UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K/A
AMENDMENT NO. 1
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-12295
GENESIS ENERGY, L.P.
(Exact name of registrant as specified in its charter)
Delaware 76-0513049
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
500 Dallas, Suite 3200, Houston, Texas 77002
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 646-1200
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- --------------------
Common Units New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
----------
Aggregate market value of the Common Units held by non-affiliates of the
Registrant, based on closing prices in the daily composite list for transactions
on the New York Stock Exchange on March 14, 1997, was approximately $184.4
million.
GENESIS ENERGY, L.P.
1996 FORM 10-K ANNUAL REPORT
Table of Contents
Page
----
Part I
Item 1. Business 3
Item 2. Properties 11
Item 3. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Part II
Item 5. Market for Registrant's Common Units and Related
Security Holder Matters 11
Item 6. Selected Financial Data 13
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 14
Item 8. Financial Statements and Supplementary Data 18
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 18
Part III
Item 10. Directors and Executive Officers of the Registrant 18
Item 11. Executive Compensation 20
Item 12. Security Ownership of Certain Beneficial Owners and
Management 22
Item 13. Certain Relationships and Related Transactions 23
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 24
PART I
Item 1. Business
General
Genesis Energy, L.P., a Delaware limited partnership, was formed in December
1996. With the proceeds of an offering of common limited partnership units
("Common Units") to the public, Genesis Energy, L.P., through its affiliated
limited partnership, Genesis Crude Oil, L.P., (collectively the "Partnership" or
"Genesis") acquired the crude oil gathering and marketing operations of Basis
Petroleum, Inc. ("Basis") and the crude oil gathering, marketing and pipeline
operations of Howell Corporation and its subsidiaries ("Howell"). The
Partnership is one of the largest independent gatherers and marketers of crude
oil in North America. Genesis' operations are concentrated in Texas, Louisiana,
Alabama, Florida, Mississippi, New Mexico, Kansas and Oklahoma. In its
gathering and marketing business, Genesis is principally engaged in the purchase
and aggregation of crude oil at the wellhead and the bulk purchase of crude oil
at pipeline and terminal facilities for resale at various points along the crude
oil distribution chain, which extends from the wellhead to aggregation and
terminal stations, refineries and other end markets (the "Distribution Chain").
The Partnership's gathering and marketing margins are generated by buying crude
oil at competitive prices, efficiently transporting or exchanging the crude oil
along the Distribution Chain and marketing the crude oil to refineries or other
customers at favorable prices. In addition to its gathering and marketing
business, Genesis' operations include transportation of crude oil at regulated
published tariffs on its four common carrier pipeline systems. On a pro forma
basis, in 1996 the gathering and marketing operations contributed approximately
67% of the Partnership's total gross margin and the pipeline operations
contributed the remaining 33%.
Genesis currently purchases approximately 120,000 bpd of crude oil at the
wellhead from approximately 7,100 leases. Genesis utilizes its trucking fleet
of approximately 100 tractor-trailers and its gathering lines to transport crude
oil purchased at the wellhead to pipeline injection points, terminals and
refineries for sale to its customers. It also transports purchased crude oil on
trucks, barges and pipelines owned and operated by third parties. In addition,
as part of its gathering and marketing business, Genesis makes purchases of
crude oil in bulk at pipeline and terminal facilities for resale to refineries
or other customers. When opportunities arise to increase margin or to acquire a
grade of crude oil that more nearly matches the specifications for crude oil the
Partnership is obligated to deliver, Genesis exchanges crude oil with third
parties through exchange or buy/sell agreements.
Genesis currently transports a total of approximately 86,000 barrels per day on
its three principal common carrier crude oil pipeline systems and related
gathering lines. These systems are the Texas System, the Jay System extending
between Florida and Alabama and the Mississippi System extending between
Mississippi and Louisiana. Additionally, Genesis owns an interstate pipeline in
the Gulf of Mexico serving Main Pass Block 64. Approximately 2.2 million
barrels of associated storage capacity is owned by Genesis, of which
approximately 1.0 million barrels are available for use.
Genesis Energy, L.L.C. (the "General Partner"), a Delaware limited liability
company, serves as the sole general partner of Genesis Energy, L.P., and as the
operating general partner of its affiliated limited partnership, Genesis Crude
Oil, L.P. (GCOLP). The General Partner is owned 54% by Basis, a wholly-owned
subsidiary of Salomon Inc and 46% by Howell Crude Oil Company, a wholly-owned
subsidiary of Howell Corporation. Basis also owns 1,163,700 subordinated
limited partner units in GCOLP, representing 10.58% of GCOLP. Howell owns
991,300 subordinated limited partner units in GCOLP, representing 9.01% of
GCOLP. These subordinated limited partner interests are hereinafter referred to
as Subordinated OLP Units.
Announced Sale of Basis
On March 17, 1997, Salomon Inc announced that it had entered into a letter of
intent to sell 100% of the stock of Basis to Valero Energy Corporation. The
parties expect the transaction to close in May 1997. Prior to the transaction,
Basis will convey its interests in the Partnership and in the General Partner to
Salomon Inc.
Management is currently evaluating the impact that such a sale may have on the
Partnership. Salomon Inc, who controls the General Partner through their
indirect 54% ownership, does not anticipate that the transaction with Valero
will have a material impact on the Partnership.
Business Overview
In its gathering and marketing business, the Partnership seeks to purchase and
sell crude oil at points along the Distribution Chain where gross margins can be
achieved. Genesis generally purchases crude oil at prevailing prices from
producers at the wellhead under short-term contracts or in bulk from major oil
companies, intermediaries and other third parties. Genesis then transports the
crude oil along the Distribution Chain for sale to or exchange with customers.
The Partnership's margins from its gathering and marketing operations are
generated by the difference between the price of crude oil at the point of
purchase and the price of crude oil at the point of sale, minus the associated
costs of aggregation and transportation. The Partnership utilizes computerized
management information systems to identify the optimal combination of
transportation and exchange transactions expected to result in the greatest
margin for each barrel of crude oil purchased. Genesis generally enters into an
exchange transaction only when the cost of the exchange is less than the
alternative costs that it would otherwise incur in transporting or storing the
crude oil. In addition, Genesis often exchanges one grade of crude oil for
another to maximize margins or meet contract delivery requirements.
Generally, as Genesis purchases crude oil, it simultaneously establishes a
margin by selling crude oil for physical delivery to third party users, such as
independent refiners or major oil companies, or by entering into a future
delivery obligation with respect to futures contracts on the New York Mercantile
Exchange ("NYMEX"). Through these transactions, the Partnership seeks to
maintain a position that is substantially balanced between crude oil purchases,
on the one hand, and sales or future delivery obligations, on the other hand.
It is the Partnership's policy not to acquire and hold crude oil, futures
contracts or other derivative products for the purpose of speculating on crude
oil price changes.
Gross margin from gathering, marketing and pipeline operations varies from
period to period, depending to a significant extent upon changes in the supply
and demand of crude oil and the resulting changes in U.S. crude oil inventory
levels. In general, gathering and marketing gross margin increases when crude
oil inventories decline, resulting in crude oil for prompt (generally the next
month) delivery being priced at an increased premium over crude oil for future
delivery. During periods of low crude oil inventories, however, pipeline
margins in the Partnership's operating areas generally decrease because there is
less crude oil available for shipment and storage in Genesis' pipeline systems
as large supplies of crude oil are directed to markets located away from the
U.S. Gulf Coast. Conversely, when crude oil inventories are high, gathering and
marketing margins narrow, but crude oil shipment and storage opportunities
result in increased pipeline margins as crude oil is not directed away from the
U.S. Gulf Coast. Accordingly, the aggregate gross margins from pipeline
operations generally tend to be countercyclical to those from gathering and
marketing. The General Partner believes that the countercyclical nature of the
two businesses will tend to have a stabilizing effect on Genesis' cash flows
from operations.
Through the pipeline systems it owns and operates, the Partnership transports
crude oil for itself and others pursuant to tariff rates regulated by the
Federal Energy Regulatory Commission ("FERC") or the Texas Railroad Commission.
Accordingly, the Partnership offers transportation services to any shipper of
crude oil, provided that the products tendered for transportation satisfy the
conditions and specifications contained in the applicable tariff. Pipeline
revenues and gross margins are primarily a function of the level of throughput
and storage activity. The margins from the Partnership's pipeline operations
are generated by the difference between the regulated published tariff and the
fixed and variable costs of operating the pipeline. The pipeline transportation
business has considerable flexibility with respect to sources of crude oil and
does not depend on any specific wellhead source. Genesis believes that the
areas served by its pipeline systems will continue to produce crude oil in
volumes that are sufficient to maintain or increase its pipeline throughput for
the foreseeable future.
Management Information and Risk Management Systems
Genesis' computerized management information and risk management systems are
integral to each stage of the gathering, transportation and marketing
operations. Hand-held computer terminals combined with modems and satellite
equipment are used by field personnel to provide data to Genesis' marketing
personnel about crude oil purchases on a daily basis. Using this information
from the field, management is able to monitor crude oil volumes, grades,
locations and timing of delivery on a daily basis and to transmit instructions
to field personnel regarding crude oil pick-up schedules and truck routing to
crude oil injection stations and end markets. Using information transmitted
from field personnel and representatives to its computers, Genesis has developed
a database that includes volumes of crude oil purchases, volumes and prices
under contracts with producers and customers, accounting balances,
transportation costs and alternatives, and marketing and exchange opportunities.
Genesis uses this database to support its management information and risk
management systems.
Risk management strategies, including those involving price hedges using NYMEX
futures contracts, have become increasingly important in creating and
maintaining margins, although the costs of such strategies are not billed to the
Partnership's customers. Such hedging techniques require significant resources
dedicated to managing futures positions. By analyzing information in its
database through internally developed software programs, Genesis is able to
monitor crude oil volumes, grades, locations and delivery schedules and to
coordinate marketing and exchange opportunities, as well as NYMEX hedging
positions. This coordination enables the Partnership to net positions
internally, thereby reducing NYMEX commissions, and further ensures that
Genesis' NYMEX hedging activities are consistent with its business objectives.
Producer Services
Crude oil purchasers who buy from producers compete on the basis of competitive
prices and highly responsive services. Through its team of crude oil purchasing
representatives, Genesis maintains ongoing relationships with more than 700
producers. The Partnership believes that its ability to offer high-quality
field and administrative services to producers will be a key factor in its
ability to maintain volumes of purchased crude oil and to obtain new volumes.
High-quality field services include efficient gathering capabilities,
availability of trucks, willingness to construct gathering pipelines where
economically justified, timely pickup of crude oil from tank batteries at the
lease or production point, accurate measurement of crude oil volumes received,
avoidance of spills and effective management of pipeline deliveries. Accounting
and other administrative services include securing division orders (statements
from interest owners affirming the division of ownership in crude oil purchased
by the Partnership), providing statements of the crude oil purchased each month,
disbursing production proceeds to interest owners and calculation and payment of
ad valorem and production taxes on behalf of interest owners. In order to
compete effectively, the Partnership must maintain records of title and division
order interests in an accurate and timely manner for purposes of making prompt
and correct payment of crude oil production proceeds, together with the correct
payment of all severance and production taxes associated with such proceeds. In
1996, with its staff of division order specialists, Genesis distributed monthly
payments to approximately 29,000 interest owners.
Credit
Genesis' credit standing is a major consideration for parties with whom Genesis
does business. At times, in connection with its crude oil purchases or
exchanges, Genesis is required to furnish guarantees or letters of credit. In
most purchases from producers and most exchanges, an open line of credit is
provided by the seller up to a dollar limit, with credit support required for
amounts in excess of the limit.
In connection with the purchase, sale or exchange of crude oil, subject to
Genesis' compliance with specified terms and conditions, Salomon Inc has agreed
in a Master Credit Support Agreement to provide certain amounts of credit
support until December 31, 1999, in the form of guarantees from time to time at
the Partnership's request. See Note 8 of Notes to Consolidated Financial
Statements.
When Genesis markets crude oil, it must determine the amount, if any, of the
line of credit to be extended to any given customer. If Genesis determines that
a customer should receive a credit line, it must then decide on the amount of
credit that should be extended. Since typical Genesis sales transactions can
involve tens of thousands of barrels of crude oil, the risk of nonpayment and
nonperformance by customers is a major consideration in Genesis' business.
Management believes that most of Genesis' sales are made to creditworthy
entities or entities with adequate credit support.
Credit review and analysis are also integral to Genesis' leasehold purchases.
Payment for all or substantially all of the monthly leasehold production is
sometimes made to the operator of the lease. The operator, in turn, is
responsible for the correct payment and distribution of such production proceeds
to the proper parties. In these situations, Genesis must determine whether the
operator has sufficient financial resources to make such payments and
distributions and to indemnify and defend Genesis in the event any third party
should bring a protest, action or complaint in connection with the ultimate
distribution of production proceeds by the operator.
Competition
In the various business activities described above, the Partnership is in
competition with a number of major oil companies and smaller entities. There is
intense competition among all participants in the business for leasehold
purchases of crude oil. The number and location of the Partnership's pipeline
systems and trucking facilities give the Partnership access to a substantial
volume of domestic crude oil production throughout its area of operations. The
Partnership also has considerable flexibility in marketing the volumes of crude
oil which it purchases, without dependence on any single customer or
transportation or storage facility. The Partnership's principal competitors in
the purchase of leasehold crude oil production are Koch Oil Company, Scurlock
Permian Oil Company, Texaco Trading & Transportation Co., Inc., and EOTT Energy
Partners, L.P. Competitive factors include price, range and quality of
services, knowledge of products and markets and capabilities of risk management
systems.
Genesis' most significant competitors in its pipeline operations are primarily
common carrier and proprietary pipelines owned and operated by major oil
companies, large independent pipeline companies and other companies in the areas
where the Mississippi and Texas Systems deliver crude oil. The Jay System and
the Main Pass System operate in areas not currently served by pipeline
competitors. Competition among common carrier pipelines is based primarily on
posted tariffs, quality of customer service and proximity to refineries and
connecting pipelines. The Partnership believes that high capital costs, tariff
regulation and problems in acquiring rights-of-way make it unlikely that other
competing crude oil pipeline systems comparable in size and scope to Genesis'
pipelines will be built in the same geographic areas in the near future,
provided that Genesis' pipelines continue to have available capacity to satisfy
demands of shippers and that its tariffs remain at reasonable levels.
Employees
To carry out various purchasing, gathering, transporting and marketing
activities, the General Partner employs approximately 260 employees, including
management, truck drivers and other operating personnel, division order
analysts, accountants, tax specialists, contract administrators, schedulers,
marketing and credit specialists and employees involved in Genesis' pipeline
operations. None of such employees is represented by labor unions, and the
General Partner believes that the relationships with such employees are good.
Additional services will be performed on behalf of the Partnership pursuant to a
Corporate Services Agreement with Basis.
Environmental Matters
The Partnership is subject to federal and state laws and regulations relating to
the protection of the environment. At the federal level such laws include,
among others, the Clean Air Act, 42 U.S.C. Section 7401 et seq., as amended; the
Clean Water Act, 33 U.S.C. Section 1251 et seq., as amended; the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq., as amended; the
Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C.
Section 9601 et seq., as amended; and the National Environmental Policy Act, 42
U.S.C. Section 4321 et seq., as amended. Although compliance with such laws has
not had a significant effect on Genesis' business, such compliance in the future
could prove to be costly, and there can be no assurance that the Partnership
will not incur such costs in material amounts.
The Clean Air Act regulates, among other things, the emission of volatile
organic compounds in order to minimize the creation of ozone. Such emissions
may occur from the handling or storage of crude oil. The required levels of
emission control are established in state air quality control implementation
plans. Both federal and state law impose substantial penalties for violation of
these applicable requirements.
The Clean Water Act controls, among other things, the discharge of oil and
derivatives into certain surface waters. The Clean Water Act provides penalties
for any discharges of crude oil in harmful quantities and imposes liability for
the costs of removing an oil spill. State laws for the control of water
pollution also provide varying civil and criminal penalties and liabilities in
the case of a release of crude oil in surface waters or into the ground.
Federal and state permits for water discharges may be required. The Oil
Pollution Act of 1990 ("OPA"), as amended by the Coast Guard Authorization Act
of 1996, requires operators of offshore facilities to provide financial
assurance in the amount of $35 million to cover potential environmental cleanup
and restoration costs. This amount is subject to upward regulatory adjustment.
The Resource Conservation and Recovery Act regulates, among other things, the
generation, transportation, treatment, storage and disposal of hazardous wastes.
Transportation of petroleum, petroleum derivatives or other commodities and
maintenance activities may invoke the requirements of the federal statute, or
state counterparts, which impose substantial penalties for violation of
applicable standards.
The Comprehensive Environmental Response, Compensation, and Liability Act
("CERCLA"), also known as the "Superfund" law, imposes liability, without regard
to fault or the legality of the original conduct, on certain classes of persons
that are considered to have contributed to the release of a "hazardous
substance" into the environment. These persons include the owner or operator of
the disposal site or sites where the release occurred and companies that
disposed or arranged for the disposal of the hazardous substances found at the
site. Persons who are or were responsible for releases of hazardous substances
under CERCLA may be subject to joint and several liability for the costs of
cleaning up the hazardous substances that have been released into the
environment and for damages to natural resources, and it is not uncommon for
neighboring landowners and other third parties to file claims for personal
injury and property damage allegedly caused by the hazardous substances released
into the environment. In the ordinary course of the Partnership's operations,
substances may be generated or handled which fall within the definition of
"hazardous substances."
Under the National Environmental Policy Act ("NEPA"), a federal agency, in
conjunction with a permittee, may be required to prepare an environmental
assessment or a detailed environmental impact study before issuing a permit for
a pipeline extension or addition that would significantly affect the quality of
the environment. Should an environmental impact study or assessment be required
for any proposed pipeline extensions or additions, the effect of NEPA may be to
delay or prevent construction or to alter the proposed location, design or
method of construction.
The Partnership is subject to similar state and local environmental laws and
regulations that may also address additional environmental considerations of
particular concern to a state.
As part of the partnership formation, Basis and Howell are responsible for
certain environmental conditions related to their ownership and operation of
their respective assets transferred to the Partnership and for any environmental
liabilities which Basis or Howell may have assumed from prior owners of these
assets. Neither Basis nor Howell, however, will be required to indemnify the
Partnership for any liabilities resulting from an invasive environmental site
investigation unless such investigation was undertaken as a result of (i)
certain requirements imposed by a lending institution, (ii) any governmental or
judicial proceeding, (iii) any disposition of assets, (iv) a discovery in the
ordinary course of business of materials, or a discovery in prudent and
customary business practice of the possible presence of such materials, that
require regulatory disclosure or (v) any complaints by property owners or public
groups. In addition, the Partnership has assumed responsibility for the first
$25,000 per occurrence as to any environmental liability, up to an annual
aggregate of $200,000 and a total maximum liability of $600,000.
The Partnership has no knowledge of any outstanding liabilities or claims
relating to safety and environmental matters, individually or in the aggregate,
which would have a material adverse effect on the Partnership's financial
position or results of operations and that Partnership assets are in compliance
in all material respects with all applicable environmental laws and regulations.
No assurance can be given, however, as to the amount or timing of future
expenditures for environmental remediation or compliance, and actual future
expenditures may be different from the amounts currently anticipated.
Regulation
Pipeline regulation
Interstate Regulation Generally. The interstate common carrier pipeline
operations of the Jay, Mississippi and Main Pass Systems are subject to rate
regulation by FERC under the Interstate Commerce Act ("ICA"). The ICA requires,
among other things, that to be lawful, petroleum pipeline rates be just and
reasonable and not unduly discriminatory. The ICA permits challenges to
proposed new or changed rates by protest and to rates that are already final and
in effect by complaint, and provides that upon an appropriate showing a
complainant may obtain reparations for damages sustained for a period of up to
two years prior to the filing of a complaint. Howell is responsible for any ICA
liabilities with respect to activities or conduct during periods prior to the
closing of the Partnership's initial public offering of Common Units, and the
Partnership is responsible for ICA liabilities with respect to activities or
conduct thereafter. The Partnership adopted all of Howell's tariffs in effect
on the date of the transfer of the assets to Genesis. None of the tariffs have
been subjected to a protest or complaint by any shipper or other interested
party.
In general, the ICA requires that petroleum pipeline rates be cost based and
permits them to generate operating revenues on the basis of projected volumes
sufficient to cover, among other things, the following: (i) operating expenses,
(ii) depreciation and amortization, (iii) federal and state income taxes
determined on a separate company basis and adjusted or "normalized" to reflect
the impact of timing differences between book and tax accounting for certain
expenses, primarily depreciation and (iv) an overall allowed rate of return on
the pipeline's "rate base." Generally, rate base is a measure of investment in
or value of the common carrier assets which are used and useful in providing the
regulated services.
Energy Policy Act of 1992 and Subsequent Developments. In October of 1992
Congress passed the Energy Policy Act of 1992 ("Energy Policy Act"). The Energy
Policy Act is significant in that it requires FERC to promulgate regulations
establishing a simplified and generally applicable ratemaking methodology under
the ICA which will streamline FERC procedures to avoid unnecessary costs and
delays. As a fundamental part of this simplification and streamlining of
procedures, the Energy Policy Act deemed pipeline rates in effect for the 365-
day period ending on the date of enactment of the Energy Policy Act or that were
in effect on the 365th day preceding enactment and had not been subject to
complaint, protest or investigation during the 365-day period to be "just and
reasonable" under the ICA. In regard to these so-called "grandfathered" rates,
the Energy Policy Act provides that such grandfathered rates may only be
challenged under the following limited circumstances: (i) a substantial change
has occurred since enactment in either the economic circumstances of the oil
pipeline or the nature of the services which were a basis for the rate; (ii) the
complainant was contractually barred from challenging the rate prior to
enactment (in which event, following the expiration of the contractual bar, the
complainant has a very limited time period to lodge a complaint); or (iii) the
rate is unduly discriminatory or preferential.
FERC responded to the requirement that it promulgate rules simplifying and
streamlining the ratemaking process in a series of three related rulemaking
proceedings, the principal provisions of which took effect on January 1, 1995.
On October 22, 1993, FERC first responded to this mandate by issuing Order No.
561, which adopts a new indexing rate methodology for petroleum pipelines.
Under the new regulations, which were effective January 1, 1995, petroleum
pipelines are able to change their rates within prescribed ceiling levels that
are tied to the Producer Price Index for Finished Goods, minus one percent.
Rate increases made pursuant to the index will be subject to protest, but such
protests must show that the portion of the rate increase resulting from
application of the index is substantially in excess of the pipeline's increase
in costs. FERC's regulations provide, and a recent FERC order in a contested
pipeline rate proceeding affirms, that shippers may not challenge that portion
of the pipeline's rates which was grandfathered under the Energy Policy Act
whenever the pipeline files for its annual indexed rate increase; such
challenges are limited to the amount of the increase only unless, in a separate
showing, the complainant satisfies the Energy Policy Act's threshold requirement
to show that a "substantial change" has occurred in the economic circumstances
or the nature of the pipeline's services. Rate decreases are mandated under the
new regulations if the index decreases and the carrier has been collecting rates
equal to the rate ceiling. The new indexing methodology can be applied to any
existing rate, including in particular all "grandfathered" rates, but also
applies to rates under investigation. If such rate is subsequently adjusted,
the ceiling level established under the index must be likewise adjusted.
In Order No. 561, FERC emphasized that the combination of grandfathered rates
plus use of the new indexation methodology is expected to be the generally
prevailing methodology. The new indexation methodology is expected to cover all
normal cost increases. Cost-of-service ratemaking, while still available to the
pipeline for certain rate increases and to establish initial rates for new
service, is generally disfavored except in specified circumstances. In this
regard, the carrier may not use the cost-of-service methodology to change an
existing rate unless the pipeline can demonstrate that there is a substantial
divergence between the actual cost experienced by the carrier and the rate
resulting from the index such that the rate at the ceiling level would preclude
the carrier from being able to charge a just and reasonable rate. Similarly,
any party complaining of any existing indexed rate or challenging any indexed
rate change (other than a grandfathered rate) must provide a reasonable basis
for FERC to conclude that there may be a substantial divergence between actual
costs experienced and the rate resulting from the index such that the carrier's
rates are excessive and, therefore, unjust and unreasonable, and should be
investigated in a cost-of-service proceeding. FERC regulations also allow rate
changes to occur through market- based rates (for pipeline services which have
been found to be eligible for such rates) and through settlement rates, which
are rates unanimously agreed by the carrier and all shippers as appropriate. In
respect of new facilities and new services requiring the establishment of new,
initial rates, the carrier may rely on either cost-of-service ratemaking or may
initiate service under rates which have been contractually agreed with at least
one nonaffiliated shipper; however, other shippers may protest any new rates
established in this manner, in which event a cost-of-service showing is
required.
These alternative ratemaking methodologies to FERC's indexing methodology were
finalized on October 28, 1994, when FERC issued Order Nos. 571 and 572. In
Order No. 571, FERC articulated cost-of-service filing and reporting
requirements to be applicable to a pipeline's initial rates and to situations
where indexing is determined to be inappropriate. Order No. 571 also adopted
rules for the establishment of revised depreciation rates, and revised the
information required to be reported by pipelines in their FERC Form No. 6,
"Annual Report for Oil Pipelines." Order No. 572 establishes the filing
requirements and procedures that must be followed when a pipeline seeks to
charge market-based rates.
On May 10, 1996, the Court of Appeals for the District of Columbia Circuit
affirmed Order Nos. 561, 571 and 572. The Court held that by establishing a
general indexing methodology along with limited exceptions to indexed rates,
FERC had fulfilled its responsibilities under the Energy Policy Act and
reasonably balanced its dual responsibilities of ensuring just and reasonable
rates and streamlining ratemaking through generally applicable procedures.
Among other things, the Court affirmed FERC's interpretation of the Energy
Policy Act respecting challenges to grandfathered rates in the context of rate
increase filings using the indexation methodology.
Because of the novelty and uncertainty surrounding the indexing methodology as
well as the numerous untested issues associated with the trended original cost
methodology and light-handed regulation, the General Partner is unable to
predict with certainty whether, how or the extent to which FERC may apply these
methodologies to the Jay, Mississippi and Main Pass Systems, which FERC
regulates. The General Partner adopted Howell's preexisting tariffs and rates
pertaining to the Jay, Mississippi and Main Pass Systems and intends to rely on
the indexation procedures available under FERC regulations. Nevertheless, by
protest, complaint or shipper challenge under the Energy Policy Act to the
Partnership's grandfathered or indexed rates, the Partnership could become
involved in a cost-of-service proceeding before FERC and be required to defend
and support its rates based on costs. In any such cost-of-service rate
proceeding involving rates of the FERC-regulated Jay, Mississippi and Main Pass
Systems, FERC would be permitted to inquire into and determine all relevant
matters including such issues as (i) the appropriate capital structure to be
utilized in calculating rates, (ii) the appropriate rate of return, (iii) the
rate base, including the proper starting rate base, (iv) the rate design and (v)
the proper allowance for federal and state income taxes. In addition to the
regulatory considerations noted above, it is expected that the interstate common
carrier pipeline tariff rates will continue to be constrained by competitive and
other market factors.
Texas intrastate regulation
The intrastate common carrier pipeline operations of the Partnership in Texas
are subject to regulation by the Texas Railroad Commission. The applicable
Texas statutes require that pipeline rates be non-discriminatory and provide a
fair return on the aggregate value of the property of a common carrier used and
useful in the services performed after providing reasonable allowance for
depreciation and other factors and for reasonable operating expenses. There is
no case law interpreting these standards as used in the applicable Texas
statutes. This is because historically, as well as currently, the Texas
Railroad Commission has not been aggressive in regulating common carrier
pipelines such as those of the Partnership and has not investigated the rates or
practices of such carriers in the absence of shipper complaints, which have been
few and almost invariably settled informally. Given this history, although no
assurance can be given that the tariffs to be charged by the Partnership would
ultimately be upheld if challenged, the General Partner believes that the
tariffs now in effect can be sustained. Howell is responsible for any
liabilities under the applicable Texas statutes with respect to activities or
conduct during periods prior to the closing, and the Partnership is responsible
for such liabilities with respect to activities or conduct thereafter. The
Partnership adopted the tariffs in effect on the date of the closing of the
Partnership's initial public offering of Common Units.
Pipeline Safety Regulation
The Partnership's crude oil pipelines are subject to construction, installation,
operating and safety regulation by the Department of Transportation ("DOT") and
various other federal, state and local agencies. The Pipeline Safety Act of
1992, among other things, amends the Hazardous Liquid Pipeline Safety Act of
1979 ("HLPSA") in several important respects. It requires the Research and
Special Programs Administration ("RSPA") of DOT to consider environmental
impacts, as well as its traditional public safety mandate, when developing
pipeline safety regulations. In addition, the Pipeline Safety Act mandates the
establishment by DOT of pipeline operator qualification rules requiring minimum
training requirements for operators, and requires that pipeline operators
provide maps and records to RSPA. It also authorizes RSPA to require that
pipelines be modified to accommodate internal inspection devices, to mandate the
installation of emergency flow restricting devices for pipelines in populated or
sensitive areas, and to order other changes to the operation and maintenance of
petroleum pipelines. The Partnership has conducted hydrostatic testing of most
segments. Significant expenses could be incurred in the future if additional
safety measures are required or if safety standards are raised and exceed the
current pipeline control system capabilities.
States are largely preempted from regulating pipeline safety by federal law but
may assume responsibility for enforcing federal intrastate pipeline regulations
and inspection of intrastate pipelines. In practice, states vary considerably
in their authority and capacity to address pipeline safety. The Partnership
does not anticipate any significant problems in complying with applicable state
laws and regulations in those states in which it operates.
The Partnership's crude oil pipelines are also subject to the requirements of
the Federal Occupational Safety and Health Act ("OSHA") and comparable state
statutes. The General Partner believes that the Partnership's crude oil
pipelines have been operated in substantial compliance with OSHA requirements,
including general industry standards, record keeping requirements and monitoring
of occupational exposure to regulated substances.
In general, the General Partner expects to increase the Partnership's
expenditures in the future to comply with higher industry and regulatory safety
standards such as those described above. Such expenditures cannot be accurately
estimated at this time, although the General Partner does not expect that such
expenditures will have a material adverse impact on the Partnership, except to
the extent additional testing requirements or safety measures are imposed.
Trucking regulation
The Partnership will operate its fleet of trucks as a private carrier. Although
a private carrier that transports property in interstate commerce is not
required to obtain operating authority from the ICC, the carrier is subject to
certain motor carrier safety regulations issued by the DOT. The trucking
regulations cover, among other things, driver operations, keeping of log books,
truck manifest preparations, the placement of safety placards on the trucks and
trailer vehicles, drug testing, safety of operation and equipment, and many
other aspects of truck operations. The Partnership is also subject to OSHA with
respect to its trucking operations.
Commodities regulation
The Partnership's price risk management operations are subject to constraints
imposed under the Commodity Exchange Act and the rules of the NYMEX. The
futures and options contracts that are traded on the NYMEX are subject to strict
regulation by the Commodity Futures Trading Commission.
Information Regarding Forward-Looking Information
The statements in this Annual Report on Form 10-K that are not historical
information are forward looking statements within the meaning of Section 27a of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. Although the Partnership believes that its expectations regarding future
events are based on reasonable assumptions, it can give no assurance that its
goals will be achieved or that its expectations regarding future developments
will prove to be correct. Important factors that could cause actual results to
differ materially from those in the forward looking statements herein include
changes in regulations, the Partnership's success in obtaining additional lease
barrels, developments relating to possible acquisitions or business combination
opportunities, the success of the Partnership's risk management activities and
conditions of the capital markets and equity markets during the periods covered
by the forward looking statements.
Item 2. Properties
The Partnership owns and operates three common carrier crude oil pipeline
systems onshore and one offshore common carrier crude oil pipeline. The onshore
pipelines and related gathering systems consist of the 553-mile Texas system,
the 117-mile Jay System extending between Florida and Alabama and the 281-mile
Mississippi System extending between Mississippi and Louisiana. The offshore
pipeline is located in the Gulf of Mexico. It is 5.5 miles long and extends
from Main Pass Block 64 to a connection with another pipeline. The Partnership
also owns approximately 2.2 million barrels of storage capacity associated with
the onshore pipelines. These storage capacities include approximately 200,000
barrels each on the Mississippi and Jay Systems and 1.6 million barrels on the
Texas System, primarily at the Satsuma terminal in Houston, Texas.
In addition to transporting crude oil by pipeline, the Partnership transports
crude oil through a fleet of owned and leased tractors and trailers. At
December 31, 1996, the trucking fleet consisted of approximately 100 tractor-
trailers. The trucking fleet generally hauls the crude oil to one of the 110
pipeline injection stations owned or leased by the Partnership.
Item 3. Legal Proceedings
There is presently no pending or threatened litigation to which the Partnership
is a party.
During 1996 and 1995, various suits were filed in different jurisdictions
against numerous purchasers of crude oil production alleging price-fixing and
other discriminatory practices in connection with the purchase of crude oil
production at posted prices. The premise of these suits generally is that the
use of posted prices in purchasing crude oil has resulted in the underpayment of
the plaintiffs, and other interest owners, for the crude oil purchased and that
purchasers of crude oil have conspired to accomplish this result. Basis or
Howell, as well as major competitors of Genesis, were named in several of these
suits. Class certification either has been denied or not yet granted in the
cases filed against Basis or Howell. No assurance can be given that Genesis
will not be named as a defendant in these cases or that the prosecution of these
claims will not have an impact on industry practices and profitability in the
crude oil gathering and marketing business.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the one
month ended December 31, 1996.
PART II
Item 5. Market for Registrant's Common Units and Related Security Holder
Matters
The following table sets forth, for the periods indicated, the high and low sale
prices per Common Unit, as reported on the New York Stock Exchange Composite
Tape, and the amount of cash distributions paid per Common Unit.
Price Range
-------------------- Cash
High Low Distributions
-------- -------- -------------
One Month Ended December 31, 1996 $21.125 $20.250 $ -
As of January 31, 1997, there were approximately 12,000 record holders and
beneficial owners (held in street name) of the Partnership's Common Units.
There is no established public trading market for the Partnership's Subordinated
OLP Units. The Partnership will distribute 100% of its Available Cash as
defined in the Partnership Agreement within 45 days after the end of each
quarter to Unitholders of record and to the General Partner. Available Cash
consists generally of all of the cash receipts less cash disbursements of the
Partnership adjusted for net changes to reserves. The full definition of
Available Cash is set forth in the Partnership Agreement and amendments thereto,
a form of which is filed as an exhibit hereto. Distributions of Available Cash
to the Subordinated Unitholders will be subject to the prior rights of the
Common Unitholders to receive the Minimum Quarterly Distribution ("MQD") for
each quarter during the subordination period, which will not end earlier than
December 31, 2001, and to receive any arrearages in the distribution of the MQD
on the Common Units for prior quarters during the subordination period.
In connection with the Partnership's initial public offering of Common Units in
December 1996, Salomon Inc and the Partnership entered into a Distribution
Support Agreement pursuant to which, among other things, Salomon Inc agreed that
it would contribute up to $17.6 million to the Partnership in exchange for
Additional Partnership Interests ("APIs"), if necessary, to support the
Partnership's ability to pay the MQD on Common Units. Salomon Inc's obligation
to purchase APIs will end no earlier than December 31, 1999 and end no later
than December 31, 2001, with the actual termination subject to the levels of
distributions that have been made prior to the termination date.
The Partnership expects to declare a cash distribution to the Common Unitholders
and the General Partner that will be paid on or about May 15, 1997.
Item 6. Selected Financial Data (Unaudited)
(in thousands, except per unit and operating data)
The table below includes selected financial data for the Partnership for the one
month ended December 31, 1996 and includes the results of operations acquired
from Basis and Howell. Since Basis has the largest ownership interest in the
Partnership, the net assets acquired from Basis have been recorded at their
historical carrying amounts and the crude oil gathering and marketing division
of Basis has been treated as the Predecessor and the acquirer of Howell's
operations. The acquisition of Howell has been treated as a purchase for
accounting purposes.
<TABLE>
<CAPTION>
Eleven
Year One Month Months
Ended Ended Ended Year Ended
December 31,December 31,November 30, December 31,
-------------------------------------------
1996 <F1> 1996 1996 1995 1994 1993 1992
---------- -------- ---------- ---------- ---------- --------- ----------
(Pro forma) (Predecessor) (Predecessor)
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Revenues:
Gathering and marketing revenues $4,565,834 $370,559 $3,598,107 $3,440,065 $1,830,721 $2,171,056 $2,705,077
Pipeline revenues 16,780 1,426 - - - - -
---------- -------- ---------- ---------- ---------- ---------- ----------
Total revenues 4,582,614 371,985 3,598,107 3,440,065 1,830,721 2,171,056 2,705,077
Cost of sales:
Crude cost 4,526,363 366,723 3,573,086 3,409,759 1,806,241 2,153,901 2,687,226
Field operating costs 15,092 1,290 6,744 7,152 7,778 8,046 9,783
Pipeline operating costs 4,978 463 - - - - -
---------- ------- ---------- --------- ---------- ---------- ----------
Total cost of sales 4,546,433 368,476 3,579,830 3,416,911 1,814,019 2,161,947 2,697,009
---------- -------- ---------- --------- ---------- ---------- ----------
Gross margin 36,181 3,509 18,277 23,154 16,702 9,109 8,068
General and administrative expenses 9,470 1,363 3,316 3,658 3,858 4,111 4,960
Depreciation and amortization 6,834 518 1,396 4,815 7,530 7,947 8,611
---------- -------- ---------- --------- --------- ---------- ----------
Operating income 19,877 1,628 13,565 14,681 5,314 (2,949) (5,503)
Interest income (expense) 56 56 294 173 (685) (1,215) (1,691)
Other income (expense) (74) - (83) (197) 82 122 93
---------- -------- ---------- --------- --------- ---------- ----------
Net income (loss) before minority interests 19,859 1,684 13,776 14,657 4,711 (4,042) (7,101)
Minority interests 3,970 337 - - - - -
---------- -------- ---------- --------- --------- ---------- ----------
Net income (loss) <F2> $ 15,889 $ 1,347 $ 13,776 $ 14,657 $ 4,711 $ (4,042)$ (7,101)
========== ======== ========== ========== ========= ========== ==========
Net income per common unit $ 1.81 $ 0.15 N/A N/A N/A N/A N/A
========== ========
Balance Sheet Data (at end of period):
Current assets $ 410,371 $410,371 N/A $ 279,285 $ 184,253 $ 132,95 $ 324,111
Total assets 509,900 509,900 N/A 283,036 193,367 149,430 349,957
Long-term liabilities - - N/A - - - -
Equity of parent - - N/A (8,437) 4,393 15,578 24,824
Minority interest 26,257 26,257 N/A - - - -
Partners' capital 85,080 85,080 N/A - - - -
Other Data:
Maintenance capital expenditures <F3> $ 2,535 $ 106 $ 1,100 $ 17 $ 56 $ 122 $ 2,849
EBITDA <F4> $ 26,637 $ 2,146 $ 14,878 $ 19,299 $ 12,926 $ 5,120 $ 3,201
Volumes (bpd):
Gathering and marketing:
Wellhead 116,263 120,553 83,239 83,551 89,788 90,974 93,141
Bulk 174,174 163,645 170,003 190,279 33,595 - -
Exchange 288,880 216,709 247,936 248,781 180,924 236,555 270,946
---------- -------- ---------- --------- --------- ---------- ----------
Total 579,317 500,907 501,178 522,611 304,307 327,529 364,087
Pipeline 86,557 85,874 - - - - -
<FN>
<F1>
The unaudited pro forma selected financial data of the Partnership includes (a)
the historical operating results of the crude oil gathering and marketing
operations of Basis, (b) the historical crude gathering, marketing and pipeline
transportation operations of Howell and (c) certain pro forma adjustments to the
historical results of operations of Basis and Howell as if the Partnership had
been formed on January 1, 1996. See Note 2 of Notes to the Consolidated
Financial Statements for a description of the pro forma adjustments.
<F2>
Net income (loss) excludes the effect of income taxes and accounting changes for
the Predecessor.
<F3>
The General Partner estimates that capital expenditures necessary to maintain
the existing asset base at current operating levels will be $3 million each
year.
<F4>
EBITDA (earnings before interest expense, income taxes, depreciation and
amortization and minority interests) should not be considered as an alternative
to net income (loss) (as an indicator of operating performance) or as an
alternative to cash flow (as a measure of liquidity of ability to service debt
obligations).
</FN>
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following review of the results of operations and financial condition should
be read in conjunction with the Consolidated Financial Statements and Notes
thereto. The pro forma results of operations for the years ended December 31,
1996 and 1995 reflect the activities of Genesis Energy, L.P., and its subsidiary
(the "Partnership"). The results of operations for the years ended December 31,
1995 and 1994 reflect the activities of the Predecessor. In order to make the
comparisons more meaningful, the pro forma results of operations of the
Partnership for the year ended December 31, 1996 are compared to the pro forma
results of operations for the year ended December 31, 1995 and the historical
results of operations of the Predecessor for the year ended December 31, 1995
are compared to the historical results of operations for the year ended December
31, 1994.
Results of Operations
Selected financial data for this discussion of the results of operations
follows, in thousands.
Years Ended
Years Ended
December 31, December 31,
------------------ -----------------
1996 1995 1995 1994
------- ------- ------- -------
(Pro forma) (Predecessor)
Gross margin
Gathering & marketing $24,379 $26,571 $23,154 $16,702
Pipeline $11,802 $14,055 $ - $ -
General and administrative expenses $ 9,470 $ 9,148 $ 3,658 $ 3,858
Depreciation and amortization $ 6,834 $10,146 $ 4,815 $ 7,530
Operating income $19,877 $21,332 $14,681 $ 5,314
Interest income (expense) net $ 56 $ - $ 173 $ (685)
The profitability of Genesis and the entities from which Genesis was formed
depends to a significant extent upon their ability to maximize gross margin. The
gross margin from gathering and marketing operations is generated by the
difference between the price of crude oil at the point of purchase and the price
of crude oil at the point of sale, minus the associated costs of aggregation and
transportation. In addition to purchasing crude oil at the wellhead, Genesis
purchases crude oil in bulk at major pipeline terminal points and enters into
exchange transactions with third parties. These bulk and exchange transactions
are characterized by large volumes and narrow profit margins on purchase and
sales transactions, and the absolute price levels for crude oil do not
necessarily bear a relationship to gross margin, although such price levels
significantly impact revenues and cost of sales. Because period-to-period
variations in revenues and cost of sales are not generally meaningful in
analyzing the variation in gross margin for gathering and marketing operations,
such changes are not addressed in the following discussion. Pipeline revenues
and gross margins are primarily a function of the level of throughput and
storage activity and are generated by the difference between the regulated
published tariff and the fixed and variable costs of operating the pipeline.
Changes in revenues, volumes and pipeline operating costs, therefore, are
relevant to the analysis of financial results of Genesis' pipeline operations
and are addressed in the following discussion of pipeline operations of Genesis.
Gross margin from gathering, marketing and pipeline operations varies from
period to period, depending to a significant extent upon changes in the supply
and demand of crude oil and the resulting changes in U.S. crude oil inventory
levels. In general, gathering and marketing gross margin increases when crude
oil inventories decline, resulting in crude oil for prompt (generally the next
month) delivery being priced at an increased premium over crude oil for future
delivery. During periods of low crude oil inventories, however, pipeline margins
in the Partnership's operating areas generally decrease because there is less
crude oil available for shipment and storage in Genesis' pipeline systems as
large supplies of crude oil are directed to markets located away from the U.S.
Gulf Coast. Conversely, when crude oil inventories are high, gathering and
marketing margins narrow, but crude oil shipments and storage opportunities
result in increased pipeline margins as crude oil is not directed away from the
U.S. Gulf Coast. Accordingly, the aggregate gross margins from pipeline
operations generally tend to be countercyclical to those from gathering and
marketing. The General Partner believes that the countercyclical nature of the
two businesses will tend to have a stabilizing effect on Genesis' cash flows
from operations.
Pro Forma Year Ended December 31, 1996 Compared with Pro Forma Year Ended
December 31, 1995
The following analyses compare the pro forma results of the Partnership for the
year ended December 31, 1996 and the year ended December 31, 1995. The pro
forma consolidated financial statements of the Partnership reflect the
historical operating results of the crude oil gathering and marketing operations
of Basis and the crude oil gathering, marketing and pipeline transportation
operations of Howell including operations of certain of the crude oil pipelines
while they were owned by Exxon Pipeline Company from January 1 to March 31,
1995. Because the Partnership has no long-term debt, the pro forma consolidated
results reflect the elimination of interest expense. Income taxes were also
eliminated from the pro forma consolidated results as the Partnership will not
be subject to federal income taxes. The pro forma consolidated results of
operations assume no significant period-to-period changes in Genesis' general
and administrative expenses for 1996.
Gross Margin. Gathering and marketing gross margin decreased $2.2 million or 8%
to $24.4 million for the year ended December 31, 1996, as compared to $26.6
million for the year ended December 31, 1995. Field operating expenses
increased by $0.4 million, primarily due to higher fuel costs to operate
Genesis' fleet of tractors-trailers.
In the first half of 1996, U.S. crude oil inventories were at their historically
low levels and refiner demand for prompt delivery of crude oil was strong,
leading to substantial backwardation in crude oil prices. This backwardated
market caused the sales prices received by the Partnership to increase faster
than prices paid to producers at the wellhead, which resulted in increasing
gross margins for the six months ended June 30, 1996 as compared to the six
months ended June 30, 1995. In the second half of 1996, due to increasing crude
oil inventories and reduced refiner demand for prompt delivery of crude oil, the
sales prices received by the Partnership decreased faster than the prices paid
to producers, particularly as other gathering companies continued to pay higher
producer bonuses in an effort to increase market share. As a result of the
expiration of a favorable provision in a large crude oil purchase contract with
one of the Partnership's principal customers that reduced gross margins by
approximately $1.0 million and the third and fourth quarters' unfavorable
pricing situation, pro forma gathering and marketing gross margin declined from
the first half of 1996 to the second half of 1996.
Pipeline gross margin decreased $2.3 million or 16% to $11.8 million for the
year ended December 31, 1996, as compared to $14.1 million for the year ended
December 31, 1995. Although increased demand for crude oil resulted in
increased gross margin in the gathering and marketing operations during the
first half of 1996, pipeline operations experienced a countercyclical decline in
gross margin during the same period. Pipeline volumes per day increased
slightly in the second half of 1996. Low U.S. crude oil inventories resulted in
reduced pipeline utilization, which resulted in a decline of 9% in pipeline
throughput during 1996 compared to 1995. Pipeline revenues for 1995 include
nine months of tank rental fees totaling $0.9 million charged to a third party
for usage of storage tanks that the Partnership owns in northwest Houston
whereas the 1996 period includes three months of tank rental fees totaling $0.3
million. The Partnership has not received any payments under such lease since
March 31, 1996.
Depreciation and Amortization. Depreciation and amortization expense decreased
$3.3 million or 33% to $6.8 million for the year ended December 31, 1996, as
compared to $10.1 million for the year ended December 31, 1995. Of the
reduction, $2.4 million resulted from the full amortization in 1995 of costs
capitalized from the JM Petroleum Corporation acquisition by Basis in 1991.
Year Ended December 31, 1995 (Predecessor) Compared to Year Ended December 31,
1994 (Predecessor)
Gross Margin. Gathering and marketing gross margin increased $6.5 million or
39% to $23.2 million for the year ended December 31, 1995, as compared to $16.7
million for the prior year. The increase in gross margin is attributable in
part to decreased U.S. crude oil inventories and higher levels of bulk purchases
as compared with the prior period. Field operating costs decreased from year to
year, primarily due to the full realization in 1995 of the discontinuation of
unprofitable operations in nonstrategic areas during 1994. Also, during June
1995 all of the Predecessor's Oklahoma trucking operation assets were sold,
which further decreased field operating costs in 1995.
General and Administrative Expenses. General and administrative expenses
decreased $0.2 million or 5% to $3.7 million for the year ended December 31,
1995, as compared to $3.9 million for the prior year, primarily reflecting
ongoing efforts to reduce expenses and to consolidate functions.
Depreciation and Amortization. Depreciation and amortization expense decreased
$2.7 million or 36% to $4.8 million for the year ended December 31, 1995, as
compared to $7.5 million for the prior year. Of this reduction, $2.4 million
resulted from the full amortization in 1995 of costs capitalized from the JM
Petroleum acquisition in 1991. The remainder of the reduction in 1995 is due to
the full amortization of some operating assets.
Interest Expense. Net interest expense decreased $0.9 million to net interest
income of $0.2 million for the year ended December 31, 1995, as compared to net
interest expense of $0.7 million for the prior year. This reduction in interest
expense was due primarily to repayment to Basis of cash advances outstanding.
Liquidity and Capital Resources
Cash Flows
Net cash used in operating activities was $0.8 million for the one-month ended
December 31, 1996. The decrease in cash flow from the formation of the
Partnership is due primarily to increases in inventories. Net cash used in
operating activities of the Predecessor was $2.6 million for the eleven months
ended November 30, 1996 and net cash provided by operating activities was $21.5
million and $13.8 million for the years ended December 31, 1995 and 1994,
respectively. The decrease during 1996 was primarily the result of an increase
in accounts receivable of $133.7 million, only partially offset by an increase
of $118.9 million in accounts payable. The increases in 1995 and 1994 were
primarily due to increases in operating income.
Net cash used in investing activities was $74.1 million for the one month ended
December 31, 1996. This amount primarily relates to the cash expended to
acquire the Howell operations. For the eleven months ended November 30, 1996,
net cash used in investing activities for the Predecessor was $2.0 primarily
from the purchase of 26 new tractors and NYMEX seats contributed to Genesis.
For the years ended December 31, 1995 and 1994, net cash provided by investing
activities was $0.5 million and $0.1 million, respectively, primarily as a
result of the sale of nonstrategic assets.
Net cash provided by financing activities for the one month ended December 31,
1996, was $79.5 million, consisting of the net public offering proceeds and
general partner contribution at formation of the Partnership totaling $165.9
million, offset by the distribution to Basis at formation of $87.0 million. Net
cash provided by financing activities for the eleven months ended November 30,
1996 and net cash used by financing activities for the years ended December 31,
1995 and 1994 resulted from advances between Basis and the Predecessor.
Capital Expenditures
Capital expenditures for the one month ended December 31, 1996 and eleven months
ended November 30, 1996 were $0.1 million and $1.1 million, respectively. In
each period, these expenditures were maintenance capital expenditures. In the
years ended December 31, 1995 and 1994, capital expenditures by the Predecessor
were less than $0.1 million.
Maintenance capital expenditures on a pro forma basis for the years ended
December 31, 1996 and 1995 were $2.5 million and $0.7 million, respectively.
The Partnership estimates future maintenance capital expenditures to be
approximately $3.0 million per year. These expenditures are expected to be
primarily for improvements related to the three principal pipeline systems and
for the periodic replacement of tractors and trailers in the Partnership's
fleet. The Partnership expects to fund its maintenance capital expenditure
requirements from internally generated cash.
Working Capital and Credit Resources
Pursuant to the Master Credit Support Agreement, Salomon Inc will provide
transitional credit support in the form of a Guaranty Facility over a period of
approximately three years in connection with the purchase, sale or exchange of
crude oil in the ordinary course of the Partnership's business with third
parties. The aggregate amount of the Guaranty Facility will be limited to $550
million through June 30, 1997, $500 million for the period from July 1, 1997 to
December 31, 1997, $400 million for the year ending December 31, 1998 and $300
million for the year ending December 31, 1999 (to be reduced in each case by the
amount utilized at any one time pursuant to the Working Capital Facility and by
the amount of any obligation to a third party to the extent that such party has
a prior security interest in the collateral under the Master Credit Support
Agreement). The Partnership will be required to pay a guaranty fee to Salomon
Inc which will increase over the three-year period, thereby increasing the cost
of the credit support provided to the Partnership under the Guaranty Facility,
from a below-market rate to a rate that may be higher than rates paid to
independent financial institutions for similar credit.
Basis has agreed to use its reasonable best efforts, to the extent it has
availability under its uncommitted credit lines, to provide to the Partnership,
for a six-month period ending May 31, 1997, a Working Capital Facility of up to
$50 million, which amount includes direct cash advances not to exceed $35
million outstanding at any one time and letters of credit that may be required
in the ordinary course of the Partnership's business. The total amounts
outstanding at any one time under this Working Capital Facility will
correspondingly reduce the amounts available under the Guaranty Facility. The
interest rate for the Working Capital Facility will equal the cost to Basis of
its borrowings as reasonably determined by Basis. Prior to the expiration of
the six-month period of availability, it is expected that the Partnership will
have arranged for a working capital facility through one or more third party
lenders.
At December 31, 1996, the aggregate amount of obligations covered by guarantees
was $459.6 million, including $260.6 million in payable obligations and $199.0
million in estimated crude oil purchase obligations for January 1997. In
addition, the Partnership had letters of credit in the amount of $2.2 million
outstanding at December 31, 1996. No direct cash advances were outstanding at
year end.
Salomon Inc and Basis received a security interest in all the Partnership's
receivables, inventories, general intangibles and cash to secure obligations
under the Master Credit Support Agreement.
There can be no assurance of the availability or the terms of credit for the
Partnership. Salomon Inc does not currently foresee any circumstances under
which it would provide guarantees or other credit support after the three-year
credit support period. In addition, if the General Partner is removed without
its consent, Salomon Inc's and Basis' credit support obligations will terminate.
In addition, Salomon Inc's and Basis' obligations under the Master Credit
Support Agreement may be transferred or terminated early subject to certain
conditions. Prior to December 1999, management of the Partnership intends to
replace the Guaranty Facility with a letter of credit facility with one or more
third party lenders.
The Partnership will make its first distribution of Available Cash within 45
days after the end of the first quarter of 1997 to Unitholders of record and to
the General Partner.
Announced Sale of Basis
On March 17, 1997, Salomon Inc announced that it had entered into a letter of
intent to sell 100% of the stock of Basis to Valero Energy Corporation. The
parties expect the transaction to close in May 1997. Prior to the transaction,
Basis will convey its interests in the Partnership and in the General Partner to
Salomon Inc.
Management is currently evaluating the impact that such a sale may have on the
Partnership. Salomon Inc, who controls the General Partner through their
indirect 54% ownership, does not anticipate that the transaction with Valero
will have a material impact on the Partnership.
Item 8. Financial Statements and Supplementary Data
The information required hereunder is included in this report as set forth in
the "Index to Consolidated Financial Statements" on page 26.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
None.
Part III
Item 10. Directors and Executive Officers of the Registrant
The Partnership does not directly employ any persons responsible for managing or
operating the Partnership or for providing services relating to day-to-day
business affairs. The General Partner provides such services and is reimbursed
for its direct and indirect costs and expenses, including all compensation and
benefit costs.
The Board of Directors of the General Partner has established a committee (the
"Audit Committee") consisting of individuals who are neither officers nor
employees of the General Partner or any affiliate of the General Partner. The
committee has the authority to review, at the request of the General Partner,
specific matters as to which the General Partner believes there may be a
conflict of interest in order to determine if the resolution of such conflict is
fair and reasonable to the Partnership. In addition, the committee will review
the external financial reporting of the Partnership, will recommend engagement
of the Partnership's independent accountants, and will review the Partnership's
procedures for internal auditing and the adequacy of the Partnership's internal
accounting controls.
Directors and Executive Officers of the General Partner
Set forth below is certain information concerning the directors and executive
officers of the General Partner. All directors of the General Partner are
elected annually by the General Partner. All executive officers serve at the
discretion of the General Partner.
Name Age Position
- ----------------- ---- ------------------------------------
Jeffrey R. Serra 40 Director and Chairman of the Board
John P. vonBerg 43 Director, Chief Executive Officer and
President
Mark J. Gorman 42 Director and Executive Vice President
Thomas W. Jasper 51 Director
Paul N. Howell 78 Director
Ronald E. Hall 65 Director
Donald H. Anderson 48 Director
Herbert I. Goodman 74 Director
J. Conley Stone 65 Director
John M. Fetzer 43 Senior Vice President, Crude Oil
Allyn R. Skelton, II 45 Chief Financial Officer
Paul A. Scoff 38 General Counsel and Secretary
Allen R. Stanley 53 Vice President, Pipeline Operations
Ben F. Runnels 56 Vice President, Trucking Operations
Jeffrey R. Serra has served as a Director and Chairman of the Board of the
General Partner since December 1996. He is currently Chairman, President and
Chief Executive Officer of Basis Petroleum, Inc., formerly Phibro Energy USA,
Inc. ("Phibro USA"), and has held this post since January 1, 1992. From 1991 to
1992, Mr. Serra was Vice-Chairman and a Director of Phibro Energy, Inc., a
wholly owned subsidiary of Salomon Inc, responsible for all refining and
marketing activities. From 1987 to 1991, Mr. Serra was Vice President of Supply
and Trading for Hill Petroleum Company, at the time an 80% owned subsidiary of
Phibro Energy Inc. Prior to 1987, Mr. Serra held the position of Crude Oil
Trader at Phibro Energy Inc. for one year as well as for The Standard Oil
Company of Ohio for the three preceding years. Prior to that, he served four
years in the United States Army Corps of Engineers with the final rank of
Captain.
John P. vonBerg has served as Director, Chief Executive Officer and President of
the General Partner since December 1996. He was Vice President of Crude Oil
Gathering, Domestic Supply and Trading, for Basis and its predecessor, Phibro
USA, from January 1994 to December 1996. He managed the Gathering and Domestic
Trading and Commercial Support functions for Phibro USA during 1993. Prior to
1993, Mr. vonBerg worked for Marathon Oil Company ("Marathon") for 13 years in
various capacities, including Product Trading, Risk Management, Crude Oil
Purchases and Sales, Finance, Auditing and Operations.
Mark J. Gorman has served as Director and Executive Vice President of the
General Partner since December 1996. He was President of Howell Crude Oil
Company, a wholly-owned subsidiary of Howell Corporation, from September 1992 to
December 1996. Prior to joining Howell, Mr. Gorman worked for Marathon for
fifteen years in various capacities in Crude Oil Acquisition and Finance and
Administration, including Manager of Crude Oil Purchases and Sales and Manager
of Crude Oil Trading and Risk Management.
Thomas W. Jasper has served as a director of the General Partner since December
1996. He was appointed to the position of Treasurer of Salomon Inc and Salomon
Brothers in April 1996. Mr. Jasper is also a Managing Director of Salomon
Brothers. Prior to this appointment, he was responsible for investment banking
client relationships with European and Japanese multinational subsidiaries in
the United States. In February 1994, Mr. Jasper was named Chairman of Salomon
Brothers Hong Kong Limited and Chief Operating Officer for the Asia-Pacific
region. Mr. Jasper was originally made Regional Head of Salomon Brothers Hong
Kong Limited in July 1992. His previous responsibilities with Salomon Brothers
included managing the firm's Capital Markets Services Group and its Interest
Rate Swap Group. He joined Salomon Brothers in 1982. Mr. Jasper was with
Bankers Trust Company prior to 1982.
Paul N. Howell has served as a Director of the General Partner since December
1996. He is currently President and Chief Executive Officer of Howell. He has
held the position of President since 1995 and the post of Chief Executive
Officer since 1955. Mr. Howell served as Chairman of the Board of Howell from
1978 to 1995.
Ronald E. Hall has served as a Director of the General Partner since December
1996. He has been Chairman of the Board of Howell since 1995. From 1985 to
1995, Mr. Hall held the position of President and Chief Executive Officer of
CITGO Petroleum Corporation ("CITGO"), a refining, marketing and distribution
company. Mr. Hall served as a director of CITGO from 1990 to 1995.
Donald H. Anderson was elected to the Board of Directors of the General Partner
in March 1997. He was Chairman, President and Chief Executive Officer of
PanEnergy Services, Inc., from December 1994 to March 1, 1997. PanEnergy
Services, Inc., a subsidiary of PanEnergy Corp., is engaged in nonjurisdictional
natural gas and electric marketing, natural gas gathering and processing and
crude oil and natural gas liquids trading and pipeline transportation. From
1989 to 1994, Mr. Anderson was President and Chief Operating Officer and
Director of Associated Natural Gas Corporation, which merged with PanEnergy
Corp. in 1994. Prior to 1989, Mr. Anderson was Vice President of Lantern
Petroleum Corporation.
Herbert I. Goodman was elected to the Board of Directors of the General Partner
in January 1997. He is the Chairman of IQ Holdings, Inc., a manufacturer and
marketer of petrochemical-based consumer products. From 1988 until 1996 he was
Chairman and Chief Executive Officer of Applied Trading Systems, Inc., a trading
and consulting business. Prior to 1988, Mr. Goodman was with Gulf Trading and
Transportation Company and Gulf Oil Corporation.
Mr. J. Conley Stone was elected to the Board of Directors of the General Partner
in January 1997. From 1987 to his retirement in 1995, he served as President,
Chief Executive Officer, Chief Operating Officer and Director of Plantation Pipe
Line Company, a common carrier liquid petroleum products pipeline transporter.
From 1976 to 1987, Mr. Stone served in a variety of positions with Exxon
Pipeline Company.
John M. Fetzer has served as Senior Vice President, Crude Oil, for the General
Partner since December 1996. He served in the same capacity for Howell Crude
Oil Company from September 1994 to December 1996. From 1993 to September 1994,
Mr. Fetzer was a private investor and a consultant and expert witness in oil-
and gas-related matters. He held the positions of Senior Vice President,
Marketing, from 1991 to 1993 and Vice President of Crude Oil Trading from 1986
to 1991 at Enron Oil Trading and Transportation. From 1981 to 1986, Mr. Fetzer
served as Manager, Crude Oil Trading for UPG Falco and P&O Falco, which later
became Enron Oil Trading and Transportation. Prior to joining P&O Falco he held
various financial and commercial positions with Marathon, which he joined in
1976.
Allyn R. Skelton, II, has served as Chief Financial Officer of the General
Partner since December 1996. He served as Chief Financial Officer of Howell
from 1989 until October 1996, and served as Senior Vice President of Howell from
1993 to December 1996. Previously, he held the position of Controller of Howell
from 1985 to 1989. Mr. Skelton joined Howell in 1983 as Tax Manager. Prior to
joining Howell, he held various tax and financial positions with other oil
companies.
Paul A. Scoff has served as General Counsel and Secretary of the General Partner
since December 1996. He served as Senior Counsel for Basis Petroleum, Inc. and
its predecessor Phibro USA from June 1994 to December 1996. Prior to joining
Phibro USA, he was a Senior Attorney for The Coastal Corporation ("Coastal")
from 1989 until June of 1994 where he advised the marine, refining and marketing
and crude gathering subsidiaries of Coastal. Mr. Scoff was in private practice
from 1984 until he joined Coastal in 1989.
Allen R. Stanley has served as Vice President, Pipeline Operations, of the
General Partner since December 1996. He joined Howell Crude Oil Company as
Senior Vice President of Operations in February 1995 following one year of
consulting work for Howell. From 1986 to his retirement from Marathon in 1992,
he was Manager, Business Development and Joint Interest for the downstream
component. From 1976 to 1986, he served as Manager/Gulf Coast Division in
Houston, Texas for Marathon Pipe Line Company, Manager/Non-operated Joint
Interests in London for Marathon, Manager/Engineering for Oasis Oil Company and
Manager, Engineering for Marathon Pipe Line Company in Findlay, Ohio. Mr.
Stanley began his career with Marathon in 1965.
Ben F. Runnels has served as Vice President, Trucking Operations of the General
Partner since December 1996. He held the position of General Manager,
Operations with Basis and its predecessor, Phibro USA, for the past four years.
Prior to that, he was Manager, Operations for JM Petroleum Corporation for four
years. From 1974 until 1988, he was employed by Tesoro Petroleum Corp. and held
the positions of Terminal Manager, Regional Manager, Pipeline Manager, and
Division Manager, respectively. From 1962 until 1974, Mr. Runnels held various
managerial positions at Ryder Tank Lines, Coastal Tank Lines, Robertson Tank
Lines and Gulf Oil Corporation.
Section 16(a) of the Securities Exchange Act of 1934 requires the officers and
directors of the General Partner and persons who own more than ten percent of a
registered class of the equity securities of the Partnership to file reports of
ownership and changes in ownership with the SEC and the New York Stock Exchange.
Based solely on its review of the copies of such reports received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the General Partner believes that during 1996 its
officers and directors complied with all applicable filing requirements in a
timely manner.
Officers of Salomon Inc, Basis, Howell and the General Partner will not receive
any additional compensation for serving Genesis Energy, L.L.C., as members of
the Board of Directors or any of its committees. Each of the independent
directors will receive an annual fee of $20,000.
Item 11. Executive Compensation
The Partnership and the General Partner were formed in September 1996 but
transacted no business until December 1996. Accordingly, the General Partner
paid no compensation to its directors and officers with respect to the first
eleven months of 1996 or the 1995 fiscal year. Under the terms of the
Partnership Agreement, the Partnership is required to reimburse the General
Partner for expenses relating to the operation of the Partnership, including
salaries and bonuses of employees employed on behalf of the Partnership, as well
as the costs of providing benefits to such persons under employee benefit plans
and for the costs of health and life insurance. See "Certain Relationships and
Related Transactions."
The following table summarizes certain information regarding the compensation
paid or accrued by Genesis during the one month ended December 31, 1996 to the
Chief Executive Officer.
<TABLE>
<CAPTION>
Summary Compensation Table
Annual
Compensation
Salary
Name and Principal Position <F1> Year ($)
--------------------------- ---- ------
<S> <C> <C>
John P. vonBerg <F2> 1996 29,167
Chief Executive Officer and President
<FN>
<F1>
No executive officer received compensation from the General Partner in amounts
greater than $100,000 for the one month ended December 31, 1996. Therefore, the
only executive officer listed is the Chief Executive Officer.
<F2>
Amounts listed for Mr. vonBerg represent amounts paid to him for services to the
General Partner for the one month ended December 31, 1996. Mr. vonBerg did not
have "Perquisites and Other Benefits" with a value greater than the lesser of
$50,000 or 10% of his reported salary.
</FN>
</TABLE>
Employment Agreements
The General Partner entered into employment agreements with the following
executive officers: Mr. vonBerg, Mr. Gorman, Mr. Fetzer, Mr. Skelton, Mr.
Stanley, Mr. Runnels and Mr. Scoff. The agreements have an initial term
expiring December 31, 1999 ("Initial Term") with one optional extension term of
two years and five additional optional extension terms of one year each
("Extension Terms"), and include the following additional provisions: (i) an
annual base salary, (ii) eligibility to participate in the Restricted Unit Plan
(including the allocation of Initial Restricted Units) and Incentive
Compensation Plan described below, (iii) confidential information and
noncompetition provisions and (iv) an involuntary termination provision pursuant
to which the executive officer will receive severance compensation under certain
circumstances. Severance compensation applicable under the employment
agreements for an involuntary termination during the Initial Term and Extension
Terms (other than a termination for cause, as defined in the agreements) will
include payment of the greater of (i) the base salary for the balance of the
applicable term, or (ii) one year's base salary then in effect and, in addition,
the executive will be entitled to retain the Initial Restricted Units allocated
to such employee under the Restricted Unit Plan for a period of six months after
termination or expiration and incentive compensation payable to the executive in
accordance with the Incentive Plan. Upon expiration or termination of the
agreement, the confidential information and noncompetition provisions will
continue until the earlier of one year after the date of termination or the
remainder of the unexpired term, but in no event for less than six months
following the expiration or termination.
Restricted Unit Plan
In January 1997, the General Partner adopted a restricted unit plan (the
"Restricted Unit Plan") for key employees of the General Partner. Initially,
rights to receive 291,000 Common Units are available under the Restricted Unit
Plan. From these Units, rights to receive 194,000 Common Units (the "Initial
Restricted Units") have been allocated to approximately 30 individuals, subject
to the vesting conditions described below and subject to other customary terms
and conditions.
The Initial Restricted Units will vest upon the conversion of Subordinated OLP
Units to Common OLP Units. In the event of early conversion of a portion of the
Subordinated OLP Units into Common OLP Units, the Initial Restricted Units will
vest in the same proportion as the percentage of Subordinated OLP Units that
convert into Common OLP Units. The remaining rights to receive 97,000 Common
Units initially available under the Restricted Unit Plan may be allocated or
issued in the future to key employees on such terms and conditions (including
vesting conditions) as the Compensation Committee of the General Partner
("Compensation Committee") shall determine.
Upon "vesting" in accordance with the terms and conditions of the Restricted
Unit Plan, Common Units allocated to a plan participant will be issued to such
participant. Units issued to participants may be newly issued Units acquired by
the General Partner from the Partnership at then prevailing market prices or may
be acquired by the General Partner in the open market. In either case, the
associated expense will be borne by the Partnership. Until Common Units have
vested and have been issued to a participant, such participant shall not be
entitled to any distributions or allocations of income or loss and shall not
have any voting or other rights in respect of such Common Units. The issuance
of the Common Units pursuant to the Restricted Unit Plan is intended to serve as
a means of incentive compensation for performance. Accordingly, no
consideration will be payable by the plan participants upon vesting and issuance
of the Common Units.
Incentive Plan
In January 1997, the General Partner adopted the Genesis Incentive Compensation
Plan (the "Incentive Plan"). The Incentive Plan is designed to enhance the
financial performance of the Partnership by rewarding the executive officers and
other specific key employees for achieving annual financial performance
objectives. The Incentive Plan will be administered by the Compensation
Committee. Individual participants and payments, if any, for each calendar year
will be determined by and in the discretion of the Compensation Committee. In
no event will incentive payments be made with respect to any year unless (i) the
aggregate Minimum Quarterly Distribution in the Incentive Plan year has been
distributed to each holder of Common Units, plus any arrearage thereon, and to
each holder of Subordinated OLP Units, (ii) the Adjusted Operating Surplus
generated during such year has equaled or exceeded the sum of the Minimum
Quarterly Distribution on all of the outstanding Common Units and Subordinated
OLP Units and the related distribution on the General Partner's 2% general
partner interest during such year and (iii) no APIs are outstanding. Any
incentive payments will be at the discretion of the Compensation Committee, and
the General Partner will be able to amend or change the Incentive Plan at any
time.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The Partnership knows of no one who beneficially owns in excess of five percent
of the Common Units of the Partnership. As set forth below, certain beneficial
owners own interests in the General Partner of the Partnership.
<TABLE>
<CAPTION>
Amount and Nature
Name and Address of Beneficial Ownership Percent
Title of Class of Beneficial Owner as of January 1, 1997 of Class
--------------------- --------------------- ----------------------- ---------
<S> <C> <C> <C>
General Partner Interest Genesis Energy, L.L.C. 1 <F1> 100.00
500 Dallas, Suite 3200
Houston, TX 77002
General Partner Interest Basis Petroleum, Inc. 1 <F1> 100.00
500 Dallas, Suite 3200
Houston, TX 77002
General Partner Interest Howell Corporation 1 <F1><F2> 100.00
1111 Fannin, Suite 1500
Houston, TX 77002
<FN>
<F1>
Basis owns 54% of Genesis Energy, L.L.C., and a wholly-owned subsidiary of
Howell owns 46% of Genesis Energy, L.L.C. The reporting of the General Partner
interest shall not be deemed to be a concession that such interest represents a
security.
<F2>
Held by wholly-owned subsidiary of Howell.
</FN>
</TABLE>
The following table sets forth certain information as of January 31, 1997,
regarding the beneficial ownership of the Common Units by all directors of the
General Partner, each of the named executive officers and all directors and
executive officers as a group.
<TABLE>
<CAPTION>
Amount and Nature of Beneficial Ownership
--------------------------------------------------
Sole Voting and Shared Voting and Percent
Title of Class Name Investment Power Investment Power of Class
- ------------------- ----------------- ----------------- ---------------- -----------
<S> <C> <C> <C> <C>
Genesis Energy, L.P. Jeffrey R. Serr - 10,000 *
Common Unit John P. vonBerg 1,000 - *
Mark J. Gorman 1,000 - *
Thomas W. Jasper - - -
Paul N. Howell 1,200 - *
Ronald E. Hall 3,000 - *
Donald H. Anderson - - -
Herbert I. Goodman - - -
J. Conley Stone - - -
All directors and
executive officers
as a group
(14 in number) 7,700 12,200 *
- --------------------------
* Less than 1%
</TABLE>
The above table includes shares owned by certain members of the families of the
directors or executive officers, including shares in which pecuniary interest
may be disclaimed.
Item 13. Certain Relationships and Related Transactions
See Note 10 to the Consolidated Financial Statements for information regarding
certain transactions between Genesis and the General Partner, Salomon Inc,
Basis, and Howell and their subsidiaries and affiliates.
Basis and Howell own 1,163,700 and 991,300 Subordinated OLP Units, respectively,
representing a 10.58% and 9.01% limited partner interest in GCOLP. Basis and
Howell own 54% and 46%, respectively, of the General Partner. Through its
control of the General Partner, Basis has the ability to control the management
of the Partnership and GCOLP.
For administrative reasons, each of Basis and Howell employed through December
31, 1996, the persons responsible for managing or operating the Partnership.
All employment costs and expenses related to such employees for the one month
ended December 31, 1996 were charged to the General Partner and were reimbursed
by the Partnership to the General Partner.
Redemption and Registration Rights Agreement. Pursuant to the Redemption and
Registration Rights Agreement, the Partnership has agreed, at the end of the
Subordination Period or upon earlier conversion of Subordinated OLP Units into
Common OLP Units, to use reasonable efforts to sell that number of Common Units
equal to the number of Common OLP Units that Basis or Howell is requesting be
redeemed. The proceeds, net of underwriting discount or placement fees, if any,
from such sale will be used by the Operating Partnership to redeem such Common
OLP Units. The Partnership is obligated to pay the expenses incidental to
redemption requests, other than the underwriting discount or placement fees, if
any. The General Partner will have a proportionate percentage of its general
partner interest in the Operating Partnership redeemed when Common OLP Units are
redeemed in connection with the exercise of the redemption right.
Distribution Support Agreement. To further enhance the Partnership's ability to
distribute the Minimum Quarterly Distribution on the Common Units with respect
to each quarter through the quarter ending December 31, 2001 (subject to earlier
termination commencing December 31, 1999), Salomon Inc has agreed in the
Distribution Support Agreement, subject to certain limitations, to contribute or
cause to be contributed cash, if necessary, to the Partnership in return for
APIs. Salomon Inc's obligation to purchase APIs is limited to a maximum amount
outstanding at any one time equal to $17.6 million. The Unitholders have no
independent right separate and apart from the Partnership to enforce obligations
of Salomon Inc under the Distribution Support Agreement. See "Cash Distribution
Policy--Distribution Support."
Corporate Services Agreement. The Partnership entered into a Corporate Services
Agreement with Basis pursuant to which Basis, directly or through its
affiliates, provides certain administrative and support services for the benefit
of the Partnership. Such services may include human resources, tax, accounting,
data processing, NYMEX transaction clearing and other similar administrative
services. Under such agreement, Basis does not receive a fee for such services
but the Partnership reimburses Basis or its affiliates for (i) allocated
personnel costs (such as salaries and employee benefits) of the personnel
actually providing such services, (ii) rent on office space allocated to the
General Partner in Basis' offices in Houston, Texas and (iii) all reasonable
out-of-pocket expenses related to the provision of such services. Either the
Partnership or Basis may terminate or reduce the level of services or office
space on 90 days' or 180 days' notice, respectively, to the other party. The
Corporate Services Agreement may be terminated at the Partnership's or Basis'
option on 180 days' notice to the other party. In the event the Corporate
Services Agreement is terminated, the cost to the Partnership of obtaining the
services covered thereby from third parties would likely be higher than the cost
of such services under the Corporate Services Agreement. In addition, the
Partnership has agreed to indemnify and hold harmless Basis and its affiliates
from all claims and damages arising from the provision of services under the
Corporate Services Agreement, unless due to the gross negligence or willful
misconduct of Basis or its affiliates.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) and (2) Financial Statements and Financial Statement Schedules
See "Index to Consolidated Financial Statements" set forth on page 26.
(a)(3) Exhibits
3.1 Certificate of Limited Partnership of Genesis Energy, L.P.
("Genesis") (incorporated by reference to Exhibit 3.1 to
Registration Statement, File No. 333-11545)
* 3.2 Agreement of Limited Partnership of Genesis
3.3 Certificate of Limited Partnership of Genesis Crude Oil, L.P.
(the "Operating Partnership")
* 3.4 Agreement of Limited Partnership of the Operating Partnership
(incorporated by reference to Exhibit 3.4 to Registration
Statement, File No. 333-11545)
* 10.1 Purchase & Sale and Contribution & Conveyance Agreement dated as
of December 3, 1996 among Basis Petroleum, Inc., Howell
Corporation ("Howell"), certain subsidiaries of Howell,
Genesis, the Operating Partnership and Genesis Energy, L.L.C.
* 10.2 First Amendment to Purchase & Sale and Contribution & Conveyance
Agreement
* 10.3 Distribution Support Agreement among the Operating Partnership
and Salomon Inc
* 10.4 Master Credit Support Agreement among the Operating Partnership,
Salomon Inc and Basis Petroleum, Inc. ("Basis")
* 10.5 Redemption and Registration Rights Agreement among Basis, Howell
Corporation ("Howell"), certain Howell subsidiaries, Genesis
and the Operating Partnership
* 10.6 Corporate Services Agreement between Basis, Genesis and the
Operating Partnership
10.7 Non-competition Agreement among Genesis, the Operating
Partnership, Salomon Inc, Basis and Howell (incorporated by
reference to Exhibit 10.6 to Registration Statement, File No.
333-11545)
* 10.8 Employment Agreement between Genesis Energy, L.L.C. and John P.
vonBerg
* 10.9 Employment Agreement between Genesis Energy, L.L.C. and Mark J.
Gorman
* 10.10 Employment Agreement between Genesis Energy, L.L.C. and John M.
Fetzer
* 10.11 Employment Agreement between Genesis Energy, L.L.C. and Allyn R.
Skelton, II
* 10.12 Employment Agreement between Genesis Energy, L.L.C. and Paul A.
Scoff
* 10.13 Employment Agreement between Genesis Energy, L.L.C. and Allen R.
Stanley
* 10.14 Employment Agreement between Genesis Energy, L.L.C. and Ben F.
Runnels
11.1 Statement Regarding Computation of Per Share Earnings (See Note 3
to the Consolidated Financial Statements - "Net Income Per Unit")
* 21.1 Subsidiaries of the Registrant
------------------------
* Filed herewith
(b) Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 on the 7th day of April,
1997.
GENESIS ENERGY, L.P.
(A Delaware Limited Partnership)
By: GENESIS ENERGY, L.L.C., as
General Partner
By: /s/ John P. vonBerg *
---------------------------
John P. vonBerg
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons in the capacities and on the
dates indicated.
/s/ John P. vonBerg * Director, Chief Executive Officer April 7, 1997
- ---------------------------
John P. vonBerg and President
(Principal Executive Officer)
/s/ Allyn R. Skelton, II Chief Financial Officer April 7, 1997
- ---------------------------
Allyn R. Skelton, II (Principal Financial and
Accounting Officer)
/s/ Jeffrey R. Serra * Chairman of the Board and April 7, 1997
- ---------------------------
Jeffrey R. Serra Director
/s/ Thomas W. Jasper * Director April 7, 1997
- ---------------------------
Thomas W. Jasper
/s/ Paul N. Howell * Director April 7, 1997
- ---------------------------
Paul N. Howell
/s/ Ronald E. Hall * Director April 7, 1997
- ---------------------------
Ronald E. Hall
/s/ Mark J. Gorman * Director and April 7, 1997
- ---------------------------
Mark J. Gorman Executive Vice President
* By /s/ Allyn R. Skelton, II
- ---------------------------
Allyn R. Skelton, II
(Attorney-in-fact for persons indicated)
GENESIS ENERGY, L.P.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Report of Independent Public Accountants 28
Consolidated Balance Sheet, December 31, 1996,
Balance Sheet, December 31, 1995 (Predecessor) 29
Pro Forma Consolidated Statement of Operations for the Year
Ended December 31, 1996,
Consolidated Statement of Operations for the One Month Ended
December 31, 1996,
Statement of Operations for the Eleven Months Ended November 30, 1996
(Predecessor),
Statement of Operations for the Year Ended December 31, 1995
(Predecessor), and
Statement of Operations for the Year Ended December 31, 1994 (Predecessor) 30
Consolidated Statement of Cash Flows for the One Month Ended December
31, 1996,
Statement of Cash Flows for the Eleven Months Ended November 30, 1996
(Predecessor),
Statement of Cash Flows for the Year Ended December 31, 1995
(Predecessor), and
Statement of Cash Flows for the Year Ended December 31, 1994 (Predecessor) 31
Consolidated Statement of Partners' Capital for the One Month
Ended December 31, 1996,
Statement of Divisional Equity for the Eleven Months Ended
November 30, 1996 (Predecessor),
Statement of Divisional Equity for the Year Ended December 31, 1995
(Predecessor), and
Statement of Divisional Equity for the Year Ended December 31, 1994
(Predecessor) 32
Notes to Consolidated Financial Statements 33
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Genesis Energy, L.P.:
We have audited the accompanying consolidated balance sheet of Genesis Energy,
L.P., (a Delaware limited partnership) as of December 31, 1996 and the related
consolidated statements of operations, cash flows and partners' capital for the
one month ended December 31, 1996. We have also audited the balance sheet of
the Predecessor (as defined in Note 1 to the consolidated financial statements)
as of December 31, 1995 and the related statements of operations, cash flows and
divisional equity for the eleven months ended November 30, 1996 and the years
ended December 31, 1995 and 1994. These financial statements are the
responsibility of the Partnership's management and the Predecessor's management,
respectively. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Genesis Energy, L.P. as of
December 31, 1996, and the results of its operations and its cash flows for the
one month ended December 31, 1996 and the financial position of the Predecessor
as of December 31, 1995 and the results of its operations and its cash flows for
the eleven months ended November 30, 1996 and the years ended December 31, 1995
and 1994, in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
- -------------------------------------
ARTHUR ANDERSEN LLP
Houston, Texas
March 17, 1997
GENESIS ENERGY, L.P.
CONSOLIDATED BALANCE SHEET
(In thousands)
December 31, December 31,
1996 1995
----------- -----------
Assets (Predecessor)
Current Assets
Cash and cash equivalents $ 11,878 $ -
Accounts receivable -
Trade 336,358 117,361
Related party 52,449 155,427
Inventories 8,290 6,041
Deferred income tax assets - 456
Other 1,396 -
-------- --------
Total current assets 410,371 279,285
Property and Equipment, at cost 100,097 13,517
Less: Accumulated depreciation (11,160) (9,766)
-------- --------
Net property and equipment 88,937 3,751
Other Assets, net of amortization 10,592 -
-------- --------
Total Assets $509,900 $283,036
======== ========
Liabilities and Partners' Capital/Divisional Equity
Current Liabilities
Accounts payable -
Trade $387,322 $212,035
Related party 3,430 70,316
Accrued liabilities 7,811 3,078
Accrued income taxes - 6,030
-------- --------
Total current liabilities 398,563 291,459
Deferred Income Tax Liabilities - 14
Commitments and Contingencies (Notes 15 and 16)
Minority Interests 26,257 -
Divisional Equity - (8,437)
Partners' Capital
Common unitholders, 8,625 units
issued and outstanding 83,378 -
General partner 1,702 -
-------- --------
Total partners' capital 85,080 -
-------- --------
Total Liabilities and Partners'
Capital/Divisional Equity $509,900 $283,036
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
<TABLE>
GENESIS ENERGY, L.P.
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per unit amounts)
<CAPTION>
One Month Eleven Months
Year Ended Ended Ended
December 31, December 31, November 30,Year Ended December 31,
----------------------
1996 1996 1996 1995 1994
-------- -------- -------- -------- --------
(Pro forma) ( P r e d e c e s s o r )
(Unaudited)
REVENUES:
<S> <C> <C> <C> <C> <C>
Gathering and marketing revenues
Unrelated parties $3,101,632 $318,110 $2,194,156 $1,916,231 $1,160,151
Related parties 1,464,202 52,449 1,403,951 1,523,834 670,570
Pipeline revenues 16,780 1,426 - - -
---------- -------- ---------- ---------- ----------
Total revenues 4,582,614 371,985 3,598,107 3,440,065 1,830,721
COST OF SALES:
Crude costs, unrelated parties 4,179,974 363,735 3,245,123 2,729,145 1,455,275
Crude costs, related parties 346,389 2,988 327,963 680,614 350,966
Field operating costs 15,092 1,290 6,744 7,152 7,778
Pipeline operating costs 4,978 463 - - -
---------- -------- ---------- ---------- ----------
Total cost of sales 4,546,433 368,476 3,579,830 3,416,911 1,814,019
---------- -------- ---------- ---------- ----------
GROSS MARGIN 36,181 3,509 18,277 23,154 16,702
EXPENSES:
General and administrative 9,470 1,363 3,316 3,658 3,858
Depreciation and amortization 6,834 518 1,396 4,815 7,530
---------- -------- ---------- ---------- ----------
OPERATING INCOME 19,877 1,628 13,565 14,681 5,314
OTHER INCOME (EXPENSE):
Interest, net 56 56 294 173 (685)
Other, net (74) - (83) (197) 82
---------- -------- ---------- ---------- ----------
Income before income taxes,
cumulative effect of change in
accounting principle and minority
interests 19,859 1,684 13,776 14,657 4,711
Income tax provision - - 5,167 5,530 1,792
---------- -------- ---------- ---------- ----------
Income before cumulative effect of
change in accounting principle
and minority interests 19,859 1,684 8,609 9,127 2,919
Cumulative effect of change in
accounting principle - - - - (136)
Net income before minority interests 19,859 1,684 8,609 9,127 2,783
---------- -------- ---------- ---------- ----------
Minority interests 3,970 337 - - -
---------- -------- ---------- ---------- ----------
NET INCOME $ 15,889 $ 1,347 $ 8,609 $ 9,127 $ 2,783
========== ======== ========== ========== ==========
NET INCOME PER COMMON UNIT $ 1.81 $ 0.15
========== ========
NUMBER OF COMMON UNITS OUTSTANDING 8,625 8,625
========== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<TABLE>
GENESIS ENERGY, L.P.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
<CAPTION>
One Month Eleven Months
Ended Ended Year Ended
December 31, November 30, December 31,
1996 1996 1995 1994
--------- -------- -------- --------
(Predecessor)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C> <C>
Net income $ 1,347 $ 8,609 $ 9,127 $ 2,783
Adjustments to reconcile net income to
net cash provided by (used in)operating
activities -
Depreciation 479 1,396 2,178 2,472
Amortization of intangible assets 39 - 2,637 5,058
Deferred income taxes - (12) (500) (452)
Loss (gain) on disposal of assets - 82 (33) (85)
Minority interests equity in earnings 337 - - -
Other noncash charges 200 - 124 (196)
Changes in components of working capital -
Accounts receivable (384,681) (133,676) 98,158) (51,951)
Inventories (4,944) 2,763 3,249 (426)
Other current assets (1,260) (17) - -
Accounts payable 381,418 118,948 98,916 52,459
Accrued liabilities 6,218 157 83 760
Accrued income taxes - (851) 3,858 3,413
--------- --------- -------- --------
Net cash (used in) provided by operating activities (847) (2,601) 21,481 13,835
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (106) (1,100) (17) (56)
Increase in other assets - (1,203) - -
Purchase of operations of Howell (74,021) - - -
Proceeds from sale of assets - 270 493 173
--------- --------- -------- --------
Net cash (used in) provided by investing activities (74,127) (2,033) 476 117
CASH FLOWS FROM FINANCING ACTIVITIES:
General partner contribution at formation 2,941 - - -
Net proceeds of public offering of Common Units 162,975 - - -
Distribution to Basis at formation (86,985) - - -
Net advances from (to) Basis - 4,634 (21,957) (13,968)
Other 543 - - -
--------- --------- -------- --------
Net cash provided by (used in) financing activities 79,474 4,634 (21,957) (13,968)
--------- --------- -------- --------
Net increase (decrease) in cash and cash equivalents 4,500 - - (16)
Cash and cash equivalents at beginning of period 7,378 - - 16
--------- --------- -------- --------
Cash and cash equivalents at end of period $ 11,878 $ - $ - $ -
========= ========= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
GENESIS ENERGY, L.P.
CONSOLIDATED STATEMENT OF PARTNERS'
CAPITAL/DIVISIONAL EQUITY
(In thousands)
Partners' Capital
-----------------------
Common General Divisional
Unitholders Partner Equity
----------- ------- ----------
(Predecessor)
Divisional equity at December 31, 1993 $15,578
Net income 2,783
Net advances to Basis (13,968)
-------
Divisional equity at December 31, 1994 4,393
Net income 9,127
Net advances to Basis (21,957)
-------
Divisional equity at December 31, 1995 (8,437)
Net income for eleven months ended November 30, 1996 8,609
Net advances from Basis 4,634
-------
Divisional equity at November 30, 1996 $ 4,806
=======
Initial capital based on issuance of partnership
interests (see Note 1) $82,058 $1,675
Net income for the one month ended
December 31, 1996 1,320 27
------- ------
Partners' capital at December 31, 1996 $83,378 $1,702
======= ======
The accompanying notes are an integral part of these consolidated financial
statements.
GENESIS ENERGY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Formation and Offering
In December 1996, Genesis Energy, L.P. ("GELP") completed an initial public
offering of 8.6 million Common Units at $20.625 per unit, representing limited
partner interests in GELP of 98%. The offering consisted of 7.5 million Common
Units, with an option to the underwriters of the offering to purchase 1.1
million additional overallotment Common Units. The underwriters exercised their
overallotment option in December 1996. Genesis Energy, L.L.C. (the "General
Partner") serves as general partner of GELP and its operating limited
partnership, Genesis Crude Oil, L.P. ("GCOLP)". At December 31, 1996, the
General Partner owned a 2% general partner interest in GELP.
Transactions at Formation
At the closing of the offering, GELP contributed the net proceeds of the
offering ($163.0 million) to GCOLP in exchange for a 80.01% general partner
interest in GCOLP. With the net proceeds of the offering, GCOLP purchased for
$74.0 million a portion of the crude oil gathering, marketing and pipeline
operations of Howell Corporation ("Howell") and made a distribution of $86.9
million to Basis in exchange for its conveyance of a portion of its crude oil
gathering and marketing operations. GCOLP issued an aggregate of 2.2 million
subordinated limited partner units ("Subordinated OLP Units") to Basis and
Howell to obtain the remaining operations. Such operations acquired from Basis
are hereafter referred to as the "Predecessor". The General Partner received an
effective 2% general partner interest in GELP in exchange for a contribution of
$2.9 million. The effects of these transactions, and the dilutive effect of
differences in the consideration paid by the respective parties for their
interests, have been reflected in the initial capital recorded by the
Partnership.
Unless the context otherwise requires, the term "the Partnership" hereafter
refers to GELP, its operating limited partnership and the Predecessor.
Basis has the largest ownership interest in the Partnership, with an effective
10.58% limited partner interest in GCOLP and ownership of 54% of the General
Partner; therefore, the net assets acquired from Basis have been recorded at
their historical carrying amounts and the crude oil gathering and marketing
division of Basis has been treated as the Predecessor and the acquirer of
Howell's operations. The acquisition of Howell's operations was treated as a
purchase for accounting purposes. See Note 4.
2. Basis of Presentation
The accompanying financial statements and related notes present the consolidated
financial position as of December 31, 1996 for GELP and its results of
operations, cash flows and changes in partners' capital for the one month ended
December 31, 1996, the financial position as of December 31, 1995 for the
Predecessor and its results of operations, cash flows and changes in divisional
equity for the eleven months ended November 30, 1996, and the years ended
December 31, 1995 and 1994.
The accompanying financial statements of the Predecessor were prepared in
connection with the public offering of limited partner interests in the
Partnership. These financial statements include the accounts of the
Predecessor, a division of Basis, a wholly-owned subsidiary of Salomon Inc.
Cash flows of the Predecessor not funded from operating activities were funded
by Basis prior to the formation of the Partnership. Changes in divisional
equity during the eleven months ended November 30, 1996 and the years ended
December 31, 1995 and 1994 which are not attributable to net income of the
Predecessor represent net advances to or from Basis.
No provision for income taxes related to the operation of GELP is included in
the accompanying consolidated financial statements, as such income will be
taxable directly to the partners holding partnership interests in the
Partnership. Federal income tax liabilities resulting from activities of the
Predecessor and Howell prior to the closing of the offering were retained by
Basis and Howell.
The unaudited pro forma Consolidated Statement of Operations for the year ended
December 31, 1996 reflects certain pro forma adjustments to the historical
results of operations of the Predecessor and Howell as if the Partnership had
been formed on January 1, 1996. These pro forma adjustments reflect the
inclusion of fees associated with the Master Credit Support Agreement,
incremental fees related to execution of futures contracts on the New York
Mercantile Exchange ("NYMEX") as a separate entity, and incremental general and
administrative expenses and compensation costs for the operation of the
Partnership as a separate public entity. The pro forma adjustments also include
additional depreciation and amortization expense due to the increase in property
and intangibles that resulted from applying the purchase method of accounting to
the assets acquired from Howell. The pro forma adjustments eliminate net
interest expense recorded by the Predecessor and Howell as the Partnership had
no long-term debt as of the closing of the public offering. Income tax
provisions have also been eliminated as the Partnership is not a taxable entity.
The pro forma adjustments were made based upon available information and certain
estimates and assumptions which management believes provide a reasonable basis
for presentation.
3. Summary of Significant Accounting Policies
Principles of Consolidation
The Partnership owns and operates its assets through GCOLP, an operating limited
partnership. The accompanying consolidated financial statements reflect the
combined accounts of the Partnership and the operating partnership after
elimination of intercompany transactions. All material intercompany accounts
and transactions have been eliminated.
Nature of Operations
The principal business activities of the Partnership are the purchasing,
gathering, transporting and marketing of crude oil in the United States. The
Partnership gathers approximately 120,000 barrels per day at the wellhead
principally in the southern and southwestern states and offshore in the Gulf of
Mexico. The Partnership also owns and operates three crude oil pipelines
onshore as well as one offshore pipeline. The onshore pipelines are in Texas,
Mississippi/Louisiana and Florida/Alabama. The offshore pipeline is a 5.5-mile
pipeline in the Gulf of Mexico that transports oil from Main Pass Block 64 to a
connection with another party's pipeline.
Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities, if any, at the date of the
consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Cash and Cash Equivalents
The Partnership considers investments purchased with a maturity of three months
or less to be cash equivalents. Funds deposited with Basis, as discussed in Note
10, are also considered cash equivalents. The Partnership has no requirement
for compensating balances or restrictions on cash.
Inventories
Crude oil inventories held for sale are valued at market. Due to the nature of
the Partnership's marketing activities, a minimum level of physical inventories
is required, as determined by management, to ensure efficient and uninterrupted
operation of the gathering business. These minimum inventories are not marked-
to-market as inventories held for sale but are carried at the lower of cost or
market, using the weighted-average cost method.
Store warehouse inventories, including parts and fuel, are carried at the lower
of cost or market.
Property and Equipment
Property and equipment are carried at cost. Depreciation of property and
equipment is provided using the straight-line method over the respective
estimated useful lives of the assets. Asset lives are 20 years for pipelines
and related assets, 3 to 7 years for vehicles and transportation equipment, and
3 to 10 years for buildings, office equipment, furniture and fixtures and other
equipment. Maintenance and repair costs are charged against current operations.
Expenditures which materially increase value, change capacities or extend useful
lives are capitalized.
Other Assets
Goodwill of the Partnership is amortized over a period of 20 years and is
recorded net of accumulated amortization.
Minority Interests
Minority interests represent the Subordinated OLP Units held by Basis and Howell
totaling 19.59% in GCOLP and the 0.4% interest the General Partner owns directly
in GCOLP. Also included in minority interests are Howell's and Basis' interests
in $5 million to be retained by GCOLP for at least one year to provide
additional support for the Partnership's ability to distribute the minimum
quarterly distribution on the Common Units and the Subordinated OLP Units.
Environmental Liabilities
The Partnership provides for the estimated costs of environmental contingencies
when liabilities are likely to occur and reasonable estimates can be made.
Ongoing environmental compliance costs, including maintenance and monitoring
costs, are charged to expense as incurred.
Income Taxes
The Predecessor was included, through Basis, in the consolidated federal and
state income tax returns of Salomon Inc. The Predecessor's federal and state
income taxes were provided as if the Predecessor filed its income tax return
separately from Basis. If there was taxable income, taxes were provided at the
statutory rate reduced by allowable tax credits. If there was a taxable loss, a
tax benefit was provided at the statutory rate without limitation of any loss
deduction. The tax benefit was increased by tax credits to the extent the
credits were utilized by Basis.
Income taxes have been eliminated as the Partnership is not a taxable entity.
No provision for income taxes related to the operation of GELP is included in
the accompanying consolidated financial statements, as such income will be
taxable directly to the partners holding partnership interests in the
Partnership.
Financial Instruments
The Partnership routinely utilizes forward contracts, swaps, options and futures
contracts in an effort to minimize the impact of market fluctuations on
inventories and contractual commitments. Gains and losses on forward contracts,
swaps, options and futures contracts used to hedge future contract purchases of
unpriced domestic crude oil, where firm commitments to sell are required prior
to establishment of the purchase price, are deferred until the margin from the
underlying risk element of the hedged item is recognized in accordance with
Statement of Financial Accounting Standards (SFAS) No. 80, "Accounting for
Futures Contracts." Unrecognized income of $355,000 and $1,614,000 was deferred
on these contracts at December 31, 1996 and 1995, respectively.
Based on the historical correlations between the NYMEX price for West Texas
intermediate crude at Cushing, Oklahoma, and the various trading hubs at which
the Partnership trades, the Partnership's management believes the hedging
program has been effective in minimizing the overall price risk. The
Partnership continuously monitors the basis differentials between its various
trading hubs and Cushing, Oklahoma, to further manage its basis exposure.
The Partnership accounts for all other transactions which are not designated as
hedges under the marked-to-market method of accounting. Under this methodology,
forward contracts, swaps, options and futures contracts are reflected at market
value and the resulting unrealized gains and losses are recognized currently in
the statement of operations. The net gains and losses are determined on a
counterparty-by-counterparty basis, netted when a contractual right of offset
exists and reflected as either an asset or liability on the balance sheet.
Activities for trading purposes were not material to the Partnership's
consolidated financial position or results of operations for all periods
presented. See Note 14 for further discussion of the Partnership's financial
instruments.
Revenue Recognition
Gathering and marketing revenues are recognized when title to the crude oil is
transferred to the customer. Pipeline revenues are recognized upon delivery of
the barrels to the location designated by the shipper.
Cost of Sales
Cost of sales consists of the cost of crude oil and field and pipeline operating
expenses. Field and pipeline operating expenses consist primarily of labor
costs for drivers and pipeline field personnel, truck rental costs and
maintenance, utilities, insurance and property taxes.
Adoption of Accounting Standards
Effective January 1, 1994, Basis adopted SFAS No. 112, "Employers' Accounting
for Postemployment Benefits." SFAS No. 112 requires employers to accrue the
cost of postemployment benefits during the service periods of eligible
employees. The Predecessor was allocated, as the cumulative effect of a change
in accounting principle, a charge to income of $136,000 (net of income tax
benefit of $73,000) in 1994 to reflect the present value at January 1, 1994, of
expected future benefits to be provided for by Basis to former or inactive
employees of the Predecessor after employment but before retirement attributed
to employees' services prior to the January 1, 1994, adoption date.
In October 1996, the American Institute of Certified Public Accountants issued
Statement of Position No. 96-1, "Environmental Remediation Liabilities," which
establishes new accounting and reporting for the recognition and disclosure of
environmental remediation liabilities. The provisions of the statement are
effective for fiscal years beginning after December 15, 1996. The impact of
this new standard is not expected to have a significant effect on the
Partnership's consolidated financial position or results of operations.
In June 1996, the Financial Accounting Standards Board issued SFAS No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities," which establishes new accounting and reporting standards for
transfers and servicing of financial assets and extinguishment of liabilities.
The statement is effective for transactions occurring after December 31, 1996.
The impact of the adoption of the new standard is not expected to have a
significant effect on the Partnership's consolidated financial position or
results of operations.
Significant Customers
A significant portion of the Partnership's revenues resulted from transactions
with Basis and other Salomon Inc affiliates. No other customer accounted for
more than 10% of the Partnership's revenues in any period.
Net Income Per Common Unit
Net income per Common Unit is calculated on the number of outstanding Common
Units of 8,625,000. For this purpose, the 2% General Partner interest is
excluded from net income.
4. Acquisition of Howell
As discussed in Notes 1 and 2, GCOLP acquired the crude oil gathering, marketing
and pipeline operations of Howell in December 1996. This acquisition has been
treated as a purchase for accounting purposes.
The purchase price consisted of cash and Subordinated OLP Units in GCOLP. The
total purchase price was determined as follows (in thousands).
Cash $74,021
Subordinated OLP Units in GCOLP 21,174
Howell's share of cash proceeds from
the public offering of units that
was retained in GCOLP 2,300
-------
Total purchase price of Howell $97,495
=======
The purchase price was allocated to the assets acquired from Howell based on
their relative fair values. The allocation was as follows (in thousands).
Property and inventory $88,094
Goodwill 9,401
-------
Total allocated $97,495
=======
The results of operations of the assets acquired from Howell are included in the
consolidated statement of operations of the Partnership for the one month ended
December 31, 1996. The following unaudited pro forma information represents the
consolidated pro forma amounts assuming the acquisition of Howell had occurred
at the beginning of each period presented, including the operations of certain
of the crude oil pipelines while they were owned by Exxon Pipeline Company from
January 1 to March 31, 1995 (in thousands, except per unit amounts).
Year Ended December 31,
--------------------------
1996 1995
---------- -----------
Revenues $4,582,614 $4,045,450
Net income $15,889 $16,918
Net income per Common Unit $1.81 $1.92
The above amounts are based upon certain assumptions and estimates which the
Partnership believes are reasonable. The pro forma results do not necessarily
represent results which would have occurred if the acquisition had taken place
on the basis assumed above, nor are they necessarily indicative of the results
of future combined operations.
5. Inventories
Inventories consisted of the following (in thousands).
December 31,
---------------
1996 1995
------ ------
(Predecessor)
Crude inventories, at market $3,548 $3,134
Minimum crude inventories,
at lower of cost or market 4,435 2,551
Store warehouse inventories,
at lower of cost or market 307 356
------ ------
Total inventories $8,290 $6,041
====== ======
As of December 31, 1996 and 1995, the number of barrels included in minimum
crude inventories was 285,000 and 185,000, respectively, with approximate market
values of $7,259,000 and $3,573,000, respectively.
6. Property and Equipment
Property and equipment consisted of the following (in thousands).
December 31,
--------------------
1996 1995
-------- -------
(Predecessor)
Land and buildings $ 3,553 $ 1,032
Pipelines and related assets 80,567 -
Vehicles and transportation equipment 8,065 3,377
Office equipment, furniture and fixtures 3,375 3,410
Other equipment 4,537 5,698
-------- -------
100,097 13,517
Less - Accumulated depreciation (11,160) (9,766)
-------- -------
Net property and equipment $ 88,937 $ 3,751
======== =======
Depreciation expense was $479,000 for the one month ended December 31, 1996,
$1,396,000 for the eleven months ended November 30, 1996 and $2,178,000 and
$2,472,000 for the years ended December 31, 1995 and 1994, respectively.
7. Other Assets
Other assets consisted of the following (in thousands).
December 31,
--------------------
1996 1995
------- --------
(Predecessor)
Goodwill $ 9,401 $ -
Producer contracts - 15,150
Noncompete agreements - 4,910
NYMEX seats 1,203 -
Other 27 604
------- --------
10,631 20,664
Less - Accumulated amortization (39) (20,664)
------- --------
Unamortized other assets $10,592 $ -
======= ========
Amortization expense was $39,000 for the one month ended December 31, 1996 and
$2,637,000 and $5,058,000 for the years ended December 31, 1995 and 1994,
respectively. There was no amortization expense for the eleven months ended
November 30, 1996.
8. Credit Resources and Liquidity
GCOLP entered into credit facilities with Salomon Inc and Basis (collectively,
the "Credit Facilities") pursuant to a Master Credit Support Agreement. GCOLP's
obligations under the Credit Facilities are secured by its receivables,
inventories, general intangibles and cash.
Guaranty Facility
Salomon Inc is providing a Guaranty Facility through December 31, 1999 in
connection with the purchase, sale and exchange of crude oil by GCOLP. The
aggregate amount of the Guaranty Facility is limited to $550 million through
June 30, 1997, $500 million for the period July 1, 1997 to December 31, 1997,
$400 million for the year ending December 31, 1998 and $300 million for the year
ending December 31, 1999 (to be reduced in each case by the amount utilized at
any one time pursuant to the Working Capital Facility, as described below, and
by the amount of any obligation to a third party to the extent that such third
party has a prior security interest in the collateral under the Master Credit
Support Agreement as described below). GCOLP pays a guarantee fee to Salomon
Inc which will increase over the three-year period, thereby increasing the cost
of the credit support provided to GCOLP under the Guaranty Facility from a
below-market rate to a rate that may be higher than rates paid to independent
financial institutions for similar credit. At December 31, 1996, the aggregate
amount of obligations covered by guarantees was $459.6 million, including $260.6
million in payable obligations and $199.0 million of estimated crude oil
purchase obligations for January 1997.
Working Capital Facility
Basis has agreed to use its reasonable best efforts, to the extent it has
availability under its uncommitted credit lines, to provide GCOLP, through May
31, 1997, with a Working Capital Facility of up to $50 million, which amount
includes direct cash advances not to exceed $35 million outstanding at any one
time and letters of credit that may be required in the ordinary course of
GCOLP's business. The total amounts outstanding at any one time under the
Working Capital Facility will correspondingly reduce the amounts available under
the Guaranty Facility. The interest rate for the Working Capital Facility is
equal to Basis' cost of borrowings as reasonably determined by Basis. The
Partnership had letters of credit in the amount of $2.2 million outstanding at
December 31, 1996. No direct cash advances were outstanding at December 31,
1996. Prior to the expiration of the six-month period of availability, it is
expected that the Partnership will have arranged for a working capital facility
through one or more third party lenders.
Summary of Credit Facilities Terms
The Master Credit Support Agreement contains various restrictive and affirmative
covenants including (i) restrictions on indebtedness other than (a) pre-existing
indebtedness, (b) indebtedness pursuant to Hedging Agreements (as defined in the
Master Credit Support Agreement) entered into in the ordinary course of business
and (c) indebtedness incurred in the ordinary course of business by acquiring
and holding receivables to be collected in accordance with customary trade
terms, (ii) restrictions on certain liens, investments, guarantees, loans,
advances, lines of business, acquisitions, mergers, consolidations and sales of
assets and (iii) compliance with certain risk management policies, audit and
receivable risk exposure practices and cash management practices as in effect
for Basis and as may from time to time be revised or altered by Salomon Inc in
its sole discretion.
Pursuant to the Master Credit Support Agreement, GCOLP is required to maintain
(a) Consolidated Tangible Net Worth of not less than $50 million, (b)
Consolidated Working Capital of not less than $1 million, (c) a ratio of its
Consolidated Current Liabilities to Consolidated Working Capital plus net
property, plant and equipment of not more than 7.5 to 1, (d) a ratio of
Consolidated Earnings before Interest, Taxes, Depreciation and Amortization to
Consolidated Fixed Charges of at least 1.75 to 1 as of the last day of each
fiscal quarter prior to December 31, 1999 and (e) a ratio of Consolidated Total
Liabilities to Consolidated Tangible Net Worth of not more than 10.0 to 1 (as
such terms are defined in the Master Credit Support Agreement).
An Event of Default could result in the termination of the Credit Facilities at
the discretion of Salomon Inc and Basis. Significant Events of Default include
(a) a default in the payment of (i) any principal on any payment obligation
under the Credit Facilities when due or (ii) interest or fees or other amounts
within two business days of the due date, (b) the guaranty exposure amount
exceeding the maximum credit support amount for two consecutive calendar months,
(c) failure to perform or otherwise comply with any covenants contained in the
Master Credit Support Agreement if such failure continues unremedied for a
period of 30 days after written notice thereof and (d) a material
misrepresentation in connection with any loan, letter of credit or guarantee
issued under the Credit Facilities. Removal of the General Partner will result
in the termination of the Credit Facilities and the release of all of Salomon
Inc's and Basis' obligations thereunder. Salomon Inc does not currently foresee
any circumstances under which it would provide guarantees or other credit
support after the three-year credit support period. In addition, Salomon Inc's
and Basis' obligations under the Master Credit Support Agreement may be
transferred or terminated early subject to certain conditions. Prior to
December 1999, management of the Partnership intends to replace the Guaranty
Facility with a letter of credit facility with one or more third party lenders.
There can be no assurance of the availability or the terms of credit for the
Partnership. The General Partner believes that the Credit Facilities will be
sufficient to support the Partnership's crude oil purchasing activities and
working capital requirements. No assurance, however, can be given that the
General Partner will not be required to reduce or restrict the Partnership's
gathering and marketing activities because of limitations on its ability to
obtain credit support and financing for its working capital needs.
Distributions
GCOLP will distribute 100% of its Available Cash within 45 days after the end of
each quarter to Unitholders of record and to the General Partner. Available
Cash consists generally of all of the cash receipts less cash disbursements of
GCOLP adjusted for net changes to reserves. (A full definition of Available
Cash is set forth in the Partnership Agreement.) Distributions of Available
Cash to the holders of Subordinated OLP Units are subject to the prior rights of
holders of Common Units to receive the minimum quarterly distribution ("MQD")
for each quarter during the subordination period (which will not end earlier
than December 31, 2001) and to receive any arrearages in the distribution of the
MQD on the Common Units for prior quarters during the subordination period. MQD
is $0.50 per unit.
Salomon Inc has committed, subject to certain limitations, to provide total cash
distribution support, with respect to quarters ending on or before December 31,
2001, in an amount up to an aggregate of $17.6 million in exchange for
Additional Partnership Interests ("APIs"). Salomon Inc's obligation to purchase
APIs will end no earlier than December 31, 1999 and end no later than December
31, 2001, with the actual termination subject to the levels of distributions
that have been made prior to the termination date. Any APIs purchased by
Salomon Inc are not entitled to cash distributions or voting rights. The APIs
will be redeemed if and to the extent that Available Cash for any future quarter
exceeds an amount necessary to distribute the MQD on all Common Units and
Subordinated OLP Units and to eliminate any arrearages in the MQD on Common
Units for prior periods.
In addition, the Partnership Agreement authorizes the General Partner to cause
GCOLP to issue additional limited partner interests and other equity securities,
the proceeds from which could be used to provide additional funds for
acquisitions or other GCOLP needs.
9. Partnership Equity
Partnership equity in GELP consists of the general partner interest of 2% and
8.6 million Common Units representing limited partner interests of 98%. The
Common Units were sold to the public in an initial public offering in December
1996. The general partner interest is held by the General Partner.
GELP has an approximate 80.01% general partner interest in GCOLP. The remainder
of GCOLP is held by Basis, Howell and the General Partner. These interests,
reflected in the consolidated financial statements as minority interests, are as
follows.
Interest in
GCOLP
---------
Subordinated limited partner interest held by:
Basis 10.58%
Howell 9.01
General partner interest in GCOLP held by
the General Partner 0.40
------
Total minority interests 19.99%
======
The Partnership will be managed by the General Partner. Common Units will
receive distributions in liquidation in preference to Subordinated OLP Units.
See Note 8 for a discussion regarding distributions.
Conversion of Subordinated OLP Units
There is no established public market for the Subordinated OLP Units. The
Subordinated OLP Units will convert into common units of GCOLP ("Common OLP
Units") upon the expiration of the subordination period. The subordination
period will not end prior to December 31, 2001 and will only end thereafter if
GCOLP satisfies certain cash distribution and earnings tests. In addition, up
to one half of the Subordinated OLP Units may convert into Common OLP Units
prior to the end of the subordination period if GCOLP satisfies certain cash
distribution and earnings tests. Subordinated OLP Units that have converted
into Common OLP Units will share equally in distributions of Available Cash with
the Common Units.
Once the Subordinated OLP Units have converted into Common OLP Units, Basis or
Howell may request that these units be redeemed. At such time, pursuant to a
Redemption and Registration Rights Agreement, GELP will use its reasonable best
efforts to sell the number of Common Units equal to the number of Common OLP
Units in GCOLP that are to be redeemed. The proceeds, net of underwriting
discount or placement fees from such sale, will be contributed to GCOLP and used
to redeem such Common OLP Units. GELP is obligated to pay the expenses
incidental to redemption requests, other than underwriting discount or placement
fees. The General Partner will have a proportionate percentage of its general
partner interest in GCOLP redeemed when Common OLP Units are redeemed in
connection with the exercise of the redemption right.
10. Transactions with Related Parties
Sales, purchases and other transactions with affiliated companies, in the
opinion of management, are conducted under terms no more or less favorable than
those conducted with unaffiliated parties.
Sales and Purchases of Crude Oil
A summary of sales to and purchases from related parties of crude oil is as
follows (in thousands).
One Month Eleven
Ended Months Ended Year Ended
December 31, November 30, December 31,
-----------------
1996 1996 1995 1994
--------- ---------- -------- --------
( P r e d e c e s s o r )
Sales to affiliates $52,449 $1,403,951 $1,523,834 $670,570
Purchases from affiliates $2,988 $327,963 $680,614 $350,966
Clearing of Commodities Futures Transactions
The Predecessor cleared its commodity futures transactions on the NYMEX through
Basis Clearing, Inc., a wholly-owned subsidiary of Basis, and Phibro Energy
Clearing, Inc., a wholly-owned subsidiary of Phibro Inc., a wholly-owned
subsidiary of Salomon Inc. The Predecessor paid commissions to these entities,
of $645,000 for the eleven months ended November 30, 1996 and $376,000 and
$263,000 in 1995 and 1994, respectively.
The Partnership cleared its NYMEX transactions through a third party during the
month ended December 31, 1996. In 1997, the Partnership plans to use third
parties as well as Basis Clearing, Inc., for clearing of NYMEX transactions.
General and Administrative Services
The Partnership does not directly employ any persons to manage or operate its
business. Those functions are provided by the General Partner. The Partnership
reimburses the General Partner for all direct and indirect costs of these
services. Total costs reimbursed to the General Partner by the Partnership were
$703,000 for the one month ended December 31, 1996.
The Partnership entered into a Corporate Services Agreement with Basis pursuant
to which Basis, directly or through its affiliates, provides certain
administrative and support services for the benefit of the Partnership. Such
services may include human resources, tax, accounting, data processing, NYMEX
transaction clearing and other similar administrative services. Under such
agreement, Basis does not receive a fee for such services but the Partnership
reimburses Basis or its affiliates for (i) allocated personnel costs (such as
salaries and employee benefits) of the personnel actually providing such
services, (ii) rent on office space allocated to the General Partner in Basis'
offices in Houston, Texas and (iii) all reasonable out-of-pocket expenses
related to the provision of such services. Either the Partnership or Basis may
terminate or reduce the level of services under certain circumstances as
described in the Corporate Services Agreement. In the event the Corporate
Services Agreement is terminated, the cost to the Partnership of obtaining the
services covered thereby from third parties would likely be higher than the cost
of such services under the Corporate Services Agreement. In addition, the
Partnership has agreed to indemnify and hold harmless Basis and its affiliates
from all claims and damages arising from the provision of services under the
Corporate Services Agreement, unless due to the gross negligence or willful
misconduct of Basis or its affiliates. Charges by Basis under the Corporate
Services Agreement were $120,000 for the one month ended December 31, 1996.
For the one month ended December 31, 1996, those persons who managed and
operated the Partnership were employees of Basis or Howell, providing services
to the General Partner under a transition services agreement. The total amount
paid for the services and the related benefit costs were $344,000 to Basis and
$359,000 to Howell.
Basis allocated certain general and administrative costs to the Predecessor for
ancillary services, insurance and office space. These costs amounted to
approximately $1,100,000 for the eleven months ended November 30, 1996 and
approximately $1,200,000 for each of the years ended December 31, 1995 and 1994.
Treasury Services
The Partnership entered into a Treasury Management Agreement with Basis. Under
the Treasury Management Agreement, the Partnership loans excess cash to Basis at
an interest rate that is the mid-point between a market rate from third parties
on invested funds and the cost to Basis of borrowing funds from Salomon Inc. At
December 31, 1996, Basis owed the Partnership $6,053,000 under the Treasury
Management Agreement. Such amount has been classified in the consolidated
balance sheet as cash and cash equivalents. For the one month ended December
31, 1996, the Partnership earned interest of $52,000 on these loans by the
Partnership to Basis.
Credit Facilities
As discussed in Note 8, Salomon Inc and Basis provide Credit Facilities to the
Partnership. For the one month ended December 31, 1996, the Partnership paid
Salomon Inc $102,000 for guarantee fees under the Credit Facilities.
11. Supplemental Cash Flow Information
Cash received for imputed interest was $299,000 for the eleven months ended
November 30, 1996. Payments of imputed interest were $169,000 and $685,000 for
the years ended December 31, 1995 and 1994, respectively.
Cash paid for state income taxes and the imputed cash payments made by the
Predecessor for federal income taxes totaled $6,030,000 during the eleven months
ended November 30, 1996 related to 1995 and $1,959,000 during the year ended
December 31, 1995 related to 1994. Basis received payments on behalf of the
Predecessor of $1,109,000 in 1994 for the utilization of federal income tax net
operating losses in prior periods.
12. Employee Benefit Plans
The Partnership does not directly employ any of the persons responsible for
managing or operating the Partnership. Beginning January 1, 1997, employees of
the General Partner provide those services and are covered by various retirement
and other benefit plans. The General Partner's employees will participate in
the plans of Basis beginning in 1997.
The plans described below represent the plans of the Predecessor. The General
Partner has adopted these plans in 1997.
In order to encourage long-term savings and to provide additional funds for
retirement to its employees, the Predecessor sponsored a profit-sharing and
retirement savings plan. Under this plan, the Predecessor's matching
contribution was calculated as the lesser of 50% of each employee's annual
pretax contribution or 3% of each employee's total compensation. The
Predecessor also made a profit-sharing contribution of at least 3% of each
eligible employee's total compensation. The Predecessor's costs relating to
this plan were $267,000 for the eleven months ended November 30, 1996 and
$292,000 and $289,000 in 1995 and 1994, respectively.
The Predecessor also provided certain health care and survivor benefits for its
active and retired employees. Basis self-insured these benefit programs. Both
active and retired employees contributed to such programs with retired employees
assuming a larger portion of the cost attributable to their benefits. Expenses
allocated to the Predecessor for these benefits were $369,000 for the eleven
months ended November 30, 1996, and $391,000 and $625,000 in 1995 and 1994,
respectively. The Partnership has accrued approximately $200,000 at December
31, 1996 for these benefits.
The General Partner also adopted two new plans in January 1997. These plans are
a restricted unit plan ("Restricted Unit Plan") for key employees of the General
Partner and the Genesis Incentive Compensation Plan ("Incentive Plan").
Restricted Unit Plan
Initially, rights to receive 291,000 Common Units are available under the
Restricted Unit Plan. From these Units, rights to receive 194,000 Common Units
(the "Initial Restricted Units") have been allocated to approximately 30
individuals, subject to the vesting conditions described below and subject to
other customary terms and conditions.
The Initial Restricted Units will vest upon the conversion of Subordinated OLP
Units to Common OLP Units. In the event of early conversion of a portion of the
Subordinated OLP Units into Common OLP Units, the Initial Restricted Units will
vest in the same proportion as the percentage of Subordinated OLP Units that
convert into Common OLP Units. The remaining rights to receive 97,000 Common
Units initially available under the Restricted Unit Plan may be allocated or
issued in the future to key employees on such terms and conditions (including
vesting conditions) as the Compensation Committee of the General Partner
("Compensation Committee") shall determine.
Upon "vesting" in accordance with the terms and conditions of the Restricted
Unit Plan, Common Units allocated to a plan participant will be issued to such
participant. Units issued to participants may be newly issued Units acquired by
the General Partner from the Partnership at then prevailing market prices or may
be acquired by the General Partner in the open market. In either case, the
associated expense will be borne by the Partnership. Until Common Units have
vested and have been issued to a participant, such participant shall not be
entitled to any distributions or allocations of income or loss and shall not
have any voting or other rights in respect of such Common Units. The issuance
of the Common Units pursuant to the Restricted Unit Plan is intended to serve as
a means of incentive compensation for performance. Accordingly, no
consideration will be payable by the plan participants upon vesting and issuance
of the Common Units.
Incentive Plan
The Incentive Plan is designed to enhance the financial performance of the
Partnership by rewarding the executive officers and other specific key employees
for achieving annual financial performance objectives. The Incentive Plan will
be administered by the Compensation Committee. Individual participants and
payments, if any, for each calendar year will be determined by and in the
discretion of the Compensation Committee. In no event will incentive payments
be made with respect to any year unless (i) the aggregate MQD in the Incentive
Plan year has been distributed to each holder of Common Units, plus any
arrearage thereon, and to each holder of Subordinated OLP Units, (ii) the
Adjusted Operating Surplus generated during such year has equaled or exceeded
the sum of the MQD on all of the outstanding Common Units and Subordinated OLP
Units and the related distribution on the General Partner's 2% general partner
interest during such year and (iii) no APIs are outstanding. Any incentive
payments will be at the discretion of the Compensation Committee, and the
General Partner will be able to amend or change the Incentive Plan at any time.
13. Income Taxes
The components of the provision for income taxes for the Predecessor are as
follows (in thousands).
November 30, December 31,
---------- --------------
1996 1995 1994
------ ------ ------
Current -
Federal $4,656 $5,416 $1,959
State 523 614 212
------ ------ ------
Total current 5,179 6,030 2,171
------ ------ ------
Deferred -
Federal (12) (500) (452)
------ ------ ------
Total deferred (12) (500) (452)
------ ------ ------
Total provision $5,167 $5,530 $1,719
====== ====== ======
The components of deferred tax assets and liabilities of the Predecessor are as
follows (in thousands).
December 31,
1995
-----------
Current deferred tax assets -
Inventories $249
Accrued liabilities 207
Net current deferred tax assets 456
Noncurrent deferred tax liabilities -
Property and equipment (14)
----
Net deferred tax assets $442
====
A reconciliation of income taxes computed at the federal statutory rate to
income taxes computed at the Predecessor's effective tax rate is as follows (in
thousands).
November 30, December 31,
--------- ----------------
1996 1995 1994
------ ------ ------
Provision for income taxes at the statutory rate $4,822 $5,130 $1,649
State taxes, net of federal tax benefit 340 399 138
Other 5 1 5
Provision for income taxes 5,167 5,530 1,792
Tax effect of accounting changes - - (73)
------ ------ ------
Provision for income taxes after tax effect of
accounting changes $5,167 $5,530 $1,719
====== ====== ======
Net operating loss carryforwards have not been utilized as a reduction against
the Predecessor's future tax liability. Rather, as the losses were utilized on
the consolidated tax return, the benefit has been reflected as a contribution
from Basis in the Predecessor's equity in the year of benefit.
14. Financial Instruments
Market Risk
Market risk represents the potential loss than can be caused by a change in the
market value of a commitment. In order to hedge its exposure to market
fluctuations, the Partnership enters into various financial instruments with
off-balance-sheet risk, including option contracts and swap agreements. The
Partnership does not consider its commodity futures and forward contracts to be
financial instruments since these contracts either require or permit settlement
by the delivery of the underlying commodities. Normally, any contracts used to
hedge market risk are generally less than one year in duration. Changes in the
market value of these transactions are deferred until the gain or loss is
recognized on the hedged transaction, at which time such gains and losses are
recognized through cost of sales
Credit Risk
Credit risk represents the accounting loss that the Partnership would record if
counterparties failed to perform pursuant to contractual terms. Management of
credit risk involves a number of considerations, such as the financial profile
of the counterparty, the value of collateral held, if any, specific terms and
duration of the contractual agreement, and the counterparty's sensitivity to
political and macroeconomic developments.
The Partnership's exposure to credit risk is limited to the book value of trade
receivables included in the accompanying financial statements. The Partnership
has established various procedures to manage credit exposure, including initial
credit approvals, credit limits, collateral requirements and rights of offset.
Letters of credit, prepayments and guarantees are also utilized to limit credit
risk to ensure that management's established credit criteria are met.
Fair Value and Net Gains and Losses
Estimated fair values of financial instruments and the net gains and losses,
both recognized and deferred, arising from hedging activities at December 31,
1996, 1995 and 1994, are as follows (in thousands).
<TABLE>
<CAPTION>
1996 1995 1994
---------------------- ------------------------- ------------------------
Net Net Net
Carrying Fair Gains Carrying Fair Gains Carrying Fair Gains
Amount Value (Losses) Amount Value (Losses) Amount Value (Losses)
------ ----- ------- ------- ----- -------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Option contracts
written $- $- $- $557 $324 $213 $1,880 $2,339 $(459)
</TABLE>
Quoted market prices are used in determining the fair value of financial
instruments. If quoted prices are not available, fair values are estimated on
the basis of pricing models or quoted prices for financial instruments with
similar characteristics. Judgment is required in interpreting market data and
the use of different market assumptions or estimation methodologies may affect
the estimated fair value amounts.
15. Commitments and Contingencies
The Partnership uses surface, vehicle and office leases in the course of its
business operations. The Partnership also leases three tanks for use in its
pipeline operations. The future minimum rental payments under all noncancelable
operating leases as of December 31, 1996, were as follows (in thousands).
1997 $ 779
1998 611
1999 502
2000 -
2001 -
Thereafter -
------
Total minimum lease obligations $1,892
======
Total operating lease expense was as follows (in thousands).
One month ended December 31, 1996 $133
Eleven months ended November 30, 1996 $522
Year ended December 31, 1995 $538
Year ended December 31, 1994 $472
The Partnership has contractual commitments (primarily forward contracts)
arising in the ordinary course of business. At December 31, 1996, the
Partnership had commitments to purchase 13,967,000 barrels of crude oil at fixed
prices ranging from $20.30 to $26.85 per barrel extending to January 1998, and
commitments to sell 11,541,000 barrels of crude oil at fixed prices ranging from
$22.00 to $28.00 per barrel extending to June 1997. Additionally, the
Partnership had commitments to purchase 32,742,000 barrels of crude oil
extending to December 1998, and commitments to sell 7,696,000 barrels of crude
oil extending to June 1997, associated with market-price related contracts.
The Partnership is subject to various environmental laws and regulations.
Policies and procedures are in place to monitor compliance. The Partnership's
management has made an assessment of its potential environmental exposure and
determined that such exposure is not material to its consolidated financial
position, results of operations or cash flows. As part of the formation of the
Partnership, Basis and Howell agreed to be responsible for certain environmental
conditions related to their ownership and operation of their respective assets
contributed to the Partnership and for any environmental liabilities which Basis
or Howell may have assumed from prior owners of these assets.
The Partnership is subject to lawsuits in the normal course of business and
examination by tax and other regulatory authorities. No such matters are
presently pending.
As part of the formation of the Partnership, Basis and Howell agreed to each
retain liability and responsibility for the defense of any future lawsuits
arising out of activities conducted by Basis and Howell prior to the formation
of the Partnership and have also agreed to cooperate in the defense of such
lawsuits.
16. Subsequent Event
On March 17, 1997, Salomon Inc announced that it had entered into a letter of
intent to sell 100% of the stock of Basis to Valero Energy Corporation. The
parties expect the transaction to close in May 1997. Prior to the transaction,
Basis will convey its interests in the Partnership and in the General Partner to
Salomon Inc.
Management is currently evaluating the impact that such a sale may have on the
Partnership. Salomon Inc, who controls the General Partner through their
indirect 54% ownership, does not anticipate that the transaction with Valero
will have a material impact on the Partnership.
EXHIBIT 3.2
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
GENESIS ENERGY, L.P.
TABLE OF CONTENTS
ARTICLE I
Definitions
1.1 Definitions
1.2 Construction
ARTICLE II
Organization
2.1 Formation
2.2 Name
2.3 Registered Office; Registered Agent; Principal Office; Other Offices
2.4 Purpose and Business
2.5 Powers
2.6 Power of Attorney
2.7 Term
2.8 Title to Partnership Assets
ARTICLE III
Rights of Limited Partners
3.1 Limitation of Liability
3.2 Management of Business
3.3 Outside Activities of the Limited Partners
3.4 Rights of Limited Partners
ARTICLE IV
Certificates; Record Holders; Transfer of
Partnership Interests; Redemption of Partnership Interests
4.1 Certificates
4.2 Mutilated, Destroyed, Lost or Stolen Certificates
4.3 Record Holders
4.4 Transfer Generally
4.5 Registration and Transfer of Limited Partner Interests
4.6 Transfer of a General Partner's General Partner Interest
4.7 Restrictions on Transfers
4.8 Citizenship Certificates; Non-citizen Assignees
4.9 Redemption of Partnership Interests of Non-citizen Assignees
ARTICLE V
Capital Contributions and Issuance of Partnership Interests
5.1 Organizational Contributions
5.2 Contributions by General Partner
5.3 Contributions by Initial Limited Partners
5.4 Interest and Withdrawal
5.5 Capital Accounts
5.6 Issuances of Additional Partnership Securities
5.7 Limitations on Issuance of Additional Partnership Securities
5.8 Limited Preemptive Right
5.9 Splits and Combination
5.10 Fully Paid and Non-Assessable Nature of Limited Partner Interests0
ARTICLE VI
Allocations and Distributions
6.1 Allocations for Capital Account Purposes
6.2 Allocations for Tax Purposes
6.3 Distributions to Record Holders
ARTICLE VII
Management and Operation of Business
7.1 Management
7.2 Certificate of Limited Partnership
7.3 Restrictions on General Partner's Authority
7.4 Reimbursement of the General Partner
7.5 Outside Activities
7.6 Loans from the General Partner; Loans or Contributions from the
Partnership; Contracts
with Affiliates; Certain Restrictions on the General Partner
7.7 Indemnification
7.8 Liability of Indemnitees
7.9 Resolution of Conflicts of Interest
7.10 Other Matters Concerning the General Partner
7.11 Purchase or Sale of Partnership Securities
7.12 Registration Rights of the General Partner and its Affiliates
7.13 Reliance by Third Parties
ARTICLE VIII
Books, Records, Accounting and Reports
8.1 Records and Accounting
8.2 Fiscal Year
8.3 Reports
ARTICLE IX
Tax Matters
9.1 Tax Returns and Information
9.2 Tax Elections
9.3 Tax Controversies
9.4 Withholding
ARTICLE X
Admission of Partners
10.1 Admission of Initial Limited Partners
10.2 Admission of Substituted Limited Partner
10.3 Admission of Successor General Partner
10.4 Admission of Additional Limited Partners
10.5 Amendment of Agreement and Certificate of Limited Partnership
ARTICLE XI
Withdrawal or Removal of Partners
11.1 Withdrawal of the General Partner
11.2 Removal of the General Partner
11.3 Interest of Departing Partner and Successor General Partner
11.4 Withdrawal of Limited Partners
ARTICLE XII
Dissolution and Liquidation
12.1 Dissolution
12.2 Continuation of the Business of the Partnership After Dissolution0
12.3 Liquidator
12.4 Liquidation
12.5 Cancellation of Certificate of Limited Partnership
12.6 Return of Contributions
12.7 Waiver of Partition
12.8 Capital Account Restoration
ARTICLE XIII
Amendment of Partnership Agreement; Meetings; Record Date
13.1 Amendment to be Adopted Solely by the General Partner
13.2 Amendment Procedures
13.3 Amendment Requirements
13.4 Special Meetings
13.5 Notice of a Meeting
13.6 Record Date
13.7 Adjournment
13.8 Waiver of Notice; Approval of Meeting; Approval of Minutes
13.9 Quorum
13.10 Conduct of a Meeting
13.11 Action Without a Meeting
13.12 Voting and Other Rights
14.1 Authority
14.2 Procedure for Merger or Consolidation
14.3 Approval by Limited Partners of Merger or Consolidation
14.4 Certificate of Merger
ARTICLE XIV
Merger
14.5 Effect of Merger
ARTICLE XV
Right to Acquire Limited Partner Interests
15.1 Right to Acquire Limited Partner Interests
ARTICLE XVI
General Provisions
16.1 Addresses and Notices
16.2 Further Action
16.3 Binding Effect
16.4 Integration
16.5 Creditors
16.6 Waiver
16.7 Counterparts
16.8 Applicable Law
16.9 Invalidity of Provisions
16.10 Consent of Partners
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
GENESIS ENERGY, L.P.
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP of Genesis
Energy, L.P. dated as of December 3, 1996, is entered into by and among Genesis
Energy, L.L.C., a Delaware limited liability company, as the General Partner,
and Wayne Kubicek, as the Organizational Limited Partner, 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
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.
''Acquisition'' means any transaction in which any Group Member acquires
(through an asset acquisition, merger, stock acquisition or other form of
investment) control over all or a portion of the assets, properties or business
of another Person for the purpose of increasing the operating capacity or
revenues of the Partnership Group from the operating capacity or revenues of the
Partnership Group existing immediately prior to such transaction.
''Additional Limited Partner'' means a Person admitted to the Partnership
as a Limited Partner pursuant to Section 10.4 and who is shown as such on the
books and records of the Partnership.
''Adjusted Capital Account'' means the Capital Account maintained for each
Partner as of the end of each fiscal year of the Partnership, (a) increased by
any amounts that such Partner is obligated to restore under the standards set by
Treasury Regulation Section 1.704-1(b)(2)(ii)(c) (or is deemed obligated to
restore under Treasury Regulation Sections 1.704-2(g) and 1.704-2(i)(5)) and (b)
decreased by (i) the amount of all losses and deductions that, as of the end of
such fiscal year, are reasonably expected to be allocated to such Partner in
subsequent years under Sections 704(e)(2) and 706(d) of the Code and Treasury
Regulation Section 1.751-1(b)(2)(ii), and (ii) the amount of all distributions
that, as of the end of such fiscal year, are reasonably expected to be made to
such Partner in subsequent years in accordance with the terms of this Agreement
or otherwise to the extent they exceed offsetting increases to such Partner's
Capital Account that are reasonably expected to occur during (or prior to) the
year in which such distributions are reasonably expected to be made (other than
increases as a result of a minimum gain chargeback pursuant to Section 6.1(c)(i)
or 6.1(c)(ii)). The foregoing definition of Adjusted Capital Account is intended
to comply with the provisions of Treasury Regulation Section 1.704-
1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
''Adjusted Operating Surplus'' has the meaning assigned to such term in the
Genesis OLP Partnership Agreement.
''Adjusted Property'' means any property the Carrying Value of which has
been adjusted pursuant to Section 5.5(d)(i) or 5.5(d)(ii). Once an Adjusted
Property is deemed distributed by, and recontributed to, the Partnership for
federal income tax purposes upon a termination of the Partnership pursuant to
Treasury Regulation Section 1.708-1(b)(1)(iv), such property shall thereafter
constitute a Contributed Property until the Carrying Value of such property is
subsequently adjusted pursuant to Section 5.5(d)(i) or 5.5(d)(ii). Upon a
termination of the Partnership following the publication of Proposed Treasury
Regulation 1.708-1(b)(1)(iv) as a final regulation, an Adjusted Property deemed
contributed to a new partnership in exchange for an interest in the new
partnership, followed by the deemed liquidation of the Partnership, shall
thereafter constitute a Contributed Property until the Carrying Value of such
property is subsequently adjusted pursuant to Section 5.5(d)(i) or 5.5(d)(ii).
''Affiliate'' means, with respect to any Person, any other Person that (i)
directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with, the Person in question or (ii)
owns, beneficially, directly or indirectly, 20% or more of the outstanding
capital stock, shares or other equity interests of 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 Allocation'' means any allocation, other than a Required
Allocation, of an item of income, gain, loss or deduction pursuant to the
provisions of Section 6.1, including, without limitation, a Curative Allocation
(if appropriate to the context in which the term ''Agreed Allocation'' is used).
''Agreed Value'' of any Contributed Property means the fair market value of
such property or other consideration at the time of contribution as determined
by the General Partner using such reasonable method of valuation as it may
adopt; provided, however, that the Agreed Value of any property deemed
contributed to the Partnership for federal income tax purposes upon termination
and reconstitution thereof pursuant to Section 708 of the Code (whether before
or after finalization of Proposed Treasury Regulation Section 1.708-1(b)(1)(iv))
shall be determined in accordance with Section 5.5(c)(i). Subject to Section
5.5(c)(i), the General Partner shall, in its discretion, use such method as it
deems reasonable and appropriate to allocate the aggregate Agreed Value of
Contributed Properties contributed to 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.
''Agreement'' means this Amended and Restated Agreement of Limited
Partnership of Genesis Energy, L.P., as it may be amended, supplemented or
restated from time to time.
''API'' has the meaning assigned to such term in the Genesis OLP
Partnership Agreement.
''Assignee'' means a Non-citizen Assignee or a Person to whom one or more
Limited Partner Interests have been transferred in a manner permitted under this
Agreement and who has executed and delivered a Transfer Application as required
by this Agreement, but who has not been admitted as a Substituted Limited
Partner.
''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.
''Audit Committee'' means a committee of the Board of Directors of the
General Partner composed entirely of two or more directors who are neither
officers nor employees of the General Partner or officers, directors or
employees of any Affiliate of the General Partner.
''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 on hand
at the end of such Quarter and (ii) all additional cash and cash equivalents of
the Partnership on hand on the date of determination of Available Cash with
respect to such Quarter resulting from borrowings for working capital purposes
and purchases of APIs made subsequent to the end of such Quarter, less
(b) the amount of any cash reserves that is necessary or appropriate in the
reasonable discretion of 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 business of
the Partnership Group) subsequent to such Quarter or (ii) comply with applicable
law or any loan agreement (including the Master Credit Support Agreement),
security agreement (including the 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; provided, however, that
disbursements made by the Partnership 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, less
(c) any Redemption Proceeds on hand that have not yet been contributed to
Genesis OLP.
Notwithstanding the foregoing, ''Available Cash'' with respect to the
Quarter in which the Liquidation Date occurs and any subsequent Quarter shall
equal zero.
''Basis'' means Basis Petroleum, Inc., a Texas corporation.
''Book-Tax Disparity'' means with respect to any item of Contributed
Property or Adjusted Property, as of the date of any determination, the
difference between the Carrying Value of such Contributed Property or Adjusted
Property and the adjusted basis thereof for federal income tax purposes as of
such date. A Partner's share of the Partnership's Book-Tax Disparities in all of
its Contributed Property and Adjusted Property will be reflected by the
difference between such Partner's Capital Account balance as maintained pursuant
to Section 5.5 and the hypothetical balance of such Partner's Capital Account
computed as if it had been maintained strictly in accordance with federal income
tax accounting principles.
''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 states of New York or Texas shall not be regarded as a Business
Day.
''Capital Account'' means the capital account maintained for a Partner
pursuant to Section 5.5.
''Capital Contribution'' means any cash, cash equivalents or the Net Agreed
Value of Contributed Property that a Partner contributes to the Partnership
pursuant to this Agreement.
''Capital Improvement'' means any (a) addition or improvement to the
capital assets owned by any Group Member or (b) acquisition of existing or the
construction of new capital assets (including pipeline systems, storage
facilities and related assets), made to increase the operating capacity or
revenues of the Partnership Group from the operating capacity or revenues of the
Partnership Group existing immediately prior to such addition, improvement,
acquisition or construction.
''Carrying Value'' means (a) with respect to a Contributed Property, the
Agreed Value of such property reduced (but not below zero) by all depreciation,
amortization and cost recovery deductions charged to the Partners' and
Assignees' Capital Accounts in respect of such Contributed Property, and (b)
with respect to any other Partnership property, the adjusted basis of such
property for federal income tax purposes, all as of the time of determination.
The Carrying Value of any property shall be adjusted from time to time in
accordance with Sections 5.5(d)(i) and 5.5(d)(ii) and to reflect changes,
additions or other adjustments to the Carrying Value for dispositions and
acquisitions of Partnership properties, as deemed appropriate by the General
Partner.
''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 general partner of
the Partnership.
''Certificate'' means a certificate, substantially in the form of Exhibit A
to this Agreement or in such other form as may be adopted by the General Partner
in its discretion, issued by the Partnership evidencing ownership of one or more
Common Units or a certificate, in such form as may be adopted by the General
Partner in its discretion, 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 Secretary of State of the State of
Delaware as referenced in Section 7.2, as such Certificate of Limited
Partnership may be amended, supplemented or restated from time to time.
''Citizenship Certification'' means a properly completed certificate in
such form as may be specified by the General Partner by which an Assignee or a
Limited Partner certifies that he (and if he is a nominee holding for the
account of another Person, that to the best of his knowledge such other Person)
is an Eligible Citizen.
''claim'' 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 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
future 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 representing a fractional part
of the Partnership Interests of all Limited Partners and Assignees and having
the rights and obligations specified with respect to a Common Unit in this
Agreement.
''Contributed Property'' means each property or other asset, in such form
as may be permitted by the Delaware Act, but excluding cash, contributed to the
Partnership (or deemed contributed to the Partnership on termination and
reconstitution thereof pursuant to Section 708 of the Code, whether before or
after finalization of Proposed Treasury Regulation Section 1.708-1(b)(1)(iv)).
Once the Carrying Value of a Contributed Property is adjusted pursuant to
Section 5.5(d), such property shall no longer constitute a Contributed Property,
but shall be deemed an Adjusted Property.
''Conversion Election'' has the meaning assigned to such term in the
Genesis OLP Partnership Agreement.
''Conveyance Agreement'' means that certain Purchase & Sale and
Contribution & Conveyance Agreement, dated as of November 26, 1996, among the
Partnership, Genesis OLP, Genesis Energy, L.L.C., Basis, Howell and the Howell
Subsidiaries, together with the additional conveyance documents and instruments
contemplated or referenced thereunder.
''Curative Allocation'' means any allocation of an item of income, gain,
deduction, loss or credit pursuant to the provisions of Section 6.1(c)(ix).
''Current Market Price'' has the meaning assigned to such term in Section
15.1(a).
''Delaware Act'' means the Delaware Revised Uniform Limited Partnership
Act, 6 Del C. 17-101, et seq., as amended, supplemented or restated from time to
time, and any successor to such statute.
''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.
''Distribution Support Agreement'' means the Distribution Support
Agreement, dated as of the Closing Date, among Salomon and Genesis OLP, which
sets forth the agreement of Salomon and Genesis OLP relating to the purchase of
APIs.
''Economic Risk of Loss'' has the meaning set forth in Treasury Regulation
Section 1.752-2(a).
''Eligible Citizen'' means a Person qualified to own interests in real
property in jurisdictions in which any Group Member does business or proposes to
do business from time to time, and whose status as a Limited Partner or Assignee
does not or would not subject such Group Member to a significant risk of
cancellation or forfeiture of any of its properties or any interest therein.
''Event of Withdrawal'' has the meaning assigned to such term in Section
11.1(a).
''GP Unit'' means a Partnership Security representing a fractional part of
the Partnership Interest of the General Partner and having the rights and
obligations specified with respect to GP Units in this Agreement.
''General Partner'' means Genesis Energy, L.L.C. and its successors and
permitted assigns as general partner of the Partnership.
''General Partner Interest'' means the ownership interest of a 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
GP Units or other 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.
''Genesis Energy, L.L.C.'' means Genesis Energy, L.L.C., a Delaware limited
liability company, which is currently the General Partner of the Partnership,
and its successors.
''Genesis OLP'' means Genesis Crude Oil, L.P., a Delaware limited
partnership, and its successors.
''Genesis OLP Partnership Agreement'' means the Amended and Restated
Agreement of Limited Partnership of Genesis Crude Oil, L.P., as it may be
amended, supplemented or restated from time to time.
''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.
''Holder'' as used in Section 7.12, has the meaning assigned to such term
in Section 7.12(a).
''Howell'' means Howell Corporation, a Delaware corporation.
''Howell Subsidiaries'' means Howell Crude Oil Company, a Delaware
corporation, Howell Pipeline Texas, Inc., a Delaware corporation, Howell
Pipeline USA, Inc., a Delaware corporation, Howell Power Systems, Inc., a
Delaware corporation, and Howell Transportation Services, Inc., a Delaware
corporation.
''Incentive Compensation Payment'' has the meaning assigned to such term in
the Genesis OLP Partnership Agreement.
''Indemnified Persons'' has the meaning assigned to such term in Section
7.12(c).
''Indemnitee'' means (a) the General Partner, any Departing Partner and any
Person who is or was an Affiliate of the General Partner or any Departing
Partner, (b) any Person who is or was a director, officer, employee, agent or
trustee of a Group Member, (c) any Person who is or was a member, officer,
director, employee, agent or trustee of the General Partner or any Departing
Partner or any Affiliate of the General Partner or any Departing Partner, or any
Affiliate of any such Person, and (d) any Person who is or was serving at the
request of the General Partner or any Departing Partner or any such Affiliate as
a director, officer, employee, member, partner, agent, fiduciary or trustee of
another Person; provided, that a Person shall not be an Indemnitee by reason of
providing, on a fee-for-services basis, trustee, fiduciary or custodial
services.
''Initial Common Unit'' means a Common Unit sold in the Initial Offering.
''Initial Limited Partners'' means the Underwriters upon being admitted to
the Partnership in accordance with Section 10.1.
''Initial Offering'' means the initial offering and sale of Common Units to
the public, as described in the Registration Statement.
''Issue Price'' means the price at which a Unit is purchased from the
Partnership, after taking into account any sales commission or underwriting
discount charged to the Partnership.
''LLC Contribution Amount'' has the meaning assigned to such term in the
Conveyance Agreement.
''LLC Overallotment Contribution'' has the meaning assigned to such term in
the Conveyance Agreement.
''Limited Partner'' means, unless the context otherwise requires, (a) the
Organizational Limited Partner, each Initial Limited Partner, each Substituted
Limited Partner, each Additional Limited Partner, and any Partner upon the
change of its status from General Partner to Limited Partner pursuant to Section
11.3 and (b) solely for purposes of Articles V, VI, VII and IX and Section 12.4,
each Assignee.
''Limited Partner Interest'' means the ownership interest of a Limited
Partner or Assignee in the Partnership, which may be evidenced by Common Units
or other Partnership Securities or a combination thereof or interest therein,
and includes any and all benefits to which such Limited Partner or Assignee is
entitled as provided in this Agreement, together with all obligations of such
Limited Partner or Assignee 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 Partners have the right to elect to reconstitute the
Partnership and continue its business 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 12.3 as liquidating trustee of the
Partnership within the meaning of the Delaware Act.
''Master Credit Support Agreement'' means the Master Credit Support
Agreement, dated as of the Closing Date, among Genesis OLP, Salomon and Basis
which sets forth the agreement of Genesis OLP and Salomon relating to the credit
support to be provided by Salomon to Genesis OLP and the agreement of Genesis
OLP and Basis regarding working capital to be provided by Basis to Genesis OLP.
''Majority Interest'' means at least a majority in Voting Power of the
Outstanding Limited Partner Interests.
''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, or the Nasdaq Stock Market or any successor thereto.
''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 or
Assignee by the Partnership, the Partnership's Carrying Value of such property
(as adjusted pursuant to Section 5.5(d)(ii)) at the time such property is
distributed, reduced by any indebtedness either assumed by such Partner or
Assignee upon such distribution or to which such property is subject at the time
of distribution, in either case, as determined under Section 752 of the Code.
''Net Income'' means, for any taxable year, the excess, if any, of the
Partnership's items of income and gain for such taxable year over the
Partnership's items of loss and deduction for such taxable year. The items
included in the calculation of Net Income shall be determined in accordance with
Section 5.5(b) and shall not include any items specially allocated under Section
6.1(c).
''Net Loss'' means, for any taxable year, the excess, if any, of the
Partnership's items of loss and deduction for such taxable year over the
Partnership's items of income and gain for such taxable year. The items included
in the calculation of Net Loss shall be determined in accordance with Section
5.5(b) and shall not include any items specially allocated under Section 6.1(c).
''Ninety Percent Interest'' means at least 90% in Voting Power of the
Outstanding Limited Partner Interests.
''Non-Competition Agreement'' means the Non-Competition Agreement, dated as
of the Closing Date, among the Partnership, Genesis OLP, Salomon, Basis and
Howell.
''Non-citizen Assignee'' means a Person whom the General Partner has
determined in its discretion does not constitute an Eligible Citizen and as to
whose Limited Partner Interest the General Partner has become the Substituted
Limited Partner, pursuant to Section 4.8.
''Nonrecourse Built-in Gain'' means with respect to any Contributed
Properties or Adjusted Properties that are subject to a mortgage or pledge
securing a Nonrecourse Liability, the amount of any taxable gain that would be
allocated to the Partners pursuant to Sections 6.2(b)(i)(A), 6.2(b)(ii)(A) and
6.2(b)(iii) if such properties were disposed of in a taxable transaction in full
satisfaction of such liabilities and for no other consideration.
''Nonrecourse Deductions'' means any and all items of loss, deduction or
expenditures (described in Section 705(a)(2)(B) of the Code) that, in accordance
with the principles of Treasury Regulation Section 1.704-2(b), are attributable
to a Nonrecourse Liability.
''Nonrecourse Liability'' has the meaning set forth in Treasury Regulation
Section 1.752-1(a)(2).
''Notice of Election to Purchase'' has the meaning assigned to such term in
Section 15.1(b) hereof.
''OLP Common Unit'' has the meaning assigned to the term ''Common Unit'' in
the Genesis OLP Partnership Agreement.
''OLP Parity Unit'' has the meaning assigned to the term ''Parity Unit'' in
the Genesis OLP Partnership Agreement.
''OLP Subordinated Unit'' has the meaning assigned to the term
''Subordinated Unit'' in the Genesis OLP Partnership Agreement.
''OLP Unit'' has the meaning assigned to the term ''Unit'' in the Genesis
OLP Partnership Agreement.
''OLP Unitholders'' has the meaning assigned to the term ''Unitholders'' in
the Genesis OLP Partnership Agreement.
''Operating General Partner'' has the meaning assigned to such term in the
Genesis OLP Partnership Agreement.
''Opinion of Counsel'' means a written opinion of counsel (who may be
regular counsel to the Partnership or the General Partner or any of their
Affiliates) acceptable to the General Partner in its reasonable discretion.
''Option Closing Date'' has the meaning assigned to such term in the
Underwriting Agreement.
''Organizational Limited Partner'' means Wayne Kubicek in his 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 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, except that such Partnership
Securities shall be considered to be Outstanding for purposes of Section
11.1(b)(iv) (such Partnership Securities shall not, however, be treated as a
separate class of Partnership Securities for purposes of this Agreement).
''Over-allotment Option'' means the over-allotment option granted to the
Underwriters by the Partnership pursuant to the Underwriting Agreement.
''Parity Units'' means Common Units and all other Limited Partner Interests
having rights to distributions or in liquidation ranking on a parity with the
Common Units.
''Partner Nonrecourse Debt'' has the meaning set forth in Treasury
Regulation Section 1.704-2(b)(4).
''Partner Nonrecourse Debt Minimum Gain'' has the meaning set forth in
Treasury Regulation Section 1.704-2(i)(2).
''Partner Nonrecourse Deductions'' means any and all items of loss,
deduction or expenditure (including, without limitation, any expenditure
described in Section 705(a)(2)(B) of the Code) that, in accordance with the
principles of Treasury Regulation Section 1.704-2(i), are attributable to a
Partner Nonrecourse Debt.
''Partner'' means the General Partner and each Limited Partner.
''Partnership'' means Genesis Energy, L.P., a Delaware limited partnership,
and any successors thereto.
''Partnership Group'' means the Partnership, Genesis OLP and any other
Subsidiary of the Partnership, treated as a single consolidated entity.
''Partnership Interest'' means an ownership interest in the Partnership,
which shall include General Partner Interests and Limited Partner Interests.
''Partnership Minimum Gain'' means that amount determined in accordance
with the principles of Treasury Regulation Section 1.704-2(d).
''Partnership Security'' means any class or series of equity interest in
the Partnership and shall include, without limitation, Common Units and GP
Units.
''Percentage Interest'' means as of the date of such determination (a) as
to any Partner or Assignee holding Units, the product obtained by multiplying
(i) 100% less the percentage applicable to paragraph (b) by (ii) the quotient
obtained by dividing (A) the number of Units held by such Partner or Assignee by
(B) the total number of all Outstanding Units, and (b) as to the holders of
additional Partnership Securities issued by the Partnership in accordance with
Section 5.6, the percentage established as a part of such issuance.
''Person'' means an individual or a corporation, limited liability company,
partnership, joint venture, trust, unincorporated organization, association,
government agency or political subdivision thereof or other entity.
''Pro Rata'' means (a) when modifying Units or any class thereof,
apportioned among all designated Units in accordance with their relative
Percentage Interests and (b) when modifying Partners and Assignees, apportioned
among all Partners and Assignees in accordance with their respective Percentage
Interests.
''Purchase Date'' means the date determined by the General Partner as the
date for purchase of all Outstanding Units (other than Units owned by the
General Partner and its Affiliates) pursuant to Article XV.
''Quarter'' means, unless the context requires otherwise, a calendar
quarter.
''Recapture Income'' means any gain recognized by the Partnership (computed
without regard to any adjustment required by Section 734 or 743 of the Code)
upon the disposition of any property or asset of the Partnership, which gain is
characterized as ordinary income because it represents the recapture of
deductions previously taken with respect to such property or asset.
''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
participate in any offer.
''Record Holder'' means 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, or with respect to other Partnership Securities, the
Person in whose name any such other Partnership Security is registered on the
books which the General Partner has caused to be kept as of the opening of
business on such Business Day.
''Redeemable Interests'' means any Limited Partner Interests for which a
redemption notice has been given, and has not been withdrawn, pursuant to
Section 4.9.
''Redemption and Registration Rights Agreement'' means the Redemption and
Registration Rights Agreement, dated as of the Closing Date, among Basis,
Howell, the Howell Subsidiaries, the Partnership and Genesis OLP which sets
forth the agreement regarding the redemption of OLP Common Units by Genesis OLP.
''Redemption Proceeds'' means any cash received by the Partnership from the
issuance of Partnership Securities which cash is to be contributed to Genesis
OLP and used by Genesis OLP to redeem OLP Common Units pursuant to the
Redemption and Registration Rights Agreement.
''Registration Statement'' means the Registration Statement on Form S-1
(Registration
No. 333-11545) 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.
''Required Allocations'' means (a) any limitation imposed on any allocation
of Net Losses under Section 6.1(b) and (b) any allocation of an item of income,
gain, loss or deduction pursuant to Section 6.1(c)(i), 6.1(c)(ii), 6.1(c)(iii),
6.1(c)(vi) or 6.1(c)(viii).
''Residual Gain'' or ''Residual Loss'' means any item of gain or loss, as
the case may be, of the Partnership recognized for federal income tax purposes
resulting from a sale, exchange or other disposition of a Contributed Property
or Adjusted Property, to the extent such item of gain or loss is not allocated
pursuant to Section 6.2(b)(i)(A) or 6.2(b)(ii)(A), respectively, to eliminate
Book-Tax Disparities.
''Salomon'' means Salomon Inc, a Delaware corporation.
''Securities Act'' means the Securities Act of 1933, as amended,
supplemented or restated from time to time and any successor to such statute.
''Security Agreement'' means the Security Agreement, dated as of the
Closing Date, among Genesis OLP, Salomon and the Secured Parties (as defined in
the Security Agreement) securing the obligations of Genesis OLP under the Master
Credit Support Agreement and creating a security interest in the Collateral (as
defined in the Security Agreement) in favor of the Collateral Agent (as defined
in the Security Agreement).
''Special Approval'' means approval by a majority of the members of the
Audit Committee.
''Subordination Period'' has the meaning assigned to such term in the
Genesis OLP Partnership Agreement.
''Subsidiary'' means, with respect to any Person, (a) a corporation of
which more than 50% of the voting power of shares entitled (without regard to
the occurrence of any contingency) to vote in the election of directors or other
governing body of such corporation is owned, directly or indirectly, at the date
of determination, by such Person, by one or more Subsidiaries of such Person or
a combination thereof, (b) a partnership (whether general or limited) in which
such Person or a Subsidiary of such Person is, at the date of determination, a
general or limited partner of such partnership, but only if more than 50% of the
partnership interests of such partnership (considering all of the partnership
interests of such partnership as a single class) is owned, directly or
indirectly, at the date of determination, by such Person, by one or more
Subsidiaries of such Person, or a combination thereof, or (c) any other Person
(other than a corporation or a partnership) in which such Person, one or more
Subsidiaries of such Person, or a combination thereof, directly or indirectly,
at the date of determination, has (i) at least a majority ownership interest or
(ii) the power to elect or direct the election of a majority of the directors or
other governing body of such Person.
''Substituted Limited Partner'' means a Person who is admitted as a Limited
Partner to the Partnership pursuant to Section 10.2 in place of and with all the
rights of a Limited Partner and who is shown as a Limited Partner on the books
and records of the Partnership.
''Surviving Business Entity'' has the meaning assigned to such term in
Section 14.2(b).
''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.
''Transfer Application'' means an application and agreement for transfer of
Partnership Securities in the form set forth on the back of a Certificate or in
a form substantially to the same effect in a separate instrument.
''Two-Thirds Interest'' means at least 662/3% in Voting Power of the
Outstanding Limited Partner Interests.
''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 November
26, 1996, among the Underwriters, the Partnership, Genesis OLP, the General
Partner and certain other parties, providing for the purchase of Common Units by
such Underwriters.
''Unit'' means a Common Unit or a GP Unit or any other Partnership Security
that is designated as a ''Unit.''
''Unrealized Gain'' attributable to any item of Partnership property means,
as of any date of determination, the excess, if any, of (a) the fair market
value of such property as of such date (as determined under Section 5.5(d)) over
(b) the Carrying Value of such property as of such date (prior to any adjustment
to be made pursuant to Section 5.5(d) as of such date).
''Unrealized Loss'' attributable to any item of Partnership property means,
as of any date of determination, the excess, if any, of (a) the Carrying Value
of such property as of such date (prior to any adjustment to be made pursuant to
Section 5.5(d) as of such date) over (b) the fair market value of such property
as of such date (as determined under Section 5.5(d)).
''U.S. GAAP'' means United States Generally Accepted Accounting Principles
consistently applied.
''Voting Power'' means the right, if any, of the holder of a Partnership
Security to vote on Partnership matters. Each Common Unit shall entitle the
holder thereof to one vote. Each additional Partnership Security shall entitle
the holder thereof to such vote, if any, as shall be established at the time of
issuance of such Partnership Security.
''Withdrawal Opinion of Counsel'' has the meaning assigned to such term in
Section 11.1(b).
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) ''include'' or ''includes'' means includes,
without limitation, and ''including'' means including, without limitation.
ARTICLE II
Organization
2.1 Formation
The General Partner and the Organizational Limited Partner have previously
formed the Partnership as a limited partnership pursuant to the provisions of
the Delaware Act and hereby amend and restate the original Agreement of Limited
Partnership of Genesis Energy, L.P. in its entirety. This amendment and
restatement shall become effective on the date of this 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 Delaware 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.
2.2 Name
The name of the Partnership shall be ''Genesis Energy, L.P.'' The
Partnership's business may be conducted under any other name or names deemed
necessary or appropriate by the General Partner in its sole discretion,
including the name of the General Partner. The words ''Limited Partnership,''
''L.P.,'' ''Ltd.'' 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 in its discretion 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.
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 State of Delaware shall be located at 1209 Orange Street,
New Castle County, Wilmington, Delaware 19801, and the registered agent for
service of process on the Partnership in the State of Delaware at such
registered office shall be CT Corporation System. The principal office of the
Partnership shall be located at 500 Dallas, Suite 3100, Houston, Texas 77002 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 State of Delaware as the General
Partner deems necessary or appropriate. The address of the General Partner shall
be 500 Dallas, Suite 3100, Houston, Texas 77002 or such other place as the
General Partner may from time to time designate by notice to the Limited
Partners.
2.4 Purpose and Business
The purpose and nature of the business to be conducted by the Partnership
shall be to (a) serve as a general partner in Genesis OLP and, in connection
therewith, to exercise all the rights and powers conferred upon the Partnership
as a general partner in Genesis OLP pursuant to the Genesis OLP Partnership
Agreement or otherwise, (b) 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 Genesis OLP is
permitted to engage in by the Genesis OLP Partnership Agreement 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,
(c) engage directly in, or to 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
which lawfully may be conducted by a limited partnership organized pursuant to
the Delaware 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 (d) do anything necessary or appropriate to the
foregoing, including the making of capital contributions or loans to a Group
Member; provided, however, that, notwithstanding the foregoing, the Partnership
shall not engage in the activities described in (b) and (c) above if (x) there
are any outstanding OLP Units that are not held by the Partnership, which OLP
Units give the holders thereof the right to cause Genesis OLP to redeem such OLP
Units based on a value that is related to the value of Partnership Securities
and, as a result of engaging in such activities, the relative values of such OLP
Units and Partnership Securities will be materially affected or (y) there are
any outstanding OLP Subordinated Units. The General Partner has no obligation or
duty to the Partnership, the Limited Partners, or the Assignees to propose or
approve, and in its discretion may decline to propose or approve, the conduct by
the Partnership of any business.
2.5 Powers
The Partnership shall be empowered to do any and all acts and things
necessary, appropriate, proper, advisable, incidental to or convenient for the
furtherance and accomplishment of the purposes and business described in Section
2.4 and for the protection and benefit of the Partnership.
2.6 Power of Attorney
(a) Each Limited Partner and each Assignee hereby constitutes and appoints
the General Partner and, if a Liquidator shall have been selected pursuant to
Section 12.3, the Liquidator, severally (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 deems 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 State
of Delaware 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 deems 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 deems 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, Article 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 or consolidation 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
necessary or appropriate, in the discretion of the General Partner or the
Liquidator, to 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 is necessary or
appropriate, in the discretion of the General Partner or the Liquidator, to
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 or Assignee and the transfer of all or any portion of such Limited
Partner's or Assignee's Partnership Interest and shall extend to such Limited
Partner's or Assignee's heirs, successors, assigns and personal representatives.
Each such Limited Partner or Assignee 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 or
Assignee, 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 or Assignee 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 deems necessary to effectuate this
Agreement and the purposes of the Partnership.
2.7 Term
The term of the Partnership commenced upon the filing of the Certificate of
Limited Partnership in accordance with the Delaware Act and shall continue until
the close of Partnership business on December 31, 2086 or until the earlier
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
Delaware Act.
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 or Assignee, 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
3.1 Limitation of Liability
The Limited Partners and the Assignees shall have no liability under this
Agreement except as expressly provided in this Agreement or the Delaware Act.
3.2 Management of Business
No Limited Partner or Assignee, in its capacity as such, shall participate
in the operation, management or control (within the meaning of the Delaware 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, 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 17-303(a)
of the Delaware Act) and shall not affect, impair or eliminate the limitations
on the liability of the Limited Partners or Assignees under this Agreement.
3.3 Outside Activities of the Limited Partners
Subject to the provisions of Section 7.5, which shall continue to be
applicable to the Persons referred to therein, regardless of whether such
Persons shall also be Limited Partners or Assignees, any Limited Partner or
Assignee 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 or Assignees shall
have any rights by virtue of this Agreement in any business ventures of any
Limited Partner or Assignee.
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) to obtain true and full information regarding the status of the
business and financial condition of the Partnership;
(ii) promptly after becoming available, to obtain a copy of the
Partnership's federal, state and local tax returns for each year;
(iii) to have furnished to him a current list of the name and last known
business, residence or mailing address of each 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 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; 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 and
Assignees, 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
4.1 Certificates
Upon the Partnership's issuance of Common Units to any Person, the
Partnership shall issue one or more Certificates in the name of such Person
evidencing the number of such Common Units being so issued. In addition, the
General Partner may cause the Partnership to issue Certificates evidencing
ownership of one or more other classes or series of Partnership Securities.
Certificates shall be executed on behalf of the Partnership by the Chairman of
the Board, President or any Vice President and the Secretary or any Assistant
Secretary of the General Partner. No Common Unit Certificate shall be valid for
any purpose until it has been countersigned by the Transfer Agent.
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 deliver and, in the case of a Common Unit Certificate, the Transfer
Agent shall countersign, 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, in the case of a Common Unit
Certificate, 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
Partnership, that a previously issued Certificate has been lost, destroyed or
stolen;
(ii) requests the issuance of a new Certificate before the Partnership 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 Partnership, delivers to the Partnership a bond,
in form and substance satisfactory to the Partnership, with surety or sureties
and with fixed or open penalty as the Partnership may reasonably direct, in its
sole discretion, to indemnify the Partnership, 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
Partnership.
If a Limited Partner or Assignee fails to notify the Partnership within a
reasonable 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 or Assignee 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 Partnership 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.
4.3 Record Holders
The Partnership shall be entitled to recognize the Record Holder as the
Partner or Assignee 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 Limited Partner Interests are listed
for trading. 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 Limited Partner Interests, as
between the Partnership on the one hand, and such other Persons on the other,
such representative Person (a) shall be the Partner or Assignee (as the case may
be) of record and beneficially, (b) must execute and deliver a Transfer
Application and (c) shall be bound by this Agreement and shall have the rights
and obligations of a Partner or Assignee (as the case may be) hereunder and as,
and to the extent, provided for herein.
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 by which the
General Partner assigns its General Partner Interest to another Person who
becomes the General Partner, or by which the holder of a Limited Partner
Interest assigns such Limited Partner Interest to another Person who is or
becomes a Limited Partner or an Assignee, and includes a sale, assignment, gift,
pledge, encumbrance, hypothecation, mortgage, exchange or any other disposition
by law or otherwise.
(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 interest holder in the General Partner of any or all of the
issued and outstanding interests in the General Partner.
4.5 Registration and Transfer of Limited Partner Interests
(a) The Partnership 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 transfers of such Common 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 Interest, 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, 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) Except as otherwise provided in Section 4.8, the Partnership shall not
recognize any transfer of Limited Partner Interests until the Certificates
evidencing such Limited Partner Interests are surrendered for registration of
transfer and are accompanied by a Transfer Application duly executed by the
transferee (or the transferee's attorney-in-fact duly authorized in writing). No
charge shall be imposed by the Partnership for such transfer; provided, that as
a condition to the issuance of any new Certificate under this Section 4.5, the
Partnership may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed with respect thereto.
(c) Limited Partner Interests may be transferred only in the manner
described in this Section 4.5. The transfer of any Limited Partner Interests and
the admission of any new Limited Partner shall not constitute an amendment to
this Agreement.
(d) Until admitted as a Substituted Limited Partner pursuant to Section
10.2, the Record Holder of a Limited Partner Interest shall be an Assignee in
respect of such Limited Partner Interest. Limited Partners may include
custodians, nominees or any other individual or entity in its own or any
representative capacity.
(e) A transferee of a Limited Partner Interest who has completed and
delivered a Transfer Application shall be deemed to have (i) requested admission
as a Substituted Limited Partner, (ii) agreed to comply with and be bound by and
to have executed this Agreement, (iii) represented and warranted that such
transferee has the right, power and authority and, if an individual, the
capacity to enter into this Agreement, (iv) granted the powers of attorney set
forth in this Agreement and (v) given the consents and approvals and made the
waivers contained in this Agreement.
4.6 Transfer of a General Partner's General Partner Interest
Prior to December 31, 2006, the General Partner shall not transfer all or
any part of its General Partner Interest to a Person unless such transfer (a)
has been approved by the prior written consent or vote of the holders of a
Majority Interest or (b) is of all, but not less than all, of its General
Partner Interest to (i) an Affiliate of the General Partner or (ii) another
Person in connection with the merger or consolidation of the General Partner
with or into another Person or the transfer by the General Partner of all or
substantially all of its assets to another Person. 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 (x) the
transferee agrees to assume the rights and duties of the General Partner under
this Agreement and the Genesis OLP Partnership Agreement and to be bound by the
provisions of this Agreement and the Genesis OLP Partnership Agreement, (y) 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 of Genesis OLP or cause the Partnership or Genesis OLP to be treated as
an association taxable as a corporation or otherwise to be taxed as an entity
for federal income tax purposes (to the extent not already so treated or taxed)
and (z) such transferee also agrees to purchase all (or the appropriate portion
thereof, if applicable) of the partnership interest of the General Partner as
the general partner 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 a General Partner immediately prior to
the transfer of the General Partner Interest, and the business of the
Partnership shall continue without dissolution.
4.7 Restrictions on Transfers
(a) Notwithstanding the other provisions of this Article IV, no transfer of
any Partnership Interest shall be made if such transfer would (i) violate the
then applicable federal or state securities laws or rules and regulations of the
Commission, any state securities commission or any other governmental authority
with jurisdiction over such transfer, (ii) terminate the existence or
qualification of the Partnership or Genesis OLP under the laws of the
jurisdiction of its formation or (iii) cause the Partnership or Genesis OLP to
be treated as an association taxable as a corporation or otherwise to be taxed
as an entity for federal income tax purposes (to the extent not already so
treated or taxed).
(b) The General Partner may impose restrictions on the transfer of
Partnership Interests if a subsequent Opinion of Counsel determines that such
restrictions are necessary to avoid a significant risk of the Partnership or
Genesis OLP becoming taxable as a corporation or otherwise to be taxed as an
entity for federal income tax purposes. The restrictions may be imposed by
making such amendments to this Agreement as the General Partner may determine to
be necessary or appropriate to impose such restrictions; provided, however, that
any amendment that the General Partner believes, in the exercise of its
reasonable discretion, could 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 traded must be
approved, prior to such amendment being effected, by the holders of at least 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.
4.8 Citizenship Certificates; Non-citizen Assignees
(a) If any Group Member is or becomes subject to any federal, state or
local law or regulation that, in the reasonable determination of the General
Partner, creates a substantial risk of cancellation or forfeiture of any
property in which the Group Member has an interest based on the nationality,
citizenship or other related status of a Limited Partner or Assignee, the
General Partner may request any Limited Partner or Assignee to furnish to the
General Partner, within 30 days after receipt of such request, an executed
Citizenship Certification or such other information concerning his nationality,
citizenship or other related status (or, if the Limited Partner or Assignee is a
nominee holding for the account of another Person, the nationality, citizenship
or other related status of such Person) as the General Partner may request. If a
Limited Partner or Assignee fails to furnish to the General Partner within the
aforementioned 30-day period such Citizenship Certification or other requested
information or if upon receipt of such Citizenship Certification or other
requested information the General Partner determines, with the advice of
counsel, that a Limited Partner or Assignee is not an Eligible Citizen, the
Limited Partner Interests owned by such Limited Partner or Assignee shall be
subject to redemption in accordance with the provisions of Section 4.9. In
addition, the General Partner may require that the status of any such Limited
Partner or Assignee be changed to that of a Non-citizen Assignee and, thereupon,
the General Partner shall be substituted for such Non-citizen Assignee as the
Limited Partner in respect of his Limited Partner Interests.
(b) The General Partner shall, in exercising voting rights in respect of
Limited Partner Interests held by it on behalf of Non-citizen Assignees,
distribute the votes in the same ratios as the votes of Limited Partners
(including without limitation the General Partner) in respect of Limited Partner
Interests other than those of Non-citizen Assignees are cast, either for,
against or abstaining as to the matter.
(c) Upon dissolution of the Partnership, a Non-citizen Assignee shall have
no right to receive a distribution in kind pursuant to Section 12.4 but shall be
entitled to the cash equivalent thereof, and the Partnership shall provide cash
in exchange for an assignment of the Non-citizen Assignee's share of the
distribution in kind. Such payment and assignment shall be treated for
Partnership purposes as a purchase by the Partnership from the Non-citizen
Assignee of his Limited Partner Interest (representing his right to receive his
share of such distribution in kind).
(d) At any time after he can and does certify that he has become an
Eligible Citizen, a Non-citizen Assignee may, upon application to the General
Partner, request admission as a Substituted Limited Partner with respect to any
Limited Partner Interests of such Non-citizen Assignee not redeemed pursuant to
Section 4.9, and upon his admission pursuant to Section 10.2, the General
Partner shall cease to be deemed to be the Limited Partner in respect of the
Non-citizen Assignee's Limited Partner Interests.
4.9 Redemption of Partnership Interests of Non-citizen Assignees
(a) If at any time a Limited Partner or Assignee fails to furnish a
Citizenship Certification or other information requested within the 30-day
period specified in Section 4.8(a), or if upon receipt of such Citizenship
Certification or other information the General Partner determines, with the
advice of counsel, that a Limited Partner or Assignee is not an Eligible
Citizen, the Partnership may, unless the Limited Partner or Assignee establishes
to the satisfaction of the General Partner that such Limited Partner or Assignee
is an Eligible Citizen or has transferred his Limited Partner Interests to a
Person who is an Eligible Citizen and who furnishes a Citizenship Certification
to the General Partner prior to the date fixed for redemption as provided below,
redeem the Limited Partner Interest of such Limited Partner or Assignee as
follows:
(i) The General Partner shall, not later than the 30th day before the date
fixed for redemption, give notice of redemption to the Limited Partner or
Assignee, at his last address designated on the records of the Partnership or
the Transfer Agent, by registered or certified mail, postage prepaid. The notice
shall be deemed to have been given when so mailed. The notice shall specify the
Redeemable Interests, the date fixed for redemption, the place of payment, that
payment of the redemption price will be made upon surrender of the Certificate
evidencing the Redeemable Interests and that on and after the date fixed for
redemption no further allocations or distributions to which the Limited Partner
or Assignee would otherwise be entitled in respect of the Redeemable Interests
will accrue or be made.
(ii) The aggregate redemption price for Redeemable Interests shall be an
amount equal to the Current Market Price (the date of determination of which
shall be the date fixed for redemption) of Limited Partner Interests of the
class to be so redeemed multiplied by the number of Limited Partner Interests of
each such class included among the Redeemable Interests. The redemption price
shall be paid, in the discretion of the General Partner, in cash or by delivery
of a promissory note of the Partnership in the principal amount of the
redemption price, bearing interest at the rate of 10% annually and payable in
three equal annual installments of principal together with accrued interest,
commencing one year after the redemption date.
(iii) Upon surrender by or on behalf of the Limited Partner or Assignee, at
the place specified in the notice of redemption, of the Certificate evidencing
the Redeemable Interests, duly endorsed in blank or accompanied by an assignment
duly executed in blank, the Limited Partner or Assignee or his duly authorized
representative shall be entitled to receive the payment therefor.
(iv) After the redemption date, Redeemable Interests shall no longer
constitute issued and Outstanding Limited Partner Interests.
(b) The provisions of this Section 4.9 shall also be applicable to Limited
Partner Interests held by a Limited Partner or Assignee as nominee of a Person
determined to be other than an Eligible Citizen.
(c) Nothing in this Section 4.9 shall prevent the recipient of a notice of
redemption from transferring his Limited Partner Interests before the redemption
date if such transfer is otherwise permitted under this Agreement. Upon receipt
of notice of such a transfer, the General Partner shall withdraw the notice of
redemption, provided the transferee of such Limited Partner Interests certifies
to the satisfaction of the General Partner in a Citizenship Certification
delivered in connection with the Transfer Application that he is an Eligible
Citizen. If the transferee fails to make such certification, such redemption
shall be effected from the transferee on the original redemption date.
ARTICLE V
Capital Contributions and Issuance of
Partnership Interests
5.1 Organizational Contributions
In connection with the formation of the Partnership under the Delaware Act,
the General Partner made an initial Capital Contribution to the Partnership in
the amount of $10.00 for an interest in the Partnership and has been admitted as
the General Partner of the Partnership, and the Organizational Limited Partner
made an initial Capital Contribution to the Partnership in the amount of $990.00
for an interest in the Partnership and has been admitted as a Limited Partner of
the Partnership. As of the Closing Date, the interest of the Organizational
Limited Partner shall be redeemed as provided in the Conveyance Agreement; the
initial Capital Contributions of each Partner shall thereupon be refunded; and
the Organizational Limited Partner shall cease to be a Limited Partner of the
Partnership. Ninety-nine percent of any interest or other profit that may have
resulted from the investment or other use of such initial Capital Contributions
shall be allocated and distributed to the Organizational Limited Partner, and
the balance thereof shall be allocated and distributed to the General Partner.
5.2 Contributions by General Partner
(a) On the Closing Date and pursuant to the Conveyance Agreement, the
General Partner shall contribute to the Partnership, as a Capital Contribution,
cash in an amount equal to the LLC Contribution Amount in exchange for the
number of GP Units specified in Section 2.2(a) of the Conveyance Agreement and
the continuation of its General Partner Interest in the Partnership, subject to
all of the rights, privileges and duties of the General Partner under this
Agreement.
(b) Upon the issuance of any Common Units pursuant to the exercise of the
Over-allotment Option, the General Partner shall be required to make an
additional Capital Contribution equal to the LLC Overallotment Contribution in
exchange for a number of additional GP Units equal to 2/98ths of the number of
Common Units issued to the Underwriters pursuant to Section 5.3(b). All cash
contributed to the Partnership in exchange for the GP Units issued to the
General Partner pursuant to this Section 5.2(b) shall be contributed to Genesis
OLP.
(c) If the Partnership issues Partnership Securities, other than Common
Units issued pursuant to Sections 5.3(a) and 5.3(b), then: (i) if the proceeds
of such issuance of Partnership Securities will be used to redeem OLP Units
pursuant to the terms of the Redemption and Registration Rights Agreement, the
General Partner shall not make an additional Capital Contribution to the
Partnership in conjunction with the issuance of such Partnership Securities and
(ii) if the proceeds of such issuance of Partnership Securities will be used for
purposes other than to redeem OLP Units pursuant to the terms of the Redemption
and Registration Rights Agreement, the General Partner shall make an additional
Capital Contribution to the Partnership in conjunction with the issuance of such
Partnership Securities in exchange for a number of GP Units sufficient to
maintain the Percentage Interest of the General Partner's General Partner
Interest existing prior to the issuance of such Partnership Securities.
(d) Except as set forth in Sections 5.2(a), 5.2(b) and 5.2(c) and Article
XII, the General Partner shall not be obligated to make any Capital
Contributions to the Partnership.
5.3 Contributions by Initial Limited Partners
(a) On the Closing Date, simultaneous with the Capital Contribution
referred to in Section 5.2(a), each Underwriter shall contribute to the
Partnership cash in an amount equal to the Issue Price per Initial Common Unit,
multiplied by the number of Common Units specified in the Underwriting Agreement
to be purchased by such Underwriter at the Closing Date. In exchange for such
Capital Contributions by the Underwriters, the Partnership shall issue Common
Units to each Underwriter on whose behalf such Capital Contribution is made in
an amount equal to the quotient obtained by dividing (i) the cash contribution
to the Partnership by or on behalf of such Underwriter by (ii) the Issue Price
per Initial Common Unit. All cash contributed to the Partnership in exchange for
the Common Units issued to the Underwriters on the Closing Date pursuant to this
Section 5.3(a) remaining after the payment or reservation of amounts for payment
of all expenses associated with the Initial Offering shall be contributed to
Genesis OLP.
(b) Upon the exercise of the Over-allotment Option, each Underwriter shall
contribute to the Partnership cash in an amount equal to the Issue Price per
Initial Common Unit, multiplied by the number of Common Units specified in the
Underwriting Agreement to be purchased by such Underwriter at the Option Closing
Date. In exchange for such Capital Contributions by the Underwriters, the
Partnership shall issue Common Units to each Underwriter on whose behalf such
Capital Contribution is made in an amount equal to the quotient obtained by
dividing (i) the cash contributions to the Partnership by or on behalf of such
Underwriter by (ii) the Issue Price per Common Unit. All cash contributed to the
Partnership in exchange for the Common Units issued to the Underwriters pursuant
to this Section 5.3(b) shall be contributed to Genesis OLP.
(c) No Limited Partner Interests will be issued or issuable as of or at the
Closing Date other than (i) the Common Units issuable pursuant to Section 5.3(a)
in aggregate number equal to 7,500,000 and (ii) the ''Option Units'' as such
term is defined in the Underwriting Agreement in aggregate number up to
1,125,000 issuable upon exercise of the Over-allotment Option pursuant to
Section 5.3(b).
5.4 Interest and Withdrawal
No interest shall be paid by the Partnership on Capital Contributions. No
Partner or Assignee 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 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 or Assignee shall have
priority over any other Partner or Assignee either as to the return of Capital
Contributions or as to profits, losses or distributions. Any such return shall
be a compromise to which all Partners and Assignees agree within the meaning of
Section 17-502(b) of the Delaware Act.
5.5 Capital Accounts
(a) The Partnership shall maintain for each Partner (or a beneficial owner
of Partnership Interests held by a nominee in any case in which the nominee has
furnished the identity of such owner to the Partnership in accordance with
Section 6031(c) of the Code or any other method acceptable to the General
Partner in its sole discretion) owning a Partnership Interest a separate Capital
Account with respect to such Partnership Interest in accordance with the rules
of Treasury Regulation Section 1.704-1(b)(2)(iv). Such Capital Account shall be
increased by (i) the amount of all Capital Contributions made to the Partnership
with respect to such Partnership Interest pursuant to this Agreement and (ii)
all items of Partnership income and gain (including, without limitation, income
and gain exempt from tax) computed in accordance with Section 5.5(b) and
allocated with respect to such Partnership Interest pursuant to Section 6.1, and
decreased by (x) the amount of cash or Net Agreed Value of all actual and deemed
distributions of cash or property made with respect to such Partnership Interest
pursuant to this Agreement and (y) all items of Partnership deduction and loss
computed in accordance with Section 5.5(b) and allocated with respect to such
Partnership Interest pursuant to Section 6.1.
(b) For purposes of computing the amount of any item of income, gain, loss
or deduction which is to be allocated pursuant to Article VI and is to be
reflected in the Partners' Capital Accounts, the determination, recognition and
classification of any such item shall be the same as its determination,
recognition and classification for federal income tax purposes (including,
without limitation, any method of depreciation, cost recovery or amortization
used for that purpose), provided, that:
(i) Solely for purposes of this Section 5.5, the Partnership shall be
treated as owning directly its proportionate share (as determined by the General
Partner based upon the provisions of the Genesis OLP Partnership Agreement) of
all property owned by Genesis OLP.
(ii) All underwriting discounts and commissions incurred by the Partnership
in connection with the issuance of Partnership Securities that can neither be
deducted nor amortized under Section 709 of the Code shall, for purposes of
Capital Account maintenance, be treated as an item of deduction at the time such
costs are incurred and shall be allocated 100% to the holders of such
Partnership Securities in accordance with their relative Percentage Interests.
All other fees and other expenses incurred by the Partnership to promote the
sale of (or to sell) Partnership Securities that can neither be deducted nor
amortized under Section 709 of the Code, if any, shall, for purposes of Capital
Account maintenance, be treated as an item of deduction at the time such fees
and other expenses are incurred and shall be allocated among the Partners
pursuant to Section 6.1.
(iii) Except as otherwise provided in Treasury Regulation Section 1.704-
1(b)(2)(iv)(m), the computation of all items of income, gain, loss and deduction
shall be made without regard to any election under Section 754 of the Code which
may be made by the Partnership and, as to those items described in Section
705(a)(1)(B) or 705(a)(2)(B) of the Code, without regard to the fact that such
items are not includable in gross income or are neither currently deductible nor
capitalized for federal income tax purposes. To the extent an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Section 734(b) or 743(b)
of the Code is required, pursuant to Treasury Regulation Section 1.704-
1(b)(2)(iv)(m) to be taken into account in determining Capital Accounts, the
amount of such adjustment in the Capital Accounts shall be treated as an item of
gain or loss.
(iv) Any income, gain or loss attributable to the taxable disposition of
any Partnership property shall be determined as if the adjusted basis of such
property as of such date of disposition were equal in amount to the
Partnership's Carrying Value with respect to such property as of such date.
(v) In accordance with the requirements of Section 704(b) of the Code, any
deductions for depreciation, cost recovery or amortization attributable to any
Contributed Property shall be determined as if the adjusted basis of such
property on the date it was acquired by the Partnership were equal to the Agreed
Value of such property. Upon an adjustment pursuant to Section 5.5(d) to the
Carrying Value of any Partnership property subject to depreciation, cost
recovery or amortization, any further deductions for such depreciation, cost
recovery or amortization attributable to such property shall be determined (A)
as if the adjusted basis of such property were equal to the Carrying Value of
such property immediately following such adjustment and (B) using a rate of
depreciation, cost recovery or amortization derived from the same method and
useful life (or, if applicable, the remaining useful life) as is applied for
federal income tax purposes; provided, however, that, if the asset has a zero
adjusted basis for federal income tax purposes, depreciation, cost recovery or
amortization deductions shall be determined using any reasonable method that the
General Partner may adopt.
(vi) If the Partnership's adjusted basis in a depreciable or cost recovery
property is reduced for federal income tax purposes pursuant to Section 48(q)(1)
or 48(q)(3) of the Code, the amount of such reduction shall, solely for purposes
hereof, be deemed to be an additional depreciation or cost recovery deduction in
the year such property is placed in service and shall be allocated among the
Partners pursuant to Section 6.1. Any restoration of such basis pursuant to
Section 48(q)(2) of the Code shall, to the extent possible, be allocated in the
same manner to the Partners to whom such deemed deduction was allocated.
(c) A transferee of a Partnership Interest shall succeed to a pro rata
portion of the Capital Account of the transferor relating to the Partnership
Interest so transferred; provided, however, that, if the transfer causes a
termination of the Partnership under Section 708(b)(1)(B) of the Code, the
Partnership's properties and liabilities shall be deemed (i) to have been
distributed in liquidation of the Partnership to the Partners (including any
transferee of a Partnership Interest that is a party to the transfer causing
such termination) pursuant to Section 12.4 (after adjusting the balance of the
Capital Accounts of the Partners as provided in Section 5.5(d)(ii)) and
recontributed by such Partners in reconstitution of the Partnership or (ii) in
the event of a termination of the Partnership that occurs after the finalization
of Proposed Treasury Regulation Section 1.704-1(b)(1)(iv), to have been
contributed to a new partnership which will be deemed to be a continuation of,
and successor to, the Partnership and the Partnership will be deemed to make
liquidating distributions of the interests in this new partnership to the
Partners (including any transferee of a Partnership Interest that is a party to
the transfer causing such termination) pursuant to Section 12.4 (after adjusting
the balance of the Capital Accounts of the Partners as provided in Section
5.5(d)(ii)). Any such deemed distribution and contribution, in the case of a
characterization under clause (i) of the preceding sentence, or any such deemed
contribution and distribution, in the case of a characterization under clause
(ii) of the preceding sentence, shall be treated as an actual contribution and
distribution for purposes of this Section 5.5. In such event, the Carrying
Values of the Partnership properties shall be adjusted immediately prior to such
deemed distribution and contribution, or deemed contribution and distribution,
pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv) and this Section 5.5
and such Carrying Values shall then constitute the Agreed Values of such
properties upon such deemed contribution to the new partnership. In either case,
the Capital Accounts of the new partnership that results under the applicable
characterization shall be maintained in accordance with the principles of this
Section 5.5.
(d) (i) In accordance with Treasury Regulation Section 1.704-
1(b)(2)(iv)(f), on an issuance of additional Partnership Interests for cash or
Contributed Property or the conversion of the General Partner's Combined
Interest to Common Units pursuant to Section 11.3(b), the Capital Account of all
Partners and the Carrying Value of each Partnership property immediately prior
to such issuance shall be adjusted upward or downward to reflect any Unrealized
Gain or Unrealized Loss attributable to such Partnership property, as if such
Unrealized Gain or Unrealized Loss had been recognized on an actual sale of each
such property immediately prior to such issuance and had been allocated to the
Partners at such time pursuant to Section 6.1 in the same manner as any item of
gain or loss actually recognized during such period would have been allocated.
In determining such Unrealized Gain or Unrealized Loss, the aggregate cash
amount and fair market value of all Partnership assets (including, without
limitation, cash or cash equivalents) immediately prior to the issuance of
additional Partnership Securities shall be determined by the General Partner
using such reasonable method of valuation as it may adopt; provided, however,
that the General Partner, in arriving at such valuation, must take fully into
account the fair market value of the Partnership Interests of all Partners at
such time. The General Partner shall allocate such aggregate value among the
assets of the Partnership (in such manner as it determines in its discretion to
be reasonable) to arrive at a fair market value for individual properties.
(ii) In accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(f),
immediately prior to any actual or deemed distribution to a Partner of any
Partnership property (other than a distribution of cash that is not in
redemption or retirement of a Partnership Interest), the Capital Accounts of all
Partners and the Carrying Value of all Partnership property shall be adjusted
upward or downward to reflect any Unrealized Gain or Unrealized Loss
attributable to such Partnership property, as if such Unrealized Gain or
Unrealized Loss had been recognized in a sale of such property immediately prior
to such distribution for an amount equal to its fair market value, and had been
allocated to the Partners, at such time, pursuant to Section 6.1 in the same
manner as any item of gain or loss actually recognized during such period would
have been allocated. In determining such Unrealized Gain or Unrealized Loss the
aggregate cash amount and fair market value of all Partnership assets
(including, without limitation, cash or cash equivalents) immediately prior to a
distribution shall (A) in the case of an actual distribution which is not made
pursuant to Section 12.4 or in the case of a deemed contribution and/or
distribution occurring as a result of a termination of the Partnership pursuant
to Section 708 of the Code, be determined and allocated in the same manner as
that provided in Section 5.5(d)(i) or (B) in the case of a liquidating
distribution pursuant to Section 12.4, be determined and allocated by the
Liquidator using such reasonable method of valuation as it may adopt.
5.6 Issuances of Additional Partnership Securities
(a) Subject to Section 5.7, the Partnership may issue additional
Partnership Securities and options, rights, warrants and appreciation rights
relating to 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 shall be established by the General Partner in its sole
discretion, 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 in the
exercise of its sole discretion, 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 such 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 such Partnership Security will be issued, evidenced by
certificates and assigned or transferred; and (vii) the right, if any, of 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 is hereby authorized and directed to take all
actions that it deems necessary or appropriate in connection with (i) each
issuance of Partnership Securities pursuant to this Section 5.6, (ii) the
conversion of a General Partner Interest into Common 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 is
further authorized and directed to specify the relative rights, powers and
duties of the holders of Partnership Securities being so issued. The General
Partner shall do all things necessary to comply with the Delaware Act and is
authorized and directed to do all things it deems to be necessary or advisable
in connection with any future issuance of Partnership Securities or in
connection with the conversion of a General Partner Interest into Common 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 Common Units or other
Partnership Securities are listed for trading.
(d) If the Partnership shall issue any Partnership Securities at a time
when there are any outstanding OLP Units that are not held by the Partnership,
which OLP Units give the holders thereof the right to cause Genesis OLP to
redeem such OLP Units based on a value that is related to the value of
Partnership Securities, the Partnership shall contribute the net proceeds raised
in connection with all such issuances of Partnership Securities (including
Partnership Securities issued to the General Partner) as a Capital Contribution
to Genesis OLP if the contribution of such net proceeds to Genesis OLP is
required to maintain the relative values of the OLP Units and the Partnership
Securities.
5.7 Limitations on Issuance of Additional Partnership Securities
The issuance of Partnership Securities pursuant to Section 5.6 shall be
subject to the following restrictions and limitations:
(a) During the Subordination Period, the Partnership shall not issue an
aggregate of more than 3,750,000 additional Parity Units without the prior
approval of the holders of a majority of the Outstanding Common Units; provided,
however that the number of additional Parity Units that may be issued without
the prior approval of the holders of a majority of the Outstanding Common Units
shall be reduced by the number of OLP Parity Units issued by Genesis OLP to any
Person other than the Partnership. In applying this limitation, there shall be
excluded Common Units issued (i) in connection with the exercise of the Over-
allotment Option, (ii) in accordance with Section 5.7(b), (iii) in connection
with the redemption of OLP Common Units pursuant to the Redemption and
Registration Rights Agreement, (iv) pursuant to the employee benefit plans of
the General Partner, the Partnership or any other Group Member and (v) in the
event of a combination or subdivision of Common Units.
(b) The Partnership may also issue an unlimited number of Parity Units,
prior to the end of the Subordination Period and without the prior approval of
the Limited Partners if such issuance occurs (i) in connection with an
Acquisition or a Capital Improvement or (ii) within 365 days of, and the net
proceeds from such issuance are used to repay debt incurred in connection with,
an Acquisition or a Capital Improvement, in each case where such Acquisition or
Capital Improvement involves assets that, if acquired by the Partnership as of
the date that is one year prior to the first day of the Quarter in which such
Acquisition is to be consummated or such Capital Improvement is to be completed,
would have resulted, on a pro forma basis, in an increase in:
(A) the amount of Adjusted Operating Surplus generated by Genesis OLP on a
per-unit basis (for all Outstanding OLP Units) with respect to each of the four
most recently completed Quarters (on a pro forma basis as described below) as
compared to
(B) the actual amount of Adjusted Operating Surplus generated by Genesis
OLP on a per-unit basis (for all Outstanding OLP Units) (excluding Adjusted
Operating Surplus attributable to the Acquisition or Capital Improvement) with
respect to each of such four most recently completed Quarters.
If the issuance of Partnership Securities with respect to an Acquisition or
a Capital Improvement occurs within the first four full Quarters after the
Closing Date, then Adjusted Operating Surplus as used in clauses (A) (subject to
the succeeding sentence) and (B) above shall be calculated (i) for each Quarter,
if any, that commenced after the Closing Date for which actual results of
operations are available, based on the actual Adjusted Operating Surplus of
Genesis OLP generated with respect to such Quarter, and (ii) for each other
Quarter, on a pro forma basis not inconsistent with the procedure, as
applicable, set forth in Appendix E to the Registration Statement. Furthermore,
the amount in clause (A) shall be determined on a pro forma basis assuming that
(1) all of the Parity Units or Partnership Securities to be issued in connection
with or within 365 days of such Acquisition or Capital Improvement had been
issued and outstanding, (2) all indebtedness for borrowed money to be incurred
or assumed in connection with such Acquisition or Capital Improvement (other
than any such indebtedness that is to be repaid with the proceeds of such
issuance) had been incurred or assumed, in each case as of the commencement of
such four-Quarter period, (3) the personnel expenses that would have been
incurred by the Partnership in the operation of the acquired assets are the
personnel expenses for employees to be retained by the Partnership in the
operation of the acquired assets, and (4) the non-personnel costs and expenses
are computed on the same basis as those incurred by the Partnership in the
operation of the Partnership's business at similarly situated Partnership
facilities.
(c) During the Subordination Period, the Partnership shall not issue
additional Partnership Securities having rights to distributions or in
liquidation ranking prior or senior to the Common Units, without the prior
approval of the holders of a majority of the Outstanding Common Units.
(d) No fractional Common Units shall be issued by the Partnership.
5.8 Limited Preemptive Right
Except as provided in this Section 5.8 and in Section 5.2, 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.
5.9 Splits and Combination
(a) Subject to Section 5.9(d), the Partnership may make a Pro Rata
distribution of Partnership Securities to all Record Holders or may effect a
subdivision or combination of Partnership Securities so long as, after any such
event, each Partner shall have the same Percentage Interest in the Partnership
as before such event, and any amounts calculated on a per Unit basis or stated
as a number of Units (including the number of additional Parity Units that may
be issued pursuant to Section 5.7 without a vote of the Limited Partners) are
proportionately adjusted retroactive to the beginning of the Partnership.
(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 as it may deem 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 Common Units upon any
distribution, subdivision or combination of Common Units. If a distribution,
subdivision or combination of Common Units would result in the issuance of
fractional Common Units but for the provisions of Section 5.7(d) and this
Section 5.9(d), each fractional Common Unit shall be rounded to the nearest
whole Common Unit (and a 0.5 Common Unit shall be rounded to the next higher
Common Unit).
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 17-607 of the Delaware Act.
ARTICLE VI
Allocations and Distributions
6.1 Allocations for Capital Account Purposes
For purposes of maintaining the Capital Accounts and in determining the
rights of the Partners among themselves, the Partnership's items of income,
gain, loss and deduction (computed in accordance with Section 5.5(b)) shall be
allocated among the Partners in each taxable year (or portion thereof) as
provided hereinbelow.
(a) Net Income. After giving effect to the special allocations set forth in
Section 6.1(c), Net Income for each taxable year and all items of income, gain,
loss and deduction taken into account in computing Net Income for such taxable
year shall be allocated as follows:
(i) First, 100% to the General Partner until the aggregate Net Income
allocated to the General Partner pursuant to this Section 6.1(a)(i) for the
current taxable year and all previous taxable years is equal to the aggregate
Net Losses allocated to the General Partner pursuant to Section 6.1(b)(ii) for
all previous taxable years; and
(ii) Second, the balance, if any, 100% to the Partners in accordance with
their respective Percentage Interests.
(b) Net Losses. After giving effect to the special allocations set forth in
Section 6.1(c), Net Losses for each taxable period and all items of income,
gain, loss and deduction taken into account in computing Net Losses for such
taxable period shall be allocated as follows:
(i) First, 100% to the Partners in accordance with their respective
Percentage Interests; provided, that Net Losses shall not be allocated pursuant
to this Section 6.1(b)(i) to the extent that such allocation would cause any
Limited Partner to have a deficit balance in its Adjusted Capital Account at the
end of such taxable year (or increase any existing deficit balance in its
Adjusted Capital Account); and
(ii) Second, the balance, if any, 100% to the General Partner.
(c) Special Allocations. Notwithstanding any other provision of this
Section 6.1, the following special allocations shall be made for such taxable
period:
(i) Partnership Minimum Gain Chargeback. Notwithstanding any other
provision of this Section 6.1, if there is a net decrease in Partnership Minimum
Gain during any Partnership taxable period, each Partner shall be allocated
items of Partnership income and gain for such period (and, if necessary,
subsequent periods) in the manner and amounts provided in Treasury Regulation
Sections 1.704-2(f)(6), 1.704-2(g)(2) and 1.704-2(j)(2)(i), or any successor
provision. For purposes of this Section 6.1(c), each Partner's Adjusted Capital
Account balance shall be determined, and the allocation of income or gain
required hereunder shall be effected, prior to the application of any other
allocations pursuant to this Section 6.1(c) with respect to such taxable period
(other than an allocation pursuant to Sections 6.1(c)(v) and 6.1(c)(vi)). This
Section 6.1(c)(i) is intended to comply with the Partnership Minimum Gain
chargeback requirement in Treasury Regulation Section 1.704-2(f) and shall be
interpreted consistently therewith.
(ii) Chargeback of Partner Nonrecourse Debt Minimum Gain. Notwithstanding
the other provisions of this Section 6.1 (other than Section 6.1(c)(i)), except
as provided in Treasury Regulation Section 1.704-2(i)(4), if there is a net
decrease in Partner Nonrecourse Debt Minimum Gain during any Partnership taxable
period, any Partner with a share of Partner Nonrecourse Debt Minimum Gain at the
beginning of such taxable period shall be allocated items of Partnership income
and gain for such period (and, if necessary, subsequent periods) in the manner
and amounts provided in Treasury Regulation Sections 1.704-2(i)(4) and 1.704-
2(j)(2)(ii), or any successor provisions. For purposes of this Section 6.1(c),
each Partner's Adjusted Capital Account balance shall be determined, and the
allocation of income or gain required hereunder shall be effected, prior to the
application of any other allocations pursuant to this Section 6.1(c), other than
Section 6.1(c)(i) and other than an allocation pursuant to Sections 6.1(c)(v)
and 6.1(c)(vi), with respect to such taxable period. This Section 6.1(c)(ii) is
intended to comply with the chargeback of items of income and gain requirement
in Treasury Regulation Section 1.704-2(i)(4) and shall be interpreted
consistently therewith.
(iii) Qualified Income Offset. In the event any Partner unexpectedly
receives any adjustments, allocations or distributions described in Treasury
Regulation Section 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-
1(b)(2)(ii)(d)(6), items of Partnership income and gain shall be specially
allocated to such Partner in an amount and manner sufficient to eliminate, to
the extent required by the Treasury Regulations promulgated under Section 704(b)
of the Code, the deficit balance, if any, in its Adjusted Capital Account
created by such adjustments, allocations or distributions as quickly as possible
unless such deficit balance is otherwise eliminated pursuant to Section
6.1(c)(i) or 6.1(c)(ii).
(iv) Gross Income Allocations. In the event any Partner has a deficit
balance in its Capital Account at the end of any Partnership taxable period in
excess of the sum of (A) the amount such Partner is required to restore pursuant
to the provisions of this Agreement and (B) the amount such Partner is deemed
obligated to restore pursuant to Treasury Regulation Sections 1.704-2(g) and
1.704-2(i)(5), such Partner shall be specially allocated items of Partnership
gross income and gain in the amount of such excess as quickly as possible;
provided, that an allocation pursuant to this Section 6.1(c)(iv) shall be made
only if and to the extent that such Partner would have a deficit balance in its
Capital Account as adjusted after all other allocations provided for in this
Section 6.1 have been tentatively made as if this Section 6.1(c)(iv) were not in
this Agreement.
(v) Nonrecourse Deductions. Nonrecourse Deductions for any taxable period
shall be allocated to the Partners in accordance with their respective
Percentage Interests. If the General Partner determines in its good faith
discretion that the Partnership's Nonrecourse Deductions must be allocated in a
different ratio to satisfy the safe harbor requirements of the Treasury
Regulations promulgated under Section 704(b) of the Code, the General Partner is
authorized, upon notice to the other Partners, to revise the prescribed ratio to
the numerically closest ratio that does satisfy such requirements.
(vi) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions for any
taxable period shall be allocated 100% to the Partner that bears the Economic
Risk of Loss with respect to the Partner Nonrecourse Debt to which such Partner
Nonrecourse Deductions are attributable in accordance with Treasury Regulation
Section 1.704-2(i). If more than one Partner bears the Economic Risk of Loss
with respect to a Partner Nonrecourse Debt, such Partner Nonrecourse Deductions
attributable thereto shall be allocated between or among such Partners in
accordance with the ratios in which they share such Economic Risk of Loss.
(vii) Nonrecourse Liabilities. For purposes of Treasury Regulation Section
1.752-3(a)(3), the Partners agree that Nonrecourse Liabilities of the
Partnership in excess of the sum of (A) the amount of Partnership Minimum Gain
and (B) the total amount of Nonrecourse Built-in Gain shall be allocated among
the Partners in accordance with their respective Percentage Interests.
(viii) Code Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Section 734(b) or 743(c)
of the Code is required, pursuant to Treasury Regulation Section 1.704-
1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the
amount of such adjustment to the Capital Accounts shall be treated as an item of
gain (if the adjustment increases the basis of the asset) or loss (if the
adjustment decreases such basis), and such item of gain or loss shall be
specially allocated to the Partners in a manner consistent with the manner in
which their Capital Accounts are required to be adjusted pursuant to such
Section of the Treasury Regulations.
(ix) Curative Allocation.
(A) Notwithstanding any other provision of this Section 6.1, other than the
Required Allocations, the Required Allocations shall be taken into account in
making the Agreed Allocations so that, to the extent possible, the net amount of
items of income, gain, loss and deduction allocated to each Partner pursuant to
the Required Allocations and the Agreed Allocations, together, shall be equal to
the net amount of such items that would have been allocated to each such Partner
under the Agreed Allocations had the Required Allocations and the related
Curative Allocation not otherwise been provided in this Section 6.1.
Notwithstanding the preceding sentence, Required Allocations relating to (1)
Nonrecourse Deductions shall not be taken into account except to the extent that
there has been a decrease in Partnership Minimum Gain and (2) Partner
Nonrecourse Deductions shall not be taken into account except to the extent that
there has been a decrease in Partner Nonrecourse Debt Minimum Gain. Allocations
pursuant to this Section 6.1(c)(ix)(A) shall only be made with respect to
Required Allocations to the extent the General Partner reasonably determines
that such allocations will otherwise be inconsistent with the economic agreement
among the Partners. Further, allocations pursuant to this Section 6.1(c)(ix)(A)
shall be deferred with respect to allocations pursuant to clauses (1) and (2)
hereof to the extent the General Partner reasonably determines that such
allocations are likely to be offset by subsequent Required Allocations.
(B) The General Partner shall have reasonable discretion, with respect to
each taxable period, to (1) apply the provisions of Section 6.1(c)(ix)(A) in
whatever order is most likely to minimize the economic distortions that might
otherwise result from the Required Allocations, and (2) divide all allocations
pursuant to Section 6.1(c)(ix)(A) among the Partners in a manner that is likely
to minimize such economic distortions.
6.2 Allocations for Tax Purposes
(a) Except as otherwise provided herein, for federal income tax purposes,
each item of income, gain, loss and deduction shall be allocated among the
Partners in the same manner as its correlative item of ''book'' income, gain,
loss or deduction is allocated pursuant to Section 6.1.
(b) In an attempt to eliminate Book-Tax Disparities attributable to a
Contributed Property or Adjusted Property, items of income, gain, loss,
depreciation, amortization and cost recovery deductions shall be allocated for
federal income tax purposes among the Partners as follows:
(i) (A) In the case of a Contributed Property, such items attributable
thereto shall be allocated among the Partners in the manner provided under
Section 704(c) of the Code that takes into account the variation between the
Agreed Value of such property and its adjusted basis at the time of
contribution; and (B) any item of Residual Gain or Residual Loss attributable to
a Contributed Property shall be allocated among the Partners in the same manner
as its correlative item of ''book'' gain or loss is allocated pursuant to
Section 6.1.
(ii) (A) In the case of an Adjusted Property, such items shall (1) first,
be allocated among the Partners in a manner consistent with the principles of
Section 704(c) of the Code to take into account the Unrealized Gain or
Unrealized Loss attributable to such property and the allocations thereof
pursuant to Section 5.5(d)(i) or 5.5(d)(ii), and (2) second, in the event such
property was originally a Contributed Property, be allocated among the Partners
in a manner consistent with Section 6.2(b)(i)(A); and (B) any item of Residual
Gain or Residual Loss attributable to an Adjusted Property shall be allocated
among the Partners in the same manner as its correlative item of ''book'' gain
or loss is allocated pursuant to Section 6.1.
(iii) The General Partner shall apply the principles of Treasury Regulation
Section 1.704-3(d) to eliminate Book-Tax Disparities.
(c) For the proper administration of the Partnership and for the
preservation of uniformity of the Limited Partner Interests (or any class or
classes thereof), the General Partner shall have sole discretion to (i) adopt
such conventions as it deems appropriate in determining the amount of
depreciation, amortization and cost recovery deductions; (ii) make special
allocations for federal income tax purposes of income (including, without
limitation, gross income) or deductions; and (iii) amend the provisions of this
Agreement as appropriate (x) to reflect the proposal or promulgation of Treasury
Regulations under Section 704(b) or 704(c) of the Code or (y) otherwise to
preserve or achieve uniformity of the Limited Partner Interests (or any class or
classes thereof). The General Partner may adopt such conventions, make such
allocations and make such amendments to this Agreement as provided in this
Section 6.2(c) only if such conventions, allocations or amendments would not
have a material adverse effect on the Partners, the holders of any class or
classes of Limited Partner Interests issued and Outstanding or the Partnership,
and if such allocations are consistent with the principles of Section 704 of the
Code.
(d) The General Partner in its discretion may determine to depreciate or
amortize the portion of an adjustment under Section 743(b) of the Code
attributable to unrealized appreciation in any Adjusted Property (to the extent
of the unamortized Book-Tax Disparity) using a predetermined rate derived from
the depreciation or amortization method and useful life applied to the
Partnership's common basis of such property, despite any inconsistency of such
approach with Proposed Treasury Regulation Section 1.168-2(n), Treasury
Regulation Section 1.167(c)-l(a)(6) or the legislative history of Section 197 of
the Code. If the General Partner determines that such reporting position cannot
reasonably be taken, the General Partner may adopt depreciation and amortization
conventions under which all purchasers acquiring Limited Partner Interests in
the same month would receive depreciation and amortization deductions, based
upon the same applicable rate as if they had purchased a direct interest in the
Partnership's property. If the General Partner chooses not to utilize such
aggregate method, the General Partner may use any other reasonable depreciation
and amortization conventions to preserve the uniformity of the intrinsic tax
characteristics of any Limited Partner Interests that would not have a material
adverse effect on the Limited Partners or the Record Holders of any class or
classes of Limited Partner Interests.
(e) Any gain allocated to the Partners upon the sale or other taxable
disposition of any Partnership asset shall, to the extent possible, after taking
into account other required allocations of gain pursuant to this Section 6.2, be
characterized as Recapture Income in the same proportions and to the same extent
as such Partners (or their predecessors in interest) have been allocated any
deductions directly or indirectly giving rise to the treatment of such gains as
Recapture Income.
(f) All items of income, gain, loss, deduction and credit recognized by the
Partnership for federal income tax purposes and allocated to the Partners in
accordance with the provisions hereof shall be determined without regard to any
election under Section 754 of the Code which may be made by the Partnership;
provided, however, that such allocations, once made, shall be adjusted as
necessary or appropriate to take into account those adjustments permitted or
required by Sections 734 and 743 of the Code.
(g) Each item of Partnership income, gain, loss and deduction attributable
to a transferred Partnership Interest, shall for federal income tax purposes, be
determined on an annual basis and prorated on a monthly basis and shall be
allocated to the Partners as of the opening of the New York Stock Exchange on
the first Business Day of each month; provided, however, that (i) if the Over-
allotment Option is not exercised, such items for the period beginning on the
Closing Date and ending on the last day of the month in which the Closing Date
occurs shall be allocated to Partners as of the opening of the New York Stock
Exchange on the first Business Day of the next succeeding month or (ii) if the
Over-allotment Option is exercised, such items for the period beginning on the
Closing Date and ending on the last day of the month in which the Option Closing
Date occurs shall be allocated to the Partners as of the opening of the New York
Stock Exchange on the first Business Day of the next succeeding month; and
provided, further, that gain or loss on a sale or other disposition of any
assets of the Partnership other than in the ordinary course of business shall be
allocated to the Partners as of the opening of the New York Stock Exchange on
the first Business Day of the month in which such gain or loss is recognized for
federal income tax purposes. The General Partner may revise, alter or otherwise
modify such methods of allocation as it determines necessary, to the extent
permitted or required by Section 706 of the Code and the regulations or rulings
promulgated thereunder.
(h) Allocations that would otherwise be made to a Limited Partner under the
provisions of this Article VI shall instead be made to the beneficial owner of
Limited Partner Interests held by a nominee in any case in which the nominee has
furnished the identity of such owner to the Partnership in accordance with
Section 6031(c) of the Code or any other method acceptable to the General
Partner in its sole discretion.
6.3 Distributions to Record Holders
(a) Within 45 days following the end of each Quarter commencing with the
Quarter ending on March 31, 1997, an amount equal to 100% of Available Cash with
respect to such Quarter shall, subject to Section 17-607 of the Delaware Act, be
distributed in accordance with this Article VI by the Partnership to the
Partners as of the Record Date selected by the General Partner in its reasonable
discretion in accordance with their respective Percentage Interests. The
immediately preceding sentence shall not require any distribution of cash if and
to the extent such distribution would be prohibited by applicable law or by any
loan agreement, security agreement, mortgage, debt instrument or other agreement
or obligation to which the Partnership is a party or by which it is bound or its
assets are subject. All distributions required to be made under this Agreement
shall be made subject to Section 17-607 of the Delaware Act.
(b) 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 shall have the discretion to treat taxes paid by
the Partnership on behalf of, or amounts 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.
ARTICLE VII
Management and Operation of Business
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 which 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, in its sole discretion, may deem 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, 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);
(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, the lending of funds
to other Persons, the repayment 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 such insurance for the benefit of the Partnership
Group and the Partners as it deems necessary or appropriate;
(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 or other relationships
(including the acquisition of interests in, and the contributions of property
to, Genesis OLP from time to time), subject, however, 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 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 4.7);
(xiii) the purchase, sale or other acquisition or disposition of
Partnership Securities, and, unless restricted or prohibited by Section 5.7, the
issuance of additional Partnership Securities and options, rights, warrants and
appreciation rights relating to Partnership Securities; and
(xiv) the undertaking of any action in connection with the Partnership's
participation as a general partner of Genesis OLP including, without limitation,
exercising the authority granted to the Partnership in Section 7.3(d) of the
Genesis OLP Partnership Agreement to make certain decisions relating to the
operation and conduct of the business of Genesis OLP.
(b) Notwithstanding any other provision of this Agreement, the Genesis OLP
Partnership Agreement, the Delaware 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 other agreements and documents filed as exhibits to the
Registration Statement, and the other agreements described in 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.
7.2 Certificate of Limited Partnership
The General Partner has caused the Certificate of Limited Partnership to be
filed with the Secretary of State of the State of Delaware as required by the
Delaware Act and shall use all reasonable efforts to cause to be filed such
other certificates or documents as may be determined by the General Partner in
its sole discretion to be reasonable and 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
State of Delaware or any other state in which the Partnership may elect to do
business or own property. To the extent that such action is determined by the
General Partner in its sole discretion to be reasonable and 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 State of
Delaware or of any other state 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.
7.3 Restrictions on General Partner's Authority
(a) 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, except as otherwise
provided in this Agreement, (i) possessing Partnership property, or assigning
any rights in specific Partnership property, for other than a Partnership
purpose; (ii) admitting a Person as a Partner; (iii) amending this Agreement in
any manner; or (iv) transferring its General Partner Interest.
(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 in a single transaction or a series of related
transactions, without the approval of holders of a Majority Interest; 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; and
provided, futher, that this provision shall not preclude or limit the ability of
Genesis OLP to sell, exchange or otherwise dispose of all of the assets of
Genesis OLP in a single transaction or a series of related transactions that is
approved by the OLP Unitholders as provided in Section 7.3(b) of the Genesis OLP
Partnership Agreement.
(c) Without the approval of holders of a Majority Interest, the General
Partner shall not, on behalf of the Partnership, (i) consent to any amendment to
the Genesis OLP Partnership Agreement or, except as expressly permitted by
Section 7.9(d), take any action permitted to be taken by a partner of Genesis
OLP, in either case, that would have a material adverse effect on the
Partnership as a partner of Genesis OLP 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 Genesis OLP; provided, however, that if a vote of the holders
of OLP Units is to be taken or the approval of such holders is otherwise sought
(A) as required by Section 3.6 of the Distribution Support Agreement to approve
an amendment to the Distribution Support Agreement, (B) to approve the sale,
exchange or other disposition of all or substantially all of the assets of
Genesis OLP, (C) to approve the merger or consolidation of Genesis OLP, or (D)
to approve the dissolution of Genesis OLP, the General Partner will call a
special meeting of the Limited Partners at which special meeting the Limited
Partners will be asked to vote on the proposal for which a vote of the holders
of OLP Units is to be taken, and following the vote of the Limited Partners the
General Partner will vote the Partnership's OLP Units on such proposal in the
same ratios as the votes of the Limited Partner Interests were cast on such
proposal, either for, against or abstaining.
(d) At all times while serving as the general partner of the Partnership,
the General Partner shall not make any dividend or distribution on, or
repurchase any shares of, its stock or take any other action within its control
if the effect of such action would cause its net worth, independent of its
interest in the Partnership Group, to be less than $7.5 million or such lower
amount, which based on an Opinion of Counsel that states, (i) based on a change
in the position of the Internal Revenue Service with respect to partnership
status pursuant to Code Section 7701, such lower amount would not cause the
Partnership or Genesis OLP to be treated as an association taxable as a
corporation or otherwise to be taxed as an entity for federal income tax
purposes and (ii) would not result in the loss of the limited liability of any
Limited Partner or of any limited partner of Genesis OLP.
7.4 Reimbursement of the General Partner
(a) Except as provided in this Section 7.4 and elsewhere in this Agreement
or in the Genesis OLP Partnership Agreement, the General Partner shall not be
compensated for its services as general partner of any Group Member.
(b) The General Partner shall be reimbursed on a monthly basis, or such
other reasonable basis as the General Partner may determine in its sole
discretion, 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
necessary or appropriate expenses allocable to the Partnership or otherwise
reasonably 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 in any reasonable manner determined by the General
Partner in its sole discretion. 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) Subject to Section 5.7, the General Partner, in its sole discretion and
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 Partnership Securities), or cause the Partnership to issue
Partnership Securities 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
Affiliate is 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 Affiliate of Partnership
Securities purchased by the General Partner or such Affiliate 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.
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 of the Partnership, Genesis OLP and any other
partnership of which the Partnership or Genesis OLP is, directly or indirectly,
a partner and to undertake activities that are ancillary or related thereto
(including being a limited partner in the Partnership or any such other
partnership) and (ii) shall not, directly or indirectly, 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 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 of any Group
Member.
(b) Salomon, Basis and Howell have entered into the Non-Competition
Agreement with the Partnership and Genesis OLP, which agreement sets forth
certain restrictions on their ability to engage in the business of (i) crude oil
gathering at the wellhead in the states of Alabama, Florida, Kansas, Louisiana,
Mississippi, New Mexico, Oklahoma or Texas, or any states contiguous to such
states, and (ii) transporting for third parties crude oil by pipeline along the
routes of the Partnership's crude oil pipelines owned as of the Closing Date.
(c) Except as specifically restricted by Section 7.5(a) and the Non-
Competition Agreement, each Indemnitee 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 express or implied by law to any Group Member or any
Partner. Neither any Group Member, any Limited Partner nor any other Person
shall have any rights by virtue of this Agreement, the Genesis OLP Partnership
Agreement or the partnership relationship established hereby or thereby in any
business ventures of any Indemnitee.
(d) Subject to the terms of Sections 7.5(a), 7.5(b) and 7.5(c) and the Non-
Competition 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 and (ii) it
shall be deemed not to be a breach of the General Partner's fiduciary duty or
any other obligation of any type whatsoever of the General Partner 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 the General Partner and the Indemnitees shall have no
obligation to present business opportunities to the Partnership.
(e) The General Partner and any of its Affiliates may acquire Partnership
Securities in addition to those acquired on the Closing Date and, except as
otherwise provided in this Agreement, shall be entitled to exercise all rights
of a General Partner or Limited Partner, as applicable, relating to such
Partnership Securities.
(f) The term ''Affiliates'' when used in Section 7.5 with respect to the
General Partner shall not include any Group Member or any Subsidiary of the
Group Member.
7.6 Loans from the General Partner; Loans or Contributions from the
Partnership; Contracts with Affiliates; Certain Restrictions on the General
Partner
(a) The General Partner or any Affiliate thereof 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). 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. No Group Member may lend funds to the General Partner or any of its
Affiliates (other than another 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
established in the sole discretion of the General Partner; provided, however,
that the Partnership may not charge the Group Member interest at a rate less
than the rate that would be charged to the Group Member (without reference to
the General Partner's financial abilities or guarantees) by unrelated lenders on
comparable loans. The foregoing authority shall be exercised by the General
Partner in its sole discretion and shall not create any right or benefit in
favor of any Group Member or any other Person.
(c) The General Partner may itself, or may enter into an agreement with any
of its Affiliates to, render services to a Group Member or to the General
Partner in the discharge of its duties as general partner of the Partnership.
Any services rendered to a Group Member by the General Partner or any of its
Affiliates shall be on terms that are fair and reasonable to the Partnership;
provided, however, that the requirements of this Section 7.6(c) shall be deemed
satisfied as to (i) any transaction approved by Special Approval, (ii) any
transaction, the terms of which are no less favorable to the Partnership Group
than those generally being provided to or available from unrelated third parties
or (iii) any transaction that, 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 Group), is
equitable to the Partnership Group. The provisions of Section 7.4 shall apply to
the rendering of services described in this Section 7.6(c).
(d) The Partnership Group may transfer assets to joint ventures, other
partnerships, corporations, limited liability companies or other business
entities in which it is or thereby becomes a participant upon such terms and
subject to such conditions as are consistent with this Agreement and applicable
law.
(e) Neither the General Partner nor any of its Affiliates shall sell,
transfer or convey any property to, or purchase any property from the
Partnership, directly or indirectly, except pursuant to transactions that are
fair and reasonable to the Partnership; provided, however, that the requirements
of this Section 7.6(e) shall be deemed to be satisfied as to (i) the
transactions effected pursuant to Sections 5.2 and 5.3, the Conveyance Agreement
and any other transactions described in or contemplated by the Registration
Statement, (ii) any transaction approved by Special Approval, (iii) any
transaction, the terms of which are no less favorable to the Partnership than
those generally being provided to or available from unrelated third parties, or
(iv) any transaction that, 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), is equitable to the
Partnership. With respect to any contribution of assets to the Partnership in
exchange for Partnership Securities, the Audit Committee, in determining whether
the appropriate number of Partnership Securities are being issued, may take into
account, among other things, the fair market value of the assets, the liquidated
and contingent liabilities assumed, the tax basis in the assets, the extent to
which tax-only allocations to the transferor will protect the existing partners
of the Partnership against a low tax basis, and such other factors as the Audit
Committee deems relevant under the circumstances.
(f) The General Partner and its Affiliates will have no obligation to
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, nor shall there be any
obligation on the part of the General Partner or its Affiliates to enter into
such contracts.
(g) Without limitation of Sections 7.6(a) through 7.6(f), and
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.
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 in each case the Indemnitee acted in
good faith and in a manner that such Indemnitee reasonably believed to be in, or
not opposed to, the best interests of the Partnership and, with respect to any
criminal proceeding, had no reasonable cause to believe its conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere, or its equivalent,
shall not create a presumption that the Indemnitee acted in a manner contrary to
that specified above. 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 the final disposition of
such claim, demand, action, suit or proceeding 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 interest of the
participants and beneficiaries of the plan shall be deemed to be for a purpose
which is in, or not opposed to, 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.
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 Partnership
Securities, for losses sustained or liabilities incurred as a result of any act
or omission if such Indemnitee acted in good faith.
(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. The provisions of this Agreement, to the extent that they
restrict or otherwise modify the duties and liabilities of an Indemnitee
otherwise existing at law or in equity, are agreed by the Partners to replace
such other duties and liabilities of such Indemnitee.
(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.
7.9 Resolution of Conflicts of Interest
(a) Unless otherwise expressly provided in this Agreement or the Genesis
OLP Partnership 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, Genesis OLP 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 the Genesis OLP Partnership
Agreement, of any agreement contemplated herein, or of any duty stated or
implied by law or equity, if the resolution or course of action is, or by
operation of this Agreement is deemed to be, fair and reasonable 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. Any conflict of interest and any resolution of such
conflict of interest shall be conclusively deemed fair and reasonable to the
Partnership if such conflict of interest or resolution is (i) approved by
Special Approval (as long as the material facts known to the General Partner or
any of its Affiliates regarding any proposed transaction were disclosed to the
Audit Committee at the time it gave its approval), (ii) on terms no less
favorable to the Partnership than those generally being provided to or available
from unrelated third parties or (iii) fair 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 may also adopt a resolution or course
of action that has not received Special Approval. The General Partner (including
the Audit Committee in connection with Special Approval) shall be authorized in
connection with its determination of what is ''fair and reasonable'' to the
Partnership and in connection with its resolution of any conflict of interest to
consider (A) the relative interests of any party to such conflict, agreement,
transaction or situation and the benefits and burdens relating to such interest;
(B) any customary or accepted industry practices and any customary or historical
dealings with a particular Person; (C) any applicable generally accepted
accounting practices or principles; and (D) such additional factors as the
General Partner (including the Audit Committee) determines in its sole
discretion to be relevant, reasonable or appropriate under the circumstances.
Nothing contained in this Agreement, however, is intended to nor shall it be
construed to require the General Partner (including the Audit Committee) to
consider the interests of any Person other than the Partnership. In the absence
of bad faith by the General Partner, the resolution, action or terms so made,
taken or provided by the General Partner with respect to such matter shall not
constitute a breach of this Agreement or any other agreement contemplated herein
or a breach of any standard of care or duty imposed herein or therein or, to the
extent permitted by law, under the Delaware Act or any other law, rule or
regulation.
(b) Whenever this Agreement or any other agreement contemplated hereby
provides that the General Partner or any of its Affiliates is permitted or
required to make a decision (i) in its ''sole discretion'' or ''discretion,''
that it deems ''necessary or appropriate'' or ''necessary or advisable'' or
under a grant of similar authority or latitude, except as otherwise provided
herein, the General Partner or such Affiliate shall be entitled to consider only
such interests and factors as it desires and shall have no duty or obligation to
give any consideration to any interest of, or factors affecting, the
Partnership, Genesis OLP or any Limited Partner, (ii) it may make such decision
in its sole discretion (regardless of whether there is a reference to ''sole
discretion'' or ''discretion'') unless another express standard is provided for,
or (iii) in ''good faith'' or under another express standard, the General
Partner or such Affiliate shall act under such express standard and shall not be
subject to any other or different standards imposed by this Agreement, the
Genesis OLP Partnership Agreement, any other agreement contemplated hereby or
under the Delaware Act or any other law, rule or regulation. In addition, any
actions taken by the General Partner or such Affiliate consistent with the
standards of ''reasonable discretion'' set forth in the definition of Available
Cash shall not constitute a breach of any duty of the General Partner to the
Partnership or the Limited Partners. The General Partner shall have no duty,
express or implied, to sell or otherwise dispose of any asset of the Partnership
Group other than in the ordinary course of business. No borrowing by any Group
Member or the approval thereof by the General Partner shall be deemed to
constitute a breach of any duty of the General Partner 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 (A) enable Genesis OLP to make Incentive
Compensation Payments or (B) hasten the expiration of the Subordination Period
or the conversion of any OLP Subordinated Units into OLP Common Units.
(c) Whenever a particular transaction, arrangement or resolution of a
conflict of interest is required under this Agreement to be ''fair and
reasonable'' to any Person, the fair and reasonable nature of such transaction,
arrangement or resolution shall be considered in the context of all similar or
related transactions.
(d) The Limited Partners hereby authorize the General Partner, on behalf of
the Partnership as a partner of a Group Member, to approve of actions by the
general partner of such Group Member similar to those actions permitted to be
taken by the General Partner pursuant to this Section 7.9.
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.
(d) Any standard of care and duty imposed by this Agreement or under the
Delaware Act or any applicable law, rule or regulation shall be modified, waived
or limited, to the extent permitted by law, as required to permit the General
Partner to act under this Agreement or any other agreement contemplated by this
Agreement and to make any decision pursuant to the authority prescribed in this
Agreement, so long as such action is reasonably believed by the General Partner
to be in, or not inconsistent with, the best interests of the Partnership.
7.11 Purchase or Sale of Partnership Securities
The General Partner may cause the Partnership to purchase or otherwise
acquire Partnership Securities; provided that the General Partner may not cause
the Partnership or any other Group Member to purchase OLP Subordinated Units
during the Subordination Period. 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 and 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.
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) 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 upon the
request of the General Partner or any of its Affiliates, 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
Audit Committee determines in its good faith judgment 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 promptly prepare and file (x) such documents as may be
necessary to register or qualify the Partnership 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 (y) 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 do any and all other acts and things that may
reasonably be necessary or advisable 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 Partnership Securities 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
Partnership Securities held by the Holder in such registration statement as the
Holder shall request. 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 Partnership Securities held by the Holder
which, 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 7.12(b) shall continue to be
applicable with respect to the General Partner (and any of the General Partner's
Affiliates) after it ceases to be a General 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 shares 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.
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 the 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
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
and Assignees 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.
8.2 Fiscal Year
The fiscal year of the Partnership shall be the calendar year.
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 furnished to each Record Holder of a Limited Partner Interest as of
a date selected by the General Partner in its discretion, 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 year, the General Partner
shall cause to be mailed or furnished to each Record Holder of a Limited Partner
Interest, as of a date selected by the General Partner in its discretion, 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 Limited Partner Interests are listed
for trading, or as the General Partner determines to be necessary or
appropriate.
ARTICLE IX
Tax Matters
9.1 Tax Returns and Information
The General Partner shall arrange for the preparation and timely filing of
all returns of the Partnership that are required for 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. The classification, realization and
recognition of income, gain, losses and deductions and other items shall be on
the accrual method of accounting for federal income tax purposes.
9.2 Tax Elections
(a) The Partnership shall make the election under Section 754 of the Code
in accordance with applicable regulations thereunder, subject to the reservation
of the right to seek to revoke any such election upon the General Partner's
determination that such revocation is in the best interests of the Limited
Partners. Notwithstanding any other provision herein contained, for the purposes
of computing the adjustments under Section 743(b) of the Code, the General
Partner shall be authorized (but not required) to adopt a convention whereby the
price paid by a transferee of a Limited Partner Interest will be deemed to be
the lowest quoted closing price of such Limited Partner Interests on any
National Securities Exchange on which such Limited Partner Interests are traded
during the calendar month in which such transfer is deemed to occur pursuant to
Section 6.2(g) without regard to the actual price paid by such transferee.
(b) The Partnership shall elect to deduct expenses incurred in organizing
the Partnership ratably over a sixty-month period as provided in Section 709 of
the Code.
(c) Except as otherwise provided herein, the General Partner shall
determine whether the Partnership should make any other elections permitted by
the Code.
9.3 Tax Controversies
Subject to the provisions hereof, the General Partner is designated as the
Tax Matters Partner (as defined in the Code) and is authorized and required 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, and to expend Partnership
funds for professional services and costs associated therewith. Each Partner
agrees to cooperate with the General Partner and to do or refrain from doing any
or all things reasonably required by the General Partner to conduct such
proceedings.
9.4 Withholding
Notwithstanding any other provision of this Agreement, the General Partner
is authorized to take any action that it determines in its discretion to be
necessary or appropriate to cause the Partnership 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 or Assignee (including, without
limitation, by reason of Section 1446 of the Code), the amount withheld may be
treated as a distribution of cash pursuant to Section 6.3 in the amount of such
withholding from such Partner.
ARTICLE X
Admission of Partners
10.1 Admission of Initial Limited Partners
Upon the issuance by the Partnership of Common Units to the Underwriters as
described in Section 5.3 in connection with the Initial Offering and the
execution by each Underwriter of a Transfer Application, the General Partner
shall admit the Underwriters to the Partnership as Initial Limited Partners in
respect of the Common Units purchased by them.
10.2 Admission of Substituted Limited Partner
By transfer of a Limited Partner Interest in accordance with Article IV,
the transferor shall be deemed to have given the transferee the right to seek
admission as a Substituted Limited Partner subject to the conditions of, and in
the manner permitted under, this Agreement. A transferor of a Certificate
representing a Limited Partner Interest shall, however, only have the authority
to convey to a purchaser or other transferee who does not execute and deliver a
Transfer Application (a) the right to negotiate such Certificate to a purchaser
or other transferee and (b) the right to transfer the right to request admission
as a Substituted Limited Partner to such purchaser or other transferee in
respect of the transferred Limited Partner Interests. Each transferee of a
Limited Partner Interest (including any nominee holder or an agent acquiring
such Limited Partner Interest for the account of another Person) who executes
and delivers a Transfer Application shall, by virtue of such execution and
delivery, be an Assignee and be deemed to have applied to become a Substituted
Limited Partner with respect to the Limited Partner Interest so transferred to
such Person. Such Assignee shall become a Substituted Limited Partner (x) at
such time as the General Partner consents thereto, which consent may be given or
withheld in the General Partner's discretion, and (y) when any such admission is
shown on the books and records of the Partnership. If such consent is withheld,
such transferee shall be an Assignee. An Assignee shall have an interest in the
Partnership equivalent to that of a Limited Partner with respect to allocations
and distributions, including liquidating distributions, of the Partnership. With
respect to voting rights attributable to Limited Partner Interests that are held
by Assignees, the General Partner shall be deemed to be the Limited Partner with
respect thereto and shall, in exercising the voting rights in respect of such
Limited Partner Interests on any matter, vote such Limited Partner Interests at
the written direction of the Assignee who is the Record Holder of such Limited
Partner Interests. If no such written direction is received, such Limited
Partner Interests will not be voted. An Assignee shall have no other rights of a
Limited Partner.
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's 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 General Partner
pursuant to Section 11.1 or 11.2 or the transfer of the General Partner's
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 Partnership and Genesis OLP without dissolution.
10.4 Admission of Additional Limited Partners
(a) A Person (other than the General Partner, an Initial Limited Partner or
a Substituted Limited Partner) who makes a Capital Contribution to the
Partnership in accordance with this Agreement in exchange for Limited Partner
Interests shall be admitted to the Partnership as an Additional Limited Partner
only upon furnishing to the General Partner (i) evidence of acceptance in form
satisfactory to the General Partner of all of the terms and conditions of this
Agreement, including the power of attorney granted in Section 2.6, and (ii) such
other documents or instruments as may be required in the discretion of the
General Partner to effect such Person's admission as an Additional Limited
Partner.
(b) Notwithstanding anything to the contrary in this Section 10.4, no
Person shall be admitted as an Additional Limited Partner without the consent of
the General Partner, which consent may be given or withheld in the General
Partner's discretion. The admission of any Person as an Additional Limited
Partner shall become effective on the date upon which the name of such Person is
recorded as such in the books and records of the Partnership, following the
consent of the General Partner to such admission.
10.5 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 and appropriate under the Delaware 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
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 Limited Partners (and it shall be deemed that the
General Partner has withdrawn pursuant to this Section 11.1(a)(i) if the General
Partner voluntarily withdraws as a general partner of Genesis OLP);
(ii) the General Partner transfers all of its General Partner Interest
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 bankruptcy petition for relief under Chapter 7
of the United States Bankruptcy Code; (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)-(C) of this Section
11.1(a)(iv); or (E) seeks, consents to or acquiesces in the appointment of a
trustee (but not a debtor in possession), receiver or liquidator of the General
Partner or of all or any substantial part of its properties;
(v) a final and non-appealable order of relief under Chapter 7 of the
United States Bankruptcy Code is entered by a court with appropriate
jurisdiction pursuant to a voluntary or involuntary petition by or against the
General Partner; or
(vi) (A) in the event the General Partner is a corporation, a certificate
of dissolution or its equivalent is filed for the General Partner, or 90 days
expire after the date of notice to the General Partner of revocation of its
charter without a reinstatement of its charter, under the laws of its state of
incorporation; (B) in the event the General Partner is a partnership, 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), (v) or (vi)(A), (B),
(C) or (E) 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) at any time during the period
beginning on the Closing Date and ending at 12:00 midnight, Eastern Standard
Time, on December 31, 2006, the General Partner voluntarily withdraws by giving
at least 90 days' advance notice of its intention to withdraw to the Limited
Partners; provided that prior to the effective date of such withdrawal, the
withdrawal is approved by the holders of a Majority Interest and the General
Partner delivers to the Partnership an Opinion of Counsel (''Withdrawal Opinion
of Counsel'') that such withdrawal (following the selection of the successor
General Partner) would not result in the loss of the limited liability of any
Limited Partner or any limited partner of Genesis OLP or cause the Partnership
or Genesis OLP to be treated as an association taxable as a corporation or
otherwise to be taxed as an entity for federal income tax purposes (to the
extent not previously treated as such); (ii) at any time after 12:00 midnight,
Eastern Standard Time, on December 31, 2006, the General Partner voluntarily
withdraws by giving at least 90 days' advance notice to the Limited Partners,
such withdrawal to take effect on the date specified in such notice; (iii) 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; or (iv)
notwithstanding clause (i) of this sentence, at any time that the General
Partner voluntarily withdraws by giving at least 90 days' advance notice of its
intention to withdraw to the Limited Partners, such withdrawal to take effect on
the date specified in the notice, if at the time such notice is given one Person
and its Affiliates (other than the General Partner and its Affiliates) own
beneficially or of record or control at least 50% of the Outstanding Limited
Partner Interests. 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 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 Majority Interest, 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 a successor general partner
of the other Group Members of which the General Partner is a general partner.
If, prior to the effective date of the General Partner's withdrawal, a successor
is not selected by the Limited Partners as provided herein or the Partnership
does not receive a Withdrawal Opinion of Counsel, 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.
11.2 Removal of the General Partner
The General Partner may not be removed without Cause. If Cause exists the
General Partner may be removed if such removal is approved by the holders of a
Two-Thirds Interest (including Limited Partner Interests held by the General
Partner and its Affiliates). 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 holders of a Two-Thirds Interest (including Limited Partner
Interests 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
of the other Group Members of which the General Partner is a general partner. 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 of the other Group
Members of which the General Partner is a general partner. The right of the
Limited Partners to remove the General Partner pursuant to this Section 11.2
shall not exist or be exercised unless the Partnership has received an opinion
opining as to the matters covered by a Withdrawal Opinion of Counsel. 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.
11.3 Interest of Departing Partner and Successor General Partner
(a) In the event of the withdrawal of the General Partner under
circumstances where such withdrawal does not violate this Agreement, if a
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 partnership interest
as a general partner in the other Group Members and if the General Partner has
delivered a Conversion Election as provided in Section 7.13 of the Genesis OLP
Partnership Agreement, its right to participate in distributions as provided in
Section 7.13 of the Genesis OLP Partnership Agreement (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 Partners under circumstances where Cause exists or if the General Partner
withdraws under circumstances where such withdrawal violates this Agreement or
the Genesis OLP Partnership Agreement, and if a successor General Partner is
elected in accordance with the terms of Section 11.1 or 11.2, such successor
shall have the option, exercisable prior to the effective date of the departure
of such Departing Partner, to purchase the Combined Interest of the Departing
Partner for such fair market value of such Combined Interest. 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 General 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. In making its determination, such third independent
investment banking firm or other independent expert may consider the then
current trading price of Common Units on any National Securities Exchange on
which Common Units are then listed, the value of the Partnership's assets, the
rights and obligations of the General 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 will have the right to convert the
Combined Interest into Common Units or to receive cash from the Partnership in
exchange for such Combined Interest. The Departing Partner's 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 Combined Interest (but subject to
proportionate dilution by reason of the admission of its successor). Any
successor General Partner shall indemnify the Departing Partner as to all debts
and liabilities of the Partnership arising on or after the date on which the
Departing Partner becomes a Limited Partner. For purposes of this Agreement,
conversion of the General Partner's Combined Interest to Common Units will be
characterized as if the General Partner 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 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 necessary to acquire a General Partner Interest
equal to the General Partner Interest of the Departing Partner. In such event,
such successor General Partner shall be entitled to such Percentage Interest of
all Partnership allocations and distributions and any other allocations and
distributions to which the Departing Partner was entitled.
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
12.1 Dissolution
The Partnership shall not be dissolved by the admission of Substituted
Limited Partners or 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 Section 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) the expiration of its term as provided in Section 2.7;
(b) 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 an
Opinion of Counsel is received as provided in Section 11.1(b) or 11.2 and such
successor is admitted to the Partnership pursuant to Section 10.3;
(c) an election to dissolve the Partnership by the General Partner that is
approved by the holders of a Majority Interest;
(d) the entry of a decree of judicial dissolution of the Partnership
pursuant to the provisions of the Delaware Act;
(e) the dissolution of Genesis OLP; or
(f) the sale of all or substantially all of the assets and properties of
the Partnership Group.
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
Section 11.1(a)(i) or (iii) and the failure of the Partners to select a
successor to such Departing Partner pursuant to Section 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 Section 11.1(a)(iv), (v) or
(vi), then, to the maximum extent permitted by law, within 180 days thereafter,
the holders of a Majority Interest may elect to reconstitute the Partnership and
continue its business on the same terms and conditions set forth in this
Agreement by forming a new limited partnership on terms identical to those set
forth in this Agreement and having as the successor general partner a Person
approved by the holders of a Majority Interest. 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 reconstituted Partnership shall continue until the end of the term
set forth in Section 2.7 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) all necessary steps shall be taken to cancel this Agreement and the
Certificate of Limited Partnership and to enter into and, as necessary, to file
a new partnership agreement and certificate of limited partnership, and the
successor general partner may for this purpose exercise the powers of attorney
granted the General Partner pursuant to Section 2.6; provided, that the right of
the holders of a Majority Interest 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 (x) the exercise of the right would not result in the loss of limited
liability of any Limited Partner and (y) neither the Partnership, the
reconstituted limited partnership, nor Genesis OLP would be treated as an
association taxable as a corporation or otherwise be taxable as an entity for
federal income tax purposes upon the exercise of such right to continue.
12.3 Liquidator
Upon dissolution of the Partnership, unless the Partnership is continued
under an election to reconstitute and continue the Partnership 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 the holders
of a Majority Interest. 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 the holders
of a Majority Interest. 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 the holders of a Majority Interest. 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)) to the extent necessary or desirable in the good
faith judgment of the Liquidator to carry out the duties and functions of the
Liquidator hereunder for and during such period of time as shall be reasonably
required in the good faith judgment of the Liquidator to complete the winding up
and liquidation of the Partnership as provided for herein.
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 the Liquidator determines to be in the best interest of the
Partners, subject to Section 17-804 of the Delaware Act and the following:
(a) Disposition of Assets. 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, in its absolute discretion,
defer liquidation or distribution of the Partnership's assets for a reasonable
time if it determines that an immediate sale of all or some of the Partnership's
assets would be impractical or would cause undue loss to the partners. The
Liquidator may, in its absolute discretion, 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) Discharge of Liabilities. Liabilities of the Partnership include
amounts owed to Partners otherwise than in respect of their distribution rights
under Article VI. 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
reasonable 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) Liquidation Distributions. 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 in accordance with, and to the extent of, the
positive balances in their respective Capital Accounts, as determined after
taking into account all Capital Account adjustments (other than those made by
reason of distributions pursuant to this Section 12.4(c)) for the taxable year
of the Partnership during which the liquidation of the Partnership occurs (with
such date of occurrence being determined pursuant to Treasury Regulation Section
1.704-1(b)(2)(ii)(g)), and such distribution shall be made by the end of such
taxable year (or, if later, within 90 days after said date of such occurrence).
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 Partnership shall be terminated and the Certificate of Limited Partnership
and all qualifications of the Partnership as a foreign limited partnership in
jurisdictions other than the State of Delaware shall be canceled and such other
actions as may be necessary to terminate the Partnership shall be taken.
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 any portion thereof, it being expressly understood that any such
return shall be made solely from Partnership assets.
12.7 Waiver of Partition
To the maximum extent permitted by law, each Partner hereby waives any
right to partition of the Partnership property.
12.8 Capital Account Restoration
No Limited Partner shall have any obligation to restore any negative
balance in its Capital Account upon liquidation of the Partnership. The General
Partner shall be obligated to restore any negative balance in its Capital
Account upon liquidation of its interest in the Partnership by the end of the
taxable year of the Partnership during which such liquidation occurs, or, if
later, within 90 days after the date of such liquidation.
ARTICLE XIII
Amendment of Partnership Agreement; Meetings; Record Date
13.1 Amendment to be Adopted Solely by the General Partner
Each Partner agrees that the General Partner, without the approval of any
Partner or Assignee, 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, in the sole discretion of the General Partner, is
necessary or advisable 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 any state or to ensure that
the Partnership and Genesis OLP will not be treated as an association taxable as
a corporation or otherwise taxed as an entity for federal income tax purposes;
(d) a change that, in the discretion of the General Partner, (i) does not
adversely affect the Limited Partners in any material respect, (ii) is necessary
or advisable (A) to satisfy any requirements, conditions or guidelines contained
in any opinion, directive, order, ruling or regulation of any federal or state
agency or judicial authority or contained in any federal or state statute
(including the Delaware Act), (B) to facilitate the trading of Limited Partner
Interests (including the division of any class or classes of Outstanding Limited
Partner Interests into different classes to facilitate uniformity of tax
consequences within such classes of Limited Partner Interests) or comply with
any rule, regulation, guideline or requirement of any National Securities
Exchange on which Limited Partner Interests are or will be listed for trading,
compliance with any of which the General Partner determines in its discretion to
be in the best interests of the Partnership and the Limited Partners (C) in
connection with action taken by the General Partner pursuant to Section 5.9, or
(iii) 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
changes that, in the discretion of the General Partner, are necessary or
advisable 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 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 Investment
Company Act of 1940, as amended, the Investment Advisers Act of 1940, as
amended, or ''plan asset'' regulations adopted under the 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 the terms of Section 5.7, an amendment that, in the
discretion of the General Partner, is necessary or advisable 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 effected, necessitated or contemplated by a Merger
Agreement approved in accordance with Section 14.3;
(j) an amendment that, in the discretion of the General Partner, is
necessary or advisable to reflect, account for and deal with appropriately 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;
(k) a merger or conveyance pursuant to Section 14.3(d); or
(l) any other amendments substantially similar to the foregoing.
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 or with the consent of the
General Partner, which consent may be given or withheld in its sole discretion.
A proposed amendment shall be effective upon its approval by the holders of a
Majority Interest, unless a greater or different percentage is required under
this Agreement or by Delaware law. Each proposed amendment that requires the
approval of the holders of a specified percentage of Outstanding Limited Partner
Interests 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 Limited Partner
Interests or call a meeting of the Limited Partners to consider and vote on such
proposed amendment. The General Partner shall notify all Record Holders upon
final adoption of any such proposed amendments.
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 Limited Partner
Interests (including Limited Partner Interests 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 Limited Partner Interests
(including Limited Partner Interests deemed owned by the General Partner) whose
aggregate Outstanding Limited Partner Interests 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 may be given or withheld in its
sole discretion, (iii) change Section 12.1(a) or 12.1(c), or (iv) change the
term of the Partnership or, except as set forth in Section 12.1(c) or 12.1(e),
give any Person the right to dissolve the Partnership.
(c) Except as provided in Section 14.3, and except as otherwise provided,
and without limitation of the General Partner's authority to adopt amendments to
this Agreement as contemplated in Section 13.1, any amendment that would have a
material adverse effect on the rights or preferences of any class of Partnership
Interests in relation to other classes of Partnership Interests must be approved
by the holders of not less than a majority of the Outstanding Partnership
Interests of the class affected.
(d) Notwithstanding any other provision of this Agreement, except for
amendments pursuant to Section 7.3 or 13.1 and except as otherwise provided by
Section 14.3(b), no amendments shall become effective without the approval of
the holders of a Ninety Percent Interest 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 a Ninety Percent Interest.
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 Limited Partner Interests of the class or
classes for which a meeting is proposed and which are entitled to vote thereat.
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 Delaware Act or the law of any other state in which the
Partnership is qualified to do business.
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 or classes of Limited Partner Interests for which a
meeting is proposed in writing by mail or other means of written communication
in accordance with Section 16.1. 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.
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 Limited Partner
Interests 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.
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.
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 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 does not approve, at
the beginning of the meeting, of 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.
13.9 Quorum
The holders of a majority of the Outstanding Limited Partner Interests
(including Limited Partner Interests deemed owned by the General Partner) of the
class or classes for which a meeting has been called and which are entitled to
vote represented in person or by proxy shall constitute a quorum at a meeting of
Limited Partners of such class or classes unless any such action by the Limited
Partners requires approval by holders of a greater percentage of such Limited
Partner Interests, 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 Limited Partner Interests (including Limited Partner Interests
deemed owned by the General Partner) that in the aggregate represent a majority
of the Outstanding Limited Partner Interests (including Limited Partner
Interests deemed owned by the General Partner) 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 Limited Partner Interests
(including Limited Partner Interests deemed owned by the General Partner) 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 Limited Partner Interests (including Limited Partner
Interests deemed owned by the General Partner) specified in this Agreement. 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 at least a majority of the
Outstanding Limited Partner Interests (including Limited Partner Interests
deemed owned by the General Partner) entitled to vote at such meeting
represented either in person or by proxy, but no other business may be
transacted, except as provided in Section 13.7.
13.10 Conduct of a Meeting
The General Partner shall have full power and authority concerning the
manner of conducting any meeting of the 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 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.
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 Limited Partner
Interests (including Limited Partner Interests 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 Limited Partner Interests are listed for trading,
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 Limited Partner Interests held by a Limited Partner the
Partnership shall be deemed to have failed to receive a ballot for the Limited
Partner Interests 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 state
statutes then governing the rights, duties and liabilities of the Partnership
and the Partners.
13.12 Voting and Other Rights
(a) Only those Record Holders of the Limited Partner Interests 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 Limited Partner Interests 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 Limited Partner Interests shall be
deemed to be references to the votes or acts of the Record Holders of such
Outstanding Limited Partner Interests.
(b) With respect to Limited Partner Interests 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
Limited Partner Interests are registered, such other Person shall, in exercising
the voting rights in respect of such Limited Partner Interests on any matter,
and unless the arrangement between such Persons provides otherwise, vote such
Limited Partner Interests 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
14.1 Authority
The Partnership may merge or consolidate with one or more corporations,
limited liability companies, business trusts or associations, real estate
investment trusts, common law trusts or unincorporated businesses, including a
general partnership or limited partnership, formed under the laws of the State
of Delaware or any other state of the United States of America, pursuant to a
written agreement of merger or consolidation (''Merger Agreement'') in
accordance with this Article XIV.
14.2 Procedure for Merger or Consolidation
Merger or consolidation of the Partnership pursuant to this Article XIV
requires the prior approval of the General Partner. If the General Partner shall
determine, in the exercise of its discretion, 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 general or
limited partner 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 general or limited partner
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 limited partnership, corporation, trust or other entity
(other than the Surviving Business Entity) which the holders of such general or
limited partner interests, securities or rights are to receive in exchange for,
or upon conversion of their general or limited partner interests, securities or
rights, and (ii) in the case of securities represented by certificates, upon the
surrender of such certificates, which cash, property or general or limited
partner interests, rights, securities or obligations of the Surviving Business
Entity or any general or limited partnership, corporation, trust 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
the certificate of merger, the effective time shall be fixed no later than the
time of the filing of the certificate of merger and stated therein); and
(g) Such other provisions with respect to the proposed merger or
consolidation as are deemed necessary or appropriate by the General Partner.
14.3 Approval by Limited Partners of Merger or Consolidation
(a) Except as provided in Section 14.3(d), the General Partner, upon its
approval of the Merger Agreement, shall direct that the Merger Agreement be
submitted to a vote of the 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 Section 14.3(d), the Merger Agreement shall be
approved upon receiving the affirmative vote or consent of the holders of a
Majority Interest unless the Merger Agreement contains any provision that, if
contained in an amendment to this Agreement, the provisions of this Agreement or
the Delaware Act would require the vote or consent of a greater percentage of
the Outstanding Limited Partner Interests or of any class of Limited Partners,
in which case such greater percentage vote or consent shall be required for
approval of the Merger Agreement.
(c) Except as provided in Section 14.3(d), 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, in its discretion, without Limited
Partner approval, 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 Merger 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
merger or conveyance, as the case may be, would not result in the loss of the
limited liability of any Limited Partner or any limited partner in Genesis OLP
or cause the Partnership or Genesis OLP to be treated as an association taxable
as a corporation or otherwise to be taxed as an entity for federal income tax
purposes (to the extent not previously treated as such), (ii) the sole purpose
of such merger or conveyance is to effect a mere 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 and the General
Partner with the same rights and obligations as are herein contained.
14.4 Certificate of Merger
Upon the required approval by the General Partner and the Limited Partners
of a Merger Agreement, a certificate of merger shall be executed and filed with
the Secretary of State of the State of Delaware in conformity with the
requirements of the Delaware Act.
14.5 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 XIV 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
15.1 Right to Acquire Limited Partner Interests
(a) Notwithstanding any other provision of this Agreement, if at any time
not more than 20% of the total Limited Partner Interests of any class then
Outstanding are held by Persons other than the General Partner and its
Affiliates, 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 in its sole discretion, to purchase all, but
not less than all, of such Limited Partner Interests of such class 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 purchased during the 90-day period
preceding the date that the notice described in Section 15.1(b) is mailed. As
used in this Agreement, (i) ''Current Market Price'' as of any date of any class
of Limited Partner Interests listed or admitted to trading on any National
Securities Exchange means the average of the daily Closing Prices (as
hereinafter defined) per Limited Partner Interest of such class 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, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted for trading on the principal National
Securities Exchange (other than the Nasdaq Stock Market) on which such Limited
Partner Interests of such class are listed or admitted to trading or, if such
Limited Partner Interests of such class are not listed or admitted to trading 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 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 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, the fair value of such Limited Partner Interests on such day as
determined reasonably and in good faith 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 are listed or admitted to
trading is open for the transaction of business or, if Limited Partner Interests
of a class are not listed or admitted to trading 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 (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 or admitted to
trading. 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), therefor, without interest thereon.
ARTICLE XVI
General Provisions
16.1 Addresses and Notices
Any notice, demand, request, report or proxy materials required or
permitted to be given or made to a Partner or Assignee 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 or Assignee at the address described below. Any
notice, payment or report to be given or made to a Partner or Assignee 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 Security 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 Security 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 16.1 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 Post Office 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 or Assignee 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 and Assignees.
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, Assignee or other Person if
believed by it to be genuine.
16.2 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.
16.3 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.
16.4 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.
16.5 Creditors
None of the provisions of this Agreement shall be for the benefit of, or
shall be enforceable by, any creditor of the Partnership.
16.6 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.
16.7 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, upon accepting the certificate evidencing such Limited Partner
Interest or executing and delivering a Transfer Application as herein described,
independently of the signature of any other party.
16.8 Applicable Law
This Agreement shall be construed in accordance with and governed by the
laws of the State of Delaware, without regard to the principles of conflicts of
law.
16.9 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.
16.10 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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
GENESIS ENERGY, L.L.C.,
As General Partner
By: /s/ John P. VonBerg
----------------------------------------------
Name: John P. vonBerg
Title: President and Chief
Executive Officer
/s/ Wayne Kubicek
- ----------------------------------------------------
Wayne Kubicek,
As Organizational Limited Partner
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.
By: Genesis Energy, L.L.C.
General Partner, as attorney-in-fact for all Limited Partners pursuant to the
Powers of Attorney granted pursuant to Section 2.6.
By: /s/ John P. vonBerg
---------------------
EXHIBIT 3.4
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
GENESIS CRUDE OIL, L.P.
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
1.1 Definitions
1.2 Construction
ARTICLE II
ORGANIZATION
2.1 Formation
2.2 Name
2.3 Registered Office; Registered Agent; Principal Office; Other Offices
2.4 Purpose and Business
2.5 Powers
2.6 Power of Attorney
2.7 Term
2.8 Title to Partnership Assets
ARTICLE III
RIGHTS OF LIMITED PARTNERS
3.1 Limitation of Liability
3.2 Management of Business
3.3 Outside Activities of Limited Partners
3.4 Rights of Limited Partners
ARTICLE IV
CERTIFICATES; RECORD HOLDERS;
TRANSFER OF PARTNERSHIP INTERESTS;
REDEMPTION OF PARTNERSHIP INTERESTS
4.1 Certificates
4.2 Mutilated, Destroyed, Lost or Stolen Certificates
4.3 Record Holders
4.4 Transfer Generally
4.5 Registration and Transfer of Limited Partner Interests
4.6 Transfer of a General Partner's General Partner Interest
4.7 Transfer of APIs
4.8 Restrictions on Transfers
ARTICLE V
CAPITAL CONTRIBUTIONS AND
ISSUANCE OF PARTNERSHIP INTERESTS
5.1 Organizational Contributions
5.2 Contributions by General Partners
5.3 Contributions by Initial Limited Partners
5.4 Interest and Withdrawal
5.5 Capital Accounts
5.6 Issuances of Additional Partnership Securities
5.7 Limitations on Issuance of Additional Partnership Securities
5.8 Conversion of Subordinated Units
5.9 Limited Preemptive Right
5.10 Splits and Combination
5.11 Fully Paid and Non-Assessable Nature of Limited Partner Interests
ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS
6.1 Allocations for Capital Account Purposes
6.2 Allocations for Tax Purposes
6.3 Requirement and Characterization of Distributions; Distributions to Record
Holders
6.4 Distributions of Available Cash from Operating Surplus
6.5 Distributions of Available Cash from Capital Surplus
6.6 Adjustment of Minimum Quarterly Distribution and Target Distribution Levels
6.7 Special Provisions Relating to the Holders of APIs
6.8 Entity-Level Taxation
6.9 Special Distribution to the Initial Limited Partners and the Operating
General Partner
6.10 Characterization of Distributions as Advances or Drawings
ARTICLE VII
MANAGEMENT AND OPERATION OF BUSINESS
7.1 Management
7.2 Certificate of Limited Partnership
7.3 Restrictions on the General Partners' Authority
7.4 Reimbursement of the General Partners
7.5 Outside Activities
7.6 Loans from the General Partners; Loans or Contributions from the
Partnership;
Contracts with Affiliates; Certain Restrictions on the Operating General Partner
7.7 Indemnification
7.8 Liability of Indemnitees
7.9 Resolution of Conflicts of Interest
7.10 Other Matters Concerning the General Partners
7.11 Reliance by Third Parties
7.12 Incentive Compensation Payments to the Operating General Partner
7.13 Conversion of Operating General Partner's Incentive Compensation Payment
Rights
ARTICLE VIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS
8.1 Records and Accounting
8.2 Fiscal Year
ARTICLE IX
TAX MATTERS
9.1 Tax Returns and Information
9.2 Tax Elections
9.3 Tax Controversies
9.4 Withholding
ARTICLE X
ADMISSION OF PARTNERS
10.1 Admission of General Partners
10.2 Admission of Successor or Transferee General Partner
10.3 Admission of Initial Limited Partners
10.4 Admission of Substituted Limited Partner
10.5 Admission of Additional Limited Partners
10.6 Amendment of Agreement and Certificate of Limited Partnership
ARTICLE XI
WITHDRAWAL OR REMOVAL OF PARTNERS
11.1 Withdrawal of Operating General Partner
11.2 Removal of Operating General Partner
11.3 Interest of Departing Partner and Successor Operating General Partner
11.4 Withdrawal or Removal of Managing General Partner
11.5 Withdrawal of Limited Partners
ARTICLE XII
DISSOLUTION AND LIQUIDATION
12.1 Dissolution
12.2 Continuation of the Business of the Partnership After Dissolution
12.3 Liquidator
12.4 Liquidation
12.5 Cancellation of Certificate of Limited Partnership
12.6 Return of Contributions
12.7 Waiver of Partition
12.8 Capital Account Restoration
ARTICLE XIII
AMENDMENT OF PARTNERSHIP AGREEMENT;
MEETINGS; RECORD DATE
13.1 Amendment to be Adopted Solely by Operating General Partner
13.2 Amendment Procedures
13.3 Amendment Requirements
13.4 Special Meetings
13.5 Notice of a Meeting
13.6 Record Date
13.7 Adjournment
13.8 Waiver of Notice; Approval of Meeting; Approval of Minutes
13.9 Quorum
13.10 Conduct of a Meeting
13.11 Action Without a Meeting
13.12 Voting and Other Rights
ARTICLE XIV
MERGER
14.1 Authority
14.2 Procedure for Merger or Consolidation
14.3 Approval by Partners of Merger or Consolidation
14.4 Certificate of Merger
14.5 Effect of Merger
ARTICLE XV
GENERAL PROVISIONS
15.1 Addresses and Notices
15.2 Further Action
15.3 Binding Effect
15.4 Integration
15.5 Creditors
15.6 Waiver
15.7 Counterparts
15.8 Applicable Law
15.9 Invalidity of Provisions
15.10 Consent of Partners
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
GENESIS CRUDE OIL, L.P.
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF Genesis Crude
Oil, L.P., dated as of December 3, 1996, is entered into by and among Genesis
Energy, L.L.C., a Delaware limited liability company, as the Operating General
Partner, Genesis Energy, L.P., a Delaware limited partnership, as the Managing
General Partner and the Organizational Limited Partner, 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
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.
''Acquisition'' means any transaction in which any Group Member acquires
(through an asset acquisition, merger, stock acquisition or other form of
investment) control over all or a portion of the assets, properties or business
of another Person for the purpose of increasing the operating capacity or
revenues of the Partnership Group from the operating capacity or revenues of the
Partnership Group existing immediately prior to such transaction.
''Additional Limited Partner'' means a Person admitted to the Partnership
as a Limited Partner pursuant to Section 10.5 and who is shown as such on the
books and records of the Partnership.
''Adjusted Capital Account'' means the Capital Account maintained for each
Partner as of the end of each fiscal year of the Partnership, (a) increased by
any amounts that such Partner is obligated to restore under the standards set by
Treasury Regulation Section 1.704-1(b)(2)(ii)(c) (or is deemed obligated to
restore under Treasury Regulation Sections 1.704-2(g) and 1.704-2(i)(5)) and (b)
decreased by (i) the amount of all losses and deductions that, as of the end of
such fiscal year, are reasonably expected to be allocated to such Partner in
subsequent years under Sections 704(e)(2) and 706(d) of the Code and Treasury
Regulation Section 1.751-1(b)(2)(ii), and (ii) the amount of all distributions
that, as of the end of such fiscal year, are reasonably expected to be made to
such Partner in subsequent years in accordance with the terms of this Agreement
or otherwise to the extent they exceed offsetting increases to such Partner's
Capital Account that are reasonably expected to occur during (or prior to) the
year in which such distributions are reasonably expected to be made (other than
increases as a result of a minimum gain chargeback pursuant to Section 6.1(d)(i)
or 6.1(d)(ii)). The foregoing definition of Adjusted Capital Account is intended
to comply with the provisions of Treasury Regulation Section 1.704-
1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
''Adjusted Operating Surplus'' means, with respect to any period, Operating
Surplus generated during such period (a) less (i) any net increase in working
capital borrowings during such period, (ii) any net reduction in cash reserves
for Operating Expenditures during such period not relating to an Operating
Expenditure made during such period and (iii) any Capital Contributions made
during such period in exchange for APIs, and (b) plus (i) any net decrease in
working capital borrowings during such period, (ii) any net increase in cash
reserves for Operating Expenditures during such period required by any debt
instrument for the repayment of principal, interest or premium and (iii) the
amount of any Incentive Compensation Payments that reduced Operating Surplus for
such period. Adjusted Operating Surplus does not include that portion of
Operating Surplus included in clause (a)(i) of the definition of Operating
Surplus.
''Adjusted Property'' means any property the Carrying Value of which has
been adjusted pursuant to Section 5.5(d)(i) or 5.5(d)(ii). Once an Adjusted
Property is deemed distributed by, and recontributed to, the Partnership for
federal income tax purposes upon a termination of the Partnership pursuant to
Treasury Regulation Section 1.708-1(b)(1)(iv), such property shall thereafter
constitute a Contributed Property until the Carrying Value of such property is
subsequently adjusted pursuant to Section 5.5(d)(i) or 5.5(d)(ii). Upon a
termination of the Partnership following the publication of Proposed Treasury
Regulation 1.708-1(b)(1)(iv) as a final regulation, an Adjusted Property deemed
contributed to a new partnership in exchange for an interest in the new
partnership, followed by the deemed liquidation of the Partnership shall
thereafter constitute a Contributed Property until the Carrying Value of such
property is subsequently adjusted pursuant to Section 5.5(d)(i) or 5.5(d)(ii).
''Affiliate'' means, with respect to any Person, any other Person that (i)
directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with, the Person in question or (ii)
owns, beneficially, directly or indirectly, 20% or more of the outstanding
capital stock, shares or other equity interests of 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 Allocation'' means any allocation, other than a Required
Allocation, of an item of income, gain, loss or deduction pursuant to the
provisions of Section 6.1, including, without limitation, a Curative Allocation
(if appropriate to the context in which the term ''Agreed Allocation'' is used).
''Agreed Value'' of any Contributed Property means the fair market value of
such property or other consideration at the time of contribution as determined
by the Operating General Partner using such reasonable method of valuation as it
may adopt; provided, however, that the Agreed Value of any property deemed
contributed to the Partnership for federal income tax purposes upon termination
and reconstitution thereof pursuant to Section 708 of the Code (whether before
or after finalization of Proposed Treasury Regulation Section 1.708-1(b)(1)(iv))
shall be determined in accordance with Section 5.5(c)(i). Subject to Section
5.5(c)(i), the Operating General Partner shall, in its discretion, use such
method as it deems reasonable and appropriate to allocate the aggregate Agreed
Value of Contributed Properties contributed to 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.
''Agreement'' means this Amended and Restated Agreement of Limited
Partnership of Genesis Crude Oil, L.P., as it may be amended, supplemented or
restated from time to time.
''API'' means a non-voting, Limited Partner Interest issued (at a rate of
$100 per API) pursuant to Section 5.6 and in accordance with the Distribution
Support Agreement, which non-voting, Limited Partner Interest shall confer upon
the holder thereof only the rights and obligations specifically provided in this
Agreement with respect to APIs (and no other rights otherwise available to
holders of a Limited Partner Interest).
''Assets'' has the meaning assigned to such term in the Conveyance
Agreement.
''Assignee'' means a Person to whom one or more Limited Partner Interests
have been transferred in a manner permitted under this Agreement and who has
executed and delivered a Transfer Application as required by this Agreement, but
who has not been admitted as a Substituted Limited Partner.
''Audit Committee'' means a committee of the Board of Directors of the
Operating General Partner composed entirely of two or more directors who are
neither officers nor employees of the Operating General Partner or officers,
directors or employees of any Affiliate of the Operating General Partner.
''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
on hand at the end of such Quarter and (ii) all additional cash and cash
equivalents of the Partnership Group on hand on the date of determination of
Available Cash with respect to such Quarter resulting from borrowings for
working capital purposes and purchases of APIs made subsequent to the end of
such Quarter, less
(b) the amount of any cash reserves that is necessary or appropriate in the
reasonable discretion of the Operating 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
business of the Partnership Group) subsequent to such Quarter, (ii) comply with
applicable law or any loan agreement (including the Master Credit Support
Agreement), security agreement (including the 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 distributions under Section 6.4, 6.5 or 6.9 or to make Incentive
Compensation Payments to the Operating General Partner in respect of any one or
more of the next four Quarters; provided, however, that the Operating General
Partner may not establish cash reserves pursuant to (iii) above if the effect of
such reserves would be that the Partnership is unable to distribute the Minimum
Quarterly Distribution on all Common Units with respect to such Quarter; and,
provided further, 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 Operating General Partner
so determines, less
(c) the amount necessary to make Incentive Compensation Payments to the
Operating General Partner pursuant to Section 7.12 with respect to such Quarter,
less
(d) any Redemption Proceeds on hand that have not yet been used by the
Partnership to redeem Common Units pursuant to the Redemption and Registration
Rights Agreement.
Notwithstanding the foregoing, ''Available Cash'' with respect to the
Quarter in which the Liquidation Date occurs and any subsequent Quarter shall
equal zero.
''Basis'' means Basis Petroleum, Inc., a Texas corporation.
''Book-Tax Disparity'' means with respect to any item of Contributed
Property or Adjusted Property, as of the date of any determination, the
difference between the Carrying Value of such Contributed Property or Adjusted
Property and the adjusted basis thereof for federal income tax purposes as of
such date. A Partner's share of the Partnership's Book-Tax Disparities in all of
its Contributed Property and Adjusted Property will be reflected by the
difference between such Partner's Capital Account balance as maintained pursuant
to Section 5.5 and the hypothetical balance of such Partner's Capital Account
computed as if it had been maintained strictly in accordance with federal income
tax accounting principles.
''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 states of New York or Texas shall not be regarded as a Business
Day.
''Capital Account'' means the capital account maintained for a Partner
pursuant to Section 5.5.
''Capital Contribution'' means any cash, cash equivalents or the Net Agreed
Value of Contributed Property that a Partner contributes to the Partnership
pursuant to this Agreement or the Conveyance Agreement.
''Capital Improvement'' means any (a) addition or improvement to the
capital assets owned by any Group Member or (b) acquisition of existing or the
construction of new capital assets (including pipeline systems, storage
facilities and related assets), made to increase the operating capacity or
revenues of the Partnership Group from the operating capacity or revenues of the
Partnership Group existing immediately prior to such addition, improvement,
acquisition or construction.
''Capital Surplus'' has the meaning assigned to such term in Section
6.3(a).
''Carrying Value'' means (a) with respect to a Contributed Property, the
Agreed Value of such property reduced (but not below zero) by all depreciation,
amortization and cost recovery deductions charged to the Partners' and
Assignees' Capital Accounts in respect of such Contributed Property, and (b)
with respect to any other Partnership property, the adjusted basis of such
property for federal income tax purposes, all as of the time of determination.
The Carrying Value of any property shall be adjusted from time to time in
accordance with Sections 5.5(d)(i) and 5.5(d)(ii) and to reflect changes,
additions or other adjustments to the Carrying Value for dispositions and
acquisitions of Partnership properties, as deemed appropriate by the Operating
General Partner.
''Certificate'' means a certificate, substantially in the form of Exhibit A
to this Agreement or in such other form as may be adopted by the Operating
General Partner in its discretion, issued by the Partnership evidencing
ownership of one or more Common LP Units or Subordinated LP Units or a
certificate, in such form as may be adopted by the Operating General Partner in
its discretion, 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 Secretary of State of the State of
Delaware as referenced in Section 7.2, as such Certificate of Limited
Partnership may be amended, supplemented or restated from time to time.
''Closing Date'' means the first date on which MLP Common Units are sold by
Genesis MLP to the Underwriters pursuant to the provisions of the Underwriting
Agreement.
''Code'' means the Internal Revenue Code of 1986, as amended and in effect
from time to time. Any reference herein to a specific section or sections of the
Code shall be deemed to include a reference to any corresponding provision of
future law.
''Commission'' means the United States Securities and Exchange Commission.
''Common GP Unit'' means a Partnership Security representing a fractional
part of the Partnership Interests of all General Partners and having the rights
and obligations specified with respect to a Common GP Unit in this Agreement.
The term ''Common GP Unit'' does not refer to a Subordinated GP Unit prior to
its conversion into a Common GP Unit pursuant to the terms of this Agreement.
''Common LP Unit'' means a Partnership Security representing a fractional
part of the Partnership Interests of all Limited Partners and Assignees (other
than of holders of the APIs) and having the rights and obligations specified
with respect to a Common LP Unit in this Agreement. The term ''Common LP Unit''
does not refer to a Subordinated LP Unit prior to its conversion into a Common
LP Unit pursuant to the terms of this Agreement.
''Common Unit'' means a Common GP Unit or a Common LP Unit.
''Common Unit Arrearage'' means as to any Quarter within the Subordination
Period commencing prior to the Liquidation Date, the excess, if any, of (a) the
Minimum Quarterly Distribution in respect of such Quarter over (b) the sum of
all Available Cash distributed with respect to a Common Unit in respect of such
Quarter pursuant to Section 6.4(a)(i).
''Contributed Property'' means each property or other asset, in such form
as may be permitted by the Delaware Act, but excluding cash, contributed to the
Partnership (or deemed contributed to the Partnership on termination and
reconstitution thereof pursuant to Section 708 of the Code, whether before or
after finalization of Proposed Treasury Regulation Section 1.708-1(b)(1)(iv)).
Once the Carrying Value of a Contributed Property is adjusted pursuant to
Section 5.5(d), such property shall no longer constitute a Contributed Property,
but shall be deemed an Adjusted Property.
''Conversion Election'' has the meaning assigned to such term in Section
7.13.
''Conveyance Agreement'' means that certain Purchase & Sale and
Contribution & Conveyance Agreement, dated as of November 26, 1996, among the
Partnership, Genesis MLP, Genesis Energy, L.L.C., Basis, Howell and the Howell
Subsidiaries, together with the additional conveyance documents and instruments
contemplated or referenced thereunder.
''Cumulative Common Unit Arrearage'' means, with respect to any Common
Unit, whenever issued, and as of the end of any Quarter, the excess, if any, of
(a) the sum resulting from adding together the Common Unit Arrearage as to an
Initial Common Unit for each of the Quarters within the Subordination Period
ending on or before the last day of such Quarter over (b) the sum of any
distributions theretofore made pursuant to Section 6.4(a)(ii) and Section
6.5(ii) with respect to such Initial Common Unit (including any distributions to
be made in respect of the last of such Quarters).
''Curative Allocation'' means any allocation of an item of income, gain,
deduction, loss or credit pursuant to the provisions of Section 6.1(d)(xi).
''Delaware Act'' means the Delaware Revised Uniform Limited Partnership
Act, 6 Del C. 17-101, et seq., as amended, supplemented or restated from time
to time, and any successor to such statute.
''Departing Partner'' means a former Operating General Partner from and
after the effective date of any withdrawal or removal of such former Operating
General Partner pursuant to Section 11.1 or 11.2.
''Distribution Support Agreement'' means the Distribution Support
Agreement, dated as of the Closing Date, between the Partnership and Salomon,
which sets forth the agreement of the Partnership and Salomon relating to the
purchase of APIs.
''Economic Risk of Loss'' has the meaning set forth in Treasury Regulation
Section 1.752-2(a).
''Event of Withdrawal'' has the meaning assigned to such term in Section
11.1(a).
''Excess Basis Cash'' has the meaning assigned to such term in the
Conveyance Agreement.
''Excess Howell Cash'' has the meaning assigned to such term in the
Conveyance Agreement.
''Excess Howell Subordinated LP Units'' has the meaning assigned to such
term in the Conveyance Agreement.
''Final Subordinated Units'' has the meaning assigned to such term in
Section 6.1(d)(x).
''First Target Distribution'' means $0.550 per Unit per Quarter (or, with
respect to the Quarter ending on March 31, 1997, it means the product of $0.550
multiplied by the sum of (x) 1.00 and (y) a fraction of which the numerator is
the number of days in the period commencing on the Closing Date and ending on
December 31, 1996, and of which the denominator is 92), subject to adjustment in
accordance with Sections 6.6 and 6.8.
''GP Unit'' means a Common GP Unit or a Subordinated GP Unit.
''General Partner'' means each of the Managing General Partner and the
Operating General Partner, and their successors and permitted assigns as general
partners of the Partnership.
''General Partner Interest'' means the ownership interest of a 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
GP Units or other Partnership Securities or a combination thereof or interest
therein, and includes any and all benefits to which such General Partner is
entitled as provided in this Agreement (other than the right of the Operating
General Partner to receive Incentive Compensation Payments pursuant to Section
7.12), together with all obligations of such General Partner to comply with the
terms and provisions of this Agreement.
''Genesis Energy, L.L.C.'' means Genesis Energy, L.L.C., a Delaware limited
liability company, which is currently the Operating General Partner, and its
successors.
''Genesis MLP'' means Genesis Energy, L.P., a Delaware limited partnership,
and its successors.
''Genesis MLP Partnership Agreement'' means the Amended and Restated
Agreement of Limited Partnership of Genesis Energy, L.P., as it may be amended,
supplemented or restated from time to time.
''Group Member'' means a member of the Partnership Group.
''Howell'' means Howell Corporation, a Delaware corporation.
''Howell Affiliate Cash'' has the meaning assigned to such term in the
Conveyance Agreement.
''Howell Purchase Cash'' has the meaning assigned to such term in the
Conveyance Agreement.
''Howell Subsidiaries'' means Howell Crude Oil Company, a Delaware
corporation, Howell Pipeline Texas, Inc., a Delaware corporation, Howell
Pipeline USA, Inc., a Delaware corporation, Howell Power Systems, Inc., a
Delaware corporation, and Howell Transportation Services, Inc., a Delaware
corporation.
''Incentive Compensation Payment'' means a payment made to the Operating
General Partner pursuant to Section 7.12.
''Indemnitee'' means (a) a General Partner, any Departing Partner and any
Person who is or was an Affiliate of a General Partner or any Departing Partner,
(b) any Person who is or was a director, officer, employee, agent or trustee of
a Group Member, (c) any Person who is or was a member, officer, director,
employee, agent, or trustee of a General Partner or any Departing Partner or any
Affiliate of the General Partner or any Departing Partner, or any Affiliate of
any such Person, and (d) any Person who is or was serving at the request of a
General Partner or any Departing Partner or any such Affiliate as a director,
officer, employee, member, partner, agent, fiduciary or trustee of another
Person; provided, however, that a Person shall not be an Indemnitee by reason of
providing, on a fee-for-services basis, trustee, fiduciary or custodial
services.
''Initial Common Unit'' means a Common Unit issued on the Closing Date.
''Initial Limited Partners'' means Basis and the Howell Subsidiaries upon
being admitted to the Partnership in accordance with Section 10.3.
''Initial Unit Price'' means the initial public offering price per MLP
Common Unit at which the Underwriters offered the MLP Common Units to the public
for sale as set forth on the cover page of the prospectus included as part of
the Registration Statement and first issued at or after the time the
Registration Statement first became effective, adjusted as appropriate to give
effect to any distribution, subdivision or combination of MLP Common Units.
''Interim Capital Transactions'' means the following transactions if they
occur prior to the Liquidation Date: (a) borrowings, refinancings or refundings
of indebtedness and sales of debt securities (other than for working capital
purposes and other than for items purchased on open account in the ordinary
course of business) by any Group Member; (b) sales of equity interests by any
Group Member (other than sales of APIs); and (c) sales or other voluntary or
involuntary dispositions of any assets of any Group Member other than (x) sales
or other dispositions of inventory in the ordinary course of business, (y) sales
or other dispositions of other current assets, including receivables and
accounts in the ordinary course of business, and (z) sales or other dispositions
of assets as part of normal retirements or replacements.
''Limited Partner'' means, unless the context otherwise requires, (a) the
Organizational Limited Partner, each Initial Limited Partner, each Substituted
Limited Partner, each Additional Limited Partner, (b) each holder of an API and
(c) solely for purposes of Articles V, VI, VII and IX and Section 12.4, each
Assignee.
''Limited Partner Interest'' means the ownership interest of a Limited
Partner or Assignee in the Partnership, which may be evidenced by LP Units, APIs
or other Partnership Securities or a combination thereof or interest therein,
and includes any and all benefits to which such Limited Partner or Assignee is
entitled as provided in this Agreement, together with all obligations of such
Limited Partner or Assignee 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 Units have the right to elect to
reconstitute the Partnership and continue its business 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 Operating General
Partner to perform the functions described in Section 12.3 as liquidating
trustee of the Partnership within the meaning of the Delaware Act.
''LLC Overallotment Contribution'' has the meaning assigned to such term in
the Conveyance Agreement.
''LP Unit'' means a Common LP Unit or a Subordinated LP Unit.
''Managing General Partner'' means Genesis MLP and its successors and
permitted assigns as managing general partner of the Partnership.
''Majority Interest'' means, during the Subordination Period, at least a
majority in Voting Power of the Outstanding Common Units, voting as a separate
class, and at least a majority in Voting Power of the Outstanding Subordinated
Units, voting as a separate class and, thereafter, at least a majority of the
Outstanding Units, voting as a class, excluding in each case GP Units held by
the Operating General Partner.
''Master Credit Support Agreement'' means the Master Credit Support
Agreement, dated as of the Closing Date, among the Partnership, Salomon and
Basis which sets forth the agreement of the Partnership and Salomon relating to
the credit support to be provided by Salomon to the Partnership and the
agreement of the Partnership and Basis regarding working capital to be provided
by Basis to the Partnership.
''Merger Agreement'' has the meaning assigned to such term in Section 14.1.
''Minimum Quarterly Distribution'' means $0.50 per Unit per Quarter (or
with respect to the Quarter ending on March 31, 1997, it means the product of
$0.50 multiplied by the sum of (x) 1.00 and (y) a fraction of which the
numerator is equal to the number of days in the period commencing on the Closing
Date and ending on December 31, 1996, and of which the denominator is 92),
subject to adjustment in accordance with Sections 6.6 and 6.8.
''MLP Common Unit'' has the meaning assigned to the term ''Common Unit'' in
the Genesis MLP Partnership Agreement.
''MLP General Partner Interest'' has the meaning assigned to the term
''General Partner Interest'' in the Genesis MLP Partnership Agreement.
''MLP Parity Unit'' has the meaning assigned to the term ''Parity Unit'' in
the Genesis MLP Partnership Agreement.
''MLP Partnership Security'' has the meaning assigned to the term
''Partnership Security'' in the Genesis MLP Partnership Agreement.
''MLP Unit'' has the meaning assigned to the term ''Unit'' in the Genesis
MLP Partnership Agreement.
''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 or
Assignee by the Partnership, the Partnership's Carrying Value of such property
(as adjusted pursuant to Section 5.5(d)(ii)) at the time such property is
distributed, reduced by any indebtedness either assumed by such Partner or
Assignee upon such distribution or to which such property is subject at the time
of distribution, in either case, as determined under Section 752 of the Code.
''Net Income'' means, for any taxable year, the excess, if any, of the
Partnership's items of income and gain (other than those items taken into
account in the computation of Net Termination Gain or Net Termination Loss) for
such taxable year over the Partnership's items of loss and deduction (other than
those items taken into account in the computation of Net Termination Gain or Net
Termination Loss) for such taxable year. The items included in the calculation
of Net Income shall be determined in accordance with Section 5.5(b) and shall
not include any items specially allocated under Section 6.1(d).
''Net Loss'' means, for any taxable year, the excess, if any, of the
Partnership's items of loss and deduction (other than those items taken into
account in the computation of Net Termination Gain or Net Termination Loss) for
such taxable year over the Partnership's items of income and gain (other than
those items taken into account in the computation of Net Termination Gain or Net
Termination Loss) for such taxable year. The items included in the calculation
of Net Loss shall be determined
in accordance with Section 5.5(b) and shall not include any items specially
allocated under
Section 6.1(d).
''Net MLP Proceeds'' has the meaning assigned to such term in the
Conveyance Agreement.
''Net Overallotment Proceeds'' has the meaning assigned to such term in the
Conveyance Agreement.
''Net Termination Gain'' means, for any taxable year, the sum, if positive,
of all items of income, gain, loss or deduction recognized by the Partnership
after the Liquidation Date. The items included in the determination of Net
Termination Gain shall be determined in accordance with Section 5.5(b) and shall
not include any items of income, gain or loss specially allocated under Section
6.1(d).
''Net Termination Loss'' means, for any taxable period, the sum, if
negative, of all items of income, gain, loss or deduction recognized by the
Partnership after the Liquidation Date. The items included in the determination
of Net Termination Loss shall be determined in accordance with Section 5.5(b)
and shall not include any items of income, gain or loss specially allocated
under Section 6.1(d).
''Ninety Percent Interest'' means at least 90% in Voting Power of the
Outstanding Units, excluding GP Units held by the Operating General Partner.
''Non-Competition Agreement'' means the Non-Competition Agreement, dated as
of the Closing Date, among the Partnership, Genesis MLP, Salomon, Basis and
Howell.
''Nonrecourse Built-in Gain'' means with respect to any Contributed
Properties or Adjusted Properties that are subject to a mortgage or pledge
securing a Nonrecourse Liability, the amount of any taxable gain that would be
allocated to the Partners pursuant to Sections 6.2(b)(i)(A), 6.2(b)(ii)(A) and
6.2(b)(iii) if such properties were disposed of in a taxable transaction in full
satisfaction of such liabilities and for no other consideration.
''Nonrecourse Deductions'' means any and all items of loss, deduction or
expenditures (described in Section 705(a)(2)(B) of the Code) that, in accordance
with the principles of Treasury Regulation Section 1.704-2(b), are attributable
to a Nonrecourse Liability.
''Nonrecourse Liability'' has the meaning set forth in Treasury Regulation
Section 1.752-1(a)(2).
''Operating Expenditures'' means all Partnership Group expenditures,
including, but not limited to, taxes, reimbursements of the General Partners,
Incentive Compensation Payments to the Operating General Partner, debt service
payments, guarantee fees and capital expenditures, subject to the following:
(a) Payments (including prepayments) of principal of and premium on
indebtedness shall not be an Operating Expenditure if the payment is (i)
required in connection with the sale or other disposition of assets or (ii) made
in connection with the refinancing or refunding of indebtedness with the
proceeds from new indebtedness or from the sale of equity interests. For
purposes of the foregoing, at the election and in the reasonable discretion of
the Operating General Partner, any payment of principal or premium shall be
deemed to be refunded or refinanced by any indebtedness incurred or to be
incurred by the Partnership Group within 180 days before or after such payment
to the extent of the principal amount of such indebtedness.
(b) Operating Expenditures shall not include (i) capital expenditures made
for Acquisitions or for Capital Improvements, (ii) payment of transaction
expenses relating to Interim Capital Transactions or (iii) distributions to
Partners. Where capital expenditures are made in part for Acquisitions or for
Capital Improvements and in part for other purposes, the Operating General
Partner's good faith allocation between the amounts paid for each shall be
conclusive.
''Operating General Partner'' means Genesis Energy, L.L.C., and its
successors and permitted assigns as operating general partner of the
Partnership.
''Operating Surplus'' means, with respect to any period ending prior to the
Liquidation Date, on a cumulative basis and without duplication,
(a) the sum of (i) $20 million plus all cash and cash equivalents of the
Partnership Group on hand as of the close of business on the Closing Date, (ii)
all cash receipts of the Partnership Group for the period beginning on the
Closing Date and ending with the last day of such period, other than cash
receipts from Interim Capital Transactions (except to the extent specified in
Section 6.5) and (iii) all cash receipts of the Partnership Group after the end
of such period but on or before the date of determination of Operating Surplus
with respect to such period resulting from borrowings for working capital
purposes and purchases of APIs, less
(b) the sum of (i) Operating Expenditures for the period beginning on the
Closing Date and ending with the last day of such period and (ii) the amount of
cash reserves that is necessary or advisable in the reasonable discretion of the
Operating General Partner to provide funds for future Operating Expenditures,
provided, however, that disbursements made (including contributions to a Group
Member or disbursements on behalf of a Group Member) or cash reserves
established, increased or reduced after the end of such period but on or before
the date of determination of Available Cash with respect to such period shall be
deemed to have been made, established, increased or reduced for purposes of
determining Operating Surplus, within such period if the Operating General
Partner so determines.
Notwithstanding the foregoing, ''Operating Surplus'' with respect to the Quarter
in which the Liquidation Date occurs and any subsequent Quarter shall equal
zero.
''Opinion of Counsel'' means a written opinion of counsel (who may be
regular counsel to the Partnership or a General Partner or any of their
Affiliates) acceptable to the Operating General Partner in its reasonable
discretion.
''Option Closing Date'' has the meaning assigned to such term in the
Underwriting Agreement.
''Organizational Limited Partner'' means Genesis MLP 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.
''Over-allotment Option'' means the over-allotment option granted to the
Underwriters by Genesis MLP pursuant to the Underwriting Agreement.
''Parity Units'' means Common Units and all other Partnership Securities
having rights to distributions or in liquidation on a parity with the Common
Units.
''Partner'' means each General Partner and each Limited Partner.
''Partner Nonrecourse Debt'' has the meaning set forth in Treasury
Regulation Section 1.704-2(b)(4).
''Partner Nonrecourse Debt Minimum Gain'' has the meaning set forth in
Treasury Regulation Section 1.704-2(i)(2).
''Partner Nonrecourse Deductions'' means any and all items of loss,
deduction or expenditure (including, without limitation, any expenditure
described in Section 705(a)(2)(B) of the Code) that, in accordance with the
principles of Treasury Regulation Section 1.704-2(i), are attributable to a
Partner Nonrecourse Debt.
''Partnership'' means Genesis Crude Oil, L.P., a Delaware limited
partnership, and any successors thereto.
''Partnership Group'' means the Partnership and any Subsidiary of the
Partnership, treated as a single consolidated entity.
''Partnership Interest'' means an ownership interest in the Partnership
which shall include General Partner Interests and Limited Partner Interests.
''Partnership Minimum Gain'' means that amount determined in accordance
with the principles of Treasury Regulation Section 1.704-2(d).
''Partnership Security'' means any class or series of equity interest in
the Partnership and shall include, without limitation, Common Units,
Subordinated Units and APIs.
''Per Unit Capital Amount'' means, as of any date of determination, the
Capital Account, stated on a per Unit basis, underlying any Common Unit held by
the Managing General Partner.
''Percentage Interest'' means as of the date of such determination (a) as
to any Partner or an Assignee holding Units, the product obtained by multiplying
(i) 100% less the percentage applicable to paragraph (b) by (ii) the quotient
obtained by dividing (A) the number of Units held by such Partner or Assignee by
(B) the total number of all Outstanding Units and (b) as to the holders of
additional Partnership Securities issued by the Partnership in accordance with
Section 5.6, the percentage established as a part of such issuance. The
Percentage Interest with respect to an API shall at all times be zero.
''Person'' means an individual or a corporation, limited liability company,
partnership, joint venture, trust, unincorporated organization, association,
government agency or political subdivision thereof or other entity.
''Pro Rata'' means (a) when modifying Units or any class thereof,
apportioned among all designated Units in accordance with their relative
Percentage Interests, (b) when modifying Partners and Assignees, apportioned
among all Partners and Assignees in accordance with their respective Percentage
Interests and (c) when modifying holders of APIs, apportioned among all holders
of APIs in accordance with the relative number of APIs held by each such holder.
''Quarter'' means, unless the context requires otherwise, a calendar
quarter.
''Recapture Income'' means any gain recognized by the Partnership (computed
without regard to any adjustment required by Section 734 or 743 of the Code)
upon the disposition of any property or asset of the Partnership, which gain is
characterized as ordinary income because it represents the recapture of
deductions previously taken with respect to such property or asset.
''Record Date'' means the date established by the Operating General Partner
for determining (a) the identity of the Record Holders entitled to notice of, or
to vote at, any meeting of 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 Partners or (b) the identity
of Record Holders entitled to receive any report or distribution or participate
in any offer.
''Record Holder'' means, as of a particular Business Day, with respect to a
holder of a Common Unit, a Subordinated Unit, an API or other Partnership
Security, the Person in whose name such Common Unit, Subordinated Unit, API or
other Partnership Security is registered on the books which the Operating
General Partner has caused to be kept as of the opening of business on such
Business Day.
''Redemption and Registration Rights Agreement'' means the Redemption and
Registration Rights Agreement, dated as of the Closing Date, among Basis,
Howell, the Howell Subsidiaries, the Partnership and Genesis MLP which sets
forth the agreement regarding the redemption of Common LP Units by the
Partnership.
''Redemption Proceeds'' means any cash contributed by Genesis MLP to the
Partnership which is to be used by the Partnership to redeem Common LP Units
pursuant to the Redemption and Registration Rights Agreement.
''Registration Statement'' means the Registration Statement on Form S-1
(Registration No. 333-11545) as it has been or as it may be amended or
supplemented from time to time, filed by Genesis MLP with the Commission under
the Securities Act to register the initial offering and sale of MLP Common Units
to the public.
''Required Allocations'' means (a) any limitation imposed on any allocation
of Net Losses or Net Termination Losses under Section 6.1(b) or Section 6.1(c)
and (b) any allocation of an item of income, gain, loss or deduction pursuant to
Section 6.1(d)(i), 6.1(d)(ii), 6.1(d)(iv), 6.1(d)(vii) or 6.1(d)(ix).
''Residual Gain'' or ''Residual Loss'' means any item of gain or loss, as
the case may be, of the Partnership recognized for federal income tax purposes
resulting from a sale, exchange or other disposition of a Contributed Property
or Adjusted Property, to the extent such item of gain or loss is not allocated
pursuant to Section 6.2(b)(i)(A) or 6.2(b)(ii)(A), respectively, to eliminate
Book-Tax Disparities.
''Salomon'' means Salomon Inc, a Delaware corporation.
''Second Target Distribution'' means $0.635 per Unit per Quarter (or, with
respect to the Quarter ending on March 31, 1997, it means the product of $0.635
multiplied by the sum of (x) 1.00 and (y) a fraction of which the numerator is
equal to the number of days in the period commencing on the Closing Date and
ending on December 31, 1996, and of which the denominator is 92), subject to
adjustment in accordance with Sections 6.6 and 6.8.
''Securities Act'' means the Securities Act of 1933, as amended,
supplemented or restated from time to time and any successor to such statute.
''Security Agreement'' means the Security Agreement, dated as of the
Closing Date, among the Partnership, Salomon and the Secured Parties (as defined
in the Security Agreement) securing the obligations of the Partnership under the
Master Credit Support Agreement and creating a security interest in the
Collateral (as defined in the Security Agreement) in favor of the Collateral
Agent (as defined in the Security Agreement).
''Special Approval'' means approval by a majority of the members of the
Audit Committee.
''Subordinated GP Unit'' means a Partnership Security representing a
fractional part of the Partnership Interests of all General Partners and having
the rights and obligations specified with respect to a Subordinated GP Unit in
this Agreement.
''Subordinated LP Unit'' means a Partnership Security representing a
fractional part of the Partnership Interests of all Limited Partners and
Assignees (other than of holders of the APIs) and having the rights and
obligations specified with respect to a Subordinated LP Unit in this Agreement.
''Subordinated Unit'' means a Subordinated GP Unit or a Subordinated LP
Unit.
''Subordination Period'' means the period commencing on the Closing Date
and ending on the first day of any Quarter beginning after December 31, 2001 in
respect of which (i) distributions of Available Cash from Operating Surplus on
each of the Outstanding Common Units and Subordinated Units with respect to each
of the three consecutive, non-overlapping four-Quarter periods immediately
preceding such date equaled or exceeded the sum of the Minimum Quarterly
Distribution on all Outstanding Common Units and Subordinated Units during such
periods, (ii) the Adjusted Operating Surplus generated during each of the three
consecutive, non-overlapping four-Quarter periods immediately preceding such
date equaled or exceeded the sum of the Minimum Quarterly Distribution on all of
the Outstanding Common Units and Subordinated Units during such periods and
(iii) there are no outstanding Cumulative Common Unit Arrearages.
''Subsidiary'' means, with respect to any Person, (a) a corporation of
which more than 50% of the voting power of shares entitled (without regard to
the occurrence of any contingency) to vote in the election of directors or other
governing body of such corporation is owned, directly or indirectly, at the date
of determination, by such Person, by one or more Subsidiaries of such Person or
a combination thereof, (b) a partnership (whether general or limited) in which
such Person or a Subsidiary of such Person is, at the date of determination, a
general or limited partner of such partnership, but only if more than 50% of the
partnership interests of such partnership (considering all of the partnership
interests of such partnership as a single class) is owned, directly or
indirectly, at the date of determination, by such Person, by one or more
Subsidiaries of such Person, or a combination thereof, or (c) any other Person
(other than a corporation or a partnership) in which such Person, one or more
Subsidiaries of such Person, or a combination thereof, directly or indirectly,
at the date of determination, has (i) at least a majority ownership interest or
(ii) the power to elect or direct the election of a majority of the directors or
other governing body of such Person.
''Substituted Limited Partner'' means a Person who is admitted as a Limited
Partner to the Partnership pursuant to Section 10.4 in place of and with all the
rights of a Limited Partner and who is shown as a Limited Partner on the books
and records of the Partnership.
''Surviving Business Entity'' has the meaning assigned to such term in
Section 14.2(b).
''Third Target Distribution'' means $0.825 per Unit per Quarter (or, with
respect to the Quarter ending on March 31, 1997, it means the product of $0.825
multiplied by the sum of (x) 1.00 and (y) a fraction of which the numerator is
equal to the number of days in the period commencing on the Closing Date and
ending on December 31, 1996, and of which the denominator is 92), subject to
adjustment in accordance with Sections 6.6 and 6.8.
''transfer'' has the meaning assigned to such term in Section 4.4(a).
''Transfer Application'' means an application and agreement for transfer of
Partnership Securities in the form set forth on the back of a Certificate or in
a form substantially to the same effect in a separate instrument.
''Underwriter'' means each Person named as an underwriter in Schedule I to
the Underwriting Agreement who purchases MLP Common Units pursuant thereto.
''Underwriting Agreement'' means the Underwriting Agreement dated November
26, 1996, among the Underwriters, the Partnership, Genesis MLP, the Operating
General Partner and certain other parties, providing for the purchase of MLP
Common Units by such Underwriters.
''Unit'' means a Common Unit or Subordinated Unit or any other Partnership
Security that is designated as a ''Unit.''
''Unitholder'' means a holder of a Unit.
''Unpaid MQD'' has the meaning assigned to such term in Section
6.1(c)(i)(B).
''Unrealized Gain'' attributable to any item of Partnership property means,
as of any date of determination, the excess, if any, of (a) the fair market
value of such property as of such date (as determined under Section 5.5(d)) over
(b) the Carrying Value of such property as of such date (prior to any adjustment
to be made pursuant to Section 5.5(d) as of such date).
''Unrealized Loss'' attributable to any item of Partnership property means,
as of any date of determination, the excess, if any, of (a) the Carrying Value
of such property as of such date (prior to any adjustment to be made pursuant to
Section 5.5(d) as of such date) over (b) the fair market value of such property
as of such date (as determined under Section 5.5(d)).
''Unrecovered Capital'' means at any time, with respect to (a) a Unit, the
Initial Unit Price less the sum of all distributions constituting Capital
Surplus theretofore made in respect of an Initial Common Unit and any
distributions of cash (or the Net Agreed Value of any distributions in kind) in
connection with the dissolution and liquidation of the Partnership theretofore
made in respect of an Initial Common Unit, adjusted as the Operating General
Partner determines to be appropriate to give effect to any distribution,
subdivision or combination of such Units, and (b) an API, the excess of (i) the
cash amount contributed to the Partnership in exchange for such API over (ii)
any amounts previously distributed toward the redemption of such API pursuant to
Section 6.4 or 12.4.
''U.S. GAAP'' means United States Generally Accepted Accounting Principles
consistently applied.
''Voting Power'' means the right, if any, of the holder of a Partnership
Security to vote on Partnership matters. Each Common Unit and Subordinated Unit
shall entitle the holder thereof to one vote. Each additional Partnership
Security shall entitle the holder thereof to such vote, if any, as shall be
established at the time of issuance of such Partnership Security.
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) ''include'' or ''includes'' means includes,
without limitation, and ''including'' means including, without limitation.
ARTICLE II
ORGANIZATION
2.1 Formation
The Operating General Partner and the Organizational Limited Partner have
previously formed the Partnership as a limited partnership pursuant to the
provisions of the Delaware Act and hereby amend and restate the original
Agreement of Limited Partnership of Genesis Crude Oil, L.P. in its entirety.
This amendment and restatement shall become effective on the date of this
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 Delaware 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.
2.2 Name
The name of the Partnership shall be ''Genesis Crude Oil, L.P.'' The
Partnership's business may be conducted under any other name or names deemed
necessary or appropriate by the Operating General Partner in its sole
discretion, including the name of a General Partner. The words ''Limited
Partnership,'' ''L.P.,'' ''Ltd.'' 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 Operating General Partner in its
discretion 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.
2.3 Registered Office; Registered Agent; Principal Office; Other Offices
Unless and until changed by the Operating General Partner, the registered
office of the Partnership in the State of Delaware shall be located at 1209
Orange Street, New Castle County, Wilmington, Delaware 19801, and the registered
agent for service of process on the Partnership in the State of Delaware at such
registered office shall be CT Corporation System. The principal office of the
Partnership shall be located at 500 Dallas, Suite 3100, Houston, Texas 77002 or
such other place as the Operating General Partner may from time to time
designate by notice to the other Partners. The Partnership may maintain offices
at such other place or places within or outside the State of Delaware as the
Operating General Partner deems necessary or appropriate. The address of the
Managing General Partner and the Operating General Partner shall be 500 Dallas,
Suite 3100, Houston, Texas 77002 or such other place as the Managing General
Partner or the Operating General Partner, as the case may be, may from time to
time designate by notice to the Limited Partners.
2.4 Purpose and Business
The purpose and nature of the business to be conducted by the Partnership
shall be to (a) acquire, manage and operate the Assets and any similar assets or
properties, and to engage directly in, or to enter into or form any corporation,
partnership, joint venture, limited liability company or other arrangement to
engage indirectly in, any type of business or activity engaged in by Basis or
Howell immediately prior to the Closing Date associated with the Assets 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,
(b) engage directly in, or to 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 Operating General
Partner and which lawfully may be conducted by a limited partnership organized
pursuant to the Delaware 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 (c) do anything necessary or appropriate
to the foregoing, including the making of capital contributions or loans to a
Group Member. The General Partners have no obligation or duty to the
Partnership, the Partners, or the Assignees to propose or approve, and in their
discretion may decline to propose or approve, the conduct by the Partnership of
any business.
2.5 Powers
The Partnership shall be empowered to do any and all acts and things
necessary, appropriate, proper, advisable, incidental to or convenient for the
furtherance and accomplishment of the purposes and business described in Section
2.4 and for the protection and benefit of the Partnership.
2.6 Power of Attorney
(a) Each Limited Partner and each Assignee hereby constitutes and appoints
the Operating General Partner and, if a Liquidator shall have been selected
pursuant to Section 12.3, the Liquidator, severally (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 Operating General Partner
or the Liquidator deems 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 State
of Delaware and in all other jurisdictions in which the Partnership may conduct
business or own property; (B) all certificates, documents and other instruments
that the Operating General Partner or the Liquidator deems 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 Operating General Partner or the Liquidator deems 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, Article 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 or consolidation 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
necessary or appropriate, in the discretion of the Operating General Partner or
the Liquidator, to 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 is necessary or
appropriate, in the discretion of the Operating General Partner or the
Liquidator, to 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 Operating 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 Operating 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 or Assignee and the transfer of all or any portion of such Limited
Partner's or Assignee's Partnership Interest and shall extend to such Limited
Partner's or Assignee's heirs, successors, assigns and personal representatives.
Each such Limited Partner and Assignee hereby agrees to be bound by any
representation made by the Operating General Partner or the Liquidator acting in
good faith pursuant to such power of attorney; and each such Limited Partner and
Assignee, 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
Operating General Partner or the Liquidator taken in good faith under such power
of attorney. Each Limited Partner and Assignee shall execute and deliver to the
Operating 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 Operating General Partner or the Liquidator deems necessary
to effectuate this Agreement and the purposes of the Partnership.
2.7 Term
The term of the Partnership commenced upon the filing of the Certificate of
Limited Partnership in accordance with the Delaware Act and shall continue until
the close of Partnership business on December 31, 2086 or until the earlier
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
Delaware Act.
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 or Assignee, 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,
a General Partner, one or more of a General Partner's Affiliates or one or more
nominees, as the Operating General Partner may determine. The General Partners
hereby declare and warrant that any Partnership assets for which record title is
held in the name of such General Partner or one or more of its Affiliates or one
or more nominees shall be held by such 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 such General Partner shall
use reasonable efforts to cause record title to such assets (other than those
assets in respect of which the Operating 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 such
General Partner or as soon thereafter as practicable, such 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 Operating 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
3.1 Limitation of Liability
The Limited Partners and the Assignees shall have no liability under this
Agreement except as expressly provided in this Agreement or the Delaware Act.
3.2 Management of Business
No Limited Partner or Assignee, in its capacity as such, shall participate
in the operation, management or control (within the meaning of the Delaware 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 a General Partner or any officer, director,
employee, member, general partner, agent or trustee of a 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 17-303(a) of
the Delaware Act) and shall not affect, impair or eliminate the limitations on
the liability of the Limited Partners or Assignees under this Agreement.
3.3 Outside Activities of Limited Partners
Subject to the provisions of Section 7.5, which shall continue to be
applicable to the Persons referred to therein, regardless of whether such
Persons shall also be Limited Partners or Assignees, any Limited Partner or
Assignee 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 or Assignees shall
have any rights by virtue of this Agreement in any business ventures of any
Limited Partner or Assignee.
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) to obtain true and full information regarding the status of the
business and financial condition of the Partnership;
(ii) promptly after becoming available, to obtain a copy of the
Partnership's federal, state and local tax returns for each year;
(iii) to have furnished to him a current list of the name and last known
business, residence or mailing address of each 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 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; and
(vi) to obtain such other information regarding the affairs of the
Partnership as is just and reasonable.
(b) The General Partners may keep confidential from the Limited Partners
and Assignees, for such period of time as the General Partners deem reasonable,
(i) any information that the General Partners reasonably believe to be in the
nature of trade secrets or (ii) other information the disclosure of which the
General Partners in good faith believe (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
4.1 Certificates
Upon the request of any Person owning Units, APIs or other Partnership
Securities, the Partnership shall issue to such Person one or more Certificates
evidencing such Units, APIs or other Partnership Securities, as applicable.
Certificates shall be executed on behalf of the Partnership by the Operating
General Partner. Partners holding Certificates evidencing Subordinated GP Units
may exchange such Certificates for Certificates evidencing Common GP Units and
Partners holding Certificates evidencing Subordinated LP Units may exchange such
Certificates for Certificates evidencing Common LP Units, in each case on or
after the date on which such Subordinated Units are converted into Common Units
pursuant to Section 5.8.
4.2 Mutilated, Destroyed, Lost or Stolen Certificates
(a) If any mutilated Certificate is surrendered to the Operating General
Partner, the Operating General Partner on behalf of the Partnership shall
execute and deliver in exchange therefor, a new Certificate evidencing the same
number and type of Partnership Securities as the Certificate so surrendered.
(b) The Operating General Partner on behalf of the Partnership shall
execute and deliver 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
Partnership, that a previously issued Certificate has been lost, destroyed or
stolen;
(ii) requests the issuance of a new Certificate before the Partnership 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 Partnership, delivers to the Partnership a bond,
in form and substance satisfactory to the Partnership, with surety or sureties
and with fixed or open penalty as the Partnership may reasonably direct, in its
sole discretion, to indemnify the Partnership and the Partners 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
Partnership.
If a Limited Partner or Assignee fails to notify the Partnership within a
reasonable time after he has notice of the loss, destruction or theft of a
Certificate, and a transfer of the Partnership Securities represented by the
Certificate is registered before the Partnership or the General Partners receive
such notification, the Limited Partner or Assignee shall be precluded from
making any claim against the Partnership or the General Partners 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 Partnership 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 reasonably connected therewith.
4.3 Record Holders
The Partnership shall be entitled to recognize the Record Holder as the
Partner or Assignee 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. 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 Securities,
as between the Partnership on the one hand, and such other Persons on the other,
such representative Person (a) shall be the Partner or Assignee (as the case may
be) of record and beneficially, (b) must execute and deliver a Transfer
Application and (c) shall be bound by this Agreement and shall have the rights
and obligations of a Partner or Assignee (as the case may be) hereunder and as,
and to the extent, provided for herein.
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 by which a
General Partner assigns its General Partner Interest to another Person or by
which a holder of a Limited Partner Interest assigns such Limited Partner
Interest to another Person who is or becomes a Limited Partner or an Assignee,
and includes a sale, assignment, gift, pledge, encumbrance, hypothecation,
mortgage, exchange or any other disposition by law or otherwise.
(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 interest holder of a General Partner of any or all of the
issued and outstanding interests of such General Partner.
4.5 Registration and Transfer of Limited Partner Interests
(a) The Partnership 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
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 Interest evidenced by a Certificate, and subject to the
provisions of Section 4.5(b), the appropriate officers of the Operating General
Partner on behalf of the Partnership shall execute, 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 Partnership shall not recognize any transfer of Limited Partner
Interests until the Certificates evidencing such Limited Partner Interests are
surrendered for registration of transfer and are accompanied by a Transfer
Application duly executed by the transferee (or the transferee's attorney-in-
fact duly authorized in writing). No charge shall be imposed by the Partnership
for such transfer; provided, however, that as a condition to the issuance of any
new Certificate under this Section 4.5, the Partnership may require the payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed with respect thereto.
(c) Limited Partner Interests may be transferred only in the manner
described in this Section 4.5. The transfer of any Limited Partner Interests and
the admission of any new Limited Partner shall not constitute an amendment to
this Agreement.
(d) Until admitted as a Substituted Limited Partner pursuant to Section
10.4, the Record Holder of a Limited Partner Interest shall be an Assignee in
respect of such Limited Partner Interest. Limited Partners may include
custodians, nominees or any other individual or entity in its own or any
representative capacity.
(e) A transferee of a Limited Partner Interest who has completed and
delivered a Transfer Application shall be deemed to have (i) requested admission
as a Substituted Limited Partner, (ii) agreed to comply with and be bound by and
to have executed this Agreement, (iii) represented and warranted that such
transferee has the right, power and authority and, if an individual, the
capacity to enter into this Agreement, (iv) granted the powers of attorney set
forth in this Agreement and (v) given the consents and approvals and made the
waivers contained in this Agreement.
4.6 Transfer of a General Partner's General Partner Interest
(a) If the Operating General Partner transfers its MLP General Partner
Interest to any Person in accordance with the provisions of the Genesis MLP
Partnership Agreement, the Operating General Partner shall contemporaneously
therewith transfer all, but not less than all, of its General Partner Interest
to such Person, and the Partners hereby expressly consent to such transfer, and
following any such transfer such Person may become a successor Operating General
Partner pursuant to Section 10.4(a). Except as set forth in the immediately
preceding sentence, the Operating General Partner may not transfer all or any
part of its General Partner Interest.
(b) The Managing General Partner may transfer all, but not less than all,
of its Partnership Interest in connection with the merger, consolidation or
other combination of the Managing General Partner with or into any other Person
or the transfer by the Managing General Partner of all or substantially all of
its assets to another Person, and following any such transfer such Person may
become a successor Managing General Partner pursuant to Section 10.4(b). Except
as set forth in the immediately preceding sentence, or in connection with any
pledge of (or any related foreclosure on) the Managing General Partner's
Partnership Interest solely for the purpose of securing, directly or indirectly,
indebtedness of Genesis MLP, a Group Member or the Managing General Partner, the
Managing General Partner may not transfer all or any part of its Partnership
Interest.
4.7 Transfer of APIs
A holder of APIs may transfer any or all of the APIs held by such holder.
The Operating General Partner shall have the authority (but shall not be
required) to adopt such reasonable restrictions on the transfer of APIs and
requirements for registering the transfer of APIs as the Operating General
Partner, in its sole discretion, shall determine are necessary or appropriate.
4.8 Restrictions on Transfers
(a) Notwithstanding the other provisions of this Article IV, no transfer of
any Partnership Interest shall be made if such transfer would (i) violate the
then applicable federal or state securities laws or rules and regulations of the
Commission, any state securities commission or any other governmental
authorities with jurisdiction over such transfer, (ii) terminate the existence
or qualification of the Partnership under the laws of the jurisdiction of its
formation, or (iii) cause the Partnership to be treated as an association
taxable as a corporation or otherwise to be taxed as an entity for federal
income tax purposes (to the extent not already so treated or taxed).
(b) The Operating General Partner may impose restrictions on the transfer
of Partnership Interests if a subsequent Opinion of Counsel determines that such
restrictions are necessary to avoid a significant risk of the Partnership
becoming taxable as a corporation or otherwise to be taxed as an entity for
federal income tax purposes. The restrictions may be imposed by making such
amendments to this Agreement as the Operating General Partner may determine to
be necessary or appropriate to impose such restrictions.
ARTICLE V
CAPITAL CONTRIBUTIONS AND
ISSUANCE OF PARTNERSHIP INTERESTS
5.1 Organizational Contributions
In connection with the formation of the Partnership under the Delaware Act,
the Operating General Partner made an initial Capital Contribution to the
Partnership in the amount of $10.00, for an interest in the Partnership and has
been admitted as the Operating General Partner of the Partnership, and the
Organizational Limited Partner made an initial Capital Contribution to the
Partnership in the amount of $990.00 for an interest in the Partnership and has
been admitted as a Limited Partner of the Partnership. As of the Closing Date,
the interest of the Organizational Limited Partner shall be redeemed as provided
in the Conveyance Agreement; the initial Capital Contributions of each Partner
shall thereupon be refunded; and the Organizational Limited Partner shall cease
to be a Limited Partner of the Partnership. Ninety-nine percent of any interest
or other profit that may have resulted from the investment or other use of such
initial Capital Contributions shall be allocated and distributed to the
Organizational Limited Partner, and the balance thereof shall be allocated and
distributed to the Operating General Partner.
5.2 Contributions by General Partners
(a) Contributions by the Managing General Partner.
(i) On the Closing Date, the Managing General Partner shall, as set forth
in the Conveyance Agreement, contribute cash to the Partnership in an amount
equal to the Net MLP Proceeds in exchange for 7,653,061 Common GP Units.
(ii) As further set forth in the Conveyance Agreement, if the Underwriters
exercise the Over-Allotment Option, in whole or in part, the Managing General
Partner shall contribute cash to the Partnership in an amount equal to the sum
of (A) the Net Overallotment Proceeds plus (B) the LLC Overallotment
Contribution in exchange for an additional number of Common GP Units equal to
the number of MLP Units issued pursuant to Sections 5.2(b) and 5.3(b) of the
Genesis MLP Partnership Agreement. The Partnership shall use the cash
contributed by the Managing General Partner pursuant to this Section 5.2(a)(ii)
to redeem from all of the holders of Subordinated Units, in accordance with
their relative Percentage Interests, a number of Subordinated Units equal to the
number of additional Common GP Units issued pursuant to this Section 5.2(a)(ii).
(b) Contributions by the Operating General Partner. In the event that any
Capital Contribution is made to the Partnership subsequent to the Closing Date
(other than Capital Contributions made pursuant to Section 5.2(a)): (i) if such
Capital Contribution will be used by the Partnership solely to redeem
Partnership Securities pursuant to the terms of the Redemption and Registration
Rights Agreement, the Operating General Partner shall not be required to make an
additional Capital Contribution to the Partnership in conjunction therewith, or
(ii) if such Capital Contribution will be used, in whole or in part, by the
Partnership for any purpose other than the redemption of Partnership Securities
pursuant to the terms of the Redemption and Registration Rights Agreement, the
Operating General Partner shall make an additional Capital Contribution to the
Partnership in the amount necessary to maintain an overall two percent interest
in all Partnership distributions, taking into account for this purpose the
Operating General Partner's General Partner Interest and any indirect interest
in Partnership distributions held by the Operating General Partner as a
consequence of its MLP General Partner Interest.
(c) Except as set forth in Sections 5.2(a) and (b) and Article XII, the
General Partners shall not be obligated to make any Capital Contribution to the
Partnership.
5.3 Contributions by Initial Limited Partners
(a) On the Closing Date, as set forth in the Conveyance Agreement, (i) the
Howell Subsidiaries (other than Howell Crude Oil Company), shall, in the event
the Howell Purchase Cash is less than the Howell Affiliate Cash, contribute to
the Partnership an undivided interest in the assets described in Sections
2.4(a)(ii)-(v) of the Conveyance Agreement in exchange for the number of
Subordinated LP Units specified in Section 2.4(b)(ii) of the Conveyance
Agreement, (ii) Howell Crude Oil Company shall contribute to the Partnership the
assets described in Section 2.5(a)(ii) of the Conveyance Agreement in exchange
for (x) the Excess Howell Cash, (y) the Excess Howell Subordinated LP Units, and
(z) 30,792 Subordinated GP Units, and (iii) Basis shall contribute to the
Partnership the assets described in Section 2.5(a)(i) of the Conveyance
Agreement in exchange for (x) the Excess Basis Cash, (y) 1,771,200 Subordinated
LP Units, and (z) 36,147 Subordinated GP Units.
(b) No Limited Partner Interests will be issuable as of or at the Closing
Date other than the Subordinated LP Units issued pursuant to Section 5.3(a).
5.4 Interest and Withdrawal
No interest shall be paid by the Partnership on Capital Contributions. No
Partner or Assignee 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 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 or Assignee shall have
priority over any other Partner or Assignee either as to the return of Capital
Contributions or as to profits, losses or distributions. Any such return shall
be a compromise to which all Partners and Assignees agree within the meaning of
Section 17-502(b) of the Delaware Act.
5.5 Capital Accounts
(a) The Partnership shall maintain for each Partner (or a beneficial owner
of Partnership Interests held by a nominee in any case in which the nominee has
furnished the identity of such owner to the Partnership in accordance with
Section 6031(c) of the Code or any other method acceptable to the Operating
General Partner in its sole discretion) owning a Partnership Interest a separate
Capital Account with respect to such Partnership Interest in accordance with the
rules of Treasury Regulation Section 1.704-1(b)(2)(iv). Such Capital Account
shall be increased by (i) the amount of all Capital Contributions made to the
Partnership with respect to such Partnership Interest pursuant to this Agreement
and (ii) all items of Partnership income and gain (including, without
limitation, income and gain exempt from tax) computed in accordance with Section
5.5(b) and allocated with respect to such Partnership Interest pursuant to
Section 6.1, and decreased by (x) the amount of cash or Net Agreed Value of all
actual and deemed distributions of cash or property made with respect to such
Partnership Interest pursuant to this Agreement and (y) all items of Partnership
deduction and loss computed in accordance with Section 5.5(b) and allocated with
respect to such Partnership Interest pursuant to Section 6.1.
(b) For purposes of computing the amount of any item of income, gain, loss
or deduction which is to be allocated pursuant to Article VI and is to be
reflected in the Partners' Capital Accounts, the determination, recognition and
classification of any such item shall be the same as its determination,
recognition and classification for federal income tax purposes (including,
without limitation, any method of depreciation, cost recovery or amortization
used for that purpose), provided, that:
(i) All fees and other expenses incurred by the Partnership to promote the
sale of (or to sell) a Partnership Interest that can neither be deducted nor
amortized under Section 709 of the Code, if any, shall, for purposes of Capital
Account maintenance, be treated as an item of deduction at the time such fees
and other expenses are incurred and shall be allocated among the Partners
pursuant to Section 6.1.
(ii) Except as otherwise provided in Treasury Regulation Section 1.704-
1(b)(2)(iv)(m), the computation of all items of income, gain, loss and deduction
shall be made without regard to any election under Section 754 of the Code which
may be made by the Partnership and, as to those items described in Section
705(a)(1)(B) or 705(a)(2)(B) of the Code, without regard to the fact that such
items are not includable in gross income or are neither currently deductible nor
capitalized for federal income tax purposes. To the extent an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Section 734(b) or 743(b)
of the Code is required, pursuant to Treasury Regulation Section 1.704-
1(b)(2)(iv)(m) to be taken into account in determining Capital Accounts, the
amount of such adjustment in the Capital Accounts shall be treated as an item of
gain or loss.
(iii) Any income, gain or loss attributable to the taxable disposition of
any Partnership property shall be determined as if the adjusted basis of such
property as of such date of disposition were equal in amount to the
Partnership's Carrying Value with respect to such property as of such date.
(iv) In accordance with the requirements of Section 704(b) of the Code, any
deductions for depreciation, cost recovery or amortization attributable to any
Contributed Property shall be determined as if the adjusted basis of such
property on the date it was acquired by the Partnership were equal to the Agreed
Value of such property. Upon an adjustment pursuant to Section 5.5(d) to the
Carrying Value of any Partnership property subject to depreciation, cost
recovery or amortization, any further deductions for such depreciation, cost
recovery or amortization attributable to such property shall be determined (A)
as if the adjusted basis of such property were equal to the Carrying Value of
such property immediately following such adjustment and (B) using a rate of
depreciation, cost recovery or amortization derived from the same method and
useful life (or, if applicable, the remaining useful life) as is applied for
federal income tax purposes; provided, however, that, if the asset has a zero
adjusted basis for federal income tax purposes, depreciation, cost recovery or
amortization deductions shall be determined using any reasonable method that the
Operating General Partner may adopt.
(v) If the Partnership's adjusted basis in a depreciable or cost recovery
property is reduced for federal income tax purposes pursuant to Section 48(q)(1)
or 48(q)(3) of the Code, the amount of such reduction shall, solely for purposes
hereof, be deemed to be an additional depreciation or cost recovery deduction in
the year such property is placed in service and shall be allocated among the
Partners pursuant to Section 6.1. Any restoration of such basis pursuant to
Section 48(q)(2) of the Code shall, to the extent possible, be allocated in the
same manner to the Partners to whom such deemed deduction was allocated.
(c) A transferee of a Partnership Interest shall succeed to a pro rata
portion of the Capital Account of the transferor relating to the Partnership
Interest so transferred; provided, however, that, if the transfer causes a
termination of the Partnership under Section 708(b)(1)(B) of the Code, the
Partnership's properties and liabilities shall be deemed (i) to have been
distributed in liquidation of the Partnership to the Partners (including any
transferee of a Partnership Interest that is a party to the transfer causing
such termination) pursuant to Section 12.4 (after adjusting the balance of the
Capital Accounts of the Partners as provided in Section 5.5(d)(ii)) and
recontributed by such Partners in reconstitution of the Partnership or (ii) in
the event of a termination of the Partnership that occurs after the finalization
of Proposed Treasury Regulation Section 1.704-1(b)(1)(iv), to have been
contributed to a new partnership which will be deemed to be a continuation of,
and successor to, the Partnership and the Partnership will be deemed to make
liquidating distributions of the interests in this new partnership to the
Partners (including any transferee of a Partnership Interest that is a party to
the transfer causing such termination) pursuant to Section 12.4 (after adjusting
the balance of the Capital Accounts of the Partners as provided in Section
5.5(d)(ii)). Any such deemed distribution and contribution, in the case of a
characterization under clause (i) of the preceding sentence, or any such deemed
contribution and distribution, in the case of a characterization under clause
(ii) of the preceding sentence, shall be treated as an actual contribution and
distribution for purposes of this Section 5.5. In such event, the Carrying
Values of the Partnership properties shall be adjusted immediately prior to such
deemed distribution and contribution, or deemed contribution and distribution,
pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv) and this Section 5.5
and such Carrying Values shall then constitute the Agreed Values of such
properties upon such deemed contribution to the new Partnership. In either case,
the Capital Accounts of the new Partnership that results under the applicable
characterization shall be maintained in accordance with the principles of this
Section 5.5.
(d) (i) In accordance with Treasury Regulation Section 1.704-
1(b)(2)(iv)(f), on an issuance of additional Partnership Interests for cash or
Contributed Property, the conversion of the Operating General Partner's Combined
Interest to MLP Common Units pursuant to Section 11.3(b) of the Genesis MLP
Partnership Agreement, or the conversion of the Operating General Partner's
right to Incentive Compensation Payments pursuant to Section 7.13, the Capital
Account of all Partners and the Carrying Value of each Partnership property
immediately prior to such issuance or conversion shall be adjusted upward or
downward to reflect any Unrealized Gain or Unrealized Loss attributable to such
Partnership property, as if such Unrealized Gain or Unrealized Loss had been
recognized on an actual sale of each such property immediately prior to such
issuance and had been allocated to the Partners at such time pursuant to Section
6.1(c). In determining such Unrealized Gain or Unrealized Loss, the aggregate
cash amount and fair market value of all Partnership assets (including, without
limitation, cash or cash equivalents) immediately prior to the issuance of
additional Units shall be determined by the Operating General Partner using such
reasonable method of valuation as it may adopt; provided, however, that the
Operating General Partner, in arriving at such valuation, must take fully into
account the fair market value of the Partnership Interests of all Partners at
such time. The Operating General Partner shall allocate such aggregate value
among the assets of the Partnership (in such manner as it determines in its
discretion to be reasonable) to arrive at a fair market value for individual
properties.
(ii) In accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(f),
immediately prior to any actual or deemed distribution to a Partner of any
Partnership property (other than a distribution of cash that is not in
redemption or retirement of a Partnership Interest), the Capital Accounts of all
Partners and the Carrying Value of all Partnership property shall be adjusted
upward or downward to reflect any Unrealized Gain or Unrealized Loss
attributable to such Partnership property, as if such Unrealized Gain or
Unrealized Loss had been recognized in a sale of such property immediately prior
to such distribution for an amount equal to its fair market value, and had been
allocated to the Partners, at such time, pursuant to Section 6.1(c). In
determining such Unrealized Gain or Unrealized Loss the aggregate cash amount
and fair market value of all Partnership assets (including, without limitation,
cash or cash equivalents) immediately prior to a distribution shall (A) in the
case of an actual distribution which is not made pursuant to Section 12.4 or in
the case of a deemed distribution occurring as a result of a termination of the
Partnership pursuant to Section 708 of the Code, whether before or after the
finalization of Proposed Treasury Regulation Section 1.704-1(b)(l)(iv), be
determined and allocated in the same manner as that provided in Section
5.5(d)(i) or (B) in the case of a liquidating distribution pursuant to Section
12.4, be determined and allocated by the Liquidator using such reasonable method
of valuation as it may adopt.
5.6 Issuances of Additional Partnership Securities
(a) Subject to Sections 5.7 and 7.3(d), the Partnership may issue
additional Partnership Securities and options, rights, warrants and appreciation
rights relating to 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 shall be established by the Operating General Partner in
its sole discretion, 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 Operating General Partner in
the exercise of its sole discretion, 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 such 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 such Partnership Security will be issued, evidenced by
Certificates and assigned or transferred; and (vii) the right, if any, of such
Partnership Security to vote on Partnership matters, including matters relating
to the relative rights, preferences and privileges of such Partnership Security.
(c) The Operating General Partner is hereby authorized and directed to take
all actions that it deems necessary or appropriate in connection with (i) each
issuance of Partnership Securities pursuant to this Section 5.6, (ii) the
admission of Additional Limited Partners and (iii) all additional issuances of
Partnership Securities. The Operating General Partner is further authorized and
directed to specify the relative rights, powers and duties of the holders of
Partnership Securities being so issued. The Operating General Partner shall do
all things necessary to comply with the Delaware Act and is authorized and
directed to do all things it deems to be necessary or advisable in connection
with any future issuance of Partnership Securities pursuant to the terms of this
Agreement, including compliance with any statute, rule, regulation or guideline
of any federal, state or other governmental agency.
5.7 Limitations on Issuance of Additional Partnership Securities
The issuance of Partnership Securities pursuant to Section 5.6 shall be
subject to the following restrictions and limitations:
(a) During the Subordination Period, the Partnership shall not issue an
aggregate of more than 3,750,000 additional Parity Units without the prior
approval of the holders of a Majority Interest; provided, however, that the
number of additional Parity Units that may be issued without the prior approval
of the holders of a Majority Interest shall be reduced by the number of MLP
Parity Units issued by Genesis MLP that count against the limitation on issuance
of MLP Parity Units in Section 5.7(a) of the Genesis MLP Partnership Agreement.
In applying this limitation, there shall be excluded Common GP Units issued (i)
to Genesis MLP, (ii) in accordance with Section 5.7(b), (iii) pursuant to the
employee benefit plans of a General Partner, the Partnership or any other Group
Member and (iv) in the event of a combination or subdivision of Common Units.
(b) The Partnership may also issue an unlimited number of Parity Units,
prior to the end of the Subordination Period and without the prior approval of
the Partners if such issuance occurs (i) in connection with an Acquisition or a
Capital Improvement or (ii) within 365 days of, and the net proceeds from such
issuance are used to repay debt incurred in connection with, an Acquisition or a
Capital Improvement, in each case where such Acquisition or Capital Improvement
involves assets that, if acquired by the Partnership as of the date that is one
year prior to the first day of the Quarter in which such Acquisition is to be
consummated or such Capital Improvement is to be completed, would have resulted,
on a pro forma basis, in an increase in:
(A) the amount of Adjusted Operating Surplus generated by the Partnership
on a per-Unit basis (for all Outstanding OLP Units) with respect to each of the
four most recently completed Quarters (on a pro forma basis as described below)
as compared to
(B) the actual amount of Adjusted Operating Surplus generated by the
Partnership on a per-Unit basis (for all Outstanding OLP Units) (excluding
Adjusted Operating Surplus attributable to the Acquisition or Capital
Improvement) with respect to each of such four most recently completed Quarters.
If the issuance of Partnership Securities with respect to an Acquisition or
Capital Improvement occurs within the first four full Quarters after the Closing
Date, then Adjusted Operating Surplus as used in clauses (A) (subject to the
succeeding sentence) and (B) above shall be calculated (i) for each Quarter, if
any, that commenced after the Closing Date for which actual results of
operations are available, based on the actual Adjusted Operating Surplus of
Genesis OLP generated with respect to such Quarter, and (ii) for each other
Quarter, on a pro forma basis not inconsistent with the procedure, as
applicable, set forth in Appendix E to the Registration Statement. Furthermore,
the amount in clause (A) shall be determined on a pro forma basis assuming that
(1) all of the Parity Units or Partnership Securities to be issued in connection
with or within 365 days of such Acquisition or Capital Improvement had been
issued and outstanding, (2) all indebtedness for borrowed money to be incurred
or assumed in connection with such Acquisition or Capital Improvement (other
than any such indebtedness that is to be repaid with the proceeds of such
issuance) had been incurred or assumed, in each case as of the commencement of
such four-Quarter period, (3) the personnel expenses that would have been
incurred by the Partnership in the operation of the acquired assets are the
personnel expenses for employees to be retained by the Partnership in the
operation of the acquired assets, and (4) the non-personnel costs and expenses
are computed on the same basis as those incurred by the Partnership in the
operation of the Partnership's business at similarly situated Partnership
facilities.
(c) During the Subordination Period, the Partnership shall not issue
additional Partnership Securities having rights to distributions or in
liquidation ranking prior or senior to the Common Units, without the prior
approval of the holders of a Majority Interest.
5.8 Conversion of Subordinated Units
(a) A total of 16,735 of the Outstanding Subordinated GP Units will convert
into Common GP Units on a one-for-one basis and a total of 820,000 of the
Outstanding Subordinated LP Units will convert into Common LP Units on a
one-for-one basis on the first day after the Record Date for distributions
in respect of any Quarter ending on or after December 31, 1999, in respect of
which:
(i) distributions under Section 6.4 in respect of all Outstanding Common
Units and Subordinated Units with respect to each of the three consecutive, non-
overlapping four-Quarter periods immediately preceding such date equals or
exceeds the sum of the Minimum Quarterly Distribution on all of the Outstanding
Common Units and Subordinated Units during such periods; and
(ii) the Adjusted Operating Surplus generated during each of the two
consecutive, non-overlapping four-Quarter periods immediately preceding such
date equals or exceeds the sum of the Minimum Quarterly Distribution on all of
the Outstanding Common Units and Subordinated Units, plus the related
distribution on the General Partner Interest in the Partnership, during such
periods; and
(iii) the Cumulative Common Unit Arrearage on all of the Common Units is
zero;
provided, however, that notwithstanding anything else herein contained the total
number of Outstanding Subordinated GP Units that may be converted pursuant to
this Section 5.8(a) shall be reduced by a number equal to one quarter of the
Subordinated GP Units, if any, redeemed by the Partnership pursuant to Section
5.2(a)(ii); and provided, further, that notwithstanding anything else herein
contained the total number of Outstanding Subordinated LP Units that may be
converted pursuant to this Section 5.8(a) shall be reduced by a number equal to
one quarter of the Subordinated LP Units, if any, redeemed by the Partnership
pursuant to Section 5.2(a)(ii).
(b) An additional 16,735 of the Outstanding Subordinated GP Units will
convert into Common GP Units on a one-for-one basis and an additional 820,000 of
the Outstanding Subordinated LP Units will convert into Common LP Units on a
one-for-one basis on the first day after the Record Date for distributions in
respect of any Quarter ending on or after December 31, 2000, in respect of
which:
(i) distributions under Section 6.4 in respect of all Outstanding Common
Units and Subordinated Units with respect to each of the three consecutive, non-
overlapping four-Quarter periods immediately preceding such date equals or
exceeds the sum of the Minimum Quarterly Distribution on all of the Outstanding
Common Units and Subordinated Units during such periods; and
(ii) the Adjusted Operating Surplus generated during each of the two
consecutive, non-overlapping four-Quarter periods immediately preceding such
date equals or exceeds the sum of the Minimum Quarterly Distribution on all of
the Outstanding Common Units and Subordinated Units, during such periods; and
(iii) the Cumulative Common Unit Arrearage on all of the Common Units is
zero;
provided, however, that the conversion of Subordinated Units pursuant to this
Section 5.8(b) may not occur until at least one year following the conversion of
Subordinated Units pursuant to Section 5.8(a); and provided, further, that
notwithstanding anything else herein contained the total number of Outstanding
Subordinated GP Units that may be converted pursuant to this Section 5.8(b)
shall be reduced by a number equal to one quarter of the Subordinated Units, if
any, redeemed by the Partnership pursuant to Section 5.2(a)(ii); and provided
further that notwithstanding anything else herein contained the total number of
Outstanding Subordinated LP Units that may be converted pursuant to this Section
5.8(b) shall be reduced by a number equal to one quarter of the Subordinated
Units, if any, redeemed by the Partnership pursuant to Section 5.2(a)(ii).
(c) (i) In the event that Outstanding Subordinated GP Units shall convert
into Common Units pursuant to Section 5.8(a) or 5.8(b) at a time when there
shall be more than one holder of Subordinated GP Units, then, unless all of the
holders of Subordinated GP Units shall agree to a different allocation, the
Subordinated GP Units that are to be converted into Common GP Units shall be
allocated among all of the holders of Subordinated GP Units in accordance with
their relative Percentage Interests.
(ii) In the event that Outstanding Subordinated LP Units shall convert into
Common Units pursuant to Section 5.8(a) or 5.8(b) at a time when there shall be
more than one holder of Subordinated LP Units, then, unless all of the holders
of Subordinated LP Units shall agree to a different allocation, the Subordinated
LP Units that are to be converted into Common LP Units shall be allocated among
all of the holders of Subordinated LP Units in accordance with their relative
Percentage Interests.
(d) Any Subordinated Units that are not converted into Common Units
pursuant to Sections 5.8(a) and 5.8(b) shall convert into Common Units on a one-
for-one basis on the first day following the Record Date for distributions in
respect of the final Quarter of the Subordination Period.
5.9 Limited Preemptive Right
Except as provided in this Section 5.9 and in Section 5.2, 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 Operating 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 Operating General Partner and its Affiliates, to the extent necessary to
maintain the Percentage Interests of the Operating General Partner and its
Affiliates equal to that which existed immediately prior to the issuance of such
Partnership Securities.
5.10 Splits and Combination
(a) The Partnership may make a Pro Rata distribution of Partnership
Securities to all Record Holders or may effect a subdivision or combination of
Partnership Securities so long as, after any such event, each Partner shall have
the same Percentage Interest in the Partnership as before such event, and any
amounts calculated on a per Unit basis (including any Common Unit Arrearage or
Cumulative Common Unit Arrearage) or stated as a number of Units (including the
number of Subordinated Units that may convert prior to the end of the
Subordination Period and the number of additional Parity Units that may be
issued pursuant to Section 5.7 without a Unitholder vote) are proportionately
adjusted retroactive to the beginning of the Partnership.
(b) The Partnership may make distributions of Partnership Securities and
effect subdivisions and combinations of Partnership Securities to reflect any
such distribution, subdivision or combination of MLP Partnership Securities.
(c) Whenever such a distribution, subdivision or combination of Partnership
Securities is declared, the Operating 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 Operating 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 Operating General Partner shall be
entitled to rely on any certificate provided by such firm as conclusive evidence
of the accuracy of such calculation.
(d) 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 Operating General
Partner may adopt such other procedures as it may deem 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.
5.11 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 17-607 of the Delaware Act.
ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS
6.1 Allocations for Capital Account Purposes
For purposes of maintaining the Capital Accounts and in determining the
rights of the Partners among themselves, the Partnership's items of income,
gain, loss and deduction (computed in accordance with Section 5.5(b)) shall be
allocated among the Partners in each taxable year (or portion thereof) as
provided hereinbelow.
(a) Net Income. After giving effect to the special allocations set forth in
Section 6.1(d), Net Income for each taxable year and all items of income, gain,
loss and deduction taken into account in computing Net Income for such taxable
year shall be allocated as follows:
(i) First, 100% to the Operating General Partner until the aggregate Net
Income allocated to the Operating General Partner pursuant to this Section
6.1(a)(i) for the current taxable year and all previous taxable years is equal
to the aggregate Net Losses allocated to the Operating General Partner pursuant
to Section 6.1(b)(iv) for all previous taxable years;
(ii) Second, 100% to the holders of APIs, in the proportion that the
Capital Account maintained for each holder with respect to such APIs bears to
the aggregate Capital Accounts attributable to all APIs then Outstanding, until
the aggregate Net Income allocated to such holders pursuant to this Section
6.1(a)(ii) for the current taxable year and all previous taxable years is equal
to the aggregate Net Losses allocated to such holders pursuant to Section
6.1(b)(iii) for all previous taxable years;
(iii) Third, 100% to the Partners in accordance with their respective
Percentage Interests, until the aggregate Net Income allocated to the Partners
pursuant to this Section 6.1(a)(iii) for the current taxable year and all
previous taxable years is equal to the aggregate Net Losses allocated to the
Partners pursuant to Section 6.1(b)(ii) for all previous taxable years; and
(iv) Fourth, the balance, if any, 100% to the Partners in accordance with
their respective Percentage Interests.
(b) Net Losses. After giving effect to the special allocations set forth in
Section 6.1(d), Net Losses for each taxable period and all items of income,
gain, loss and deduction taken into account in computing Net Losses for such
taxable period shall be allocated as follows:
(i) First, 100% to the Partners, in accordance with their respective
Percentage Interests, until the aggregate Net Losses allocated pursuant to this
Section 6.1(b)(i) for the current taxable year and all previous taxable years is
equal to the aggregate Net Income allocated to the Partners pursuant to Section
6.1(a)(iv) for all previous taxable years; provided that Net Losses shall not be
allocated pursuant to this Section 6.1(b)(i) to the extent that such allocation
would cause any Partner other than the Operating General Partner to have a
deficit balance in its Adjusted Capital Account at the end of such taxable year
(or increase any existing deficit balance in its Adjusted Capital Account);
(ii) Second, 100% to the Partners in accordance with their respective
Percentage Interests; provided that Net Losses shall not be allocated pursuant
to this Section 6.1(b)(ii) to the extent that such allocation would cause any
Partner other than the Operating General Partner to have a deficit balance in
its Adjusted Capital Account at the end of such taxable year (or increase any
existing deficit balance in its Adjusted Capital Account);
(iii) Third, 100% to holders of APIs, in the proportion that the Capital
Account maintained for each holder with respect to such APIs bears to the
aggregate Capital Accounts attributable to all APIs then Outstanding; provided
that Net Losses shall not be allocated pursuant to this Section 6.1(b)(iii) to
the extent that such allocation would cause any holder of APIs to have a deficit
balance in its Adjusted Capital Account at the end of such taxable year (or
increase any existing deficit balance in its Adjusted Capital Account); and
(iv) Fourth, the balance, if any, 100% to the Operating General Partner.
(c) Net Termination Gains and Losses. After giving effect to the special
allocations set forth in Section 6.1(d), all items of income, gain, loss and
deduction taken into account in computing Net Termination Gain or Net
Termination Loss for such taxable period shall be allocated in the same manner
as such Net Termination Gain or Net Termination Loss is allocated hereunder. All
allocations under this Section 6.1(c) shall be made after Capital Account
balances have been adjusted by all other allocations provided under this Section
6.1 and after all distributions of Available Cash provided under Sections 6.4
and 6.5 have been made; provided, however, that solely for purposes of this
Section 6.1(c), Capital Accounts shall not be adjusted for distributions made
pursuant to Section 12.4.
(i) If a Net Termination Gain is recognized (or deemed recognized pursuant
to Section 5.5(d)), such Net Termination Gain shall be allocated among the
General Partner and the Limited Partners in the following manner (and the
Capital Accounts of the Partners shall be increased by the amount so allocated
in each of the following subclauses, in the order listed, before an allocation
is made pursuant to the next succeeding subclause):
(A) First, to each Partner having a deficit balance in its Capital Account,
in the proportion that such deficit bears to the total deficit balances in the
Capital Accounts of all Partners, until each Partner has been allocated Net
Termination Gain equal to any such deficit balance in its Capital Account;
(B) Second, 100% to all Partners holding Common Units, in accordance with
their relative Percentage Interests, until the Capital Account in respect of
each Common Unit held by the Managing General Partner is equal to the sum of (1)
its Unrecovered Capital, plus (2) the Minimum Quarterly Distribution for the
Quarter during which the Liquidation Date occurs (the ''Unpaid MQD''), plus (3)
any then existing Cumulative Common Unit Arrearages;
(C) Third, 100% to the holders of APIs, in the proportion that the Capital
Account maintained for each holder with respect to such APIs bears to the
aggregate Capital Accounts attributable to all APIs then Outstanding, until the
Capital Account in respect of each API then Outstanding is equal to its
Unrecovered Capital;
(D) Fourth, 100% to all Partners holding Subordinated Units, in accordance
with their relative Percentage Interests, until the Capital Account in respect
of each Subordinated LP Unit then Outstanding is equal to the sum of (1) its
Unrecovered Capital, plus (2) the Unpaid MQD; and
(E) Fifth, the balance, if any, 100% to the Partners in accordance with
their respective Percentage Interests.
(ii) If a Net Termination Loss is recognized (or deemed recognized pursuant
to Section 5.5(d)), such Net Termination Loss shall be allocated to the Partners
in the following manner:
(A) First, 100% to the Partners holding Subordinated Units in accordance
with their relative Percentage Interests until the Capital Account in respect of
each Subordinated LP Unit then Outstanding has been reduced to zero;
(B) Second, 100% to the holders of APIs, in the proportion that the Capital
Account maintained for each holder with respect to such APIs bears to the
aggregate Capital Accounts attributable to all APIs then Outstanding, to the
extent of the positive balances in the Capital Accounts maintained with respect
to such APIs;
(C) Third, 100% to the Partners holding Common Units in accordance with
their relative Percentage Interests until the Capital Account in respect of each
Common Unit held by the Managing General Partner has been reduced to zero; and
(D) Fourth, the balance, if any, 100% to the Operating General Partner.
(d) Special Allocations. Notwithstanding any other provision of this
Section 6.1, the following special allocations shall be made for such taxable
period:
(i) Partnership Minimum Gain Chargeback. Notwithstanding any other
provision of this Section 6.1, if there is a net decrease in Partnership Minimum
Gain during any Partnership taxable period, each Partner shall be allocated
items of Partnership income and gain for such period (and, if necessary,
subsequent periods) in the manner and amounts provided in Treasury Regulation
Sections 1.704-2(f)(6), 1.704-2(g)(2) and 1.704-2(j)(2)(i), or any successor
provision. For purposes of this Section 6.1(d), each Partner's Adjusted Capital
Account balance shall be determined, and the allocation of income or gain
required hereunder shall be effected, prior to the application of any other
allocations pursuant to this Section 6.1(d) with respect to such taxable period
(other than an allocation pursuant to Sections 6.1(d)(vi) and 6.1(d)(vii)). This
Section 6.1(d)(i) is intended to comply with the Partnership Minimum Gain
chargeback requirement in Treasury Regulation Section 1.704-2(f) and shall be
interpreted consistently therewith.
(ii) Chargeback of Partner Nonrecourse Debt Minimum Gain. Notwithstanding
the other provisions of this Section 6.1 (other than Section 6.1(d)(i)), except
as provided in Treasury Regulation Section 1.704-2(i)(4), if there is a net
decrease in Partner Nonrecourse Debt Minimum Gain during any Partnership taxable
period, any Partner with a share of Partner Nonrecourse Debt Minimum Gain at the
beginning of such taxable period shall be allocated items of Partnership income
and gain for such period (and, if necessary, subsequent periods) in the manner
and amounts provided in Treasury Regulation Sections 1.704-2(i)(4) and 1.704-
2(j)(2)(ii), or any successor provisions. For purposes of this Section 6.1(d),
each Partner's Adjusted Capital Account balance shall be determined, and the
allocation of income or gain required hereunder shall be effected, prior to the
application of any other allocations pursuant to this Section 6.1(d), other than
Section 6.1(d)(i) and other than an allocation pursuant to Sections 6.1(d)(vi)
and 6.1(d)(vii), with respect to such taxable period. This Section 6.1(d)(ii) is
intended to comply with the chargeback of items of income and gain requirement
in Treasury Regulation Section 1.704-2(i)(4) and shall be interpreted
consistently therewith.
(iii) Priority Allocations. If the amount of cash or the Net Agreed Value
of any property distributed (except cash or property distributed pursuant to
Section 12.4) to any Partner with respect to its Common Units for a taxable year
is greater (on a per Unit basis) than the amount of cash or the Net Agreed Value
of property distributed to the Partners holding Subordinated Units with respect
to their Units (on a per Unit basis), then each Partner receiving such greater
cash or property distribution shall be allocated gross income in an amount equal
to the product of (aa) the amount by which the distribution (on a per Unit
basis) to such Partner exceeds the distribution (on a per Unit basis) to the
Partners receiving the smallest distribution and (bb) the number of Units owned
by the Partner receiving the greater distribution.
(iv) Qualified Income Offset. In the event any Partner unexpectedly
receives any adjustments, allocations or distributions described in Treasury
Regulation Section 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-
1(b)(2)(ii)(d)(6), items of Partnership income and gain shall be specially
allocated to such Partner in an amount and manner sufficient to eliminate, to
the extent required by the Treasury Regulations promulgated under Section 704(b)
of the Code, the deficit balance, if any, in its Adjusted Capital Account
created by such adjustments, allocations or distributions as quickly as possible
unless such deficit balance is otherwise eliminated pursuant to Section
6.1(d)(i) or 6.1(d)(ii).
(v) Gross Income Allocations. In the event any Partner has a deficit
balance in its Capital Account at the end of any Partnership taxable period in
excess of the sum of (A) the amount such Partner is required to restore pursuant
to the provisions of this Agreement and (B) the amount such Partner is deemed
obligated to restore pursuant to Treasury Regulation Sections 1.704-2(g) and
1.704-2(i)(5), such Partner shall be specially allocated items of Partnership
gross income and gain in the amount of such excess as quickly as possible;
provided, that an allocation pursuant to this Section 6.1(d)(v) shall be made
only if and to the extent that such Partner would have a deficit balance in its
Capital Account as adjusted after all other allocations provided for in this
Section 6.1 have been tentatively made as if this Section 6.1(d)(v) were not in
this Agreement.
(vi) Nonrecourse Deductions. Nonrecourse Deductions for any taxable period
shall be allocated to the Partners in accordance with their respective
Percentage Interests. If the Operating General Partner determines in its good
faith discretion that the Partnership's Nonrecourse Deductions must be allocated
in a different ratio to satisfy the safe harbor requirements of the Treasury
Regulations promulgated under Section 704(b) of the Code, the Operating General
Partner is authorized, upon notice to the other Partners, to revise the
prescribed ratio to the numerically closest ratio that does satisfy such
requirements.
(vii) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions for
any taxable period shall be allocated 100% to the Partner that bears the
Economic Risk of Loss with respect to the Partner Nonrecourse Debt to which such
Partner Nonrecourse Deductions are attributable in accordance with Treasury
Regulation Section 1.704-2(i). If more than one Partner bears the Economic Risk
of Loss with respect to a Partner Nonrecourse Debt, such Partner Nonrecourse
Deductions attributable thereto shall be allocated between or among such
Partners in accordance with the ratios in which they share such Economic Risk of
Loss.
(viii) Nonrecourse Liabilities. For purposes of Treasury Regulation Section
1.752-3(a)(3), the Partners agree that Nonrecourse Liabilities of the
Partnership in excess of the sum of (A) the amount of Partnership Minimum Gain
and (B) the total amount of Nonrecourse Built-in Gain shall be allocated among
the Partners in accordance with their respective Percentage Interests.
(ix) Code Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Section 734(b) or 743(c)
of the Code is required, pursuant to Treasury Regulation Section 1.704-
1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the
amount of such adjustment to the Capital Accounts shall be treated as an item of
gain (if the adjustment increases the basis of the asset) or loss (if the
adjustment decreases such basis), and such item of gain or loss shall be
specially allocated to the Partners in a manner consistent with the manner in
which their Capital Accounts are required to be adjusted pursuant to such
Section of the Treasury Regulations.
(x) Economic Uniformity. At the election of the Operating General Partner
with respect to any taxable period ending upon, or after, the termination of the
Subordination Period, all or a portion of the remaining items of Partnership
gross income or gain for such taxable period, after taking into account
allocations pursuant to Section 6.1(d)(iii), shall be allocated 100% to each
Partner holding Subordinated Units that are Outstanding as of the termination of
the Subordination Period (''Final Subordinated Units'') in the proportion of the
number of Final Subordinated Units held by such Partner to the total number of
Final Subordinated Units then Outstanding, until each such Partner has been
allocated an amount of gross income or gain which increases the Capital Account
maintained with respect to such Final Subordinated Units to an amount equal to
the product of (A) the number of Final Subordinated Units held by such Partner
and (B) the Per Unit Capital Amount. The purpose of this allocation is to
establish uniformity between the Capital Accounts underlying Final Subordinated
Units and the Capital Accounts underlying Common Units immediately prior to the
conversion of such Final Subordinated Units into Common Units.
(xi) Curative Allocation. (A) Notwithstanding any other provision of this
Section 6.1, other than the Required Allocations, the Required Allocations shall
be taken into account in making the Agreed Allocations so that, to the extent
possible, the net amount of items of income, gain, loss and deduction allocated
to each Partner pursuant to the Required Allocations and the Agreed Allocations,
together, shall be equal to the net amount of such items that would have been
allocated to each such Partner under the Agreed Allocations had the Required
Allocations and the related Curative Allocation not otherwise been provided in
this Section 6.1. Notwithstanding the preceding sentence, Required Allocations
relating to (1) Nonrecourse Deductions shall not be taken into account except to
the extent that there has been a decrease in Partnership Minimum Gain and (2)
Partner Nonrecourse Deductions shall not be taken into account except to the
extent that there has been a decrease in Partner Nonrecourse Debt Minimum Gain.
Allocations pursuant to this Section 6.1(d)(xi)(A) shall only be made with
respect to Required Allocations to the extent the Operating General Partner
reasonably determines that such allocations will otherwise be inconsistent with
the economic agreement among the Partners. Further, allocations pursuant to this
Section 6.1(d)(xi)(A) shall be deferred with respect to allocations pursuant to
clauses (1) and (2) hereof to the extent the Operating General Partner
reasonably determines that such allocations are likely to be offset by
subsequent Required Allocations.
(B) The Operating General Partner shall have reasonable discretion, with
respect to each taxable period, to (1) apply the provisions of Section
6.1(d)(xi)(A) in whatever order is most likely to minimize the economic
distortions that might otherwise result from the Required Allocations, and (2)
divide all allocations pursuant to Section 6.1(d)(xi)(A) among the Partners in a
manner that is likely to minimize such economic distortions.
6.2 Allocations for Tax Purposes
(a) Except as otherwise provided herein, for federal income tax purposes,
each item of income, gain, loss and deduction shall be allocated among the
Partners in the same manner as its correlative item of ''book'' income, gain,
loss or deduction is allocated pursuant to Section 6.1.
(b) In an attempt to eliminate Book-Tax Disparities attributable to a
Contributed Property or Adjusted Property, items of income, gain, loss,
depreciation, amortization and cost recovery deductions shall be allocated for
federal income tax purposes among the Partners as follows:
(i) (A) In the case of a Contributed Property, such items attributable
thereto shall be allocated among the Partners in the manner provided under
Section 704(c) of the Code that takes into account the variation between the
Agreed Value of such property and its adjusted basis at the time of
contribution; and (B) any item of Residual Gain or Residual Loss attributable to
a Contributed Property shall be allocated among the Partners in the same manner
as its correlative item of ''book'' gain or loss is allocated pursuant to
Section 6.1.
(ii) (A) In the case of an Adjusted Property, such items shall (1) first,
be allocated among the Partners in a manner consistent with the principles of
Section 704(c) of the Code to take into account the Unrealized Gain or
Unrealized Loss attributable to such property and the allocations thereof
pursuant to Section 5.5(d)(i) or 5.5(d)(ii), and (2) second, in the event such
property was originally a Contributed Property, be allocated among the Partners
in a manner consistent with Section 6.2(b)(i)(A); and (B) any item of Residual
Gain or Residual Loss attributable to an Adjusted Property shall be allocated
among the Partners in the same manner as its correlative item of ''book'' gain
or loss is allocated pursuant to Section 6.1.
(iii) The Operating General Partner shall apply the principles of Treasury
Regulation Section 1.704-3(d) to eliminate Book-Tax Disparities.
(c) For the proper administration of the Partnership and for the
preservation of uniformity of Partnership Securities (or any class or classes
thereof), the Operating General Partner shall have sole discretion to (i) adopt
such conventions as it deems appropriate in determining the amount of
depreciation, amortization and cost recovery deductions; (ii) make special
allocations for federal income tax purposes of income (including, without
limitation, gross income) or deductions; and (iii) amend the provisions of this
Agreement as appropriate (x) to reflect the proposal or promulgation of Treasury
regulations under Section 704(b) or 704(c) of the Code or (y) otherwise to
preserve or achieve uniformity of Partnership Securities (or any class or
classes thereof). The Operating General Partner may adopt such conventions, make
such allocations and make such amendments to this Agreement as provided in this
Section 6.2(c) only if such conventions, allocations or amendments would not
have a material adverse effect on the Partners, the holders of any class or
classes of Partnership Securities issued and Outstanding or the Partnership, and
if such allocations are consistent with the principles of Section 704 of the
Code.
(d) The Operating General Partner in its discretion may determine to
depreciate or amortize the portion of an adjustment under Section 743(b) of the
Code attributable to unrealized appreciation in any Adjusted Property (to the
extent of the unamortized Book-Tax Disparity) using a predetermined rate derived
from the depreciation or amortization method and useful life applied to the
Partnership's common basis of such property, despite any inconsistency of such
approach with Proposed Treasury Regulation Section 1.168-2(n), Treasury
Regulation Section 1.167(c)-l(a)(6) or the legislative history of Section 197 of
the Code. If the Operating General Partner determines that such reporting
position cannot reasonably be taken, the Operating General Partner may adopt
depreciation and amortization conventions under which all purchasers acquiring
Partnership Securities in the same month would receive depreciation and
amortization deductions, based upon the same applicable rate as if they had
purchased a direct interest in the Partnership's property. If the Operating
General Partner chooses not to utilize such aggregate method, the Operating
General Partner may use any other reasonable depreciation and amortization
conventions to preserve the uniformity of the intrinsic tax characteristics of
any Partnership Securities that would not have a material adverse effect on the
Limited Partners, the Managing General Partner or the Record Holders of any
class or classes of Partnership Securities.
(e) Any gain allocated to the Partners upon the sale or other taxable
disposition of any Partnership asset shall, to the extent possible, after taking
into account other required allocations of gain pursuant to this Section 6.2, be
characterized as Recapture Income in the same proportions and to the same extent
as such Partners (or their predecessors in interest) have been allocated any
deductions directly or indirectly giving rise to the treatment of such gains as
Recapture Income.
(f) All items of income, gain, loss, deduction and credit recognized by the
Partnership for federal income tax purposes and allocated to the Partners in
accordance with the provisions hereof shall be determined without regard to any
election under Section 754 of the Code which may be made by the Partnership;
provided, however, that such allocations, once made, shall be adjusted as
necessary or appropriate to take into account those adjustments permitted or
required by Sections 734 and 743 of the Code.
(g) Each item of Partnership income, gain, loss and deduction attributable
to a transferred Partnership Interest, shall for federal income tax purposes, be
determined on an annual basis and prorated on a monthly basis and shall be
allocated to the Partners as of the opening of the New York Stock Exchange on
the first Business Day of each month; provided, however, that (i) if the Over-
allotment Option is not exercised, such items for the period beginning on the
Closing Date and ending on the last day of the month in which the Closing Date
occurs shall be allocated to Partners as of the opening of the New York Stock
Exchange on the first Business Day of the next succeeding month or (ii) if the
Over-allotment Option is exercised, such items for the period beginning on the
Closing Date and ending on the last day of the month in which the Option Closing
Date occurs shall be allocated to the Partners as of the opening of the New York
Stock Exchange on the first Business Day of the next succeeding month; and
provided, further, that gain or loss on a sale or other disposition of any
assets of the Partnership other than in the ordinary course of business shall be
allocated to the Partners as of the opening of the New York Stock Exchange on
the first Business Day of the month in which such gain or loss is recognized for
federal income tax purposes. The Operating General Partner may revise, alter or
otherwise modify such methods of allocation as it determines necessary, to the
extent permitted or required by Section 706 of the Code and the regulations or
rulings promulgated thereunder.
(h) Allocations that would otherwise be made to a Partner under the
provisions of this Article VI shall instead be made to the beneficial owner of
Partnership Securities held by a nominee in any case in which the nominee has
furnished the identity of such owner to the Partnership in accordance with
Section 6031(c) of the Code or any other method acceptable to the Operating
General Partner in its sole discretion.
6.3 Requirement and Characterization of Distributions; Distributions to Record
Holders
(a) Within 45 days following the end of each Quarter commencing with the
Quarter ending on March 31, 1997, an amount equal to 100% of Available Cash with
respect to such Quarter shall, subject to Section 17-607 of the Delaware Act, be
distributed in accordance with this Article VI by the Partnership to the
Partners as of the Record Date selected by the Operating General Partner in its
reasonable discretion. All amounts of Available Cash distributed by the
Partnership on any date from any source shall be deemed to be Operating Surplus
until the sum of all amounts of Available Cash theretofore distributed by the
Partnership to the Partners pursuant to Section 6.4 equals the Operating Surplus
from the Closing Date through the close of the immediately preceding Quarter.
Any remaining amounts of Available Cash distributed by the Partnership on such
date shall, except as otherwise provided in Section 6.5, be deemed to be
''Capital Surplus.'' All distributions required to be made under this Agreement
shall be made subject to Section 17-607 of the Delaware Act.
(b) 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 Operating General Partner shall have the discretion to treat taxes
paid by the Partnership on behalf of, or amounts 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 any 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.
6.4 Distributions of Available Cash from Operating Surplus
(a) During Subordination Period. Available Cash with respect to any Quarter
within the Subordination Period that is deemed to be Operating Surplus pursuant
to the provisions of Section 6.3 or 6.5 shall, subject to Section 17-607 of the
Delaware Act, be distributed as follows, except as otherwise required by Section
5.6(b) (in respect of additional Partnership Securities issued pursuant thereto)
or permitted by Section 6.9:
(i) First, 100% to the Partners holding Common Units, in proportion to
their relative Percentage Interests, until there has been distributed in respect
of each Common Unit then Outstanding an amount equal to the Minimum Quarterly
Distribution for such Quarter;
(ii) Second, 100% to the Partners holding Common Units, in proportion to
their relative Percentage Interests, until there has been distributed in respect
of each Common Unit then Outstanding an amount equal to the Cumulative Common
Unit Arrearage existing with respect to such Quarter;
(iii) Third, 100% to the Partners holding Subordinated Units, in proportion
to their relative Percentage Interests, until there has been distributed in
respect of each Subordinated Unit then Outstanding an amount equal to the
Minimum Quarterly Distribution for such Quarter;
(iv) Fourth, 100% to Salomon and its Affiliates, Pro Rata, to redeem
Outstanding APIs held by them at a price of $100 per API, until Salomon and its
Affiliates hold 54% of the total number of Outstanding APIs;
(v) Fifth, 100% to the holders of APIs, Pro Rata, to redeem Outstanding
APIs at a price of $100 per API, until all Outstanding APIs have been redeemed;
and
(vi) Thereafter, 100% to all Partners in accordance with their respective
Percentage Interests;
provided, however, if the Minimum Quarterly Distribution, the First Target
Distribution, the Second Target Distribution and the Third Target Distribution
have been reduced to zero pursuant to the second sentence of Section 6.6(a), the
distribution of Available Cash that is deemed to be Operating Surplus with
respect to any Quarter will be made solely in accordance with Sections
6.4(a)(ii), (iv), (v) and (vi).
(b) After Subordination Period. Available Cash with respect to any Quarter
after the Subordination Period that is deemed to be Operating Surplus pursuant
to the provisions of Section 6.3 or 6.5, subject to Section 17-607 of the
Delaware Act, shall be distributed as follows, except as otherwise required by
Section 5.6(b) (in respect of additional Partnership Securities issued pursuant
thereto) or permitted by Section 6.9:
(i) First, 100% to all Partners, in accordance with their relative
Percentage Interests, until there has been distributed in respect of each Unit
then Outstanding an amount equal to the Minimum Quarterly Distribution for such
Quarter;
(ii) Second, 100% to Salomon and its Affiliates, Pro Rata, to redeem
Outstanding APIs held by them at a price of $100 per API, until Salomon and its
Affiliates hold 54% of the total number of Outstanding APIs;
(iii) Third, 100% to the holders of APIs, Pro Rata, to redeem Outstanding
APIs at a price of $100 per API, until all Outstanding APIs have been redeemed;
and
(iv) Thereafter, 100% to all Partners, in accordance with their respective
Percentage Interests;
provided, however, if the Minimum Quarterly Distribution, the First Target
Distribution, the Second Target Distribution and the Third Target Distribution
have been reduced to zero pursuant to the second sentence of Section 6.6(a), the
distribution of Available Cash that is deemed to be Operating Surplus with
respect to any Quarter will be made solely in accordance with Sections
6.4(b)(ii), (iii) and (iv).
6.5 Distributions of Available Cash from Capital Surplus
Available Cash with respect to any Quarter that is deemed to be Capital
Surplus pursuant to the provisions of Section 6.3 shall, subject to Section 17-
607 of the Delaware Act, be distributed as follows, unless the provisions of
Section 6.3 require otherwise:
(i) First, 100% to all Partners, in accordance with their respective
Percentage Interests, until a hypothetical holder of a Common Unit acquired on
the Closing Date has received with respect to such Common Unit, during the
period since the Closing Date through such date, distributions of Available Cash
that are deemed to be Capital Surplus in an aggregate amount equal to the
Initial Unit Price;
(ii) Second, 100% to all Partners holding Common Units, in proportion to
their relative Percentage Interests, until there has been distributed in respect
of each Common Unit then Outstanding an amount equal to the Cumulative Common
Unit Arrearage existing with respect to such Quarter; and
(iii) Thereafter, all Available Cash that is deemed to be Capital Surplus
pursuant to the provisions of Section 6.3 shall be distributed as if it were
Operating Surplus and shall be distributed in accordance with Section 6.4.
6.6 Adjustment of Minimum Quarterly Distribution and Target Distribution Levels
(a) The Minimum Quarterly Distribution, First Target Distribution, Second
Target Distribution, Third Target Distribution, Common Unit Arrearages and
Cumulative Common Unit Arrearages shall be proportionately adjusted in the event
of any distribution, combination or subdivision (whether effected by a
distribution payable in Units or otherwise) of Units or other Partnership
Securities in accordance with Section 5.10. In the event of a distribution of
Available Cash that is deemed to be from Capital Surplus, the then applicable
Minimum Quarterly Distribution, First Target Distribution, Second Target
Distribution and Third Target Distribution shall be adjusted proportionately
downward to equal the product obtained by multiplying the otherwise applicable
Minimum Quarterly Distribution, First Target Distribution, Second Target
Distribution and Third Target Distribution, as the case may be, by a fraction of
which the numerator is the Unrecovered Capital of the Common Units immediately
after giving effect to such distribution and of which the denominator is the
Unrecovered Capital of the Common Units immediately prior to giving effect to
such distribution.
(b) The Minimum Quarterly Distribution, First Target Distribution, Second
Target Distribution and Third Target Distribution shall also be subject to
adjustment pursuant to Section 6.8.
6.7 Special Provisions Relating to the Holders of APIs
Notwithstanding anything to the contrary set forth in this Agreement, the
holders of APIs (a) shall (i) possess the rights and obligations provided in
this Agreement with respect to a Limited Partner pursuant to Articles III and
VII and (ii) have a Capital Account as a Partner pursuant to Section 5.5 and all
other provisions related thereto and (b) shall not (i) be entitled to vote on
any matters requiring the approval or vote of the holders of Outstanding Units,
(ii) be entitled to any distributions other than to such holders as provided by
Section 6.4 and 12.4 or (iii) be allocated items of income, gain, loss or
deduction other than as specified in this Article VI.
6.8 Entity-Level Taxation
If legislation is enacted or the interpretation of existing language is
modified by the relevant governmental authority which causes the Partnership to
be treated as an association taxable as a corporation or otherwise subjects the
Partnership to entity-level taxation for federal income tax purposes, the then
applicable Minimum Quarterly Distribution, First Target Distribution, Second
Target Distribution and Third Target Distribution shall be adjusted to equal the
product obtained by multiplying (a) the amount thereof by (b) one minus the sum
of (i) the highest marginal federal corporate (or other entity, as applicable)
income tax rate of the Partnership for the taxable year of the Partnership in
which such Quarter occurs (expressed as a percentage) plus (ii) the effective
overall state and local income tax rate (expressed as a percentage) applicable
to the Partnership for the calendar year next preceding the calendar year in
which such Quarter occurs (after taking into account the benefit of any
deduction allowable for federal income tax purposes with respect to the payment
of state and local income taxes), but only to the extent of the increase in such
rates resulting from such legislation or interpretation. Such effective overall
state and local income tax rate shall be determined for the taxable year next
preceding the first taxable year during which the Partnership is taxable for
federal income tax purposes as an association taxable as a corporation or is
otherwise subject to entity-level taxation by determining such rate as if the
Partnership had been subject to such state and local taxes during such preceding
taxable year.
6.9 Special Distribution to the Initial Limited Partners and the Operating
General Partner
At any time following the first anniversary of the Closing Date, the
Operating General Partner may, but shall not be required, to cause the
Partnership to distribute up to $5 million to the Initial Limited Partners and
the Operating General Partner in the ratio of their respective Percentage
Interests; provided, however, that no distribution shall be made by the
Partnership pursuant to this Section 6.9 prior to the second anniversary of the
Closing Date unless the Operating General Partner reasonably believes that the
Partnership will distribute the Minimum Quarterly Distribution on all Common
Units in each of the next four Quarters.
6.10 Characterization of Distributions as Advances or Drawings
Any distribution made to a Partner pursuant to Section 6.4, Section 6.5 or
Section 12.4 of this Agreement shall be treated as an advance or drawing against
such Partner's share of Partnership income under Treasury Regulation Section
1.731-1(a)(1)(ii). Any other distribution made to a Partner pursuant to the
terms of this Agreement shall not be treated as an advance or drawing against
such Partner's share of Partnership income under Treasury Regulation Section
1.731-1(a)(1)(ii).
ARTICLE VII
MANAGEMENT AND OPERATION OF BUSINESS
7.1 Management
(a) The General Partners 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 Partners, and no Limited Partner shall have
any management power over the business and affairs of the Partnership. Subject
to the provisions of Section 7.3(d), the day-to-day activities of the
Partnership shall be conducted, directed and managed on the Partnership's behalf
by the Operating General Partner. In addition to the powers now or hereafter
granted a general partner of a limited partnership under applicable law or which
are granted to the General Partners under any other provision of this Agreement,
the General Partners, subject to Section 7.3, shall have full power and
authority to do all things and on such terms as they, in their sole discretion,
may deem 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, including entering into the Master Credit Support Agreement, the
issuance of evidences of indebtedness, including indebtedness that is
convertible into Partnership 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);
(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, the lending of funds
to other Persons, the repayment of obligations of the Partnership 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 a 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 such insurance for the benefit of the Partnership
Group and the Partners as it deems necessary or appropriate;
(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 or other relationships;
(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 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; and
(xii) the purchase, sale or other acquisition or disposition of Partnership
Securities, or, unless restricted or prohibited by Section 5.7, the issuance of
additional Partnership Securities and options, rights, warrants and appreciation
rights relating to Partnership Securities.
(b) Notwithstanding any other provision of this Agreement, the Delaware 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 other agreements and documents filed as
exhibits to the Registration Statement and the other agreements described in the
Registration Statement; (ii) agrees that the General Partners (on their own or
through any officer of the Partnership) are 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 Partners, any Group Member or any
Affiliate of any of them, of this Agreement or any agreement authorized or
permitted under this Agreement, shall not constitute a breach by the General
Partners of any duty that the General Partners 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.
7.2 Certificate of Limited Partnership
The Operating General Partner has caused the Certificate of Limited
Partnership to be filed with the Secretary of State of the State of Delaware as
required by the Delaware Act and shall use all reasonable efforts to cause to be
filed such other certificates or documents as may be determined by the Operating
General Partner in its sole discretion to be reasonable and 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 State of Delaware or any other state in which the Partnership
may elect to do business or own property. To the extent that such action is
determined by the Operating General Partner in its sole discretion to be
reasonable and necessary or appropriate, the Operating 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 State of Delaware or of any other state in
which the Partnership may elect to do business or own property. Subject to the
terms of Section 3.4(a), the Operating 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.
7.3 Restrictions on the General Partners' Authority
(a) The General Partners may not, without written approval of the specific
act by holders of all of the Outstanding Partnership Securities or by other
written instrument executed and delivered by all of the Outstanding Partnership
Securities subsequent to the date of this Agreement, take any action in
contravention of this Agreement, including, except as otherwise provided in this
Agreement, (i) possessing Partnership property, or assigning any rights in
specific Partnership property, for other than a Partnership purpose; (ii)
admitting a Person as a Partner; (iii) amending this Agreement in any manner; or
(iv) transferring its General Partner Interest.
(b) Except as provided in Articles XII and XIV, the General Partners may
not sell, exchange or otherwise dispose of all or substantially all of the
assets of the Partnership Group in a single transaction or a series of related
transactions, without the approval of holders of a Majority Interest; provided,
however, that this provision shall not preclude or limit the General Partners'
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.
(c) At all times while serving as the general partner of the Partnership,
the Operating General Partner shall not make any dividend or distribution on, or
repurchase any shares of, its stock or take any other action within its control
if the effect of such action would cause its net worth, independent of its
interest in the Partnership Group, to be less than $7.5 million or such lower
amount, which based on an Opinion of Counsel that states, (i) based on a change
in the position of the Internal Revenue Service with respect to partnership
status pursuant to Code Section 7701, such lower amount would not cause the
Partnership to be treated as an association taxable as a corporation or
otherwise to be taxed as an entity for federal income tax purposes and (ii)
would not result in the loss of the limited liability of any Limited Partner.
(d) Notwithstanding anything else herein contained, the Operating General
Partner shall not hire or terminate Partnership officers or cause the
Partnership to take any of the following actions, in each case without the prior
approval of the Managing General Partner:
(i) sell, exchange or otherwise dispose of Partnership assets outside the
ordinary course of business if the consideration (including Partnership
liabilities assumed) received from such sale, exchange or other disposition
exceeds $100,000;
(ii) purchase or otherwise acquire assets outside the ordinary course of
business if the acquisition price (including liabilities assumed by the
Partnership) exceeds $100,000;
(iii) undertake a capital project that is budgeted to exceed $100,000;
(iv) reorganize, merge, consolidate or dissolve;
(v) issue any additional Partnership Securities;
(vi) incur any debt or the guarantee of or contingent liability for any
debt outside the ordinary course of business if the debt proceeds exceed
$100,000;
(vii) file any Federal or state income tax returns for the Partnership;
(viii) make any distributions to the Partners;
(ix) adopt any employee benefit plans, employee programs or practices;
(x) lend money; or
(xi) any other action that is either (A) outside the ordinary course of the
business of the Partnership or (B) similar in scope or magnitude to the
foregoing items listed in this Section 7.3(d).
7.4 Reimbursement of the General Partners
(a) Except as provided in this Section 7.4 and elsewhere in this Agreement
or the Genesis MLP Partnership Agreement, the General Partners shall not be
compensated for their services as general partner of Genesis MLP or any Group
Member.
(b) The General Partners shall be reimbursed on a monthly basis, or such
other reasonable basis as the General Partners may determine in their sole
discretion, for (i) all direct and indirect expenses they incur or payments they
make on behalf of Genesis MLP and the Partnership Group (including salary,
bonus, incentive compensation and other amounts paid to any Person, including
Affiliates of the General Partners, to perform services for Genesis MLP and the
Partnership Group or for the General Partners in the discharge of their duties
to Genesis MLP or the Partnership Group), and (ii) all other necessary or
appropriate expenses allocable to Genesis MLP and the Partnership Group or
otherwise reasonably incurred by the General Partners in connection with
operating the business of Genesis MLP and the Partnership Group (including
expenses allocated to the General Partners by their Affiliates). The General
Partners shall determine the expenses that are allocable to Genesis MLP and the
Partnership in any reasonable manner determined by the General Partners in their
sole discretion. Reimbursements pursuant to this Section 7.4 shall be in
addition to any reimbursement to the General Partners as a result of
indemnification pursuant to Section 7.7.
(c) Expenses incurred by a General Partner in connection with any employee
benefit plans, employee programs and employee practices (including the net cost
to such General Partner or such Affiliate of MLP Units or other MLP Partnership
Securities purchased by such General Partner or such Affiliate 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 a General Partner under any employee benefit plans, employee
programs or employee practices adopted by such General Partner as permitted by
this Section 7.4(c) shall constitute obligations of such 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
such General Partner's General Partner Interest pursuant to Section 4.6.
7.5 Outside Activities
(a) After the Closing Date, the Operating General Partner, for so long as
it is a general partner of the Partnership, (i) agrees that its sole business
will be to act as a general partner of the Partnership, Genesis MLP and any
other partnership of which the Partnership or Genesis MLP is, directly or
indirectly, a partner and to undertake activities that are ancillary or related
thereto (including being a limited partner in the Partnership or any such other
partnership) and (ii) shall not, directly or indirectly, 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 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 of Genesis MLP
or any Group Member.
(b) Salomon, Basis and Howell have entered into the Non-Competition
Agreement with the Partnership and Genesis MLP which agreement sets forth
certain restrictions on their ability to engage in the business of (i) crude oil
gathering at the wellhead in the states of Alabama, Florida, Kansas, Louisiana,
Mississippi, New Mexico, Oklahoma or Texas, or any states contiguous to such
states, and (ii) transporting for third parties crude oil by pipeline along the
routes of the Partnership's crude oil pipelines owned as of the Closing Date.
(c) Except as specifically restricted by Section 7.5(a) and the Non-
Competition Agreement, each Indemnitee 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 express or implied by law to any Group Member or any
Partner. Neither any Group Member, any Limited Partner nor any other Person
shall have any rights by virtue of this Agreement, the Genesis MLP Partnership
Agreement or the partnership relationship established hereby in any business
ventures of any Indemnitee.
(d) Subject to the terms of Sections 7.5(a), 7.5(b) and 7.5(c) and the Non-
Competition Agreement, but otherwise notwithstanding anything to the contrary in
this Agreement, (i) the engaging in competitive activities by any Indemnitees
(other than the Operating General Partner) in accordance with the provisions of
this Section 7.5 is hereby approved by the Partnership and all Partners and (ii)
it shall be deemed not to be a breach of the Operating General Partner's
fiduciary duty or any other obligation of any type whatsoever of the Operating
General Partner for the Indemnitees (other than the Operating General Partner)
to engage in such business interests and activities in preference to or to the
exclusion of the Partnership, and the Operating General Partner and the
Indemnitees shall have no obligation to present business opportunities to the
Partnership.
(e) The Operating General Partner and any of its Affiliates may acquire
Partnership Securities in addition to those acquired on the Closing Date and,
except as otherwise provided in this Agreement, shall be entitled to exercise
all rights of a General Partner or Limited Partner, as applicable, relating to
such Partnership Securities.
(e) The term ''Affiliates'' when used in this Section 7.5 with respect to
the Operating General Partner shall not include Genesis MLP, any Group Member or
any Subsidiary of a Group Member.
7.6 Loans from the General Partners; Loans or Contributions from the
Partnership; Contracts with Affiliates; Certain Restrictions on the Operating
General Partner
(a) Subject to Section 7.3(d), the General Partners and any of their
Affiliates may lend to any Group Member, and any Group Member may borrow from
the General Partners or any of their Affiliates, funds needed or desired by the
Group Member for such periods of time and in such amounts as the Operating
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). 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. No Group Member may lend
funds to the Operating General Partner or any of its Affiliates (other than
Genesis MLP or another Group Member).
(b) Subject to Section 7.3(d), the Partnership may lend or contribute to
Genesis MLP or any Group Member, and Genesis MLP and any Group Member may borrow
from the Partnership, funds on terms and conditions established in the sole
discretion of the Operating General Partner; provided, however, that the
Partnership may not charge Genesis MLP or the Group Member interest at a rate
less than the rate that would be charged to the Group Member (without reference
to the General Partners' financial abilities or guarantees) by unrelated lenders
on comparable loans. Subject to Section 7.3(d), the foregoing authority shall be
exercised by the Operating General Partner in its sole discretion and shall not
create any right or benefit in favor of Genesis MLP or any Group Member or any
other Person.
(c) The General Partners may themselves, or may enter into an agreement
with any of their Affiliates to, render services to a Group Member or to the
General Partners in the discharge of their duties as general partners of the
Partnership. Any services rendered to a Group Member by a General Partner or any
of its Affiliates shall be on terms that are fair and reasonable to the
Partnership; provided, however, that the requirements of this Section 7.6(c)
shall be deemed satisfied as to (i) any transaction approved by Special
Approval, (ii) any transaction, the terms of which are no less favorable to the
Partnership Group than those generally being provided to or available from
unrelated third parties or (iii) any transaction that, 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 Group), is equitable to the Partnership Group. The provisions of
Section 7.4 shall apply to the rendering of services described in this Section
7.6(c).
(d) The Partnership Group may transfer assets to joint ventures, other
partnerships, corporations, limited liability companies or other business
entities in which it is or thereby becomes a participant upon such terms and
subject to such conditions as are consistent with this Agreement and applicable
law.
(e) Neither the Operating General Partner nor any of its Affiliates shall
sell, transfer or convey any property to, or purchase any property from the
Partnership, directly or indirectly, except pursuant to transactions that are
fair and reasonable to the Partnership; provided, however, that the requirements
of this Section 7.6(e) shall be deemed to be satisfied as to (i) the
transactions effected pursuant to Sections 5.1, 5.2 and 5.3, the Conveyance
Agreement and any other transactions described in or contemplated by the
Registration Statement, (ii) any transaction approved by Special Approval, (iii)
any transaction, the terms of which are no less favorable to the Partnership
than those generally being provided to or available from unrelated third
parties, or (iv) any transaction that, 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), is equitable
to the Partnership. With respect to any contribution of assets to the
Partnership in exchange for Partnership Securities, the Audit Committee, in
determining whether the appropriate number of Partnership Securities are being
issued, may take into account, among other things, the fair market value of the
assets, the liquidated and contingent liabilities assumed, the tax basis in the
assets, the extent to which tax-only allocations to the transferor will protect
the existing partners of the Partnership against a low tax basis, and such other
factors as the Audit Committee deems relevant under the circumstances.
(f) The Operating General Partner and its Affiliates will have no
obligation to permit any Group Member to use any facilities or assets of the
Operating General Partner and its Affiliates, except as may be provided in
contracts entered into from time to time specifically dealing with such use, nor
shall there be any obligation on the part of the Operating General Partner or
its Affiliates to enter into such contracts.
(g) Without limitation of Sections 7.6(a) through 7.6(f), and
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.
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 in each case the Indemnitee acted in
good faith and in a manner that such Indemnitee reasonably believed to be in, or
not opposed to, the best interests of the Partnership and, with respect to any
criminal proceeding, had no reasonable cause to believe its conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere, or its equivalent,
shall not create a presumption that the Indemnitee acted in a manner contrary to
that specified above. 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
Partners 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 the final disposition of
such claim, demand, action, suit or proceeding 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 Partnership Securities, 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 a General
Partner or its Affiliates for the cost of) insurance, on behalf of a General
Partner, its Affiliates and such other Persons as the Operating 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 interest of the
participants and beneficiaries of the plan shall be deemed to be for a purpose
which is in, or not opposed to, 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.
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 Partnership
Securities, for losses sustained or liabilities incurred as a result of any act
or omission if such Indemnitee acted in good faith.
(b) Subject to their obligations and duties as a general partner of the
Partnership set forth in Section 7.1(a), the General Partners may exercise any
of the powers granted to them by this Agreement and perform any of the duties
imposed upon them hereunder either directly or by or through their agents, and a
General Partner shall not be responsible for any misconduct or negligence on the
part of any such agent appointed by a 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 Partners 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. The provisions of this Agreement, to the extent that they
restrict or otherwise modify the duties and liabilities of an Indemnitee
otherwise existing at law or in equity, are agreed by the Partners to replace
such other duties and liabilities of such Indemnitee.
(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.
7.9 Resolution of Conflicts of Interest
(a) Unless otherwise expressly provided in this Agreement, whenever a
potential conflict of interest exists or arises between a General Partner or any
of its Affiliates, on the one hand, and the Partnership 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 agreement contemplated herein, or of any duty stated or implied by law or
equity, if the resolution or course of action is, or by operation of this
Agreement is deemed to be, fair and reasonable to the Partnership. The Operating
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. Any conflict of interest and any resolution of such conflict of
interest shall be conclusively deemed fair and reasonable to the Partnership if
such conflict of interest or resolution is (i) approved by Special Approval (as
long as the material facts known to the Operating General Partner or any of its
Affiliates regarding any proposed transaction were disclosed to the Audit
Committee at the time it gave its approval), (ii) on terms no less favorable to
the Partnership than those generally being provided to or available from
unrelated third parties or (iii) fair 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 Operating General Partner may also adopt a resolution or
course of action that has not received Special Approval. The Operating General
Partner (including the Audit Committee in connection with Special Approval)
shall be authorized in connection with its determination of what is ''fair and
reasonable'' to the Partnership and in connection with its resolution of any
conflict of interest to consider (A) the relative interests of any party to such
conflict, agreement, transaction or situation and the benefits and burdens
relating to such interest; (B) any customary or accepted industry practices and
any customary or historical dealings with a particular Person; (C) any
applicable generally accepted accounting practices or principles; and (D) such
additional factors as the Operating General Partner (including the Audit
Committee) determines in its sole discretion to be relevant, reasonable or
appropriate under the circumstances. Nothing contained in this Agreement,
however, is intended to nor shall it be construed to require the Operating
General Partner (including the Audit Committee) to consider the interests of any
Person other than the Partnership. In the absence of bad faith by the Operating
General Partner, the resolution, action or terms so made, taken or provided by
the Operating General Partner with respect to such matter shall not constitute a
breach of this Agreement or any other agreement contemplated herein or a breach
of any standard of care or duty imposed herein or therein or, to the extent
permitted by law, under the Delaware Act or any other law, rule or regulation.
(b) Whenever this Agreement or any other agreement contemplated hereby
provides that a General Partner or any of its Affiliates is permitted or
required to make a decision (i) in its ''sole discretion'' or ''discretion,''
that it deems ''necessary or appropriate'' or ''necessary or advisable'' or
under a grant of similar authority or latitude, except as otherwise provided
herein, a General Partner or such Affiliate shall be entitled to consider only
such interests and factors as it desires and shall have no duty or obligation to
give any consideration to any interest of, or factors affecting, Genesis MLP,
the Partnership, any other General Partner or any Limited Partner, (ii) it may
make such decision in its sole discretion (regardless of whether there is a
reference to ''sole discretion'' or ''discretion'') unless another express
standard is provided for, or (iii) in ''good faith'' or under another express
standard, a General Partner or such Affiliate shall act under such express
standard and shall not be subject to any other or different standards imposed by
this Agreement, any other agreement contemplated hereby or under the Delaware
Act or any other law, rule or regulation. In addition, any actions taken by a
General Partner or such Affiliate consistent with the standards of ''reasonable
discretion'' set forth in the definitions of Available Cash or Operating Surplus
shall not constitute a breach of any duty of a General Partner to the
Partnership or the Limited Partners. The General Partners shall have no duty,
express or implied, to sell or otherwise dispose of any asset of the Partnership
Group other than in the ordinary course of business. No borrowing by any Group
Member or the approval thereof by a General Partner shall be deemed to
constitute a breach of any duty of the General Partner to the Partnership, any
other General Partner, any Limited Partner or any Assignee by reason of the fact
that the purpose or effect of such borrowing is directly or indirectly to (A)
enable the Operating General Partner to receive Incentive Compensation Payments
or (B) hasten the expiration of the Subordination Period or the conversion of
any Subordinated Units into Common Units.
(c) Whenever a particular transaction, arrangement or resolution of a
conflict of interest is required under this Agreement to be ''fair and
reasonable'' to any Person, the fair and reasonable nature of such transaction,
arrangement or resolution shall be considered in the context of all similar or
related transactions.
(d) The Unitholders hereby authorize the Operating General Partner, on
behalf of the Partnership as a partner of a Group Member, to approve of actions
by the general partner of such Group Member similar to those actions permitted
to be taken by a General Partner pursuant to this Section 7.9.
7.10 Other Matters Concerning the General Partners
(a) The General Partners 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 Partners 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 such 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 Partners 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.
(d) Any standard of care and duty imposed by this Agreement or under the
Delaware Act or any applicable law, rule or regulation shall be modified, waived
or limited, to the extent permitted by law, as required to permit the General
Partners to act under this Agreement or any other agreement contemplated by this
Agreement and to make any decision pursuant to the authority prescribed in this
Agreement, so long as such action is reasonably believed by such General Partner
to be in, or not inconsistent with, the best interests of the Partnership.
7.11 Reliance by Third Parties
Notwithstanding anything to the contrary in this Agreement, any Person
dealing with the Partnership shall be entitled to assume that any General
Partner and any officer of a General Partner authorized by such 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 a 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 a General Partner or any such officer in
connection with any such dealing. In no event shall any Person dealing with a
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 a General Partner or
any such officer or its representatives. Each and every certificate, document or
other instrument executed on behalf of the Partnership by a 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.
7.12 Incentive Compensation Payments to the Operating General Partner
(a) Within 45 days following the end of each Quarter commencing with the
Quarter ending on March 31, 1997 and ending with the Quarter immediately
preceding the Quarter in which a Conversion Election is made, the Partnership
shall make the following payments to the Operating General Partner as
compensation for management and other services provided to the Partnership (such
payments will be characterized for federal income tax purposes as guaranteed
payments within the meaning of Section 707(c) of the Code):
(i) An amount equal to 13/85ths of all amounts distributed to the Partners
with respect to such Quarter pursuant to Section 6.4(a)(vi) or Section
6.4(b)(iv) on a per Unit basis that are in excess of the First Target
Distribution up to and including the Second Target Distribution;
(ii) An amount equal to 23/75ths of all amounts distributed to the Partners
with respect to such Quarter pursuant to Section 6.4(a)(vi) or Section
6.4(b)(iv) on a per Unit basis that are in excess of the Second Target
Distribution up to and including the Third Target Distribution; and
(iii) An amount equal to 48/50ths of all amounts distributed to the
Partners with respect to such Quarter pursuant to Section 6.4(a)(vi) or Section
6.4(b)(iv) on a per Unit basis that are in excess of the Third Target
Distribution.
(b) The Operating General Partner shall not be entitled to transfer the
right to receive Incentive Compensation Payments to any Person; provided,
however, that upon the admission of a successor Operating General Partner
pursuant to Section 10.4(a), such successor Operating General Partner shall,
unless a Conversion Election has been previously made, be entitled to receive
Incentive Compensation Payments and shall have the right to elect to convert its
right to receive Incentive Compensation Payments into a right to participate
with all other Partners in distributions made in excess of the First Target
Distribution as provided in Section 7.13.
7.13 Conversion of Operating General Partner's Incentive Compensation Payment
Rights
At any time following the second anniversary of the Closing Date, the
Operating General Partner may elect to convert (a ''Conversion Election'') its
right to receive Incentive Compensation Payments pursuant to Section 7.12 into a
right to participate with all other Partners in distributions made in excess of
the First Target Distribution in a ratio which would result in the Operating
General Partner receiving additional cash distributions with respect to the
Quarter in which the Conversion Election is made and for any subsequent Quarter
in an amount equal to the amount of Incentive Compensation Payments which would
have otherwise been made to the Operating General Partner pursuant to Section
7.12 for such Quarters. If the Operating General Partner makes a Conversion
Election, the Partnership Agreement shall be amended to reflect the following:
(a) the Operating General Partner's right to Incentive Compensation
Payments has been extinguished;
(b) the Operating General Partner's right to participate in distributions
in excess of the First Target Distribution in a ratio which would result in the
Operating General Partner receiving additional cash distributions with respect
to the Quarter in which the Conversion Election is made and for any subsequent
Quarter pursuant to such provisions in an amount equal to the amount of
Incentive Compensation Payments which would have otherwise been made to the
Operating General Partner pursuant to Section 7.12 for such Quarters;
(c) the special allocation of additional Net Income to the Operating
General Partner in a manner which matches the Operating General Partner's
increased share of subsequent distributions, but only to the extent that the
Partnership has sufficient net income to achieve such matching in that year or
later years;
(d) the Operating General Partner's right to participate in an increased
share of any gains realized (or deemed realized) by the Partnership following
the Conversion Election in connection with (i) an issuance of additional
Partnership Interests, (ii) distributions of Partnership property, or (iii) the
liquidation of the Partnership; and
(e) any special allocations or other matters associated with and reasonably
necessary to the implementation of the foregoing to the extent such special
allocations or other matters do not adversely impact the interests of the other
Partners.
ARTICLE VIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS
8.1 Records and Accounting
The Operating 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 Unitholders 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 and Assignees 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.
8.2 Fiscal Year
The fiscal year of the Partnership shall be the calendar year.
ARTICLE IX
TAX MATTERS
9.1 Tax Returns and Information
The Operating General Partner shall arrange for the preparation and timely
filing of all returns of the Partnership that are required for 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. The classification,
realization and recognition of income, gain, losses and deductions and other
items shall be on the accrual method of accounting for federal income tax
purposes.
9.2 Tax Elections
(a) The Partnership shall make the election under Section 754 of the Code
in accordance with applicable regulations thereunder, subject to the reservation
of the right to seek to revoke any such election upon the Operating General
Partner's determination that such revocation is in the best interests of the
Unitholders.
(b) The Partnership shall elect to deduct expenses incurred in organizing
the Partnership ratably over a sixty-month period as provided in Section 709 of
the Code.
(c) Except as otherwise provided herein, the Operating General Partner
shall determine whether the Partnership should make any other elections
permitted by the Code.
9.3 Tax Controversies
Subject to the provisions hereof, the Operating General Partner is
designated as the Tax Matters Partner (as defined in the Code) and is authorized
and required 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, and to
expend Partnership funds for professional services and costs associated
therewith. Each Partner agrees to cooperate with the Operating General Partner
and to do or refrain from doing any or all things reasonably required by the
Operating General Partner to conduct such proceedings.
9.4 Withholding
Notwithstanding any other provision of this Agreement, the Operating
General Partner is authorized to take any action that it determines in its
discretion to be necessary or appropriate to cause the Partnership 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 or
Assignee (including, without limitation, by reason of Section 1446 of the Code),
the amount withheld may be treated as a distribution of cash pursuant to Section
6.3 in the amount of such withholding from such Partner.
ARTICLE X
ADMISSION OF PARTNERS
10.1 Admission of General Partners
(a) In connection with the formation of the Partnership under the Delaware
Act, the Operating General Partner made an initial Capital Contribution to the
Partnership in the amount of $10.00 for an interest in the Partnership and has
been admitted as the Operating General Partner of the Partnership.
(b) Upon the issuance of Common GP Units pursuant to Section 5.2(a),
Genesis MLP will be admitted to the Partnership as the Managing General Partner.
10.2 Admission of Successor or Transferee General Partner
(a) A successor Operating General Partner approved pursuant to Section 11.1
or 11.2 or the transferee of or successor to all of the Operating General
Partner's General Partner Interest pursuant to Section 4.6(a) who is proposed to
be admitted as a successor Operating General Partner shall, subject to
compliance with the terms of Section 11.3, if applicable, be admitted to the
Partnership as a successor Operating General Partner, effective immediately
prior to the withdrawal or removal of the Operating General Partner pursuant to
Section 11.1 or 11.2 or the transfer of the Operating General Partner's General
Partner Interest pursuant to Section 4.6(a); provided, however, that no such
successor shall be admitted to the Partnership until compliance with the terms
of Section 4.6(a) 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 Partnership without dissolution.
(b) A successor Managing General Partner approved pursuant to Section 11.4
or the transferee of or successor to all of the Managing General Partner's
General Partner Interest pursuant to Section 4.6(b) who is proposed to be
admitted as a successor Managing General Partner shall be admitted to the
Partnership as a successor Managing General Partner, effective immediately prior
to the withdrawal or removal of the Managing General Partner pursuant to Section
11.4 or the transfer of the Managing General Partner's General Partner Interest
pursuant to Section 4.6(b); provided, however, that no such successor shall be
admitted to the Partnership until compliance with the terms of Section 4.6(b)
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 Partnership
without dissolution.
10.3 Admission of Initial Limited Partners
Upon the issuance of Subordinated LP Units pursuant to Section 5.3(a),
Basis and the Howell Subsidiaries will be admitted to the Partnership as Initial
Limited Partners.
10.4 Admission of Substituted Limited Partner
By transfer of a Limited Partner Interest in accordance with Article IV,
the transferor shall be deemed to have given the transferee the right to seek
admission as a Substituted Limited Partner subject to the conditions of, and in
the manner permitted under, this Agreement. A transferor of a Certificate
representing a Limited Partner Interest shall, however, only have the authority
to convey to a purchaser or other transferee who does not execute and deliver a
Transfer Application (a) the right to negotiate such Certificate to a purchaser
or other transferee and (b) the right to transfer the right to request admission
as a Substituted Limited Partner to such purchaser or other transferee in
respect of the transferred Limited Partner Interests. Each transferee of a
Limited Partner Interest (including any nominee holder or an agent acquiring
such Limited Partner Interest for the account of another Person) who executes
and delivers a Transfer Application shall, by virtue of such execution and
delivery, be an Assignee and be deemed to have applied to become a Substituted
Limited Partner with respect to the Limited Partner Interest so transferred to
such Person. Such Assignee shall become a Substituted Limited Partner (x) at
such time as the Operating General Partner consents thereto, which consent may
be given or withheld in the Operating General Partner's discretion and (y) when
any such admission is shown on the books and records of the Partnership. If such
consent is withheld, such transferee shall be an Assignee. An Assignee shall
have an interest in the Partnership equivalent to that of a Limited Partner with
respect to allocations and distributions, including liquidating distributions,
of the Partnership. With respect to voting rights attributable to Limited
Partner Interests that are held by Assignees, the Operating General Partner
shall be deemed to be the Limited Partner with respect thereto and shall, in
exercising the voting rights in respect of such Limited Partner Interests on any
matter, vote such Limited Partner Interests at the written direction of the
Assignee who is the Record Holder of such Limited Partner Interests. If no such
written direction is received, such Limited Partner Interests will not be voted.
An Assignee shall have no other rights of a Limited Partner.
10.5 Admission of Additional Limited Partners
(a) A Person (other than a General Partner, an Initial Limited Partner or a
Substituted Limited Partner) who makes a Capital Contribution to the Partnership
in accordance with this Agreement in exchange for Limited Partner Interests
(other than by virtue of the purchase of APIs) shall be admitted to the
Partnership as an Additional Limited Partner only upon furnishing to the
Operating General Partner (i) evidence of acceptance in form satisfactory to the
Operating General Partner of all of the terms and conditions of this Agreement,
including the power of attorney granted in Section 2.6, and (ii) such other
documents or instruments as may be required in the discretion of the Operating
General Partner to effect such Person's admission as an Additional Limited
Partner.
(b) Notwithstanding anything to the contrary in this Section 10.5, no
Person shall be admitted as an Additional Limited Partner without the consent of
the Operating General Partner, which consent may be given or withheld in the
Operating General Partner's discretion. The admission of any Person as an
Additional Limited Partner shall become effective on the date upon which the
name of such Person is recorded as such in the books and records of the
Partnership, following the consent of the Operating General Partner to such
admission.
10.6 Amendment of Agreement and Certificate of Limited Partnership
To effect the admission to the Partnership of any Partner, the Operating
General Partner shall take all steps necessary and appropriate under the
Delaware 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 Operating General Partner shall prepare
and file an amendment to the Certificate of Limited Partnership, and the
Operating 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
11.1 Withdrawal of Operating General Partner
(a) The Operating 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 Operating General Partner voluntarily withdraws from the
Partnership by giving written notice to the other Partners (and it shall be
deemed that the Operating General Partner has withdrawn pursuant to this Section
11.1(a)(i) if the Operating General Partner voluntarily withdraws as a general
partner of Genesis MLP);
(ii) the Operating General Partner transfers all of its General Partner
Interest pursuant to Section 4.6;
(iii) the Operating General Partner is removed pursuant to Section 11.2;
(iv) the Operating General Partner (A) makes a general assignment for the
benefit of creditors; (B) files a voluntary bankruptcy petition for relief under
Chapter 7 of the United States Bankruptcy Code; (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
Operating General Partner in a proceeding of the type described in clauses (A)-
(C) of this Section 11.1(a)(iv); or (E) seeks, consents to or acquiesces in the
appointment of a trustee (but not a debtor in possession), receiver or
liquidator of the Operating General Partner or of all or any substantial part of
its properties;
(v) a final and non-appealable order of relief under Chapter 7 of the
United States Bankruptcy Code is entered by a court with appropriate
jurisdiction pursuant to a voluntary or involuntary petition by or against the
Operating General Partner; or
(vi) (A) in the event the Operating General Partner is a corporation, a
certificate of dissolution or its equivalent is filed for the Operating General
Partner, or 90 days expire after the date of notice to the Operating General
Partner of revocation of its charter without a reinstatement of its charter,
under the laws of its state of incorporation; (B) in the event the Operating
General Partner is a partnership, the dissolution and commencement of winding up
of the Operating General Partner; (C) in the event the Operating 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 Operating General Partner is a
natural person, his death or adjudication of incompetency; and (E) otherwise in
the event of the termination of the Operating General Partner.
If an Event of Withdrawal specified in Section 11.1(a)(iv), (v) or (vi)(A), (B),
(C) or (E) occurs, the withdrawing Operating General Partner shall give notice
to the 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 Operating General Partner from the Partnership.
(b) Withdrawal of the Operating 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) if the Operating General
Partner has voluntarily withdrawn as a general partner of Genesis MLP and such
withdrawal was not in breach of the Genesis MLP Partnership Agreement or (ii) at
any time that the Operating General Partner ceases to be the Operating General
Partner pursuant to Section 11.1(a)(ii) or is removed pursuant to Section 11.2.
The withdrawal of the Operating General Partner from the Partnership upon the
occurrence of an Event of Withdrawal shall also constitute the withdrawal of the
Operating General Partner as general partner of the other Group Members. If the
Operating General Partner gives a notice of withdrawal pursuant to Section
11.1(a)(i), the Person elected as successor general partner of Genesis MLP
shall, upon admission as a successor general partner of Genesis MLP,
automatically become the successor Operating General Partner and a successor
general partner of the other Group Members of which the Operating General
Partner is a general partner. If, prior to the effective date of the Operating
General Partner's withdrawal, a successor Operating General is not selected as
provided herein, the Partnership shall be dissolved in accordance with Section
12.1. Any successor Operating General Partner selected in accordance with the
terms of this Section 11.1 shall be subject to the provisions of Section 10.3.
11.2 Removal of Operating General Partner
The Operating General Partner may not be removed as a general partner of
the Partnership unless the Operating General Partner is removed as a general
partner of Genesis MLP pursuant to Section 11.2 of the Genesis MLP Partnership
Agreement. If the Operating General Partner is removed as a general partner of
Genesis MLP pursuant to Section 11.2 of the Genesis MLP Partnership Agreement,
the Operating General Partner shall be removed as a general partner of the
Partnership. Such removal shall be effective concurrently with the effectiveness
of the removal of the Operating General Partner as a general partner of Genesis
MLP pursuant to the terms of the Genesis MLP Partnership Agreement. If a Person
is elected as a successor general partner of Genesis MLP in connection with the
removal of the Operating General Partner as a general partner of Genesis MLP,
such Person shall, upon admission as a successor general partner of Genesis MLP,
automatically become the successor Operating General Partner of the Partnership
and a successor general partner of the other Group Members of which the
Operating General Partner is a general partner.
11.3 Interest of Departing Partner and Successor Operating General Partner
(a) The General Partner Interest of a Departing Partner departing as a
result of withdrawal or removal pursuant to Section 11.1 or 11.2 shall (unless
it is otherwise required to be converted into MLP Common Units pursuant to
Section 11.3(b) of the Genesis MLP Partnership Agreement) be purchased by the
successor to the Departing Partner for cash in the manner specified in the
Genesis MLP Partnership Agreement. Such purchase (or conversion into MLP Common
Units, as applicable) shall be a condition to the admission to the Partnership
of the successor as the Operating General Partner. Any successor Operating
General Partner shall indemnify the Departing General Partner as to all debts
and liabilities of the Partnership arising on or after the effective date of the
withdrawal or removal of the Departing Partner.
(b) 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 General Partner for the
benefit of the Partnership or the other Group Members.
11.4 Withdrawal or Removal of Managing General Partner
(a) Without the prior written consent of the Operating General Partner,
which may be granted or withheld in its sole discretion, the Managing General
Partner shall not have the right to withdraw from the Partnership.
(b) The Partners shall not have the right to remove the Managing General
Partner.
11.5 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 LP Units or
APIs becomes a Record Holder of the LP Units or APIs so transferred, such
transferring Limited Partner shall cease to be a Limited Partner with respect to
the LP Units or APIs so transferred.
ARTICLE XII
DISSOLUTION AND LIQUIDATION
12.1 Dissolution
The Partnership shall not be dissolved by the admission of Substituted
Limited Partners or 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 Operating General Partner, if a successor
Operating General Partner is selected as provided in Section 11.1 or 11.2, the
Partnership shall not be dissolved and such successor Operating 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) the expiration of its term as provided in Section 2.7;
(b) an Event of Withdrawal of the Operating General Partner as provided in
Section 11.1(a) (other than Section 11.1(a)(ii)), unless a successor is selected
as provided in Section 11.1(b) or 11.2 and such successor is admitted to the
Partnership pursuant to Section 10.3;
(c) an election to dissolve the Partnership by the Operating General
Partner that is approved by the holders of a Majority Interest;
(d) the entry of a decree of judicial dissolution of the Partnership
pursuant to the provisions of the Delaware Act; or
(e) the sale of all or substantially all of the assets and properties of
the Partnership Group.
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 Operating General Partner as provided
in Section 11.1(a)(i) or (iii) and the failure of the Partners to select a
successor to such Departing Partner pursuant to Section 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 Section 11.1(a)(iv), (v) or
(vi), then, to the maximum extent permitted by law, within 180 days thereafter,
the holders of a Majority Interest may elect to reconstitute the Partnership and
continue its business on the same terms and conditions set forth in this
Agreement by forming a new limited partnership on terms identical to those set
forth in this Agreement and having as the successor Operating General Partner a
Person approved by the holders of a Majority Interest. 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 reconstituted Partnership shall continue until the end of the term
set forth in Section 2.7 unless earlier dissolved in accordance with this
Article XII;
(ii) if the successor Operating General Partner is not the former Operating
General Partner, then the interest of the former Operating General Partner shall
be treated in the manner provided in Section 11.3; and
(iii) all necessary steps shall be taken to cancel this Agreement and the
Certificate of Limited Partnership and to enter into and, as necessary, to file
a new partnership agreement and certificate of limited partnership, and the
successor general partner may for this purpose exercise the powers of attorney
granted the Operating General Partner pursuant to Section 2.6; provided, that
the right of the holders of a Majority Interest to approve a successor Operating
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 (x) the exercise of the right would not
result in the loss of limited liability of any Limited Partner and (y) neither
the Partnership nor the reconstituted limited partnership would be treated as an
association taxable as a corporation or otherwise be taxable as an entity for
federal income tax purposes upon the exercise of such right to continue.
12.3 Liquidator
Upon dissolution of the Partnership, unless the Partnership is continued
under an election to reconstitute and continue the Partnership pursuant to
Section 12.2, the Operating General Partner shall select one or more Persons to
act as Liquidator. The Liquidator (if other than the Operating General Partner)
shall be entitled to receive such compensation for its services as may be
approved by the holders of a Majority Interest. The Liquidator (if other than
the Operating 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 the holders of at least a majority of the
Outstanding Units voting as a single class. 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 the holders of at least a
majority of the Outstanding Units voting as a single class. 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 Operating 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)) to the extent necessary or desirable in the
good faith judgment of the Liquidator to carry out the duties and functions of
the Liquidator hereunder for and during such period of time as shall be
reasonably required in the good faith judgment of the Liquidator to complete the
winding up and liquidation of the Partnership as provided for herein.
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 the Liquidator determines to be in the best interest of the
Partners, subject to Section 17-804 of the Delaware Act and the following:
(a) Disposition of Assets. 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, in its absolute discretion,
defer liquidation or distribution of the Partnership's assets for a reasonable
time if it determines that an immediate sale of all or some of the Partnership's
assets would be impractical or would cause undue loss to the partners. The
Liquidator may, in its absolute discretion, 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) Discharge of Liabilities. Liabilities of the Partnership include
amounts owed to Partners otherwise than in respect of their distribution rights
under Article VI. 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
reasonable 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) Liquidation Distributions. 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 in accordance with, and to the extent of, the
positive balances in their respective Capital Accounts, as determined after
taking into account all Capital Account adjustments (other than those made by
reason of distributions pursuant to this Section 12.4(c)) for the taxable year
of the Partnership during which the liquidation of the Partnership occurs (with
such date of occurrence being determined pursuant to Treasury Regulation Section
1.704-1(b)(2)(ii)(g)), and such distribution shall be made by the end of such
taxable year (or, if later, within 90 days after said date of such occurrence).
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 Partnership shall be terminated and the Certificate of Limited Partnership
and all qualifications of the Partnership as a foreign limited partnership in
jurisdictions other than the State of Delaware shall be canceled and such other
actions as may be necessary to terminate the Partnership shall be taken.
12.6 Return of Contributions
The General Partners 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.
12.7 Waiver of Partition
To the maximum extent permitted by law, each Partner hereby waives any
right to partition of the Partnership property.
12.8 Capital Account Restoration
Neither the Managing General Partner nor any Limited Partner shall have any
obligation to restore any negative balance in its Capital Account upon
liquidation of the Partnership. The Operating General Partner shall be obligated
to restore any negative balance in its Capital Account upon liquidation of its
interest in the Partnership by the end of the taxable year of the Partnership
during which such liquidation occurs, or, if later, within 90 days after the
date of such liquidation.
ARTICLE XIII
AMENDMENT OF PARTNERSHIP AGREEMENT;
MEETINGS; RECORD DATE
13.1 Amendment to be Adopted Solely by Operating General Partner
Each Partner agrees that the Operating General Partner, without the
approval of any Partner or Assignee, 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) the admission, substitution, withdrawal or removal of Partners in
accordance with this Agreement;
(c) a change that, in the sole discretion of the Operating General Partner,
is necessary or advisable 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 any state or to ensure that
the Partnership will not be treated as an association taxable as a corporation
or otherwise taxed as an entity for federal income tax purposes;
(d) a change that, in the discretion of the Operating General Partner, (i)
does not adversely affect the Partners in any material respect, (ii) is
necessary or advisable (A) to satisfy any requirements, conditions or guidelines
contained in any opinion, directive, order, ruling or regulation of any federal
or state agency or judicial authority or contained in any federal or state
statute (including the Delaware Act), (B) to facilitate the trading of the
Partnership Securities (including the division of any class or classes of
Outstanding Partnership Securities into different classes to facilitate
uniformity of tax consequences within such classes of Partnership Securities),
compliance with any of which the Operating General Partner determines in its
discretion to be in the best interests of the Partnership and the Partners, (C)
in connection with action taken by the Operating General Partner pursuant to
Section 5.10, or (D) to effect the conversion of the Operating General Partner's
Incentive Compensation Payments as provided in Section 7.13, or (iii) 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
changes that, in the discretion of the Operating General Partner, are necessary
or advisable as a result of a change in the fiscal year or taxable year of the
Partnership including, if the Operating General Partner shall so determine, a
change in the definition of ''Quarter'' and the dates on which 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 Partners or their directors, officers, trustees
or agents from in any manner being subjected to the provisions of the Investment
Company Act of 1940, as amended, the Investment Advisers Act of 1940, as
amended, or ''plan asset'' regulations adopted under the 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 the terms of Section 5.7, an amendment that, in the
discretion of the Operating General Partner, is necessary or advisable 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
Operating General Partner acting alone;
(i) an amendment effected, necessitated or contemplated by a Merger
Agreement approved in accordance with Section 14.3;
(j) an amendment that, in the discretion of the Operating General Partner,
is necessary or advisable to reflect, account for and deal with appropriately
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;
(k) a merger or conveyance pursuant to Section 14.3(d); or
(l) any other amendments substantially similar to the foregoing.
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 or with the consent of both
of the General Partners which consent may be given or withheld in their sole
discretion. A proposed amendment shall be effective upon its approval by the
holders of a Majority Interest, unless a greater or different percentage is
required under this Agreement or by Delaware law. Each proposed amendment that
requires the approval of the holders of a specified percentage of Outstanding
Partnership Securities shall be set forth in a writing that contains the text of
the proposed amendment. If such an amendment is proposed, the Operating General
Partner shall seek the written approval of the requisite percentage of
Outstanding Partnership Securities or call a meeting of the Partners to consider
and vote on such proposed amendment. The Operating General Partner shall notify
all Record Holders upon final adoption of any such proposed amendments.
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 Partnership
Securities 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 Partnership Securities whose
aggregate Outstanding Partnership Securities 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 Partners or any
of their Affiliates without its consent, which may be given or withheld in its
sole discretion, (iii) change Section 12.1(a) or (c), or (iv) change the term of
the Partnership or, except as set forth in Section 12.1(c), give any Person the
right to dissolve the Partnership.
(c) Except as provided in Section 14.3, and except as otherwise provided,
and without limitation of the Operating General Partner's authority to adopt
amendments to this Agreement as contemplated in Section 13.1, any amendment that
would have a material adverse effect on the rights or preferences of any class
of Partnership Interests in relation to other classes of Partnership Interests
must be approved by the holders of not less than a majority of the Outstanding
Partnership Interests of the class affected.
(d) Notwithstanding any other provision of this Agreement, except for
amendments pursuant to Section 7.3 or 13.1 and except as otherwise provided by
Section 14.3(b), no amendments shall become effective without the approval of
the holders of a Ninety Percent Interest 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 a Ninety Percent Interest.
13.4 Special Meetings
All acts of Partners to be taken pursuant to this Agreement shall be taken
in the manner provided in this Article XIII. Special meetings of the Partners
may be called by a General Partner or by Partners owning 20% or more of the
Outstanding Partnership Securities of the class or classes for which a meeting
is proposed and which are entitled to vote thereat. Partners shall call a
special meeting by delivering to the Operating General Partner one or more
requests in writing stating that the signing 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
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 Operating General Partner shall send a
notice of the meeting to the Partners. A meeting shall be held at a time and
place determined by the Operating 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 Delaware Act or the law of any other state in which the
Partnership is qualified to do business.
13.5 Notice of a Meeting
Notice of a meeting called pursuant to Section 13.4 shall be given to the
Record Holders in writing by mail or other means of written communication in
accordance with Section 15.1. 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.
13.6 Record Date
For purposes of determining the Partners entitled to notice of or to vote
at a meeting of Partners or to give approvals without a meeting as provided in
Section 13.11, the Operating 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 or
(b) in the event that approvals are sought without a meeting, the date by which
Partners are requested in writing by the Operating General Partner to give such
approvals.
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.
13.8 Waiver of Notice; Approval of Meeting; Approval of Minutes
The transactions of any meeting of Partners, however called and noticed,
and whenever held, shall be as valid as if 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, 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 Partner at a meeting shall constitute a waiver of notice of the meeting,
except when the Partner does not approve, at the beginning of the meeting, of
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.
13.9 Quorum
The holders of a majority of the Outstanding Partnership Securities of the
class or classes for which a meeting has been called represented in person or by
proxy shall constitute a quorum at a meeting of Partners of such class or
classes unless any such action by the Partners requires approval by holders of a
greater percentage of such Partnership Securities, in which case the quorum
shall be such greater percentage. At any meeting of the Partners duly called and
held in accordance with this Agreement at which a quorum is present, the act of
Partners holding Outstanding Partnership Securities that in the aggregate
represent a majority of the Outstanding Partnership Securities entitled to vote
and be present in person or by proxy at such meeting shall be deemed to
constitute the act of all 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 Partners holding Outstanding Partnership Securities
that in the aggregate represent at least such greater or different percentage
shall be required. The 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 Partners to leave less than a quorum,
if any action taken (other than adjournment) is approved by the required
percentage of Outstanding Partnership Securities specified in this Agreement. In
the absence of a quorum any meeting of Partners may be adjourned from time to
time by the affirmative vote of holders of at least a majority of the
Outstanding Partnership Securities represented either in person or by proxy, but
no other business may be transacted, except as provided in Section 13.7.
13.10 Conduct of a Meeting
The Operating General Partner shall have full power and authority
concerning the manner of conducting any meeting of the 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 Operating 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 Operating General Partner.
The Operating 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 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.
13.11 Action Without a Meeting
If authorized by the Operating General Partner, any action that may be
taken at a meeting of the Partners may be taken without a meeting if an approval
in writing setting forth the action so taken is signed by Partners owning not
less than the minimum percentage of the Outstanding Partnership Securities that
would be necessary to authorize or take such action at a meeting at which all
the Partners were present and voted. Prompt notice of the taking of action
without a meeting shall be given to the Partners who have not approved in
writing. The Operating General Partner may specify that any written ballot
submitted to 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 Operating General Partner. If a ballot
returned to the Partnership does not vote all of the Partnership Securities held
by a Person the Partnership shall be deemed to have failed to receive a ballot
for the Partnership Securities that were not voted. If approval of the taking of
any action by the Partners is solicited by any Person other than by or on behalf
of the Operating 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 Operating 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 Operating 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 state statutes then governing the
rights, duties and liabilities of the Partnership and the Partners.
13.12 Voting and Other Rights
(a) Only those Record Holders of Partnership Securities on the Record Date
set pursuant to Section 13.6 shall be entitled to notice of, and to vote at, a
meeting of Partners or to act with respect to matters as to which the holders of
the Outstanding Partnership Securities 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 Partnership Securities shall be deemed to be references to the
votes or acts of the Record Holders of such Outstanding Partnership Securities.
(b) With respect to Partnership Securities 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
Partnership Securities are registered, such other Person shall, in exercising
the voting rights in respect of such Partnership Securities on any matter, and
unless the arrangement between such Persons provides otherwise, vote such
Partnership Securities 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
14.1 Authority
The Partnership may merge or consolidate with one or more corporations,
limited liability companies, business trusts or associations, real estate
investment trusts, common law trusts or unincorporated businesses, including a
general partnership or limited partnership, formed under the laws of the State
of Delaware or any other state of the United States of America, pursuant to a
written agreement of merger or consolidation (''Merger Agreement'') in
accordance with this Article XIV.
14.2 Procedure for Merger or Consolidation
Merger or consolidation of the Partnership pursuant to this Article XIV
requires the prior approval of the General Partners. If the General Partners
shall determine, in the exercise of their discretion, to consent to the merger
or consolidation, the General Partners 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 general or
limited partner 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 general or limited partner
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 limited partnership, corporation, trust or other entity
(other than the Surviving Business Entity) which the holders of such general or
limited partner interests, securities or rights are to receive in exchange for,
or upon conversion of their general or limited partner interests, securities or
rights, and (ii) in the case of securities represented by certificates, upon the
surrender of such certificates, which cash, property or general or limited
partner interests, rights, securities or obligations of the Surviving Business
Entity or any general or limited partnership, corporation, trust 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
the certificate of merger, the effective time shall be fixed no later than the
time of the filing of the certificate of merger and stated therein); and
(g) Such other provisions with respect to the proposed merger or
consolidation as are deemed necessary or appropriate by the General Partners.
14.3 Approval by Partners of Merger or Consolidation
(a) Except as provided in Section 14.3(d), the General Partners, upon their
approval of the Merger Agreement, shall direct that the Merger Agreement be
submitted to a vote of 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 Section 14.3(d), the Merger Agreement shall be
approved upon receiving the affirmative vote or consent of the holders of a
Majority Interest unless the Merger Agreement contains any provision that, if
contained in an amendment to this Agreement, the provisions of this Agreement or
the Delaware Act would require the vote or consent of a greater percentage of
the Outstanding Partnership Securities or of any class of Partners, in which
case such greater percentage vote or consent shall be required for approval of
the Merger Agreement.
(c) Except as provided in Section 14.3(d), after such approval by vote or
consent of the 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 Operating General Partner is permitted, in its discretion,
without Partner approval, 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 Merger other than those it receives from the Partnership or
other Group Member if (i) the Operating General Partner has received an Opinion
of Counsel that the merger or conveyance, as the case may be, would not result
in the loss of the limited liability of any Limited Partner or cause the
Partnership to be treated as an association taxable as a corporation or
otherwise to be taxed as an entity for federal income tax purposes (to the
extent not previously treated as such), (ii) the sole purpose of such merger or
conveyance is to effect a mere 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 and the General Partners with the same
rights and obligations as are herein contained.
14.4 Certificate of Merger
Upon the required approval by the Partners of a Merger Agreement, a
certificate of merger shall be executed and filed with the Secretary of State of
the State of Delaware in conformity with the requirements of the Delaware Act.
14.5 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
GENERAL PROVISIONS
15.1 Addresses and Notices
Any notice, demand, request, report or proxy materials required or
permitted to be given or made to a Partner or Assignee 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 or Assignee at the address described below. Any
notice, payment or report to be given or made to a Partner or Assignee 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 Security 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 Security 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 15.1 executed by the Operating 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 Post Office 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 or Assignee 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 and
Assignees. Any notice to the Partnership shall be deemed given if received by
the Operating General Partner at the principal office of the Partnership
designated pursuant to Section 2.3. The General Partners may rely and shall be
protected in relying on any notice or other document from a Partner, Assignee or
other Person if believed by it to be genuine.
15.2 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.
15.3 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.
15.4 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.
15.5 Creditors
None of the provisions of this Agreement shall be for the benefit of, or
shall be enforceable by, any creditor of the Partnership.
15.6 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.
15.7 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, upon accepting the certificate evidencing such Limited Partner
Interest or executing and delivering a Transfer Application as herein described,
independently of the signature of any other party.
15.8 Applicable Law
This Agreement shall be construed in accordance with and governed by the
laws of the State of Delaware, without regard to the principles of conflicts of
law.
15.9 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.
15.10 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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
OPERATING GENERAL PARTNER
GENESIS ENERGY, L.L.C.
By: /s/ John P. vonBerg
- ---------------------------------------------------
Name: John P. vonBerg
Title: President and Chief Executive Officer
MANAGING GENERAL PARTNER
GENESIS ENERGY, L.P.
By: GENESIS ENERGY, L.L.C.,
As General Partner
By: /s/ John P. vonBerg
- ---------------------------------------------------
Name: John P. vonBerg
Title: President and Chief Executive Officer
ORGANIZATIONAL LIMITED PARTNER
GENESIS ENERGY, L.P.
By: GENESIS ENERGY, L.L.C.,
As General Partner
By: /s/ John P. vonBerg
- ---------------------------------------------------
Name: John P. vonBerg
Title: President and Chief Executive Officer
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 Operating General Partner.
By: Genesis Energy, L.L.C.
General Partner, as attorney-in-fact for all Limited Partners pursuant to the
Powers of Attorney granted pursuant to Section 2.6.
By: /s/ John P. vonBerg
---------------------------------------------------
EXHIBIT 10.1
PURCHASE & SALE
AND
CONTRIBUTION & CONVEYANCE
AGREEMENT
Dated as of November 26, 1996
<PAGE>
TABLE OF CONTENTS
1. Definitions 2
2. Capitalization and Conveyance Transactions 15
2.1 LLC Funding 15
2.2 MLP Funding 15
2.3 Genesis MLP's Contribution to Genesis OLP 16
2.4 Asset Purchase and Sale 16
2.5 Basis' and Howell Crude's Contributions to
Genesis OLP 17
2.6 Additional LLC Contributions 18
2.7 Clean Up Distributions 18
2.8 Over-Allotment Contributions 18
3. Representations and Warranties 19
3.1 Basis 19
3.2 Howell 29
3.3 Genesis OLP 40
3.4 Genesis MLP 41
4. Miscellaneous Provisions Relating to Transfer of
Assets and Business 42
4.1 Nonassignability of Assets 42
4.2 Direct Transfer to a Genesis OLP Affiliate 44
4.3 Assumption of Assumed Liabilities by Genesis
OLP 44
4.4 Post Signing Covenants and Agreements 44
4.5 Satsuma Crude Oil Tanks 46
4.6 Nontransferability of Subordinated LP Units 47
4.7 Environmental Make-Whole Provision 47
5. Conditions to Closing 48
6. Closing 49
6.1 Date of Closing 49
6.2 Deliveries 49
7. Post-Closing Matters 50
7.1 Post-Closing Accounting Adjustment 50
7.2. Survival 50
7.3. Further Assurances 50
8. Indemnification 50
8.1 Indemnification by the Transferors 50
8.2 Indemnification by Genesis OLP and Genesis MLP 52
8.3 Specific Indemnification Issues 52
8.4 Notice and Payment of Claims 54
8.5 Defense of Third Party Claims 55
8.6 Cooperation and Preservation of Records 56
9. Disclaimers and Waiver 57
9.1 Disclaimer of Warranties 57
9.2 Waiver of Bulk Sales Laws 57
10. Trademarks and Tradenames 57
10.1 Written Materials and Logos 57
10.2 Signs 57
11. Employee Matters 58
11.1 Employment 58
11.2 LLC Plans 58
11.3 No Third Party Beneficiaries 59
12. Termination of Agreement 59
12.1 Termination 59
12.2 Effect of Termination 59
13. Tax Matters 59
13.1 Refunds of Taxes 59
13.2 Notice of Tax Audits 60
14. Miscellaneous 60
14.1 Costs 60
14.2 Notices 61
14.3 Files and Records 62
14.4 Headings; References; Interpretation 62
14.5 Successors and Assigns 62
14.6 No Third Party Rights 63
14.7 Counterparts 63
14.8 Governing Law 63
14.9 Waiver of Jury Trial 63
14.10 Severability 63
14.11 Deed; Bill of Sale; Assignment 63
14.12 Amendment or Modification 63
14.13 Integration 63
Exhibits
A Form of Agency Agreement
B Form of Ancillary Agreement
C Form of Assignment and Assumption Agreement (Tractors and other Assets)
D Form of Assignment Agreement (Pipelines)
E Form of Assignment and Assumption Agreement (Station Sites)
F Form of Corporate Services Agreement
G Form of Credit Support Agreement
H Form of Distribution Support Agreement
I Form of Employment Agreement
J Form of Members Agreement Addendum
K Form of Non-Competition Agreement
L Form of Pledge Agreement
M Form of Refinery Supply Agreement
N Form of Redemption and Registration Rights Agreement
O Form of Supply, Transportation and Purchase Agreement
P Form of Transition Services Agreement
Schedules
1.1 Assets
A. Basis Assets
B-1. Howell Crude Assets
B-2. Howell Pipeline Assets
B-3. Howell Texas Assets
B-4. Howell Transportation Assets
B-5. Howell Power Assets
B-6. Howell Corporation Assets
1.2 Assumed Liabilities
1.3 Excluded Assets
1.4 Excluded Liabilities
3.1(c) Basis exceptions to representations regarding noncontravention
of obligations associated with Basis Assets due to execution of
Agreement and consummation of transaction
3.1(g) Basis exceptions to representations regarding balance sheet
3.1(h) Basis exceptions to representations regarding timely
filing of tax returns
3.1(j) Basis exceptions to representation regarding leases to
third parties of Basis Assets to remain in effect
after closing date
3.1(k) Basis exceptions to representation regarding marketing,
distribution, etc. of technology used with respect to Basis Assets
3.1(l) Basis Litigation
3.1(m) Basis Employment Plans;
Basis exceptions to representation regarding payments
to Basis Employees, or increases in benefits
payable under Basis Employee Plan;
Basis exceptions to representations regarding employment
matters contained in Section 3.1(m)(iv)
3.1(n) Basis consents required in connection with execution,
delivery or performance of agreements (excepting such
consents which the failure to obtain would not have a
MAE with respect to the Business)
3.1(o) Basis exceptions to representations regarding Basis Assets
and Business contained in Section 3.1(o)(i)-(vii);
Amendments to contracts assigned to OLP listed in
Schedule 3.1(o) other than in ordinary course;
Contracts listed in Schedule 3.1.(o) requiring consent
for assignment;
Cancellations or threats to cancel contracts listed in Schedule 3.1(o)
3.1(q) Basis exceptions to representations regarding Environmental
Matters contained in Section 3.1(q)(i)-(iii)
3.1(s) Basis exceptions to representations regarding compliance
with law and permits contained in Section 3.1(s)(ii)
3.1(u) Basis exceptions to representations regarding third party
rights to Basis Assets
3.2(c) Howell exceptions to representations regarding noncontravention
of obligations associated with Howell Assets due to execution of
Agreement and consummation of transaction
3.2(g) Howell exceptions to representations regarding balance sheet
3.2(h) Howell exceptions to representations regarding timely
filing of tax returns
3.2(j) Howell exceptions to representation regarding leases
to third parties of Howell Assets to remain in effect
after closing date
3.2(k) Howell exceptions to representation regarding marketing,
distribution, etc. of technology used with respect to Howell Assets
3.2(l) Howell Litigation
3.2(m) Howell Employee Plans;
Howell exceptions to representation regarding payments to
Howell Employees or directors, or increases in benefits
payable under Howell Employee Plan or acceleration of time
of payment or vesting of benefits due to execution and
consummation of Agreement;
Howell exceptions to representations regarding employment
matters contained in Section 3.2(m)(iv)
3.2(n) Howell consents required in connection with execution,
delivery or performance of agreements (excepting such
consents which the failure to obtain would not have a MAE
with respect to the Business)
3.2(o) Howell exceptions to representations regarding Howell Assets
and Business contained in Section 3.2(o)(i)-(vii);
Amendments to contracts assigned to OLP listed in
Schedule 3.2(o) other than in ordinary course;
Contracts listed in Schedule 3.2(o) requiring consent for assignment;
Cancellations or threats to cancel contracts listed in Schedule 3.2(o)
3.2(q) Howell exceptions to representations regarding Environmental
Matters contained in Section 3.2(q)(i)-(iii)
3.2(s) Howell exceptions to representations regarding compliance
with law and permits contained in Section 3.2(s)(ii)
3.2(u) Howell exceptions to representations regarding third party
rights to Howell Assets
7.1 Post-Closing Accounting Adjustment
11.1 List of Business Employees;
Severance Payment Terms
PURCHASE & SALE AND
CONTRIBUTION & CONVEYANCE AGREEMENT
This PURCHASE & SALE AND CONTRIBUTION & CONVEYANCE AGREEMENT, dated as of
November 26, 1996, is entered into by and among GENESIS ENERGY, L.P., a Delaware
limited partnership ("Genesis MLP"), GENESIS CRUDE OIL, L.P., a Delaware limited
partnership ("Genesis OLP"), BASIS PETROLEUM, INC., a Texas corporation
("Basis"), HOWELL CORPORATION, a Delaware corporation ("Howell"), HOWELL CRUDE
OIL COMPANY, a Delaware corporation ("Howell Crude"), HOWELL PIPELINE TEXAS,
INC., a Delaware corporation ("Howell Texas"), HOWELL PIPELINE USA, INC., a
Delaware corporation ("Howell Pipeline"), HOWELL TRANSPORTATION SERVICES, INC.,
a Delaware corporation ("Howell Transportation"), HOWELL POWER SYSTEMS, INC., a
Delaware corporation ("Howell Power" and, collectively with Howell Crude,
Howell Texas, Howell Pipeline and Howell Transportation, the "Howell
Subsidiaries") and GENESIS ENERGY, L.L.C., a Delaware limited liability company
("Genesis LLC").
RECITALS
WHEREAS, each of Basis and Howell (individually a Sponsor and together the
"Sponsors") has heretofore caused the formation of Genesis LLC pursuant to the
Delaware Limited Liability Company Act (the "DLLCA") for the purposes of
serving as the general partner of Genesis MLP and a general partner of Genesis
OLP;
WHEREAS, Basis owns 540 LLC Shares (as defined herein) and Howell owns 460
LLC Shares;
WHEREAS, Genesis LLC, as the general partner, and Wayne Kubicek
("Kubicek"), as the organizational limited partner, have heretofore formed
Genesis MLP pursuant to the Delaware Revised Uniform Limited Partnership Act
(the "Delaware Act") for the purpose, in part, of serving as the organizational
limited partner of Genesis OLP;
WHEREAS, Genesis LLC contributed $10.00 to the capital of Genesis MLP and
received a 1% General Partner Interest (as defined herein) therein; and Kubicek
contributed $990.00 to the capital of Genesis MLP and received a 99% Limited
Partner Interest (as defined herein) therein;
WHEREAS, Genesis LLC, as the general partner, and Genesis MLP, as the
organizational limited partner, have heretofore caused the formation of Genesis
OLP pursuant to the Delaware Act for the purpose of acquiring, owning and
operating the Assets and Business (as hereinafter defined);
WHEREAS, Genesis LLC contributed $10.00 to the capital of Genesis OLP and
received a 1% General Partner Interest therein; and Genesis MLP contributed
$990.00 to the capital of Genesis OLP and received a 99% Limited Partner
Interest therein;
WHEREAS, Genesis LLC, as the general partner, and Kubicek, as the
organizational limited partner, have entered into that certain Agreement of
Limited Partnership of Genesis MLP (as it may be amended, supplemented or
restated from time to time, the "MLP Agreement");
WHEREAS, Genesis LLC, as the general partner, and Genesis MLP, as the
organizational limited partner, have entered into that certain Agreement of
Limited Partnership of Genesis OLP (as it may be amended, supplemented or
restated from time to time, the "OLP Agreement"); and
WHEREAS, Howell Crude has contributed all of its tangible assets to Howell
Power;
NOW, THEREFORE, in consideration of their mutual undertakings and
agreements hereunder, and subject to the terms and conditions set forth in this
Agreement, the Parties (as defined herein) hereto undertake and agree as
follows:
ARTICLE 1
DEFINITIONS.
The following capitalized terms shall have the meanings given below.
"Accounting Firm" has the meaning assigned to such term in Schedule 7.1.
"Additional LLC Contributions" has the meaning assigned to such term in
Section 2.6(b).
"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. Notwithstanding anything contained in this definition to the
contrary, the term Affiliate, (i) with respect to Genesis MLP and Genesis OLP,
shall not include the Sponsors, the Transferors, Genesis LLC or SI (or their
respective Affiliates determined without regard to Genesis MLP or Genesis OLP),
and (ii) with respect to the Sponsors, the Transferors, Genesis LLC or SI, shall
not include Genesis MLP or Genesis OLP (or their respective Affiliates
determined without regard to the Sponsors, the Transferors, Genesis LLC or SI).
"Agency Agreement" means the Agency Agreement between Genesis OLP and each
Transferor or its Affiliate, dated as of the Closing Date, relating to the
servicing by Genesis OLP as an agent of such Transferor of certain contracts
that would (but for limitations on assignability or transfer as referred to in
Section 4.1 therein) be part of the Assets, substantially in the form attached
hereto as Exhibit A.
"Aggregate Obligation" has the meaning assigned to such term in Section
8.3(c).
"Agreement" means this Purchase & Sale and Contribution & Conveyance
Agreement, as it may be amended, supplemented or restated from time to time.
"Ancillary Agreement" means the Ancillary Agreement between Basis, SI,
Howell, Howell Crude and Howell Pipeline Texas, dated as of the Closing Date,
substantially in the form attached hereto as Exhibit B.
"Andersen" has the meaning assigned to such term in Section 3.1(d).
"Annual Obligation" has the meaning assigned to such term in Section
8.3(c).
"Asset Purchase and Sale" has the meaning assigned to such term in Section
2.4(c).
"Assets" means the Basis Assets and the Howell Assets, collectively,
including, however, any accounting adjustments for operating income in the
ordinary course of business as of the Effective Date.
"Assignment and Assumption Agreement (Tractors and Other Assets)" means a
Bill of Sale, Assignment and Assumption Agreement, dated as of the Closing Date,
between each of the Transferors and Genesis OLP, in substantially the form
attached hereto as Exhibit C.
"Assignment Agreement (Pipelines)" means a Conveyance, Assignment and Bill
of Sale between certain Howell Subsidiaries and Genesis OLP, substantially in
the form attached hereto as Exhibit D.
"Assignment and Assumption Agreement (Station Sites)" means a Conveyance,
General Assignment and Bill of Sale, dated as of the Closing Date, between a
Transferor and Genesis OLP, substantially in the form attached hereto as Exhibit
E.
"Assumed Liabilities" means (a) all liabilities and obligations reflected
on Schedule 1.2, (b) all liabilities or obligations arising from or relating to
the ownership or operation of the Assets or the Business on or after the Closing
Date, but excluding all liabilities (including those created under CERCLA)
arising from ownership or operation of the Assets or the Business prior to the
Closing Date, (c) all liabilities and obligations with respect to the contracts,
including without limitation, those listed on Schedules 1.1A-1.1B-6, to be paid
or performed by Genesis OLP on or after the Closing Date, or which relate to
periods on or after the Closing Date, and (d) all liabilities and obligations in
connection with all funds transferred to Genesis OLP for the account of any
other Person in Suspense Accounts as reflected on Schedule 1.2; excluding,
however, in each case, any Excluded Liabilities; provided, however, that any
accounting adjustment to operating expenses in the ordinary course of business
shall be as of the Effective Date.
"Base Inventory" means (i) with respect to Basis 184,671 barrels of crude
oil and (ii) with respect to Howell 100,000 barrels of crude oil.
"Basis" has the meaning assigned to such term in the opening paragraph of
this Agreement.
"Basis and Howell Crude Contributions" has the meaning assigned to such
term in Section 2.5(b).
"Basis Adjusted Working Capital" has the meaning assigned to such term in
Schedule 7.1.
"Basis Assets" means the assets referred to in Schedule 1.1A.
"Basis Employee Plans" has the meaning assigned to such term in Section
3.1(m)(ii).
"Basis Employees" has the meaning assigned to such term in Section
3.1(m)(iii).
"Basis Final Balance Sheet" has the meaning assigned to such term in
Schedule 7.1.
"Basis Financial Statements" has the meaning assigned to such term in
Section 3.1(d).
"Basis Purchase Cash" means 54% of the Purchase Cash.
"Basis Returns" has the meaning assigned to such term in Section 3.1(h).
"Basis Taxes" has the meaning assigned to such term in Section 3.1(h).
"Benefit Plan" has the meaning assigned to such term in Section 11.2.
"Business" means (i) with respect to Basis, the crude oil gathering and
marketing operations conducted by Basis immediately prior to the Closing Date;
(ii) with respect to the Howell Entities, the crude oil gathering and marketing
operations and pipeline-related operations conducted by the Howell Entities
immediately prior to the Closing Date; and (iii) with respect to Genesis OLP,
the crude oil gathering and marketing operations and pipeline-related operations
to be conducted by Genesis OLP immediately after the Closing Date.
"Business Employees" has the meaning assigned to such term in Section 11.1.
"Case Handler" has the meaning assigned to such term in Section 8.5(a).
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. 9601 et seq., as amended by the Superfund Amendments
and Reauthorization Act of 1986.
"Clean Up Distributions" has the meaning assigned to such term in Section
2.7(d).
"Closing" has the meaning assigned to such term in Section 6.1.
"Closing Date" means the Closing Date as defined in the Underwriting
Agreement or such other date as the Parties may mutually agree.
"Collateral Agent" has the meaning assigned to such term in the Pledge
Agreement.
"Commitment" has the meaning assigned to such term in Section 4.1(a).
"Common GP Units" means units representing common general partner interests
in Genesis OLP.
"Common LP Units" means units representing common limited partner interests
in Genesis OLP.
"Common MLP Units" means units representing limited partner interests in
Genesis MLP.
"Common Units" means Common GP Units or Common LP Units.
"Corporate Services Agreement" means the Corporate Services Agreement dated
as of the Closing Date, among Genesis MLP, Genesis OLP and Basis, substantially
in the form attached hereto as Exhibit F.
"Credit Support Agreement" means the Master Credit Support Agreement dated
as of the Closing Date, by and among Genesis OLP, Basis and SI, substantially in
the form attached hereto as Exhibit G.
"Delaware Act" has the meaning assigned to such term in the Recitals to
this Agreement.
"DGCL" means the Delaware General Corporation Law.
"Disputed Items" has the meaning assigned to such term in Schedule 7.1.
"Distribution Support Agreement" means the Distribution Support Agreement,
dated as of the Closing Date, among Genesis OLP and SI, substantially in the
form attached hereto as Exhibit H.
"DLLCA" has the meaning assigned to such term in the Recitals to this
Agreement.
"Effective Time" has the meaning assigned to such term in Schedule 7.1.
"Employment Agreement" means the employment agreements entered into by
certain officers of Genesis LLC substantially in the form attached hereto as
Exhibit I.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Estimated Basis Adjustment" means $4,298,539, a good faith estimate as of
the date hereof by Basis, in consultation with Genesis OLP, of the amount
necessary to be paid by Basis to Genesis OLP so that no post-closing adjustment
is required pursuant to section 1(b)(i) of Schedule 7.1.
"Excess Basis Cash" means an amount equal to the excess of (x) the Basis
Purchase Cash over (y) $8,700,000.
"Estimated Howell Adjustment" means $2,828,373, a good faith estimate as of
the date hereof by Howell, in consultation with Genesis OLP, of the amount
necessary to be paid by Howell to Genesis OLP so that no post-closing adjustment
is required pursuant to section 1(b)(ii) of Schedule 7.1.
"Excess Howell Cash" means an amount equal to the excess, if any, of (x)
the Howell Purchase Cash over (y) the Howell Affiliate Cash.
"Excess Howell Subordinated LP Units" means a number of Subordinated LP
Units equal to the excess of (x) 1,508,800 Subordinated LP Units over (y) the
Howell Affiliate Subordinated LP Units.
"Excluded Assets" means the assets referred to in Schedule 1.3.
"Excluded Liabilities" means the respective liabilities and obligations of
each Transferor and each of their respective Affiliates: (a) reflected on
Schedule 1.4; (b) for income and franchise taxes; (c) accruing or arising from
or relating to the ownership or operation of the Assets or the Business prior to
the Closing Date by each Transferor and its Affiliates, including, without
limitation, all environmental matters (including those created under CERCLA) and
all ad valorem taxes, real property taxes, federal, state or other income taxes,
sales taxes, personal property taxes, excise, production, severance, gross
receipts and other similar taxes relating to the Assets and the operation of the
Business prior to the Closing Date, including any such income tax liabilities of
the Transferors and their Affiliates that may result from consummation of the
transactions contemplated by this Agreement; (d) for salary, wages, bonus
payments and fringe benefits for employees of each Transferor or its Affiliates
with respect to all periods ending prior to the Closing Date except as otherwise
provided in Section 11 hereto; (e) to third parties for personal injury and/or
property damage occurring prior to the Closing Date or arising out of operation
of the Assets or the Business prior to the Closing Date; (f) to third parties
arising from or attributable to any civil, criminal, administrative, arbitrative
or other such proceedings or government investigations pending against such
Transferor or Affiliate or its Assets prior to the Closing Date or that may be
filed against such Transferor or Affiliate or its Assets on or after the Closing
Date that are attributable to a claim or claims arising prior to the Closing
Date or to the ownership or operation of the Assets or the Business prior to the
Closing Date; (g) any indebtedness of Basis or any of the Howell Entities for
borrowed money; (h) any obligation or liability relating primarily to the
Excluded Assets; and (i) with respect to the Howell Entities the
indemnification obligations of Howell and its Affiliates to Exxon relating to
the purchase of Exxon's pipeline operations pursuant to the Purchase and Sale
Agreement dated February 22, 1995, as amended March 31, 1995; provided, however,
that any accounting adjustment for operating expenses in the ordinary course of
business shall be as of the Effective Date.
"Expertise" means all processes, trade secrets, confidential or proprietary
know-how (to the fullest extent that such know-how can be conveyed), design,
manufacturing, engineering and other drawings, technology, intellectual property
rights, agent agreements, technical information, software, engineering data,
design and engineering specifications relating to the Business, including
Transferor's internally developed computer technology related to the Assets and
the Business.
"Exxon" means Exxon Pipeline Company.
"Exxon Pipeline Statement" has the meaning assigned to such term in Section
3.2(d).
"Exxon Satsuma Facilities Lease Agreement" has the meaning assigned to such
term in Section 4.5(c).
"Final Balance Sheets" means the Basis Final Balance Sheet and the Howell
Final Balance Sheet.
"Final Prospectus" means the prospectus relating to the Common MLP Units
offered in the Public Offering that is first filed pursuant to Rule 424(b) of
the Securities Act or, if no filing pursuant to Rule 424(b) is required, the
final prospectus included in the Registration Statement.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants, in statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be accepted by a significant segment of the accounting
profession, that are applicable to the circumstances as of the date of
determination.
"General Partner Interest" shall mean, with respect to Genesis MLP and
Genesis OLP, an interest in the profits, losses and capital of Genesis MLP and
Genesis OLP, respectively, that provides the holder thereof with the rights and
obligations of a general partner in accordance with MLP Agreement and the OLP
Agreement, respectively.
"Genesis LLC" has the meaning assigned to such term in the opening
paragraph of this Agreement.
"Genesis MLP" has the meaning assigned to such term in the opening
paragraph of this Agreement.
"Genesis OLP" has the meaning assigned to such term in the opening
paragraph of this Agreement.
"Howell" has the meaning assigned to such term in the opening paragraph of
this Agreement.
"Howell Adjusted Working Capital" has the meaning assigned to such term in
Schedule 7.1.
"Howell Affiliate Cash" means the aggregate amount of cash to be paid by
Genesis OLP to Howell Pipeline, Howell Texas, Howell Transportation and Howell
Power pursuant to Sections 2.4(a)(ii) through (a)(v).
"Howell Affiliate Subordinated LP Units" means the aggregate number of
Subordinated LP Units, if any, issued to Howell Pipeline, Howell Texas, Howell
Transportation and Howell Power pursuant to Section 2.4(b).
"Howell Assets" means the Howell Corporation Assets, the Howell Crude
Assets, the Howell Pipeline Assets, the Howell Texas Assets, the Howell
Transportation Assets and the Howell Power Assets.
"Howell Corporation Assets" means the Assets referred to in Schedule 1.1B-
6.
"Howell Crude" has the meaning assigned to such term in the opening
paragraph of this Agreement.
"Howell Crude Assets" means the assets referred to in Schedule 1.1B-1.
"Howell Crude Operations" has the meaning assigned to such term in Section
3.2(d).
"Howell Employee Plans" has the meaning assigned to such term in Section
3.2(m)(ii).
"Howell Employees" has the meaning assigned to such term in Section
3.2(m)(iii).
"Howell Entities" means Howell and the Howell Subsidiaries.
"Howell Final Balance Sheet" has the meaning assigned to such term in
Schedule 7.1.
"Howell Financial Statements" has the meaning assigned to such term in
Section 3.2(d).
"Howell Pipeline" has the meaning assigned to such term in the opening
paragraph of this Agreement.
"Howell Pipeline Assets" means the assets referred to in Schedule 1.1B-2.
"Howell Power" has the meaning assigned to such term in the opening
paragraph of this Agreement.
"Howell Power Assets" means the assets referred to in Schedule 1.1B-5.
"Howell Purchase Cash" means 46% of the Purchase Cash.
"Howell Returns" has the meaning assigned to such term in Section 3.2(h).
"Howell Subsidiaries" means Howell Crude, Howell Texas, Howell Pipeline,
Howell Transportation and Howell Power.
"Howell Taxes" has the meaning assigned to such term in Section 3.2(h).
"Howell Texas" has the meaning assigned to such term in the opening
paragraph of this Agreement.
"Howell Texas Assets" means the assets referred to in Schedule 1.1B-3.
"Howell Transportation" has the meaning assigned to such term in the
opening paragraph of this Agreement.
"Howell Transportation Assets" means the assets referred to in
Schedule 1.1B-4.
"Indemnified Losses" has the meaning assigned to such term in Section 8.1.
"Indemnified Party" has the meaning assigned to such term in Section 8.4.
"Indemnifying Party" has the meaning assigned to such term in Section 8.4.
"Information" has the meaning assigned to such term in Section 14.3.
"Interest" has the meaning assigned to such term in Section 4.1.
"JMP" means JM Petroleum Corporation.
"Laws" means any and all laws, statutes, common law, ordinances, rules or
regulations promulgated by a governmental authority, orders or decrees of a
court or other governmental authority, judicial decisions, decisions of
arbitrators or determinations of any governmental authority or court.
"Liens" means liens, claims, pledges, security interests, charges,
restrictive covenants, easements or encumbrances or title defects of any
nature.
"Limited Partner Interest" shall mean, with respect to Genesis MLP and
Genesis OLP, an interest in the profits, losses and capital of Genesis MLP and
Genesis OLP, respectively, that provides the holder thereof with the rights and
obligations of a limited partner in accordance with the MLP Agreement and the
OLP Agreement, respectively.
"Litigation Records" has the meaning assigned to such term in Section
8.6(b).
"LLC Agreement" the Limited Liability Company Agreement of Genesis LLC
entered into by Basis and Howell, as members, dated as of November 14, 1996.
"LLC Contribution Amount" means an amount equal to 2/98ths of the Net
Offering Proceeds.
"LLC Funding" has the meaning assigned to such term in Section 2.1(c).
"LLC Interest" shall mean, with respect to Genesis LLC, an interest in the
profits, losses and capital of Genesis LLC that provides the holder thereof with
the rights and obligations of a member in accordance with the Members Agreement.
"LLC Over-Allotment Contribution" has the meaning assigned to such term in
Section 2.8(b).
"LLC Plans" has the meaning assigned to such term in Section 11.2.
"LLC Shares" means shares issued pursuant to the LLC Agreement representing
LLC Interests.
"MAE" means a material adverse effect on the business, results of
operations, assets, liabilities or financial condition of the applicable Person
or the Business.
"Make-Whole Payment Request" has the meaning assigned to such term in
Section 4.7.
"Managing General Partner Interest" shall mean, with respect to Genesis
OLP, an interest in the profits, losses and capital of Genesis OLP that provides
the holder thereof with the rights and obligations of the managing general
partner in accordance with the OLP Agreement.
"Members Agreement Addendum" means the addendum dated as of the Closing
Date of the LLC Agreement between Howell and Howell Crude regarding the transfer
of interests in Genesis LLC, in the form of Exhibit J hereto.
"MLP Agreement" has the meaning assigned to such term in the Recitals to
this Agreement.
"MLP Contribution" has the meaning assigned to such term in Section 2.3(b).
"MLP Funding" has the meaning assigned to such term in Section 2.2(c).
"MLP GP Units" means units representing a general partner interest in
Genesis MLP.
"Net MLP Proceeds" means an amount equal to (x) the sum of (i) the Net
Offering Proceeds, plus (ii) the LLC Contribution Amount, minus (y) the
Nonunderwriting Offering Expenses.
"Net Offering Proceeds" means the Public Offering Proceeds less the
Underwriting Discount.
"Net Over-Allotment Proceeds" means the gross proceeds received by Genesis
MLP in connection with the exercise by the Underwriters of the Over-Allotment
Option, less the Over-Allotment UW Discount.
"Non-Competition Agreement" means the agreement, dated as of the Closing
Date, among SI, Basis, Howell, Genesis MLP and Genesis OLP, in substantially the
form attached hereto as Exhibit K.
"Nonunderwriting Offering Expenses" means, any and all fees and other out-
of-pocket expenses (including, without limitation, all Transfer Expenses, fees
and expenses of accountants, attorneys, printers, consultants or other agents)
incurred, paid, payable or provided by Genesis MLP in connection with the
Public Offering; provided, however, Nonunderwriting Offering Expenses shall
not include the Underwriting Discount or the Over-Allotment UW Discount.
"OLP Agreement" has the meaning assigned to such term in the Recitals to
this Agreement.
"OLP Covered Liabilities" has the meaning assigned to such term in Section
4.7.
"OLP Damages" has the meaning assigned to such term in Section 8.1 of this
Agreement.
"OLP Parties" means Genesis OLP and any direct or indirect subsidiary or
Affiliate of Genesis OLP, and any of their respective directors, shareholders,
officers, employees, agents, consultants, customers and representatives.
"Operating General Partner Interest" shall mean, with respect to Genesis
OLP, an interest in the profits, losses and capital of Genesis OLP that provides
the holder thereof with the rights and obligations of an operating general
partner in accordance with the OLP Agreement.
"Organizational Limited Partner" means, with respect to Genesis MLP, Wayne
Kubicek, and with respect to Genesis OLP, Genesis MLP.
"Over-Allotment Common MLP Units" means the Common MLP Units purchased by
the Underwriters upon exercise of the Over-Allotment Option.
"Over-Allotment Contributions" has the meaning assigned to such term in
Section 2.8(e).
"Over-Allotment Option" means the over-allotment option granted to the
Underwriters in the Underwriting Agreement to purchase up to 1,125,000
additional Common MLP Units.
"Over-Allotment UW Discount" means the amount of underwriting discounts and
commissions provided to the Underwriters in connection with the exercise by the
Underwriters of the Over-Allotment Option.
"Party" means each of the Persons who are signatories to this Agreement.
"Per Unit Capital Amount" has the meaning set forth in the OLP Agreement.
"Percentage Interests" has, with respect to Genesis MLP and Genesis OLP,
the meaning assigned to such terms in the MLP Agreement and the OLP Agreement,
respectively.
"Permitted Encumbrances" means any claims or Liens which would not result
in a loss, liability, cost or expense in excess of $5 million each or which do
not secure monetary obligations.
"Person" means an individual, corporation, limited liability company,
partnership, joint venture, trust, unincorporated organization, association,
government agency or political subdivision thereof or other entity.
"Phibro" means Phibro Energy USA, Inc. and any other entity containing the
name "Phibro".
"Pipeline Assets" means all pipelines for the transmission of crude oil and
fixtures related thereto included in the Assets, including interests in real
property relating thereto, but expressly excluding all storage terminals,
station sites and improvements located thereon.
"Pledge Agreement" means the Pledge Agreement dated as of the Closing Date
among Basis, the Howell Entities and Genesis OLP, substantially in the form
attached as Exhibit L.
"Post-Signing Period" means the period beginning on the date hereof and
until the Closing Date.
"Prime Rate" means the U.S. annual interest rate published as the "Prime
Rate" in the Wall Street Journal under the column headed "Money Rates" or such
other title as may succeed such heading for the applicable period in effect from
time to time.
"Proportional Share" means with regard to Basis 54% and to Howell 46%.
"Public Offering" means the initial public offering of Common MLP Units
(including the Over-Allotment Option) pursuant to the terms of the Underwriting
Agreement.
"Public Offering Expenses" means the Nonunderwriting Offering Expenses plus
the Underwriting Discount.
"Public Offering Proceeds" means the gross proceeds received by Genesis MLP
in connection with the Public Offering (excluding gross proceeds received by
Genesis MLP in connection with the exercise by the Underwriters of the Over-
Allotment Option).
"Purchase Cash" means the Net MLP Proceeds minus $5 million.
"Recent Audited Balance Sheet" means (i) with respect to Basis, the balance
sheet as of December 31, 1995 of Basis Petroleum, Inc. Crude Gathering Division
that is included in the Final Prospectus and (ii) with respect to Howell, the
balance sheet as of December 31, 1995 of Howell Crude Operations that is
included in the Final Prospectus.
"Redemption and Registration Rights Agreement" means the Redemption and
Registration Rights Agreement, dated as of the Closing Date, among Genesis MLP,
Genesis OLP, Basis and the Howell Entities, substantially in the form attached
hereto as Exhibit M.
"Refinery Supply Agreement" means the Purchase and Sale Agreement for Crude
Oil dated as of the Closing Date, by and among Basis and Genesis OLP,
substantially in the form attached hereto as Exhibit N.
"Registration Statement" means the Registration Statement on Form S-1
(Registration No. 333-11545) filed with the Securities and Exchange Commission
on behalf of Genesis MLP, as amended or supplemented.
"Representatives" means Salomon Brothers Inc, Smith Barney Inc., Dean
Witter Reynolds Inc., PaineWebber Incorporated and Prudential Securities
Incorporated, as the representatives of the several Underwriters.
"Retained Accounts" has the meaning assigned to such term in Schedule 7.1.
"Securities Act" means the Securities Act of 1933, as amended.
"September Balance Sheet" means (i) with respect to Basis, a balance sheet
of Basis Petroleum, Inc. Crude Gathering Division as of September 30, 1996
prepared in accordance with GAAP and (ii) with respect to Howell, a balance
sheet of Howell Crude Operations as of September 30, 1996 prepared in accordance
with GAAP.
"SI" means Salomon Inc, a Delaware corporation.
"Sponsor" means each of Basis and Howell, but does not include any of the
Howell Subsidiaries.
"Subordinated GP Units" means units representing subordinated general
partner interests in Genesis OLP.
"Subordinated LP Units" means units representing subordinated limited
partner interests in Genesis OLP.
"Subordinated Unit" means a Subordinated LP Unit or a Subordinated GP Unit.
"Supply, Transportation and Purchase Agreement" means the Supply,
Transportation and Purchase Agreement dated as of the Closing Date, by and among
Howell and Genesis OLP, substantially in the form attached hereto as Exhibit O.
"Suspense Account" means an account established by a Transferor to hold
hydrocarbon production revenues where a dispute or question exists as to the
ownership of such revenues.
"Tank Cleaning" means the complete removal and disposal in Howell's name,
to a location away from the Assets, of all water, tank bottoms, sediments,
sludges and residual materials in any of the following Satsuma Station bulk
crude oil storage tanks and associated piping, in each case in compliance with
all applicable Laws: Tanks 1786, 1788, 1789, 1790, 1912, 1913, 1915, and 1916.
"Transaction Documents" means this Agreement, the Agency Agreement, if
applicable, the Ancillary Agreement, each Assignment Agreement (Pipelines), each
Assignment and Assumption Agreement (Station Sites), each Assignment and
Assumption Agreement (Tractors and Other Assets), the Corporate Services
Agreement, the Credit Support Agreement, the Distribution Support Agreement,
Employment Agreements, the Members Agreement Addendum, the restatements of
each of the MLP Agreement and the OLP Agreement in substantially the forms
included in the Final Prospectus, the Non-Competition Agreement, the Pledge
Agreement, the Redemption and Registration Rights Agreement, the Refinery Supply
Agreement, the Supply, Transportation and Purchase Agreement, the Transition
Services Agreement and the Underwriting Agreement.
"Transfer Expenses" means all reasonable out-of-pocket expenses, fees and
costs, including, without limitation all sales, use and similar taxes and
documentary, filing, recording, transfer, deed or conveyance fees or taxes, in
each case, that are reasonably incurred or proposed to be reasonably incurred in
connection with the contributions, conveyances and deliveries to be made
hereunder.
"Transferor" means each of Basis, Howell and the Howell Subsidiaries.
"Transferor Damages" has the meaning assigned to such term in Section 8.2.
"Transferor Parties" means any Transferor and any Affiliate of such
Transferor (including, without limitation, Genesis LLC and, with respect to
Basis, SI), and (unless such Persons are OLP Parties) any of their respective
directors, shareholders, partners, members, officers, employees, agents,
consultants, customers, representatives, successors, transferees or assignees.
"Transition Services Agreement" means the Transition Services Agreement
dated as of the Closing Date, among Genesis LLC, Basis and Howell, substantially
in the form attached hereto as Exhibit P.
"Underallocated Sponsor" has the meaning assigned to such term in Section
4.7.
"Underground Storage Tanks" has the meaning assigned to such term in the
Resource, Conservation and Recovery Act, 42 U.S.C. 6991, as amended, or any
applicable state law.
"Underwriters" means the several Underwriters to be listed in Schedule I
to the Underwriting Agreement.
"Underwriting Agreement" means the Underwriting Agreement of even date
herewith relating to the Public Offering by and among Genesis MLP, Genesis OLP,
Genesis LLC, the Sponsors, SI and the Representatives.
"Underwriting Discount" means the underwriting discounts and commissions
provided to the Underwriters in connection with the Public Offering (excluding
the Over-Allotment UW Discount).
"Usable Tanks" means the following tanks located at the Satsuma Station:
Tanks 1788, 1912, 1913, 1915, and 1916.
ARTICLE 2
CAPITALIZATION AND CONVEYANCE TRANSACTIONS.
On the Closing Date, the transactions described in this Section 2 will
occur in the exact order set forth in this Section 2.
SECTION 2.1 LLC Funding. (a) Simultaneously, (i) with respect to its
540 LLC Shares, Basis shall contribute to Genesis LLC (A) a $ 4.05 million
demand, interest-bearing promissory note and (B) cash in an amount equal to 54%
of the LLC Contribution Amount and (ii) with respect to its 460 LLC Shares,
Howell shall contribute to Genesis LLC (A) a $ 3.45 million demand, interest-
bearing promissory note and (B) cash in an amount equal to 46% of the LLC
Contribution Amount.
(b) Howell shall then contribute its 460 LLC Shares to Howell Crude.
(c) The transactions contemplated by this Section 2.1 shall be
collectively referred to as the "LLC Funding."
SECTION 2.2 MLP Funding. (a) Upon the prior consummation of the LLC
Funding, and simultaneously, (i) Genesis LLC shall contribute to Genesis MLP
cash in an amount equal to the LLC Contribution Amount in exchange for 153,061
MLP GP Units representing a 2% general partner interest in Genesis MLP and (ii)
the Underwriters shall contribute to Genesis MLP cash in an amount equal to the
Net Offering Proceeds in exchange for 7,500,000 Common MLP Units representing a
98% limited partner interest in Genesis MLP.
(b) Genesis MLP shall accept the amounts contributed pursuant to clauses
(a)(i) and (a)(ii) hereof as a contribution to capital.
(c) The transactions contemplated by this Section 2.2 shall be
collectively referred to as the "MLP Funding."
SECTION 2.3 Genesis MLP's Contribution to Genesis OLP. (a) Upon the
prior consummation of the MLP Funding, Genesis MLP shall transfer cash in an
amount equal to the Net MLP Proceeds to Genesis OLP in exchange for 7,653,061
Common GP Units representing a 69.57% Managing General Partner Interest in
Genesis OLP, and Genesis OLP shall accept such cash as a contribution to
capital.
(b) The transactions contemplated by this Section 2.3 shall be
collectively referred to as the "MLP Contribution."
SECTION 2.4 Asset Purchase and Sale. (a) Upon the prior consummation of
the MLP Contribution, and simultaneously,
(i) Basis shall sell, grant, convey, assign, transfer, set over and
deliver to Genesis OLP, its successors and assigns, for its and their own
use forever, all right, title and interest of Basis in and to the tangible
Basis Assets in exchange for cash in the amount of $8,700,000, the
sufficiency of such consideration which is hereby acknowledged,
(ii) Howell Pipeline shall sell, grant, convey, assign, transfer,
set over and deliver to Genesis OLP, its successors and assigns, for its
and their own use forever, all right, title and interest of Howell Pipeline
in and to the Howell Pipeline Assets in exchange for cash in the amount of
$38,818,514, the sufficiency of such consideration which is hereby
acknowledged,
(iii) Howell Texas shall sell, grant, convey, assign, transfer,
set over and deliver to Genesis OLP, its successors and assigns, for its
and their own use forever, all right, title and interest of Howell Texas in
and to the Howell Texas Assets in exchange for cash in the amount of
$44,116,066, the sufficiency of such consideration which is hereby
acknowledged,
(iv) Howell Transportation shall sell, grant, convey, assign,
transfer, set over and deliver to Genesis OLP, its successors and assigns,
for its and their own use forever, all right, title and interest of Howell
Transportation in and to the Howell Transportation Assets in exchange for
cash in the amount of $1,573,000, the sufficiency of such consideration
which is hereby acknowledged, and
(v) Howell Power shall sell, grant, convey, assign, transfer, set
over and deliver to Genesis OLP, its successors and assigns, for its and
their own use forever, all right, title and interest of Howell Power in and
to the Howell Power Assets in exchange for cash in the amount of
$3,586,000, the sufficiency of such consideration which is hereby
acknowledged.
(b) In the event that the Howell Purchase Cash is less than the Howell
Affiliate Cash,
(i) the Howell Purchase Cash shall be paid first to Howell Pipeline,
Howell Transportation and Howell Power with the remainder, if any, to
Howell Texas, and
(ii)Genesis OLP shall issue to each of Howell Pipeline, Howell Texas,
Howell Transportation and Howell Power Subordinated LP Units with an
aggregate Per Unit Capital Amount equal to the difference, in each case,
between the amount to be paid by Genesis OLP to each Howell Subsidiary for
its assets under clause (a) hereof and the amount of Howell Purchase Cash
received by each Howell Subsidiary pursuant to this clause (b).
(c) The transactions contemplated by this Section 2.4 shall be
collectively referred to as the "Asset Purchase and Sale."
SECTION 2.5 Basis' and Howell Crude's Contributions to Genesis OLP. (a)
Upon the prior consummation of the Asset Purchase and Sale, and simultaneously,
(i) Basis shall grant, convey, assign, transfer, set over and deliver
to Genesis OLP, its successors and assigns, for its and their own use
forever, all right, title and interest of Basis in and to all of the
intangible assets associated with its crude oil gathering and marketing
business, including all associated goodwill, going concern value and know-
how, in exchange for (A) the distribution of the Excess Basis Cash, (B)
the issuance of 1,771,200 Subordinated LP Units and (C) the issuance of
36,147 Subordinated GP Units representing a .3286% General Partner Interest
in Genesis OLP, the sufficiency of such consideration which is hereby
acknowledged, and Genesis OLP shall accept such assets as a contribution to
the capital of Genesis OLP, and
(ii) Howell Crude shall grant, convey, assign, transfer, set over
and deliver to Genesis OLP, its successors and assigns, for its and their
own use forever, all right, title and interest of Howell Crude in and to
all of the intangible assets associated with its crude oil gathering and
marketing business, including all associated goodwill, going concern
value, and know-how, in exchange for (A) the distribution of the Excess
Howell Cash, (B) the issuance of the Excess Howell Subordinated LP Units
and (C) the issuance of 30,792 Subordinated GP Units representing a .2799%
General Partner Interest in Genesis OLP, the sufficiency of such
consideration which is hereby acknowledged, and Genesis OLP shall accept
such assets as a contribution to the capital of Genesis OLP.
(b) The transactions contemplated by this Section 2.5 shall be
collectively referred to as the "Basis and Howell Crude Contributions."
SECTION 2.6 Additional LLC Contributions. (a) Upon the prior
consummation of the Basis and Howell Crude Contributions, and simultaneously,
(i) with respect to its 540 LLC Shares, Basis shall transfer to Genesis LLC its
36,147 Subordinated GP Units and (ii) with respect to its 460 LLC Shares, Howell
Crude shall transfer to Genesis LLC its 30,792 Subordinated GP Units. Genesis
LLC shall accept the contributions made pursuant to clauses (a)(i) and (a)(ii)
of this Section 2.6 as additional contributions to its capital.
(b) The transactions contemplated by this Section 2.6 shall be
collectively referred to as the "Additional LLC Contributions."
SECTION 2.7 Clean Up Distributions. (a) Upon the prior consummation of
the Additional LLC Contributions, and simultaneously, Genesis OLP shall
distribute (i) cash in the amount of $10.00 to Genesis LLC with respect to its
General Partner Interest in Genesis OLP and (ii) cash in the amount of $990.00
to Genesis MLP with respect to its organizational Limited Partner Interest in
Genesis OLP. Thereafter, Genesis MLP shall cease to be a limited partner of
Genesis OLP.
(b) Genesis MLP shall distribute (i) cash in the amount of $10.00 to
Genesis LLC with respect to its General Partner Interest in Genesis MLP and (ii)
cash in the amount of $990.00 to Kubicek with respect to his Organizational
Limited Partner Interest in Genesis MLP. Thereafter, Kubicek shall cease to be
a limited partner of Genesis MLP.
(c) Genesis LLC shall distribute (i) cash in the amount of $540.00 to
Basis with respect to its 540 LLC Shares and (ii) cash in the amount of $460.00
to Howell Crude with respect to its 460 LLC Shares.
(d) The transactions contemplated by this Section 2.7 shall be
collectively referred to as the "Clean Up Distributions."
SECTION 2.8 Over-Allotment Contributions. (a) In the event the
Underwriters exercise the Over-Allotment Option, in whole or in part, (i) with
respect to its 540 LLC Shares, Basis shall contribute to Genesis LLC cash in an
amount equal to 54% of the LLC Over-Allotment Contribution and (ii) with respect
to its 460 LLC Shares, Howell shall contribute or cause an Affiliate to
contribute to Genesis LLC cash in an amount equal to 46% of the LLC Over-
Allotment Contribution.
(b) Genesis LLC shall then contribute cash to Genesis MLP in an amount
equal to 2/98ths of the Net Over-Allotment Proceeds (the "LLC Over-Allotment
Contribution") in exchange for an additional number of MLP GP Units equal to
2/98ths of the total number of Over-Allotment Common MLP Units.
(c) Genesis MLP shall then contribute to Genesis OLP cash in an amount
equal to the sum of (i) the Net Over-Allotment Proceeds plus (ii) the LLC Over-
Allotment Contribution in exchange for a number of additional Common GP Units
equal to the sum of (x) the total number of Over-Allotment Common MLP Units
plus (y) the number of additional MLP GP Units issued pursuant to the MLP
Agreement as described therein.
(d) Genesis OLP shall use the cash received pursuant to clause (c) of this
Section 2.8 to redeem from all the holders of Subordinated Units, based on the
relative number of Subordinated Units owned by each such holder, a number of
such Subordinated Units equal to the number of additional Common GP Units issued
to Genesis MLP pursuant to the OLP Agreement as described therein.
(e) The transactions contemplated by this Section 2.8 shall be
collectively referred to as the "Over-Allotment Contributions."
If and to the extent any of the Parties hereto receive funds in connection
with the transactions contemplated by this Section 2 at a time not contemplated
by this Section 2, then such funds shall be deemed held in escrow to be applied
in accordance with this Section 2.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES.
SECTION 3.1 Basis hereby represents and warrants to Genesis OLP as
follows:
(a) Corporate Organization and Subsidiaries.
(i) Basis is a corporation duly organized, validly existing and in
good standing under the laws of the State of Texas and is duly qualified or
licensed as a foreign corporation authorized to do business in each
jurisdiction in which the character of the properties and assets now owned
or held by it, including the Basis Assets, or the nature of the business
now conducted by it requires it to be so licensed or qualified, except in
those jurisdictions where the failure to be so qualified or licensed would
not have a MAE on Basis or the Business. Basis is a wholly owned
subsidiary of SI. Basis has full corporate power and authority to own its
properties and carry on its business, including the Business, as now being
conducted. Basis has delivered to Genesis OLP true, complete and correct
copies of the articles of incorporation and all amendments thereto to the
date hereof and the by-laws as presently in effect for Basis.
(ii)Basis does not own, directly or indirectly, interests in any
partnership that is related to the Basis Assets or the Business. Other
than as set forth on Schedule 1.1A and other than the stock of Basis
Clearing, Inc., Basis does not own, directly or indirectly, any stock or
other equity or profit interest, or have any other investment of any kind,
in any other entity or business, that is necessary to or employed in the
operation of the Basis Assets or the Business.
(b) Authorization. Basis has full corporate power and authority to
execute and deliver each Transaction Document to which it is a party and to
consummate the transactions contemplated thereby. The execution and delivery by
Basis of each Transaction Document to which it is a party and the consummation
by Basis of the transactions contemplated thereby have been duly authorized by
all necessary corporate action on the part of Basis and its stockholder, and no
other corporate action or proceeding on the part of Basis or its stockholder is
necessary to authorize the execution and delivery by Basis of any Transaction
Document to which it is a party or the consummation by Basis of the transactions
contemplated thereby. This Agreement has, and on the Closing Date each other
Transaction Document to which it is a party will have, been duly executed and
delivered by Basis and, assuming each has been duly authorized, executed and
delivered by the other parties thereto, is a legal, valid and binding obligation
of Basis, enforceable against it in accordance with its terms, except as may be
limited by applicable bankruptcy, insolvency and similar laws affecting the
rights of creditors generally or as may be limited by the availability of
equitable remedies, including specific performance, subject to the discretion of
the court before which any proceeding therefor may be brought.
(c) Noncontravention. The execution and delivery of each Transaction
Document, and the consummation of the transactions contemplated hereby and
thereby, will not: (i) violate any provision of the Articles of Incorporation or
By-laws of Basis; (ii) except as set forth on Schedule 3.1(c), violate, or
result with the giving of notice or the passage of time in a violation of any
provision of, or result in the acceleration of or entitle any party to
accelerate (whether after the giving of notice or lapse of time or both) any
obligation under, or entitle any party to terminate any or all of the provisions
of, or result in the creation or imposition of any Lien upon any of the Basis
Assets pursuant to any provision of, or require the consent or approval of any
other party to, any mortgage, lease, license, loan agreement, indenture or other
agreement, instrument or document to which Basis is a party or to or by which
any of the Basis Assets is subject or bound; or (iii) violate or conflict with
any law, order, rule, regulation, arbitration award, judgment or decree to or by
which Basis or any of the Basis Assets is subject or bound; except, in the case
of (ii) and (iii) above, for such violations, conflicts, breaches, defaults,
Liens or encumbrances the existence of which would not have a MAE with respect
to Basis or the Business.
(d) Financial Statements. Basis has previously delivered to Genesis OLP
balance sheets of Basis Petroleum, Inc. Crude Gathering Division as of
December 31, 1994, December 31, 1995 and September 30, 1996 and the related
statements of income and cash flows for Basis Petroleum, Inc. Crude Gathering
Division for the years ended 1993, 1994 and 1995 and the nine-month period ended
September 30, 1996. All of the financial statements referred to above in this
Section 3.1(d) are included in the Prospectus and are herein collectively
referred to as the "Basis Financial Statements." Arthur Andersen LLP
("Andersen") has audited the Basis Financial Statements other than the September
Balance Sheet and the income and cash flow statements for the nine month period
ended September 30, 1996 and furnished an opinion with respect thereto. The
balance sheets included in the Basis Financial Statements fairly present in all
material respects the financial position of Basis and its subsidiaries as of the
respective dates set forth therein and the income statements and statements of
cash flows included in the Basis Financial Statements fairly present in all
material respects the results of operations and the cash flows of Basis and its
subsidiaries for the respective periods set forth therein, in each case in
conformity with GAAP applied on a consistent basis, except as otherwise noted
therein and, in the case of unaudited statements for the period ended
September 30, 1996, for normally recurring year-end adjustments which are not
material.
(e) Condition of Assets. The Basis Assets (other than the real property)
are in good condition, except for ordinary wear and tear and except for such
defects as would not in the aggregate have a MAE with respect to the Business.
Basis has not received any appraisals or engineering reports nor has Basis
conducted any appraisals or engineering reports relating to the condition of any
of the Basis Assets, other than data or reports the contents of which have been
specifically disclosed to Genesis OLP and to Howell.
(f) Information Included in Registration Statement. The information
supplied or to be supplied by Basis for inclusion in the Registration Statement,
as of the time the Registration Statement becomes effective, does not contain
any untrue statement of a material fact or omit a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading.
(g) Absence of Certain Changes or Events. Except as reflected in Schedule
3.1(g)) as specifically set forth herein, or, as expressly permitted or
described elsewhere in the Transaction Documents or as disclosed in the
Prospectus since the September Balance Sheet, Basis has not:
(i) incurred any material liability whether absolute or contingent,
with respect to the Basis Assets or the Business taken as whole except (a)
trade or business obligations or liabilities incurred in the ordinary
course of business, (b) obligations under any contracts or commitments made
in the ordinary course of business and (c) sales, income, franchise, ad
valorem, severance and windfall profit taxes and assessments accruing or
becoming payable in the ordinary course of business;
(ii)purchased or redeemed any shares from, or declared or made any
payment or distribution to, any stockholders of Basis, except such payments
or distributions consisting of Excluded Assets or as reflected on Schedule
7.1;
(iii) issued or authorized the issuance of any securities or any
options, warrants or rights to purchase any securities that relate to the
Basis Assets or the Business;
(iv)disposed of or acquired any material assets or business to be
included in the Basis Assets or Business (other than the Excluded Assets)
or canceled any debts or claims except in the ordinary course of business;
(v) suffered any extraordinary losses or any damage, destruction or
other casualty losses with respect to the Basis Assets, or waived any
rights of substantial value, except as would not have, individually or in
the aggregate, a MAE with respect to the Business;
(vi)entered into any material transaction with respect to the Basis
Assets or the Business other than in the ordinary course of business;
(vii) had, individually or in the aggregate, any material adverse
change in its business, assets, liabilities, financial condition or results
of operations with respect to the Basis Assets or the Business or such that
would have a MAE on the Basis Assets or the Business, except for any change
resulting from general economic, market or financial conditions and for any
change resulting from conditions or circumstances generally affecting the
industry in which the Business operates or which have been specifically
disclosed to Genesis OLP and to Howell;
(viii) given any promise, assurance or guaranty of the payment,
discharge or fulfillment of any obligation of any other Person with respect
to the Assumed Liabilities or the Basis Assets or the Business after the
Closing Date except in the ordinary course of business;
(ix)had any actual or, to the knowledge of Basis, threatened
cancellation or nonrenewal of customer agreements or adverse change in the
relationship with any of the significant customers of the Business;
(x) sold or disposed of or otherwise divested itself of the
ownership, possession, custody and control of any corporate books and
records of any nature which, in accordance with past business practices,
are retained for a period of time after their use, creation or receipt with
respect to the Basis Assets or the Business;
(xi)transferred to any stockholder or any Affiliate of any
stockholder any right, property or interest which is necessary in the
operation of the Business other than in the ordinary course of business,
except Excluded Assets and regular cash compensation in accordance with
past practice or pursuant to existing severance agreements with employees
of Basis; or
(xii) engaged in any transaction which gives rise to an
intercompany receivable, payable or loan between Basis and any Affiliate
thereof except in the ordinary course of business.
(h) Taxes. For purposes of this Agreement, "Basis Taxes" shall mean all
federal, state, local and foreign taxes for which Basis is or may be liable.
Basis has taken the position on all tax returns, reports and forms
(collectively, the "Basis Returns") since July 1, 1985 that it is a corporation.
Except as set forth on Schedule 3.1(h), Basis has filed or caused to be filed in
a timely manner (within any applicable extension periods) all Basis Returns
required to be filed. All such Basis Returns when filed were true, complete and
accurate in all material respects except to the extent the same would not have a
MAE on the Basis Assets or the Business. The amounts withheld and paid to
governmental authorities for production, windfall profit and other taxes during
the immediately preceding year are correct in all material respects. To the
best of Basis' knowledge, there are no filed or threatened state or federal tax
Liens relating to the Basis Assets that would have a MAE on the Basis Assets or
the Business.
(i) Title to Properties. Basis has, and will at the Closing have and
shall convey by a recordable instrument, (i) good and indefeasible title to all
owned real property related to the Business, excluding Pipeline Assets, to be
transferred to Genesis OLP by Basis or any of its Affiliates pursuant hereto,
(ii) sufficient title to the portion of the Basis Assets constituting the
Pipeline Assets, if any, to enable Genesis OLP to use the Pipeline Assets as
they have been used in the past and as they are proposed to be used in the
Business and any lack of title to the Pipeline Assets has not had and will not
have a MAE on the Business and will not materially increase the cost of such
use, (iii) valid leasehold interests in Basis' leased real property and leased
personal property and vehicles that are the subject of assigned leases included
in the Basis Assets, and (iv) good title to all other assets and properties,
whether real, personal, mixed or fixtures, included in the Basis Assets, in each
case, with respect to clauses (i) + (iv) hereof, free and clear of all Liens,
except for (a) Liens that are specified as a part of the Assumed Liabilities and
(b) Permitted Encumbrances. Basis enjoys peaceful possession of all its owned
or leased real property, personal property and vehicles relating to the
Business, except as would not have a MAE on the Business, all of which assets
are included on Schedule 1.1A and are reflected on the September Balance Sheet.
No covenants, easements, restrictions, servitudes or rights of way applicable to
the Basis Assets have or can be reasonably expected to have a MAE with respect
to the Business.
(j) Leased Property. To the best knowledge of Basis, Basis is not in
default, and no notice of alleged default has been received by Basis, under any
leases under which Basis is lessee of any of the Basis Assets, no lessor is in
default or alleged to be in default thereunder, and there exists no condition or
event which, after notice or lapse of time or both, would constitute a default
by any party thereto, except as would not have a MAE on the Business. Except as
set forth on Schedule 3.1(j), there are no leases or tenancies of third parties
for any part of the real property, personal property or vehicles included in the
Basis Assets that shall remain in effect at or after the Closing Date, except as
would not have a MAE on the Business.
(k) Patents, Trademarks, Expertise, Etc. There are no patents, trade
names, copyrights or trademarks relating to the Basis Assets or the Business
that are material to the Business. The consummation of the transactions
contemplated by the Transaction Documents will not result in the loss or
material impairment of any of Basis' Expertise; and no proceedings have been
instituted, are pending or, to the best knowledge of Basis, are threatened which
challenge the rights of Basis in respect to Basis' Expertise. To the best
knowledge of Basis, Basis has adequate patent and trademark rights to the
technology used or useful with respect to the Basis Assets or the Business, and
the use thereof is not infringing any patent, copyright, trademark or similar
right of any person. Except as set forth in Schedule 3.1(k), there are no
agreements or arrangements in effect with respect to the marketing,
distribution, licensing or promotion of such technology by any independent
salesperson, distributor, sublicensor, or other remarketer or sales
organization.
(l) Litigation. Except as set forth on Schedule 3.1(l) hereto, there is
not pending or, to the knowledge of Basis, threatened any judicial,
administrative or arbitration action, suit or proceeding against Basis, which
might result in any significant adverse change in the Assumed Liabilities or
have a MAE on the Business, or which questions the validity of any Transaction
Document or any action taken or to be taken in connection therewith.
(m) Employees, Employee Benefit Plans, Labor Matters and Compensation.
(i) Genesis LLC intends to offer employment effective as of January
1, 1997 to all of the employees of Basis actively employed in the Business
under such terms and conditions (including compensation and benefits) as
Genesis LLC may deem appropriate. Basis shall use its reasonable best
efforts to persuade such employees as Genesis LLC may designate to become
employees of Genesis LLC. Basis will not solicit, or in any other manner
attempt to induce, any employee of Genesis LLC to leave the employ of
Genesis LLC. Any severance pay or other severance-related obligations
arising with respect to any employees of Basis, as of the Closing Date or
thereafter, shall be the obligation of Basis except as otherwise provided
in Section 11. Basis will timely pay all its employees who will become
employees of Genesis LLC, their pro rata portion of any bonus otherwise
payable under any bonus payment plan or arrangement of Basis through the
Closing Date.
(ii)Basis has provided Genesis LLC with summaries of all employee
benefit plans, programs and arrangements of Basis (the "Basis Employee
Plans") and each of the documents relating thereto as Genesis LLC shall
reasonably request, as well as a list of employees of Basis who are
actively employed in the Business with a listing of each such employee's
"service" with Basis and such other information as Genesis LLC may
reasonably request.
(iii) Except as described on Schedule 3.1(m), there are no
agreements with, or pending petitions for recognition of, a labor union or
association as the exclusive bargaining agent for any or all employees
currently or formerly employed in the Business, or their respective
dependents (collectively, the "Basis Employees"); no such petitions have
been pending at any time within two years prior to the date of this
Agreement and, to the best knowledge of Basis, there has not been any
organizing effort by any union or other group seeking to represent any
Basis Employees as their exclusive bargaining agent at any time within two
years prior to the date of this Agreement; and there are no labor strikes,
work stoppages or other labor troubles, other than routine grievance
matters, now pending, or, to the best of Basis's knowledge, threatened,
against Basis, nor have there been any such labor strikes, work stoppages
or other labor troubles, other than routine grievance matters, with respect
to the Business at any time within two years prior to the date of this
Agreement.
(iv)Except as set forth on Schedule 3.1(m) or pursuant to the
Transition Services Agreement, since January 1, 1996, Basis (a) has not
entered into any employment or similar contract with, or made any increase
in the compensation payable or to become payable by it to, any Basis
Employee other than in the ordinary course of business, in accordance with
past practice or in accordance with the requirements of applicable Laws,
which will become the obligation of Genesis OLP or Genesis LLC, and (b) has
not contributed or made any commitment to, or representation that it will,
contribute any amounts to any bonus or other Basis Employee Plan, severance
plan or collective bargaining agreement in respect of Basis Employees in
the case of (a) and (b), other than as required by applicable Laws or by
the terms of any such Basis Employee Plan as in effect on the date of the
September Balance Sheet, which will become the obligation of Genesis OLP or
Genesis LLC.
(n) Consents. Except as set forth in Schedule 3.1(n), no consent,
approval, authorization or order of (or registration or filing with) any court
or governmental agency or body is required in connection with the execution,
delivery or performance by Basis of any Transaction Document or in connection
with the transactions contemplated thereby, except for such consents which the
failure to obtain would not have, individually or in the aggregate, a MAE with
respect to the Business.
(o) Contracts. Except as set forth in Schedule 3.1(o) and except for
lessee leases, to the knowledge of Basis with respect to Basis Assets or the
Business, Basis is not a party to, nor bound by, nor are any of the Basis Assets
or the Business subject to:
(i) any contract which (A) has not been entered into or received in
the ordinary course of Basis' business and is not consistent with prior
practice of Basis, or (B) involves the bulk or wellhead purchase, sale or
exchange of in the aggregate more than 5,000 barrels of oil per day;
(ii)any mortgage, pledge or other form of secured indebtedness for
borrowed money;
(iii) any debentures, notes or installment obligations, other than
accounts payable arising in the ordinary course of Basis' business, or
other instruments for or relating to any borrowing of money by Basis;
(iv)any guaranty of any obligation for borrowings or otherwise,
excluding endorsements made for collection, and any other guaranty, which
has not been entered into in the ordinary course of Basis' business;
(v) any agreement or arrangement for the sale or lease of any of the
Basis Assets (other than inventory and other than in the ordinary course of
business) or for the sale of inventory other than in the ordinary course of
business;
(vi)any contract pursuant to which Basis is obligated to make
payments, contingent or otherwise, on account of or arising out of the
prior acquisition of the business, or all or substantially all of the
assets or stock, of other companies or any division thereof; or
(vii) any other contract, agreement or other instrument not
entered into in the ordinary course of business which is material to the
Business and not excluded by reason of the provisions of clauses (i)
through (vi), inclusive, of this subsection.
Except as would not have a MAE with respect to the Business, all contracts
referred to in Schedule 3.1(o) which are contracts assigned to Genesis OLP are
legal, valid and binding obligations of Basis enforceable against it in
accordance with their terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency and similar laws affecting the rights of
creditors generally or as may be limited by the availability of equitable
remedies, including specific performance, subject to the discretion of the court
before which any proceeding therefor may be brought. Except as set forth on
Schedule 3.1(o), such assigned contracts have not been amended except in the
ordinary course of business and additions or deletions of leases pursuant to
such assigned contracts in the ordinary course of business. To the best
knowledge of Basis, (i) Basis is not in default, and no notice of alleged
default has been received by Basis, under any of such contracts which are
assigned contracts and (ii) no other party thereto is in default or alleged to
be in default thereunder. Except as separately identified in Schedule 3.1(o),
each of the assigned contracts of Basis set forth on Schedule 3.1(o) may be
assigned by Basis to Genesis OLP without the consent of any Person, except such
as would not have a MAE with respect to the Business or for which consent has
been obtained. To the best knowledge of Basis, the rights of Basis under all
assigned contracts that are set forth in Schedule 3.1(o) are owned or possessed
by Basis free and clear of all Liens, except such as would not have a MAE with
respect to the Business. Except as set forth on Schedule 3.1(o), Basis does
not know of any cancellation, and Basis has not received any written threat to
cancel or not to renew or extend, any such contract which is an assigned
contract by or from any other party thereto. To the extent that there are any
exchange imbalances relating to assigned contracts that are contracts for the
exchange of liquid hydrocarbons, such imbalances are to be settled in the
ordinary course of business and consistent with past practice and would not have
a MAE on the Business.
(p) Broker's and Finder's Fees. Basis is not obligated to pay, nor has
Basis retained any broker or finder or any other Person who is entitled to, any
broker's or finder's fee or any other commission or financial advisory fee based
on any agreement or undertaking made by or on behalf of Basis in connection with
the transactions contemplated hereby or in the Transaction Documents, except
pursuant to the Underwriting Agreement.
(q) Environmental Matters.
(i) Except as set forth in Schedule 3.1(q), Basis has not and does
not handle, treat, store or dispose of, on Basis' owned or leased real
property or easements included in the Basis Assets, any wastes (including,
without limitation, hazardous or toxic wastes but excluding ordinary
garbage and trash and further excluding the handling and storage of crude
oil, condensate, motor fuels, lubricants and solvents for use in the
Business) or hazardous or toxic substances. Except as set forth in
Schedule 3.1(q), any such handling, treatment, storage or disposal has been
conducted in compliance with all applicable Laws, except where the failure
to so comply would not, individually or in the aggregate, have a MAE on the
Business.
(ii) Except as set forth on Schedule 3.1(q), the Business relating to
Basis as currently being operated meets and as operated at all times during
the three-year period prior to the date hereof met, all applicable federal,
state and local requirements with respect to air and water quality,
pipeline safety, and the handling, treatment, storage and disposal of
wastes or by-products (including hazardous or toxic wastes, if any) and
hazardous or toxic substances generated by Basis, where any failure to
meet, or during the three-year period prior to the date hereof any failure
to have met, such requirements would have a MAE on the Business. Basis has
given to pertinent government authorities all notices required pursuant to
the Clean Air Act, 42 U.S.C. 7401 et seq., the Clean Water Act, 42 U.S.C.
1251 et seq., the Toxic Substances Control Act, 15 U.S.C. 2601 et seq.,
the Solid Waste Disposal Act, as amended by the Resource, Conservation and
Recovery Act, 42 U.S.C. 6901 et seq., CERCLA, and all other federal,
state and local environmental Laws, where any failure to give such notices
would have a MAE on the Business, or would materially and adversely affect
Basis' ability to consummate the transactions contemplated by the
Transaction Documents. Except as listed on Schedule 3.1(q), Basis has not
since the date five years prior to the date hereof received any order or
notice of violation or noncompliance from, or been the subject of any
regulatory audit or investigation (other than any periodic investigation or
inspection of a routine nature) by, any governmental authority in
connection with the ownership or operation of the Basis Assets or the
Business or as a potentially responsible party in connection with any waste
disposal facility, except where such violations or noncompliance would not
have a MAE with respect to the Business.
(iii) With respect to the operation of the Basis Assets, Basis has
not handled, treated, stored, recycled, reclaimed or disposed of, or
arranged for the handling, treatment, storage, recycling or reclamation or
disposal of, any wastes or by-products (including hazardous or toxic
wastes) or hazardous or toxic substances on any property other than the
sites disclosed on Schedule 3.1(q).
(iv)To the best knowledge of Basis, there are no Underground Storage
Tanks on the owned or leased real property or easements included in the
Basis Assets, and any Underground Storage Tanks that may have been on
Basis' owned or leased real property were removed, and any soil
contaminated as a result of such Underground Storage Tanks was remediated
in accordance with all applicable Laws. Except as set forth on Schedule
3.1(q), none of the improvements owned or used by Basis on such owned or
leased real property or easements contain, to the knowledge of Basis, any
friable asbestos, nor does any equipment owned or used, except for
electrical transformers owned and in service by third parties, by Basis on
such owned or leased real property or easements contain, to the knowledge
of Basis, any polychlorinated biphenyls at least greater than 50 parts per
million.
(v) With respect to environmental matters, all financial assurances
required by governmental authorities for the lawful operation of the Basis
Assets are in place and fully funded as described on Schedule 3.1(q).
(r) Public Utility Status. Basis is not (i) a "public utility company", a
"holding company" or an "affiliate" of a "holding company" as those terms are
defined in the Public Utility Holding Company Act of 1935, (ii) a "gas utility",
"public utility" or "utility" as those terms are defined in Article 6050 of the
Revised Civil Statutes of Texas or (iii) a "public utility" or "utility" as
those terms are defined in the Public Utility Regulatory Act of Texas or under
the applicable laws of any state in which Basis does business.
(s) Authorities, Permits, Tariffs and Regulatory Authorizations.
(i) Basis has no common carrier pipelines relating to the Business or
the Basis Assets and is licensed and qualified to own and operate any and
all trucks, tractors and trailers leased, owned or operated by, for or on
behalf of Basis in connection with the Basis Assets or the Business and
holds all necessary certificates, permits or other regulatory
authorizations to own and operate the Basis Assets as utilized in the
Business presently and during the past twelve months, except where the
failure to be so qualified or licensed would not have a MAE on the
Business.
(ii)Except as set forth on Schedule 3.1(s), (a) Basis has complied
with all federal, state and local Laws, including, without limitation, the
rules and regulations of all governmental agencies having authority over it
and any such Laws, concerned with export and import licenses, occupational
safety, environmental protection and employment practices, relating to the
Business, (b) Basis has complied with each and all permits and tariffs,
including any required filings and renewals, and no default exists with
respect thereto, and (c) Basis has not received written notice of violation
of any such rules or regulations, corrected or not, since January 1, 1996,
except, in the cases of (a) and (b) where such violations or noncompliance
would not have a MAE with respect to the Business. Basis has not received
from any governmental authority any written notice since January 1, 1996,
of any currently proposed public improvement which would impose a Lien upon
any of the Basis Assets, except as would not have a MAE with respect to the
Business.
(t) Suspense Accounts. Basis has maintained each of its Suspense Accounts
for third party sellers of crude oil in accordance with all applicable Laws,
including, without limitation, applicable escheat laws, except as would not have
a MAE with respect to the Business.
(u) Third Party Rights. Except as set forth in Schedule 3.1(u), no party
has any right, whether or not exercisable after notice or lapse of time or any
triggering event, to purchase any material part of the Basis Assets (other than
crude oil transactions in the ordinary course of business). Except as set forth
in Schedule 3.1(u), no agreement binding on Basis or the Business contains any
provision which would impose material limitations on Genesis OLP or any of its
Affiliates or their respective business practices through a noncompetition, an
area of interest or similar type of provision.
(v) Prepayment. Basis is not obligated by virtue of any express or
implied contract or agreement to deliver at some future time oil, gas or
products thereof, without receiving at such time a commitment for full payment
in accordance with usual business practice. Except as provided for in Schedule
7.1, Basis has not received any prepayment for any oil or gas to be sold, or for
services, including transportation, treating or storage, to be rendered with
respect to which Genesis OLP could have any liability.
(w) Investment Representation. Basis is acquiring the Subordinated LP
Units for its own account and not with a view to or for sale in connection with
any distribution thereof, and will not sell or transfer the Subordinated LP
Units except pursuant to an effective registration statement under the
Securities Act, and the rules and regulations promulgated thereunder or an
exemption therefrom and in compliance with all state securities and blue sky
laws; provided, however, it is understood that Basis may transfer the
Subordinated LP Units to Affiliates of Basis and to John vonBerg under the
circumstances described in the Final Prospectus, and that the Subordinated LP
Units will bear an appropriate legend relating to such restriction on transfer
and to restrictions on transfer under the Securities Act and the regulations
thereunder. Basis is an "accredited investor" as defined in Rule 501(a) under
the Securities Act.
SECTION 3.2 Each of the Howell Entities hereby represents and warrants to
Genesis OLP as follows:
(a) Corporate Organization and Subsidiaries.
(i) Each of the Howell Entities is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware and is duly qualified or licensed as a foreign corporation
authorized to do business in each jurisdiction in which the character of
the properties and assets now owned or held by it, including the Howell
Assets, or the nature of the business now conducted by it requires it to be
so licensed or qualified, except in those jurisdictions where the failure
to be so qualified or licensed would not have a MAE on such entities as a
whole or the Business. Each of the Howell Entities has full corporate
power and authority to own its properties and carry on its business,
including the Business, as now being conducted. Each of the Howell
Subsidiaries is a direct or indirect wholly owned subsidiary of Howell.
Howell has delivered to Genesis OLP true, complete and correct copies of
the certificate of incorporation and all amendments thereto to the date
hereof and the by-laws as presently in effect for each of the Howell
Entities.
(ii)None of the Howell Entities owns, directly or indirectly,
interests in any partnership that is related to the Howell Assets or the
Business. Other than as set forth on Schedule 1.1B and other than stock of
the Howell Subsidiaries, none of the Howell Entities owns, directly or
indirectly, any stock or other equity or profit interest, or have any other
investment of any kind, in any other entity or business, that is necessary
to or employed in the operation of the Howell Assets or the Business.
(b) Authorization. Each of the Howell Entities has full corporate power
and authority to execute and deliver each Transaction Document to which it is a
party and to consummate the transactions contemplated thereby. The execution
and delivery of each Transaction Document by each of the Howell Entities to
which it is a party, and the consummation by each Howell Entity of the
transactions contemplated thereby have been duly authorized by all necessary
corporate action on the part of each of the Howell Entities and their
stockholders, and no other corporate action or proceeding on the part of any
Howell Entity or its stockholders is necessary to authorize the execution and
delivery by the Howell Entities of any Transaction Document to which it is a
party or the consummation by each Howell Entity of the transactions contemplated
thereby. This Agreement has, and on the Closing Date each other Transaction
Document will have, been duly executed and delivered by each Howell Entity which
is a party and, assuming each has been duly authorized, executed and delivered
by the other parties thereto, is a legal, valid and binding obligation of each
Howell Entity party thereto, enforceable against it in accordance with its
terms, except as may be limited by applicable bankruptcy, insolvency and similar
laws affecting the rights of creditors generally or as may be limited by the
availability of equitable remedies, including specific performance, subject to
the discretion of the court before which any proceeding therefor may be brought.
(c) Noncontravention. The execution and delivery of each Transaction
Document, and the consummation of the transactions contemplated thereby, will
not: (i) violate any provision of the Certificate of Incorporation or By-laws of
any Howell Entity; (ii) except as set forth on Schedule 3.2(c), violate, or
result with the giving of notice or the passage of time in a violation of any
provision of, or result in the acceleration of or entitle any party to
accelerate (whether after the giving of notice or lapse of time or both) any
obligation under, or entitle any party to terminate any or all of the provisions
of, or result in the creation or imposition of any Lien upon any of the Howell
Assets pursuant to any provision of, or require the consent or approval of any
other party to, any mortgage, lease, license, loan agreement, indenture or other
agreement, instrument or document to which any Howell Entity is a party or to or
by which any of the Howell Assets is subject or bound; or (iii) violate or
conflict with any Law, order, arbitration award, judgment or decree to or by
which any Howell Entity or any of the Howell Assets is subject or bound; except,
in the case of (ii) and (iii) above, for such violations, conflicts, breaches,
defaults, Liens or encumbrances the existence of which would not, individually
or in the aggregate, have a MAE with respect to the Howell Entities taken as a
whole or the Business.
(d) Financial Statements. Howell has previously delivered to Genesis OLP
balance sheets of the combination of Howell Crude and its wholly-owned
subsidiaries and the crude oil transportation operations of Howell
Transportation (collectively referred to as "Howell Crude Operations") as of the
end of each of the fiscal periods ended December 31, 1994, December 31, 1995 and
September 30, 1996 and the related statements of income and statement of cash
flow for the annual fiscal periods of 1993, 1994 and 1995 and nine month period
ended September 30, 1996. All of the financial statements referred to above in
this Section 3.2(d) are included in the Prospectus and are herein collectively
referred to as the "Howell Financial Statements." Deloitte & Touche LLP has
audited the Howell Financial Statements other than the September Balance Sheet
and the income and cash flow statements for the nine month period ended
September 30, 1996 and furnished an opinion with respect thereto. The balance
sheets included in the Howell Financial Statements fairly present in all
material respects the financial position of Howell Crude Operations as of the
respective dates set forth therein, and the income statements and statements of
cash flows included in the Howell Financial Statements fairly present in all
material respects the results of operations and the cash flows of Howell and its
subsidiaries for the respective periods set forth therein, in each case in
conformity with GAAP applied on a consistent basis, except as otherwise noted
therein and, in the case of unaudited statements for the period ended
September 30, 1996, for normally recurring year-end adjustments which are not
material. Howell has also previously delivered to Genesis OLP a statement of
revenue and direct operating expenses relating to the Howell Assets acquired
from Exxon (the "Exxon Pipeline Statement") as of the end of each of the fiscal
periods ended December 31, 1992, December 31, 1993, December 31, 1994 and March
31, 1995. Price Waterhouse LLP audited the Exxon Pipeline Statement, except for
the fiscal period ending March 31, 1995 and furnished an opinion with respect
thereto.
(e) Condition of Assets. The Howell Assets (other than the real property)
are in good condition, except for ordinary wear and tear and except for such
defects as would not in the aggregate have a MAE with respect to the Business.
Howell has not received any appraisals or engineering reports nor has Howell
conducted any appraisals or engineering reports relating to the condition of any
of the Howell Assets, other than data or reports the contents of which have been
specifically disclosed to Genesis OLP and to Basis.
(f) Information Included in Registration Statement. The information
supplied or to be supplied by the Howell Entities for inclusion in the
Registration Statement, as of the time the Registration Statement becomes
effective, does not contain any untrue statement of a material fact or omit a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading.
(g) Absence of Certain Changes or Events. Except as reflected in Schedule
3.2(g) or as specifically set forth herein, or, as expressly permitted or
described elsewhere in the Transaction Documents or as disclosed in the
Prospectus since the September Balance Sheet, no Howell Entity has:
(i) incurred any material liability whether absolute or contingent,
with respect to the Howell Assets or the Business taken as a whole, except
(A) trade or business obligations or liabilities incurred in the ordinary
course of business, (B) obligations under any contracts or commitments made
in the ordinary course of business, (C) sales, income, franchise, ad
valorem, severance and windfall profit taxes and assessments accruing or
becoming payable in the ordinary course of business and (D) as expressly
permitted elsewhere in the Transaction Documents;
(ii)purchased or redeemed any shares from, or declared or made any
payment or distribution to, any stockholders of Howell or the Howell
Subsidiaries, except such payments or distributions consisting of Excluded
Assets or as reflected on Schedule 7.1;
(iii) issued or authorized the issuance of any securities or any
options, warrants or rights to purchase any securities that relate to the
Howell Assets or the Business;
(iv)disposed of or acquired any material assets or business to be
included in the Howell Assets or Business (other than the Excluded Assets)
or canceled any debts or claims except in the ordinary course of business;
(v) suffered any extraordinary losses or any damage, destruction or
other casualty losses with respect to the Howell Assets, or waived any
rights of substantial value, except as would not, individually or in the
aggregate, have a MAE with respect to the Business;
(vi)entered into any material transaction with respect to the Howell
Assets or the Business other than in the ordinary course of business;
(vii) had, individually or in the aggregate, any material adverse
change in its business, assets, liabilities, financial condition or results
of operations, with respect to the Howell Assets or the Business or such
that would have a MAE on the Howell Assets or the Business, except for any
change resulting from general economic, market or financial conditions and
for any change resulting from conditions or circumstances generally
affecting the industry in which the Business operates or which have been
specifically disclosed to Genesis OLP and to Basis;
(viii) given any promise, assurance or guaranty of the payment,
discharge or fulfillment of any obligation of any other person or entity
with respect to the Assumed Liabilities or the Howell Assets or the
Business after the Closing Date except in the ordinary course of business;
(ix)had any actual or, to the knowledge of Howell, threatened
cancellation or nonrenewal of customer agreements or adverse change in the
relationship with any of the significant customers of the Business;
(x) sold or disposed of or otherwise divested itself of the
ownership, possession, custody and control of any corporate books and
records of any nature which, in accordance with past business practices,
are retained for a period of time after their use, creation or receipt with
respect to the Howell Assets or the Business;
(xi)transferred to any stockholder or any Affiliate of any
stockholder any right, property or interest which is necessary in the
operation of the Business other than in the ordinary course of business,
except Excluded Assets and regular cash compensation in accordance with
past practice or pursuant to existing severance agreements with employees
of any Howell Entity; or
(xii) engaged in any transaction which gives rise to an
intercompany receivable, payable or loan between any Howell Entity and any
Affiliate thereof except in the ordinary course of business.
(h) Taxes. For purposes of this Agreement, "Howell Taxes" shall mean all
federal, state, local and foreign taxes for which any Howell Entity is or may be
liable. Howell has taken the position on all tax returns, reports and forms
(collectively, "Howell Returns") since its incorporation that it is a
corporation. Except as set forth on Schedule 3.2(h), Howell has filed or caused
to be filed in a timely manner (within any applicable extension periods) all
Howell Returns required to be filed. All such Howell Returns when filed were
true, complete and accurate in all material respects except to the extent the
same would not have a MAE on the Howell Assets or the Business. The amounts
withheld and paid to governmental authorities for production, windfall profit
and other taxes during the immediately preceding year are correct in all
material respects. To the best of Howell's knowledge, there are no filed or
threatened state or federal tax Liens relating to the Howell Assets that would
have a MAE on the Howell Assets or the Business.
(i) Title to Properties. Each of the Howell Entities has, and will at the
Closing have and shall convey by a recordable instrument, (i) good and
indefeasible title to all owned real property related to the Business, excluding
Pipeline Assets, to be transferred to Genesis OLP by Howell or any of its
Affiliates pursuant hereto, (ii) sufficient title to the portion of the Howell
Assets constituting the Pipeline Assets to enable Genesis OLP to use the
Pipeline Assets as they have been used in the past and as they are proposed to
be used in the Business and any lack of title to the Pipeline Assets has not had
and will not have a MAE on the Business and will not materially increase the
cost of such use, (iii) valid leasehold interests in each of the Howell
Entities' leased real property and leased personal property and vehicles that
are the subject of assigned leases included in the Howell Assets, and (iv) good
title to all other assets and properties, whether real, personal, mixed or
fixtures, included in the Howell Assets, in each case, with respect to clauses
(i) + (iv) hereof, free and clear of all Liens, except for (a) Liens that are
specified as a part of the Assumed Liabilities and (b) Permitted Encumbrances.
Each of the Howell Entities enjoys peaceful possession of all its owned or
leased real property, personal property and vehicles relating to the Business,
except as would not have a MAE on the Business, all of which assets are included
on Schedule 1.1B and are reflected on the September Balance Sheet. No
covenants, easements, restrictions, servitudes or rights of way applicable to
the Howell Assets have or can be reasonably expected to have a MAE with respect
to the Business.
(j) Leased Property. To the best knowledge of Howell, none of the Howell
Entities is in default, and no notice of alleged default has been received by
the Howell Entities, under any leases under which a Howell Entity is lessee of
any of the Howell Assets, no lessor is in default or alleged to be in default
thereunder, and there exists no condition or event which, after notice or lapse
of time or both, would constitute a default by any party thereto, except as
would not have a MAE on the Business. Except as set forth on Schedule 3.2(j),
there are no leases or tenancies of third parties for any part of the real
property, personal property or vehicles included in the Howell Assets that
shall remain in effect at or after the Closing Date, except as would not have a
MAE on the Business.
(k) Patents, Trademarks, Expertise, Etc. There are no patents, trade
names, copyrights or trademarks relating to the Howell Assets or the Business
that are material to the Business. The consummation of the transactions
contemplated by the Transaction Documents will not result in the loss or
material impairment of any of the Howell Entities' Expertise; and no proceedings
have been instituted, are pending or, to the best knowledge of Howell, are
threatened which challenge the rights of any Howell Entity in respect to its
Expertise. To the best knowledge of Howell, each Howell Entity has adequate
patent and trademark rights to the technology used or useful with respect to the
Howell Assets or the Business, and the use thereof is not infringing any patent,
copyright, trademark or similar right of any person. Except as set forth in
Schedule 3.2(k), there are no agreements or arrangements in effect with respect
to the marketing, distribution, licensing or promotion of such technology by any
independent salesperson, distributor, sublicensor, or other remarketer or sales
organization.
(l) Litigation. Except as set forth on Schedule 3.2(l) hereto, there is
not pending or, to the knowledge of Howell, threatened any judicial,
administrative or arbitration action, suit or proceeding against Howell or any
of the Howell Subsidiaries, which might result in any significant adverse change
in the Assumed Liabilities or have, individually or in the aggregate, a MAE on
the Business, or which questions the validity of any Transaction Document or any
action taken or to be taken in connection therewith.
(m) Employees and Employee Benefit Plans, Labor Matters and Compensation.
(i) Genesis LLC intends to offer employment effective as of January
1, 1997 to all of the employees of the Howell Entities actively employed in
the Business under such terms and conditions (including compensation and
benefits) as Genesis LLC may deem appropriate. Howell shall use its
reasonable best efforts to persuade such employees as Genesis LLC may
designate to become employees of Genesis LLC. Howell will not solicit, or
in any other manner attempt to induce, any employee of Genesis LLC to leave
the employ of Genesis LLC. Any severance pay or other severance-related
obligations arising with respect to any employees of Howell or its
Affiliates, as of the Closing Date or thereafter, shall be the obligation
of Howell except as otherwise provided in Section 11 hereto. Howell will
timely pay all its employees and its Affiliates' employees, including those
who will become employees of Genesis LLC, their pro rata portion of any
bonus otherwise payable under any bonus payment plan or arrangement of
Howell or its Affiliates through the Closing Date.
(ii)Howell has provided Genesis LLC with summaries of all employee
benefit plans, programs and arrangements of Howell ("Howell Employee
Plans") and each of the documents relating thereto as Genesis LLC shall
reasonably request, as well as a list of employees of Howell who are
actively employed in the Business with a listing of each such employee's
"service" with Howell and such other information as Genesis LLC may
reasonably request.
(iii) Except as described on Schedule 3.2(m), there are no
agreements with, or pending petitions for recognition of, a labor union or
association as the exclusive bargaining agent for any employees currently
or formerly employed in the Business, or their respective dependents
(collectively, the "Howell Employees"); no such petitions have been pending
at any time within two years prior to the date of this Agreement or in the
case of the Exxon Pipeline Acquisition since April 1, 1995 and, to the best
knowledge of Howell, there has not been any organizing effort by any union
or other group seeking to represent any Howell Employees as their exclusive
bargaining agent at any time within two years prior to the date of this
Agreement; and there are no labor strikes, work stoppages or other labor
troubles, other than routine grievance matters, now pending, or, to the
best of Howell's knowledge, threatened, against Howell, nor have there been
any such labor strikes, work stoppages or other labor troubles, other than
routine grievance matters, with respect to the Business at any time within
two years prior to the date of this Agreement.
(iv)Except as set forth on Schedule 3.2(m) or pursuant to the
Transition Services Agreement, since January 1, 1996, no Howell Entity (a)
has entered into any employment or similar contract with, or made any
increase in the compensation payable or to become payable by it to, any
Howell Employee other than in the ordinary course of business, in
accordance with past practice or in accordance with the requirements of
applicable Law, which will become the obligation of Genesis OLP or Genesis
LLC, (b) has contributed or made any commitment to, or representation that
it will, contribute any amounts to any bonus or other Howell Employee Plan,
severance plan or collective bargaining agreement in respect of Howell
Employees in the case of (a) and (b), other than as required by applicable
Law or by the terms of any such Howell Employee Plan as in effect on the
September Balance Sheet, which will become the obligation of Genesis OLP or
Genesis LLC.
(n) Consents. Except as set forth in Schedule 3.2(n), no consent,
approval, authorization or order of (or registration or filing with) any court
or governmental agency or body is required in connection with the execution,
delivery or performance by any Howell Entity of any Transaction Document or in
connection with the transactions contemplated thereby, except for such consents
the failure to obtain which would not have, individually or in the aggregate, a
MAE with respect to the Business.
(o) Contracts. Except as set forth in Schedule 3.2(o) and except for
lessee leases, to the knowledge of Howell with respect to the Howell Assets or
the Business, no Howell Entity is a party to, nor bound by, nor are any of the
Howell Assets or the Business subject to:
(i) any contract which (A) has not been entered into or received in
the ordinary course of business of the Howell Entities and which is not
consistent with prior practice of the Howell Entities, or (B) involves the
bulk or wellhead purchase, sale or transfer of in the aggregate more than
5,000 barrels of oil per day;
(ii)any mortgage, pledge or other form of secured indebtedness for
borrowed money;
(iii) any debentures, notes or installment obligations, other than
accounts payable arising in the ordinary course of business of the Howell
Entities, or other instruments for or relating to any borrowing of money by
any Howell Entity;
(iv)any guaranty of any obligation for borrowings or otherwise,
excluding endorsements made for collection, and any other guaranty, which
has not been entered into in the ordinary course of business of the Howell
Entity;
(v) any agreement or arrangement for the sale or lease of any of the
Howell Assets (other than inventory and other than in the ordinary course
of business) or for the sale of inventory other than in the ordinary course
of business;
(vi)any contract pursuant to which a Howell Entity is obligated to
make payments, contingent or otherwise, on account of or arising out of the
prior acquisition of the business, or all or substantially all of the
assets or stock, of other companies or any division thereof; or
(vii) any other contract, agreement or other instrument not
entered into in the ordinary course of business which is material to the
Business and not excluded by reason of the provisions of clauses (i)
through (vi), inclusive, of this subsection.
Except as would not have a MAE with respect to the Business, all contracts
referred to in Schedule 3.2(o) which are contracts assigned to Genesis OLP are
legal, valid and binding obligations of the Howell Entities enforceable against
them in accordance with their terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency and similar laws affecting the
rights of creditors generally or as may be limited by the availability of
equitable remedies, including specific performance, subject to the discretion of
the court before which any proceeding therefor may be brought. Except as set
forth on Schedule 3.2(o), such assigned contracts have not been amended except
in the ordinary course of business and additions or deletions of leases pursuant
to such assigned contracts in the ordinary course of business. To the best
knowledge of Howell, (i) none of the Howell Entities is in default, and no
notice of alleged default has been received by any Howell Entity, under any of
such contracts which are assigned contracts and (ii) no other party thereto is
in default or alleged to be in default thereunder. Except as separately
identified in Schedule 3.2(o), each of the assigned contracts of the Howell
Entities set forth on Schedule 3.2(o) may be assigned by the Howell Entities to
Genesis OLP without the consent of any Person except such, individually or in
the aggregate, as would not have a MAE on the Business or for which consent has
been obtained. To the best knowledge of Howell, the rights of the Howell
Entities under all assigned contracts that are set forth in Schedule 3.2(o) are
owned or possessed by the Howell Entities free and clear of all Liens, except
such as would not have a MAE with respect to the Business. Except as set forth
on Schedule 3.2(o), Howell does not know of any cancellation, and no Howell
Entities has received any written threat to cancel or not to renew or extend,
any such contract which is an assigned contract by or from any other party
thereto. To the extent that there are any exchange imbalances relating to
assigned contracts that are contracts for the exchange of liquid hydrocarbons,
such imbalances are to be settled in the ordinary course of business and
consistent with past practice and would not have a MAE on the Business.
(p) Broker's and Finder's Fees. Neither Howell nor any of its Affiliates
is obligated to pay, nor has any of them retained any broker or finder or any
other Person who is entitled to, any broker's or finder's fee or any other
commission or financial advisory fee based on any agreement or undertaking made
by or on behalf of Howell nor any of its Affiliates in connection with the
transactions contemplated in the Transaction Documents, except pursuant to the
Underwriting Agreement.
(q) Environmental Matters.
(i) Except as set forth in Schedule 3.2(q), none of the Howell
Entities have and none handle, treat, store or dispose of, on the Howell
Entities' owned or leased real property or easements included in the Howell
Assets, any wastes (including, without limitation, hazardous or toxic
wastes but excluding ordinary garbage and trash and further excluding the
handling and storage of crude oil, condensate, motor fuels, lubricants and
solvents for use in the Business) or hazardous or toxic substances. Except
as set forth in Schedule 3.2(q), any such handling, treatment, storage or
disposal has been conducted in compliance with all applicable Laws, except
where the failure to so comply would not, individually or in the aggregate,
have a MAE on the Business.
(ii) Except as set forth on Schedule 3.2(q), the Business relating to
the Howell Entities as currently being operated meets, and as operated at
all times during the three-year period prior to the date hereof met (except
that Howell makes no representations about the Pipeline Assets prior to
their acquisition by Howell in April 1995), all applicable federal, state
and local requirements with respect to air and water quality, pipeline
safety, and the handling, treatment, storage and disposal of wastes or by-
products (including hazardous or toxic wastes, if any) and hazardous or
toxic substances generated by any Howell Entity, where any failure to meet,
or during the three-year period prior to the date hereof any failure to
have met, such requirements would have a MAE on the Business. Howell has
given to pertinent government authorities all notices required pursuant to
the Clean Air Act, 42 U.S.C. 7401 et seq., the Clean Water Act, 42 U.S.C.
1251 et seq., the Toxic Substances Control Act, 15 U.S.C. 2601 et seq.,
the Solid Waste Disposal Act, as amended by the Resource, Conservation and
Recovery Act, 42 U.S.C. 6901 et seq., CERCLA, and all other federal,
state and local environmental Laws, where any failure to give such notices
would have a MAE on the Business, or would materially and adversely affect
the Howell Entities' ability to consummate the transactions contemplated by
the Transaction Documents. Except as listed on Schedule 3.2(q), no Howell
Entity, and to the knowledge of Howell with respect to the assets acquired
from Exxon in April 1995, has since the date five years prior to the date
hereof received any order or notice of violation or noncompliance from, or
been the subject of any regulatory audit or investigation (other than any
periodic investigation or inspection of a routine nature) by, any
governmental authority in connection with ownership or operation of the
Howell Assets or the Business or as a potentially responsible party in
connection with any waste disposal facility, except where such violations
or noncompliance would not have, individually or in the aggregate, a MAE
with respect to the Business.
(iii) With respect to the operation of the Howell Assets, no
Howell Entity and, to the knowledge of Howell with respect to the assets
acquired from Exxon in April 1995, has handled, treated, stored, recycled,
reclaimed or disposed of, or arranged for the handling, treatment, storage,
recycling or reclamation or disposal of, any wastes or by-products
(including hazardous or toxic wastes) or hazardous or toxic substances on
any property other than the sites disclosed on Schedule 3.2(q).
(iv)To the best knowledge of Howell, there are no Underground Storage
Tanks on the owned or leased real property or easements included in the
Howell Assets, and any Underground Storage Tanks that may have been on any
Howell Entity's owned or leased real property were removed, and any soil
contaminated as a result of such Underground Storage Tanks was remediated
in accordance with all applicable Laws. Except as set forth on Schedule
3.2(q), none of the improvements owned or used by a Howell Entity on such
owned or leased real property or easements contain, to the knowledge of
Howell, any friable asbestos, nor does any equipment owned or used, except
for electrical transformers owned and in service by third parties by a
Howell Entity on such owned or leased real property or easements contain,
to the knowledge of Howell, any polychlorinated biphenyls at levels greater
than 50 parts per million.
(v) With respect to environmental matters, all financial assurances
required by governmental authorities for the lawful operation of the Howell
Assets are in place and fully funded as described on Schedule 3.2(q).
(r) Public Utility Status. No Howell Entity is (i) a "public utility
company", a "holding company" or an "affiliate" of a "holding company" as those
terms are defined in the Public Utility Holding Company Act of 1935, (ii) a "gas
utility", "public utility" or "utility" as those terms are defined in Article
6050 of the Revised Civil Statutes of Texas or (iii) a "public utility" or
"utility" as those terms are defined in the Public Utility Regulatory Act of
Texas or under the applicable laws of any state in which Howell or the Howell
Subsidiaries does business.
(s) Authorities, Permits, Tariffs and Regulatory Authorizations.
(i) Each Howell Entity is qualified and licensed to own and operate
each pipeline system owned or operated by such Howell Entity relating to
the Business or the Howell Assets and any and all trucks, tractors and
trailers leased, owned or operated by, for or on behalf of Howell in
connection with the Howell Assets or the Business, and holds all necessary
certificates, permits or other regulatory authorizations to own and operate
the Howell Assets as utilized in the Business presently and during the past
twelve months, except where the failure to be so qualified or licensed
would not have, individually or in the aggregate, a MAE on the Business.
(ii)Except as set forth on Schedule 3.2(s), (a) each Howell Entity
has complied with all federal, state and local Laws, including, without
limitation, the rules and regulations of all governmental agencies having
authority over it and any such Laws, concerned with export and import
licenses, occupational safety, environmental protection and employment
practices, relating to the Business, (b) each Howell Entity has complied
with each and all permits and tariffs, including any required filings and
renewals and no default exists with respect thereto, and (c) no Howell
Entity has received written notice of violation of any such rules or
regulations, corrected or not, since January 1, 1996, except, in the cases
of (a) and (b), where such violations or noncompliance, individually or in
the aggregate, would not have a MAE with respect to the Business. No
Howell Entity has received from any governmental authority any written
notice since January 1, 1996, of any currently proposed public improvement
which would impose a Lien upon any of the Howell Assets, except as would
not have a MAE with respect to the Business.
(t) Suspense Accounts. Each Howell Entity has maintained its Suspense
Accounts for third party sellers of crude oil in accordance with all applicable
Laws, including, without limitation, applicable escheat laws, except as would
not have a MAE with respect to the Business.
(u) Third Party Rights. Except as set forth in Schedule 3.2(u), no party
has any right, whether or not exercisable after notice or lapse of time or any
triggering event, to purchase any material part of the Howell Assets (other than
crude oil sold in the ordinary course of business). Except as set forth in
Schedule 3.2(u), no agreement binding on any Howell Entity or the Business
contains any provision which would impose material limitations on Genesis OLP or
any of its Affiliates or their respective business practices through a
noncompetition, an area of interest or similar type of provision.
(v) Prepayment. No Howell Entity is obligated by virtue of any express or
implied contract or agreement to deliver at some future time oil, gas or
products thereof, without receiving at such time a commitment for full payment
in accordance with usual business practice. Except as provided for in Schedule
7.1, no Howell Entity has received any prepayment for any oil or gas to be sold,
or for services, including transportation, treating or storage, to be rendered.
(w) Investment Representation. The Howell Entities are acquiring the
Subordinated LP Units for their own account and not with a view to or for sale
in connection with any distribution thereof, and will not sell or transfer the
Subordinated LP Units except pursuant to an effective registration statement
under the Securities Act, and the rules and regulations promulgated thereunder,
or an exemption therefrom and in compliance with all state securities and blue
sky laws; provided, however, it is understood that, subject to the provisions of
Section 4.6, a Howell Entity may transfer its Subordinated LP Units to its
Affiliates, and that the Subordinated LP Units will bear an appropriate legend
relating to such restriction on transfer and to restrictions on transfer under
the Securities Act and the regulations thereunder. Each Howell Entity is an
"accredited investor" as defined in Rule 501(a) under the Securities Act.
SECTION 3.3 Genesis OLP hereby represents and warrants to each Transferor
as follows:
(a) Organization, Standing and Authority. Genesis OLP is a limited
partnership duly organized, validly existing and in good standing under the laws
of the State of Delaware. Genesis OLP has full power and authority to enter
into each Transaction Document to which it is a party, to perform its
obligations thereunder and to consummate the transactions contemplated thereby
which are to be consummated by it. The execution and delivery of the
Transaction Documents to which it is a party by Genesis OLP and the consummation
by Genesis OLP of the transactions contemplated thereby have been duly
authorized by all necessary partnership action on the part of Genesis OLP, and
no other partnership action or proceeding on the part of Genesis OLP is
necessary to authorize the execution and delivery by Genesis OLP of the
Transaction Documents to which it is a party or the consummation by Genesis OLP
of the transactions contemplated thereby. This Agreement has, and on the
Closing Date each other Transaction Document to which it is a party will have,
been duly executed and delivered by Genesis OLP and, assuming each has been duly
authorized, executed and delivered by the other parties thereto, is a legal,
valid and binding obligation of Genesis OLP enforceable against it in accordance
with its terms, except as may be limited by applicable bankruptcy, insolvency
and similar laws affecting the rights of creditors generally or as may be
limited by the availability of equitable remedies, including specific
performance, subject to the discretion of the court before which any proceeding
therefor may be brought.
(b) Noncontravention. The execution and delivery of the Transaction
Documents do not, and the consummation of the transactions contemplated thereby
will not: (i) violate any provision of the OLP Agreement; (ii) violate, or
result with the giving of notice or the passage of time in a violation of any
provision of, or result in the acceleration of or entitle any party to
accelerate (whether after the giving of notice or lapse of time or both) any
obligation under, or entitle any party to terminate any or all of the provisions
of, or result in the creation or imposition of any Lien upon any of the assets
of Genesis OLP pursuant to any provision of, or require the consent or approval
of any other party to, any mortgage, lien, lease, license, loan agreement,
indenture or other agreement, instrument or document to which Genesis OLP is a
party or to or by which Genesis OLP or any of the assets of Genesis OLP are
subject or bound; or (iii) violate or conflict with any Law, order, arbitration
award, judgment or decree to or by which Genesis OLP or any of the assets of
Genesis OLP are subject or bound; except, in the case of (ii) and (iii) above,
for such violations, conflicts, breaches, defaults or encumbrances the existence
of which would not have a MAE with respect to Genesis OLP.
(c) Brokers and Finders. Neither Genesis OLP nor any of the officers,
directors or employees of Genesis LLC is obligated to pay, nor has any of them
retained, any broker or finder or any other person who is entitled to any
broker's or finder's fees or any other commission or financial advisory fee
based on any agreement or undertaking made by or on behalf of Genesis OLP or
Genesis LLC in connection with the transactions contemplated hereby or in the
Transaction Documents, except pursuant to the Underwriting Agreement.
SECTION 3.4 Genesis MLP hereby represents and warrants to each Transferor
as follows:
(a) Organization, Standing and Authority. Genesis MLP is a limited
partnership duly organized, validly existing and in good standing under the laws
of the State of Delaware. Genesis MLP has full power and authority to enter
into each Transaction Document to which it is a party, to perform its
obligations thereunder and to consummate the transactions contemplated thereby
which are to be consummated by it. The execution and delivery of the
Transaction Documents to which it is a party by Genesis MLP and the consummation
by Genesis MLP of the transactions contemplated thereby have been duly
authorized by all necessary partnership action on the part of Genesis MLP and
no other partnership action or proceeding on the part of Genesis MLP is
necessary to authorize the execution and delivery by Genesis MLP of the
Transaction Documents to which it is a party or the consummation by Genesis MLP
of the transactions contemplated thereby. This Agreement has, and on the
Closing Date each other Transaction Document to which it is a party will have,
been duly executed and delivered by Genesis MLP and, assuming each has been duly
authorized, executed and delivered by the other parties thereto, is a legal,
valid and binding obligation of Genesis MLP enforceable against it in accordance
with its terms, except as may be limited by applicable bankruptcy, insolvency
and similar laws affecting the rights of creditors generally or as may be
limited by the availability of equitable remedies, including specific
performance, subject to the discretion of the court before which any proceeding
therefor may be brought.
(b) Noncontravention. The execution and delivery of the Transaction
Documents do not, and the consummation of the transactions contemplated thereby
will not: (i) violate any provision of the MLP Agreement; (ii) violate, or
result with the giving of notice or the passage of time in a violation of any
provision of, or result in the acceleration of or entitle any party to
accelerate (whether after the giving of notice or lapse of time or both) any
obligation under, or entitle any party to terminate any or all of the provisions
of, or result in the creation or imposition of any Lien upon any of the assets
of Genesis MLP pursuant to any provision of, or require the consent or approval
of any other party to, any mortgage, lien, lease, license, loan agreement,
indenture or other agreement, instrument or document to which Genesis MLP is a
party or to or by which Genesis MLP or any of the assets of Genesis MLP are
subject or bound; or (iii) violate or conflict with any Law, order, rule, award,
judgment or decree to or by which Genesis MLP or any of the assets of Genesis
MLP are subject or bound; except, in the case of (ii) and (iii) above, for such
violations, conflicts, breaches, defaults or encumbrances the existence of which
would not have a MAE with respect to Genesis MLP.
(c) Brokers and Finders. Neither Genesis MLP nor any of the officers,
directors or employees of Genesis LLC is obligated to pay, nor has any of them
retained, any broker or finder or any other person who is entitled to any
broker's or finder's fees or any other commission or financial advisory fee
based on any agreement or undertaking made by or on behalf of Genesis MLP or
Genesis LLC in connection with the transactions contemplated in the Transaction
Documents, except pursuant to the Underwriting Agreement.
ARTICLE 4
MISCELLANEOUS PROVISIONS RELATING
TO TRANSFER OF ASSETS AND BUSINESS.
SECTION 4.1 Nonassignability of Assets. (a) To the extent that any
lease, contract, license, permit, agreement, sales or purchase order,
commitment, property interest, qualification or other assets described in this
Agreement as being sold, assigned, transferred, set over or delivered to Genesis
OLP (each, a "Commitment") or any claim, right or benefit arising thereunder or
resulting therefrom (collectively with the Commitment it arises or results from,
an "Interest"), is not capable of being sold, granted, conveyed, assigned,
transferred, set over or delivered without the approval, consent or waiver of
the issuer thereof or the other party thereto, or any third person (including a
government or governmental authority), or if such sale, assignment, grant,
conveyance, transfer, set over or delivery or attempted sale, grant, conveyance,
assignment, transfer set over or delivery would be invalid, would destroy or
eliminate such Interest, or would constitute a breach of such Commitment or a
violation of any Law, this Agreement shall not constitute a sale, grant,
conveyance, assignment, transfer, set over or delivery thereof, or an attempted
sale, grant, conveyance, assignment, transfer, set over or delivery thereof in
the absence of such approval, consent or waiver. The obligations of Genesis OLP
and the Transferor with respect to such Interests will be governed by clause (b)
hereof.
(b) The Parties hereto undertake to co-operate in good faith to ensure
that they do such acts and things as may be reasonably necessary to complete the
transfer of the Business. At all times after the date of this Agreement, the
Parties shall do such acts and things as may be reasonably required for the
purpose of giving to the OLP Parties hereto the full benefit of all the
provisions of this Agreement in respect of the Interests, including using their
reasonable best efforts in order that any necessary third party shall execute
such documents and do such acts and things as may be reasonably required for
such purpose. Each of the Transferors and Genesis OLP will use its reasonable
best efforts to obtain any consent, substitution, approval or amendment required
to novate, reissue or assign all Commitments; provided, however, that no
Transferor shall be obligated to pay more than a reasonable amount as
consideration therefor (except for filing fees and other similar charges) to,
and no Transferor nor Genesis OLP shall be obligated to commence litigation
against, the third party from whom such consents, approvals, substitutions or
amendments are requested. If the Transferors and Genesis OLP are unable to
obtain any such required consent, approval, substitution or amendment, the
Transferor (or its Affiliates) that is the holder of or party to a commitment
for which such required consent, approval, substitution or amendment cannot be
obtained shall continue to be bound by such Commitments and, unless not
permitted by Law or the terms thereof, Genesis OLP (or its Affiliates) shall, as
agent for such Transferor (or its Affiliates) or as subcontractor, pay, perform
and discharge fully all the obligations of such Transferor (or its Affiliates)
thereunder from and after the Closing Date and indemnify and hold harmless such
Transferor and its Affiliates from and against all losses, claims, damages,
taxes, liabilities and expenses whatsoever arising out of or in connection with
Genesis OLP's (or its Affiliates') performance of or omission to perform its
obligations thereunder and hereunder. Such Transferor (or its Affiliates)
shall, without further consideration, pay and remit to Genesis OLP (or its
designee) promptly all money, rights and other consideration received in respect
of such performance after payment of any taxes, costs or expenses due from such
Transferor (or its Affiliates) with respect to such receipt. Such Transferor
(or its Affiliates) shall exercise its rights and options under all such
Commitments only as reasonably directed by Genesis OLP and at Genesis OLP's
expense. If and when any such approval, consent or waiver shall be obtained or
such Commitment shall otherwise become assignable or able to be novated, the
assignment of the Assets and the assumption of the Assumed Liabilities related
to such approval, consent or waiver or restriction on assignment and/or
assumption shall become effective automatically as of the Closing Date, without
further action on the part of such Transferor, Genesis OLP or any of their
respective Affiliates, and without payment of further consideration. To the
extent that the assignment of any Commitment or the proceeds thereof pursuant to
this Section 4.1 is prohibited by Law, the assignment provisions of this
paragraph shall operate to create a subcontract or agency with Genesis OLP to
perform each relevant, unassignable Commitment, and the subcontract price shall
be equal to the money, rights and other consideration received by a Transferor
(net of any taxes imposed on such Transferor or any of its Affiliates with
respect to such money, rights or other consideration) in respect of the
performance by Genesis OLP under such subcontract. If any such restriction on
the assignability of the Interests is not satisfied or waived within 21 years
after the death of the last to die of all descendants of Joseph P. Kennedy,
father of the late President of the United States of America, who are living on
the date the assignments executed pursuant to this Agreement are executed, the
transfer to Genesis OLP of the Interests affected by such restriction shall be
null and void.
(c) Genesis OLP and each Transferor shall enter into the Agency Agreement
as of the Closing Date. To the extent that a conflict exists between the Agency
Agreement and this Agreement, the Agency Agreement shall control with respect to
the subject matter thereof.
SECTION 4.2 Direct Transfer to a Genesis OLP Affiliate. Genesis OLP may,
in its sole discretion, direct a Transferor to transfer any of the Assets
directly to an Affiliate of Genesis OLP; provided, however, that any such
transfer shall not relieve Genesis OLP of any of its obligations under this
Agreement (including, without limitation, the obligation to assume the Assumed
Liabilities and to indemnify the Transferor Parties).
SECTION 4.3 Assumption of Assumed Liabilities by Genesis OLP. In
connection with the Asset Purchase and Sale and the Basis and Howell Crude
Contributions, Genesis OLP shall absolutely and irrevocably assume and agree to
be solely liable and responsible for, and to duly and timely pay, perform and
discharge, all of the Assumed Liabilities; provided, however, that said
assumption and agreement shall not (a) waive any valid defense that was
available to a Transferor with respect to the Assumed Liabilities or (b) enlarge
any rights or remedies of any third party under any of the Assumed Liabilities.
The only liabilities to be assumed by Genesis OLP in connection with the
transfer of Assets from any of the Transferors or their Affiliates are the
Assumed Liabilities. Genesis OLP will not assume or become obligated, and
nothing in this Agreement shall be deemed to constitute an assumption by Genesis
OLP of liability, to pay, perform or discharge, and will not be responsible for,
any other liabilities or obligations of any Transferor or its Affiliates,
whether accrued, absolute, contingent or otherwise, including, without
limitation, liabilities or obligations based on, arising out of or in connection
with the Excluded Liabilities, except to the extent set forth in Section 8 of
this Agreement.
SECTION 4.4 Post Signing Covenants and Agreements. Each of the
Transferors and Genesis OLP covenants and agrees with each other as follows:
(a) During the Post-Signing Period, each Transferor agrees, and will cause
its Affiliates,
(i) to maintain and operate their respective Assets and the Business
only in, and not to take any action except in, the ordinary course of
business and consistent with past practice;
(ii)to maintain books of account and records with regard to the
Assets in accordance with past practice of such Transferor or its
Affiliate;
(iii) not to enter into any material agreements with respect to
any of its respective Assets or the Business which is not in the ordinary
course of business and consistent with past practice;
(iv)not to encumber (other than by Permitted Encumbrances), sell, or
otherwise dispose of any of its respective Assets other than the
disposition of inventory in the ordinary course of business and consistent
with Schedule 7.1;
(v) to maintain its properties, machinery and equipment in good
operating condition and repair subject to wear and tear consistent with
past practice;
(vi)not to take any action that is reasonably expected to result in
any termination of a material lease related to the Assets;
(vii) not to fail to take any action that is reasonably expected
to maintain a material lease related to the Assets;
(viii) to use its reasonable best efforts to preserve its business
relationships with suppliers, licensors, licensees, distributors, customers
and others having material business dealings with it such that the Business
will not be materially impaired;
(ix)not to cancel, release or waive any debt, claim, or right of
value relating to the Interests or the Business, which, in the aggregate,
exceeds $10,000; and
(x) not to agree in writing, or otherwise, to take any of the
foregoing actions or any other action which would make any representation
or warranty contained in Section 3 untrue or incorrect in any material
respect as of the Closing Date.
(b) Each Party will cooperate with the other Parties and use its best
reasonable efforts to:
(i) procure upon reasonable terms and conditions all necessary
consents and approvals to (A) the Transaction Documents and (B) all
agreements, instruments or documents referred to on Schedules 3.1(c) and
3.2(c);
(ii)complete all necessary filings, registrations, and certificates;
and
(iii) satisfy all requirements prescribed by applicable Laws for,
and all conditions to, the consummation of the transactions contemplated in
the Transaction Documents.
(c) Notwithstanding any other provision of this Agreement, if any tangible
Asset currently used in the Business sustains damage greater than $50,000, per
occurrence, from and after the date hereof and prior to the Closing Date which
in the reasonable opinion of Genesis OLP either materially impairs its
usefulness or materially reduces its remaining useful life, other than wear and
tear sustained in the ordinary course of the Business, the Transferor thereof,
at its sole discretion, shall immediately either (i) replace, repair or cause to
be repaired the damage to such Asset at such Transferor's own expense, prior to
the Closing Date or (ii) pay to Genesis OLP at Closing an amount reasonably
necessary to allow Genesis OLP to replace such Asset or restore such Asset to
its condition immediately prior to such damage.
SECTION 4.5 Satsuma Crude Oil Tanks. (a) Covenants Made by Howell -
Howell makes the following covenants to Genesis OLP with regard to the Tank
Cleaning:
(i) Howell agrees to perform and shall retain liability for all Tank
Cleaning, provided that Howell reserves any rights it may have against
Exxon relating to the Tank Cleaning and rental obligations. Genesis OLP
shall be entitled to have a representative present to observe the Tank
Cleaning.
(ii)As between Howell and Genesis OLP, Howell shall retain full
liability and financial responsibility for all Tank Cleaning regardless of
whether such Tank Cleaning may be performed by Howell, Genesis OLP, or some
other party.
(b) Genesis OLP Performance Privilege - If Tank Cleaning has not been
completed by June 30, 1997, Genesis OLP, at its sole discretion, may elect by
written notice to Howell, at Howell's risk and expense, to commence judicial
proceedings with Howell's assistance and to perform any or all of the Tank
Cleaning itself or by contracting with any other party for the performance
thereof. Alternatively, Genesis OLP, at its sole discretion, may accept any
request from Howell, at Howell's risk and expense, to perform any or all of the
Tank Cleaning itself or by contracting with any other party for the performance
thereof. Should Genesis OLP exercise its right or so elect to perform any of
the Tank Cleaning in accordance with this Section 4.5(b), Genesis OLP shall
provide Howell copies of any resulting invoice for such amounts. Howell shall
reimburse Genesis OLP for all Tank Cleaning expenses within 15 days of receipt
of an invoice from Genesis OLP for any such expenses.
(c) Rental Payment for the Satsuma Station Tanks -All rental payments
attributable to the Exxon Satsuma facilities lease agreement, dated March 31,
1995 (the "Exxon Satsuma Facilities Lease Agreement"), for periods (i) prior to
June 30, 1997 shall be retained by Howell and (ii) on or after June 30, 1997, if
any, shall be delivered to Genesis OLP. Should the Tank Cleaning not be
completed by June 30, 1997, Howell agrees to pay monthly rent on any Usable Tank
that is not cleaned on or after that date until such time as such Usable Tank
has been cleaned and becomes available for service by Genesis OLP. These
monthly rental payments shall (x) be due on the first day of each month, (y)
paid by Howell to the extent such rental payments are not made by Exxon to
Genesis OLP and (z) be calculated at a rate of 10 cents per barrel of shell
capacity without regard to proration for any term less than a calendar month.
Genesis OLP shall reimburse Howell for any payments made by Howell for which
Genesis OLP also received payment from Exxon for such obligation.
(d) Indemnification - Howell shall indemnify, defend, save and hold
harmless each of the OLP Parties from and against all claims, liabilities,
obligations, losses, costs, cost of defense (as and when incurred), including
expenses, fines, charges, penalties, allegations, demands, damages (including
but not limited to actual, punitive or consequential, foreseen or unforeseen,
known or unknown), settlements, awards or judgments of any kind or nature
whatsoever and reasonable outside attorney's and consultant's fees, to the
extent arising out of (a) the Tank Cleaning Operations, whether performed by
Howell or any of the OLP parties or any third party, or the presence of waste in
any of the tanks, regardless or whether this liability results from the
negligent acts of Howell, any OLP Party or Exxon or any of their respective
contractors, invitees or licensees or (b) any and all claims made by Exxon under
the Exxon Satsuma Facilities Lease Agreement relating to matters occurring prior
to the Closing Date.
SECTION 4.6 Nontransferability of Subordinated LP Units. Except pursuant
to the terms of the Pledge Agreement, the Subordinated LP Units received by
Howell Crude pursuant to Section 2 of this Agreement shall not be transferred
to any Person nor shall any Subordinated LP Units be transferred to Howell Crude
until the special distribution pursuant to Section 6.9 of the OLP Agreement has
been made.
SECTION 4.7 Environmental Make-Whole Provisions. In the event that
pursuant to Section 8.1 Genesis OLP is entitled to a defense and/or
indemnification for environmental liabilities which constitute Excluded
Liabilities with respect to the Assets ("OLP Covered Liabilities"), the
allocated pro rata share of each of the Sponsors with respect to the Annual
Obligation and the Aggregate Obligation referenced in Section 8.3(c) shall be
66 2/3 % to Howell, including any matters related to the Howell Subsidiaries,
and 33 1/3 % to Basis. Each Sponsor will initially be allocated its pro rata
share of Genesis OLP's Annual Obligation and Aggregate Obligation. However, if
a Sponsor has not used any, or all, of its allocated pro rata share of the
Annual Obligation or the Aggregate Obligation (the "Underallocated Sponsor"),
the other Sponsor shall be entitled to use such allocated pro rata share until
the Annual Obligation and the Aggregate Obligation are met. Once the Annual
Obligation and Aggregate Obligation have been met, the Underallocated Sponsor
shall be entitled to receive a cash payment for each occurrence from the other
Sponsor, which payment shall be in the amount of the claim up to $25,000 per
occurrence. These payments shall occur until the full unused amount of the
Underallocated Sponsor's allocated pro rata share has been utilized. Each
payment shall be made within five business days of the Underallocated Sponsor
having submitted to the other Sponsor a request for a make-whole reimbursement
payment for such environmental liability or liabilities (the "Make-Whole Payment
Request"). Any Sponsor who does not deliver a Make-Whole Payment Request for
any or all of its unused allocated pro rata share of the Annual Obligation or
Aggregate Obligation to the other Sponsor within seven years of the Closing Date
forfeits any claim hereunder for restitution for such unused allocated pro rata
share from such other Sponsor for any subsequent indemnification claims made by
Genesis OLP for OLP Covered Liabilities.
ARTICLE 5
CONDITIONS TO CLOSING.
In addition to the conditions set forth in Section 2 of this Agreement, the
obligations of each Party under this Agreement shall be subject to the prior
satisfaction of each of the following conditions:
(a) There shall not be in effect any injunction or restraining order
issued by a court of competent jurisdiction barring the consummation of any of
the transactions contemplated by this Agreement;
(b) There shall not have occurred any MAE with respect to the Basis
Assets, the Howell Assets or the Business of Basis and the Howell Entities since
December 31, 1995;
(c) The representations and warranties of each Party shall have been true
and correct on the date when made and such representations and warranties shall
be true and correct on and as of the Closing Date (except those, if any,
expressly stated to be true and correct at an earlier date), with the same force
and effect as though such representations and warranties had been made on and as
of the Closing Date;
(d) All consents, permits, approvals and other actions of any Person
required for the lawful transfer, conveyance and assignment to Genesis OLP of
the Assets (except (i) consents for the assignment of government leases that are
customarily obtained after the Closing of a sale of these type of assets and
(ii) consents the failure to obtain that will not individually or in the
aggregate have a MAE on Genesis OLP, Genesis MLP or the Business);
(e) Genesis OLP shall have received a full release of all Liens
encumbering the Howell Assets in favor of Banc One, Texas, N.A.; such release to
be in a form reasonable acceptable to Genesis OLP;
(f) Each Party shall have performed and satisfied in all material respects
all covenants and agreements required by this Agreement to be performed and
satisfied by the applicable Party at or prior to the Closing Date;
(g) All of the conditions under the Underwriting Agreement (other than
those conditions relating to the consummation of the transactions contemplated
by this Agreement) shall have been satisfied or waived and the Underwriting
Agreement shall be in full force and effect, enforceable against the
Underwriters in accordance with its terms (subject to the consummation of the
transactions contemplated by this Agreement);
(h) Opinions dated as of the Closing Date, in form and substance
reasonably acceptable to the Parties from (i) Wayne Kubicek, General Counsel of
Basis, on behalf of Basis, (ii) Robert T. Moffett, General Counsel of Howell, on
behalf of the Howell Entities and (iii) Andrews & Kurth L.L.P., counsel for
Genesis MLP and Genesis OLP, shall have been delivered; and
(i) The appropriate parties shall have executed and acknowledged each of
the Transaction Documents.
ARTICLE 6
CLOSING.
SECTION 6.1 Date of Closing. Subject to the satisfaction of the
conditions in Section 5 of this Agreement, the closing of the transactions
contemplated by this Agreement (the "Closing") shall take place on the Closing
Date at the offices of Andrews & Kurth L.L.P., 4200 Texas Commerce Tower,
Houston, Texas 77002 (or at such other place as the Parties may agree).
SECTION 6.2 Deliveries. In order to more fully implement the
transactions contemplated by Sections 2 and 4 of this Agreement, the Parties
covenant and agree as follows:
(a) On the Closing Date, Genesis OLP and the Transferors shall, and shall
cause their Affiliates to each execute and deliver, to the other (or in the case
of Genesis OLP, to Genesis LLC), an Assignment and Assumption Agreement (Other
Assets), an Assignment Agreement (Pipelines) and an Assignment and Assumption
Agreement (Station Sites) and any instruments necessary to record such deeds and
other instruments, as may be necessary or appropriate to vest effectively in
Genesis OLP or its Affiliate or Genesis LLC title to the Assets and to comply
with the purpose and intent of this Agreement;
(b) The appropriate parties shall have executed and delivered each of the
Transaction Documents;
(c) On the Closing Date, Genesis OLP shall deliver to (i) each Transferor
or a Person designated by such Transferor, net proceeds pursuant to the terms
of Section 2 hereof and (ii) to the Collateral Agent pursuant to the Pledge
Agreement certificates representing the Subordinated LP Units, which
certificates with appropriate restrictive legends imposed thereon shall be
issued in the name and denominations as requested by the Transferors on or prior
to the Closing Date;
(d) Each Transferor shall, and shall cause its Affiliates to, deliver to
Genesis OLP or its designee at its principal place of business the original or
copies of records related to the Assets; and
(e) Each of the Parties hereto shall, and shall cause its Affiliates to,
execute and deliver such other documents as may be reasonably necessary to
effectuate the transactions contemplated hereby.
ARTICLE 7
POST-CLOSING MATTERS.
SECTION 7.1 Post-Closing Accounting Adjustment. The Parties hereto agree
to the post closing adjustment referred to in Schedule 7.1.
SECTION 7.2 Survival. The representations and warranties of the parties
hereto contained herein and in any certificates, exhibits, schedules or other
documents furnished in connection with this Agreement shall survive the Closing
for a period of five (5) years thereafter, except for the representations and
warranties of Basis set forth in Sections 3.1(f) and (h), and the
representations and warranties of Howell set forth in Sections 3.2(f) and (h),
which representations and warranties shall survive until the expiration of any
applicable statutes of limitations, including, without limitation, as a result
of any claims for violations of state or federal securities or tax laws;
provided, that all such representations and warranties shall survive with
respect to any claim, notice of which shall have been duly given under this
Agreement prior to the time of expiration set forth above. All covenants and
agreements of the parties contained herein (other than representations and
warranties) shall except as expressly provided herein survive the Closing, for
the time periods set forth therein.
SECTION 7.3 Further Assurances. After the Closing Date, each Transferor
shall, and shall cause its Affiliates to, execute, acknowledge and deliver, or
cause to be executed, acknowledged and delivered, such instruments, agreements,
and other documents and shall take such other action, including providing
transition services at reasonable charges to Genesis LLC, Genesis MLP and
Genesis OLP (such as use of Howell's computer hardware), as may reasonably be
necessary or advisable to effectuate the intent of this Agreement or to carry
out the obligations of the Parties under this Agreement or under any other
instrument, agreement, certificate or other document delivered pursuant hereto.
Each of Genesis MLP and Genesis OLP shall, and shall cause their Affiliates to,
execute, acknowledge and deliver, or cause to be executed, acknowledged and
delivered, such instruments, agreements, and other documents and shall take such
other action, including providing services to the Transferors and their
Affiliates (such as in connection with the accounting adjustment described in
Schedule 7.1), as may reasonably be necessary or advisable to effectuate the
intent of this Agreement or to carry out the obligations of the Parties under
this Agreement or under any other instrument, agreement, certificate or other
document delivered pursuant hereto; provided, however, that any third-party
out-of-pocket expenses incurred by Genesis LLC, Genesis MLP or Genesis OLP
on behalf of any Transferor or Affiliate shall be reimbursed by such
Transferor or Affiliate.
ARTICLE 8
INDEMNIFICATION.
SECTION 8.1 Indemnification by the Transferors. (a) Subject to Section
8.3, each Transferor shall, without any further responsibility or liability of,
or recourse to, any of the OLP Parties, absolutely and irrevocably be solely
liable and responsible for its respective Excluded Liabilities; provided,
however, the Howell Entities shall be jointly and severally liable and
responsible for the Excluded Liabilities of the Howell Entities. Basis and its
Affiliates shall not be liable for the Excluded Liabilities of the Howell
Entities and their Affiliates and none of the Howell Entities or their
Affiliates shall be liable for the Excluded Liabilities of Basis and its
Affiliates. None of the OLP Parties shall be liable to any of the Transferor
Parties or any third parties for any reason whatsoever on account of any of the
Excluded Liabilities and none of the Transferor Parties shall be liable to any
of the OLP Parties or any third party for any reason whatsoever on account of
any of the Assumed Liabilities.
(b) Each Transferor shall indemnify, defend, save and hold harmless each
of the OLP Parties from and against all claims, liabilities, obligations,
losses, costs, costs of defense (as and when incurred), including expenses,
fines, charges, penalties, allegations, demands, damages (including but not
limited to actual, punitive or consequential, foreseen or unforeseen, known or
unknown), settlements, awards or judgments of any kind or nature whatsoever and
reasonable outside attorneys' and consultants' fees, to the extent arising out
of (a) Excluded Liabilities of such Transferor, including liability arising
under CERCLA or relating to the Assets or the operation of the Business prior to
the Closing Date, (b) any failure of a Transferor or its Affiliate to comply
with any applicable bulk sales law of any jurisdiction in connection with the
transactions contemplated by this Agreement, (c) any breach of the
representations and warranties of such Transferor in this Agreement for which
Genesis OLP must assert a claim for indemnification during the applicable
survival period referred to in Section 7.2, including, without limitation, any
loss suffered by Genesis OLP or Genesis MLP to the Underwriters or any third
party that is attributable solely to a breach by any Transferor of its
representations in Section 3.1(f) or Section 3.2(f), as the case may be, or (d)
the breach by such Transferor or its Affiliate of any of its obligations under
this Agreement, including, without limitation, with respect to Howell, Howell's
obligations pursuant to Section 4.5, all of which are hereinafter collectively
referred to as the "OLP Damages." The Transferors' obligations pursuant to this
Section 8.1 shall terminate in the event Genesis LLC is removed as a General
Partner of Genesis OLP without the General Partner's consent. Notwithstanding
anything in this Agreement to the contrary, each of Basis' and the Howell
Entities' liability under this Agreement shall be several and not joint;
provided, however, the Howell Entities shall be jointly and severally liable
among themselves for the liabilities of the Howell Entities. Notwithstanding
anything in this Agreement to the contrary, neither Basis' nor the Howell
Entities' indemnification obligations pursuant to this Section 8.1 shall
include any liability or responsibility attributable to the ownership or
operation of certain of the Assets by either JMP or Exxon, which liabilities or
responsibilities were not assumed by either Basis or the Howell Entities in
connection with their respective acquisitions of such Assets.
(c) The indemnification obligations of Basis and the Howell Entities
pursuant to this Section 8.1 shall not apply to any claims, liabilities,
obligations, losses, costs, costs of defense (as and when incurred), including
expenses, fines, charges, penalties, allegations, demands, damages (including
but not limited to actual, punitive or consequential, foreseen or unforeseen,
known or unknown), settlements, awards or judgments of any kind or nature
whatsoever and reasonable outside attorneys' and consultants' fees (hereafter
referred to as "Indemnified Losses"), to the extent such Indemnified Losses,
including liabilities arising under CERCLA, were suffered or incurred as a
result of an invasive environmental site investigation of the Basis Assets or
Howell Assets undertaken after the Closing Date other than such an investigation
which is undertaken (i) under the direction of any financial institution in
connection with any application or request for a loan or other financial
transaction by Genesis LLC, Genesis MLP or Genesis OLP, (ii) as a result of, or
in defense of, or pursuant to any administrative, arbitral, civil or criminal
judicial proceeding by reason of a notice of deficiency, notice of violation,
judgment, order, consent decree, settlement or otherwise, (iii) as a condition
to, or in connection with, any merger, sale, assignment or other disposition of
the business or assets of Genesis LLC, Genesis MLP or Genesis OLP or with
respect to any part thereof, (iv) as a result of the discovery in the ordinary
course of business of (or, a discovery in prudent and customary business
practice, as a result of any condition, leaks or other occurrences which
reasonably suggests the possible presence of) a quantity of crude oil, petroleum
products or other hydrocarbons, wastes (whether hazardous or nonhazardous) or
materials that are required to be reported or otherwise disclosed to any
regulatory agency, body or authority or (v) in response to any complaints of, or
notices from, any property owner, community or civic group.
SECTION 8.2 Indemnification by Genesis OLP and Genesis MLP. Subject to
Section 8.3, upon, from and after the Closing Date, Genesis OLP and Genesis MLP
shall, without any further responsibility or liability of, or recourse to, any
of the Transferor Parties, absolutely and irrevocably assume and be solely
liable and responsible for the Assumed Liabilities. None of the Transferor
Parties shall be liable to any of the OLP Parties or any third parties for any
reason whatsoever on account of any of the Assumed Liabilities.
Genesis OLP and Genesis MLP shall indemnify, defend, save and hold harmless
each of the Transferor Parties from and against all claims, liabilities,
obligations, losses, costs, costs of defense (as and when incurred), including
expenses, fines, charges, penalties, allegations, demands, damages (including
but not limited to actual, punitive or consequential, foreseen or unforeseen,
known or unknown), settlements, awards or judgments of any kind or nature
whatsoever and reasonable outside attorneys' and consultants' fees, to the
extent arising out of (a) the Assumed Liabilities, (b) any breach of the
representations or warranties of Genesis OLP and Genesis MLP in this Agreement
for which a Transferor Party must assert a claim for indemnification during the
applicable survival period referred to in Section 7.2 or (c) the breach by any
of the OLP Parties of any of their obligations under this Agreement, all of
which are hereinafter collectively referred to as the "Transferor Damages."
SECTION 8.3 Specific Indemnification Issues. (a) In the event a claim,
demand, action or proceeding is brought by a third party in which the liability
as between any Transferor, on the one hand, and Genesis MLP or Genesis OLP, on
the other hand, is determined after trial in any judgment, award or decree to be
joint or concurrent or in which the entitlement to indemnification hereunder is
not readily determinable, the parties shall negotiate in good faith in an effort
to agree, as between such Transferor, on the one hand, and Genesis MLP or
Genesis OLP, on the other hand, on the proper allocation of liability or
entitlement to indemnification, as well as the proper allocation of the costs of
any joint defense or settlement pursuant to Section 8.5(d), all in accordance
with the provisions of, and the principles set forth in, this Agreement.
(b) It is acknowledged that after the Closing Date, the Parties may have
business relationships with one another, which relationships will be described
in contracts, agreements and other documents entered into in the normal course
of business, including the Transaction Documents. Such documents may include
agreements by the Parties and their Affiliates to supply, after the Closing
Date, materials, products, services and leases to another Party or its
Affiliate. Such business relationships shall not be subject to the indemnity
provisions hereof, unless the parties expressly agree to the contrary in the
agreements governing such relationships.
(c) Notwithstanding anything in this Agreement to the contrary, Genesis
OLP shall assume the responsibility for the payment of the first $25,000 per
occurrence as to any environmental liability included in Excluded Liabilities up
to an amount that shall not exceed in the aggregate $200,000 for the twelve-
month period beginning on the Closing Date and ending on the anniversary thereof
and for each twelve-month period thereafter (the "Annual Obligation"); provided
that Genesis OLP's aggregate liability pursuant to this Section 8.3(c) shall not
exceed $600,000 (the "Aggregate Obligation"). As security to cover any and all
costs, including any reserves required in accordance with GAAP, arising out of
each of the Transferor's indemnification obligation for environmental
liabilities included in the Excluded Liabilities, pursuant to the Pledge
Agreement, each Transferor shall pledge to Genesis OLP one half of its initial
Subordinated LP Units subject to release of such Subordinated LP Units from this
pledge upon conversion of such Subordinated LP Units into Common LP Units
pursuant to the terms of OLP Agreement.
(d) EACH OF THE AGREEMENTS TO INDEMNIFY, DEFEND OR HOLD HARMLESS CONTAINED
IN THIS AGREEMENT SHALL APPLY, IN ACCORDANCE WITH ITS TERMS, IRRESPECTIVE OF
WHETHER THE SUBJECT CLAIM IS BASED IN WHOLE OR IN PART UPON THE CONTRIBUTING
NEGLIGENCE (WHETHER ACTIVE OR PASSIVE), BREACH OF WARRANTY, STRICT LIABILITY, OR
BREACH OR VIOLATION OF ANY DUTY IMPOSED BY ANY LAW OR REGULATION, ON THE PART OF
THE BENEFICIARY OF THE AGREEMENT, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS
AGREEMENT.
(e) The Indemnified Party shall not be entitled to recover from the
Indemnifying Party for any losses, costs, expenses, or damages arising under
this Agreement or in connection with or with respect to the transactions
contemplated in this Agreement any amount in excess of the actual compensatory
damages, court costs and reasonable attorney fees, suffered by the Indemnified
Party. Each OLP Party and each Transferor Party waives any right to recover
punitive, special, exemplary and consequential damages arising in connection
with or with respect to the transactions contemplated in this Agreement unless
recovered by a third party against the OLP Party or the Transferor Party.
(f) The Indemnified Party shall take reasonable steps to mitigate losses,
costs, expenses and damages after becoming aware of any event or circumstance
that could reasonably be expected to give rise to any losses, costs, expenses
and damages that are indemnifiable or recoverable hereunder or in connection
herewith; provided, however, that (i) such mitigation shall be necessary only
for a reasonable time after notice is given to the Indemnifying Party, and (ii)
all costs of such mitigation shall be an indemnifiable expense, including
indirect and administrative costs.
SECTION 8.4 Notice and Payment of Claims. (a) If any Person entitled to a
defense and/or indemnification under this Agreement (the "Indemnified Party")
determines that it is or may be entitled to a defense or indemnification by
Genesis OLP, Genesis MLP or any Transfer or, as the case may be (the
"Indemnifying Party"), under this Agreement:
(i) The Indemnified Party shall deliver promptly to the
Indemnifying Party a written notice and demand for a defense or
indemnification, specifying the basis for the claim for defense and/or
indemnification, the nature of the claim, and if known, the amount for
which the Indemnified Party reasonably believes it is entitled to be
indemnified. Nothing in this subparagraph shall be interpreted to
invalidate any claim by the Indemnified Party to be entitled to
indemnification, except to the extent, if any, that the failure of the
Indemnified Party to deliver such notice resulted in actual prejudice
to the Indemnifying Party.
(ii)The Indemnifying Party shall promptly, but in any event
within 30 days from receipt of the notice requesting indemnification,
either: (A) assume the defense of such litigation or claim; (B) pay
the claim in immediately available funds; (C) reserve its rights
pending resolution under Section 8.5(d); or (D) object in accordance
with clause (b) of this Section 8.4. This 30-day period may be
extended by agreement of the parties. Nothing in this subparagraph
shall be interpreted to abrogate or delay a party's obligation to
provide the other with a defense under this Agreement.
(b) The Indemnifying Party may object to the claim for defense and/or
indemnification set forth in any notice; provided, however, that if the
Indemnifying Party does not give the Indemnified Party written notice setting
forth its objection to such claim (or the amount thereof) and the grounds
therefor within the same 30-day period (or any extended period), the
Indemnifying Party shall be deemed to have acknowledged its liability to provide
a defense or to pay the amount of such claim and the Indemnified Party may
exercise any and all of its rights under applicable Law to collect such amount
or obtain such defense.
(c) Payments due to be made to any Indemnified Party under this Section 8
shall bear interest from the date on which the Indemnified Party paid any amount
or actually suffered a loss in respect of OLP Damages or Transferor Damages, as
the case may be, to but excluding the date of actual payment (whether before or
after judgment) at the Prime Rate.
(d) Payments due to be made under this Agreement shall be free and clear
of all deductions, withholdings, set-offs or counterclaims whatsoever, except as
may be required by law. If any deductions or withholdings are required by law,
the Indemnifying Party shall be obliged to pay such sum as will, after such
deduction, withholding, set-off or counter-claim has been made, leave the
Indemnified Party with the same amount as it would have been entitled to receive
in the absence of any such requirement to make a deduction, withholding, set-off
or counterclaim. The parties to this Agreement may enter into agreements or
other arrangements providing for the set-off of payments due to be made by way
of indemnification to both the Transferors and Genesis OLP.
(e) Payments due to be made under this Agreement shall be reduced by the
amount by which any taxes for which the Indemnified Party would have been
accountable or liable to be assessed are either (i) actually reduced prior to
payment falling due hereunder or (ii) likely to be reduced subsequent to payment
falling due hereunder in the reasonable opinion of the Indemnified Party acting
in good faith in the light of the circumstances prevailing at the time of
delivery of written notice in accordance with clause (a) of this Section 8.4.
The determination of the amount by which taxes are actually or likely to be
reduced shall take into account the time value of money.
SECTION 8.5 Defense of Third Party Claims. (a) If the Indemnified Party's
claim for indemnification is based, under this Agreement, on a claim, demand,
investigation, action or proceeding, judicial or otherwise, brought by a third
party, and the Indemnifying Party does not object under Section 8.4(b), the
Indemnifying Party shall, within the 30+day period (or any extended period)
referred to in Section 8.4(a), assume the defense of such third-party claim at
its sole cost and expense and shall thereafter be designated as the "Case
Handler." Any such defense shall be conducted by attorneys employed by the
Indemnifying Party. The Indemnified Party may retain attorneys of its own
choosing to participate in such defense at the Indemnified Party's sole cost and
expense.
(b) If the Indemnifying Party assumes the defense of any such third-party
claim, the Indemnifying Party may settle or compromise the claim without the
prior consent of the Indemnified Party so long as all existing and future claims
relating to the compromised claim against the Indemnified Party are irrevocably
and unconditionally released in full.
(c) The Indemnifying Party shall pay to the Indemnified Party in
immediately available funds the amount for which the Indemnified Party is
entitled to be indemnified within 30 days after the settlement or compromise of
such third-party claim or the judgment of a court of competent jurisdiction (or
within such longer period as agreed to by the parties in a final nonappealable
decision). If the Indemnifying Party does not assume the defense of any such
third-party claim, the Indemnifying Party shall be bound by the result obtained
with respect thereto by the Indemnified Party, except that the Indemnifying
Party has the right to contest that it is obligated to the Indemnified Party
under the terms of this Agreement, provided the Indemnifying Party shall have
raised its objection in a timely manner under Section 8.4.
(d) In the event a claim, demand, action or proceeding is brought by a
third party in which the liability as between Genesis OLP and any Transferor is
alleged to be joint or in which the entitlement to indemnification hereunder is
not readily determinable, the parties shall cooperate in a joint defense. Such
joint defense shall be under the general management and supervision of the party
which is expected to bear the greater share of the liability, and which will be
considered the Case Handler, unless otherwise agreed; provided, however, that
neither party shall settle or compromise any such joint defense matter without
the consent of the other, which consent shall not be unreasonably withheld. The
costs of such joint defense, any settlement and any award or judgment (unless
the award or judgment specifies otherwise) shall be borne as the parties may
agree; or in the absence of such agreement, such costs shall be borne by the
party incurring such costs.
SECTION 8.6 Cooperation and Preservation of Records. (a) The OLP
Parties and the Transferor Parties shall cooperate with one another fully and in
a timely manner in connection with the defense of any litigation or any other
actual or threatened claim.
(b) Such cooperation shall include, without limitation, making available
to the other party, during normal business hours and upon reasonable notice, all
books, records and information ("Litigation Records"), officers and employees
(without substantial interruption of employment) necessary or useful in
connection with any actual or threatened claim, investigation, audit, action or
proceeding.
(c) Each party shall continue in force, or at the request of the other
party, shall issue, notices exempting from destruction any Litigation Records
which the requesting party represents may be necessary to the defense of, or
required to be produced in discovery in connection with, any such claim,
investigation, audit, action or proceeding and shall either refrain from
destroying any such Litigation Records until authorized by the requesting party
or provide copies at the requesting party's expense thereof. The requesting
party shall notify the other party promptly when the Litigation Records are no
longer required to be maintained.
(d) The party requesting access to Litigation Records or officers and
employees pursuant to clause (b) of this Section 8.6 or preservation of
Litigation Records pursuant to clause (c) of this Section 8.6 shall bear all
reasonable out-of-pocket expenses (except reimbursement of salaries, employee
benefits and general overhead) incurred by the other party in connection with
providing such Litigation Records or officers and employees.
(e) The party providing Litigation Records hereunder may elect, upon a
reasonable basis and within a reasonable time, to designate all or a portion of
the Litigation Records as confidential or proprietary. If Litigation Records
are so designated, the party receiving them will treat them as it would its own
confidential or proprietary information and will take all reasonable steps to
protect and safeguard the Litigation Records while in its own custody and will
attempt to shield such information from disclosure by motions to quash, motions
for a protective order, redaction or other appropriate actions.
ARTICLE 9
DISCLAIMERS AND WAIVER.
SECTION 9.1 Disclaimer of Warranties. (a) EACH TRANSFEROR IS CONVEYING
AND TRANSFERRING THE ASSETS "AS IS" AND, EXCEPT AS EXPRESSLY SET FORTH HEREIN,
WITHOUT REPRESENTATION OR WARRANTY, WHETHER EXPRESS, IMPLIED OR STATUTORY (ALL
OF WHICH THE TRANSFEROR HEREBY DISCLAIMS), AS TO (i) TITLE, (ii) FITNESS FOR ANY
PARTICULAR PURPOSE OR MERCHANTABILITY OR DESIGN OR QUALITY, OR (iii) ANY OTHER
MATTER WHATSOEVER. THE PROVISIONS OF THIS SECTION 9.1 HAVE BEEN NEGOTIATED BY
THE TRANSFERORS AND GENESIS OLP AFTER DUE CONSIDERATION AND ARE INTENDED TO BE A
COMPLETE EXCLUSION AND NEGATION OF ANY REPRESENTATIONS OR WARRANTIES OF THE
TRANSFERORS, WHETHER EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT TO THE ASSETS
THAT MAY ARISE PURSUANT TO ANY LAW NOW OR HEREAFTER IN EFFECT, OR OTHERWISE,
EXCEPT AS EXPRESSLY SET FORTH HEREIN.
(b) The Transferors, Genesis MLP and Genesis OLP agree that the
disclaimers contained in this Section 9.1 are "conspicuous" disclaimers. Any
covenants implied by statute or by the use of the words "grant," "convey,"
"bargain," "sell," "assign," "transfer," "deliver," or "set over" or any of
them or any other words used in this Agreement are hereby expressly disclaimed,
waived and negated.
SECTION 9.2 Waiver of Bulk Sales Laws. Each of the parties hereto hereby
waives compliance with any applicable bulk sales law or any similar law in any
applicable jurisdiction in respect of the transactions contemplated by this
Agreement.
ARTICLE 10
TRADEMARKS AND TRADENAMES.
SECTION 10.1 Written Materials and Logos. Genesis OLP shall as soon as
reasonably practicable cease to use written materials, including without
limitation, packaging, labels, package inserts, invoices, catalogs, brochures,
handbooks, and similar materials, which contain the name Salomon, Phibro, Basis
Petroleum, Inc., Howell Corporation, any names of the Howell Subsidiaries or
variations thereof (including logos), or other trade names currently in use by
the Business and not included in the Assets, as necessary; provided, however,
that Genesis OLP shall use all reasonable efforts in its procurement of such
materials after the Closing Date to procure materials which do include any such
names, and to overprint, sticker, or otherwise identify on such materials in
such a way as to either obliterate such names or clearly indicate that the
Transferor is no longer affiliated with the Business or the Assets.
SECTION 10.2 Signs. Each Transferor hereby agrees that Genesis OLP and
its Affiliates may, until April 1, 1997, use signs which contain the name Basis
Petroleum, Inc., any names of the Howell Entities or variations thereof
(including logos), or other trade names currently in use by the Business and not
included in the Assets, as necessary after the Closing Date; provided, however,
Genesis OLP shall remove such signs as soon as reasonably possible; provided
further, all pipeline signs in the name of Basis or any of the Howell Entities
may be used but must be removed by December 31, 1997.
ARTICLE 11
EMPLOYEE MATTERS.
SECTION 11.1 Employment. Genesis LLC on behalf of Genesis MLP and
Genesis OLP shall offer employment as of January 1, 1997 to all persons who are
employees of the Business actively employed immediately prior to the date
hereof, each of which is listed on Schedule 11.1, including, without limitation,
the officers referred to therein (collectively, the "Business Employees"). The
Business Employees shall be employed by Genesis LLC on substantially the same
terms and conditions as those in effect in respect of their employment by the
Transferors or their Affiliates immediately prior to the Closing Date. The
officers identified in the Final Prospectus shall be offered employment pursuant
to the form of Employment Agreement. Either Sponsor shall have the right to
designate any employee who becomes actively employed in the Business between
date hereof and December 31, 1996 as a Business Employee to be added to Schedule
11.1. Notwithstanding the foregoing, this Agreement shall not create any
obligation on the part of Genesis LLC or any of its Affiliates to continue the
employment of the Business Employees, nor create any other right of any such
employee, or his or her beneficiaries, in either case, following the Closing
Date. If Genesis LLC shall not hire or terminate without cause any Business
Employee within the first six months of employment, then Genesis LLC shall be
obligated to pay severance pursuant to the terms described in Schedule 11.1 or
the Employment Agreement, as the case may be. From the Closing Date through
December 31, 1996, each Transferor and its Affiliates shall provide the services
of the Business Employees to Genesis MLP and Genesis OLP and be promptly
reimbursed by Genesis MLP and Genesis OLP for such services pursuant to the term
of the Transition Services Agreement.
SECTION 11.2 LLC Plans. To the extent required, as of January 1, 1997,
Genesis LLC shall, directly, or indirectly through the Corporate Services
Agreement become the sponsor of and/or shall duly adopt each plan, program,
policy, payroll practice, contract, agreement or other arrangement providing for
compensation, severance, termination pay, fringe benefits, medical benefits,
performance awards (other than stock or stock related awards), or other employee
benefits of any kind, including, without limitation, each "employee benefit
plan" (within the meaning of Section 3(3) of ERISA) (each, a "Benefit Plan"),
sponsored by, maintained, contributed to, or required to be sponsored,
maintained or contributed to, by the Transferor or any of its Affiliates
immediately prior to January 1, 1997 for the benefit of any Business Employee or
former employee or agent of the Business (such Benefit Plans, the "LLC Plans").
The foregoing does not and shall not be construed to provide the Business
Employees or former employees or agents of the Business any rights, or impose
upon Genesis OLP or its Affiliates, any obligations, in either case, in addition
to those which such employees or agents or a Transferor or its Affiliates may
have in respect of the LLC Plans immediately prior to January 1, 1997.
Notwithstanding anything to the contrary in this Agreement, Genesis OLP and its
Affiliates shall not assume any of the Excluded Liabilities related to the LLC
Plans.
SECTION 11.3 No Third Party Beneficiaries. This Section 11 is solely for
the benefit of the Parties and their respective Affiliates and nothing contained
herein should be deemed to confer upon any other person any remedy, claim,
liability, reimbursement, claim of action or other right in excess of those
existing without reference to this Agreement.
ARTICLE 12
TERMINATION OF AGREEMENT.
SECTION 12.1 Termination. This Agreement and transactions contemplated
hereby may be terminated and abandoned at any time prior to the Closing Date:
(a) by the mutual consent of the Transferors, Genesis MLP and Genesis OLP;
or
(b) by either Basis or Howell (provided that the Party seeking termination
has diligently and in good faith performed and complied in all material respects
with the agreements and covenants required to be performed by it hereunder), by
action of its Board of Directors, in the event the transactions contemplated
hereby are not consummated pursuant to this Agreement by December 31, 1996,
unless Basis and Howell shall have agreed upon an extension of time in which to
consummate the transactions contemplated hereby.
SECTION 12.2 Effect of Termination. In the event of the termination of
this Agreement and the transactions contemplated hereby pursuant to Section
12.1, this Agreement shall become wholly void and of no force or effect, without
any liability or further obligation on the part of the Transferors, Genesis MLP
or Genesis OLP (or any of their respective Affiliates, directors, officers,
employees, agents, representatives, partners or members); provided, however,
that the provisions of Section 14.1(e) hereof shall survive such termination;
and provided further, that such termination shall not relieve either Basis or
Howell from any liability for any breach of this Agreement attributable to bad
faith or willful misconduct.
ARTICLE 13
TAX MATTERS.
SECTION 13.1 Refunds of Taxes. Upon the reasonable request of either
Sponsor, Genesis OLP shall assist such Sponsor in connection with (or to the
extent necessary shall file, or cause to be filed in such form as such Sponsor
may reasonably request), claims for refunds of federal, state, local or foreign
income taxes attributable to the operation of the Business prior to the Closing
Date. The Sponsor shall have the sole right to prosecute any claims for such
refunds (by suit or otherwise) at the Sponsor's expense and with counsel of the
Sponsor's choice, and Genesis OLP and its Affiliates shall cooperate fully with
the Sponsor in connection therewith.
SECTION 13.2 Notice of Tax Audits. Genesis LLC or Genesis OLP shall
promptly notify the appropriate Sponsor in writing upon the receipt by Genesis
LLC, Genesis OLP or any of their Affiliates of a notice of any pending or
threatened audits or assessments against Genesis OLP or any of its Affiliates
with respect to any taxes for which Genesis OLP or any of its Affiliates is or
may be entitled to indemnification under this Agreement. The Sponsor shall have
the sole right, at its election, (a) to represent Genesis OLP's (and its
Affiliates') interest with respect to any such audits or assessments, including
in any administrative or court proceeding relating thereto, and (b) employ
counsel of its choice at its expense and to control the conduct of such audit,
assessment, or proceeding, including the settlement or disposition thereof.
Genesis LLC, Genesis OLP and their Affiliates shall cooperate fully with the
Sponsor and its counsel in the defense against or compromise of any claim in any
such audit, assessment, or proceeding.
ARTICLE 14
MISCELLANEOUS.
SECTION 14.1 Costs. (a) Genesis OLP shall be responsible for and,
within a reasonable time after any request by a Transferor, shall pay directly
to any designated third party, all Transfer Expenses; provided, that in lieu of
such direct payment, the Transferor shall be entitled to pay such Transfer
Expenses directly to third parties and shall be entitled to be reimbursed by
Genesis OLP within a reasonable time after any request therefor.
(b) Genesis MLP shall be responsible for and shall pay all Public Offering
Expenses incurred prior to, as of or after the Closing Date. Such payment shall
be made by Genesis MLP or its subsidiaries directly to any obligee in respect of
such expenses. If, on or before April 30, 1997, Genesis MLP has reasonably
incurred or paid Public Offering Expenses in excess of the actual and estimated
amounts of such expenses used in the calculation as of the Closing Date of the
Net MLP Proceeds, each Sponsor shall, promptly after each request by Genesis
MLP, pay to Genesis MLP its Proportional Share of the amount of such excess.
If, on or before April 30, 1997, Genesis MLP has reasonably incurred or paid
Public Offering Expenses that are less than the actual and estimated amounts of
such expenses used in the calculation as of the Closing Date of the Net MLP
Proceeds, Genesis MLP shall promptly pay to each Sponsor, an amount equal to its
Proportional Share of such deficiency.
(c) If any Transferor or any of its Affiliates have paid any expenses,
fees, costs or taxes that are the responsibility of Genesis MLP or Genesis OLP
pursuant to clauses (a) or (b) of this Section 14.1, then Genesis MLP or Genesis
OLP, as appropriate, shall reimburse the appropriate Transferor or such
Affiliate promptly upon request therefor.
(d) Each Transferor shall be responsible for and shall pay directly to any
designated third party its own fees and expenses of attorneys incurred in
connection with this Agreement.
(e) In the event that this Agreement is terminated pursuant to Section
12.1, Basis and Howell shall bear their Proportional Share of all expenses,
fees, costs or taxes referred to in clauses (a) or (b) of this Section 14.1 that
were the responsibility of Genesis MLP and Genesis OLP.
SECTION 14.2 Notices. All notices and other communications under this
Agreement will be in writing and will be duly given (i) upon delivery if
delivered personally with signed receipt acknowledging delivery; or (ii) upon
dispatch if telexed (with answerback confirmation) or telegraphed (and if
telegraphed confirmed by first-class mail as hereinafter provided); or (iii) if
mailed, by certified mail, postage prepaid, ten business days after date of
mailing, addressed as follows:
(a) If to the Basis
Basis Petroleum, Inc.
One Allen Center, Suite 3200
500 Dallas
Houston, Texas 77002
Attention: President
with copy to: General Counsel
Fax No.: (713) 646+5278
(b) If to any of the Howell Entities
Howell Corporation
1111 Fannin, Suite 1500
Houston, Texas 77002
Attention: Robert T. Moffett
Fax No.: (713) 658+4007
(c) If to Genesis MLP,
Genesis OLP or Genesis LLC
c/o Genesis Energy, L.P.
One Allen Center, Suite 3200
500 Dallas
Houston, Texas 77002
Fax No.: (713) 646+5278
Attention: President
with a copy to: General Counsel
or to such other address as a party may from time to time designate in the
manner heretofore provided.
SECTION 14.3 Files and Records. As soon as reasonably practicable
following the Closing Date, each Transferor shall, and shall cause its
Affiliates to, deliver copies or originals of all books, files, records and
other data relating to the Assets and the Business (the "Information") to be
delivered to Genesis LLC's offices at One Allen Center, 500 Dallas, Suite 3200,
Houston, Texas. After the Closing Date, Genesis OLP and its Affiliates shall
permit each Transferor and its Affiliates and agents to have full access, at any
reasonable time and from time to time, to such Assets and former Information of
such Transferor as such Transferor and its Affiliates may reasonably request in
connection with the preparation of financial statements, tax returns, or other
similar reports regarding the Assets and former Business for periods of such
Transferor. If Genesis OLP intends at any time to discard any Information
relating to the Assets and operation of the Business prior to the Closing Date,
Genesis OLP shall (a) give the appropriate Transferor written notice of such
intention at least thirty days prior to discarding such Information, and (b)
offer to allow such Transferor to take possession of such Information.
SECTION 14.4 Headings; References; Interpretation. The definitions in
this Agreement shall apply equally to both the singular and plural forms of the
terms defined. All Article and Section headings in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any of the provisions hereof. All references herein to
Articles, Sections, Schedules and Exhibits shall, unless the context requires a
different construction, be deemed to be references to the Articles and Sections
of this Agreement and the Schedules and Exhibits attached hereto, and all such
Schedules and Exhibits attached hereto are hereby incorporated herein and made a
part hereof for all purposes. All personal pronouns used in this Agreement,
whether used in the masculine, feminine or neuter gender, shall include all
other genders, and the singular shall include the plural and vice versa. The
use herein of the word "including" following any general statement. term or
matter shall not be construed to limit such statement, term or matter to the
specific items or matters set forth immediately following such word or to
similar items or matters, whether or not nonlimiting language (such as "without
limitation," "but not limited to," or words of similar import) is used with
reference thereto, but rather shall be deemed to refer to all other items or
matters that could reasonably fall within the broadest possible scope of such
general statement, term or matter. Except as otherwise expressly provided
herein, (a) any reference in this Agreement to any Transaction Document shall
mean such document as amended, restated, supplemented or otherwise modified from
time to time and (b) all terms of an accounting or financial nature shall be
construed in accordance with GAAP.
SECTION 14.5 Successors and Assigns. This Agreement shall not be
assignable by any party hereto by operation of law or otherwise without the
applicable consent of the Parties to this Agreement. The Agreement shall be
binding upon and inure to the benefit of the Parties and their respective
successors and permitted assigns.
SECTION 14.6 No Third Party Rights. Except as expressly provided in
Article 8, the provisions of this Agreement are not intended to and do not
create rights in any Person not a party to this Agreement or confer upon any
other Person any benefits, rights or remedies, and except as expressly provided
for in Article 8, no Person is or is intended to be a third party beneficiary of
any of the provisions of this Agreement.
SECTION 14.7 Counterparts. This Agreement may be executed in any number
of counterparts, all of which together shall constitute one agreement binding on
the parties hereto.
SECTION 14.8 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Texas, to the
extent permitted by law, without regard to the conflicts of law principles
thereof.
SECTION 14.9 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY EXHIBIT OR SCHEDULE HERETO.
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT, AS APPLICABLE BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION 14.9.
SECTION 14.10 Severability. If any of the provisions of this Agreement
are held by any court of competent jurisdiction to contravene, or to be invalid
under, the laws of any political body having jurisdiction over the subject
matter hereof, such contravention or invalidity shall not invalidate the entire
Agreement. Instead, this Agreement shall be construed as if it did not contain
the particular provision or provisions held to be invalid, and an equitable
adjustment shall be made and necessary provision added so as to give effect to
the intention of the parties as expressed in this Agreement at the time of
execution of this Agreement.
SECTION 14.11 Deed; Bill of Sale; Assignment. To the extent required by
applicable law, this Agreement shall also constitute a "deed," "bill of sale" or
"assignment" of the Assets.
SECTION 14.12 Amendment or Modification. This Agreement may be amended
or modified, or any provision waived or rescinded, from time to time only by the
written agreement of the Parties directly bound by, or benefited from, the
provisions in respect of which such amendment, modification, waiver or
rescission is sought.
SECTION 14.13 Integration. This Agreement supersedes all previous
understandings or agreements between the parties, whether oral or written, with
respect to its subject matter. This Agreement and the Transaction Documents
constitute an integrated agreement which contain the entire understanding of the
parties. No understanding, representation, promise or agreement, whether oral
or written, is intended to be or shall be included in or form part of this
Agreement or the Transaction Documents unless it is contained in a written
amendment hereto executed by the Parties hereto after the date of this
Agreement.
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of the date first above written.
BASIS PETROLEUM, INC.
By: /s/ Jeffrey R. Serra
---------------------
Jeffrey R. Serra
Chairman of the Board, President and
Chief Executive Officer
HOWELL CORPORATION
By: /s/ Paul N. Howell
--------------------
Paul N. Howell
President and Chief Executive Officer
HOWELL CRUDE OIL COMPANY
By: /s/ Mark J. Gorman
--------------------
Mark J. Gorman
President
HOWELL PIPELINE TEXAS, INC.
By: /s/ Allen R. Stanley
-----------------------
Allen R. Stanley
President
HOWELL PIPELINE USA, INC.
By: /s/ Allen R. Stanley
-----------------------
Allen R. Stanley
President
HOWELL TRANSPORTATION SERVICES, INC.
By: /s/ Bradley N. Howell
--------------------------
Bradley N. Howell
President
HOWELL POWER SYSTEMS, INC.
By: /s/ Allyn R. Skelton, II
--------------------------
Allyn R. Skelton, II
President
GENESIS ENERGY, L.L.C.
By: /s/ Allyn R. Skelton, II
-------------------------
Allyn R. Skelton, II
Chief Financial Officer
GENESIS ENERGY, L.P.
By: Genesis Energy, L.L.C.
As General Partner
By: /s/ Allyn R. Skelton, II
--------------------------
Allyn R. Skelton, II
Chief Financial Officer
GENESIS CRUDE OIL, L.P.
By: Genesis Energy, L.L.C.
As General Partner
By: /s/ Allyn R. Skelton, II
-------------------------
Allyn R. Skelton, II
Chief Financial Officer
EXHIBIT 10.2
FIRST AMENDMENT TO PURCHASE & SALE
AND CONTRIBUTION & CONVEYANCE AGREEMENT
This First Amendment to the Purchase & Sale and Contribution and Conveyance
Agreement (the "First Amendment") is effective as of December 2, 1996 among
GENESIS ENERGY, L.P., a Delaware limited partnership ("Genesis MLP"), GENESIS
CRUDE OIL, L.P., a Delaware limited partnership ("Genesis OLP"), BASIS
PETROLEUM, INC., a Texas corporation ("Basis"), HOWELL CORPORATION, a Delaware
corporation ("Howell"), HOWELL CRUDE OIL COMPANY, a Delaware corporation
("Howell Crude"), HOWELL PIPELINE TEXAS, INC., a Delaware corporation ("Howell
Texas"), HOWELL PIPELINE USA, INC., a Delaware corporation ("Howell Pipeline"),
HOWELL TRANSPORTATION SERVICES, INC., a Delaware corporation ("Howell
Transportation"), HOWELL POWER SYSTEMS, INC., a Delaware corporation ("Howell
Power" and, collectively with Howell Crude, Howell Texas, Howell Pipeline and
Howell Transportation, the "Howell Subsidiaries") and GENESIS ENERGY, L.L.C., a
Delaware limited liability company ("Genesis LLC").
W I T N E S S E T H:
WHEREAS, on November 26, 1996 the parties entered into a Purchase & Sale
and Contribution & Conveyance Agreement (the "Agreement") relating to the
contribution, conveyance and sale of certain crude oil gathering, marketing and
pipeline assets and operations to Genesis OLP; and
WHEREAS, pursuant to Section 14.2 of the Agreement, the parties now
mutually desire to amend the Agreement as described hereinbelow.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
1. The following definitions in Article I shall be amended as follows:
A. The defined term "Basis Final Balance Sheet" is replaced with
"Basis Final Adjustment Statement."
B. The definition of "Basis Purchase Cash" is hereby amended to read
as follows: " `Basis Purchase Cash' means 54% of the Purchase
Cash minus the Estimated Basis Adjustment."
C. The definition of "Effective Time" is hereby amended to mean
"12:01 a.m. on December 1, 1996, the Effective Date."
D. The amount included in the definition of the "Estimated Basis
Adjustment" is hereby amended by changing it from "$4,298,538" to
"$4,429,563."
E. The amount included in the definition of "Estimated Howell
Adjustment" is hereby amended by changing it from "$2,828,373" to
$2,858,691.84."
F. The defined term "Howell Final Balance Sheet" is replaced with
"Howell Financial Adjustment Statement."
2. Section 2.4(a)(i) is hereby amended to delete the word "tangible."
3. Section 2.4(a)(iii) is hereby amended to add the following phrase at
the end of the last line of such section "subject to reduction pursuant to
Section 2.4(b)(i)."
4. Section 2.5(a)(i) is hereby amended to add the phrase "not included in
the Basis Assets" on the fourth line after business and before the comma.
5. Schedule 1.1A to the Agreement is hereby amended to delete the "and"
after (n) and insert "and" after (o) and to add the following:
"(p) 26 new 1997 Mack trucks on order.
For purposes hereof, the words "primarily in the operation of the Business" or
words of similar import shall mean used in the operation of the Business and not
otherwise used primarily in the operation of any other business of Basis."
6. Schedule 1.3(d) is hereby amended to add the word "and" after refining
in the last line of 1.3(d).
7. Schedule 7.1 to the Agreement is hereby deleted in its entirety and
replaced with Annex A, attached hereto.
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
be duly executed this 3rd day of December, 1996.
BASIS PETROLEUM, INC.
By: /s/ Jeffrey R. Serra
------------------------
Jeffrey R. Serra
Chairman of the Board, President and
Chief Executive Officer
HOWELL CORPORATION
By: /s/ Paul N. Howell
------------------------
Paul N. Howell
President and Chief Executive Officer
HOWELL CRUDE OIL COMPANY
By: /s/ Mark J. Gorman
-----------------------
Mark J. Gorman
President
HOWELL PIPELINE TEXAS, INC.
By: /s/ Allen R. Stanley
-------------------------
Allen R. Stanley
President
HOWELL PIPELINE USA, INC.
By: /s/ Allen R. Stanley
-----------------------
Allen R. Stanley
President
HOWELL TRANSPORTATION SERVICES, INC.
By: /s/ Bradley N. Howell
-------------------------
Bradley N. Howell
President
HOWELL POWER SYSTEMS, INC.
By: /s/ Allyn R. Skelton, II
------------------------
Allyn R. Skelton, II
President
GENESIS ENERGY, L.L.C.
By: /s/ John P. vonBerg
-------------------------
John P. vonBerg
President and Chief Executive Officer
GENESIS ENERGY, L.P.
By: Genesis Energy, L.L.C.
As General Partner
By: /s/ John P. vonBerg
-------------------------
John P. vonBerg
President and Chief Executive Officer
GENESIS CRUDE OIL, L.P.
By: Genesis Energy, L.L.C.
As General Partner
By: /s/ John P. vonBerg
------------------------
John P. vonBerg
President and Chief Executive Officer
EXHIBIT 10.3
DISTRIBUTION SUPPORT AGREEMENT
This DISTRIBUTION SUPPORT AGREEMENT, dated as of December 3, 1996 (this
"Agreement"), is entered into by and between GENESIS CRUDE OIL, L.P., a Delaware
limited partnership ("Genesis OLP"), and SALOMON INC, a Delaware corporation
("Salomon").
For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and as an inducement to consummate the transactions
contemplated by the Genesis OLP Partnership Agreement (as hereinafter defined),
the parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1. Terms Defined by Reference to the Genesis OLP Partnership
Agreement. All capitalized terms used herein and not defined herein shall have
the meanings provided therefor in the Amended and Restated Agreement of Limited
Partnership of Genesis Crude Oil, L.P., dated as of December 3, 1996 (the
"Genesis OLP Partnership Agreement"), without giving effect to any amendments or
modifications to the Genesis OLP Partnership Agreement subsequent to the Closing
Date that would modify or amend in any respect any of such terms not defined
herein unless such amendment or modification is consented to in accordance with
the provisions of Section 3.6.
SECTION 1.2. Terms Defined Herein. The following definitions shall be for all
purposes, unless otherwise clearly indicated to the contrary, applied to the
terms used in this Agreement.
"Agreement" means this Distribution Support Agreement, as it may be amended,
supplemented or restated from time to time.
"Aggregate Ceiling" means, with respect to any Quarter, an amount equal to the
product obtained by multiplying (a) four, times (b) the Minimum Quarterly
Distribution as in effect for such Quarter, times (c) the sum of (i) the number
of OLP Common Units Outstanding as of the Closing Date, plus (ii) the number of
OLP Common Units, if any, issued after the Closing Date to Genesis MLP pursuant
to Section 5.2(a)(ii) of the Genesis OLP Partnership Agreement; provided,
however, that the number of OLP Common Units, if any, calculated as provided in
clause (c) of this definition shall be proportionately adjusted in the event of
any combination or subdivision of OLP Common Units, however effected, with the
result that, after taking into account an adjustment to the Minimum Quarterly
Distribution resulting pursuant to the Genesis OLP Partnership Agreement due to
such combination or subdivision, there shall not be any change in the Aggregate
Ceiling as a result of such combination or subdivision.
"API Contributor" means Salomon unless and until Salomon has transferred its
obligations under this Agreement to a transferee pursuant to and in compliance
with Section 2.6, and thereafter shall mean the transferee of such obligations.
"Cumulative OLP Common Unit Arrearage" has the meaning assigned to the term
"Cumulative Common Unit Arrearage" in the Genesis OLP Partnership Agreement.
"General Partner" means Genesis Energy, LLC unless and until Genesis Energy, LLC
has transferred its General Partner Interest in Genesis OLP in compliance with
the requirements of Section 4.6 of the Genesis OLP Partnership Agreement, and
thereafter shall mean the transferee of such General Partner Interest.
"Genesis Energy, LLC" means Genesis Energy, L.L.C., a Delaware limited
liability company, and its successors.
"Genesis MLP" means Genesis Energy, L.P., a Delaware limited partnership, and
its successors.
"Genesis MLP Partnership Agreement" means the Amended and Restated Agreement of
Limited Partnership of Genesis Energy, L.P., dated as of December 3, 1996, as it
may be amended, supplemented or restated from time to time.
"Genesis OLP" means Genesis Crude Oil, L.P., a Delaware limited partnership, and
its successors.
"Genesis OLP Partnership Agreement" has the meaning assigned to such term in
Section 1.1.
"Investment Grade Entity" means (a) a Person that has any long-term unsecured
debt obligations that are rated Qualified Investment Grade or (b) in the case of
a Person (i) who does not have long-term unsecured debt obligations, (ii) whose
long-term unsecured debt obligations are not rated by S&P, Moody's or an NRSRO
or (iii) who is not a U.S. Person, a Person having, in the reasonable judgment
of the API Contributor, credit quality comparable to that of a Person described
in clause (a) of this definition.
"Letter of Credit" means a letter of credit issued by a Qualified Bank, which
letter of credit meets the requirements set forth in Section 2.7.
"MLP Unit" has the meaning assigned to the term "Unit" in the Genesis MLP
Partnership Agreement.
"MLP Unitholder" has the meaning assigned to the term "Unitholder" in the
Genesis MLP Partnership Agreement.
"Moody's" means Moody's Investors Service, Inc., or any successor thereto.
"NRSRO" means a rating agency that is designated by the Securities and Exchange
Commission as a nationally recognized statistical rating organization.
"OLP Common Unit" has the meaning assigned to the term "Common Unit" in the
Genesis OLP Partnership Agreement.
"OLP Subordinated Unit" has the meaning assigned to the term "Subordinated Unit"
in the Genesis OLP Partnership Agreement.
"OLP Unit" has the meaning assigned to the term "Unit" in the Genesis OLP
Partnership Agreement.
"OLP Unitholders" has the meaning assigned to the term "Unitholders" in the
Genesis OLP Partnership Agreement.
"Qualified Bank" means a commercial bank whose long-term unsecured debt
obligations are rated Qualified Investment Grade at the time of issuance of a
Letter of Credit by such commercial bank.
"Qualified Investment Grade" means (a) a rating of at least BBB- by S&P, (b) a
rating of at least Baa3 by Moody's or (c) a rating by any other NRSRO that is
comparable to the ratings of S&P and Moody's described in clauses (a) and (b) of
this definition.
"Quarterly Ceiling" means, with respect to any Quarter and any contribution
contemplated hereby, an amount equal to the product of (i) the Minimum Quarterly
Distribution as in effect for such Quarter, times (ii) the number of OLP Common
Units Outstanding on the Record Date with respect to such Quarter.
"Required Contribution" has the meaning assigned to such term in Section 2.7.
"S&P" means Standard & Poor's Ratings Group, or any successor thereto.
"Salomon" means Salomon Inc, a Delaware corporation, and its successors.
"Support Period" means the period commencing on the Closing Date and ending on
the earlier to occur of (a) the first day after the day on which Available Cash
is distributed with respect to the Quarter ending December 31, 2001, (b) the
first day of any Quarter beginning after December 31, 1999 in respect of which
(i) distributions of Available Cash from Operating Surplus on each of the
Outstanding OLP Common Units and OLP Subordinated Units with respect to the
four-Quarter period immediately preceding such date equaled or exceeded the
sum of the Minimum Quarterly Distribution on all of the Outstanding OLP
Common Units and OLP Subordinated Units during such period, (ii) the Adjusted
Operating Surplus generated during the four-Quarter period immediately
preceding such date equaled or exceeded 133% of the sum of the Minimum
Quarterly Distribution on all of the Outstanding OLP Common Units and OLP
Subordinated Units during such period and (iii) there are no outstanding
Cumulative OLP Common Unit Arrearages, and (c) the date this Agreement
terminates in accordance with its terms and as contemplated by Section 2.3.
"Trustee" has the meaning assigned to such term in Section 2.7.
"U.S. Person" means a Person who is organized and existing under the laws of the
United States of America or any state thereof.
ARTICLE 2
DISTRIBUTION SUPPORT
SECTION 2.1. Distribution Support. The API Contributor agrees that, if the
amount of Available Cash from Operating Surplus (before giving effect to the
purchase of APIs as described below) with respect to any Quarter ending during
the Support Period is less at the relevant time than the amount necessary to
distribute the Minimum Quarterly Distribution as in effect for such Quarter on
all OLP Common Units Outstanding on the Record Date with respect to such
Quarter, then, on the date of determination of Available Cash with respect to
such Quarter, the API Contributor, subject to the limitations of this Agreement,
will contribute (or cause to be contributed) to Genesis OLP, in exchange for
APIs, cash in an amount equal to the lesser of (a) the amount that would enable
Genesis OLP to distribute the Minimum Quarterly Distribution as in effect for
such Quarter on all OLP Common Units Outstanding on the Record Date with respect
to such Quarter, (b) an amount equal to the Quarterly Ceiling with respect to
such Quarter and (c) the amount, if any, by which the Aggregate Ceiling with
respect to such Quarter exceeds at the relevant time the Unrecovered Capital of
the APIs Outstanding on the Record Date with respect to such Quarter.
SECTION 2.2. Issuance of APIs to the API Contributor. Genesis OLP shall issue
one API (having an initial Unrecovered Capital of $100) in exchange for each
$100 contributed (or caused to be contributed) by the API Contributor to Genesis
OLP pursuant to Section 2.1.
SECTION 2.3. Termination of Distribution Support Obligation Upon the
Dissolution and Liquidation of Genesis OLP. Upon the occurrence of the
Liquidation Date, the obligations of the API Contributor under this Agreement
shall terminate and the Support Period shall end immediately, retroactive to the
end of the last Quarter preceding the Liquidation Date with respect to which
distributions of Available Cash have been paid or are payable to holders of the
OLP Common Units. After such termination, the API Contributor shall not be
required to contribute (or cause to be contributed) any cash in exchange for
additional APIs from Genesis OLP.
SECTION 2.4. Rights of API Holders. As a result of the contribution of cash
in exchange for APIs, the holder of such APIs will become a non-voting limited
partner of Genesis OLP with a capital account in Genesis OLP and the right to
require Genesis OLP to redeem such APIs as provided in the Genesis OLP
Partnership Agreement and as provided in Section 2.5. APIs will not be
allocated any items of Genesis OLP income, gain, loss, deduction or credit,
except as otherwise expressly provided in the Genesis OLP Partnership Agreement.
SECTION 2.5. Redemption of APIs in Excess of Required Amount. In the event
that cash is contributed to Genesis OLP in exchange for APIs pursuant to this
Agreement and subsequent thereto it is determined that any portion of such cash
was not required to be so contributed by reason of the limitations contained in
this Article 2, then Genesis OLP shall redeem the APIs issued in exchange for
the portion of such cash not required to be so contributed as promptly as
practicable prior to any distributions of Available Cash with respect to the OLP
Common Units.
SECTION 2.6. Permitted Assignment by the API Contributor. The API
Contributor may transfer its obligations under this Agreement and be relieved of
its obligations hereunder at any time, provided that the transferee of such
obligations (a) unconditionally assumes all of the API Contributor's obligations
under this Agreement, (b) is an Affiliate of the General Partner, (c) is a
Person (i) who is a U.S. Person or (ii) who agrees to abide by and submit to the
jurisdiction of the United Kingdom or the United States of America with respect
to matters arising out of this Agreement and at the time of transfer is not
organized or based in any jurisdiction that is subject to any general provision
under the laws or regulations of the United States of America prohibiting U.S.
Persons from making investments in or conducting business with such
jurisdictions and (d) at the time of such transfer and after giving effect to
the assumption either (i) is an Investment Grade Entity or (ii) has arranged
for a Letter of Credit that satisfies the requirements of Section 2.7 to be
issued by a Qualified Bank for the account of Genesis OLP which Letter of Credit
secures the transferee's obligations under this Agreement to contribute cash to
Genesis OLP in exchange for APIs pursuant to Section 2.1.
SECTION 2.7. Letter of Credit. To constitute a Letter of Credit, a letter of
credit must (a) be a letter of credit providing for draws thereunder to be made
directly by a trustee ("Trustee") that is acceptable to Genesis OLP and the API
Contributor, (b) be issued by a Qualified Bank for the account of Genesis OLP,
(c) secure the API Contributor's obligations under this Agreement to contribute
cash to Genesis OLP in exchange for APIs pursuant to Section 2.1, and (d) at all
times be in an amount at least equal to the Aggregate Ceiling less the
Unrecovered Capital of any Outstanding APIs, unless more than one Letter of
Credit is issued and outstanding in which case the aggregate amount of such
Letters of Credit shall at all times be in an amount at least equal to the
Aggregate Ceiling less the Unrecovered Capital of any Outstanding APIs. Each
Letter of Credit must provide that (x) in the event that the API Contributor is
required to contribute cash to Genesis OLP in exchange for APIs pursuant to
Section 2.1 (a "Required Contribution") and such Required Contribution is not
made as required the Trustee will make a draw thereunder in an amount equal to
the amount of the Required Contribution and (y) the Trustee will make a draw
thereunder, in an amount equal to the full amount of such Letter of Credit, 30
days prior to the expiration of any such Letter of Credit, unless on such date
the API Contributor has in place a substitute Letter of Credit or Letters of
Credit. In the event of any draw under a Letter of Credit the amount of such
draw will be paid directly to Genesis OLP in cash.
ARTICLE 3
MISCELLANEOUS
SECTION 3.1. Headings; References; Interpretation. All Article or Section
headings in this Agreement are for convenience only and shall not be deemed to
control or affect the meaning or construction of the provisions hereof. The
definitions in this Agreement shall apply equally to both the singular and
plural forms of the terms defined. All personal pronouns used in this Agreement,
whether used in the masculine, feminine or neuter gender, shall include all
other genders, and the singular shall include the plural and vice versa. The
use herein of the word "including" following any general statement, term or
matter shall not be construed to limit such statement, term or matter to the
specific items or matters set forth immediately following such word or to
similar items or matters, whether or not nonlimiting language (such as "without
limitation," "but not limited to," or words of similar import) is used with
reference thereto, but rather shall be deemed to refer to all other items or
matters that could reasonably fall within the broadest possible scope of such
general statement, term or matter.
SECTION 3.2. Benefit of Agreement. This Agreement is not a direct or indirect
guaranty of payment of all or any portion of the Minimum Quarterly Distribution
on any of the OLP Units or of any distribution on any of the MLP Units. The
covenants and agreements contained in this Agreement are for the sole benefit of
the parties hereto and shall not be construed as conferring, and are not
intended to confer, any direct, indirect or third-party beneficiary rights on
any other persons, including without limitation, the OLP Unitholders and the MLP
Unitholders. This Agreement shall be binding upon Genesis OLP and the API
Contributor.
SECTION 3.3. Integration. This Agreement supersedes all previous
understandings or agreements between the parties, whether oral or written, with
respect to its subject matter. This document is an integrated agreement which
contains the entire understanding of the parties. No understanding,
representation, promise or agreement, whether oral or written, is intended to be
or shall be included in or form part of this Agreement unless it is contained in
a written amendment hereto executed by the parties hereto after the date of this
Agreement.
SECTION 3.4 Counterparts. This Agreement may be executed in any number of
counterparts, all of which together shall constitute one agreement binding on
the parties hereto.
SECTION 3.5 Applicable Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York, to the extent
permitted by law, without regard to the principles of conflicts of law.
SECTION 3.6 Amendments and Waivers. The parties hereto, by mutual agreement
in writing, may amend, modify or supplement this Agreement; provided, however,
that if any such amendment, modification or supplement adversely affects the
holders of the OLP Common Units in any material respect then such amendment,
modification or supplement shall require the approval of holders of more than
50% of the outstanding OLP Common Units (excluding OLP Common Units held by the
API Contributor and any of its Affiliates (other than Genesis MLP)).
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto
as of the date first above written.
GENESIS CRUDE OIL, L. P.
By: GENESIS ENERGY, L.L.C., general partner
By: /s/ John P. vonBerg
-----------------------------------------------------
Name: John P. vonBerg
Title: President and Chief Executive Officer
SALOMON INC
By: /s/ Thomas W. Jasper
--------------------------------------
Name: Thomas W. Jasper
Title: Treasurer
/s/ Michelle Turner
- ------------------------------
Michelle Turner
Authorized Signatory
EXHIBIT 10.4
================================================================
MASTER CREDIT SUPPORT AGREEMENT
dated as of December 3, 1996
among
GENESIS CRUDE OIL, L.P.,
SALOMON INC
and
BASIS PETROLEUM, INC.
==================================================================
TABLE OF CONTENTS
Page
ARTICLE I
Definitions
SECTION 1.1. Definitions 1
SECTION 1.2. Terms Generally 14
ARTICLE II
Guaranty Facility
SECTION 2.1. Guaranties 14
SECTION 2.2. Notice of Issuance, Amendment, Renewal or Extension 15
SECTION 2.3. Guaranty Fees 15
SECTION 2.4. Agent 16
SECTION 2.5. Repayment Obligation 16
ARTICLE III
Working Capital Facility
SECTION 3.1. Loans 17
SECTION 3.2. Letters of Credit 17
SECTION 3.3. Term 18
SECTION 3.4. Pricing Terms 18
SECTION 3.5. Notes 19
SECTION 3.6. Default Interest 19
SECTION 3.7. Payments Generally 19
ARTICLE IV
Conditions of Lending
SECTION 4.1. Conditions to All Credit Events 20
SECTION 4.2. Conditions to First Credit Event 20
ARTICLE V
Representations and Warranties
SECTION 5.1. Organization; Powers 22
SECTION 5.2. Authorization; Enforceability 22
SECTION 5.3. Governmental Approvals; No Conflicts 22
SECTION 5.4. No Material Adverse Change 23
SECTION 5.5. Title to Properties 23
SECTION 5.6. Litigation and Environmental Matters 23
SECTION 5.7. Compliance with Laws and Agreements 23
SECTION 5.8. Investment and Holding Company Status 24
SECTION 5.9. Taxes 24
SECTION 5.10. ERISA 24
SECTION 5.11. Disclosure 24
SECTION 5.12. Subsidiaries 24
SECTION 5.13. Federal Reserve Regulations 24
SECTION 5.14. Security Agreement 25
SECTION 5.15. Solvency 25
ARTICLE VI
Covenants
SECTION 6.1. Liens 25
SECTION 6.2. Management Practices 27
SECTION 6.3. Limitation on Transactions 27
SECTION 6.4. Cash Management 27
SECTION 6.5. Information Covenants 28
SECTION 6.6. Consolidation, Merger, Sale of Assets, etc. 29
SECTION 6.7. Indebtedness 29
SECTION 6.8. Minimum Tangible Net Worth 30
SECTION 6.9. Minimum Working Capital 30
SECTION 6.10. Working Capital Leverage Ratio 30
SECTION 6.11. Fixed Charge Coverage 30
SECTION 6.12. Leverage Ratio 30
SECTION 6.13. Advances, Investments and Loans 30
SECTION 6.14. Restricted Payments 31
SECTION 6.15. Existence; Conduct of Businesses 31
SECTION 6.16. Payment of Obligations 31
SECTION 6.17. Maintenance of Properties; Insurance 31
SECTION 6.18. Books and Records; Inspection Rights 31
SECTION 6.19. Compliance with Laws 32
SECTION 6.20. Further Assurances 32
ARTICLE VII
Events of Default
ARTICLE VIII
Miscellaneous
SECTION 8.1. Choice of Law; Submission to Jurisdiction;
Waiver of Jury Trial 35
SECTION 8.2. Notices 36
SECTION 8.3. Entire Agreement 36
SECTION 8.4. Effect of Waiver or Consent 36
SECTION 8.5. Amendment, Modification or Waiver 36
SECTION 8.6. Termination 37
SECTION 8.7. Assignment 37
SECTION 8.8. Counterparts 37
SECTION 8.9. Demands and Claims 38
SECTION 8.10. U.S. Currency 38
SECTION 8.11. Laws and Regulations 38
SECTION 8.12. Negation of Rights of Assignees and Third Parties 38
SECTION 8.13. Maximum Interest Rate 38
SECTION 8.14. Expenses; Indemnification 38
SECTION 8.15. Cash Collateralization 39
SECTION 8.16. Survival 40
SECTION 8.17. Obligations Absolute 40
Schedule I Guaranty Facility Fees
Schedule II Working Capital Facility Fees
Exhibit A Form of Promissory Note
Exhibit B Security Agreement
Exhibit C Form of Subsidiary Guarantee Agreement
Exhibit D Form of Pledge Agreement
Exhibit E Form of Indemnity, Subrogation and Contribution Agreement
Exhibit F Form of Borrowing Base Certificate
Exhibit G Form of Borrowing Request
Exhibit H Form of Opinion of Andrews & Kurth L.L.P.
EXECUTION COPY
MASTER CREDIT SUPPORT AGREEMENT, dated as of December 3,
1996 (this "Agreement"), entered into among GENESIS CRUDE OIL, L.P., a Delaware
limited partnership ("Genesis OLP"), SALOMON INC, a Delaware corporation
("Salomon Inc"), and BASIS PETROLEUM, INC., a Texas corporation ("Basis").
WHEREAS Genesis OLP has been formed to conduct the crude oil gathering and
marketing and pipeline business previously conducted by Howell Corporation
("Howell") and the crude oil gathering and marketing business previously
conducted by Basis;
WHEREAS the crude oil gathering and marketing business to be conducted by
Genesis OLP is expected to require significant transitional credit support in
connection with crude oil purchase, sale, transfer and other related
transactions entered into by Genesis OLP in the ordinary course of business; and
WHEREAS Salomon Inc and Basis desire to provide transitional credit support to
Genesis OLP on the terms and subject to the limitations specified herein;
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions.
The following terms shall for purposes of this Agreement have the meanings
assigned below.
"Account" shall mean any right to payment for goods sold, exchanged or leased or
for services rendered, whether or not earned by performance.
"Account Debtor" shall mean, with respect to any Account, the obligor with
respect to such Account.
"Affiliate" shall have the meaning assigned to such term in the Conveyance
Agreement.
"Agent" shall have the meaning assigned to such term in Section 2.4 of this
Agreement.
"Availability Period" shall mean (a) with respect to the Working Capital
Facility Commitment, the period from and including the Closing Date to but
excluding the earlier of (i) the Working Capital Facility Maturity Date and
(ii) the date of termination of the Working Capital Facility Commitment pursuant
to Section 3.2(d), Section 3.3, Article VII or Section 8.6 and (b) with respect
to the Guaranty Facility Commitment, the period from and including the Closing
Date to but excluding the earlier of (i) the Guaranty Facility Maturity Date and
(ii) the date of termination of the Guaranty Facility Commitment pursuant to
Section 2.1(b), Article VII or Section 8.6.
"Bankruptcy Code" shall mean Title 11 of the United States Code.
"Borrowing Base" shall mean an amount equal to the sum, without duplication, of
(a) 90% of Pre-Approved Eligible Receivables, (b) 85% of Eligible Receivables
other than Pre-Approved Eligible Receivables and (c) 80% of the crude oil
inventories of Genesis OLP calculated on a mark-to-market basis on the relevant
date and in accordance with industry practice, which inventories shall be taken
into account if and only to the extent that the mark-to-market value of such
inventories is in excess of $5,000,000; provided that at no time shall the
amount resulting from clause (c) above with respect to crude oil inventories
exceed 20% of the total Borrowing Base; and, provided further, that for the
period from and including the Closing Date until December 31, 1996, the
Borrowing Base shall be deemed to be $50,000,000. The Borrowing Base at any
time in effect shall be determined by reference to the Borrowing Base
Certificate most recently delivered hereunder.
"Borrowing Base Certificate" shall have the meaning assigned to such term in
Section 4.2(i) of this Agreement.
"Borrowing Request" shall mean a request by Genesis OLP in accordance with the
terms of Section 3.1(b) and substantially in the form of Exhibit G hereto.
"Business Day" shall mean any day other than a Saturday, Sunday or day on which
banks in New York City are authorized or required by law to close.
"Capitalized Lease Obligations" of any Person shall mean the obligations of such
Person to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination thereof,
which obligations are required to be classified and accounted for as capital
leases on a balance sheet of such Person under GAAP, and the amount of such
obligations shall be the capitalized amount thereof determined in accordance
with GAAP.
"Capital Stock" shall mean, with respect to any Person, any and all shares,
interests, rights to purchase, warrants, options, participation or other
equivalents of or interests in (however designated) equity of such Person,
including any preferred stock, any limited or general partnership interest and
any limited liability company membership interest.
"Closing Date" shall mean the date of the first Credit Event.
"Code" shall mean the Internal Revenue Code of 1986.
"Collateral" shall mean all the "Collateral" as defined in the Security
Agreement.
"Collateral Agent" shall mean Salomon Inc, in its capacity as Collateral Agent
for the Secured Parties under the Security Agreement.
"Commitments" shall mean the Guaranty Facility Commitment and the Working
Capital Facility Commitment.
"Compromise of Claims Agreement" shall mean an agreement evidenced in writing
whereby Genesis OLP and another Person have agreed to compromise their claims
and cancel in all respects without further liability specified contracts to
purchase and sell quantities of crude oil and both parties have agreed to enter
into a new contract to purchase and sell the net quantity of crude oil related
to such purchase and sale contracts and such agreement is in compliance with the
terms of Section 6.2 hereof.
"Consolidated Current Assets" shall mean the current assets of Genesis OLP and
the Subsidiaries determined on a consolidated basis in accordance with GAAP.
"Consolidated Current Liabilities" shall mean the current liabilities of Genesis
OLP and the Subsidiaries determined on a consolidated basis in accordance with
GAAP.
"Consolidated EBITDA" shall mean, for any period, the Consolidated Net Income
for such period, plus, to the extent deducted in computing Consolidated Net
Income, the sum (without duplication) of (a) income tax expense, (b) interest
expense, (c) depreciation and amortization expense, (d) Guaranty fees and Letter
of Credit fees payable hereunder and (e) any extraordinary losses, minus, to the
extent added in computing such Consolidated Net Income, (i) any interest income
and (ii) any extraordinary gains, all as determined on a consolidated basis with
respect to Genesis OLP and the Subsidiaries in accordance with GAAP.
"Consolidated Fixed Charges" shall mean, for any period, the sum (without
duplication) of (i) Maintenance Capital Expenditures during such period,
(ii) interest expense for such period, (iii) Guaranty fees and Letter of Credit
fees payable hereunder for such period and (iv) the aggregate amount of payments
of principal on Indebtedness (excluding any payments of principal on Loans
hereunder) of Genesis OLP and the Subsidiaries scheduled to be made during such
period (including, without limitation, scheduled Capitalized Lease Obligations).
"Consolidated Net Income" shall mean, for any period, the net income or loss of
Genesis OLP and the Subsidiaries for such period determined on a consolidated
basis in accordance with GAAP; provided that there shall be excluded (a) the
income of any Person in which any other Person (other than Genesis OLP or any of
the Subsidiaries or any director holding qualifying shares in compliance with
applicable law) has an interest, except to the extent of the amount of dividends
or other distributions actually paid to Genesis OLP or any of the Subsidiaries
(subject to the limitation contained in clause (c)) by such Person during such
period, (b) the income (or loss) of any Person accrued prior to the date it
becomes a Subsidiary or is merged into or consolidated with Genesis OLP or any
of the Subsidiaries or the date that Person's assets are acquired by Genesis OLP
or any of the Subsidiaries, (c) the income of any Subsidiary if such Subsidiary
is subject to restrictions, directly or indirectly, on the payment of dividends
or the making of distributions by such Subsidiary, directly or indirectly, to
Genesis OLP, except to the extent of the amount of dividends or other
distributions actually paid to Genesis OLP or any of the Subsidiaries as a
dividend or other distribution (subject, in the case of a dividend or other
distribution paid to another Subsidiary, to the limitations contained in this
clause), (d) any after-tax gains or losses attributable to sales of assets out
of the ordinary course of business and (e) to the extent not excluded by clauses
(a) through (d) above, any non-cash extraordinary gains or non-cash
extraordinary losses.
"Consolidated Net Worth" shall mean the total partners' capital of Genesis OLP
determined on a consolidated basis in accordance with GAAP after appropriate
deduction for any less-than-wholly owned interests in Subsidiaries.
"Consolidated Tangible Net Worth" shall mean the total amount of assets (less
accumulated depreciation and amortization, allowances for doubtful receivables,
other applicable reserves and other properly deductible items) which would
appear on a consolidated balance sheet of Genesis OLP and the Subsidiaries,
determined on a consolidated basis in accordance with GAAP, and after giving
effect to purchase accounting and after deducting therefrom Consolidated Current
Liabilities and, to the extent otherwise included, the amounts of (i) minority
interests in the Subsidiaries held by Persons other than Genesis OLP or a
Subsidiary; (ii) excess of cost over fair value of assets of businesses
acquired, as determined in good faith by the General Partner; (iii) any
revaluation or other write-up in book value of assets subsequent to the Closing
Date as a result of a change in the method of valuation in accordance with GAAP
consistently applied; (iv) unamortized debt discount and expenses and other
unamortized deferred charges, goodwill, patents, trademarks, service marks,
trade names, copyrights, licenses, organization or developmental expenses and
other intangible items; (v) treasury stock; and (vi) cash set apart and held in
a sinking or other analogous fund established for the purpose of redemption or
other retirement of Capital Stock to the extent such obligation is not reflected
in Consolidated Current Liabilities.
"Consolidated Total Liabilities" shall mean the total liabilities (including,
without limitation, all Indebtedness) of Genesis OLP and the Subsidiaries
determined on a consolidated basis in accordance with GAAP.
"Consolidated Working Capital" shall mean the Consolidated Current Assets less
the Consolidated Current Liabilities.
"Contingent Obligation" shall mean any obligation of a Person guaranteeing or
having the effect of guaranteeing any Indebtedness, leases, distributions,
dividends or other obligations ("primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly or indirectly including,
without limitation, any obligation of such Person, whether or not contingent,
(i) to purchase any such primary obligation or any property constituting direct
or indirect security therefor, (ii) to advance or supply funds (x) for the
purpose of payment of any such primary obligation or (y) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (iii) to purchase property,
securities or services primarily for the purpose of assuring the holder of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation or (iv) otherwise to assure or hold harmless the holder
of such primary obligation against loss in respect thereof; provided, however,
that the term Contingent Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course of business. The
amount of any Contingent Obligation shall be deemed to be an amount equal to the
stated or determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person is
required to perform thereunder) as determined by Genesis OLP in good faith.
"Contract Cancelation Agreement" shall mean an agreement evidenced in writing
whereby Genesis OLP and another Person have agreed to cancel in all respects and
without further liability specified contracts to purchase and sell equal
quantities of crude oil resulting in no deliveries of crude oil and both parties
have agreed to pay cancelation fees as set forth in such agreement and such
agreement is in compliance with the terms of Section 6.2 hereof.
"Conveyance Agreement" shall mean that certain Purchase & Sale and Contribution
& Conveyance Agreement dated as of November 26, 1996 by and between Genesis MLP,
Genesis OLP, Basis, Howell, certain subsidiaries of Howell and Genesis LLC.
"Credit Event" shall have the meaning assigned to such term in Section 4.1.
"Crude Oil Contracts" shall mean contracts entered into by Genesis OLP with
third parties for the sale, purchase, exchange, marketing or transportation of
crude oil in form and substance customary in Genesis OLP's crude oil gathering,
marketing and transportation business and in compliance with Section 6.2 hereof.
"Default" shall mean any event or condition that upon notice, lapse of time or
both would constitute an Event of Default.
"Disbursement" shall mean a Guaranty Disbursement or an L/C Disbursement.
"Domestic Subsidiary" shall mean each Subsidiary that is organized under the
laws of the United States or any state thereof.
"Eligible Receivable" shall mean, on any date, all Accounts of Genesis OLP and
the Subsidiaries on such date that (a) have been invoiced and represent the bona
fide sale and delivery or rendering of goods or services, in each case in the
ordinary course of business of such Person in connection with its trade
operations, and (b) are not ineligible for inclusion in the calculation of the
Borrowing Base pursuant to any of clauses (i) through (ix) below or otherwise
deemed by the Collateral Agent in good faith to be ineligible for inclusion in
the calculation of the Borrowing Base as described below. Without limiting the
foregoing, to qualify as an Eligible Receivable, an Account shall indicate
Genesis OLP or any Subsidiary as sole payee and as sole remittance party. In
determining the amount to be so included, the face amount of Accounts shall be
reduced, without duplication, by (x) the amount of all accrued and actual
returns, discounts, claims, credits or credits pending, charges, price
adjustments, freight or finance charges or other allowances (including any
amount that Genesis OLP or any Subsidiary may be obligated to rebate to an
Account pursuant to the terms of any agreement or understanding (written or
oral)), (y) the aggregate amount of all reserves, limits and deductions provided
for in this definition and elsewhere in this Agreement and (z) the aggregate
amount of all cash received in respect of Accounts but not yet applied by
Genesis OLP or a Subsidiary to reduce the amount of the Accounts and modified to
take into account the effects of Compromise of Claims Agreements and Contract
Cancelation Agreements. Standards of eligibility may be fixed from time to time
solely by the Collateral Agent in the exercise of its reasonable judgment, with
any changes in such standards to be effective 10 days after delivery of notice
thereof to Genesis OLP. Unless otherwise approved from time to time in writing
by the Collateral Agent, no Account shall be an Eligible Receivable:
(i) if Genesis OLP or a Subsidiary does not have sole lawful and absolute title
to such Account (other than as pledged hereunder); or
(ii) if it arises out of a sale made by Genesis OLP or a Subsidiary to an
employee, officer, agent, director, stockholder, or Affiliate of Genesis OLP
(including Genesis MLP, but excluding Basis, Salomon Inc, Phibro Inc. and
Howell); or
(iii) if (A) it is unpaid more than 3 Business Days from the due date or (B) it
has been written off the books of Genesis OLP or a Subsidiary or has been
otherwise designated on such books as uncollectible; or
(iv) if more than 50% in face amount of all Accounts of the same Account Debtor
are ineligible pursuant to clause (iii) above; or
(v) if the Account Debtor (A) is a creditor of Genesis OLP or a Subsidiary other
than as a creditor in the capacity of a party to a Crude Oil Contract, Contract
Cancelation Agreement or a Compromise of Claims Agreement and other than Basis,
Salomon Inc, Phibro Inc. or Howell, (B) has or has asserted a right of setoff
against Genesis OLP or a Subsidiary other than in the ordinary course and in
accordance with the terms of a Crude Oil Contract, Compromise of Claims
Agreement or Contract Cancelation Agreement or (C) has disputed its liability
(whether by chargeback or otherwise) or made any claim with respect to the
Account or any other Account of Genesis OLP or a Subsidiary which has not been
resolved, in each case, without duplication, to the extent of the amount owed by
Genesis OLP or a Subsidiary to the Account Debtor, the amount of such actual or
asserted right of setoff, or the amount of such dispute or claim, as the case
may be; or
(vi) if the Account Debtor is insolvent or the subject of any bankruptcy case or
insolvency proceeding of any kind; or
(vii) if the Account is not payable in dollars or the Account Debtor is either
not incorporated under the laws of the United States of America or any State
thereof or Canada or is located outside or has its principal place of business
or substantially all of its assets outside the continental United States or
Canada, except to the extent the Account is supported by an irrevocable letter
of credit reasonably satisfactory to the Collateral Agent (as to form, substance
and issuer) and assigned to and directly drawable by the Collateral Agent; or
(viii) if the goods giving rise to such Account have not been shipped and
delivered to and accepted by the Account Debtor, or the Account otherwise does
not represent a completed sale; or
(ix) if (A) either the perfection, enforceability or validity of the Collateral
Agent's security interest or the Secured Parties' right or ability to receive
direct payments as to such Account is governed by any Federal or state statutory
requirement other than the Uniform Commercial Code, (B) it is not subject to a
valid and perfected first priority Lien in favor of the Collateral Agent for the
benefit of the Secured Parties, subject to no other Liens other than the Liens
(if any) permitted by the Loan Documents, or (C) it does not otherwise conform
in all material respects to the representations and warranties contained in the
Loan Documents.
In determining the aggregate amount of Accounts from the same Account Debtor
that are unpaid more than 3 Business Days from the due date pursuant to
clause (iii) above, there shall be excluded the amount of any net credit
balances relating to Accounts with invoice or payment dates more than 3 Business
Days from the due date.
"Environmental Laws" shall mean all laws, rules, regulations, codes, ordinances,
orders, decrees, judgments, injunctions, notices or binding agreements issued,
promulgated or entered into by any Governmental Authority, relating in any way
to the environment, preservation or reclamation of natural resources, the
management, release or threatened release of any Hazardous Material or to health
and safety matters.
"Environmental Liability" shall mean any liability, contingent or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of Genesis OLP or any Subsidiary directly or
indirectly resulting from or based upon (a) violation of any Environmental Law,
(b) the generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials,
(d) the release or threatened release of any Hazardous Materials into the
environment or (e) any contract, agreement or other consensual arrangement
pursuant to which liability is assumed or imposed with respect to any of the
foregoing.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974.
"ERISA Affiliate" shall mean any trade or business (whether or not incorporated)
that, together with Genesis OLP, is treated as a single employer under
Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of
ERISA and Section 412 of the Code, is treated as a single employer under Section
414 of the Code.
"ERISA Event" shall mean (a) any "reportable event", as defined in Section 4043
of ERISA or the regulations issued thereunder with respect to a Plan (other than
an event for which the 30-day notice period is waived); (b) the existence with
respect to any Plan of an "accumulated funding deficiency" (as defined in
Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the
filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by Genesis OLP or any ERISA Affiliate of any liability
under Title IV of ERISA with respect to the termination of any Plan; (e) the
receipt by Genesis OLP or any ERISA Affiliate from the PBGC or a plan
administrator of any notice relating to an intention to terminate any Plan or
Plans or to appoint a trustee to administer any Plan; (f) the incurrence by
Genesis OLP or any ERISA Affiliate of any liability with respect to the
withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the
receipt by Genesis OLP or any ERISA Affiliate of any notice, or the receipt by
any Multiemployer Plan from Genesis OLP or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.
"Event of Default" shall have the meaning assigned to such term in Article VII.
"First Purchase Lien" shall mean any Lien on crude oil under Section 9.319 of
the Texas Business and Commerce Code securing the obligation of the first
purchaser to purchase and pay for such oil and arising in the ordinary course of
business.
"Foreign Subsidiary" shall mean any Subsidiary that is not a Domestic
Subsidiary.
"Forward Exposure" shall mean, for any date, the aggregate hypothetical
liability of Genesis OLP to third parties on such date with respect to executory
payment and performance obligations pursuant to Guaranteed Contracts which are
not Scheduled Obligations, assuming all such Guaranteed Contracts were
terminated on such date as a result of the nonpayment or nonperformance of
Genesis OLP, calculated in accordance with such Guaranteed Contracts if such
contracts specify a measure of such liability upon termination, in the form of
liquidated damages or otherwise, or if no such measure is specified, then in
accordance with industry standards as determined by the Agent, in each case
using the closing prices for the relevant commodities on the date Forward
Exposure is calculated as published in Platt's Crude Oil Marketwire.
"GAAP" shall mean generally accepted accounting principles applied on a
consistent basis.
"General Partner" shall mean the operating general partner of Genesis OLP.
"Genesis MLP" shall mean Genesis Energy, L.P., a Delaware limited partnership.
"Genesis LLC" shall mean Genesis Energy, L.L.C., a Delaware limited liability
company.
"Genesis OLP Partnership Agreement" shall mean the Agreement of Limited
Partnership of Genesis OLP Crude Oil, L.P., as the same may be amended and
restated.
"Governmental Authority" shall mean the government of the United States of
America, any other nation or any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.
"Guaranteed Contracts" shall mean Crude Oil Contracts with respect to which the
payment and/or performance obligations of Genesis OLP are guaranteed by Salomon
Inc pursuant to a Guaranty.
"Guaranty" shall mean a guaranty issued by Salomon Inc pursuant to Section 2.1
in form and substance acceptable to Salomon Inc.
"Guaranty Disbursement" shall mean any payment or disbursement made by Salomon
Inc pursuant to a Guaranty.
"Guaranty Exposure" shall mean, for any date, (a) the sum of (i) Priced
Exposure, (ii) Unpriced Exposure and (iii) Forward Exposure, in each case for
such date, plus (b) the aggregate principal amount of all Guaranty Disbursements
that have not yet been reimbursed at such time.
"Guaranty Facility Commitment" shall mean the commitment of Salomon Inc to issue
Guaranties pursuant to Section 2.1.
"Guaranty Facility Maturity Date" shall mean December 31, 1999.
"Hazardous Materials" shall mean all explosive or radioactive substances or
wastes and all hazardous or toxic substances, wastes or other pollutants,
including petroleum or petroleum distillates, asbestos or asbestos containing
materials, polychlorinated biphenyls, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law.
"Hedging Agreement" shall mean any interest rate protection agreement, foreign
currency exchange agreement, commodity price protection agreement, forward
agreement, futures contract or other interest rate, currency exchange rate or
commodity price hedging arrangement or like agreement.
"Indebtedness" of any Person shall mean, without duplication, (a) all
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
property acquired by such Person, (e) all obligations of such Person in respect
of the deferred purchase price of property or services (excluding current
accounts payable incurred in the ordinary course of business), (f) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien
(other than any First Purchase Lien) on property owned or acquired by such
Person, whether or not the Indebtedness secured thereby has been assumed, to the
extent of the book value of the property subject to such Lien, (g) all
Contingent Obligations of such Person, (h) all Capitalized Lease Obligations of
such Person, (i) all net obligations of such Person in respect of Hedging
Agreements, (j) all obligations, contingent or otherwise, of such Person as an
account party in respect of letters of credit and letters of guaranty and (k)
all obligations, contingent or otherwise, of such Person in respect of bankers'
acceptances. The Indebtedness of any Person shall include the Indebtedness of
any other entity (including any partnership in which such Person is a general
partner) to the extent such Person is liable therefor as a result of such
Person's ownership interest in or other relationship with such entity, except to
the extent the terms of such Indebtedness provide that such Person is not liable
therefor. For purposes of clause (g) above, the amount of the net obligation in
respect of any Hedging Agreement shall be determined after giving effect to any
other Hedging Agreement entered into for the purpose of offsetting the liability
with respect to such Hedging Agreement and which has such effect.
"Indemnity, Subrogation and Contribution Agreement" shall mean the Indemnity,
Subrogation and Contribution Agreement, substantially in the form of Exhibit E
hereto, to be entered into by and among the Subsidiary Guarantors and the
Collateral Agent.
"Investment Grade Entity" shall mean (a) with respect to any U.S. Entity, an
entity having long-term unsecured debt obligations which are rated at least BBB-
by Standard & Poor's Ratings Service, or any successor thereto ("S&P"), or Baa3
by Moody's Investor Service or any successor thereto ("Moody's"), or a
comparable rating from any other rating agency designated by the Securities and
Exchange Commission as a nationally recognized statistical rating organization
(an "NRSRO") or (b) in the case of an entity which does not have long-term
unsecured debt obligations, or whose long-term unsecured debt obligations are
not rated by S&P, Moody's or any other NRSRO, or which is not a U.S. Entity, an
entity having, in the reasonable judgment of Salomon Inc, credit quality
comparable to that of an entity described in clause (a).
"L/C Disbursement" shall mean any payment or reimbursement made by Basis to the
issuer of any Letter of Credit.
"L/C Exposure" shall mean at any time the sum of (a) the aggregate undrawn
amount of all outstanding Letters of Credit at such time plus (b) the aggregate
principal amount of all L/C Disbursements that have not yet been reimbursed at
such time.
"Letter of Credit" shall mean any letter of credit issued for the benefit of
Genesis OLP pursuant to Section 3.2(b).
"Lien" shall mean, with respect to any asset, (a) any mortgage, deed of trust,
lien, pledge, encumbrance, charge or security interest in or on such asset,
(b) the interest of a vendor or a lessor under any conditional sale agreement,
capital lease or title retention agreement (or any financing lease having
substantially the same economic effect as any of the foregoing) relating to such
asset and (c) in the case of securities, any purchase option, call or similar
right of a third party with respect to such securities.
"Loan" shall have the meaning assigned to such term in Section 3.1(a).
"Loan Parties" shall mean Genesis OLP and the Subsidiary Guarantors.
"Loan Documents" shall mean this Agreement, the Guaranties, the Letters of
Credit, the Notes, the Security Documents, the Subsidiary Guarantee Agreement,
the Pledge Agreement and the Indemnity, Subrogation and Contribution Agreement.
"Maintenance Capital Expenditures" shall mean, for any period, capital
expenditures made during such period by Genesis OLP and the Subsidiaries to
maintain operating capacity, including to maintain or effect environmental
compliance, and to maintain the quality and cost-competitiveness of their
respective assets and operations, such amount to be offset by the proceeds of
the sales of any capital assets; provided that such proceeds are used to make
Maintenance Capital Expenditures for capital assets to be employed in a capacity
similar to those sold.
"Material Adverse Effect" shall mean a material adverse effect on (a) the
business, assets, operations, prospects or condition, financial or otherwise, of
Genesis OLP and the Subsidiaries taken as a whole, (b) the ability of Genesis
OLP or any other Loan Party to perform any of its obligations under this
Agreement or any other Loan Document or (c) the rights of or benefits available
to the Agent, the Collateral Agent, Salomon Inc or Basis under this Agreement
and the other Loan Documents.
"Maximum Credit Support Amount" shall mean (w) $550,000,000 for the period
beginning on the date hereof and ending on June 30, 1997; (x) $500,000,000 for
the period beginning on July 1, 1997 and ending on December 31, 1997;
(y) $400,000,000 for the period beginning on January 1, 1998 and ending on
December 31, 1998; and (z) $300,000,000 for the period beginning on January 1,
1999 and ending on December 31, 1999; provided, however, that the Maximum Credit
Support Amount at any time shall be reduced, on a dollar-for-dollar basis, by
the Working Capital Exposure at such time and by the amount of any obligation to
a third party to the extent that such third party has a security interest in any
Collateral (other than a First Purchase Lien) that is prior to the security
interest of the Collateral Agent for the benefit of the Secured Parties under
the Security Documents.
"Multiemployer Plan" shall mean a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
"Note" shall have the meaning assigned to such term in Section 3.5 of this
Agreement.
"Obligations" shall mean (a) the due and punctual payment of (i) the principal
of, premium, if any, and interest (including interest accruing during the
pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding) on,
the Loans, when and as due, whether at maturity, by acceleration, upon one or
more dates set for prepayment or otherwise, (ii) each payment required to be
made by Genesis OLP under this Agreement in respect of any Guaranty or any
Letter of Credit, when and as due, including payments in respect of
reimbursement of Disbursements, interest thereon and obligations to provide cash
collateral and (iii) all other monetary obligations, including fees, costs,
expenses and indemnities, whether primary, secondary, direct, contingent, fixed
or otherwise (including monetary obligations incurred during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding, regardless of
whether allowed or allowable in such proceeding), of the Loan Parties to the
Secured Parties under this Agreement and the other Loan Documents, (b) the due
and punctual performance of all covenants, agreements, obligations and
liabilities of the Loan Parties under or pursuant to this Agreement and the
other Loan Documents and (c) all obligations of Genesis OLP, monetary or
otherwise, under each Hedging Agreement entered into with Salomon Inc or Basis
(or any Affiliate of Salomon Inc or Basis).
"Officer's Certificate" shall mean a certificate signed by the President or
Chief Financial Officer of the General Partner in a form reasonably acceptable
to the Agent.
"PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and
defined in ERISA and any successor entity performing similar functions.
"Perfection Certificate" shall have the meaning assigned to such term in the
Security Agreement.
"Person" shall mean any individual, partnership, limited liability company,
joint venture, firm, corporation, association, trust or other enterprise or any
government or political subdivision or any agency, department or instrumentality
thereof.
"Plan" shall mean any employee pension benefit plan (other than a Multiemployer
Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code
or Section 302 of ERISA, and in respect of which Genesis OLP or any ERISA
Affiliate is (or, if such plan were terminated, would under Section 4069 of
ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.
"Pledge Agreement" shall mean the Pledge Agreement, substantially in the form of
Exhibit D hereto, to be entered into by and among Genesis OLP, the Subsidiaries
party thereto and the Collateral Agent for the benefit of the Secured Parties.
"Pre-Approved Eligible Receivable" shall mean an Eligible Receivable, the
obligor of which has been, in accordance with the Agent's credit policies in
effect at such time, listed on a schedule to be prepared and delivered by the
Agent to Genesis OLP from time to time for such purpose.
"Priced Exposure" shall mean, for any date, the aggregate actual liability of
Genesis OLP to third parties on such date with respect to Scheduled Obligations,
the actual liability for the nonpayment or nonperformance of which has been
determined, in accordance with the Guaranteed Contracts to which such Scheduled
Obligations relate, either by reference to certain fixed prices or by reference
to certain average or closing commodity prices for dates on or prior to the date
Priced Exposure is calculated.
"Prime Rate" shall mean the U.S. annual interest rate published as the "Prime
Rate" in the Wall Street Journal under the column headed "Money Rates" or such
other title as may succeed such heading for the applicable period in effect from
time to time.
"Prospectus" shall mean the Prospectus dated November 26, 1996, relating to the
initial public offering of the common units of Genesis MLP.
"Receivable and Payable Report" shall mean a report itemizing in reasonable
detail the accounts receivable and payable of Genesis OLP for the current month,
in form and substance reasonably acceptable to the Agent.
"Restricted Payment" shall mean any dividend or other distribution (whether in
cash, securities or other property) with respect to any shares of or interest in
any class of Capital Stock of Genesis OLP or any Subsidiary, or any payment
(whether in cash, securities or other property), including any sinking fund or
similar deposit, on account of the purchase, redemption, retirement,
acquisition, cancelation or termination of any such shares of or interest in
Capital Stock of Genesis OLP or any option, warrant or other right to acquire
any such shares of or interest in Capital Stock of Genesis OLP.
"Scheduled Obligations" shall mean, on any date, all executory payment or
performance obligations of Genesis OLP to third parties pursuant to Guaranteed
Contracts, after taking into account the effects of any Compromise of Claims
Agreements or Contract Cancelation Agreements, the time and manner for the
payment or performance of which obligations have been determined as of any
pipeline scheduling day on or prior to such date.
"Secured Parties" shall have the meaning assigned to such term in the Security
Documents.
"Security Agreement" shall mean the Security Agreement, substantially in the
form of Exhibit B hereto, among Genesis OLP, the Collateral Agent and the
Secured Parties.
"Security Documents" shall mean the Security Agreement and each of the security
agreements and other instruments and documents executed and delivered pursuant
thereto or pursuant to Section 6.20 hereof.
"Subsidiary" shall mean (i) any corporation more than 50% of whose stock of any
class or classes having by the terms thereof ordinary voting power to elect a
majority of the directors of such corporation (irrespective of whether or not at
the time stock of any class or classes of such corporation shall have or might
have voting power by reason of the happening of any contingency) is at the time
owned by Genesis OLP and/or one or more Subsidiaries of Genesis OLP and (ii) any
limited liability company, partnership, association, joint venture or other
entity in which Genesis OLP and/or one or more Subsidiaries of Genesis OLP has
more than a 50% equity interest at the time.
"Subsidiary Guarantee Agreement" shall mean the Subsidiary Guarantee Agreement,
substantially in the form of Exhibit C hereto, to be entered into by and among
the Subsidiary Guarantors in favor of the Collateral Agent for the benefit of
the Secured Parties.
"Subsidiary Guarantor" shall mean each Subsidiary that becomes a party to a
Subsidiary Guarantee Agreement pursuant to Section 6.20.
"Substitute Facility" shall mean one or more bank credit agreements or other
third party credit facilities entered into by Genesis OLP or Genesis MLP in
substitution or replacement of this Agreement (and which would accordingly
result in termination of this Agreement), which agreement or facility or
combination thereof is, in the reasonable judgment of the General Partner, fair
and reasonable to Genesis OLP, and adequate for Genesis OLP to conduct its
business substantially in the manner conducted under this Agreement.
"Taxes" shall mean any and all present or future taxes, levies, imposts, duties,
deductions, charges or withholdings imposed by any Governmental Authority.
"Transactions" shall have the meaning assigned to such term in Section 5.2.
"Uniform Commercial Code" shall mean, as the context requires, the Uniform
Commercial Code as in effect at the relevant time in the relevant jurisdiction.
"Unpriced Exposure" shall mean, for any date, any liability of Genesis OLP to
third parties on such date with respect to Scheduled Obligations that is not
Priced Exposure, i.e. the aggregate hypothetical liability of Genesis OLP to
third parties on such date with respect to Scheduled Obligations, the actual
liability for the nonpayment or nonperformance of which would be determined, in
accordance with the Guaranteed Contracts to which such Scheduled Obligations
relate, by reference to certain average or closing commodity prices for dates
after the date Unpriced Exposure is calculated, calculated as if such prices
were the relevant average or closing commodity prices for the date Unpriced
Exposure is calculated as published in Platt's Crude Oil Marketwire.
"U.S. Entity" shall mean any entity that is organized under the laws of the
United States or any state thereof.
"Wholly Owned Subsidiary" of any Person shall mean a subsidiary of such Person
of which securities (except for directors' qualifying shares) or other ownership
interests representing 100% of the equity or 100% of the ordinary voting power
or 100% of the general partnership interests are, at the time any determination
is being made, owned, controlled or held by such Person or one or more Wholly
Owned Subsidiaries of such Person or by such Person and one or more Wholly Owned
Subsidiaries of such Person.
"Withdrawal Liability" shall mean liability to a Multiemployer Plan as a result
of a complete or partial withdrawal from such Multiemployer Plan, as such terms
are defined in Part I of Subtitle E of Title IV of ERISA.
"Working Capital Facility Commitment" shall mean the commitment of Basis to make
Loans pursuant to Section 3.1(a) and to request the issuance of Letters of
Credit pursuant to Section 3.2(a).
"Working Capital Exposure" shall mean the aggregate principal amount at such
time of all outstanding Loans, plus the L/C Exposure at such time.
"Working Capital Facility Maturity Date" shall mean May 31, 1997.
SECTION 1.2. Terms Generally.
The definitions in Section 1.1 shall apply equally to both the singular and
plural forms of the terms defined. Whenever the context may require, any
pronoun shall include the corresponding masculine, feminine and neuter forms.
The words "include", "includes" and "including" shall be deemed to be followed
by the phrase "without limitation". All references herein to Articles,
Sections, Exhibits and Schedules shall be deemed references to Articles and
Sections of, and Exhibits and Schedules to, this Agreement unless the context
shall otherwise require. Except as otherwise expressly provided herein, (a) any
reference in this Agreement to any Loan Document shall mean such document as
amended, restated, supplemented or otherwise modified from time to time and (b)
all terms of an accounting or financial nature shall be construed in accordance
with GAAP, as in effect from time to time; provided, however, that for purposes
of determining compliance with the covenants contained in Article VI, all
accounting terms herein shall be interpreted and all accounting determinations
hereunder shall be made in accordance with GAAP as in effect on the date of this
Agreement and applied on a basis consistent with the application used in the
financial statements referred to in Section 6.5(d) and (e); and, provided
further, that to the extent accounting terms herein are applied to periods prior
to the Closing Date, such terms shall be calculated on a pro forma basis on a
basis consistent with the pro forma financial statements of Genesis OLP
contained in the Prospectus.
ARTICLE II
GUARANTY FACILITY
SECTION 2.1. Guaranties.
(a) Subject to the terms and conditions set forth herein, upon the request of
Genesis OLP, Salomon Inc shall, during the Availability Period (i) issue
Guaranties to third parties from time to time with respect to Crude Oil
Contracts on behalf of Genesis OLP and (ii) issue Guaranties as soon as
reasonably practicable in substitution for guaranties outstanding on the date
hereof issued by Basis, Howell or their Affiliates in connection with Crude Oil
Contracts entered into prior to the date hereof, in each case on terms
reasonably acceptable to Salomon Inc and generally consistent with its prior
practices with respect to Basis.
(b) The obligations of Salomon Inc pursuant to Section 2.1(a) shall be subject
to the following limitations:
(i) If (A) Genesis LLC is removed as General Partner of Genesis OLP for any
reason without the prior written consent of Salomon Inc, (B) Salomon Inc assigns
its obligations hereunder pursuant to Section 8.7 hereof, or (C) Salomon Inc's
obligations hereunder are terminated pursuant to Section 8.6 hereof, then
Salomon Inc shall have no further obligation hereunder to issue, substitute,
keep in effect or available or amend any Guaranty hereunder and shall have the
right to cancel in all respects all outstanding Guaranties with respect to any
transaction entered into from and after the date of such removal. In addition,
Genesis OLP shall promptly obtain full and complete releases of Salomon Inc from
all outstanding Guaranties and all related liabilities and obligations;
(ii) Salomon Inc shall have no obligation hereunder to issue, substitute or
amend any Guaranty hereunder if, at such time, the Guaranty Exposure at such
time exceeds the Maximum Credit Support Amount or if, immediately after the
issuance, substitution or amendment of such Guaranty, the Guaranty Exposure
would exceed the Maximum Credit Support Amount;
(iii) Salomon Inc shall have no obligation hereunder to issue or keep in effect
or available any Guaranty hereunder with a term extending beyond December 31,
1999;
(iv) no Guaranteed Contract shall require payment or performance by Genesis OLP
on a date later than December 31, 1999, unless on such date the Guaranty
relating thereto is released and canceled in all respects and Salomon has no
further liabilities or obligations in respect of such Guaranteed Contract from
and after such date; and
(v) Salomon Inc shall have no obligation hereunder to provide or extend any
Guaranty beyond the amounts or after the periods specified herein (or such
earlier date as the Guaranty Facility Commitment has terminated pursuant to
Article VII or Section 8.6).
(c) Genesis OLP shall not permit the Guaranty Exposure at any time to exceed
the Maximum Credit Support Amount at such time. Upon termination of the
Guaranty Facility Commitment pursuant to this Agreement, if any Guaranties
remain outstanding, Genesis OLP shall immediately deposit in an account with the
Collateral Agent an amount in cash equal to the Guaranty Exposure at such time
as collateral with respect to the outstanding Guaranties.
(d) Notwithstanding anything to the contrary in this Agreement, Genesis OLP
will not enter into any Guaranteed Contract or schedule any Scheduled Obligation
at any time if, after giving effect to such action, the Guaranty Exposure would
exceed the Maximum Credit Support Amount at such time.
SECTION 2.2. Notice of Issuance, Amendment, Renewal or Extension.
To request the issuance of a Guaranty (or the amendment, renewal or extension of
an outstanding Guaranty), Genesis OLP shall hand deliver or telecopy to Salomon
Inc or its Agent (reasonably in advance of the requested date of issuance,
amendment, renewal or extension) a notice requesting the issuance of a Guaranty,
or identifying the Guaranty to be amended, renewed or extended, the date of
issuance, amendment, renewal or extension, the date on which such Guaranty is to
expire (which shall comply with Section 2.1(b)), the amount of such Guaranty,
the name and address of the beneficiary thereof and such other information as
shall be necessary to prepare, amend, renew or extend such Guaranty. A Guaranty
shall be issued, amended, renewed or extended at any time only if (and, upon
issuance, amendment, renewal or extension of each Guaranty, Genesis OLP shall be
deemed to represent and warrant that), after giving effect to such issuance,
amendment, renewal or extension, the Guaranty Exposure shall not exceed the
Maximum Credit Support Amount at such time.
SECTION 2.3. Guaranty Fees.
(a) Each month, commencing with the first full calendar month following the
Closing Date, as soon as practicable after the day of such month scheduled for
final discharge by Genesis OLP of all Scheduled Obligations relating to
deliveries of crude oil in the immediately preceding month (the "Payment Day"),
the Agent shall calculate (i) the Priced Exposure relating to such Scheduled
Obligations for each day from and including the later of (A) the Closing Date
and (B) the day in the calendar month immediately preceding such month such
obligations first became Scheduled Obligations (the "Scheduling Day") through
and including the Payment Day, (ii) the Forward Exposure for each day in the
immediately preceding month, and (iii) the Guaranty Exposure for each day in the
immediately preceding month. The Agent may determine the methodology for making
such calculations and may make any assumptions it deems appropriate, including
assuming that barrels of crude oil are delivered ratably over the immediately
preceding month.
(b) The Agent shall calculate and invoice the monthly guaranty fee payable by
Genesis OLP in accordance with the following formula:
(i) the quotient of (A) the product of (1) the sum of each of the daily amounts
in Sections 2.3(a)(i) and 2.3(a)(ii) and (2) the applicable rate in Schedule I
hereto and (B) the number of days in the calendar year including the immediately
preceding calendar month; plus
(ii) to the extent that any of the daily amounts contained in Section
2.3(a)(iii) exceeded the Maximum Credit Support Amount for such day, the
quotient of (A) 1% of the sum of such excesses and (B) the number of days in the
calendar year including the immediately preceding calendar month.
Such guaranty fee so calculated and invoiced by the Agent shall be due and
payable by Genesis OLP on the last Business Day of the month of calculation.
SECTION 2.4. Agent.
Salomon Inc hereby appoints Basis to serve as its agent (the "Agent") with
respect to the management and administration of Guaranties to be provided by
Salomon Inc pursuant to this Article II (including in respect of monitoring,
determining issuance of Guaranties, calculation of certain amounts and
collection of fees), subject to Salomon Inc's notification to the parties hereto
of the termination or the substitution in its sole discretion of such Agent.
Genesis OLP will provide Basis, as Agent, and Salomon Inc, at its request, such
information as Basis shall request to enable Basis to maintain in its internal
records the Guaranty Exposure and such information necessary to manage the
Guaranties.
SECTION 2.5. Repayment Obligation.
Genesis OLP hereby agrees to reimburse Salomon Inc by making payment to Salomon
Inc in immediately available funds for any Guaranty Disbursement made by Salomon
Inc or its Agent under any Guaranty immediately upon delivery of notice by
Salomon Inc or its Agent of such Guaranty Disbursement, together with interest
on the amount so paid or disbursed at the Prime Rate in effect for the period
during which any such Guaranty Disbursement remains outstanding. If Genesis OLP
fails to make such reimbursement by the second Business Day after the date of
notice of such Guaranty Disbursement, interest shall accrue on the outstanding
amount at the Prime Rate plus an additional 2.00% per annum until the date of
payment, all such interest to be payable on demand.
ARTICLE III
WORKING CAPITAL FACILITY
SECTION 3.1. Loans.
(a) Subject to the terms and conditions set forth herein and to availability
under Basis's credit facilities as the same may exist from time to time, Basis
will use its best efforts to make working capital loans (each, a "Loan") to
Genesis OLP, at any time and from time to time during the Availability Period,
in an aggregate principal amount at any time outstanding that will not result in
(i) the Working Capital Exposure exceeding the lesser of (A) $50,000,000 and
(B) the Borrowing Base in effect at such time or (ii) the aggregate principal
amount of Loans outstanding exceeding $35,000,000. Within the limits set forth
in the preceding sentence, Genesis OLP may borrow, pay or prepay and reborrow
Loans on or after the Closing Date and prior to the Working Capital Facility
Maturity Date, subject to the terms, conditions and limitations set forth
herein. Each Loan shall have a maturity not to exceed 30 days and be in an
aggregate principal amount that is (x) an integral multiple of $250,000 or
(y) equal to the remaining available balance of the Working Capital Facility
Commitment. Notwithstanding any other provision of this Agreement, Genesis OLP
shall not be entitled to request any new Loan after 10:00 a.m., New York City
time, on the Business Day prior to the Working Capital Facility Maturity Date.
Loans shall be made solely for the purpose of supporting the working capital
requirements of Genesis OLP and the Subsidiaries.
(b) In order to request a Loan, Genesis OLP shall notify Basis telephonically
not later than 10:00 a.m., New York City time, and hand deliver or telecopy to
Basis a duly completed request (a "Borrowing Request") not later than
12:00 p.m., New York City time, on the proposed date of such Loan (which shall
be a Business Day). Each Borrowing Request shall be irrevocable, signed by or
on behalf of Genesis OLP and shall specify the following information: (i) the
proposed date of such Loan (which shall be a Business Day); (ii) the number and
location of the account to which funds are to be disbursed; (iii) the amount of
such Loan; and (iv) the maturity of such Loan; provided, however, that,
notwithstanding any contrary specification in any Borrowing Request, each
requested Loan shall comply with the requirements set forth in Section 3.1(a).
SECTION 3.2. Letters of Credit.
(a) Issuance of Letters of Credit. Subject to the terms and conditions set
forth herein, upon the request of Genesis OLP, at any time and from time to time
during the Availability Period, Basis will request the issuance of standby and
documentary letters of credit on behalf of Genesis OLP for the benefit of third
parties on the terms and subject to availability under Basis's credit facilities
as the same may exist from time to time. Such Letters of Credit shall be issued
solely for the purpose of supporting Crude Oil Contracts and other general
corporate purposes of Genesis OLP and the Subsidiaries.
(b) Notice of Issuance, Amendment, Renewal or Extension. To request the
issuance of a Letter of Credit (or the amendment, renewal or extension of an
outstanding Letter of Credit), Genesis OLP shall hand deliver or telecopy to
Basis (reasonably in advance of the requested date of issuance, amendment,
renewal or extension) a notice requesting the issuance of a Letter of Credit, or
identifying the Letter of Credit to be amended, renewed or extended, the date of
issuance, amendment, renewal or extension, the date on which such Letter of
Credit is to expire (which shall comply with Section 3.2(c)), the amount of such
Letter of Credit, the name and address of the beneficiary thereof and such other
information as shall be necessary to prepare, amend, renew or extend such Letter
of Credit. A Letter of Credit shall be issued, amended, renewed or extended
only if (and, upon issuance, amendment, renewal or extension of each Letter of
Credit, Genesis OLP shall be deemed to represent and warrant that), after giving
effect to such issuance, amendment, renewal or extension, the Working Capital
Exposure shall not exceed the lesser of (i) $50,000,000 and (ii) the Borrowing
Base in effect at such time.
(c) Expiration Date. Each Letter of Credit shall expire at or prior to the
close of business on the earlier of (i) up to 120 days after the date of the
issuance of such Letter of Credit (or, in the case of any renewal or extension
thereof, up to 120 days after such renewal or extension) and (ii) the date that
is five Business Days prior to the Working Capital Facility Maturity Date.
(d) Reimbursement. Genesis OLP hereby agrees to reimburse Basis, by making
payment to Basis in immediately available funds, for any L/C Disbursement made
by Basis under any Letter of Credit issued at its direction or for any other
financial liability or obligation incurred by Basis in connection with the
Working Capital Facility Commitment immediately after, and in any event on the
date of, notice from Basis of such L/C Disbursement, with interest on the amount
so paid or disbursed at the rate per annum equal to the Prime Rate plus an
additional 2.00% per annum if not reimbursed by the second Business Day after
the date of notice of such L/C Disbursement, such interest to be payable on
demand. In addition, in the event of the failure of Genesis OLP to reimburse
Basis in accordance with this Section 3.2(d) for any such L/C Disbursement by
Basis in respect of any standby Letter of Credit, Basis shall have no further
obligation to Genesis OLP to request the issuance of Letters of Credit or make
Loans, any outstanding Loans shall be repaid immediately and Genesis OLP shall
immediately deposit in an account with the Collateral Agent an amount in cash
equal to face amount of any outstanding Letters of Credit as collateral with
respect to such Letters of Credit.
SECTION 3.3. Term.
Subject to the limitations set forth in Sections 3.1 and 3.2, the Working
Capital Facility Commitment shall expire on the Working Capital Maturity Date
(or such earlier date on which the Loans shall become due and payable hereunder
pursuant to Article VII or otherwise) and all amounts owing by Genesis OLP
thereunder shall be paid in full at such time. If Genesis LLC is removed as
General Partner of Genesis OLP for any reason without the prior written consent
of Salomon Inc or Basis, the Working Capital Facility Commitment shall terminate
and Basis shall have no further obligation to Genesis OLP to cause or facilitate
the issuance of Letters of Credit or make Loans, any outstanding Loans shall be
repaid immediately and Genesis OLP shall immediately remit cash to Basis equal
to the amount of any outstanding Letters of Credit as collateral with respect to
such outstanding Letters of Credit.
SECTION 3.4. Pricing Terms.
Genesis OLP shall pay the amounts set forth on Schedule II in connection with
the Working Capital Facility and amounts outstanding thereunder. Genesis OLP
shall pay all accrued and unpaid interest on each Loan at the maturity of such
Loan and all accrued and unpaid Letter of Credit fees on demand; provided that
(i) in the event of any prepayment of any Loan, accrued interest on the
principal amount prepaid shall be payable on the date of such prepayment and
(ii) all accrued interest and Letter of Credit fees shall be payable upon
termination of the Working Capital Facility Commitment.
SECTION 3.5. Notes.
Each Loan shall bear interest from and including the date such Loan is made on
the outstanding principal balance thereof as provided in Section 3.4. Genesis
OLP's obligation to pay the principal of, interest on and any and all other fees
or payments associated with Loans shall be evidenced by a promissory note (the
"Note") duly executed and delivered by Genesis OLP in the form of Exhibit A
hereto. Basis will note on its internal records the amount of each such Loan
made by it and each payment with respect thereto, and will note on the reverse
side of such promissory note the outstanding principal amount of the loans
evidenced thereby and the interest payments made thereon; provided that failure
to make any such notation shall not affect the obligations of Genesis OLP
thereunder.
SECTION 3.6. Default Interest.
If Genesis OLP shall default in the payment of the principal of or interest on
any Loan or any other amount becoming due hereunder, by acceleration or
otherwise, or under any other Loan Document, Genesis OLP shall on demand from
time to time pay interest, to the extent permitted by law, on such defaulted
amount to but excluding the date of actual payment (after as well as before
judgment) at a rate per annum (computed on the basis of the actual number of
days elapsed over a year of 365 or 366 days, as the case may be) equal to the
sum of the Prime Rate plus 2.00%.
SECTION 3.7. Payments Generally.
(a) Genesis OLP shall make each payment required to be made by it hereunder
(whether of principal, interest, fees or reimbursement of Disbursements), prior
to 12:00 noon, New York City time, on the date when due, in immediately
available funds, without setoff or counterclaim. Any amounts received after
such time on any date may, in the discretion of the Agent, be deemed to have
been received on the next succeeding Business Day for purposes of calculating
interest thereon. All such payments shall be made to the Agent at its offices
at One Allen Center, 500 Dallas, Suite 3200, Houston, Texas 77002, or by wire
transfer to such account as may be designated by the Agent from time to time.
The Agent shall distribute any such payments received by it for the account of
any other Person to the appropriate recipient promptly following receipt
thereof. If any payment hereunder shall be due on a day that is not a Business
Day, the date for payment shall be extended to the next succeeding Business Day,
and, in the case of any payment accruing interest, interest thereon shall be
payable for the period of such extension.
(b) If at any time insufficient funds are received by and available to the
Agent to pay fully all amounts of principal, unreimbursed Disbursements,
interest and fees then due hereunder, such funds shall be applied (i) first, to
pay interest and fees then due hereunder, ratably among the parties entitled
thereto in accordance with the amounts of interest and fees then due to such
parties, and (ii) second, to pay principal and unreimbursed Disbursements then
due hereunder, ratably among the parties entitled thereto in accordance with the
amounts of principal and unreimbursed Disbursements then due to such parties.
ARTICLE IV
CONDITIONS OF LENDING
SECTION 4.1. Conditions to All Credit Events.
The obligations of Salomon Inc to issue (or amend, renew or extend) Guaranties
pursuant to Article II and of Basis to make Loans and to cause the issuance (or
amendment, renewal or extension) of Letters of Credit pursuant to Article III
(each, a "Credit Event") shall be subject to the satisfaction of the following
conditions:
(a) The Agent shall have received (i) a notice requesting such issuance (or
amendment, renewal or extension) of a Guaranty as required by Section 2.2,
(ii) a Borrowing Request for such Loan as required by Section 3.1(b) or (iii) a
notice requesting such issuance (or amendment, renewal or extension) of a Letter
of Credit as required by Section 3.2(b).
(b) The representations and warranties set forth in Article V hereof shall be
true and correct (or, in the case of those representations and warranties not
qualified as to materiality, true and correct in all material respects) on and
as of the date of such Credit Event with the same effect as though made on and
as of such date, except to the extent such representations and warranties
expressly relate to an earlier date.
(c) Each Loan Party shall be in material compliance with all the terms and
provisions set forth herein and in the Security Documents on its part to be
observed or performed, and at the time of and immediately after such Credit
Event, no Event of Default or Default shall have occurred and be continuing.
Each Credit Event shall be deemed to constitute a representation and warranty by
Genesis OLP on the date of such Credit Event as to the matters specified in
clauses (b) and (c) of this Section 4.1.
SECTION 4.2. Conditions to First Credit Event.
On the Closing Date:
(a) The Agent shall have received, on behalf of itself, Salomon Inc and Basis,
a favorable written opinion of Andrews & Kurth L.L.P., substantially to the
effect set forth in Exhibit I hereto (i) dated the Closing Date, (ii) addressed
to the Agent, Salomon Inc and Basis and (iii) covering such other matters
relating to the Loan Documents as the Agent shall reasonably request, and
Genesis OLP hereby requests such counsel to deliver such opinions.
(b) The Agent shall have received such documents and certificates as the Agent
or its counsel may reasonably request relating to the organization, existence
and good standing of each Loan Party and the General Partner, the authorization
of the Transactions and any other legal matters relating to the each Loan Party
and the General Partner, this Agreement, the other Loan Documents or the
Transactions, all in form and substance satisfactory to the Agent and its
counsel.
(c) The Agent shall have received an Officer's Certificate, dated the Closing
Date, confirming compliance with the conditions precedent set forth in
paragraphs (b) and (c) of Section 4.1.
(d) The Collateral Agent shall have received a Perfection Certificate with
respect to Genesis OLP dated the Closing Date and duly executed by an executive
officer of the General Partner.
(d) The Collateral Agent shall have received the results of a search of the
Uniform Commercial Code filings (or equivalent filings) made with respect to the
Loan Parties in the states (or other jurisdictions) in which the chief executive
office of each such Person is located, any offices of such Persons in which
records have been kept relating to Accounts and the other jurisdictions in which
Uniform Commercial Code filings (or equivalent filings) are to be made pursuant
to the following paragraph, together with copies of the financing statements (or
similar documents) disclosed by such search, and accompanied by evidence
satisfactory to the Collateral Agent that the Liens indicated in any such
financing statement (or similar document) would be permitted under Section 6.1
or have been released.
(f) The Security Documents shall have been duly executed by Genesis OLP and
shall have been delivered to the Collateral Agent and shall be in full force and
effect on such date and each document (including each Uniform Commercial Code
financing statement) required by law or reasonably requested by the Collateral
Agent to be filed, registered, recorded or pledged in order to create in favor
of the Collateral Agent for the benefit of the Secured Parties a valid, legal
and perfected first-priority security interest in and lien on the Collateral
(subject to any Lien expressly permitted by Section 6.1) described in such
agreement shall have been delivered to the Collateral Agent.
(g) The Conveyance Agreement shall have been executed and delivered by the
parties thereto and the Transactions contemplated by the Prospectus shall have
been consummated or shall be consummated simultaneously with the initial Credit
Event hereunder in accordance with applicable law.
(h) All material consents to the Transactions by Governmental Authorities and
third parties shall have been obtained to the extent required as of the Closing
Date, all applicable appeal periods and waiting periods shall have expired and
there shall be no governmental or judicial action, actual or threatened, that
has or could have a reasonable likelihood of restraining, preventing or imposing
materially burdensome conditions on the Transactions.
(i) The Agent shall have received (i) a certificate substantially in the form
of Exhibit F hereto (a "Borrowing Base Certificate"), setting forth on an
itemized basis, a good faith estimate of the Borrowing Base, as well as a
Receivable and Payable Report, each as of the last day of the preceding month on
a pro forma basis, giving effect to the Transactions as if they had occurred on
such date, with counterparty transactions identified on such schedule that are
subject to a Compromise of Claims Agreement or a Contract Cancelation Agreement,
such Certificate to be certified as complete and correct on behalf of Genesis
OLP by the chief financial officer of the General Partner and (ii) such other
supporting documentation and additional reports with respect to the Borrowing
Base as the Agent shall reasonably request.
(j) A counterpart of this Agreement and the Note shall have been duly executed
and delivered by Genesis OLP.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Genesis OLP represents and warrants to the Agent, the Collateral Agent, Salomon
Inc and Basis that:
SECTION 5.1. Organization; Powers.
Each of Genesis OLP, the General Partner and the Subsidiaries is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, has all requisite power and authority to carry on its business as
now conducted (and, in the case of the General Partner, to act as the general
partner of Genesis OLP) and, except where the failure to do so, individually or
in the aggregate, could not reasonably be expected to result in a Material
Adverse Effect, is qualified to do business in, and is in good standing in,
every jurisdiction where such qualification is required.
SECTION 5.2. Authorization; Enforceability.
The execution, delivery and performance of each of the Loan Documents by each
Loan Party, the use of proceeds of the Loans and the issuance of the Guaranties
and Letters of Credit, the creation of the security interests contemplated by
the Loan Documents and the consummation of the other transactions contemplated
by the Prospectus (collectively, the "Transactions") are within the partnership,
corporate or company power of each Loan Party and have been duly authorized by
all necessary partnership, corporate or company and, if required, partner,
stockholder or member action. This Agreement has been duly executed and
delivered by Genesis OLP and constitutes a legal, valid and binding obligation
of Genesis OLP, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors' rights generally and subject to general principles of equity,
regardless of whether considered in a proceeding in equity or at law.
SECTION 5.3. Governmental Approvals; No Conflicts.
The Transactions (a) do not require any consent or approval of, registration or
filing with, or any other action by, any Governmental Authority, except such as
have been obtained or made and are in full force and effect, (b) will not
violate any applicable law or regulation or the charter, by-laws or other
organizational documents of Genesis OLP, the General Partner or any of the
Subsidiaries or any order of any Governmental Authority, (c) will not violate or
result in a default under any indenture, agreement or other instrument binding
upon Genesis OLP, the General Partner or any of the Subsidiaries or any of their
respective assets, or give rise to a right thereunder to require any payment to
be made by Genesis OLP, the General Partner or any of the Subsidiaries, and (d)
will not result in the creation or imposition of any Lien on any asset of
Genesis OLP, the General Partner or any of the Subsidiaries (other than the
Liens under the Loan Documents).
SECTION 5.4. No Material Adverse Change.
There has been no material adverse change in the business, assets, operations,
prospects or condition, financial or otherwise, of Genesis OLP and the
Subsidiaries, taken as a whole, since the Closing Date.
SECTION 5.5. Title to Properties.
(a) Each of Genesis OLP and the Subsidiaries has good title to, or valid
leasehold interests in, all its real and personal property material to its
business, except for minor defects in title that do not interfere with its
ability to conduct its business as currently conducted or to utilize such
properties for their intended purposes.
(b) Each of Genesis OLP and the Subsidiaries owns, or is licensed to use, all
trademarks, tradenames, copyrights, patents and other intellectual property
material to its business, and the use thereof by Genesis OLP and the
Subsidiaries does not infringe upon the rights of any other Person, except for
any such infringements that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.
SECTION 5.6. Litigation and Environmental Matters.
(a) There are no actions, suits or proceedings by or before any arbitrator or
Governmental Authority pending against or, to the knowledge of Genesis OLP,
threatened against or affecting Genesis OLP or any of the Subsidiaries (i) as to
which there is a reasonable possibility of an adverse determination and that, if
adversely determined, could reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect or (ii) that involve this
Agreement or the Transactions.
(b) Except with respect to any other matters that, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect, neither Genesis OLP nor any of the Subsidiaries (i) has failed to comply
with any Environmental Law or to obtain, maintain or comply with any permit,
license or other approval required under any Environmental Law, (ii) has become
subject to any Environmental Liability, (iii) has received notice of any claim
with respect to any Environmental Liability or (iv) knows of any condition or
event that could reasonably be expected to result in any Environmental
Liability.
SECTION 5.7. Compliance with Laws and Agreements.
Each of Genesis OLP and the Subsidiaries is in compliance with all laws,
regulations and orders of any Governmental Authority applicable to it or its
property and all indentures, agreements and other instruments binding upon it or
its property, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect. No Default has occurred and is continuing.
SECTION 5.8. Investment and Holding Company Status.
Neither Genesis OLP nor any of the Subsidiaries is (a) an "investment company"
as defined in, or subject to regulation under, the Investment Company Act of
1940 or (b) a "holding company" as defined in, or subject to regulation under,
the Public Utility Holding Company Act of 1935.
SECTION 5.9. Taxes.
Each of Genesis OLP and the Subsidiaries has timely filed or caused to be filed
all Tax returns and reports required to have been filed and has paid or caused
to be paid all Taxes required to have been paid by it, except (a) Taxes that are
being contested in good faith by appropriate proceedings and for which Genesis
OLP or such Subsidiary, as applicable, has set aside on its books adequate
reserves in accordance with GAAP or (b) to the extent that the failure to do so
could not reasonably be expected to result in a Material Adverse Effect.
SECTION 5.10. ERISA.
No ERISA Event has occurred or is reasonably expected to occur that, when taken
together with all other such ERISA Events for which liability is reasonably
expected to occur, could reasonably be expected to result in a Material Adverse
Effect; provided, however, that Genesis OLP shall not be deemed to make any
representation and warranty under this Section with respect to any Plan of Basis
if and for so long as Genesis OLP shall participate in such Plan and Basis shall
be a Wholly Owned Subsidiary of Salomon Inc.
SECTION 5.11. Disclosure.
Genesis OLP has disclosed to Salomon Inc and Basis all agreements, instruments
and corporate or other restrictions to which it or any of its Subsidiaries is
subject, and all other matters known to it, that, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse Effect.
None of the reports, financial statements, certificates or other information
furnished by or on behalf of Genesis OLP to Salomon Inc or Basis in connection
with the negotiation of this Agreement or delivered hereunder (as modified or
supplemented by other information so furnished) contains any material
misstatement of fact or omits to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided that, with respect to projected financial
information, Genesis OLP represents only that such information was prepared in
good faith based upon assumptions believed to be reasonable at the time.
SECTION 5.12. Subsidiaries.
The shares of Capital Stock or other ownership interests of each Subsidiary that
are owned by Genesis OLP or a Subsidiary are fully paid and non-assessable and
are owned by Genesis OLP or a Subsidiary, as applicable, directly or indirectly,
free and clear of all Liens.
SECTION 5.13. Federal Reserve Regulations.
None of Genesis OLP or any of the Subsidiaries is engaged, directly or
indirectly, in the business of extending or maintaining credit for the purpose
of buying or carrying Margin Stock (within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System of the United States of America
(the "Board") as from time to time in effect and all official rulings and
interpretations thereunder or thereof). No part of the proceeds of any Loan or
any Letter of Credit will be used, whether directly or indirectly, and whether
immediately, incidentally or ultimately, for any purpose that entails a
violation of, or that is inconsistent with, the provisions of the regulations of
the Board, including Regulation G, U or X of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.
SECTION 5.14. Security Agreement.
The Security Agreement is effective to create in favor of the Collateral Agent,
for the ratable benefit of the Secured Parties, a legal, valid and enforceable
security interest in the Collateral (as defined in the Security Agreement) and,
when financing statements in appropriate form are filed in the offices specified
in Schedule 6 to the Perfection Certificate, the Security Agreement shall
constitute a fully perfected Lien on, and security interest in, all right, title
and interest of the grantors thereunder in such Collateral, in each case prior
and superior in right to any other Person.
SECTION 5.15. Solvency.
Immediately after the consummation of the Transactions and the execution and
delivery of the Loan Documents, and immediately following the making of each
Loan made on the Closing Date and after giving effect to the application of the
proceeds of such Loans, (i) the fair value of the assets of each Loan Party, at
a fair valuation, will exceed its debts and liabilities, subordinated,
contingent or otherwise; (ii) the present fair saleable value of the property of
each Loan Party will be greater than the amount that will be required to pay the
probable liability on its debts and other liabilities, subordinated, contingent
or otherwise, as such debts and other liabilities become absolute and matured;
(iii) each Loan Party will be able to pay its debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured; and (iv) each Loan Party will not have unreasonably small
capital with which to conduct the business in which it is engaged as such
business is now conducted and is proposed to be conducted following the Closing
Date.
ARTICLE VI
COVENANTS
Genesis OLP covenants and agrees that on and after the date hereof and until the
commitments of Salomon Inc and Basis hereunder have terminated and all
obligations of Genesis OLP incurred hereunder are paid in and performed in full:
SECTION 6.1. Liens.
Genesis OLP will not, and will not permit any of the Subsidiaries to, create,
incur, assume or suffer to exist any Lien upon or with respect to any property
or assets (real or personal, tangible or intangible) of Genesis OLP or such
Subsidiary, whether now owned or hereafter acquired; provided that the
provisions of this Section 6.1 shall not prevent the creation, incurrence,
assumption or existence of:
(i) Liens for Taxes not yet due, or Liens for Taxes being contested in good
faith and by appropriate proceedings for which adequate reserves have been
established;
(ii) Liens in respect of property or assets of Genesis OLP or any Subsidiary
imposed by law or agreement, which were incurred in the ordinary course of
business, such as carriers', warehousemen's and mechanics' Liens and other
similar Liens arising in the ordinary course of business, including First
Purchase Liens, and (x) which do not in the aggregate materially detract from
the value of such property or assets or materially impair the use thereof in the
operation of the business of Genesis OLP and the Subsidiaries, and (y) which are
being contested in good faith by appropriate proceedings, which proceedings have
the effect of preventing the forfeiture or sale of the property or assets
subject to any such Lien;
(iii) Liens created pursuant to the Security Documents;
(iv) pledges or deposits in connection with the worker's compensation,
unemployment insurance and other social security legislation in the ordinary
course of business;
(v) good faith deposits in connection with any tender, lease or real estate,
bid or contract, deposits to secure any duty or public or statutory obligation,
deposits to secure, or in lieu of, surety, stay or appeal bonds, and deposits as
security for the payment of any Tax or assessment or similar charge, in each
case in the ordinary course of business;
(vi) Liens on accounts maintained with commodity brokers or finance affiliates
thereof incurred in the ordinary course of business;
(vii) Liens consisting of any (A) statutory landlord's Lien under any lease to
which Genesis OLP or any Subsidiary is a party or any other Lien on leased
property reserved in any lease thereof for rent or for compliance with the terms
of such lease, (B) rights reserved to or vested in any municipality or
governmental, statutory or public authority to control or regulate any property
of Genesis OLP or any Subsidiary or to use such property in any manner which
does not materially impair the use of such property for the purpose for which it
is held by Genesis OLP or any Subsidiary, (C) obligations or duties to any
Governmental Authority with respect to any franchise, grant, license, lease or
permit and the rights reserved or vested in any Governmental Authority or public
utility to terminate any such franchise, grant, license, lease or permit or to
condemn or expropriate any property, or (D) zoning laws, ordinances or municipal
regulations;
(viii) Liens on deposit required by any Person with whom Genesis OLP or any
Subsidiary enters into forward contracts, futures contracts, swap agreements or
other commodities contracts in the ordinary course of business, including Liens
in connection with New York Mercantile Exchange margin obligations;
(ix) Liens existing on any property or asset prior to the acquisition thereof
by Genesis OLP or any Subsidiary; provided that (A) such Lien is not created in
contemplation of or in connection with such acquisition, (B) such Lien does not
apply to any other property or asset of Genesis OLP or any Subsidiary and (C)
such Lien does not (1) materially interfere with the use, occupancy and
operation of such property or asset, (2) materially reduce the fair market value
of such property or asset but for such Lien or (3) result in any material
increase in the cost of operating, occupying or owning or leasing such property
or asset; and
(x) purchase money security interests in real property, improvements thereto or
equipment hereafter acquired (or, in the case of improvements, constructed) by
Genesis OLP or any Subsidiary; provided that (A) such security interests secure
Indebtedness permitted by Section 6.7 hereof, (B) such security interests are
incurred, and the Indebtedness secured thereby is created, within 90 days after
such acquisition (or construction), (C) the Indebtedness secured thereby does
not exceed 85% of the lesser of the cost or the fair market value of such real
property, improvements or equipment at the time of such acquisition (or
construction) and (D) such security interests do not apply to any other property
or assets of Genesis OLP or any Subsidiary.
SECTION 6.2. Management Practices.
Genesis OLP shall, and shall cause the Subsidiaries to, operate at all times in
conformity with risk management policies, credit and receivable risk exposure
practices and cash management practices in effect prior to the date hereof for
the crude oil gathering operations of Basis; provided that Salomon Inc may from
time to time revise or alter such policies and practices in its reasonable
discretion, in which case Genesis OLP and the Subsidiaries shall from and
thereafter operate in conformity with such revised or altered policies and
practices.
SECTION 6.3. Limitation on Transactions.
Genesis OLP shall not, and shall not permit any of the Subsidiaries to, acquire
or dispose of any business, line of business or any assets, other than in the
ordinary course of business and consistent with past practice. For such
purpose, (i) transactions which could reasonably be expected to increase or
decrease consolidated revenues or net income of Genesis OLP on a pro forma basis
for its most recent 12 months of operations as if such transaction has occurred
at the beginning of such period, by more than 10% or (ii) any sale or
disposition of any business, line of business or any assets (other than
inventory or obsolete equipment sold in the ordinary course of business) having
a market value in excess of $500,000 shall, in each such case, be deemed to be
not in the ordinary course of business.
SECTION 6.4. Cash Management.
Genesis OLP shall, and shall cause each of the Subsidiaries to, invest its cash
with Salomon Inc's designee, in accordance with the cash management practices
determined by the Agent; provided that the return of (but not a return on) such
investment with Salomon Inc's designee shall be fully guaranteed by Salomon Inc
(subject to any right of setoff). In addition to any other rights and remedies
which Basis and Salomon Inc may have, if an Event of Default shall have occurred
and be continuing, each of Basis and Salomon Inc is hereby authorized to the
fullest extent permitted by law to set off and apply any amounts invested with
Basis and Salomon Inc, respectively, pursuant to this Section 6.4 against any of
the Obligations of the Loan Parties under the Loan Documents, whether matured or
unmatured.
SECTION 6.5. Information Covenants.
Genesis OLP will furnish to Basis:
(a) Event of Default. Prompt (but in no event later than three Business Days
after any executive officer (or, without limitation, the principal accounting
officer, treasurer or controller) of Genesis OLP obtains knowledge thereof)
written notice of:
(i) any Default or Event of Default, specifying the nature and period of
existence thereof and what action has been taken, is being taken or is proposed
to be taken with respect thereto;
(ii) the filing or commencement of, or any written threat or notice of intention
of any Person to file or commence, any action, suit or proceeding, whether at
law or in equity or by or before any Governmental Authority, against Genesis
OLP, the General Partner or any Subsidiary that could reasonably be expected to
result in a Material Adverse Effect; and
(iii) any development that has resulted in, or could reasonably be expected to
result in, a Material Adverse Effect.
(b) Monthly Management Reports. As soon as available, and in any event, within
30 days after the end of each monthly accounting period in each fiscal year of
Genesis OLP, a monthly report of management of Genesis OLP as to the financial
condition of Genesis OLP and the Subsidiaries as at the end of such monthly
period, in a form reasonably satisfactory to the Agent.
(c) Borrowing Base Reports. As soon as available, and in any event within
five Business Days after the end of each month, a Borrowing Base Certificate as
of the last day of such preceding month, setting forth on an itemized basis, a
good faith estimate of the Borrowing Base, as well as a monthly Receivable and
Payable Report, as of the last day of such preceding month, identifying by
counterparty transactions on such schedule that are subject to a Compromise of
Claims Agreement or a Contract Cancelation Agreement, together with such other
supporting documentation and additional reports with respect to the Borrowing
Base as the Agent shall reasonably request; provided, however, that Genesis OLP
shall provide the information required by this paragraph (c) as often as may be
reasonably requested by Salomon Inc, Basis or the Agent if (i) a Default or
Event of Default has occurred and is continuing or (ii) Salomon Inc, Basis or
the Agent otherwise determines that a material adverse change has occurred with
respect to the Loan Parties, their management practices or the Collateral.
(d) Quarterly Financial Statements. As soon as available, and in any event,
within 45 days after the end of each quarterly accounting period in each fiscal
year of Genesis OLP, the consolidated and consolidating balance sheets of
Genesis OLP and the Subsidiaries as at the end of such quarterly period and the
related consolidated and consolidating statements of operations, partners'
capital and cash flows of such quarterly period and for the elapsed portion of
the fiscal year ended with the last day of such quarterly period, in each case
setting forth comparative figures for the related periods in the prior fiscal
year, all of which shall be prepared in accordance with GAAP and certified by an
appropriate officer of the General Partner, subject to normal year-end audit
adjustments, which certificate shall set forth computations in reasonable detail
demonstrating compliance with the covenants contained in Sections 6.8, 6.9,
6.10, 6.11 and 6.12.
(e) Annual Financial Statements. As soon as available, and in any event within
90 days after the end of each fiscal year of Genesis OLP, the consolidated and
consolidating balance sheets of Genesis OLP and the Subsidiaries as at the end
of such fiscal year and the related consolidated statements of operations,
partners' capital and cash flows for such fiscal year, in each case setting
forth comparative figures for the preceding fiscal year and prepared in
accordance with GAAP and certified, in the case of the consolidated financial
statements, by independent certified public accountants of recognized national
standing reasonably acceptable to Salomon Inc, in each case together with the
audit report of such accounting firm.
(f) Perfection Certificate. Concurrently with any delivery of annual financial
statements under paragraph (e) above, a certificate executed by the Chief
Financial Officer and the chief legal officer (if any) of the General Partner
(i) certifying that the information contained in the most recently delivered
Perfection Certificate is true, complete and correct in all material respects as
of such date, and (ii) certifying that none of the Loan Parties has consented
to, or is aware of, the filing of any Uniform Commercial Code financing
statements with respect to the Collateral naming such Person as the debtor
therein by any Person other than the Collateral Agent since the date of the most
recently delivered Perfection Certificate, or if any such filing has been made,
setting forth a reasonably detailed description thereof and of the related
financing.
(g) Additional Information. Promptly, from time to time, such other information
regarding the operations, business affairs and financial condition of Genesis
OLP or any Subsidiary, or compliance with the terms of any Loan Document, as the
Agent, Salomon Inc or Basis may reasonably request.
SECTION 6.6. Consolidation, Merger, Sale of Assets, etc.
Genesis OLP will not, and will not permit any of the Subsidiaries to, wind up,
liquidate or dissolve its affairs or enter into any transaction of merger or
consolidation (or equivalent transaction), or convey, sell, lease or otherwise
dispose of (or agree to do any of the foregoing at any future time) all or any
substantial part of its property or assets, or permit any of the Subsidiaries to
do any of the foregoing, except that (i) Genesis OLP and the Subsidiaries may
make sales of inventory in the ordinary course of business, (ii) Genesis OLP and
the Subsidiaries may, in the ordinary course of business, sell equipment which
is uneconomic or obsolete and (iii) any subsidiary of Genesis OLP may be merged
or consolidated with or into Genesis OLP (provided that Genesis OLP shall be the
continuing or surviving entity) and any Subsidiary of Genesis OLP may be merged
with or into any one or more Wholly Owned Subsidiaries of Genesis OLP (provided
that the Wholly Owned Subsidiary shall be the continuing or surviving entity).
SECTION 6.7. Indebtedness.
Genesis OLP will not, and will not permit any of the Subsidiaries to, contract,
create, incur, assume or suffer to exist any Indebtedness other than:
(a) Indebtedness hereunder;
(b) Indebtedness in existence on the date of this Agreement;
(c) Indebtedness permitted pursuant to Section 6.13(ii);
(d) Indebtedness pursuant to Hedging Agreements entered into in the ordinary
course of business and not for the purpose of speculation; and
(e) APIs (as defined in the Genesis OLP Partnership Agreement).
SECTION 6.8. Minimum Tangible Net Worth.
Genesis OLP shall not, at any time, permit its Consolidated Tangible Net Worth
to be less than $50,000,000.
SECTION 6.9. Minimum Working Capital.
Genesis OLP shall not, at any time, permit its Consolidated Working Capital to
be less than $1,000,000.
SECTION 6.10. Working Capital Leverage Ratio.
Genesis OLP shall not, at any time, permit the ratio of its Consolidated Current
Liabilities to its Consolidated Working Capital plus net property, plant and
equipment to exceed 7.5:1.0.
SECTION 6.11. Fixed Charge Coverage.
Genesis OLP shall not permit, as of the last day of any fiscal quarter, the
ratio of (i) the Consolidated EBITDA of Genesis OLP for such fiscal quarter to
(ii) the Consolidated Fixed Charges of Genesis OLP for such fiscal quarter to be
less than 1.75:1.0.
SECTION 6.12. Leverage Ratio.
Genesis OLP shall not permit, at any time, the ratio of its Consolidated Total
Liabilities to its Consolidated Tangible Net Worth to exceed 10.0:1.0.
SECTION 6.13. Advances, Investments and Loans.
Genesis OLP will not, and will not permit any of its Subsidiaries to, lend money
or credit or make advances to any Person, or purchase or acquire any stock,
obligations or securities of, or any other interest in, or make any capital
contribution to, any other Person, except that the following shall be permitted:
(i) Genesis OLP and its Subsidiaries may acquire and hold receivables owing to
it, if created or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms; and
(ii) Genesis OLP may make advances and capital contributions to any of its
Wholly Owned Subsidiaries and any Wholly Owned Subsidiary of Genesis OLP may
make advances and capital contributions to Genesis OLP or any other Wholly Owned
Subsidiary of Genesis OLP; provided that (A) all the outstanding Capital Stock
of any such Wholly Owned Subsidiary shall have been pledged under the Pledge
Agreement for the ratable benefit of the Secured Parties and (B) any such Wholly
Owned Subsidiary shall have executed and delivered each applicable Security
Document as required by Section 6.20.
SECTION 6.14. Restricted Payments.
Genesis OLP will not, and will not permit any of the Subsidiaries to, declare or
make, or agree to pay or make, directly or indirectly, any Restricted Payment,
except (a) Genesis OLP may declare and pay (i) dividends or distributions with
respect to its outstanding limited partner interests payable solely in
additional limited partners interests or (ii) dividends or distributions payable
solely to Genesis OLP or a Wholly Owned Subsidiary of Genesis OLP (or pro rata
dividends or other distributions made by a Subsidiary that is not a Wholly Owned
Subsidiary of Genesis OLP to minority securityholders), (b) Genesis OLP may make
Restricted Payments pursuant to and in accordance with stock option plans or
other benefit plans for management or employees of Genesis OLP and its
Subsidiaries and (c) Genesis OLP may make Restricted Payments pursuant to and in
accordance with and as required by the terms of the Genesis OLP Partnership
Agreement as in effect on the date of this Agreement.
SECTION 6.15. Existence; Conduct of Businesses.
Genesis OLP will, and will cause each of the Subsidiaries to, do or cause to be
done all things necessary to preserve, renew and keep in full force and effect
its legal existence and the rights, licenses, permits, privileges and franchises
material to the conduct of its business; provided that the foregoing shall not
prohibit any merger, consolidation, liquidation or dissolution permitted under
Section 6.6.
SECTION 6.16. Payment of Obligations.
Genesis OLP will, and will cause each of the Subsidiaries to, pay its
obligations, including Tax liabilities, that, if not paid, could result in a
Material Adverse Effect before the same shall become delinquent or in default,
except where (a) the validity or amount thereof is being contested in good faith
by appropriate proceedings, (b) Genesis OLP or such Subsidiary has set aside on
its books adequate reserves with respect thereto in accordance with GAAP and (c)
the failure to make payment pending such contest could not reasonably be
expected to result in a Material Adverse Effect.
SECTION 6.17. Maintenance of Properties; Insurance.
Genesis OLP will, and will cause each of the Subsidiaries to, (i) keep and
maintain all property material to the conduct of its business in good working
order and condition, ordinary wear and tear excepted, and (ii) maintain, with
financially sound and reputable insurance companies, insurance in such amounts
and against such risks as are customarily maintained by companies engaged in the
same or similar businesses operating in the same or similar locations.
SECTION 6.18. Books and Records; Inspection Rights.
Genesis OLP will, and will cause each of the Subsidiaries to, keep proper books
of record and account in which full, true and correct entries are made of all
dealings and transactions in relation to its business and activities. Genesis
OLP will, and will cause each of the Subsidiaries to, permit any representatives
designated by the Agent, Salomon Inc or Basis, upon reasonable prior notice, to
visit and inspect its properties, to examine and make extracts from its books
and records, and to discuss its affairs, finances and condition with its
officers and independent accountants, all at such reasonable times and as often
as reasonably requested.
SECTION 6.19. Compliance with Laws.
Genesis OLP will, and will cause each of the Subsidiaries to, comply with all
laws, rules, regulations and orders of any Governmental Authority applicable to
it or its property, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
SECTION 6.20. Further Assurances.
Genesis OLP shall, and shall cause the Subsidiaries to, execute any and all
further documents, financing statements, agreements and instruments, and take
all further action (including filing Uniform Commercial Code and other financing
statements) that may be required under applicable law, or that the Collateral
Agent may reasonably request, in order to effectuate the transactions
contemplated by the Loan Documents and in order to grant, preserve, protect and
perfect the validity and first priority of the security interests created or
intended to be created by the Security Documents. Genesis OLP will cause any
subsequently acquired or organized Domestic Subsidiary to execute the Subsidiary
Guarantee Agreement, the Indemnity, Subrogation and Contribution Agreement and
each applicable Security Document in favor of the Collateral Agent. In
addition, from time to time, Genesis OLP will, at its cost and expense, promptly
secure the Obligations by pledging or creating, or causing to be pledged or
created, perfected security interests with respect to such of its assets and
properties as the Collateral Agent shall designate, including the Capital Stock
of any subsequently acquired or organized Subsidiary through the execution of
the Pledge Agreement. Such security interests and Liens will be created under
the Security Documents and other security agreements, and other instruments and
documents in form and substance satisfactory to the Collateral Agent, and
Genesis OLP shall deliver or cause to be delivered to Salomon Inc and Basis all
such instruments and documents (including legal opinions and lien searches) as
the Collateral Agent shall reasonably request to evidence compliance with this
Section. Genesis OLP agrees to provide such evidence as the Collateral Agent
shall reasonably request as to the perfection and priority status of each such
security interest and Lien.
The parties hereto acknowledge that the intent of this Agreement is to provide
transitional credit support to Genesis OLP and that, during the Availability
Period, Genesis OLP and Genesis MLP are expected to be actively seeking to enter
into one or more bank credit agreements or third party credit facilities to
supplement and eventually replace this Agreement, and Salomon Inc and Basis
agree to cooperate with Genesis OLP and Genesis MLP to effect this transition;
provided that neither Salomon Inc nor Basis will be obligated to effect any
amendment to this Agreement prior to its termination that would adversely affect
either Salomon Inc or Basis. In connection with Genesis OLP or Genesis MLP
entering into any such agreement or facility, Salomon Inc, as Collateral Agent,
will take any action with respect to the Collateral that it deems appropriate at
such time, including partially or fully releasing the security interest of the
Secured Parties.
ARTICLE VII
EVENTS OF DEFAULT
Upon the occurrence of any of the following specified events (each an "Event of
Default"):
(ii) Genesis OLP shall (x) default in the payment when due of any principal on
any payment obligation to Salomon Inc or Basis hereunder or (y) default, and
such default shall continue unremedied for two Business Days, in the payment
when due of any interest, fee or other repayment obligation hereunder or under
any Loan Document, including, without limitation, pursuant to Section 2.5 or
Section 3.2(d), or in any of its other obligations contained in Article II
hereof; or
(iii) the Guaranty Exposure, as calculated on and for the first day of each
calendar month, shall exceed the applicable Maximum Credit Support Amount for
such day for two or more consecutive calendar months; or
(iv) any Loan Party shall default in the due performance or observance by it of
any covenant contained in any Loan Document and such default shall continue
unremedied for a period of 30 days after written notice by Salomon Inc or Basis
or Genesis OLP (except in the case of a default relating to Section 6.2, with
respect to which a period of five days after written notice shall be
applicable); or
(v) any representation or warranty made or deemed made in or in connection with
any Loan Document or the borrowings or issuances of Guaranties or Letters of
Credit hereunder, or any representation, warranty, statement or information
contained in any report, certificate, financial statement or other instrument
furnished in connection with or pursuant to any Loan Document, shall prove to
have been false or misleading (or, in the case of any such representation or
warranty not qualified as to materiality, false or misleading in any material
respect) when so made, deemed made or furnished;
(vi) Genesis OLP shall (x) default in any payment of any indebtedness for
borrowed money (other than indebtedness incurred under this Agreement) in an
aggregate amount of $1,000,000 or more beyond the period of grace (not to exceed
30 days), if any, provided in the instrument or agreement under which such
indebtedness was created or (y) default in the observance or performance of any
agreement, covenant or condition relating to any indebtedness in an aggregate
principal amount of $1,000,000 or more (other than indebtedness incurred under
this Agreement) or contained in any instrument or agreement evidencing, securing
or relating thereto, or any other event shall occur or condition exist, the
effect of which default or other event or condition is to cause, or to permit
the holder or holders of such indebtedness (or a trustee or agent on behalf of
such holder or holders) to cause (determined without regard to whether any
notice is required), any such indebtedness to become due prior to its stated
maturity; or any indebtedness in an aggregate principal amount of $1,000,000 or
more of Genesis OLP shall be declared to be due and payable, or required to be
prepaid other than by a regularly scheduled required prepayment, prior to the
stated maturity thereof; or
(vii) Genesis OLP shall commence a voluntary case concerning itself under the
Bankruptcy Code; or an involuntary case is commenced against Genesis OLP, and
the petition is not controverted within 10 days, or is not stayed or dismissed
within 60 days, after commencement of the case; or a custodian (as defined in
the Bankruptcy Code) is appointed for, or takes charge of, all or substantially
all of the property of Genesis OLP, or Genesis OLP commences any other
proceeding under any reorganization, arrangement, adjustment of debt, relief of
debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to Genesis OLP, or
there is commenced against Genesis OLP any such proceeding which remains
unstayed or undismissed for a period of 60 days, or Genesis OLP is adjudicated
insolvent or bankrupt; or any order of relief or other order approving any such
case or proceeding is entered; or Genesis OLP suffers any appointment of any
custodian or the like for it or any substantial part of its property to continue
undischarged or unstayed for a period of 60 days; or Genesis OLP makes a general
assignment for the benefit of creditors; or any corporate action is taken by
Genesis OLP for the purpose of effecting any of the foregoing; or
(viii) any Loan Document or any provision thereof shall cease to be in full
force and effect, or shall cease to give the Liens, rights, powers and
privileges purported to be created thereby; or
(ix) one or more judgments or decrees shall be entered against Genesis OLP
involving in the aggregate a liability (not paid or fully covered by insurance
except for normal deductibles) of $1,000,000 or more, and all such judgments or
decrees shall not have been vacated, discharged or stayed or bonded pending
appeal within 60 days after the entry thereof; or
(x) an ERISA Event shall have occurred that, in the opinion of the Agent, when
taken together with all other ERISA Events that have occurred, could reasonably
be expected to result in a Material Adverse Effect;
then, and in any such event (other than an event with respect to Genesis OLP
described in clause (vi) above), and at any time thereafter, if any Event of
Default shall then be continuing, Salomon Inc, acting for itself and on behalf
of Basis, or Basis may by written notice to Genesis OLP take any or all of the
following actions, without prejudice to any other rights of Salomon Inc or
Basis: (A) declare the commitments and obligations of Salomon Inc and Basis to
provide credit support to Genesis OLP terminated, whereupon any fees payable
hereunder shall forthwith become due and payable without any other notice of any
kind; (B) declare the principal of and any accrued interest in respect of all
obligations owing hereunder to be, whereupon the same shall become, forthwith
due and payable without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by Genesis OLP; (C) enforce any or all of
the Liens and security interests created pursuant to the Security Documents;
(D) terminate any Letter of Credit which may be terminated in accordance with
its terms and cash collateralize all other outstanding Letters of Credit;
(E) terminate any Guaranty issued by Salomon Inc hereunder which may be
terminated in accordance with its terms; and in any event with respect to
Genesis OLP described in clause (vi) above, the obligations of Salomon Inc and
Basis under this Agreement shall automatically terminate and the principal of
and any accrued interest in respect of all obligations owing hereunder shall
automatically become due and payable, without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by Genesis OLP.
Notwithstanding anything to the contrary in this Agreement, no Event of Default
shall be deemed to have occurred under clause (iv) or (ix) above solely as a
result of any ERISA Event relating to any Plan of Basis, if and for so long as
Genesis OLP shall participate in such Plan and Basis shall be a Wholly Owned
Subsidiary of Salomon Inc.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. Choice of Law; Submission to Jurisdiction; Waiver of Jury Trial.
(a) This Agreement shall be subject to and governed by the laws of State of
New York, excluding any conflicts-of-law rule or principle that might refer the
construction or interpretation of this Agreement to the laws of another state.
(b) Genesis OLP hereby irrevocably and unconditionally submits, for itself and
its property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Loan Documents, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that the
Agent, the Collateral Agent, Salomon Inc or Basis may otherwise have to bring
any action or proceeding relating to this Agreement or the other Loan Documents
against Genesis OLP or its properties in the courts of any jurisdiction.
Genesis OLP hereby irrevocably and unconditionally waives, to the fullest extent
it may legally and effectively do so, any objection which it may now or
hereafter have to the laying of venue of any suit, action or proceeding arising
out of or relating to this Agreement or the other Loan Documents in any New York
State or Federal court. Each of the parties hereto hereby irrevocably waives,
to the fullest extent permitted by law, the defense of an inconvenient forum to
the maintenance of such action or proceeding in any such court. Each party to
this Agreement irrevocably consents to service of process in the manner provided
for notices in Section 8.2. Nothing in this Agreement will affect the right of
any party to this Agreement to serve process in any other manner permitted by
law.
(c) EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.1.
SECTION 8.2. Notices.
All notices, requests and other communications to any party hereunder shall be
in writing (including bank wire, telex, facsimile transmission or similar
writing) and shall be given to such party by personal delivery, telex or
facsimile at the address or number set forth on the signature pages hereof,
confirmed in writing if telex or facsimile at the address set forth in the
signature pages (with, in the case of notices to Genesis OLP, a copy to Howell
Corporation, 1111 Fannin, Suite 1500, Houston, Texas 77002). Each such notice
request or other communication shall be effective upon (i) actual receipt by
personal delivery or (ii) such telex or facsimile is transmitted to the telex or
facsimile number specified in this Section and the appropriate answer-back is
received or accompanied by a telephone call to the party receiving such
transmission subject to confirmation given within 72 hours by mail with first
class postage prepaid, addressed as aforesaid; if received during the
recipient's normal business hours, or at the beginning of the recipient's next
Business Day after receipt if not received during the recipient's normal
business hours or delivered at the address specified in this Section. All
notices to be sent to a party pursuant to this Agreement shall be sent to or
made at the number and address set forth below such party's signature to this
Agreement, or at such other number and address as such party may stipulate to
other parties in the manner provided in this Section 8.2.
SECTION 8.3. Entire Agreement.
This Agreement constitutes the entire agreement of the parties relating to the
matters contained herein, superseding all prior contracts or agreements, whether
oral or written, relating to the matters contained herein.
SECTION 8.4. Effect of Waiver or Consent.
No waiver or consent, express or implied, by any party to or of any breach or
default by any Person in the performance by such Person of its obligations
hereunder shall be deemed or construed to be a consent or waiver to or of any
other breach or default by such Person of the same or any other obligations of
such Person hereunder. Failure on the part of a party to complain of any act of
any Person or to declare any Person in default, irrespective of how long such
failure continues, shall not constitute a waiver by such party of its rights
hereunder until the applicable statute of limitations period has run.
SECTION 8.5. Amendment, Modification or Waiver.
(a) Except as otherwise provided herein or contemplated hereby, this Agreement
may be amended, modified or waived from time to time only by a written
instrument signed by all parties hereto; provided that this Agreement may not be
amended or modified if in the reasonable judgment of the General Partner such
amendment or modification would not be fair and reasonable to Genesis MLP or the
limited partners of Genesis MLP. Any such amendment, modification or waiver
shall be reduced to writing and shall be designated on its face an "Amendment"
or an "Addendum" to this Agreement. Except as expressly provided in the Loan
Documents, no full or partial release of any Collateral or any Subsidiary
Guarantor shall be effective without the prior written approval of Salomon Inc
and Basis.
(b) No failure or delay of the Agent, the Collateral Agent, Salomon Inc or
Basis in exercising any power or right hereunder or under any other Loan
Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further exercise
thereof or the exercise of any other right or power. The rights and remedies of
the Agent, the Collateral Agent, Salomon Inc and Basis hereunder and under the
other Loan Documents are cumulative and are not exclusive of any rights or
remedies that they would otherwise have. No waiver of any provision of this
Agreement or any other Loan Document or consent to any departure by Genesis OLP
or any other Loan Party therefrom shall in any event be effective unless the
same shall be permitted by paragraph (a) above, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. No notice or demand on Genesis OLP in any case shall entitle Genesis OLP
to any other or further notice or demand in similar or other circumstances.
SECTION 8.6. Termination.
On the date of the closing of any Substitute Facility entered into by either
Genesis OLP or Genesis MLP (i) this Agreement shall terminate and all
obligations of Salomon Inc and Basis hereunder shall cease, (ii) Salomon Inc
shall have the right to cancel all outstanding Guaranties with respect to any
transactions entered into from and after such date and (iii) Genesis OLP shall
immediately repay any outstanding Loans to Basis and shall immediately remit
cash to Basis equal to the amount of any outstanding Letters of Credit as
collateral with respect to such outstanding Letters of Credit. Upon the
termination of the Working Capital Facility Commitment, the expiration of all
outstanding Letters of Credit, the repayment of all outstanding Loans and the
payment of all other amounts owing to Basis hereunder, Basis shall have no
further rights or obligations under this Agreement, other than any rights
pursuant to Sections 8.9 and 8.14 and any rights or obligations it may have in
its capacity as Agent. Upon the termination of this Agreement pursuant to this
Section 8.6 and the final satisfaction of all Obligations, the security interest
of the Secured Parties in the Collateral shall be released in accordance with
Section 9.08 of the Security Agreement.
SECTION 8.7. Assignment.
No party shall have the right to assign its rights or obligations under this
Agreement without the consent of the other applicable party or parties hereto;
provided, however, Salomon Inc or Basis may assign any of its rights or
obligations under this Agreement (including any Loans at the time owing to it),
provided that the assignee thereof (i) unconditionally assumes such obligations
of Salomon Inc or Basis, as applicable, under this Agreement, (ii) (x) is a U.S.
Entity or (y) agrees to abide by and submit to the jurisdiction of the United
Kingdom or the United States of America with respect to matters arising out of
this Agreement and at the time of assignment is not organized or based in any
jurisdiction that is subject to any general provision under U.S. laws or
regulations prohibiting U.S. Persons from making investments in or conducting
business with such jurisdiction and (iii) at the time of such transfer and
giving effect to such transfer, is an Investment Grade Entity.
SECTION 8.8. Counterparts.
This Agreement may be executed in any number of counterparts with the same
effect as if all signatory parties had signed the same document. All
counterparts shall be construed together and shall constitute one and the same
instrument.
SECTION 8.9. Demands and Claims.
Genesis OLP shall use its best efforts to assist Basis and Salomon Inc in
defending, pursuing, monitoring or settling any demands or claims for payment of
any Guaranties, Letters of Credit, Loans or any other obligations arising
hereunder by Basis or Salomon Inc.
SECTION 8.10. U.S. Currency.
All sums and amounts payable or to be payable pursuant to the provisions of this
Agreement shall be payable in coin or currency of the United States of America
that, at the time of payment, is legal tender for the payment of public and
private debts in the United States of America.
SECTION 8.11. Laws and Regulations.
Notwithstanding any provision of this Agreement to the contrary, no party hereto
shall be required to take any act, or be prohibited from taking any act, under
this Agreement if the effect thereof would be to cause such party to be in
violation of any applicable law, statute, rule or regulation.
SECTION 8.12. Negation of Rights of Assignees and Third Parties.
The provisions of this Agreement are enforceable solely by the parties to this
Agreement and Genesis MLP, and no assignee, other than a permitted transferee of
Salomon Inc pursuant to Section 8.7 of this Agreement, or other Person shall
have the right to enforce any provision of this Agreement or to compel any party
to this Agreement to comply with the terms of this Agreement.
SECTION 8.13. Maximum Interest Rate.
Nothing contained in this Agreement or the promissory notes issued pursuant
hereto shall require Genesis OLP to pay interest at a rate exceeding the maximum
rate permitted without penalty by applicable law. Each provision in this
Agreement and any note, financial document or other agreement executed in
connection herewith is expressly limited so that in no event whatsoever shall
the amount paid thereunder, or otherwise paid, by Genesis OLP for the use,
forbearance or detention of the money to be loaned under this Agreement, exceed
that amount of money which would cause the effective rate of interest thereon to
exceed the maximum rate of interest permitted without penalty under applicable
law, and all amounts payable under any note, financial documents or any other
agreement executed in connection herewith, or otherwise payable in connection
therewith, shall be subject to reduction so that such amounts paid or payable
for the use, forbearance or detention of money to be loaned under this Agreement
shall not exceed that amount of money which would cause the effective rate of
interest thereon to exceed the maximum rate of interest permitted without
penalty under applicable law.
SECTION 8.14. Expenses; Indemnification.
(a) Genesis OLP agrees to pay all out-of-pocket expenses incurred by the Agent,
the Collateral Agent, Salomon Inc and Basis in connection with any amendments,
modifications or waivers of the provisions hereof or thereof or incurred by the
Agent, the Collateral Agent, Salomon Inc or Basis in connection with the
enforcement or protection of its rights in connection with this Agreement and
the other Loan Documents or in connection with the Loans made or Guaranties or
Letters of Credit issued hereunder, including the fees, charges and
disbursements of counsel, and, in connection with any such enforcement or
protection, the fees, charges and disbursements of counsel for the Agent, the
Collateral Agent, Salomon Inc and Basis.
(b) Genesis OLP shall indemnify the Agent, the Collateral Agent, Salomon Inc
and Basis, each Affiliate of any of the foregoing Persons and each of their
respective directors, officers, employees and agents (each such Person being
called an "Indemnitee") against, and to hold each Indemnitee harmless from, any
and all losses, claims, damages, liabilities and related expenses, including
reasonable counsel fees, charges and disbursements, incurred by or asserted
against any Indemnitee arising out of, in any way connected with, or as a result
of (i) the execution or delivery of this Agreement or any other Loan Document or
any agreement or instrument contemplated thereby, the performance by the parties
thereto of their respective obligations thereunder or the consummation of the
Transactions and the other transactions contemplated thereby, (ii) any Loans,
Guaranty or Letter of Credit or the use of proceeds therefrom, (iii) any actual
or alleged presence or release of Hazardous Materials on any property owned or
operated by Genesis OLP or any of the Subsidiaries, or any Environmental
Liability related in any way to Genesis OLP or the Subsidiaries, in each case
arising out or resulting from any such Person being a party to this Agreement or
any other Loan Document, or (iv) any actual or prospective claim, litigation,
investigation or proceeding relating to any of the foregoing, whether or not any
Indemnitee is a party thereto; provided that such indemnity shall not, as to any
Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or wilful misconduct of such Indemnitee.
(c) The provisions of this Section 8.14 shall remain operative and in full
force and effect regardless of the expiration of the term of this Agreement, the
consummation of the transactions contemplated hereby, the repayment of any of
the Loans, the expiration of the Working Capital Facility Commitment or the
Guaranty Facility Commitment, the expiration of any Guaranty or Letter of
Credit, the invalidity or unenforceability of any term or provision of this
Agreement or any other Loan Document, or any investigation made by or on behalf
of the Agent, the Collateral Agent, Salomon Inc or Basis. All amounts due under
this Section 8.14 shall be payable on written demand therefor.
SECTION 8.15. Cash Collateralization.
If any Event of Default shall occur and be continuing (and in addition to any
other obligation contained herein), on the Business Day that Genesis OLP
receives notice from the Agent or Basis, demanding the deposit of cash
collateral pursuant to this paragraph, Genesis OLP shall deposit in an account
with the Agent, in the name of the Agent and for the benefit of Basis and
Salomon Inc, an amount in cash equal to the Guaranty Exposure and the L/C
Exposure as of such date plus any accrued and unpaid interest thereon; provided
that the obligation to deposit such cash collateral shall become effective
immediately, and such deposit shall become immediately due and payable, without
demand or other notice of any kind, upon the occurrence of any Event of Default
with respect to Genesis OLP described in clause (vi) of Article VII. Such
deposit shall be held by the Agent as collateral for the payment and performance
of the obligations of Genesis OLP under this Agreement. The Agent shall have
exclusive dominion and control, including the exclusive right of withdrawal,
over such account. Other than any interest earned on the investment of such
deposits, which investments shall be made at the option and sole discretion of
the Agent and at Genesis OLP's risk and expense, such deposits shall not bear
interest. Interest or profits, if any, on such investments shall accumulate in
such account. Moneys in such account shall be applied by the Agent to reimburse
Salomon Inc or Basis, as applicable, for Guaranty Disbursements or L/C
Disbursements for which they have not been reimbursed and, to the extent not so
applied, shall be held for the satisfaction of the reimbursement obligations of
Genesis OLP for the Guaranty Exposure and the L/C Exposure at such time or may
be applied to satisfy other obligations of Genesis OLP under this Agreement. If
Genesis OLP is required to provide an amount of cash collateral hereunder as a
result of the occurrence of an Event of Default, such amount (to the extent not
applied as aforesaid) shall be returned to Genesis OLP within three Business
Days after all Events of Default have been cured or waived.
SECTION 8.16. Survival.
All covenants, agreements, representations and warranties made by Genesis OLP
herein and in the certificates or other instruments delivered in connection with
or pursuant to this Agreement shall be considered to have been relied upon by
the other parties hereto and shall survive the execution and delivery of this
Agreement and the making of any Loans and issuance of any Guaranty or Letters of
Credit, regardless of any investigation made by any such other party or on its
behalf and notwithstanding that the Agent, Salomon Inc or Basis may have had
notice or knowledge of any Default or incorrect representation or warranty at
the time any credit is extended hereunder, and shall continue in full force and
effect as long as the principal of or any accrued interest on any Loan or any
fee or any other amount payable under this Agreement is outstanding and unpaid
or any Guaranty or Letter of Credit is outstanding and so long as the
Commitments have not expired or terminated. The provisions of Section 8.14
shall survive and remain in full force and effect regardless of the consummation
of the transactions contemplated hereby, the repayment of the Loans, the
expiration or termination of the Guaranties or Letters of Credit and the
Commitments or the termination of this Agreement or any provision hereof.
SECTION 8.17. Obligations Absolute.
Genesis OLP's obligation to reimburse Disbursements as provided in Section 2.5
and Section 3.2(d) shall be absolute, unconditional and irrevocable, and shall
be performed strictly in accordance with the terms of this Agreement under any
and all circumstances whatsoever and irrespective of:
(i) any lack of validity or enforceability of any Guaranty or Letter of Credit
or this Agreement, or any term or provision therein;
(ii) any amendment or waiver of or any consent to departure from all or any of
the provisions of any Guaranty or Letter of Credit or this Agreement;
(iii) the existence of any claim, setoff, defense or other right that Genesis
OLP, any other party guaranteeing, or otherwise obligated with, Genesis OLP, any
Subsidiary or other Affiliate thereof or any other Person may at any time have
against the beneficiary under any Guaranty or Letter of Credit, the Agent,
Salomon Inc, Basis or any other Person, whether in connection with this
Agreement or any other related or unrelated agreement or transaction;
(iv) any draft or other document presented under a Guaranty or Letter of Credit
proving to be forged, fraudulent or invalid in any respect or any statement
therein being untrue or inaccurate in any respect;
(v) payment by Salomon Inc under any Guaranty or by the issuer of any Letter of
Credit under such Letter of Credit against presentation of a draft or other
document that does not comply with the terms of such Guaranty or Letter of
Credit; and
(vi) any other act or omission to act or delay of any kind of the Agent, Salomon
Inc, Basis or any other Person or any other event or circumstance whatsoever,
whether or not similar to any of the foregoing, that might, but for the
provisions of this Section, constitute a legal or equitable discharge of Genesis
OLP's obligations hereunder.
Neither the Agent, Salomon Inc and Basis nor any of their Affiliates, shall have
any liability or responsibility by reason of or in connection with the issuance
or transfer of any Guaranty or Letter of Credit or any payment or failure to
make any payment thereunder, including any of the circumstances specified in
clauses (i) through (vi) above, as well as any error, omission, interruption,
loss or delay in transmission or delivery of any draft, notice or other
communication under or relating to any Guaranty or Letter of Credit (including
any document required to make a drawing thereunder), any error in interpretation
of technical terms or any consequence arising from causes beyond the control of
the Agent, Salomon Inc or Basis, provided that the foregoing shall not be
construed to excuse the Agent, Salomon Inc or Basis from liability to Genesis
OLP to the extent of any direct damages (as opposed to consequential damages,
claims in respect of which are hereby waived by Genesis OLP to the extent
permitted by applicable law) suffered by Genesis OLP that are caused by such
Person's gross negligence or wilful misconduct.
IN WITNESS WHEREOF, the parties have executed this Agreement on, and effective
as of, the Closing Date.
GENESIS CRUDE OIL, L.P.
By: GENESIS ENERGY, L.L.C., general partner
One Allen Center
500 Dallas, Suite 3200
Houston, Texas 77002
Telephone Number:
Fax/Telex Number:
Attention:
By /s/ John P. vonBerg
-----------------------
Name: John P. vonBerg
Title: President and Chief Executive Officer
SALOMON INC
Seven World Trade Center
43rd Floor
New York, New York 10048
Telephone Number:
Fax/Telex Number:
Attention:
By /s/ Thomas W. Jasper
-----------------------
Name: Thomas W. Jasper
Title: Treasurer
By /s/ Michelle Turner
----------------------
Name: Michelle Turner
Title: Authorized Signatory
BASIS PETROLEUM, INC.
One Allen Center
500 Dallas, Suite 3200
Houston, Texas 77002
Telephone Number:
Fax/Telex Number:
Attention:
By /s/ Jeffrey R. Serra
--------------------
Name: Jeffrey R. Serra
Title: Chairman of the Board, President and Chief Executive Officer
SCHEDULE I
Period Fee*
Year 1 (beginning on the Closing Date and ending on December 31, 1997)
First Quarter** 0.25%
Second Quarter 0.25%
Third Quarter 0.30%
Fourth Quarter 0.30%
Year 2 (beginning on January 1 and ending on December 31, 1998)
First Quarter 0.50%
Second Quarter 0.50%
Third Quarter 0.70%
Fourth Quarter 0.70%
Year 3 (beginning on January 1 and ending on December 31, 1999)
First Quarter 0.90%
Second Quarter 1.10%
Third Quarter 1.25%
Fourth Quarter 1.50%
- -----------------------
*Fee is based upon the indicated rate on a per annum basis.
**Each quarter shall be a three calendar month period except for this First
Quarter, which shall extend from the Closing Date through March 31, 1997.
SCHEDULE II
(to be provided by Basis)
EXHIBIT 10.5
REDEMPTION AND REGISTRATION RIGHTS AGREEMENT
REDEMPTION AND REGISTRATION RIGHTS AGREEMENT, dated as of December 3, 1996 by
and among BASIS PETROLEUM, INC., a Texas corporation ("Basis"), HOWELL
CORPORATION, a Delaware corporation ("Howell"), HOWELL CRUDE OIL COMPANY, a
Delaware corporation ("Howell Crude"), HOWELL PIPELINE TEXAS, INC., a Delaware
corporation ("Howell Texas" and, collectively with Howell Crude, the "Howell
Subsidiaries"), GENESIS ENERGY, L.P., a Delaware limited partnership ("Genesis
MLP"), and GENESIS CRUDE OIL, L.P., a Delaware limited partnership ("Genesis
OLP").
W I T N E S S E T H:
WHEREAS, Basis and Howell have agreed pursuant to the Purchase & Sale and
Contribution & Conveyance Agreement (the "Conveyance Agreement") by and among
Basis, Howell, the Howell Subsidiaries, Genesis MLP, Genesis OLP and Genesis
Energy, L.L.C., a Delaware limited liability company, to transfer their
respective crude oil gathering, marketing, transportation and pipeline assets to
Genesis OLP in exchange for, among other things, the net proceeds of an offering
to the public of Common Units representing limited partner interests of Genesis
MLP and for the issuance to each of Basis and the Howell Subsidiaries of a
certain number of Subordinated OLP Units representing limited partner interests
in Genesis OLP; and
WHEREAS, pursuant to the Amended and Restated Agreement of Limited Partnership
of Genesis OLP (the "OLP Agreement"), upon the expiration of the Subordination
Period (as defined in the OLP Agreement), the Subordinated OLP Units will
convert on a one-for-one basis into Common OLP Units and, in addition, up to one
half of the Subordinated OLP Units may convert into Common OLP Units prior to
the end of the Subordination Period; and
WHEREAS, the parties desire that, upon the conversion of all or part of
Subordinated OLP Units into Common OLP Units, each of Basis and Howell (on
behalf of the Howell Subsidiaries) may, subject to the terms and conditions set
forth herein cause Genesis OLP to redeem the Common OLP Units held by either
Basis or the Howell Subsidiaries, in either case using the proceeds, net of
underwriting discounts and commissions or placement fees, if any, of a public
offering or private sale by Genesis MLP of a number of newly issued Common Units
equal to the number of Common OLP Units being redeemed.
NOW THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
The following terms, as used herein, have the following meanings (all terms
defined herein in the singular to have the correlative meanings when used in the
plural and vice versa):
"Affiliate" shall have the meaning ascribed to such term in the OLP Agreement.
"Aggregate Redemption Number" has the meaning ascribed to it in Section 2.1(a)
of this Agreement.
"Agreement" means this Redemption and Registration Rights Agreement, as the same
shall be amended, modified or supplemented from time to time.
"Ancillary Agreement" means the Ancillary Agreement among Salomon Inc and the
Howell Entities.
"API" has the meaning set forth in the OLP Agreement.
"Assignee" has the meaning ascribed to it in Section 10 of this Agreement.
"Common OLP Unit" has the meaning assigned to the term "Common LP Unit" in the
OLP Agreement.
"Common Units" means the Common Units representing limited partner interests of
Genesis MLP.
"Demand Redemption" means any sale of Common Units effected in accordance with
Section 2.1 of this Agreement.
"Distribution Support Agreement" means the Distribution Support Agreement
between Genesis OLP and Salomon Inc.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from time
to time, or any successor statute, and the rules and regulations promulgated
thereunder.
"General Partner" means Genesis Energy, L.L.C., a Delaware limited liability
company and the general partner of Genesis MLP and Genesis OLP.
"Holders" means the holders of record of Common OLP Units or the agent
designated by such holders of record (in the case of the Howell Subsidiaries,
Howell).
"Howell Entities" means Howell and the Howell Subsidiaries.
"Indemnified Party" has the meaning ascribed to it in Section 2.4(a) of this
Agreement.
"Individual Redemption Number" has the meaning ascribed to it in Section 2.1(a)
of this Agreement.
"Loss" has the meaning ascribed to it in Section 2.4(a) of this Agreement.
"Notice of Demand" has the meaning ascribed to it in Section 2.1(a) of this
Agreement.
"Offering Expenses" means all expenses incident to Genesis MLP's performance of
or compliance with this Agreement, including, without limitation, (a) all
registration, filing, securities exchange listing, rating agency and National
Association of Securities Dealers fees, (b) all registration, filing,
qualification and other fees and expenses of complying with securities or blue
sky laws of all jurisdictions in which the securities are to be registered and
any legal fees and expenses incurred in connection with the blue sky
qualifications of the Common Units and the determination of their eligibility
for investment under the laws of all such jurisdictions, (c) all word
processing, duplicating, printing, messenger and delivery expenses, (d) the fees
and disbursements of counsel for Genesis MLP and of its independent public
accountants, including, without limitation, the expenses of any special audits
or "cold comfort" letters required by or incident to such performance and
compliance, (e) premiums and other costs of policies of insurance against
liabilities arising out of the public offering of the Common Units being
registered to the extent Genesis MLP elects to obtain such insurance, (f) the
fees of preparing a private placement memorandum, (g) any expenses and
disbursements of underwriters or placement agents customarily paid by issuers or
sellers of securities (but excluding underwriting discounts and commissions,
placement fees and transfer taxes, if any, relating to the Common Units being
registered) and (h) fees and expenses of other Persons retained or employed by
Genesis MLP. Offering Expenses, to the extent payable by Genesis MLP pursuant
to this Agreement, shall not include fees and disbursements of counsel for any
Participating Holder.
"Participating Holder" means a Holder who has provided a Notice of Demand or a
Participation Notice to Genesis MLP requesting the redemption of all or a part
of its Common OLP Units.
"Participation Notice" has the meaning ascribed to it in Section 2.1(c) of this
Agreement.
"Person" means a natural person, a corporation, a partnership, a limited
liability company, a trust, a joint venture, any regulatory authority or any
other entity or organization.
"Pledge Agreement" means the Pledge Agreement among Basis, the Howell Entities
and Genesis OLP.
"Reasonable Efforts," when used with respect to any obligation to be performed
or term or provision to be observed hereunder, means such efforts as a prudent
Person seeking the benefits of such performance or action would make, use, apply
or exercise to preserve, protect or advance its rights or interests, provided,
that such efforts do not require such Person to incur a material financial cost
or a substantial risk of material liability unless such cost or liability (i)
would customarily be incurred in the course of performance or observance of the
relevant obligation, term or provision, (ii) is caused by or results from the
wrongful act or negligence of the Person whose performance or observance is
required hereunder or (iii) is not excessive or unreasonable in view of the
rights or interests to be preserved, protected or advanced. Such efforts may
include, without limitation, the expenditure of such funds and retention by such
Person of such accountants, attorneys or other experts or advisors as may be
necessary or appropriate to effect the relevant action; and the commencement,
termination or settlement of any action, suit or proceeding involving such
Person to the extent necessary or appropriate to effect the relevant action.
"Redemption Notice" has the meaning ascribed to it in Section 2.1(e) of this
Agreement.
"Redemption Price" has the meaning ascribed to it in Section 2.1(a) of this
Agreement.
"SEC" means the United States Securities and Exchange Commission, or any
successor governmental agency or authority thereto.
"Securities Act" means the Securities Act of 1933, as amended from time to time,
or any successor statute, and the rules and regulations promulgated thereunder.
"Subordinated OLP Units" has the meaning assigned to the term "Subordinated LP
Units" in the OLP Agreement.
"Successor" means, with respect to any Person, a successor to such Person by
merger, consolidation, liquidation or other similar transaction.
ARTICLE II
SALE OF COMMON UNITS TO EFFECT
REDEMPTION OF COMMON OLP UNITS
Section 2.1. Right to Demand the Redemption of Common OLP Units.
(a) Request to Effect Redemption. At any time and from time to time after any
conversion of any of the Subordinated OLP Units held by Basis or any Howell
Subsidiary into Common OLP Units pursuant to Section 5.8 of the OLP Agreement,
either Basis or Howell (on behalf of the Howell Subsidiaries) may provide
Genesis MLP with a request ("Notice of Demand") (with a copy to the non-
requesting Holder of Common OLP Units) that Genesis MLP cause Genesis OLP to
redeem Common OLP Units held by such requesting Holder at a per unit redemption
price (the "Redemption Price") equal to the per unit proceeds, net of
underwriting discounts and commissions or placement fees, if any, of a sale by
Genesis MLP of a number of Common Units equal to the number (the "Aggregate
Redemption Number") of Common OLP Units the Participating Holders request at any
one time in the applicable Notice of Demand and, as the case may be, a
Participation Notice to have redeemed, as such requested number may be reduced
pursuant to Section 2.1(d) of this Agreement. Upon receipt of a Notice of
Demand and, as the case may be, a Participation Notice, Genesis MLP shall,
subject to Sections 2.1(b) and 2.1(d) of this Agreement, use Reasonable Efforts
(i) to sell a number of Common Units at least equal to the Aggregate Redemption
Number, (ii) if the sale of Common Units is to be effected pursuant to a
registered public offering, to effect at the earliest practicable date the
registration under the Securities Act of a number of Common Units at least equal
to the Aggregate Redemption Number, (iii) to complete the sale in accordance
with terms and conditions satisfactory to the Participating Holders (provided
that if such terms are not satisfactory to any Participating Holder, then such
Participating Holder may withdraw its participation at any time prior to Genesis
MLP's undertaking of any contractual obligations to any underwriter or other
purchaser in connection with such sale) and (iv) to apply, pursuant to Section
2.1(e) of this Agreement, the proceeds of such sale, net of underwriting
discounts and commissions or placement fees, if any, to the redemption by
Genesis OLP of the Common OLP Units with respect to which the Notice of Demand
or Participation Notice applies, as adjusted pursuant to Section 2.1(d) of this
Agreement. Upon completion of a sale with respect to a Notice of Demand or
Participation Notice, pursuant to Section 2.1(e) of this Agreement, each
Participating Holder that has not withdrawn in accordance with clause (ii) of
the foregoing sentence shall be obligated to transfer to Genesis OLP the number
of Common OLP Units (the "Individual Redemption Number") such Participating
Holder requested be redeemed in such Notice of Demand or Participation Notice,
as such number of Common OLP Units to be redeemed may have been reduced pursuant
to Section 2.1(d) of this Agreement. Genesis MLP shall not be obligated
pursuant to this Agreement to cause Genesis OLP to redeem Common OLP Units of
Holders other than from the proceeds of a sale of Common Units equal to the
Aggregate Redemption Number pursuant to this Agreement (net of underwriting
discounts and commissions or placement fees, if any, and excluding proceeds from
the simultaneous sale of Common Units in excess of the Aggregate Redemption
Number, including pursuant to any over-allotment option granted in connection
with a sale pursuant to this Agreement).
(b) Limitations on Demand Redemption. (i) In case of an underwritten public
offering and notwithstanding any of the foregoing, (A) Genesis MLP shall not be
obligated to file a registration statement at any time during the six-month
period immediately following the effective date of another registration
statement subject to this Agreement and (B) Genesis MLP may delay for a period
not to exceed 60 days after receipt of a Notice of Demand the filing of a
registration statement pursuant to this Section 2.1, and may for a period not to
exceed 60 days after receipt of a Notice of Demand withhold efforts to cause the
registration statement to become effective, if the General Partner determines in
good faith that such registration might (x) interfere with or affect the
negotiation or completion of any transaction that is being contemplated by
Genesis MLP (whether or not a final decision has been made to undertake such
transaction) at the time the right to delay is exercised, or (y) involve
disclosure obligations the timing of which is not in the best interests of
Genesis MLP, including, but not limited to, the obligation to conduct a special
audit prior to the regular audit conducted by Genesis MLP.
(ii) The right of a Holder to request Genesis MLP to cause redemption of Common
OLP Units shall be limited to one Notice of Demand and one Participation Notice
during any period of six (6) consecutive months.
(c) Notice to the Non-Requesting Holder. Upon receipt of any Notice of Demand,
Genesis MLP will give prompt (but in any event within ten (10) days after such
receipt) notice to the non-requesting Holder of the receipt of the Notice of
Demand. Upon the request of any such Holder to participate ("Participation
Notice") made within fifteen (15) days after the receipt by such Holder of any
such notice (which request shall specify the number of Common OLP Units to be
redeemed Genesis MLP will (subject to any priorities in redemption rights) use
Reasonable Efforts to effect the sale of a number of Common Units equal to at
least the number of Common OLP Units to be redeemed from the Participating
Holders.
(d) Priority in Demand Redemption. Notwithstanding Section 2.1(a) of this
Agreement, in the case of an underwritten offering, if the managing underwriter
of an underwritten offering of the Common Units being distributed pursuant to
this Agreement, or the placement agent in the case of a private sale, shall
inform Genesis MLP by letter of its belief that the amount of securities
requested to be included in such distribution or private placement exceeds the
amount which can be sold in such distribution or placement within a price range
acceptable to the Participating Holders, then Genesis MLP will include in such
distribution or placement such amount of Common Units which Genesis MLP is so
advised can be sold in such sale pro rata on the basis of the Participating
Holders' respective aggregate ownership of Subordinated OLP Units and Common OLP
Units or otherwise as the Participating Holders may agree.
(e) Redemption Mechanics. Prior to the undertaking by Genesis MLP of any
contractual obligations to any underwriter or other purchaser to complete any
sale of Common Units by Genesis MLP pursuant to this Agreement, the
Participating Holders shall transfer to a custodian, pursuant to custodial
arrangements satisfactory to Genesis MLP and the Participating Holders,
certificates representing Common OLP Units equal to the Aggregate Redemption
Number. After the completion of a sale of Common Units by Genesis MLP pursuant
to this Agreement, Genesis MLP shall transfer to Genesis OLP the proceeds of the
sale of a number of Common Units equal to the Aggregate Redemption Number, net
of underwriting discounts and commissions or placement fees, if any, with
respect to such sale. Genesis OLP shall thereafter send a notice (a "Redemption
Notice") to each Participating Holder that has not withdrawn in accordance with
clause (iii) of Section 2.1(a) of this Agreement specifying (i) that the sale is
complete and (ii) that Genesis OLP will redeem the Individual Redemption Number
of Common OLP Units of such Participating Holder. Within ten (10) days after
the date of the Redemption Notice, Genesis OLP shall submit payment of the
Redemption Price to the Participating Holders.
Section 2.2. Redemption Terms and Procedures.
(a) Underwritten Public Offering. If the sale of Common Units pursuant to this
Agreement is conducted through a registered underwritten public offering:
(i) Registration Statement Form. Registrations pursuant to this Agreement
shall be on such appropriate registration forms of the SEC as shall permit the
issuance and sale of Common Units. Genesis MLP agrees to include in any such
registration statement all information that any Participating Holder shall
reasonably request (to the extent such information relates to such Participating
Holder), and each Participating Holder shall be obligated to provide to Genesis
MLP information concerning such Participating Holder as Genesis MLP shall
reasonably request for inclusion in the registration statement.
(ii) Registration Procedures. In connection with Genesis MLP's obligations to
register Common Units pursuant to this Agreement, Genesis MLP will use
Reasonable Efforts to effect such registration so as to permit the sale of any
Common Units included in such registration, and pursuant thereto Genesis MLP
will as expeditiously as possible:
(A) as soon as reasonably practicable after receipt of a Notice of Demand and a
Participation Notice (or the expiration of the period for receipt thereof),
prepare and file with the SEC the requisite registration statement and
thereafter use Reasonable Efforts to cause such registration statement to be
declared effective by the SEC, provided that before filing such registration
statement or any amendment or supplement thereto, Genesis MLP will furnish to
the Participating Holders copies of drafts of all such documents proposed to be
filed (excluding exhibits, which shall be made available upon request by any
Participating Holder), and any Participating Holder shall have the opportunity
to timely object to any information relating to such Participating Holders
contained therein and Genesis MLP will make the corrections reasonably requested
with respect to information relating to such Participating Holder prior to
filing any such registration statement, amendment or supplement;
(B) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to complete the distribution of the securities
covered thereby and as may be required to comply with Section 4(3) of the
Securities Act and Rule 174 thereunder;
(C) furnish to each underwriter participating in the distribution of securities
under such registration statement, such number of conformed copies of such
registration statement and of each amendment thereto (in each case excluding all
exhibits and documents incorporated by reference, which exhibits and documents
shall be furnished upon request), such number of copies of the prospectus
contained in such registration statement (including each preliminary prospectus)
and any other prospectus filed under Rule 424 under the Securities Act, as such
underwriter may reasonably request to facilitate the distribution of such Common
Units;
(D) use Reasonable Efforts to register or qualify all Common Units and other
securities covered by such registration statement under all applicable blue sky
and other securities laws, and to keep such registration or qualification in
effect for so long as such registration statement remains in effect, except
that Genesis MLP shall not for any such purpose be required to (a) qualify
generally to do business as a foreign corporation in any jurisdiction wherein it
would not but for the requirements of this clause (D) be obligated to be so
qualified, (b) subject itself to taxation in any such jurisdiction or (c)
consent to general service of process in any jurisdiction;
(E) use Reasonable Efforts to cause all Common Units covered by such
registration statement to be registered with or approved by such other
governmental agencies or authorities applicable to Genesis MLP as may be
reasonably necessary to enable Genesis MLP (or underwriter or agent, if any) to
consummate the offering and sale of such Common Units pursuant to such
registration statement;
(F) use Reasonable Efforts to prevent the issuance by the SEC or any other
governmental agency or court of a stop order, injunction or other order
suspending the effectiveness of such registration statement and, if such an
order is issued, use Reasonable Efforts to cause such order to be lifted as
promptly as practicable;
(G) take such other actions as are reasonably necessary to expedite or
facilitate the disposition of such Common Units; and
(H) participate, to the extent reasonably requested by the managing underwriter
for the offering, in customary efforts to sell the securities under the
offering.
(b) Private Sale. In the case of a private placement, Genesis MLP will use
Reasonable Efforts to effect such private placement as to permit the sale of any
Common Units included in such private placement, and pursuant thereto, Genesis
MLP will as expeditiously as possible and as soon as reasonably practicable
after receipt of a Notice of Demand and a Participation Notice (or the
expiration of the period for receipt thereof), prepare and distribute the
requisite private placement memorandum, provided that before distributing such
private placement memorandum or any amendment or supplement thereto, Genesis MLP
will furnish to the Participating Holders copies of drafts of all such documents
proposed to be distributed (excluding exhibits, which shall be made available
upon request by any Participating Holder), and any Participating Holder shall
have the opportunity to timely object to any information relating to such
Participating Holders contained therein and Genesis MLP will make the
corrections reasonably requested with respect to information relating to such
Participating Holder prior to distribution of any such private placement
memorandum, amendment or supplement. Each Participating Holder shall be
obligated to provide to Genesis MLP information concerning such Participating
Holder as Genesis MLP shall reasonably request for inclusion in any such private
placement memorandum.
(c) General Redemption Terms.
(i) Offering Expenses. Genesis MLP will pay all Offering Expenses incurred in
connection with one Demand Redemption effected pursuant to a Notice of Demand by
Basis and one Demand Redemption effected pursuant to a Notice of Demand by
Howell on behalf of the Howell Subsidiaries (including any incremental expenses
resulting from the inclusion of additional Common Units by reason of a
Participation Notice being given); Offering Expenses associated with subsequent
sales effected pursuant to Section 2.1 shall be borne by the Participating
Holders.
(ii) Effectiveness of Demand Redemption. A Demand Redemption will not be deemed
to have been effected under Section 2.1 unless a sale of Common Units has been
effected pursuant thereto.
(iii) Selection of Underwriter or Placement Agent. The Participating
Holders shall select one or more nationally recognized firms of investment
bankers to act as the book-running managing underwriter or underwriters in the
case of an underwritten public offering, and, in the case of a private
placement, as placement agents, in connection with a distribution or private
placement effected pursuant to Section 2.1, provided that such selection shall
be subject to the consent of Genesis MLP, which consent shall not be
unreasonably withheld.
Section 2.3. Underwriting Agreement.
If the sale of Common Units pursuant to this Agreement is conducted through an
underwritten public offering, Genesis MLP hereby agrees to enter into an
underwriting agreement with the underwriters for such offering selected pursuant
to Section 2.2 (c)(iii), such agreement (a) to be reasonably satisfactory in
substance and form to the Participating Holders and (b) to contain such
representations and warranties by Genesis MLP and by each of the Participating
Holders and such other terms as are generally prevailing in agreements of such
type.
Section 2.4. Indemnification.
(a) Indemnification by Genesis MLP. Genesis MLP agrees to indemnify and hold
harmless, to the full extent permitted by law, the Participating Holders, their
directors, officers, shareholders, employees, investment advisers, agents and
Affiliates, either direct or indirect (and each such Affiliate's directors,
officers, shareholders, employees, investment advisers and agents), and each
other Person, if any, who controls such Persons within the meaning of the
Securities Act (each such Person, an "Indemnified Party"), from and against any
losses, claims, damages, liabilities or expenses, joint or several (each a
"Loss" and collectively, "Losses"), to which such Indemnified Party may become
subject under the Securities Act, to the extent that such Losses (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
securities were registered under the Securities Act (including all documents
incorporated therein by reference), any preliminary prospectus, final prospectus
or summary prospectus contained therein, or any amendment or supplement thereto
(or in any private placement memorandum distributed by Genesis MLP to effect a
private placement of Common Units pursuant to this Agreement), or any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and Genesis
MLP will reimburse such Indemnified Party for any legal or any other expenses
reasonably incurred by it in connection with investigating or defending against
any such Loss, action or proceeding; provided that in any such case Genesis MLP
shall not be liable to any particular Indemnified Party to the extent that such
Loss (or action or proceeding in respect thereof) arises out of or is based upon
an untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, any such preliminary prospectus, final
prospectus, amendment or supplement (or in any private placement memorandum
distributed by Genesis MLP to effect a private placement of Common Units
pursuant to this Agreement), in reliance upon and in conformity with written
information furnished to Genesis MLP by such Indemnified Party specifically for
inclusion therein. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the transfer of such securities by such Indemnified Party.
Genesis MLP shall also indemnify each other Person who participates (including
as an underwriter) in the offering or sale of Common Units hereunder, its
officers and directors and each other Person, if any, who controls any such
participating Person within the meaning of the Securities Act to the same extent
as provided above with respect to Indemnified Parties.
(b) Indemnification by the Participating Holders. (i) Genesis MLP may require,
as a condition to filing any registration statement or distributing any private
placement memorandum for the issuance and sale of new Common Units pursuant to
this Agreement and as a condition to indemnifying the Participating Holders
pursuant to this Section 2.4, that Genesis MLP shall have received an
undertaking reasonably satisfactory to it from each Participating Holder in
which they agree to indemnify and hold harmless and reimburse (in the same
manner and to the same extent as set forth in paragraph (a) of this Section 2.4)
Genesis MLP, Genesis OLP, each director, officer, employee and agent of Genesis
MLP and Genesis OLP, and each other Person, if any, who controls Genesis MLP and
Genesis OLP within the meaning of the Securities Act or the Exchange Act, from
and against any Losses (or actions or proceedings, whether commenced or
threatened, in respect thereof) arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in any
registration statement under which such securities were registered under the
Securities Act (including all documents incorporated therein by reference), any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto (or in any private placement
memorandum distributed by Genesis MLP to effect a private placement of the
Common Units pursuant to this Agreement), or any omission or alleged omission
from such registration statement, preliminary prospectus, final prospectus or
summary prospectus, or any amendment or supplement thereto required to be stated
therein or necessary to make the statements therein not misleading, if (but only
if) such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to Genesis MLP by such Participating Holder specifically for inclusion
therein; provided, however, that no Participating Holder shall be obligated to
provide such indemnity to the extent that such Losses result, directly or
indirectly, from the failure of Genesis MLP to promptly amend or take action to
correct or supplement any such registration statement, prospectus, amendment or
supplement (or in any private placement memorandum distributed by Genesis MLP to
effect a private placement of Common Units pursuant to this Agreement), based on
corrected or supplemental information provided in writing by such Participating
Holder to Genesis MLP expressly for such purpose; and provided further, that the
obligation to provide indemnification pursuant to this Section 2.4(b) shall be
several, and not joint and several, among such indemnifying parties.
Notwithstanding anything in this Section 2.4(b) to the contrary, in no event
shall the liability of any Participating Holder under such indemnity be greater
in amount than the amount of the proceeds received by such Participating Holder
upon the redemption from such Participating Holder of Common OLP Units using
proceeds from the sale of Common Units to which the Losses relate. Such
indemnity shall remain in full force and effect, regardless of any investigation
made by or on behalf of Genesis MLP or any such director, officer, employee,
agent or participating or controlling Person and shall survive the transfer of
such securities by such Participating Holder.
(c) Notices of Claims, etc. Promptly after receipt by an indemnified party of
notice of the commencement of any action or proceeding involving a claim
referred to in paragraph (a) or (b) of this Section 2.4, such indemnified party
will, if a claim in respect thereof is to be made against an indemnifying party,
give prompt written notice to the latter of the commencement of such action,
provided that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under this
Section 2.4, except to the extent that the indemnifying party is actually and
materially prejudiced by such failure to give notice. In case any such action
is brought against an indemnified party, the indemnifying party shall be
entitled to participate in and to assume the defense thereof (such assumption to
constitute its acknowledgment of its agreement to indemnify the indemnified
party with respect to such matters), jointly with any other indemnifying party
similarly notified to the extent that it may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such indemnified party
for any legal fees or other expenses subsequently incurred by the latter in
connection with the defense thereof other than reasonable costs of
investigation; provided, however, that if, in such indemnified party's
reasonable judgment, a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, such indemnified party
shall be entitled to separate counsel at the expense of the indemnifying party;
and provided further, that, unless there exists a conflict of interest among
indemnified parties, all indemnified parties in respect of such claim shall be
entitled to only one counsel or firm of counsel for all such indemnified
parties. In the event an indemnifying party shall not be entitled, or elects
not, to assume the defense of a claim, such indemnifying party shall not be
obligated to pay the fees and expenses of more than one counsel or firm of
counsel for all parties indemnified by such indemnifying party in respect of
such claim, unless in the reasonable judgment of any such indemnified party a
conflict of interest exists between such indemnified party and any other of such
indemnified parties in respect of such claim, in which event the indemnifying
party shall be obligated to pay the fees and expenses of one additional counsel
or firm of counsel for such indemnified parties. No indemnifying party shall,
without the consent of the indemnified party, consent to entry of any judgment
or enter into any settlement that (i) does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all Losses in respect of such claim or litigation or (ii) would
impose injunctive relief on such indemnified party. No indemnifying party shall
be subject to any Losses for any settlement made without its consent, which
consent shall not be unreasonably withheld.
(d) Other Indemnification. The provisions of this Section 2.4 shall be in
addition to any other rights to indemnification or contribution which an
indemnified party may have pursuant to law, equity, contract or otherwise.
(e) Indemnification Payments. The indemnification required by this Section
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, promptly after receipt by the Indemnifying Party
of invoices or other evidence of Losses incurred by the Indemnified Party.
(f) Contribution. If for any reason the foregoing indemnity and reimbursement
is unavailable or is insufficient to hold harmless an indemnified party under
paragraph (a) or (b) of this Section 2.4, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of any Loss (or actions or proceedings, whether commenced or threatened, in
respect thereof), including, without limitation, any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such Loss, action or proceeding, in such proportion as is appropriate to reflect
the relative fault of the indemnifying party on the one hand and the indemnified
party on the other. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the indemnifying party or the indemnified party and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. Notwithstanding anything
in this Section 2.4(f) to the contrary, no indemnifying party (other than
Genesis MLP) shall be required pursuant to this Section 2.4(f) to contribute any
amount in excess of the amount by which the net proceeds received by such
indemnifying party from the sale of Common Units in the offering to which the
Losses of the indemnified parties relate exceeds the amount of any damages which
such indemnifying party has otherwise been required to pay by reason of such
untrue statement or omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
Section 2.5. Term.
This Agreement shall be effective on the date hereof and shall continue in full
force and effect until all Subordinated OLP Units have converted into Common OLP
Units and all such Common OLP Units have been purchased or redeemed.
Section 2.6. Holdback Agreement.
If any sale hereunder shall be in connection with an underwritten public
offering, each Holder agrees not to sell or request any redemption of Common OLP
Units by Genesis OLP and thereby cause Genesis MLP to effect any public sale or
distribution, including any sale pursuant to Rule 144 under the Securities Act,
of Common Units other than as part of such underwritten public offering within
seven (7) days before or 90 days (or such lesser period as the managing
underwriter may permit) after the effective date of such registration.
Section 2.7. Amendments and Waivers.
This Agreement may be amended, supplemented or modified at any time, provided
that each of (i) Basis and Howell, on behalf of the Howell Subsidiaries, and
(ii) Genesis MLP has provided its written consent to such amendment, supplement
or modification. Any term or condition of this Agreement may be waived at any
time by the party that is entitled to the benefit thereof, but no such waiver
shall be effective unless set forth in a written instrument duly executed by or
on behalf of the party waiving such term or condition. No waiver by any party
of any term or condition of this Agreement, in any one or more instances, shall
be deemed to be or construed as a waiver of the same term or condition of this
Agreement on any future occasion.
Section 2.8. Entire Agreement.
This Agreement supersedes all prior discussions and agreements between the
parties with respect to the subject matter hereof and contains the sole and
entire agreement between the parties hereto with respect to the subject matter
hereof.
Section 2.9. No Third-Party Beneficiary.
The terms and provisions of this Agreement are intended solely for the benefit
of each party and their respective Successors and it is not the intention of the
parties to confer third-party beneficiary rights upon any other Person.
Section 2.10. Invalid Provisions.
If any provision of this Agreement is held to be illegal, invalid or
unenforceable under any present or future law, (i) such provision will be fully
severable, (ii) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(iii) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom and (iv) in lieu of such illegal, invalid
or unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
Section 2.11. Notices.
All notices, requests and other communications hereunder must be in writing and
will be deemed to have been duly given only (i) if delivered personally, (ii) by
facsimile transmission, (iii) by Federal Express or other nationally recognized
courier service or (iv) mailed (first class postage prepaid) to the parties at
the following addresses or facsimile numbers:
If to Genesis MLP to:
Genesis Energy, L.P.
500 Dallas, Suite 3200
Houston, Texas 77002
Attention: President
with a copy to:
General Counsel
Fax No.: (713) 646-5278
If to Basis, to:
Basis Petroleum, Inc.
500 Dallas, Suite 3200
Houston, Texas 77002
Attention: President
with a copy to:
General Counsel
Fax No.: (713) 646-5278
If to Howell or any of the Howell Subsidiaries, to:
Howell Corporation
1111 Fannin, Suite
Houston, Texas 77002
Attention: Robert T. Moffett
Fax No.: (713) 658-4007
Section 2.12. Assignment.
Basis and the Howell Subsidiaries may assign (by written instruments in form
reasonably acceptable to the parties) any of their rights hereunder (in whole or
in part) to one or more transferees of Subordinated OLP Units or Common OLP
Units ("Assignee"). Any such assignment may provide that each Assignee shall be
entitled (subject to priorities in registration rights) to participate in a sale
of Common Units pursuant to this Agreement and, with respect to any such
participation, to have all of the rights of its assignor provided in this
Agreement, provided that the assignment of rights by Basis or any Howell
Subsidiary shall not enlarge the rights of Basis or any Howell Subsidiary
hereunder, and any such assignment shall establish the procedures for the
exercise of the rights originally granted to Basis or such Howell Subsidiary
hereunder, as the case may be. This Agreement shall be binding upon and inure
to the benefit of and be enforceable by the parties hereto and their successors
and assigns.
In case Basis transfers less than all of its Subordinated OLP Units and Common
OLP Units (collectively, the "OLP Units") to one or more transferees, Basis
shall retain the right to act on behalf of such transferees for purposes of this
Agreement. In case Basis transfers all of its OLP Units to one or more
transferees, Basis shall appoint an agent who shall act on behalf of such
transferees for purposes of this Agreement.
In case any Howell Subsidiary transfers its OLP Units, Howell shall act on
behalf of the transferee(s) for purposes of this Agreement. In case all of the
Howell Subsidiaries transfer their OLP Units to one or more transferees, Howell
shall appoint an agent who shall act on behalf of such transferee(s) for
purposes of this Agreement.
Section 2.13. Headings; References; Interpretation.
All Article or Section headings in this Agreement are for convenience only and
shall not be deemed to control or affect the meaning or construction of the
provisions hereof. The definitions in this Agreement shall apply equally to both
the singular and plural forms of the terms defined. All personal pronouns used
in this Agreement, whether used in the masculine, feminine or neuter gender,
shall include all other genders, and the singular shall include the plural and
vice versa. The use herein of the word "including" following any general
statement, term or matter shall not be construed to limit such statement, term
or matter to the specific items or matters set forth immediately following such
word or to similar items or matters, whether or not nonlimiting language (such
as "without limitation," "but not limited to," or words of similar import) is
used with reference thereto, but rather shall be deemed to refer to all other
items or matters that could reasonably fall within the broadest possible scope
of such general statement, term or matter.
Section 2.14. GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF DELAWARE, TO THE EXTENT PERMITTED BY LAW, WITHOUT REFERENCE TO THE
CONFLICTS OF LAW PRINCIPLES THEREOF.
Section 2.15. Attorneys' Fees.
In any action or proceeding brought to enforce any provision of this Agreement
or where any provision hereof is validly asserted as a defense, the successful
party shall, to the extent permitted by applicable law, be entitled to recover
reasonable attorneys' fees in addition to any other available remedy.
Section 2.16. No Inconsistent Agreements.
Genesis MLP will not hereafter enter into, modify, amend or waive any agreement
with respect to its securities if such agreement, modification or waiver would
conflict with the rights granted pursuant to this Agreement to Basis, Howell and
the Howell Subsidiaries.
Section 2.17. Pledge Agreement.
The rights of Basis and Howell or of their Assignees pursuant to this Agreement
shall be subject to their obligations under and to the terms of the Pledge
Agreement.
Section 2.18. Specific Performance.
The parties agree that, to the extent permitted by law, (i) the obligations
imposed on them in this Agreement are special, unique and of an extraordinary
character, and that in the event of a breach by any such party damages would not
be an adequate remedy and (ii) each of the other parties shall be entitled to
apply for specific performance and injunctive and other equitable relief in
addition to any other remedy to which it may be entitled at law or in equity.
Section 2.19. Counterparts.
This Agreement may be executed simultaneously in any number of counterparts,
each of which shall be deemed an original, but all of which shall together
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and
delivered by their respective officers thereunto duly authorized as of the date
first above written.
GENESIS ENERGY, L.P.
By: GENESIS ENERGY, L.L.C., its general partner
By: /s/ John P. vonBerg
- -----------------------------------------------
John P. vonBerg
President and Chief Executive Officer
GENESIS CRUDE OIL, L.P.
By: GENESIS ENERGY, L.L.C., its general partner
By: /s/ John P. vonBerg
- -----------------------------------------------
John P. vonBerg
President and Chief Executive Officer
BASIS PETROLEUM, INC.
By: /s/ Jeffrey R. Serra
- -----------------------------------------------
Jeffrey R. Serra
Chairman of the Board, President and
Chief Executive Officer
HOWELL CORPORATION
By: /s/ Paul N. Howell
- -----------------------------------------------
Paul N. Howell
President and Chief Executive Officer
HOWELL CRUDE OIL COMPANY
By: /s/ Mark J. Gorman
- -----------------------------------------------
Mark J. Gorman
President
HOWELL PIPELINE TEXAS, INC.
By: /s/ Allen R. Stanley
- -----------------------------------------------
Allen R. Stanley
President
EXHIBIT 10.6
CORPORATE SERVICES AGREEMENT
This Corporate Services Agreement, dated as of December 3, 1996 (this
"Agreement"), is entered into on, and effective as of, the Closing Date by and
among GENESIS ENERGY, L.P., a Delaware limited partnership ("Genesis MLP"),
GENESIS CRUDE OIL, L.P., a Delaware limited partnership ("Genesis OLP") and
BASIS PETROLEUM, INC., a Texas corporation ("Basis").
R E C I T A L S:
WHEREAS, the parties desire by their execution of this Agreement to evidence
their understanding concerning the providing of certain services by Basis to
Genesis OLP and Genesis MLP.
WHEREAS, capitalized terms used herein but not defined shall have the meanings
provided therefor in the Amended and Restated Agreement of Limited Partnership
of GENESIS CRUDE OIL, L.P., dated as of the Closing Date, as such agreement is
in effect on the Closing Date (the "OLP Partnership Agreement"), to which
reference is hereby made for all purposes of this Agreement. Other definitions
are set forth in Section 8.14.
THEREFORE, in consideration of the premises and the covenants, conditions, and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I
SERVICES
SECTION 1.1 Services Generally.
During the Applicable Period, in exchange for the reimbursement described
herein, Basis agrees to use its reasonable best efforts to provide or cause one
or more of its Affiliates to provide to Genesis MLP and Genesis OLP
(collectively, the "Partnership Entities"), certain corporate and staff
services, including those services listed on Exhibit A hereto, and office space
(collectively, the "Services") to the extent such Services may be reasonably
requested by Genesis Energy L.L.C., a Delaware limited liability company and the
operating general partner of Genesis OLP and the general partner of Genesis MLP
(the "General Partner"), from time to time during the Applicable Period;
provided, at Basis' election, it may engage third-party contractors to provide
any Service (an "Outsourced Service") called for by this Agreement; provided,
however, any such Outsourced Service provided solely for the Partnership
Entities shall require approval of such contractor by the Partnership Entities
and approval of the terms and conditions of any such agreement governing the
Outsourced Service. The Services shall include, without limitation, and in
addition to those Services listed on Exhibit A hereto: (i) computer and
telecommunications-related services, (ii) credit, treasury and tax services,
(iii) accounting and human resource services, (iv) corporate office services and
(v) any additional services not specifically named in this Agreement or listed
on Exhibit A hereto that shall be mutually agreed upon by Basis and Genesis OLP
or Genesis MLP, as the case may be. It is expressly agreed that Basis shall not
be obligated to hire any additional employees or retain or acquire any outside
or additional assistance, equipment, computer programs or data to enable it to
provide any of the Services. In the event that the employment with Basis of an
employee providing Services pursuant to this Agreement ("Terminated Employee")
terminates voluntarily or involuntarily, Basis shall use its reasonable efforts
to continue to provide the Services provided by the Terminated Employee, but
Basis shall not be required to do so if providing such Services would
unreasonably disrupt the other operations of Basis or its Affiliates.
ARTICLE II
CANCELLATION OR REDUCTION OF SERVICES
SECTION 2.1 Notice Requirements.
Except as provided in Sections 2.2, 5.1 or 8.16 or otherwise mutually agreed
between Basis and the General Partner on behalf of the Partnership Entities,
either Basis or the General Partner on behalf of the Partnership Entities may
terminate or reduce the level of any Service or Services, other than office
space or Outsourced Services, on ninety (90) days' prior written notice to the
other party; provided, however, the office space may be terminated or reduced in
amount on one hundred eighty (180) days' prior written notice to the other
party. Genesis MLP or Genesis OLP may terminate any Outsourced Service upon
proper notice as provided in and in compliance with the agreement for such
Outsourced Service.
SECTION 2.2 Consequences of Cancellation.
Should Genesis MLP or Genesis OLP terminate or be ineligible for any Service
being provided hereunder or cease to be eligible to purchase certain Services
from Basis' third party providers (such as the inability of Genesis MLP or
Genesis OLP to use computer licenses or otherwise not qualify under certain
agreements to purchase equipment or Services as a result of Genesis MLP or
Genesis OLP not meeting the definition of "Affiliate" or in the eligibility of
Genesis MLP, Genesis OLP or the General Partner to participate in Basis'
programs such as any applicable employee related plans), Basis shall have no
liability to Genesis MLP or Genesis OLP for their failure or inability to
replace such terminated Service or Services, as the case may be. Further, if
Genesis MLP or Genesis OLP terminates any Service, Genesis MLP and Genesis OLP
agree that Basis shall not be required to provide the terminated Service to the
General Partner, Genesis MLP or Genesis OLP in the future. No agreement entered
into by Basis or any of its Affiliates after the Closing Date shall give to any
third party a preferential right to provide the General Partner or any of the
Partnership Entities with Services.
ARTICLE III
NATURE AND QUALITY OF SERVICES
SECTION 3.1 Nature and Quality of Services Generally.
The parties agree that the Services described in Exhibit A shall be performed
with reasonable care. Basis alone may determine whether or not to Outsource a
Service. To the extent Basis Outsources a Service, then Basis shall provide and
each of the Partnership Entities agrees that such Services will be of the nature
and quality provided in the agreement with the third party provider. This
Agreement is subject to all of the provisions of Basis' lease for office space
(the "Lease"). The Partnership Entities acknowledge that they have received a
copy of the Lease and are familiar with the terms thereof. The Partnership
Entities shall observe all of the rules posted by the lessor pursuant to the
Lease and will comply with all restrictions. The Partnership Entities shall
preserve the premises and personal property covered thereby and keep them free
from damage, waste and nuisance and shall deliver up same in good repair and
condition, reasonable wear and tear and damage by fire or other casualty
excepted, upon expiration of this Agreement.
ARTICLE IV
PAYMENT
SECTION 4.1 Payment Generally.
Each of the Partnership Entities, in consideration for the performance of the
Services by or on behalf of Basis agrees to reimburse Basis for (i) all direct
and indirect expenses actually incurred by Basis relating to the Services
provided by Basis hereunder to the General Partner or the Partnership Entities,
including all Administrative and General Expenditures ("Direct Charges"),
(ii) the actual cost of any item purchased for the General Partner or the
Partnership Entities by Basis ("Operating Charges"), (iii) all expenses actually
incurred by Basis for Outsourced Services or other contract services or
utilities provided by any third party providers for the General Partner or the
Partnership Entities under an agreement between Basis or any of its Affiliates
and such third party ("Outsourced Charges"), and (iv) all expenses for office
space, including any leasehold improvements, as allocated per space and per
individual by reasonable determination of Basis ("Office Charges").
ARTICLE V
INVOICING
SECTION 5.1 Invoicing for Direct Charges, Operating Charges, Outsourced
Charges and Office Charges.
Basis shall invoice, or cause its Affiliates to invoice, the General Partner, on
behalf of the Partnership Entities, by the 15th working day of each month for
all Direct Charges, Operating Charges, Outsourced Charges and Office Charges
attributable to each of the Partnership Entities with respect to the preceding
month and any adjustments that may be necessary to correct prior invoices. All
invoices shall reflect in reasonable detail a description of the Services
performed during the preceding month, and shall be due and payable on the last
day of the month in which the invoice is received. In the event of default in
payment by either of the Partnership Entities, upon thirty (30) days' written
notice to the General Partner, sent by certified mail to the address specified
below, Basis may terminate this Agreement as to those Services which relate to
the unpaid portion of the invoice if it has not received payment within such
thirty (30) days. In the event of a dispute as to the propriety of invoiced
amounts (a "Dispute"), the Partnership Entity shall pay all undisputed amounts
on each invoice, but shall be entitled to withhold payment of any amount in
dispute and shall notify Basis within ten (10) business days from receipt of the
disputed invoice of the disputed amount and the reasons each such charge is
disputed by the Partnership Entity. Basis shall provide the General Partner on
behalf of the Partnership Entity with records relating to the disputed amount so
as to enable the parties to resolve the Dispute. If the Dispute cannot be
resolved within fifteen (15) days of Basis receiving such notification, either
party may initiate arbitration proceedings in the manner provided for by Section
5.2 herein. So long as the parties are attempting in good faith to resolve the
Dispute, including the period during which the Dispute is in arbitration, Basis
shall not be entitled to terminate the Services related to and by reason of the
disputed charge.
SECTION 5.2 Arbitration of Disputed Invoiced Amounts.
Resolution of any and all Disputes arising under Section 5.1 herein shall be
exclusively governed by and settled in accordance with the provisions of this
Section 5.2; provided, however, that nothing contained herein shall preclude any
party from seeking or obtaining (i) injunctive relief or (ii) equitable or other
judicial relief, in each case to preserve the status quo, pending resolution of
Disputes hereunder. Either Basis, Genesis MLP or Genesis OLP may commence
proceedings hereunder by delivering a written notice to the other party
expressly requesting arbitration hereunder after a Dispute has remained
unresolved for the period of time specified under Section 5.1 herein. The
parties hereby agree to submit all Disputes to arbitration under the terms
hereof, which arbitration shall be final, conclusive and binding upon the
parties, their successors and assigns. The arbitration shall be conducted in
Houston, Texas by a sole arbitrator selected by mutual agreement of the parties
not later than ten (10) days after delivery of such notice or, failing such
agreement, appointed pursuant to the commercial arbitration rules of the
American Arbitration Association, as amended from time to time (the "AAA
Rules"). The arbitrators shall be generally knowledgeable about the crude oil
gathering, marketing and pipeline operating industry and the nature of the
issues to be arbitrated and shall be qualified by education, experience and
training to render a decision upon the issues in arbitration. If the arbitrator
so selected becomes unable to serve, his or her successors shall be similarly
selected or appointed. The arbitration shall be conducted in accordance with
the AAA Rules to the extent such AAA Rules do not conflict with the terms of
this Agreement. Notwithstanding the foregoing: (i) each party shall have the
right to audit the books and records of the other party that are reasonably
related to the Dispute; (ii) each party shall provide to the other party
involved in the applicable Dispute, reasonably in advance of any hearing, copies
of all documents which such party intends to present in such hearing; and (iii)
each party shall be allowed to conduct reasonable discovery through written
requests for information, document requests, requests for stipulation of fact
and depositions, the nature and extent of which discovery shall be determined by
the arbitrator, taking into account the needs of the parties and the
desirability of making discovery expeditious and cost effective. All hearings
shall be conducted on an expedited schedule, and all proceedings shall be
confidential. Any party may, at its expense, make a stenographic record
thereof. The arbitrator shall complete all hearings not later than sixty days
after his or her selection or appointment and shall make a final award not later
than thirty days thereafter. All claims presented for arbitration shall be
particularly identified, and the parties to the arbitration shall each prepare a
written statement of their position and their proposed course of action. These
written statements of positions and proposed courses of action shall be
submitted to the arbitrator. In making his or her decision, the arbitrator must
accept in its entirety the position of one party or the other and make an
arbitration award based on that party's proposed course of action. The
arbitrator shall not be empowered in reaching his or her decision to equitably
adjust and declare a result utilizing the positions espoused by both parties, or
to make decisions beyond the scope of the written statements. All costs and
expenses of arbitration, including the fees and expenses of the arbitrator or of
any experts, shall be borne equally between the prevailing and non-prevailing
party, except that each party shall pay all of its respective attorneys' fees,
consultants' fees and other costs of participating in the Arbitration
proceeding. Notwithstanding the foregoing, in no event may the arbitrator award
multiple, punitive or exemplary damages. Any arbitration award shall be binding
and enforceable against each party involved in the particular Dispute and
judgment may be entered thereon in any court of competent jurisdiction. Payment
of any such award shall be made within five (5) business days of the
arbitrator's decision.
SECTION 5.3 Finality of Undisputed Statements.
Any statement or payment not disputed in writing by either party within six
months of the date of such statement shall be considered final and no longer
subject to adjustment. Neither Genesis MLP nor Genesis OLP shall be obligated
to pay for any Direct Charges, Operating Charges, Outsourced Charges or Office
Charges for which statements for payment are submitted more than one year after
the termination of this Agreement.
ARTICLE VI
INPUT FROM THE PARTNERSHIP ENTITIES
SECTION 6.1 Input Necessary for Basis to Perform Services.
Any input or direction necessary for Basis or any third party provider to
perform any Services shall be provided by the Partnership Entities as reasonably
requested in a manner consistent with the practices utilized by Basis during the
one year period prior to the effective date hereof under this Agreement, which
manner shall not be altered except by mutual written agreement of the parties.
Should the Partnership Entities' failure to supply such input or direction
render performance of any Services by or on behalf of Basis unreasonably
difficult, Basis, upon reasonable notice, may provide a lesser quality of
Services or refuse to perform such Services.
ARTICLE VII
BENEFICIARIES
SECTION 7.1 Partnership Entities are Sole Beneficiaries.
Genesis MLP and Genesis OLP acknowledge that the Services shall be provided only
with respect to the business of Genesis MLP and Genesis OLP as described in the
Registration Statement. Neither Genesis MLP nor Genesis OLP shall request
performance of any Services for the benefit of any entity other than the General
Partner, Genesis MLP and Genesis OLP. Each of Genesis MLP and Genesis OLP
represents and agrees that it will direct that the Services be conducted only in
accordance with all applicable federal, state and local laws and regulations and
communications and common carrier tariffs, and in accordance with the reasonable
conditions, rules, regulations and specifications which may be set forth in any
manuals, materials, documents or instructions furnished from time to time by
Basis to Genesis MLP and Genesis OLP. Basis reserves the right to take all
actions, including termination of any particular Services, that Basis reasonably
believes to be necessary to assure compliance with applicable laws, regulations
and tariffs. Basis will notify the General Partner of the reasons for any such
termination of Services.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Limited Warranty, Limitation of Liability.
BASIS REPRESENTS THAT IT WILL PROVIDE OR CAUSE THE SERVICES TO BE PROVIDED TO
THE GENERAL PARTNER AND THE PARTNERSHIP ENTITIES WITH REASONABLE DILIGENCE.
EXCEPT AS SET FORTH IN THE IMMEDIATELY PRECEDING SENTENCE, ALL PRODUCTS OBTAINED
FOR THE GENERAL PARTNER OR THE PARTNERSHIP ENTITIES ARE AS IS, WHERE IS, WITH
ALL FAULTS. BASIS AND ITS AFFILIATES MAKE NO (AND HEREBY DISCLAIM AND NEGATE
ANY AND ALL) REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THE
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT
TO THE SERVICES RENDERED OR PRODUCTS OBTAINED FOR THE GENERAL PARTNER OR THE
PARTNERSHIP ENTITIES. FURTHERMORE, NONE OF THE GENERAL PARTNER OR THE
PARTNERSHIP ENTITIES MAY RELY UPON ANY REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, INCLUDING THE WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE MADE TO BASIS OR ITS AFFILIATES BY ANY PARTY (INCLUDING, AN AFFILIATE OF
BASIS) PERFORMING SERVICES ON BEHALF ON BASIS OR ITS AFFILIATES HEREUNDER,
UNLESS SUCH PARTY MAKES AN EXPRESS WARRANTY TO THE GENERAL PARTNER, GENESIS MLP
OR GENESIS OLP. HOWEVER, IN THE CASE OF OUTSOURCED SERVICES PROVIDED SOLELY FOR
THE PARTNERSHIP ENTITIES, IF THE THIRD PARTY PROVIDER OF SUCH SERVICES MAKES AN
EXPRESS WARRANTY TO BASIS, THE GENERAL PARTNER AND THE PARTNERSHIP ENTITIES ARE
ALSO ENTITLED TO CAUSE BASIS TO RELY ON SUCH WARRANTY.
IT IS EXPRESSLY UNDERSTOOD BY GENESIS MLP AND GENESIS OLP AND GENESIS MLP AND
GENESIS OLP AGREE THAT BASIS AND ITS AFFILIATES SHALL HAVE NO LIABILITY FOR THE
FAILURE OF THIRD PARTY PROVIDERS TO PERFORM ANY SERVICES HEREUNDER AND FURTHER
THAT BASIS AND ITS AFFILIATES SHALL HAVE NO LIABILITY WHATSOEVER FOR THE
SERVICES PROVIDED BY THEM UNLESS SUCH SERVICES ARE PROVIDED IN A MANNER WHICH
WOULD EVIDENCE GROSS NEGLIGENCE ON THE PART OF BASIS OR ITS AFFILIATES OR
WILLFUL OR INTENTIONAL MISCONDUCT. GENESIS MLP AND GENESIS OLP AGREE THAT THE
REMUNERATION PAID TO BASIS OR AN AFFILIATE HEREUNDER FOR THE SERVICES TO BE
PERFORMED REFLECT THIS LIMITATION OF LIABILITY AND DISCLAIMER OF WARRANTIES. IN
NO EVENT SHALL BASIS OR ITS AFFILIATES BE LIABLE TO THE GENERAL PARTNER, THE
PARTNERSHIP ENTITIES OR ANY OTHER PERSON FOR ANY INDIRECT, SPECIAL OR
CONSEQUENTIAL DAMAGES RESULTING FROM ANY ERROR IN THE PERFORMANCE OF SERVICES OR
FROM THE BREACH OF THIS AGREEMENT, REGARDLESS OF THE FAULT OF BASIS, ANY BASIS
AFFILIATE OR ANY THIRD PARTY PROVIDER OR WHETHER BASIS, ANY BASIS AFFILIATE OR
THE THIRD PARTY PROVIDER ARE WHOLLY, CONCURRENTLY, PARTIALLY, OR SOLELY
NEGLIGENT. TO THE EXTENT ANY THIRD PARTY PROVIDER HAS LIMITED ITS LIABILITY TO
BASIS OR ITS AFFILIATE FOR SERVICES UNDER AN OUTSOURCING OR OTHER AGREEMENT,
GENESIS MLP AND GENESIS OLP AGREE TO BE BOUND BY SUCH LIMITATION OF LIABILITY
FOR ANY PRODUCT OR SERVICE PROVIDED TO THE GENERAL PARTNER OR ANY PARTNERSHIP
ENTITY BY SUCH THIRD PARTY PROVIDER UNDER BASIS'S OR SUCH AFFILIATE'S AGREEMENT.
Section 8.2 Indemnity.
IT IS EXPRESSLY UNDERSTOOD BY EACH OF GENESIS MLP AND GENESIS OLP AND GENESIS
MLP AND GENESIS OLP AGREE TO INDEMNIFY AND HOLD HARMLESS BASIS AND ITS
AFFILIATES FROM AND AGAINST ALL LOSSES, CLAIMS, DAMAGES, LIABILITIES, JOINT OR
SEVERAL, EXPENSES (INCLUDING LEGAL FEES AND EXPENSES), JUDGMENTS, FINES,
PENALTIES, INTEREST SETTLEMENTS AND OTHER AMOUNTS ARISING FROM ANY AND ALL
CLAIMS, DEMANDS, ACTIONS, SUITS OR PROCEEDINGS, WHETHER CIVIL, CRIMINAL,
ADMINISTRATIVE OR INVESTIGATIVE, IN WHICH BASIS OR ITS AFFILIATES MAY BE
INVOLVED OR IS BELIEVED TO BE INVOLVED, AS A PARTY OR OTHERWISE, BY REASON OF
ITS STATUS OR SERVICES RENDERED OR ARISING FROM THE PROVISION OF SERVICES UNDER
THIS AGREEMENT, UNLESS DUE TO GROSS NEGLIGENCE OR WILLFUL OR INTENTIONAL
MISCONDUCT ON THE PART OF BASIS OR ITS AFFILIATES.
Section 8.3 Force Majeure.
BASIS SHALL HAVE NO OBLIGATION TO PERFORM OR CAUSE THE SERVICES TO BE PERFORMED
IF ITS FAILURE TO DO SO IS CAUSED BY OR RESULTS FROM ANY ACT OF GOD,
GOVERNMENTAL ACTION, NATURAL DISASTER, STRIKE, FAILURE OF ESSENTIAL EQUIPMENT OR
ANY OTHER CAUSE OR CIRCUMSTANCE BEYOND THE CONTROL OF BASIS, OR, IF APPLICABLE,
ITS AFFILIATES OR THIRD PARTY PROVIDERS OF SERVICES TO BASIS ("Event of Force
Majeure"). Basis will notify the General Partner of any Event of Force Majeure.
Basis agrees that upon the restoration of Services following any Event of Force
Majeure, Basis will allow Genesis MLP and Genesis OLP to have equal priority
with Basis and its Affiliates, in accordance with prior practice, with respect
to access to the restored Service.
SECTION 8.4 Waiver of Trial, by Jury.
EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION 8.4.
SECTION 8.5 Severability.
In the event any portion of this Agreement shall be found by a court of
competent jurisdiction to be unenforceable, that portion of this Agreement will
be null and void and the remainder of this Agreement will be binding on the
parties as if the unenforceable provisions had never been contained herein.
SECTION 8.6 Assignment.
Except for the ability of Basis to cause one or more of the Services to be
performed by another Basis Affiliate or third party provider, no party shall
have the right to assign its rights or obligations under this Agreement without
the consent of the other party.
SECTION 8.7 Entire Agreement, Supersedure.
This Agreement constitutes the entire agreement of the parties relating to the
performance of the Services, and all prior or contemporaneous written or oral
agreements are merged herein.
SECTION 8.8 Choice of Law.
This Agreement shall be subject to and governed by the laws of the State of
Texas, to the extent permitted by law, excluding any conflicts-of-law rule or
principle that might refer the construction or interpretation of this Agreement
to the laws of another state.
SECTION 8.9 Amendment or Modification.
This Agreement may be amended or modified from time to time only by a written
amendment signed by Genesis MLP, Genesis OLP and Basis.
SECTION 8.10 Conflicts.
In the event of any conflict between the terms of this Agreement and the
Conveyance Agreement or between the terms of this Agreement and the Transition
Services Agreement, the terms of the Conveyance Agreement or this Agreement, as
the case may be, shall control.
SECTION 8.11 Notices.
Any notice, request, instruction, correspondence or other document to be given
hereunder by any party to any other party (collectively, "Notice") shall be in
writing and delivered personally, by mail, postage prepaid, or by telegram or
telecopier, as follows:
If to Basis:
Basis Petroleum, Inc.
500 Dallas, Suite 3200
Houston, Texas 77002
Attention: President
with a copy to General Counsel
Fax No.: (713) 646-5278
If to Genesis MLP or Genesis OLP:
Genesis Energy, L.P.
Genesis Crude Oil, L.P.
c/o Genesis Energy, L.L.C.
500 Dallas, Suite 3200
Houston, Texas 77002
Attention: President
with a copy to General Counsel
Fax No.: (713) 646-5278
Notice given by personal delivery or mail shall be effective upon actual
receipt. Notice given by telegram or telecopier shall be effective upon actual
receipt if received during the recipient's normal business hours, or at the
beginning of the recipient's next business day after receipt if not received
during the recipient's normal business hours. Any party may change the address
to which Notice is to be given to such Party by giving Notice as provided above
of such change of address.
SECTION 8.12 Further Assurances.
In connection with this Agreement and all transactions contemplated by this
Agreement each signatory party hereto agrees to execute and deliver such
additional documents and instruments as may be required for Basis to provide the
Services hereunder and to perform such other additional acts as may be necessary
or appropriate to effectuate, carry out and perform all of the terms, provisions
and conditions of this Agreement.
SECTION 8.13 Acknowledgment Regarding Certain Provisions.
EACH OF THE PARTIES HERETO SPECIFICALLY ACKNOWLEDGES AND AGREES (a) THAT IT HAS
A DUTY TO READ THIS AGREEMENT AND THAT IT IS CHARGED WITH NOTICE AND KNOWLEDGE
OF THE TERMS HEREOF, (b) THAT IT HAS IN FACT READ THIS AGREEMENT AND IS FULLY
INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF THE TERMS, CONDITIONS AND EFFECTS
OF THIS AGREEMENT, AND (c) THAT IT RECOGNIZES THAT CERTAIN OF THE TERMS OF THIS
AGREEMENT PROVIDE FOR THE ASSUMPTION BY ONE PARTY OF, AND/OR RELEASE OF THE
OTHER PARTY FROM, CERTAIN LIABILITIES ATTRIBUTABLE TO THE MATTERS COVERED BY
THIS AGREEMENT THAT SUCH PARTY WOULD OTHERWISE BE RESPONSIBLE FOR UNDER THE LAW.
EACH PARTY HERETO FURTHER AGREES AND COVENANTS THAT IT WILL NOT CONTEST THE
VALIDITY OR ENFORCEABILITY OF ANY SUCH PROVISIONS OF THIS AGREEMENT ON THE BASIS
THAT THE PARTY HAD NO NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT SUCH
PROVISIONS ARE NOT "CONSPICUOUS".
Section 8.14 Definitions.
The following terms shall have the indicated meanings for the purposes of this
Agreement:
"Administrative and General Expenditures" shall mean all administrative and
general expenditures, including (i) salaries, bonus, incentive compensation and
related benefits, payroll taxes and expenses of personnel who render Services
related to the business or administration of Genesis MLP or Genesis OLP, (ii)
charges related to the computer and telecommunications services, (iii) the
administrative fee charged by Basis Affiliates to manage, administer and bill
for third party contracts related to the provision of Services hereunder, but
administrative and general expenditures shall not include charges related to
Basis' senior executive management. The Administrative and General Expenditures
shall be allocated to the General Partner in a fair and reasonable manner
determined by Basis in its sole discretion.
"Affiliate" shall mean, 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; provided,
however, that for the purposes of this Agreement neither the General Partner,
Genesis MLP, Genesis OLP, nor any Person controlled by Genesis MLP, Genesis OLP
or the General Partner shall be deemed to be an Affiliate of Basis. Salomon Inc
shall be deemed an Affiliate of Basis for purposes of this Agreement. 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.
"Applicable Period" shall mean the period from the Closing Date to the date that
neither the General Partner nor an Affiliate of Basis is the general partner of
Genesis OLP.
"Outsource" shall mean to cause a Service to be provided by a third party
provider.
"Transition Services Agreement" shall mean that certain Transition Services
Agreement, dated as of the date hereof, among Genesis LLC, Basis and Howell
Corporation, a Delaware corporation, Howell Crude Oil Company, a Delaware
corporation, and Howell Transportation Services, Inc., a Delaware corporation.
SECTION 8.15 No Third Party Beneficiary.
The provisions of this Agreement are enforceable solely by the parties to this
Agreement, and no Limited Partner, Assignee or other Person shall have the
right, separate and apart from the Partnership Entities, to enforce any
provision of this Agreement or to compel any party to this Agreement to comply
with the terms of this Agreement; provided, however, that Basis' Affiliates and
vendors are third party beneficiaries of those provisions of this Agreement that
apply to Basis' Affiliates and vendors and may enforce such provisions directly
against Genesis MLP and Genesis OLP.
SECTION 8.16 Termination.
This Agreement shall terminate upon the expiration of the Applicable Period
except for liabilities or obligations accruing prior to such termination. In
addition to the terms provided in Sections 2.1, 2.2 or 5.1 or as mutually or
otherwise agreed between Basis and the Partnership Entities, either the General
Partner on behalf of Genesis MLP and Genesis OLP or Basis shall have the right
to terminate this Agreement by giving written notice, signed by the terminating
party, to the other party and this Agreement shall terminate one hundred eighty
(180) days from the date on which notice is delivered.
SECTION 8.17 Headings; References; Interpretation.
All Article or Section headings in this Agreement are for convenience only and
shall not be deemed to control or affect the meaning or construction of the
provisions hereof. The definitions in this Agreement shall apply equally to both
the singular and plural forms of the terms defined. All personal pronouns used
in this Agreement, whether used in the masculine, feminine or neuter gender,
shall include all other genders, and the singular shall include the plural and
vice versa. The use herein of the word "including" following any general
statement, term or matter shall not be construed to limit such statement, term
or matter to the specific items or matters set forth immediately following such
word or to similar items or matters, whether or not nonlimiting language (such
as "without limitation," "but not limited to," or words of similar import) is
used with reference thereto, but rather shall be deemed to refer to all other
items or matters that could reasonably fall within the broadest possible scope
of such general statement, term or matter.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
on their behalf by their duly authorized officers.
BASIS PETROLEUM, INC.
By: /s/ Jeffrey R. Serra
- ----------------------------------------------------
Jeffrey R. Serra
Chairman of the Board, President and
Chief Executive Officer
GENESIS ENERGY, L.P., a Delaware limited
partnership
By: GENESIS ENERGY, L.L.C., a Delaware
limited liability company
By: /s/ John P. vonBerg
----------------------------------------------
John P. vonBerg
President and Chief Executive Officer
GENESIS CRUDE OIL, L.P., a Delaware limited
partnership
By: GENESIS ENERGY, L.L.C., a Delaware
limited liability company
By: /s/ John P. vonBerg
----------------------------------------------
John P. vonBerg
President and Chief Executive Officer
EXHIBIT A
Attached to and made part of that certain
Corporate Services Agreement
Employee Relations
Personnel File Management
HRIS System Data Entry, Updates & Reports Recruitment (Salaried Employees Only)
Termination/COBRA Administration
New Employee Orientation:
- -- Corporate (full treatment)
- -- Field (paperwork only)
Employee Counseling
Managerial Counseling
Drug & Alcohol Policy Administration
Development of Affirmative Action Plan
Assistance in response to claims:
- -- Equal Employment Opportunity
- -- State Department on Human Rights
Policy Development
Unemployment Claims
Employee Assistance Program
Temporary Hires (Corporate Only)
Workers Compensation
Federal Compliance (EEO-1, OSHA-200,
VETS-100, I-9, FMLA, ADA, FLSA,
Site Postings)
Budget (Salary & Overhead)
Employment Verification:
- -- Recruits
- -- Mortgage and Loan Processing
Compensation Administration
Salary Survey
Organization Charts
Relocation
Bus Pass, Parking, Health Club
Benefits
Plan Creation & Administration: Premium Billing
- -- Medical (POS (In/Out & 3 HMO'S) Hardship Withdrawals
- -- Dental (Core & Optional) QDROs
- -- Short Term Disability 401(k) Match
- -- Long Term Disability (Core & Optional) 401(k) Loans
- -- Group Term Life (Core & Optional) 401(k) Audit
- -- Dependent Life Summary Plan Descriptions
- -- AD&D (Core & Optional) 5500 Filing
- -- Business Travel & Accident Summary Annual Report
- -- Employee Assistance Program ERISA Compliance
- -- COBRA Qualified Plan Department of Labor approvals
& Plan Documentation Updates
- -- Flexible Spending Accounts Benefit Cost Analysis & Reporting
- -- Vision Charles Schwab Investments
- -- Prescription Drugs
- -- Retiree Medical & Life
- -- 401(k)
- -- Profit Share
Payroll
Timesheet Processing (hourly & non-exempt) W-2's
Driver Logs Federal Taxes (Social Security, Medicare, FIT)
Company Vehicle Mileage Reports State Income Taxes
Payroll / Bonus / Manual Checks State & Federal Unemployment
Check Distribution Bank Reconciliations
Direct Deposit Invoice Reconciliations
Savings Bonds Workers Comp Billings
401(k) 2-way downloads Automated Systems Maintenance (DG & Ceridian)
401(k) Wire Transfers Stop Payments
Payroll Balancing Accounting Overdraft Protection
Garnishments Audit Support (Internal & External)
Labor Distribution Salary Continuance
General Ledger Interface Attendance Reporting
Office Services
(Corporate Office Only)
- -- Receptionist/Switchboard
- -- Mail Processing
- -- Courier Processing
- -- Shipping/Receiving
- -- Ordering Supplies and Printed Materials
- -- Records Management Services (moving boxes in/out of storage, control
system)
- -- Facilities Management Services (move coordination, maintenance of
furniture, file systems, building services, security, etc.)
- -- Equipment acquisition and maintenance coordination (copiers, pagers, fax
machines, microfiche reader/printers, typewriters, etc.)
Credit and Treasury
Credit Services:
Negotiate and maintain credit lines (incoming and outgoing)
Monitor credit exposures to/from counterparties
Provide counterparty credit review and analysis
Calculate Salomon guaranty usage fees
Maintain credit files
Provide credit and information agency reports
Treasury Services:
Maintain internal and external credit facilities for loans and letters of credit
Provide cash management
Provide money market investment services
Negotiate and maintain bank services
Manage NYMEX margin and financial credit support
Negotiate and manage derivative collateral requirements
Tax Department Service
Review work plan of Accounting Firm vendor.
Monitor qualified income compliance.
Prepare FIT tax adjustments, monthly taxable income schedules, depreciable asset
database and state tax information for Genesis OLP.
Review asset computation subsystem product.
Review and monitor customized tax package production.
Monitor and communicate status of process to management.
Monitor investor response service during 6 week period and provide same service
during balance
of the year.
Process federal and state filings of Genesis OLP tax returns.
Prepare and review federal and state income tax returns and annual reports for
the LLC.
Provide technical support to division order tax functions.
Provide technical support to sales tax function for pipeline.
Provide technical support to ad valorem tax function; i.e. maintain property
database.
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made as of November 15, 1996 by
and between Genesis Energy, L.L.C. (the "Company") and John P. vonBerg
("Executive").
RECITALS:
A. The Company is the general partner of Genesis Energy L.P. ("Genesis MLP")
and Genesis Crude Oil, L.P. ("Genesis OLP") and is engaged in the crude oil
gathering, marketing and pipeline business.
B. Executive is the President and Chief Executive Officer for the Company.
C. Executive desires to obtain the benefits and incentives from the Company of
a written employment agreement having an initial term through December 31, 1999,
and, at the Company's election, certain extension terms.
D. The Company desires to enter into such an employment agreement with
Executive.
NOW, THEREFORE, in consideration of the premises and mutual agreements contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and Executive hereby
agree as follows:
SECTION 1. Employment. The Company hereby employs Executive as President and
Chief Executive Officer of the Company; provided, however, that Executive will
continue as an employee of Executive's employer on the date hereof but will be
seconded to the Company until January 1, 1997 at which time Executive will
become employed by the Company. In such capacity, Executive will have the
responsibilities and perform the services and duties described in Section 3 of
this Agreement. Executive hereby accepts such employment and agrees to perform
such services and duties for the Company.
SECTION 2. Term. This Agreement will be for an initial term commencing on the
effective date of that certain initial public offering of limited partnership
interests in Genesis MLP and ending on December 31, 1999 (the "Initial Term"),
unless sooner terminated in accordance with the provisions hereof. Thereafter,
the Company will have the option, exercisable by notice to Executive given not
less than 60 days prior to the expiration of the Initial Term, or any Extension
Term (as hereinafter defined), to extend this Agreement for one additional term
of two calendar years ending December 31, 2001, and, if, in each instance, so
extended, for five additional terms of one calendar year each with the term of
the last extension, if so exercised, expiring on December 31, 2006 (each such
extension an "Extension Term"). Anything herein to the contrary
notwithstanding, this Agreement, and Executive's employment hereunder, may be
terminated at any time, with or without cause, upon notice of termination to
Executive; provided, however, that in the event of any such termination without
cause (including any Involuntary Termination (as hereinafter defined)),
Executive will be entitled to the Termination Compensation (as hereinafter
defined) set forth herein.
SECTION 3. Duties of Executive. As President and Chief Executive Officer,
Executive will report directly to the Non-Executive Chairman of the Board and
the Board of Directors of the Company and will have such duties and
responsibilities with respect to the Company, Genesis MLP and Genesis OLP as
customarily would be undertaken by the president and chief executive officer of
companies engaged in businesses similar to, or competitive with, the Company.
Executive will not be required to hold any other offices, positions or
directorships of the Company and/or any subsidiary or affiliate of the Company
during the term of this Agreement. Executive will act in the best interest of
the Company, Genesis MLP and Genesis OLP and their subsidiaries and affiliates
in the performance of Executive's services and duties under this Agreement.
Without the prior consent of the Non-Executive Chairman of the Board of
Directors of the Company, Executive will not actively engage in any other
business or business activity; provided, however, that nothing herein contained
will limit the right of Executive to manage Executive's personal investment
activities provided that such personal investment activities do not materially
interfere with the performance of Executive's duties and responsibilities
hereunder or otherwise materially conflict with any policies which have been
promulgated and distributed by the Company.
SECTION 4. Compensation.
4.1 Compensation during the Initial Term. Subject to the terms and conditions
of this Agreement, the Company will cause Executive to be paid an annual salary
of $29,167.00 for the partial year ending December 31, 1996 and will pay
Executive an annual salary of $350,000.00 for each of the years ending December
31, 1997, 1998 and 1999 (such annual salary hereinafter referred to as the "Base
Compensation"). The Base Compensation will be reviewed annually by the
Compensation Committee of the Board of Directors of the Company. In addition,
Executive will be entitled to participate in the Company's Incentive Plan in
accordance with the terms thereof (the "Incentive Plan Amount").
4.2 Compensation during the Extension Terms. The Base Compensation paid by the
Company to Executive during the Extension Terms will be established by the
Company in connection with the election to extend the term of this Agreement
pursuant to Section 2, will not be less than the Base Compensation multiplied by
1.05 with respect to the first Extension Term and thereafter not less than the
Base Compensation in effect immediately prior to such election for any
subsequent Extension Term and will be advised to Executive simultaneously with
notice from the Company of its election to exercise an Extension Term option.
4.3 Award of Restricted Units. The Company will grant to Executive Restricted
Units ("Initial Award Units") in an amount determined by dividing $600,000 by
the initial offering price of a limited partnership interest in Genesis MLP,
pursuant to the Company's Restricted Unit Plan, in accordance with the terms
thereof, promptly upon the adoption of such plan by the Board of Directors of
the Company. The Initial Award Units shall vest in accordance with terms of the
Restricted Unit Plan.
4.4 Short Term Disability Salary Continuance. In the event of a
short term illness or injury that would entitle Executive to salary continuance
benefits under the Company's short term disability salary continuance plan (the
"STD Plan") in effect from time to time, and Executive's years of service with
the Company, as determined in accordance with the STD Plan, are not sufficient
to provide 100% of the maximum amount of salary continuance that would otherwise
be available to Executive with more years of service (the "Maximum STD Payment")
the Company will pay Executive, as and when salary continuance payments are made
under the STD Plan, an amount equal to the difference between the Maximum STD
Payment and the payment made to Executive under the STD Plan.
SECTION 5. Payment of Compensation. The compensation payable to Executive
pursuant to Section 4 of this Agreement will be paid as follows:
(i) During the term of Executive's employment by the Company
(A) the Base Compensation will be paid to Executive in accordance with the
Company's customary payroll practices; and
(B) the Incentive Plan Amount, if any, will be paid in the manner determined by
the Compensation Committee of the Board of Directors of the Company in
accordance with the Incentive Plan.
(ii) Upon termination of Executive's employment by the Company in accordance
with Section 7.5(A) of this Agreement, the Termination Compensation (as
hereinafter defined), if any, will be paid in accordance with the provisions of
Section 7.5(C).
All payments of Base Compensation, the Incentive Plan Amount, Initial Award
Units and any other amounts paid to Executive will be subject to such deductions
and withholdings as, from time to time, may be required by law or as may be
elected by Executive pursuant to the Company's benefit plans in effect from time
to time.
SECTION 6. Employment Benefits. During the Initial Term or any Extension Term
of Executive's employment by the Company, Executive will be entitled to four
weeks paid vacation. In addition, Executive will be entitled to sick leave in
accordance with the Company's sick leave plans in effect from time to time, and
to participate, subject to qualification requirements, in such medical, dental,
life or other insurance or employee benefit plans as the Company may have in
effect from time to time and generally offer to its employees.
SECTION 7. Termination.
7.1 Termination for Cause. This Agreement will be null and void (except for
the provisions of Section 8 concerning Confidentiality which will survive any
termination of this Agreement) upon the termination of Executive's employment
for Cause. As used in this Agreement, "Cause" will mean (a) conviction of
Executive, in a final non-appealable decision, in a court of law of a felony, a
crime involving moral turpitude or any crime or offense involving the misuse or
misappropriation of money, credit or other property of the Company or any
subsidiary or affiliate of the Company which hereinafter may employ Executive;
provided, however, that the Company may suspend Executive's employment and any
payment due Executive under this Agreement during the pendency of any such
criminal charge; (b) violation in any material respect of any material rule or
policy promulgated and distributed by the Company, Genesis MLP, Genesis OLP or
any subsidiary or affiliate of the Company which hereinafter may employ
Executive (hereinafter the "Genesis Affiliates"); (c) violation, as determined
in a final non-appealable decision, of any rule or regulation of any regulatory
or self-regulatory body to which any of the Genesis Affiliates is subject or of
which any of the Genesis Affiliates is a member including without limitation,
the New York Stock Exchange, The National Association of Securities Dealers,
Inc., the Commodity Futures Trading Commission and the New York Mercantile
Exchange, which violation would materially reflect on Executive's character,
competence or integrity; (d) a material breach by Executive of Executive's duty
of loyalty to any of the Genesis Affiliates including, by way of illustration,
Executive's pretermination of employment solicitation of customers or employees
of any of the Genesis Affiliates, unauthorized removal of Confidential Business
Information (as hereinafter defined) from the premises of any of the Genesis
Affiliates and the dissemination thereof or refusal to return such Confidential
Business Information to the Company; (e) Executive's material breach of this
Agreement; or (f) Executive's gross misconduct, gross insubordination or willful
refusal to perform the lawful duties of his employment. In no event will
Executive be entitled to any compensation or payments under this Agreement
following Executive's termination, or deemed termination, for Cause, provided
that Executive's termination for Cause under this Agreement shall not affect
Executive's rights with respect to any Initial Award Units that shall have
vested at the time of termination. If, after Executive's termination of
employment, it is determined that Executive's employment could have been
terminated for Cause under items (a),(b),(c) or (d) above and such grounds for
termination resulted in or reasonably could be expected to result in injury to
the business, reputation or prospects of the Company or the Genesis Affiliates,
Executive's employment shall, at the election of the Company in its sole
discretion, be deemed to have been terminated for Cause. If Executive's
employment and payment are suspended pursuant to item (a) above, Executive will
have the right, excercisable by notice to the Company given within 15 days after
any such suspension, to treat such suspension as a termination for Cause and
resign from the Company without being bound by the non-compete provisions of
Section 10 of this Agreement.
Prior to any termination of Executive's employment for Cause, the Company shall
afford Executive an opportunity to meet with the Company's independent directors
and Chairman of the Board and present Executive's position with respect to such
grounds for termination.
7.2 Involuntary Termination. Executive's employment will be considered to have
been terminated involuntarily (an "Involuntary Termination") upon occurrence of
the following: (a) the duties and responsibilities of Executive shall have been
substantially and materially reduced such that Executive's duties and
responsibilities would no longer reasonably be considered to be comparable to
those of the chief financial officers of companies similar to, or competitive
with, the Company, (b) reduction in Executive's Base Compensation or exclusion,
other than for failure to meet qualification requirements, from the Company's
employee benefit plans in effect from time to time and generally offered to its
employees, (c) a change of greater than 75 miles in the location, on the date
hereof, of the Company's principal executive offices or (d) the Company's
material breach of this Agreement. Executive will promptly, but in any event
within 30 days after the occurrence or discovery thereof, notify the Company of
any event which Executive considers an Involuntary Termination.
7.3 Termination under Benefit Plans. If Executive's employment is terminated
in accordance with the terms of the Company's long term disability plan in
effect from time to time, any unpaid portion of Executive's Base Compensation
will be due Executive pursuant to this Agreement only for periods prior to such
termination, and any payment pursuant to the Incentive Plan may be made solely
in the discretion of the Compensation Committee and otherwise in accordance with
the terms of such plan.
7.4 Termination due to Death. If Executive dies while employed by the Company,
this Agreement will immediately terminate and, except for any unpaid portion of
Executive's Base Compensation for periods prior to Executive's death, no further
payments will be due hereunder, whether to Executive, Executive's heirs, estate
or otherwise; provided, however, that Executive's heirs and estate will be
entitled to retain any Initial Award Units for a period of six months after
Executive's death. Executive shall have the right to designate in writing from
time to time a beneficiary or beneficiaries by filing a written notice of such
designation with the Company, which Beneficiary shall be entitled to receive any
amount required to be paid as provided in this Section 7.4 in the event of the
Executive's death. In the event that the beneficiary designated by Executive
does not survive Executive and no successor beneficiary is selected or in the
event no valid designation has been made, Executive's beneficiary shall be such
Executive's estate. In the event of the death of Executive, any payment
required to be made hereunder to Executive shall be made to such Executive's
beneficiary or beneficiaries. In the event Executive's beneficiary is the
Executive's estate, no payment shall be made unless the Company shall have been
furnished with such evidence as the Company may deem necessary to establish the
validity of the payment.
7.5 Termination Compensation.
(A) In the event the Company (i) terminates Executive's employment during the
Initial Term or any Extension Term for any reason other than Cause, including
any Involuntary Termination, or as provided in Section 7.3 of this Agreement, or
(ii) does not exercise its option to extend the Initial Term or any Extension
Term of this Agreement, the Company will pay Executive, in full settlement of
all sums due Executive from the Company (excluding, however, any sums then due
Executive under any of the Company's benefit plans or with respect to accrued
vacation), whether under this Agreement or arising at law or in equity, a
termination payment (the "Termination Compensation") equal to the greater of (i)
Executive's Base Compensation for the remaining period of the Initial Term or
Extension Term then in effect, as the case may be, or (ii) one year of
Executive's Base Compensation at the level in effect at the time of termination
or expiration without exercise of the option to extend. In addition, Executive
will be entitled to (a) retain any Initial Award Units for a period of six
months after Executive's termination or after expiration of this Agreement
without the exercise by the Company of the option to extend, (b) such Incentive
Compensation, if any, as may be payable to Executive in accordance with any
Incentive Compensation plan then in effect and (c) in the event Executive elects
to continue medical and/or dental coverage under the provisions of the
Consolidated Omnibus Budget Reconciliation Act (COBRA), the Company will pay
Executive, as and when required to maintain such coverage, an amount equal to
the required premiums for the duration of the Non-Compete Period (as hereinafter
defined).
(B) As a condition to the right to receive the Termination Compensation,
Executive will (i) execute and deliver to the Company a severance and release
agreement in the form attached hereto as Exhibit A, and (ii) Executive will not,
for a period (the "Non-Compete Period") equal to (a) six months in the event the
Company does not exercise its option to extend this Agreement or (b) or in the
event of termination of the shorter of one year after the date of Executive's
termination or the unexpired portion of the Initial Term or Extension Term, as
the case may be, but in no event less than six months, either directly or
indirectly, compete with the Company in the crude oil gathering, marketing
(including domestic crude oil trading but excluding trading solely on the New
York Mercantile Exchange or other commodities exchanges) and transportation
(including pipeline) business whether as an employee, officer, director,
shareholder (other than as an ordinary shareholder of a publicly traded entity),
partner, proprietor or otherwise, in the geographical areas in which the Company
then operates or is engaged in business.
(C) The Termination Compensation will be paid to Executive in the event of a
termination pursuant to Section 7.5(A) above, in four equal installments with
the first installment due on the date of such termination and the remaining
installments at equal intervals thereafter over the applicable Non-Compete
Period.
SECTION 8. Confidentiality. Executive acknowledges that the business of
the Company and the Genesis Affiliates is highly competitive and that the
Company's method of operation, crude oil trading practices, financial condition
and other matters relating to the conduct of such business, and the conduct of
such business as previously conducted by Basis Petroleum, Inc. and Howell
Corporation and its affiliates, comprise confidential business information (the
"Confidential Business Information") which is unique and valuable to the
Company. Executive further acknowledges that the use of the Confidential
Business Information by Executive in competition with the Company and the
Genesis Affiliates will be highly detrimental to the continued successful
operation of the business of the Company and the Genesis Affiliates. Executive
will keep the Confidential Business Information confidential and will not
disclose it to any unauthorized parties. Executive acknowledges and agrees that
the Company shall have the broadest possible protection, consistent with public
policy, of the business of the Company and the Genesis Affiliates from the
wrongful use by Executive of such Confidential Business Information.
Confidential Business Information shall not include any information which is
generally available to the public other than as a result of a disclosure by
Executive or which was known to Executive prior to Executive's employment with
the Company or with Basis Petroleum, Inc. or Howell Corporation and its
affiliates, as the case may be.
SECTION 9. Remedies. Each of the parties acknowledges that the rights
hereunder are necessarily of a special, unique and extraordinary nature, and
that the loss arising from a breach hereof cannot reasonably and adequately be
compensated by money damages and will cause a party to suffer irreparable harm.
Accordingly, upon the breach by a party of any material term of this Agreement
at any time, the other party shall be entitled to injunctive or other
extraordinary relief in case of such breach, and such injunctive or other
extraordinary relief shall be cumulative to, but not in limitation of, any other
remedies to which the party may be entitled as a result of the breach of such
Agreement. In the event Executive breaches this Agreement, the Company will
also have the right, in addition to any other rights it may have at law, in
equity or under this Agreement to cancel, withhold and/or offset any payments
due Executive hereunder against any payments otherwise due to Executive from the
Company, Genesis MLP or Genesis OLP. In any action to enforce any right or
remedy hereunder, the prevailing party in a final non-appealable decision of a
court of competent jurisdiction shall be entitled to recover such prevailing
party's reasonable legal fees and expenses.
SECTION 10. Noncompetition. If Executive resigns or otherwise terminates his
employment for any reason other than the Company's breach of a material
provision of this Agreement, or as a result of an Involuntary Termination, then,
Executive will not, for the duration of the Non-Compete Period, directly or
indirectly compete with the Company in the crude oil gathering, marketing
(including domestic crude oil trading but excluding trading solely on the New
York Mercantile Exchange or other commodities exchanges) and transportation
(including) pipeline business at the time of such resignation or termination
whether as an employee, officer, director, shareholder (other than as an
ordinary shareholder of a publicly traded entity), partner, proprietor or
otherwise in the geographical areas in which the Company then operates or is
engaged in business. Executive will not be entitled to any compensation or
payments under this Agreement following any such resignation or termination
except for Incentive Compensation, if any, payable to Executive in accordance
with any Incentive Compensation plan then in effect.
SECTION 11. Amendments; Waivers. This Agreement may not be modified, revised,
amended or waived in any manner except by an instrument in writing signed on
behalf of each of the parties by their respective duly authorized
representatives. No delay on the part of either party in exercising any right,
power or privilege under this Agreement will operate as a waiver thereof, nor
will any partial exercise or waiver of any right, power or privilege under this
Agreement preclude any other or further exercise of such right, power or
privilege.
SECTION 12. Severability. In the event that any provision of this Agreement
is determined by a court of competent jurisdiction to be invalid or
unenforceable in any respect, the parties will amend this Agreement to provide a
substitute provision which as nearly as possible carries out the intent of the
provision so held invalid or unenforceable; provided, however, that no such
amendment will in any way materially increase the obligation of either party
under this Agreement. Any such determination of invalidity or unenforceability
will not affect such provision in any other respect or affect any other
provision of this Agreement all of which will remain in full force and effect.
SECTION 13. Notices. All notices and other communications under this
Agreement will be in writing and will be duly given (i) upon delivery if
delivered personally with signed receipt acknowledging delivery; or (ii) upon
dispatch if telexed (with answerback confirmation) or telegraphed (and if
telegraphed confirmed by first-class mail as hereinafter provided); or (iii) if
mailed, by first class mail, postage prepaid, ten business days after date of
mailing, addressed as follows:
(a) If to the Company
Genesis Energy, L.L.C.
One Allen Center, Suite 3200
500 Dallas
Houston, Texas 77002
Attention: President
(b) If to Executive
John P. vonBerg
at such address as appears on the records of the Company
or to such other address as a party may from time to time designate in the
manner heretofore provided.
SECTION 14. Governing Law and Jurisdiction. This Agreement and the
obligations of the parties hereunder will be governed by and construed in
accordance with the substantive laws of the State of Texas without regard to any
conflict of law rules. Each party consents to the jurisdiction of the courts
located in Harris County, Texas with respect to any action arising hereunder.
SECTION 15. Assignment. This Agreement, and any rights or obligations
hereunder, may not be assigned by either party hereto without written consent of
the other; provided, however, that the Company may assign this Agreement to
Genesis MLP, Genesis OLP, an affiliate of the Company which has succeeded to all
or substantially all of the business of the Company or to a third party
acquiring all or substantially all of the business, equity or assets of the
Company.
SECTION 16. No Third Party Beneficiaries. No person other than Executive and
his beneficiaries on the one hand and the Company or its successors and assigns
on the other hand shall be made a party to this Agreement directly or indirectly
or have any rights or benefits under this Agreement.
SECTION 17. Captions. The titles, captions and headings in this Agreement are
inserted for convenience of reference only and are not intended to form a part
of, or to affect the meaning or interpretation of, this Agreement.
SECTION 18. Execution in Counterparts. This Agreement may be executed in one
or more counterparts, all of which will be considered one and the same
Agreement, and will become a binding Agreement when one or more counterparts
have been signed by each of the parties and delivered to the other party.
SECTION 19. Entire Agreement. This Agreement constitutes the entire agreement
between Executive and the Company concerning the subject matter hereof and
supersedes all previous negotiations, commitments and writings with respect to
such subject matter.
SECTION 20. Advice of Counsel. Executive represents and warrants that
Executive has been advised by competent counsel of his own selection as to the
meaning and significance of this Agreement and all of the terms hereof.
/s/ John P. vonBerg
- -----------------------------------------------
John P. vonBerg
GENESIS ENERGY, L.L.C.
By: BASIS PETROLEUM, INC.
As Member
By: /s/ Jeffrey R. Serra
- -----------------------------------------------
Jeffrey R. Serra, Chairman, President
and Chief Executive Officer
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made as of November 15, 1996 by
and between Genesis Energy, L.L.C. (the "Company") and Mark J. Gorman
("Executive").
RECITALS:
A. The Company is the general partner of Genesis Energy L.P. ("Genesis MLP")
and Genesis Crude Oil, L.P. ("Genesis OLP") and is engaged in the crude oil
gathering, marketing and pipeline business.
B. Executive is the Executive Vice President, Marketing and Operations for the
Company.
C. Executive desires to obtain the benefits and incentives from the Company of
a written employment agreement having an initial term through December 31, 1999,
and, at the Company's election, certain extension terms.
D. The Company desires to enter into such an employment agreement with
Executive.
NOW, THEREFORE, in consideration of the premises and mutual agreements contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and Executive hereby
agree as follows:
SECTION 1. Employment. The Company hereby employs Executive as Executive Vice
President, Marketing and Operations of the Company; provided, however, that
Executive will continue as an employee of Executive's employer on the date
hereof but will be seconded to the Company until January 1, 1997 at which time
Executive will become employed by the Company. In such capacity, Executive will
have the responsibilities and perform the services and duties described in
Section 3 of this Agreement. Executive hereby accepts such employment and
agrees to perform such services and duties for the Company.
SECTION 2. Term. This Agreement will be for an initial term commencing on the
effective date of that certain initial public offering of limited partnership
interests in Genesis MLP and ending on December 31, 1999 (the "Initial Term"),
unless sooner terminated in accordance with the provisions hereof. Thereafter,
the Company will have the option, exercisable by notice to Executive given not
less than 60 days prior to the expiration of the Initial Term, or any Extension
Term (as hereinafter defined), to extend this Agreement for one additional term
of two calendar years ending December 31, 2001, and, if, in each instance, so
extended, for five additional terms of one calendar year each with the term of
the last extension, if so exercised, expiring on December 31, 2006 (each such
extension an "Extension Term"). Anything herein to the contrary
notwithstanding, this Agreement, and Executive's employment hereunder, may be
terminated at any time, with or without cause, upon notice of termination to
Executive; provided, however, that in the event of any such termination without
cause (including any Involuntary Termination (as hereinafter defined)),
Executive will be entitled to the Termination Compensation (as hereinafter
defined) set forth herein.
SECTION 3. Duties of Executive. As Executive Vice President, Marketing and
Operations, Executive will report directly to the President and Chief Executive
Officer and will have such duties and responsibilities with respect to the
Company, Genesis MLP and Genesis OLP as customarily would be undertaken by the
executive vice president, marketing and operations of companies engaged in
businesses similar to, or competitive with, the Company. Executive will not be
required to hold any other offices, positions or directorships of the Company
and/or any subsidiary or affiliate of the Company during the term of this
Agreement. Executive will act in the best interest of the Company, Genesis MLP
and Genesis OLP and their subsidiaries and affiliates in the performance of
Executive's services and duties under this Agreement. Without the prior consent
of the Non-Executive Chairman of the Board of Directors of the Company,
Executive will not actively engage in any other business or business activity;
provided, however, that nothing herein contained will limit the right of
Executive to manage Executive's personal investment activities provided that
such personal investment activities do not materially interfere with the
performance of Executive's duties and responsibilities hereunder or otherwise
materially conflict with any policies which have been promulgated and
distributed by the Company.
SECTION 4. Compensation.
4.1 Compensation during the Initial Term. Subject to the terms and conditions
of this Agreement, the Company will cause Executive to be paid an annual salary
of $17,500.00 for the partial year ending December 31, 1996 and will pay
Executive an annual salary of $210,000.00 for each of the years ending December
31, 1997, 1998 and 1999 (such annual salary hereinafter referred to as the "Base
Compensation"). The Base Compensation will be reviewed annually by the
Compensation Committee of the Board of Directors of the Company. In addition,
Executive will be entitled to participate in the Company's Incentive Plan in
accordance with the terms thereof (the "Incentive Plan Amount").
4.2 Compensation during the Extension Terms. The Base Compensation paid by the
Company to Executive during the Extension Terms will be established by the
Company in connection with the election to extend the term of this Agreement
pursuant to Section 2, will not be less than the Base Compensation multiplied by
1.05 with respect to the first Extension Term and thereafter not less than the
Base Compensation in effect immediately prior to such election for any
subsequent Extension Term and will be advised to Executive simultaneously with
notice from the Company of its election to exercise an Extension Term option.
4.3 Award of Restricted Units. The Company will grant to Executive Restricted
Units ("Initial Award Units") in an amount determined by dividing $600,000 by
the initial offering price of a limited partnership interest in Genesis MLP,
pursuant to the Company's Restricted Unit Plan, in accordance with the terms
thereof, promptly upon the adoption of such plan by the Board of Directors of
the Company. The Initial Award Units shall vest in accordance with terms of the
Restricted Unit Plan.
4.4 Short Term Disability Salary Continuance. In the event of a
short term illness or injury that would entitle Executive to salary continuance
benefits under the Company's short term disability salary continuance plan (the
"STD Plan") in effect from time to time, and Executive's years of service with
the Company, as determined in accordance with the STD Plan, are not sufficient
to provide 100% of the maximum amount of salary continuance that would otherwise
be available to Executive with more years of service (the "Maximum STD Payment")
the Company will pay Executive, as and when salary continuance payments are made
under the STD Plan, an amount equal to the difference between the Maximum STD
Payment and the payment made to Executive under the STD Plan.
SECTION 5. Payment of Compensation. The compensation payable to Executive
pursuant to Section 4 of this Agreement will be paid as follows:
(i) During the term of Executive's employment by the Company
(A) the Base Compensation will be paid to Executive in accordance with the
Company's customary payroll practices; and
(B) the Incentive Plan Amount, if any, will be paid in the manner determined by
the Compensation Committee of the Board of Directors of the Company in
accordance with the Incentive Plan.
(ii) Upon termination of Executive's employment by the Company in accordance
with Section 7.5(A) of this Agreement, the Termination Compensation (as
hereinafter defined), if any, will be paid in accordance with the provisions of
Section 7.5(C).
All payments of Base Compensation, the Incentive Plan Amount, Initial Award
Units and any other amounts paid to Executive will be subject to such deductions
and withholdings as, from time to time, may be required by law or as may be
elected by Executive pursuant to the Company's benefit plans in effect from time
to time.
SECTION 6. Employment Benefits. During the Initial Term or any Extension Term
of Executive's employment by the Company, Executive will be entitled to four
weeks paid vacation. In addition, Executive will be entitled to sick leave in
accordance with the Company's sick leave plans in effect from time to time, and
to participate, subject to qualification requirements, in such medical, dental,
life or other insurance or employee benefit plans as the Company may have in
effect from time to time and generally offer to its employees.
SECTION 7. Termination.
7.1 Termination for Cause. This Agreement will be null and void (except for
the provisions of Section 8 concerning Confidentiality which will survive any
termination of this Agreement) upon the termination of Executive's employment
for Cause. As used in this Agreement, "Cause" will mean (a) conviction of
Executive, in a final non-appealable decision, in a court of law of a felony, a
crime involving moral turpitude or any crime or offense involving the misuse or
misappropriation of money, credit or other property of the Company or any
subsidiary or affiliate of the Company which hereinafter may employ Executive;
provided, however, that the Company may suspend Executive's employment and any
payment due Executive under this Agreement during the pendency of any such
criminal charge; (b) violation in any material respect of any material rule or
policy promulgated and distributed by the Company, Genesis MLP, Genesis OLP or
any subsidiary or affiliate of the Company which hereinafter may employ
Executive (hereinafter the "Genesis Affiliates"); (c) violation, as determined
in a final non-appealable decision, of any rule or regulation of any regulatory
or self-regulatory body to which any of the Genesis Affiliates is subject or of
which any of the Genesis Affiliates is a member including without limitation,
the New York Stock Exchange, The National Association of Securities Dealers,
Inc., the Commodity Futures Trading Commission and the New York Mercantile
Exchange, which violation would materially reflect on Executive's character,
competence or integrity; (d) a material breach by Executive of Executive's duty
of loyalty to any of the Genesis Affiliates including, by way of illustration,
Executive's pretermination of employment solicitation of customers or employees
of any of the Genesis Affiliates, unauthorized removal of Confidential Business
Information (as hereinafter defined) from the premises of any of the Genesis
Affiliates and the dissemination thereof or refusal to return such Confidential
Business Information to the Company; (e) Executive's material breach of this
Agreement; or (f) Executive's gross misconduct, gross insubordination or willful
refusal to perform the lawful duties of his employment. In no event will
Executive be entitled to any compensation or payments under this Agreement
following Executive's termination, or deemed termination, for Cause, provided
that Executive's termination for Cause under this Agreement shall not affect
Executive's rights with respect to any Initial Award Units that shall have
vested at the time of termination. If, after Executive's termination of
employment, it is determined that Executive's employment could have been
terminated for Cause under items (a),(b),(c) or (d) above and such grounds for
termination resulted in or reasonably could be expected to result in injury to
the business, reputation or prospects of the Company or the Genesis Affiliates,
Executive's employment shall, at the election of the Company in its sole
discretion, be deemed to have been terminated for Cause. If Executive's
employment and payment are suspended pursuant to item (a) above, Executive will
have the right, excercisable by notice to the Company given within 15 days after
any such suspension, to treat such suspension as a termination for Cause and
resign from the Company without being bound by the non-compete provisions of
Section 10 of this Agreement.
Prior to any termination of Executive's employment for Cause, the Company shall
afford Executive an opportunity to meet with the Company's independent directors
and Chairman of the Board and present Executive's position with respect to such
grounds for termination.
7.2 Involuntary Termination. Executive's employment will be considered to have
been terminated involuntarily (an "Involuntary Termination") upon occurrence of
the following: (a) the duties and responsibilities of Executive shall have been
substantially and materially reduced such that Executive's duties and
responsibilities would no longer reasonably be considered to be comparable to
those of the chief financial officers of companies similar to, or competitive
with, the Company, (b) reduction in Executive's Base Compensation or exclusion,
other than for failure to meet qualification requirements, from the Company's
employee benefit plans in effect from time to time and generally offered to its
employees, (c) a change of greater than 75 miles in the location, on the date
hereof, of the Company's principal executive offices or (d) the Company's
material breach of this Agreement. Executive will promptly, but in any event
within 30 days after the occurrence or discovery thereof, notify the Company of
any event which Executive considers an Involuntary Termination.
7.3 Termination under Benefit Plans. If Executive's employment is terminated
in accordance with the terms of the Company's long term disability plan in
effect from time to time, any unpaid portion of Executive's Base Compensation
will be due Executive pursuant to this Agreement only for periods prior to such
termination, and any payment pursuant to the Incentive Plan may be made solely
in the discretion of the Compensation Committee and otherwise in accordance with
the terms of such plan.
7.4 Termination due to Death. If Executive dies while employed by the Company,
this Agreement will immediately terminate and, except for any unpaid portion of
Executive's Base Compensation for periods prior to Executive's death, no further
payments will be due hereunder, whether to Executive, Executive's heirs, estate
or otherwise; provided, however, that Executive's heirs and estate will be
entitled to retain any Initial Award Units for a period of six months after
Executive's death. Executive shall have the right to designate in writing from
time to time a beneficiary or beneficiaries by filing a written notice of such
designation with the Company, which Beneficiary shall be entitled to receive any
amount required to be paid as provided in this Section 7.4 in the event of the
Executive's death. In the event that the beneficiary designated by Executive
does not survive Executive and no successor beneficiary is selected or in the
event no valid designation has been made, Executive's beneficiary shall be such
Executive's estate. In the event of the death of Executive, any payment
required to be made hereunder to Executive shall be made to such Executive's
beneficiary or beneficiaries. In the event Executive's beneficiary is the
Executive's estate, no payment shall be made unless the Company shall have been
furnished with such evidence as the Company may deem necessary to establish the
validity of the payment.
7.5 Termination Compensation.
(A) In the event the Company (i) terminates Executive's employment during the
Initial Term or any Extension Term for any reason other than Cause, including
any Involuntary Termination, or as provided in Section 7.3 of this Agreement, or
(ii) does not exercise its option to extend the Initial Term or any Extension
Term of this Agreement, the Company will pay Executive, in full settlement of
all sums due Executive from the Company (excluding, however, any sums then due
Executive under any of the Company's benefit plans or with respect to accrued
vacation), whether under this Agreement or arising at law or in equity, a
termination payment (the "Termination Compensation") equal to the greater of (i)
Executive's Base Compensation for the remaining period of the Initial Term or
Extension Term then in effect, as the case may be, or (ii) one year of
Executive's Base Compensation at the level in effect at the time of termination
or expiration without exercise of the option to extend. In addition, Executive
will be entitled to (a) retain any Initial Award Units for a period of six
months after Executive's termination or after expiration of this Agreement
without the exercise by the Company of the option to extend, (b) such Incentive
Compensation, if any, as may be payable to Executive in accordance with any
Incentive Compensation plan then in effect and (c) in the event Executive elects
to continue medical and/or dental coverage under the provisions of the
Consolidated Omnibus Budget Reconciliation Act (COBRA), the Company will pay
Executive, as and when required to maintain such coverage, an amount equal to
the required premiums for the duration of the Non-Compete Period (as hereinafter
defined).
(B) As a condition to the right to receive the Termination Compensation,
Executive will (i) execute and deliver to the Company a severance and release
agreement in the form attached hereto as Exhibit A, and (ii) Executive will not,
for a period (the "Non-Compete Period") equal to (a) six months in the event the
Company does not exercise its option to extend this Agreement or (b) or in the
event of termination of the shorter of one year after the date of Executive's
termination or the unexpired portion of the Initial Term or Extension Term, as
the case may be, but in no event less than six months, either directly or
indirectly, compete with the Company in the crude oil gathering, marketing
(including domestic crude oil trading but excluding trading solely on the New
York Mercantile Exchange or other commodities exchanges) and transportation
(including pipeline) business whether as an employee, officer, director,
shareholder (other than as an ordinary shareholder of a publicly traded entity),
partner, proprietor or otherwise, in the geographical areas in which the Company
then operates or is engaged in business.
(C) The Termination Compensation will be paid to Executive in the event of a
termination pursuant to Section 7.5(A) above, in four equal installments with
the first installment due on the date of such termination and the remaining
installments at equal intervals thereafter over the applicable Non-Compete
Period.
SECTION 8. Confidentiality. Executive acknowledges that the business of
the Company and the Genesis Affiliates is highly competitive and that the
Company's method of operation, crude oil trading practices, financial condition
and other matters relating to the conduct of such business, and the conduct of
such business as previously conducted by Basis Petroleum, Inc. and Howell
Corporation and its affiliates, comprise confidential business information (the
"Confidential Business Information") which is unique and valuable to the
Company. Executive further acknowledges that the use of the Confidential
Business Information by Executive in competition with the Company and the
Genesis Affiliates will be highly detrimental to the continued successful
operation of the business of the Company and the Genesis Affiliates. Executive
will keep the Confidential Business Information confidential and will not
disclose it to any unauthorized parties. Executive acknowledges and agrees that
the Company shall have the broadest possible protection, consistent with public
policy, of the business of the Company and the Genesis Affiliates from the
wrongful use by Executive of such Confidential Business Information.
Confidential Business Information shall not include any information which is
generally available to the public other than as a result of a disclosure by
Executive or which was known to Executive prior to Executive's employment with
the Company or with Basis Petroleum, Inc. or Howell Corporation and its
affiliates, as the case may be.
SECTION 9. Remedies. Each of the parties acknowledges that the rights
hereunder are necessarily of a special, unique and extraordinary nature, and
that the loss arising from a breach hereof cannot reasonably and adequately be
compensated by money damages and will cause a party to suffer irreparable harm.
Accordingly, upon the breach by a party of any material term of this Agreement
at any time, the other party shall be entitled to injunctive or other
extraordinary relief in case of such breach, and such injunctive or other
extraordinary relief shall be cumulative to, but not in limitation of, any other
remedies to which the party may be entitled as a result of the breach of such
Agreement. In the event Executive breaches this Agreement, the Company will
also have the right, in addition to any other rights it may have at law, in
equity or under this Agreement to cancel, withhold and/or offset any payments
due Executive hereunder against any payments otherwise due to Executive from the
Company, Genesis MLP or Genesis OLP. In any action to enforce any right or
remedy hereunder, the prevailing party in a final non-appealable decision of a
court of competent jurisdiction shall be entitled to recover such prevailing
party's reasonable legal fees and expenses.
SECTION 10. Noncompetition. If Executive resigns or otherwise terminates his
employment for any reason other than the Company's breach of a material
provision of this Agreement, or as a result of an Involuntary Termination, then,
Executive will not, for the duration of the Non-Compete Period, directly or
indirectly compete with the Company in the crude oil gathering, marketing
(including domestic crude oil trading but excluding trading solely on the New
York Mercantile Exchange or other commodities exchanges) and transportation
(including) pipeline business at the time of such resignation or termination
whether as an employee, officer, director, shareholder (other than as an
ordinary shareholder of a publicly traded entity), partner, proprietor or
otherwise in the geographical areas in which the Company then operates or is
engaged in business. Executive will not be entitled to any compensation or
payments under this Agreement following any such resignation or termination
except for Incentive Compensation, if any, payable to Executive in accordance
with any Incentive Compensation plan then in effect.
SECTION 11. Amendments; Waivers. This Agreement may not be modified, revised,
amended or waived in any manner except by an instrument in writing signed on
behalf of each of the parties by their respective duly authorized
representatives. No delay on the part of either party in exercising any right,
power or privilege under this Agreement will operate as a waiver thereof, nor
will any partial exercise or waiver of any right, power or privilege under this
Agreement preclude any other or further exercise of such right, power or
privilege.
SECTION 12. Severability. In the event that any provision of this Agreement
is determined by a court of competent jurisdiction to be invalid or
unenforceable in any respect, the parties will amend this Agreement to provide a
substitute provision which as nearly as possible carries out the intent of the
provision so held invalid or unenforceable; provided, however, that no such
amendment will in any way materially increase the obligation of either party
under this Agreement. Any such determination of invalidity or unenforceability
will not affect such provision in any other respect or affect any other
provision of this Agreement all of which will remain in full force and effect.
SECTION 13. Notices. All notices and other communications under this
Agreement will be in writing and will be duly given (i) upon delivery if
delivered personally with signed receipt acknowledging delivery; or (ii) upon
dispatch if telexed (with answerback confirmation) or telegraphed (and if
telegraphed confirmed by first-class mail as hereinafter provided); or (iii) if
mailed, by first class mail, postage prepaid, ten business days after date of
mailing, addressed as follows:
(a) If to the Company
Genesis Energy, L.L.C.
One Allen Center, Suite 3200
500 Dallas
Houston, Texas 77002
Attention: President
(b) If to Executive
Mark J. Gorman
at such address as appears on the records of the Company
or to such other address as a party may from time to time designate in the
manner heretofore provided.
SECTION 14. Governing Law and Jurisdiction. This Agreement and the
obligations of the parties hereunder will be governed by and construed in
accordance with the substantive laws of the State of Texas without regard to any
conflict of law rules. Each party consents to the jurisdiction of the courts
located in Harris County, Texas with respect to any action arising hereunder.
SECTION 15. Assignment. This Agreement, and any rights or obligations
hereunder, may not be assigned by either party hereto without written consent of
the other; provided, however, that the Company may assign this Agreement to
Genesis MLP, Genesis OLP, an affiliate of the Company which has succeeded to all
or substantially all of the business of the Company or to a third party
acquiring all or substantially all of the business, equity or assets of the
Company.
SECTION 16. No Third Party Beneficiaries. No person other than Executive and
his beneficiaries on the one hand and the Company or its successors and assigns
on the other hand shall be made a party to this Agreement directly or indirectly
or have any rights or benefits under this Agreement.
SECTION 17. Captions. The titles, captions and headings in this Agreement are
inserted for convenience of reference only and are not intended to form a part
of, or to affect the meaning or interpretation of, this Agreement.
SECTION 18. Execution in Counterparts. This Agreement may be executed in one
or more counterparts, all of which will be considered one and the same
Agreement, and will become a binding Agreement when one or more counterparts
have been signed by each of the parties and delivered to the other party.
SECTION 19. Entire Agreement. This Agreement constitutes the entire agreement
between Executive and the Company concerning the subject matter hereof and
supersedes all previous negotiations, commitments and writings with respect to
such subject matter.
SECTION 20. Advice of Counsel. Executive represents and warrants that
Executive has been advised by competent counsel of his own selection as to the
meaning and significance of this Agreement and all of the terms hereof.
/s/ Mark J. Gorman
- ------------------------------------------------
Mark J. Gorman
GENESIS ENERGY, L.L.C.
By: BASIS PETROLEUM, INC.
As Member
By: /s/ Jeffrey R. Serra
- ------------------------------------------------
Jeffrey R. Serra, Chairman, President
and Chief Executive Officer
EXHIBIT 10.10
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made as of November 15, 1996 by
and between Genesis Energy, L.L.C. (the "Company") and John M. Fetzer
("Executive").
RECITALS:
A. The Company is the general partner of Genesis Energy L.P. ("Genesis MLP")
and Genesis Crude Oil, L.P. ("Genesis OLP") and is engaged in the crude oil
gathering, marketing and pipeline business.
B. Executive is the Senior Vice President, Crude Oil for the Company.
C. Executive desires to obtain the benefits and incentives from the Company of
a written employment agreement having an initial term through December 31, 1999,
and, at the Company's election, certain extension terms.
D. The Company desires to enter into such an employment agreement with
Executive.
NOW, THEREFORE, in consideration of the premises and mutual agreements contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and Executive hereby
agree as follows:
SECTION 1. Employment. The Company hereby employs Executive as Senior Vice
President, Crude Oil of the Company; provided, however, that Executive will
continue as an employee of Executive's employer on the date hereof but will be
seconded to the Company until January 1, 1997 at which time Executive will
become employed by the Company. In such capacity, Executive will have the
responsibilities and perform the services and duties described in Section 3 of
this Agreement. Executive hereby accepts such employment and agrees to perform
such services and duties for the Company.
SECTION 2. Term. This Agreement will be for an initial term commencing on the
effective date of that certain initial public offering of limited partnership
interests in Genesis MLP and ending on December 31, 1999 (the "Initial Term"),
unless sooner terminated in accordance with the provisions hereof. Thereafter,
the Company will have the option, exercisable by notice to Executive given not
less than 60 days prior to the expiration of the Initial Term, or any Extension
Term (as hereinafter defined), to extend this Agreement for one additional term
of two calendar years ending December 31, 2001, and, if, in each instance, so
extended, for five additional terms of one calendar year each with the term of
the last extension, if so exercised, expiring on December 31, 2006 (each such
extension an "Extension Term"). Anything herein to the contrary
notwithstanding, this Agreement, and Executive's employment hereunder, may be
terminated at any time, with or without cause, upon notice of termination to
Executive; provided, however, that in the event of any such termination without
cause (including any Involuntary Termination (as hereinafter defined)),
Executive will be entitled to the Termination Compensation (as hereinafter
defined) set forth herein.
SECTION 3. Duties of Executive. As Senior Vice President, Crude Oil,
Executive will report directly to the Executive Vice President, Marketing and
Operations and will have such duties and responsibilities with respect to the
Company, Genesis MLP and Genesis OLP as customarily would be undertaken by the
senior vice president, crude oil of companies engaged in businesses similar to,
or competitive with, the Company. Executive will not be required to hold any
other offices, positions or directorships of the Company and/or any subsidiary
or affiliate of the Company during the term of this Agreement. Executive will
act in the best interest of the Company, Genesis MLP and Genesis OLP and their
subsidiaries and affiliates in the performance of Executive's services and
duties under this Agreement. Without the prior consent of the Non-Executive
Chairman of the Board of Directors of the Company, Executive will not actively
engage in any other business or business activity; provided, however, that
nothing herein contained will limit the right of Executive to manage Executive's
personal investment activities provided that such personal investment activities
do not materially interfere with the performance of Executive's duties and
responsibilities hereunder or otherwise materially conflict with any policies
which have been promulgated and distributed by the Company.
SECTION 4. Compensation.
4.1 Compensation during the Initial Term. Subject to the terms and conditions
of this Agreement, the Company will cause Executive to be paid an annual salary
of $16,667.00 for the partial year ending December 31, 1996 and will pay
Executive an annual salary of $200,000.00 for each of the years ending December
31, 1997, 1998 and 1999 (such annual salary hereinafter referred to as the "Base
Compensation"). The Base Compensation will be reviewed annually by the
Compensation Committee of the Board of Directors of the Company. In addition,
Executive will be entitled to participate in the Company's Incentive Plan in
accordance with the terms thereof (the "Incentive Plan Amount").
4.2 Compensation during the Extension Terms. The Base Compensation paid by the
Company to Executive during the Extension Terms will be established by the
Company in connection with the election to extend the term of this Agreement
pursuant to Section 2, will not be less than the Base Compensation multiplied by
1.05 with respect to the first Extension Term and thereafter not less than the
Base Compensation in effect immediately prior to such election for any
subsequent Extension Term and will be advised to Executive simultaneously with
notice from the Company of its election to exercise an Extension Term option.
4.3 Award of Restricted Units. The Company will grant to Executive Restricted
Units ("Initial Award Units") in an amount determined by dividing $600,000 by
the initial offering price of a limited partnership interest in Genesis MLP,
pursuant to the Company's Restricted Unit Plan, in accordance with the terms
thereof, promptly upon the adoption of such plan by the Board of Directors of
the Company. The Initial Award Units shall vest in accordance with terms of the
Restricted Unit Plan.
4.4 Short Term Disability Salary Continuance. In the event of a
short term illness or injury that would entitle Executive to salary continuance
benefits under the Company's short term disability salary continuance plan (the
"STD Plan") in effect from time to time, and Executive's years of service with
the Company, as determined in accordance with the STD Plan, are not sufficient
to provide 100% of the maximum amount of salary continuance that would otherwise
be available to Executive with more years of service (the "Maximum STD Payment")
the Company will pay Executive, as and when salary continuance payments are made
under the STD Plan, an amount equal to the difference between the Maximum STD
Payment and the payment made to Executive under the STD Plan.
SECTION 5. Payment of Compensation. The compensation payable to Executive
pursuant to Section 4 of this Agreement will be paid as follows:
(i) During the term of Executive's employment by the Company
(A) the Base Compensation will be paid to Executive in accordance with the
Company's customary payroll practices; and
(B) the Incentive Plan Amount, if any, will be paid in the manner determined by
the Compensation Committee of the Board of Directors of the Company in
accordance with the Incentive Plan.
(ii) Upon termination of Executive's employment by the Company in accordance
with Section 7.5(A) of this Agreement, the Termination Compensation (as
hereinafter defined), if any, will be paid in accordance with the provisions of
Section 7.5(C).
All payments of Base Compensation, the Incentive Plan Amount, Initial Award
Units and any other amounts paid to Executive will be subject to such deductions
and withholdings as, from time to time, may be required by law or as may be
elected by Executive pursuant to the Company's benefit plans in effect from time
to time.
SECTION 6. Employment Benefits. During the Initial Term or any Extension Term
of Executive's employment by the Company, Executive will be entitled to four
weeks paid vacation. In addition, Executive will be entitled to sick leave in
accordance with the Company's sick leave plans in effect from time to time, and
to participate, subject to qualification requirements, in such medical, dental,
life or other insurance or employee benefit plans as the Company may have in
effect from time to time and generally offer to its employees.
SECTION 7. Termination.
7.1 Termination for Cause. This Agreement will be null and void (except for
the provisions of Section 8 concerning Confidentiality which will survive any
termination of this Agreement) upon the termination of Executive's employment
for Cause. As used in this Agreement, "Cause" will mean (a) conviction of
Executive, in a final non-appealable decision, in a court of law of a felony, a
crime involving moral turpitude or any crime or offense involving the misuse or
misappropriation of money, credit or other property of the Company or any
subsidiary or affiliate of the Company which hereinafter may employ Executive;
provided, however, that the Company may suspend Executive's employment and any
payment due Executive under this Agreement during the pendency of any such
criminal charge; (b) violation in any material respect of any material rule or
policy promulgated and distributed by the Company, Genesis MLP, Genesis OLP or
any subsidiary or affiliate of the Company which hereinafter may employ
Executive (hereinafter the "Genesis Affiliates"); (c) violation, as determined
in a final non-appealable decision, of any rule or regulation of any regulatory
or self-regulatory body to which any of the Genesis Affiliates is subject or of
which any of the Genesis Affiliates is a member including without limitation,
the New York Stock Exchange, The National Association of Securities Dealers,
Inc., the Commodity Futures Trading Commission and the New York Mercantile
Exchange, which violation would materially reflect on Executive's character,
competence or integrity; (d) a material breach by Executive of Executive's duty
of loyalty to any of the Genesis Affiliates including, by way of illustration,
Executive's pretermination of employment solicitation of customers or employees
of any of the Genesis Affiliates, unauthorized removal of Confidential Business
Information (as hereinafter defined) from the premises of any of the Genesis
Affiliates and the dissemination thereof or refusal to return such Confidential
Business Information to the Company; (e) Executive's material breach of this
Agreement; or (f) Executive's gross misconduct, gross insubordination or willful
refusal to perform the lawful duties of his employment. In no event will
Executive be entitled to any compensation or payments under this Agreement
following Executive's termination, or deemed termination, for Cause, provided
that Executive's termination for Cause under this Agreement shall not affect
Executive's rights with respect to any Initial Award Units that shall have
vested at the time of termination. If, after Executive's termination of
employment, it is determined that Executive's employment could have been
terminated for Cause under items (a),(b),(c) or (d) above and such grounds for
termination resulted in or reasonably could be expected to result in injury to
the business, reputation or prospects of the Company or the Genesis Affiliates,
Executive's employment shall, at the election of the Company in its sole
discretion, be deemed to have been terminated for Cause. If Executive's
employment and payment are suspended pursuant to item (a) above, Executive will
have the right, excercisable by notice to the Company given within 15 days after
any such suspension, to treat such suspension as a termination for Cause and
resign from the Company without being bound by the non-compete provisions of
Section 10 of this Agreement.
Prior to any termination of Executive's employment for Cause, the Company shall
afford Executive an opportunity to meet with the Company's independent directors
and Chairman of the Board and present Executive's position with respect to such
grounds for termination.
7.2 Involuntary Termination. Executive's employment will be considered to have
been terminated involuntarily (an "Involuntary Termination") upon occurrence of
the following: (a) the duties and responsibilities of Executive shall have been
substantially and materially reduced such that Executive's duties and
responsibilities would no longer reasonably be considered to be comparable to
those of the chief financial officers of companies similar to, or competitive
with, the Company, (b) reduction in Executive's Base Compensation or exclusion,
other than for failure to meet qualification requirements, from the Company's
employee benefit plans in effect from time to time and generally offered to its
employees, (c) a change of greater than 75 miles in the location, on the date
hereof, of the Company's principal executive offices or (d) the Company's
material breach of this Agreement. Executive will promptly, but in any event
within 30 days after the occurrence or discovery thereof, notify the Company of
any event which Executive considers an Involuntary Termination.
7.3 Termination under Benefit Plans. If Executive's employment is terminated
in accordance with the terms of the Company's long term disability plan in
effect from time to time, any unpaid portion of Executive's Base Compensation
will be due Executive pursuant to this Agreement only for periods prior to such
termination, and any payment pursuant to the Incentive Plan may be made solely
in the discretion of the Compensation Committee and otherwise in accordance with
the terms of such plan.
7.4 Termination due to Death. If Executive dies while employed by the Company,
this Agreement will immediately terminate and, except for any unpaid portion of
Executive's Base Compensation for periods prior to Executive's death, no further
payments will be due hereunder, whether to Executive, Executive's heirs, estate
or otherwise; provided, however, that Executive's heirs and estate will be
entitled to retain any Initial Award Units for a period of six months after
Executive's death. Executive shall have the right to designate in writing from
time to time a beneficiary or beneficiaries by filing a written notice of such
designation with the Company, which Beneficiary shall be entitled to receive any
amount required to be paid as provided in this Section 7.4 in the event of the
Executive's death. In the event that the beneficiary designated by Executive
does not survive Executive and no successor beneficiary is selected or in the
event no valid designation has been made, Executive's beneficiary shall be such
Executive's estate. In the event of the death of Executive, any payment
required to be made hereunder to Executive shall be made to such Executive's
beneficiary or beneficiaries. In the event Executive's beneficiary is the
Executive's estate, no payment shall be made unless the Company shall have been
furnished with such evidence as the Company may deem necessary to establish the
validity of the payment.
7.5 Termination Compensation.
(A) In the event the Company (i) terminates Executive's employment during the
Initial Term or any Extension Term for any reason other than Cause, including
any Involuntary Termination, or as provided in Section 7.3 of this Agreement, or
(ii) does not exercise its option to extend the Initial Term or any Extension
Term of this Agreement, the Company will pay Executive, in full settlement of
all sums due Executive from the Company (excluding, however, any sums then due
Executive under any of the Company's benefit plans or with respect to accrued
vacation), whether under this Agreement or arising at law or in equity, a
termination payment (the "Termination Compensation") equal to the greater of (i)
Executive's Base Compensation for the remaining period of the Initial Term or
Extension Term then in effect, as the case may be, or (ii) one year of
Executive's Base Compensation at the level in effect at the time of termination
or expiration without exercise of the option to extend. In addition, Executive
will be entitled to (a) retain any Initial Award Units for a period of six
months after Executive's termination or after expiration of this Agreement
without the exercise by the Company of the option to extend, (b) such Incentive
Compensation, if any, as may be payable to Executive in accordance with any
Incentive Compensation plan then in effect and (c) in the event Executive elects
to continue medical and/or dental coverage under the provisions of the
Consolidated Omnibus Budget Reconciliation Act (COBRA), the Company will pay
Executive, as and when required to maintain such coverage, an amount equal to
the required premiums for the duration of the Non-Compete Period (as hereinafter
defined).
(B) As a condition to the right to receive the Termination Compensation,
Executive will (i) execute and deliver to the Company a severance and release
agreement in the form attached hereto as Exhibit A, and (ii) Executive will not,
for a period (the "Non-Compete Period") equal to (a) six months in the event the
Company does not exercise its option to extend this Agreement or (b) or in the
event of termination of the shorter of one year after the date of Executive's
termination or the unexpired portion of the Initial Term or Extension Term, as
the case may be, but in no event less than six months, either directly or
indirectly, compete with the Company in the crude oil gathering, marketing
(including domestic crude oil trading but excluding trading solely on the New
York Mercantile Exchange or other commodities exchanges) and transportation
(including pipeline) business whether as an employee, officer, director,
shareholder (other than as an ordinary shareholder of a publicly traded entity),
partner, proprietor or otherwise, in the geographical areas in which the Company
then operates or is engaged in business.
(C) The Termination Compensation will be paid to Executive in the event of a
termination pursuant to Section 7.5(A) above, in four equal installments with
the first installment due on the date of such termination and the remaining
installments at equal intervals thereafter over the applicable Non-Compete
Period.
SECTION 8. Confidentiality. Executive acknowledges that the business of
the Company and the Genesis Affiliates is highly competitive and that the
Company's method of operation, crude oil trading practices, financial condition
and other matters relating to the conduct of such business, and the conduct of
such business as previously conducted by Basis Petroleum, Inc. and Howell
Corporation and its affiliates, comprise confidential business information (the
"Confidential Business Information") which is unique and valuable to the
Company. Executive further acknowledges that the use of the Confidential
Business Information by Executive in competition with the Company and the
Genesis Affiliates will be highly detrimental to the continued successful
operation of the business of the Company and the Genesis Affiliates. Executive
will keep the Confidential Business Information confidential and will not
disclose it to any unauthorized parties. Executive acknowledges and agrees that
the Company shall have the broadest possible protection, consistent with public
policy, of the business of the Company and the Genesis Affiliates from the
wrongful use by Executive of such Confidential Business Information.
Confidential Business Information shall not include any information which is
generally available to the public other than as a result of a disclosure by
Executive or which was known to Executive prior to Executive's employment with
the Company or with Basis Petroleum, Inc. or Howell Corporation and its
affiliates, as the case may be.
SECTION 9. Remedies. Each of the parties acknowledges that the rights
hereunder are necessarily of a special, unique and extraordinary nature, and
that the loss arising from a breach hereof cannot reasonably and adequately be
compensated by money damages and will cause a party to suffer irreparable harm.
Accordingly, upon the breach by a party of any material term of this Agreement
at any time, the other party shall be entitled to injunctive or other
extraordinary relief in case of such breach, and such injunctive or other
extraordinary relief shall be cumulative to, but not in limitation of, any other
remedies to which the party may be entitled as a result of the breach of such
Agreement. In the event Executive breaches this Agreement, the Company will
also have the right, in addition to any other rights it may have at law, in
equity or under this Agreement to cancel, withhold and/or offset any payments
due Executive hereunder against any payments otherwise due to Executive from the
Company, Genesis MLP or Genesis OLP. In any action to enforce any right or
remedy hereunder, the prevailing party in a final non-appealable decision of a
court of competent jurisdiction shall be entitled to recover such prevailing
party's reasonable legal fees and expenses.
SECTION 10. Noncompetition. If Executive resigns or otherwise terminates his
employment for any reason other than the Company's breach of a material
provision of this Agreement, or as a result of an Involuntary Termination, then,
Executive will not, for the duration of the Non-Compete Period, directly or
indirectly compete with the Company in the crude oil gathering, marketing
(including domestic crude oil trading but excluding trading solely on the New
York Mercantile Exchange or other commodities exchanges) and transportation
(including) pipeline business at the time of such resignation or termination
whether as an employee, officer, director, shareholder (other than as an
ordinary shareholder of a publicly traded entity), partner, proprietor or
otherwise in the geographical areas in which the Company then operates or is
engaged in business. Executive will not be entitled to any compensation or
payments under this Agreement following any such resignation or termination
except for Incentive Compensation, if any, payable to Executive in accordance
with any Incentive Compensation plan then in effect.
SECTION 11. Amendments; Waivers. This Agreement may not be modified, revised,
amended or waived in any manner except by an instrument in writing signed on
behalf of each of the parties by their respective duly authorized
representatives. No delay on the part of either party in exercising any right,
power or privilege under this Agreement will operate as a waiver thereof, nor
will any partial exercise or waiver of any right, power or privilege under this
Agreement preclude any other or further exercise of such right, power or
privilege.
SECTION 12. Severability. In the event that any provision of this Agreement
is determined by a court of competent jurisdiction to be invalid or
unenforceable in any respect, the parties will amend this Agreement to provide a
substitute provision which as nearly as possible carries out the intent of the
provision so held invalid or unenforceable; provided, however, that no such
amendment will in any way materially increase the obligation of either party
under this Agreement. Any such determination of invalidity or unenforceability
will not affect such provision in any other respect or affect any other
provision of this Agreement all of which will remain in full force and effect.
SECTION 13. Notices. All notices and other communications under this
Agreement will be in writing and will be duly given (i) upon delivery if
delivered personally with signed receipt acknowledging delivery; or (ii) upon
dispatch if telexed (with answerback confirmation) or telegraphed (and if
telegraphed confirmed by first-class mail as hereinafter provided); or (iii) if
mailed, by first class mail, postage prepaid, ten business days after date of
mailing, addressed as follows:
(a) If to the Company
Genesis Energy, L.L.C.
One Allen Center, Suite 3200
500 Dallas
Houston, Texas 77002
Attention: President
(b) If to Executive
John M. Fetzer
at such address as appears on the records of the Company
or to such other address as a party may from time to time designate in the
manner heretofore provided.
SECTION 14. Governing Law and Jurisdiction. This Agreement and the
obligations of the parties hereunder will be governed by and construed in
accordance with the substantive laws of the State of Texas without regard to any
conflict of law rules. Each party consents to the jurisdiction of the courts
located in Harris County, Texas with respect to any action arising hereunder.
SECTION 15. Assignment. This Agreement, and any rights or obligations
hereunder, may not be assigned by either party hereto without written consent of
the other; provided, however, that the Company may assign this Agreement to
Genesis MLP, Genesis OLP, an affiliate of the Company which has succeeded to all
or substantially all of the business of the Company or to a third party
acquiring all or substantially all of the business, equity or assets of the
Company.
SECTION 16. No Third Party Beneficiaries. No person other than Executive and
his beneficiaries on the one hand and the Company or its successors and assigns
on the other hand shall be made a party to this Agreement directly or indirectly
or have any rights or benefits under this Agreement.
SECTION 17. Captions. The titles, captions and headings in this Agreement are
inserted for convenience of reference only and are not intended to form a part
of, or to affect the meaning or interpretation of, this Agreement.
SECTION 18. Execution in Counterparts. This Agreement may be executed in one
or more counterparts, all of which will be considered one and the same
Agreement, and will become a binding Agreement when one or more counterparts
have been signed by each of the parties and delivered to the other party.
SECTION 19. Entire Agreement. This Agreement constitutes the entire agreement
between Executive and the Company concerning the subject matter hereof and
supersedes all previous negotiations, commitments and writings with respect to
such subject matter.
SECTION 20. Advice of Counsel. Executive represents and warrants that
Executive has been advised by competent counsel of his own selection as to the
meaning and significance of this Agreement and all of the terms hereof.
/s/ John M. Fetzer
- -----------------------------------------------
John M. Fetzer
GENESIS ENERGY, L.L.C.
By: BASIS PETROLEUM, INC.
As Member
By: /s/ Jeffrey R. Serra
- -----------------------------------------------
Jeffrey R. Serra, Chairman, President
and Chief Executive Officer
EXHIBIT 10.11
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made as of November 15, 1996 by
and between Genesis Energy, L.L.C. (the "Company") and Allyn R. Skelton, II
("Executive").
RECITALS:
A. The Company is the general partner of Genesis Energy L.P. ("Genesis MLP")
and Genesis Crude Oil, L.P. ("Genesis OLP") and is engaged in the crude oil
gathering, marketing and pipeline business.
B. Executive is the Chief Financial Officer and Secretary for the Company.
C. Executive desires to obtain the benefits and incentives from the Company of
a written employment agreement having an initial term through December 31, 1999,
and, at the Company's election, certain extension terms.
D. The Company desires to enter into such an employment agreement with
Executive.
NOW, THEREFORE, in consideration of the premises and mutual agreements contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and Executive hereby
agree as follows:
SECTION 1. Employment. The Company hereby employs Executive as Chief
Financial Officer of the Company; provided, however, that Executive will
continue as an employee of Executive's employer on the date hereof but will be
seconded to the Company until January 1, 1997 at which time Executive will
become employed by the Company. In such capacity, Executive will have the
responsibilities and perform the services and duties described in Section 3 of
this Agreement. Executive hereby accepts such employment and agrees to perform
such services and duties for the Company.
SECTION 2. Term. This Agreement will be for an initial term commencing on the
effective date of that certain initial public offering of limited partnership
interests in Genesis MLP and ending on December 31, 1999 (the "Initial Term"),
unless sooner terminated in accordance with the provisions hereof. Thereafter,
the Company will have the option, exercisable by notice to Executive given not
less than 60 days prior to the expiration of the Initial Term, or any Extension
Term (as hereinafter defined), to extend this Agreement for one additional term
of two calendar years ending December 31, 2001, and, if, in each instance, so
extended, for five additional terms of one calendar year each with the term of
the last extension, if so exercised, expiring on December 31, 2006 (each such
extension an "Extension Term"). Anything herein to the contrary
notwithstanding, this Agreement, and Executive's employment hereunder, may be
terminated at any time, with or without cause, upon notice of termination to
Executive; provided, however, that in the event of any such termination without
cause (including any Involuntary Termination (as hereinafter defined)),
Executive will be entitled to the Termination Compensation (as hereinafter
defined) set forth herein.
SECTION 3. Duties of Executive. As Chief Financial Officer and Secretary,
Executive will report directly to the President and Chief Executive Officer and
will have such duties and responsibilities with respect to the Company, Genesis
MLP and Genesis OLP as customarily would be undertaken by the chief financial
officer and by the secretary of companies engaged in businesses similar to, or
competitive with, the Company. Executive will not be required to hold any other
offices, positions or directorships of the Company and/or any subsidiary or
affiliate of the Company during the term of this Agreement. Executive will act
in the best interest of the Company, Genesis MLP and Genesis OLP and their
subsidiaries and affiliates in the performance of Executive's services and
duties under this Agreement. Without the prior consent of the Non-Executive
Chairman of the Board of Directors of the Company, Executive will not actively
engage in any other business or business activity; provided, however, that
nothing herein contained will limit the right of Executive to manage Executive's
personal investment activities provided that such personal investment activities
do not materially interfere with the performance of Executive's duties and
responsibilities hereunder or otherwise materially conflict with any policies
which have been promulgated and distributed by the Company.
SECTION 4. Compensation.
4.1 Compensation during the Initial Term. Subject to the terms and conditions
of this Agreement, the Company will cause Executive to be paid an annual salary
of $14,584.00 for the partial year ending December 31, 1996 and will pay
Executive an annual salary of $175,000.00 for each of the years ending December
31, 1997, 1998 and 1999 (such annual salary hereinafter referred to as the "Base
Compensation"). The Base Compensation will be reviewed annually by the
Compensation Committee of the Board of Directors of the Company. In addition,
Executive will be entitled to participate in the Company's Incentive Plan in
accordance with the terms thereof (the "Incentive Plan Amount").
4.2 Compensation during the Extension Terms. The Base Compensation paid by the
Company to Executive during the Extension Terms will be established by the
Company in connection with the election to extend the term of this Agreement
pursuant to Section 2, will not be less than the Base Compensation multiplied by
1.05 with respect to the first Extension Term and thereafter not less than the
Base Compensation in effect immediately prior to such election for any
subsequent Extension Term and will be advised to Executive simultaneously with
notice from the Company of its election to exercise an Extension Term option.
4.3 Award of Restricted Units. The Company will grant to Executive Restricted
Units ("Initial Award Units") in an amount determined by dividing $600,000 by
the initial offering price of a limited partnership interest in Genesis MLP,
pursuant to the Company's Restricted Unit Plan, in accordance with the terms
thereof, promptly upon the adoption of such plan by the Board of Directors of
the Company. The Initial Award Units shall vest in accordance with terms of the
Restricted Unit Plan.
4.4 Short Term Disability Salary Continuance. In the event of a
short term illness or injury that would entitle Executive to salary continuance
benefits under the Company's short term disability salary continuance plan (the
"STD Plan") in effect from time to time, and Executive's years of service with
the Company, as determined in accordance with the STD Plan, are not sufficient
to provide 100% of the maximum amount of salary continuance that would otherwise
be available to Executive with more years of service (the "Maximum STD Payment")
the Company will pay Executive, as and when salary continuance payments are made
under the STD Plan, an amount equal to the difference between the Maximum STD
Payment and the payment made to Executive under the STD Plan.
SECTION 5. Payment of Compensation. The compensation payable to Executive
pursuant to Section 4 of this Agreement will be paid as follows:
(i) During the term of Executive's employment by the Company
(A) the Base Compensation will be paid to Executive in accordance with the
Company's customary payroll practices; and
(B) the Incentive Plan Amount, if any, will be paid in the manner determined by
the Compensation Committee of the Board of Directors of the Company in
accordance with the Incentive Plan.
(ii) Upon termination of Executive's employment by the Company in accordance
with Section 7.5(A) of this Agreement, the Termination Compensation (as
hereinafter defined), if any, will be paid in accordance with the provisions of
Section 7.5(C).
All payments of Base Compensation, the Incentive Plan Amount, Initial Award
Units and any other amounts paid to Executive will be subject to such deductions
and withholdings as, from time to time, may be required by law or as may be
elected by Executive pursuant to the Company's benefit plans in effect from time
to time.
SECTION 6. Employment Benefits. During the Initial Term or any Extension Term
of Executive's employment by the Company, Executive will be entitled to four
weeks paid vacation. In addition, Executive will be entitled to sick leave in
accordance with the Company's sick leave plans in effect from time to time, and
to participate, subject to qualification requirements, in such medical, dental,
life or other insurance or employee benefit plans as the Company may have in
effect from time to time and generally offer to its employees.
SECTION 7. Termination.
7.1 Termination for Cause. This Agreement will be null and void (except for
the provisions of Section 8 concerning Confidentiality which will survive any
termination of this Agreement) upon the termination of Executive's employment
for Cause. As used in this Agreement, "Cause" will mean (a) conviction of
Executive, in a final non-appealable decision, in a court of law of a felony, a
crime involving moral turpitude or any crime or offense involving the misuse or
misappropriation of money, credit or other property of the Company or any
subsidiary or affiliate of the Company which hereinafter may employ Executive;
provided, however, that the Company may suspend Executive's employment and any
payment due Executive under this Agreement during the pendency of any such
criminal charge; (b) violation in any material respect of any material rule or
policy promulgated and distributed by the Company, Genesis MLP, Genesis OLP or
any subsidiary or affiliate of the Company which hereinafter may employ
Executive (hereinafter the "Genesis Affiliates"); (c) violation, as determined
in a final non-appealable decision, of any rule or regulation of any regulatory
or self-regulatory body to which any of the Genesis Affiliates is subject or of
which any of the Genesis Affiliates is a member including without limitation,
the New York Stock Exchange, The National Association of Securities Dealers,
Inc., the Commodity Futures Trading Commission and the New York Mercantile
Exchange, which violation would materially reflect on Executive's character,
competence or integrity; (d) a material breach by Executive of Executive's duty
of loyalty to any of the Genesis Affiliates including, by way of illustration,
Executive's pretermination of employment solicitation of customers or employees
of any of the Genesis Affiliates, unauthorized removal of Confidential Business
Information (as hereinafter defined) from the premises of any of the Genesis
Affiliates and the dissemination thereof or refusal to return such Confidential
Business Information to the Company; (e) Executive's material breach of this
Agreement; or (f) Executive's gross misconduct, gross insubordination or willful
refusal to perform the lawful duties of his employment. In no event will
Executive be entitled to any compensation or payments under this Agreement
following Executive's termination, or deemed termination, for Cause, provided
that Executive's termination for Cause under this Agreement shall not affect
Executive's rights with respect to any Initial Award Units that shall have
vested at the time of termination. If, after Executive's termination of
employment, it is determined that Executive's employment could have been
terminated for Cause under items (a),(b),(c) or (d) above and such grounds for
termination resulted in or reasonably could be expected to result in injury to
the business, reputation or prospects of the Company or the Genesis Affiliates,
Executive's employment shall, at the election of the Company in its sole
discretion, be deemed to have been terminated for Cause. If Executive's
employment and payment are suspended pursuant to item (a) above, Executive will
have the right, excercisable by notice to the Company given within 15 days after
any such suspension, to treat such suspension as a termination for Cause and
resign from the Company without being bound by the non-compete provisions of
Section 10 of this Agreement.
Prior to any termination of Executive's employment for Cause, the Company shall
afford Executive an opportunity to meet with the Company's independent directors
and Chairman of the Board and present Executive's position with respect to such
grounds for termination.
7.2 Involuntary Termination. Executive's employment will be considered to have
been terminated involuntarily (an "Involuntary Termination") upon occurrence of
the following: (a) the duties and responsibilities of Executive shall have been
substantially and materially reduced such that Executive's duties and
responsibilities would no longer reasonably be considered to be comparable to
those of the chief financial officers of companies similar to, or competitive
with, the Company, (b) reduction in Executive's Base Compensation or exclusion,
other than for failure to meet qualification requirements, from the Company's
employee benefit plans in effect from time to time and generally offered to its
employees, (c) a change of greater than 75 miles in the location, on the date
hereof, of the Company's principal executive offices or (d) the Company's
material breach of this Agreement. Executive will promptly, but in any event
within 30 days after the occurrence or discovery thereof, notify the Company of
any event which Executive considers an Involuntary Termination.
7.3 Termination under Benefit Plans. If Executive's employment is terminated
in accordance with the terms of the Company's long term disability plan in
effect from time to time, any unpaid portion of Executive's Base Compensation
will be due Executive pursuant to this Agreement only for periods prior to such
termination, and any payment pursuant to the Incentive Plan may be made solely
in the discretion of the Compensation Committee and otherwise in accordance with
the terms of such plan.
7.4 Termination due to Death. If Executive dies while employed by the Company,
this Agreement will immediately terminate and, except for any unpaid portion of
Executive's Base Compensation for periods prior to Executive's death, no further
payments will be due hereunder, whether to Executive, Executive's heirs, estate
or otherwise; provided, however, that Executive's heirs and estate will be
entitled to retain any Initial Award Units for a period of six months after
Executive's death. Executive shall have the right to designate in writing from
time to time a beneficiary or beneficiaries by filing a written notice of such
designation with the Company, which Beneficiary shall be entitled to receive any
amount required to be paid as provided in this Section 7.4 in the event of the
Executive's death. In the event that the beneficiary designated by Executive
does not survive Executive and no successor beneficiary is selected or in the
event no valid designation has been made, Executive's beneficiary shall be such
Executive's estate. In the event of the death of Executive, any payment
required to be made hereunder to Executive shall be made to such Executive's
beneficiary or beneficiaries. In the event Executive's beneficiary is the
Executive's estate, no payment shall be made unless the Company shall have been
furnished with such evidence as the Company may deem necessary to establish the
validity of the payment.
7.5 Termination Compensation.
(A) In the event the Company (i) terminates Executive's employment during the
Initial Term or any Extension Term for any reason other than Cause, including
any Involuntary Termination, or as provided in Section 7.3 of this Agreement, or
(ii) does not exercise its option to extend the Initial Term or any Extension
Term of this Agreement, the Company will pay Executive, in full settlement of
all sums due Executive from the Company (excluding, however, any sums then due
Executive under any of the Company's benefit plans or with respect to accrued
vacation), whether under this Agreement or arising at law or in equity, a
termination payment (the "Termination Compensation") equal to the greater of (i)
Executive's Base Compensation for the remaining period of the Initial Term or
Extension Term then in effect, as the case may be, or (ii) one year of
Executive's Base Compensation at the level in effect at the time of termination
or expiration without exercise of the option to extend. In addition, Executive
will be entitled to (a) retain any Initial Award Units for a period of six
months after Executive's termination or after expiration of this Agreement
without the exercise by the Company of the option to extend, (b) such Incentive
Compensation, if any, as may be payable to Executive in accordance with any
Incentive Compensation plan then in effect and (c) in the event Executive elects
to continue medical and/or dental coverage under the provisions of the
Consolidated Omnibus Budget Reconciliation Act (COBRA), the Company will pay
Executive, as and when required to maintain such coverage, an amount equal to
the required premiums for the duration of the Non-Compete Period (as hereinafter
defined).
(B) As a condition to the right to receive the Termination Compensation,
Executive will (i) execute and deliver to the Company a severance and release
agreement in the form attached hereto as Exhibit A, and (ii) Executive will not,
for a period (the "Non-Compete Period") equal to (a) six months in the event the
Company does not exercise its option to extend this Agreement or (b) or in the
event of termination of the shorter of one year after the date of Executive's
termination or the unexpired portion of the Initial Term or Extension Term, as
the case may be, but in no event less than six months, either directly or
indirectly, compete with the Company in the crude oil gathering, marketing
(including domestic crude oil trading but excluding trading solely on the New
York Mercantile Exchange or other commodities exchanges) and transportation
(including pipeline) business whether as an employee, officer, director,
shareholder (other than as an ordinary shareholder of a publicly traded entity),
partner, proprietor or otherwise, in the geographical areas in which the Company
then operates or is engaged in business.
(C) The Termination Compensation will be paid to Executive in the event of a
termination pursuant to Section 7.5(A) above, in four equal installments with
the first installment due on the date of such termination and the remaining
installments at equal intervals thereafter over the applicable Non-Compete
Period.
SECTION 8. Confidentiality. Executive acknowledges that the business of
the Company and the Genesis Affiliates is highly competitive and that the
Company's method of operation, crude oil trading practices, financial condition
and other matters relating to the conduct of such business, and the conduct of
such business as previously conducted by Basis Petroleum, Inc. and Howell
Corporation and its affiliates, comprise confidential business information (the
"Confidential Business Information") which is unique and valuable to the
Company. Executive further acknowledges that the use of the Confidential
Business Information by Executive in competition with the Company and the
Genesis Affiliates will be highly detrimental to the continued successful
operation of the business of the Company and the Genesis Affiliates. Executive
will keep the Confidential Business Information confidential and will not
disclose it to any unauthorized parties. Executive acknowledges and agrees that
the Company shall have the broadest possible protection, consistent with public
policy, of the business of the Company and the Genesis Affiliates from the
wrongful use by Executive of such Confidential Business Information.
Confidential Business Information shall not include any information which is
generally available to the public other than as a result of a disclosure by
Executive or which was known to Executive prior to Executive's employment with
the Company or with Basis Petroleum, Inc. or Howell Corporation and its
affiliates, as the case may be.
SECTION 9. Remedies. Each of the parties acknowledges that the rights
hereunder are necessarily of a special, unique and extraordinary nature, and
that the loss arising from a breach hereof cannot reasonably and adequately be
compensated by money damages and will cause a party to suffer irreparable harm.
Accordingly, upon the breach by a party of any material term of this Agreement
at any time, the other party shall be entitled to injunctive or other
extraordinary relief in case of such breach, and such injunctive or other
extraordinary relief shall be cumulative to, but not in limitation of, any other
remedies to which the party may be entitled as a result of the breach of such
Agreement. In the event Executive breaches this Agreement, the Company will
also have the right, in addition to any other rights it may have at law, in
equity or under this Agreement to cancel, withhold and/or offset any payments
due Executive hereunder against any payments otherwise due to Executive from the
Company, Genesis MLP or Genesis OLP. In any action to enforce any right or
remedy hereunder, the prevailing party in a final non-appealable decision of a
court of competent jurisdiction shall be entitled to recover such prevailing
party's reasonable legal fees and expenses.
SECTION 10. Noncompetition. If Executive resigns or otherwise terminates his
employment for any reason other than the Company's breach of a material
provision of this Agreement, or as a result of an Involuntary Termination, then,
Executive will not, for the duration of the Non-Compete Period, directly or
indirectly compete with the Company in the crude oil gathering, marketing
(including domestic crude oil trading but excluding trading solely on the New
York Mercantile Exchange or other commodities exchanges) and transportation
(including) pipeline business at the time of such resignation or termination
whether as an employee, officer, director, shareholder (other than as an
ordinary shareholder of a publicly traded entity), partner, proprietor or
otherwise in the geographical areas in which the Company then operates or is
engaged in business. Executive will not be entitled to any compensation or
payments under this Agreement following any such resignation or termination
except for Incentive Compensation, if any, payable to Executive in accordance
with any Incentive Compensation plan then in effect.
SECTION 11. Amendments; Waivers. This Agreement may not be modified, revised,
amended or waived in any manner except by an instrument in writing signed on
behalf of each of the parties by their respective duly authorized
representatives. No delay on the part of either party in exercising any right,
power or privilege under this Agreement will operate as a waiver thereof, nor
will any partial exercise or waiver of any right, power or privilege under this
Agreement preclude any other or further exercise of such right, power or
privilege.
SECTION 12. Severability. In the event that any provision of this Agreement
is determined by a court of competent jurisdiction to be invalid or
unenforceable in any respect, the parties will amend this Agreement to provide a
substitute provision which as nearly as possible carries out the intent of the
provision so held invalid or unenforceable; provided, however, that no such
amendment will in any way materially increase the obligation of either party
under this Agreement. Any such determination of invalidity or unenforceability
will not affect such provision in any other respect or affect any other
provision of this Agreement all of which will remain in full force and effect.
SECTION 13. Notices. All notices and other communications under this
Agreement will be in writing and will be duly given (i) upon delivery if
delivered personally with signed receipt acknowledging delivery; or (ii) upon
dispatch if telexed (with answerback confirmation) or telegraphed (and if
telegraphed confirmed by first-class mail as hereinafter provided); or (iii) if
mailed, by first class mail, postage prepaid, ten business days after date of
mailing, addressed as follows:
(a) If to the Company
Genesis Energy, L.L.C.
One Allen Center, Suite 3200
500 Dallas
Houston, Texas 77002
Attention: President
(b) If to Executive
Allyn R. Skelton, II
at such address as appears on the records of the Company
or to such other address as a party may from time to time designate in the
manner heretofore provided.
SECTION 14. Governing Law and Jurisdiction. This Agreement and the
obligations of the parties hereunder will be governed by and construed in
accordance with the substantive laws of the State of Texas without regard to any
conflict of law rules. Each party consents to the jurisdiction of the courts
located in Harris County, Texas with respect to any action arising hereunder.
SECTION 15. Assignment. This Agreement, and any rights or obligations
hereunder, may not be assigned by either party hereto without written consent of
the other; provided, however, that the Company may assign this Agreement to
Genesis MLP, Genesis OLP, an affiliate of the Company which has succeeded to all
or substantially all of the business of the Company or to a third party
acquiring all or substantially all of the business, equity or assets of the
Company.
SECTION 16. No Third Party Beneficiaries. No person other than Executive and
his beneficiaries on the one hand and the Company or its successors and assigns
on the other hand shall be made a party to this Agreement directly or indirectly
or have any rights or benefits under this Agreement.
SECTION 17. Captions. The titles, captions and headings in this Agreement are
inserted for convenience of reference only and are not intended to form a part
of, or to affect the meaning or interpretation of, this Agreement.
SECTION 18. Execution in Counterparts. This Agreement may be executed in one
or more counterparts, all of which will be considered one and the same
Agreement, and will become a binding Agreement when one or more counterparts
have been signed by each of the parties and delivered to the other party.
SECTION 19. Entire Agreement. This Agreement constitutes the entire agreement
between Executive and the Company concerning the subject matter hereof and
supersedes all previous negotiations, commitments and writings with respect to
such subject matter.
SECTION 20. Advice of Counsel. Executive represents and warrants that
Executive has been advised by competent counsel of his own selection as to the
meaning and significance of this Agreement and all of the terms hereof.
/s/ Allyn R. Skelton, II
- ------------------------------------------------------
Allyn R. Skelton, II
GENESIS ENERGY, L.L.C.
By: BASIS PETROLEUM, INC.
As Member
By: /s/ Jeffrey R. Serra
- ------------------------------------------------------
Jeffrey R. Serra, Chairman, President
and Chief Executive Officer
EXHIBIT 10.12
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made as of December 1, 1996 by
and between Genesis Energy, L.L.C. (the "Company") and Paul A. Scoff
("Executive").
RECITALS:
A. The Company is the general partner of Genesis Energy L.P. ("Genesis MLP")
and Genesis Crude Oil, L.P. ("Genesis OLP") and is engaged in the crude oil
gathering, marketing and pipeline business.
B. Executive is the General Counsel for the Company.
C. Executive desires to obtain the benefits and incentives from the Company of
a written employment agreement having an initial term through December 31, 1999,
and, at the Company's election, certain extension terms.
D. The Company desires to enter into such an employment agreement with
Executive.
NOW, THEREFORE, in consideration of the premises and mutual agreements contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and Executive hereby
agree as follows:
SECTION 1. Employment. The Company hereby employs Executive as General
Counsel of the Company; provided, however, that Executive will continue as an
employee of Executive's employer on the date hereof but will be seconded to the
Company until January 1, 1997 at which time Executive will become employed by
the Company. In such capacity, Executive will have the responsibilities and
perform the services and duties described in Section 3 of this Agreement.
Executive hereby accepts such employment and agrees to perform such services and
duties for the Company.
SECTION 2. Term. This Agreement will be for an initial term commencing on the
effective date of that certain initial public offering of limited partnership
interests in Genesis MLP and ending on December 31, 1999 (the "Initial Term"),
unless sooner terminated in accordance with the provisions hereof. Thereafter,
the Company will have the option, exercisable by notice to Executive given not
less than 60 days prior to the expiration of the Initial Term, or any Extension
Term (as hereinafter defined), to extend this Agreement for one additional term
of two calendar years ending December 31, 2001, and, if, in each instance, so
extended, for five additional terms of one calendar year each with the term of
the last extension, if so exercised, expiring on December 31, 2006 (each such
extension an "Extension Term"). Anything herein to the contrary
notwithstanding, this Agreement, and Executive's employment hereunder, may be
terminated at any time, with or without cause, upon notice of termination to
Executive; provided, however, that in the event of any such termination without
cause (including any Involuntary Termination (as hereinafter defined)),
Executive will be entitled to the Termination Compensation (as hereinafter
defined) set forth herein.
SECTION 3. Duties of Executive. Executive will render his services to the
Company as General Counsel and will have such other duties and responsibilities
with respect to the Company as the President and CEO of the Company may, from
time to time, designate. Executive will act in the best interest of the Company,
Genesis MLP and Genesis OLP and their subsidiaries and affiliates in the
performance of Executive's services and duties under this Agreement. Without
the prior consent of the President and CEO of the Company, Executive will not
actively engage in any other business or business activity; provided, however,
that nothing herein contained will limit the right of Executive to manage
Executive's personal investment activities provided that such personal
investment activities do not materially interfere with the performance of
Executive's duties and responsibilities hereunder or otherwise materially
conflict with any policies which have been promulgated and distributed by the
Company.
SECTION 4. Compensation.
4.1 Compensation during the Initial Term. Subject to the terms and conditions
of this Agreement, the Company will cause Executive to be paid an annual salary
of $10,417.00 for the partial year ending December 31, 1996 and will pay
Executive an annual salary of $125,000.00 for each of the years ending December
31, 1997, 1998 and 1999 (such annual salary hereinafter referred to as the "Base
Compensation"). The Base Compensation will be reviewed annually by the
Compensation Committee of the Board of Directors of the Company. In addition,
Executive will be entitled to participate in the Company's Incentive Plan in
accordance with the terms thereof (the "Incentive Plan Amount").
4.2 Compensation during the Extension Terms. The Base Compensation paid by the
Company to Executive during the Extension Terms will be established by the
Company in connection with the election to extend the term of this Agreement
pursuant to Section 2, will not be less than the Base Compensation multiplied by
1.05 with respect to the first Extension Term and thereafter not less than the
Base Compensation in effect immediately prior to such election for any
subsequent Extension Term and will be advised to Executive simultaneously with
notice from the Company of its election to exercise an Extension Term option.
4.3 Award of Restricted Units. The Company will grant to Executive Restricted
Units ("Initial Award Units") in an amount determined by dividing $200,000 by
the initial offering price of a limited partnership interest in Genesis MLP,
pursuant to the Company's Restricted Unit Plan, in accordance with the terms
thereof, promptly upon the adoption of such plan by the Board of Directors of
the Company. The Initial Award Units shall vest in accordance with terms of the
Restricted Unit Plan.
4.4 Short Term Disability Salary Continuance. In the event of a
short term illness or injury that would entitle Executive to salary continuance
benefits under the Company's short term disability salary continuance plan (the
"STD Plan") in effect from time to time, and Executive's years of service with
the Company, as determined in accordance with the STD Plan, are not sufficient
to provide 100% of the maximum amount of salary continuance that would otherwise
be available to Executive with more years of service (the "Maximum STD Payment")
the Company will pay Executive, as and when salary continuance payments are made
under the STD Plan, an amount equal to the difference between the Maximum STD
Payment and the payment made to Executive under the STD Plan.
SECTION 5. Payment of Compensation. The compensation payable to Executive
pursuant to Section 4 of this Agreement will be paid as follows:
(i) During the term of Executive's employment by the Company
(A) the Base Compensation will be paid to Executive in accordance with the
Company's customary payroll practices; and
(B) the Incentive Plan Amount, if any, will be paid in the manner determined by
the Compensation Committee of the Board of Directors of the Company in
accordance with the Incentive Plan.
(ii) Upon termination of Executive's employment by the Company in accordance
with Section 7.5(A) of this Agreement, the Termination Compensation (as
hereinafter defined), if any, will be paid in accordance with the provisions of
Section 7.5(C).
All payments of Base Compensation, the Incentive Plan Amount, Initial Award
Units and any other amounts paid to Executive will be subject to such deductions
and withholdings as, from time to time, may be required by law or as may be
elected by Executive pursuant to the Company's benefit plans in effect from time
to time.
SECTION 6. Employment Benefits. During the Initial Term or any Extension Term
of Executive's employment by the Company, Executive will be entitled to four
weeks paid vacation. In addition, Executive will be entitled to sick leave in
accordance with the Company's sick leave plans in effect from time to time, and
to participate, subject to qualification requirements, in such medical, dental,
life or other insurance or employee benefit plans as the Company may have in
effect from time to time and generally offer to its employees.
SECTION 7. Termination.
7.1 Termination for Cause. This Agreement will be null and void (except for
the provisions of Section 8 concerning Confidentiality which will survive any
termination of this Agreement) upon the termination of Executive's employment
for Cause. As used in this Agreement, "Cause" will mean (a) conviction of
Executive, in a final non-appealable decision, in a court of law of a felony, a
crime involving moral turpitude or any crime or offense involving the misuse or
misappropriation of money, credit or other property of the Company or any
subsidiary or affiliate of the Company which hereinafter may employ Executive;
provided, however, that the Company may suspend Executive's employment and any
payment due Executive under this Agreement during the pendency of any such
criminal charge; (b) violation in any material respect of any material rule or
policy promulgated and distributed by the Company, Genesis MLP, Genesis OLP or
any subsidiary or affiliate of the Company which hereinafter may employ
Executive (hereinafter the "Genesis Affiliates"); (c) violation, as determined
in a final non-appealable decision, of any rule or regulation of any regulatory
or self-regulatory body to which any of the Genesis Affiliates is subject or of
which any of the Genesis Affiliates is a member including without limitation,
the New York Stock Exchange, The National Association of Securities Dealers,
Inc., the Commodity Futures Trading Commission and the New York Mercantile
Exchange, which violation would materially reflect on Executive's character,
competence or integrity; (d) a material breach by Executive of Executive's duty
of loyalty to any of the Genesis Affiliates including, by way of illustration,
Executive's pretermination of employment solicitation of customers or employees
of any of the Genesis Affiliates, unauthorized removal of Confidential Business
Information (as hereinafter defined) from the premises of any of the Genesis
Affiliates and the dissemination thereof or refusal to return such Confidential
Business Information to the Company; (e) Executive's material breach of this
Agreement; or (f) Executive's gross misconduct, gross insubordination or willful
refusal to perform the lawful duties of his employment. In no event will
Executive be entitled to any compensation or payments under this Agreement
following Executive's termination, or deemed termination, for Cause, provided
that Executive's termination for Cause under this Agreement shall not affect
Executive's rights with respect to any Initial Award Units that shall have
vested at the time of termination. If, after Executive's termination of
employment, it is determined that Executive's employment could have been
terminated for Cause under items (a),(b),(c) or (d) above and such grounds for
termination resulted in or reasonably could be expected to result in injury to
the business, reputation or prospects of the Company or the Genesis Affiliates,
Executive's employment shall, at the election of the Company in its sole
discretion, be deemed to have been terminated for Cause. If Executive's
employment and payment are suspended pursuant to item (a) above, Executive will
have the right, excercisable by notice to the Company given within 15 days after
any such suspension, to treat such suspension as a termination for Cause and
resign from the Company without being bound by the non-compete provisions of
Section 10 of this Agreement.
7.2 Involuntary Termination. Executive's employment will be considered to have
been terminated involuntarily (an "Involuntary Termination") upon occurrence of
the following: (a) reduction in Executive's Base Compensation or exclusion,
other than for failure to meet qualification requirements, from the Company's
employee benefit plans in effect from time to time and generally offered to its
employees or (b) the Company's material breach of this Agreement. Executive
will promptly, but in any event within 30 days after the occurrence or discovery
thereof, notify the Company of any event which Executive considers an
Involuntary Termination.
7.3 Termination under Benefit Plans. If Executive's employment is terminated
in accordance with the terms of the Company's long term disability plan in
effect from time to time, any unpaid portion of Executive's Base Compensation
will be due Executive pursuant to this Agreement only for periods prior to such
termination, and any payment pursuant to the Incentive Plan may be made solely
in the discretion of the Compensation Committee and otherwise in accordance with
the terms of such plan.
7.4 Termination due to Death. If Executive dies while employed by the Company,
this Agreement will immediately terminate and, except for any unpaid portion of
Executive's Base Compensation for periods prior to Executive's death, no further
payments will be due hereunder, whether to Executive, Executive's heirs, estate
or otherwise; provided, however, that Executive's heirs and estate will be
entitled to retain any Initial Award Units for a period of six months after
Executive's death. Executive shall have the right to designate in writing from
time to time a beneficiary or beneficiaries by filing a written notice of such
designation with the Company, which Beneficiary shall be entitled to receive any
amount required to be paid as provided in this Section 7.4 in the event of the
Executive's death. In the event that the beneficiary designated by Executive
does not survive Executive and no successor beneficiary is selected or in the
event no valid designation has been made, Executive's beneficiary shall be such
Executive's estate. In the event of the death of Executive, any payment
required to be made hereunder to Executive shall be made to such Executive's
beneficiary or beneficiaries. In the event Executive's beneficiary is the
Executive's estate, no payment shall be made unless the Company shall have been
furnished with such evidence as the Company may deem necessary to establish the
validity of the payment.
7.5 Termination Compensation.
(A) In the event the Company (i) terminates Executive's employment during the
Initial Term or any Extension Term for any reason other than Cause, including
any Involuntary Termination, or as provided in Section 7.3 of this Agreement, or
(ii) does not exercise its option to extend the Initial Term or any Extension
Term of this Agreement, the Company will pay Executive, in full settlement of
all sums due Executive from the Company (excluding, however, any sums then due
Executive under any of the Company's benefit plans or with respect to accrued
vacation), whether under this Agreement or arising at law or in equity, a
termination payment (the "Termination Compensation") equal to the greater of (i)
Executive's Base Compensation for the remaining period of the Initial Term or
Extension Term then in effect, as the case may be, or (ii) one year of
Executive's Base Compensation at the level in effect at the time of termination
or expiration without exercise of the option to extend. In addition, Executive
will be entitled to (a) retain any Initial Award Units for a period of six
months after Executive's termination or after expiration of this Agreement
without the exercise by the Company of the option to extend, (b) such Incentive
Compensation, if any, as may be payable to Executive in accordance with any
Incentive Compensation plan then in effect and (c) in the event Executive elects
to continue medical and/or dental coverage under the provisions of the
Consolidated Omnibus Budget Reconciliation Act (COBRA), the Company will pay
Executive, as and when required to maintain such coverage, an amount equal to
the required premiums for the duration of the Non-Compete Period (as hereinafter
defined).
(B) As a condition to the right to receive the Termination Compensation,
Executive will (i) execute and deliver to the Company a severance and release
agreement in the form attached hereto as Exhibit A, and (ii) Executive will not,
for a period (the "Non-Compete Period") equal to (a) six months in the event the
Company does not exercise its option to extend this Agreement or (b) or in the
event of termination of the shorter of one year after the date of Executive's
termination or the unexpired portion of the Initial Term or Extension Term, as
the case may be, but in no event less than six months, either directly or
indirectly, compete with the Company in the crude oil gathering, marketing
(including domestic crude oil trading but excluding trading solely on the New
York Mercantile Exchange or other commodities exchanges) and transportation
(including pipeline) business whether as an employee, officer, director,
shareholder (other than as an ordinary shareholder of a publicly traded entity),
partner, proprietor or otherwise, in the geographical areas in which the Company
then operates or is engaged in business.
(C) The Termination Compensation will be paid to Executive in the event of a
termination pursuant to Section 7.5(A) above, in four equal installments with
the first installment due on the date of such termination and the remaining
installments at equal intervals thereafter over the applicable Non-Compete
Period.
SECTION 8. Confidentiality. Executive acknowledges that the business of
the Company and the Genesis Affiliates is highly competitive and that the
Company's method of operation, crude oil trading practices, financial condition
and other matters relating to the conduct of such business, and the conduct of
such business as previously conducted by Basis Petroleum, Inc. and Howell
Corporation and its affiliates, comprise confidential business information (the
"Confidential Business Information") which is unique and valuable to the
Company. Executive further acknowledges that the use of the Confidential
Business Information by Executive in competition with the Company and the
Genesis Affiliates will be highly detrimental to the continued successful
operation of the business of the Company and the Genesis Affiliates. Executive
will keep the Confidential Business Information confidential and will not
disclose it to any unauthorized parties. Executive acknowledges and agrees that
the Company shall have the broadest possible protection, consistent with public
policy, of the business of the Company and the Genesis Affiliates from the
wrongful use by Executive of such Confidential Business Information.
Confidential Business Information shall not include any information which is
generally available to the public other than as a result of a disclosure by
Executive or which was known to Executive prior to Executive's employment with
the Company or with Basis Petroleum, Inc. or Howell Corporation and its
affiliates, as the case may be.
SECTION 9. Remedies. Each of the parties acknowledges that the rights
hereunder are necessarily of a special, unique and extraordinary nature, and
that the loss arising from a breach hereof cannot reasonably and adequately be
compensated by money damages and will cause a party to suffer irreparable harm.
Accordingly, upon the breach by a party of any material term of this Agreement
at any time, the other party shall be entitled to injunctive or other
extraordinary relief in case of such breach, and such injunctive or other
extraordinary relief shall be cumulative to, but not in limitation of, any other
remedies to which the party may be entitled as a result of the breach of such
Agreement. In the event Executive breaches this Agreement, the Company will
also have the right, in addition to any other rights it may have at law, in
equity or under this Agreement to cancel, withhold and/or offset any payments
due Executive hereunder against any payments otherwise due to Executive from the
Company, Genesis MLP or Genesis OLP. In any action to enforce any right or
remedy hereunder, the prevailing party in a final non-appealable decision of a
court of competent jurisdiction shall be entitled to recover such prevailing
party's reasonable legal fees and expenses.
SECTION 10. Noncompetition. If Executive resigns or otherwise terminates his
employment for any reason other than the Company's breach of a material
provision of this Agreement, or as a result of an Involuntary Termination, then,
Executive will not, for the duration of the Non-Compete Period, directly or
indirectly compete with the Company in the crude oil gathering, marketing
(including domestic crude oil trading but excluding trading solely on the New
York Mercantile Exchange or other commodities exchanges) and transportation
(including) pipeline business at the time of such resignation or termination
whether as an employee, officer, director, shareholder (other than as an
ordinary shareholder of a publicly traded entity), partner, proprietor or
otherwise in the geographical areas in which the Company then operates or is
engaged in business. Executive will not be entitled to any compensation or
payments under this Agreement following any such resignation or termination
except for Incentive Compensation, if any, payable to Executive in accordance
with any Incentive Compensation plan then in effect.
SECTION 11. Amendments; Waivers. This Agreement may not be modified, revised,
amended or waived in any manner except by an instrument in writing signed on
behalf of each of the parties by their respective duly authorized
representatives. No delay on the part of either party in exercising any right,
power or privilege under this Agreement will operate as a waiver thereof, nor
will any partial exercise or waiver of any right, power or privilege under this
Agreement preclude any other or further exercise of such right, power or
privilege.
SECTION 12. Severability. In the event that any provision of this Agreement
is determined by a court of competent jurisdiction to be invalid or
unenforceable in any respect, the parties will amend this Agreement to provide a
substitute provision which as nearly as possible carries out the intent of the
provision so held invalid or unenforceable; provided, however, that no such
amendment will in any way materially increase the obligation of either party
under this Agreement. Any such determination of invalidity or unenforceability
will not affect such provision in any other respect or affect any other
provision of this Agreement all of which will remain in full force and effect.
SECTION 13. Notices. All notices and other communications under this
Agreement will be in writing and will be duly given (i) upon delivery if
delivered personally with signed receipt acknowledging delivery; or (ii) upon
dispatch if telexed (with answerback confirmation) or telegraphed (and if
telegraphed confirmed by first-class mail as hereinafter provided); or (iii) if
mailed, by first class mail, postage prepaid, ten business days after date of
mailing, addressed as follows:
(a) If to the Company
Genesis Energy, L.L.C.
One Allen Center, Suite 3200
500 Dallas
Houston, Texas 77002
Attention: President
(b) If to Executive
Paul A. Scoff
at such address as appears on the records of the Company
or to such other address as a party may from time to time designate in the
manner heretofore provided.
SECTION 14. Governing Law and Jurisdiction. This Agreement and the
obligations of the parties hereunder will be governed by and construed in
accordance with the substantive laws of the State of Texas without regard to any
conflict of law rules. Each party consents to the jurisdiction of the courts
located in Harris County, Texas with respect to any action arising hereunder.
SECTION 15. Assignment. This Agreement, and any rights or obligations
hereunder, may not be assigned by either party hereto without written consent of
the other; provided, however, that the Company may assign this Agreement to
Genesis MLP, Genesis OLP, an affiliate of the Company which has succeeded to all
or substantially all of the business of the Company or to a third party
acquiring all or substantially all of the business, equity or assets of the
Company.
SECTION 16. No Third Party Beneficiaries. No person other than Executive and
his beneficiaries on the one hand and the Company or its successors and assigns
on the other hand shall be made a party to this Agreement directly or indirectly
or have any rights or benefits under this Agreement.
SECTION 17. Captions. The titles, captions and headings in this Agreement are
inserted for convenience of reference only and are not intended to form a part
of, or to affect the meaning or interpretation of, this Agreement.
SECTION 18. Execution in Counterparts. This Agreement may be executed in one
or more counterparts, all of which will be considered one and the same
Agreement, and will become a binding Agreement when one or more counterparts
have been signed by each of the parties and delivered to the other party.
SECTION 19. Entire Agreement. This Agreement constitutes the entire agreement
between Executive and the Company concerning the subject matter hereof and
supersedes all previous negotiations, commitments and writings with respect to
such subject matter.
SECTION 20. Advice of Counsel. Executive represents and warrants that
Executive has been advised by competent counsel of his own selection as to the
meaning and significance of this Agreement and all of the terms hereof.
/s/ Paul A. Scoff
- -------------------------------------------------------
Paul A. Scoff
GENESIS ENERGY, L.L.C.
By: BASIS PETROLEUM, INC.
As Member
By:/s/ Jeffrey R. Serra
- -------------------------------------------------------
Jeffrey R. Serra, Chairman, President
and Chief Executive Officer
EXHIBIT 10.13
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made as of December 1, 1996 by
and between Genesis Energy, L.L.C. (the "Company") and Allen R. Stanley
("Executive").
RECITALS:
A. The Company is the general partner of Genesis Energy L.P. ("Genesis MLP")
and Genesis Crude Oil, L.P. ("Genesis OLP") and is engaged in the crude oil
gathering, marketing and pipeline business.
B. Executive is the Vice President, Pipeline Operations for the Company.
C. Executive desires to obtain the benefits and incentives from the Company of
a written employment agreement having an initial term through December 31, 1999,
and, at the Company's election, certain extension terms.
D. The Company desires to enter into such an employment agreement with
Executive.
NOW, THEREFORE, in consideration of the premises and mutual agreements contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and Executive hereby
agree as follows:
SECTION 1. Employment. The Company hereby employs Executive as an executive
officer of the Company, to perform such executive, managerial and senior
operations services as may be assigned to Executive from time to time; provided,
however, that Executive will continue as an employee of Executive's employer on
the date hereof but will be seconded to the Company until January 1, 1997 at
which time Executive will become employed by the Company. In such capacity,
Executive will have the responsibilities and perform the services and duties
described in Section 3 of this Agreement. Executive hereby accepts such
employment and agrees to perform such services and duties for the Company.
SECTION 2. Term. This Agreement will be for an initial term commencing on the
effective date of that certain initial public offering of limited partnership
interests in Genesis MLP and ending on December 31, 1999 (the "Initial Term"),
unless sooner terminated in accordance with the provisions hereof. Thereafter,
the Company will have the option, exercisable by notice to Executive given not
less than 60 days prior to the expiration of the Initial Term, or any Extension
Term (as hereinafter defined), to extend this Agreement for one additional term
of two calendar years ending December 31, 2001, and, if, in each instance, so
extended, for five additional terms of one calendar year each with the term of
the last extension, if so exercised, expiring on December 31, 2006 (each such
extension an "Extension Term"). Anything herein to the contrary
notwithstanding, this Agreement, and Executive's employment hereunder, may be
terminated at any time, with or without cause, upon notice of termination to
Executive; provided, however, that in the event of any such termination without
cause (including any Involuntary Termination (as hereinafter defined)),
Executive will be entitled to the Termination Compensation (as hereinafter
defined) set forth herein.
SECTION 3. Duties of Executive. Executive will render his services to the
Company as Vice President, Pipeline Operations, and/or in such other executive
or managerial capacities as the President and CEO of the Company may, from time
to time, designate. Executive will act in the best interest of the Company,
Genesis MLP and Genesis OLP and their subsidiaries and affiliates in the
performance of Executive's services and duties under this Agreement. Without
the prior consent of the President and CEO of the Company, Executive will not
actively engage in any other business or business activity; provided, however,
that nothing herein contained will limit the right of Executive to manage
Executive's personal investment activities provided that such personal
investment activities do not materially interfere with the performance of
Executive's duties and responsibilities hereunder or otherwise materially
conflict with any policies which have been promulgated and distributed by the
Company.
SECTION 4. Compensation.
4.1 Compensation during the Initial Term. Subject to the terms and conditions
of this Agreement, the Company will cause Executive to be paid an annual salary
of $11,667.00 for the partial year ending December 31, 1996 and will pay
Executive an annual salary of $140,000.00 for each of the years ending December
31, 1997, 1998 and 1999 (such annual salary hereinafter referred to as the "Base
Compensation"). The Base Compensation will be reviewed annually by the
Compensation Committee of the Board of Directors of the Company. In addition,
Executive will be entitled to participate in the Company's Incentive Plan in
accordance with the terms thereof (the "Incentive Plan Amount").
4.2 Compensation during the Extension Terms. The Base Compensation paid by the
Company to Executive during the Extension Terms will be established by the
Company in connection with the election to extend the term of this Agreement
pursuant to Section 2, will not be less than the Base Compensation multiplied by
1.05 with respect to the first Extension Term and thereafter not less than the
Base Compensation in effect immediately prior to such election for any
subsequent Extension Term and will be advised to Executive simultaneously with
notice from the Company of its election to exercise an Extension Term option.
4.3 Award of Restricted Units. The Company will grant to Executive Restricted
Units ("Initial Award Units") in an amount determined by dividing $300,000 by
the initial offering price of a limited partnership interest in Genesis MLP,
pursuant to the Company's Restricted Unit Plan, in accordance with the terms
thereof, promptly upon the adoption of such plan by the Board of Directors of
the Company. The Initial Award Units shall vest in accordance with terms of the
Restricted Unit Plan.
4.4 Short Term Disability Salary Continuance. In the event of a
short term illness or injury that would entitle Executive to salary continuance
benefits under the Company's short term disability salary continuance plan (the
"STD Plan") in effect from time to time, and Executive's years of service with
the Company, as determined in accordance with the STD Plan, are not sufficient
to provide 100% of the maximum amount of salary continuance that would otherwise
be available to Executive with more years of service (the "Maximum STD Payment")
the Company will pay Executive, as and when salary continuance payments are made
under the STD Plan, an amount equal to the difference between the Maximum STD
Payment and the payment made to Executive under the STD Plan.
SECTION 5. Payment of Compensation. The compensation payable to Executive
pursuant to Section 4 of this Agreement will be paid as follows:
(i) During the term of Executive's employment by the Company
(A) the Base Compensation will be paid to Executive in accordance with the
Company's customary payroll practices; and
(B) the Incentive Plan Amount, if any, will be paid in the manner determined by
the Compensation Committee of the Board of Directors of the Company in
accordance with the Incentive Plan.
(ii) Upon termination of Executive's employment by the Company in accordance
with Section 7.5(A) of this Agreement, the Termination Compensation (as
hereinafter defined), if any, will be paid in accordance with the provisions of
Section 7.5(C).
All payments of Base Compensation, the Incentive Plan Amount, Initial Award
Units and any other amounts paid to Executive will be subject to such deductions
and withholdings as, from time to time, may be required by law or as may be
elected by Executive pursuant to the Company's benefit plans in effect from time
to time.
SECTION 6. Employment Benefits. During the Initial Term or any Extension Term
of Executive's employment by the Company, Executive will be entitled to four
weeks paid vacation. In addition, Executive will be entitled to sick leave in
accordance with the Company's sick leave plans in effect from time to time, and
to participate, subject to qualification requirements, in such medical, dental,
life or other insurance or employee benefit plans as the Company may have in
effect from time to time and generally offer to its employees.
SECTION 7. Termination.
7.1 Termination for Cause. This Agreement will be null and void (except for
the provisions of Section 8 concerning Confidentiality which will survive any
termination of this Agreement) upon the termination of Executive's employment
for Cause. As used in this Agreement, "Cause" will mean (a) conviction of
Executive, in a final non-appealable decision, in a court of law of a felony, a
crime involving moral turpitude or any crime or offense involving the misuse or
misappropriation of money, credit or other property of the Company or any
subsidiary or affiliate of the Company which hereinafter may employ Executive;
provided, however, that the Company may suspend Executive's employment and any
payment due Executive under this Agreement during the pendency of any such
criminal charge; (b) violation in any material respect of any material rule or
policy promulgated and distributed by the Company, Genesis MLP, Genesis OLP or
any subsidiary or affiliate of the Company which hereinafter may employ
Executive (hereinafter the "Genesis Affiliates"); (c) violation, as determined
in a final non-appealable decision, of any rule or regulation of any regulatory
or self-regulatory body to which any of the Genesis Affiliates is subject or of
which any of the Genesis Affiliates is a member including without limitation,
the New York Stock Exchange, The National Association of Securities Dealers,
Inc., the Commodity Futures Trading Commission and the New York Mercantile
Exchange, which violation would materially reflect on Executive's character,
competence or integrity; (d) a material breach by Executive of Executive's duty
of loyalty to any of the Genesis Affiliates including, by way of illustration,
Executive's pretermination of employment solicitation of customers or employees
of any of the Genesis Affiliates, unauthorized removal of Confidential Business
Information (as hereinafter defined) from the premises of any of the Genesis
Affiliates and the dissemination thereof or refusal to return such Confidential
Business Information to the Company; (e) Executive's material breach of this
Agreement; or (f) Executive's gross misconduct, gross insubordination or willful
refusal to perform the lawful duties of his employment. In no event will
Executive be entitled to any compensation or payments under this Agreement
following Executive's termination, or deemed termination, for Cause, provided
that Executive's termination for Cause under this Agreement shall not affect
Executive's rights with respect to any Initial Award Units that shall have
vested at the time of termination. If, after Executive's termination of
employment, it is determined that Executive's employment could have been
terminated for Cause under items (a),(b),(c) or (d) above and such grounds for
termination resulted in or reasonably could be expected to result in injury to
the business, reputation or prospects of the Company or the Genesis Affiliates,
Executive's employment shall, at the election of the Company in its sole
discretion, be deemed to have been terminated for Cause. If Executive's
employment and payment are suspended pursuant to item (a) above, Executive will
have the right, excercisable by notice to the Company given within 15 days after
any such suspension, to treat such suspension as a termination for Cause and
resign from the Company without being bound by the non-compete provisions of
Section 10 of this Agreement.
7.2 Involuntary Termination. Executive's employment will be considered to have
been terminated involuntarily (an "Involuntary Termination") upon occurrence of
the following: (a) reduction in Executive's Base Compensation or exclusion,
other than for failure to meet qualification requirements, from the Company's
employee benefit plans in effect from time to time and generally offered to its
employees or (b) the Company's material breach of this Agreement. Executive
will promptly, but in any event within 30 days after the occurrence or discovery
thereof, notify the Company of any event which Executive considers an
Involuntary Termination.
7.3 Termination under Benefit Plans. If Executive's employment is terminated
in accordance with the terms of the Company's long term disability plan in
effect from time to time, any unpaid portion of Executive's Base Compensation
will be due Executive pursuant to this Agreement only for periods prior to such
termination, and any payment pursuant to the Incentive Plan may be made solely
in the discretion of the Compensation Committee and otherwise in accordance with
the terms of such plan.
7.4 Termination due to Death. If Executive dies while employed by the Company,
this Agreement will immediately terminate and, except for any unpaid portion of
Executive's Base Compensation for periods prior to Executive's death, no further
payments will be due hereunder, whether to Executive, Executive's heirs, estate
or otherwise; provided, however, that Executive's heirs and estate will be
entitled to retain any Initial Award Units for a period of six months after
Executive's death. Executive shall have the right to designate in writing from
time to time a beneficiary or beneficiaries by filing a written notice of such
designation with the Company, which Beneficiary shall be entitled to receive any
amount required to be paid as provided in this Section 7.4 in the event of the
Executive's death. In the event that the beneficiary designated by Executive
does not survive Executive and no successor beneficiary is selected or in the
event no valid designation has been made, Executive's beneficiary shall be such
Executive's estate. In the event of the death of Executive, any payment
required to be made hereunder to Executive shall be made to such Executive's
beneficiary or beneficiaries. In the event Executive's beneficiary is the
Executive's estate, no payment shall be made unless the Company shall have been
furnished with such evidence as the Company may deem necessary to establish the
validity of the payment.
7.5 Termination Compensation.
(A) In the event the Company (i) terminates Executive's employment during the
Initial Term or any Extension Term for any reason other than Cause, including
any Involuntary Termination, or as provided in Section 7.3 of this Agreement, or
(ii) does not exercise its option to extend the Initial Term or any Extension
Term of this Agreement, the Company will pay Executive, in full settlement of
all sums due Executive from the Company (excluding, however, any sums then due
Executive under any of the Company's benefit plans or with respect to accrued
vacation), whether under this Agreement or arising at law or in equity, a
termination payment (the "Termination Compensation") equal to the greater of (i)
Executive's Base Compensation for the remaining period of the Initial Term or
Extension Term then in effect, as the case may be, or (ii) one year of
Executive's Base Compensation at the level in effect at the time of termination
or expiration without exercise of the option to extend. In addition, Executive
will be entitled to (a) retain any Initial Award Units for a period of six
months after Executive's termination or after expiration of this Agreement
without the exercise by the Company of the option to extend, (b) such Incentive
Compensation, if any, as may be payable to Executive in accordance with any
Incentive Compensation plan then in effect and (c) in the event Executive elects
to continue medical and/or dental coverage under the provisions of the
Consolidated Omnibus Budget Reconciliation Act (COBRA), the Company will pay
Executive, as and when required to maintain such coverage, an amount equal to
the required premiums for the duration of the Non-Compete Period (as hereinafter
defined).
(B) As a condition to the right to receive the Termination Compensation,
Executive will (i) execute and deliver to the Company a severance and release
agreement in the form attached hereto as Exhibit A, and (ii) Executive will not,
for a period (the "Non-Compete Period") equal to (a) six months in the event the
Company does not exercise its option to extend this Agreement or (b) or in the
event of termination of the shorter of one year after the date of Executive's
termination or the unexpired portion of the Initial Term or Extension Term, as
the case may be, but in no event less than six months, either directly or
indirectly, compete with the Company in the crude oil gathering, marketing
(including domestic crude oil trading but excluding trading solely on the New
York Mercantile Exchange or other commodities exchanges) and transportation
(including pipeline) business whether as an employee, officer, director,
shareholder (other than as an ordinary shareholder of a publicly traded entity),
partner, proprietor or otherwise, in the geographical areas in which the Company
then operates or is engaged in business.
(C) The Termination Compensation will be paid to Executive in the event of a
termination pursuant to Section 7.5(A) above, in four equal installments with
the first installment due on the date of such termination and the remaining
installments at equal intervals thereafter over the applicable Non-Compete
Period.
SECTION 8. Confidentiality. Executive acknowledges that the business of
the Company and the Genesis Affiliates is highly competitive and that the
Company's method of operation, crude oil trading practices, financial condition
and other matters relating to the conduct of such business, and the conduct of
such business as previously conducted by Basis Petroleum, Inc. and Howell
Corporation and its affiliates, comprise confidential business information (the
"Confidential Business Information") which is unique and valuable to the
Company. Executive further acknowledges that the use of the Confidential
Business Information by Executive in competition with the Company and the
Genesis Affiliates will be highly detrimental to the continued successful
operation of the business of the Company and the Genesis Affiliates. Executive
will keep the Confidential Business Information confidential and will not
disclose it to any unauthorized parties. Executive acknowledges and agrees that
the Company shall have the broadest possible protection, consistent with public
policy, of the business of the Company and the Genesis Affiliates from the
wrongful use by Executive of such Confidential Business Information.
Confidential Business Information shall not include any information which is
generally available to the public other than as a result of a disclosure by
Executive or which was known to Executive prior to Executive's employment with
the Company or with Basis Petroleum, Inc. or Howell Corporation and its
affiliates, as the case may be.
SECTION 9. Remedies. Each of the parties acknowledges that the rights
hereunder are necessarily of a special, unique and extraordinary nature, and
that the loss arising from a breach hereof cannot reasonably and adequately be
compensated by money damages and will cause a party to suffer irreparable harm.
Accordingly, upon the breach by a party of any material term of this Agreement
at any time, the other party shall be entitled to injunctive or other
extraordinary relief in case of such breach, and such injunctive or other
extraordinary relief shall be cumulative to, but not in limitation of, any other
remedies to which the party may be entitled as a result of the breach of such
Agreement. In the event Executive breaches this Agreement, the Company will
also have the right, in addition to any other rights it may have at law, in
equity or under this Agreement to cancel, withhold and/or offset any payments
due Executive hereunder against any payments otherwise due to Executive from the
Company, Genesis MLP or Genesis OLP. In any action to enforce any right or
remedy hereunder, the prevailing party in a final non-appealable decision of a
court of competent jurisdiction shall be entitled to recover such prevailing
party's reasonable legal fees and expenses.
SECTION 10. Noncompetition. If Executive resigns or otherwise terminates his
employment for any reason other than the Company's breach of a material
provision of this Agreement, or as a result of an Involuntary Termination, then,
Executive will not, for the duration of the Non-Compete Period, directly or
indirectly compete with the Company in the crude oil gathering, marketing
(including domestic crude oil trading but excluding trading solely on the New
York Mercantile Exchange or other commodities exchanges) and transportation
(including) pipeline business at the time of such resignation or termination
whether as an employee, officer, director, shareholder (other than as an
ordinary shareholder of a publicly traded entity), partner, proprietor or
otherwise in the geographical areas in which the Company then operates or is
engaged in business. Executive will not be entitled to any compensation or
payments under this Agreement following any such resignation or termination
except for Incentive Compensation, if any, payable to Executive in accordance
with any Incentive Compensation plan then in effect.
SECTION 11. Amendments; Waivers. This Agreement may not be modified, revised,
amended or waived in any manner except by an instrument in writing signed on
behalf of each of the parties by their respective duly authorized
representatives. No delay on the part of either party in exercising any right,
power or privilege under this Agreement will operate as a waiver thereof, nor
will any partial exercise or waiver of any right, power or privilege under this
Agreement preclude any other or further exercise of such right, power or
privilege.
SECTION 12. Severability. In the event that any provision of this Agreement
is determined by a court of competent jurisdiction to be invalid or
unenforceable in any respect, the parties will amend this Agreement to provide a
substitute provision which as nearly as possible carries out the intent of the
provision so held invalid or unenforceable; provided, however, that no such
amendment will in any way materially increase the obligation of either party
under this Agreement. Any such determination of invalidity or unenforceability
will not affect such provision in any other respect or affect any other
provision of this Agreement all of which will remain in full force and effect.
SECTION 13. Notices. All notices and other communications under this
Agreement will be in writing and will be duly given (i) upon delivery if
delivered personally with signed receipt acknowledging delivery; or (ii) upon
dispatch if telexed (with answerback confirmation) or telegraphed (and if
telegraphed confirmed by first-class mail as hereinafter provided); or (iii) if
mailed, by first class mail, postage prepaid, ten business days after date of
mailing, addressed as follows:
(a) If to the Company
Genesis Energy, L.L.C.
One Allen Center, Suite 3200
500 Dallas
Houston, Texas 77002
Attention: President
(b) If to Executive
Allen R. Stanley
at such address as appears on the records of the Company
or to such other address as a party may from time to time designate in the
manner heretofore provided.
SECTION 14. Governing Law and Jurisdiction. This Agreement and the
obligations of the parties hereunder will be governed by and construed in
accordance with the substantive laws of the State of Texas without regard to any
conflict of law rules. Each party consents to the jurisdiction of the courts
located in Harris County, Texas with respect to any action arising hereunder.
SECTION 15. Assignment. This Agreement, and any rights or obligations
hereunder, may not be assigned by either party hereto without written consent of
the other; provided, however, that the Company may assign this Agreement to
Genesis MLP, Genesis OLP, an affiliate of the Company which has succeeded to all
or substantially all of the business of the Company or to a third party
acquiring all or substantially all of the business, equity or assets of the
Company.
SECTION 16. No Third Party Beneficiaries. No person other than Executive and
his beneficiaries on the one hand and the Company or its successors and assigns
on the other hand shall be made a party to this Agreement directly or indirectly
or have any rights or benefits under this Agreement.
SECTION 17. Captions. The titles, captions and headings in this Agreement are
inserted for convenience of reference only and are not intended to form a part
of, or to affect the meaning or interpretation of, this Agreement.
SECTION 18. Execution in Counterparts. This Agreement may be executed in one
or more counterparts, all of which will be considered one and the same
Agreement, and will become a binding Agreement when one or more counterparts
have been signed by each of the parties and delivered to the other party.
SECTION 19. Entire Agreement. This Agreement constitutes the entire agreement
between Executive and the Company concerning the subject matter hereof and
supersedes all previous negotiations, commitments and writings with respect to
such subject matter.
SECTION 20. Advice of Counsel. Executive represents and warrants that
Executive has been advised by competent counsel of his own selection as to the
meaning and significance of this Agreement and all of the terms hereof.
/s/ Allen R. Stanley
- ----------------------------------------------------
Allen R. Stanley
GENESIS ENERGY, L.L.C.
By: BASIS PETROLEUM, INC.
As Member
By: /s/ Jeffrey R. Serra
- ----------------------------------------------------
Jeffrey R. Serra, Chairman, President
and Chief Executive Officer
EXHIBIT 10.14
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made as of December 1, 1996 by
and between Genesis Energy, L.L.C. (the "Company") and Ben F. Runnels
("Executive").
RECITALS:
A. The Company is the general partner of Genesis Energy L.P. ("Genesis MLP")
and Genesis Crude Oil, L.P. ("Genesis OLP") and is engaged in the crude oil
gathering, marketing and pipeline business.
B. Executive is the Vice President, Trucking Operations for the Company.
C. Executive desires to obtain the benefits and incentives from the Company of
a written employment agreement having an initial term through December 31, 1999,
and, at the Company's election, certain extension terms.
D. The Company desires to enter into such an employment agreement with
Executive.
NOW, THEREFORE, in consideration of the premises and mutual agreements contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and Executive hereby
agree as follows:
SECTION 1. Employment. The Company hereby employs Executive as an executive
officer of the Company to perform such executive, managerial and senior
operations services as may be assigned to Executive from time to time; provided,
however, that Executive will continue as an employee of Executive's employer on
the date hereof but will be seconded to the Company until January 1, 1997 at
which time Executive will become employed by the Company. In such capacity,
Executive will have the responsibilities and perform the services and duties
described in Section 3 of this Agreement. Executive hereby accepts such
employment and agrees to perform such services and duties for the Company.
SECTION 2. Term. This Agreement will be for an initial term commencing on the
effective date of that certain initial public offering of limited partnership
interests in Genesis MLP and ending on December 31, 1999 (the "Initial Term"),
unless sooner terminated in accordance with the provisions hereof. Thereafter,
the Company will have the option, exercisable by notice to Executive given not
less than 60 days prior to the expiration of the Initial Term, or any Extension
Term (as hereinafter defined), to extend this Agreement for one additional term
of two calendar years ending December 31, 2001, and, if, in each instance, so
extended, for five additional terms of one calendar year each with the term of
the last extension, if so exercised, expiring on December 31, 2006 (each such
extension an "Extension Term"). Anything herein to the contrary
notwithstanding, this Agreement, and Executive's employment hereunder, may be
terminated at any time, with or without cause, upon notice of termination to
Executive; provided, however, that in the event of any such termination without
cause (including any Involuntary Termination (as hereinafter defined)),
Executive will be entitled to the Termination Compensation (as hereinafter
defined) set forth herein.
SECTION 3. Duties of Executive. Executive will render his services to the
Company as Vice President, Trucking Operations, and/or in such other executive
or managerial capacities as the President and CEO of the Company may, from time
to time, designate. Executive will act in the best interest of the Company,
Genesis MLP and Genesis OLP and their subsidiaries and affiliates in the
performance of Executive's services and duties under this Agreement. Without
the prior consent of the President and CEO of the Company, Executive will not
actively engage in any other business or business activity; provided, however,
that nothing herein contained will limit the right of Executive to manage
Executive's personal investment activities provided that such personal
investment activities do not materially interfere with the performance of
Executive's duties and responsibilities hereunder or otherwise materially
conflict with any policies which have been promulgated and distributed by the
Company.
SECTION 4. Compensation.
4.1 Compensation during the Initial Term. Subject to the terms and conditions
of this Agreement, the Company will cause Executive to be paid an annual salary
of $10,000.00 for the partial year ending December 31, 1996 and will pay
Executive an annual salary of $120,000.00 for each of the years ending December
31, 1997, 1998 and 1999 (such annual salary hereinafter referred to as the "Base
Compensation"). The Base Compensation will be reviewed annually by the
Compensation Committee of the Board of Directors of the Company. In addition,
Executive will be entitled to participate in the Company's Incentive Plan in
accordance with the terms thereof (the "Incentive Plan Amount").
4.2 Compensation during the Extension Terms. The Base Compensation paid by the
Company to Executive during the Extension Terms will be established by the
Company in connection with the election to extend the term of this Agreement
pursuant to Section 2, will not be less than the Base Compensation multiplied by
1.05 with respect to the first Extension Term and thereafter not less than the
Base Compensation in effect immediately prior to such election for any
subsequent Extension Term and will be advised to Executive simultaneously with
notice from the Company of its election to exercise an Extension Term option.
4.3 Award of Restricted Units. The Company will grant to Executive Restricted
Units ("Initial Award Units") in an amount determined by dividing $200,000 by
the initial offering price of a limited partnership interest in Genesis MLP,
pursuant to the Company's Restricted Unit Plan, in accordance with the terms
thereof, promptly upon the adoption of such plan by the Board of Directors of
the Company. The Initial Award Units shall vest in accordance with terms of the
Restricted Unit Plan.
4.4 Short Term Disability Salary Continuance. In the event of a
short term illness or injury that would entitle Executive to salary continuance
benefits under the Company's short term disability salary continuance plan (the
"STD Plan") in effect from time to time, and Executive's years of service with
the Company, as determined in accordance with the STD Plan, are not sufficient
to provide 100% of the maximum amount of salary continuance that would otherwise
be available to Executive with more years of service (the "Maximum STD Payment")
the Company will pay Executive, as and when salary continuance payments are made
under the STD Plan, an amount equal to the difference between the Maximum STD
Payment and the payment made to Executive under the STD Plan.
SECTION 5. Payment of Compensation. The compensation payable to Executive
pursuant to Section 4 of this Agreement will be paid as follows:
(i) During the term of Executive's employment by the Company
(A) the Base Compensation will be paid to Executive in accordance with the
Company's customary payroll practices; and
(B) the Incentive Plan Amount, if any, will be paid in the manner determined by
the Compensation Committee of the Board of Directors of the Company in
accordance with the Incentive Plan.
(ii) Upon termination of Executive's employment by the Company in accordance
with Section 7.5(A) of this Agreement, the Termination Compensation (as
hereinafter defined), if any, will be paid in accordance with the provisions of
Section 7.5(C).
All payments of Base Compensation, the Incentive Plan Amount, Initial Award
Units and any other amounts paid to Executive will be subject to such deductions
and withholdings as, from time to time, may be required by law or as may be
elected by Executive pursuant to the Company's benefit plans in effect from time
to time.
SECTION 6. Employment Benefits. During the Initial Term or any Extension Term
of Executive's employment by the Company, Executive will be entitled to four
weeks paid vacation. In addition, Executive will be entitled to sick leave in
accordance with the Company's sick leave plans in effect from time to time, and
to participate, subject to qualification requirements, in such medical, dental,
life or other insurance or employee benefit plans as the Company may have in
effect from time to time and generally offer to its employees.
SECTION 7. Termination.
7.1 Termination for Cause. This Agreement will be null and void (except for
the provisions of Section 8 concerning Confidentiality which will survive any
termination of this Agreement) upon the termination of Executive's employment
for Cause. As used in this Agreement, "Cause" will mean (a) conviction of
Executive, in a final non-appealable decision, in a court of law of a felony, a
crime involving moral turpitude or any crime or offense involving the misuse or
misappropriation of money, credit or other property of the Company or any
subsidiary or affiliate of the Company which hereinafter may employ Executive;
provided, however, that the Company may suspend Executive's employment and any
payment due Executive under this Agreement during the pendency of any such
criminal charge; (b) violation in any material respect of any material rule or
policy promulgated and distributed by the Company, Genesis MLP, Genesis OLP or
any subsidiary or affiliate of the Company which hereinafter may employ
Executive (hereinafter the "Genesis Affiliates"); (c) violation, as determined
in a final non-appealable decision, of any rule or regulation of any regulatory
or self-regulatory body to which any of the Genesis Affiliates is subject or of
which any of the Genesis Affiliates is a member including without limitation,
the New York Stock Exchange, The National Association of Securities Dealers,
Inc., the Commodity Futures Trading Commission and the New York Mercantile
Exchange, which violation would materially reflect on Executive's character,
competence or integrity; (d) a material breach by Executive of Executive's duty
of loyalty to any of the Genesis Affiliates including, by way of illustration,
Executive's pretermination of employment solicitation of customers or employees
of any of the Genesis Affiliates, unauthorized removal of Confidential Business
Information (as hereinafter defined) from the premises of any of the Genesis
Affiliates and the dissemination thereof or refusal to return such Confidential
Business Information to the Company; (e) Executive's material breach of this
Agreement; or (f) Executive's gross misconduct, gross insubordination or willful
refusal to perform the lawful duties of his employment. In no event will
Executive be entitled to any compensation or payments under this Agreement
following Executive's termination, or deemed termination, for Cause, provided
that Executive's termination for Cause under this Agreement shall not affect
Executive's rights with respect to any Initial Award Units that shall have
vested at the time of termination. If, after Executive's termination of
employment, it is determined that Executive's employment could have been
terminated for Cause under items (a),(b),(c) or (d) above and such grounds for
termination resulted in or reasonably could be expected to result in injury to
the business, reputation or prospects of the Company or the Genesis Affiliates,
Executive's employment shall, at the election of the Company in its sole
discretion, be deemed to have been terminated for Cause. If Executive's
employment and payment are suspended pursuant to item (a) above, Executive will
have the right, excercisable by notice to the Company given within 15 days after
any such suspension, to treat such suspension as a termination for Cause and
resign from the Company without being bound by the non-compete provisions of
Section 10 of this Agreement.
7.2 Involuntary Termination. Executive's employment will be considered to have
been terminated involuntarily (an "Involuntary Termination") upon occurrence of
the following: (a) reduction in Executive's Base Compensation or exclusion,
other than for failure to meet qualification requirements, from the Company's
employee benefit plans in effect from time to time and generally offered to its
employeesor (b) the Company's material breach of this Agreement. Executive will
promptly, but in any event within 30 days after the occurrence or discovery
thereof, notify the Company of any event which Executive considers an
Involuntary Termination.
7.3 Termination under Benefit Plans. If Executive's employment is terminated
in accordance with the terms of the Company's long term disability plan in
effect from time to time, any unpaid portion of Executive's Base Compensation
will be due Executive pursuant to this Agreement only for periods prior to such
termination, and any payment pursuant to the Incentive Plan may be made solely
in the discretion of the Compensation Committee and otherwise in accordance with
the terms of such plan.
7.4 Termination due to Death. If Executive dies while employed by the Company,
this Agreement will immediately terminate and, except for any unpaid portion of
Executive's Base Compensation for periods prior to Executive's death, no further
payments will be due hereunder, whether to Executive, Executive's heirs, estate
or otherwise; provided, however, that Executive's heirs and estate will be
entitled to retain any Initial Award Units for a period of six months after
Executive's death. Executive shall have the right to designate in writing from
time to time a beneficiary or beneficiaries by filing a written notice of such
designation with the Company, which Beneficiary shall be entitled to receive any
amount required to be paid as provided in this Section 7.4 in the event of the
Executive's death. In the event that the beneficiary designated by Executive
does not survive Executive and no successor beneficiary is selected or in the
event no valid designation has been made, Executive's beneficiary shall be such
Executive's estate. In the event of the death of Executive, any payment
required to be made hereunder to Executive shall be made to such Executive's
beneficiary or beneficiaries. In the event Executive's beneficiary is the
Executive's estate, no payment shall be made unless the Company shall have been
furnished with such evidence as the Company may deem necessary to establish the
validity of the payment.
7.5 Termination Compensation.
(A) In the event the Company (i) terminates Executive's employment during the
Initial Term or any Extension Term for any reason other than Cause, including
any Involuntary Termination, or as provided in Section 7.3 of this Agreement, or
(ii) does not exercise its option to extend the Initial Term or any Extension
Term of this Agreement, the Company will pay Executive, in full settlement of
all sums due Executive from the Company (excluding, however, any sums then due
Executive under any of the Company's benefit plans or with respect to accrued
vacation), whether under this Agreement or arising at law or in equity, a
termination payment (the "Termination Compensation") equal to the greater of (i)
Executive's Base Compensation for the remaining period of the Initial Term or
Extension Term then in effect, as the case may be, or (ii) one year of
Executive's Base Compensation at the level in effect at the time of termination
or expiration without exercise of the option to extend. In addition, Executive
will be entitled to (a) retain any Initial Award Units for a period of six
months after Executive's termination or after expiration of this Agreement
without the exercise by the Company of the option to extend, (b) such Incentive
Compensation, if any, as may be payable to Executive in accordance with any
Incentive Compensation plan then in effect and (c) in the event Executive elects
to continue medical and/or dental coverage under the provisions of the
Consolidated Omnibus Budget Reconciliation Act (COBRA), the Company will pay
Executive, as and when required to maintain such coverage, an amount equal to
the required premiums for the duration of the Non-Compete Period (as hereinafter
defined).
(B) As a condition to the right to receive the Termination Compensation,
Executive will (i) execute and deliver to the Company a severance and release
agreement in the form attached hereto as Exhibit A, and (ii) Executive will not,
for a period (the "Non-Compete Period") equal to (a) six months in the event the
Company does not exercise its option to extend this Agreement or (b) or in the
event of termination of the shorter of one year after the date of Executive's
termination or the unexpired portion of the Initial Term or Extension Term, as
the case may be, but in no event less than six months, either directly or
indirectly, compete with the Company in the crude oil gathering, marketing
(including domestic crude oil trading but excluding trading solely on the New
York Mercantile Exchange or other commodities exchanges) and transportation
(including pipeline) business whether as an employee, officer, director,
shareholder (other than as an ordinary shareholder of a publicly traded entity),
partner, proprietor or otherwise, in the geographical areas in which the Company
then operates or is engaged in business.
(C) The Termination Compensation will be paid to Executive in the event of a
termination pursuant to Section 7.5(A) above, in four equal installments with
the first installment due on the date of such termination and the remaining
installments at equal intervals thereafter over the applicable Non-Compete
Period.
SECTION 8. Confidentiality. Executive acknowledges that the business of
the Company and the Genesis Affiliates is highly competitive and that the
Company's method of operation, crude oil trading practices, financial condition
and other matters relating to the conduct of such business, and the conduct of
such business as previously conducted by Basis Petroleum, Inc. and Howell
Corporation and its affiliates, comprise confidential business information (the
"Confidential Business Information") which is unique and valuable to the
Company. Executive further acknowledges that the use of the Confidential
Business Information by Executive in competition with the Company and the
Genesis Affiliates will be highly detrimental to the continued successful
operation of the business of the Company and the Genesis Affiliates. Executive
will keep the Confidential Business Information confidential and will not
disclose it to any unauthorized parties. Executive acknowledges and agrees that
the Company shall have the broadest possible protection, consistent with public
policy, of the business of the Company and the Genesis Affiliates from the
wrongful use by Executive of such Confidential Business Information.
Confidential Business Information shall not include any information which is
generally available to the public other than as a result of a disclosure by
Executive or which was known to Executive prior to Executive's employment with
the Company or with Basis Petroleum, Inc. or Howell Corporation and its
affiliates, as the case may be.
SECTION 9. Remedies. Each of the parties acknowledges that the rights
hereunder are necessarily of a special, unique and extraordinary nature, and
that the loss arising from a breach hereof cannot reasonably and adequately be
compensated by money damages and will cause a party to suffer irreparable harm.
Accordingly, upon the breach by a party of any material term of this Agreement
at any time, the other party shall be entitled to injunctive or other
extraordinary relief in case of such breach, and such injunctive or other
extraordinary relief shall be cumulative to, but not in limitation of, any other
remedies to which the party may be entitled as a result of the breach of such
Agreement. In the event Executive breaches this Agreement, the Company will
also have the right, in addition to any other rights it may have at law, in
equity or under this Agreement to cancel, withhold and/or offset any payments
due Executive hereunder against any payments otherwise due to Executive from the
Company, Genesis MLP or Genesis OLP. In any action to enforce any right or
remedy hereunder, the prevailing party in a final non-appealable decision of a
court of competent jurisdiction shall be entitled to recover such prevailing
party's reasonable legal fees and expenses.
SECTION 10. Noncompetition. If Executive resigns or otherwise terminates his
employment for any reason other than the Company's breach of a material
provision of this Agreement, or as a result of an Involuntary Termination, then,
Executive will not, for the duration of the Non-Compete Period, directly or
indirectly compete with the Company in the crude oil gathering, marketing
(including domestic crude oil trading but excluding trading solely on the New
York Mercantile Exchange or other commodities exchanges) and transportation
(including) pipeline business at the time of such resignation or termination
whether as an employee, officer, director, shareholder (other than as an
ordinary shareholder of a publicly traded entity), partner, proprietor or
otherwise in the geographical areas in which the Company then operates or is
engaged in business. Executive will not be entitled to any compensation or
payments under this Agreement following any such resignation or termination
except for Incentive Compensation, if any, payable to Executive in accordance
with any Incentive Compensation plan then in effect.
SECTION 11. Amendments; Waivers. This Agreement may not be modified, revised,
amended or waived in any manner except by an instrument in writing signed on
behalf of each of the parties by their respective duly authorized
representatives. No delay on the part of either party in exercising any right,
power or privilege under this Agreement will operate as a waiver thereof, nor
will any partial exercise or waiver of any right, power or privilege under this
Agreement preclude any other or further exercise of such right, power or
privilege.
SECTION 12. Severability. In the event that any provision of this Agreement
is determined by a court of competent jurisdiction to be invalid or
unenforceable in any respect, the parties will amend this Agreement to provide a
substitute provision which as nearly as possible carries out the intent of the
provision so held invalid or unenforceable; provided, however, that no such
amendment will in any way materially increase the obligation of either party
under this Agreement. Any such determination of invalidity or unenforceability
will not affect such provision in any other respect or affect any other
provision of this Agreement all of which will remain in full force and effect.
SECTION 13. Notices. All notices and other communications under this
Agreement will be in writing and will be duly given (i) upon delivery if
delivered personally with signed receipt acknowledging delivery; or (ii) upon
dispatch if telexed (with answerback confirmation) or telegraphed (and if
telegraphed confirmed by first-class mail as hereinafter provided); or (iii) if
mailed, by first class mail, postage prepaid, ten business days after date of
mailing, addressed as follows:
(a) If to the Company
Genesis Energy, L.L.C.
One Allen Center, Suite 3200
500 Dallas
Houston, Texas 77002
Attention: President
(b) If to Executive
Ben F. Runnels
at such address as appears on the records of the Company
or to such other address as a party may from time to time designate in the
manner heretofore provided.
SECTION 14. Governing Law and Jurisdiction. This Agreement and the
obligations of the parties hereunder will be governed by and construed in
accordance with the substantive laws of the State of Texas without regard to any
conflict of law rules. Each party consents to the jurisdiction of the courts
located in Harris County, Texas with respect to any action arising hereunder.
SECTION 15. Assignment. This Agreement, and any rights or obligations
hereunder, may not be assigned by either party hereto without written consent of
the other; provided, however, that the Company may assign this Agreement to
Genesis MLP, Genesis OLP, an affiliate of the Company which has succeeded to all
or substantially all of the business of the Company or to a third party
acquiring all or substantially all of the business, equity or assets of the
Company.
SECTION 16. No Third Party Beneficiaries. No person other than Executive and
his beneficiaries on the one hand and the Company or its successors and assigns
on the other hand shall be made a party to this Agreement directly or indirectly
or have any rights or benefits under this Agreement.
SECTION 17. Captions. The titles, captions and headings in this Agreement are
inserted for convenience of reference only and are not intended to form a part
of, or to affect the meaning or interpretation of, this Agreement.
SECTION 18. Execution in Counterparts. This Agreement may be executed in one
or more counterparts, all of which will be considered one and the same
Agreement, and will become a binding Agreement when one or more counterparts
have been signed by each of the parties and delivered to the other party.
SECTION 19. Entire Agreement. This Agreement constitutes the entire agreement
between Executive and the Company concerning the subject matter hereof and
supersedes all previous negotiations, commitments and writings with respect to
such subject matter.
SECTION 20. Advice of Counsel. Executive represents and warrants that
Executive has been advised by competent counsel of his own selection as to the
meaning and significance of this Agreement and all of the terms hereof.
/s/ Ben F. Runnels
- -----------------------------------------------
Ben F. Runnels
GENESIS ENERGY, L.L.C.
By: BASIS PETROLEUM, INC.
As Member
By: /s/ Jeffrey R. Serra
- -----------------------------------------------
Jeffrey R. Serra, Chairman, President
and Chief Executive Officer
EXHIBIT 21.1
GENESIS ENERGY, L.P.
SUBSIDIARIES OF THE REGISTRANT
Genesis Crude Oil, L.P. (a Delaware limited partnership)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL REPORT ON
FORM 10-K OF GENESIS ENERGY, L.P. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 1-MO
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> DEC-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 11,878
<SECURITIES> 0
<RECEIVABLES> 388,807
<ALLOWANCES> 0
<INVENTORY> 8,290
<CURRENT-ASSETS> 410,371
<PP&E> 100,097
<DEPRECIATION> 11,160
<TOTAL-ASSETS> 509,900
<CURRENT-LIABILITIES> 398,563
<BONDS> 0
0
0
<COMMON> 0<F1>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 509,900<F2>
<SALES> 370,559
<TOTAL-REVENUES> 371,985
<CGS> 366,723
<TOTAL-COSTS> 368,994<F3>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,684
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,347<F4>
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,347
<EPS-PRIMARY> 0<F5>
<EPS-DILUTED> 0
<FN>
<F1>GENESIS ENERGY, L.P. IS A MASTER LIMITED PARTNERSHIP AND THERFORE HAS NO COMMON
STOCK OUTSTANDING.
<F2>GENESIS ENERGY, L.P. IS AMASTER LIMITED PARTNERSHIP. ITS BALANCE SHEET
INCLUDES MINORITY INTERESTS IN ITS SUBSIDIARY, GENESIS CRUDE OIL, L.P. OF
$26,257 AND PARTNERS' CAPITAL CONSISTING OF THE CAPITAL OF THE COMMON
UNITHOLDERS OF $83,378 AND THE CAPITAL OF THE GENERAL PARTNER OF $1,702.
<F3>TOTAL COSTS INCLUDES DEPRECIATION AND AMORTIZATION OF $518.
<F4>THE MINORITY INTERESTS IN NET INCOME OF GENESIS ENERGY, L.P. IS $337.
<F5>NET INCOME PER COMMON UNIT IS $0.15.
</FN>
</TABLE>
