SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
x Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1998 or
Transition report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from _______________ to _______________
Commission file number 1-9356
BUCKEYE PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
Delaware 23-2432497
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
5 Radnor Corporate Center, Suite 500
100 Matsonford Road
Radnor, PA 19087
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: 610-254-4600
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report).
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Class Outstanding at July 14, 1998
Limited Partnership Units 26,742,306 Units
<PAGE>
<TABLE>
<CAPTION>
BUCKEYE PARTNERS, L.P.
INDEX
Page No.
<S> <C>
Part I. Financial Information
Item 1. Consolidated Financial Statements
Consolidated Statements of Income 1
for the three months and six months
ended June 30, 1998 and 1997
Consolidated Balance Sheets 2
June 30, 1998 and December 31, 1997
Consolidated Statements of Cash Flows 3
for the six months ended June 30, 1998
and 1997
Notes to Consolidated Financial Statements 4-7
Item 2. Management's Discussion and Analysis 7-10
of Financial Condition and Results
of Operations
Part II. Other Information
Item 1. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 11
</TABLE>
<PAGE>
Item 1. Consolidated Financial Statements
Buckeye Partners, L.P.
Consolidated Statements of Income
(In thousands, except per Unit amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
- - ------------------ -----------------
1998 1997 1998 1997
---- ---- ---- ----
<C> <C> <S> <C> <C>
$47,034 $46,398 Revenue $90,082 $90,213
- - ------- ------- ------- -------
Costs and expenses
20,565 23,168 Operating expenses 38,913 44,053
4,082 2,842 Depreciation and amortization 8,184 5,693
3,524 3,742 General and administrative expenses 7,761 6,977
- - ------- ------- ------- -------
28,171 29,752 Total costs and expenses 54,858 56,723
- - ------- ------- ------- -------
18,863 16,646 Operating income 35,224 33,490
Other income (expenses)
133 528 Investment income 153 1,077
(3,884) (5,343) Interest and debt expense (7,818) (10,758)
(1,666) (450) Minority interests and other (3,197) (902)
- - ------- ------- ------- -------
(5,417) (5,265) Total other income (expenses) (10,862) (10,583)
- - ------- ------- ------- -------
$13,446 $11,381 Net income $24,362 $22,907
======= ======= ======= =======
Net income allocated to General
$ 121 $ 114 Partner $ 220 $ 229
Net income allocated to Limited
$13,325 $11,267 Partners $24,142 $22,678
Earnings per Partnership Unit:
Net income allocated to General
and Limited Partners per Partnership
$ 0.50 $ 0.47 Unit $ 0.90 $ 0.94
======= ======= ======= =======
Earnings per Partnership Unit -
assuming dilution:
Net income allocated to General
and Limited Partners per Partnership
$ 0.50 $ 0.47 Unit $ 0.90 $ 0.94
======= ======= ======= =======
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Buckeye Partners, L.P.
Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
----------- ------------
(Unaudited)
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $7,195 $7,349
Temporary investments - 2,854
Trade receivables 9,756 10,195
Inventories 2,781 2,087
Prepaid and other current assets 7,673 7,297
-------- --------
Total current assets 27,405 29,782
Property, plant and equipment, net 527,466 520,941
Other non-current assets 62,778 64,339
-------- --------
Total assets $617,649 $615,062
======== ========
Liabilities and partners' capital
Current liabilities
Accounts payable $3,950 $3,664
Accrued and other current liabilities 25,672 21,073
-------- --------
Total current liabilities 29,622 24,737
Long-term debt 240,000 240,000
Minority interests 2,503 2,535
Other non-current liabilities 46,355 45,012
Commitments and contingent liabilities - -
-------- --------
Total liabilities 318,480 312,284
-------- --------
Partners' capital
General Partner 2,396 2,432
Limited Partners 296,773 300,346
-------- --------
Total partners' capital 299,169 302,778
-------- --------
Total liabilities and partners' capital $617,649 $615,062
======== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Buckeye Partners, L.P.
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $24,362 $22,907
------- -------
Adjustments to reconcile net income to
net cash provided by operating activities:
Gain on sale of property, plant and equipment (196) -
Depreciation and amortization 8,184 5,693
Minority interests 278 239
Distributions to minority interests (310) (191)
Changes in assets and liabilities:
Temporary investments 2,854 1,683
Trade receivables 439 2,255
Inventories (694) (26)
Prepaid and other current assets (376) 1,304
Accounts payable 286 (3,534)
Accrued and other current liabilities 4,599 2,871
Other non-current assets (788) 160
Other non-current liabilities 1,343 (305)
------- -------
Total adjustments 15,619 10,149
------- -------
Net cash provided by operating activities 39,981 33,056
------- -------
Cash flows from investing activities:
Capital expenditures (11,996) (8,240)
Expenditures for disposal of property,
plant and equipment, net (168) (125)
------- -------
Net cash used in investing activities (12,164) (8,365)
------- -------
Cash flows from financing activities:
Capital contribution - 3
Proceeds from exercise of unit options 359 341
Payment of long-term debt - (5,950)
Distributions to Unitholders (28,330) (18,285)
------- -------
Net cash used in financing activities (27,971) (23,891)
------- -------
Net (decrease) increase in cash and cash
equivalents (154) 800
Cash and cash equivalents at beginning of period 7,349 17,416
------- -------
Cash and cash equivalents at end of period $7,195 $18,216
======= =======
Supplemental cash flow information:
Cash paid during the period for interest
(net of amount capitalized) $7,856 $10,899
======= =======
</TABLE>
See notes to consolidated financial statements.
<PAGE>
BUCKEYE PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
In the opinion of management, the accompanying financial statements of Buckeye
Partners, L.P. (the "Partnership"), which are unaudited except that the
Balance Sheet as of December 31, 1997 is derived from audited financial
statements, include all adjustments necessary to present fairly the
Partnership's financial position as of June 30, 1998 and the results of
operations for the three month and six month periods ended June 30, 1998 and
1997 and cash flows for the six month periods ended June 30, 1998 and 1997.
The American Institute of Certified Public Accountants issued Statement of
Position ("SOP") 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use," which provides guidance on accounting
for the costs of computer software developed or obtained for internal use.
The Partnership adopted SOP 98-1 on January 1, 1998 with no significant impact
on the Partnership's operating results or financial condition.
The Financial Accounting Standards Board issued Statement No. 130, "Reporting
Comprehensive Income," which establishes standards for the reporting and
display of comprehensive income and its components (revenues, expenses, gains
and losses) in a full set of general purpose financial statements. The
Partnership has not reported comprehensive income due to the absence of items
of other comprehensive income in any period presented.
The Financial Accounting Standards Board issued Statement No. 131,
"Disclosures about Segments of an Enterprise and Related Information," which
establishes standards for the way that those business enterprises report
selected information about operating segments in annual financial statements
and requires that those enterprises report selected information about
operating segments in the interim financial reports issued to shareholders.
It also establishes standards for related disclosures about products and
services, geographic areas, and major customers. This standard will be
effective for the Partnership's 1998 Annual Report.
In February 1998, the Financial Accounting Standards Board issued Statement
No. 132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits." This standard revises employers' disclosures about pension and
other postretirement plans but does not change the measurement or recognition
of those plans. This standard will be effective for the Partnership's 1998
Annual Report.
In June 1998, the Financial Accounting Standards Board issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities" which
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts,
(collectively referred to as derivatives) and for hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those
instruments at fair value. This standard is effective for the Partnership's
financial statements for all quarters beginning in the year 2000.
Pursuant to the rules and regulations of the Securities and Exchange
Commission, the financial statements do not include all of the information and
notes normally included with financial statements prepared in accordance with
generally accepted accounting principles. These financial statements should
be read in conjunction with the consolidated financial statements and notes
thereto included in the Partnership's Annual Report on Form 10-K/A for the
year ended December 31, 1997.
2. CONTINGENCIES
The Partnership and its subsidiaries (the "Operating Partnerships"), in the
ordinary course of business, are involved in various claims and legal
proceedings, some of which are covered in whole or in part by insurance.
Buckeye Management Company (the "General Partner") is unable to predict the
timing or outcome of these claims and proceedings. Although it is possible
that one or more of these claims or proceedings, if adversely determined,
could, depending on the relative amounts involved, have a material effect on
the Partnership's results of operations for a future period, the General
Partner does not believe that their outcome will have a material effect on the
Partnership's consolidated financial condition or results of operations.
Environmental
Certain Operating Partnerships (or their predecessors) have been named as a
defendant in lawsuits or have been notified by federal or state authorities
that they are a potentially responsible party ("PRP") under federal laws or a
respondent under state laws relating to the generation, disposal, or release
of hazardous substances into the environment. These proceedings generally
relate to potential liability for clean-up costs. The total potential
remediation costs relating to these clean-up sites cannot be reasonably
estimated.
With respect to each site, however, the Operating Partnership involved is one
of several or as many as several hundred PRPs that would share in the total
costs of clean-up under the principle of joint and several liability. The
General Partner believes that the generation, handling and disposal of
hazardous substances by the Operating Partnerships and their predecessors have
been in material compliance with applicable environmental and regulatory
requirements. Additional claims for the cost of cleaning up releases of
hazardous substances and for damage to the environment resulting from the
activities of the Operating Partnerships or their predecessors may be asserted
in the future under various federal and state laws.
Guaranteed Investment Contract
The Buckeye Pipe Line Company Retirement and Savings Plan (the "Plan") held a
guaranteed investment contract ("GIC") issued by Executive Life Insurance
Company ("Executive Life"), which entered conservatorship proceedings in the
state of California in April 1991. The GIC was purchased in July 1989, with
an initial principal investment of $7.4 million earning interest at an effec
tive rate per annum of 8.98 percent through June 30, 1992. Pursuant to the
Executive Life Plan of Rehabilitation, the Plan has received an interest only
contract from Aurora National Life Assurance Company in substitution for its
Executive Life GIC. The contract provides for semi-annual interest payments
at a rate of 5.61 percent per annum through September 1998, the maturity date
of the contract. In addition, the Plan has and will receive certain
additional cash payments through the maturity date of the contract pursuant to
the Plan of Rehabilitation. The Plan also received a payment of approximately
$2 million in March, 1998, from the Pennsylvania Life and Health Insurance
Guaranty Association for partial reimbursement of losses of Plan participants
who were Pennsylvania residents on December 6, 1991. The timing and amount of
any additional reimbursements cannot be estimated accurately at this time. In
May 1991, the General Partner, in order to safeguard the basic retirement and
savings benefits of its employees, announced its intention to enter an
arrangement with the Plan that would guarantee that the Plan would receive at
least its initial principal investment of $7.4 million plus interest at an
effective rate per annum of 5 percent from July 1, 1989. The General
Partner's present intention is to effectuate its commitment no later than
September 1998. The costs and expenses of the General Partner's employee
benefit plans are reimbursable by the Partnership under the applicable limited
partnership and management agreements. The General Partner believes that an
adequate provision has been made for costs which may be incurred by the
Partnership in connection with the guarantee.
3. PARTNERS' CAPITAL
Partners' capital consists of the following:
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
------- -------- --------
(In thousands)
<S> <C> <C> <C>
Partners' Capital - 1/1/98 $2,432 $300,346 $302,778
Net Income 220 24,142 24,362
Distributions (256) (28,074) (28,330)
Exercise of unit options - 359 359
------ -------- --------
Partners' Capital - 6/30/98 $2,396 $296,773 $299,169
====== ======== ========
</TABLE>
The following is a reconciliation of basic and dilutive income per Partnership
Unit for the three and six month periods ended June 30:
<TABLE>
<CAPTION>
Three Months Ended June 30,
-------------------------------------------------
1998 1997
----------------------- -----------------------
Income Units Per Income Units Per
(Numer- (Denomi- Unit (Numer- (Denomi- Unit
ator) nator) Amount ator) nator) Amount
------ ------ ------ ------ ------ ------
(in thousands, except per unit amounts)
<S> <C> <C> <C> <C> <C> <C>
Net income $13,446 $11,381
------- -------
Basic earnings
per Partnership Unit 13,446 26,984 $0.50 11,381 24,382 $0.47
Effect of dilutive
securities - options - 97 - - 64 -
------- ------ ----- ------- ------ -----
Diluted earnings per
Partnership Unit $13,446 27,081 $0.50 $11,381 24,446 $0.47
======= ====== ===== ======= ====== =====
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------------------------------
1998 1997
----------------------- -----------------------
Income Units Per Income Units Per
(Numer- (Denomi- Unit (Numer- (Denomi- Unit
ator) nator) Amount ator) nator) Amount
------ ------ ------ ------ ------ ------
(in thousands, except per unit amounts)
<S> <C> <C> <C> <C> <C> <C>
Net income $24,362 $22,907
------- -------
Basic earnings
per Partnership Unit 24,362 26,978 $0.90 22,907 24,377 $0.94
Effect of dilutive
securities - options - 101 - - 65 -
------- ------ ----- ------- ------ -----
Diluted earnings per
Partnership Unit $24,362 27,079 $0.90 $22,907 24,442 $0.94
======= ====== ===== ======= ====== =====
</TABLE>
Options reported as dilutive securities are related to unexercised options
outstanding under the Option Plan.
4. CASH DISTRIBUTIONS
The Partnership will generally make quarterly cash distributions of
substantially all of its available cash, generally defined as consolidated
cash receipts less consolidated cash expenditures and such retentions for
working capital, anticipated cash expenditures and contingencies as the
General Partner deems appropriate.
The Partnership has declared a cash distribution of $0.525 per unit payable on
August 31, 1998 to unitholders of record on August 5, 1998. The total
distribution will amount to approximately $14,168,000.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Amounts in the following discussion and analysis of financial condition and
results of operations relate to continuing operations unless otherwise
indicated.
RESULTS OF OPERATIONS
Second Quarter
Revenue for the second quarter 1998 was $47.0 million or 1.3 percent greater
than revenue of $46.4 million for the second quarter 1997. Volumes for the
second quarter 1998 were 1,044,300 barrels per day, 22,200 barrels per day or
2.2 percent greater than volumes of 1,022,100 barrels per day for the second
quarter 1997. Gasoline volumes were 1.5 percent greater than 1997 levels.
Strong demand in the East, particularly in the Pittsburgh, Pennsylvania area
as a result of a new connection at Midland, Pennsylvania offset declines on
other systems. Distillate volumes declined by 0.5 percent from 1997 levels as
a result of warmer weather. This decline was offset somewhat by favorable
heating oil prices that led to some inventory building. Turbine fuel volumes
were 3.7 percent greater than 1997 levels as a result of higher deliveries to
Newark, Miami and Detroit Metro airports. Tariff increases instituted during
the first quarter 1998 contributed approximately $0.7 million of additional
revenue over the second quarter of 1997.
Costs and expenses for the second quarter 1998 were $28.2 million or 5.4
percent less than costs and expenses of $29.8 million for the second quarter
1997. Declines in payroll benefits, outside service, operating power and
property tax expense were partially offset by the amortization of a deferred
charge related to the ESOP restructuring that occurred during the third
quarter 1997.
Other income (expenses), which is the net of non-operating income and
expenses, was a net expense of $5.4 million during the second quarter 1998
compared to a net expense of $5.3 million during the second quarter 1997.
Higher incentive compensation paid to the General Partner, due to an increase
in per unit distributions, was partially offset by a decline in interest
expense related to a debt refinancing in December 1997.
First Six Months
Revenue for the first six months of 1998 was $90.1 million or 0.1 percent less
than revenue of $90.2 million for the first six months of 1997. Volumes for
the first six months of 1998 were 1,021,200 barrels per day, 16,700 barrels
per day or 1.7 percent greater than volumes of 1,004,500 barrels per day for
the first six months of 1997. Gasoline volumes were 2.4 percent greater than
1997 levels. Strong volumes to the Pittsburgh, Pennsylvania area and Long
Island were offset by declines in other market areas. Distillate volumes
declined by 2.3 percent from 1997 levels primarily as a result of mild winter
weather experienced throughout a majority of Buckeye's system, partially
offset by favorable heating oil prices during the second quarter that led to
some inventory building. Turbine fuel volumes increased by 3.1 percent from
1997 levels. Demand was strong at most airports served by the Partnership
particularly at Newark airport where a combination of new business and
increased international air traffic led to increased volumes. Tariff
increases instituted during the first quarter 1998 contributed approximately
$1.4 million of additional revenue during the first six months of 1998.
Costs and expenses for the first six months of 1998 were $54.9 million or 3.2
percent less than costs and expenses of $56.7 million for the first six months
of 1997. Declines in payroll benefits, outside service, operating power and
property tax expense were partially offset by the amortization of a deferred
charge related to the ESOP restructuring and payroll expense provisions with
respect to the realignment of senior management.
Other income (expenses), which is the net of non-operating income and
expenses, was a net expense of $10.9 million during the first six months of
1998 compared to a net expense of $10.6 million during the first six months of
1997. Higher incentive compensation paid to the General Partner due to an
increase in per unit distributions was partially offset by a decline in
interest expense related to a debt refinancing in December 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership's financial condition at June 30, 1998 is highlighted in the
following comparative summary:
Liquidity and Capital Indicators
As of
-----------------------
6/30/98 12/31/97
-------- --------
Current ratio 0.9 to 1 1.2 to 1
Ratio of cash and cash equivalents,
temporary investments and trade
receivables to current liabilities 0.6 to 1 0.8 to 1
Working capital (in thousands) $(2,217) $5,045
Ratio of total debt to total capital .44 to 1 .44 to 1
Book value (per Unit) $11.09 $11.23
The Partnership's cash flow from operations is generally sufficient to meet
current working capital requirements. In addition, the Partnership maintains
$10.0 million in short-term credit facilities under which there are no current
outstanding borrowings.
Cash Provided by Operations
For the six months ended June 30, 1998, cash provided by operations of $40.0
million was derived principally from $32.5 million of income before
depreciation and amortization. Depreciation and amortization of $8.2 million
increased by $2.5 million over the first six months of 1997 as a result of the
amortization of deferred charge associated with the ESOP Restructuring that
occurred in August 1997. Changes in current assets and current liabilities
resulted in a net cash source of $7.1 million, resulting primarily from
maturities of temporary investments, the continued improvement in the
collection of trade receivables and an increase in outstanding liabilities.
Cash provided by operations was used to pay distributions to Unitholders of
$28.3 million, an increase of $10.0 million over the first six months of 1997,
and capital expenditures of $12.0 million. Changes in non-current assets and
liabilities resulted in a net cash source of $0.5 million.
Debt Obligation and Credit Facilities
At June 30, 1998, the Partnership had $240.0 million in outstanding long-term
debt representing the Senior Notes of Buckeye Pipe Line Company, L.P.
("Buckeye"). The indenture pursuant to which the Senior Notes were issued
(the "Senior Note Indenture") contains covenants which affect Buckeye, Laurel
Pipe Line Company, L.P. and Buckeye Pipe Line Company of Michigan, L.P. (the
"Indenture Parties"). Generally, the Senior Note Indenture (a) limits
outstanding indebtedness of Buckeye based upon certain financial ratios of the
Indenture Parties, (b) prohibits the Indenture Parties from creating or
incurring certain liens on their property, (c) prohibits the Indenture Parties
from disposing of property which is material to their operations, and (d)
limits consolidation, merger and asset transfers of the Indenture Parties. In
addition, the Amended and Restated Agreement of Limited Partnership contains
certain restrictions which limit the incurrence of debt to (a) any future debt
of Buckeye permitted by the Senior Note Indenture and (b) other debt not in
excess of an aggregate principal amount of $25 million plus the aggregate
proceeds from the sale of additional Partnership Units.
Buckeye has a $10 million short-term line of credit secured by accounts
receivable. At June 30, 1998, there were no outstanding borrowings under these
facilities.
At June 30, 1998, the ratio of total debt to total capital was 44 percent.
For purposes of the calculation of this ratio, total capital consists of long-
term debt, minority interests in subsidiaries and partners' capital.
Capital Expenditures
At June 30, 1998, approximately 85 percent of total consolidated assets
consisted of property, plant and equipment.
Capital expenditures during the six months ended June 30, 1998 totaled $12.0
million compared to $8.2 million during the six months ended June 30, 1997.
During both periods, capital expenditures were paid from internally generated
funds.
The Partnership Agreement provides that the consolidated capital expenditures
of the Partnership and the Operating Partnerships in any calendar year may not
exceed an amount equal to 20 percent of the sum of consolidated operating
income and depreciation and amortization for such calendar year unless, in the
good faith opinion of the General Partner, capital expenditures in excess of
such amount are required to sustain or improve the existing pipeline
operations of the Operating Partnerships. If capital expenditures in excess
of the 20 percent limit are incurred, the General Partner will use its best
efforts to finance the amount of such excess within six months after its
incurrence through additional permitted indebtedness, the sale of additional
partnership interests, or both. This provision may be waived by a majority of
the holders of limited partnership interests as to particular capital
expenditures.
OTHER MATTERS
Accounting Pronouncements
The American Institute of Certified Public Accountants issued Statement of
Position ("SOP") 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use," which provides guidance on accounting
for the costs of computer software developed or obtained for internal use.
The Partnership adopted SOP 98-1 on January 1, 1998 with no significant impact
on the Partnership's operating results or financial condition.
The Financial Accounting Standards Board issued Statement No. 130, "Reporting
Comprehensive Income," which establishes standards for the reporting and
display of comprehensive income and its components (revenues, expenses, gains
and losses) in a full set of general purpose financial statements. The
Partnership has not reported comprehensive income due to the absence of items
of other comprehensive income in any period presented.
The Financial Accounting Standards Board issued Statement No. 131,
"Disclosures about Segments of an Enterprise and Related Information," which
establishes standards for the way that those business enterprises report
selected information about operating segments in annual financial statements
and requires that those enterprises report selected information about
operating segments in the interim financial reports issued to shareholders.
It also establishes standards for related disclosures about products and
services, geographic areas, and major customers. This standard will be
effective for the Partnership's 1998 Annual Report.
In February 1998, the Financial Accounting Standards Board issued Statement
No. 132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits." This standard revises employers' disclosures about pension and
other postretirement plans but does not change the measurement or recognition
of those plans. This standard will be effective for the Partnership's 1998
Annual Report.
In June 1998, the Financial Accounting Standards Board issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities" which
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts,
(collectively referred to as derivatives) and for hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those
instruments at fair value. This standard is effective for the Partnership's
financial statements for all quarters beginning in the year 2000.
Forward Looking Statements
This SEC Form 10-Q includes forward looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Although the General Partner believes that its
expectations are based on reasonable assumptions, it can give no assurance
that such assumptions will materialize.
Part II - Other Information
Item 1. Legal Proceedings
On June 19, 1998, a putative class action complaint (Shakerdge v. Martinelli,
et al) was filed in the Delaware Court of Chancery against the Partnership,
Buckeye Management Company (the "General Partner"), Glenmoor Ltd., the parent
of the General Partner, and the directors of the General Partner alleging that
the Consent Solicitation Statement is materially false and misleading because
it fails to disclose that the incentive payments made to the General Partner
by the Partnership may be affected by an increase in the number of LP Units
outstanding; that the elimination of the restrictions contained in the
Partnership Agreement will remove the checks and balances imposed on the
Partnership and the General Partner; and whether the defendants were planning
or considering any specific transactions that would be affected by the removal
of the restrictions at the time of the Consent Solicitation Statement. The
complaint seeks, among other things, an injunction prohibiting the
consummation of the consent solicitation or giving effect to any other
proposed amendments to the Partnership Agreement. The General Partner and the
other defendants believe that the Consent Solicitation Statement disclosed all
material information to the Unitholders and that the complaint is without
merit.
Item 4. Submission of Matters to a Vote of Security Holders
On May 22, 1998, the Partnership commenced a consent solicitation seeking
Unitholder approval of certain amendments to the Partnership Agreement. The
solicitation of consents is set to expire at 5:00 p.m., Eastern Standard Time,
on July 17, 1998, unless extended.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10.1 Management Agreement, dated as of January 1, 1998,
among Buckeye Management Company, Buckeye Pipe Line
Company and Glenmoor Ltd.
10.2 Transition and Retirement Agreement, dated as of May 22, 1998,
by and among Buckeye Management Company, Buckeye Pipe Line
Services Company, Buckeye Pipe Line Company, Glenmoor, Ltd.,
and C. Richard Wilson.
10.3 First Amendment to the Unit Option and Distribution Equivalent
Plan of Buckeye Partners, L.P., dated as of July 14, 1998.
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended June 30, 1998.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BUCKEYE PARTNERS, L.P.
(Registrant)
By: Buckeye Management Company,
as General Partner
Dated: July 14, 1998 By: /s/ Steven C. Ramsey
------------------------------
Steven C. Ramsey
Senior Vice President, Finance
and Chief Financial Officer
(Principal Accounting and
Financial Officer)
CONFORMED COPY
MANAGEMENT AGREEMENT
Dated as of January 1, 1998
among
BUCKEYE MANAGEMENT COMPANY,
BUCKEYE PIPE LINE COMPANY
and
GLENMOOR, LTD.
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (the "Agreement"), dated as
of January 1, 1998, is entered into among BUCKEYE MANAGEMENT
COMPANY, a Delaware corporation (the "General Partner"), BUCKEYE
PIPE LINE COMPANY, a Delaware corporation ("BPLC"), and GLENMOOR,
LTD., a Delaware corporation ("Glenmoor") formerly known as "BMC
Acquisition Company".
WITNESSETH:
WHEREAS, the General Partner owns a 1% general
partnership interest in, and serves as sole general partner of,
Buckeye Partners, L.P., a publicly traded Delaware limited
partnership (the "Partnership"); and
WHEREAS, BPLC owns a 1% general partnership interest
in, and serves as sole general partner of, Buckeye Pipe Line
Company, L.P., Buckeye Tank Terminals Company, L.P., Everglades
Pipe Line Company, L.P. and Laurel Pipe Line Company, L.P., each
a Delaware limited partnership (together, the "Operating
Partnerships"), and the Partnership owns a 99% limited
partnership interest in each such entity; and
WHEREAS, Glenmoor acquired all of the issued and
outstanding capital stock of the General Partner from
Pennsylvania Company, a wholly owned subsidiary of American
Financial Group, Inc. ("AFG"), on March 22, 1996; and
WHEREAS, pursuant to a Management Agreement, dated as
of March 22, 1996 (the "1996 Agreement"), the General Partner and
BPLC engaged Glenmoor Partners LLP, a Pennsylvania limited
liability partnership ("Glenmoor Partners") and the owner of all
of the issued and outstanding capital stock of Glenmoor, to
provide senior management services to the General Partner and
BPLC; and
WHEREAS, Glenmoor Partners dissolved effective December
31, 1997, and Glenmoor wishes to assume, and the General Partner
and BPLC wish to engage Glenmoor to provide, the senior
management services previously provided by Glenmoor Partners
under the 1996 Agreement, in accordance with the terms set forth
below.
NOW, THEREFORE, in consideration of the mutual
promises hereinafter set forth and intending to be legally bound,
the General Partner, BPLC and Glenmoor hereby agree as follows:
ARTICLE I
Appointment of Glenmoor
The General Partner and BPLC hereby appoint Glenmoor as
managing agent, and Glenmoor accepts its appointment by the
General Partner and BPLC, to manage the business and affairs of
the General Partner and BPLC in the manner which Glenmoor deems
appropriate and to perform all management functions previously
performed by Glenmoor Partners. Management functions to be
performed by Glenmoor shall include, among other things,
supervision of day-to-day activities, ESOP plan administration,
insurance management, risk management, strategic planning and
advice regarding corporate and partnership governance issues.
Glenmoor agrees to perform such services under the supervision
and control of the boards of directors of the General Partner and
BPLC. Employees of Glenmoor may also serve as officers of the
General Partner and BPLC, as they may be duly elected from time
to time by the boards of directors of the General Partner and
BPLC, respectively.
ARTICLE II
Compensation
In consideration for the services to be performed
hereunder, the General Partner shall pay Glenmoor an annual
management fee, the amount of which shall be approved each year
by the disinterested directors of the General Partner. In
connection with such annual approval, Glenmoor shall submit to
the board of directors of the General Partner an itemized report
on the components of the management fee in reasonable detail,
consistent with past practice. Except to the extent such
reimbursement obligations have been released pursuant to the
terms and conditions of the Exchange Agreement, dated as of
August 12, 1997, among the General Partner, the Partnership,
BPLC, the Operating Partnerships (as therein defined), and
Glenmoor, the management fee shall be based on the reimbursement
of all costs and expenses (direct or indirect) incurred by
Glenmoor which are directly or indirectly related to the
capitalization, business or activities of the Partnership and the
Operating Partnerships, including the salaries, bonuses and
benefits (including without limitation participation in all
retirement, savings, welfare, workers' compensation and other
benefit plans maintained by the General Partner and BPLC for its
employees) of employees of Glenmoor reasonably allocated to the
General Partner and BPLC based upon time spent on behalf of the
Partnership and the Operating Partnerships. The management fee
shall include a "Senior Administrative Charge" of not less than
$975,000 to compensate Glenmoor for certain senior management
functions (including the services of A.W. Martinelli and E.
Varalli) set forth in Article I hereof which were previously
provided to the General Partner by AFG and its affiliates. This
Senior Administrative Charge component of the management fee
shall be specifically approved by the disinterested directors of
the General Partner in connection with its annual approval of the
management fee.
ARTICLE III
Outside Activities
Glenmoor shall be entitled to and may have business
interests and engage in business activities in addition to those
relating to the business of the General Partner, BPLC, the
Partnership or any Operating Partnership for its own account and
for the account of others, without having or incurring any
obligation to offer any interest in such businesses or activities
to the General Partner, BPLC, the Partnership or any Operating
Partnership; provided, however, that Glenmoor shall not engage in
any businesses or activities that are in direct competition with
the General Partner, BPLC, the Partnership or any Operating
Partnership unless Glenmoor has received prior written consent of
the disinterested directors of the General Partner to engage in
such competitive activities. Neither the General Partner, BPLC,
the Partnership, any Operating Partnership, nor any limited
partner of the Partnership, shall have any rights by virtue of
this Agreement, or the relationship created hereby, in any such
business interests of Glenmoor.
ARTICLE IV
Liability of Glenmoor; Indemnification
4.01 Liability of Glenmoor. Notwithstanding anything
to the contrary in this Agreement, and except to the extent
required by applicable law, neither Glenmoor, any person who is
or was a director, officer, employee or agent of Glenmoor, or any
person who is or was serving at the request of Glenmoor as a
director, officer, partner, trustee, employee or agent of another
person (collectively, the "Indemnitees") shall be liable to the
General Partner or BPLC for any action taken or omitted to be
taken by such Indemnitee, provided that such action was taken in
good faith and such action or omission does not involve the gross
negligence or willful misconduct of such Indemnitee. The
termination of any action, suit or proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere, or its
equivalent, shall not, of itself, create a presumption that an
Indemnitee did not act in good faith or that an action or
omission involves gross negligence or willful misconduct.
4.02 Indemnification. (a) The General Partner and BPLC
shall, to the fullest extent permitted by applicable law, jointly
and severally indemnify each Indemnitee against expenses
(including legal fees and expenses), judgments, fines and amounts
paid in settlement, actually and reasonably incurred by such
Indemnitee, in connection with any threatened, pending or
completed action, suit or proceeding to which such Indemnitee was
or is a party or is threatened to be made a party by reason of
the Indemnitee's status as (i) as managing agent under this
Agreement; (ii) a director, officer, employee or agent of
Glenmoor; or (iii) a person serving at the request of Glenmoor in
another entity in similar capacity, and which relates to this
Agreement or the property, business, affairs or management of the
General Partner or BPLC, provided that the Indemnitee acted in
good faith, and the act or omission which is the basis of such
demand, claim, action, suit or proceeding does not involve the
gross negligence or willful misconduct of such Indemnitee.
(b) Expenses (including legal fees and expenses)
incurred in defending any proceeding subject to Section 4.02(a)
hereof shall be paid by the General Partner or BPLC in advance of
the final disposition of such proceeding upon receipt of an
undertaking (which need not be secured) by or on behalf of the
Indemnitee to repay such amount if it shall ultimately be
determined, by a court of competent jurisdiction, that the
Indemnitee is not entitled to be indemnified by the General
Partner or BPLC as authorized hereunder.
(c) The indemnification provided by Section 4.02(a)
hereof shall be in addition to any other rights to which the
Indemnitees may be entitled and shall continue as to an
Indemnitee who has ceased to serve in a capacity for which the
Indemnitee is entitled to indemnification, and shall inure to the
benefit of the heirs, successors, assigns, administrators and
personal representatives of the Indemnitee.
(d) To the extent commercially reasonable, the General
Partner shall purchase and maintain insurance on behalf of the
Indemnitees against any liability which may be asserted against,
or expense which may be incurred by, such Indemnitees in
connection with the General Partner's and BPLC's activities,
whether or not the General Partner or BPLC would have the power
to indemnify such Indemnitees against such liability under the
provisions of this Agreement.
(e) An Indemnitee shall not be denied indemnification
in whole or in part under Section 4.02(a) hereof because the
Indemnitee had an interest in the transaction with respect to
which the indemnification applies if the transaction was
otherwise permitted by the terms of this Agreement and the
Partnership's Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement").
(f) The provisions of this Article IV are for the
benefit of the Indemnitees and their heirs, successors, assigns,
administrators and personal representatives, and shall not be
deemed to create any rights for the benefit of any other persons.
ARTICLE V
No Interest Conveyed to Glenmoor
This Agreement is a management agreement only and does
not convey to Glenmoor any right, title or interest in or to any
assets of the General Partner or BPLC, except that Glenmoor shall
have and is hereby granted a license to enter upon and use such
assets for the purpose of performing its duties and obligations
hereunder.
ARTICLE VI
Term
The term of this Agreement shall commence as of the
date hereof and shall continue until the earlier of (i) the
dissolution and liquidation of the Partnership, (ii) the
dissolution and liquidation of Glenmoor or (iii) the removal of
the General Partner as general partner of the Partnership.
Notwithstanding the foregoing, the General Partner may terminate
this Agreement on not less than 180 days' prior written notice
upon a determination by the disinterested directors of the
General Partner that continuation of this Agreement is not in the
best interests of the Partnership; provided, however, that if the
General Partner terminates this Agreement pursuant to the
foregoing clause for reasons other than the bad faith, gross
negligence or willful misconduct of Glenmoor or its directors,
officers or employees in connection with a matter material to the
Partnership, the General Partner shall pay Glenmoor promptly
following the effective date of Glenmoor's termination a
termination fee equal to (i) the previous year's Senior
Administrative Charge multiplied by three, plus (ii) any amount
outstanding pursuant to Article II hereof, including
reimbursement of severance obligations arising out of the
termination of this Agreement by the General Partner which have
been approved by the appropriate committee of the board of
directors of the General Partner.
ARTICLE VII
General Provisions
7.01 Address and Notices. Any notice under this
Agreement shall be deemed given if received in writing by the
General Partner and BPLC at BPLC's principal offices located at
3900 Hamilton Blvd., Allentown, Pennsylvania 18103, or by
Glenmoor at its principal offices located at 5 Radnor Corporate
Center, 100 Matsonford Road, Radnor, Pennsylvania 19087.
7.02 Headings. All article or section headings in this
Agreement are for convenience only and shall not be deemed to
control or affect the meaning or construction of any of the
provisions hereof.
7.03 Assignment; Binding Effect. This Agreement may
not be assigned by Glenmoor without the prior written consent of
the disinterested directors of the General Partner. This
Agreement shall be binding upon and inure to the benefit of the
parties hereto and their permitted successors and assigns.
7.04 Entire Agreement. This Agreement constitutes the
entire agreement between the parties with regard to management
services to be provided by Glenmoor to the General Partner and
BPLC and supersedes all prior agreements or understandings
between the General Partner, BPLC and Glenmoor or their agents
with regard to such services.
7.05 Modification; Waiver. No modification or waiver
of any provision of this Agreement shall be valid unless it is in
writing and signed by the party against whom it is sought to be
enforced. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this
Agreement, or to exercise any right or remedy consequent upon a
breach thereof, shall constitute a waiver of any such breach or
of any other covenant, duty, agreement or condition. No waiver
at any time of any provision of this Agreement shall be deemed a
waiver of any other provision of this Agreement at that time or a
waiver of that or any other provision at any other time.
7.06 Counterparts. This Agreement may be executed in
any number of counterparts, all of which together shall
constitute one agreement binding on the parties hereto.
7.07 Accounting Principles. All financial reports
requested to be rendered under this Agreement shall be prepared
in accordance with generally accepted accounting principles.
7.08 Severability. If any provision of this Agreement
is or becomes invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining
provisions hereof, or of such provision in other respects, shall
not be affected thereby.
7.09 Applicable Law. This Agreement shall be construed
and enforced in accordance with the laws of the Commonwealth of
Pennsylvania without giving effect to any conflict of laws
provisions.
IN WITNESS WHEREOF, this Agreement has been duly
executed by the parties hereto as of the date first above
written.
BUCKEYE MANAGEMENT COMPANY
By: /S/ Steven C. Ramsey
Title: Senior Vice President
BUCKEYE PIPE LINE COMPANY
By: /S/ Stephen C. Muther
Title: Senior Vice President
GLENMOOR, LTD.
By: /S/ William H. Shea, Jr.
Title: President and Chief Operating Officer
CONFORMED COPY
TRANSITION AND RETIREMENT AGREEMENT
THIS AGREEMENT (the "Agreement"), dated as of May 22, 1998,
by and among Buckeye Management Company, a Delaware corporation
("BMC"), Buckeye Pipe Line Services Company, a Pennsylvania
corporation ("BPLSC"), Buckeye Pipe Line Company, a Delaware
corporation ("Pipe Line"), Glenmoor, Ltd., a Delaware corporation
formerly known as BMC Acquisition Company ("Glenmoor") (BMC,
BPLSC, Pipe Line and Glenmoor being hereinafter collectively
referred to as the "Company"), and C. Richard Wilson
("Executive").
WHEREAS, the Company is in the business of managing the oil
pipeline and related businesses of Buckeye Partners, L.P., a
Delaware limited partnership, and its subsidiary operating
partnerships (collectively, the "Partnerships");
WHEREAS, the Company and Executive entered into a Severance
Agreement, dated as of May 6, 1997 (the "Severance Agreement"),
at which time Executive was President and Chief Operating Officer
of the Company;
WHEREAS, Executive has elected to retire on February 1, 2000
(the "Retirement Date"), and the Company believes that
Executive's retirement at that time is in the best interests of
all parties; and
WHEREAS, both parties desire to enter into a new agreement
that shall supersede the Severance Agreement and shall reflect
the transition arrangements and the retirement and other benefits
to which Executive shall be entitled.
NOW, THEREFORE, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Employment.
(a) The Company hereby agrees to continue the
employment of Executive, and Executive hereby accepts such
employment and agrees to perform his duties and responsibilities
as delegated to him by the Chairman of the Board of Directors
("Chairman") or the President of the Company until Executive's
Retirement Date. All duties assigned to Executive shall be
appropriate to Executive's status with the Company. Executive
shall be available on a full-time basis and shall have the title
of Vice Chairman of BMC beginning on May 1, 1998, and ending on
the Retirement Date.
(b) For Executive's services rendered prior to the
Retirement Date, Executive shall receive a continuation of
Executive's current compensation through May 31, 1998, including
a profit-sharing award of $116,667; a salary of $151,667 plus a
guaranteed bonus of $98,583 for the balance of 1998; a salary of
$260,000 and a guaranteed bonus of $169,000 for the 1999 calendar
year; and a salary of $21,667 and a guaranteed bonus of $14,083
for the month of January 2000. Such salary, guaranteed bonus and
profit-sharing amounts shall be payable at such time or times as
salary, bonus and profit-sharing are payable to other officers of
the Company (without regard to whether such other officers
actually receive bonus or profit-sharing payments for any
period). In connection with such services, Executive shall be
entitled to exclusive use of an office at the Company's
facilities on the 4th Floor, Five Radnor Corporate Center or at
such other office of reasonably comparable size and amenities
selected by the Company and reasonably convenient to Executive.
(c) Between the date hereof and the Retirement Date,
Executive shall resign as and when requested by the Chairman or
the President of the Company from all positions as an officer or
director of the Company, its subsidiaries or affiliates other
than his position as Vice Chairman of BMC; as a trustee under any
pension, profit-sharing or similar plan sponsored by the Company,
its subsidiaries or affiliates; or as a nominee or designee of
the Company on any board of directors, board of trustees or
similar body of another entity. The foregoing shall not apply to
Executive's position as Chairman of the American Petroleum
Institute's General Committee on Pipelines.
(d) Executive shall be entitled to continuation of his
current non-accountable automobile allowance of $600 per month up
to the Retirement Date. Executive shall also be entitled to
continue to participate up to the Retirement Date, on a basis
comparable to other executives of the Company (including the
payment by Executive of any applicable employee contributions and
premiums), in those benefit and insurance plans in which he is
currently participating and in such other plans as may be
established or adopted by the Company from time to time for
employees of the Company, to the extent that Executive is
otherwise eligible to participate under the general provisions
thereof and in accordance with Executive's elections thereunder,
as such plans and elections may be changed from time to time.
The benefits and insurance plans in which Executive currently
participates are listed on Exhibit A to this Agreement.
(e) Executive shall be reimbursed by the Company for,
or the Company shall pay directly, all reasonable business
expenses incurred by Executive in the course of his performance
of services hereunder, subject to approval by the President of
the Company or his designee and presentation of appropriate
documentation in accordance with the Company's expense
reimbursement policy in effect from time to time. The Company
agrees that reasonable business expenses include (i) Executive's
fixed charges for membership and reasonable business use of
Lehigh Country Club, and (ii) Executive's fixed charges and
reasonable business use of mobile and cellular telephone and home
office and mobile business devices. In connection with entering
into this Agreement, Executive shall be entitled to reimbursement
from the Company for reasonable fees and expenses for financial,
tax and estate planning services obtained by Executive, subject
to a maximum reimbursement of $7,500. Executive shall also be
entitled to reimbursement from the Company for reasonable legal
fees and expenses incurred by Executive in connection with
entering into this Agreement, subject to a maximum reimbursement
of $3,000.
(f) The parties agree that the Severance Agreement is
superseded in its entirety by this Agreement and is of no further
force or effect. Notwithstanding the provisions of subsection
(d) above, Executive hereby releases the Company, its
subsidiaries and affiliates, and the Partnerships from, and
waives any and all rights to, any severance or similar benefits
to which Executive may be entitled under the terms of any plan or
policy which is currently in effect or may hereafter be
established or adopted by the Company from time to time for
employees of the Company.
(g) Except as expressly set forth in this Section 1,
the Company has no other liabilities or obligations to Executive
to pay or provide Executive with any compensation, benefits or
other consideration as an employee of the Company. Executive
acknowledges and agrees that he shall not separately accrue or
earn any "Quarterly Awards" or any "Profit-Sharing Awards" under
the Glenmoor Bonus Plan (the "Glenmoor Bonus Plan") after
December 31, 1997. Any payments to which Executive may be
entitled as an owner of shares of common stock of Glenmoor shall
be governed by Section 17 hereof.
2. Consulting Services.
(a) Commencing on the Retirement Date and for a period
of 60 months thereafter (the "Transition Term") , the Company
shall engage Executive as a consultant to the Company to perform
such services as are requested by the Chairman or the President
from time to time, including, among other things, assuring an
orderly transition of Executive's responsibilities to other
officers of the Company.
(b) During the Transition Term, Executive shall
receive, as his total fee for consulting services hereunder (the
"Consulting Fee"), $200,000 per 12-month period for each of the
first two such 12-month periods, and $100,000 per 12-month period
for the each of third, fourth and fifth such 12-month periods.
The Consulting Fee for each 12-month period shall be payable
ratably in installments during such period, but not less
frequently than monthly. Executive shall devote such of his time
and business efforts to the performance of his consultancy under
this Section as shall reasonably be required to perform the
services requested hereunder, but in no event shall Executive be
required to render more than 500 hours of service during each of
the first two 12-month periods and 250 hours of service during
each of the third, fourth and fifth such 12-month periods. The
Company shall provide Executive reasonable notice of any request
for Executive's services, specifying the approximate dates of
performance, duration and scope. Executive may resign as a
consultant hereunder at any time upon 30 days' written notice and
the completion of all projects previously assigned to Executive,
whereupon no further Consulting Fees shall be payable hereunder.
(c) During the Transition Term and thereafter,
Executive shall be entitled to participate, on a basis comparable
to other retirees of the Company (including the payment by
Executive of any applicable retiree contributions and premiums),
in such benefit and insurance plans as may be established or
adopted by the Company from time to time for retirees of the
Company, to the extent Executive is otherwise eligible to
participate under the general provisions thereof and in
accordance with Executive's elections thereunder, as such plans
and elections may be changed from time to time.
(d) Executive shall be reimbursed by the Company for
all reasonable business expenses incurred by Executive in the
course of his performance of consulting services hereunder,
subject to approval by the President of the Company or his
designee and upon presentation of appropriate documentation in
accordance with the Company's expense reimbursement policy in
effect from time to time. During the Transition Term, Executive
shall also be reimbursed for the reasonable fees and expenses of
an annual physical examination, subject to a maximum of $750
annually.
(e) During the Transition Term, Executive shall be
entitled to pursue other business opportunities to the extent
that there is no conflict with the services requested by the
Chairman or President of the Company or with the requirements of
Sections 3 and 4 of this Agreement. All services to be performed
under this Agreement during the Transition Term shall be
performed by Executive as an independent contractor acting in a
consulting capacity and nothing contained herein shall be
construed so as to confer employment status on Executive during
the Transition Term.
3. Confidential Information. Executive acknowledges and
agrees that, by reason of his employment by and service to the
Company, he has had and will continue to have access to
confidential information of the Company, its subsidiaries and
affiliates, and the Partnerships, including, without limitation,
information and knowledge pertaining to products and services
offered, innovations, designs, ideas, plans, trade secrets,
proprietary information, distribution and sales methods and
systems, sales and profit figures, customer and client lists, and
relationships between the Company and its subsidiaries and
affiliates and other distributors, customers, clients, suppliers
and others who have business dealings with the Company and its
subsidiaries and affiliates and the Partnerships ("Confidential
Information"). Executive acknowledges that such Confidential
Information is a valuable and unique asset and covenants that he
will not, either during or after his employment by the Company,
disclose or use any such Confidential Information to or for the
benefit of any person for any reason whatsoever without the prior
written authorization of the Chairman or President of the
Company, unless such information is in the public domain through
no fault of Executive or except as may be required by law.
4. Non-Competition.
(a) At all times during his employment by the Company and
the Transition Term, and for a period of 12 months thereafter,
but in no event more than five years after the Retirement Date
(the "Restricted Period"), Executive shall not, unless acting
with the prior written consent of the Chairman or the President
of the Company, directly or indirectly, (i) own, manage, operate,
join, control, finance or participate in the ownership,
management, operation, control or financing of, (ii) be connected
as an officer, director, employee, partner, principal, agent,
representative, consultant or otherwise with, or (iii) use or
permit his name to be used in connection with, (A) any business
or enterprise engaged in by the Company, its subsidiaries or
affiliates, or the Partnerships, either during his employment by
the Company or the Transition Term, as applicable, in any state
in which such business or enterprise is so operated (whether or
not such business is physically located within those areas) (the
"Geographic Area"), or (B) any customer of the Company, its
subsidiaries or affiliates, or the Partnerships accounting for at
least five percent of the respective gross revenues of the
Company, such subsidiary, affiliate or Partnership during the
fiscal year preceding the date Executive first commences activity
with such customer. It is recognized by Executive that the
business of the Company, its subsidiaries and affiliates, and the
Partnerships, and Executive's connection therewith, involves
activity throughout the Geographic Area, and that more limited
geographical limitations on this non-competition covenant are
therefore not appropriate. The foregoing restrictions shall not
apply to (i) any activity in which Executive engages during the
Restricted Period which is not an active business of the Company,
its subsidiaries or affiliates, or the Partnerships at the time
Executive first commences such activity or (ii) to any Geographic
Area which is not a Geographic Area at the time Executive first
commences such activity.
(b) Executive also shall not, directly or indirectly,
during the Restricted Period, (i) solicit or divert business
from, or attempt to divert any account or customer of the
Company, its subsidiaries or affiliates, or the Partnerships,
whether existing at the date hereof or at any time through the
end of the Transition Term, to any competitor of the Company, its
subsidiaries and affiliates, or the Partnerships, or (ii) solicit
or attempt to hire any then employee of the Company, its
subsidiaries or affiliates, or the Partnerships who was at a
managerial or higher level.
(c) The foregoing restrictions shall not be construed to
prohibit the ownership by Executive of less than five percent
(5%) of any class of securities of any corporation or limited
partnership which is engaged in any of the foregoing businesses
having a class of securities registered pursuant to the Exchange
Act, provided that such ownership represents a passive investment
and that neither Executive nor any group of persons including
Executive in any way, either directly or indirectly, manages or
exercises control of any such corporation or limited partnership,
guarantees any of its financial obligations, otherwise takes part
in its business, other than exercising his rights as a
shareholder or limited partner, or seeks to do any of the
foregoing.
5. Consideration and Equitable Relief.
(a) In consideration of Executive's undertakings under
Sections 3 and 4, the Company shall pay to Executive, as soon as
practicable after the eighth day after Executive executes and
does not revoke a general release substantially in the form
attached to this Agreement as Exhibit B (the "Release"), the sum
of $532,313, by wire transfer of immediately available funds to a
bank account designated by Executive.
(b) Executive acknowledges and agrees that the restrictions
contained in Sections 3 and 4 hereof are reasonable and necessary
to protect the legitimate interests of the Company, its
subsidiaries and affiliates, and the Partnerships; that the
Company would not have entered into this Agreement in the absence
of such restrictions; and that any violation of any provision of
those Sections would result in irreparable injury to the Company.
Executive represents that his experience and capabilities are
such that the restrictions contained in Section 4 hereof will not
prevent Executive from obtaining satisfactory alternative
employment or consulting engagements.
(c) Executive agrees that the Company, its subsidiaries and
affiliates, and the Partnerships shall be entitled to preliminary
and permanent injunctive relief, without the necessity of proving
actual damages, as well as an equitable accounting of all
earnings, profits and other benefits arising from any violation
of Sections 3 or 4, which rights shall be cumulative and in
addition to any other rights or remedies to which the Company,
its subsidiaries and affiliates, or the Partnerships may be
entitled. In the event that any of the provisions of Sections 3
or 4 should ever be adjudicated to exceed the time, geographic,
service, or other limitations permitted by applicable law in any
jurisdiction, then such provisions shall be deemed reformed in
such jurisdiction to the maximum time, geographic, service, or
other limitations permitted by applicable law.
(d) Executive irrevocably and unconditionally (i) agrees
that any suit, action or other legal proceeding arising out of
Section 3 or 4, including, without limitation, any action
commenced by the Company, its subsidiaries and affiliates, or the
Partnerships for preliminary and permanent injunctive relief or
other equitable relief, may be brought in the United States
District Court for the Eastern District of Pennsylvania, or if
such court does not have or accept jurisdiction, in any court of
general jurisdiction in Delaware County, Pennsylvania, (ii)
consents to the non-exclusive jurisdiction of any such court in
any such suit, action or proceeding, and (iii) waives any
objection which Executive may have to the laying of venue of any
such suit, action or proceeding in any such court. Executive
also irrevocably and unconditionally consents to the service of
any process, pleadings, notices or other papers in a manner
permitted by the notice provisions of this Agreement
6. Death or Disability. The amounts payable to Executive
during his employment under Section 1 and during the Transition
Term under Section 2 shall be paid or provided to Executive (and,
if applicable, his spouse and dependents) irrespective of his
death or inability to perform his duties and responsibilities
under this Agreement by reason of illness, injury or incapacity
occurring after the date of this Agreement, provided that any non-
governmental disability insurance payments received by Executive
from policies paid for by the Company in respect of any period
between the date hereof and the expiration of the Transition Term
shall reduce the amount of payments otherwise required to be made
by the Company hereunder. In the event of Executive's death
prior to the Retirement Date, the Company shall calculate
Executive's benefit under the Company's Benefit Equalization Plan
(the "Equalization Plan"), (i) if the Executive is survived by
his spouse, as if Executive elected and received the lump sum
value under the Equalization Plan on the day prior to the date of
death, and (ii) if the Executive's death is prior to his 55th
birthday, as if the Executive had attained the age of 55 on the
day prior to his death but based on actual service to the Company
only through the date of death. In the event of Executive's
death at any time between the date hereof and the expiration of
the Transition Term, the Company shall pay to Executive's
executors, legal representatives or administrators, as
applicable, the remaining installments of salary, guaranteed
bonus, profit-sharing payments and Consulting Fees at the same
time or times that such payments would otherwise have been paid
to Executive under this Agreement.
7. Retirement Benefits.
(a) On the Retirement Date, provided that Executive (or, if
applicable, his spouse and dependents) executes and does not
revoke a Release dated the Retirement Date, Executive (or, if
applicable, his spouse and dependents) shall be entitled to the
Consulting Fees payable as provided in Section 2 above and all
compensation and benefits provided to retirees of the Company
generally or due to Executive specifically, but subject to the
terms and conditions of each plan, practice, policy and program
of the Company and Executive's elections thereunder from time to
time in effect.
(b) In the event of Executive's termination of employment
for any reason other than death prior to the Retirement Date,
Executive shall be treated as a retiree of the Company for
purposes of the Company's retiree medical and life insurance plan
and for purposes of the Equalization Plan as if Executive had
attained the age of 55 prior to the effective date of termination
but based on actual service to the Company only through the date
of termination. Under such circumstances, Executive shall be
entitled to commence his benefits upon actually attaining age 55
with the benefits calculated as aforesaid.
(c) Except for the reference in this Section and Section 6
hereof to the Equalization Plan, nothing in this Agreement is
intended to modify or amend Executive's rights or obligations
under the terms of any such plan, practice, policy or program.
8. Arbitration; Expenses. In the event of any dispute
regarding the provisions of this Agreement other than a dispute
in which the primary relief sought is an equitable remedy such as
an injunction, the parties shall be required to have the dispute,
controversy or claim settled by arbitration in the City of
Philadelphia, Pennsylvania, in accordance with the National Rules
for the Resolution of Employment Disputes then in effect of the
American Arbitration Association, before a panel of three
arbitrators, two of whom shall be selected by the Company and
Executive, respectively, and the third of whom shall be selected
by the other two arbitrators. Any award entered by the
arbitrators shall be final, binding and nonappealable and
judgment may be entered thereon by either party in accordance
with applicable law in any court of competent jurisdiction. This
arbitration provision shall be specifically enforceable. The
arbitrators shall have no authority to modify any provision of
this Agreement or to award a remedy for a dispute involving this
Agreement other than a benefit specifically provided under or by
virtue of the Agreement. If Executive prevails on any material
issue which is the subject of such arbitration or lawsuit, the
Company shall be responsible for all of the fees of the American
Arbitration Association and the arbitrators and any expenses
relating to the conduct of the arbitration (including reasonable
attorneys' fees and expenses). Otherwise, each party shall be
responsible for his or its own expenses relating to the conduct
of the arbitration (including reasonable attorneys' fees and
expenses) and shall share the fees of the American Arbitration
Association.
9. Notices. All notices and other communications required
or permitted under this Agreement or necessary or convenient in
connection herewith shall be in writing and shall be deemed to
have been given when hand delivered or mailed by registered or
certified mail, as follows (provided that notice of change of
address shall be deemed given only when received):
If to the Company, to:
Buckeye Management Company
5 Radnor Corporate Center
Suite 445
Radnor, PA 19087
Attention: Chairman
With a required copy to:
Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, PA 19103-6993
Attention: Howard L. Meyers, Esquire
If to Executive, to:
C. Richard Wilson
2876 Parkview Circle
Emmaus, PA 18049
With a required copy to:
Bildersee & Silbert LLP
One Penn Center, Suite 1111
1617 JFK Boulevard
Philadelphia, PA 19103
Attention: Marc M. Silbert, Esquire
or to such other names or addresses as the Company or Executive,
as the case may be, shall designate by notice to each other
person entitled to receive notices in the manner specified in
this Section.
10. Contents of Agreement; Amendment and Assignment.
(a) This Agreement supersedes all prior agreements,
including the Severance Agreement, and sets forth the entire
understanding between the parties hereto with respect to the
subject matter hereof and cannot be changed, modified, extended
or terminated except upon written amendment approved by the
Chairman or President of the Company and executed on its behalf
by a duly authorized officer and by Executive.
(b) All of the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be
enforceable by the respective heirs, executors, administrators,
legal representatives, successors and assigns (whether by equity
purchase, merger, consolidation, asset purchase or otherwise) of
the parties hereto, except that the duties and responsibilities
of Executive under this Agreement are of a personal nature and
shall not be assigned or delegated in whole or in part by
Executive.
11. Severability. If any provision of this Agreement or
application thereof to anyone or under any circumstances is
adjudicated to be invalid or unenforceable in any jurisdiction,
such invalidity or unenforceability shall not affect any other
provision or application of this Agreement which can be given
effect without the invalid or unenforceable provision or
application and shall not invalidate or render unenforceable such
provision or application in any other jurisdiction. If any
provision is held void, invalid or unenforceable with respect to
particular circumstances, it shall nevertheless remain in full
force and effect in all other circumstances.
12. Remedies Cumulative; No Waiver. No remedy conferred
upon a party by this Agreement is intended to be exclusive of any
other remedy, and each and every such remedy shall be cumulative
and shall be in addition to any other remedy given under this
Agreement or now or hereafter existing at law or in equity. No
delay or omission by a party in exercising any right, remedy or
power under this Agreement or existing at law or in equity shall
be construed as a waiver thereof, and any such right, remedy or
power may be exercised by such party from time to time and as
often as may be deemed expedient or necessary by such party in
its sole discretion.
13. Beneficiaries/References. Executive shall be entitled,
to the extent permitted under any applicable law, to select and
change a beneficiary or beneficiaries to receive any compensation
or benefit payable under this Agreement following Executive's
death by giving the Company written notice thereof. In the event
of Executive's death or a judicial determination of his
incompetence, reference in this Agreement to Executive shall be
deemed, where appropriate, to refer to his beneficiary, estate or
other legal representative.
14. Withholding; Taxes. The Company may withhold from any
payments made under this Agreement all federal, state and local
taxes and other amounts required by law to be withheld or
deducted and such other amounts as may be authorized by
Executive. Executive shall bear all expense of, and shall be
solely responsible for, all federal, state or local taxes due
with respect to any payment under this Agreement.
15. Miscellaneous. All section headings used in this
Agreement are for convenience only. This Agreement may be
executed in counterparts, each of which is an original. It shall
not be necessary in making proof of this Agreement or any
counterpart hereof to produce or account for any of the other
counterparts.
16. Governing Law. This Agreement shall be governed by and
interpreted under the laws of the Commonwealth of Pennsylvania
without giving effect to any conflict of laws provisions.
17. Glenmoor Stockholders' Agreement. Nothing in this
Agreement is intended to modify or amend Executive's rights or
obligations under the terms and conditions of the First Amended
and Restated Stockholders' Agreement, dated as September 1, 1997
(the "Stockholders' Agreement"), among Glenmoor and its
stockholders. Executive shall be entitled to receive dividends
and other distributions in respect of the shares of common stock
of Glenmoor as and when declared in accordance with the Glenmoor
Bonus Plan, so long as Executive retains ownership of such shares
in accordance with the Stockholders' Agreement. For each year
that Executive maintains his investment in the common stock of
Glenmoor, Executive shall be entitled to reimbursement from the
Company for reasonable fees and expenses for tax preparation
services on a basis comparable to the other "Management
Stockholders" of Glenmoor (as such term is defined in the
Stockholders' Agreement). Executive acknowledges and agrees that
under the terms of the Stockholders' Agreement his shares of
common stock of Glenmoor are subject to various put/call options
upon the occurrence of certain events and that for purposes of
Sections 2.1(a)(iii) and 2.2(a)(i) of the Stockholders' Agreement
his employment shall be deemed to be terminated effective on the
Retirement Date.
18. Unit Option and Distribution Equivalent Plan. For
purposes of Section 13(d) of the Unit Option and Distribution
Equivalent Plan, the Executive shall be deemed to have achieved
"Retirement" on his Retirement Date, and any outstanding
"Options" shall terminate on their respective "Expiration Dates".
19. Executive's Acknowledgment. Executive acknowledges and
represents that he has read and understands the terms and
conditions of this Agreement; that he has been informed by the
Company that he should discuss this Agreement with an attorney of
his choice; that he has had any questions regarding the meaning
of this Agreement answered to his satisfaction; that neither the
Company nor any of its agents, representatives or attorneys have
made any representations to Executive concerning the meaning or
effect of this Agreement other than those specifically set forth
herein; and that Executive has been represented by competent
counsel who has participated in the preparation and review of
this Agreement. Executive has been informed by the Company that
he has the right to consider this Agreement for a period of at
least 21 days and has the right to revoke this Agreement for a
period of seven days after his execution and delivery of this
Agreement by giving written notice thereof to the Company.
IN WITNESS WHEREOF, the undersigned, intending to be legally
bound, have duly executed this Agreement as of the date first
above written.
BUCKEYE MANAGEMENT
COMPANY
/S/ C. Richard Wilson By: /S/William H. Shea, Jr.
C. Richard Wilson Name: William H. Shea, Jr.
Title: President
/S/ B. J. Killeen BUCKEYE PIPE LINE SERVICES
Witness COMPANY
By: /S/ William H. Shea,Jr.
Name: William H. Shea, Jr.
Title: President
BUCKEYE PIPE LINE COMPANY
By: /S/ William H. Shea,Jr.
Name: William H. Shea, Jr.
Title: President
GLENMOOR, LTD.
By: /S/ William H. Shea,Jr.
Name: William H. Shea, Jr.
Title: President
<PAGE>
EXHIBIT A
BUCKEYE PIPE LINE SERVICES COMPANY
PLANS AND POLICIES
Plans
The Retirement and Savings Plan
The Retirement Income Guarantee Plan
Employee Stock Ownership Plan
The Flexible Benefit Plan (includes)
- Medical
- Dental
- Core Life Insurance
- Medical Spending
- Dependent Care Spending Accounts
- Vacation Trade-in
The Long-term Disability Plan
Unit Option and Distribution Equivalent Plan
Benefit Equalization Plan
Policies
Vacation Time
Holiday Time
Sick Time Off
Personal Time Off
Reimbursement of Business and Travel Expense
Service Awards
Employee Assistance Program
Death Benefit
<PAGE>
EXHIBIT B
GENERAL RELEASE
WHEREAS, C. Richard Wilson has been employed by or has
served as an officer or director of Buckeye Management Company, a
Delaware corporation ("BMC"), Buckeye Pipe Line Company, a
Delaware corporation ("Pipe Line"), Buckeye Pipe Line Services
Company, a Pennsylvania corporation ("BPLSC"), and Glenmoor,
Ltd., a Delaware corporation formerly known as BMC Acquisition
Company ("Glenmoor") (BMC, Pipe Line, BPLSC and Glenmoor are
collectively referred to as the "Company"); and
WHEREAS, the Company has been engaged in the business of
managing the oil pipeline and related businesses of Buckeye
Partners, L.P., a Delaware limited partnership, and its
subsidiary operating partnerships (collectively, the
"Partnerships"); and
WHEREAS, the Company and Executive are contemporaneously
herewith entering into a Transition and Retirement Agreement,
dated as of May ____, 1998 (the "Transition Agreement"), pursuant
to which the Company and Executive provide for the continuation
of Executive's employment to and including February 1, 2000 (the
"Retirement Date"), Executive's retirement on the Retirement
Date, and a consultancy period of five years thereafter during
which Executive agrees to consult with and advise the Company on
the terms and conditions set forth in the Transition Agreement,
all of which are acceptable to Executive.
NOW, THEREFORE, in consideration of the undertakings of the
Company set forth in the Transition Agreement, and intending to
be legally bound,
1. Executive does hereby permanently and irrevocably
REMISE, RELEASE AND FOREVER DISCHARGE the Company and the
Partnerships, and its and their respective officers, directors,
shareholders, partners, employees, agents and attorneys and its
and their respective successors and assigns, heirs, executors and
administrators (hereinafter referred collectively as the
"Released Parties") of and from any and all actions and causes of
action, suits, debts, claims and demands whatsoever in law or in
equity which Executive ever had, now has or which his heirs,
executors or administrators may have, by reason of any matter,
cause or thing whatsoever from the beginning of Executive's
employment with the Company to the date of this General Release,
including, without limitation, any claims arising from or
relating in any manner to Executive's employment relationship
with the Company or the termination thereof in accordance with
the terms and conditions of the Transition Agreement. This
General Release includes, without limitation, any claims which
Executive could now or in the future assert under any federal,
state or local law, rule or regulation, including the
Pennsylvania Human Relations Act, Title VII of the Civil Rights
Act of 1964, the Age Discrimination in Employment Act, any common
law claims now or hereafter recognized, and all claims for
counsel fees and costs associated with any such claims. This
Release (a) shall not prevent Executive from enforcing his rights
under the Transition Agreement in accordance with the terms
thereof, (b) shall have no applicability to Company's obligations
under the Stockholders' Agreement (as defined in Section 17 of
the Transition Agreement), the Unit Option and Distribution
Equivalent Plan or benefits payable under the terms of any
"employee benefit plan" within the meaning of the Employee
Retirement Income Security Act of 1974, as amended, and (c) shall
not release the Company from any obligation the Company might
otherwise have to indemnify Executive and hold him harmless from
any claims made against him arising out of his activities as a
partner, shareholder, officer, director or employee of Company,
to the same extent as Company is or may be obligated to indemnify
and hold harmless any other partner, shareholder, officer,
director or employee.
2. Executive acknowledges and agrees that neither he, nor
any person, organization or other entity on his behalf, shall
file, charge, claim, sue or cause or permit to be filed, charged
or claimed any civil action, suit or legal or arbitration
proceeding for personal relief, including, without limitation,
any action for damages, injunctive, declaratory or other relief,
against the Company or the Partnerships involving any matter
occurring at any time in the past up to the date of this General
Release or involving any continuing effects of any acts or
practices which may have arisen or occurred prior to the date of
this General Release. Executive further agrees that if any
person, organization or other entity should bring any claim
against the Released Parties involving any such matter, Executive
will not accept any personal relief in any such actions.
3. Executive acknowledges and agrees that the Transition
Agreement is not and shall not be construed to be an admission by
the Company or the Partnerships of any violation of any federal,
state or local law, rule or regulation, or an acknowledgment of
any duty of the Company or the Partnerships to Executive, and
that the Transition Agreement is entered into voluntarily to
provide for an amicable conclusion of Executive's employment
relationship with the Company and an orderly transition to
retirement.
4. Executive hereby certifies that he has the intention of
releasing all claims recited herein in exchange for the
consideration set forth in the Transition Agreement, which he
acknowledges is adequate and satisfactory to him.
5. Executive acknowledges and represents that he has read
and understands the terms and conditions of this General Release;
that he has been informed by the Company that he should discuss
this General Release with an attorney of his choice; that he has
had any questions regarding the meaning of this General Release
answered to his satisfaction; that neither the Company nor any of
its agents, representatives or attorneys have made any
representations to Executive concerning the meaning or effect of
this General Release other than those specifically set forth
herein; and that Executive has been represented by competent
counsel who has participated in the preparation and review of
this General Release. Executive has been informed by the Company
that he has the right to consider this General Release for a
period of at least 21 days and has the right to revoke this
General Release for a period of seven days after his execution
and delivery of this General Release by giving written notice
thereof to the Company.
IN WITNESS WHEREOF, and intending to be legally bound
hereby, C. Richard Wilson has duly executed this General Release
this ___________ day of May, 1998.
_____________________________
C. Richard Wilson
_____________________________
Witness
FIRST AMENDMENT OF THE
BUCKEYE PARTNERS, L.P.
Unit Option And Distribution Equivalent Plan
This First Amendment of the Buckeye Partners, L.P. Unit
Option And Distribution Equivalent Plan is adopted by Buckeye
Partners, L.P. (the "Partnership").
Background
A. The Partnership adopted the Buckeye Partners, L.P. Unit
Option And Distribution Equivalent Plan ("Plan"), effective April
25, 1991.
B. The Partnership now wishes to amend the Plan.
Amendment
Effective as to Options granted under the Plan on or after
July 14, 1998, the Plan is amended as follows:
1. Section 5 is amended to read as follows:
The persons who shall be eligible to receive
Options pursuant to the Plan shall be such officers and
key employees of the Partnership, the General Partner,
or any Subsidiary who can make a meaningful
contribution to the Partnership's success, as
determined by the Committee from time to time.
Effective July 14, 1998, the following individuals
shall not be eligible to receive further grants of
Options under the Plan, nor shall they receive material
increases in benefits with respect to previously
granted Options as a result of Plan amendments that
become effective that date: (1) a member of the Board
of Directors; (2) an officer of the General Partner; or
(3) a person determined by resolution to be an
"insider" of the Partnership, General Partner or any
Subsidiary.
2. Section 6(c) is amended to read as follows:
(c) Terms and Conditions of Options. Each Option
granted pursuant to the Plan shall be evidenced by an
Option Agreement between the Partnership and the
Optionee in such form or forms as the Committee, from
time to time, shall prescribe, which agreements need
not be identical to each other but shall comply, inter
alia, with and be subject to the terms and conditions
of this Section 6(c). In addition, the Committee may,
in its absolute discretion, include in any Option
Agreement other terms, conditions and provisions that
are not inconsistent with the express provisions of the
Plan.
(i) Option Price. The price at which each
Unit may be purchased pursuant to an Option
granted under the Plan shall be not less than 100%
of the higher of the "fair market value" for each
such Unit (A) on the date the Committee approves
the grant of such Option (the "Date of Grant"), or
(B) on a future date if such is fixed on the Date
of Grant by the Committee. The "fair market
value" of the Units on any date shall be the mean
between the high and the low prices of the Units
on such date on the New York Stock Exchange (or
the principal market in which the Units are
traded, if the Units are not listed on that
Exchange on such date), or if the Units were not
traded on such date, the mean between the high and
the low prices of the Units on the next preceding
trading day during which the Units were traded.
Anything contained in this subsection (i) to the
contrary notwithstanding, in the event that the
number of Units subject to any Option is adjusted
pursuant to 4(b) or 8(b) hereof, a corresponding
adjustment shall be made in the price at which the
Units subject to such Option may be purchased
thereafter.
(ii) Duration of Options. An Option (or
portion thereof) granted under the Plan shall
expire and all rights to purchase Units pursuant
to the Option (or portion thereof) shall cease at
the end of the day which is seven years following
the date such Option (or portion thereof) became
exercisable for the first time, or such lesser
period as may be prescribed by the Committee and
specified in the Option Agreement (the "Expiration
Date").
(iii) Vesting of Options. The Units
subject to each Option granted hereunder may only
be purchased to the extent that the Optionee is
vested in such Option. An Optionee shall vest
separately in each Option granted hereunder in
accordance with a schedule determined by the
Committee in its sole discretion, which will be
appended to the Option Agreement. In the absence
of any special circumstances, including the
circumstances described in Sections 8 and 13 of
the Plan or the terms of any vesting schedule
contained in any Option Agreement which differ
from the schedule below, the Committee will cause
the Options to vest in accordance with the
following schedule:
Number of
anniversaries the
Optionee has
remained in the
employ of the Extent to which the
Partnership, the Option is vested
General Partner or
any Subsidiary
following the Date
of the Grant
Under three 0%
Three or more 100%
At the time an Option (or portion thereof) becomes vested in
accordance with the foregoing schedule, the Option (or such
portion) shall remain exercisable for a period of seven (7)
years following the date the Option (or such portion) became
vested. Anything contained in this subsection (iii) to the
contrary notwithstanding, an Optionee shall become fully
(100%) vested in each of his or her Options upon (A) his or
her termination of employment with the Partnership, the
General Partner or a Subsidiary for reasons of death,
Disability or Retirement (as such terms are defined in
Section 13); (B) his or her termination of employment by the
Partnership, the General Partner or a Subsidiary within one
year after the merger of the Partnership into, consolidation
of the Partnership with, or sale or transfer of all or
substantially all the Partnership's assets to, another
entity, or within one year after the acquisition of
effective voting control of the Partnership by any
individual or entity or by any individuals or entities
acting in concert (a good faith determination by the
Committee that such control has been acquired shall be final
and conclusive), in any such case for a reason other than
discharge for cause; (C) a determination by the Committee in
its sole discretion that acceleration of the Option vesting
schedule would be desirable for the Partnership; or (D) such
Options becoming vested pursuant to Section 8 of the Plan.
(iv) Unit Retention Requirement. The Committee may
require, as a term of an Option Agreement, that the Optionee
accumulate and retain a minimum number of Units, as
specified by the Committee in its discretion ("Unit
Retention Requirement"). The Committee shall permit an
Optionee to satisfy the Unit Retention Requirement over a
prescribed period of at least five years. An Optionee who
fails to comply with the Unit Retention Requirement after
expiration of the prescribed period shall not be eligible to
receive further grants of Options under the Plan.
3. Section 6(d) is amended to read as follows:
(d) Purchase of Units Pursuant to Options. An
Optionee may purchase Units subject to the vested
portion of an Option in whole at any time, or in part
from time to time, by delivering to the Secretary of
the General Partner written notice specifying the
number of Units with respect to which the Option is
being exercised, together with payment in full of the
purchase price of such Units plus any applicable
federal, state or local taxes for which the
Partnership, the General Partner or any Subsidiary has
a withholding obligation in connection with such
purchase. Such payment shall be payable to the
Partnership in full (i) in cash, (ii) with the proceeds
of a promissory note payable by the Optionee to the
General Partner, but only in accordance with the
provisions of, and from a person otherwise eligible
under, the Loan Program, or any successor program as in
effect from time to time, (A) in a principal amount of
up to 95% of the payment due upon the purchase of Units
subject to the Option, or such applicable lower
percentage as may be specified by the Committee
pursuant to the Loan Program, and (B) bearing interest
at a rate not less than the applicable federal rate
prescribed by Section 1274 of the Code, or any
successor provision, or such higher rate as may be
specified by the Committee pursuant to the Loan
Program, and (iii) through any combination of (i) and
(ii) above. During the lifetime of the Optionee, the
Option shall be exercised only by the Optionee and
shall not be assignable or transferable by the Optionee
other than (1) by will, (2) by the laws of descent and
distribution, (3) pursuant to the terms of the Plan, or
(4) pursuant to the terms of a qualified domestic
relations order.
4. Section 7(a) is amended to read as follows:
(a) Distribution Equivalents. The Committee may
grant, in its discretion and subject to such
conditions, if any, as it shall determine, certain
Options with a feature which would allow Optionees to
accumulate accrued credit balances as adjusted in
subsection (c) (the "Distribution Equivalents"). Only
those Options which have been specifically awarded with
Distribution Equivalents, as evidenced by the terms of
the Option Agreement relating to such Option, shall be
deemed to have the Distribution Equivalent feature.
The Partnership shall maintain records with respect to
each Option granted to an Optionee with Distribution
Equivalents, calculated in accordance with subsection
(b) (the "Distribution Equivalent Account").
5. Section 7(c) is amended to read as follows:
(c) Use of Distribution Equivalents. As a term of
an Option Agreement, the Committee may condition the
Optionee's receipt of the Distribution Equivalent
Account value upon the achievement of such corporate
performance goals as the Committee may establish in its
discretion. At the end of the period described in
subsection (b), the Committee shall (i) adjust the
accumulated Distribution Equivalents to reflect the
achievement of such performance goals and (ii)
distribute to each Optionee any Distribution
Equivalents, as adjusted, in cash.
6. Section 8(a) is amended to read as follows:
(a) Extraordinary Transaction. In the event one
or more of the following transactions (an
"Extraordinary Transaction"):
(1) the Unitholders approve a merger or
consolidation of the Partnership with any other
entity, other than a merger or consolidation which
would result in the Unitholders retaining at least
75% of the total equity interest of the surviving
entity, as represented by the percentage of Units
or equity securities of the Partnership or such
surviving entity held by the Unitholders
immediately after such merger or consolidation;
(2) a plan of complete dissolution of the
Partnership is adopted or the Unitholders approve
an agreement for the sale or disposition by the
Partnership (in one transaction or a series of
transactions) of all or substantially all the
Partnership's assets; or
(3) The General Partner is removed,
then (i) each Option at the time outstanding under the
Plan and not then otherwise fully exercisable shall,
during the ten (10) business day period immediately
prior to the specified effective date for the
Extraordinary Transaction, become fully exercisable for
up to the total number of Units purchasable or issuable
thereunder and may be exercised for all or any portion
of the Units for which the Option is so accelerated,
(ii) all Units issuable upon the exercise of Options
under this Section 8(a) of the Plan shall be delivered
to the Optionee immediately prior to the specified
effective date for the Extraordinary Transaction, and
(iii) all accumulated Distribution Equivalents, without
adjustment pursuant to Section 7(c), shall be paid to
the Optionee in cash. Notwithstanding the foregoing,
if the Extraordinary Transaction is abandoned, (A) any
Units not purchased upon exercise of such Option shall
continue to be available for purchase in accordance
with the other provisions of the Plan, and (B) to the
extent that any Option not exercised prior to such
amendment shall have vested solely by operation of this
Section 8, such vesting shall be deemed annulled, and
the vesting schedule set forth in Section 6(c), or in
the Option Agreement if different from the vesting
schedule in Section 6(c), shall be reinstituted as of
the date of such abandonment.
In no event shall any such acceleration in
connection with an Extraordinary Transaction occur if
the terms of the agreement governing the Extraordinary
Transaction require, as a condition to consummation,
that the outstanding Options shall either be assumed by
the successor entity, or its Affiliate, or be replaced
with a comparable option or right to purchase or
receive securities of the successor entity or
Affiliate. The determination of such comparability
shall be made by the Committee, and its determination
shall be final, binding and conclusive. Upon
consummation of an Extraordinary Transaction, all
outstanding Options under the Plan shall, to the extent
not previously exercised or assumed by the successor
entity or its Affiliate, terminate.
Notwithstanding the above, in the event of any
Extraordinary Transaction, the Committee shall have the
discretion to cancel outstanding Options in whole or in
part, subject to such conditions as the Committee may
determine, upon payment to Optionees with respect to
each Option then exercisable an amount in cash equal to
the difference between (i) the fair market value (at
the effective date of such Extraordinary Transaction)
of the consideration the Optionee would have received
in the Extraordinary Transaction if the Option had been
exercised immediately prior to the effective date of
such Extraordinary Transaction and (ii) the aggregate
exercise price of such Option.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 7,195
<SECURITIES> 0
<RECEIVABLES> 9,756
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0
0
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</TABLE>
