UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
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 Identification No.)
incorporation or organization)
500 Dallas, Suite 2500, Houston, Texas 77002
(Address of principal executive offices) (Zip Code)
(713) 860-2500
(Registrant's telephone number, including area code)
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
-------- --------
This report contains 13 pages
<PAGE>
GENESIS ENERGY, L.P.
Form 10-Q
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements Page
Condensed Consolidated Balance Sheets - March 31, 1998 and
December 31, 1997 3
Condensed Consolidated Statements of Operations for the Three
Months Ended March 31, 1998 and 1997 4
Condensed Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 1998 and 1997 5
Condensed Consolidated Statement of Partners' Capital for the
Three Months Ended March 31, 1998 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 6. Exhibits and Reports on Form 8-K 12
<PAGE>
GENESIS ENERGY, L.P.
CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, December 31,
1998 1997
-------- --------
Assets (Unaudited)
Current Assets
Cash and cash equivalents $ 6,080 $ 11,812
Accounts receivable -
Trade 180,828 209,869
Related party 14,709 -
Inventories 4,017 7,033
Other 2,749 3,488
-------- --------
Total current assets 208,383 232,202
Property and Equipment, at cost 105,285 105,102
Less: Accumulated depreciation (16,159) (16,464)
-------- --------
Net property and equipment 89,126 88,638
Other Assets, net of amortization 10,460 10,274
-------- --------
Total Assets $307,969 $331,114
======== ========
Liabilities and Partners' Capital
Current Liabilities
Accounts payable -
Trade $193,250 $215,159
Related party 3,305 2,832
Accrued liabilities 7,080 6,547
-------- --------
Total current liabilities 203,635 224,538
Commitments and Contingencies (Note 8)
Minority Interests 28,656 28,225
Partners' Capital
Common unitholders, 8,625 units issued and
outstanding 74,163 76,783
General partner 1,515 1,568
-------- --------
Total partners' capital 75,678 78,351
-------- --------
Total Liabilities and Partners' Capital $307,969 $331,114
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
GENESIS ENERGY, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per unit amounts)
(Unaudited)
Three Months Ended March 31,
1998 1997
-------- --------
REVENUES:
Gathering and marketing revenues
Unrelated parties $628,398 $729,521
Related parties 17,500 212,905
Pipeline revenues 4,359 4,056
-------- --------
Total revenues 650,257 946,482
COST OF SALES:
Crude costs, unrelated parties 626,342 903,962
Crude costs, related parties 12,353 30,916
Field operating costs 3,361 3,348
Pipeline operating costs 1,865 1,222
-------- --------
Total cost of sales 643,921 939,448
-------- --------
GROSS MARGIN 6,336 7,034
EXPENSES:
General and administrative 2,741 2,133
Depreciation and amortization 1,633 1,565
-------- --------
OPERATING INCOME 1,962 3,336
OTHER INCOME (EXPENSE):
Interest, net 178 92
Other, net 19 2
-------- --------
Income before minority interests 2,159 3,430
Minority interests 431 686
-------- --------
NET INCOME $ 1,728 $ 2,744
======== ========
NET INCOME PER COMMON UNIT - BASIC AND DILUTED $ 0.20 $ 0.31
======== ========
NUMBER OF COMMON UNITS OUTSTANDING 8,625 8,625
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
GENESIS ENERGY, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended March 31,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES: -------- --------
Net income $ 1,728 $ 2,744
Adjustments to reconcile net income to net
cash provided by (used in) operating activities -
Depreciation 1,508 1,448
Amortization of intangible assets 125 117
Minority interests equity in earnings 431 686
Gain on asset dispositions (19) -
Other noncash charges 407 17
Changes in components of working capital -
Accounts receivable 14,332 43,106
Inventories 3,016 4,500
Other current assets 739 184
Accounts payable (21,436) (58,294)
Accrued liabilities 126 5,634
-------- --------
Net cash provided by operating activities 957 142
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (2,047) (457)
Increase in other assets (311) (7)
Proceeds from sale of assets 70 -
-------- --------
Net cash used in investing activities (2,288) (464)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions:
To common unitholders (4,313) -
To general partner (88) -
-------- --------
Net cash used in financing activities (4,401) -
-------- --------
Net decrease in cash and cash equivalents (5,732) (322)
Cash and cash equivalents at beginning of period 11,812 11,878
-------- --------
Cash and cash equivalents at end of period $ 6,080 $ 11,556
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
GENESIS ENERGY, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
(In thousands)
(Unaudited)
<CAPTION>
Partners' Capital
------------------------------
Common General
Unitholders Partner Total
----------- ------- -------
<S> <C> <C> <C>
Partners' capital at December 31, 1997 $76,783 $1,568 $78,351
Net income for the three months ended March 31, 1998 1,693 35 1,728
Cash distributions for the three months ended March 31, 1998 (4,313) (88) (4,401)
------- ------ -------
Partners' capital at March 31, 1998 $74,163 $1,515 $75,678
======= ====== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
GENESIS ENERGY, L.P.
NOTES TO CONDENSED 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%. 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"). The General Partner owns a 2%
general partner interest in GELP.
Transactions at Formation
At the closing of the offering, GELP contributed the net proceeds of the
offering to GCOLP in exchange for an 80.01% general partner interest in GCOLP.
With the net proceeds of the offering, GCOLP purchased a portion of the crude
oil gathering, marketing and pipeline operations of Howell Corporation
("Howell") and made a distribution to Basis Petroleum, Inc. ("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. Basis' Subordinated OLP units were transferred to its
then parent, Salomon Smith Barney Holdings Inc. ("Salomon") in May 1997.
Unless the context otherwise requires, the term "the Partnership" hereafter
refers to GELP and its operating limited partnership.
2. Basis of Presentation
The accompanying financial statements and related notes present the
consolidated financial position as of March 31, 1998 and 1997 for GELP and its
results of operations, cash flows and changes in partners' capital for the three
months ended March 31, 1998 and 1997.
The financial statements included herein have been prepared by the
Partnership without audit pursuant to the rules and regulations of the
Securities and Exchange Commission ("SEC"). Accordingly, they reflect all
adjustments (which consist solely of normal recurring adjustments) which are, in
the opinion of management, necessary for a fair presentation of the financial
results for interim periods. Certain information and notes normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. However, the Partnership believes that the disclosures are
adequate to make the information presented not misleading. These financial
statements should be read in conjunction with the financial statements and notes
thereto included in the Partnership's Annual Report on Form 10-K for the year
ended December 31, 1997 filed with the SEC.
Basic 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. Diluted net income per Common Unit did not differ
from basic net income per Common Unit for either period presented. The Common
Units that will be issued in accordance with the Restricted Unit Plan are
antidilutive.
3. Adoption of Accounting Standards
SFAS No. 130, "Reporting Comprehensive Income", was issued in June 1997, with
adoption required for fiscal years beginning after December 31, 1997. SFAS No.
130 requires the presentation of an additional income measure (termed
"comprehensive income"), which adjusts traditional net income for certain items
that previously were only reflected as direct charges to equity. For the
quarters ended March 31, 1998 and 1997, there is not a difference between
"traditional" net income and comprehensive net income.
SFAS No. 131, "Disclosures About Segments of an Enterprise and Related
Information", was issued in June 1997, establishing standards for the way that
public business enterprises report information about operating segments and
related information in interim and annual financial statements. The Partnership
has evaluated the applicability of the Statement and has concluded that the
Partnership does not meet the criteria which required business segment
reporting.
<PAGE>
4. Credit Resources
GCOLP entered into credit facilities with Salomon (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 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 $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 which will increase
over its term, 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 March 31, 1998, the aggregate amount of obligations covered by guarantees was
$175.0 million, including $96.0 million in payable obligations and $79.0 million
of estimated crude oil purchase obligations for April 1998.
Working Capital Facility
Salomon has agreed to provide GCOLP, through June 30, 1998, 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
interest rate for the Working Capital Facility is equal to the federal funds
rate plus 5/8%. The Partnership had no letters of credit outstanding at March
31, 1998. No direct cash advances were outstanding at March 31, 1998. The
Partnership expects to arrange for a working capital facility through one or
more third party lenders prior to the expiration of the availability of the
Working Capital Facility.
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.
5. 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).
Three Months Three Months
Ended Ended
March 31, March 31,
1998 1997
--------- ---------
Sales to affiliates $17,500 $212,905
Purchases from affiliates $12,353 $ 30,916
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 $3,546,000 and $3,656,000 for the three months ended March 31,
1998 and 1997, respectively.
<PAGE>
The Partnership entered into a Corporate Services Agreement with Basis
pursuant to which Basis, directly or through its affiliates, provided certain
administrative and support services for the benefit of the Partnership. Such
services included human resources, tax, accounting, data processing, NYMEX
transaction clearing and other similar administrative services. The Partnership
ceased to receive services under the agreement at December 31, 1997. Charges by
Basis under the Corporate Services Agreement were $353,000 for the three months
ended March 31, 1997.
Treasury Services
The Partnership entered into a Treasury Management Agreement with Basis.
Effective May 1, 1997, Salomon replaced Basis as a party to the Treasury
Management Agreement. Under the Treasury Management Agreement, the Partnership
invests excess cash with Salomon and earns interest at market rates. At March
31, 1998, the Partnership had $8.2 million in funds deposited with Salomon under
the Treasury Management Agreement. At March 31, 1997, the Partnership had $6.2
million in funds deposited with Basis under the Treasury Management Agreement.
Such amounts have been classified in the consolidated balance sheet as cash and
cash equivalents. For the three months ended March 31, 1998, the Partnership
earned interest of $151,000 on the investments with Salomon. For the three
months ended March 31, 1997, the Partnership earned interest of $97,000 on these
deposits by the Partnership with Basis.
Credit Facilities
As discussed in Note 4, Salomon provides Credit Facilities to the
Partnership. For the three months ended March 31, 1998 and 1997, the
Partnership paid Salomon $154,000 and $191,000, respectively, for guarantee fees
under the Credit Facilities. The Partnership paid Basis $82,000 for interest
under the Credit Facilities during the 1997 period.
6. Supplemental Cash Flow Information
Cash received by the Partnership for interest was $184,000 and $183,000 for
the three months ended March 31, 1998 and 1997, respectively. Payments of
interest were $8,000 and $59,000 for the three months ended March 31, 1998 and
1997, respectively.
7. Contingencies
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. Such matters presently
pending are not expected to have a material adverse effect on the financial
position, results of operations or cash flows of the Partnership.
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.
8. Distributions
On April 8, 1998, the Board of Directors of the General Partner declared a
cash distribution of $0.50 per Unit for the three months ended March 31, 1998.
This distribution will be paid on May 15, 1998, to the General Partner and all
Common Unitholders of record as of the close of business on April 30, 1998. The
Subordinated OLP Unitholders will not receive a distribution for that period.
<PAGE>
9. Subsequent Event
On April 17, 1998, the Partnership closed on an asset acquisition from Falco
S&D, Inc., a regional crude oil gathering and marketing company with operations
primarily in Louisiana and East Texas. The acquisition was funded from working
capital.
<PAGE>
GENESIS ENERGY, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Genesis Energy, L.P., operates crude oil common carrier pipelines and is one
of the largest independent gatherers and marketers of crude oil in North
America, with operations concentrated in Texas, Louisiana, Alabama, Florida,
Mississippi, New Mexico, Kansas and Oklahoma. The following review of the
results of operations and financial condition should be read in conjunction with
the Condensed Consolidated Financial Statements and Notes thereto.
Results of Operations - Three Months Ended March 31, 1998 Compared with Three
Months Ended March 31, 1997
Selected financial data for this discussion of the results of operations
follows, in thousands, except volumes per day.
Three Months Ended March 31,
1998 1997
---- ----
Gross margin
Gathering and marketing $3,842 $4,200
Pipeline $2,494 $2,834
General and administrative expenses $2,741 $2,133
Depreciation and amortization $1,633 $1,565
Operating income $1,962 $3,336
Interest income (expense), net $ 178 $ 92
Volumes per day
Wellhead 110,723 106,811
Bulk and exchange 342,908 339,467
Pipeline 89,519 80,789
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. The absolute price levels of crude oil do not necessarily bear
a relationship to gross margin, although such price levels significantly impact
revenues and cost of sales. As a result, period-to-period variations in
revenues and cost of sales are generally not meaningful in analyzing the
variation in gross margin. Such changes are not addressed in the following
discussion.
Pipeline 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 the Partnership's pipeline
operations.
Gross margin from gathering and marketing operations was $3.8 million for the
quarter ended March 31, 1998, as compared to $4.2 million for the quarter ended
March 31, 1997. In the first quarter of 1998, margins between sales prices for
crude oil and the prices paid to producers for the oil were narrower than in the
first quarter of 1997.
Pipeline gross margin was $2.5 million for the quarter ended March 31, 1998,
as compared to the pipeline gross margin of $2.8 million for the first quarter
of 1997. Pipeline throughput increased by 8,730 barrels per day between the two
periods. In the latter half of 1997, the Partnership began transporting crude
from a new area in Texas, increasing its revenues. Although volumes transported
increased, gross margin declined. This decline can be attributed primarily to
the cost of repairs that were required to the Main Pass pipeline.
General and administrative expenses were $2.7 million for the three months
ended March 31, 1998, an increase of $0.6 million over the 1997 period. The
increase in 1998 was primarily attributable to two factors. In the 1998
<PAGE>
period,
the Partnership recorded a non-cash charge of $0.4 million related to its
Restricted Unit Plan. The estimated total charge for the Restricted Unit Plan
is being recognized ratably over the three-year vesting period beginning in
1998. In addition, in 1998 the Partnership no longer benefited from the sharing
of certain services with Basis Petroleum, Inc., under the terms of a Corporate
Services Agreement as it did in 1997. Depreciation and amortization was flat at
$1.6 million for the two periods.
Liquidity and Capital Resources
Cash Flows
Cash flows from operating activities were $1.0 million for the three months
ended March 31, 1998. The timing of payment for crude purchases utilized the
cash flows from net income. Operating activities in the prior year period
provided cash of $0.1 million primarily due to variations in the timing of
payment of crude purchase obligations.
For the three months ended March 31, 1998, cash flows utilized in investing
activities were $2.3 million as a result of additions in property and equipment,
primarily related to pipeline operations. In the 1997 first quarter, investing
activities utilized cash flows of $0.5 million also for property and equipment
additions.
Cash flows utilized in financing activities of $4.4 million in the quarter
ended March 31, 1998, were due to the payment of a distribution to common
unitholders and the General Partner.
Working Capital and Credit Resources
As discussed in Note 4 of the Notes to Condensed Consolidated Financial
Statements, Salomon extended the term of the Working Capital Facility to June
30, 1998. The Partnership expects to arrange for a working capital facility
through one or more third party lenders prior to the June 30, 1998 expiration.
Forward Looking Statements
The statements in this Report on Form 10-Q 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, refiner demand for various grades of crude oil and the resulting
changes in pricing relationships, 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.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See Part I. Item 1. Note 7 to the Condensed Consolidated Financial
Statements entitled "Contingencies", which is incorporated herein by reference.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
10.18 Amended and Restated Restricted Unit Plan
10.19 Seventh Amendment to Master Credit Support Agreement
27 Financial Data Schedule
<PAGE>
(b) Reports on Form 8-K.
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GENESIS ENERGY, L.P.
(A Delaware Limited Partnership)
By: GENESIS ENERGY, L.L.C., as
General Partner
Date: May 11, 1998 By: /s/ Allyn R. Skelton, II
-----------------------------
Allyn R. Skelton, II
Chief Financial Officer
EXHIBIT 10.18
GENESIS ENERGY, L.L.C.
AMENDED AND RESTATED RESTRICTED UNIT PLAN
Genesis Energy, L.L.C., a Delaware limited liability company (the "Company"),
hereby amends and restates the Genesis Energy, L.L.C. Restricted Unit Plan (the
"Plan") effective as of the 27th day of January, 1998 (the "Effective Date")
(though the effective date of the initial Restricted Unit Plan amended hereby is
January 27, 1997).
SECTION 1. Purpose. The purpose of the Plan is to promote the interests of the
Company and Genesis Energy, L.P. ("Genesis MLP") by encouraging Key Employees to
remain with the Company by providing a means whereby such individuals may
develop a sense of proprietorship and personal involvement in the development
and financial success of Genesis MLP, and to encourage them to devote their best
efforts to the Business of Genesis MLP, thereby advancing the interests of
Genesis MLP and the Company.
SECTION 2. Definitions. As used in this Plan:
"Committee" means the Compensation Committee of the Board of Directors.
"Date of Grant" means the date specified by the Members on which a grant of
Phantom Units to a Key Employee is effective.
"Distribution" means the amount payable per unit to a holder of a Phantom Unit
pursuant to this Plan.
"Genesis MLP" means Genesis Energy, L.P.
"Genesis MLP Partnership Agreement" means the Amended and Restated Agreement of
Limited Partnership of Genesis MLP.
"Genesis OLP" means Genesis Crude Oil, L.P.
"Key Employee" means any individual who is a key management employee of the
Company as determined by the Members.
"MLP Common Unit" means a limited partnership interest in Genesis MLP
represented by a common unit as set forth in Genesis MLP Partnership Agreement.
"Members" means the members of the Company acting through the Committee.
"OLP Common LP Unit" means a unit representing a fractional part of the
partnership interests of all limited partners and assignees and having the
rights and obligations specified with respect to Common Units in the Amended and
Restated Agreement of Limited Partnership of Genesis OLP.
"OLP Subordinated Unit" means a unit representing a fractional part of the
limited partner partnership interests of all limited partners of Genesis OLP and
assignees of any such limited partner interest and having the rights and
obligations specified with respect to Subordinated Units in the Amended and
Restated Agreement of Limited Partnership of Genesis OLP.
"Participant" means a Key Employee who is selected by the Members to receive a
grant of Phantom Units under the Plan.
"Phantom Unit" means a notional (or phantom) unit granted under the Plan, which
upon vesting entitles the Participant to receive an MLP Common Unit.
SECTION 3. Phantom Units Available under Plan. Subject to adjustments as
provided in Section 6, the maximum number of Phantom Units that may be granted
under this Plan shall be 290,909; provided, however, any Phantom Units that are
forfeited or which expire for any reason without vesting into MLP Common Units
will again be available for grant under this Plan. MLP Common Units to be
delivered by the Company upon the vesting of Phantom Units granted under the
Plan may be MLP Common Units acquired by the Company in the open market, MLP
Common Units acquired by the Company directly from Genesis MLP, Genesis OLP or
any other person, or any combination of the foregoing.
SECTION 4. Grants of Phantom Units. The Members via the Committee, in their
discretion, may from time-to-time grant Phantom Units to any Key Employee upon
such terms and conditions as they may determine in accordance with the
following:
(a) Each grant will specify the number of Phantom Units to which it pertains.
(b) Each grant will specify the terms and conditions for the Participant to
become vested in such Phantom Units. All Phantom Units outstanding as of the
Effective Date are hereby deemed amended to vest over a three year period, with
the first one-third to vest on December 31, 1998, the second one-third to vest
on December 31, 1999, and the rest to vest on December 31, 2000. Any grants
made after January 27, 1998 shall vest on such terms as the members may
establish via the Committee. Upon vesting, each Phantom Unit entitles the
Participant to receive an MLP Common Unit.
(c) In the event of a potential merger or consolidation involving the Company,
the potential liquidation or dissolution of the Company or Genesis MLP, a
potential sale or other disposition by the Company or Genesis MLP of all or
substantially all of its assets, or a potential sale or other disposition by the
equityholders of the Company or Genesis MLP of a majority of the equity
interests of the Company or of the MLP Common Units, as applicable, to one
Purchaser or related Purchasers (any such merger, consolidation, liquidation,
dissolution, or sale being referred to herein as a "Significant Event"), then
the Company shall waive any and all restrictions on the vesting of Participants'
rights under Phantom Units granted pursuant to this Plan, and Participants'
rights under their respective Phantom Units shall vest in full, subject to the
actual occurrence of the Significant Event.
(d) Each grant will be evidenced by an agreement executed on behalf of the
Company by an authorized officer and delivered to and accepted by the
Participant and shall contain such terms and provisions, consistent with this
Plan, as the Members may approve with respect to such grant.
(e) All Phantom Units that have vested and been converted into MLP Common Units
must be held for one year by the recipient. The Company, will retain possession
of such MLP Common Units on behalf of the Participant until the expiration of
such year. Upon the occurrence of a Significant Event (as defined in Section
4(c)), in which case all restrictions on MLP Common Units shall terminate,
including those described in this Section.
(f) The Committee will make loans available to Participants on terms to be
determined by the Committee to assist Participants in paying any tax liabilities
arising from the grant or the vesting of Phantom Units.
(g) All Phantom Units outstanding as of the Effective Date are hereby deemed
amended to reflect the terms of the Plan, as amended and restated.
SECTION 5. Transferability. No Phantom Units granted under this Plan shall be
transferable by a Participant other than by will or the laws of descent and
distribution, or pursuant to a qualified domestic relations order.
SECTION 6. Adjustments. In the event that (i) any change is made to the MLP
Common Units deliverable under the Plan or (ii) Genesis MLP makes any
distribution of cash, MLP Common Units or other property to unitholders which
results from the sale or disposition of a major asset or separate operating
division of Genesis MLP or any other extraordinary event and, in the judgment of
the Members, such change or distribution would significantly dilute the rights
of Participants hereunder, then the Members may make appropriate adjustments in
the maximum number of Phantom Units deliverable under the Plan and may make
appropriate adjustments to each outstanding Phantom Unit. The adjustments
determined by the Members shall be final, binding and conclusive.
SECTION 7. No Fractional Units. The Company will not be required to
deliver any fractional MLP Common Units pursuant to this Plan. The Committee,
in its discretion, may provide for the elimination of fractions or for the
settlement of fractions in cash.
SECTION 8. Withholding of Taxes. To the extent that the Company is
required to withhold any taxes in connection with any grant or payment made to a
Participant or any other person under this Plan, it will be a condition to the
receipt of such payment that the Participant or such other person make
arrangements satisfactory to the Company for the payment of the balance of such
taxes required or requested to be withheld, which arrangements in the discretion
the Members may include the relinquishment of a portion of each person's
Distribution payment.
SECTION 9. Distribution Payment.. Company shall distribute to holders
of Phantom Units hereunder on a quarterly basis a distribution per Phantom Unit
equal to the quarterly distribution on each Subordinated Unit. Said payment
shall be made at the same time and in the same manner as the distributions on
the Subordinated Units.
SECTION 10. Compliance with Securities Laws. Notwithstanding anything
herein or in any other agreement to the contrary, Genesis MLP shall not be
obligated to sell or issue any MLP Common Units to the Company under the Plan
unless and until Genesis MLP is satisfied that such sale or issuance complies
with (i) all applicable requirements of the securities exchange on which the MLP
Common Units are traded (or the governing body of the principal market in which
such MLP Common Units are traded, if such MLP Common Units are not then listed
on an exchange), (ii) all applicable provisions of the 1933 Act and (iii) all
other laws or regulations by which Genesis MLP is bound or to which Genesis MLP
is subject. The Company acknowledges that, as the general partner of Genesis
MLP, it is an affiliate of Genesis MLP under the securities laws and it shall
comply with such laws and obligations of Genesis MLP relating thereto as if they
were directly applicable to the Company.
SECTION 11 Administration of the Plan. (a) This Plan will be directed
by the Members and administered by the Committee which at all times will consist
entirely of directors appointed by the Members of the Company. A majority of
the Committee will constitute a quorum, and the action of the members of the
Committee present at any meeting at which a quorum is present, or acts
unanimously approved in writing, will be the acts of the Committee.
(b) Subject to the terms of the Plan and applicable law, the Members shall
have the sole power, authority and discretion to: (i) designate the Key
Employees who are to be Participants; (ii) determine the number of Phantom Units
to be granted to a Key Employee; (iii) determine the terms and conditions of any
grant of Phantom Units to a Key Employee; (iv) interpret, construe and
administer the Plan and any instrument or agreement relating to Phantom Units
granted under the Plan; (v) establish, amend, suspend, or waive such rules and
regulations and appoint such agents as it shall deem appropriate for the proper
administration if the Plan; (vi) make a determination as to the right of any
person to receive payment of (or with respect to) Phantom Units; and (vii) make
any other determinations and take any other actions that the Members deem
necessary or desirable for the administration of the Plan.
(c) The Members may correct any defect, supply any omission, or reconcile
any inconsistency in the Plan or any Phantom Unit grant in the manner and to the
extent it shall deem desirable in the establishment or administration of the
Plan.
SECTION 12. Conditional Grants. All grants of Phantom Units are
conditional and subject to the following conditions, as well as special
conditions set forth in the grant:
(a) The employee awarded a grant of Phantom Units must be employed by the
Company at the time the Phantom Units vest to MLP Common Units and, prior to
such vesting, at the time any Distribution is declared, in order to receive the
MLP Common Units and/or any Distribution, as applicable. An employee who is
awarded Phantom Units but who either terminates his/her employment with the
Company or is terminated by the Company (including as the result of death or
disability) forfeits his/her right to the unvested Phantom Units and any
subsequent Distribution unless the Board of Directors make a special
dispensation or as is otherwise set forth in a written employment agreement with
such employee; provided, however, that if an employee is terminated without
cause in violation of a written employment agreement between the Company and
such employee, then none of the Phantom Units shall be forfeited and they will
vest and convert into MLP Common Units immediately without any restrictions,
including the restrictions in Section 4(e).
(b) The award of Phantom Units may be subject to additional conditions as
set forth in the specific Grant Agreement.
(c) To the extent the provisions of a Grant Agreement or a written
employment agreement are inconsistent with the provisions of the Plan, such
provisions of the Grant Agreement or the employment agreement shall control.
SECTION 13. Amendments, Termination, Etc. (a) The Plan may be amended from
time-to-time by the Company; provided, however, that no change in any
outstanding grant may be made that would impair the rights of the Participant
without the consent of such Participant, and further, during the Subordination
Period (as defined in the OLP Partnership Agreement), no amendment will be made
without the approval of a majority of the Unitholders that would increase the
total number of MLP Common Units available for grants under the Plan.
(b) The Plan will not confer upon any Participant any right with respect
to continuance of employment or other service with the Company, Genesis MLP or
Genesis OLP, nor will it interfere in any way with any right the Company,
Genesis MLP or Genesis OLP would otherwise have to terminate such Participant's
employment or other service at any time.
(c) No grants may be made under the Plan following the 10th anniversary of
its effective date; however, the Company in its discretion may terminate the
Plan at any earlier time with respect to any MLP Common Units for which a grant
has not heretofore been made.
SECTION 14. Governing Law. The validity, construction and effect of the
Plan and any rules and regulations relating to the Plan shall be determined in
accordance with applicable Federal law, and to the extent not preempted thereby,
with the laws of the State of Delaware.
SECTION 15. Effective Date. The effective date of this plan shall be
January 21, 1997; provided however, that the effective date of the amendments
reflected in this amended and restated plan shall be January 27, 1998.
EXHIBIT 10.19
SEVENTH AMENDMENT (this "Amendment") dated as of March 20, 1998, to the Master
Credit Support Agreement dated as of December 3, 1996, between GENESIS CRUDE
OIL, L.P., a Delaware limited partnership ("Genesis OLP"), and SALOMON SMITH
BARNEY HOLDINGS INC., a Delaware corporation ("SSB Holdings"), as amended by the
First Amendment dated as of May 12, 1997, the Second Amendment dated as of
August 22, 1997, the Third Amendment dated as of August 1, 1997, the Fourth
Amendment dated as of September 29, 1997, the Fifth Amendment dated as of
November 14, 1997, and the Sixth Amendment dated as of February 13, 1998 (as
amended, the "Credit Agreement").
A. Genesis OLP and SSB Holdings are parties to the Credit Agreement,
pursuant to which SSB Holdings has agreed to extend credit to Genesis OLP,
subject to the terms and conditions set forth therein. Capitalized terms used
but not otherwise defined herein have the meanings assigned to them in the
Credit Agreement.
B. To make certain changes requested by Genesis OLP, the parties
hereto desire to amend the Credit Agreement as provided herein, subject to the
terms and conditions set forth herein.
Accordingly, in consideration of the mutual agreements herein
contained and other good and valuable consideration, the sufficiency and receipt
of which are hereby acknowledged, the parties hereto hereby agree as follows:
SECTION 1. Amendments to Section 1.1. The following amendment is
made to the definitions contained in Section 1.1 of the Credit Agreement:
(i) The definition of "Working Capital Facility Maturity Date" is hereby
amended to read as follows:
"Working Capital Facility Maturity Date" shall mean June 30, 1998.
SECTION 2. Representations and Warranties. Genesis OLP hereby
represents and warrants to SSB Holdings, on and as of the date hereof, that:
(a) This Amendment has been duly authorized, executed and delivered
by Genesis OLP, and each of this Amendment and the Credit Agreement as amended
by this Amendment constitutes a legal, valid and binding obligation of Genesis
OLP, enforceable in accordance with its terms.
(b) The representations and warranties set forth in Article V of the
Credit Agreement are true and correct in all material respects on and as of the
date hereof, and will be true and correct after giving effect to this Amendment.
(c) No Default or Event of Default has occurred and is continuing, or
will have occurred or be continuing after giving effect to this Amendment.
SECTION 3. Miscellaneous. (a) THIS AMENDMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK.
(b) This Amendment may be executed in any number of counterparts,
each of which shall be an original but all of which, when taken together, shall
constitute but one instrument.
(c) Except as specifically amended or modified hereby, the Credit
Agreement shall continue in full force and effect in accordance with the
provisions thereof. As used therein, the terms "Agreement", "herein",
"hereunder", "hereinafter", "hereto", "hereof" and words of similar import
shall, unless the context otherwise requires, refer to the Credit Agreement as
amended hereby. The Credit Agreement, as amended and modified hereby,
constitutes the entire agreement of the parties relating to the matters
contained herein and therein, superseding all prior contracts or agreements,
whether oral or written, relating to the matters contained herein and therein.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective authorized officers as of the date first
written above.
SALOMON SMITH BARNEY HOLDINGS INC.,
By /s/ Thomas W. Jasper
---------------------------
Name: Thomas W. Jasper
Title: Treasurer
GENESIS CRUDE OIL, L.P., by
GENESIS ENERGY, L.L.C., its operating
general partner,
By /s/ Allyn R. Skelton, II
-----------------------------
Name: Allyn R. Skelton, II
Title: Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM THE FORM 10-Q OF
GENESIS ENERGY, L.P. FOR THE PERIOD ENDED MARCH 31, 1998 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS CONTAINED IN THAT
FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 6,080
<SECURITIES> 0
<RECEIVABLES> 195,537
<ALLOWANCES> 0
<INVENTORY> 4,017
<CURRENT-ASSETS> 208,383
<PP&E> 105,285
<DEPRECIATION> 16,159
<TOTAL-ASSETS> 307,969
<CURRENT-LIABILITIES> 203,635
<BONDS> 0
0
0
<COMMON> 0<F1>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 307,969<F2>
<SALES> 645,898
<TOTAL-REVENUES> 650,257
<CGS> 638,695
<TOTAL-COSTS> 645,554<F3>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,159
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,728<F4>
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,728<F4>
<EPS-PRIMARY> 0<F5>
<EPS-DILUTED> 0<F6>
<FN>
<F1>GENESIS ENERGY, L.P. IS A MASTER LIMITED PARTNERSHIP AND THEREFORE HAS NO
COMMON STOCK OUTSTANDING.
<F2>GENESIS ENERGY, L.P. IS A MASTER LIMITED PARTNERSHIP. ITS BALANCE SHEET
INCLUDES MINORITY INTERESTS IN ITS SUBSIDIARY, GENESIS CRUDE OIL, L.P. OF
$28,656 AND PARTNERS' CAPITAL CONSISTING OF THE CAPITAL OF THE COMMON
UNITHOLDERS OF $74,163 AND THE CAPITAL OF THE GENERAL PARTNER OF $1,515.
<F3>TOTAL COSTS INCLUDES DEPRECIATION AND AMORTIZATION OF $1,633.
<F4>THE MINORITY INTERESTS IN NET INCOME OF GENESIS ENERGY, L.P. IS $431.
<F5>BASIC NET INCOME PER COMMON UNIT IS $0.20.
<F6>DILUTED NET INCOME PER COMMON UNIT IS $0.20.
</FN>
</TABLE>
