<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 15, 1998
Registration No. 333-59597
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Amendment No. 2
to
Form S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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Lakehead Pipe Line Company, Limited Partnership
(Exact name of registrant as specified in its charter)
Delaware 39-1715851
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
SUSAN D. LENCZEWSKI
LAKE SUPERIOR PLACE CORPORATE SECRETARY
21 WEST SUPERIOR STREET LAKE SUPERIOR PLACE
DULUTH, MINNESOTA 55802 21 WEST SUPERIOR STREET
(218) 725-0100 DULUTH, MINNESOTA 55802
(218) 725-0100
(Address, including zip code, (Name, address, including zip
and telephone number, including code, and telephone number,
area code, of registrants' including area code,
principal executive offices) of agent for service)
------------------
Copies to:
WILLIAM N. FINNEGAN, IV
ANDREWS & KURTH L.L.P.
4200 CHASE TOWER
600 TRAVIS
HOUSTON, TEXAS 77002
(713) 220-4200
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after the effective date of this Registration Statement, as
determined in light of market conditions and other factors.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION DATED SEPTEMBER 15, 1998
PROSPECTUS
LAKEHEAD PIPE LINE COMPANY, LIMITED PARTNERSHIP
SENIOR DEBT SECURITIES
SUBORDINATED DEBT SECURITIES
------------------------
Lakehead Pipe Line Company, Limited Partnership (the "Company") may offer
and sell from time to time in one or more series its unsecured debt securities
which may be senior (the "Senior Debt Securities") or subordinated (the
"Subordinated Debt Securities"). The Company is 98.9899% owned by Lakehead Pipe
Line Partners, L.P. ("Lakehead" and, together with the Company, the
"Partnership").
The Senior Debt Securities and the Subordinated Debt Securities are
collectively hereinafter referred to as the "Debt Securities." The Debt
Securities will be limited to an aggregate initial public offering price not to
exceed $400 million, or the equivalent thereof in one or more foreign currencies
or currency units, including composite currencies. The Debt Securities may be
offered in separate series, in amounts, at prices and on terms to be determined
in light of market conditions at the time of sale and set forth in a related
Prospectus Supplement.
Certain specific terms of the particular Debt Securities for which this
Prospectus is being delivered will be set forth in a related Prospectus
Supplement, including, where applicable, the specific designation and priority,
aggregate principal amount, authorized denominations, maturities, interest rate
or rates or the method of determining the same, the date or dates on which
interest, if any, shall be payable, the place or places where principal of and
premium, if any, and interest, if any, on such Debt Securities of the series
will be payable, any terms for optional or mandatory redemption or any sinking
fund or analogous provisions, currency or currencies, or currency unit or
currency units of denomination and payment if other than U.S. dollars, the
initial public offering price, the net proceeds to the Company, terms relating
to temporary or permanent global securities, provisions regarding registration
of transfer or exchange and other special terms.
The Debt Securities may be offered and sold to or through underwriters,
dealers, or agents as designated from time to time, or through a combination of
such methods, and also may be offered and sold directly to one or more other
purchasers. See "Plan of Distribution." The names of, and the principal amounts
of Debt Securities to be purchased by or through, underwriters, dealers or
agents, and the compensation of such underwriters, dealers or agents, including
any applicable fees, commissions, and discounts, will be set forth in the
related Prospectus Supplement. The net proceeds to the Company from the offer
and sale of each series of Debt Securities also will also be set forth in the
related Prospectus Supplement.
No Debt Securities may be sold without delivery of a Prospectus Supplement
describing such series or issue of Debt Securities and the method and terms of
offering thereof.
SEE "RISK FACTORS" BEGINNING ON PAGE 4 FOR A DISCUSSION OF CERTAIN FACTORS
THAT PROSPECTIVE INVESTORS IN THE DEBT SECURITIES SHOULD CONSIDER.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is September , 1998.
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AVAILABLE INFORMATION
Lakehead is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports and other information may be
inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the following regional offices of the Commission: 7 World Trade Center,
Suite 1300, New York, New York 10048; and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such material also may be obtained at
prescribed rates from the Public Reference Section of the Commission, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. Such material also may be
accessed electronically by means of the Commission's home page on the Internet
at http://www.sec.gov. Lakehead's Class A Common Units are listed for trading on
the New York Stock Exchange (the "NYSE") under the trading symbol "LHP", and
reports and other information concerning Lakehead may be inspected at the
offices of the NYSE, 20 Broad Street, New York, New York 10005. Information
relating to Lakehead may also be obtained electronically by means of Lakehead's
home page on the Internet at http://www.lakehead.com.
This Prospectus does not contain all of the information set forth in the
Registration Statement, of which this Prospectus is a part, filed with the
Commission under the Securities Act of 1933, as amended (the "Securities Act").
Reference is made to such Registration Statement for further information with
respect to the Company and the Debt Securities offered hereby. Statements
contained herein concerning the provisions of documents are necessarily
summaries of such documents, and each statement is qualified in its entirety by
reference to the copy of the applicable document filed with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed with the Commission by Lakehead
pursuant to the Exchange Act (File No. 1-10934) are incorporated herein by
reference and shall be a part hereof:
1. Lakehead's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, as amended by Lakehead's Annual Report on Form 10-K/A
for the fiscal year ended December 31, 1997 (the "Form 10-K");
2. Lakehead's Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 1998;
3. Lakehead's Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 1998, as amended by Lakehead's Quarterly Report on Form
10-Q/A for the quarterly period ended June 30, 1998; and
4. Lakehead's Current Report on Form 8-K dated July 21, 1998, as
amended by Lakehead's Current Report on Form 8-K/A filed September 15,
1998.
All documents filed by Lakehead pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Debt Securities offered hereby shall be
deemed to be incorporated by reference in this Prospectus and to be part hereof
from the date of filing of such documents. Any statement contained herein or in
a document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained therein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
Lakehead will provide without charge to each person, including any
beneficial owner of a Debt Security, to whom a copy of this Prospectus is
delivered, upon written or oral request of such person, a copy of any or all
documents incorporated by reference in this Prospectus (other than exhibits to
such documents unless such exhibits are specifically incorporated by reference
into such documents). Requests for such copies should be
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directed to Lakehead Pipe Line Partners, L.P., Lake Superior Place, 21 West
Superior Street, Duluth, Minnesota 55802, Attention: R.R. Karlen, Investor
Relations, telephone (800) 525-3999 or (218) 725-0100.
No separate financial information for the Company has been provided or
incorporated by reference in this Prospectus because all operations of Lakehead
are conducted by the Company, substantially all of the earnings and cash flow of
Lakehead are generated by the Company, and substantially all of the assets and
liabilities shown in the consolidated financial statements for Lakehead are
owned directly by the Company.
CERTAIN FORWARD-LOOKING STATEMENTS
This Prospectus and the accompanying Prospectus Supplement (including the
documents incorporated by reference herein and therein) contain certain
forward-looking statements and information relating to the Partnership that are
based on the beliefs of the management of the General Partner as well as
assumptions made by and information currently available to the management of the
General Partner. When used in, or incorporated by reference into, this
Prospectus and the accompanying Prospectus Supplement, the words "anticipate,"
"expect," "project" and similar expressions are intended to identify
forward-looking statements. Such statements are subject to certain risks,
uncertainties and assumptions pertaining to operating performance, regulatory
parameters, economic conditions, etc. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary significantly from those anticipated, expected or
projected. Except as required by applicable securities laws, the Company does
not intend to update these forward-looking statements and information. For
additional discussion of such risks, uncertainties and assumptions, see "Risk
Factors" in this Prospectus and "Items 1 & 2. Business and
Properties -- Business Risks" in the Form 10-K. All written and verbal
forward-looking statements attributable to the Company, or persons acting on its
behalf are expressly qualified in their entirety by such factors.
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RISK FACTORS
Prospective investors should carefully consider the risk factors described
below, in addition to the other information set forth elsewhere or incorporated
by reference in this Prospectus and any accompanying Prospectus Supplement, in
connection with an investment in the Debt Securities offered hereby and thereby.
CONSIDERATIONS RELATING TO THE PARTNERSHIP'S BUSINESS
Dependence Upon Western Canadian Crude Oil Supply and the IPL System
The Lakehead System (as defined herein) is dependent upon the level of
supply of crude oil and other liquid hydrocarbons from western Canada.
Interprovincial Pipe Line Inc. ("IPL"), the parent company of Lakehead Pipe Line
Company, Inc., which is the general partner of Lakehead and the Company (the
"General Partner"), has advised the General Partner that in 1997, the IPL System
(as defined herein) transported approximately 65% of all crude oil produced in
western Canada, of which approximately 90% was transported by the Lakehead
System. If a decline in western Canadian crude oil production occurs, the
General Partner expects that throughput on the Lakehead System will also
decline.
The Lakehead System is dependent upon the utilization of the IPL System by
producers of western Canadian crude oil to reach markets in the United States
and eastern Canada. The diversion of western Canadian crude oil away from the
IPL System, whether by virtue of increased demand by western Canadian refiners
or the shipment of crude oil by other pipelines, would likely have a direct
impact on the volumes transported by the Lakehead System. Although the General
Partner believes that under regulations of the Federal Energy Regulatory
Commission ("FERC") the Partnership will periodically be allowed to increase
tariff rates to compensate for declines in throughput which result in a
substantial divergence between the Partnership's costs and tariff rates, there
can be no assurance that this will be the case. Even if such tariff increases
were allowed, the Partnership may suffer lower revenues during the period before
a tariff adjustment can be implemented. In addition, reduced throughput on the
IPL System as a result of testing, line repair, reduced operating pressures or
other causes could result in reduced throughput on the Lakehead System. If the
Partnership were not able to recoup lost revenue related to such reduced
throughput, the Partnership could be adversely impacted.
Reduced Demand Could Affect Shipments on the Lakehead System
The Partnership's business depends in part on the level of demand for crude
oil and natural gas liquids (in particular, western Canadian crude oil and
natural gas liquids) in the geographic areas in which deliveries are made by the
Lakehead System and the ability and willingness of shippers having access to the
Lakehead System to satisfy such demand by deliveries through the Lakehead
System. Demand for western Canadian crude oil and natural gas liquids in the
geographic areas served by the Lakehead System is affected by the delivery of
other supplies of crude oil and refined products into such geographic areas.
Existing pipeline capacity for the delivery of crude oil to the Midwest U.S.,
the primary market served by the Lakehead System, exceeds current refining
capacity. In addition, IPL and a group of refiners have developed a project to
reverse the flow of a portion of the IPL System from Sarnia to Montreal, Quebec
to bring crude oil from Montreal to Sarnia. The reversal of this line would
result in IPL becoming a competitor of the Partnership for supplying crude oil
to the Ontario market and is expected to reduce the deliveries of western
Canadian crude oil into the eastern Canadian markets served by the System (as
defined herein). When the reversal of the line is effective (which is expected
in 1999), quantities of crude oil historically delivered by the System to the
Ontario market are expected to be redirected to existing U.S. markets served by
the Lakehead System, although at reduced tariffs (due to shorter transportation
distances). The Partnership cannot predict the impact of future economic
conditions, fuel conservation measures, alternative fuel requirements,
governmental regulation or technological advances in fuel economy and energy
generation devices, all of which could reduce the demand for crude oil and other
liquid hydrocarbons in the areas in which deliveries are made by the Lakehead
System.
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Uncertainty Arising From Ratemaking Methodologies
As an interstate common carrier, the Partnership's pipeline operations are
subject to regulation by the FERC under the Interstate Commerce Act, which
permits challenges to proposed or changed rates and to rates that are already
effective by protest or complaint, respectively, by an interested person or upon
the FERC's own motion. Proposed or changed rates may be suspended by the FERC
for up to seven months and allowed to become effective subject to investigation
and potential refund. Rates that are already effective may be ordered to be
reduced for the future and, upon an appropriate showing, reparations may be
awarded for damages sustained by a complainant as a result of such rates for up
to two years prior to the commencement of an investigation.
In October 1993, the FERC established a new ratemaking methodology for
liquids pipelines to be effective January 1, 1995 allowing for the annual
indexing of rate ceilings based on changes in a producer price index. Rate
ceilings may increase or decrease depending upon the change in the index minus
1%. The order also provides that, under certain circumstances, pipelines or
shippers may seek to establish cost-based or market-based rates rather than
indexed rates. To the extent this order limits the ability of the Partnership to
establish cost-based rates, or the indexing methodology restricts or delays the
Partnership's ability to implement rates that reflect increased costs, the
Partnership could be adversely affected. Furthermore, no assurances can be given
that inflationary rate increases allowed under the FERC's indexing methodology
will be sufficient to offset increases in the Partnership's costs. In addition,
if the applicable index increases less than 1% or decreases, the FERC's indexing
methodology could result in a corresponding reduction in tariffs, as was the
case in July 1998. See "Items 1 and 2. Business and Properties -- Regulation" in
the Form 10-K.
Many of the ratemaking issues contested in the Partnership's prior rate
cases, in particular the FERC's oil pipeline ratemaking methodology, have not
previously been reviewed by a federal appellate court. Any decision ultimately
rendered by the FERC on any rate case involving its oil pipeline ratemaking
methodology may be subject to judicial review. Any such judicial review could
ultimately result in alternative ratemaking methodologies that could have a
material adverse effect on the Partnership.
There is also pending at the FERC a proceeding involving another publicly
traded limited partnership engaged in the common carrier transportation of crude
oil (the "Santa Fe Proceeding") in which the FERC could further limit its
current position related to the tax allowance permitted in the rates of publicly
traded partnerships, as well as possibly altering the FERC's current application
of the FERC oil pipeline ratemaking methodology. On September 25, 1997, the
administrative law judge in the Santa Fe Proceeding issued an initial decision
addressing various aspects of the tax allowance issue as it affects publicly
traded partnerships, as well as various technical issues involving the
application of the FERC oil pipeline ratemaking methodology. The administrative
law judge's initial decision in the Santa Fe Proceeding is currently pending
review by the FERC. In such review, it is possible that the FERC could alter its
current rulings on the tax allowance issue or on the application of the FERC oil
pipeline ratemaking methodology in a way that could, if applied to the
Partnership, have a material adverse impact on the Partnership.
The Partnership's operating income and cash flow will remain sensitive to
the level of tariffs established from time to time under rules and regulations
of the FERC. The Partnership anticipates filing a tariff surcharge in late 1998
or early 1999 to reflect the projected incremental costs and throughput
resulting from System Expansion Program II ("SEP II") and Terrace Expansion
Program ("Terrace"). The Settlement Agreement entered into in 1996 between the
Partnership and representatives of the Partnership's customers on all their
outstanding contested tariffs (the "Settlement Agreement") sets forth parameters
governing the tariff surcharge associated with SEP II, although certain details
of implementation remain subject to further discussions. The Partnership has
also entered into an agreement with customer representatives regarding the
tariff surcharge associated with Terrace. Customers who are not parties to the
Settlement Agreement may challenge any tariff rate filing. It is anticipated
that advance approval will be sought from the FERC for the tariff surcharges for
SEP II and Terrace. See "Items 1 and 2. Business and Properties -- SEP II
Expansion Program," "-- Terrace Expansion Program" and "-- Tariffs" in the Form
10-K. Any challenges of the Partnership's tariff rates, if successful, could
have a material adverse effect on the Partnership.
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SEP II Right of Way Acquisition and Permitting
In May 1997, the ICC denied the Partnership's application for a certificate
that is a necessary step toward receiving condemnation authority in Illinois
with respect to SEP II. Without such condemnation authority, the cost to obtain
rights of way in connection with SEP II has increased.
The Partnership is currently seeking and acquiring environmental and
construction permits necessary to construct the new pipeline in connection with
SEP II. Delays in acquiring environmental or construction permits could delay
the in-service date of the new pipeline.
Competition
Because pipelines have historically been the lowest cost method for
intermediate and long haul overland movement of crude oil, the System's most
significant existing competitors for the transportation of western Canadian
crude oil (other than indigenous consumption in western Canada) are other
pipelines. The System encounters competition in serving shippers to the extent
that shippers have alternate opportunities for transporting liquid hydrocarbons
from their sources to customers. IPL has advised the General Partner that in
1997 the IPL System transported approximately 65% of total western Canadian
crude oil production, of which approximately 90% was transported by the Lakehead
System. The remainder was refined in Alberta or Saskatchewan or transported
through other pipelines to British Columbia, Washington, Montana and other
states in the Northwest U.S. In the United States, the Lakehead System
encounters competition from other crude oil and refined product pipelines and
other modes of transportation delivering crude oil and refined products to the
refining centers of Minneapolis-St. Paul, Chicago, Detroit and Toledo and the
refinery market and pipeline hub located in the Patoka/Wood River area. See
"Items 1 and 2. Business and Properties -- Competition" in the Form 10-K.
Risk of Environmental and Safety Costs and Liabilities
The operations of the Partnership are subject to federal and state laws and
regulations relating to environmental protection and operational safety.
Although the General Partner believes that the operations of the Lakehead System
are in substantial compliance with applicable environmental and safety
regulations, risks of substantial costs and liabilities are inherent in pipeline
operations, and there can be no assurance that such costs and liabilities will
not be incurred. Moreover, it is possible that other developments, such as
increasingly strict environmental and safety laws, regulations and enforcement
policies thereunder, and claims for damages to property or persons resulting
from the Partnership's operations, could result in substantial costs and
liabilities to the Partnership. If the Partnership were not able to recover such
resulting costs through insurance or increased tariffs, the Partnership could be
adversely affected.
The General Partner has, from time to time, hydrostatically tested certain
portions of the Lakehead System. If additional hydrostatic testing is determined
necessary by the General Partner or were to be required by a regulatory
authority, such testing could result in significant, and perhaps material,
expense arising out of treatment and disposal of the hydrostatic test water and
downtime resulting in lost transportation revenues. While the General Partner
believes suitable alternatives to hydrostatically testing the pipeline exist, no
assurance can be given that future hydrostatic testing will not be required on
the System. Hydrostatic testing of the IPL System in Canada potentially may
decrease deliveries on the Lakehead System due to restrictions on volumes
received from western Canada.
CONSIDERATIONS RELATING TO THE COMPANY'S INDEBTEDNESS
The Company's secured indebtedness will be effectively senior to the Debt
Securities, and the indenture relating to the Debt Securities will not limit the
Company's ability to incur additional indebtedness. The Company had long-term
debt of $610 million as of August 31, 1998, all of which was secured by
substantially all of the Company's assets. In addition, the General Partner
expects the Company to incur additional indebtedness from time to time to fund a
portion of the remaining cost of SEP II and the expected cost of phase one of
Terrace and to fund a portion of its other expansion programs and capital
expenditures. The $610 million of long-term secured debt as of August 31, 1998
consisted of $310 million of the Partnership's
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first mortgage notes ("First Mortgage Notes"), which have no principal payments
due until 2002, and $300 million outstanding under the Partnership's $350
million revolving bank credit facility (the "Revolving Credit Facility"). The
Revolving Credit Facility has a five-year term with an "evergreen" provision
that automatically extends the maturity date each year unless the banks give
notice to the Company of their intent not to extend. The current maturity date
of the Revolving Credit Facility is September 6, 2003. See "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" in the Form 10-K.
The agreements relating to the First Mortgage Notes and the Revolving
Credit Facility contain a number of covenants that restrict the ability of the
Company to dispose of assets, merge or consolidate with another entity, incur
additional indebtedness, create liens, make capital expenditures or other
investments or acquisitions and otherwise restrict business activities. The
ability of the Company to comply with such provisions may be affected by events
that are beyond the Partnership's control. The breach of any of these covenants
could result in a default under the First Mortgage Notes and the Revolving
Credit Facility. In addition, as a result of these covenants, the ability of the
Company to respond to changing business and economic conditions and to secure
additional financing, if needed, may be restricted, and the Company may be
prevented from engaging in transactions that might otherwise be considered
beneficial to the holders ("Holders") of the Debt Securities.
CONSIDERATIONS RELATING TO CANADIAN CONTROLLING PERSONS
Difficulty in Enforcing Civil Liabilities Against Officers, Directors and
Controlling Persons
Certain of the controlling persons of the Partnership, within the meaning
of the U.S. federal securities laws, and certain of the officers and directors
of the General Partner are not residents of the United States, and all or a
substantial portion of their assets are located outside the United States. As a
result, it may be difficult for Holders of the Debt Securities to effect service
of process within the United States with respect to such persons, officers and
directors predicated upon civil liabilities under the United States federal
securities laws. The Partnership has been advised by Canadian counsel that there
is doubt as to the enforceability against such persons in Canada, in original
actions or in actions for the enforcement of judgments of United States courts,
of liabilities predicated solely upon the federal securities laws of the United
States.
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THE PARTNERSHIP
Lakehead is a publicly traded Delaware limited partnership that owns and
operates, through the Company, a regulated crude oil and natural gas liquids
("NGLs") pipeline business in the United States. Lakehead Pipe Line Company,
Inc. (the "General Partner"), a wholly owned subsidiary of Interprovincial Pipe
Line Inc. ("IPL") and an indirect, wholly owned subsidiary of IPL Energy Inc.
("IPL Energy") of Calgary, Alberta, Canada, serves as the general partner of
Lakehead and the Company. IPL Energy is a publicly traded company that is a
North American leader in energy services and delivery. The General Partner owns
a 14.8% limited partner interest (in the form of 3,912,750 Class B Common Units)
and a 1% general partner interest in Lakehead, and a 1.0101% general partner
interest in the Company, representing an effective combined 16.6% interest in
the Partnership. The remaining 83.4% limited partner interest in the Partnership
is represented by 22,290,000 publicly traded Class A Common Units.
The following chart depicts the organization and ownership of Lakehead, the
Company and the General Partner. The percentages reflected in the chart
represent the approximate ownership interest in each of Lakehead and the
Company, individually. Except in the following chart, the ownership percentages
referred to in this Prospectus and any accompanying Prospectus Supplement
reflect the approximate effective ownership interest of the holders in Lakehead
and the Company on a combined basis.
[ORGANIZATION CHART]
EDGAR DESCRIPTION
Organizational chart depicting the following organizational and ownership
information for the Company, Lakehead and the General Partner.
OWNERSHIP OF THE COMPANY
<TABLE>
<CAPTION>
PERCENTAGE/TYPE OF INTEREST INTEREST HELD
HELD BY
<S> <C> <C>
98.9899% limited partner interest Lakehead
1.0101% general partner interest General Partner
</TABLE>
OWNERSHIP OF LAKEHEAD
<TABLE>
<CAPTION>
PERCENTAGE/TYPE OF INTEREST NUMBER/TYPE OF UNITS INTEREST HELD
HELD BY
<S> <C> <C>
84.2% limited partner interest 22,290,000 Class A Common Units Public Unitholders
14.8% limited partner interest 3,912,750 Class B Common Units General Partner
1% general partner interest General Partner
</TABLE>
OWNERSHIP OF THE GENERAL PARTNER
<TABLE>
<CAPTION>
PERCENTAGE/TYPE OF INTEREST INTEREST HELD
HELD BY
<S> <C> <C>
100% Common Shares IPL
</TABLE>
The Partnership and IPL are engaged in the transportation of crude oil and
other liquid hydrocarbons through the world's longest common carrier pipeline
system (the "System"). The System is the primary transporter of crude oil from
western Canada to the United States and is the only pipeline that transports
crude oil from western Canada to eastern Canada. The System serves all the major
refining centers in the Great Lakes region of the United States, as well as the
Province of Ontario, Canada and, through a connecting pipeline, the Patoka/Wood
River refinery market and pipeline hub in southern Illinois. The System, which
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traverses approximately 3,200 miles, consists of a Canadian portion (the "IPL
System"), which is owned by IPL, and a United States portion (the "Lakehead
System"), which is owned by the Partnership.
Shipments tendered to the IPL System originate in oil fields in the western
Canadian provinces of Alberta, Saskatchewan, Manitoba and British Columbia and
in the Northwest Territories of Canada and reach the IPL System through
facilities owned and operated by third parties or affiliates of IPL. Deliveries
from the IPL System are currently made in the prairie provinces of Canada and,
through the Lakehead System, in the Great Lakes and Midwest regions of the
United States and the Province of Ontario, principally to refineries, either
directly or through connecting pipelines of other companies.
The IPL System extends approximately 1,200 miles from Edmonton, Alberta,
across the Canadian prairies to the U.S. border near Neche, North Dakota, and
continues from the U.S. border near Marysville, Michigan, to Toronto, Ontario,
and Montreal, Quebec, with lateral lines to Nanticoke, Ontario, and Niagara
Falls, Ontario. The IPL System includes a pipeline which is owned and operated
by Interprovincial Pipe Line (NW) Ltd., a wholly owned subsidiary of IPL Energy.
This pipeline extends approximately 540 miles between Norman Wells, Northwest
Territories and Zama, Alberta, and connects from Zama, through a system owned by
others, to the IPL System at Edmonton.
The Lakehead System traverses approximately 1,750 miles from the Canadian
border near Neche, to the Canadian border near Marysville. The Lakehead System
consists of three separate lines extending from the Canadian border near Neche
to Superior, Wisconsin, and a line from the Canadian border near Neche to
Clearbrook, Minnesota. At Superior, the pipeline continues as two separate and
diverging lines, one traversing through the upper Great Lakes region and the
other through the lower Great Lakes region of the United States, with both lines
re-entering Canada at a point near Marysville. The Lakehead System also includes
a lateral line from the Canadian border near Niagara Falls to the Buffalo, New
York area. Crude oil and NGLs are received by the Lakehead System at the
Canadian border from the IPL System and, to a lesser extent, at a number of
other receipt points and are scheduled into the pipeline in accordance with
customer nominations.
All scheduling of shipments (including routes, storage, etc.) is handled by
IPL in coordination with the General Partner. The Lakehead System includes 16
connections to pipelines and refineries at various locations in the United
States, including the Chicago, Illinois, Minneapolis-St. Paul area of Minnesota,
Detroit, Michigan, Toledo, Ohio and Buffalo refining areas, and, through a
connecting pipeline, the Patoka/Wood River refinery market and pipeline hub. As
of June 30, 1998, the Lakehead System had approximately nine million barrels of
tankage capacity at its three main terminals at Clearbrook, Superior and
Griffith, Indiana. The tankage capacity is utilized both to gather crude oil
prior to injection into the Lakehead System and to provide tankage in order to
facilitate more flexible oil movements scheduling. At Superior, all crude oil is
removed from the Lakehead System, directed into tankage and then, when
appropriate to meet the requirements of batch movements, reinjected into the
Lakehead System for delivery through either the upper Great Lakes region or the
lower Great Lakes region.
The principal executive offices of Lakehead, the Company and the General
Partner are located at Lake Superior Place, 21 West Superior Street, Duluth,
Minnesota 55802, and its telephone number at such offices is (800) 525-3999 or
(218) 725-0100.
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<PAGE> 11
USE OF PROCEEDS
Unless otherwise specified in a related Prospectus Supplement, the net
proceeds received by the Company from the sale of Debt Securities will be used
for general partnership purposes, including the expansion of the Lakehead
System.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, SIX MONTHS
-------------------------------------- ENDED JUNE 30,
1993 1994 1995 1996 1997 1998
---- ---- ------- ------- ---- --------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed
Charges........................ 2.6x 2.7x 1.9x(1) 2.1x(2) 2.8x 2.9x
</TABLE>
- ---------------
(1) Net earnings of the Partnership for 1995 were impacted by a prior years'
rate refund and interest accrual adjustment of $22.9 million and $1.5
million, respectively, resulting from the June 1995 decision (Opinion No.
397) of the FERC. See "Items 1 and 2. Business and Properties -- Tariffs" in
the Form 10-K.
(2) Net earnings of the Partnership for 1996 were impacted by a non-recurring
rate refund and interest accrual adjustment of $20.1 million and $3.2
million, respectively, resulting from the 1996 Settlement Agreement. See
"Items 1 and 2. Business and Properties -- Tariffs" in the Form 10-K.
For purposes of calculating the ratio of earnings to fixed charges: (i)
"fixed charges" represent interest expense (including amounts capitalized),
amortization of debt costs and the portion of rental expense representing the
interest factor; and (ii) "earnings" represent the aggregate of income from
continuing operations before income taxes, interest expense, amortization of
debt costs and the portion of rental expense representing the interest factor.
10
<PAGE> 12
DESCRIPTION OF THE DEBT SECURITIES
The Debt Securities offered hereby will represent unsecured obligations of
the Company. The Debt Securities will constitute either Senior Debt Securities
or Subordinated Debt Securities. The Senior Debt Securities will be issued under
an Indenture dated as of September , 1998 (the "Senior Indenture"), between
the Company and The Chase Manhattan Bank, as trustee under the Senior Indenture.
The Subordinated Debt Securities will be issued under an Indenture dated as of
September , 1998 (the "Subordinated Indenture"), between the Company and The
Chase Manhattan Bank, as trustee under the Subordinated Indenture. The Senior
Indenture and the Subordinated Indenture are sometimes hereinafter referred to
herein individually as an "Indenture" and collectively as the "Indentures." The
Chase Manhattan Bank, as trustee under each of the Indentures (and any successor
thereto under each Indenture), is referred to herein as the "Trustee."
The terms of the Debt Securities include those stated in the respective
Indentures and those made part of the respective Indentures by reference to the
Trust Indenture Act. The Debt Securities will be subject to all such terms, and
Holders of Debt Securities are referred to the Indentures and the Trust
Indenture Act for a statement of those terms. The Senior Indenture and the
Subordinated Indenture will be substantially identical, except for the
provisions relating to subordination and certain covenants. See "Provisions
Applicable Solely to Senior Debt Securities" and "Provisions Applicable Solely
to Subordinated Debt Securities."
The statements set forth below in this section are brief summaries of
certain provisions contained in the Indentures, do not purport to be complete,
and are subject to, and are qualified in their entirety by reference to, all the
provisions of the Indentures, including the definitions therein of certain
terms. Copies of the Indentures are filed as exhibits to the Registration
Statement of which this Prospectus is a part. Capitalized terms used in this
section and not otherwise defined in this section have the respective meanings
assigned to them in the Indentures.
PROVISIONS APPLICABLE TO BOTH SENIOR AND SUBORDINATED DEBT SECURITIES
General. The Indentures do not limit the aggregate principal amount of Debt
Securities which may be issued thereunder and provide that Debt Securities may
be issued from time to time thereunder in one or more series, each in an
aggregate principal amount authorized by the Company prior to issuance. The
Indentures do not limit the amount of other unsecured indebtedness or securities
which may be issued by the Company.
The Debt Securities are not expected to be secured by any of the assets of
the Company and will, therefore, be effectively subordinated to all indebtedness
of the Company that is secured, to the extent of the value of the assets
securing such indebtedness. The amount of the Company's long term debt, and the
amount thereof that is secured, outstanding at the time of the issuance of a
series of Debt Securities, will be disclosed in the Prospectus Supplement
relating to such series of Debt Securities. In addition, the Debt Securities
will be effectively subordinated to any indebtedness or other obligations of any
subsidiaries of the Company outstanding from time to time.
Reference is made to the Prospectus Supplement relating to the particular
series offered thereby for the terms of such Debt Securities, including where
applicable: (a) the form and title of the Debt Securities; (b) the aggregate
principal amount of the Debt Securities; (c) the date or dates on which the Debt
Securities may be issued; (d) the date or dates on which the principal of and
premium, if any, on the Debt Securities shall be payable; (e) the rate or rates
(which may be fixed or variable), or the method of determination thereof, at
which the Debt Securities shall bear interest, if any, and the date or dates
from which such interest shall accrue; (f) the dates on which interest, if any,
shall be payable and the record dates for the interest payment dates; (g) the
place or places where the principal of and premium, if any, and interest, if
any, on the Debt Securities of the series will be payable; (h) the period or
periods, if any, within which, the price or prices at which, and the terms and
conditions upon which, the Debt Securities may be redeemed at the option of the
Company or otherwise; (i) any optional or mandatory redemption or any sinking
fund or analogous provisions; (j) if other than denominations of $1,000 and
integral multiples thereof, the denominations in which the Debt Securities of
the series shall be issuable; (k) if other than the principal amount thereof,
the portion of the principal amount of the Debt Securities which shall be
payable upon declaration of the acceleration of the
11
<PAGE> 13
maturity thereof in accordance with the provisions of the Indenture; (l) whether
payment of the principal of and premium, if any, and interest, if any, on the
Debt Securities shall be without deduction for taxes, assessments, or
governmental charges paid by the Holders; (m) the currency or currencies, or
currency unit or currency units, in which the principal of and premium, if any,
and interest, if any, on the Debt Securities shall be denominated, payable,
redeemable or purchasable, as the case may be; (n) any Events of Default (as
defined below) with respect to the Debt Securities that differ from those set
forth in the applicable Indenture; (o) whether the Debt Securities will be
convertible; (p) whether the Debt Securities of such series shall be issued as a
global certificate or certificates and, in such case, the identity of the
depositary for such series and whether in temporary or permanent global form;
(q) provisions regarding the convertibility or exchangeability of the Debt
Securities; (r) whether the Debt Securities are Senior Debt Securities or
Subordinated Debt Securities; (s) the terms and conditions upon which and the
manner in which such series of Debt Securities may be defeased or discharged if
different from the defeasance and discharge provisions described under
"Satisfaction and Discharge; Legal and Covenant Defeasance" below; (t) any
deletions or modifications of or additions to the Events of Default or covenants
of the Company pertaining to the Debt Securities; (u) any restrictions or other
provisions with respect to the transfer or exchange of the Debt Securities; (v)
the Person to whom any interest on a Debt Security of the series shall be
payable, if other than the Person in whose name that Debt Security (or one or
more Predecessor Securities) is registered at the close of business on the
Regular Record Date for such interest; (w) if the amount of payments of
principal of or any premium or interest on any Debt Securities of the series may
be determined with reference to an index, the manner in which such amounts shall
be determined; (x) if the principal of or any premium or interest on any Debt
Securities of the series is to be payable, at the election of the Company or a
Holder thereof, in one or more currencies or currency units other than that or
those in which the Debt Securities are stated to be payable, the currency,
currencies or currency units in which payment of the principal of and any
premium and interest on Debt Securities of such series as to which such election
is made shall be payable, and the periods within which and the terms and
conditions upon which such election is to be made; (y) the right, if any, of the
Company to defer payments of interest by extending the interest payment periods
and to specify the duration of such extension, the Interest Payment Dates on
which such interest shall be payable and whether and under what circumstances
additional interest on amounts deferred shall be payable; (z) if other than the
Trustee, the identity of the Security Registrar and any Paying Agent; and (aa)
any other terms of the Debt Securities of the series not inconsistent with the
Indentures.
All Debt Securities of any one series need not be issued at the same time
and, unless otherwise provided, a series may be reopened, without the consent of
the Holders, for increases in the aggregate principal amount of such series of
Debt Securities and issuances of additional Debt Securities of such series or
for the establishment of additional terms with respect to the Debt Securities of
such series.
If any Debt Securities offered hereby are sold for foreign currencies or
foreign currency units or if the principal of and premium, if any, or interest,
if any, on any series of Debt Securities is payable in foreign currencies or
foreign currency units, the restrictions, elections, tax consequences, specific
terms and other information with respect to such issue of Debt Securities and
such currencies and currency units will be set forth in the Prospectus
Supplement relating thereto.
One or more series of Debt Securities offered hereby may be sold at a
discount (which may be substantial) below their stated principal amount, bearing
no interest or interest at a rate that at the time of issuance is below market
rates. The federal income tax consequences and special considerations applicable
to any such series of Debt Securities will be described generally in the
Prospectus Supplement relating to such series.
Form, Exchange and Transfer. Unless otherwise indicated in the Prospectus
Supplement relating thereto, the Debt Securities offered hereby will be issued
only in registered form in denominations of $1,000 or any integral multiple
thereof. The Debt Securities of a series may be issuable in the form of one or
more global certificates, which will be denominated in an amount equal to all or
a portion of the aggregate principal amount of such Debt Securities. See
"-- Global Debt Securities."
12
<PAGE> 14
At the option of the Holders, subject to the terms of the Indenture and the
limitations applicable to Global Securities, Debt Securities of each series will
be exchangeable for other Debt Securities of the same series, of any authorized
denomination and of a like tenor and aggregate principal amount.
Subject to the terms of the Indenture and the limitations applicable to
Global Securities, Debt Securities may be presented for exchange as provided
above or for registration of transfer (duly endorsed or with the form of
transfer endorsed thereon duly executed) at the office of the Security Registrar
or at the office of any transfer agent designated by the Company for such
purpose. No service charge will be made for any registration of transfer or
exchange of Debt Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith. Such transfer or exchange will be effected upon the Security
Registrar or such transfer agent, as the case may be, being satisfied with the
documents of title and identity of the person making the request. The Company
has appointed the Trustee as Security Registrar. Any transfer agent (in addition
to the Security Registrar) initially designated by the Company for any Debt
Securities will be named in the applicable Prospectus Supplement. The Company
may at any time designate additional transfer agents or rescind the designation
of any transfer agent or approve a change in the office through which any
transfer agent acts, except that the Company will be required to maintain a
transfer agent in each Place of Payment for the Debt Securities of each series.
Neither the Trustee nor the Company will be required to (a) issue, register
the transfer of or exchange any Debt Security of any series (or of any series
and specified tenor, as the case may be) during a period beginning at the
opening of business 15 days before the day of mailing of a notice of redemption
of any such Debt Security that may be selected for redemption and ending at the
close of business on the day of such mailing, or (b) register the transfer of or
exchange any Debt Security so selected for redemption, in whole or in part,
except the unredeemed portion of any Debt Security being redeemed in part.
Global Debt Securities. The Debt Securities of a series may be issued in
whole or in part in the form of one or more global certificates that will be
deposited with, or on behalf of, a depositary (the "Depositary"), or its
nominee, identified in the Prospectus Supplement relating to such series. Global
Debt Securities may be issued in either temporary or permanent form. Unless and
until such global certificate or certificates are exchanged in whole or in part
for Debt Securities in individually certificated form, a global Debt Security
may not be transferred or exchanged except as a whole to a nominee of the
Depositary for such global Debt Security, or by a nominee for the Depositary to
the Depositary, or to a successor of the Depositary or a nominee of such
successor, except in the circumstances described in the applicable Prospectus
Supplement.
The specific terms of the depositary arrangement with respect to a series
of Debt Securities and the rights of, and limitations on, owners of beneficial
interests in a global Debt Security representing all or a portion of a series of
Debt Securities will be described generally in the Prospectus Supplement
relating to such series.
Consolidation, Merger and Sale of Assets. Each Indenture provides that the
Company shall not consolidate with or merge into any other Person or sell, lease
or transfer its properties and assets as, or substantially as, an entirety to,
any Person, unless (i) (A) in the case of a merger, the Company is the surviving
entity or (B) the Person formed by such consolidation or into which the Company
is merged or the Person which acquires by sale or transfer, or which leases the
properties and assets of the Company as, or substantially as, an entirety shall
expressly assume by supplemental indenture payment of the principal of and any
premium and interest on all the Debt Securities and the performance or
observance of every covenant of and condition of the Indenture applicable to the
Company; (ii) the surviving entity or successor Person is a Person organized and
existing under the laws of the U.S., any State thereof or the District of
Columbia; (iii) immediately after giving effect to the transaction, no Default
or Event of Default exists; and (iv) the Company has delivered the Officer's
Certificate and the Opinion of Counsel required by the Indenture. Any such
successor Person shall succeed to and be substituted for, and may exercise every
right and power of, the Company under the relevant Indenture with the same
effect as if it had been named originally as a party in the Indenture and the
Company shall (except in the case of a lease) be released and discharged from
all its obligations under the Indenture and the Debt Securities outstanding
thereunder.
Events of Default. Unless otherwise provided with respect to any series of
Debt Securities, an "Event of Default" will occur under each Indenture with
respect to Debt Securities of a particular series issued
13
<PAGE> 15
thereunder upon: (a) default in the payment of the principal of, or premium, if
any, on, any Debt Security of such series at its maturity; (b) default in the
payment of any interest on any Debt Security of such series when it becomes due
and payable and continuance of such default for a period of 30 days; (c) default
in the performance, or breach, of any term, covenant or warranty contained in
the Indenture with respect to such series and continuance of such default or
breach for a period of 60 days after there has been given to the Company by the
Trustee or to the Company and the Trustee by the Holders of at least 25% in
principal amount of the outstanding Debt Securities of that series a written
notice as provided in the Indenture; (d) the occurrence of certain events of
bankruptcy, insolvency or reorganization of the Company; or (e) any other Event
of Default applicable to such series.
Each Indenture provides that if an Event of Default with respect to a
series of Debt Securities issued thereunder shall have occurred and be
continuing, either the Trustee or the Holders of not less than 25% in principal
amount of Debt Securities of such series then outstanding may declare the
principal amount (or, if any of the Debt Securities of that series are Original
Issue Discount Securities, such portion of the principal amount of such Debt
Securities as may be specified in the terms thereof) of, and accrued but unpaid
interest, if any, on all Debt Securities of such series to be due and payable
immediately upon giving written notice as provided in the Indenture. Each
Indenture provides that the Holders of a majority in principal amount of Debt
Securities then outstanding of such series may rescind and annul such
declaration and its consequences under certain circumstances.
The Holders of a majority in principal amount of Debt Securities of a
series then outstanding may waive past defaults under the Indenture with respect
to such series and its consequences (except a continuing default in the payment
of principal of or premium, if any, or interest on any series of Debt Securities
or a default in respect of any covenant or provision of the Indenture which
cannot be modified or amended without the consent of the Holder of each
outstanding Debt Security affected thereby).
Pursuant to each Indenture, the Holders of a majority in aggregate
principal amount of each affected series of Debt Securities then outstanding
thereunder may direct with respect to such series the time, method, and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee, subject to certain limitations
specified in that Indenture. Before proceeding to exercise any right or power
under an Indenture at the direction of any Holders, the Trustee thereunder shall
be entitled to receive from such Holders of Debt Securities outstanding under
that Indenture reasonable security or indemnity against the costs, expenses, and
liabilities which might be incurred by it in compliance with any such direction.
Pursuant to each Indenture, no Holder of a Debt Security of any series will
have any right to institute any proceeding with respect to that Indenture, or
for the appointment of a receiver or trustee, or for any other remedy
thereunder, unless (a) such Holder has previously given to the Trustee written
notice of a continuing Event of Default with respect to the Debt Securities of
that series, (b) the Holders of at least 25% in aggregate principal amount of
the outstanding Debt Securities of that series have made written request to the
Trustee, and such Holder or Holders have offered reasonable indemnity, to the
Trustee to institute such proceeding and (c) the Trustee has failed to institute
such proceeding, and has not received from the Holders of a majority in
aggregate principal amount of the outstanding Debt Securities of that series a
direction inconsistent with such request, within 60 days after such notice,
request and offer. However, such limitations do not apply to a suit instituted
by a Holder of a Debt Security for the enforcement of payment of the principal
of or any premium or interest on such Debt Security on or after the applicable
due date specified in such Debt Security.
Under the terms of each Indenture, the Company is required to furnish to
the Trustee annually an Officer's Certificate to the effect that to the best of
such officer's knowledge, the Company is not in default in the performance and
observance of the terms, provisions and conditions of the Indenture or, if such
officer has knowledge that the Company is in default, specifying such default.
Each Indenture requires the Trustee thereunder to give to all Holders of Debt
Securities outstanding thereunder notice of any Default by the Company in the
manner provided in the Indenture, unless such Default shall have been cured or
waived; however, except in the case of a default in the payment of principal of
and premium, if any, or interest, if any,
14
<PAGE> 16
on any Debt Securities outstanding thereunder, the Trustee is entitled to
withhold such notice if it determines in good faith that withholding such notice
is in the interest of the Holders of such outstanding Debt Securities.
Satisfaction and Discharge; Legal and Covenant Defeasance. Under the terms
of each Indenture, the Company may satisfy and discharge certain obligations to
Holders of Debt Securities of any series which have not already been delivered
to the Trustee for cancellation and which have either become due and payable or
are by their terms due and payable within one year or are to be called for
redemption within one year by (i) irrevocably depositing or causing to be
deposited with the Trustee an amount of money in the currency or currency units
in which such Debt Securities are payable sufficient to pay the principal and
any premium and interest to the date of such deposit (in case of Debt Securities
of such series which have become due and payable) or to the Stated Maturity or
Redemption Date, as the case may be; (ii) paying or causing to be paid all other
sums payable under the Indenture with respect to such Debt Securities; and (iii)
delivering to the Trustee an Officer's Certificate and Opinion of Counsel
relating to such satisfaction and discharge.
Each Indenture also provides that, unless otherwise specified with respect
to Debt Securities of any series, the Company and any other obligor thereunder,
if any, will be deemed to have paid and discharged the entire indebtedness on
all Debt Securities of such series on the 91st day following the deposit
referred to in the following clause (i), and the provisions of the Indenture
with respect to the Debt Securities of such series shall no longer be in effect
except as to certain obligations, such as the obligation to register the
transfer or exchange of such outstanding Debt Securities of such series, to
replace mutilated, destroyed, lost or stolen certificates, rights of Holders of
the Debt Securities of such series to receive principal and interest on the
original stated due dates or specified redemption dates, rights of Holders to
receive any sinking fund payments, and any rights to convert or exchange the
Debt Securities of such series, subject to the following conditions: (i) the
Company shall have irrevocably deposited or caused to be deposited with the
Trustee as trust funds in trust specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of the Debt Securities of such
series cash or (in the case of any series of Debt Securities the payments on
which may only be made in legal coin or currency of the United States) U.S.
Government Obligations (or a combination thereof) certified to be sufficient, in
the opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee, to pay
(A) the principal and interest and premium, if any, on all Debt Securities of
such series on each date that such principal, interest or premium, if any, is
due and payable or on any Redemption Date established pursuant to clause (iii)
below, and (B) any mandatory sinking fund payments on the dates on which such
payments are due and payable in accordance with the terms of the Indenture and
the Debt Securities of such series; (ii) the Company shall have delivered to the
Trustee an Opinion of Counsel based on the fact that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling, or (B) since the date of the Indenture, there has been a change in the
applicable federal income tax law, in either case, to the effect that, and
confirming that, the Holders of the Debt Securities of such series will not
recognize income, gain or loss for federal income tax purposes as a result of
such deposit, defeasance and discharge and will be subject to federal income tax
on the same amount and in the same manner and at the same times, as would have
been the case if such deposit, defeasance and discharge had not occurred; (iii)
if the Debt Securities are to be redeemed prior to their Stated Maturity (other
than from mandatory sinking fund payments or analogous payments), notice of such
redemption shall have been duly given pursuant to the Indenture or provision
therefor satisfactory to the Trustee shall have been made; (iv) no Event of
Default or event which with notice or lapse of time or both would become an
Event of Default shall have occurred and be continuing on the date of such
deposit; (v) such defeasance shall not cause the Trustee to have a conflicting
interest within the meaning of the Trust Indenture Act (assuming all Debt
Securities are in default within the meaning of such Act); (vi) such defeasance
shall not result in a breach or violation of, or constitute a default under, any
other agreement or instrument to which the Company is a party or by which it is
bound; (vii) such defeasance shall not result in the trust arising from such
deposit constituting an investment company within the meaning of the Investment
Company Act of 1940, as amended, unless such trust shall be registered under
such Act or exempt from registration thereunder; and (viii) the Company's
delivery to the Trustee of an Officer's Certificate and an Opinion of Counsel,
each stating that the conditions precedent under the Indenture relating to
defeasance have been complied with.
15
<PAGE> 17
Under each Indenture, the Company also may discharge certain of its
obligations under the Indenture including its obligations referred to above
under "-- Consolidation, Merger and Sale of Assets" and, in the case of the
Senior Indenture, under the covenants described below under "-- Provisions
Applicable Solely to Senior Debt Securities," as well as certain of its
obligations relating to reporting obligations under the Indenture, in respect of
any series of Debt Securities on the 91st day following the deposit referred to
in clause (i) in the immediately preceding paragraph, subject to satisfaction of
the conditions described in clauses (i) and (iii) through (viii) in the
immediately preceding paragraph with respect to such series of Debt Securities
and the delivery of an Opinion of Counsel confirming that the Holders of the
Debt Securities will not recognize income, gain or loss for federal income tax
purposes as a result of such deposit and covenant defeasance and will be subject
to federal income tax on the same amount and in the same manner and at the same
times, as would have been the case if such deposit and covenant defeasance had
not occurred.
Changes in Control and Highly Leveraged Transactions. Unless otherwise set
forth in a Prospectus Supplement, the Subordinated Indenture will not contain,
and, other than the limitations on Liens and the restriction on Sale-Leaseback
Transactions described below under "-- Provisions Applicable Solely to Senior
Debt Securities," the Senior Indenture does not contain, any covenant or other
provisions designed to afford Holders of the Debt Securities issued thereunder
protection in the event of a change in control of the Company or any of its
affiliates or a highly leveraged transaction involving the Company.
Modification of the Indentures. Each Indenture provides that the Company
and the Trustee may enter into supplemental indentures without the consent of
the Holders of Debt Securities issued thereunder to: (a) secure any of such Debt
Securities; (b) evidence the succession of another Person to the Company under
the Indenture and the Debt Securities and the assumption by such successor
Person of the obligations of the Company thereunder; (c) add covenants and
Events of Default for the benefit of the Holders of all or any series of such
Debt Securities or to surrender any right or power conferred by the Indenture
upon the Company; (d) add to, change or eliminate any of the provisions of the
Indenture, provided that any such addition, change or elimination shall become
effective only after there are no such Debt Securities of any series entitled to
the benefit of such provision outstanding; (e) establish the forms or terms of
the Debt Securities of any series issued thereunder; (f) cure any ambiguity or
correct any inconsistency in the Indenture; (g) evidence the acceptance of
appointment by a successor Trustee; (h) qualify the Indenture under the Trust
Indenture Act; (i) provide for uncertificated securities in addition to
certificated securities; (j) supplement any provisions of the Indenture
necessary to permit or facilitate the defeasance and discharge of any series of
Debt Securities, provided that such action does not adversely affect the
interests of the Holders of the Debt Securities of such series or any other
series; and (k) comply with the rules or regulations of any securities exchange
or automated quotation system on which any of the Debt Securities may be listed
or traded.
Each Indenture also contains provisions permitting the Company and the
Trustee, with the consent of the Holders of not less than a majority in
aggregate principal amount of all outstanding Debt Securities affected by such
supplemental Indenture (voting as a single class) to add any provisions to, or
change in any manner or eliminate any of the provisions of, the Indenture, or
modify in any manner the rights of the Holders of such Debt Securities; provided
that the Company and the Trustee may not, without the consent of the Holder of
each outstanding Debt Security affected thereby, (a) change the stated maturity
of the principal of or any installment of principal of or interest, if any, on,
any Debt Security, or reduce the principal amount thereof or premium, if any, on
or the rate of interest thereon or alter the method of computation of interest,
(b) reduce the percentage in principal amount of Debt Securities required for
any such supplemental Indenture or for any waiver provided for in the Indenture,
(c) change the Company's obligation to maintain an office or agency for payment
of Debt Securities and the other matters specified therein, (d) impair the right
to institute suit for the enforcement of any payment of principal of, premium,
if any, or interest on, any Debt Security or (e) modify any of the provisions of
the Indenture relating to the execution of supplemental indentures with the
consent of Holders of Debt Securities which are discussed in this paragraph or
modify any provisions relating to the waiver by Holders of past defaults and
certain covenants, except to increase any required percentage or to provide that
certain other provisions of the Indenture cannot be modified or waived without
the consent of the Holder of each outstanding Debt Security affected thereby.
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<PAGE> 18
Each Indenture provides that a supplemental indenture which changes or
eliminates any covenant or other provision of the Indenture which has expressly
been included solely for the benefit of one or more particular series of Debt
Securities, or which modifies the rights of the Holders of Debt Securities of
such series with respect to such covenant or other provision, shall be deemed
not to affect the rights under the Indenture of the Holders of Debt Securities
of any other series.
Non-Recourse to the General Partner and Lakehead: No Personal Liability of
Officers, Directors, Employees or Partners. Each Indenture provides that
obligations of the Company under the Indenture and the Debt Securities
thereunder will be non-recourse to the General Partner and Lakehead and their
respective affiliates (other than the Company), and payable only out of cash
flow and assets of the Company. The Trustee, and each Holder of a Debt Security
by its acceptance thereof, will be deemed to have agreed in the applicable
Indenture that (a) neither the General Partner nor its assets nor Lakehead nor
its assets (nor any of their respective affiliates other than the Company, nor
their respective assets) shall be liable for any of the obligations of the
Company under such Indenture or such Debt Securities, and (b) no director,
officer, employee, stockholder or unitholder, as such, of the Company, the
Trustee, the General Partner, Lakehead or any affiliate of any of the foregoing
entities shall have any personal liability in respect of the obligations of the
Company under such Indenture or such Debt Securities by reason of his, her or
its status. Notwithstanding the foregoing, nothing in this Section shall be
construed to modify or supersede any obligation of Lakehead or the General
Partner to restore any negative balance in their respective capital account
(maintained by the Company pursuant to the Company's Amended and Restated
Agreement of Limited Partnership) upon liquidation of their respective interest
in the Company.
Applicable Law. The Indentures are, and the Debt Securities offered hereby
will be, governed by, and construed in accordance with, the laws of the State of
New York.
Concerning the Trustee. Each Indenture provides that, except during the
continuance of an Event of Default, the Trustee thereunder will perform only
such duties as are specifically set forth in the Indenture. If an Event of
Default has occurred and is continuing, the Trustee will use the same degree of
care and skill in its exercise of the rights and powers vested in it by the
Indenture as a prudent person would exercise or use under the circumstances in
the conduct of such person's own affairs.
Each Indenture contains limitations on the rights of the Trustee, should it
become a creditor of the Company, to obtain payment of claims in certain cases
or to realize on certain property received by it in respect of such claims, as
security or otherwise. The Trustee is permitted to engage in other transactions;
provided, however, that if it acquires any conflicting interest, it must
eliminate such conflict or resign.
The Chase Manhattan Bank, a New York banking corporation, is the Trustee
under the Indentures. The Chase Manhattan Bank has lending relationships with
IPL Energy and its affiliates.
PROVISIONS APPLICABLE SOLELY TO SENIOR DEBT SECURITIES
General. The Senior Debt Securities will be unsecured obligations of the
Company, and will constitute Senior Indebtedness (in each case as defined in the
applicable supplemental Indenture) ranking on a parity with all other unsecured
and unsubordinated indebtedness of the Company and senior to any subordinated
indebtedness of the Company (including the Subordinated Debt Securities).
Limitations on Liens. The Senior Indenture provides that the Company will
not, nor will it permit any Restricted Subsidiary (as defined below) to, create,
assume, incur or suffer to exist any Lien (as defined below) upon any Principal
Property (as defined below) or upon any shares of capital stock of any
Restricted Subsidiary, whether owned or leased on the date of the Senior
Indenture or thereafter acquired, to secure any Debt (as defined below) of the
Company or any other Person (as defined below) (other than the Senior Debt
Securities issued thereunder), without in any such case making effective
provision whereby all of the Senior Debt Securities Outstanding thereunder shall
be secured equally and ratably with, or prior to, such Debt so long as such Debt
shall be so secured. There is excluded from this restriction:
(i) any Lien upon any property or assets of the Company or any
Restricted Subsidiary in existence on the Issue Date or created pursuant to
an "after-acquired property" clause or similar term in existence
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<PAGE> 19
on the Issue Date or any mortgage, pledge agreement, security agreement or
other similar instrument in existence on the Issue Date;
(ii) any Lien upon any property or assets created at the time of
acquisition of such property or assets by the Company or any Restricted
Subsidiary or within one year after such time to secure all or a portion of
the purchase price for such property or assets or Debt incurred to finance
such purchase price, whether such Debt was incurred prior to, at the time
of or within one year of such acquisition;
(iii) any Lien upon any property or assets existing thereon at the
time of the acquisition thereof by the Company or any Restricted Subsidiary
(whether or not the obligations secured thereby are assumed by the Company
or any Restricted Subsidiary); provided, however, that such Lien only
encumbers the property or assets so acquired;
(iv) any Lien upon any property or assets of a Person existing thereon
at the time such Person becomes a Restricted Subsidiary by acquisition,
merger or otherwise; provided, however, that such Lien only encumbers the
assets or property of such Person at the time such Person becomes a
Restricted Subsidiary;
(v) the assumption by the Company or any Restricted Subsidiary of
obligations secured by any Lien existing at the time of the acquisition by
the Company or any Restricted Subsidiary of the property or assets subject
to such Lien or at the time of the acquisition of the Person which owns
such property or assets;
(vi) any Lien upon any property or assets to secure all or part of the
cost of construction, development, repair or improvements thereon or to
secure Debt incurred prior to, at the time of, or within one year after
completion of such construction, development, repair or improvements or the
commencement of full operations thereof (whichever is later), to provide
funds for any such purpose;
(vii) any Lien in favor of the Company or any Restricted Subsidiary;
(viii) any Lien created or assumed by the Company or any Restricted
Subsidiary in connection with the issuance of Debt the interest on which is
excludable from gross income of the Holder of such Debt pursuant to the
Internal Revenue Code of 1986, as amended, or any successor statute, for
the purpose of financing, in whole or in part, the acquisition or
construction of property or assets to be used by the Company or any
Subsidiary;
(ix) Permitted Liens (as defined below);
(x) any Lien upon any additions, improvements, replacements, repairs,
fixtures, appurtenances or component parts thereof attaching to or required
to be attached to property or assets pursuant to the terms of any mortgage,
pledge agreement, security agreement or other similar instrument, creating
a Lien upon such property or assets permitted by clauses (i) through (ix),
inclusive, above; or
(xi) any extension, renewal, refinancing, refunding or replacement (or
successive extensions, renewals, refinancing, refundings or replacements)
of any Lien, in whole or in part, that is referred to in clauses (i)
through (x), inclusive, above, or of any Debt secured thereby; provided,
however, that the principal amount of Debt secured thereby shall not exceed
the greater of (A) the principal amount of Debt so secured at the time of
such extension, renewal, refinancing, refunding or replacement (plus the
aggregate amount of premiums, other payments, costs and expenses required
to be paid or incurred in connection with such extension, renewal,
refinancing, refunding or replacement) and (B) the maximum committed
principal amount of Debt so secured at such time; provided further,
however, that such extension, renewal, refinancing, refunding or
replacement shall be limited to all or a part of the property (including
improvements, alterations and repairs on such property) subject to the
encumbrance so extended, renewed, refinanced, refunded or replaced (plus
improvements, alterations and repairs on such property).
Notwithstanding the foregoing, under the Senior Indenture, the Company may,
and may permit any Restricted Subsidiary to, create, assume, incur, or suffer to
exist any Lien upon any Principal Property to
18
<PAGE> 20
secure Debt of the Company or any Person (other than the Senior Debt Securities)
that is not excepted by clauses (i) through (xi), inclusive, above without
securing the Senior Debt Securities issued under the Senior Indenture, provided
that the aggregate principal amount of all Debt then outstanding secured by such
Lien and all similar Liens, together with all net sale proceeds from
Sale-Leaseback Transactions (as defined below) (excluding Sale-Leaseback
Transactions permitted by clauses (i) through (iv), inclusive, of the first
paragraph of the restriction on sale-leasebacks covenant described below) does
not exceed 10% of Consolidated Net Tangible Assets (as defined below).
Restriction on Sale-Leasebacks. The Senior Indenture provides that the
Company will not, and will not permit any Restricted Subsidiary to, engage in a
Sale-Leaseback Transaction, unless: (i) such Sale-Leaseback Transaction occurs
within one year from the date of acquisition of the Principal Property subject
thereto or the date of the completion of construction or commencement of full
operations on such Principal Property, whichever is later; (ii) the
Sale-Leaseback Transaction involves a lease for a period, including renewals, of
not more than three years; (iii) the Company or such Restricted Subsidiary would
be entitled to incur Debt secured by a Lien on the Principal Property subject
thereto in a principal amount equal to or exceeding the net sale proceeds from
such Sale-Leaseback Transaction without equally and ratably securing the Senior
Debt Securities; or (iv) the Company or such Restricted Subsidiary, within a
one-year period after such Sale-Leaseback Transaction, applies or causes to be
applied an amount not less than the net sale proceeds from such Sale-Leaseback
Transaction to (A) the prepayment, repayment, redemption or retirement of Funded
Debt (as defined below) of the Company or any Subsidiary, or (B) investment in
another Principal Property.
Notwithstanding the foregoing, under the Senior Indenture the Company may,
and may permit any Restricted Subsidiary to, effect any Sale-Leaseback
Transaction that is not excepted by clauses (i) through (iv), inclusive, of the
above paragraph, provided that the net sale proceeds from such Sale-Leaseback
Transaction, together with the aggregate principal amount of outstanding Debt
(other than the Senior Debt Securities) secured by Liens upon Principal
Properties not excepted by clauses (i) through (xi), inclusive, of the first
paragraph of the limitation on liens covenant described above, do not exceed 10%
of the Consolidated Net Tangible Assets.
Certain Defined Terms. As used herein:
"Consolidated Net Tangible Assets" means, at any date of determination, the
total amount of assets after deducting therefrom (i) all current liabilities
(excluding (A) any current liabilities that by their terms are extendable or
renewable at the option of the obligor thereon to a time more than 12 months
after the time as of which the amount thereof is being computed, and (B) current
maturities of long-term debt), and (ii) the value (net of any applicable
reserves) of all goodwill, trade names, trademarks, patents and other like
intangible assets, all as set forth on the consolidated balance sheet of the
Company and its consolidated subsidiaries for the Company's most recently
completed fiscal quarter, prepared in accordance with generally accepted
accounting principles.
"Debt" means any obligation created or assumed by any Person for the
repayment of money borrowed, any purchase money obligation created or assumed by
such Person and any guarantee of the foregoing.
"Funded Debt" means all Debt maturing one year or more from the date of the
creation thereof, all Debt directly or indirectly renewable or extendible, at
the option of the debtor, by its terms or by the terms of any instrument or
agreement relating thereto, to a date one year or more from the date of the
creation thereof, and all Debt under a revolving credit or similar agreement
obligating the lender or lenders to extend credit over a period of one year or
more.
"Issue Date" means the date on which Debt Securities are initially issued
under the Indentures.
"Lien" means, as to any entity, any mortgage, lien, pledge, security
interest or other encumbrance in or on, or adverse interest or title of any
vendor, lessor, lender or other secured party to or of the entity under
conditional sale or other title retention agreement or capital lease with
respect to, any property or asset of the entity.
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<PAGE> 21
"Permitted Liens" means (i) Liens upon rights-of-way for pipeline purposes;
(ii) any statutory or governmental Lien, mechanics', materialmen's, carriers' or
similar Lien incurred in the ordinary course of business which is not yet due or
which is being contested in good faith by appropriate proceedings and any
undetermined Lien which is incidental to construction; (iii) the right reserved
to, or vested in, any municipality or public authority by the terms of any
right, power, franchise, grant, license, permit or by any provision of law, to
purchase or recapture or to designate a purchaser of, any property; (iv) Liens
of taxes and assessments which are (A) for the then current year, (B) not at the
time delinquent, or (C) delinquent but the validity of which is being contested
at the time by the Company or any Restricted Subsidiary in good faith; (v) Liens
of, or to secure performance of, leases, other than capital leases; (vi) any
Lien upon, or deposits of, any assets in favor of any surety company or clerk of
court for the purpose of obtaining indemnity or stay of judicial proceedings;
(vii) any Lien upon property or assets acquired or sold by the Company or any
Restricted Subsidiary resulting from the exercise of any rights arising out of
defaults on receivables; (viii) any Lien incurred in the ordinary course of
business in connection with workmen's compensation, unemployment insurance,
temporary disability, social security, retiree health or similar laws or
regulations or to secure obligations imposed by statute or governmental
regulations; (ix) any Lien upon any property or assets in accordance with
customary banking practice to secure any Debt incurred by the Company or any
Restricted Subsidiary in connection with the exporting of goods to, or between,
or the marketing of goods in, or the importing of goods from, foreign countries;
(x) any Lien in favor of the United States of America or any state thereof, or
any other country, or any political subdivision of any of the foregoing, to
secure partial, progress, advance, or other payments pursuant to any contract or
statute, or any Lien securing industrial development, pollution control, or
similar revenue bonds; or (xi) any easements, exceptions or reservations in any
property of the Company or any Subsidiary granted or reserved for the purpose of
pipelines, roads, the removal of oil, gas, coal or other minerals, and other
like purposes, or for the joint or common use of real property, facilities and
equipment, which are incidental to, and do not materially interfere with, the
ordinary conduct of its business or the business of the Company and its
Subsidiaries, taken as a whole.
"Person" means any individual, corporation, partnership, joint venture,
limited liability company, association, joint-stock company, trust, other
entity, unincorporated organization or government, or any agency or political
subdivision thereof.
"Principal Property" means (a) any pipeline assets of the Company or any
Restricted Subsidiary, including any related facilities employed in the
transportation, terminalling or storage of crude oil or natural gas liquids,
that are located in the United States or Canada and (b) any processing or
manufacturing plant or terminal owned or leased by the Company or any Subsidiary
that is located within the United States or Canada, except, in the case of
either clause (a) or (b), (i) any assets consisting of inventories, furniture,
office fixtures and equipment (including data processing equipment), vehicles
and equipment used on, or useful with, vehicles, and (ii) any such assets, plant
or terminal which, in the opinion of the Board of Directors, is not material in
relation to the activities of the Company and its Subsidiaries, taken as a
whole.
"Restricted Subsidiary" means any Subsidiary of the Company owning or
leasing any Principal Property.
"Sale-Leaseback Transaction" means the sale or transfer by the Company or
any Restricted Subsidiary of any Principal Property to a Person (other than the
Company or a Restricted Subsidiary) and the taking back by the Company or any
Restricted Subsidiary, as the case may be, of a lease of such Principal
Property.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of capital stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or an entity described in clause (i) and
related to such Person or (b) the only general partners of which are such Person
or of one or more entities described in clause (i) and related to such Person
(or any combination thereof).
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PROVISIONS APPLICABLE SOLELY TO SUBORDINATED DEBT SECURITIES
General. The Subordinated Debt Securities will be unsecured obligations of
the Company, and will be subordinated in right of payment to all Senior Debt (as
defined in the applicable Prospectus Supplement), including the Senior Debt
Securities, of the Company to the extent set forth in the applicable Prospectus
Supplement.
Subordination. Upon any voluntary or involuntary liquidation or bankruptcy
of the Company, Senior Debt of the Company is entitled to receive payment in
full of all amounts due on such Senior Debt, before Holders of Subordinated Debt
Securities are entitled to receive any payments of amounts due on the
Subordinated Debt Securities.
Unless otherwise indicated in the applicable Prospectus Supplement, in the
event of payment defaults under, or acceleration of, Senior Debt of the Company,
no payments may be made in respect of the Subordinated Debt Securities until
such Senior Debt has been paid in full or any payment default thereunder has
been cured or waived. Failure to make required payments on the Subordinated Debt
Securities would constitute an Event of Default under the Subordinated Indenture
with respect thereto.
Unless otherwise indicated in the applicable Prospectus Supplement, if any
default occurs (other than a default described in the preceding paragraph) under
the Senior Debt of the Company, pursuant to which the maturity thereof may be
accelerated immediately or at the expiration of any applicable grace periods (a
"Senior Nonmonetary Default"), then, upon the receipt by the Company and the
Trustee of written notice thereof (a "Payment Blockage Notice") from or on
behalf of Holders of such Senior Debt specifying an election to prohibit such
payment by the Company in accordance with the following provisions of this
paragraph, the Company may not make any payment that would be prohibited by the
immediately preceding paragraph during the period (the "Payment Blockage
Period") commencing on the date of receipt of such Payment Blockage Notice and
ending on the earlier of (i) the date, if any, on which the Holders of such
Senior Debt or their representative notifies the Trustee that such Senior
Nonmonetary Default is cured or waived or ceases to exist or the Senior Debt to
which such Senior Nonmonetary Default relates is discharged or (ii) the 179th
day after the date of receipt of such Payment Blockage Notice. Notwithstanding
the provisions described in the immediately preceding sentence, the Company may
resume payments on the Subordinated Debt Securities after such Payment Blockage
Period.
PLAN OF DISTRIBUTION
The Company may offer or sell the Debt Securities to or through one or more
underwriters, dealers or agents as designated from time to time, or through a
combination of such methods and also may offer or sell the Debt Securities
directly to one or more other purchasers. The Company may sell the Debt
Securities as soon as practicable after effectiveness of the Registration
Statement of which this Prospectus is a part.
A Prospectus Supplement will set forth the terms of the offering of the
particular series of Debt Securities offered thereby, including: (i) the name or
names of any underwriters or agents; (ii) the name or names of any managing
underwriter or underwriters; (iii) the initial public offering or purchase price
of such series of Debt Securities; (iv) any underwriting discounts, commissions,
and other items constituting underwriters' compensation and any other discount,
concessions, or commissions allowed or reallowed or paid by any underwriters to
other dealers; (v) any commissions paid to any agents; (vi) the net proceeds to
the Company from the sales; and (vii) any securities exchanges or markets on
which such series of Debt Securities may be listed.
Unless otherwise set forth in the Prospectus Supplement relating to a
particular series of Debt Securities, the obligations of the underwriters to
purchase such series of Debt Securities will be subject to certain conditions
precedent and each of the underwriters with respect to such series of Debt
Securities will be obligated to purchase all of the Debt Securities of such
series allocated to it if any such Debt Securities are purchased. Any initial
public offering price and any discounts or concessions allowed, reallowed, or
paid to dealers may be changed from time to time.
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The Debt Securities may be offered and sold by the Company directly or
through agents designated by the Company from time to time. Unless otherwise
indicated in the related Prospectus Supplement, each such agent will be acting
on a best efforts basis for the period of its appointment. Any agent
participating in the distribution of Debt Securities may be deemed to be an
"underwriter," as that term is defined in the Securities Act, of the Debt
Securities so offered and sold. The Debt Securities also may be sold to dealers
at the applicable price to the public set forth in the Prospectus Supplement
relating to such series of Debt Securities. Such dealers may be deemed to be
"underwriters" within the meaning of the Securities Act. Underwriters, dealers
and agents may be entitled, under agreements entered into with the Company, to
indemnification by the Company against certain civil liabilities, including
liabilities under the Securities Act.
Underwriters, dealers and agents may engage in transactions with, or
perform services for, or be customers of, the Company in the ordinary course of
business.
All Debt Securities offered will be a new issue of securities with no
established trading market. Any underwriter to whom Debt Securities are sold by
the Company for public offering and sale may make a market in such Debt
Securities, but such underwriters will not be obligated to do so and may
discontinue any market making at any time without notice. The Debt Securities of
any series may or may not be listed on a national securities exchange or a
foreign securities exchange. No assurance can be given as to the liquidity of or
the trading markets for the Debt Securities.
In connection with the offering, the underwriters or agents, as the case
may be, may purchase and sell the Debt Securities in the open market. These
transaction may include over-allotment and stabilizing transactions and
purchases to cover syndicate short positions created in connection with the
offering. Stabilizing transactions consist of certain bids or purchases for the
purpose of preventing or retarding a decline in the market price of the Debt
Securities; and syndicate short positions involve the sale by the underwriters
or agents, as the case may be, of a greater number of Debt Securities than they
are required to purchase from the Company in the offering. The underwriters also
may impose a penalty bid, whereby selling concessions allowed to syndicate
members or other broker dealers in respect of the Debt Securities sold in the
offering for their account may be reclaimed by the syndicate if such Debt
Securities are repurchased by the syndicate in stabilizing or covering
transactions. These activities may stabilize, maintain or otherwise affect the
market price of the Debt Securities, which may be higher than the price that
might otherwise prevail in the open market, and these activities, if commenced,
may be discontinued at any time.
LEGAL MATTERS
Certain legal matters in connection with the Debt Securities offered hereby
will be passed upon for the Company by Andrews & Kurth L.L.P., Houston, Texas.
If the Debt Securities are being distributed in an underwritten offering,
certain legal matters will be passed upon for the underwriters by counsel
identified in the related Prospectus Supplement.
EXPERTS
The consolidated financial statements incorporated in this Prospectus by
reference to the Annual Report on Form 10-K of Lakehead Pipe Line Partners, L.P.
for the year ended December 31, 1997, as amended by the Annual Report on Form
10-K/A of Lakehead Pipe Line Partners, L.P. for the year ended December 31,
1997, and the audited balance sheet of Lakehead Pipe Line Company, Inc. as of
December 31, 1997 and 1996, incorporated in this Prospectus by reference to the
Current Report on Form 8-K of Lakehead Pipe Line Partners, L.P. dated July 21,
1998, as amended by the Current Report on Form 8-K of Lakehead Pipe Line
Partners, L.P. dated September 14, 1998, have been so incorporated in reliance
on the report of PricewaterhouseCoopers LLP, independent accountants, given on
the authority of said firm as experts in auditing and accounting.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES Of ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
selling or underwriting discounts and commissions, to be incurred by the Company
in connection with the issuance and distribution of the Debt Securities being
registered. All amounts shown are estimated except the Securities and Exchange
Commission registration fee. All such costs will be borne by the Company.
Securities and Exchange Commission registration fee ............ $ 118,000
Blue Sky expenses, including legal fees ........................ 10,000
Printing and engraving expenses ................................ 100,000
Legal fees and expenses ........................................ 200,000
Rating agency fees ............................................. 200,000
Accounting fees and expenses ................................... 40,000
Trustee's fees and expenses .................................... 10,000
Miscellaneous .................................................. 2,000
---------
Total .................................................... $ 680,000
=========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Partnership Agreements of the Company and Lakehead provide that the
Company or Lakehead, as the case may be, will indemnify (to the fullest extent
permitted by applicable law) certain persons (each, an "Indemnitee") from and
against any and all losses, claims, damages, liabilities (joint or several),
expenses (including, without limitation, legal fees and expenses), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
Indemnitee in connection with any claim, demand, action, suit or proceeding to
which the Indemnitee is or was an actual or threatened party and which relates
to the Partnership Agreement of the Company or the Partnership Agreement of
Lakehead or the property, business, affairs or management of the Company or
Lakehead. This indemnity is available only if the Indemnitee acted in good
faith, in a manner in which such Indemnitee believed to be in, or not opposed
to, the best interests of the Company or Lakehead and, with respect to any
criminal proceeding, had no reasonable cause to believe its conduct was
unlawful. Indemnitees include the General Partner, any Departing Partner (as
defined in the Partnership Agreement of the Company or the Partnership Agreement
of Lakehead), any affiliate of the General Partner or any Departing Partner, any
person who is or was a director, officer, employee or agent of the General
Partner or any Departing Partner or any affiliate of either, or any person who
is or was serving at the request of the General Partner, any Departing Partner,
or any such affiliate as a director, officer, partner, trustee, employee or
agent of another person. Expenses subject to indemnity will be paid by the
applicable partnership to the Indemnitee in advance, subject to receipt of an
undertaking by or on behalf of the Indemnitee to repay such amount if it is
ultimately determined by a court of competent jurisdiction that the Indemnitee
is not entitled to indemnification.
Lakehead will, to the extent commercially reasonable, purchase and
maintain insurance on behalf of the Indemnitees, whether or not Lakehead would
have the power to indemnify such Indemnitees against liability under the
applicable partnership agreement.
Subject to any terms, conditions or restrictions set forth in the
Partnership Agreement of the Company or the Partnership Agreement of Lakehead,
Section 17-108 of the Delaware Revised Limited Partnership Act empowers a
Delaware limited partnership to indemnify and hold harmless any partner or other
person from and against all claims and demands whatsoever.
Reference is made to Exhibits 1.1 and 1.2 hereto, respectively, which
will contain provisions for indemnification of the Partnership, the General
Partner and its directors, officers, and any controlling persons, against
II-1
<PAGE> 25
certain liabilities for information furnished by the underwriters and/or agents,
as applicable, expressly for use in a Prospectus Supplement.
ITEM 16. EXHIBITS
EXHIBIT NO. EXHIBIT
*1.1 -- Form of the Company's Senior Debt Securities Underwriting
Agreement
*1.2 -- Form of the Company's Subordinated Debt Securities Underwriting
Agreement
4.1 -- Certificate of Limited Partnership of the Company (incorporated
herein by reference to Exhibit 10.1 to Lakehead's Registration
Statement on Form S-1 (File No. 33-43425))
4.2 -- Amended and Restated Agreement of Limited Partnership of the
Company, dated December 27, 1991 (incorporated herein by
reference to Exhibit 10.6 to Lakehead's Annual Report on Form
10-K for the year ended December 31, 1991 (Commission File No.
1-10934))
**4.3 -- Form of Senior Indenture between the Company and The Chase
Manhattan Bank, as Trustee
**4.4 -- Form of Subordinated Indenture between the Company and The Chase
Manhattan Bank, as Trustee
**5.1 -- Opinion of Andrews & Kurth L.L.P. as to the legality of the
securities
**12.1 -- Computation of Ratio of Earnings to Fixed Charges
23.1 -- Consent of PricewaterhouseCoopers LLP
**23.2 -- Consent of Andrews & Kurth L.L.P. (included in Exhibit 5.1)
**24.1 -- Powers of Attorney (included on signature page)
**25.1 -- Form T-1 Statement of Eligibility under the Trust Indenture Act
of 1939 related to the Senior Debt Securities
**25.2 -- Form T-1 Statement of Eligibility under the Trust Indenture Act
of 1939 related to the Subordinated Debt Securities
- -----------------------
* To be filed as an exhibit to a Current Report on Form 8-K.
** Previously filed.
ITEM 17. UNDERTAKINGS
A. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(a) To include any prospectus required by Section 10(a)(3)
of the Securities Act;
(b) To reflect in the Prospectus any facts or events
arising after the effective date of the Registration Statement (or the
most recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the Registration Statement; and
(c) To include any material information with respect to
the plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in this
Registration Statement;
provided, however, that paragraphs A(l)(a) and A(l)(b) above do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed by
the Registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
II-2
<PAGE> 26
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Partnership's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in this Registration Statement shall be deemed to be a
new registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
C. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, and controlling persons
of the Registrant pursuant to the provisions described in Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
D. The undersigned Registrant hereby undertakes to deliver or cause to
be delivered with the Prospectus, to each person to whom the Prospectus is sent
or given, the latest annual report to security holders that is incorporated by
reference in the Prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the Prospectus, to deliver, or
cause to be delivered to each person to whom the Prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the Prospectus to provide such interim financial information.
II-3
<PAGE> 27
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and that it reasonably believes
that the security rating requirement of General Instruction I.B.2. will be met
by the time of sale and has duly caused this Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Duluth, in the State of Minnesota, on September 14,
1998.
Lakehead Pipe Line Company, Limited Partnership
By: Lakehead Pipe Line Company, Inc.,
as General Partner
By: /s/ S.J. WUORI
-----------------------------------------------
S.J. Wuori
President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 2 to the Registration Statement has been signed below by the
following persons in the capacities and on the dates as indicated.
SIGNATURE TITLE DATE
/s/ S.J. WUORI President and Director September 14, 1998
- ------------------------ (Principal Executive Officer)
S.J. Wuori
* Chairman and Director September 14, 1998
- ------------------------
E. C. Hambrook
* Vice President and Director September 14, 1998
- ------------------------
R. C. Sandahl
* Chief Accountant (Chief Financial September 14, 1998
- ------------------------ and Accounting Officer)
M. A. Maki
* Director September 14, 1998
- ------------------------
P. D. Daniel
* Director September 14, 1998
- ------------------------
F. W. Fitzpatrick
* Director September 14, 1998
- ------------------------
C. A. Russell
* Director September 14, 1998
- ------------------------
D. P. Truswell
*By: /s/ S.J. WUORI
--------------------
S.J. Wuori,
Attorney-in-Fact
II-4
<PAGE> 28
LIST OF EXHIBITS
EXHIBIT NO. EXHIBIT
*1.1 -- Form of the Company's Senior Debt Securities Underwriting
Agreement
*1.2 -- Form of the Company's Subordinated Debt Securities
Underwriting Agreement
4.1 -- Certificate of Limited Partnership of the Company
(incorporated herein by reference to Exhibit 10.1 to
Lakehead's Registration Statement on Form S-1 (File No.
33-43425))
4.2 -- Amended and Restated Agreement of Limited Partnership
of the Company, dated December 27, 1991 (incorporated
herein by reference to Exhibit 10.6 to Lakehead's
Annual Report on Form 10-K for the year ended
December 31, 1991 (Commission File No. 1-10934))
**4.3 -- Form of Senior Indenture between the Company and The Chase
Manhattan Bank, as Trustee
**4.4 -- Form of Subordinated Indenture between the Company and The
Chase Manhattan Bank, as Trustee
**5.1 -- Opinion of Andrews & Kurth L.L.P. as to the legality of the
securities
**12.1 -- Computation of Ratio of Earnings to Fixed Charges
23.1 -- Consent of PricewaterhouseCoopers LLP
**23.2 -- Consent of Andrews & Kurth L.L.P. (included in Exhibit 5.1)
**24.1 -- Powers of Attorney (included on signature page)
**25.1 -- Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939 related to the Senior Debt Securities
**25.2 -- Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939 related to the Subordinated Debt Securities
- -----------------------
* To be filed as an exhibit to a Current Report on Form 8-K.
** Previously filed.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and any
accompanying Prospectus Supplement constituting part of this Amendment No. 2 to
the Registration Statement on Form S-3 of our report dated January 12, 1998,
appearing on page F-2 of Lakehead Pipe Line Partners, L.P. Annual Report on
Form 10-K for the year ended December 31, 1997, as amended on Form 10-K/A for
the year ended December 31, 1997. We also consent to the incorporation by
reference in the Prospectus and any accompanying Prospectus Supplement
constituting part of this Amendment No. 2 to the Registration Statement on Form
S-3 of our report on the balance sheet of Lakehead Pipe Line Company, Inc. dated
January 12, 1998, which appears on page F-1 of the Lakehead Pipe Line Partners,
L.P. Current Report on Form 8-K dated July 21, 1998, as amended on Form 8-K/A
dated September 14, 1998. We also consent to the reference to us under the
headings "Experts," "Selected Historical Financial and Operating Data" and
"Summary Historical Financial and Operating Data" in such Prospectus and any
accompanying Prospectus Supplement. However, it should be noted that
PricewaterhouseCoopers LLP has not prepared or certified such "Selected
Historical Financial and Operating Data" and "Summary Historical Financial and
Operating Data."
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Minneapolis, Minnesota
September 14, 1998
