuance of any new Certificate under this Section 4.5, the General Partner may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed with respect thereto.
(c)    The General Partner and its Affiliates shall have the right at any time to transfer their Common Units or Preferred Units to one or more Persons.
Section 4.6
Transfer of the General Partner’s General Partner Interest.
(a)    [Reserved].
(b)    Subject to Section 4.6(c) below, the General Partner may transfer all or any of its General Partner Interest without Unitholder approval.
(c)    Notwithstanding anything herein to the contrary, no transfer by the General Partner of all or any part of its General Partner Interest to another Person shall be permitted unless (i) the transferee agrees to assume the rights and duties of the General Partner under this Agreement and to be bound by the provisions of this Agreement, (ii) the Partnership receives an Opinion of Counsel that such transfer would not result in the loss of limited liability of any Limited Partner or of any limited partner or member of any other Group Member and (iii) such transferee also agrees to purchase all (or the appropriate portion thereof, if applicable) of the partnership or membership interest of the General Partner as the general partner or managing member, if any, of each other Group Member. In the case of a transfer pursuant to and in compliance with this Section 4.6, the transferee or successor (as the case may be) shall, subject to compliance with the terms of Section 10.3, be admitted to the Partnership as the General Partner immediately prior to the transfer of the General Partner Interest, and the business of the Partnership shall continue without dissolution.
Section 4.7
[Reserved].
Section 4.8
Restrictions on Transfers.
(a)    Except as provided in Section 4.8(c) below, but notwithstanding the other provisions of this Article IV, no transfer of any Partnership Interests shall be made if such transfer would (i) violate the then applicable federal or state securities laws, laws of the Republic of the Marshall Islands, or rules and regulations of the Commission, any state securities commission or any other governmental authority with jurisdiction over such transfer, or (ii) terminate the existence or qualification of the Partnership or any Group Member under the laws of the jurisdiction of its formation.
(b)    The General Partner may impose such restrictions by amending this Agreement; provided, however, that any amendment that would result in the delisting or suspension of trading of any class of Limited Partner Interests on the principal National Securities Exchange on which such class of Limited Partner Interests is then listed must be approved, prior to such amendment being effected, by the holders of a majority of the Outstanding Limited Partner Interests of such class.
(c)    Nothing contained in this Article IV, or elsewhere in this Agreement, shall preclude the settlement of any transactions involving Partnership Interests entered into through the facilities of any National Securities Exchange on which such Partnership Interests are listed for trading.
ARTICLE V    

CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS
Section 5.1
Exchange of Incentive Distribution Rights.
As of the Effective Date, pursuant to the Exchange Agreement, the Incentive Distribution Rights that were held by the General Partner and were outstanding prior to the execution of this Agreement were contributed to the Partnership in exchange for 10,750,000 Common Units. Effective immediately following the aforementioned transactions, the Incentive Distribution Rights shall be cancelled and no longer exist.
Section 5.2
[Reserved].
Section 5.3
[Reserved].
Section 5.4
Interest and Withdrawal.
No interest shall be paid by the Partnership on Capital Contributions. No Partner shall be entitled to the withdrawal or return of its Capital Contribution, except to the extent, if any, that distributions made pursuant to this Agreement or upon termination of the Partnership may be considered and permitted as such by law and then only to the extent provided for in this Agreement. Except to the extent expressly provided in this Agreement, no Partner shall have priority over any other Partner either as to the return of Capital Contributions or as to profits, losses or distributions.
Section 5.5
[Reserved].
Section 5.6
Issuances of Additional Partnership Securities.
(a)    Subject to any approvals required by Preferred Unit Holders pursuant to Section 16.5(c)(ii), the Partnership may issue additional Partnership Securities and options, rights, warrants and appreciation rights relating to the Partnership Securities for any Partnership purpose at any time and from time to time to such Persons for such consideration and on such terms and conditions as the General Partner shall determine, all without the approval of any Limited Partners.
(b)    Each additional Partnership Security authorized to be issued by the Partnership pursuant to Section 5.6(a) may be issued in one or more classes, or one or more series of any such classes, with such designations, preferences, rights, powers and duties (which may be senior to existing classes and series of Partnership Securities), as shall be fixed by the General Partner, including (i) the right to share Partnership profits and losses or items thereof; (ii) the right to share in Partnership distributions; (iii) the rights upon dissolution and liquidation of the Partnership; (iv) whether, and the terms and conditions upon which, the Partnership may redeem the Partnership Security; (v) whether such Partnership Security is issued with the privilege of conversion or exchange and, if so, the terms and conditions of such conversion or exchange; (vi) the terms and conditions upon which each Partnership Security will be issued, evidenced by certificates and assigned or transferred; (vii) the method for determining the Percentage Interest as to such Partnership Security; and (viii) the right, if any, of each such Partnership Security to vote on Partnership matters, including matters relating to the relative rights, preferences and privileges of such Partnership Security.
(c)    The General Partner shall take all actions that it determines to be necessary or appropriate in connection with (i) each issuance of Partnership Securities and options, rights, warrants and appreciation rights relating to Partnership Securities pursuant to this Section 5.6, (ii) the conversion of the General Partner Interest into Units pursuant to the terms of this Agreement, (iii) the admission of additional Limited Partners and (iv) all additional issuances of Partnership Securities. The General Partner shall determine the relative rights, powers and duties of the holders of the Units or other Partnership Securities being so issued. The General Partner shall do all things necessary to comply with the Marshall Islands Act and is authorized and directed to do all things that it determines to be necessary or appropriate in connection with any future issuance of Partnership Securities or in connection with the conversion of the General Partner Interest into Units pursuant to the terms of this Agreement, including compliance with any statute, rule, regulation or guideline of any federal, state or other governmental agency or any National Securities Exchange on which the Units or other Partnership Securities are listed.
Section 5.7
Limitations on Issuance of Additional Partnership Securities.
The Partnership may issue an unlimited number of Partnership Securities (or options, warrants or appreciation rights related thereto) pursuant to Section 5.6 without the approval of the Limited Partners; provided, however, that no fractional units shall be issued by the Partnership.
Section 5.8
Limited Preemptive Right.
Except as provided in this Section 5.8, no Person shall have any preemptive, preferential or other similar right with respect to the issuance of any Partnership Security, whether unissued, held in the treasury or hereafter created. The General Partner shall have the right, which it may from time to time assign in whole or in part to any of its Affiliates, to purchase Partnership Securities from the Partnership whenever, and on the same terms that, the Partnership issues Partnership Securities to Persons other than the General Partner and its Affiliates, to the extent necessary to maintain the Percentage Interests of the General Partner and its Affiliates equal to that which existed immediately prior to the issuance of such Partnership Securities; provided, however, that the amount of any series of Preferred Units issued by the Partnership from time to time that the General Partner shall have a right to purchase pursuant to this Section 5.8 shall equal the product of (a) the aggregate Percentage Interest of the General Partner and its Affiliates multiplied by (b) the number of such series of Preferred Units so issued. Except as set forth in Article XII, the General Partner shall not be obligated to make any Capital Contributions to the Partnership.
Section 5.9
Splits and Combinations.
(a)    Subject to Section 5.9(d), the Partnership may make a Pro Rata distribution of Partnership Securities (other than Series A Preferred Units or Series B Preferred Units) to all Record Holders of the same class or series of Partnership Securities or may effect a subdivision or combination of the same class or series of Partnership Securities so long as, after any such event, each Partner holding such class or series of such Partnership Securities shall have the same Percentage Interest in the Partnership as before such event, and any amounts calculated on a per Unit basis (including those based on the applicable Stated Preferred Unit Liquidation Preference) or stated as a number of Units are proportionately adjusted.
(b)    Whenever such a distribution, subdivision or combination of Partnership Securities is declared, the General Partner shall select a Record Date as of which the distribution, subdivision or combination shall be effective and shall send notice thereof at least 20 days prior to such Record Date to each Record Holder as of a date not less than 10 days prior to the date of such notice. The General Partner also may cause a firm of independent public accountants selected by it to calculate the number of Partnership Securities to be held by each Record Holder after giving effect to such distribution, subdivision or combination. The General Partner shall be entitled to rely on any certificate provided by such firm as conclusive evidence of the accuracy of such calculation.
(c)    Promptly following any such distribution, subdivision or combination, the Partnership may issue Certificates to the Record Holders of Partnership Securities as of the applicable Record Date representing the new number of Partnership Securities held by such Record Holders, or the General Partner may adopt such other procedures that it determines to be necessary or appropriate to reflect such changes. If any such combination results in a smaller total number of Partnership Securities Outstanding, the Partnership shall require, as a condition to the delivery to a Record Holder of such new Certificate, the surrender of any Certificate held by such Record Holder immediately prior to such Record Date.
(d)    The Partnership shall not issue fractional Units upon any distribution, subdivision or combination of Units. If a distribution, subdivision or combination of Units would result in the issuance of fractional Units but for the provisions of this Section 5.9(d), each fractional Unit, as applicable, shall be rounded to the nearest whole Unit (and a 0.5 Unit shall be rounded to the next higher Unit).
Section 5.10
Fully Paid and Non-Assessable Nature of Limited Partner Interests.
All Limited Partner Interests issued pursuant to, and in accordance with the requirements of, this Article V shall be fully paid and non-assessable Limited Partner Interests in the Partnership, except as such non-assessability may be affected by Section 51 of the Marshall Islands Act.
ARTICLE VI    

DISTRIBUTIONS
Section 6.1
Allocations.
The profits and losses of the Partnership shall be allocated among the Partners by the General Partner in such manner as the General Partner determines in good faith most accurately reflects the rights of the Partners as set forth elsewhere in this Agreement.
Section 6.2
[Reserved].
Section 6.3
Distributions to Record Holders.
(a)    Subject to Section 16.3 and except as otherwise required by Section 5.6(b) in respect of other Partnership Securities issued pursuant thereto, within 45 days following the end of each Quarter commencing with the Quarter ending on June 30, 2005, an amount equal to 100% of Available Cash with respect to such Quarter shall, subject to Section 51 of the Marshall Islands Act, be distributed in accordance with this Article VI by the Partnership to (a) the General Partner in accordance with its Percentage Interest and (b) to all Unitholders holding Common Units, Pro Rata, a percentage equal to 100% less the General Partner’s Percentage Interest as of the Record Date selected by the General Partner. All distributions required to be made under this Agreement shall be made subject to Section 51 of the Marshall Islands Act. This Section 6.3(a) shall not apply to Preferred Units.
(b)    Notwithstanding Section 6.3(a), in the event of the dissolution and liquidation of the Partnership, all receipts received during or after the Quarter in which the Liquidation Date occurs, other than from borrowings described in (a)(ii) of the definition of Available Cash, shall be applied and distributed solely in accordance with, and subject to the terms and conditions of, Section 12.4.
(c)    The General Partner may treat taxes required or elected to be withheld with respect to, all or less than all of the Partners, as a distribution of Available Cash to such Partners.
(d)    Each distribution in respect of a Partnership Interest shall be paid by the Partnership, directly or through the Transfer Agent or through any other Person or agent, only to the Record Holder of such Partnership Interest as of the Record Date set for such distribution. Such payment shall constitute full payment and satisfaction of the Partnership’s liability in respect of such payment, regardless of any claim of any Person who may have an interest in such payment by reason of an assignment or otherwise
Section 6.4
[Reserved].
Section 6.5
[Reserved].
Section 6.6
[Reserved].
Section 6.7
[Reserved].
Section 6.8
[Reserved].
ARTICLE VII    

MANAGEMENT AND OPERATION OF BUSINESS
Section 7.1
Management.
(a)    The General Partner shall conduct, direct and manage all activities of the Partnership. Except as otherwise expressly provided in this Agreement, all management powers over the business and affairs of the Partnership shall be exclusively vested in the General Partner, and no Limited Partner shall have any management power over the business and affairs of the Partnership. In addition to the powers now or hereafter granted a general partner of a limited partnership under applicable law or that are granted to the General Partner under any other provision of this Agreement, the General Partner, subject to Section 7.3, shall have full power and authority to do all things and on such terms as it determines to be necessary or appropriate to conduct the business of the Partnership, to exercise all powers set forth in Section 2.5 and to effectuate the purposes set forth in Section 2.4, including the following:
(i)    the making of any expenditures, the lending or borrowing of money, the assumption or guarantee of, or other contracting for, indebtedness and other liabilities, the issuance of evidences of indebtedness, including indebtedness that is convertible into Partnership Securities (subject to Section 16.5 with respect to any Senior Securities), and the incurring of any other obligations;
(ii)    the making of tax, regulatory and other filings, or rendering of periodic or other reports to governmental or other agencies having jurisdiction over the business or assets of the Partnership;
(iii)    the acquisition, disposition, mortgage, pledge, encumbrance, hypothecation or exchange of any or all of the assets of the Partnership or the merger or other combination of the Partnership with or into another Person (the matters described in this clause (iii) being subject, however, to any prior approval that may be required by Section 7.3 and Article XIV);
(iv)    the use of the assets of the Partnership (including cash on hand) for any purpose consistent with the terms of this Agreement, including the financing of the conduct of the operations of the Partnership Group; subject to Section 7.6(a), the lending of funds to other Persons (including other Group Members); the repayment or guarantee of obligations of the Partnership Group; and the making of capital contributions to any member of the Partnership Group;
(v)    the negotiation, execution and performance of any contracts, conveyances or other instruments (including instruments that limit the liability of the Partnership under contractual arrangements to all or particular assets of the Partnership, with the other party to the contract to have no recourse against the General Partner or its assets other than its interest in the Partnership, even if same results in the terms of the transaction being less favorable to the Partnership than would otherwise be the case);
(vi)    the distribution of Partnership cash;
(vii)    the selection and dismissal of employees (including employees having titles such as “president,” “vice president,” “secretary” and “treasurer”) and agents, outside attorneys, accountants, consultants and contractors and the determination of their compensation and other terms of employment or hiring;
(viii)    the maintenance of insurance for the benefit of the Partnership Group, the Partners and Indemnitees;
(ix)    the formation of, or acquisition of an interest in, and the contribution of property and the making of loans to, any further limited or general partnerships, joint ventures, corporations, limited liability companies or other relationships (including the acquisition of interests in, and the contributions of property to, any Group Member from time to time) subject to the restrictions set forth in Section 2.4;
(x)    the control of any matters affecting the rights and obligations of the Partnership, including the bringing and defending of actions at law or in equity and otherwise engaging in the conduct of litigation, arbitration or mediation and the incurring of legal expense and the settlement of claims and litigation;
(xi)    the indemnification of any Person against liabilities and contingencies to the extent permitted by law;
(xii)    the entering into of listing agreements with any National Securities Exchange and the delisting of some or all of the Limited Partner Interests from, or requesting that trading be suspended on, any such exchange (subject to any prior approval that may be required under Section 4.8);
(xiii)    the purchase, sale or other acquisition or disposition of Partnership Securities (subject to Section 16.6(g)), or the issuance of options, rights, warrants and appreciation rights relating to Partnership Securities;
(xiv)    the undertaking of any action in connection with the Partnership’s participation in any Group Member; and
(xv)    the entering into of agreements with any of its Affiliates to render services to a Group Member or to itself in the discharge of its duties as General Partner of the Partnership.
(b)    Notwithstanding any other provision of this Agreement, any Group Member Agreement, the Marshall Islands Act or any applicable law, rule or regulation, each of the Partners and each other Person who may acquire an interest in Partnership Securities hereby (i) approves, ratifies and confirms the execution, delivery and performance by the parties thereto of this Agreement, the Underwriting Agreement, the Omnibus Agreement, the Contribution Agreement, any Group Member Agreement of any other Group Member and the other agreements described in or filed as exhibits to the Registration Statement that are related to the transactions contemplated by the Registration Statement; (ii) agrees that the General Partner (on its own or through any officer of the Partnership) is authorized to execute, deliver and perform the agreements referred to in clause (i) of this sentence and the other agreements, acts, transactions and matters described in or contemplated by the Registration Statement on behalf of the Partnership without any further act, approval or vote of the Partners or the other Persons who may acquire an interest in Partnership Securities; and (iii) agrees that the execution, delivery or performance by the General Partner, any Group Member or any Affiliate of any of them of this Agreement or any agreement authorized or permitted under this Agreement (including the exercise by the General Partner or any Affiliate of the General Partner of the rights accorded pursuant to Article XV) shall not constitute a breach by the General Partner of any duty that the General Partner may owe the Partnership or the Limited Partners or any other Persons under this Agreement (or any other agreements) or of any duty stated or implied by law or equity.
Section 7.2
Certificate of Limited Partnership.
The General Partner caused the Certificate of Limited Partnership to be filed with the Registrar of Corporations of the Marshall Islands as required by the Marshall Islands Act. The General Partner shall use all reasonable efforts to cause to be filed such other certificates or documents that the General Partner determines to be necessary or appropriate for the formation, continuation, qualification and operation of a limited partnership (or a partnership in which the limited partners have limited liability) in the Marshall Islands or any other jurisdiction in which the Partnership may elect to do business or own property. To the extent the General Partner determines such action to be necessary or appropriate, the General Partner shall file amendments to and restatements of the Certificate of Limited Partnership and do all things to maintain the Partnership as a limited partnership (or a partnership or other entity in which the limited partners have limited liability) under the laws of the Marshall Islands or of any other jurisdiction in which the Partnership may elect to do business or own property. Subject to the terms of Section 3.4(a), the General Partner shall not be required, before or after filing, to deliver or mail a copy of the Certificate of Limited Partnership, any qualification document or any amendment thereto to any Limited Partner.
Section 7.3
Restrictions on the General Partner’s Authority.
(a)    Except as otherwise provided in this Agreement, the General Partner may not, without written approval of the specific act by holders of all of the Outstanding Limited Partner Interests or by other written instrument executed and delivered by holders of all of the Outstanding Limited Partner Interests subsequent to the date of this Agreement, take any action in contravention of this Agreement, including, (i) committing any act that would make it impossible to carry on the ordinary business of the Partnership; (ii) possessing Partnership property, or assigning any rights in specific Partnership property, for other than a Partnership purpose; (iii) admitting a Person as a Partner; (iv) amending this Agreement in any manner; or (v) transferring its interest as a general partner of the Partnership.
(b)    Except as provided in Articles XII and XIV, the General Partner may not sell, exchange or otherwise dispose of all or substantially all of the assets of the Partnership Group, taken as a whole, in a single transaction or a series of related transactions (including by way of merger, consolidation, other combination or sale of ownership interests of the Partnership’s Subsidiaries) without the approval of holders of a Unit Majority; provided, however, that this provision shall not preclude or limit the General Partner’s ability to mortgage, pledge, hypothecate or grant a security interest in all or substantially all of the assets of the Partnership Group and shall not apply to any forced sale of any or all of the assets of the Partnership Group pursuant to the foreclosure of, or other realization upon, any such encumbrance. Without the approval of holders of a Unit Majority, the General Partner shall not, on behalf of the Partnership, (i) consent to any amendment to the Operating Company Agreement or, except as expressly permitted by Section 7.9(e), take any action permitted to be taken by a member of the Operating Company, in either case, that would adversely affect the Limited Partners (including any particular class of Partnership Interests as compared to any other class of Partnership Interests) in any material respect or (ii) except as permitted under Sections 4.6, 11.1 and 11.2, elect or cause the Partnership to elect a successor general partner of the Partnership.
Section 7.4
Reimbursement of the General Partner.
(a)    Except as provided in this Section 7.4 and elsewhere in this Agreement, the General Partner shall not be compensated for its services as a general partner or managing member of any Group Member.
(b)    The General Partner shall be reimbursed on a monthly basis, or such other basis as the General Partner may determine, for (i) all direct and indirect expenses it incurs or payments it makes on behalf of the Partnership (including salary, bonus, incentive compensation and other amounts paid to any Person including Affiliates of the General Partner to perform services for the Partnership or for the General Partner in the discharge of its duties to the Partnership), and (ii) all other expenses allocable to the Partnership or otherwise incurred by the General Partner in connection with operating the Partnership’s business (including expenses allocated to the General Partner by its Affiliates). The General Partner shall determine the expenses that are allocable to the Partnership. Reimbursements pursuant to this Section 7.4 shall be in addition to any reimbursement to the General Partner as a result of indemnification pursuant to Section 7.7.
(c)    The General Partner, without the approval of the Limited Partners (who shall have no right to vote in respect thereof), may propose and adopt on behalf of the Partnership employee benefit plans, employee programs and employee practices (including plans, programs and practices involving the issuance of Partnership Securities or options to purchase or rights, warrants or appreciation rights relating to Partnership Securities), or cause the Partnership to issue Partnership Securities in connection with, or pursuant to, any employee benefit plan, employee program or employee practice maintained or sponsored by the General Partner or any of its Affiliates, in each case for the benefit of employees of the General Partner, any Group Member or any Affiliate, or any of them, in respect of services performed, directly or indirectly, for the benefit of the Partnership Group. The Partnership agrees to issue and sell to the General Partner or any of its Affiliates any Partnership Securities that the General Partner or such Affiliates are obligated to provide to any employees pursuant to any such employee benefit plans, employee programs or employee practices. Expenses incurred by the General Partner in connection with any such plans, programs and practices (including the net cost to the General Partner or such Affiliates of Partnership Securities purchased by the General Partner or such Affiliates from the Partnership to fulfill options or awards under such plans, programs and practices) shall be reimbursed in accordance with Section 7.4(b). Any and all obligations of the General Partner under any employee benefit plans, employee programs or employee practices adopted by the General Partner as permitted by this Section 7.4(c) shall constitute obligations of the General Partner hereunder and shall be assumed by any successor General Partner approved pursuant to Section 11.1 or 11.2 or the transferee of or successor to all of the General Partner’s General Partner Interest pursuant to Section 4.6.
Section 7.5
Outside Activities.
(a)    After the Closing Date, the General Partner, for so long as it is the General Partner of the Partnership (i) agrees that its sole business will be to act as a general partner or managing member, as the case may be, of the Partnership and any other partnership or limited liability company of which the Partnership or the Operating Company is, directly or indirectly, a partner or member and to undertake activities that are ancillary or related thereto (including being a limited partner in the Partnership), (ii) shall not engage in any business or activity or incur any debts or liabilities except in connection with or incidental to (A) its performance as general partner or managing member, if any, of one or more Group Members or as described in or contemplated by the Registration Statement or (B) the acquiring, owning or disposing of debt or equity securities in any Group Member and (iii) except to the extent permitted in the Omnibus Agreement, shall not, and shall cause its controlled Affiliates not to, engage in any Offshore Restricted Business or Crude Oil Restricted Business (as such terms are defined in the Omnibus Agreement).
(b)    Teekay Corporation and certain of its Affiliates have entered into the Omnibus Agreement, which agreement sets forth certain restrictions on the ability of Teekay Corporation and its Affiliates to engage in any LNG Restricted Businesses (as such term is defined in the Omnibus Agreement).
(c)    Except as specifically restricted by Section 7.5(a) or the Omnibus Agreement, each Indemnitee (other than the General Partner) 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 any Group Member, independently or with others, including business interests and activities in direct competition with the business and activities of any Group Member, and none of the same shall constitute a breach of this Agreement or any duty expressed or implied by law to any Group Member or any Partner. None of any Group Member, any Limited Partner or any other Person shall have any rights by virtue of this Agreement, any Group Member Agreement, or the partnership relationship established hereby in any business ventures of any Indemnitee.
(d)    Subject to the terms of Section 7.5(a), Section 7.5(b), Section 7.5(c) and the Omnibus Agreement, but otherwise notwithstanding anything to the contrary in this Agreement, (i) the engaging in competitive activities by any Indemnitees (other than the General Partner) in accordance with the provisions of this Section 7.5 is hereby approved by the Partnership and all Partners, (ii) it shall be deemed not to be a breach of any fiduciary duty or any other obligation of any type whatsoever of the General Partner or of any Indemnitee for the Indemnitees (other than the General Partner) to engage in such business interests and activities in preference to or to the exclusion of the Partnership and (iii) except as set forth in the Omnibus Agreement, the General Partner and the Indemnitees shall have no obligation hereunder or as a result of any duty expressed or implied by law to present business opportunities to the Partnership.
(e)    The General Partner and each of its Affiliates may acquire Units or other Partnership Securities in addition to those acquired on the Closing Date and, except as otherwise provided in this Agreement, shall be entitled to exercise, at their option, all rights relating to all Units or other Partnership Securities acquired by them.
(f)    The term “Affiliates” when used in Section 7.5(a) and Section 7.5(e) with respect to the General Partner shall not include any Group Member.
(g)    Notwithstanding anything to the contrary in this Agreement, to the extent that any provision of this Agreement purports or is interpreted to have the effect of restricting the fiduciary duties that might otherwise, as a result of Marshall Islands law or other applicable law, be owed by the General Partner to the Partnership and its Limited Partners, or to constitute a waiver or consent by the Limited Partners to any such restriction, such provisions shall be inapplicable and have no effect in determining whether the General Partner has complied with its fiduciary duties in connection with determinations made by it under this Section 7.5.
Section 7.6
Loans from the General Partner; Loans or Contributions from the Partnership or Group Members.
(a)    The General Partner or any of its Affiliates may lend to any Group Member, and any Group Member may borrow from the General Partner or any of its Affiliates, funds needed or desired by the Group Member for such periods of time and in such amounts as the General Partner may determine; provided, however, that in any such case the lending party may not charge the borrowing party interest at a rate greater than the rate that would be charged the borrowing party or impose terms less favorable to the borrowing party than would be charged or imposed on the borrowing party by unrelated lenders on comparable loans made on an arm’s-length basis (without reference to the lending party’s financial abilities or guarantees), all as determined by the General Partner. The borrowing party shall reimburse the lending party for any costs (other than any additional interest costs) incurred by the lending party in connection with the borrowing of such funds. For purposes of this Section 7.6(a) and Section 7.6(b), the term “Group Member” shall include any Affiliate of a Group Member that is controlled by the Group Member.
(b)    The Partnership may lend or contribute to any Group Member, and any Group Member may borrow from the Partnership, funds on terms and conditions determined by the General Partner. No Group Member may lend funds to the General Partner or any of its Affiliates (other than another Group Member).
(c)    No borrowing by any Group Member or the approval thereof by the General Partner shall be deemed to constitute a breach of any duty, expressed or implied, of the General Partner or its Affiliates to the Partnership or the Limited Partners by reason of the fact that the purpose or effect of such borrowing is directly or indirectly to enable distributions to the General Partner or its Affiliates (including in their capacities as Limited Partners) to exceed the General Partner’s Percentage Interest of the total amount distributed to all partners.
Section 7.7
Indemnification.
(a)    To the fullest extent permitted by law but subject to the limitations expressly provided in this Agreement, all Indemnitees shall be indemnified and held harmless by the Partnership from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including legal fees and expenses), judgments, fines, penalties, interest, settlements or other amounts arising from any and all claims, demands, actions, suits or proceedings, whether civil, criminal, administrative or investigative, in which any Indemnitee may be involved, or is threatened to be involved, as a party or otherwise, by reason of its status as an Indemnitee; provided, that the Indemnitee shall not be indemnified and held harmless if there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that, in respect of the matter for which the Indemnitee is seeking indemnification pursuant to this Section 7.7, the Indemnitee acted in bad faith or engaged in fraud, willful misconduct or gross negligence or, in the case of a criminal matter, acted with knowledge that the Indemnitee’s conduct was unlawful; provided, further, no indemnification pursuant to this Section 7.7 shall be available to the General Partner or its Affiliates (other than a Group Member) with respect to its or their obligations incurred pursuant to the Underwriting Agreement, the Omnibus Agreement or the Contribution Agreement (other than obligations incurred by the General Partner on behalf of the Partnership). Any indemnification pursuant to this Section 7.7 shall be made only out of the assets of the Partnership, it being agreed that the General Partner shall not be personally liable for such indemnification and shall have no obligation to contribute or loan any monies or property to the Partnership to enable it to effectuate such indemnification.
(b)    To the fullest extent permitted by law, expenses (including legal fees and expenses) incurred by an Indemnitee who is indemnified pursuant to Section 7.7(a) in defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Partnership prior to a determination that the Indemnitee is not entitled to be indemnified upon receipt by the Partnership of any undertaking by or on behalf of the Indemnitee to repay such amount if it shall be determined that the Indemnitee is not entitled to be indemnified as authorized in this Section 7.7.
(c)    The indemnification provided by this Section 7.7 shall be in addition to any other rights to which an Indemnitee may be entitled under any agreement, pursuant to any vote of the holders of Outstanding Limited Partner Interests, as a matter of law or otherwise, both as to actions in the Indemnitee’s capacity as an Indemnitee and as to actions in any other capacity (including any capacity under the Underwriting Agreement), and shall continue as to an Indemnitee who has ceased to serve in such capacity and shall inure to the benefit of the heirs, successors, assigns and administrators of the Indemnitee.
(d)    The Partnership may purchase and maintain (or reimburse the General Partner or its Affiliates for the cost of) insurance, on behalf of the General Partner, its Affiliates and such other Persons as the General Partner shall determine, against any liability that may be asserted against, or expense that may be incurred by, such Person in connection with the Partnership’s activities or such Person’s activities on behalf of the Partnership, regardless of whether the Partnership would have the power to indemnify such Person against such liability under the provisions of this Agreement.
(e)    For purposes of this Section 7.7, the Partnership shall be deemed to have requested an Indemnitee to serve as fiduciary of an employee benefit plan whenever the performance by it of its duties to the Partnership also imposes duties on, or otherwise involves services by, it to the plan or participants or beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect to an employee benefit plan pursuant to applicable law shall constitute “fines” within the meaning of Section 7.7(a); and action taken or omitted by it with respect to any employee benefit plan in the performance of its duties for a purpose reasonably believed by it to be in the best interest of the participants and beneficiaries of the plan shall be deemed to be for a purpose that is in the best interests of the Partnership.
(f)    In no event may an Indemnitee subject the Limited Partners to personal liability by reason of the indemnification provisions set forth in this Agreement.
(g)    An Indemnitee shall not be denied indemnification in whole or in part under this Section 7.7 because the Indemnitee had an interest in the transaction with respect to which the indemnification applies if the transaction was otherwise permitted by the terms of this Agreement.
(h)    The provisions of this Section 7.7 are for the benefit of the Indemnitees, their heirs, successors, assigns and administrators and shall not be deemed to create any rights for the benefit of any other Persons.
(i)    No amendment, modification or repeal of this Section 7.7 or any provision hereof shall in any manner terminate, reduce or impair the right of any past, present or future Indemnitee to be indemnified by the Partnership, nor the obligations of the Partnership to indemnify any such Indemnitee under and in accordance with the provisions of this Section 7.7 as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted.
Section 7.8
Liability of Indemnitees.
(a)    Notwithstanding anything to the contrary set forth in this Agreement, no Indemnitee shall be liable for monetary damages to the Partnership, the Limited Partners or any other Persons who have acquired interests in the Partnership Securities, for losses sustained or liabilities incurred as a result of any act or omission of an Indemnitee unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that, in respect of the matter in question, the Indemnitee acted in bad faith or engaged in fraud, willful misconduct or gross negligence or, in the case of a criminal matter, acted with knowledge that the Indemnitee’s conduct was criminal.
(b)    Subject to its obligations and duties as General Partner set forth in Section 7.1(a), the General Partner may exercise any of the powers granted to it by this Agreement and perform any of the duties imposed upon it hereunder either directly or by or through its agents, and the General Partner shall not be responsible for any misconduct or negligence on the part of any such agent appointed by the General Partner in good faith.
(c)    To the extent that, at law or in equity, an Indemnitee has duties (including fiduciary duties) and liabilities relating thereto to the Partnership or to the Partners, the General Partner and any other Indemnitee acting in connection with the Partnership’s business or affairs shall not be liable to the Partnership or to any Partner for its good faith reliance on the provisions of this Agreement.
(d)    Any amendment, modification or repeal of this Section 7.8 or any provision hereof shall be prospective only and shall not in any way affect the limitations on the liability of the Indemnitees under this Section 7.8 as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted.
Section 7.9
Resolution of Conflicts of Interest; Standards of Conduct and Modification of Duties.
(a)    Unless otherwise expressly provided in this Agreement or any Group Member Agreement, whenever a potential conflict of interest exists or arises between the General Partner or any of its Affiliates, on the one hand, and the Partnership, any Group Member or any Partner, on the other, any resolution or course of action by the General Partner or its Affiliates in respect of such conflict of interest shall be permitted and deemed approved by all Partners, and shall not constitute a breach of this Agreement, of any Group Member Agreement, of any agreement contemplated herein or therein, or of any duty stated or implied by law or equity, if the resolution or course of action in respect of such conflict of interest is (i) approved by Special Approval, (ii) approved by the vote of a majority of the Outstanding Common Units (excluding Common Units owned by the General Partner and its Affiliates), (iii) on terms no less favorable to the Partnership than those generally being provided to or available from unrelated third parties or (iv) fair and reasonable to the Partnership, taking into account the totality of the relationships between the parties involved (including other transactions that may be particularly favorable or advantageous to the Partnership). The General Partner shall be authorized but not required in connection with its resolution of such conflict of interest to seek Special Approval of such resolution, and the General Partner may also adopt a resolution or course of action that has not received Special Approval. If Special Approval is not sought and the Board of Directors of the General Partner determines that the resolution or course of action taken with respect to a conflict of interest satisfies either of the standards set forth in clauses (iii) or (iv) above, then it shall be presumed that, in making its decision, the Board of Directors of the General Partner acted in good faith, and in any proceeding brought by any Limited Partner or by or on behalf of such Limited Partner or any other Limited Partner or the Partnership challenging such approval, the Person bringing or prosecuting such proceeding shall have the burden of overcoming such presumption. Notwithstanding anything to the contrary in this Agreement, the existence of the conflicts of interest described in the Registration Statement are hereby approved by all Partners.
(b)    Whenever the General Partner makes a determination or takes or declines to take any other action, or any of its Affiliates causes it to do so, in its capacity as the general partner of the Partnership as opposed to in its individual capacity, whether under this Agreement, any Group Member Agreement or any other agreement contemplated hereby or otherwise, then, unless another express standard is provided for in this Agreement, the General Partner, or such Affiliates causing it to do so, shall make such determination or take or decline to take such other action in good faith and shall not be subject to any other or different standards imposed by this Agreement, any Group Member Agreement, any other agreement contemplated hereby or under the Marshall Islands Act or any other law, rule or regulation. In order for a determination or other action to be in “good faith” for purposes of this Agreement, the Person or Persons making such determination or taking or declining to take such other action must reasonably believe that the determination or other action is in the best interests of the Partnership, unless the context otherwise requires.
(c)    Whenever the General Partner makes a determination or takes or declines to take any other action, or any of its Affiliates causes it to do so, in its individual capacity as opposed to in its capacity as the general partner of the Partnership, whether under this Agreement, any Group Member Agreement or any other agreement contemplated hereby or otherwise, then the General Partner, or such Affiliates causing it to do so, are entitled to make such determination or to take or decline to take such other action free of any fiduciary duty or obligation whatsoever to the Partnership or any Limited Partner, and the General Partner, or such Affiliates causing it to do so, shall not be required to act in good faith or pursuant to any other standard imposed by this Agreement, any Group Member Agreement, any other agreement contemplated hereby or under the Marshall Islands Act or any other law, rule or regulation. By way of illustration and not of limitation, whenever the phrase, “at the option of the General Partner,” or some variation of that phrase, is used in this Agreement, it indicates that the General Partner is acting in its individual capacity.
(d)    Notwithstanding anything to the contrary in this Agreement, the General Partner and its Affiliates shall have no duty or obligation, express or implied, to (i) sell or otherwise dispose of any asset of the Partnership Group other than in the ordinary course of business or (ii) permit any Group Member to use any facilities or assets of the General Partner and its Affiliates, except as may be provided in contracts entered into from time to time specifically dealing with such use. Any determination by the General Partner or any of its Affiliates to enter into such contracts shall be at its option.
(e)    Except as expressly set forth in this Agreement, neither the General Partner nor any other Indemnitee shall have any duties or liabilities, including fiduciary duties, to the Partnership or any Limited Partner and the provisions of this Agreement, to the extent that they restrict or otherwise modify the duties and liabilities, including fiduciary duties, of the General Partner or any other Indemnitee otherwise existing at law or in equity, are agreed by the Partners to replace such other duties and liabilities of the General Partner or such other Indemnitee. Notwithstanding anything to the contrary, but subject to Section 7.9(c) and without reference to the definition of “good faith” in Section 7.9(b), neither the General Partner nor any other Indemnitee shall owe any fiduciary duties to Preferred Unit Holders other than a contractual duty of good faith and fair dealing.
(f)    The Unitholders hereby authorize the General Partner, on behalf of the Partnership as a partner or member of a Group Member, to approve of actions by the general partner or managing member of such Group Member similar to those actions permitted to be taken by the General Partner pursuant to this Section 7.9.
Section 7.10
Other Matters Concerning the General Partner.
(a)    The General Partner may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties.
(b)    The General Partner may consult with legal counsel, accountants, appraisers, management consultants, investment bankers and other consultants and advisers selected by it, and any act taken or omitted to be taken in reliance upon the opinion (including an Opinion of Counsel) of such Persons as to matters that the General Partner reasonably believes to be within such Person’s professional or expert competence shall be conclusively presumed to have been done or omitted in good faith and in accordance with such opinion.
(c)    The General Partner shall have the right, in respect of any of its powers or obligations hereunder, to act through any of its duly authorized officers, a duly appointed attorney or attorneys-in-fact or the duly authorized officers of the Partnership.
Section 7.11
Purchase or Sale of Partnership Securities.
Subject to Section 16.6(g), the General Partner may cause the Partnership to purchase or otherwise acquire Partnership Securities. As long as Partnership Securities are held by any Group Member, such Partnership Securities shall not be considered Outstanding for any purpose, except as otherwise provided herein. The General Partner or any Affiliate of the General Partner may also purchase or otherwise acquire and sell or otherwise dispose of Partnership Securities for its own account, subject to the provisions of Articles IV and X and Section 16.6(g).
Section 7.12
Registration Rights of the General Partner and its Affiliates.
(a)    If (i) the General Partner or any Affiliate of the General Partner (including for purposes of this Section 7.12, any Person that is an Affiliate of the General Partner at the date hereof notwithstanding that it may later cease to be an Affiliate of the General Partner) or any of their assignees holds Partnership Securities that it desires to sell and (ii) Rule 144 of the Securities Act (or any successor rule or regulation to Rule 144) or another exemption from registration is not available to enable such holder of Partnership Securities (the “Holder”) to dispose of the number of Partnership Securities it desires to sell at the time it desires to do so without registration under the Securities Act, then at the option and upon the request of the Holder, the Partnership shall file with the Commission as promptly as practicable after receiving such request, and use all reasonable efforts to cause to become effective and remain effective for a period of not less than six months following its effective date or such shorter period as shall terminate when all Partnership Securities covered by such registration statement have been sold, a registration statement under the Securities Act registering the offering and sale of the number of Partnership Securities specified by the Holder; provided, however, that the Partnership shall not be required to effect more than three registrations pursuant to this Section 7.12(a); and provided further, however, that if the Conflicts Committee determines that a postponement of the requested registration for up to six months would be in the best interests of the Partnership and its Partners due to a pending transaction, investigation or other event, the filing of such registration statement or the effectiveness thereof may be deferred for up to six months, but not thereafter. In connection with any registration pursuant to the immediately preceding sentence, the Partnership shall (i) promptly prepare and file (A) such documents as may be necessary to register or qualify the securities subject to such registration under the securities laws of such states as the Holder shall reasonably request; provided, however, that no such qualification shall be required in any jurisdiction where, as a result thereof, the Partnership would become subject to general service of process or to taxation or qualification to do business as a foreign corporation or partnership doing business in such jurisdiction solely as a result of such registration, and (B) such documents as may be necessary to apply for listing or to list the Partnership Securities subject to such registration on such National Securities Exchange as the Holder shall reasonably request, and (ii) do any and all other acts and things that may be necessary or appropriate to enable the Holder to consummate a public sale of such Partnership Securities in such states. Except as set forth in Section 7.12(c), all costs and expenses of any such registration and offering (other than the underwriting discounts and commissions) shall be paid by the Partnership, without reimbursement by the Holder.
(b)    If the Partnership shall at any time propose to file a registration statement under the Securities Act for an offering of equity securities of the Partnership for cash (other than an offering relating solely to an employee benefit plan), the Partnership shall use all reasonable efforts to include such number or amount of securities held by the Holder in such registration statement as the Holder shall request; provided, that the Partnership is not required to make any effort or take any action to so include the securities of the Holder once the registration statement is declared effective by the Commission, including any registration statement providing for the offering from time to time of securities pursuant to Rule 415 of the Securities Act. If the proposed offering pursuant to this Section 7.12(b) shall be an underwritten offering, then, in the event that the managing underwriter or managing underwriters of such offering advise the Partnership and the Holder in writing that in their opinion the inclusion of all or some of the Holder’s Partnership Securities would adversely and materially affect the success of the offering, the Partnership shall include in such offering only that number or amount, if any, of securities held by the Holder that, in the opinion of the managing underwriter or managing underwriters, will not so adversely and materially affect the offering. Except as set forth in Section 7.12(c), all costs and expenses of any such registration and offering (other than the underwriting discounts and commissions) shall be paid by the Partnership, without reimbursement by the Holder.
(c)    If underwriters are engaged in connection with any registration referred to in this Section 7.12, the Partnership shall provide indemnification, representations, covenants, opinions and other assurance to the underwriters in form and substance reasonably satisfactory to such underwriters. Further, in addition to and not in limitation of the Partnership’s obligation under Section 7.7, the Partnership shall, to the fullest extent permitted by law, indemnify and hold harmless the Holder, its officers, directors and each Person who controls the Holder (within the meaning of the Securities Act) and any agent thereof (collectively, “Indemnified Persons”) against any losses, claims, demands, actions, causes of action, assessments, damages, liabilities (joint or several), costs and expenses (including interest, penalties and reasonable attorneys’ fees and disbursements), resulting to, imposed upon, or incurred by the Indemnified Persons, directly or indirectly, under the Securities Act or otherwise (hereinafter referred to in this Section 7.12(c) as a “claim” and in the plural as “claims”) based upon, arising out of or resulting from any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which any Partnership Securities were registered under the Securities Act or any state securities or Blue Sky laws, in any preliminary prospectus (if used prior to the effective date of such registration statement), or in any summary or final prospectus or in any amendment or supplement thereto (if used during the period the Partnership is required to keep the registration statement current), or arising out of, based upon or resulting from the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements made therein not misleading; provided, however, that the Partnership shall not be liable to any Indemnified Person to the extent that any such claim arises out of, is based upon or results from an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, such preliminary, summary or final prospectus or such amendment or supplement, in reliance upon and in conformity with written information furnished to the Partnership by or on behalf of such Indemnified Person specifically for use in the preparation thereof.
(d)    The provisions of Section 7.12(a) and Section 7.12(b) shall continue to be applicable with respect to the General Partner (and any of the General Partner’s Affiliates and any of the General Partner’s or its Affiliates’ assignees) after it ceases to be a Partner of the Partnership, during a period of two years subsequent to the effective date of such cessation and for so long thereafter as is required for the Holder to sell all of the Partnership Securities with respect to which it has requested during such two-year period inclusion in a registration statement otherwise filed or that a registration statement be filed; provided, however, that the Partnership shall not be required to file successive registration statements covering the same Partnership Securities for which registration was demanded during such two-year period. The provisions of Section 7.12(c) shall continue in effect thereafter.
(e)    Any request to register Partnership Securities pursuant to this Section 7.12 shall (i) specify the Partnership Securities intended to be offered and sold by the Person making the request, (ii) express such Person’s present intent to offer such Partnership Securities for distribution, (iii) describe the nature or method of the proposed offer and sale of Partnership Securities, and (iv) contain the undertaking of such Person to provide all such information and materials and take all action as may be required in order to permit the Partnership to comply with all applicable requirements in connection with the registration of such Partnership Securities.
Section 7.13
Reliance by Third Parties.
Notwithstanding anything to the contrary in this Agreement, any Person dealing with the Partnership shall be entitled to assume that the General Partner and any officer of the General Partner authorized by the General Partner to act on behalf of and in the name of the Partnership has full power and authority to encumber, sell or otherwise use in any manner any and all assets of the Partnership and to enter into any authorized contracts on behalf of the Partnership, and such Person shall be entitled to deal with the General Partner or any such officer as if it were the Partnership’s sole party in interest, both legally and beneficially. Each Limited Partner hereby waives any and all defenses or other remedies that may be available against such Person to contest, negate or disaffirm any action of the General Partner or any such officer in connection with any such dealing. In no event shall any Person dealing with the General Partner or any such officer or its representatives be obligated to ascertain that the terms of this Agreement have been complied with or to inquire into the necessity or expedience of any act or action of the General Partner or any such officer or its representatives. Each and every certificate, document or other instrument executed on behalf of the Partnership by the General Partner or its representatives shall be conclusive evidence in favor of any and every Person relying thereon or claiming thereunder that (a) at the time of the execution and delivery of such certificate, document or instrument, this Agreement was in full force and effect, (b) the Person executing and delivering such certificate, document or instrument was duly authorized and empowered to do so for and on behalf of the Partnership and (c) such certificate, document or instrument was duly executed and delivered in accordance with the terms and provisions of this Agreement and is binding upon the Partnership.
ARTICLE VIII    

BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 8.1
Records and Accounting.
The General Partner shall keep or cause to be kept at the principal office of the Partnership appropriate books and records with respect to the Partnership’s business, including all books and records necessary to provide to the Limited Partners any information required to be provided pursuant to Section 3.4(a). Any books and records maintained by or on behalf of the Partnership in the regular course of its business, including the record of the Record Holders of Units or other Partnership Securities, books of account and records of Partnership proceedings, may be kept on, or be in the form of, computer disks, hard drives, punch cards, magnetic tape, photographs, micrographics or any other information storage device; provided, that the books and records so maintained are convertible into clearly legible written form within a reasonable period of time. The books of the Partnership shall be maintained, for financial reporting purposes, on an accrual basis in accordance with U.S. GAAP.
Section 8.2
Fiscal Year.
The fiscal year of the Partnership shall be a fiscal year ending December 31.
Section 8.3
Reports.
(a)    As soon as practicable, but in no event later than 120 days after the close of each fiscal year of the Partnership, the General Partner shall cause to be mailed or made available to each Record Holder of a Unit as of a date selected by the General Partner, an annual report containing financial statements of the Partnership for such fiscal year of the Partnership, presented in accordance with U.S. GAAP, including a balance sheet and statements of operations, Partnership equity and cash flows, such statements to be audited by a firm of independent public accountants selected by the General Partner.
(b)    As soon as practicable, but in no event later than 90 days after the close of each Quarter except the last Quarter of each fiscal year, the General Partner shall cause to be mailed or made available to each Record Holder of a Unit, as of a date selected by the General Partner, a report containing unaudited financial statements of the Partnership and such other information as may be required by applicable law, regulation or rule of any National Securities Exchange on which the Units are listed, or as the General Partner determines to be necessary or appropriate.
ARTICLE IX    

TAX MATTERS
Section 9.1
Tax Returns and Information.
The Partnership shall timely file all returns of the Partnership that are required for foreign, federal, state and local income tax purposes on the basis of the accrual method and a taxable year ending on December 31. The tax information reasonably required by Record Holders for federal and state income tax reporting purposes with respect to a taxable year shall be furnished to them within 90 days of the close of the calendar year in which the Partnership’s taxable year ends.
Section 9.2
Tax Elections.
The General Partner is authorized to make the election on Form 8832 for the Partnership to be classified as an association taxable as a corporation for U.S. federal income tax purposes pursuant to Treasury Regulation Section 301.7701-3(c) effective on the Effective Date, and such election has been made (the “Tax Election”).
Section 9.3
Tax Controversies.
Subject to the provisions hereof, the General Partner is designated as the “tax matters partner” as defined in Section 6231 the Code as in effect prior to the Bipartisan Budget Act of 2015 for taxable years of the Partnership beginning before January 1, 2018 (the “Tax Matters Partner”). For taxable years of the Partnership beginning after December 31, 2017, and ending on or prior to date immediately prior to the Effective Date, the General Partner shall, in its sole discretion, designate a “partnership representative” as defined in Section 6223 of the Code (the “Partnership Representative”). The Tax Matters Partner and the Partnership Representative shall exercise any and all authority of a “tax matters partner” or a “partnership representative,” respectively, under the Code, including to represent the Partnership (at the Partnership’s expense) in connection with all examinations of the Partnership’s affairs by tax authorities, including resulting administrative and judicial proceedings, to bind the Partnership and its Partners with respect to any applicable tax matters, to make any available elections and to expend Partnership funds for professional services and costs associated therewith. Each Partner agrees to cooperate with the Tax Matters Partner and the Partnership Representative and to do or refrain from doing any or all things reasonably required by the Tax Matters Partner and the Partnership Representative to conduct such proceedings.
Section 9.4
Withholding.
Notwithstanding any other provision of this Agreement, the General Partner is authorized to take any action that may be required to cause the Partnership and other Group Members to comply with any withholding requirements established under the Code or any other federal, state or local law including, without limitation, pursuant to Sections 1441, 1442, 1445 and 1446 of the Code. To the extent that the Partnership is required or elects to withhold and pay over to any taxing authority any amount resulting from the allocation or distribution of income to any Partner (including, without limitation, by reason of Section 1446 of the Code), the General Partner may treat the amount withheld as a distribution of cash pursuant to Section 6.3 in the amount of such withholding from such Partner.
Section 9.5
Conduct of Operations.
The General Partner shall use commercially reasonable efforts to conduct the business of the Partnership and its Affiliates in a manner that does not require a holder of Common Units or Preferred Units to file a tax return in any jurisdiction with which the holder has no contact other than through ownership of Common Units or Preferred Units. For greater certainty, the General Partner shall conduct the affairs and governance of the Partnership so that the General Partner and the Partnership are not residents of Canada for purposes of Canada’s tax legislation and neither the General Partner nor the Partnership is carrying on business in Canada for purposes of such legislation.
ARTICLE X    

ADMISSION OF PARTNERS
Section 10.1
[Reserved].
Section 10.2
Admission of Additional Limited Partners.
(a)    By acceptance of the transfer of any Limited Partner Interests in accordance with Article IV or the acceptance of any Limited Partner Interests issued pursuant to Article V or pursuant to a merger or consolidation pursuant to Article XIV, each transferee of, or other such Person acquiring, a Limited Partner Interest (including any nominee holder or an agent or representative acquiring such Limited Partner Interests for the account of another Person) (i) shall be admitted to the Partnership as a Limited Partner with respect to the Limited Partner Interests so transferred or issued to such Person when any such transfer, issuance or admission is reflected in the books and records of the Partnership and such Limited Partner becomes the Record Holder of the Limited Partner Interests so transferred, (ii) shall become bound by the terms of this Agreement, (iii) represents that the transferee has the capacity, power and authority to enter into this Agreement, (iv) grants the powers of attorney set forth in this Agreement and (v) makes the consents and waivers contained in this Agreement, all with or without execution of this Agreement by such Person. The transfer of any Limited Partner Interests and the admission of any new Limited Partner shall not constitute an amendment to this Agreement. A Person may become a Limited Partner or Record Holder of a Limited Partner Interest without the consent or approval of any of the Partners. A Person may not become a Limited Partner until such Person acquires a Limited Partner Interest and such Person is reflected in the books and records of the Partnership as the Record Holder of such Limited Partner Interest.
(b)    The name and mailing address of each Limited Partner shall be listed on the books and records of the Partnership maintained for such purpose by the Partnership or the Transfer Agent. The General Partner shall update the books and records of the Partnership from time to time as necessary to reflect accurately the information therein (or shall cause the Transfer Agent to do so, as applicable). A Limited Partner Interest may be represented by a Certificate, as provided in Section 4.1 hereof.
(c)    Any transfer of a Limited Partner Interest shall not entitle the transferee to receive distributions or to any other rights to which the transferor was entitled until the transferee becomes a Limited Partner pursuant to Section 10.2(a).
Section 10.3
Admission of Successor General Partner.
A successor General Partner approved pursuant to Section 11.1 or 11.2 or the transferee of or successor to all of the General Partner Interest pursuant to Section 4.6 who is proposed to be admitted as a successor General Partner shall be admitted to the Partnership as the General Partner, effective immediately prior to the withdrawal or removal of the predecessor or transferring General Partner, pursuant to Section 11.1 or 11.2 or the transfer of the General Partner Interest pursuant to Section 4.6, provided, however, that no such successor shall be admitted to the Partnership until compliance with the terms of Section 4.6 has occurred and such successor has executed and delivered such other documents or instruments as may be required to effect such admission. Any such successor shall, subject to the terms hereof, carry on the business of the members of the Partnership Group without dissolution.
Section 10.4
Amendment of Agreement and Certificate of Limited Partnership.
To effect the admission to the Partnership of any Partner, the General Partner shall take all steps necessary or appropriate under the Marshall Islands Act to amend the records of the Partnership to reflect such admission and, if necessary, to prepare as soon as practicable an amendment to this Agreement and, if required by law, the General Partner shall prepare and file an amendment to the Certificate of Limited Partnership and the General Partner may for this purpose, among others, exercise the power of attorney granted pursuant to Section 2.6.
ARTICLE XI    

WITHDRAWAL OR REMOVAL OF PARTNERS
Section 11.1
Withdrawal of the General Partner.
(a)    The General Partner shall be deemed to have withdrawn from the Partnership upon the occurrence of any one of the following events (each such event herein referred to as an “Event of Withdrawal”);
(i)    The General Partner voluntarily withdraws from the Partnership by giving written notice to the other Partners;
(ii)    The General Partner transfers all of its rights as General Partner pursuant to Section 4.6;
(iii)    The General Partner is removed pursuant to Section 11.2;
(iv)    The General Partner (A) makes a general assignment for the benefit of creditors; (B) files a voluntary petition in bankruptcy; (C) files a petition or answer seeking for itself a liquidation, dissolution or similar relief (but not a reorganization) under any law; (D) files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against the General Partner in a proceeding of the type described in clauses (A)-(B) of this Section 11.1(a)(iv); or (E) seeks, consents to or acquiesces in the appointment of a trustee, receiver or liquidator of the General Partner or of all or any substantial part of its properties;
(v)    The General Partner is adjudged bankrupt or insolvent, or has entered against him or her an order for relief in any bankruptcy or insolvency proceeding;
(vi)     (A) in the case of a general partner that is a corporation, the filing of a certificate of dissolution, or its equivalent, for the corporation or the revocation of its charter and the expiration of ninety (90) days after the date of notice to the corporation of revocation without a reinstatement of its charter; (B) in the event the General Partner is a partnership or a limited liability company, the dissolution and commencement of winding up of the General Partner; (C) in the event the General Partner is acting in such capacity by virtue of being a trustee of a trust, the termination of the trust; (D) in the event the General Partner is a natural person, his death or adjudication of incompetency; and (E) otherwise in the event of the termination of the General Partner.
If an Event of Withdrawal specified in Section 11.1(a)(iv), or Section 11.1(a)(vi)(A), (B), or (D) occurs, the withdrawing General Partner shall give notice to the Limited Partners within 30 days after such occurrence. The Partners hereby agree that only the Events of Withdrawal described in this Section 11.1 shall result in the withdrawal of the General Partner from the Partnership.
(b)    Withdrawal of the General Partner from the Partnership upon the occurrence of an Event of Withdrawal shall not constitute a breach of this Agreement under the following circumstances: (i) the General Partner voluntarily withdraws by giving at least 90 days’ advance notice to the Unitholders, such withdrawal to take effect on the date specified in such notice; or (ii) at any time that the General Partner ceases to be the General Partner pursuant to Section 11.1(a)(ii) or is removed pursuant to Section 11.2. The withdrawal of the General Partner from the Partnership upon the occurrence of an Event of Withdrawal shall also constitute the withdrawal of the General Partner as general partner or managing member, if any, to the extent applicable, of the other Group Members. If the General Partner gives a notice of withdrawal pursuant to Section 11.1(a)(i), the holders of a Unit Majority, may, prior to the effective date of such withdrawal, elect a successor General Partner. The Person so elected as successor General Partner shall automatically become the successor general partner or managing member, to the extent applicable, of the other Group Members of which the General Partner is a general partner or a managing member. If, prior to the effective date of the General Partner’s withdrawal, a successor is not selected by the Unitholders as provided herein the Partnership shall be dissolved in accordance with Section 12.1. Any successor General Partner elected in accordance with the terms of this Section 11.1 shall be subject to the provisions of Section 10.3.
Section 11.2
Removal of the General Partner.
The General Partner may be removed if such removal is approved by the Unitholders holding at least 66 2/3% of the Outstanding Units (including Units held by the General Partner and its Affiliates voting as a single class). Any such action by such holders for removal of the General Partner must also provide for the election of a successor General Partner by the Unitholders holding a Unit Majority (including Units held by the General Partner and its Affiliates). Such removal shall be effective immediately following the admission of a successor General Partner pursuant to Section 10.3. The removal of the General Partner shall also automatically constitute the removal of the General Partner as general partner or managing member, to the extent applicable, of the other Group Members of which the General Partner is a general partner or a managing member. If a Person is elected as a successor General Partner in accordance with the terms of this Section 11.2, such Person shall, upon admission pursuant to Section 10.3, automatically become a successor general partner or managing member, to the extent applicable, of the other Group Members of which the General Partner is a general partner or a managing member. The right of the holders of Outstanding Units to remove the General Partner shall not exist or be exercised unless the Partnership has received an Opinion of Counsel that such removal (following the selection of the successor General Partner) would not result in the loss of the limited liability of any Limited Partner or any Group Member. Any successor General Partner elected in accordance with the terms of this Section 11.2 shall be subject to the provisions of Section 10.3.
Section 11.3
Interest of Departing Partner and Successor General Partner.
(a)    In the event of (i) withdrawal of the General Partner under circumstances where such withdrawal does not violate this Agreement or (ii) removal of the General Partner by the holders of Outstanding Units under circumstances where Cause does not exist, if the successor General Partner is elected in accordance with the terms of Section 11.1 or 11.2, the Departing Partner shall have the option, exercisable prior to the effective date of the departure of such Departing Partner, to require its successor to purchase its General Partner Interest and its general partner interest (or equivalent interest), if any, in the other Group Members (collectively, the “Combined Interest”) in exchange for an amount in cash equal to the fair market value of such Combined Interest, such amount to be determined and payable as of the effective date of its departure. If the General Partner is removed by the Unitholders under circumstances where Cause exists or if the General Partner withdraws under circumstances where such withdrawal violates this Agreement, and if a successor General Partner is elected in accordance with the terms of Section 11.1 or 11.2 (or if the business of the Partnership is continued pursuant to Section 12.2 and the successor General Partner is not the former General Partner), such successor shall have the option, exercisable prior to the effective date of the departure of such Departing Partner (or, in the event the business of the Partnership is continued, prior to the date the business of the Partnership is continued), to purchase the Combined Interest for such fair market value of such Combined Interest of the Departing Partner. In either event, the Departing Partner shall be entitled to receive all reimbursements due such Departing Partner pursuant to Section 7.4, including any employee-related liabilities (including severance liabilities), incurred in connection with the termination of any employees employed by the Departing Partner for the benefit of the Partnership or the other Group Members.
For purposes of this Section 11.3(a), the fair market value of the Departing Partner’s Combined Interest shall be determined by agreement between the Departing Partner and its successor or, failing agreement within 30 days after the effective date of such Departing Partner’s departure, by an independent investment banking firm or other independent expert selected by the Departing Partner and its successor, which, in turn, may rely on other experts, and the determination of which shall be conclusive as to such matter. If such parties cannot agree upon one independent investment banking firm or other independent expert within 45 days after the effective date of such departure, then the Departing Partner shall designate an independent investment banking firm or other independent expert, the Departing Partner’s successor shall designate an independent investment banking firm or other independent expert, and such firms or experts shall mutually select a third independent investment banking firm or independent expert, which third independent investment banking firm or other independent expert shall determine the fair market value of the Combined Interest of the Departing Partner. In making its determination, such third independent investment banking firm or other independent expert may consider the then current trading price of Units on any National Securities Exchange on which Units are then listed, the value of the Partnership’s assets, the rights and obligations of the Departing Partner and other factors it may deem relevant.
(b)    If the Combined Interest is not purchased in the manner set forth in Section 11.3(a), the Departing Partner (or its transferee) shall become a Limited Partner and its Combined Interest shall be converted into Common Units pursuant to a valuation made by an investment banking firm or other independent expert selected pursuant to Section 11.3(a), without reduction in such Partnership Interest (but subject to proportionate dilution by reason of the admission of its successor). Any successor General Partner shall indemnify the Departing Partner (or its transferee) as to all debts and liabilities of the Partnership arising on or after the date on which the Departing Partner (or its transferee) becomes a Limited Partner. For purposes of this Agreement, conversion of the Combined Interest of the Departing Partner to Common Units will be characterized as if the Departing Partner (or its transferee) contributed its Combined Interest to the Partnership in exchange for the newly issued Common Units.
(c)    If a successor General Partner is elected in accordance with the terms of Section 11.1 or 11.2 (or if the business of the Partnership is continued pursuant to Section 12.2 and the successor General Partner is not the former General Partner) and the option described in Section 11.3(a) is not exercised by the party entitled to do so, the successor General Partner shall, at the effective date of its admission to the Partnership, contribute to the Partnership cash in the amount equal to the product of (i) the quotient obtained by dividing (A) the Percentage Interest of the General Partner Interest of the Departing Partner by (B) a percentage equal to 100% less the Percentage Interest of the General Partner Interest of the Departing Partner and (ii) the Net Agreed Value of the Partnership’s assets on such date. In such event, such successor General Partner shall, subject to the following sentence, be entitled to its Percentage Interest of all Partnership allocations and distributions to which the Departing Partner was entitled. In addition, the successor General Partner shall cause this Agreement to be amended to reflect that, from and after the date of such successor General Partner’s admission, the successor General Partner’s interest in all Partnership distributions and allocations shall be equal to its Percentage Interest.
Section 11.4
Withdrawal of Limited Partners.
No Limited Partner shall have any right to withdraw from the Partnership; provided, however, that when a transferee of a Limited Partner’s Limited Partner Interest becomes a Record Holder of the Limited Partner Interest so transferred, such transferring Limited Partner shall cease to be a Limited Partner with respect to the Limited Partner Interest so transferred.
ARTICLE XII    

DISSOLUTION AND LIQUIDATION
Section 12.1
Dissolution.
The Partnership shall not be dissolved by the admission of additional Limited Partners or by the admission of a successor General Partner in accordance with the terms of this Agreement. Upon the removal or withdrawal of the General Partner, if a successor General Partner is elected pursuant to Sections 11.1 or 11.2, the Partnership shall not be dissolved and such successor General Partner shall continue the business of the Partnership. The Partnership shall dissolve, and (subject to Section 12.2) its affairs shall be wound up, upon:
(a)    an election to dissolve the Partnership by the General Partner that is approved by the holders of a Unit Majority;
(b)    the sale of all or substantially all of the assets and properties of the Partnership Group;
(c)    the entry of a decree of judicial dissolution of the Partnership pursuant to the provisions of the Marshall Islands Act; or
(d)    an Event of Withdrawal of the General Partner as provided in Section 11.1(a) (other than Section 11.1(a)(ii)), unless a successor is elected and, if applicable, an Opinion of Counsel is received as provided in Section 11.2 and such successor is admitted to the Partnership pursuant to Section 10.3.
Section 12.2
Continuation of the Business of the Partnership After Dissolution.
Upon (a) dissolution of the Partnership following an Event of Withdrawal caused by the withdrawal or removal of the General Partner as provided in Sections 11.1(a)(i) or 11.1(a)(iii) and the failure of the Partners to select a successor to such Departing Partner pursuant to Sections 11.1 or 11.2, then within 90 days thereafter, or (b) dissolution of the Partnership upon an event constituting an Event of Withdrawal as defined in Sections 11.1(a)(iv) or 11.1(a)(vi), then, to the maximum extent permitted by law, within 180 days thereafter, the holders of a Unit Majority may elect to continue the business of the Partnership on the same terms and conditions set forth in this Agreement by appointing as a successor General Partner a Person approved by the holders of a Unit Majority. Unless such an election is made within the applicable time period as set forth above, the Partnership shall conduct only activities necessary to wind up its affairs. If such an election is so made, then:
(i)    the Partnership shall continue without dissolution unless earlier dissolved in accordance with this Article XII;
(ii)    if the successor General Partner is not the former General Partner, then the interest of the former General Partner shall be treated in the manner provided in Section 11.3; and
(iii)    the successor General Partner shall be admitted to the Partnership as General Partner, effective as of the Event of Withdrawal, by agreeing in writing to be bound by this Agreement; provided, that the right of the holders of a Unit Majority to approve a successor General Partner and to reconstitute and to continue the business of the Partnership shall not exist and may not be exercised unless the Partnership has received an Opinion of Counsel that the exercise of the right would not result in the loss of limited liability of any Limited Partner.
Section 12.3
Liquidator.
Upon dissolution of the Partnership, unless the business of the Partnership is continued pursuant to Section 12.2, the General Partner shall select one or more Persons to act as Liquidator. The Liquidator (if other than the General Partner) shall be entitled to receive such compensation for its services as may be approved by holders of a Unit Majority. The Liquidator (if other than the General Partner) shall agree not to resign at any time without 15 days’ prior notice and may be removed at any time, with or without cause, by notice of removal approved by holders of a Unit Majority. Upon dissolution, removal or resignation of the Liquidator, a successor and substitute Liquidator (who shall have and succeed to all rights, powers and duties of the original Liquidator) shall within 30 days thereafter be approved by holders of a Unit Majority. The right to approve a successor or substitute Liquidator in the manner provided herein shall be deemed to refer also to any such successor or substitute Liquidator approved in the manner herein provided. Except as expressly provided in this Article XII, the Liquidator approved in the manner provided herein shall have and may exercise, without further authorization or consent of any of the parties hereto, all of the powers conferred upon the General Partner under the terms of this Agreement (but subject to all of the applicable limitations, contractual and otherwise, upon the exercise of such powers, other than the limitation on sale set forth in Section 7.3(b)) necessary or appropriate to carry out the duties and functions of the Liquidator hereunder for and during the period of time required to complete the winding up and liquidation of the Partnership as provided for herein.
Section 12.4
Liquidation.
The Liquidator shall proceed to dispose of the assets of the Partnership, discharge its liabilities, and otherwise wind up its affairs in such manner and over such period as determined by the Liquidator, subject to Section 60 of the Marshall Islands Act and the following:
(a)    The assets may be disposed of by public or private sale or by distribution in kind to one or more Partners on such terms as the Liquidator and such Partner or Partners may agree. If any property is distributed in kind, the Partner receiving the property shall be deemed for purposes of Section 12.4(c) to have received cash equal to its fair market value; and contemporaneously therewith, appropriate cash distributions must be made to the other Partners. The Liquidator may defer liquidation or distribution of the Partnership’s assets for a reasonable time if it determines that an immediate sale or distribution of all or some of the Partnership’s assets would be impractical or would cause undue loss to the Partners. The Liquidator may distribute the Partnership’s assets, in whole or in part, in kind if it determines that a sale would be impractical or would cause undue loss to the Partners.
(b)    Liabilities of the Partnership include amounts owed to the Liquidator as compensation for serving in such capacity (subject to the terms of Section 12.3) and amounts to Partners otherwise than in respect of their distribution rights under Article VI and XVI, as applicable. With respect to any liability that is contingent, conditional or unmatured or is otherwise not yet due and payable, the Liquidator shall either settle such claim for such amount as it thinks appropriate or establish a reserve of cash or other assets to provide for its payment. When paid, any unused portion of the reserve shall be distributed as additional liquidation proceeds.
(c)    All property and all cash in excess of that required to discharge liabilities as provided in Section 12.4(b) shall be distributed to the Partners as follows:
(i)    First, to the Preferred Unit Holders in accordance with their respective Preferred Unit Liquidation Preference until there has been distributed in respect of each Preferred Unit then Outstanding an amount equal to the respective Preferred Liquidation Preference; and
(ii)    Thereafter, any remaining amount (A) to the General Partner in accordance with its Percentage Interest and (B) to all Unitholders holding Common Units, Pro Rata, a percentage equal to 100% less the General Partner’s Percentage Interest.
Section 12.5
Cancellation of Certificate of Limited Partnership.
Upon the completion of the distribution of Partnership cash and property as provided in Section 12.4 in connection with the liquidation of the Partnership, the Certificate of Limited Partnership and all qualifications of the Partnership as a foreign limited partnership in jurisdictions other than the Marshall Islands shall be canceled and such other actions as may be necessary to terminate the Partnership shall be taken.
Section 12.6
Return of Contributions.
The General Partner shall not be personally liable for, and shall have no obligation to contribute or loan any monies or property to the Partnership to enable it to effectuate, the return of the Capital Contributions of the Limited Partners or Unitholders, or any portion thereof, it being expressly understood that any such return shall be made solely from Partnership assets.
Section 12.7
Waiver of Partition.
To the maximum extent permitted by law, each Partner hereby waives any right to partition of the Partnership property.
ARTICLE XIII    

AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE
Section 13.1
Amendments to be Adopted Solely by the General Partner.
Each Partner agrees that the General Partner, without the approval of any Partner, may amend any provision of this Agreement and execute, swear to, acknowledge, deliver, file and record whatever documents may be required in connection therewith, to reflect:
(a)    a change in the name of the Partnership, the location of the principal place of business of the Partnership, the registered agent of the Partnership or the registered office of the Partnership;
(b)    admission, substitution, withdrawal or removal of Partners in accordance with this Agreement;
(c)    a change that the General Partner determines to be necessary or appropriate to qualify or continue the qualification of the Partnership as a limited partnership or a partnership in which the Limited Partners have limited liability under the laws of the Marshall Islands or to ensure that the Group Members will not be taxed as entities for Marshall Islands income tax purposes;
(d)    subject to Section 16.5, to the extent applicable, a change that the General Partner determines, (i) does not adversely affect the Limited Partners (including any particular class or series of Partnership Interests as compared to other classes or series of Partnership Interests) in any material respect, (ii) to be necessary or appropriate to (A) satisfy any requirements, conditions or guidelines contained in any opinion, directive, order, ruling or regulation of any Marshall Islands authority (including the Marshall Islands Act) or (B) facilitate the trading of the Units (including the division of any class, classes or series of Outstanding Units into different classes to facilitate uniformity of tax consequences within such classes or series of Units) or comply with any rule, regulation, guideline or requirement of any National Securities Exchange on which the Units are or will be listed, (iii) to be necessary or appropriate in connection with action taken by the General Partner pursuant to Section 5.9 or (iv) is required to effect the intent expressed in the Registration Statement or the intent of the provisions of this Agreement or is otherwise contemplated by this Agreement;
(e)    a change in the fiscal year or taxable year of the Partnership and any other changes that the General Partner determines to be necessary or appropriate as a result of a change in the fiscal year or taxable year of the Partnership including, if the General Partner shall so determine, a change in the definition of “Quarter” and the dates on which distributions (other than Preferred Unit Distributions) are to be made by the Partnership;
(f)    an amendment that is necessary, in the Opinion of Counsel, to prevent the Partnership, or the General Partner or its directors, officers, trustees or agents from in any manner being subjected to the provisions of the U.S. Investment Company Act of 1940, as amended, the U.S. Investment Advisers Act of 1940, as amended, or “plan asset” regulations adopted under the U.S. Employee Retirement Income Security Act of 1974, as amended, regardless of whether such are substantially similar to plan asset regulations currently applied or proposed by the United States Department of Labor;
(g)    subject to Section 16.5, an amendment that the General Partner determines to be necessary or appropriate in connection with the authorization of issuance of any class or series of Partnership Securities pursuant to Section 5.6;
(h)    any amendment expressly permitted in this Agreement to be made by the General Partner acting alone;
(i)    an amendment that the General Partner determines to be necessary or appropriate to reflect and account for the formation by the Partnership of, or investment by the Partnership in, any corporation, partnership, joint venture, limited liability company or other entity, in connection with the conduct by the Partnership of activities permitted by the terms of Section 2.4; or
(j)    any other amendments substantially similar to the foregoing.
Section 13.2
Amendment Procedures.
Except as provided in Sections 13.1 and 13.3, all amendments to this Agreement shall be made in accordance with the following requirements. Amendments to this Agreement may be proposed only by the General Partner; provided, however, that the General Partner shall have no duty or obligation to propose any amendment to this Agreement and may decline to do so free of any fiduciary duty or obligation whatsoever to the Partnership, any Limited Partner and, in declining to propose an amendment, shall not be required to act in good faith or pursuant to any other standard imposed by this Agreement, any Group Member Agreement, any other agreement contemplated hereby or under the Marshall Islands Act or any other law, rule or regulation. Subject to Section 16.5, to the extent applicable, a proposed amendment shall be effective upon its approval by the General Partner and the holders of a Unit Majority, unless a greater or different percentage is required under this Agreement or by the Marshall Islands Act. Each proposed amendment that requires the approval of the holders of a specified percentage of Outstanding Units shall be set forth in a writing that contains the text of the proposed amendment. If such an amendment is proposed, the General Partner shall seek the written approval of the requisite percentage of Outstanding Units or call a meeting of the Unitholders to consider and vote on such proposed amendment. The General Partner shall notify all Record Holders upon final adoption of any such proposed amendments.
Section 13.3
Amendment Requirements.
(a)    Notwithstanding the provisions of Sections 13.1 and 13.2, no provision of this Agreement that establishes a percentage of Outstanding Units (including Units deemed owned by the General Partner) required to take any action shall be amended, altered, changed, repealed or rescinded in any respect that would have the effect of reducing such voting percentage unless such amendment is approved by the written consent or the affirmative vote of holders of Outstanding Units whose aggregate Outstanding Units constitute not less than the voting requirement sought to be reduced.
(b)    Notwithstanding the provisions of Sections 13.1 and 13.2, no amendment to this Agreement may (i) enlarge the obligations of any Limited Partner without its consent, unless such shall be deemed to have occurred as a result of an amendment approved pursuant to Section 13.3(c), (ii) enlarge the obligations of, restrict in any way any action by or rights of, or reduce in any way the amounts distributable, reimbursable or otherwise payable to, the General Partner or any of its Affiliates without its consent, which consent may be given or withheld at its option, (iii) change Section 12.1(a), or (iv) change the term of the Partnership or, except as set forth in Section 12.1(a), give any Person the right to dissolve the Partnership.
(c)    Except as provided in Section 14.3 and subject to Section 16.5(c)(i) with respect to the applicable series of Preferred Units described therein, and without limitation of the General Partner’s authority to adopt amendments to this Agreement without the approval of any Partners as contemplated in Section 13.1, any amendment that would have a material adverse effect on the rights or preferences of any class or series of Partnership Interests in relation to other classes or series of Partnership Interests must be approved by the holders of not less than a majority of the Outstanding Partnership Interests of the class or series affected.
(d)    Notwithstanding any other provision of this Agreement, except for amendments pursuant to Section 13.1 and except as otherwise provided in Section 14.3(b), no amendments shall become effective without the approval of the holders of at least 90% of the Outstanding Units voting as a single class unless the Partnership obtains an Opinion of Counsel to the effect that such amendment will not affect the limited liability of any Limited Partner under applicable law.
(e)    Except as provided in Section 13.1, this Section 13.3 shall only be amended with the approval of the holders of at least 90% of the Outstanding Units.
Section 13.4
Special Meetings.
All acts of Limited Partners to be taken pursuant to this Agreement shall be taken in the manner provided in this Article XIII. Special meetings of the Limited Partners may be called by the General Partner or by Limited Partners owning 20% or more of the Outstanding Units of the class, classes or series for which a meeting is proposed. Limited Partners shall call a special meeting by delivering to the General Partner one or more requests in writing stating that the signing Limited Partners wish to call a special meeting and indicating the general or specific purposes for which the special meeting is to be called. Within 60 days after receipt of such a call from Limited Partners or within such greater time as may be reasonably necessary for the Partnership to comply with any statutes, rules, regulations, listing agreements or similar requirements governing the holding of a meeting or the solicitation of proxies for use at such a meeting, the General Partner shall send a notice of the meeting to the Limited Partners either directly or indirectly through the Transfer Agent. A meeting shall be held at a time and place determined by the General Partner on a date not less than 10 days nor more than 60 days after the mailing of notice of the meeting. Limited Partners shall not vote on matters that would cause the Limited Partners to be deemed to be taking part in the management and control of the business and affairs of the Partnership so as to jeopardize the Limited Partners’ limited liability under the Marshall Islands Act or the law of any other jurisdiction in which the Partnership is qualified to do business.
Section 13.5
Notice of a Meeting.
Notice of a meeting called pursuant to Section 13.4 shall be given to the Record Holders of the class, classes or series of Units for which a meeting is proposed in writing by mail or other means of written communication in accordance with Section 17.1. The notice shall be deemed to have been given at the time when deposited in the mail or sent by other means of written communication.
Section 13.6
Record Date.
For purposes of determining the Limited Partners entitled to notice of or to vote at a meeting of the Limited Partners or to give approvals without a meeting as provided in Section 13.11 the General Partner may set a Record Date, which shall not be less than 10 nor more than 60 days before (a) the date of the meeting (unless such requirement conflicts with any rule, regulation, guideline or requirement of any National Securities Exchange on which the Units are listed for trading, in which case the rule, regulation, guideline or requirement of such exchange shall govern) or (b) in the event that approvals are sought without a meeting, the date by which Limited Partners are requested in writing by the General Partner to give such approvals.
Section 13.7
Adjournment.
When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting and a new Record Date need not be fixed, if the time and place thereof are announced at the meeting at which the adjournment is taken, unless such adjournment shall be for more than 45 days. At the adjourned meeting, the Partnership may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 45 days or if a new Record Date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given in accordance with this Article XIII.
Section 13.8
Waiver of Notice; Approval of Meeting; Approval of Minutes.
The transactions of any meeting of Limited Partners, however called and noticed, and whenever held, shall be as valid as if it had occurred at a meeting duly held after regular call and notice, if a quorum is present either in person or by proxy, and if, either before or after the meeting, Limited Partners representing such quorum who were present in person or by proxy and entitled to vote, sign a written waiver of notice or an approval of the holding of the meeting or an approval of the minutes thereof. All waivers and approvals shall be filed with the Partnership records or made a part of the minutes of the meeting. Attendance of a Limited Partner at a meeting shall constitute a waiver of notice of the meeting, except when the Limited Partner attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened; and except that attendance at a meeting is not a waiver of any right to disapprove the consideration of matters required to be included in the notice of the meeting, but not so included, if the disapproval is expressly made at the meeting.
Section 13.9
Quorum and Voting.
The holders of a majority of the Units of the class, classes or series for which a meeting has been called (including Outstanding Units deemed owned by the General Partner) represented in person or by proxy shall constitute a quorum at a meeting of Limited Partners of such class, classes or series unless any such action by the Limited Partners requires approval by holders of a greater percentage of such Units, in which case the quorum shall be such greater percentage. At any meeting of the Limited Partners duly called and held in accordance with this Agreement at which a quorum is present, the act of Limited Partners holding Outstanding Units that in the aggregate represent a majority of the Outstanding Units entitled to vote and be present in person or by proxy at such meeting shall be deemed to constitute the act of all Limited Partners, unless a greater or different percentage is required with respect to such action under the provisions of this Agreement, in which case the act of the Limited Partners holding Outstanding Units that in the aggregate represent at least such greater or different percentage shall be required. The Limited Partners present at a duly called or held meeting at which a quorum is present may continue to transact business until adjournment, notwithstanding the withdrawal of enough Limited Partners to leave less than a quorum, if any action taken (other than adjournment) is approved by the required percentage of Outstanding Units specified in this Agreement (including Outstanding Units deemed owned by the General Partner). In the absence of a quorum any meeting of Limited Partners may be adjourned from time to time by the affirmative vote of holders of a majority of the Outstanding Units entitled to vote at such meeting (including Outstanding Units deemed owned by the General Partner) represented either in person or by proxy, but no other business may be transacted, except as provided in Section 13.7.
Section 13.10
Conduct of a Meeting.
The General Partner shall have full power and authority concerning the manner of conducting any meeting of the Limited Partners or solicitation of approvals in writing, including the determination of Persons entitled to vote, the existence of a quorum, the satisfaction of the requirements of Section 13.4, the conduct of voting, the validity and effect of any proxies and the determination of any controversies, votes or challenges arising in connection with or during the meeting or voting. The General Partner shall designate a Person to serve as chairman of any meeting and shall further designate a Person to take the minutes of any meeting. All minutes shall be kept with the records of the Partnership maintained by the General Partner. The General Partner may make such other regulations consistent with applicable law and this Agreement as it may deem advisable concerning the conduct of any meeting of the Limited Partners or solicitation of approvals in writing, including regulations in regard to the appointment of proxies, the appointment and duties of inspectors of votes and approvals, the submission and examination of proxies and other evidence of the right to vote, and the revocation of approvals in writing.
Section 13.11
Action Without a Meeting.
If authorized by the General Partner, any action that may be taken at a meeting of the Limited Partners may be taken without a meeting if an approval in writing setting forth the action so taken is signed by Limited Partners owning not less than the minimum percentage of the Outstanding Units (including Units deemed owned by the General Partner) that would be necessary to authorize or take such action at a meeting at which all the Limited Partners were present and voted (unless such provision conflicts with any rule, regulation, guideline or requirement of any National Securities Exchange on which the Units are listed, in which case the rule, regulation, guideline or requirement of such exchange shall govern). Prompt notice of the taking of action without a meeting shall be given to the Limited Partners who have not approved in writing. The General Partner may specify that any written ballot submitted to Limited Partners for the purpose of taking any action without a meeting shall be returned to the Partnership within the time period, which shall be not less than 20 days, specified by the General Partner. If a ballot returned to the Partnership does not vote all of the Units held by the Limited Partners, the Partnership shall be deemed to have failed to receive a ballot for the Units that were not voted. If approval of the taking of any action by the Limited Partners is solicited by any Person other than by or on behalf of the General Partner, the written approvals shall have no force and effect unless and until (a) they are deposited with the Partnership in care of the General Partner, (b) approvals sufficient to take the action proposed are dated as of a date not more than 90 days prior to the date sufficient approvals are deposited with the Partnership and (c) an Opinion of Counsel is delivered to the General Partner to the effect that the exercise of such right and the action proposed to be taken with respect to any particular matter (i) will not cause the Limited Partners to be deemed to be taking part in the management and control of the business and affairs of the Partnership so as to jeopardize the Limited Partners’ limited liability, and (ii) is otherwise permissible under the applicable statutes then governing the rights, duties and liabilities of the Partnership and the Partners.
Section 13.12
Right to Vote and Related Matters.
(a)    Only those Record Holders of the Units on the Record Date set pursuant to Section 13.6 (and also subject to the limitations contained in the definition of “Outstanding”) shall be entitled to notice of, and to vote at, a meeting of Limited Partners or to act with respect to matters as to which the holders of the Outstanding Units have the right to vote or to act. All references in this Agreement to votes of, or other acts that may be taken by, the Outstanding Units shall be deemed to be references to the votes or acts of the Record Holders of such Outstanding Units.
(b)    With respect to Units that are held for a Person’s account by another Person (such as a broker, dealer, bank, trust company or clearing corporation, or an agent of any of the foregoing), in whose name such Units are registered, such other Person shall, in exercising the voting rights in respect of such Units on any matter, and unless the arrangement between such Persons provides otherwise, vote such Units in favor of, and at the direction of, the Person who is the beneficial owner, and the Partnership shall be entitled to assume it is so acting without further inquiry. The provisions of this Section 13.12(b) (as well as all other provisions of this Agreement) are subject to the provisions of Section 4.3.
ARTICLE XIV    

MERGER
Section 14.1
Authority.
The Partnership may merge or consolidate with or into one or more corporations, limited liability companies, statutory trusts or associations, real estate investment trusts, common law trusts or unincorporated businesses, including a partnership (whether general or limited (including a limited liability partnership)), formed under the laws of the Marshall Islands, pursuant to a written agreement of merger or consolidation (“Merger Agreement”) in accordance with this Article XIV.
Section 14.2
Procedure for Merger or Consolidation.
Merger or consolidation of the Partnership pursuant to this Article XIV requires the prior consent of the General Partner, provided, however, that, to the fullest extent permitted by law, the General Partner shall have no duty or obligation to consent to any merger or consolidation of the Partnership and may decline to do so free of any fiduciary duty or obligation whatsoever to the Partnership or any Limited Partner and, in declining to consent to a merger or consolidation, shall not be required to act in good faith or pursuant to any other standard imposed by this Agreement, any Group Member Agreement, any other agreement contemplated hereby or under the Marshall Islands Act or any other law, rule or regulation or at equity. If the General Partner shall determine to consent to the merger or consolidation, the General Partner shall approve the Merger Agreement, which shall set forth:
(a)    the names and jurisdictions of formation or organization of each of the business entities proposing to merge or consolidate;
(b)    the name and jurisdiction of formation or organization of the business entity that is to survive the proposed merger or consolidation (the “Surviving Business Entity”);
(c)    the terms and conditions of the proposed merger or consolidation;
(d)    the manner and basis of exchanging or converting the equity securities of each constituent business entity for, or into, cash, property or interests, rights, securities or obligations of the Surviving Business Entity; and (i) if any general or limited partner interests, securities or rights of any constituent business entity are not to be exchanged or converted solely for, or into, cash, property or interests, rights, securities or obligations of the Surviving Business Entity, the cash, property or general or limited partner interests, rights, securities or obligations of any general or limited partnership, corporation, trust, limited liability company, unincorporated business or other entity (other than the Surviving Business Entity) which the holders of such interests, securities or rights are to receive in exchange for, or upon conversion of their interests, securities or rights, and (ii) in the case of securities represented by certificates, upon the surrender of such certificates, which cash, property or interests, rights, securities or obligations of the Surviving Business Entity or any general or limited partnership, corporation, trust, limited liability company, unincorporated business or other entity (other than the Surviving Business Entity), or evidences thereof, are to be delivered;
(e)    a statement of any changes in the constituent documents or the adoption of new constituent documents (the articles or certificate of incorporation, articles of trust, declaration of trust, certificate or agreement of limited partnership or other similar charter or governing document) of the Surviving Business Entity to be effected by such merger or consolidation;
(f)    the effective time of the merger, which may be the date of the filing of the certificate of merger pursuant to Section 14.4 or a later date specified in or determinable in accordance with the Merger Agreement (provided, that if the effective time of the merger is to be later than the date of the filing of such certificate of merger, the effective time shall be fixed at a date or time certain at or prior to the time of the filing of such certificate of merger and stated therein); and
(g)    such other provisions with respect to the proposed merger or consolidation that the General Partner determines to be necessary or appropriate.
Section 14.3
Approval by Limited Partners of Merger or Consolidation.
(a)    Except as provided in Sections 14.3(d) and 14.3(e), the General Partner, upon its approval of the Merger Agreement, shall direct that the Merger Agreement be submitted to a vote of Limited Partners, whether at a special meeting or by written consent, in either case in accordance with the requirements of Article XIII. A copy or a summary of the Merger Agreement shall be included in or enclosed with the notice of a special meeting or the written consent.
(b)    Except as provided in Sections 14.3(d) and 14.3(e), the Merger Agreement shall be approved upon receiving the affirmative vote or consent of the holders of a Unit Majority.
(c)    Except as provided in Sections 14.3(d) and 14.3(e), after such approval by vote or consent of the Limited Partners, and at any time prior to the filing of the certificate of merger pursuant to Section 14.4, the merger or consolidation may be abandoned pursuant to provisions therefor, if any, set forth in the Merger Agreement.
(d)    Notwithstanding anything else contained in this Article XIV or in this Agreement, the General Partner is permitted, without Limited Partner approval, to convert the Partnership or any Group Member into a new limited liability entity, to merge the Partnership or any Group Member into, or convey all of the Partnership’s assets to, another limited liability entity which shall be newly formed and shall have no assets, liabilities or operations at the time of such conversion, merger or conveyance other than those it receives from the Partnership or other Group Member if (i) the General Partner has received an Opinion of Counsel that the conversion, merger or conveyance, as the case may be, would not result in the loss of the limited liability of any Limited Partner, (ii) the primary purpose of such conversion, merger or conveyance is to effect a change in the legal form of the Partnership into another limited liability entity and (iii) the governing instruments of the new entity provide the Limited Partners with substantially the same or greater rights and no greater obligations as are herein contained.
(e)    Additionally, notwithstanding anything else contained in this Article XIV or in this Agreement, the General Partner is permitted, without Limited Partner approval, to merge or consolidate the Partnership with or into another entity if (i) the General Partner has received an Opinion of Counsel that the merger or consolidation, as the case may be, would not result in the loss of the limited liability of any Limited Partner, (ii) the merger or consolidation would not result in an amendment to the Partnership Agreement, other than any amendments that could be adopted pursuant to Section 13.1, (iii) the Partnership is the Surviving Business Entity in such merger or consolidation, (iv) each Unit outstanding immediately prior to the effective date of the merger or consolidation is to be an identical Unit of the Partnership after the effective date of the merger or consolidation, and (v) the number of Partnership Securities to be issued by the Partnership in such merger or consolidation does not exceed 20% of the Partnership Securities Outstanding immediately prior to the effective date of such merger or consolidation.
Section 14.4
Certificate of Merger.
Upon the required approval by the General Partner and the Unitholders of a Merger Agreement, a certificate of merger shall be executed and filed in conformity with the requirements of the Marshall Islands Act.
Section 14.5
Amendment of Partnership Agreement.
Pursuant to Section 20(2) of the Marshall Islands Act, an agreement of merger or consolidation approved in accordance with Section 20(2) of the Marshall Islands Act may (a) effect any amendment to this Agreement or (b) effect the adoption of a new partnership agreement for a limited partnership if it is the Surviving Business Entity. Any such amendment or adoption made pursuant to this Section 14.5 shall be effective at the effective time or date of the merger or consolidation.
Section 14.6
Effect of Merger.
(a)    At the effective time of the certificate of merger:
(i)    all of the rights, privileges and powers of each of the business entities that has merged or consolidated, and all property, real, personal and mixed, and all debts due to any of those business entities and all other things and causes of action belonging to each of those business entities, shall be vested in the Surviving Business Entity and after the merger or consolidation shall be the property of the Surviving Business Entity to the extent they were of each constituent business entity;
(ii)    the title to any real property vested by deed or otherwise in any of those constituent business entities shall not revert and is not in any way impaired because of the merger or consolidation;
(iii)    all rights of creditors and all liens on or security interests in property of any of those constituent business entities shall be preserved unimpaired; and
(iv)    all debts, liabilities and duties of those constituent business entities shall attach to the Surviving Business Entity and may be enforced against it to the same extent as if the debts, liabilities and duties had been incurred or contracted by it.
(b) A merger or consolidation effected pursuant to this Article shall not be deemed to result in a transfer or assignment of assets or liabilities from one entity to another.
ARTICLE XV    

RIGHT TO ACQUIRE LIMITED PARTNER INTERESTS
Section 15.1
Right to Acquire Limited Partner Interests.
(a)    Notwithstanding any other provision of this Agreement, if at any time the General Partner and its Affiliates hold more than 80% of the total Limited Partner Interests of any class or series then Outstanding, the General Partner shall then have the right, which right it may assign and transfer in whole or in part to the Partnership or any Affiliate of the General Partner, exercisable at its option, to purchase all, but not less than all, of such Limited Partner Interests of such class or series then Outstanding held by Persons other than the General Partner and its Affiliates, at the greater of (x) the Current Market Price as of the date three days prior to the date that the notice described in Section 15.1(b) is mailed and (y) the highest price paid by the General Partner or any of its Affiliates for any such Limited Partner Interest of such class or series purchased during the 90-day period preceding the date that the notice described in Section 15.1(b) is mailed. Notwithstanding the foregoing, the repurchase right described in this Article XV shall not apply to Preferred Units. As used in this Agreement, (i) “Current Market Price” as of any date of any class or series of Limited Partner Interests means the average of the daily Closing Prices (as hereinafter defined) per Limited Partner Interest of such class or series for the 20 consecutive Trading Days (as hereinafter defined) immediately prior to such date; (ii) “Closing Price” for any day means the last sale price on such day, regular way, or in case no such sale takes place on such day, the average of the closing bid and asked prices on such day, regular way, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal National Securities Exchange (other than the Nasdaq Stock Market) on which such Limited Partner Interests are listed or, if such Limited Partner Interests of such class or series are not listed on any National Securities Exchange (other than the Nasdaq Stock Market), the last quoted price on such day or, if not so quoted, the average of the high bid and low asked prices on such day in the over-the-counter market, as reported by the Nasdaq Stock Market or such other system then in use, or, if on any such day such Limited Partner Interests of such class or series are not quoted by any such organization, the average of the closing bid and asked prices on such day as furnished by a professional market maker making a market in such Limited Partner Interests of such class or series selected by the General Partner, or if on any such day no market maker is making a market in such Limited Partner Interests of such class or series, the fair value of such Limited Partner Interests on such day as determined by the General Partner; and (iii) “Trading Day” means a day on which the principal National Securities Exchange on which such Limited Partner Interests of any class or series are listed is open for the transaction of business or, if Limited Partner Interests of a class or series are not listed on any National Securities Exchange, a day on which banking institutions in New York City generally are open.
(b)    If the General Partner, any Affiliate of the General Partner or the Partnership elects to exercise the right to purchase Limited Partner Interests granted pursuant to Section 15.1(a), the General Partner shall deliver to the Transfer Agent notice of such election to purchase (the “Notice of Election to Purchase”) and shall cause the Transfer Agent to mail a copy of such Notice of Election to Purchase to the Record Holders of Limited Partner Interests of such class or series (as of a Record Date selected by the General Partner) at least 10, but not more than 60, days prior to the Purchase Date. Such Notice of Election to Purchase shall also be published for a period of at least three consecutive days in at least two daily newspapers of general circulation printed in the English language and published in the Borough of Manhattan, New York. The Notice of Election to Purchase shall specify the Purchase Date and the price (determined in accordance with Section 15.1(a)) at which Limited Partner Interests will be purchased and state that the General Partner, its Affiliate or the Partnership, as the case may be, elects to purchase such Limited Partner Interests, upon surrender of Certificates representing such Limited Partner Interests in exchange for payment, at such office or offices of the Transfer Agent as the Transfer Agent may specify, or as may be required by any National Securities Exchange on which such Limited Partner Interests are listed. Any such Notice of Election to Purchase mailed to a Record Holder of Limited Partner Interests at his address as reflected in the records of the Transfer Agent shall be conclusively presumed to have been given regardless of whether the owner receives such notice. On or prior to the Purchase Date, the General Partner, its Affiliate or the Partnership, as the case may be, shall deposit with the Transfer Agent cash in an amount sufficient to pay the aggregate purchase price of all of such Limited Partner Interests to be purchased in accordance with this Section 15.1. If the Notice of Election to Purchase shall have been duly given as aforesaid at least 10 days prior to the Purchase Date, and if on or prior to the Purchase Date the deposit described in the preceding sentence has been made for the benefit of the holders of Limited Partner Interests subject to purchase as provided herein, then from and after the Purchase Date, notwithstanding that any Certificate shall not have been surrendered for purchase, all rights of the holders of such Limited Partner Interests (including any rights pursuant to Articles IV, V, VI, and XII) shall thereupon cease, except the right to receive the purchase price (determined in accordance with Section 15.1(a)) for Limited Partner Interests therefor, without interest, upon surrender to the Transfer Agent of the Certificates representing such Limited Partner Interests, and such Limited Partner Interests shall thereupon be deemed to be transferred to the General Partner, its Affiliate or the Partnership, as the case may be, on the record books of the Transfer Agent and the Partnership, and the General Partner or any Affiliate of the General Partner, or the Partnership, as the case may be, shall be deemed to be the owner of all such Limited Partner Interests from and after the Purchase Date and shall have all rights as the owner of such Limited Partner Interests (including all rights as owner of such Limited Partner Interests pursuant to Articles IV, V, VI, and XII).
(c)    At any time from and after the Purchase Date, a holder of an Outstanding Limited Partner Interest subject to purchase as provided in this Section 15.1 may surrender his Certificate evidencing such Limited Partner Interest to the Transfer Agent in exchange for payment of the amount described in Section 15.1(a), without interest thereon.
ARTICLE XVI    

PREFERRED UNITS
Section 16.1
Designation.
(a)    On October 5, 2016, the General Partner designated and created a series of Preferred Units designated as “9.00% Series A Cumulative Redeemable Perpetual Preferred Units,” and fixed the preferences, rights, powers and duties of the holders of the Series A Preferred Units as set forth in this Article XVI. Each Series A Preferred Unit shall be identical in all respects to every other Series A Preferred Unit, except as to the respective dates from which the Series A Liquidation Preference shall increase or from which Series A Distributions may begin accruing, to the extent such dates may differ. The Series A Preferred Units represent perpetual equity interests in the Partnership and shall not give rise to a claim by the holder for redemption thereof at a particular date.
(b)    The General Partner hereby designates and creates a series of Preferred Units to be designated as “8.50% Series B Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units,” and fixes the preferences, rights, powers and duties of the holders of the Series B Preferred Units as set forth in this Article XVI. Each Series B Preferred Unit shall be identical in all respects to every other Series B Preferred Unit, except as to the respective dates from which the Series B Liquidation Preference shall increase or from which Series B Distributions may begin accruing, to the extent such dates may differ. The Series B Preferred Units represent perpetual equity interests in the Partnership and shall not give rise to a claim by the holder for redemption thereof at a particular date.
Section 16.2
Units.
(a)    The authorized number of Series A Preferred Units and of Series B Preferred Units shall each be unlimited. Series A Preferred Units or Series B Preferred Units that are purchased or otherwise acquired by the Partnership shall be cancelled.
(b)    The Series A Preferred Units and the Series B Preferred Units shall, as to each such series of Preferred Units, be represented by a single Certificate registered in the name of the Depository or its nominee, and no Series A Holder or Series B Holder shall be entitled to receive a Certificate evidencing such Units, unless otherwise required by law or the Depository gives notice of its intention to resign or is no longer eligible to act as such with respect to such series of Preferred Units and the Partnership shall have not selected a substitute Depository within 60 calendar days thereafter. So long as the Depository shall have been appointed and is serving with respect to such series of Preferred Units, payments and communications made by the Partnership to Series A Holders or Series B Holders shall be made by making payments to, and communicating with, the Depository.
Section 16.3
Distributions.
(a)    Distributions on each Series A Preferred Unit shall accumulate at the Series A Distribution Rate in each Series A Distribution Period from and including the first day of the Series A Distribution Period (or for any Series A Preferred Units issued after the Series A Original Issue Date, from and including the first day of the Series A Distribution Period immediately preceding the issuance date of such additional Series A Preferred Units) to and including the earlier of (a) the last day of such Series A Distribution Period and (b) the date the Partnership redeems the applicable Series A Preferred Units in full in accordance with Section 16.6 below, whether or not such Series A Distributions shall have been declared. Distributions on each Series B Preferred Unit shall accumulate at the applicable Series B Distribution Rate in each Series B Distribution Period from and including the first day of the Series B Distribution Period (or for any Series B Preferred Units issued after the Series B Original Issue Date, from and including the first day of the Series B Distribution Period immediately preceding the issuance date of such additional Series B Preferred Units) to and including the earlier of (x) the last day of such Series B Distribution Period and (y) the date the Partnership redeems the applicable Series B Preferred Units in full in accordance with Section 16.6 below, whether or not such Series B Distributions shall have been declared. Series A Holders and Series B Holders shall be entitled to receive Series A Distributions or Series B Distributions, as applicable, from time to time out of any assets of the Partnership legally available for the payment of distributions at the Series A Distribution Rate per Series A Preferred Unit or at the applicable Series B Distribution Rate per Series B Preferred Unit, as applicable, in each case when, as, and if declared by the General Partner. Distributions, to the extent declared by the General Partner to be paid by the Partnership in accordance with this Section 16.3, shall be paid for each Series A Distribution Period on each Series A Distribution Payment Date or for each Series B Distribution Period on each Series B Distribution Payment Date. Series A Distributions shall be payable based on a 360-day year consisting of twelve 30-day months. Series B Distributions for any Series B Distribution Period during the Series B Fixed Rate Period shall be payable based on a 360-day year consisting of twelve 30-day months and Series B Distributions for any Series B Distribution Period during the Series B Floating Rate Period shall be payable based on a 360-day year and the number of days actually elapsed during such Series B Distribution Period. All Series A Distributions and Series B Distributions payable by the Partnership pursuant to this Section 16.3 shall be payable without regard to income of the Partnership. The guaranteed payment with respect to any Series A Distribution Period shall be for the account of the Series A Holders as of the close of the last Business Day of such Series A Distribution Period.
(b)    Not later than 5:00 p.m., New York City time, on each Series A Distribution Payment Date and Series B Distribution Payment Date, the Partnership shall pay those Series A Distributions or Series B Distributions, if any, that shall have been declared by the General Partner to Series A Holders or Series B Holders, as applicable, on the Record Date for the applicable Series A Preferred Distribution or Series B Preferred Distribution. The Record Date (the “Series A Distribution Record Date”) for any Series A Distribution payment shall be as of the close of the National Securities Exchange on which the Series A Preferred Units are listed or admitted to trading on the last Business Day of each Series A Distribution Period immediately preceding the applicable Series A Distribution Payment Date, except that in the case of payments of Series A Distributions in arrears, the Series A Distribution Record Date with respect to a Series A Distribution Payment Date shall be such date as may be designated by the General Partner in accordance with this Article XVI. The Record Date (the “Series B Distribution Record Date”) for any Series B Distribution payment shall be as of the close of the National Securities Exchange on which the Series B Preferred Units are listed or admitted to trading on the last Business Day of each Series B Distribution Period immediately preceding the applicable Series B Distribution Payment Date, except that in the case of payments of Series B Distributions in arrears, the Series B Distribution Record Date with respect to a Series B Distribution Payment Date shall be such date as may be designated by the General Partner in accordance with this Article XVI. No distribution shall be declared or paid or set apart for payment on any Junior Securities (other than a distribution payable solely in Junior Securities) unless full cumulative Series A Distributions and Series B Distributions have been or contemporaneously are being paid or provided for on all Outstanding Series A Preferred Units, Series B Preferred Units and any other Parity Securities through the most recent respective Series A Distribution Payment Dates and Series B Distribution Payment Dates. Accumulated Series A Distributions or accumulated Series B Distributions in arrears for any past Series A Distribution Period or Series B Distribution Period, as applicable, may be declared by the General Partner and paid on any date fixed by the General Partner, whether or not a Series A Distribution Payment Date or a Series B Distribution Payment Date, to Series A Holders or Series B Holders, as applicable, on the record date for such payment, which may not be more than 60 days, nor less than 15 days, before such payment date. Subject to the next succeeding sentence, if all accumulated Series A Distributions and Series B Distributions in arrears on all Outstanding Series A Preferred Units, Series B Preferred Units and any other Parity Securities shall not have been declared and paid, or if sufficient funds for the payment thereof shall not have been set apart, payment of accumulated distributions in arrears on the Series A Preferred Units, Series B Preferred Units and any such Parity Securities shall be made in order of their respective distribution payment dates, commencing with the earliest. If less than all distributions payable with respect to all Series A Preferred Units, Series B Preferred Units and any other Parity Securities are paid, any partial payment shall be made pro rata with respect to the Series A Preferred Units, Series B Preferred Units and any such other Parity Securities entitled to a distribution payment at such time in proportion to the aggregate distribution amounts remaining due in respect of such Series A Preferred Units, Series B Preferred Units and such other Parity Securities at such time. Subject to Sections 12.4 and 16.6, neither Series A Holders nor Series B Holders shall be entitled to any distribution, whether payable in cash, property or stock, in excess of full cumulative Series A Distributions or Series B Distributions, as applicable. No interest or sum of money in lieu of interest shall be payable in respect of any distribution payment which may be in arrears on the Series A Preferred Units or Series B Preferred Units. So long as the Series A Preferred Units or Series B Preferred Units, as applicable, are held of record by the nominee of the Depository, declared Series A Distributions or Series B Distributions shall be paid to the Depository in same-day funds on each Series A Distribution Payment Date or Series B Distribution Payment Date, as applicable.
Section 16.4
[Reserved].
Section 16.5
Voting Rights.
(a)    Notwithstanding anything to the contrary in this Agreement, neither the Series A Preferred Units nor the Series B Preferred Units shall have any voting rights except as set forth in Section 13.3(d), this Section 16.5 or as otherwise provided by the Marshall Islands Act.
(b)    In the event that six quarterly Series A Distributions, whether consecutive or not, are in arrears, the Series A Holders shall have the right, voting as a class together with holders of any other Parity Securities upon which like voting rights have been conferred and are exercisable, at a meeting of the General Partner called for such purpose within 30 days after receipt by the General Partner of a request by Series A Holders holding a majority of the Outstanding Series A Preferred Units, to elect one member of the Board of Directors of the General Partner, and the size of the Board of Directors of the General Partner shall be increased as needed to accommodate such change. Such right of such Series A Holders to elect a member of the Board of Directors of the General Partner shall continue until the Partnership pays in full, or declares and sets aside funds for the payment of, all Series A Distributions accumulated and in arrears on the Series A Preferred Units, at which time such right shall terminate, subject to the revesting of such right in the event of each and every subsequent failure to pay six quarterly Series A Distributions as described above in this Section 16.5(b). In the event that six quarterly Series B Distributions, whether consecutive or not, are in arrears, the Series B Holders shall have the right, voting as a class together with holders of any other Parity Securities upon which like voting rights have been conferred and are exercisable, at a meeting of the General Partner called for such purpose within 30 days after receipt by the General Partner of a request by Series B Holders holding a majority of the Outstanding Series B Preferred Units, to elect one member of the Board of Directors of the General Partner, and the size of the Board of Directors of the General Partner shall be increased as needed to accommodate such change. Such right of such Series B Holders to elect a member of the Board of Directors of the General Partner shall continue until the Partnership pays in full, or declares and sets aside funds for the payment of, all Series B Distributions accumulated and in arrears on the Series B Preferred Units, at which time such right shall terminate, subject to the revesting of such right in the event of each and every subsequent failure to pay six quarterly Series B Distributions as described above in this Section 16.5(b). Upon any termination of the right of the Series A Holders, the Series B Holders and, if applicable, holders of any other Parity Securities to vote as a class for such director, the term of office of the director then in office elected by such Series A Holders, Series B Holders and holders voting as a class shall terminate immediately. Any director elected by the Series A Holders, the Series B Holders and, if applicable, holders of any other Parity Securities shall be entitled to one vote on any matter before the Board of Directors of the General Partner.
(c)    
(i)    Unless the General Partner shall have received the affirmative vote or consent of the holders of at least 66 2/3% of the Outstanding Series A Preferred Units, voting as a separate class, the General Partner shall not adopt any amendment to this Agreement that would have a material adverse effect on the existing terms of the Series A Preferred Units. Unless the General Partner shall have received the affirmative vote or consent of the holders of at least 66 2/3% of the Outstanding Series B Preferred Units, voting as a separate class, the General Partner shall not adopt any amendment to this Agreement that would have a material adverse effect on the existing terms of the Series B Preferred Units.
(ii)    Unless the General Partner shall have received the affirmative vote or consent of the holders of at least 66 2/3% of the Outstanding Series A Preferred Units and Series B Preferred Units, voting as a class together with holders of any other Parity Securities upon which like voting rights have been conferred and are exercisable, the Partnership shall not (x) issue any Parity Securities or Senior Securities if the cumulative dividends payable on Outstanding Series A Preferred Units or Series B Preferred Units are in arrears or (y) create or issue any Senior Securities.
(d)    For any matter described in this Section 16.5 in which the Series A Holders or Series B Holders are entitled to vote as a class (whether separately or together with the holders of any Parity Securities), such Series A Holders or Series B Holders shall be entitled to one vote per Series A Preferred Unit or Series B Preferred Unit, as applicable. Any Series A Preferred Units or Series B Preferred Units held by the Partnership or any of its subsidiaries or Affiliates shall not be entitled to vote.
Section 16.6
Optional Redemption.
(a)    The Partnership shall have the right at any time, and from time to time, on or after October 5, 2021 to redeem the Series A Preferred Units, in whole or in part, from any source of funds legally available for such purpose. Any such redemption shall occur on a date set by the General Partner (the “Series A Redemption Date”). The Partnership shall have the right at any time, and from time to time, on or after October 15, 2027 to redeem the Series B Preferred Units, in whole or in part, from any source of funds legally available for such purpose. Any such redemption shall occur on a date set by the General Partner (the “Series B Redemption Date”).
(b)    The Partnership shall effect any such redemption by paying cash for each Series A Preferred Unit or Series B Preferred Unit, as applicable, to be redeemed equal to (i) the Series A Liquidation Preference for such Series A Preferred Unit on such Series A Redemption Date (the “Series A Redemption Price”) or (ii) the Series B Liquidation Preference for such Series B Preferred Unit on such Series B Redemption Date (the “Series B Redemption Price”), as applicable. So long as the Series A Preferred Units or Series B Preferred Units to be redeemed are held of record by the nominee of the Depository, the Series A Redemption Price or Series B Redemption Price, as applicable, shall be paid by the Paying Agent to the Depository on the Series A Redemption Date or the Series B Redemption Date, as applicable.
(c)    The Partnership shall give notice of any redemption by mail, postage prepaid, not less than 30 days and not more than 60 days before the scheduled Series A Redemption Date or Series B Redemption Date, to the Series A Holders or Series B Holders, as applicable (as of 5:00 p.m. New York City time on the Business Day next preceding the day on which notice is given), of any Series A Preferred Units or Series B Preferred Units to be redeemed as such Series A Holders’ or Series B Holders’ names, as applicable, appear on the books of the Transfer Agent and at the address of such Series A Holders or Series B Holders shown therein. Such notice (the “Series A Redemption Notice or the “Series B Redemption Notice”, as applicable) shall state, as applicable: (1) the Series A Redemption Date or Series B Redemption Date, (2) the number of Series A Preferred Units or Series B Preferred Units to be redeemed and, if less than all Outstanding Series A Preferred Units or Series B Preferred Units are to be redeemed, the number (and the identification) of Series A Preferred Units or Series B Preferred Units to be redeemed from such Series A Holder or Series B Holder, (3) the Series A Redemption Price or Series B Redemption Price, (4) the place where the Series A Preferred Units or Series B Preferred Units are to be redeemed and shall be presented and surrendered for payment of the Series A Redemption Price or Series B Redemption Price therefor and (5) that distributions on the Series A Preferred Units or Series B Preferred Units to be redeemed shall cease to accumulate from and after such Series A Redemption Date or Series B Redemption Date.
(d)    If the Partnership elects to redeem less than all of the Outstanding Series A Preferred Units or Series B Preferred Units, as applicable, the number of Series A Preferred Units or Series B Preferred Units to be redeemed shall be determined by the General Partner, and such Series A Preferred Units or Series B Preferred Units shall be redeemed by such method of selection as the Depository shall determine either Pro Rata or by lot, with adjustments to avoid redemption of fractional Series A Preferred Units or Series B Preferred Units. The aggregate Series A Redemption Price or Series B Redemption Price for any such partial redemption of the Outstanding Series A Preferred Units or Series B Preferred Units shall be allocated correspondingly among the redeemed Series A Preferred Units or Series B Preferred Units, as applicable. The Series A Preferred Units or Series B Preferred Units not redeemed shall remain Outstanding and entitled to all the rights and preferences provided in this Article XVI. The Partnership is permitted to redeem all or part of one series of Preferred Units without redeeming all or part of any other series of Preferred Units.
(e)    If the Partnership gives or causes to be given a Series A Redemption Notice or Series B Redemption Notice, the Partnership shall deposit with the Paying Agent funds, sufficient to redeem the Series A Preferred Units or Series B Preferred Units, as applicable, as to which such Series A Redemption Notice or Series B Redemption Notice shall have been given, no later than 5:00 p.m. New York City time on the Business Day immediately preceding the Series A Redemption Date or Series B Redemption Date, and shall give the Paying Agent irrevocable instructions and authority to pay the Series A Redemption Price to the Series A Holders or the Series B Redemption Price to the Series B Holders to be redeemed upon surrender or deemed surrender (which shall occur automatically if the Certificate representing such Series A Preferred Units or Series B Preferred Unit, as applicable, is issued in the name of the Depository or its nominee) of the certificates therefor as set forth in the Series A Redemption Notice or Series B Redemption Notice. If the Series A Redemption Notice or Series B Redemption Notice shall have been given, from and after the Series A Redemption Date or Series B Redemption Date, as applicable, unless the Partnership defaults in providing funds sufficient for such redemption at the time and place specified for payment pursuant to the Series A Redemption Notice or Series B Redemption Notice, all Series A Distributions on such Series A Preferred Units to be redeemed or Series B Distributions on such Series B Preferred Units to be redeemed shall cease to accumulate and all rights of holders of such Series A Preferred Units or Series B Preferred Units as Limited Partners with respect to such Series A Preferred Units or Series B Preferred Units to be redeemed shall cease, except the right to receive the Series A Redemption Price or Series B Redemption Price, as applicable, and such Series A Preferred Units or Series B Preferred Units shall not thereafter be transferred on the books of the Transfer Agent or be deemed to be Outstanding for any purpose whatsoever. The Partnership shall be entitled to receive from the Paying Agent the interest income, if any, earned on such funds deposited with the Paying Agent (to the extent that such interest income is not required to pay the Series A Redemption Price of the Series A Preferred Units or the Series B Redemption Price of the Series B Preferred Units, as applicable, to be redeemed), and the holders of any Series A Preferred Units or Series B Preferred Units so redeemed shall have no claim to any such interest income. Any funds deposited with the Paying Agent hereunder by the Partnership for any reason, including redemption of Series A Preferred Units or Series B Preferred Units, that remain unclaimed or unpaid after two years after the applicable Series A Redemption Date or Series B Redemption Date or other payment date, shall be, to the extent permitted by law, repaid to the Partnership upon its written request, after which repayment the Series A Holders or Series B Holders entitled to such redemption or other payment shall have recourse only to the Partnership. Notwithstanding any Series A Redemption Notice or Series B Redemption Notice, there shall be no redemption of any Series A Preferred Units or Series B Preferred Units, as applicable, called for redemption until funds sufficient to pay the full Series A Redemption Price of such Series A Preferred Units or the full Series B Redemption Price of such Series B Preferred Units shall have been deposited by the Partnership with the Paying Agent.
(f)    Any Series A Preferred Units or Series B Preferred Units that are redeemed or otherwise acquired by the Partnership shall be canceled. If only a portion of the Series A Preferred Units or Series B Preferred Units represented by a Certificate shall have been called for redemption, upon surrender of the Certificate to the Paying Agent (which shall occur automatically if the Certificate representing such Series A Preferred Units or Series B Preferred Units is registered in the name of the Depository or its nominee), the Paying Agent shall issue to the Series A Holders or Series B Holders, as applicable, a new Certificate (or adjust the applicable book-entry account) representing the number of Series A Preferred Units or Series B Preferred Units represented by the surrendered Certificate that have not been called for redemption.
(g)    Notwithstanding anything to the contrary in this Article XVI, in the event that full cumulative distributions on the Series A Preferred Units, Series B Preferred Units and any other Parity Securities shall not have been paid or declared and set apart for payment, none of the Partnership, the General Partner or any Affiliate of the General Partner shall be permitted to repurchase, redeem or otherwise acquire, in whole or in part, any Series A Preferred Units, Series B Preferred Units or other Parity Securities except pursuant to a purchase or exchange offer made on the same terms to all Series A Holders, Series B Holders and holders of any other Parity Securities. None of the Partnership, the General Partner or any Affiliate of the General Partner shall be permitted to redeem, repurchase or otherwise acquire any Common Units or any other Junior Securities unless full cumulative distributions on the Series A Preferred Units, Series B Preferred Units and any other Parity Securities for all prior and the then-ending Series A Distribution Periods and Series B Distribution Periods shall have been paid or declared and set apart for payment.
Section 16.7
Rank.
The Series A Preferred Units and Series B Preferred Units shall each be deemed to rank:
(a)    Senior to (i) the Common Units and (ii) any other class or series of Partnership Securities established after the Series A Original Issue Date by the General Partner, the terms of which class or series do not expressly provide that it is made senior to or on parity with the Series A Preferred Units or Series B Preferred Units as to current distributions (collectively referred to with the Partnership’s Common Units as “Junior Securities”);
(b)    On a parity with each other and with any other class or series of Partnership Securities established after the Series A Original Issue Date by the General Partner, the terms of which class or series are not expressly subordinated or senior to the Series A Preferred Units or Series B Preferred Units as to current distributions (collectively referred to as “Parity Securities”); and
(c)    Junior to any class or series of Partnership Securities established after the Series A Original Issue Date by the General Partner, the terms of which class or series expressly provide that it ranks senior to the Series A Preferred Units or Series B Preferred Units as to current distributions (collectively referred to as “Senior Securities”).
The Partnership may issue Junior Securities and, subject to any approvals required by Series A Holders and Series B Holders pursuant to Section 16.5(c)(ii), Parity Securities from time to time in one or more classes or series without the consent of the Series A Holders or Series B Holders. The General Partner has the authority to determine the preferences, powers, qualifications, limitations, restrictions and special or relative rights or privileges, if any, of any such class or series before the issuance of any Partnership Securities of such class or series.
Section 16.8
No Sinking Fund.
Neither the Series A Preferred Units nor the Series B Preferred Units shall have the benefit of any sinking fund.
Section 16.9
Record Holders.
To the fullest extent permitted by applicable law, the General Partner, Partnership, the Registrar, the Transfer Agent and the Paying Agent may deem and treat any Series A Holder and Series B Holder as the true, lawful and absolute owner of the applicable Series A Preferred Units or Series B Preferred Units, as applicable, for all purposes, and neither the General Partner, the Partnership nor the Registrar, the Transfer Agent or the Paying Agent shall be affected by any notice to the contrary.
Section 16.10
Notices.
All notices or communications in respect of the Series A Preferred Units or Series B Preferred Units shall be sufficiently given if given in writing and delivered in person or by first class mail, postage prepaid, or if given in such other manner as may be permitted in this Article XVI, this Agreement or by applicable law.
Section 16.11
Other Rights; Fiduciary Duties.
Neither the Series A Preferred Units nor the Series B Preferred Units shall have any voting powers, preferences or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth in this Article XVI or as provided by applicable law. Notwithstanding anything to the contrary in this Agreement, but subject to Section 7.9(c) and without reference to the definition of “good faith” in Section 7.9(b), neither the General Partner nor any other Indemnitee shall owe any fiduciary duties to Series A Holders or Series B Holders, other than a contractual duty of good faith and fair dealing.
ARTICLE XVII    

GENERAL PROVISIONS
Section 17.1
Addresses and Notices.
Any notice, demand, request, report or proxy materials required or permitted to be given or made to a Partner under this Agreement shall be in writing and shall be deemed given or made when delivered in person or when sent by first class United States mail or by other means of written communication to the Partner at the address described below. Any notice, payment or report to be given or made to a Partner hereunder shall be deemed conclusively to have been given or made, and the obligation to give such notice or report or to make such payment shall be deemed conclusively to have been fully satisfied, upon sending of such notice, payment or report to the Record Holder of such Partnership Securities at his address as shown on the records of the Transfer Agent or as otherwise shown on the records of the Partnership, regardless of any claim of any Person who may have an interest in such Partnership Securities by reason of any assignment or otherwise. An affidavit or certificate of making of any notice, payment or report in accordance with the provisions of this Section 17.1 executed by the General Partner, the Transfer Agent or the mailing organization shall be prima facie evidence of the giving or making of such notice, payment or report. If any notice, payment or report addressed to a Record Holder at the address of such Record Holder appearing on the books and records of the Transfer Agent or the Partnership is returned by the United States Postal Service marked to indicate that the United States Postal Service is unable to deliver it, such notice, payment or report and any subsequent notices, payments and reports shall be deemed to have been duly given or made without further mailing (until such time as such Record Holder or another Person notifies the Transfer Agent or the Partnership of a change in his address) if they are available for the Partner at the principal office of the Partnership for a period of one year from the date of the giving or making of such notice, payment or report to the other Partners. Any notice to the Partnership shall be deemed given if received by the General Partner at the principal office of the Partnership designated pursuant to Section 2.3. The General Partner may rely and shall be protected in relying on any notice or other document from a Partner or other Person if believed by it to be genuine.
Section 17.2
Further Action.
The parties shall execute and deliver all documents, provide all information and take or refrain from taking action as may be necessary or appropriate to achieve the purposes of this Agreement.
Section 17.3
Binding Effect.
This Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, executors, administrators, successors, legal representatives and permitted assigns.
Section 17.4
Integration.
This Agreement constitutes the entire agreement among the parties hereto pertaining to the subject matter hereof and supersedes all prior agreements and understandings pertaining thereto, including the Prior Agreement.
Section 17.5
Creditors.
None of the provisions of this Agreement shall be for the benefit of, or shall be enforceable by, any creditor of the Partnership.
Section 17.6
Waiver.
No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute waiver of any such breach of any other covenant, duty, agreement or condition.
Section 17.7
Counterparts.
This Agreement may be executed in counterparts, all of which together shall constitute an agreement binding on all the parties hereto, notwithstanding that all such parties are not signatories to the original or the same counterpart. Each party shall become bound by this Agreement immediately upon affixing its signature hereto or, in the case of a Person acquiring a Limited Partner Interest pursuant to Section 10.2(a), without execution hereof.
Section 17.8
Applicable Law.
This Agreement shall be construed in accordance with and governed by the laws of the Marshall Islands, without regard to the principles of conflicts of law.
Section 17.9
Invalidity of Provisions.
If any provision of this Agreement is or becomes invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby.
Section 17.10
Consent of Partners.
Each Partner hereby expressly consents and agrees that, whenever in this Agreement it is specified that an action may be taken upon the affirmative vote or consent of less than all of the Partners, such action may be so taken upon the concurrence of less than all of the Partners and each Partner shall be bound by the results of such action.
Section 17.11
Facsimile Signatures.
The use of facsimile signatures affixed in the name and on behalf of the transfer agent and registrar of the Partnership on Certificates is expressly permitted by this Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the parties hereto have executed this Fifth Amended and Restated Agreement of Limited Partnership as of the date first written above.
GENERAL PARTNER:
Teekay GP L.L.C.
By:                            
Name: Anne Liversedge
Title: Secretary
(Place of Execution: Hamilton, Bermuda)
LIMITED PARTNERS:
All Limited Partners now and hereafter admitted as Limited Partners of the Partnership, pursuant to powers of attorney now and hereafter executed in favor of, and granted and delivered to the General Partner.
Teekay GP L.L.C.
By:                            
Name: Anne Liversedge
Title: Secretary
(Place of Execution: Hamilton, Bermuda)
ACKNOWLEDGED AND AGREED FOR PURPOSES OF SECTION 16.5(B):
Teekay Holdings Limited, as Sole Member of the General Partner, to evidence its agreement to modify the governing documents of the General Partner at such time and in such manner as may be required from time to time by Section 16.5(b)
By:        
Name: Anne Liversedge
Title:    President
EXHIBIT A
to the Fifth Amended and Restated
Agreement of Limited Partnership of
Teekay LNG Partners L.P.
Certificate Evidencing Common Units
Representing Limited Partner Interests in
Teekay LNG Partners L.P.
No._________    _________Common Units
In accordance with Section 4.1 of the Fifth Amended and Restated Agreement of Limited Partnership of Teekay LNG Partners L.P., as amended, supplemented or restated from time to time (the “Partnership Agreement”), Teekay LNG Partners L.P., a Marshall Islands limited partnership (the “Partnership”), hereby certifies that            (the “Holder”) is the registered owner of Common Units representing limited partner interests in the Partnership (the “Common Units”) transferable on the books of the Partnership, in person or by duly authorized attorney, upon surrender of this Certificate properly endorsed. The rights, preferences and limitations of the Common Units are set forth in, and this Certificate and the Common Units represented hereby are issued and shall in all respects be subject to the terms and provisions of, the Partnership Agreement. Copies of the Partnership Agreement are on file at, and will be furnished without charge on delivery of written request to the Partnership at, the principal office of the Partnership located at 4th Floor, Belvedere Building, 69 Pitts Bay Road, Hamilton HM 08, Bermuda. Capitalized terms used herein but not defined shall have the meanings given them in the Partnership Agreement.
The Holder, by accepting this Certificate, is deemed to have (i) requested admission as, and agreed to become, a Limited Partner and to have agreed to comply with and be bound by and to have executed the Partnership Agreement, (ii) represented and warranted that the Holder has all right, power and authority and, if an individual, the capacity necessary to enter into the Partnership Agreement, (iii) granted the powers of attorney provided for in the Partnership Agreement and (iv) made the waivers and given the consents and approvals contained in the Partnership Agreement.
This Certificate shall not be valid for any purpose unless it has been countersigned and registered by the Transfer Agent and Registrar.
Dated:    ______________________________
Teekay LNG Partners L.P.
 
 
Countersigned and Registered by:
By: Teekay GP L.L.C.,
 
its General Partner
   
 
as Transfer Agent and Registrar
By:    
 
Name:    
 
 
By:    
By:    
Authorized Signature
Secretary

[Reverse of Certificate]
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of this Certificate, shall be construed as follows according to applicable laws or regulations:

TEN COM — as tenants in common
UNIF GIFT/TRANSFERS MIN ACT
 
___________Custodian___________
TEN ENT — as tenants by the entireties
(Cust) (Minor)
 
under Uniform Gifts/Transfers to CD
JT TEN — as joint tenants with right of
Minors Act (State)
survivorship and not as tenants in common
 

Additional abbreviations, though not in the above list, may also be used.
ASSIGNMENT OF COMMON UNITS
in
TEEKAY LNG PARTNERS L.P.
FOR VALUE RECEIVED, hereby assigns, conveys, sells and transfers unto

 
   
   
(Please print or typewrite name
(Please insert Social Security or other
and address of assignee)
identifying number of assignee)

Common Units representing limited partner interests evidenced by this Certificate, subject to the Partnership Agreement, and does hereby irrevocably constitute and appoint as its attorney-in-fact with full power of substitution to transfer the same on the books of Teekay LNG Partners L.P.

Date: _____________
NOTE: The signature to any endorsement hereon must correspond with the name as written upon the face of this Certificate in every particular, without alteration, enlargement or change.

THE SIGNATURE(S) MUST BE
GUARANTEED BY AN
ELIGIBLE GUARANTOR
INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS
AND LOAN ASSOCIATIONS
AND CREDIT UNIONS WITH
MEMBERSHIP IN AN
APPROVED SIGNATURE
 
GUARANTEE MEDALLION
PROGRAM), PURSUANT TO
S.E.C. RULE 17d-15

   
(Signature)



   
(Signature)
No transfer of the Common Units evidenced hereby will be registered on the books of the Partnership, unless the Certificate evidencing the Common Units to be transferred is surrendered for registration or transfer.

EXHIBIT B
to the Fifth Amended and Restated
Agreement of Limited Partnership of
Teekay LNG Partners L.P.
Certificate Evidencing Series A Cumulative
Redeemable Perpetual Preferred Units
Representing Limited Partner Interests in
Teekay LNG Partners L.P.
No._________    _________Series A Preferred Units
In accordance with Section 4.1 of the Fifth Amended and Restated Agreement of Limited Partnership of Teekay LNG Partners L.P., as amended, supplemented or restated from time to time (the “Partnership Agreement”), Teekay LNG Partners L.P., a Marshall Islands limited partnership (the “Partnership”), hereby certifies that            (the “Holder”) is the registered owner of 9.00% Series A Cumulative Redeemable Perpetual Preferred Units representing limited partner interests in the Partnership (the “Series A Preferred Units”) transferable on the books of the Partnership, in person or by duly authorized attorney, upon surrender of this Certificate properly endorsed. The rights, preferences and limitations of the Series A Preferred Units are set forth in, and this Certificate and the Series A Preferred Units represented hereby are issued and shall in all respects be subject to the terms and provisions of, the Partnership Agreement. Copies of the Partnership Agreement are on file at, and will be furnished without charge on delivery of written request to the Partnership at, the principal office of the Partnership located at 4th Floor, Belvedere Building, 69 Pitts Bay Road, Hamilton HM 08, Bermuda. Capitalized terms used herein but not defined shall have the meanings given them in the Partnership Agreement.
The Holder, by accepting this Certificate, is deemed to have (i) requested admission as, and agreed to become, a Limited Partner and to have agreed to comply with and be bound by and to have executed the Partnership Agreement, (ii) represented and warranted that the Holder has all right, power and authority and, if an individual, the capacity necessary to enter into the Partnership Agreement, (iii) granted the powers of attorney provided for in the Partnership Agreement and (iv) made the waivers and given the consents and approvals contained in the Partnership Agreement.
This Certificate shall not be valid for any purpose unless it has been countersigned and registered by the Transfer Agent and Registrar.
Dated:    ______________________________
Teekay LNG Partners L.P.
 
 
Countersigned and Registered by:
By: Teekay GP L.L.C.,
 
its General Partner
   
 
as Transfer Agent and Registrar
By:    
 
Name:    
 
 
By:    
By:    
Authorized Signature
Secretary
[Reverse of Certificate]
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of this Certificate, shall be construed as follows according to applicable laws or regulations:
TEN COM — as tenants in common
UNIF GIFT/TRANSFERS MIN ACT
 
___________Custodian___________
TEN ENT — as tenants by the entireties
(Cust) (Minor)
 
under Uniform Gifts/Transfers to CD
JT TEN — as joint tenants with right of
Minors Act (State)
survivorship and not as tenants in common
 

Additional abbreviations, though not in the above list, may also be used.
ASSIGNMENT OF SERIES A PREFERRED UNITS
in
TEEKAY LNG PARTNERS L.P.
FOR VALUE RECEIVED,        hereby assigns, conveys, sells and transfers unto
   
   
(Please print or typewrite name
(Please insert Social Security or other
and address of assignee)
identifying number of assignee)

Series A Preferred Units representing limited partner interests evidenced by this Certificate, subject to the Partnership Agreement, and does hereby irrevocably constitute and appoint as its attorney-in-fact with full power of substitution to transfer the same on the books of the Partnership.

Date:    
NOTE: The signature to any endorsement hereon must correspond with the name as written upon the face of this Certificate in every particular, without alteration, enlargement or change.


THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15
(Signature)




(Signature)
No transfer of the Series A Preferred Units evidenced hereby will be registered on the books of the Partnership, unless the Certificate evidencing the Series A Preferred Units to be transferred is surrendered for registration or transfer.

EXHIBIT C
to the Fifth Amended and Restated
Agreement of Limited Partnership of
Teekay LNG Partners L.P.
Certificate Evidencing Series B Fixed-to-Floating Rate Cumulative
Redeemable Perpetual Preferred Units
Representing Limited Partner Interests in
Teekay LNG Partners L.P.
No._________    _________Series B Preferred Units
In accordance with Section 4.1 of the Fifth Amended and Restated Agreement of Limited Partnership of Teekay LNG Partners L.P., as amended, supplemented or restated from time to time (the “Partnership Agreement”), Teekay LNG Partners L.P., a Marshall Islands limited partnership (the “Partnership”), hereby certifies that            (the “Holder”) is the registered owner of 8.50% Series B Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units representing limited partner interests in the Partnership (the “Series B Preferred Units”) transferable on the books of the Partnership, in person or by duly authorized attorney, upon surrender of this Certificate properly endorsed. The rights, preferences and limitations of the Series B Preferred Units are set forth in, and this Certificate and the Series B Preferred Units represented hereby are issued and shall in all respects be subject to the terms and provisions of, the Partnership Agreement. Copies of the Partnership Agreement are on file at, and will be furnished without charge on delivery of written request to the Partnership at, the principal office of the Partnership located at 4th Floor, Belvedere Building, 69 Pitts Bay Road, Hamilton HM 08, Bermuda. Capitalized terms used herein but not defined shall have the meanings given them in the Partnership Agreement.
The Holder, by accepting this Certificate, is deemed to have (i) requested admission as, and agreed to become, a Limited Partner and to have agreed to comply with and be bound by and to have executed the Partnership Agreement, (ii) represented and warranted that the Holder has all right, power and authority and, if an individual, the capacity necessary to enter into the Partnership Agreement, (iii) granted the powers of attorney provided for in the Partnership Agreement and (iv) made the waivers and given the consents and approvals contained in the Partnership Agreement.
This Certificate shall not be valid for any purpose unless it has been countersigned and registered by the Transfer Agent and Registrar.

Dated:    ______________________________
Teekay LNG Partners L.P.
 
 
Countersigned and Registered by:
By: Teekay GP L.L.C.,
 
its General Partner
   
 
as Transfer Agent and Registrar
By:    
 
Name:    
 
 
By:    
By:    
Authorized Signature
Secretary

[Reverse of Certificate]
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of this Certificate, shall be construed as follows according to applicable laws or regulations:
TEN COM — as tenants in common
UNIF GIFT/TRANSFERS MIN ACT
 
___________Custodian___________
TEN ENT — as tenants by the entireties
(Cust) (Minor)
 
under Uniform Gifts/Transfers to CD
JT TEN — as joint tenants with right of
Minors Act (State)
survivorship and not as tenants in common
 

Additional abbreviations, though not in the above list, may also be used.
ASSIGNMENT OF SERIES B PREFERRED UNITS
in
TEEKAY LNG PARTNERS L.P.
FOR VALUE RECEIVED,        hereby assigns, conveys, sells and transfers unto
   
   
(Please print or typewrite name
(Please insert Social Security or other
and address of assignee)
identifying number of assignee)

Series B Preferred Units representing limited partner interests evidenced by this Certificate, subject to the Partnership Agreement, and does hereby irrevocably constitute and appoint as its attorney-in-fact with full power of substitution to transfer the same on the books of the Partnership.

Date:    
NOTE: The signature to any endorsement hereon must correspond with the name as written upon the face of this Certificate in every particular, without alteration, enlargement or change.


THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15
(Signature)




(Signature)

No transfer of the Series B Preferred Units evidenced hereby will be registered on the books of the Partnership, unless the Certificate evidencing the Series B Preferred Units to be transferred is surrendered for registration or transfer.



Exhibit
Execution Version


EXCHANGE AGREEMENT
between
TEEKAY LNG PARTNERS L.P.
and
TEEKAY GP L.L.C.
Dated as of May 9, 2020



EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (this “Agreement”), dated as of May 9, 2020, is entered into by and between Teekay LNG Partners L.P., a limited partnership organized under the laws of the Republic of the Marshall Islands (the “Partnership”), and Teekay GP L.L.C., a limited liability company organized under the laws of the Republic of the Marshall Islands (the “General Partner”).
RECITALS
A.    The General Partner is the general partner of the Partnership and owns (i) all of the General Partner Interest (as defined in the Current Partnership Agreement (as defined below)) in the Partnership and (ii) all of the Incentive Distribution Rights (as defined in the Current Partnership Agreement) in the Partnership (“IDRs”).
B.    The General Partner has agreed to contribute to the Partnership all of the IDRs held by it in exchange for the issuance by the Partnership to the General Partner of 10,750,000 new Common Units (as defined in the Current Partnership Agreement) (the “New Common Units”) to be issued by the Partnership under the Revised Partnership Agreement (as defined below), having the rights, preferences, privileges and restrictions set forth therein, and the Partnership has agreed to issue the New Common Units to the General Partner as consideration for the contribution of the IDRs to the Partnership (collectively, including the amendment and restatement of the Current Partnership Agreement as provided herein, the “Transactions”).
C.    The conflicts committee (the “Conflicts Committee”) of the board of directors (the “Board”) of the General Partner has (i) received the opinion of Houlihan Lokey Capital, Inc., the financial advisor to the Conflicts Committee, as to the fairness, from a financial point of view, to the Partnership and the holders of the Common Units (other than the General Partner and its Affiliates (as defined below)) (such holders, the “TGP Public Unitholders”) of the New Common Units to be issued by the Partnership as consideration for the IDRs held by the General Partner pursuant to this Agreement, (ii) determined that this Agreement, the Revised Partnership Agreement and the Transactions are advisable, fair and reasonable to (taking into account the totality of the relationships between the parties involved) and in the best interests of the Partnership and the TGP Public Unitholders, (iii) approved this Agreement, the Revised Partnership Agreement and the Transactions, such approval constituting “Special Approval” of this Agreement, the Revised Partnership Agreement and the Transactions for all purposes under the Current Partnership Agreement, including without limitation, Section 7.9(a) thereof, and (iv) recommended that the Board approve this Agreement, the Revised Partnership Agreement and the Transactions.
D. The Conflicts Committee, in making its determinations, approvals and recommendations with respect to this Agreement, the Revised Partnership Agreement and the Transactions, did not take any position or make any recommendation with respect to the amendments set forth in Section 14.3(d) of the Revised Partnership Agreement.
E. (i) Based upon the Conflicts Committee’s recommendation referenced above, the Board has determined that this Agreement, the Revised Partnership Agreement, and the Transactions are fair and reasonable to and in the best interests of the Partnership and the TGP Public Unitholders, (ii) the Board has determined that this Agreement, the Revised Partnership Agreement and the Transactions are fair and reasonable to and in the best interests of the General Partner, acting in its individual capacity and not as the general partner of the Partnership (including in the General Partner’s capacity as the sole holder of the General Partner Interest and the IDRs), and (iii) the Board has determined that this Agreement, the Revised Partnership Agreement and the Transactions are approved, authorized and adopted in all respects.
F.    The parties hereto have agreed that the Fourth Amended and Restated Agreement of Limited Partnership of the Partnership, dated as of January 1, 2019 (the “Current Partnership Agreement”), shall be amended and restated so as to reflect the cancellation of the IDRs and the issuance of the New Common Units and to make certain other related changes to the Current Partnership Agreement, as permitted under Sections 13.1(d)(i) and 13.1(g) of the Current Partnership Agreement (such amended and restated agreement being referred to as the “Revised Partnership Agreement”).
G.    The effectiveness of the Revised Partnership Agreement, the contribution by the General Partner to the Partnership of the IDRs and the issuance by the Partnership of the New Common Units are conditioned on each other and shall occur simultaneously at the Effective Time (as defined below).
NOW, THEREFORE, in consideration of their mutual undertakings and agreements hereunder, the parties hereto undertake and agree as follows:
Article I
DEFINITIONS
Affiliate” means, with respect to any Person, any other Person that directly or indirectly through one or more intermediaries’ controls, is controlled by, or is under common control with, the Person in question. For purposes of this definition, the term “control” (including the correlative meanings of the terms “controlled by” and “under common control with”), as used with respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. Notwithstanding anything in this definition to the contrary, for the purposes of this Agreement, (a) with respect to the General Partner, “Affiliate” excludes at all times the Partnership and its Subsidiaries, and (b) with respect to the Partnership and its Subsidiaries, “Affiliate” excludes at all times the General Partner and any other Person that directly or indirectly controls or is under common control with the General Partner other than the Partnership and its Subsidiaries.
Agreement” has the meaning given such term in the Preamble.
Board” has the meaning given such term in the Recitals.
Conflicts Committee” has the meaning given such term in the Recitals.
Current Partnership Agreement” has the meaning given such term in the Recitals.
Effective Time” means 8:30 A.M. Eastern time on May 11, 2020.
General Partner” has the meaning given such term in the Preamble.
Governmental Entity” means any federal, state, local or foreign court, tribunal, administrative body or other governmental or quasi-governmental or regulatory entity, including any head of a government department, body or agency, with competent jurisdiction.
IDRs” has the meaning given such term in the Recitals.
New Common Units” has the meaning given such term in the Recitals.
Partnership” has the meaning given such term in the Preamble.
Person” means an individual or a corporation, firm, limited liability company, partnership, joint venture, trust, unincorporated organization, association, Governmental Entity or political subdivision thereof or other entity.
Revised Partnership Agreement” has the meaning given such term in the Recitals. The Revised Partnership Agreement shall be in the form attached hereto as Exhibit 1.
Securities Act” has the meaning given such term in Section 3.02(d).
Subsidiary” means, with respect to any Person, any other Person of which (a) more than 50% of (i) the total combined voting power of all classes of voting securities of such other Person, (ii) the total combined equity interests or (iii) the capital or profit interests, in each case, is beneficially owned, directly or indirectly, by such first Person or (b) the power to vote or to direct the voting of sufficient securities to elect a majority of the board of directors or similar governing body is held by such first Person.
TGP Public Unitholders” has the meaning given such term in the Recitals.
Transactions” has the meaning given such term in the Recitals.
ARTICLE II    
THE TRANSACTIONS
SECTION 2.01    Contribution of IDRs. At the Effective Time, the General Partner shall contribute to the Partnership all of its right, title and interest in the IDRs held by it immediately prior to the Effective Time, which IDRs represent all of the issued and outstanding IDRs under the Current Partnership Agreement, and the IDRs shall immediately thereupon be cancelled and shall cease to exist. The Partnership hereby confirms that it is bound by the Current Partnership Agreement and, upon the effectiveness of the Revised Partnership Agreement, it will be bound by the Revised Partnership Agreement.
SECTION 2.02    Consideration. At the Effective Time, simultaneously with and as consideration for the contribution of the IDRs to the Partnership, the Partnership shall issue the New Common Units to the General Partner. The issuance of the New Common Units shall occur simultaneously with the contribution and cancellation of the IDRs.
SECTION 2.03    Certificates. The New Common Units issued in connection with the transactions contemplated by this Agreement may, but are not required to, be evidenced by certificates.
SECTION 2.04    Partnership Agreement. The parties hereto acknowledge and agree that at the Effective Time, in order to evidence (i) the contribution and cancellation of the IDRs, (ii) the issuance of the New Common Units, and (iii) certain other related changes to the Current Partnership Agreement, as permitted under Sections 13.1(d)(i) and 13.1(g) of the Current Partnership Agreement, the Revised Partnership Agreement shall become effective.
SECTION 2.05    Further Assurances. The parties hereto agree to execute and deliver, or cause to be executed and delivered, such further instruments or documents or take such other action as may be reasonably necessary or convenient to carry out the transactions contemplated hereby.
ARTICLE III    
REPRESENTATIONS AND WARRANTIES
SECTION 3.01    Partnership. The Partnership represents and warrants to the General Partner as of the date hereof and as of the Effective Time as follows:
(a)    The Partnership is a limited partnership duly formed and validly existing in good standing under the laws of the Republic of the Marshall Islands, and has the necessary limited partnership power and authority to execute and deliver, and, subject to the terms and conditions hereof, to perform its obligations under, this Agreement.
(b)    The Partnership has taken all action as may be necessary to authorize the Revised Partnership Agreement and for the authorization, execution and delivery of this Agreement and the Revised Partnership Agreement, the consummation of the transactions contemplated by this Agreement and the performance of its obligations under this Agreement and the Revised Partnership Agreement. This Agreement and the Revised Partnership Agreement constitute a legal, valid and binding obligation of the Partnership, and is enforceable against the Partnership in accordance with their terms, subject to bankruptcy, insolvency, moratorium, receivership, reorganization, liquidation and other similar laws relating to or affecting the rights and remedies of creditors generally from time to time in effect and to principles of equity (including concepts of materiality, reasonableness, good faith and fair dealing), regardless of whether considered in a proceeding in equity or at law.
(c)    Neither the execution and delivery hereof nor the performance of the Partnership’s obligations hereunder will violate or contravene any applicable law, the Current Partnership Agreement or any of the Partnership’s material agreements.
(d)    The New Common Units and the limited partner interests represented thereby have been duly and validly authorized and, when issued and delivered in accordance with the terms and provisions of this Agreement, will be duly and validly issued and fully paid (to the extent required under the Revised Partnership Agreement) and non-assessable (except as such nonassessability may be affected by Sections 30, 41, 51 and 60 of the Marshall Islands Limited Partnership Act.
SECTION 3.02    General Partner. The General Partner represents and warrants to the Partnership as of the date hereof and as of the Effective Time as follows:
(a)    The General Partner is a limited liability company duly formed and validly existing in good standing under the laws of the Republic of the Marshall Islands and has the necessary limited liability company power and authority to execute and deliver this Agreement and to perform its obligations hereunder.
(b)    The General Partner has taken all action as may be necessary to authorize the Revised Partnership Agreement and for the authorization, execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement and the performance of its obligations under this Agreement and the Revised Partnership Agreement. In accordance with Section 13.3(b)(ii) of the Current Partnership Agreement, the General Partner, in its individual capacity as the sole holder of the General Partner Interest and the IDRs, has consented to and approved the Revised Partnership Agreement. This Agreement and the Revised Partnership Agreement constitute legal, valid and binding obligations of the General Partner, enforceable against the General Partner in accordance with their terms, subject to bankruptcy, insolvency, moratorium, receivership, reorganization, liquidation and other similar laws relating to or affecting the rights and remedies of creditors generally from time to time in effect and to principles of equity (including concepts of materiality, reasonableness, good faith and fair dealing), regardless of whether considered in a proceeding in equity or at law.
(c)    The General Partner is the beneficial and record holder of all of the IDRs, and such IDRs are owned by the General Partner free and clear of all liens; there is no subscription, option, warrant, call, right, agreement or commitment relating to the issuance, sale, delivery, repurchase, contribution or transfer by the General Partner of such IDRs, except as set forth in the Current Partnership Agreement.
(d)    The General Partner is an “Accredited Investor” as defined in Rule 501(a) promulgated under the United States Securities Act of 1933, as amended (the “Securities Act”), and is acquiring the New Common Units for its own account, and not with a view to any distribution, resale, subdivision or fractionalization thereof in violation of the Securities Act or any other applicable domestic or foreign securities law, and the General Partner has no present plans to enter into any contract, undertaking, agreement or arrangement for any such distribution, resale, subdivision or fractionalization of the New Common Units in violation of the Securities Act or any other applicable domestic or foreign securities law.
(e)    The General Partner acknowledges that the New Common Units have not been registered under the Securities Act, or the securities laws of any state and may not be sold except pursuant to an effective registration statement under the Securities Act or pursuant to an exemption from registration under the Securities Act.
(f)    The General Partner acknowledges that the New Common Units are characterized as “restricted securities” under the federal securities laws inasmuch as they are being acquired from the Partnership in a transaction not involving a public offering and that under such law and applicable regulations such securities may be resold under the Securities Act only in certain limited circumstances.
(g)    The General Partner acknowledges that the New Common Units are subject to certain restrictions on transfer set forth in the Revised Partnership Agreement.
ARTICLE IV    
CONDITIONS
SECTION 4.01    Conditions to Obligations of Each Party. Notwithstanding any other provision of this Agreement, the respective obligations of each party to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment of the following conditions:
(a)    that the agreements and covenants of the other party hereto to be complied with or performed pursuant to the terms hereof shall have been duly complied with or performed;
(b)    no order shall have been entered and remained in effect in any action or proceeding before any Governmental Entity that would prevent or make illegal the consummation of the transactions contemplated herein; and
(c)    the representations and warranties of the other party shall remain true and correct at the Effective Time.
ARTICLE V    
MISCELLANEOUS
SECTION 5.01    Governing Law. The laws of the State of Delaware shall govern the construction, interpretation and effect of this Agreement, without giving effect to principles of conflicts of law, and the obligations, rights, and remedies of the parties shall be determined in accordance with such laws.
SECTION 5.02    Jurisdiction. Each party hereby consents to submit to the jurisdiction of the Court of Chancery of the State of Delaware or, if such court shall not have jurisdiction, any federal court located in the State of Delaware or other Delaware state court for any actions, suits or proceedings arising out of or relating to this Agreement and the Transactions (and each party agrees not to commence any action, suit or proceeding relating thereto except in such courts), and further agrees that service of any process, summons, notice or document by registered mail to the address set forth in Section 5.08 shall be effective service of process for any action, suit or proceeding brought against such party in any such court. Each party hereby irrevocably and unconditionally waives any objection to the laying of venue of action, suit or proceeding arising out of this Agreement or the Transactions in the Court of Chancery of the State of Delaware or any state and federal courts located in the State of Delaware and hereby further waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.
SECTION 5.01    WAIVER OF JURY TRIAL. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION OR PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF ANY ACTION OR PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (III) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (IV) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 5.02
SECTION 5.01    Counterparts. This Agreement may be executed in one or more counterparts, each of which shall constitute an original, and all of which simultaneously shall constitute one and the same instrument. A signature delivered on any counterpart by facsimile or other electronic means shall for all purposes be deemed to be an original signature to this Agreement.
SECTION 5.02    Amendments. All waivers, modifications, amendments or alterations of this Agreement shall require the written approval of each of the parties to this Agreement; provided, however, that this Agreement may not be waived, modified, amended or altered by or on behalf of the Partnership unless such waiver, modification, amendment or alteration is approved by the Conflicts Committee.
SECTION 5.03    Assignment. This Agreement shall be binding upon and inure to the benefit of the parties and the respective successors and assigns. This Agreement shall not be assignable except with the prior written consent of the other party. Any purported assignment in violation of this Agreement shall be null and void.
SECTION 5.04    Benefits of Agreement Restricted to Parties. This Agreement is made solely for the benefit of the parties to this Agreement, and no other person or entity (including employees and partners of the Partnership) shall have any right, claim or cause of action under or by virtue of this Agreement.
SECTION 5.05    Notices. Any notice, claim or demand in connection with this Agreement shall be delivered to the parties at the following addresses (or at such other address or facsimile number for a party as may be designated by notice by such party to the other party):
If to the Partnership, at
Teekay LNG Partners L.P.
4th Floor, Belvedere Building
69 Pitts Bay Road
Hamilton, HM 08, Bermuda
E-Mail: Anne.liversedge@teekay.com
Attn: Anne Liversedge
and
The Conflicts Committee of the
Board of Directors of Teekay GP, L.L.C.
4th Floor, Belvedere Building
69 Pitts Bay Road
Hamilton, HM 08, Bermuda
E-Mail: rich.d.paterson@gmail.com
Attn: Rich Paterson

If to the General Partner, at
Teekay GP L.L.C.

c/o Teekay Corporation
4th Floor, Belvedere Building
69 Pitts Bay Road
Hamilton, HM 08, Bermuda
E-Mail: Anne.liversedge@teekay.com
Attn: Anne Liversedge
and any such notice shall be deemed to have been received (i) forty eight (48) hours from the time of dispatch, if sent by courier or (ii) on the date received by the recipient if sent by e-mail if sent during normal business hours of the recipient or on the next business day if sent after normal business hours of the recipient.
SECTION 5.06    Severability. In the event that any provision of this Agreement shall finally be determined to be unlawful, such provision shall, so long as the economic and legal substance of the transactions contemplated hereby is not affected in any materially adverse manner as to any of the parties to this Agreement, be deemed severed from this Agreement and every other provision of this Agreement shall remain in full force and effect.
SECTION 5.07    Entire Agreement. Except for the Revised Partnership Agreement, this Agreement sets forth the entire agreement and understanding of the parties relating to the subject matter herein and supersedes all prior or contemporaneous discussions between the parties.
SECTION 5.01    Titles. The article, section and paragraph titles in this Agreement are only for purposes of convenience and do not form a part of this Agreement and will not be taken to qualify, explain, or affect any provision thereof.
[Signature page follows.]

IN WITNESS WHEREOF, this Exchange Agreement has been executed on behalf of each of the parties hereto effective as of the day and year first above written.
TEEKAY LNG PARTNERS L.P.
By: TEEKAY GP L.L.C., its general partner
By:
            
Name:    Anne Liversedge
Title:    Secretary
TEEKAY GP L.L.C.
By:
            
Name:    Anne Liversedge
Title:    Secretary
(Place of execution: Hamilton, Bermuda)    


Exhibit 1
Revised Partnership Agreement

(See attached.)