UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report: October 4, 1999
Commission File Number 1-14323
ENTERPRISE PRODUCTS PARTNERS L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 76-0568219
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
2727 North Loop West
Houston, Texas 77008
(Address of principal executive (Zip Code)
offices)
(713) 880-6500
(Registrant's telephone number, including area code)
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Item 2. Acquisition or Disposition of Assets
Acquisition of Tejas Natural Gas Liquids, LLC
On September 17, 1999, Enterprise Products Partners L.P. ("Enterprise")
acquired Tejas Natural Gas Liquids, LLC ("TNGL") from a subsidiary of Tejas
Energy, LLC ("Tejas"), an affiliate of Shell Oil Company. Tejas has the
opportunity to earn an additional 6.0 million contingent convertible special
partnership units over the next two years upon the achievement of certain gas
production thresholds under a 20 year natural gas processing agreement entered
into among TNGL, Shell Oil Company and a number of its affiliates covering
substantially all of the Shell entities' Gulf of Mexico gas production. The
effective date of the transaction was August 1, 1999.
TNGL engages in natural gas processing and natural gas liquid ("NGL")
fractionation, transportation, storage and marketing in Louisiana and
Mississippi. TNGL's assets include varying interests in eleven natural gas
processing plants (including one under construction) with a combined gross
capacity of 11.0 billion cubic feet per day (Bcfd) and net capacity of 3.1 Bcfd;
four NGL fractionation facilities with a combined gross capacity of 281,000
barrels per day (BPD) and net capacity of 131,500 BPD; four NGL storage
facilities with approximately 29.5 million barrels of gross capacity and 8.8
million barrels of net capacity; and over 2,100 miles of NGL pipelines
(including a 12.5 percent interest in Dixie Pipeline).
The 14.5 million convertible special units received by Tejas at closing
represent a 17.6 percent equity ownership in Enterprise. These special units do
not accrue distributions and are not entitled to cash distributions until their
conversion into common units, which occurs automatically with respect to 1.0
million units on August 1, 2000 (or the day following the record date for
determining units entitled to receive distributions in the second quarter of
2000), 5.0 million units on August 1, 2001 and 8.5 million units on August 1,
2002. If all of the 6.0 million contingent special convertible units are earned,
Tejas' ownership interest in Enterprise would increase to 23.8 percent based on
the currently outstanding units, and 1.0 million of the contingent units would
convert into common units on August 1, 2002 and 5.0 million would convert on
August 1, 2003.
Under the rules of the New York Stock Exchange, conversion of the special
units into common units requires approval of the Enterprise unitholders. The
General Partner has agreed to call a special meeting of the unitholders of
Enterprise for the purpose of soliciting such approval. EPC Partners II, Inc.
("EPC II"), which owns in excess of 81% of the outstanding common units, has
agreed to vote its units in favor of such approval, which will satisfy the
approval requirement.
The $166 million cash portion of the purchase price was funded with
borrowings under Enterprise's existing credit facility led by The Chase
Manhattan Bank.
The consideration for the acquisition was determined by arms-length
negotiation among the parties.
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Unitholder Rights Agreement
In connection with the transactions described above, Tejas purchased from
EPC II a 30% membership interest in Enterprise Products GP, LLC (the "General
Partner"), which serves as the sole general partner of Enterprise, and entered
into a Unitholder Rights Agreement with Enterprise, the General Partner,
Enterprise Products Operating L.P., EPC II and Enterprise Products Company (the
"Unitholder Rights Agreement"). The Unitholder Rights Agreement provides that as
long as Tejas owns more than a 20% interest in the General Partner, it will be
entitled to designate one-third of the General Partner's board of directors, and
that as long as it owns at least a 10% interest in the General Partner it will
also be entitled to designate two members of a newly created Executive Committee
of the General Partner. Tejas' rights to board and committee representation
would decrease if their ownership interest decreases.
The Unitholder Rights Agreement provides that the General Partner will not
permit Enterprise, Enterprise Operating or the General Partner to take certain
actions without the consent of at least one of the Tejas designees on the
Executive Committee, including, among other things, paying special distributions
not in accordance with Enterprise's current cash distribution policy; material
dispositions of assets; dispositions of assets that could adversely affect
production or delivery of gas by Shell Oil Company or its affiliates in the Gulf
of Mexico; material acquisitions; mergers or similar transactions; issuing
partnership units in private financing transactions; incurrence of indebtedness
in excess of certain limits; repurchases of partnership units other than in
connection with employee benefit plans; entering into or modifying transactions
with affiliates; and submitting matters to a unitholder vote. The foregoing
limitations will terminate when the special units issued to Tejas have been
converted to common units and the market price of the common units has exceeded
$24 per unit for 120 consecutive calendar days (subject to certain extensions).
Pursuant to the Unitholder Rights Agreement, the board of directors of the
General Partner has been increased by three members to a total of nine, and
Tejas has designated Charles R. Crisp, Curtis R. Frasier and Stephen H. McVeigh
as its board designees. Tejas has designated Curtis R. Frasier and Stephen H.
McVeigh to serve on the Executive Committee, with the Enterprise designees being
Dan L. Duncan, O. S. Andras and Richard H. Bachmann. Mr. Crisp is President and
Chief Executive Officer of Coral Energy LLC, an affiliate of Shell Oil Company,
Mr. Frasier is Chief Operating, Administrative and Legal Officer of Coral Energy
LLC, and Mr. McVeigh is Manager of Production and Surveillance (Gulf of Mexico)
for Shell Offshore Inc.
The Unitholder Rights Agreement grants EPC II certain rights to acquire
Tejas' interest in the General Partner if Tejas disposes of its special or
common units, and to acquire Tejas' special or common units if it wishes to
dispose of them. Each of these purchase rights would also apply in the event of
specified change of control events relating to Tejas. The Unitholder Rights
Agreement grants Tejas preemptive rights to acquire additional units issued by
Enterprise in private equity financing transactions, and grants Tejas the right
to acquire all of the partnership units owned by EPC II, Enterprise Products
Company and their affiliates if certain change of control events occur with
respect to Enterprise.
The Unitholder Rights Agreement provides that if Tejas sells any of the
common units it receives upon conversion of the special units in specified types
of sale transactions for less than $18 per unit within one year after the
applicable conversion date for the special units in question, then
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Enterprise will pay to Tejas the difference between the sales price and
$18, either in cash or in additional units at Enterprise's option.
Other Agreements
In connection with the transactions described above, Enterprise entered
into a Registration Rights Agreement with Tejas granting Tejas certain rights to
require Enterprise to register for resale under the Securities Act of 1933 all
of the common units issuable upon conversion of the special units, and certain
"piggy back" rights to require Enterprise to include such common units in any
registration begun by Enterprise.
Also, the partnership agreement of Enterprise and the limited liability
agreement of the General Partner were amended to give effect to the above
transactions, including the issuance of the special units.
The foregoing summaries of the Contribution Agreement governing the
acquisition, the Unitholder Rights Agreement, the Registration Rights Agreement,
the amended partnership agreement of Enterprise and the amended limited
liability company agreement of the General Partner are qualified in their
entirety by reference to the complete documents.
Item 7 . Exhibits
1. Contribution Agreement dated September 17, 1999.
2. Unitholder Rights Agreement dated September 17, 1999.
3. Registration Rights Agreement dated September 17, 1999.
4. Second Amended and Restated Agreement of Limited Partnership of Enterprise
Products Partners L.P. dated as of September 17, 1999.
Note:The Company incorporates by reference the above documents included in the
Schedule 13 D filed September 27, 1999, by Tejas Energy LLC.
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 hereunto duly authorized.
ENTERPRISE PRODUCTS PARTNERS L.P.
By Enterprise Products GP, LLC, its general partner
Date: October 4, 1999 By: ___/s/ Gary L. Miller
Gary L. Miller
Executive Vice President and Chief Financial Officer
of Enterprise Products GP, LLC
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EXHIBIT INDEX
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
1. Contribution Agreement dated September 17, 1999.
2. Unitholder Rights Agreement dated September 17, 1999.
3. Registration Rights Agreement dated September 17, 1999.
4. Second Amended and Restated Agreement of Limited Partnership of Enterprise
Products Partners L.P. dated as of September 17, 1999.
Note: The Company incorporates by reference the above documents included in the
Schedule 13 D filed September 27, 1999, by Tejas Energy LLC.
