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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
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
(IRS EMPLOYER
(STATE OR OTHER JURISDICTION OF IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION)
5 RADNOR CORPORATE CENTER
100 MATSONFORD ROAD
RADNOR, PENNSYLVANIA 19087
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (610) 770-4000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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LP Units representing limited
partnership interests.................. New York Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
(TITLE OF CLASS)
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
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 [_]
At March 10, 1998, the aggregate market value of the registrant's LP Units
held by non-affiliates was $698 million. The calculation of such market value
should not be construed as an admission or conclusion by the registrant that
any person is in fact an affiliate of the registrant.
LP Units outstanding as of March 10, 1998: 26,735,506
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TABLE OF CONTENTS
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PART I
ITEM 1. BUSINESS...................................................... 1
ITEM 2. PROPERTIES.................................................... 10
ITEM 3. LEGAL PROCEEDINGS............................................. 10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........... 12
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S LP UNITS AND RELATED UNITHOLDER
MATTERS...................................................... 12
ITEM 6. SELECTED FINANCIAL DATA ...................................... 13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.................................... 13
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................... 20
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE..................................... 43
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT............ 43
ITEM 11. EXECUTIVE COMPENSATION ....................................... 46
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................... 47
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................ 47
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K.......................................................... 51
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PART I
ITEM 1. BUSINESS
INTRODUCTION
Buckeye Partners, L.P. (the "Partnership"), the Registrant, is a limited
partnership organized in 1986 under the laws of the state of Delaware.
The Partnership conducts all its operations through subsidiary entities.
These operating subsidiaries are Buckeye Pipe Line Company, L.P. ("Buckeye"),
Laurel Pipe Line Company, L.P. ("Laurel"), Everglades Pipe Line Company, L.P.
("Everglades") and Buckeye Tank Terminals Company, L.P. ("BTT"). (Each of
Buckeye, Laurel, Everglades and BTT is referred to as an "Operating
Partnership" and collectively as the "Operating Partnerships"). The
Partnership owns approximately a 99 percent interest in each of the Operating
Partnerships.
Buckeye is one of the largest independent pipeline common carriers of
refined petroleum products in the United States, with 3,103 miles of pipeline
serving 9 states. Laurel owns a 345-mile common carrier refined products
pipeline located principally in Pennsylvania. Everglades owns 37 miles of
refined petroleum products pipeline in Florida. Buckeye, Laurel and Everglades
conduct the Partnership's refined products pipeline business. BTT provides
bulk storage service through leased facilities with an aggregate capacity of
257,000 barrels of refined petroleum products.
The Partnership acquired its interests in the Operating Partnerships from
The Penn Central Corporation, now American Financial Group, Inc. ("American
Financial"), on December 23, 1986 (the "1986 Acquisition"). The Operating
Partnerships (other than Laurel) had been organized by American Financial for
purposes of the 1986 Acquisition and succeeded to the operations of
predecessor companies owned by American Financial, including Buckeye Pipe Line
Company, an Ohio corporation, and its subsidiaries ("Pipe Line"), in November
1986. Laurel was formed in October 1992 and succeeded to the operations of
Laurel Pipe Line Company, an Ohio corporation, which was a majority owned
corporate subsidiary of the Partnership until the minority interest was
acquired in December 1991.
Buckeye Management Company (the "General Partner"), a Delaware corporation
organized in 1986, owns approximately a 1 percent general partnership interest
in, and serves as sole general partner of, the Partnership. A corporate
subsidiary of the General Partner, Buckeye Pipe Line Company, a Delaware
corporation (the "Manager"), owns a 1 percent general partnership interest in,
and serves as sole general partner and manager of, each Operating Partnership.
During March 1996, BMC Acquisition Company ("BAC"), a Delaware corporation
organized in 1996, acquired all of the common stock of the General Partner for
$63 million in cash from a subsidiary of American Financial (the
"Acquisition"). BAC, which subsequently changed its name to Glenmoor, Ltd.
("Glenmoor"), is owned by certain directors and members of senior management
of the General Partner or trusts for the benefit of their families and certain
director-level employees of Buckeye Pipe Line Services Company, a Pennsylvania
corporation ("Services Company"). Glenmoor currently provides management
services to the General Partner, the Manager and Services Company. See
"Certain Relationships and Related Transactions."
On August 12, 1997, as part of a restructuring (the "ESOP Restructuring") of
the BMC Acquisition Company Employee Stock Ownership Plan (the "ESOP"), all of
the Manager's employees were transferred to Services Company, which is wholly
owned by the ESOP. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Employee Stock Ownership Plan." Services
Company also entered into a Services Agreement with the General Partner and
the Manager to provide services to the Partnership and the Operating
Partnerships for a 13.5 year term. Services Company is reimbursed by the
General Partner or the Manager for its direct and indirect expenses. The
General Partner and the Manager are in turn reimbursed by the Partnership
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and the Operating Partnerships for such expenses other than certain executive
compensation and fringe benefit costs. See "Certain Relationships and Related
Transactions."
REFINED PRODUCTS BUSINESS
The Partnership receives petroleum products from refineries, connecting
pipelines and marine terminals, and transports those products to other
locations. In 1997, refined petroleum products accounted for substantially all
of the Partnership's consolidated revenues and consolidated operating income.
The Partnership transported an average of approximately 1,024,000 barrels
per day of refined products in 1997. The following table shows the volume and
percentage of refined petroleum products transported over the last three
years.
VOLUME AND PERCENTAGE OF REFINED PETROLEUM PRODUCTS TRANSPORTED(1)
(VOLUME IN THOUSANDS OF BARRELS PER DAY)
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YEAR ENDED DECEMBER 31,
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1997 1996 1995
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VOLUME PERCENT VOLUME PERCENT VOLUME PERCENT
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Gasoline........................ 507.8 50% 497.9 49% 507.1 50%
Jet Fuels....................... 255.4 25 244.5 24 243.9 24
Middle Distillates(2)........... 238.8 23 238.7 24 235.2 24
Other Products.................. 22.0 2 26.0 3 23.6 2
------- --- ------- --- ------- ---
Total........................... 1,024.0 100% 1,007.1 100% 1,009.8 100%
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(1) Excludes local product transfers.
(2) Includes diesel fuel, heating oil, kerosene and other middle distillates.
The Partnership provides service in the following states: Pennsylvania, New
York, New Jersey, Indiana, Ohio, Michigan, Illinois, Connecticut,
Massachusetts and Florida.
Pennsylvania--New York--New Jersey
Buckeye serves major population centers in the states of Pennsylvania, New
York and New Jersey through 1,003 miles of pipeline. Refined petroleum
products are received at Linden, New Jersey. Products are then transported
through two lines from Linden, New Jersey to Allentown, Pennsylvania. From
Allentown, the pipeline continues west, through a connection with Laurel, to
Pittsburgh, Pennsylvania (serving Reading, Harrisburg, Altoona/Johnstown and
Pittsburgh) and north through eastern Pennsylvania into New York (serving
Scranton/Wilkes-Barre, Binghamton, Syracuse, Utica and Rochester and, via a
connecting carrier, Buffalo). Products received at Linden, New Jersey are also
transported through one line to Newark International Airport and through two
additional lines to J. F. Kennedy International and LaGuardia airports and to
commercial bulk terminals at Long Island City and Inwood, New York. These
pipelines presently supply J. F. Kennedy, LaGuardia and Newark airports with
substantially all of each airport's turbine fuel requirements.
Laurel transports refined petroleum products through a 345-mile pipeline
extending westward from five refineries in the Philadelphia area to
Pittsburgh, Pennsylvania.
Indiana--Ohio--Michigan--Illinois
Buckeye transports refined petroleum products through 1,989 miles of
pipeline (of which 246 miles are jointly owned with other pipeline companies)
in southern Illinois, central Indiana, eastern Michigan, western and northern
Ohio and western Pennsylvania. A number of receiving lines and delivery lines
connect to a central corridor which runs from Lima, Ohio, through Toledo, Ohio
to Detroit, Michigan. Products are received at East Chicago, Indiana;
Robinson, Illinois and at the
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refinery and other pipeline connection points near Detroit, Toledo and Lima.
Major market areas served include Huntington/Fort Wayne, Indiana; Bay City,
Detroit and Flint, Michigan; Cleveland, Columbus, Lima and Toledo, Ohio; and
Pittsburgh, Pennsylvania.
Other Refined Products Pipelines
Buckeye serves Connecticut and Massachusetts through 111 miles of pipeline
that carry refined products from New Haven, Connecticut to Hartford,
Connecticut and Springfield, Massachusetts.
Everglades carries primarily turbine fuel on a 37-mile pipeline from Port
Everglades, Florida to Hollywood-Ft. Lauderdale International Airport and
Miami International Airport.
OTHER BUSINESS ACTIVITIES
BTT provides bulk storage services through leased facilities located in
Pittsburgh, Pennsylvania which have the capacity to store up to an aggregate
of approximately 257,000 barrels of refined petroleum products. This facility,
which is served by Buckeye and Laurel, provides bulk storage and loading
facilities for shippers or other customers.
COMPETITION AND OTHER BUSINESS CONSIDERATIONS
The Operating Partnerships do business without the benefit of exclusive
franchises from government entities. In addition, the Operating Partnerships
generally operate as common carriers, providing transportation services at
posted tariffs and without long-term contracts. The Operating Partnerships do
not own the products they transport. Demand for the service provided by the
Operating Partnerships derives from demand for petroleum products in the
regions served and the ability and willingness of refiners, marketers and end-
users to supply such demand by deliveries through the Operating Partnerships'
pipelines. Demand for refined petroleum products is primarily a function of
price, prevailing general economic conditions and weather. The Operating
Partnerships' businesses are, therefore, subject to a variety of factors
partially or entirely beyond their control. Multiple sources of pipeline entry
and multiple points of delivery, however, have historically helped maintain
stable total volumes even when volumes at particular source or destination
points have changed.
The Partnership's business may in the future be affected by changing oil
prices or other factors affecting demand for oil and other fuels. The
Partnership's business may also be affected by energy conservation, changing
sources of supply, structural changes in the oil industry and new energy
technologies. The General Partner is unable to predict the effect of such
factors.
A substantial portion of the refined petroleum products transported by the
Partnership's pipelines are ultimately used as fuel for motor vehicles and
aircraft. Changes in transportation and travel patterns in the areas served by
the Partnership's pipelines could adversely affect the Partnership's results
of operations and financial condition.
In 1997, the Operating Partnerships had approximately 103 customers, most of
which were either major integrated oil companies or large refined product
marketing companies. The largest two customers accounted for 9.1 percent and
7.0 percent, respectively, of consolidated revenues, while the 20 largest
customers accounted for 76.1 percent of consolidated revenues.
Generally, pipelines are the lowest cost method for long-haul overland
movement of refined petroleum products. Therefore, the Operating Partnerships'
most significant competitors for large volume shipments are other pipelines,
many of which are owned and operated by major integrated oil companies.
Although it is unlikely that a pipeline system comparable in size and scope to
the Operating Partnerships' pipeline system will be built in the foreseeable
future, new pipelines (including pipeline
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segments that connect with existing pipeline systems) could be built to
effectively compete with the Operating Partnerships in particular locations.
The Operating Partnerships compete with marine transportation in some areas.
Tankers and barges on the Great Lakes account for some of the volume to
certain Michigan, Ohio and upstate New York locations during the approximately
eight non-winter months of the year. Barges are presently a competitive factor
for deliveries to the New York City area, the Pittsburgh area, Connecticut and
Ohio.
Trucks competitively deliver product in a number of areas served by the
Operating Partnerships. While their costs may not be competitive for longer
hauls or large volume shipments, trucks compete effectively for incremental
and marginal volumes in many areas served by the Operating Partnerships. The
availability of truck transportation places a significant competitive
constraint on the ability of the Operating Partnerships to increase their
tariff rates.
Privately arranged exchanges of product between marketers in different
locations are an increasing but unquantified form of competition. Generally,
such exchanges reduce both parties' costs by eliminating or reducing
transportation charges.
Distribution of refined petroleum products depends to a large extent upon
the location and capacity of refineries. In recent years, domestic refining
capacity has both increased and decreased as a result of refinery expansions
and shutdowns. Because the Partnership's business is largely driven by the
consumption of fuel in its delivery areas and the Operating Partnerships'
pipelines have numerous source points, the General Partner does not believe
that the expansion or shutdown of any particular refinery would have a
material effect on the business of the Partnership. However, the General
Partner is unable to determine whether additional expansions or shutdowns will
occur or what their specific effect would be. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Results of
Operations--Competition and Other Business Conditions."
The Operating Partnerships' mix of products transported tends to vary
seasonally. Declines in demand for heating oil during the summer months are,
to a certain extent, offset by increased demand for gasoline and jet fuels.
Overall, operations have been only moderately seasonal, with somewhat lower
than average volume being transported during March, April and May as compared
to the rest of the year.
Neither the Partnership nor any of the Operating Partnerships have any
employees. All of the operations of the Operating Partnerships are managed and
operated by employees of Services Company. In addition, Glenmoor provides
certain management services to the General Partner, the Manager and Services
Company. At December 31, 1997, Services Company had a total of 543 full-time
employees, 157 of whom were represented by two labor unions. The Operating
Partnerships (and their predecessors) have never experienced any significant
work stoppages or other significant labor problems.
CAPITAL EXPENDITURES
The General Partner anticipates that the Partnership will continue to make
ongoing capital expenditures to maintain and enhance its assets and
properties, including improvements to meet customers' needs and those required
to satisfy new environmental and safety standards. In 1997, total capital
expenditures were $19.8 million. Projected capital expenditures for 1998
amount to approximately $20.6 million and are expected to be funded from cash
generated by operations. Planned capital expenditures in 1998 include, among
other things, installation of transmix tanks, renewal and replacement of
several tank roofs and seals, upgrades to field instrumentation and cathodic
protection systems, installation and replacement of mainline pipe and valves,
facility automation and various improvements that facilitate increased
pipeline volumes. Capital expenditures are expected to
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remain approximately at this level for the next few years as a result of the
General Partner's plan to automate certain facilities in order to more
effectively control operating costs. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources--Capital Expenditures."
REGULATION
General
Buckeye is an interstate common carrier subject to the regulatory
jurisdiction of the Federal Energy Regulatory Commission ("FERC") under the
Interstate Commerce Act and the Department of Energy Organization Act. FERC
regulation requires that interstate oil pipeline rates be posted publicly and
that these rates be "just and reasonable" and non-discriminatory. FERC
regulation also enforces common carrier obligations and specifies a uniform
system of accounts. In addition, Buckeye, and the other Operating
Partnerships, are subject to the jurisdiction of certain other federal
agencies with respect to environmental and pipeline safety matters.
The Operating Partnerships are also subject to the jurisdiction of various
state and local agencies, including, in some states, public utility
commissions which have jurisdiction over, among other things, intrastate
tariffs, the issuance of debt and equity securities, transfers of assets and
pipeline safety.
FERC Rate Regulation
Buckeye's rates are governed by a market-based rate regulation program
initially approved by FERC in March 1991 for three years and subsequently
extended. Under this program, in markets where Buckeye does not have
significant market power, individual rate increases: (a) will not exceed a
real (i.e., exclusive of inflation) increase of 15 percent over any two-year
period (the "rate cap"), and (b) will be allowed to become effective without
suspension or investigation if they do not exceed a "trigger" equal to the
change in the GDP implicit price deflator since the date on which the
individual rate was last increased, plus 2 percent. Individual rate decreases
will be presumptively valid upon a showing that the proposed rate exceeds
marginal costs. In markets where Buckeye was found to have significant market
power and in certain markets where no market power finding was made: (i)
individual rate increases cannot exceed the volume weighted average rate
increase in markets where Buckeye does not have significant market power since
the date on which the individual rate was last increased, and (ii) any volume
weighted average rate decrease in markets where Buckeye does not have
significant market power must be accompanied by a corresponding decrease in
all of Buckeye's rates in markets where it does have significant market power.
Shippers retain the right to file complaints or protests following notice of a
rate increase, but are required to show that the proposed rates violate or
have not been adequately justified under the market-based rate regulation
program, that the proposed rates are unduly discriminatory, or that Buckeye
has acquired significant market power in markets previously found to be
competitive.
The Buckeye program is an exception to the generic oil pipeline regulations
issued under the Energy Policy Act of 1992. The generic rules rely primarily
on an index methodology, whereby a pipeline would be allowed to change its
rates in accordance with an index that FERC believes reflects cost changes
appropriate for application to pipeline rates. In the alternative, a pipeline
is allowed to charge market-based rates if the pipeline establishes that it
does not possess significant market power in a particular market. In addition,
the rules provide for the rights of both pipelines and shippers to demonstrate
that the index should not apply to an individual pipeline's rates in light of
the pipeline's costs. The final rules became effective on January 1, 1995.
The Buckeye program will be subject to reevaluation at the same time FERC
reviews the index selected in the generic oil pipeline regulations,
anticipated to occur by July 2000.
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At this time, the General Partner cannot predict the impact, if any, that a
change to Buckeye's rate program would have on Buckeye's operations.
Independent of regulatory considerations, it is expected that tariff rates
will continue to be constrained by competition and other market factors.
Environmental Matters
The Operating Partnerships are subject to federal and state laws and
regulations relating to the protection of the environment. Although the
General Partner believes that the operations of the Operating Partnerships
comply in all material respects with applicable environmental regulations,
risks of substantial liabilities are inherent in pipeline operations, and
there can be no assurance that material environmental liabilities will not be
incurred. Moreover, it is possible that other developments, such as
increasingly rigorous environmental laws, regulations and enforcement policies
thereunder, and claims for damages to property or persons resulting from the
operations of the Operating Partnerships, could result in substantial costs
and liabilities to the Partnership. See "Legal Proceedings" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources--Environmental Matters."
The Oil Pollution Act of 1990 ("OPA") amends certain provisions of the
federal Water Pollution Control Act of 1972, commonly referred to as the Clean
Water Act ("CWA"), and other statutes as they pertain to the prevention of and
response to oil spills into navigable waters. The OPA subjects owners of
facilities to strict joint and several liability for all containment and
clean-up costs and certain other damages arising from a spill. The CWA
provides penalties for any discharges of petroleum products in reportable
quantities and imposes substantial liability for the costs of removing a
spill. State laws for the control of water pollution also provide varying
civil and criminal penalties and liabilities in the case of releases of
petroleum or its derivatives into surface waters or into the ground.
Regulations are currently being developed under OPA and state laws which may
impose additional regulatory burdens on the Partnership.
Contamination resulting from spills or releases of refined petroleum
products are not unusual in the petroleum pipeline industry. The Partnership's
pipelines cross numerous navigable rivers and streams. Although the General
Partner believes that the Operating Partnerships comply in all material
respects with the spill prevention, control and countermeasure requirements of
federal laws, any spill or other release of petroleum products into navigable
waters may result in material costs and liabilities to the Partnership.
The Resource Conservation and Recovery Act ("RCRA"), as amended, establishes
a comprehensive program of regulation of "hazardous wastes." Hazardous waste
generators, transporters, and owners or operators of treatment, storage and
disposal facilities must comply with regulations designed to ensure detailed
tracking, handling and monitoring of these wastes. RCRA also regulates the
disposal of certain non-hazardous wastes. As a result of these regulations,
certain wastes previously generated by pipeline operations are considered
"hazardous wastes" which are subject to rigorous disposal requirements.
The Comprehensive Environmental Response, Compensation and Liability Act of
1980 ("CERCLA"), also known as "Superfund," governs the release or threat of
release of a "hazardous substance." Disposal of a hazardous substance, whether
on or off-site, may subject the generator of that substance to liability under
CERCLA for the costs of clean-up and other remedial action. Pipeline
maintenance and other activities in the ordinary course of business could
subject the Operating Partnerships to the requirements of these statutes. As a
result, to the extent hydrocarbons or other petroleum waste may have been
released or disposed of in the past, the Operating Partnerships may in the
future be required to remedy contaminated property. Governmental authorities
such as the Environmental Protection Agency, and in some instances third
parties, are authorized under CERCLA to seek to recover remediation and other
costs from responsible persons, without regard to
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fault or the legality of the original disposal. In addition to its potential
liability as a generator of a "hazardous substance," the property or right-of-
way of the Operating Partnerships may be adjacent to or in the immediate
vicinity of Superfund and other hazardous waste sites. Accordingly, the
Operating Partnerships may be responsible under CERCLA for all or part of the
costs required to cleanup such sites, which costs could be material.
The Clean Air Act, amended by the Clean Air Act Amendments of 1990 (the
"Amendments"), imposes controls on the emission of pollutants into the air.
The Amendments require states to develop permitting programs over the next
several years to comply with new federal programs. Existing operating and air-
emission permits like those held by the Operating Partnerships are being
reviewed and submitted to appropriate state agencies to comply with the new
programs. It is possible that new or more stringent controls will be imposed
upon the Operating Partnerships through this permit review process or in
connection with the renewal of such permits in the future.
The Operating Partnerships are also subject to environmental laws and
regulations adopted by the various states in which they operate. In certain
instances, the regulatory standards adopted by the states are more stringent
than applicable federal laws.
In connection with the 1986 Acquisition, Pipe Line obtained an
Administrative Consent Order ("ACO") from the New Jersey Department of
Environmental Protection and Energy under the New Jersey Environmental Cleanup
Responsibility Act of 1983 ("ECRA") for all six of Pipe Line's facilities in
New Jersey. The ACO permitted the 1986 Acquisition to be completed prior to
full compliance with ECRA, but required Pipe Line to conduct in a timely
manner a sampling plan for environmental contamination at the New Jersey
facilities and to implement any required clean-up plan. Sampling continues in
an effort to identify areas of contamination at the New Jersey facilities,
while clean-up operations have begun and have been completed at certain of the
sites. The obligations of Pipe Line were not assumed by the Partnership or by
BAC in the Acquisition, and the costs of compliance have been and will
continue to be paid by American Financial. Through December 1997, Buckeye's
costs of approximately $2,546,000 have been paid by American Financial.
Safety Matters
The Operating Partnerships are subject to regulation by the United States
Department of Transportation ("DOT") under the Hazardous Liquid Pipeline
Safety Act of 1979 ("HLPSA") relating to the design, installation, testing,
construction, operation, replacement and management of their pipeline
facilities. HLPSA covers petroleum and petroleum products and requires any
entity which owns or operates pipeline facilities to comply with applicable
safety standards, to establish and maintain a plan of inspection and
maintenance and to comply with such plans.
The Pipeline Safety Reauthorization Act of 1988 requires coordination of
safety regulation between federal and state agencies, testing and
certification of pipeline personnel, and authorization of safety-related
feasibility studies. The Manager has initiated drug and alcohol testing
programs to comply with the regulations promulgated by the Office of Pipeline
Safety and DOT.
HLPSA requires, among other things, that the Secretary of Transportation
consider the need for the protection of the environment in issuing federal
safety standards for the transportation of hazardous liquids by pipeline. The
legislation also requires the Secretary of Transportation to issue regulations
concerning, among other things, the identification by pipeline operators of
environmentally sensitive areas; the circumstances under which emergency flow
restricting devices should be required on pipelines; training and
qualification standards for personnel involved in maintenance and operation of
pipelines; and the periodic integrity testing of pipelines in environmentally
sensitive and high-density population areas by internal inspection devices or
by hydrostatic testing. Significant expenses would be incurred if, for
instance, additional valves were required, if leak detection standards were
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amended to exceed the current control system capabilities of the Operating
Partnerships or additional integrity testing of pipeline facilities were to be
required. The General Partner believes that the Operating Partnerships'
operations comply in all material respects with HLPSA. However, the industry,
including the Partnership, could be required to incur substantial additional
capital expenditures and increased operating costs depending upon the
requirements of final regulations issued by DOT pursuant to HLPSA, as amended.
The Operating Partnerships are also subject to the requirements of the
Federal Occupational Safety and Health Act ("OSHA") and comparable state
statutes. The General Partner believes that the Operating Partnerships'
operations comply in all material respects with OSHA requirements, including
general industry standards, recordkeeping, hazard communication requirements
and monitoring of occupational exposure to benzene and other regulated
substances.
The General Partner cannot predict whether or in what form any new
legislation or regulatory requirements might be enacted or adopted or the
costs of compliance. In general, any such new regulations would increase
operating costs and impose additional capital expenditure requirements on the
Partnership, but the General Partner does not presently expect that such costs
or capital expenditure requirements would have a material adverse effect on
the Partnership.
TAX TREATMENT OF PUBLICLY TRADED PARTNERSHIPS UNDER THE INTERNAL REVENUE CODE
The Internal Revenue Code of 1986, as amended (the "Code"), imposes certain
limitations on the current deductibility of losses attributable to investments
in publicly traded partnerships and treats certain publicly traded
partnerships as corporations for federal income tax purposes. The following
discussion briefly describes certain aspects of the Code that apply to
individuals who are citizens or residents of the United States without
commenting on all of the federal income tax matters affecting the Partnership
or the holders of LP Units ("Unitholders"), and is qualified in its entirety
by reference to the Code. UNITHOLDERS ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS ABOUT THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO THEM
OF AN INVESTMENT IN THE PARTNERSHIP.
Characterization of the Partnership for Tax Purposes
The Code treats a publicly traded partnership that existed on December 17,
1987, such as the Partnership, as a corporation for federal income tax
purposes, unless, for each taxable year of the Partnership, under Section
7704(d) of the Code, 90 percent or more of its gross income consists of
"qualifying income." Because the Partnership is engaged primarily in the
refined products pipeline transportation business, the General Partner
believes that 90 percent or more of the Partnership's gross income has been
qualifying income. If this continues to be true and no subsequent legislation
amends that provision, the Partnership will continue to be classified as a
partnership and not as a corporation for federal income tax purposes.
Qualifying income includes interest, dividends, real property rents, gains
from the sale or disposition of real property, income and gains derived from
the exploration, development, mining or production, processing, refining,
transportation (including pipelines transporting gas, oil or products
thereof), or the marketing of any mineral or natural resource (including
fertilizer, geothermal energy and timber), and gain from the sale or
disposition of capital assets that produce such income.
Passive Activity Loss Rules
The Code provides that an individual, estate, trust or personal service
corporation generally may not deduct losses from passive business activities,
to the extent they exceed income from all such passive activities, against
other (active) income. Income which may not be offset by passive activity
losses includes not only salary and active business income, but also portfolio
income such as interest,
8
<PAGE>
dividends or royalties or gain from the sale of property that produces
portfolio income. Credits from passive activities are also limited to the tax
attributable to any income from passive activities. The passive activity loss
rules are applied after other applicable limitations on deductions, such as
the at-risk rules and the basis limitation. Certain closely held corporations
are subject to slightly different rules which can also limit their ability to
offset passive losses against certain types of income.
Under the Code, net income from publicly traded partnerships is not treated
as passive income for purposes of the passive loss rule, but is treated as
non-passive income. Net losses and credits attributable to an interest in a
publicly traded partnership are not allowed to offset a partner's other
income. Thus, a Unitholder's proportionate share of the Partnership's net
losses may be used to offset only Partnership net income from its trade or
business in succeeding taxable years or, upon a complete disposition of a
Unitholder's interest in the Partnership to an unrelated person in a fully
taxable transaction, may be used to (i) offset gain recognized upon the
disposition, and (ii) then against all other income of the Unitholder. In
effect, net losses are suspended and carried forward indefinitely until
utilized to offset net income of the Partnership from its trade or business or
allowed upon the complete disposition to an unrelated person in a fully
taxable transaction of the Unitholder's interest in the Partnership. A
Unitholder's share of Partnership net income may not be offset by passive
activity losses generated by other passive activities. In addition, a
Unitholder's proportionate share of the Partnership's portfolio income,
including portfolio income arising from the investment of the Partnership's
working capital, is not treated as income from a passive activity and may not
be offset by such Unitholder's share of net losses of the Partnership.
Deductibility of Interest Expenses
The Code generally provides that investment interest expense is deductible
only to the extent of a non-corporate taxpayer's net investment income. In
general, net investment income for purposes of this limitation includes gross
income from property held for investment, gain attributable to the disposition
of property held for investment (except for net capital gains for which the
taxpayer has elected to be taxed at special capital gains rates) and portfolio
income (determined pursuant to the passive loss rules) reduced by certain
expenses (other than interest) which are directly connected with the
production of such income. Property subject to the passive loss rules is not
treated as property held for investment. However, the IRS has issued a Notice
which provides that net income from a publicly traded partnership (not
otherwise treated as a corporation) may be included in net investment income
for purposes of the limitation on the deductibility of investment interest. A
Unitholder's investment income attributable to its interest in the Partnership
will include both its allocable share of the Partnership's portfolio income
and trade or business income. A Unitholder's investment interest expense will
include its allocable share of the Partnership's interest expense attributable
to portfolio investments.
Unrelated Business Taxable Income
Certain entities otherwise exempt from federal income taxes (such as
individual retirement accounts, pension plans and charitable organizations)
are nevertheless subject to federal income tax on net unrelated business
taxable income and each such entity must file a tax return for each year in
which it has more than $1,000 of gross income from unrelated business
activities. The General Partner believes that substantially all of the
Partnership's gross income will be treated as derived from an unrelated trade
or business and taxable to such entities. The tax-exempt entity's share of the
Partnership's deductions directly connected with carrying on such unrelated
trade or business are allowed in computing the entity's taxable unrelated
business income. ACCORDINGLY, INVESTMENT IN THE PARTNERSHIP BY TAX-EXEMPT
ENTITIES SUCH AS INDIVIDUAL RETIREMENT ACCOUNTS, PENSION PLANS AND CHARITABLE
TRUSTS MAY NOT BE ADVISABLE.
9
<PAGE>
State Tax Treatment
During 1997, the Partnership owned property or conducted business in the
states of Pennsylvania, New York, New Jersey, Indiana, Ohio, Michigan,
Illinois, Connecticut, Massachusetts and Florida. A Unitholder will likely be
required to file state income tax returns and to pay applicable state income
taxes in many of these states and may be subject to penalties for failure to
comply with such requirements. Some of the states have proposed that the
Partnership withhold a percentage of income attributable to Partnership
operations within the state for Unitholders who are non-residents of the
state. In the event that amounts are required to be withheld (which may be
greater or less than a particular Unitholder's income tax liability to the
state), such withholding would generally not relieve the non-resident
Unitholder from the obligation to file a state income tax return. UNITHOLDERS
SHOULD CONSULT THEIR STATE AND LOCAL INCOME TAX ADVISORS.
ITEM 2. PROPERTIES
As of December 31, 1997, the principal facilities of the Operating
Partnerships included 3,485 miles of 6-inch to 24-inch diameter pipeline, 33
pumping stations, 82 delivery points and various sized tanks having an
aggregate capacity of approximately 9.2 million barrels. The Operating
Partnerships own substantially all of their facilities.
In general, the Operating Partnerships' pipelines are located on land owned
by others pursuant to rights granted under easements, leases, licenses and
permits from railroads, utilities, governmental entities and private parties.
As other pipelines, certain of the Operating Partnerships' rights are
revocable at the election of the grantor or are subject to renewal at various
intervals, and some require periodic payments. Certain portions of Buckeye's
pipeline in Connecticut and Massachusetts are subject to security interests in
favor of the owners of the right-of-way to secure future lease payments. The
Operating Partnerships have not experienced any revocations or lapses of such
rights which were material to its business or operations, and the General
Partner has no reason to expect any such revocation or lapse in the
foreseeable future. Most pumping stations and terminal facilities are located
on land owned by the Operating Partnerships.
The General Partner believes that the Operating Partnerships have sufficient
title to their material assets and properties, possess all material
authorizations and franchises from state and local governmental and regulatory
authorities and have all other material rights necessary to conduct their
business substantially in accordance with past practice. Although in certain
cases the Operating Partnerships' title to assets and properties or their
other rights, including their rights to occupy the land of others under
easements, leases, licenses and permits, may be subject to encumbrances,
restrictions and other imperfections, none of such imperfections are expected
by the General Partner to interfere materially with the conduct of the
Operating Partnerships' businesses.
ITEM 3. LEGAL PROCEEDINGS
The Partnership, in the ordinary course of business, is involved in various
claims and legal proceedings, some of which are covered in whole or in part by
insurance. 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.
FREEPORT LANDSLIDE
On March 30, 1990, a landslide near Freeport, Pennsylvania caused a rupture
to one of the Partnership's pipelines which resulted in the release of
approximately 58,000 gallons of petroleum
10
<PAGE>
area and flowed into Knapp Run and eventually into the Allegheny River.
Buckeye promptly conducted extensive emergency response and remediation
efforts.
Following the pipeline release in April and May 1990, eight civil class
actions against the Partnership, Buckeye and certain affiliates were filed in
four Pennsylvania counties. Plaintiffs in these lawsuits sought both
injunctive and monetary relief, including punitive damages and attorneys'
fees, based on a number of legal theories. In June 1991, these actions were
consolidated in a single class action (In re Buckeye Pipe Line Litigation)
before the Court of Common Pleas for Allegheny County, Pennsylvania.
On May 30, 1997, counsel for the parties entered into a stipulation of
settlement that provided that Buckeye would establish a settlement fund of up
to a maximum of $1.3 million to be paid to members of the class who submitted
claims. The proposed class consists of those residents and business entities
which on March 30, 1990 drew their drinking, industrial or commercial water
through the facilities of the Harrison Township or Breckenridge Township,
Pennsylvania water authorities, and which suffered a loss of water or a total
suspension of water service. To the extent the settlement fund exceeds the
value of the claims submitted, the excess amount of the settlement fund will
revert to Buckeye's insurance carrier.
On January 6, 1998, the Court entered an Opinion and Final Order and
Judgment certifying the settlement class and approving the settlement of the
litigation (the "Order"). The Order dismissed Buckeye from the proceeding, and
provided that the members of the class, except for those who opted out of the
settlement, were barred from asserting any further claims against Buckeye
arising from the pipeline release. No member of the class opted out of the
settlement. The Court also approved plaintiffs' request for $375,000 in
attorney's fees and costs to be paid out of the settlement fund.
Buckeye's insurance carriers have reimbursed Buckeye for all covered claims
arising from the Freeport pipeline release. The insurance carriers have funded
the settlement fund and have agreed to pay all fees and expenses associated
with the settlement except for certain costs of notice to the class. It is
anticipated, therefore, that the settlement will not have a material adverse
effect on the financial condition of Buckeye.
OTHER PROCEEDINGS
With respect to environmental litigation, certain Operating Partnerships (or
their predecessors) have been named as defendants in several 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. Typically, an Operating Partnership is one of many PRPs for a
particular site and its contribution of total waste at the site is minimal.
However, because CERCLA and similar statutes impose liability without regard
to fault and on a joint and several basis, the liability of an Operating
Partnership in connection with such proceedings could be material.
In July 1994, Buckeye was named as a defendant in an action filed by the
Michigan Department of Natural Resources ("MDNR") in Circuit Court, Oakland
County, Michigan. The complaint also names three individuals and three other
corporations as defendants. The complaint alleges that under the Michigan
Environmental Response Act, the Michigan Water Resource Commission Act and the
Leaking Underground Storage Tank Act, the defendants are liable to the state
of Michigan for remediation expenses in connection with alleged groundwater
contamination in the vicinity of Sable Road, Oakland County, Michigan. The
complaint asserts that contaminated groundwater has infiltrated drinking water
wells in the area. The complaint seeks past response costs in the amount of
approximately $2.0 million and a declaratory judgment that the defendants are
liable for future response costs and remedial activities at the site.
11
<PAGE>
The litigation is presently in the discovery phase. In November 1997,
plaintiff, MDNR, filed a motion for summary judgment against all defendants,
including Buckeye. In addition, one of Buckeye's co-defendants filed a cross-
motion for summary judgment against Buckeye in response to the MDNR summary
judgment motion. At a hearing on January 28, 1998, plaintiff's motion for
summary judgment was denied. The co-defendant's cross-motion against Buckeye
is pending with the Court. Mediation of this litigation is scheduled to
commence in April 1998.
Buckeye believes that its pipeline in the vicinity of the contaminated
groundwater has not been a source of the contaminants and that Buckeye has no
responsibility for past or future clean-up costs at the site. Although the
cost of the ultimate remediation cannot be determined at this time, Buckeye
expects that its liability, if any, will not be material.
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, but the amount of such claims or the
potential liability, if any, cannot be estimated. See "Business--Regulation--
Environmental Matters."
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the holders of LP Units during the
fourth quarter of the fiscal year ended December 31, 1997.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S LP UNITS AND RELATED UNITHOLDER MATTERS
The LP Units of the Partnership are listed and traded principally on the New
York Stock Exchange. On January 20, 1998 the General Partner approved a two-
for-one unit split to holders of record on January 29, 1998. All unit and per
unit information contained in this filing, unless otherwise noted, has been
adjusted for the two-for-one split. The high and low sales prices of the LP
Units in 1997 and 1996, as reported on the New York Stock Exchange Composite
Tape, were as follows:
<TABLE>
<CAPTION>
1997 1996
--------------- ---------------
QUARTER HIGH LOW HIGH LOW
- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
First........................................... 24.9385 20.1250 19.8750 17.1250
Second.......................................... 22.6250 21.2500 19.4375 18.6250
Third........................................... 26.7500 22.5625 19.8125 18.8125
Fourth.......................................... 30.0000 24.6875 21.4375 19.1875
</TABLE>
During the months of December 1997 and January 1998, the Partnership
gathered tax information from its known LP Unitholders and from
brokers/nominees. Based on the information collected, the Partnership
estimates its number of beneficial LP Unitholders to be approximately 17,500.
Cash distributions paid during 1996 and 1997 were as follows:
<TABLE>
<CAPTION>
RECORD DATE PAYMENT DATE AMOUNT PER UNIT
- ----------- ----------------- ---------------
<S> <C> <C>
February 20, 1996............................. February 29, 1996 $0.375
May 6, 1996................................... May 31, 1996 $0.375
August 6, 1996................................ August 30, 1996 $0.375
November 6, 1996.............................. November 29, 1996 $0.375
February 21, 1997............................. February 28, 1997 $0.375
May 6, 1997................................... May 30, 1997 $0.375
August 22, 1997............................... August 29, 1997 $0.440
November 5, 1997.............................. November 28, 1997 $0.525
</TABLE>
12
<PAGE>
In general, the Partnership makes quarterly cash distributions of
substantially all of its available cash less such retentions for working
capital, anticipated expenditures and contingencies as the General Partner
deems appropriate.
On February 5, 1998, the Partnership announced a quarterly distribution of
$0.525 per LP Unit payable on February 27, 1998.
ITEM 6. SELECTED FINANCIAL DATA
The following tables set forth, for the period and at the dates indicated,
the Partnership's income statement and balance sheet data for the years ended
December 31, 1997, 1996, 1995, 1994 and 1993. The tables should be read in
conjunction with the consolidated financial statements and notes thereto
included elsewhere in this Report.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Revenue......................... $184,981 $182,955 $183,462 $186,338 $175,495
Depreciation and amortization
(1)............................ 13,177 11,333 11,202 11,203 11,002
Operating income................ 72,075 68,784 71,504 72,481 66,851
Interest and debt expense....... 21,187 21,854 21,710 24,931 25,871
Income from continuing
operations before extraordinary
loss........................... 48,807 49,337 49,840 48,086 41,654
Net income...................... 6,383 49,337 49,840 45,817 39,366
Income per unit from continuing
operations before extraordinary
loss........................... 1.92 2.03 2.05 1.98 1.72
Net income per unit............. 0.25 2.03 2.05 1.89 1.62
Distributions per unit.......... 1.72 1.50 1.40 1.40 1.30
<CAPTION>
DECEMBER 31,
--------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets.................... $615,062 $567,837 $552,646 $534,765 $543,493
Long-term debt.................. 240,000 202,100 214,000 214,000 224,000
General Partner's capital....... 2,432 2,760 2,622 2,460 2,338
Limited Partners' capital....... 300,346 273,219 259,563 243,516 231,357
</TABLE>
- --------
(1) Depreciation and amortization for 1997 includes $1,806,000 amortization of
a deferred charge related to the ESOP Restructuring.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following is a discussion of the liquidity and capital resources and the
results of operations of the Partnership for the periods indicated below. This
discussion should be read in conjunction with the consolidated financial
statements and notes thereto, which are included elsewhere in this Report.
RESULTS OF OPERATIONS
Through its Operating Partnerships, the Partnership is principally engaged
in the transportation of refined petroleum products including gasoline,
aviation turbine fuel, diesel fuel, heating oil and kerosene. The
Partnership's revenues are principally a function of the volumes of refined
petroleum
13
<PAGE>
products transported by the Partnership, which are in turn a function of the
demand for refined petroleum products in the regions served by the
Partnership's pipelines and the tariffs or transportation fees charged for
such transportation. Results of operations are affected by factors which
include general economic conditions, weather, competitive conditions, demand
for products transported, seasonality and regulation. See "Business--
Competition and Other Business Considerations."
1997 Compared With 1996
Revenue for the year ended December 31, 1997 was $185.0 million, $2.0
million or 1.1 percent greater than revenue of $183.0 million for 1996.
Volumes delivered during 1997 averaged 1,024,000 barrels per day, 16,900
barrels per day or 1.7 percent greater than volume of 1,007,100 barrels per
day delivered in 1996. The major portion of this increase is related to
increased turbine fuel deliveries to Newark, J. F. Kennedy, Miami and Detroit
airports. At Newark, J. F. Kennedy and Miami airports, turbine fuel demand
continues to grow at a steady rate, while at Detroit the increases are
attributable primarily to the installation of new facilities and the
attraction of a new shipper. Gasoline volumes also increased over 1996 levels.
The increase in gasoline volumes is attributable primarily to market share
growth throughout Pennsylvania. The filing of tariff incentives has also led
to increased volumes and revenue at various locations. Gasoline revenue
overall, however, has declined slightly due to the loss of longer-haul, higher
tariff volumes particularly to the upstate New York area and certain Midwest
locations that are being supplied with shorter-haul, lower tariff volumes.
Distillate volumes and revenues in 1997 were comparable to 1996 volumes while
liquefied petroleum gas and other product volumes declined resulting in lower
revenues. Tariff rate increases implemented in 1996 also had a favorable
impact on 1997 revenues. See "Tariff Changes."
Costs and expenses during 1997 were $112.9 million, $1.3 million or 1.1
percent less than costs and expenses of $114.2 million during 1996. Payroll
expenses declined as the result of a staff reduction program implemented in
1996 and the non-recurrence of the $2.5 million charge recorded in connection
with that program. Payroll and payroll overhead expenses were also lower since
certain senior executive compensation costs have not been charged to the
Partnership since August 12, 1997, in accordance with the terms of the ESOP
Restructuring. Professional fee expenses also declined due to reduced expenses
associated with the ESOP Restructuring. Offsetting these decreases to some
extent were increases in rental expense and the amortization of deferred
charges related to the issuance of LP Units under the ESOP Restructuring.
Other income (expenses) consist of interest income, interest and debt
expense, and minority interests and other. Total other expenses increased by
$3.8 million. A $2.7 million gain on the sale of property in 1996 did not
recur in 1997. In addition, increased incentive compensation payments to the
General Partner as a result of greater cash distributions to Unitholders, and
the settlement of a lawsuit brought in connection with the ESOP Restructuring,
increased expenses. See "Certain Relationships and Related Transactions."
Offsetting these increases, to some extent, was a decline in minority interest
expense related to the decline in net income.
1996 Compared With 1995
Revenue for the year ended December 31, 1996 was $183.0 million, $0.5
million or 0.3 percent less than revenue of $183.5 million for 1995. Volume
delivered during 1996 averaged 1,007,100 barrels per day, 2,700 barrels per
day or 0.3 percent less than volume of 1,009,800 barrels per day delivered in
1995. The decline in 1996 revenue was related to decreases in gasoline
deliveries, offset somewhat by increases in distillate, turbine fuel,
liquefied petroleum gas and other petroleum product deliveries. Tariff rate
increases implemented in 1996 and 1995 also had a favorable impact on
revenues. See "Tariff Changes." Declines in gasoline deliveries were related
in part to severe winter storms,
14
<PAGE>
particularly in the Northeast, where ground traffic was curtailed during
January and February. Increased Canadian imports and the loss of business to
other competing pipeline systems also reduced gasoline volumes transported by
the Partnership. Continued market growth in Pennsylvania offset these volume
declines to some extent. Distillate volumes rose in 1996 compared with 1995
primarily as the result of the colder winter in 1996 and heating oil inventory
restocking occurring during the fourth quarter. Turbine fuel volumes were
higher than 1995 on increased deliveries to Newark, J. F. Kennedy and Miami
airports. Some turbine fuel volumes were lost to additional barging at
Pittsburgh and a decline in demand at LaGuardia airport.
Costs and expenses during 1996 were $114.2 million, $2.2 million or 2.0
percent greater than costs and expenses of $112.0 million during 1995. During
the second quarter 1996, the Partnership recorded a one-time expense of $2.5
million related to an employee early retirement and termination program. In
addition, increases in payroll overheads and professional fees related to the
ESOP were offset by declines in payroll, taxes, power, supplies and travel.
Other income (expenses) consist of interest income, interest and debt
expense, and minority interests and other. Total other expenses declined $2.2
million in 1996 as compared to 1995. This favorable variance is primarily
related to a $2.9 million gain on the sale of land no longer needed for the
Partnership's operations.
Tariff Changes
The Operating Partnerships did not increase tariff rates during 1997.
However, effective January 1, 1998 certain of the Operating Partnerships
implemented tariff increases that are expected to generate approximately $2.5
million in additional revenue per year.
In the years 1996 and 1995, certain tariffs were increased that, at the time
of filing, were projected to generate approximately $2.9 million and $4.0
million in additional revenue per year, respectively.
Competition and Other Business Conditions
BP America ("BP") has announced that it plans to shut down its Lima, Ohio
refinery in 1998 and supply its marginal refined petroleum product
requirements via pipeline from sources outside Ohio. BP's decision regarding
replacement supply and distribution has the potential to increase or decrease
Buckeye's Midwest volumes and revenue. Based on information currently
available, it is not possible to predict the timing or financial impact to the
Partnership of the shutdown of BP's Lima refinery. However, the General
Partner does not believe that a shutdown of the BP refinery will have a
material adverse effect on the Partnership's results of operations or
financial condition.
Several major refiners and marketers of petroleum products have announced
strategic alliances or mergers in 1997. These alliances or mergers have the
potential to alter refined product supply and distribution patterns within the
Operating Partnerships' market area. Based on information currently available,
it is not possible to predict the impact, if any, these alliances or mergers
would have on the Operating Partnerships' business. However, the General
Partner does not believe that these alliances or mergers will have a material
adverse effect on the Partnership's results of operations or financial
condition.
15
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Partnership's financial condition at December 31, 1997, 1996 and 1995 is
highlighted in the following comparative summary:
Liquidity and Capital Indicators
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Current ratio...................................... 1.4 to 1 1.3 to 1 1.7 to 1
Ratio of cash and temporary investments and trade
receivables to current liabilities................ 0.8 to 1 1.1 to 1 1.3 to 1
Working capital (in thousands)..................... $9,743 $13,660 $16,814
Ratio of total debt to total capital............... .44 to 1 .43 to 1 .45 to 1
Book value (per Unit).............................. $11.23 $11.33 $ 10.79
</TABLE>
Cash Provided by Operations
During 1997, cash provided by operations of $28.4 million was derived
principally from $62.0 million of income before extraordinary loss and
depreciation and amortization reduced by an extraordinary loss of $42.4
million on the early extinguishment of debt. Depreciation and amortization
increased by $1.8 million as a result of the amortization of a deferred charge
associated with the ESOP Restructuring. Changes in current assets and current
liabilities resulted in a net cash source of $10.4 million. The cash source
from the change in current assets and liabilities resulted primarily from
maturities of temporary investments and the continued improvement in the
collection of trade receivables. This source was offset to some extent by a
use of cash to pay accrued and other current liabilities payable to the
Manager. Changes in non-current assets and liabilities resulted in a net use
of cash of $1.6 million including a decline in minority interests of $0.4
million.
During 1996, cash provided by operations of $47.1 million was derived
principally from $60.7 million of income from operations before depreciation.
Changes in current assets and current liabilities resulted in a net cash use
of $7.5 million. This amount is comprised primarily of a $13.6 million use of
cash to increase temporary investments offset by sources of cash from declines
in outstanding trade receivables and increases in accounts payable and accrued
and other current liabilities. During the third quarter 1996, the Partnership
began billing on a weekly rather than monthly basis thereby decreasing trade
receivables. Remaining changes in cash provided by operations, totaling $6.1
million in uses, resulted from the deduction of a $2.7 million gain on the
sale of property included in net income and changes in other non-current
assets and liabilities.
During 1995, cash provided by operations of $61.8 million was derived
principally from $61.0 million of income from operations before depreciation.
Changes in current assets and current liabilities resulted in a net cash use
of $0.9 million. Increases in prepaid and other current assets and declines in
temporary investments and trade receivables account for the majority of the
change. Remaining cash sources, totaling $1.7 million, were primarily related
to increases in other non-current liabilities.
Debt Obligations and Credit Facilities
During December 1997, Buckeye issued $240.0 million of Senior Notes (Series
1997A through 1997D) (the "Senior Notes") which are due 2024 and accrue
interest at an average annual rate of 6.94 percent. The proceeds from the
issuance of the Senior Notes, plus additional cash, were used to purchase and
retire all of Buckeye's outstanding First Mortgage Notes (the "First Mortgage
Notes") which accrued interest at an average annual rate of 10.3 percent. In
connection with the purchase of the First Mortgage Notes, Buckeye was required
to pay to the holders of the First Mortgage Notes a prepayment premium equal
to the difference between the present value of the cash flows under the
16
<PAGE>
First Mortgage Notes, discounted at current U. S. Treasury rates, and the book
value of the principal due under the First Mortgage Notes. The prepayment
premium amounted to $41.4 million. In addition, debt refinancing costs
totaling $1.0 million were incurred. The total costs of $42.4 million were
recorded on the income statement as an extraordinary loss. In connection with
the issuance of the Senior Notes, the indenture pursuant to which the First
Mortgage Notes were issued was amended and restated in its entirety to
eliminate the collateral requirements and to impose certain financial
covenants.
The Senior Notes represent all of the Partnership's outstanding long-term
debt at December 31, 1997. Prior to the issuance of the Senior Notes, Buckeye
paid $11.9 million of principal on its First Mortgage Notes, Series J, that
became due in December 1997. The remaining principal of $202.1 million due
under the First Mortgage Notes was paid from the proceeds of the Senior Notes.
At December 31, 1996, the Partnership had $214.0 million in outstanding
current and long-term debt, all of which was represented by First Mortgage
Notes of Buckeye. This amount excludes $5.0 million of First Mortgage Notes
scheduled to mature after December 31, 1996 which had previously been retired
by in-substance defeasance. The First Mortgage Notes were collateralized by
substantially all of Buckeye's currently existing and after-acquired property,
plant and equipment. During 1996, the Partnership did not make any payments of
principal on the First Mortgage Notes since no payments were required due to
prior in-substance defeasances.
At December 31, 1995, the Partnership had $214.0 million in outstanding
current and long-term debt, all of which was represented by First Mortgage
Notes of Buckeye. This amount excludes $25.0 million of First Mortgage Notes
scheduled to mature after December 31, 1995 which had previously been retired
by in-substance defeasance. The First Mortgage Notes were collateralized by
substantially all of Buckeye's currently existing and after-acquired property,
plant and equipment. During 1995, the Partnership did not make any payments of
principal on the First Mortgage Notes as no payments were required due to
prior in-substance defeasances.
Buckeye has a $10 million short-term line of credit secured by accounts
receivable. At December 31, 1997, there were no outstanding borrowings under
this facility.
The ratio of total debt to total capital was 44 percent, 43 percent, and 45
percent at December 31, 1997, 1996 and 1995, respectively. For purposes of the
calculation of this ratio, total capital consists of current and long-term
debt, minority interests and partners' capital.
Capital Expenditures
At December 31, 1997, property, plant and equipment was approximately 85
percent of total consolidated assets. This compares to 90 percent and 92
percent for the years ended December 31, 1996 and 1995, respectively. Capital
expenditures are generally for expansion of the Operating Partnerships'
service capabilities and sustaining the Operating Partnerships' existing
operations.
Capital expenditures by the Partnership were $19.8 million, $14.9 million
and $17.4 million for 1997, 1996 and 1995, respectively. Projected capital
expenditures for 1998 are approximately $20.6 million and are expected to be
funded from cash generated by operations. See "Business--Capital
Expenditures." Planned capital expenditures include, among other things,
installation of transmix tanks, renewal and replacement of several tank roofs
and seals, upgrades to field instrumentation and cathodic protection systems,
installation and replacement of mainline pipe and valves, facility automation
and various facility improvements that facilitate increased pipeline volumes.
Capital expenditures are expected to remain at this higher level for the next
few years as a result of the General Partner's plan to automate certain
facilities in order to more effectively control operating costs.
17
<PAGE>
Environmental Matters
The Operating Partnerships are subject to federal and state laws and
regulations relating to the protection of the environment. These regulations,
as well as the Partnership's own standards relating to protection of the
environment, cause the Operating Partnerships to incur current and ongoing
operating and capital expenditures. During 1997, the Operating Partnerships
incurred operating expenses of $2.7 million and capital expenditures of $3.1
million for environmental matters. Capital expenditures of $2.3 million for
environmental related projects are included in the Partnership's plans for
1998. Expenditures, both capital and operating, relating to environmental
matters are expected to continue due to the Partnership's commitment to
maintain high environmental standards and to increasingly rigorous
environmental laws.
Various 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 have been asserted and may be
asserted in the future under various federal and state laws. 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.
The total potential remediation costs to be borne by the Operating
Partnerships relating to these clean-up sites cannot be reasonably estimated
and could be material. 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. Although the Partnership has made a provision for certain
legal expenses relating to these matters, the General Partner is unable to
determine the timing or outcome of any pending proceedings or of any future
claims and proceedings. See "Business--Regulation--Environmental Matters" and
"Legal Proceedings."
EMPLOYEE STOCK OWNERSHIP PLAN
In connection with the Acquisition, the ESOP was formed for the benefit of
employees of the General Partner, the Manager and Glenmoor Partners, LLP. The
General Partner borrowed $63 million pursuant to a 15-year term loan from a
third-party lender. The General Partner then loaned $63 million to the ESOP,
which used the loan proceeds to purchase $63 million of Series A Convertible
Preferred Stock of BAC ("BAC Preferred Stock"). The BAC Preferred Stock had a
7.5% cumulative dividend rate and a conversion rate of approximately 7.7
shares of BAC common stock per share of BAC Preferred Stock.
In December 1996, the Board of Directors of the General Partner approved a
restructuring of the ESOP (the "ESOP Restructuring"). The ESOP Restructuring
was approved by a majority of the holders of the LP Units at a special meeting
held on August 11, 1997. On August 12, 1997, in connection with the ESOP
Restructuring, the Partnership issued an additional 2,573,146 LP Units
(adjusted for a two-for-one split) which are beneficially owned by the ESOP
through Services Company. The market value of the LP Units issued to Services
Company was approximately $64.2 million. As a result of the Partnership's
issuance of the LP Units, the Partnership's obligation to reimburse the
General Partner for certain executive compensation costs was permanently
released, the incentive compensation formula was reduced, and other changes
were implemented to make the ESOP a less expensive fringe benefit for the
Partnership. The $64.2 million market value of the LP Units issued to Services
Company was recorded as a deferred charge relating to the ESOP Restructuring
and is being amortized over 13.5 years. As part of the ESOP Restructuring, the
$63 million loan from the third party lender became a direct obligation of the
ESOP which is secured by the stock of Services Company and guaranteed by the
General Partner and certain of its affiliates.
Total ESOP related costs charged to earnings during 1997 was $5.2 million,
which included $2.8 million of interest expense with respect to the ESOP loan,
$2.0 million based upon the value of 1,976
18
<PAGE>
shares of BAC Preferred Stock released and allocated to employees accounts
through August 12, 1997, and $0.4 million for a top-up provision representing
the estimated difference between distributions received on the LP Units and
the total debt service requirements under the ESOP loan. The 1,976 shares of
BAC Preferred Stock that were released and allocated to employees' accounts
were exchanged for 40,354 shares of Services Company stock during 1997.
Total ESOP related costs charged to earnings during 1996 were $5.6 million,
which included $3.5 million of interest expense with respect to the ESOP loan
and $2.1 million based upon the value of 2,074 shares of BAC Preferred Stock
released to employees' accounts. The 2,074 shares of BAC Preferred Stock that
were released to employees' accounts in 1996 were exchanged for 42,355 shares
of Services Company stock in 1997.
Subsequent to August 12, 1997, the Partnership will not incur any additional
charges related to interest expense and shares released to employees' accounts
under the ESOP. The Partnership will, however, incur ESOP-related costs to the
extent that required contributions to the ESOP are in excess of distributions
received on the LP Units owned by Services Company, for taxes associated with
the sale of the LP Units and for routine administrative costs.
ACCOUNTING STATEMENTS NOT YET ADOPTED
Reporting Comprehensive Income
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income," is effective for fiscal years beginning after December
15, 1997. This statement 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 impact of
this new standard is not expected to have a material effect on the
Partnership's financial statements.
Disclosures about Segments of an Enterprise and Related Information
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," is effective for fiscal years beginning after December 15, 1997.
This statement establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information
about operating segments in interim financial reports issued to shareholders.
It also establishes standards for related disclosures about products and
services, geographic areas, and major customers. The impact of this new
standard is not expected to have a material effect on the Partnership's
financial statements.
INFORMATION SYSTEMS--YEAR 2000 COMPLIANCE
The Partnership has developed preliminary plans to address possible
exposures related to the impact on its computer systems of the year 2000. Key
financial, information and operational systems are being assessed and detailed
plans developed to address systems modifications required by December 31,
1999. The financial impact of making the required systems changes is not
expected to be material to the Partnership's results of operations or
financial condition.
19
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
BUCKEYE PARTNERS, L.P.
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
PAGE NUMBER
-----------
<S> <C>
Financial Statements and Independent Auditors' Report:
Independent Auditors' Report..................................... 21
Consolidated Statements of Income--For the years ended December
31, 1997, 1996 and 1995......................................... 22
Consolidated Balance Sheets--December 31, 1997 and 1996.......... 23
Consolidated Statements of Cash Flows--For the years ended Decem-
ber 31, 1997, 1996 and 1995..................................... 24
Notes to Consolidated Financial Statements....................... 25
Financial Statement Schedules and Independent Auditors' Report:
Independent Auditors' Report..................................... S-1
Schedule I--Registrant's Condensed Financial Statements.......... S-2
</TABLE>
Schedules other than those listed above are omitted because they are either
not applicable or not required or the information required is included in the
consolidated financial statements or notes thereto.
20
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners of Buckeye Partners, L.P.:
We have audited the accompanying consolidated balance sheets of Buckeye
Partners, L.P. and its subsidiaries (the "Partnership") as of December 31,
1997 and 1996, and the related consolidated statements of income and cash
flows for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Partnership's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the
Partnership as of December 31, 1997 and 1996, and the results of its
operations and cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Philadelphia, Pennsylvania
January 23, 1998
21
<PAGE>
BUCKEYE PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
NOTES 1997 1996 1995
----- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue................................... 2 $184,981 $182,955 $183,462
-------- -------- --------
Costs and expenses
Operating expenses...................... 3,16 86,833 87,855 89,156
Depreciation and amortization........... 2,4,5 13,177 11,333 11,202
General and administrative expenses..... 16 12,896 14,983 11,600
-------- -------- --------
Total costs and expenses.............. 112,906 114,171 111,958
-------- -------- --------
Operating income.......................... 72,075 68,784 71,504
-------- -------- --------
Other income (expenses)
Interest income......................... 2,046 1,589 1,037
Interest and debt expense............... (21,187) (21,854) (21,710)
Minority interests and other............ (4,127) 818 (991)
-------- -------- --------
Total other income (expenses)......... (23,268) (19,447) (21,664)
-------- -------- --------
Income before extraordinary loss.......... 48,807 49,337 49,840
Extraordinary loss on early extinguishment
of debt.................................. 14 (42,424) -- --
-------- -------- --------
Net income................................ $ 6,383 $ 49,337 $ 49,840
======== ======== ========
Net income allocated to General Partner... 17 $ 85 $ 493 $ 498
Net income allocated to Limited Partners.. 17 $ 6,298 $ 48,844 $ 49,342
EARNINGS PER PARTNERSHIP UNIT
Income allocated to General and Limited
Partners per Partnership Unit:
Income before extraordinary loss........ $ 1.92 $ 2.03 $ 2.05
Extraordinary loss on early
extinguishment of debt................. (1.67) -- --
-------- -------- --------
Net income................................ $ 0.25 $ 2.03 $ 2.05
======== ======== ========
EARNINGS PER PARTNERSHIP UNIT--ASSUMING
DILUTION
Income allocated to General and Limited
Partners per Partnership Unit:
Income before extraordinary loss........ $ 1.91 $ 2.02 $ 2.05
Extraordinary loss on early
extinguishment of debt................. (1.66) -- --
-------- -------- --------
Net income................................ $ 0.25 $ 2.02 $ 2.05
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
22
<PAGE>
BUCKEYE PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
NOTES 1997 1996
------------- -------- --------
<S> <C> <C> <C>
Assets
Current assets
Cash and cash equivalents................... 2 $ 7,349 $ 17,416
Temporary investments....................... 2 2,854 14,528
Trade receivables........................... 2 10,195 12,536
Inventories................................. 2 2,087 1,732
Prepaid and other current assets............ 4, 13 11,995 7,715
-------- --------
Total current assets...................... 34,480 53,927
Property, plant and equipment, net............ 2, 5 520,941 511,646
Other non-current assets...................... 6, 13 59,641 2,264
-------- --------
Total assets.............................. $615,062 $567,837
======== ========
Liabilities and partners' capital
Current liabilities
Current portion of long-term debt........... $ -- $ 11,900
Accounts payable............................ 3,664 4,279
Accrued and other current liabilities....... 3, 7, 16 21,073 24,088
-------- --------
Total current liabilities................. 24,737 40,267
Long-term debt................................ 8, 14 240,000 202,100
Minority interests............................ 2,535 2,913
Other non-current liabilities................. 9, 10, 11, 16 45,012 46,578
Commitments and contingent liabilities........ 3 -- --
-------- --------
Total liabilities......................... 312,284 291,858
-------- --------
Partners' capital............................... 17
General Partner............................... 2,432 2,760
Limited Partners.............................. 300,346 273,219
-------- --------
Total partners' capital................... 302,778 275,979
-------- --------
Total liabilities and partners' capital... $615,062 $567,837
======== ========
</TABLE>
See notes to consolidated financial statements.
23
<PAGE>
BUCKEYE PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
NOTES 1997 1996 1995
----- --------- -------- --------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Income before extraordinary loss......... $ 48,807 $ 49,337 $ 49,840
--------- -------- --------
Adjustments to reconcile income to net
cash provided by operating activities:
Extraordinary loss on early extinguish-
ment of debt........................... 14 (42,424) -- --
Gain on sale of property, plant and
equipment.............................. (11) (2,651) --
Depreciation and amortization........... 4,5 13,177 11,333 11,202
Minority interests...................... 96 506 510
Distributions to minority interests..... (474) (374) (345)
Change in assets and liabilities:
Temporary investments.................. 11,674 (13,633) 505
Trade receivables...................... 2,341 3,759 762
Inventories............................ (355) (171) (241)
Prepaid and other current assets(1).... 418 (443) (1,798)
Accounts payable....................... (615) 1,873 81
Accrued and other current liabilities.. (3,015) 1,072 (231)
Other non-current assets(2)............ 319 (1,798) (106)
Other non-current liabilities.......... (1,566) (1,680) 1,657
--------- -------- --------
Total adjustments from operating ac-
tivities............................. (20,435) (2,207) 11,996
--------- -------- --------
Net cash provided by operating activi-
ties................................... 28,372 47,130 61,836
--------- -------- --------
Cash flows from investing activities:
Capital expenditures..................... (19,841) (14,881) (17,407)
Net proceeds from (expenditures for) dis-
posal of property, plant and equipment.. (814) 4,497 (656)
--------- -------- --------
Net cash used in investing activi-
ties................................. (20,655) (10,384) (18,063)
--------- -------- --------
Cash flows from financing activities:
Capital contribution..................... 5 10 4
Proceeds from exercise of unit options... 516 974 374
Proceeds from issuance of long-term
debt.................................... 8,14 240,000 -- --
Payment of long-term debt................ 8,14 (214,000) -- --
Distributions to Unitholders............. 17,18 (44,305) (36,527) (34,009)
--------- -------- --------
Net cash used in financing activi-
ties................................. (17,784) (35,543) (33,631)
--------- -------- --------
Net (decrease) increase in cash and cash
equivalents.............................. 2 (10,067) 1,203 10,142
Cash and cash equivalents at beginning of
year..................................... 2 17,416 16,213 6,071
--------- -------- --------
Cash and cash equivalents at end of year.. $ 7,349 $ 17,416 $ 16,213
========= ======== ========
Supplemental cash flow information:
Cash paid during the year for interest
(net of amount capitalized)............. $ 21,432 $ 21,900 $ 21,656
Non-cash change in financing activities:
Issuance of LP Units in exchange for BAC
stock................................... 13 $ 64,200 -- --
Non-cash change in operating activities:
(1) Deferred charge from issuance of LP
Units, current.......................... 4,13 $ 4,698 -- --
(2) Deferred charge from issuance of LP
Units, non-current...................... 6,13 $ 59,502 -- --
</TABLE>
See notes to consolidated financial statements.
24
<PAGE>
BUCKEYE PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1997 AND 1996 AND
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1. ORGANIZATION
Buckeye Partners, L.P. (the "Partnership") is a limited partnership
organized in 1986 under the laws of the state of Delaware. The Partnership
owns approximately 99 percent limited partnership interests in Buckeye Pipe
Line Company, L.P. ("Buckeye"), Laurel Pipe Line Company, L.P. ("Laurel"),
Everglades Pipe Line Company, L.P. ("Everglades") and Buckeye Tank Terminals
Company, L.P. ("BTT"). These entities are hereinafter referred to as the
"Operating Partnerships." Laurel owns a 98.01 percent limited partnership
interest in Buckeye Pipe Line Company of Michigan, L.P. ("BPL Michigan") which
discontinued operations in 1993.
Buckeye is one of the largest independent pipeline common carriers of
refined petroleum products in the United States, with 3,103 miles of pipeline
serving 9 states. Laurel owns a 345-mile common carrier refined products
pipeline located principally in Pennsylvania. Everglades owns 37 miles of
refined products pipeline in Florida. Buckeye, Laurel and Everglades conduct
the Partnership's refined products pipeline business. BTT provides bulk
storage service through leased facilities with an aggregate capacity of
257,000 barrels of refined petroleum products.
During December 1986, the Partnership sold 12,000,000 limited partnership
units ("LP Units") in a public offering representing an aggregate 99 percent
limited partnership interest in the Partnership. Concurrently, the Partnership
sold 121,212 units representing a 1 percent general partnership interest in
the Partnership ("GP Units") to Buckeye Management Company (the "General
Partner"). On August 12, 1997, the Partnership issued an additional 1,286,573
units in connection with the restructuring of the BMC Acquisition Company
Employee Stock Ownership Plan (the "ESOP") (see Note 13). The Partnership has
also issued 74,230 limited partnership units and 745 general partnership units
in connection with its Unit Option and Distribution Equivalent Plan. At
December 31, 1997, there were 13,360,803 limited partnership units and 121,957
general partnership units outstanding (see Note 12 and Note 17). The unit
information contained within this paragraph has not been adjusted for the two-
for-one unit split approved by the General Partner on January 20, 1998. All
other unit information contained within these footnotes, as well as the per
unit information contained in the financial statements, has been restated to
adjust for this split.
A subsidiary of the General Partner, Buckeye Pipe Line Company (the
"Manager"), owns a 1 percent general partnership interest in, and serves as
sole general partner and manager of, each Operating Partnership. The Manager
also owns a 1 percent general partnership interest and a 0.99 percent limited
partnership interest in BPL Michigan.
During March 1996, BMC Acquisition Corp. ("BAC"), a corporation organized in
1996 under the laws of the state of Delaware, acquired all of the common stock
of the General Partner from a subsidiary of American Financial Group, Inc.
(the "Acquisition"). BAC, which subsequently changed its name to Glenmoor,
Ltd. ("Glenmoor"), is owned by certain directors, members of senior management
of the General Partner or trusts for the benefit of their families and certain
director-level employees of Buckeye Pipe Line Services Company ("Services
Company").
On August 12, 1997, the Manager's employees were transferred to Services
Company, a newly formed corporation wholly owned by the ESOP. Services Company
employs all of the employees previously employed by the Manager and became the
sponsor of all of the employee benefit plans previously maintained by the
Manager. Services Company also entered into a Services Agreement
25
<PAGE>
BUCKEYE PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
with the General Partner and the Manager to provide services to the
Partnership and the Operating Partnerships for a 13.5 year term. Services
Company is reimbursed by the General Partner or the Manager for its direct and
indirect expenses, which in turn are reimbursed by the Partnership, except for
certain executive compensation costs which after August 12, 1997 are no longer
reimbursed (See Note 16).
The Partnership maintains its accounts in accordance with the Uniform System
of Accounts for Pipeline Companies, as prescribed by the Federal Energy
Regulatory Commission ("FERC"). Reports to FERC differ from the accompanying
consolidated financial statements, which have been prepared in accordance with
generally accepted accounting principles, generally in that such reports
calculate depreciation over estimated useful lives of the assets as prescribed
by FERC.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements include the accounts of the Operating Partnerships
on a consolidated basis. All significant intercompany transactions have been
eliminated in consolidation.
Use of Estimates
The preparation of the Partnership's consolidated financial statements in
conformity with generally accepted accounting principles necessarily requires
management to make estimates and assumptions. These estimates and assumptions,
which may differ from actual results, will affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements, as well as the reported amounts of
revenue and expense during the reporting period.
Financial Instruments
The fair values of financial instruments are determined by reference to
various market data and other valuation techniques as appropriate. Unless
otherwise disclosed, the fair values of financial instruments approximate
their recorded values (see Note 8).
Cash and Cash Equivalents
All highly liquid debt instruments purchased with a maturity of three months
or less are classified as cash equivalents.
Temporary Investments
The Partnership's temporary investments that are bought and held principally
for the purpose of selling them in the near term are classified as trading
securities. Trading securities are recorded at fair value as current assets on
the balance sheet, with the change in fair value during the period included in
earnings.
Revenue Recognition
Substantially all revenue is derived from interstate and intrastate
transportation of petroleum products. Such revenue is recognized as products
are delivered to customers. Such customers include major integrated oil
companies, major refiners and large regional marketing companies. While the
26
<PAGE>
BUCKEYE PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
consolidated Partnership's continuing customer base numbers approximately 103,
no customer during 1997 contributed more than 10 percent of total revenue. The
Partnership does not maintain an allowance for doubtful accounts.
Inventories
Inventories, consisting of materials and supplies, are carried at cost which
does not exceed realizable value.
Property, Plant and Equipment
Property, plant and equipment consist primarily of pipeline and related
transportation facilities and equipment. For financial reporting purposes,
depreciation is calculated primarily using the straight-line method over the
estimated useful life of 50 years. Additions and betterments are capitalized
and maintenance and repairs are charged to income as incurred. Generally, upon
normal retirement or replacement, the cost of property (less salvage) is
charged to the depreciation reserve, which has no effect on income.
Long-Lived Assets
The Partnership regularly assesses the recoverability of its long-lived
assets whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable.
Income Taxes
For federal and state income tax purposes, the Partnership and Operating
Partnerships are not taxable entities. Accordingly, the taxable income or loss
of the Partnership and Operating Partnerships, which may vary substantially
from income or loss reported for financial reporting purposes, is generally
includable in the federal and state income tax returns of the individual
partners. As of December 31, 1997 and 1996, the Partnership's reported amount
of net assets for financial reporting purposes exceeded its tax basis by
approximately $253 million and $247 million, respectively.
Environmental Expenditures
Environmental expenditures that relate to current or future revenues are
expensed or capitalized as appropriate. Expenditures that relate to an
existing condition caused by past operations, and do not contribute to current
or future revenue generation, are expensed. Liabilities are recorded when
environmental assessments and/or clean-ups are probable, and the costs can be
reasonably estimated. Generally, the timing of these accruals coincides with
the Partnership's commitment to a formal plan of action. In 1997, the
Partnership adopted American Institute of Certified Public Accountants
Statement of Position (SOP) 96-1, "Environmental Remediation Liabilities". SOP
96-1 prescribes that accrued environmental remediation related expenses
include direct costs of remediation and indirect costs related to the
remediation effort. Although the Partnership previously accrued for direct
costs of remediation and certain indirect costs, additional indirect costs
were required to be accrued by the Partnership at the time of adopting SOP 96-
1, such as compensation and benefits for employees directly involved in the
remediation activities and fees paid to outside engineering, consulting and
law firms. The effect of initially applying the provisions of SOP 96-1 has
been treated as a change in accounting estimate and is not material to the
accompanying financial statements.
27
<PAGE>
BUCKEYE PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Pensions
Services Company maintains a defined contribution plan, defined benefit
plans (see Note 10) and an employee stock ownership plan (see Note 13) which
provide retirement benefits to substantially all of its regular full-time
employees. Certain hourly employees of Services Company are covered by a
defined contribution plan under a union agreement.
Postretirement Benefits Other Than Pensions
Services Company provides postretirement health care and life insurance
benefits for certain of its retirees (see Note 11). Certain other retired
employees are covered by a health and welfare plan under a union agreement.
Reporting Comprehensive Income
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income," is effective for fiscal years beginning after December
15, 1997. This statement 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 impact of
this new standard is not expected to have a material effect on the
Partnership's financial statements.
Disclosures about Segments of an Enterprise and Related Information
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," is effective for fiscal years beginning after December 15, 1997.
This statement establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information
about operating segments in interim financial reports issued to shareholders.
It also establishes standards for related disclosures about products and
services, geographic areas, and major customers. The impact of this new
standard is not expected to have a material effect on the Partnership's
financial statements.
3. CONTINGENCIES
The Partnership and 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. 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 annual results
of operations.
Environmental
In accordance with its accounting policy on environmental expenditures, the
Partnership recorded operating expenses of $2.7 million, $3.1 million and $2.6
million for 1997, 1996 and 1995, respectively, which were related to the
environment. Expenditures, both capital and operating, relating to
environmental matters are expected to continue due to the Partnership's
commitment to maintain high environmental standards and to increasingly strict
environmental laws and government enforcement policies.
Various 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 have
28
<PAGE>
BUCKEYE PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
been asserted and may be asserted in the future under various federal and
state laws. 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. The total potential remediation costs to be borne
by the Operating Partnerships relating to these clean-up sites cannot be
reasonably estimated and could be material. 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. Although the Partnership has made a
provision for certain legal expenses relating to these matters, the General
Partner is unable to determine the timing or outcome of any pending
proceedings or of any future claims and proceedings.
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 effective
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 initial value of this contract was $6.8 million on
September 3, 1993. 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 additional cash
payments through the maturity date of the contract pursuant to the Plan of
Rehabilitation. The Plan has also submitted a claim to the Pennsylvania Life
and Health Insurance Guaranty Association for partial reimbursement of its
loss due to the insolvency. 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 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.
4. PREPAID AND OTHER CURRENT ASSETS
Prepaid and other current assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1997 1996
------- ------
<S> <C> <C>
Deferred charge (see Note 13)................................ $ 4,698 $ --
Other........................................................ 7,297 7,715
------- ------
Total...................................................... $11,995 $7,715
======= ======
</TABLE>
Amortization of the deferred charge related to a restructuring of the ESOP
(the "ESOP Restructuring") was $1,806,000 for the year ended December 31,
1997. This deferred charge is being amortized over 13.5 years. There was no
amortization of the deferred charge related to the ESOP Restructuring in
either 1996 or 1995.
29
<PAGE>
BUCKEYE PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Land...................................................... $ 9,504 $ 9,522
Buildings and leasehold improvements...................... 27,510 26,690
Machinery, equipment and office furnishings............... 524,735 521,945
Construction in progress.................................. 17,484 5,355
-------- --------
579,233 563,512
Less accumulated depreciation........................... 58,292 51,866
-------- --------
Total................................................... $520,941 $511,646
======== ========
</TABLE>
Depreciation expense was $11,371,000, $11,333,000 and $11,202,000 for the
years 1997, 1996 and 1995, respectively.
6. OTHER NON-CURRENT ASSETS
Other non-current assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1997 1996
------- ------
(IN THOUSANDS)
<S> <C> <C>
Deferred charge (see Note 13)................................ $57,696 $ --
Other........................................................ 1,945 2,264
------- ------
Total...................................................... $59,641 $2,264
======= ======
</TABLE>
7. ACCRUED AND OTHER CURRENT LIABILITIES
Accrued and other current liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Taxes--other than income.................................... $ 9,157 $ 9,041
Accrued charges due Manager................................. 3,231 5,754
Environmental liabilities................................... 3,141 2,527
Interest.................................................... 732 977
Accrued operating power..................................... 819 869
Accrued outside services.................................... 365 651
Other....................................................... 3,628 4,269
------- -------
Total..................................................... $21,073 $24,088
======= =======
</TABLE>
30
<PAGE>
BUCKEYE PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. LONG-TERM DEBT AND CREDIT FACILITIES
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
First Mortgage Notes:
11.18% Series J due December 15, 2006................... $ -- $152,100
7.11% Series K due December 15, 2007.................... -- 11,000
7.15% Series L due December 15, 2008.................... -- 11,000
7.19% Series M due December 15, 2009.................... -- 13,000
7.93% Series N due December 15, 2010.................... -- 15,000
Senior Notes:
6.98% Series 1997A due December 16, 2024 (subject to
$25.0 million annual sinking fund requirement
commencing December 16, 2020).......................... 125,000 --
6.89% Series 1997B due December 16, 2024 (subject to
$20.0 million annual sinking fund requirement
commencing December 16, 2020).......................... 100,000 --
6.95% Series 1997C due December 16, 2024 (subject to
$2.0 million annual sinking fund requirement commencing
December 16, 2020)..................................... 10,000 --
6.96% Series 1997D due December 16, 2024 (subject to
$1.0 million annual sinking fund requirement commencing
December 16, 2020)..................................... 5,000 --
-------- --------
Total................................................. $240,000 $202,100
======== ========
</TABLE>
At December 31, 1997, there are no scheduled maturities of debt within the
next five year period. A total of $240,000,000 of debt is scheduled to mature
in the period 2020 through 2024.
The fair value of the Partnership's debt is estimated to be $240 million and
$238 million as of December 31, 1997 and 1996, respectively. The values at
December 31, 1997 and 1996 were calculated using interest rates currently
available to the Partnership for issuance of debt with similar terms and
remaining maturities.
The indenture pursuant to which the Senior Notes were issued (the "Senior
Note Indenture") contains covenants which affect Buckeye, Laurel and BPL
Michigan (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 (the
"Partnership Agreement") 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 line of credit from two commercial banks (the "Working Capital
Facility") which permits short-term borrowings of up to $10 million
outstanding at any time. Borrowings under the
31
<PAGE>
BUCKEYE PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Working Capital Facility bear interest at each bank's prime rate and are
secured by the accounts receivable of Buckeye. The Working Capital Facility
contains covenants that require no indebtedness be outstanding under the
Working Capital Facility for a period of 45 consecutive days during any year.
At December 31, 1997, there was no amount outstanding under this facility.
9. OTHER NON-CURRENT LIABILITIES
Other non-current liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Accrued employee benefit liabilities........................ $36,319 $36,231
Accrued charges due Manager................................. -- 1,807
Accrued non-current taxes................................... 3,183 3,578
Other....................................................... 5,510 4,962
------- -------
Total..................................................... $45,012 $46,578
======= =======
</TABLE>
10. PENSION PLANS
Services Company provides retirement benefits, primarily through
noncontributory pension plans, for substantially all of its regular full-time
employees, except those covered by certain labor contracts, under which
Services Company contributes 5 percent of each covered employee's salary, and
a retirement income guarantee plan (a defined benefit plan) which generally
guarantees employees hired before January 1, 1986, a retirement benefit at
least equal to the benefit they would have received under a previously
terminated defined benefit plan. Services Company's policy is to fund amounts
as are necessary to at least meet the minimum funding requirements of ERISA.
Net pension expense for 1997, 1996 and 1995 for the defined benefit plans
included the following components:
<TABLE>
<CAPTION>
1997 1996 1995
------- ----- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost........................................ $ 291 $ 485 $ 452
Interest cost on projected benefit obligation....... 819 889 933
Actual return on assets............................. (1,086) (664) (1,653)
Net amortization and deferral....................... 393 (193) 838
------- ----- -------
Net pension expense............................... $ 417 $ 517 $ 570
======= ===== =======
</TABLE>
The pension expense for the defined contribution plan included in the
consolidated statements of income approximated $1,558,000, $1,379,000 and
$1,493,000 for 1997, 1996 and 1995, respectively.
32
<PAGE>
BUCKEYE PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table sets forth the funded status of the Services Company's
defined benefit plans and amounts recognized in the Partnership's consolidated
balance sheets at December 31, 1997 and 1996 related to those plans:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligations
Vested benefit obligations............................ $ (5,056) $ (4,730)
======== ========
Accumulated benefit obligations....................... $ (6,041) $ (6,531)
======== ========
Projected benefit obligation.......................... $(15,176) $(12,540)
Plan assets at fair value............................... 6,993 6,305
-------- --------
Projected benefit obligation in excess of plan assets... (8,183) (6,235)
Unrecognized net loss................................... 2,694 814
Unrecognized net asset.................................. (942) (1,102)
-------- --------
Pension liability recognized in the balance sheet....... $ (6,431) $ (6,523)
======== ========
</TABLE>
As of December 31, 1997, approximately 32.0 percent of plan assets were
invested in fixed income securities and 68.0 percent in equity securities.
The weighted average discount rate used in determining the actuarial present
value of the projected benefit obligation was 7.00 percent and 7.50 percent at
December 31, 1997 and 1996, respectively. The rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation was 5.00 percent and 5.25 percent at December 31,
1997 and 1996, respectively. The expected long-term rate of return on assets
was 8.50 percent as of January 1, 1997 and 1996.
Services Company also participates in a multi-employer retirement income
plan which provides benefits to employees covered by certain labor contracts.
Pension expense for the plan was $129,000, $144,000 and $145,000 for 1997,
1996 and 1995, respectively.
11. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Services Company provides postretirement health care and life insurance
benefits to certain of its retirees. To be eligible for these benefits an
employee had to be hired prior to January 1, 1991 and has to meet certain
service requirements. Services Company does not pre-fund this postretirement
benefit obligation.
Net postretirement benefit costs for 1997, 1996 and 1995 included the
following components:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Service cost....................................... $ 507 $ 500 $ 520
Interest cost on accumulated postretirement benefit
obligation........................................ 1,720 1,651 1,895
Net amortization and deferral...................... (575) (569) (577)
------ ------ ------
Net postretirement expense......................... $1,652 $1,582 $1,838
====== ====== ======
</TABLE>
33
<PAGE>
BUCKEYE PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table sets forth the amounts related to postretirement benefit
obligations recognized in the Partnership's consolidated balance sheets as of
December 31, 1997 and 1996:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1997 1996
-------- ---------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of accumulated postretirement
benefits
Retirees and dependents............................ $(13,090) $ (12,897)
Employees eligible to retire..................... (3,037) (2,833)
Employees ineligible to retire................... (8,816) (7,832)
-------- ---------
Accumulated postretirement benefit obligation.... (24,943) (23,562)
Unamortized gain due to plan amendment............... (3,478) (4,057)
Unrecognized net loss (gain)......................... (1,467) (2,090)
-------- ---------
Postretirement liability recognized in the balance
sheet............................................... $(29,888) $ (29,709)
======== =========
</TABLE>
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation ("APBO") was 7.0 percent and 7.5 percent at
December 31, 1997 and 1996, respectively. The assumed rate for plan cost
increases in 1997 was 9.5 percent and 8.5 percent for non-Medicare eligible
and Medicare eligible retirees, respectively. The assumed annual rates of cost
increase decline each year through 2005 to a rate of 4.0 percent, and remain
at 4.0 percent thereafter for both non-Medicare eligible and Medicare eligible
retirees. The effect of a 1 percent increase in the health care cost trend
rate for each future year would have increased the aggregate of service and
interest cost components by $375,000 in 1997 and the APBO would have increased
by $3,227,000 as of December 31, 1997.
Services Company also contributes to a multi-employer postretirement benefit
plan which provides health care and life insurance benefits to employees
covered by certain labor contracts. The cost of providing these benefits was
approximately $110,000, $133,000 and $137,000 for 1997, 1996 and 1995,
respectively.
12. UNIT OPTION AND DISTRIBUTION EQUIVALENT PLAN
Effective January 1, 1996, the Partnership adopted Statement of Financial
Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based
Compensation," which requires expanded disclosures of stock-based compensation
arrangements with employees. SFAS 123 encourages, but does not require,
compensation cost to be measured based on the fair value of the equity
instrument awarded. It allows the Partnership to continue to measure
compensation cost for these plans using the intrinsic value based method of
accounting prescribed by Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25"). The Partnership has
elected to continue to recognize compensation cost based on the intrinsic
value of the equity instrument awarded as promulgated in APB 25.
The Partnership has a Unit Option and Distribution Equivalent Plan (the
"Option Plan"), which was approved by the Board of Directors of the General
Partner on April 25, 1991 and by holders of the LP Units on October 22, 1991.
The Option Plan authorizes the granting of options (the "Options") to acquire
LP Units to selected key employees (the "Optionees") of Services Company not
to exceed 720,000 LP Units in the aggregate. The price at which each LP Unit
may be purchased pursuant to an Option granted under the Option Plan is
generally equal to the market value on the date of the grant. Options may be
granted with a feature that allows Optionees to apply accrued credit balances
(the "Distribution Equivalents") as an adjustment to the aggregate purchase
price of such Options. The
34
<PAGE>
BUCKEYE PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Distribution Equivalents shall be an amount equal to (i) the Partnership's per
LP Unit regular quarterly distribution, multiplied by (ii) the number of LP
Units subject to such Options that have not vested. Vesting in the Options is
determined by the number of anniversaries the Optionee has remained in the
employ of Services Company following the date of the grant of the Option.
Options become vested in varying amounts beginning generally three years after
the date of grant and remain exercisable for a period of five years. The
Partnership recorded compensation expense related to the Option Plan of
$179,000, $283,000 and $231,000 in 1997, 1996 and 1995, respectively. Had
compensation cost for the Option Plan been determined based on the fair value
at the time of the grant dates for awards consistent with the method of SFAS
123, the Partnership's net income and earnings per share would have been as
indicated by the pro-forma amounts below:
<TABLE>
<CAPTION>
1997 1996 1995
---------------- --------
(IN THOUSANDS,
EXCEPT PER UNIT AMOUNTS)
<S> <C> <C> <C>
Net income
As reported..................................... $ 6,383 $ 49,337 $ 49,840
Pro forma....................................... $ 6,387 $ 49,318 $ 49,795
Basic earnings per unit
As reported and Pro forma....................... $ 0.25 $ 2.03 $ 2.05
Diluted earnings per unit
As reported and Pro forma....................... $ 0.25 $ 2.02 $ 2.05
</TABLE>
The fair value of each option is estimated on the date of grant using the
Black-Scholes option-pricing model. A portion of each option grant vests after
three, four and five years following the date of the grant. The assumptions
used for options granted in 1997, 1996 and 1995 are indicated below. The risk
free interest rate and expected life assumptions relate to the three, four and
five year vesting periods of the grant.
<TABLE>
<CAPTION>
YEAR OF DIVIDEND RISK-FREE EXPECTED
OPTION GRANT YIELD VOLATILITY INTEREST RATE LIFE (YEARS)
------------ -------- ---------- --------------- ----------------
<S> <C> <C> <C> <C>
1997 0% 19.6% 6.4%, 6.4%, 6.5% 3.25, 4.25, 5.25
1996 0% 13.0% 6.3%, 6.4%, 6.5% 3.25, 4.25, 5.25
1995 0% 13.0% 7.5%, 7.6%, 7.6% 3.25, 4.25, 5.25
</TABLE>
No dividend yield was assumed as the exercise price of the option is
adjusted downward during the term of the option to take account of the
dividends paid on the underlying stock that the option holder does not
receive.
A summary of the changes in the LP Unit options outstanding under the Option
Plan as of December 31, 1997, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------------ ------------------ ------------------
WEIGHTED WEIGHTED WEIGHTED
UNITS AVERAGE UNITS AVERAGE UNITS AVERAGE
UNDER EXERCISE UNDER EXERCISE UNDER EXERCISE
OPTION PRICE OPTION PRICE OPTION PRICE
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year................ 197,340 $15.36 186,240 $14.18 153,080 $13.82
Granted................. 51,900 21.07 72,000 19.00 60,500 17.22
Exercised............... (28,100) 13.74 (60,900) 12.06 (27,340) 9.33
-------- -------- --------
Outstanding at end of
year................... 221,140 15.51 197,340 15.36 186,240 14.18
======== ======== ========
Options exercisable at
year-end............... 20,140 5,040 7,000
Weighted average fair
value of options
granted during the
year................... $ 5.62 $ 4.41 $ 4.44
</TABLE>
35
<PAGE>
BUCKEYE PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table summarizes information relating to LP Unit options
outstanding under the Option Plan at December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------- --------------------------
OPTIONS WEIGHTED AVERAGE WEIGHTED OPTIONS WEIGHTED
RANGE OF OUTSTANDING REMAINING AVERAGE EXERCISABLE AVERAGE
EXERCISE PRICES AT 12/31/97 CONTRACTUAL LIFE EXERCISE PRICE AT 12/31/97 EXERCISE PRICE
--------------- ----------- ---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$ 6.00 to $10.00 13,940 5.1 Years $ 7.96 6,340 $ 6.64
$10.01 to $14.00 75,500 6.8 Years 12.81 3,000 10.78
$15.00 to $21.00 131,700 8.6 Years 17.85 10,800 15.42
------- ------
Total 221,140 7.8 Years 15.51 20,140 11.96
======= ======
</TABLE>
At December 31, 1997, there were 350,400 LP Units available for future
grants under the Option Plan.
13. EMPLOYEE STOCK OWNERSHIP PLAN
In connection with the Acquisition, the ESOP was formed for the benefit of
employees of the General Partner, the Manager and Glenmoor Partners, LLP. The
General Partner borrowed $63 million pursuant to a 15-year term loan from a
third-party lender. The General Partner then loaned $63 million to the ESOP,
which used the loan proceeds to purchase $63 million of Series A Convertible
Preferred Stock of BAC ("BAC Preferred Stock"). The BAC Preferred Stock had a
7.5% cumulative dividend rate and a conversion rate of approximately 7.7
shares of BAC common stock per share of BAC Preferred Stock.
In December 1996, the Board of Directors of the General Partner approved a
restructuring of the ESOP (the "ESOP Restructuring"). The ESOP Restructuring
was approved by a majority of the holders of the LP Units at a special meeting
held on August 11, 1997. On August 12, 1997, in connection with the ESOP
Restructuring, the Partnership issued an additional 2,573,146 LP Units which
are beneficially owned by the ESOP through Services Company. The market value
of the LP Units issued to Services Company was approximately $64.2 million. As
a result of the Partnership's issuance of the LP Units, the Partnership's
obligation to reimburse the General Partner for certain executive compensation
costs was permanently released, the incentive compensation paid by the
Partnership to the General Partner under the existing incentive compensation
agreement was reduced, and other changes were implemented to make the ESOP a
less expensive fringe benefit for the Partnership. The $64.2 million market
value of the LP Units issued was recorded as a deferred charge relating to the
ESOP Restructuring and is being amortized over 13.5 years. As a result of the
ESOP Restructuring, the $63 million loan from the third party lender became a
direct obligation of the ESOP and is secured by the stock of Services Company
and guaranteed by the General Partner and certain of its affiliates.
Total ESOP related costs charged to earnings during 1997 were $5,241,000
which included $2,805,000 of interest expense with respect to the ESOP loan,
$1,976,000 based upon the value of 1,976 shares of BAC Preferred Stock
released and allocated to employees accounts through August 12, 1997 and a
$460,000 provision ("top-up provision") representing the estimated difference
between distributions received on the LP Units and the total debt service
requirements under the ESOP loan. The 1,976 shares of BAC Preferred Stock that
were released and allocated to employees' accounts were subsequently exchanged
for 40,354 shares of Services Company stock during 1997.
Total ESOP related costs charged to earnings during 1996 were $5,596,000
which included $3,522,000 of interest expense with respect to the ESOP loan
and $2,074,000 based upon the value of
36
<PAGE>
BUCKEYE PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2,074 shares of BAC Preferred Stock released and allocated to employees'
accounts. The 2,074 shares of BAC Preferred Stock that were released and
allocated to employees' accounts in 1996 were converted to 42,355 shares of
Services Company stock in 1997.
Subsequent to August 12, 1997, the Partnership will not incur any additional
charges related to interest expense and shares released to employees' accounts
under the ESOP. The Partnership will, however, incur ESOP-related costs to the
extent that required contributions to the ESOP are in excess of distributions
received on the LP Units owned by Services Company, for taxes associated with
the sale and annual taxable income of the LP Units and for routine
administrative costs.
Services Company stock is released to employee accounts in the proportion
that current payments of principal and interest on the ESOP loan bear to the
total of all principal and interest payments due under the ESOP loan.
Individual employees are allocated shares based upon the ratio of their
eligible compensation to total eligible compensation. Eligible compensation
generally includes base salary, overtime payments and certain bonuses.
Allocated Services Company stock receives stock dividends in lieu of cash,
while cash dividends are used to pay principal and interest on the ESOP loan.
14. EARLY EXTINGUISHMENT OF DEBT
In December 1997, Buckeye entered into an agreement to issue $240.0 million
of Senior Notes (Series 1997A through 1997D) bearing interest ranging from
6.89 percent to 6.98 percent (see Note 8). The proceeds from the issuance of
the Senior Notes, plus additional amounts approximating $4.5 million, were
used to extinguish all of the First Mortgage Notes outstanding, totaling
$202.1 million. This debt extinguishment resulted in an extraordinary loss of
$42.4 million in 1997 consisting of $41.4 million of prepayment premium and
$1.0 million in fees and expenses.
15. LEASES AND COMMITMENTS
The Operating Partnerships lease certain land and rights-of-way. Minimum
future lease payments for these leases as of December 31, 1997 are
approximately $2.5 million for each of the next five years. Substantially all
of these lease payments can be canceled at any time should they not be
required for operations.
The Manager leases space in an office building and certain copying equipment
and Buckeye leases certain computing equipment and automobiles. The rent on
such leases is charged to the Operating Partnerships. Future minimum lease
payments under these noncancelable operating leases at December 31, 1997 were
as follows: $1,089,000 for 1998, $596,000 for 1999, $408,000 for 2000,
$371,000 for 2001, $359,000 for 2002 and $1,288,000 thereafter.
Buckeye is party to an energy services agreement in connection with the use
of main line pumping equipment and the natural gas requirements to fuel this
equipment at its Linden, New Jersey facility. Under the energy services
agreement, which is designed to reduce power costs at the Linden facility,
Buckeye is required to pay a minimum of $1,743,000 annually over the next
fourteen years. This minimum payment is based on an annual minimum usage
requirement of the natural gas engines at the rate of $0.049 per kilowatt hour
equivalent. In addition to the annual usage requirement, Buckeye is subject to
minimum usage requirements during peak and off-peak periods.
Rent expense for all operating leases was $6,606,000, $5,276,000 and
$5,161,000 for 1997, 1996 and 1995, respectively.
37
<PAGE>
BUCKEYE PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
16. RELATED PARTY TRANSACTIONS
The Partnership and the Operating Partnerships are managed by the General
Partner and the Manager. Under certain partnership agreements and management
agreements, the General Partner, the Manager, and certain related parties are
entitled to reimbursement of all direct and indirect costs related to the
business activities of the Partnership and the Operating Partnerships.
In connection with the ESOP Restructuring in 1997, the Manager's employees
were transferred to Services Company. Services Company employs all of the
employees previously employed by the Manager and has become the sponsor of all
of the employee benefit plans previously maintained by the Manager. Services
Company also entered into a Services Agreement with the General Partner and
the Manager to provide services to the Partnership and the Operating
Partnerships over a 13.5 year term. Services Company is reimbursed by the
General Partner or the Manager for its direct and indirect expenses, other
than as described below with respect to certain executive compensation, the
General Partner and the Manager are reimbursed by the Partnership and the
Operating Partnerships. Costs reimbursed to the General Partner, the Manager
or Services Company by the Partnership and the Operating Partnerships totaled
$57.2 million, $61.1 million and $55.4 million in 1997, 1996 and 1995,
respectively. The reimbursable costs include insurance, general and
administrative costs, compensation and benefits payable to officers and
employees of the General Partner, the Manager and Services Company, tax
information and reporting costs, legal and audit fees and an allocable portion
of overhead expenses. Compensation and benefit costs of the executive officers
of the General Partner were not charged to the Partnership after August 12,
1997 pursuant to the Exchange Agreement entered into among the General
Partner, the Partnership and the Operating Partnerships. Services Company,
which is beneficially owned by the ESOP, owns 2,573,146 LP Units
(approximately 9.6 percent of the LP Units outstanding). Distributions
received on such LP Units are used to fund obligations of the ESOP. From
August 12, 1997 through December 31, 1997 distributions paid to Services
Company totaled $2,483,000.
In 1986, Buckeye's predecessor ("Pipe Line") (then owned by a subsidiary of
American Financial) obtained an Administrative Consent Order ("ACO") from the
New Jersey Department of Environmental Protection and Energy under the New
Jersey Environmental Cleanup Responsibility Act of 1983 ("ECRA") for all six
of its facilities in New Jersey. The ACO required Pipe Line to conduct in a
timely manner a sampling plan for environmental contamination at the New
Jersey facilities and to implement any required clean-up plan. Sampling
continues in an effort to identify areas of contamination at the New Jersey
facilities, while clean-up operations have begun at certain of the sites. The
obligations of Pipe Line were not assumed by the Partnership or by BAC in
connection with the Acquisition and the costs of compliance have been and will
continue to be paid by American Financial. Through December 1997, Buckeye's
costs of approximately $2,546,000 have been funded by American Financial.
On July 18, 1995, the General Partner amended the Partnership Agreement to
reflect its agreement to continue to act as general partner of the Partnership
until December 23, 2006, a ten-year extension of its current term. In
connection therewith, the General Partner, the Partnership and American
Financial amended the Distribution Support Incentive Compensation and APU
Redemption Agreement dated December 23, 1986, which provides for incentive
compensation payable to the General Partner in the event quarterly or special
distributions to Unitholders exceed specified targets. Both amendments were
approved on behalf of the Partnership by a special committee of disinterested
directors of the General Partner.
In connection with the Acquisition in March 1996, the General Partner
amended the Partnership Agreement to (a) extend the period under which the
General Partner would agree to act as general
38
<PAGE>
BUCKEYE PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
partner of the Partnership until the later of (i) December 23, 2011 or (ii)
the date the ESOP loan is paid in full, (b) clarify that fair market value of
the GP Units includes the value of the right to receive incentive compensation
for purposes of determining the amount required to be paid to the General
Partner by any successor general partner of the Partnership, and (c) reduce
the threshold for payment of Restricted Payments by the General Partner or the
Manager from $23,000,000 to $5,000,000. The Partnership received an opinion of
counsel that the execution of the amendment to the Partnership Agreement would
not (a) result in the loss of limited liability of any Limited Partner or (b)
result in the Partnership or any Operating Partnership being treated as an
association taxable as a corporation for federal income tax purposes. The
amendment to the Partnership Agreement and related opinion of counsel were
approved on behalf of the Partnership by a special committee of disinterested
directors of the Partnership.
Also in March 1996, the General Partner amended and restated the Incentive
Compensation Agreement to delete American Financial as a party to the
agreement and clarify that the amended Incentive Compensation Agreement
terminates if the General Partner is removed as general partner of the
Partnership. The amended Incentive Compensation Agreement was approved on
behalf of the Partnership by a special committee of disinterested directors of
the Partnership.
In connection with the ESOP Restructuring in August 1997, the Unitholders
approved an amendment to the Partnership Agreement to (i) relieve the General
Partner of any obligation to make an additional capital contribution to the
Partnership upon the issuance of additional LP Units if the General Partner
receives a legal opinion that such additional capital contribution is not
required for the Partnership or any of its Operating Partnerships to avoid
being treated as an association taxable as a corporation for federal income
tax purposes and (ii) obligated any successor general partner, upon removal
and replacement of the General Partner by the holders of the LP Units, to the
obligations of the General Partner and its affiliates under the Exchange
Agreement and to consider this obligation in determining the value of the
general partnership interest which must be acquired by a successor general
partner.
Also in August 1997, the Partnership and the General Partner amended the
Amended and Restated Incentive Compensation Agreement to exclude the LP Units
held by Services Company from the incentive compensation calculation and to
reduce the amount of incentive compensation payable to the General Partner by
at least $121,000 per year at annual distribution levels below $2.10 and to
increase incentive compensation at annual distribution levels above $2.20.
Incentive compensation payments were $3.0 million, $1.3 million and $0.5
million in 1997, 1996 and 1995, respectively.
The management agreements between the Manager and the Operating Partnerships
were amended in August 1997 to include the provisions of the Exchange
Agreement dated August 12, 1997 among the Partnership, the Manager and certain
of their affiliates. The amended and restated agreements of limited
partnership of each of the Operating Partnerships were also amended as of
August 12, 1997 to exclude from the definition of reimbursable costs, any cost
or expense for which the General Partner and its affiliates are not entitled
to be reimbursed pursuant to the terms of the Exchange Agreement.
39
<PAGE>
BUCKEYE PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
17. PARTNERS' CAPITAL
Changes in partners' capital for the years ended December 31, 1995, 1996,
and 1997 were as follows:
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNER PARTNERS TOTAL
----------------------- -----------
(IN THOUSANDS, EXCEPT FOR UNITS)
<S> <C> <C> <C>
Partners' capital at January 1, 1995... $ 2,460 $ 243,516 $ 245,976
Net income............................. 498 49,342 49,840
Distributions.......................... (340) (33,669) (34,009)
Proceeds from exercise of unit options
and capital contributions............. 4 374 378
--------- ----------- -----------
Partners' capital at December 31,
1995.................................. 2,622 259,563 262,185
Net income............................. 493 48,844 49,337
Distributions.......................... (365) (36,162) (36,527)
Proceeds from exercise of unit options
and capital contributions............. 10 974 984
--------- ----------- -----------
Partners' capital at December 31,
1996.................................. 2,760 273,219 275,979
Net income............................. 85 6,298 6,383
Distributions.......................... (418) (43,887) (44,305)
Value of Units issued in connection
with ESOP Restructuring....... ....... -- 64,200 64,200
Proceeds from exercise of unit options
and capital contributions............. 5 516 521
--------- ----------- -----------
Partners' capital at December 31,
1997.................................. $ 2,432 $ 300,346 $ 302,778
========= =========== ===========
Units outstanding at January 1, 1995... 242,748 24,032,120 24,274,868
Units issued pursuant to the unit
option and distribution equivalent
plan and capital contributions........ 276 27,340 27,616
--------- ----------- -----------
Units outstanding at December 31,
1995.................................. 243,024 24,059,460 24,302,484
Units issued pursuant to the unit
option and distribution equivalent
plan and capital contributions........ 616 60,900 61,516
--------- ----------- -----------
Units outstanding at December 31,
1996.................................. 243,640 24,120,360 24,364,000
Units issued in connection with ESOP
Restructuring......................... -- 2,573,146 2,573,146
Units issued pursuant to the unit
option and distribution equivalent
plan and capital contributions........ 274 28,100 28,374
--------- ----------- -----------
Units outstanding at December 31,
1997.................................. 243,914 26,721,606 26,965,520
========= =========== ===========
</TABLE>
Historical Partnership Unit information has been restated to reflect two-
for-one unit split approved by the General Partner on January 20, 1998.
The net income per unit for 1997, 1996 and 1995 was calculated using the
weighted average outstanding units of 25,385,042, 24,346,706 and 24,292,248,
respectively.
40
<PAGE>
BUCKEYE PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Partnership Agreement provides that without prior approval of limited
partners of the Partnership holding an aggregate of at least two-thirds of the
outstanding LP Units, the Partnership cannot issue more than 9,600,000
additional LP Units, or issue any additional LP Units of a class or series
having preferences or other special or senior rights over the LP Units. At
December 31, 1997, the Partnership had the ability to issue up to 6,878,394
additional LP Units without prior approval of the Limited Partners of the
Partnership.
18. CASH DISTRIBUTIONS
The Partnership makes quarterly cash distributions to Unitholders 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. In 1997, quarterly distributions of $0.375
in February and May, $0.44 in August and $0.525 in November were paid per GP
and LP Unit. In 1996, quarterly distributions of $0.375 per GP and LP Unit
were paid in February, May, August and November. In 1995, quarterly
distributions of $0.35 per GP and LP Unit were paid in February, May, August
and November. All such distributions were paid on the then outstanding GP and
LP Units. Cash distributions aggregated $44,305,000 in 1997, $36,527,000 in
1996 and $34,009,000 in 1995.
On February 5, 1998, the General Partner announced a quarterly distribution
of $0.525 per GP and LP Unit payable on February 27, 1998.
19. QUARTERLY FINANCIAL DATA (NOT COVERED BY INDEPENDENT AUDITORS' REPORT)
Summarized quarterly financial data for 1997 and 1996 are set forth below.
Quarterly results were influenced by seasonal factors inherent in the
Partnership's business.
<TABLE>
<CAPTION>
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER TOTAL
--------------- --------------- --------------- ---------------- -----------------
1997 1996 1997 1996 1997 1996 1997 1996 1997 1996
------- ------- ------- ------- ------- ------- ------- ------- -------- --------
(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................. $43,815 $46,269 $46,398 $44,633 $47,333 $45,083 $47,435 $46,970 $184,981 $182,955
Operating income........ 16,844 17,330 16,646 12,979 18,593 17,621 19,992 20,854 72,075 68,784
Income before
extraordinary loss..... 11,526 11,658 11,381 10,259 12,730 12,017 13,170 15,403 48,807 49,337
Net income.............. 11,526 11,658 11,381 10,259 12,730 12,017 (29,254) 15,403 6,383 49,337
Earnings per Partnership
Unit:
Income before extraordi-
nary loss.............. 0.47 0.48 0.47 0.42 0.49 0.49 0.49 0.63 1.92 2.03
Net income.............. 0.47 0.48 0.47 0.42 0.49 0.49 (1.08) 0.63 0.25 2.03
Earnings per Partnership
Unit-assuming dilution:
Income before
extraordinary loss..... 0.47 0.48 0.47 0.42 0.49 0.49 0.49 0.63 1.91 2.02
Net income.............. 0.47 0.48 0.47 0.42 0.49 0.49 (1.08) 0.63 0.25 2.02
</TABLE>
The earnings per Partnership Unit presented above reflect a two-for-one unit
split approved by the General Partner on January 20, 1998.
41
<PAGE>
BUCKEYE PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
20. EARNINGS PER SHARE
The following is a reconciliation of basic and dilutive income before
extraordinary loss per Partnership Unit for the years ended December 31, 1997,
1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
----------------------- ----------------------- -----------------------
INCOME UNITS PER INCOME UNITS PER INCOME UNITS PER
(NUMER- (DENOMI- UNIT (NUMER- (DENOMI- UNIT (NUMER- (DENOMI- UNIT
ATOR) NATOR) AMOUNT ATOR) NATOR) AMOUNT ATOR) NATOR) AMOUNT
------- -------- ------ ------- -------- ------ ------- -------- ------
(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income before
extraordinary loss..... $48,807 $49,337 $49,840
------- ------- -------
Basic earnings per
Partnership Unit....... 48,807 25,385 $1.92 49,337 24,347 $2.03 49,840 24,292 $2.05
===== ===== =====
Effect of dilutive
securities--options.... -- 107 -- 62 -- 41
------- ------ ------- ------ ------- ------
Diluted earnings per
Partnership Unit....... $48,807 25,492 $1.91 $49,337 24,409 $2.02 $49,840 24,333 $2.05
======= ====== ===== ======= ====== ===== ======= ====== =====
</TABLE>
Options reported as dilutive securities are related to unexercised options
outstanding under the Option Plan (see Note 12).
42
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership does not have directors or officers. The executive officers
of the General Partner and the Manager perform all management functions for
the Partnership and the Operating Partnerships in their capacities as officers
and directors of the General Partner, the Manager and Services Company.
Directors and officers of the General Partner and the Manager are selected by
Glenmoor. See "Certain Relationships and Related Transactions."
DIRECTORS OF THE GENERAL PARTNER
Set forth below is certain information concerning the directors of the
General Partner.
<TABLE>
<CAPTION>
NAME, AGE AND PRESENT BUSINESS EXPERIENCE DURING
POSITION WITH GENERAL PARTNER PAST FIVE YEARS
- ----------------------------- --------------------------
<S> <C>
Alfred W. Martinelli, 70 Mr. Martinelli has been Chairman of the Board and
Chairman of the Board, Chief Executive Officer of the General Partner for
Chief Executive Officer more than five years. He has been a director of the
and Director* General Partner since October 1986. Mr. Martinelli
served as President of the General Partner from
February 1991 to February 1992. He was Chairman and
Chief Executive Officer of Penn Central Energy
Management Company ("PCEM"), for more than five
years, until his resignation in March 1996. Mr.
Martinelli was also Vice Chairman and a director of
American Financial and a director of American
Annuity Group, Inc., for more than five years, until
his resignation in March 1996.
C. Richard Wilson, 53 Mr. Wilson has been a director of the General
President, Chief Operat- Partner since February 1995. He was elected
ing Officer and Direc- President of the General Partner in March 1996 and
tor* was elected Chief Operating Officer in January 1997.
Mr. Wilson was elected Chairman of the Board of the
Manager in February 1995. He has been President and
Chief Operating Officer of the Manager since
February 1991.
Brian F. Billings, 59 Mr. Billings has been a director of the General
Director Partner since October 1986. He served as Chairman of
the Manager until February 1995. Mr. Billings was
President of PCEM from December 1986 to 1995.
Neil M. Hahl, 49 Mr. Hahl has been a director of the General Partner
Director* since September 1997. He is President of The
Weitling Group, a business consulting firm and a
director of American Capital Strategies, Ltd., a
specialty finance firm. Mr. Hahl was previously a
director of the Company from February, 1989 until
March, 1996 and served as President of the Company
from February, 1992 until March 1996. From January
1993 to August 1996, he was a Senior Vice President
of American Financial Group and its predecessor, The
Penn Central Corporation.
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE AND PRESENT BUSINESS EXPERIENCE DURING
POSITION WITH GENERAL PARTNER PAST FIVE YEARS
- ----------------------------- ----------------------------------------------------
<S> <C>
Edward F. Kosnik, 53 Mr. Kosnik has been a director of the General
Director Partner since October 1986. Since June 1997, he has
been President of Berwind Corporation, a diversified
company. Mr. Kosnik was Senior Executive Vice
President and Chief Operating Officer of Alexander &
Alexander Services, Inc. from May 1996 until January
1997. He was Executive Vice President and Chief
Financial Officer of Alexander & Alexander Services,
Inc. from August 1994 to April 1996. Mr. Kosnik was
Chairman of the Board, President and Chief Executive
Officer of JWP, Inc. from May 1993 through April
1994. He was Executive Vice President and Chief
Financial Officer of JWP, Inc. from December 1992 to
April 1993.
Jonathan O'Herron, 68 Mr. O'Herron has been a director of the General
Director Partner since September 1997. Since January 1993, he
has been Managing Director of Lazard Freres &
Company, LLC.
William C. Pierce, 57 Mr. Pierce has been a director of the General
Director Partner since February 1987. He was Executive Vice
President and Group Executive of Chemical Bank and
Chemical Banking Corporation from November 1992
until his retirement in July 1994.
Ernest R. Varalli, 67 Mr. Varalli has been a director of the General
Director* Partner since July 1987. He was Executive Vice
President, Chief Financial Officer and Treasurer for
more than five years until 1996. Mr. Varalli served
as Executive Vice President, Chief Financial Officer
and Treasurer of PCEM until his resignation in March
1996. Mr. Varalli had been a consultant to American
Financial, for more than five years, until March
1996.
Robert H. Young, 76 Mr. Young has been a director of the General Partner
Director since July 1987. Since October 1991, he has been
Counsel to the law firm of Morgan, Lewis & Bockius
LLP. Mr. Young is also Chairman of the Board of
Directors of Independence Blue Cross.
</TABLE>
- --------
* Also a director of the Manager and Services Company.
The General Partner has an Audit Committee, which currently consists of four
directors: Brian F. Billings, Neil M. Hahl, William C. Pierce and Robert H.
Young. Messrs. Billings, Hahl, Pierce and Young are neither officers nor
employees of the General Partner or any of its affiliates.
In addition, the General Partner has a Finance Committee, which currently
consists of five directors: Neil M. Hahl, Edward F. Kosnik, Jonathan O'Herron,
Ernest R. Varalli and C. Richard Wilson. The Finance Committee provides
oversight and advice with respect to the capital structure of the Partnership.
44
<PAGE>
EXECUTIVE OFFICERS OF THE MANAGER
The executive officers of the General Partner also serve as the executive
officers of the Manager and Services Company. Set forth below is certain
information concerning the executive officers of the General Partner, the
Manager and Services Company who, other than Mr. Wilson, are not also
directors of the General Partner, the Manager or Services Company.
<TABLE>
<CAPTION>
NAME, AGE AND PRESENT BUSINESS EXPERIENCE DURING
POSITION WITH GENERAL PARTNER PAST FIVE YEARS
- ----------------------------- --------------------------
<S> <C>
C. Richard Wilson, 53 Mr. Wilson has been President and Chief Operating
President, Chief Operat- Officer of the General Partner since March 1996 and
ing Officer and Director a director of the General Partner since February
1995. He has been President and Chief Operating
Officer of the Manager since February 1991. Mr.
Wilson has been a director of the Manager since
October 1986. He was named President and Chief
Operating Officer of Services Company in September
1997.
William H. Shea, Jr., 43 Mr. Shea was named Executive Vice President of the
Executive Vice President General Partner and Manager in September 1997. He
served as Vice President of Marketing and Business
Development of the General Partner and Manager from
March 1996 to September 1997. Mr. Shea was Vice
President--West Central Region of Laidlaw
Environmental Services from 1994 until 1995. He was
Vice President--Sales and Eastern Region Operations
of USPCI, Inc. (a subsidiary of Union Pacific
Corporation) from 1993 until 1994. Mr. Shea was Vice
President--Operations of USPCI, Inc. from 1989 until
1993. He was named Executive Vice President of
Services Company in September 1997. Mr. Shea is the
son-in-law of Mr. Alfred W. Martinelli.
Michael P. Epperly, 54 Mr. Epperly has been Senior Vice President--
Senior Vice President-- Operations of the General Partner since June 1996.
Operations He has been Senior Vice President of Operations of
the Manager since 1990. Mr. Epperly was named Senior
Vice President--Operations of Services Company in
September 1997.
Stephen C. Muther, 48 Mr. Muther has been Senior Vice President--
Senior Vice President-- Administration, General Counsel and Secretary of the
Administration, General General Partner since June 1996. He has been Senior
Counsel and Secretary* Vice President--Administration, General Counsel and
Secretary of the Manager since February 1995. Mr.
Muther served as General Counsel, Vice President--
Administration and Secretary of the Manager from May
1990 to February 1995. He was named Senior Vice
President--Administration, General Counsel and
Secretary of Services Company in September 1997.
Steven C. Ramsey, 43 Mr. Ramsey has been Senior Vice President--Finance
Senior Vice President-- and Chief Financial Officer of the General Partner
Finance and Chief Finan- and Manager since June 1996. He served as Vice
cial Officer President--Finance and Treasurer of the Manager from
February 1995 to June 1996. Mr. Ramsey served as
Vice President and Treasurer of the Manager from
February 1991 to February 1995. He was named Senior
Vice President--Finance and Chief Financial Officer
of Services Company in September 1997.
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE AND PRESENT BUSINESS EXPERIENCE DURING
POSITION WITH GENERAL PARTNER PAST FIVE YEARS
- ----------------------------- --------------------------
<S> <C>
David J. Martinelli, 37 Mr. Martinelli was named Vice President and
Vice President and Trea- Treasurer of the General Partner and Manager in
surer March 1997. He served as Treasurer of the General
Partner and Manager from June 1996 to March 1997.
Mr. Martinelli served as Assistant Treasurer of the
Manager from March 1996 to June 1996. He was
employed in a corporate financial position with
Salomon Brothers Inc. from 1993 until 1996. Mr.
Martinelli was named Vice President and Treasurer of
Services Company in September 1997. He is the son of
Mr. Alfred W. Martinelli.
</TABLE>
- --------
* Also Secretary of the General Partner since February 1992.
ITEM 11. EXECUTIVE COMPENSATION
DIRECTOR COMPENSATION
The fee schedule for directors of the General Partner is as follows: annual
fee, $15,000; attendance fee for each Board of Directors meeting, $1,000; and
attendance fee for each committee meeting, $750. Messrs. Martinelli, Varalli
and Wilson do not receive any additional compensation with respect to their
services as directors. Directors' fees paid by the General Partner in 1997 to
its directors amounted to $157,000. In connection with the ESOP Restructuring,
Mr. Pierce received an additional payment of $25,000 for serving as Chairman
of the Special Committee of the Board that reviewed the ESOP Restructuring;
Mr. Hahl received $120,300 for consulting services rendered to the
Partnership; and Mr. Varalli was paid a consulting fee in the amount of
$50,000. Each of these payments were reimbursed by the Partnership.
Members of the Board of Directors of the Manager and Services Company were
not compensated for their services as directors of these companies.
EXECUTIVE COMPENSATION
Prior to the consummation of the ESOP Restructuring on August 12, 1997,
executive officers of the General Partner and the Manager and other employees
of the Manager received compensation and benefits from the Manager which were
reimbursed by the Partnership and the Operating Partnerships. As part of the
ESOP Restructuring, the Partnership and the Operating Partnerships were
permanently released from their obligation to reimburse the General Partner or
the Manager for certain compensation and fringe benefit costs for executive
level duties performed by the General Partner and the Manager with respect to
operations, finance, legal, marketing and business development, and treasury,
as well as the President of the General Partner and the Manager. During 1997,
the Partnership or the Operating Partnerships reimbursed the General Partner
or the Manager an aggregate of $1.5 million for compensation and benefits with
respect to the executive officers of the General Partner and the Manager for
the period prior to August 12, 1997. See "Certain Relationships and Related
Transactions."
EXECUTIVE OFFICER SEVERANCE AGREEMENTS
Each of Messrs. Wilson, Ramsey, Muther and Epperly entered into severance
agreements with the General Partner, Services Company and Glenmoor providing
for the payment of severance compensation equal to the amount of base salary
and incentive compensation being paid to such individuals as of August 12,
1997 (the "Severance Compensation Amount"). The severance agreements provide
for payment of 1.5 times the Severance Compensation Amount upon termination of
such
46
<PAGE>
individual's employment without "cause" under certain circumstances not
involving a "change of control" of the Partnership, and 2.99 times such
individual's Severance Compensation Amount (subject to certain limitations)
following a "change of control". For purposes of the severance agreements, a
"change of control" is defined as the acquisition (other than by the General
Partner and its affiliates) of 80 percent or more of the LP Units of the
Partnership.
DIRECTOR RECOGNITION PROGRAM
The General Partner instituted a Director Recognition Program (the
"Recognition Program") in September 1997. The Recognition Program provides
that, upon retirement or death and subject to certain conditions, directors
receive a recognition benefit of up to three times their annual director's
fees (excluding attendance and committee fees) based upon their years of
service as a member of the Board of Directors of the General Partner. A
minimum of three full years of service as a member of the Board of Directors
of the General Partner is required for eligibility under the Recognition
Program. Members of the Board of Directors who are concurrently serving as an
officer or employee of the General Partner or its affiliates are not eligible
for the Recognition Program.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Services Company owns approximately 9.6 percent of the outstanding LP Units
as of February 17, 1998. No other person or group is known to be the
beneficial owner of more than 5 percent of the LP Units as of February 17,
1998.
The following table sets forth certain information, as of February 17, 1998,
concerning the beneficial ownership of LP Units by each director of the
General Partner, the Chief Executive Officer of the General Partner, the four
most highly compensated officers of the General Partner and the Manager and by
all directors and executive officers of the General Partner and the Manager as
a group. Such information is based on data furnished by the persons named.
Based on information furnished to the General Partner by such persons, no
director or executive officer of the General Partner or the Manager owned
beneficially, as of February 17, 1998, more than 1 percent of any class of
equity securities of the Partnership or any of its subsidiaries outstanding at
that date.
<TABLE>
<CAPTION>
NAME NUMBER OF LP UNITS(1)
---- ---------------------
<S> <C>
Brian F. Billings..................................... 15,000(2)
Michael P. Epperly.................................... 80(2)
Neil M. Hahl.......................................... 2,000(2)
Edward F. Kosnik...................................... 10,000(2)
Alfred W. Martinelli.................................. 9,000(2)
Stephen C. Muther..................................... 9,400
Jonathan O'Herron..................................... 14,800
William C. Pierce..................................... 1,600(2)
William H. Shea, Jr................................... 4,200(2)
Ernest R. Varalli..................................... 13,000(2)
C. Richard Wilson..................................... 5,000
Robert H. Young....................................... 5,000
All directors and executive officers as a group
(consisting of 14 persons, including those named
above)............................................... 90,680
</TABLE>
- --------
(1) Unless otherwise indicated, the persons named above have sole voting and
investment power over the LP Units reported.
(2) The LP Units owned by the persons indicated have shared voting and
investment power with their respective spouses.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Partnership and the Operating Partnerships are managed by the General
Partner and the Manager, respectively, pursuant to the Amended and Restated
Agreement of Limited Partnership
47
<PAGE>
(the "Partnership Agreement"), the several Amended and Restated Agreements of
Limited Partnership of the Operating Partnerships (the "Operating Partnership
Agreements") and the several Management Agreements between the Manager and the
Operating Partnerships (the "Management Agreements").
Under the Partnership Agreement and the Operating Partnership Agreements, as
well as the Management Agreements, the General Partner, the Manager and
certain related parties are entitled to reimbursement of all direct and
indirect costs and expenses related to the business activities of the
Partnership and the Operating Partnerships, except as otherwise provided by
the Exchange Agreement (as discussed below). These costs and expenses include
insurance fees, consulting fees, general and administrative costs,
compensation and benefits payable to employees of the General Partner and
Manager (other than certain executive officers), tax information and reporting
costs, legal and audit fees and an allocable portion of overhead expenses.
Such reimbursed amounts constitute a substantial portion of the revenues of
the General Partner and the Manager.
On March 22, 1996, BAC, now Glenmoor, acquired all of the common stock of
the General Partner from a subsidiary of American Financial for $63 million.
At that time, BAC was owned by Glenmoor Partners, LLP ("Old Glenmoor"), the
ESOP and certain director level employees of the Manager. Effective January 1,
1998, Old Glenmoor dissolved and BAC changed its name to Glenmoor, Ltd.
Glenmoor is owned by certain directors and members of senior management of the
General Partner or trusts for the benefit of their families and certain
director-level employees of Services Company.
In connection with the Acquisition, the General Partner borrowed $63 million
pursuant to a 15-year term loan from a third-party lender. The General Partner
then loaned $63 million to the ESOP, which used the proceeds to purchase the
BAC Preferred Stock.
On August 12, 1997, with approval of a majority interest of Unitholders at a
special meeting held on August 11, 1997, the Partnership restructured the ESOP
by replacing the ESOP's investment in BMC Acquisition Company Series A
convertible Preferred Stock stated value $1,000 per share (the "BAC Preferred
Stock"), with a beneficial ownership interest in LP Units (the "ESOP
Restructuring"). Pursuant to the LP Unit Subscription Agreement, dated August
12, 1997 (the "LP Unit Subscription Agreement"), the Partnership issued
2,573,146 LP Units to Services Company in exchange for the 63,000 shares of
BAC Preferred Stock owned by the ESOP. The BAC Preferred Stock received by the
Partnership in exchange for the issuance of LP Units to Services Company
(after being converted to BMC Acquisition Company Common Stock) was exchanged
for among other things (i) the permanent release of the Partnership's
obligation to reimburse the General Partner, and its affiliates for certain
senior executive compensation costs, and (ii) the reduction of the General
Partner's incentive compensation formula under the Incentive Compensation
Agreement (as discussed below).
In connection with the ESOP Restructuring, the ESOP Loan was also
restructured. The amount, term and interest rate applicable to the ESOP Loan
were not changed, but the ESOP became the direct borrower under the ESOP Loan
rather than the General Partner. The ESOP secured the ESOP Loan with, among
other things, a pledge of the LP Units held by Services Company. The ESOP Loan
is guaranteed by Glenmoor, the Manager, the General Partner and Services
Company. The distributions on the LP Units held by the ESOP will be used to
pay the principal and interest on the ESOP Loan. The General Partner will make
an additional contribution to the ESOP (the "top-up contribution"), if
necessary, to pay any balance due under the ESOP Loan. The top-up contribution
will be reimbursed by the Partnership to the extent it exceeds certain
reserves established by the General Partner for that purpose under the
Exchange Agreement.
The Partnership Agreement was amended as part of the ESOP Restructuring to,
among other things, (i) relieve the General Partner of any obligation to make
an additional capital contribution to the Partnership upon the issuance of
additional LP Units if the General Partner receives a legal
48
<PAGE>
opinion that such additional capital contribution is not required for the
Partnership or any of its Operating Partnerships to avoid being treated as an
association taxable as a corporation for federal income tax purposes, and (ii)
to bind any successor general partner, upon removal and replacement of the
General Partner by the Unitholders, to the obligations of the General Partner
and its affiliates under the Exchange Agreement and to consider this
obligation in determining the value of the general partnership interest which
must be acquired by a successor general partner.
In connection with the ESOP Restructuring the Manager's employees were
transferred to Services Company. Services Company employs all of the employees
previously employed by the Manager and has become the sponsor of all of the
employee benefit plans previously maintained by the Manager. Services Company
also entered into a Services Agreement with the General Partner and the
Manager to provide services to the Partnership and the Operating Partnerships
over a 13.5 year term. Services Company is reimbursed by the General Partner
or the Manager for its direct and indirect expenses. Costs reimbursed to the
General Partner, the Manager or Services Company by the Partnership and the
Operating Partnerships totaled $57.2 million and $61.1 million in 1997 and
1996, respectively. Reimbursements for 1997 included $3.1 million in Old
Glenmoor management fees (discussed below) while reimbursed costs for 1996
included $3.3 million in Old Glenmoor management fees and $341,000 of American
Financial allocated expenses. Compensation and benefit costs of certain
executive officers of the General Partner were not charged to the Partnership
after August 12, 1997 pursuant to the Exchange Agreement.
On March 22, 1996, the General Partner entered into the Glenmoor Management
Agreement pursuant to which Old Glenmoor agreed to provide certain management
functions to the General Partner and the Manager. Old Glenmoor received an
annual management fee, which was approved each year by the disinterested
directors of the General Partner. The management fee included a Senior
Administrative Charge of not less than $975,000, reimbursement for certain
compensation costs and expenses and participation of Old Glenmoor employees in
the Manager's employee benefit plans, including the ESOP. Amounts paid in 1997
to Old Glenmoor for management fees equaled $3.1 million, including $1.0
million for the Senior Administrative Charge and $2.1 million of reimbursed
expenses. Following the dissolution of Old Glenmoor at the end of fiscal 1997,
Glenmoor now receives the Senior Administrative Charge and is reimbursed for
its expenses for services rendered under the Glenmoor Management Agreement.
On August 12, 1997, as part of the ESOP Restructuring, the Incentive
Compensation Agreement was amended to change the target and payment
thresholds. The General Partner also agreed not to receive any incentive
compensation in respect of distributions on the LP Units issued pursuant to
the ESOP Restructuring. The Incentive Compensation Agreement, as subsequently
amended to reflect the two-for-one LP Unit split effective on January 29,
1998, provides that, subject to certain limitations and adjustments, if a
quarterly cash distribution exceeds a target of $0.325 per LP Unit, the
Partnership will pay the General Partner, in respect of each outstanding LP
Unit, incentive compensation equal to (i) 15 percent of that portion of the
distribution per LP Unit which exceeds the target quarterly amount of $0.325
but is not more than $0.35, plus (ii) 25 percent of the amount, if any, by
which the quarterly distribution per LP Unit exceeds $0.35 but is not more
than $0.375, plus (iii) 35 percent of the amount, if any, by which the
quarterly distribution per LP Unit exceeds $0.375 but is not more than $0.425,
plus (iv) 40 percent of the amount, if any, by which the quarterly
distribution per LP Unit exceeds $0.425 but is not more than $0.525, plus (v)
45 percent of the amount, if any, by which the quarterly distribution per LP
Unit exceeds $0.525. The General Partner is also entitled to incentive
compensation, under a comparable formula, in respect of special cash
distributions exceeding a target special distribution amount per LP Unit. The
target special distribution amount generally means the amount which, together
with all amounts distributed per LP Unit prior to the special distribution
compounded quarterly at 13 percent per annum, would equal $10.00 (the initial
public offering price of the LP Units split two-for-one) compounded quarterly
at 13 percent per annum from
49
<PAGE>
the date of the closing of the initial public offering in December 1986.
Incentive compensation paid by the Partnership to the General Partner for
quarterly cash distributions totaled $3,042,000 and $1,326,000 in 1997 and
1996 respectively. No special cash distributions have ever been paid by the
Partnership.
On February 5, 1998, the General Partner announced a quarterly distribution
of $0.525 per GP and LP Unit payable on February 27, 1998. As such
distribution exceeds a target of $0.325 per LP Unit, the Partnership will pay
the General Partner incentive compensation aggregating $1.6 million as a
result of this distribution.
50
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this Report:
(1) and (2) Financial Statements and Financial Statement Schedule--see
Index to Financial Statements and Financial Statement Schedule appearing on
page 20.
(3) Exhibits, including those incorporated by reference. The following is
a list of exhibits filed as part of this Annual Report on Form 10-K. Where
so indicated by footnote, exhibits which were previously filed are
incorporated by reference. For exhibits incorporated by reference, the
location of the exhibit in the previous filing is indicated in parentheses.
<TABLE>
<CAPTION>
EXHIBIT NUMBER
(REFERENCED TO
ITEM 601 OF
REGULATION S-K)
---------------
<C> <S>
*3.1 --Amended and Restated Agreement of Limited Partnership of the
Partnership, dated as of February 25, 1998.
*3.2 --Amended and Restated Certificate of Limited Partnership of
the Partnership, dated as of February 4, 1998.
*4.1 --Amended and Restated Indenture of Mortgage and Deed of Trust
and Security Agreement, dated as of December 16, 1997, by
Buckeye to PNC Bank, National Association, as Trustee.
*4.2 --Note Agreement, dated as of December 16, 1997, between
Buckeye and The Prudential Insurance Company of America.
*4.3 --Defeasance Trust Agreement, dated as of December 16, 1997,
between and among PNC Bank, National Association, and Douglas
A. Wilson, as Trustees.
4.4 --Certain instruments with respect to long-term debt of the
Operating Partnerships which relate to debt that does not
exceed 10 percent of the total assets of the Partnership and
its consolidated subsidiaries are omitted pursuant to Item
601(b) (4) (iii) (A) of Regulation S-K, 17 C.F.R. (S)229.601.
The Partnership hereby agrees to furnish supplementally to
the Securities and Exchange Commission a copy of each such
instrument upon request.
10.1 --Amended and Restated Agreement of Limited Partnership of
Buckeye, dated as of December 23, 1986.(1)(2) (Exhibit 10.1)
*10.2 --Amendment No. 1 to the Amended and Restated Agreement of
Limited Partnership of Buckeye, dated as of August 12, 1997.
10.3 --Management Agreement, dated November 18, 1986, between the
Manager and Buckeye.(1)(3) (Exhibit 10.4)
10.4 --Management Agreement, dated November 18, 1986 between the
General Partner, Buckeye and Glenmoor.(7) (Exhibit 10.2).
*10.5 --Amendment to Management Agreement dated as of August 12,
1997 between the General Partner, Buckeye and Glenmoor.
10.6 --Amended and Restated Incentive Compensation Agreement, dated
as of March 22, 1996, between the General Partner and the
Partnership.(7) (Exhibit 10.4)
*10.7 --Amendment No. 1 to Amended and Restated Incentive
Compensation Agreement dated as of August 12, 1997 between
the General Partner and the Partnership.
*10.8 --Amendment No. 2 to Amended and Restated Incentive
Compensation Agreement dated as of January 20, 1998 between
the General Partner and the Partnership.
</TABLE>
51
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER
(REFERENCED TO
ITEM 601 OF
REGULATION S-K)
---------------
<C> <S>
*10.9 --Services Agreement, dated as of August 12, 1997, among the
General Partner, the Manager and Services Company.
*10.10 --Exchange Agreement, dated as of August 12, 1997, among the
General Partner, the Manager the Partnership and the
Operating Partnerships.
10.11 --Unit Option and Distribution Equivalent Plan of Buckeye
Partners, L.P.(4)(5) (Exhibit 10.10)
10.12 --Buckeye Management Company Unit Option Loan Program.(4)(5)
(Exhibit 10.11)
*10.13 --Form of Executive Officer Severance Agreement
21.1 --List of subsidiaries of the Partnership.(7) (Exhibit 21.1)
*27 --Financial Data Schedule
</TABLE>
- --------
(1) Previously filed with the Securities and Exchange Commission as the
Exhibit to the Buckeye Partners, L.P. Annual Report on Form 10-K for the
year 1986.
(2) The Amended and Restated Agreements of Limited Partnership of the other
Operating Partnerships are not filed because they are identical to Exhibit
10.1 except for the identity of the partnership.
(3) The Management Agreements of the other Operating Partnerships are not
filed because they are identical to Exhibit 10.4 except for the identity
of the partnership.
(4) Represents management contract or compensatory plan or arrangement.
(5) Previously filed with the Securities and Exchange Commission as the
Exhibit to the Buckeye Partners, L.P. Quarterly Report on Form 10-Q for
the quarter ended September 30, 1991.
(6) Previously filed with the Securities and Exchange Commission as the
Exhibit to the Buckeye Partners, L.P. Quarterly Report on Form 10-Q for
the quarter ended June 30, 1995.
(7) Previously filed with the Securities and Exchange Commission as the
Exhibit to the Buckeye Partners, L.P. Annual Report on Form 10-K for the
year 1995.
* Filed herewith
(b) Reports on Form 8-K filed during the quarter ended December 31, 1997:
None
52
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OF 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
Buckeye Partners, L.P.
(Registrant)
By: Buckeye Management Company,
as General Partner
/s/ Alfred W. Martinelli
Dated: March 10, 1998 By: _________________________________
Alfred W. Martinelli
Chairman of the Board
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
/s/ Brian F. Billings
Dated: March 10, 1998 By: _________________________________
Brian F. Billings
Director
/s/ Neil M. Hahl
Dated: March 10, 1998 By: _________________________________
Neil M. Hahl
Director
/s/ Edward F. Kosnik
Dated: March 10, 1998 By: _________________________________
Edward F. Kosnik
Director
/s/ Jonathan O'Herron
Dated: March 10, 1998 By: _________________________________
Jonathan O'Herron
Director
/s/ Alfred W. Martinelli
Dated: March 10, 1998 By: _________________________________
Alfred W. Martinelli
Chairman of the Board and
Director(Principal Executive
Officer)
/s/ William C. Pierce
Dated: March 10, 1998 By: _________________________________
William C. Pierce
Director
/s/ Ernest R. Varalli
Dated: March 10, 1998 By: _________________________________
Ernest R Varalli
Director
/s/ C. Richard Wilson
Dated: March 10, 1998 By: _________________________________
C. Richard Wilson
President, Chief Operating
Officer and Director
/s/ Robert H. Young
Dated: March 10, 1998 By: _________________________________
Robert H. Young
Director
53
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners of Buckeye Partners, L.P.:
We have audited the consolidated financial statements of Buckeye Partners,
L.P. and its subsidiaries as of December 31, 1997 and 1996, and for each of
the three years in the period ended December 31, 1997, and have issued our
report thereon dated January 23, 1998; such report is included elsewhere in
this Form 10-K. Our audits also included the consolidated financial statement
schedule of Buckeye Partners, L.P. and subsidiaries referred to in Item 14.
This consolidated financial statement schedule is the responsibility of the
Partnership's management. Our responsibility is to express an opinion based on
our audits. In our opinion, the consolidated financial statement schedule,
when considered in relation to the basic consolidated financial statements
taken as a whole, presents fairly in all material respects the information set
forth therein.
Deloitte & Touche LLP
Philadelphia, Pennsylvania
January 23, 1998
S-1
<PAGE>
SCHEDULE 1
BUCKEYE PARTNERS, L.P.
REGISTRANT'S CONDENSED FINANCIAL STATEMENTS
(IN THOUSANDS)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1997 1996
-------- --------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents.................................. $ 469 $ 1,210
Temporary investments...................................... 740 5,273
Other current assets....................................... 554 73
-------- --------
Total current assets...................................... 1,763 6,556
Investments in and advances to subsidiaries (at equity).... 302,265 275,620
-------- --------
Total assets.............................................. $304,028 $282,176
======== ========
Liabilities and partners' capital
Current liabilities......................................... $ 1,250 $ 6,197
-------- --------
Partners' capital
General Partner............................................ 2,432 2,760
Limited Partner............................................ 300,346 273,219
-------- --------
Total partners' capital................................... 302,778 275,979
-------- --------
Total liabilities and partners' capital................... $304,028 $282,176
======== ========
</TABLE>
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Equity in income of subsidiaries.................... $ 9,418 $50,674 $50,388
Operating credits (expenses)........................ 17 (8) (29)
Interest income..................................... 48 55 20
Interest and debt expense........................... (58) (58) (58)
Incentive compensation to General Partner........... (3,042) (1,326) (481)
------- ------- -------
Net income...................................... $ 6,383 $49,337 $49,840
======= ======= =======
STATEMENTS OF CASH FLOWS
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income........................................ $ 6,383 $49,337 $49,840
Adjustments to reconcile net income to net cash
provided by operating activities:
Decrease (increase) in investment in subsidiar-
ies............................................. 37,555 (13,590) (16,341)
Change in assets and liabilities:
Temporary investments........................... 4,533 (4,378) 1,360
Other current assets............................ (481) (29) (14)
Current liabilities............................. (4,947) 1,204 2,954
------- ------- -------
Net cash provided by operating activities....... 43,043 32,544 37,799
Cash flows from financing activities:
Capital contributions............................. 5 10 4
Proceeds from exercise of unit options............ 516 974 374
Distributions to Unitholders...................... (44,305) (36,527) (34,009)
------- ------- -------
Net (decrease) increase in cash and cash equiva-
lents............................................ (741) (2,999) 4,168
Cash and cash equivalents at beginning of period.. 1,210 4,209 41
------- ------- -------
Cash and cash equivalents at end of period........ $ 469 $ 1,210 $ 4,209
======= ======= =======
Supplemental cash flow information:
Non-cash change from issuance of LP Units........ $64,200 -- --
Non-cash change in investments in subsidiaries... $64,200 -- --
</TABLE>
See footnotes to consolidated financial statements of Buckeye Partners, L.P.
S-2
<PAGE>
AMENDED AND RESTATED AGREEMENT
OF
LIMITED PARTNERSHIP
OF
BUCKEYE PARTNERS, L.P.
(AS AMENDED AND RESTATED THROUGH FEBRUARY 25, 1998)
<PAGE>
BUCKEYE PARTNERS, L.P.
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
"Affiliate" 1
"Agent" 1
"Agreed Value" 1
"Agreement" 1
"BMC" 2
"Business Day" 2
"Capital Accounts" 2
"Capital Contribution" 2
"Carrying Value" 2
"Certificate of Limited Partnership" 2
"Code" 2
"Contributed Property" 2
"Contributing Partner" 2
"Delaware Act" 2
"Designated Expenses" 2
"Eighty Percent Interest" 3
"ESOP" 3
"ESOP Loan" 3
"Exchange Act" 3
"Exchange Agreement" 3
"First Mortgage Notes" 3
"General Partner" 3
"GP Unit" 3
"Incentive Compensation Agreement" 3
"Indemnitee" 3
"Issue Price" 4
"Limited Partner" 4
"Liquidator" 4
"LP Certificate" 4
"LP Unit" 4
"Majority Interest" 4
"Management Agreements" 4
i
<PAGE>
"Manager" 4
"Mortgage Note Indenture" 4
"NASDAQ" 4
"National Securities Exchange" 4
"Net Agreed Value" 4
"Operating Partnership Agreements" 5
"Operating Partnerships" 5
"Opinion of Counsel" 5
"Organizational Limited Partner" 5
"Partner" 5
"Partnership" 5
"Partnership Interest" 5
"Percentage Interest" 5
"Person" 5
"Pipe Line" 5
"Recapture Income" 5
"Record Date" 5
"Record Holder" or "Holder" 6
"Restricted Payment" 6
"Securities Act" 6
"Time of Delivery" 6
"Transfer Agent" 6
"Two-Thirds Interest" 6
"Unit" 6
"Unit Price" 6
"Units Register" 6
"Unrealized Gain" 6
"Unrealized Loss" 7
ARTICLE II
ORGANIZATIONAL MATTERS
2.1 Formation 7
2.2 Name 7
2.3 Principal Office; Registered Office 7
2.4 Power of Attorney 7
2.5 Term 9
2.6 Organizational Limited Partner 9
2.7 Organizational Certificate 9
ii
<PAGE>
ARTICLE III
PURPOSE
3.1 Purpose 9
ARTICLE IV
CAPITAL CONTRIBUTIONS; PURCHASES PURSUANT
TO PURCHASE AGREEMENTS; ADDITIONAL ISSUANCES
4.1 General Partner Contributions 10
4.2 Limited Partner Contributions 10
4.3 Issuances of Additional LP Units and Other Securities 10
4.4 No Preemptive Rights 11
4.5 No Interest 11
4.6 Loans from Partners 11
4.7 No Withdrawal 11
ARTICLE V
CAPITAL ACCOUNTS; DISTRIBUTIONS
5.1 Capital Accounts 11
5.2 Distributions in Respect of Units 13
ARTICLE VI
INCOME TAX MATTERS
6.1 Tax Allocations 14
6.2 Preparation of Tax Returns 15
6.3 Tax Elections 15
6.4 Tax Controversies 15
6.5 Withholding 15
ARTICLE VII
MANAGEMENT AND OPERATION OF BUSINESS; INDEMNIFICATION
7.1 Powers of General Partner 15
7.2 Duties of General Partner 17
7.3 Reliance by Third Parties 17
iii
<PAGE>
7.4 Compensation and Reimbursement of the General Partner 18
7.5 Purchase or Sale of LP Units 18
7.6 Partnership Funds 18
7.7 Outside Activities; Contracts with Affiliates; Loans to or
from Affiliates 18
7.8 Tax Basis and Value Determinations 20
7.9 Resolution of Conflicts of Interest; Standard of Care 20
7.10 Other Matters Concerning the General Partner 20
7.11 Limited Liability; Indemnification 21
ARTICLE VIII
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
8.1 Limitation of Liability 22
8.2 Management of Business 22
8.3 Outside Activities 22
8.4 Return of Capital 23
8.5 Rights of Limited Partners Relating to the Partnership 23
ARTICLE IX
BOOKS, RECORDS, ACCOUNTING AND REPORTS
9.1 Books, Records and Accounting 24
9.2 Fiscal Year 24
9.3 Reports 24
ARTICLE X
ISSUANCE OF LP CERTIFICATES; TRANSFER AND EXCHANGE OF LP UNITS
10.1 Initial Issuance of LP Certificates 24
10.2 Registration, Registration of Transfer and Exchange 25
10.3 Mutilated, Destroyed, Lost or Stolen LP Certificates 25
10.4 Persons Deemed Owners 26
ARTICLE XI
TRANSFER OF GP UNITS
11.1 Transfer of GP Units 26
11.2 Successor General Partner 26
iv
<PAGE>
ARTICLE XII
ADMISSION OF INITIAL, SUBSTITUTED AND ADDITIONAL
LIMITED PARTNERS AND SUCCESSOR GENERAL PARTNER
12.1 Admission of Initial Limited Partners 27
12.2 Admission of Substituted Limited Partners 27
12.3 Admission of Successor General Partner 27
12.4 Admission of Additional Limited Partners 27
12.5 Amendment of Agreement and Certificate of Limited Partnership 28
ARTICLE XIII
WITHDRAWAL OR REMOVAL OF THE GENERAL PARTNER
13.1 Withdrawal or Removal of the General Partner 28
13.2 Sale of Former General Partner's Interest 29
ARTICLE XIV
DISSOLUTION AND LIQUIDATION
14.1 Dissolution 29
14.2 Reconstitution 30
14.3 Liquidation 30
14.4 Distribution in Kind 31
14.5 Cancellation of Certificate of Limited Partnership 32
14.6 Return of Capital 32
14.7 Waiver of Partition 32
ARTICLE XV
AMENDMENT OF PARTNERSHIP AGREEMENT
15.1 Amendments Which May be Adopted Solely by the General Partner 32
15.2 Other Amendments 33
15.3 Amendment Requirements 33
ARTICLE XVI
MEETINGS
16.1 Meetings 34
16.2 Record Date. 34
v
<PAGE>
16.3 Conduct of Meeting 34
16.4 Action Without a Meeting 34
ARTICLE XVII
CERTAIN RESTRICTIONS
17.1 Additional Units 35
17.2 Additional Indebtedness 35
17.3 Capital Expenditures 35
17.4 Certain Amendments 36
17.5 Sale of Assets 36
17.6 Restricted Payments by General Partner or Manager 36
ARTICLE XVIII
RIGHT TO PURCHASE UNITS
18.1 Right to Purchase Units 37
18.2 Notice of Election to Purchase 37
18.3 Purchase and Transfer of Units 37
ARTICLE XIX
GENERAL PROVISIONS
19.1 Opinions Regarding Taxation as a Partnership 38
19.2 Personal Property 38
19.3 Addresses and Notices 38
19.4 Headings 38
19.5 Binding Effect 38
19.6 Integration 38
19.7 Waiver 38
19.8 Counterparts 39
19.9 Severability 39
19.10 Applicable Law 39
vi
<PAGE>
AMENDED AND RESTATED AGREEMENT
OF
LIMITED PARTNERSHIP
OF
BUCKEYE PARTNERS, L.P.
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP, dated as of
December 23, 1986 (as amended and restated through February 25, 1998), is
entered into by and among BUCKEYE MANAGEMENT COMPANY, a Delaware corporation,
PENNSYLVANIA COMPANY, a Delaware corporation, and the additional Persons that
become Partners of the Partnership as provided herein.
ARTICLE I
DEFINITIONS
The following definitions shall for all purposes, unless otherwise clearly
indicated to the contrary, apply to the terms used in this Agreement.
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls, is controlled by, or is under common control
with the Person in question; provided, however, that, for purposes of the
restrictive provisions of Sections 7.6, 7.7 and 7.9, neither the Partnership nor
any of the Operating Partnerships nor any of their respective subsidiaries shall
be deemed to be affiliates of the General Partner. As used herein, the term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through ownership of voting securities, by contract or otherwise. For purposes
of this Agreement, Buckeye Pipe Line Services Company, a Pennsylvania
corporation which provides services to the General Partner and the Manager,
shall be deemed an Affiliate of the General Partner.
"Agent" has the meaning specified in Section 2.4.
"Agreed Value" of any Contributed Property means the fair market value of
such property as of the time of contribution (or, in the case of cash, the
amount thereof), as determined by the General Partner using such reasonable
method of valuation as it may adopt.
"Agreement" means this amended and restated agreement of limited
partnership, as amended or amended and restated from time to time.
1
<PAGE>
"BMC" means Buckeye Management Company, a Delaware corporation.
"Business Day" means any day other than a Saturday, a Sunday, or a legal
holiday recognized as such by the Government of the United States or the State
of New York.
"Capital Accounts" mean the capital accounts maintained with respect to
Units pursuant to Section 5.1(a).
"Capital Contribution" means any Contributed Property which a Partner
contributes to the Partnership.
"Carrying Value" means (a) with respect to Contributed Property, the
Agreed Value of such property reduced as of the time of determination (but not
below zero) by (i) all depreciation, cost recovery and amortization deductions
charged to the Capital Accounts pursuant to Section 5.1(a) with respect to such
property and (ii) an appropriate amount to reflect any sales, retirements and
other dispositions of assets included in such property, and (b) with respect to
any other property, the adjusted basis of such property for federal income tax
purposes as of the time of determination, in any case as may be adjusted from
time to time pursuant to Section 5.1(f).
"Certificate of Limited Partnership" means the Amended and Restated
Certificate of Limited Partnership filed with the Secretary of State of the
State of Delaware as described in the first sentence of Section 2.7, as amended
or restated from time to time.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Contributed Property" means any cash, property or other consideration (in
such form as may be permitted under the Delaware Act) contributed to the
Partnership.
"Contributing Partner" means any Partner contributing Contributed Property
to the Partnership in exchange for Units (or any transferee of such Units).
"Delaware Act" means the Delaware Revised Uniform Limited Partnership Act,
as amended from time to time, and any successor to such Act.
"Designated Expenses" mean all costs and expenses (direct or indirect)
incurred by the General Partner which are directly or indirectly related to the
formation, capitalization, business or activities of the Partnership and the
Operating Partnerships (including, without limitation, expenses, direct or
indirect, reasonably allocated to the General Partner by its Affiliates);
provided, however, that Designated Expenses shall not include (a) any cost or
expense for which the General Partner is not entitled to be reimbursed by reason
of the proviso at the end of Section 7.11(b), (b) severance costs not permitted
to be reimbursed pursuant to the Management Agreements in connection with the
withdrawal of the Manager, (c) any amounts which the General Partner receives as
incentive compensation under the Incentive Compensation
2
<PAGE>
Agreement and pays over to officers or employees of the Manager or (d) any cost
or expense for which the General Partner and its Affiliates are not entitled to
be reimbursed pursuant to the terms of the Exchange Agreement.
"Eighty Percent Interest" means Limited Partners holding an aggregate of
at least 80% of the outstanding LP Units.
"ESOP" means the Buckeye Pipe Line Services Company Employee Stock
Ownership Plan, as amended.
"ESOP Loan" means the loan to the ESOP due March 28, 2011 in the original
principal amount of $62,625,000 and guaranteed by the General Partner and
certain of its Affiliates, and shall include any loans refinancing such loan.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, and any successor to such statute.
"Exchange Agreement" means the Exchange Agreement, dated as of August 12,
1997, among the General Partner, the Manager, the Partnership and each of the
Operating Partnerships and Glenmoor, Ltd., a Delaware corporation, as amended or
restated from time to time.
"First Mortgage Notes" mean the $300 million aggregate principal amount of
First Mortgage Notes due serially from 1988 to 2006 to be issued by Buckeye Pipe
Line Company, L.P., a Delaware limited partnership, at or around the Time of
Delivery and shall include any successor instruments, including the "Senior
Notes" which consist of $125,000,000 principal amount of 6.98% Senior Notes due
2024, the $100,000,000 principal amount of 6.89% Senior Notes due 2024, the
$10,000,000 principal amount of 6.95% Senior Notes due 2024 and the $5,000,000
principal amount of 6.96% Senior Notes due 2024 to be issued by Buckeye Pipe
Line Company, L.P., a Delaware limited partnership and shall include any
successor instruments and other notes permitted by the Indenture.
"General Partner" means BMC, in its capacity as the general partner of the
Partnership, and any successor to BMC as such general partner.
"GP Unit" means a Partnership Interest issued pursuant to Section 4.1 and
representing a general partner's interest in the Partnership.
"Incentive Compensation Agreement" means the incentive compensation
agreement, dated as of March 22, 1996, between BMC and the Partnership, as
amended or restated from time to time.
"Indemnitee" means the General Partner, any Affiliate of the General
Partner, any Person who is or was a director, officer, employee or agent of the
General Partner or any such Affiliate,
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or any Person who is or was serving at the request of the General Partner or any
such Affiliate as a director, officer, partner, trustee, employee or agent of
another Person.
"Issue Price" means the price at which a Unit is purchased from the
Partnership.
"Limited Partner" means any limited partner of the Partnership.
"Liquidator" has the meaning specified in Section 14.3.
"LP Certificate" means a certificate issued by the Partnership,
substantially in the form of Annex A to this Agreement, evidencing ownership of
one or more LP Units.
"LP Unit" means a Partnership Interest issued pursuant to Section 4.2 or
4.3 and representing a limited partner's interest in the Partnership.
"Majority Interest" means Limited Partners holding an aggregate of more
than 50% of the outstanding LP Units.
"Management Agreements" mean the management agreements, dated as of
November 18, 1986, pursuant to which the Manager will manage the Operating
Partnerships, in each case as amended or restated from time to time.
"Manager" means Pipe Line, in its capacity as the general partner and
manager of the Operating Partnerships, and any successor to Pipe Line as such
general partner and manager.
"Mortgage Note Indenture" means the indenture pursuant to which the First
Mortgage Notes were issued as amended or amended and restated from time to time
and shall include any successor instruments, including the "Indenture" pursuant
to which the Senior Notes were issued, as the same may be amended or amended and
restated from time to time and shall include any successor instruments.
"NASDAQ" means the National Association of Securities Dealers Automated
Quotation System.
"National Securities Exchange" means an exchange registered with the
Securities and Exchange Commission under Section 6(a) of the Exchange Act.
"Net Agreed Value" means (a) in the case of any Contributed Property, the
Agreed Value of such Contributed Property reduced by any indebtedness either
assumed by the Partnership upon contribution of such Contributed Property or to
which such Contributed Property is subject when contributed, (b) in the case of
any property distributed to a Partner pursuant to Section 5.2, 14.3 or 14.4, the
fair market value of such property at the time of such distribution reduced by
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any indebtedness either assumed by such Partner upon such distribution or to
which such property is subject at the time of distribution.
"Operating Partnership Agreements" mean the amended and restated
agreements of limited partnership, dated as of December 23, 1986, governing the
rights and obligations of the partners of the Operating Partnerships and certain
related matters, as amended or restated from time to time.
"Operating Partnerships" mean Buckeye Pipe Line Company, L.P., Buckeye
Pipe Line Company of Michigan, 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.
"Opinion of Counsel" means a written opinion of counsel (who may be
regular counsel of the General Partner or any of its Affiliates) acceptable to
the General Partner.
"Organizational Limited Partner" means Pennsylvania Company, a Delaware
corporation, acting as the organizational limited partner pursuant to this
Agreement.
"Partner" means the General Partner or a Limited Partner.
"Partnership" means Buckeye Partners, L.P., a Delaware limited
partnership.
"Partnership Interest" means a general partner's or limited partner's
interest in the Partnership.
"Percentage Interest" means, with respect to any Partner, the number of
Units held by such Partner divided by the number of Units outstanding.
"Person" means an individual, a corporation, a limited liability company,
a partnership, a trust, an unincorporated organization, an association or any
other entity.
"Pipe Line" means Buckeye Pipe Line Company, a Delaware corporation.
"Recapture Income" means any gain recognized by the Partnership upon the
disposition of any asset of the Partnership that is not a capital gain due to
the recapture of certain deductions previously taken with respect to such asset.
"Record Date" means the date established by the General Partner for
determining the identity of Limited Partners entitled (a) to notice of or to
vote at any meeting of Limited Partners, to vote by ballot or approve
Partnership action in writing without a meeting or to exercise rights in respect
of any other lawful action of Limited Partners, or (b) to receive any report or
distribution.
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"Record Holder" or "Holder" of (a) any LP Unit means the Person in whose
name such Unit is registered in the Units Register or (b) any GP Unit means the
General Partner.
"Restricted Payment" means any dividend, distribution or other payment in
respect of the capital stock of the General Partner or the Manager, as the case
may be.
"Securities Act" means the Securities Act of 1933, as amended from time to
time, and any successor to such statute.
"Time of Delivery" means December 23, 1986.
"Transfer Agent" means the bank, trust company or other Person appointed
from time to time by the Partnership to act as successor transfer agent and
registrar for LP Units.
"Two-Thirds Interest" means Limited Partners holding an aggregate of at
least two-thirds of the outstanding LP Units.
"Unit" means a GP Unit or an LP Unit.
"Unit Price" of a Unit means, as of any date of determination, (a) if such
Unit is one of a class of Units listed or admitted to trading on a National
Securities Exchange, the average of the last reported sales prices per Unit
regular way or, in case no such reported sale takes place on any such day, the
average of the last reported bid and asked prices per Unit regular way, in
either case on the principal National Securities Exchange on which such class of
Units is listed or admitted to trading (or, if such class of Units is listed or
admitted to trading on the New York Stock Exchange, on the New York Stock
Exchange Composite Tape), for the five trading days immediately preceding the
date of determination; (b) if such Unit is not of a class of Units listed or
admitted to trading on a National Securities Exchange but is of a class quoted
by NASDAQ, the average of the last reported sales prices per Unit or, in case no
such reported sale takes place on any such day or in case last reported sales
prices are not quoted by NASDAQ, the average of the last bid and asked prices
per Unit, for the five trading days immediately preceding such date of
determination, as furnished by the National Quotation Bureau Incorporated or
such other nationally recognized quotation service as may be selected by the
General Partner for such purpose, if said Bureau is not at the time furnishing
quotations; or (c) if such Unit is not of a class of Units listed for trading on
a National Securities Exchange or quoted by NASDAQ, an amount equal to the fair
market value of such Unit as of such date of determination, as determined by the
General Partner using any reasonable method of valuation it may select.
"Units Register" has the meaning specified in Section 10.2.
"Unrealized Gain" attributable to a Partnership property means, as of any
date of determination, the excess, if any, of the fair market value of such
property as of such date of
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determination over the Carrying Value of such property as of such date of
determination (prior to any adjustment to be made pursuant to Section 5.1(f) as
of such date).
"Unrealized Loss" attributable to a Partnership property means, as of any
date of determination, the excess, if any, of the Carrying Value of such
property as of such date of determination (prior to any adjustment to be made
pursuant to Section 5.1(f) as of such date) over the fair market value of such
property as of such date of determination.
ARTICLE II
ORGANIZATIONAL MATTERS
2.1 Formation. Subject to the provisions of this Agreement, the General
Partner and the Organizational Limited Partner originally formed the Partnership
as a limited partnership pursuant to the provisions of the Delaware Act. The
General Partner, pursuant to the authority contained in Article XV of this
Agreement, does hereby amend and restate this Agreement in its entirety to
continue the Partnership as a limited partnership pursuant to the provisions of
the Delaware Act and to set forth the rights and obligations of the Partners and
certain matters related thereto. Except as expressly provided herein to the
contrary, the rights and obligations of the Partners and the administration,
dissolution and termination of the Partnership shall be governed by the Delaware
Act.
2.2 Name. The name of the Partnership shall be, and the business of the
Partnership shall be conducted under the name of, "Buckeye Partners, L.P.";
provided, however, that (a) the Partnership's business may be conducted under
any other name or names deemed advisable by the General Partner, (b) the General
Partner in its sole discretion may change the name of the Partnership at any
time and from time to time and (c) the name under which the Partnership conducts
business shall include "Ltd." or "Limited Partnership" (or similar words or
letters) where necessary for purposes of maintaining the limited liability
status of each Limited Partner or otherwise complying with the laws of any
jurisdiction that so requires.
2.3 Principal Office; Registered Office. (a) The principal office of the
Partnership shall be 3900 Hamilton Boulevard, Allentown, Pennsylvania 18103, or
such other place as the General Partner may from time to time designate. The
Partnership may maintain offices at such other places as the General Partner
deems advisable.
(b) The address of the Partnership's registered office in the State of
Delaware shall be Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle, Delaware 19801, and the name of the
Partnership's registered agent for service of process at such address shall be
The Corporation Trust Company.
2.4 Power of Attorney. (a) Each Limited Partner hereby constitutes and
appoints the General Partner or, if a Liquidator shall have been selected
pursuant to Section 14.3, the
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Liquidator, with full power of substitution, as such Limited Partner's true and
lawful agent and attorney-in-fact ("Agent"), with full power and authority in
such Limited Partner's name, place and stead to:
(i) execute, swear to, acknowledge, deliver, file and record in the
appropriate public offices (A) all certificates, documents and other
instruments (including, without limitation, this Agreement and the
Certificate of Limited Partnership and any amendments or restatements
thereof) which the Agent deems appropriate or necessary to form or qualify,
or continue the existence or qualification of, the Partnership as a limited
partnership (or a partnership in which the Limited Partners have limited
liability) under the laws of any state or jurisdiction; (B) all
certificates, documents and other instruments which the Agent deems
appropriate or necessary to reflect any amendments, changes or
modifications of this Agreement in accordance with its terms; (C) all
conveyances and other documents or instruments which the Agent deems
appropriate or necessary to reflect the dissolution and liquidation of the
Partnership pursuant to the terms of this Agreement; (D) all certificates,
documents and other instruments relating to the admission, substitution,
withdrawal or removal of any Partner pursuant to Article XII, XIII or XIV
and other events described in Article XII, XIII or XIV; and (E) all
certificates, documents and other instruments (including, without
limitation, this Agreement and the Certificate of Limited Partnership and
any amendments or restatements thereof) relating to the determination of
the rights, preferences and privileges of any class or series of Units
issued pursuant to Section 4.4; and
(ii) execute, swear to, acknowledge and file all ballots, consents,
approvals, waivers, certificates, documents and other instruments which the
Agent deems appropriate or necessary in order to make, evidence, give,
confirm or ratify any vote, consent, approval, agreement or other action
which is made or given by the Partners hereunder, is deemed to be made or
given by the Partners hereunder, is consistent with the terms of this
Agreement or is deemed by the Agent to be appropriate or necessary to
effectuate the terms or intent of this Agreement or the purposes of the
Partnership; provided, however, that, if any vote or approval of Limited
Partners is specifically required for an action by any provision of this
Agreement, the Agent may exercise the power of attorney made in this
subsection (ii) to take such action only after such vote or approval is
obtained.
(b) The foregoing power of attorney is hereby declared to be irrevocable
and a power coupled with an interest, and it shall survive and not be affected
by the subsequent death, incompetency, disability, incapacity, dissolution,
bankruptcy or termination of any Limited Partner and the transfer of all or any
portion of such Limited Partner's Units and shall extend to such Limited
Partner's heirs, transferees, successors, assigns and personal representatives.
Each Limited Partner hereby agrees to be bound by any representations made by
the Agent acting in good faith pursuant to such power of attorney; and each
Limited Partner hereby waives any and all defenses which may be available to
contest, negate or disaffirm the action of the Agent taken
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in good faith pursuant to such power of attorney. Each Limited Partner shall
execute and deliver to the Agent, within 15 days after receipt of the Agent's
request therefor, such further designations, powers of attorney and other
instruments as the Agent deems appropriate or necessary to effectuate the terms
or intent of this Agreement or the purposes of the Partnership.
2.5 Term. The Partnership shall continue in existence until the close of
Partnership business on December 31, 2036 or until the earlier termination of
the Partnership in accordance with the provisions of Article XIV.
2.6 Organizational Limited Partner. At and as of the Time of Delivery,
the Partnership interest of the Organizational Limited Partner shall be
terminated and the Partnership Interest of BMC shall be as described in Section
4.1.
2.7 Organizational Certificate. An Amended and Restated Certificate of
Limited Partnership of the Partnership has been filed with the Secretary of
State of the State of Delaware as required by the Delaware Act. The General
Partner shall cause to be filed such other certificates or documents as may be
required for the formation, operation and qualification of a limited partnership
in Delaware and any other state in which the Partnership may elect to do
business. The General Partner shall thereafter file any necessary amendments to
the Certificate of Limited Partnership and any such other certificates and
documents and do all things requisite to the maintenance of the Partnership as a
limited partnership (or as a partnership in which the Limited Partners have
limited liability) under the laws of Delaware and any other state in which the
Partnership may elect to do business. Subject to applicable law, the General
Partner may omit from the Certificate of Limited Partnership and any such other
certificates and documents, and from all amendments thereto, the names and
addresses of the Limited Partners and information relating to the Capital
Contributions and shares of profits and compensation of the Limited Partners, or
state such information in the aggregate rather than with respect to each
individual Limited Partner.
ARTICLE III
PURPOSE
3.1 Purpose. The purpose and business of the Partnership shall be to
engage in any lawful activity for which limited partnerships may be organized
under the Delaware Act.
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ARTICLE IV
CAPITAL CONTRIBUTIONS; PURCHASES PURSUANT
TO PURCHASE AGREEMENTS; ADDITIONAL ISSUANCES
4.1 General Partner Contributions. (a) At and as of the Time of
Delivery, the General Partner contributed to the Partnership, in exchange for
121,212 GP Units (i.e., a 1% Percentage Interest), an amount equal to
$2,424,240.
(b) Following the Time of Delivery, whenever a Limited Partner makes a
Capital Contribution to the Partnership pursuant to Section 4.3, the General
Partner shall contribute to the Partnership, in exchange for a number of GP
Units equal to 1/99th of the total number of LP Units then being purchased,
Contributed Property (which may include LP Units) having a Net Agreed Value
equal to 1/99th of the aggregate Net Agreed Value of all Capital Contributions
to the Partnership then being made pursuant to Section 4.3, unless the General
Partner receives an Opinion of Counsel that the failure to make such additional
Capital Contribution would not result in the Partnership or any of the Operating
Partnerships being treated as an association taxable as a corporation for
federal income tax purposes.
4.2 Limited Partner Contributions. At and as of the Time of Delivery,
each underwriting firm which entered into an underwriting agreement with the
Partnership contributed to the Partnership, in exchange for the number of LP
Units specified therein an amount in cash equal to the Issue Price for such LP
Units (as specified in such underwriting agreement) multiplied by the number of
LP Units being so purchased.
4.3 Issuances of Additional LP Units and Other Securities. (a) The
General Partner is hereby authorized to cause the Partnership to issue, in
addition to the LP Units issued pursuant to Section 4.2, additional LP Units, or
classes or series thereof, or options, rights, warrants or appreciation rights
relating thereto or any other type of security that the Partnership may lawfully
issue, for any Partnership purpose, at any time or from time to time, to
Partners or to other Persons (including, without limitation, to employee benefit
plans sponsored by the General Partner, the Partnership, any of the Operating
Partnerships, the Manager or any of their respective Affiliates), for such
consideration and on such terms and conditions, and entitling the holders
thereof to such relative rights and powers, as shall be established by the
General Partner in its sole discretion, all without the approval of any Limited
Partners, except as provided in Section 17.1 or 17.2.
(b) The General Partner is hereby authorized and directed to do all acts
which it deems appropriate or necessary in connection with each issuance of
Units or other securities by the Partnership and to amend this Agreement in any
manner which it deems appropriate or necessary to provide for each such
issuance, to admit additional limited partners in connection therewith and to
specify the relative rights, powers and duties of the holders of the Units or
other securities
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being so issued, all without the approval of any Limited Partners, except as
provided in Section 17.1 or 17.2.
4.4 No Preemptive Rights. No Partner shall have any preemptive right with
respect to the issuance or sale of Units or other securities that may be issued
by the Partnership.
4.5 No Interest. No interest shall be paid by the Partnership on Capital
Contributions.
4.6 Loans from Partners. Loans or other advances by a Partner to or for
the account of the Partnership shall not be considered Capital Contributions.
4.7 No Withdrawal. No Partner shall be entitled to withdraw any part of
its Capital Contributions or its Capital Account or to receive any distributions
from the Partnership except as provided herein.
ARTICLE V
CAPITAL ACCOUNTS; DISTRIBUTIONS
5.1 Capital Accounts. (a) The Partnership shall maintain for each
Partner a separate Capital Account with respect to Units in accordance with the
regulations issued pursuant to Section 704 of the Code. The Capital Account of
any Partner shall be increased by (i) the Net Agreed Value of all Capital
Contributions made by such Partner in exchange for Units and (ii) all items of
income and gain computed in accordance with Section 5.1 (b) and allocated to
such Partner pursuant to Section 5.1(c) and reduced by (iii) the Net Agreed
Value of all distributions of cash or property made to such Partner with respect
to Units and (iv) all items of deduction and loss computed in accordance with
Section 5.1(b) and allocated to such Partner pursuant to Section 5.1(c).
(b) For purposes of computing the amount of each item of income, gain,
loss or deduction to be reflected in the Capital Accounts, the determination,
recognition and classification of such item shall be the same as its
determination, recognition and classification for federal income tax purposes,
provided that:
(i) Any deductions for depreciation, cost recovery or amortization
attributable to any Partnership property shall be determined as if the
adjusted basis of such property was equal to the Carrying Value of such
property. Upon an adjustment to the Carrying Value of any Partnership
property subject to depreciation, cost recovery or amortization pursuant to
Section 5.1(e) or 7.8, any further deductions for such depreciation, cost
recovery or amortization attributable to such property shall be determined
as if the
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adjusted basis of such property was equal to the Carrying Value of such
property immediately following such adjustment.
(ii) If the Partnership's adjusted basis in property subject to
depreciation, cost recovery or amortization is reduced for federal income
tax purposes pursuant to Section 48(q) (1) of the Code, the amount of such
reduction shall be deemed to be an additional item of deduction in the year
such property is placed in service. Any restoration of such basis pursuant
to Section 48(q) (2) of the Code shall be deemed to be an additional item
of income in the year of restoration.
(iii) Any income, gain or loss attributable to the taxable disposition of
any Partnership property shall be determined by the Partnership as if the
adjusted basis of such property as of such date of disposition was equal in
amount to the Carrying Value of such property as of such date.
(iv) All fees and other expenses incurred by the Partnership to promote
the sale of (or to sell) a Partnership Interest that can neither be
deducted nor amortized under Section 709 of the Code shall be treated as
items of deduction.
(v) The computation of all items of income, gain, loss and deduction shall
be made without regard to any election under Section 754 of the Code which
may be made by the Partnership and, as to those items described in Section
705(a)(1)(B) or Section 705(a)(2)(B) of the Code, without regard to the
fact that such items are not includible in gross income or are neither
currently deductible nor capitalizable for federal income tax purposes.
(c) (i) For purposes of maintaining the Capital Accounts and except as
otherwise provided in this Section 5.1 (c), each item of income, gain, loss and
deduction (computed in accordance with Section 5.1 (b)) shall be allocated to
the Partners in accordance with their respective Percentage Interests.
(ii) If any Partner unexpectedly receives any adjustment allocation or
distribution described in Treasury Regulation Sections 1.704-
1(b)(2)(ii)(d)(4), 1.704-1 (b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6),
items of Partnership income and gain shall be specially allocated to such
Partner in an amount and manner sufficient to eliminate a deficit in its
Capital Account created by such adjustment, allocation or distribution as
quickly as possible.
(iii) To preserve uniformity of Units, the General Partner shall have
sole discretion pursuant to Section 6.1(c) to make special allocations of
income or deduction that do not have a material adverse effect on the
Limited Partners and are consistent with the principles of Section 704 of
the Code.
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(iv) If there is a net decrease in Partnership minimum gain, within the
meaning of Treasury Regulation Section 1.704-1(b) (4) (iv), during a
Partnership taxable year, all Partners with deficit balances in their
Capital Accounts, computed as described in Treasury Regulation Section
1.704-1(b)(4)(iv)(c) at the end of such year, will be allocated items of
Partnership income and gain for such year (and, if necessary, subsequent
years) in the amounts and in the proportions needed to eliminate such
deficits as quickly as possible, before any other allocations are made
under Section 704(b) of the Code.
(d)(i) Except as otherwise provided in this Section 5.1(d), a transferee
of LP Units shall, upon becoming a Limited Partner, succeed to the portion of
the transferor's Capital Account maintained with respect to the Units
transferred.
(ii) If a transfer of Units causes a termination of the Partnership under
Section 708(b)(1)(B) of the Code, the Partnership properties shall be
deemed to have been distributed in liquidation of the Partnership to the
Partners (including the transferee of the Units) pursuant to Sections 14.4
and 14.5 and recontributed by such Partners and transferees in
reconstitution of the Partnership. The Capital Accounts of such
reconstituted Partnership shall be maintained in accordance with this
Article V.
(e) If any additional LP Units are to be issued pursuant to Section 4.3,
or if any Partnership Property is to be distributed, the Capital Accounts of the
Partners (and the Carrying Values of all Partnership properties) shall,
immediately prior to such issuance or distribution, be adjusted (consistent with
the provisions hereof and of Section 704(b) of the Code) upwards or downwards to
reflect any Unrealized Gain or Unrealized Loss attributable to all Partnership
properties (as if such Unrealized Gain or Unrealized Loss had been recognized
upon an actual sale of such properties immediately prior to such issuance). In
determining such Unrealized Gain or Unrealized Loss, the fair market value of
Partnership properties, as of any date of determination, (i) shall, in the case
of the issuance of additional LP Units, be deemed to be equal to (A) the number
of Units outstanding, as of the date of determination, times the Issue Price for
which such additional LP Units are so issued, plus (B) the amount of any
Partnership indebtedness outstanding as of the date of determination, and (ii)
shall, in the case of the distribution of Partnership property, be determined in
the manner provided in Section 14.3.
5.2 Distributions in Respect of Units. (a) From time to time, not less
often than quarterly, the General Partner shall review the Partnership's
accounts to determine whether distributions are appropriate. The General
Partner may make such cash distributions as it, in its sole discretion, may
determine, without being limited to current or accumulated income or gains, from
any Partnership funds, including, without limitation, Partnership revenues,
Capital Contributions or borrowed funds. In its sole discretion, the General
Partner may also distribute to the Partners other Partnership property,
additional Units or other securities of the Partnership or other entities.
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All distributions in respect of Units shall be made concurrently to all
Record Holders on the Record Date set for purposes of such distribution and
shall be prorated in accordance with such Record Holders' respective Percentage
Interests as of such Record Date.
(b) Amounts paid pursuant to Section 7.4, any Management Agreement, any
Operating Partnership Agreement or the Incentive Compensation Agreement shall
not be deemed to be distributions for purposes of this Agreement.
ARTICLE VI
INCOME TAX MATTERS
6.1 Tax Allocations. (a) For federal income tax purposes, each item of
income, gain, loss, deduction and credit of the Partnership shall be allocated
among the Partners in accordance with their Percentage Interests except that the
General Partner shall have the authority to make such other allocations as are
necessary and appropriate to comply with Section 704 of the Code and the
regulations issued pursuant thereto.
(b) Gain resulting from the sale or other taxable disposition of
Partnership assets and allocated to (or recognized by) a Partner (or its
successor in interest) for federal income tax purposes shall be deemed to be
Recapture Income to the extent such Partner has been allocated or has claimed
any deduction directly or indirectly giving rise to the treatment of such gain
as Recapture Income.
(c) To preserve uniformity of LP Units, the General Partner shall have
sole discretion to (i) adopt such conventions as it deems appropriate or
necessary in determining the amount of depreciation and cost recovery
deductions; (ii) make special allocations of income or deduction and (iii) amend
the provisions of this Agreement as appropriate (x) to reflect the proposal or
promulgation of regulations under Section 704(c) of the Code or (y) otherwise to
preserve the uniformity of Units issued or sold from time to time. The General
Partner may adopt such conventions and make such allocations and amendments only
if they would not have a material adverse effect on the Limited Partners and are
consistent with the principles of Section 704 of the Code.
(d) Items of Partnership income, gain, loss, deduction and credit shall,
for federal income tax purposes, be determined on a monthly basis (or other
basis, as required or permitted by Section 706 of the Code) and shall be
allocated to the Persons who are Record Holders of Units as of the close of
business on the first day of such month; provided, however, that gain or loss on
a sale or other disposition of all or a substantial portion of the assets of the
Partnership shall be allocated to the Persons who are Record Holders of Units as
of the close of business on the date of sale.
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(e) Pursuant to Section 704(c) of the Code, items of income, gain, loss,
deduction and credit attributable to Contributed Property shall be allocated in
such a manner as to take into account the variation between the basis of such
property to the Partnership and its Carrying Value.
6.2 Preparation of Tax Returns. The General Partner shall arrange for the
preparation and timely filing of all returns of Partnership income, gains,
losses, deductions, credits and other items necessary for federal and state
income tax purposes and shall use all reasonable efforts to furnish to the
Limited Partners within 90 days after the close of the taxable year the tax
information reasonably required for federal and state income tax reporting
purposes. The classification, realization and recognition of income, gains,
losses, deductions, credits and other items shall be on the accrual method of
accounting for federal income tax purposes, unless the General Partner shall
determine otherwise in its sole discretion.
6.3 Tax Elections. Except as otherwise provided herein, the General
Partner shall, in its sole discretion, determine whether to make any available
election. The General Partner shall elect under Section 754 of the Code to
cause the basis of Partnership property to be adjusted for federal income tax
purposes as provided by Sections 734 and 743 of the Code, but the General
Partner may seek to revoke this election if the General Partner determines that
such revocation is in the best interests of the Limited Partners.
6.4 Tax Controversies. Subject to the provisions hereof, the General
Partner is designated as the Tax Matters Partner (as defined in Section 6231 of
the Code) and is authorized and required to represent the Partnership (at the
Partnership's expense) in connection with all examinations of the Partnership's
affairs by tax authorities, including resulting administrative and judicial
proceedings, and to expend Partnership funds for professional services and costs
associated therewith. Each Limited Partner agrees to cooperate with the General
Partner and to do or refrain from doing any and all things reasonably required
by the General Partner to conduct such proceedings.
6.5 Withholding. The General Partner is authorized to take any action
necessary to comply with any withholding requirements established by applicable
law, including, without limitation, with regard to (a) the sale of United States
real property interests, (b) the distributions of cash or property to any
Partner which is a foreign Person, and (c) the transfer of Units.
ARTICLE VII
MANAGEMENT AND OPERATION OF BUSINESS; INDEMNIFICATION
7.1 Powers of General Partner. Except as otherwise expressly provided in
this Agreement, all powers to control and manage the business and affairs of the
Partnership shall be exclusively vested in the General Partner, and no Limited
Partner shall have any power to control or manage the business and affairs of
the Partnership.
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In addition to the powers now or hereafter granted a general partner of a
limited partnership under applicable law or which are granted to the General
Partner under any other provisions of this Agreement, the General Partner is
hereby authorized and empowered, in the name of and on behalf of the
Partnership, to do and perform any and all acts and things which it deems
appropriate or necessary in the conduct of the business and affairs of the
Partnership, including, without limitation, the following:
(a) to lend or borrow money, to assume, guarantee or otherwise become
liable for indebtedness and other liabilities and to issue evidences of
indebtedness;
(b) to buy, lease (as lessor or lessee), sell, mortgage, encumber or
otherwise acquire or dispose of any or all of the assets of the
Partnership;
(c) to own, use and invest the assets of the Partnership;
(d) to purchase or sell products, services and supplies;
(e) to make tax, regulatory and other filings, and to render periodic
and other reports, to governmental agencies or bodies having jurisdiction
over the assets or business of the Partnership;
(f) to open, maintain and close bank accounts and to draw checks and
other orders for the payment of money;
(g) to negotiate, execute and perform any contracts, conveyances
or other instruments;
(h) to distribute Partnership cash;
(i) to utilize the services of officers and employees of the General
Partner or of any other Persons and to select and dismiss employees (if
any) and outside attorneys, accountants, consultants and contractors;
(j) to maintain insurance for the benefit of the Partnership and the
Partners;
(k) to form, participate in or contribute or loan cash or property to
limited or general partnerships, joint ventures, corporations or similar
arrangements;
(1) to expand the business activities in which the Partnership is
engaged or engage in new business activities by acquisition or internal
development;
(m) to conduct litigation and incur legal expenses and otherwise deal
with or settle claims or disputes; and
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(n) to purchase, sell or otherwise acquire or dispose of Units;
in each case at such times and upon such terms and conditions as the General
Partner deems appropriate or necessary, and subject to any express restrictions
contained elsewhere in this Agreement.
7.2 Duties of General Partner. The General Partner shall manage the
business and affairs of the Partnership in the manner the General Partner deems
appropriate or necessary. Without limiting the generality of the foregoing, the
General Partner's duties shall include the following:
(a) to take possession of the assets of the Partnership;
(b) to staff and operate the business of the Partnership with the
officers and employees of the General Partner or of other Persons;
(c) to render or cause to be rendered engineering, environmental and
other technical services and perform or cause to be performed financial,
accounting, logistical and other administrative functions for the
Partnership;
(d) to render such reports and make such periodic and other filings
as may be required under applicable federal, state and local laws, rules
and regulations;
(e) to provide or cause to be provided purchasing, procurement,
repair and other services for the Partnership; and
(f) to conduct the business of the Partnership in accordance with
this Agreement and all applicable laws, rules and regulations;
in each case in such a manner as the General Partner deems appropriate or
necessary.
7.3 Reliance by Third Parties. Notwithstanding anything to the contrary
in this Agreement, any Person dealing with the Partnership shall be entitled to
assume that the General Partner has full power and authority to encumber, sell
or otherwise use in any manner any and all assets of the Partnership and to
enter into any contracts on behalf of the Partnership, and such Person shall be
entitled to deal with the General Partner as if it were the Partnership's sole
party in interest, both legally and beneficially. Each Limited Partner hereby
waives any and all defenses or other remedies which may be available against
such Person to contest, negate or disaffirm any action of the General Partner in
connection with any such dealing. In no event shall any Person dealing with the
General Partner or its representatives be obligated to ascertain that the terms
of this Agreement have been complied with or to inquire into the necessity or
expedience of any act or action of the General Partner or its representatives.
Each and every certificate, document or other instrument executed on behalf of
the Partnership by the General
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Partner or its representatives shall be conclusive evidence in favor of any and
every Person relying thereon or claiming thereunder that (a) at the time of the
execution and delivery of such certificate, document or instrument, this
Agreement was in full force and effect, (b) the Person executing and delivering
such certificate, document or instrument was duly authorized and empowered to do
so for and on behalf of the Partnership and (c) such certificate, document or
instrument was duly executed and delivered in accordance with the terms and
provisions of this Agreement and is binding upon the Partnership.
7.4 Compensation and Reimbursement of the General Partner. (a) Except as
provided in this Section 7.4 or elsewhere in this Agreement, the Incentive
Compensation Agreement or any other agreement contemplated or permitted hereby
or thereby, the General Partner shall not be compensated for its services as
General Partner to the Partnership.
(b) The General Partner shall be promptly reimbursed for all Designated
Expenses, in addition to any reimbursement as a result of indemnification in
accordance with Section 7.11. The General Partner shall determine such
Designated Expenses in any reasonable manner determined by it.
(c) The General Partner may propose and adopt without the approval of the
Limited Partners fringe benefit plans, including, without limitation, plans
comparable to those that covered employees employed by the predecessors to the
Operating Partnerships and plans involving the issuance of Units, for the
benefit of employees of the General Partner, Partnership, any of the Operating
Partnerships, the Manager or any of their respective Affiliates in respect of
services performed, or obligated to be performed, directly or indirectly, for
the benefit of the Partnership or any of the Operating Partnerships.
7.5 Purchase or Sale of LP Units. The General Partner may, on behalf of
the Partnership, purchase or otherwise acquire or sell or otherwise dispose of
LP Units. As long as LP Units are held by the Partnership or any of the
Operating Partnerships, such LP Units shall not be considered outstanding for
any purpose. The General Partner or any of its Affiliates may also purchase or
otherwise acquire or sell or otherwise dispose of LP Units for its own account.
7.6 Partnership Funds. The funds of the Partnership shall be deposited in
such account or accounts as shall be designated by the General Partner, and
shall not be commingled with the funds of the General Partner or any of its
Affiliates. All withdrawals from or charges against such accounts shall be made
by the General Partner or by its agents, which agents may be Affiliates of the
General Partner. Funds of the Partnership may be invested as determined by the
General Partner.
7.7 Outside Activities; Contracts with Affiliates; Loans to or from
Affiliates. (a) The General Partner shall not have or permit the Manager to
have any business interests or engage in any business activities except for
those relating to the Partnership and the Operating Partnerships.
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(b) Any Affiliate of the General Partner (other than the Manager) and any
director, officer, partner or employee of the General Partner or any of its
Affiliates shall be entitled to and may have business interests and engage in
business activities in addition to those relating to the Partnership, including
business interests and activities in direct competition with the Partnership and
the Operating Partnerships, for their 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 Partnership, the Operating Partnerships or any
Partner. Neither the Partnership, the Operating Partnerships nor any of the
Partners shall have any rights by virtue of this Agreement or the partnership
relationship governed hereby in any such business interests.
(c) Each of the Limited Partners hereby approves, ratifies and confirms
the execution, delivery and performance of the Operating Partnership Agreements,
the Incentive Compensation Agreement, the Management Agreements, and the
Exchange Agreement and agrees that the General Partner is authorized to execute,
deliver and perform the other agreements, acts, transactions and matters
described therein on behalf of the Partnership without the approval or vote of
any Limited Partners, notwithstanding any other provision of this Agreement or
the Operating Partnership Agreements.
(d) Subject to the provisions of Section 7.4(a), the General Partner and
its Affiliates may enter into contracts with, or render services to, the
Partnership or any of the Operating Partnerships, provided that such contracts
or services are on terms that are fair and reasonable to the Partnership.
(e) Neither the General Partner nor any of its Affiliates shall sell,
transfer or convey property to, or purchase property from, the Partnership,
directly or indirectly, except pursuant to transactions that are fair and
reasonable to the Partnership.
(f) The General Partner or any of its Affiliates may lend to the
Partnership funds needed by the Partnership for such periods of time as the
General Partner may determine; provided, however, that the General Partner or an
Affiliate may not charge the Partnership interest greater than the rate
(including points or other financing charges or fees) that would be charged to
the Partnership by unrelated lenders on comparable loans. The Partnership shall
reimburse the General Partner or its Affiliate, as the case may be, for any
costs incurred by the General Partner or Affiliate in connection with the
borrowing of funds obtained by such General Partner or Affiliate and loaned to
the Partnership.
(g) The Partnership may lend funds to the General Partner or any of its
Affiliates; provided, however, that the Partnership may not lend funds to the
General Partner or an Affiliate unless such funds consist of funds available
after provision for working capital and such reserves as the General Partner
deems appropriate and such loan shall bear interest at the rate (including
points or other financing charges or fees) that the General Partner would be
charged by unrelated lenders on comparable loans.
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7.8 Tax Basis and Value Determinations. To the extent that the General
Partner is required pursuant to the provisions of this Agreement to establish
fair market values or allocate amounts realized, tax basis, Agreed Values or Net
Agreed Values, the General Partner shall establish such values and make such
allocations in a manner that is reasonable and fair to the Limited Partners,
taking into account all applicable laws, governmental regulations, rulings and
decisions. The General Partner may, in its sole discretion, modify or revise
such allocations in order to comply with such laws, governmental regulations,
rulings or decisions or to the extent it otherwise deems such modification or
revision appropriate or necessary. The General Partner is authorized, to the
extent deemed by it to be appropriate or necessary, to utilize the services of
an independent appraiser in establishing such values or allocations and the
General Partner shall in such cases be entitled to rely on the values or
allocations established by such independent appraiser.
7.9 Resolution of Conflicts of Interest; Standard of Care. (a) Unless
otherwise expressly provided in this Agreement or any other agreement
contemplated hereby, (i) whenever a conflict of interest exists or arises
between the General Partner or any of its Affiliates, on the one hand, and the
Partnership or any Limited Partner, on the other hand, or (ii) whenever this
Agreement or any other agreement contemplated hereby provides that the General
Partner or any of its Affiliates shall act in a manner which is, or provide
terms which are, fair and/or reasonable to the Partnership, any Operating
Partnership or any Limited Partner, the General Partner or such Affiliate shall
resolve such conflict of interest, take such action or provide such terms
considering, in each case, the relative interests of each Party to such
conflict, agreement, transaction or situation and the benefits and burdens
relating to such interests, any customary or accepted industry practices, and
any applicable generally accepted accounting or engineering practices or
principles, and in the absence of bad faith by the General Partner or such
Affiliate, the resolution, action or terms so made, taken or provided by the
General Partner or such Affiliate shall not constitute a breach of this
agreement or any other agreement contemplated hereby or a breach of any standard
of care or duty imposed hereby or under the Delaware Act or any other applicable
law, rule or regulation.
(b) Whenever this Agreement or any other agreement contemplated hereby
provides that the General Partner or any of its Affiliates is permitted or
required to make a decision (i) in its "discretion" or under a grant of similar
authority or latitude, the General Partner or such Affiliate shall be entitled,
to the extent permitted by applicable law, to consider only such interests and
factors as it desires and shall have no duty or obligation to give any
consideration to any interest of or factors affecting the Partnership or the
Limited Partners, or (ii) in its "good faith" or under another express standard,
the General Partner or such Affiliate shall act under such express standard and,
except as required by applicable law, shall not be subject to any other or
different standards imposed by this Agreement, any other agreement contemplated
hereby or applicable law.
7.10 Other Matters Concerning the General Partner. (a) The General
Partner may rely and shall be protected in acting or refraining from acting upon
any certificate, document or
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other instrument believed by it to be genuine and to have been signed or
presented by the proper party or parties.
(b) The General Partner may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers and other consultants and
advisors selected by it and any opinion or advice of any such Person as to
matters which the General Partner believes to be within such Person's
professional or expert competence shall be full and complete authorization and
protection with respect to any action taken or suffered or omitted by the
General Partner hereunder in good faith and in accordance with such opinion or
advice.
(c) The General Partner may exercise any of the powers granted to it by
this Agreement and perform any of the duties imposed upon it hereunder either
directly or by or through its agents, and the General Partner shall not be
responsible for any misconduct or negligence on the part of any such agent
appointed by the General Partner in good faith.
7.11 Limited Liability; Indemnification. (a) Notwithstanding anything to
the contrary in this Agreement, and except to the extent required by applicable
law, no Indemnitee shall be liable to the Partnership or any Partner for any
action taken or omitted to be taken by such Indemnitee, provided that such
Indemnitee acted 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.
(b) The Partnership shall, to the extent permitted by applicable law,
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 claim, demand, action, suit or proceeding to which such Indemnitee was
or is a party or is threatened to be made a party, by reason of (i) such
Indemnitee's status as a General Partner, any Affiliate of the General Partner,
any Person who is or was a director, officer, employee or agent of the General
Partner or any such Affiliate, or any Person who is or was serving at the
request of the General Partner or any such Affiliate as a director, officer,
partner, trustee, employee or agent of another Person or (ii) any action taken
or omitted to be taken by such Indemnitee in any capacity referred to in clause
(i) of this Section 7.11(b), relating to this Agreement or the property,
business, affairs or management of the Partnership or any of the Operating
Partnerships (provided the Indemnitee acted in good faith and the act or
omission which is the basis of such claim, demand, action, suit or proceeding
does not involve the gross negligence or willful misconduct of such Indemnitee).
(c) Expenses (including legal fees and expenses) incurred in defending any
claim, demand, action, suit or proceeding subject to Section 7.11(b) shall be
paid by the Partnership in advance of the final disposition of such claim,
demand, action, suit or proceeding upon receipt of an undertaking (which need
not be secured) by or on behalf of the Indemnitee to repay such
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amount if it shall ultimately be determined, by a court of competent
jurisdiction, that the Indemnitee is not entitled to be indemnified by the
Partnership as authorized hereunder.
(d) The indemnification provided by Section 7.11(b) shall be in addition
to any other rights to which an Indemnitee 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.
(e) To the extent commercially reasonable, the Partnership 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 an Indemnitee in
connection with the Partnership's activities, whether or not the Partnership
would have the power to indemnify an Indemnitee against such liability under the
provisions of this Agreement.
(f) An Indemnitee shall not be denied indemnification in whole or in part
under Section 7.11(b) 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.
(g) The provisions of this Section 7.11 are for the benefit of the
Indemnitees and the heirs, successors, assigns, administrators and personal
representatives of the Indemnitees and shall not be deemed to create any rights
for the benefit of any other Persons.
ARTICLE VIII
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
8.1 Limitation of Liability. The Limited Partners shall have no liability
under this Agreement (including, without limitation, liability under Section
7.11).
8.2 Management of Business. No Limited Partner shall, in its capacity as
a Limited Partner, take part in the operation, management or control (within the
meaning of the Delaware Act) of the Partnership's business, transact any
business in the Partnership's name or have the power to sign documents for or
otherwise bind the Partnership. The transaction of any such business by a
director, officer, employee or agent of a General Partner or an Affiliate of the
General Partner in such Person's capacity as such (whether or not such Person is
also a Limited Partner) shall not affect, impair or eliminate the limitations on
the liability of the Limited Partners under this Agreement.
8.3 Outside Activities. Limited Partners shall be entitled to and may
have business interests and engage in business activities in addition to those
relating to the Partnership, including business interests and activities in
direct competition with the Partnership or the
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Operating Partnerships. Neither the Partnership, the Operating Partnerships nor
any of the other Partners shall have any rights by virtue of this Agreement or
the partnership relationship created hereby in any business ventures of any
Limited Partner.
8.4 Return of Capital. No Limited Partner shall be entitled to the
withdrawal or return of its Capital Contribution, except to the extent, if any,
that distributions made pursuant to this Agreement or upon termination of the
Partnership may be considered as such by law and then only to the extent
provided for in this Agreement.
8.5 Rights of Limited Partners Relating to the Partnership. In addition
to other rights provided by this Agreement or by applicable law, each Limited
Partner shall have the right for a proper purpose reasonably related to such
Limited Partner's interest in the Partnership, upon reasonable demand and at
such Limited Partner's own expense:
(a) to obtain true and full information regarding the status of the
business and financial condition of the Partnership;
(b) promptly after becoming available, to obtain a copy of the
Partnership's federal and state income tax returns for each year;
(c) to obtain a current list of the name and address of each Partner
as set forth in the Units Register;
(d) to obtain a description and statement of the Net Agreed Value of
any Capital Contribution made or agreed to be made by each Partner, and the
date on which such Partner became a Partner;
(e) to obtain a copy of this Agreement and the Certificate of Limited
Partnership and all amendments thereto, together with executed copies of
any powers of attorney pursuant to which this Agreement, the Certificate of
Limited Partnership and all amendments thereto have been executed; and
(f) to obtain such other information regarding the affairs of the
Partnership as may be just and reasonable;
provided, however, that the General Partner may keep confidential from the
Limited Partners, for such period of time as the General Partner deems
reasonable, any information which the General Partner reasonably believes to be
in the nature of trade secrets or other information the disclosure of which the
General Partner in good faith believes could damage the Partnership or its
business or be in violation of applicable law, including, without limitation,
federal securities law, or which the Partnership is required by agreements with
third parties to keep confidential.
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ARTICLE IX
BOOKS, RECORDS, ACCOUNTING AND REPORTS
9.1 Books, Records and Accounting. The General Partner shall keep or
cause to be kept books and records with respect to the Partnership's business,
which books and records shall at all times be kept at the principal office of
the Partnership. Any books and records maintained by the Partnership in the
regular course of its business, including the Units Register, books of account
and records of Partnership proceedings, may be kept on, or be in the form of,
punch cards, disks, magnetic tape, photographs, micrographics or any other
information storage device, provided that the records so kept are convertible
into clearly legible written form within a reasonable period of time. The books
of the Partnership shall be maintained, for financial reporting purposes, on the
accrual basis, or on a cash basis adjusted periodically to an accrual basis, as
the General Partner shall determine in its sole discretion, in accordance with
generally accepted accounting principles and applicable law.
9.2 Fiscal Year. The fiscal year of the Partnership for financial
reporting purposes shall be the calendar year, unless the General Partner shall
determine otherwise in its sole discretion.
9.3 Reports. (a) As soon as practicable, but in no event later than 90
days after the close of each fiscal year, the General Partner shall cause to be
mailed to each Record Holder of LP Units as of the last day of that fiscal year
reports containing financial statements of the Partnership for the fiscal year,
presented in accordance with generally accepted accounting principles, including
a balance sheet, statement of income, statement of Partners' capital and
statement of changes in financial position, such statements to be audited by a
nationally recognized firm of independent public accountants selected by the
General Partner.
(b) As soon as practicable, but in no event later than 45 days after the
close of each calendar quarter, except the last calendar quarter of each fiscal
year, the General Partner shall cause to be mailed to each Record Holder of LP
Units as of the last day of that calendar quarter a quarterly report for the
calendar quarter containing such financial and other information as the General
Partner deems appropriate.
ARTICLE X
ISSUANCE OF LP CERTIFICATES; TRANSFER AND EXCHANGE OF LP UNITS
10.1 Initial Issuance of LP Certificates. Upon the issuance of LP Units to
any Person, the Partnership will issue one or more LP Certificates in the name
of such Person evidencing the number of such LP Units being so issued. LP
Certificates shall be executed on behalf of the
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Partnership by the General Partner. No LP Certificate shall be valid for any
purpose until manually countersigned by the Transfer Agent.
10.2 Registration, Registration of Transfer and Exchange. (a) The
Partnership will cause to be kept a register (the "Units Register") in which,
subject to such reasonable regulations as it may prescribe and subject to the
provisions of Section 10.2(b), the Partnership will provide for the registration
of LP Units and of transfers of such LP Units. The Transfer Agent is hereby
appointed registrar for the purpose of registering LP Units and transfers of
such LP Units as herein provided.
Upon surrender for registration of transfer or exchange of any LP
Certificate, and subject to the provisions of Section 10.2(b), the General
Partner on behalf of the Partnership will execute, and the Transfer Agent will
countersign and deliver, in the name of the holder or the designated transferee
or transferees, as required pursuant to the holder's instructions, one or more
new LP Certificates evidencing the same aggregate number of LP Units as did the
LP Certificate so surrendered.
(b) Every LP Certificate surrendered for registration of transfer or
exchange shall be duly endorsed on the reverse side thereof, or be accompanied
by a written instrument of transfer in form satisfactory to the General Partner
or the Transfer Agent, as the case may be, duly executed, in either case by the
holder thereof or such holder's attorney duly authorized in writing. Every LP
Certificate surrendered for registration of transfer shall be duly accepted on
the reverse side thereof, or be accompanied by a written instrument of
acceptance to the same effect in form satisfactory to the General Partner or the
Transfer Agent, as the case may be, duly executed, in either case by the
transferee or such transferee's attorney duly authorized in writing. As a
condition to the issuance of any new LP Certificate under this Section 10.2, the
General Partner may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto.
10.3 Mutilated, Destroyed, Lost or Stolen LP Certificates. (a) If any
mutilated LP Certificate is surrendered to the Transfer Agent, the General
Partner on behalf of the Partnership shall execute and the Transfer Agent shall
countersign and deliver in exchange therefor a new LP Certificate evidencing the
same number of LP Units as did the LP Certificate so surrendered.
(b) If there shall be delivered to the General Partner and the Transfer
Agent (i) evidence to their satisfaction of the destruction, loss or theft of
any LP Certificate and (ii) such security or indemnity as may be required by
them to save each of them and any of their agents harmless, then, in the absence
of notice to the General Partner or the Transfer Agent that such LP Certificate
has been acquired by a bona fide purchaser, the General Partner on behalf of the
Partnership shall execute and upon its request the Transfer Agent shall
countersign and deliver, in lieu of any such destroyed, lost or stolen
Certificate, a new LP Certificate evidencing the same number of LP Units as did
the LP Certificate so destroyed, lost or stolen.
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(c) As a condition to the issuance of any new LP Certificate under this
Section 10.3, the General Partner may require the payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and expenses of the Transfer
Agent) connected therewith.
(d) Every new LP Certificate issued pursuant to this Section 10.3 in lieu
of any destroyed, lost or stolen LP Certificate shall evidence an original
additional Partnership Interest in the Partnership, whether or not the
destroyed, lost or stolen LP Certificate shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of this Agreement equally and
proportionately with any and all other LP Units duly issued hereunder.
10.4 Persons Deemed Owners. Prior to due presentment of an LP
Certificate for registration of transfer and satisfaction of the requirements of
Section 10.2(b) with respect thereto, (a) the Partnership, the General Partner,
the Transfer Agent and any agent of any of the foregoing may deem and treat the
Record Holder as the absolute owner thereof and of the LP Units evidenced
thereby for all purposes whatsoever and (b) a transferee shall not be entitled
to distributions or allocations or any other rights in respect of the LP Units
evidenced thereby other than the right to further transfer such LP Units.
ARTICLE XI
TRANSFER OF GP UNITS
11.1 Transfer of GP Units. The General Partner may not transfer any GP
Units unless (a) all of its GP Units are being transferred and the transferee
assumes all of the rights and obligations of the General Partner hereunder, (b)
the transfer is to an Affiliate of the General Partner or is in connection with
the General Partner's merger or consolidation with, or a transfer of all or
substantially all of the General Partner's assets to, another Person, or the
transfer is approved by a Majority Interest, and (c) the Partnership receives an
Opinion of Counsel that such transfer would not result in the loss of limited
liability of any Limited Partner or cause the Partnership or any of the
Operating Partnerships to be treated as an association taxable as a corporation
for federal income tax purposes.
11.2 Successor General Partner. Any transferee of GP Units pursuant to
Section 11.1 shall automatically be admitted to the Partnership as the successor
General Partner, and the transferor of such GP Units shall automatically cease
to be the General Partner, effective at the time provided in Section 12.3. No
such transfer shall be deemed a withdrawal pursuant to Article XIII.
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ARTICLE XII
ADMISSION OF INITIAL, SUBSTITUTED AND ADDITIONAL
LIMITED PARTNERS AND SUCCESSOR GENERAL PARTNER
12.1 Admission of Initial Limited Partners. At and as of the Time of
Delivery, the initial Record Holders of LP Units purchased pursuant to Section
4.2 shall automatically become Limited Partners and the Organizational Limited
Partner shall automatically cease to be a Limited Partner.
12.2 Admission of Substituted Limited Partners. A transferee of LP Units
shall automatically be admitted to the Partnership as a Limited Partner (and the
transferor of such LP Units shall, if such transferor is assigning all of such
transferor's LP Units, automatically cease to be a Limited Partner) at and as of
the time the transfer is registered on the Units Register pursuant to Section
10.2.
12.3 Admission of Successor General Partner. A successor General Partner
approved pursuant to Section 13.1 or the proviso to Section 14.1 or the
transferee of all of the GP Units pursuant to Section 11.1 shall be admitted to
the Partnership as the successor General Partner, effective as of the date an
amendment or restatement of the Certificate of Limited Partnership is filed with
the Secretary of State of the State of Delaware affecting such substitution;
provided, however, that no such successor shall be so admitted to the
Partnership until it has agreed in writing to assume the former General
Partner's obligations hereunder. This Agreement and the Certificate of Limited
Partnership shall be amended as appropriate to reflect the termination of the
former General Partner as a general partner and the admission of the successor
General Partner.
12.4 Admission of Additional Limited Partners. (a) A Person (other
than the initial Record Holders of LP Units pursuant to Section 4.2 or a
transferee of LP Units) who makes a Capital Contribution to the Partnership in
accordance with this Agreement shall be admitted to the Partnership as an
additional Limited Partner only upon furnishing to the General Partner (i) a
written instrument of acceptance in a form satisfactory to the General Partner
of all of the terms and conditions of this Agreement, including, without
limitation, the power of attorney granted in Section 2.4 hereof, and (ii) such
other documents and instruments as may be required in the discretion of the
General Partner to affect such Person's admission as an additional Limited
Partner.
(b) Notwithstanding anything to the contrary in this Section 12.4, no
Person shall be admitted as an additional Limited Partner without the consent of
the General Partner, which consent may be given or withheld in the General
Partner's sole discretion. The admission of any Person as an additional Limited
Partner shall become effective at and as of the time the name of such Person is
recorded on the books and records of the Partnership, following the consent of
the General Partner to such admission.
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12.5 Amendment of Agreement and Certificate of Limited Partnership.
The General Partner shall take all steps necessary and appropriate under the
Delaware Act to amend the records of the Partnership and, if necessary, this
Agreement and the Certificate of Limited Partnership to reflect the admission of
any Partner.
ARTICLE XIII
WITHDRAWAL OR REMOVAL OF THE GENERAL PARTNER
13.1 Withdrawal or Removal of the General Partner. (a) BMC agrees to
act as General Partner of the Partnership until the later of (i) the date which
is twenty-five years after the Time of Delivery or (ii) the date the ESOP Loan
is paid in full, subject to its right to transfer all of its GP Units pursuant
to Section 11.1. At any time after the later of (i) date which is twenty-five
years after the Time of Delivery or (ii) the date the ESOP Loan is paid in full,
the General Partner may withdraw from the Partnership effective upon at least 90
days' advance written notice to the Limited Partners, such withdrawal to take
effect on the date specified in such notice, provided that such withdrawal is
approved by an Eighty Percent Interest or the Partnership has received an
Opinion of Counsel that such withdrawal would not result in the loss of limited
liability of any Limited Partner or result in the Partnership or any Operating
Partnership being treated as an association taxable as a corporation for federal
income tax purposes. Any such withdrawal shall also constitute the withdrawal
of the Manager from the Operating Partnerships, as provided in the Operating
Partnership Agreements. If the General Partner gives a notice of withdrawal, a
Majority Interest may, prior to the effective date of such withdrawal, approve a
successor General Partner. The Person so approved (or its designated
Affiliates) shall become the successor general partner or partners of the
Operating Partnerships, as provided in the Operating Partnership Agreements. If
no successor General Partner is so approved, the Partnership shall be dissolved
pursuant to Section 14.1. BMC further agrees that it shall not permit the
Manager to withdraw as general partner of any Operating Partnership, except in
connection with the withdrawal of BMC as General Partner.
(b) The General Partner may be removed only by an Eighty Percent Interest,
and only if (i) in connection therewith, a successor General Partner is approved
by a Majority Interest, (ii) the Partnership shall have received an Opinion of
Counsel that the removal of the General Partner and the approval of a successor
General Partner will not result in the loss of limited liability of any Limited
Partner or cause the Partnership or any of the Operating Partnerships to be
treated as an association taxable as a corporation for federal income tax
purposes, (iii) the successor General Partner or an Affiliate thereof assumes
the liabilities and obligations of the General Partner and its Affiliates under
the Exchange Agreement and agrees to indemnify and hold harmless the General
Partner and its Affiliates from any liability or obligation arising out of, or
causes the General Partner and its Affiliates to be released from, any and all
liabilities and obligations (including loan guarantees) under fringe benefit
plans sponsored by the General Partner or any of its Affiliates in connection
with the business of the Partnership or any of the Operating Partnerships,
except as otherwise prohibited by this Agreement, and (iv) all required
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regulatory approvals for removal of the Manager shall have been obtained. Such
removal shall be effective upon the admission of the successor General Partner
pursuant to Section 12.3. The Person so approved (or its designated Affiliates)
shall become the successor general partner or partners of the Operating
Partnerships, as provided in the Operating Partnership Agreements.
13.2 Sale of Former General Partner's Interest. If a successor
General Partner is approved pursuant to Section 13.1 or 14.2 or the proviso to
Section 14.1, such successor shall purchase the GP Units of the former General
Partner for an amount in cash equal to the fair market value thereof, determined
as of the date the successor General Partner is admitted pursuant to Section
12.3. The fair market value of the GP Units shall include the value of all
rights associated with being the General Partner, including, without limitation,
the General Partner's pro rata interest in the Partnership, the right to receive
incentive compensation pursuant to the Incentive Compensation Agreement or
compensation under any other agreement between the Partnership and the General
Partner in effect on the date the successor General Partner is so admitted, and
shall be reduced by the value of the assumption by the successor General Partner
or its Affiliate of the obligations of the General Partner and its Affiliates
pursuant to Section 13.1(b)(iii). Such fair market value shall be determined by
agreement between the former General Partner and its successor or, failing
agreement within 30 days after the date the successor General Partner is so
admitted, by a firm of independent appraisers jointly selected by the former
General Partner and its successor (or, if the former General Partner and its
successor cannot agree on the selection of such a firm within 45 days after the
date the successor General Partner is so admitted, by a firm of independent
appraisers selected by two firms, one of which will be selected by the former
General Partner and the other of which will be selected by the successor).
ARTICLE XIV
DISSOLUTION AND LIQUIDATION
14.1 Dissolution. The Partnership shall be dissolved, and its affairs
shall be wound up, upon:
(a) expiration of the term as provided in Section 2.5;
(b) withdrawal of the General Partner pursuant to Section 13.1 (unless a
Person becomes a successor General Partner prior to or on the effective date of
such withdrawal);
(c) bankruptcy or dissolution of the General Partner, or any other event
that results in the General Partner ceasing to be a general partner in the
Partnership (other than by reason of a withdrawal or removal pursuant to Section
13.1 or a transfer pursuant to Section 11.1); or
(d) an election by the General Partner to dissolve the Partnership which
is approved by a Two-Thirds Interest;
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provided, however, that the Partnership shall not be dissolved upon an event
described in Section 14.1(b) if, within 90 days of such event, all Partners
agree in writing to continue the business of the Partnership and to the
appointment of a successor General Partner.
For purposes of this Section 14.1, bankruptcy of the General Partner shall
be deemed to have occurred when (i) it commences a voluntary proceeding seeking
liquidation, reorganization or other relief under any bankruptcy, insolvency or
other similar law now or hereafter in effect, (ii) it seeks, consents to or
acquiesces in the appointment of a trustee, receiver or liquidator for it or for
all or any substantial part of its properties, (iii) it is adjudged a bankrupt
or insolvent, or has entered against it a final and nonappealable order for
relief, under any bankruptcy, insolvency or similar law now or hereafter in
effect, (iv) it executes and delivers a general assignment for the benefit of
its creditors, (v) it files an answer or other pleading admitting or failing to
contest the material allegations of a petition filed against it in any
involuntary proceeding of the nature described in clause (i) above, or (vi) (1)
any involuntary proceeding of the nature described in clause (i) above has not
been dismissed 120 days after the commencement thereof, (2) the appointment
without its consent or acquiescence of a trustee, receiver or liquidator for it
or for all or any substantial part of its properties has not been vacated or
stayed within 90 days of such appointment, or (3) such appointment has been
stayed but is not vacated within 90 days after the expiration of any such stay.
14.2 Reconstitution. Upon dissolution of the Partnership in accordance
with Section 14.1(b) or (c), and a failure of all Partners to agree to continue
the business of the Partnership and to the appointment of a successor General
Partner as provided in the proviso to Section 14.1, then within 180 days after
the event described in Section 14.1(b) or (c), a Majority Interest may elect to
reconstitute the Partnership and continue its business by forming a new
partnership on terms identical to those set forth in this Agreement and having
as a general partner a Person approved by a Majority Interest. Upon any such
election by a Majority Interest, all Partners shall be bound thereby and shall
be deemed to have consented thereto. Unless such an election is made within
such 180-day period, the Partnership shall conduct only activities necessary to
wind up its affairs. If such an election is made within such 180-day period,
then (a) the reconstituted partnership shall continue until the end of the term
set forth in Section 2.5 unless earlier dissolved in accordance with this
Article XIV and (b) all necessary steps shall be taken to cancel this Agreement
and the Certificate of Limited Partnership and to enter into a new partnership
agreement and certificate of limited partnership, and the successor general
partner may for this purpose exercise the powers of attorney granted the General
Partner pursuant to this Agreement; provided that the right of a Majority
Interest to reconstitute and to continue the business of the Partnership shall
not exist and may not be exercised unless the Partnership has received an
Opinion of Counsel that (i) the exercise of the right would not result in the
loss of limited liability of any Limited Partner and (ii) neither the
Partnership nor the reconstituted partnership would be treated as an association
taxable as a corporation for federal income tax purposes.
14.3 Liquidation. Upon dissolution of the Partnership, unless the
Partnership is reconstituted pursuant to Section 14.2, the General Partner, or
in the event the General Partner
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has withdrawn from the Partnership, been removed or dissolved or become bankrupt
(as defined in Section 14.1), a liquidator or liquidating committee approved by
a Majority Interest shall be the liquidator of the Partnership (the
"Liquidator"). The Liquidator (if other than the General Partner) shall be
entitled to receive such compensation for its services as may be approved by a
Majority Interest. The Liquidator shall agree not to resign at any time without
15 days' prior written notice and (if other than the General Partner) may be
removed at any time, with or without cause, by notice of removal approved by a
Majority Interest upon dissolution, resignation or removal of the Liquidator, a
successor and substitute Liquidator (who shall have and succeed to all rights,
powers and obligations of the original Liquidator) shall, within 30 days
thereafter, be approved by a Majority Interest. Except as expressly provided in
this Article XIV, the Liquidator approved in the manner provided herein shall
have and may exercise, without further authorization or approval of any of the
parties hereto, all of the powers conferred upon the General Partner under the
terms of this Agreement (but subject to all of the applicable limitations,
contractual and otherwise, upon the exercise of such powers, other than the
restrictions set forth in Article XVII) to the extent appropriate or necessary
in the good faith judgment of the Liquidator to carry out the duties and
functions of the Liquidator hereunder for and during such period of time as
shall be reasonably required in the good faith judgment of the Liquidator to
complete the winding-up and liquidation of the Partnership as provided for
herein. The Liquidator shall liquidate the assets of the Partnership and apply
and distribute the proceeds of such liquidation in the following order of
priority, unless otherwise required by mandatory provisions of applicable law:
(a) to creditors of the Partnership (including Partners); and
(b) to the Partners, in proportion to and to the extent of the
positive balances in their respective Capital Accounts;
provided, however, that the Liquidator may place in escrow a reserve of cash
or other assets of the Partnership for contingent liabilities in an amount
determined by the Liquidator to be appropriate for such purposes.
14.4 Distribution in Kind. Notwithstanding the provisions of Section 14.3
requiring the liquidation of the assets of the Partnership, but subject to the
order of priorities set forth therein, if on dissolution of the Partnership the
Liquidator determines that an immediate sale of part or all of the Partnership's
assets would be impractical or would cause undue loss to the Partners, the
Liquidator may, in its sole discretion, defer for a reasonable time the
liquidation of any assets except those necessary to satisfy liabilities of the
Partnership and may, in its sole discretion, distribute to the Partners, or to
specific classes of Partners, as tenants in common, in lieu of cash, and as
their interests may appear in accordance with the provisions of Section 14.3
(b), undivided interests in such Partnership assets as the Liquidator deems not
suitable for liquidation. Any distributions in kind shall be subject to such
conditions relating to the disposition and management thereof as the Liquidator
deems reasonable and equitable and to any joint ownership agreements or other
agreements governing the ownership and operation of such
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properties at such time. The Liquidator shall determine the fair market value of
any property distributed in kind using such reasonable method of valuation as it
may adopt.
14.5 Cancellation of Certificate of Limited Partnership. Upon the
completion of the distribution of Partnership property pursuant to Sections 14.3
and 14.4, the Partnership shall be terminated, and the Liquidator (or the
Limited Partners if necessary) shall cause the cancellation of the Certificate
of Limited Partnership and all qualifications of the Partnership as a foreign
limited partnership in jurisdictions other than the State of Delaware and shall
take such other actions as may be necessary to terminate the Partnership.
14.6 Return of Capital. The General Partner shall not be personally liable
for the return of the Capital Contributions of the Limited Partners, or any
portion thereof, it being expressly understood that any such return shall be
made solely from Partnership assets.
14.7 Waiver of Partition. Each Partner hereby waives any rights to
partition of the Partnership property.
ARTICLE XV
AMENDMENT OF PARTNERSHIP AGREEMENT
15.1 Amendments Which May be Adopted Solely by the General Partner.
Subject to Section 15.3, the General Partner may amend any provision of this
Agreement without the consent of any Limited Partner, and may execute, swear to,
acknowledge, deliver, file and record whatever documents may be required in
connection therewith, to reflect:
(a) a change in the name of the Partnership, in the location of the
principal place of business of the Partnership or in the registered office
or registered agent of the Partnership;
(b) a change that the General Partner deems appropriate or necessary
to (i) qualify, or continue the qualification of, the Partnership as a
limited partnership (or a partnership in which the Limited Partners have
limited liability) under the laws of any state or jurisdiction or (ii)
ensure that neither the Partnership nor any of the Operating Partnerships
will be treated as an association taxable as a corporation for federal
income tax purposes;
(c) a change to divide outstanding Units into a greater number of
Units, to combine outstanding Units into a smaller number of Units or to
reclassify Units in a manner that in the good faith opinion of the General
Partner, does not adversely affect any class of Limited Partners in any
material respect;
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(d) a change that the General Partner in its sole discretion deems
appropriate or necessary to (i) satisfy any requirements, conditions or
guidelines contained in any order, rule or regulation of any federal or
state agency or contained in any federal or state statute or (ii)
facilitate the trading of any Units or comply with any rule, regulation,
requirement, condition or guideline of any National Securities Exchange on
which any Units are or will be listed or admitted to trading, or NASDAQ if
any Units are or will be quoted on NASDAQ;
(e) a change that is appropriate or necessary, as stated in an
Opinion of Counsel, to prevent the Partnership, the Operating Partnerships,
the General Partner, its Affiliates and their respective directors and
officers from in any manner being subjected to the provisions of the
Investment Company Act of 1940, as amended, the Investment Advisers Act of
1940, as amended, or "plan asset" regulations adopted under the Employee
Retirement Income Security Act of 1974, as amended, whether or not
substantially similar to plan asset regulations currently applied or
proposed by the United States Department of Labor;
(f) a change that is required or contemplated by any provision of
this Agreement, including, without limitation, Sections 4.3, 12.3 and 12.5;
(g) a change that in the good faith opinion of the General Partner
does not adversely affect the Limited Partners in any material respect; or
(h) any changes or events similar to the foregoing.
15.2 Other Amendments. Amendments to this Agreement may be proposed only
by the General Partner. Subject to Section 15.3, a proposed amendment (other
than amendments adopted pursuant to Section 15.1) shall be effective only when
approved by a Majority Interest. The General Partner shall notify all Limited
Partners upon final adoption of any proposed amendment.
15.3 Amendment Requirements. Notwithstanding the provisions of Sections
15.1 and 15.2, (i) the approval of an Eighty Percent Interest shall be required
for any amendment unless the Partnership has received an Opinion of Counsel that
such amendment would not result in the loss of limited liability of any Limited
Partner or result in the Partnership or any Operating Partnership being treated
as an association taxable as a corporation for federal income tax purposes, (ii)
no provision of this Agreement which establishes a percentage of the Limited
Partners required to take or approve any action shall be amended in any respect
which would have the affect of reducing the voting requirement, unless such
amendment is approved by at least such percentage of Limited Partners, and (iii)
this Section 15.3 shall be amended only with the approval of an Eighty Percent
Interest.
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ARTICLE XVI
MEETINGS
16.1 Meetings. Meetings of Limited Partners may be called by the General
Partner or by Limited Partners holding an aggregate of at least 20% of the
outstanding LP Units. Within 60 days after receipt by the General Partner of a
written proposal to call a meeting signed by Limited Partners holding the
requisite number of LP Units and indicating the purpose for which the meeting is
to be called (or such longer period as shall be reasonably required by the
General Partner in order to prepare documents required therefor), the General
Partner shall cause a notice of the meeting to be given to each Limited Partner.
A meeting shall be held at a time and place determined by the General Partner
within 60 days after the giving of notice of the meeting. A Majority Interest
represented in person or by proxy shall constitute a quorum at a meeting of the
Partners.
16.2 Record Date. For purposes of determining the Limited Partners
entitled to notice of or to vote at any meeting or to give approvals without a
meeting as provided in Section 16.4, the General Partner may set a Record Date,
which date for purposes of notice of a meeting shall not be less than 10 days
nor more than 60 days before the date of the meeting.
16.3 Conduct of Meeting. (a) The General Partner shall have full power and
authority concerning the manner of conducting any meeting of Limited Partners or
the solicitation of proxies or consents in writing, including, without
limitation, the determination of Persons entitled to vote, the existence of a
quorum, the conduct of voting, the validity and effect of any proxies, and the
determination of any controversies, votes or challenges arising in connection
with or during the meeting or voting. The General Partner shall designate an
individual to serve as chairman of any meeting and shall further designate an
individual to take the minutes of any meeting, which individuals may be
directors or officers of the General Partner. All minutes shall be kept with the
records of the Partnership maintained by the General Partner.
(b) The General Partner may vote its LP Units in such manner as it in its
sole discretion may determine.
16.4 Action Without a Meeting. Any action that may be taken at a meeting
of the Limited Partners may be taken without a meeting if approvals in writing
setting forth the action so taken are signed by Limited Partners holding in the
aggregate at least the minimum number of LP Units that would be necessary to
authorize or take such action at a meeting at which all the Limited Partners
were present and voted. Prompt notice of the taking of action without a meeting
shall be given to the Limited Partners who have not approved in writing. If
approvals to the taking of any action by the Limited Partners is solicited by
any Person other than by or on behalf of the General Partner, the approvals
shall have no force and effect unless and until (a) they are deposited with the
Partnership in care of the General Partner, (b) approvals sufficient to
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take the action proposed are dated as of a date not more than 90 days prior to
the date sufficient consents are deposited with the Partnership, and (c) the
Partnership receives an Opinion of Counsel that giving effect to such approvals
would not result in the loss of limited liability of any Limited Partner or
cause the Partnership or any of the Operating Partnerships to be treated as an
association taxable as a corporation for federal income tax purposes.
ARTICLE XVII
CERTAIN RESTRICTIONS
17.1 Additional Units. (a) Without the prior approval of a Two-Thirds
Interest the General Partner shall not cause the Partnership to (i) issue more
than 9,600,000 additional LP Units at any time after the Time of Delivery
(excluding for such purposes any LP Units issued in connection with the division
of outstanding LP Units into a greater number of LP Units) or (ii) issue any
class or series of LP Units having preferences or other special or senior rights
over the LP Units issued pursuant to Section 4.2.
(b) The General Partner shall not cause the Partnership to issue Units to
the General Partner or any of its Affiliates (other than pursuant to Section
4.1) unless (i) the Units are of a class which is, prior to such issuance,
listed or admitted to trading on a National Securities Exchange or quoted by
NASDAQ and the Net Agreed Value of the Contributed Property being contributed in
exchange for such Units is at least equal to the number of Units being so issued
times the Unit Price of such Units or (ii) such issuance is approved by a
Majority Interest.
17.2 Additional Indebtedness. Without the prior approval of a Two-Thirds
Interest, the General Partner shall not permit the Partnership or the Operating
Partnerships to incur any indebtedness for borrowed money except for (a) the
First Mortgage Notes, (b) any additional indebtedness of the Operating
Partnerships permitted by the Mortgage Note Indenture, (c) indebtedness owing to
the Partnership, any Operating Partnership or any subsidiary of the Partnership
or any Operating Partnership and (d) additional indebtedness not described in
any of the foregoing clauses in an aggregate consolidated principal amount not
to exceed $25 million plus the aggregate proceeds from the sale of additional
Partnership Interests after the Time of Delivery.
17.3 Capital Expenditures. (a) Subject to Section 17.3 (c), the General
Partner shall not permit the Partnership or the Operating Partnerships to make
combined capital expenditures during any calendar year in excess of 20% of the
sum of the Partnership's consolidated operating income and depreciation and
amortization for such year, except to the extent that, in the good faith opinion
of the General Partner, capital expenditures in excess of such limit are
required to sustain or improve existing operations of the Partnership and the
Operating Partnerships.
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(b) In the event that capital expenditures in excess of the limit referred
to in Section 17.3(a) are incurred for any year (because such expenditures are
required to sustain or improve existing operations or otherwise), the General
Partner shall use its best efforts to finance at least the amount of such excess
within six months after its incurrence through the issuance of additional
Partnership Interests not prohibited by Section 17.1, borrowings not prohibited
by Section 17.2 or both.
(c) The provisions of Sections 17.3 (a) and (b) may be waived as to
particular capital expenditures by the approval of a Majority Interest.
17.4 Certain Amendments. (a) Without the prior approval of a Two-Thirds
Interest, the General Partner shall not amend the Incentive Compensation
Agreement or permit the Partnership or any Operating Partnership to amend any
compensation arrangement for the General Partner or the Manager, unless, in any
case, such amendment does not, in the good faith opinion of the General Partner,
adversely affect the Limited Partners in any material respect.
(b) The General Partner shall not cause the Partnership to approve any
amendment to an Operating Partnership Agreement pursuant to Section 13.2 thereof
unless such amendment is approved by a Majority Interest.
17.5 Sale of Assets. Without the prior approval of a Two-Thirds Interest,
the General Partner shall not permit the sale or other disposition of all or
substantially all of the consolidated assets owned by the Partnership and the
Operating Partnerships.
17.6 Restricted Payments by General Partner or Manager. (a) The General
Partner shall not declare or make any Restricted Payment unless (i) after giving
effect thereto, the General Partner's assets that can be reached by creditors
(excluding its Partnership Interest and any notes receivable from or payable to
the Partnership) would have a fair market value (using such reasonable method of
valuation as the General Partner may adopt) equal to or greater than $5,000,000,
(ii) the Partnership has received an Opinion of Counsel that such Restricted
Payment would not result in the Partnership or any Operating Partnership being
treated as an association taxable as a corporation for federal income tax
purposes, or (iii) such Restricted Payment is approved by an Eighty Percent
Interest.
(b) The General Partner shall not permit the Manager to declare or make
any Restricted Payment unless (i) after giving effect thereto, the Manager's
assets that can be reached by creditors (excluding its partnership interest in
any Operating Partnership and any notes receivable from or payable to such
Operating Partnership) would have a fair market value (using such reasonable
method of calculation as the General Partner may adopt) equal to or greater than
$5,000,000, (ii) the Partnership has received an Opinion of Counsel that such
Restricted Payment would not result in the Partnership or any Operating
Partnership being treated as an association taxable as a corporation for federal
income tax purposes, or (iii) such Restricted Payment is approved by an Eighty
Percent Interest.
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ARTICLE XVIII
RIGHT TO PURCHASE UNITS
18.1 Right to Purchase Units. If fewer than 10% of the outstanding LP
Units are held by Persons other than the General Partner and its Affiliates, the
General Partner shall have the right, which it may assign to the Partnership or
any Affiliate, to purchase all, but not less than all, of the LP Units that
remain outstanding and are held by Persons other than the General Partner and
its Affiliates. Any such purchase shall be at a price per LP Unit in cash (the
"Purchase Price") equal to the greater of the Unit Price on the date of purchase
(the "Purchase Date") or the Issue Price for such LP Units, in either case
multiplied by (a)1.2, if the Purchase Date is after December 31, 1996 and on or
prior to December 31, 2001, (b) 1.1, if the Purchase Date is after December 31,
2001 and on or prior to December 31, 2006, or (c) 1.0, if the Purchase Date is
after December 31, 2006.
18.2 Notice of Election to Purchase. In the event the General Partner, any
Affiliate of the General Partner or the Partnership elects to exercise such
right to purchase LP Units pursuant to Section 18.1, the General Partner shall
cause the Transfer Agent to give written notice of such election to purchase
(the "Notice of Election to Purchase") to the Record Holders at least 10, but
not more than 60, days prior to the Purchase Date. Such Notice of Election to
Purchase shall also be published in daily newspapers of general circulation
printed in the English language and published in the Borough of Manhattan, New
York. The Notice of Election to Purchase shall specify the Purchase Date and the
Purchase Price and state that the General Partner, its Affiliate or the
Partnership, as the case may be, has elected to purchase such LP Units, upon
surrender thereof in exchange for payment, and at such place as specified. Any
such Notice of Election to Purchase mailed to a Record Holder of LP Units at his
address as reflected in the Units Register shall be conclusively presumed to
have been given whether or not the owner receives such notice.
18.3 Purchase and Transfer of Units. On or prior to the Purchase Date, the
General Partner, its Affiliate or the Partnership, as the case may be, shall
deposit with the Transfer Agent cash in an amount equal to the amount required
to purchase all outstanding LP Units held by Persons other than the General
Partner or its Affiliates. If the Notice of Election to Purchase shall have been
duly given as aforesaid and if on or prior to the Purchase Date the cash shall
have been deposited with the Transfer Agent in trust for the benefit of the
holders of LP Units subject to purchase as provided herein, then from and after
the Purchase Date, whether or not any LP Units shall have been surrendered for
purchase, all rights of the holders of such LP Units (including, without
limitation, any rights pursuant to Articles V, VI and XIV) shall thereupon
cease, except the right to receive the Purchase Price therefor, without
interest, upon surrender to the Transfer Agent of the LP Certificates
representing such LP Units, and such LP Units shall thereupon be transferred to
the General Partner, its Affiliate or the Partnership, as the case
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may be, on the Units Register, and the General Partner, its Affiliate or the
Partnership, as the case may be, shall be deemed to be the owner of all such LP
Units from and after the Purchase Date and shall have all rights as the owner of
such LP Units.
ARTICLE XIX
GENERAL PROVISIONS
19.1 Opinions Regarding Taxation as a Partnership. Notwithstanding any
other provisions of this Agreement, the requirement, as a condition to any
action proposed to be taken under this Agreement, that the Partnership receive
an Opinion of Counsel that the proposed action would not result in the
Partnership or any of the Operating Partnerships being treated as an association
taxable as a corporation for federal income tax purposes (a) shall not be
applicable to the extent that the Partnership or any of the Operating
Partnerships is at such time treated in all material respects as an association
taxable as a corporation for federal income tax purposes and (b) shall be deemed
satisfied by an Opinion of Counsel containing conditions, limitations and
qualifications which are acceptable to the General Partner in its sole
discretion.
19.2 Personal Property. The Partnership Interest of any Partner shall be
personal property for all purposes.
19.3 Addresses and Notices. Any notice, demand, request, payment or report
required or permitted to be given or made to a Limited Partner under this
Agreement shall be in writing and shall be deemed given or made when delivered
in person or when sent by first class mail or by other means of written
communication to the Limited Partner at such Limited Partner's address as shown
on the Units Register. Any notice to the Partnership or the General Partner
shall be deemed given if received in writing by the General Partner at the
principal office of the Partnership designated pursuant to Section 2.3.
19.4 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.
19.5 Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto (including the additional Persons that become
Limited Partners as provided herein) and their heirs, executors, administrators,
successors, legal representatives and assigns.
19.6 Integration. This Agreement constitutes the entire agreement among
the parties pertaining to the subject matter hereof and supersedes all prior
agreements and understandings pertaining thereto.
19.7 Waiver. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy
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consequent upon a breach thereof shall constitute a waiver of any such breach or
of any other covenant, duty, agreement or condition.
19.8 Counterparts. This Agreement may be executed in any number of
counterparts, all of which together shall constitute one agreement binding on
the parties hereto (including the additional Persons that become Limited
Partners as provided herein).
19.9 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.
19.10 Applicable Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Delaware.
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IN WITNESS WHEREOF, this Agreement has been duly executed by the General
Partner on behalf of itself and as agent and attorney-in-fact for the Limited
Partners, as of the date first above written.
BUCKEYE MANAGEMENT COMPANY,
as General Partner
By:
-------------------------------
Title:
LIMITED PARTNERS,
All Limited Partners now or hereafter admitted
as limited partners of the Partnership,
pursuant to powers of attorney now or
hereafter executed in favor of, and
delivered to, the General Partner.
By BUCKEYE MANAGEMENT COMPANY,
as General Partner
By:
---------------------------------
Title:
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AMENDED AND RESTATED CERTIFICATE OF LIMITED PARTNERSHIP
OF
BUCKEYE PARTNERS, L.P.
THIS Amended and Restated Certificate of Limited Partnership of
Buckeye Partners, L.P. (the "Partnership"), dated as of February 4, 1998, has
been duly executed and is being filed by the undersigned in accordance with the
provisions of 6 Del.C. (S) 17-210, to amend and restate the original Certificate
of Limited Partnership of the Partnership, which was filed on July 11, 1986,
with the Secretary of State of the State of Delaware, to form a limited
partnership under the Delaware Revised Uniform Limited Partnership Act (6 Del.C.
(S) 17-101, et seq.), as such certificate was previously amended (the
"Certificate").
The Certificate is hereby amended and restated in its entirety to read
as follows:
1. Name. The name of the limited partnership formed and continued
hereby is Buckeye Partners, L.P.
2. Registered Office. The address of the registered office of the
Partnership in the State of Delaware is c/o the Corporation Trust Company,
Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County,
Delaware 19801.
3. Registered Agent. The name and address of the registered agent
for service of process on the Partnership in the State of Delaware is the
Corporation Trust Company, Corporation Trust Center, 1209 Orange Street,
Wilmington, New Castle County, Delaware 19801.
<PAGE>
4. General Partner. The name and the business address of the sole
general partner of the Partnership is: Buckeye Management Company, a Delaware
corporation, 3900 Hamilton Boulevard, Allentown, Pennsylvania 18103.
IN WITNESS WHEREOF, the undersigned General Partner has duly executed
this Amended and Restated Certificate of Limited Partnership as of the date and
year first aforesaid.
BUCKEYE MANAGEMENT COMPANY,
a Delaware Corporation, as sole
General Partner
By: /s/Stephen C. Muther
------------------------------
Stephen C. Muther
Senior Vice President
-2-
<PAGE>
================================================================================
BUCKEYE PIPE LINE COMPANY, L.P.
TO
PNC BANK, NATIONAL ASSOCIATION
AS TRUSTEE
_______________
AMENDED AND RESTATED INDENTURE
DATED AS OF DECEMBER 16, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
[Not Part of Agreement]
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE ONE - DEFINITIONS; ACCOUNTING PRINCIPLES 6
(S) 1.01. Certain Definitions 6
"Affiliate" 7
"Bankruptcy Law" 7
"Board of Directors" 7
"BP Michigan" 7
"BP Pipeline System" 7
"Business Day" 7
"Called Principal" 7
"Capitalized Lease Obligation" 7
"Certified Resolution" 7
"Code" 7
"Company" 8
"Consolidated Interest Expense" 8
"Consolidated Net Income" 8
"Consolidated Tangible Assets" 8
"Counsel" 8
"Default" 9
["Defeased Notes" 9
"Discounted Value" 9
"EBITDA" 9
"ERISA" 9
"ERISA Affiliate" 9
"Event of Default" 9
"Exchange Act" 9
"General Partner" 10
"Indebtedness" 10
"Indenture" 10
"Institutional Noteholder" 10
"Laurel" 10
"Lien" 10
"Material Adverse Effect" 10
"Multiemployer Plan" 11
"1997 Note Agreement" 11
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
"Note" or "Notes" 11
"Noteholders" or "Holders of the Notes" or "Holders" 11
"Officers' Certificate" 11
"Original Indenture" 11
"Outstanding" 11
"Partnership Agreement" 11
"PBGC" 11
"Person" 12
"Pipelines" 12
"Pipeline Assets" 12
"Pipeline Systems" 12
"Plan" 12
"Priority Debt" 12
"Prior Liens" 12
"Prior Lien Obligations" 12
"Public Partnership" 12
"Registered Owner" 12
"Reinvestment Yield" 13
"Remaining Average Life" 13
"Remaining Scheduled Payments" 13
"Required Holder(s)" 13
"Responsible Officer" 13
"Responsible Officers of the Trustee" 13
"Restricted Affiliates" 14
"Restricted Subsidiary" 14
"Sale-Leaseback Attributable Debt" 14
"Sale-Leaseback Transaction" 14
"Securities Act" 14
"Settlement Date" 14
"Significant Holder" 14
"Sixth Supplement" 14
"Subsidiary" 14
"Supplemental Indenture" or "Indenture Supplemental" 14
"Swaps" 14
"Total Indebtedness" 15
"Transferee" 15
"Trustee" 15
"Yield-Maintenance Amount" 15
(S) 1.02. Accounting Principles 15
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
ARTICLE TWO - DESCRIPTION AND MANNER OF EXECUTION,
AUTHENTICATION AND REGISTRATION OF NOTES 16
(S) 2.01. Series; Designations 16
(S) 2.02. Variations and Special Provisions 16
(S) 2.03. Books for Registration and Transfer of Notes 17
(S) 2.04. Transfer and Date of Notes 18
(S) 2.05. Deemed Owners of Notes 18
(S) 2.06. Manner and Conditions of Exchange 18
(S) 2.07. Numbers, Designations, Legends, etc. 19
(S) 2.08. Execution of Notes 19
(S) 2.09. Mutilated, Destroyed, Lost or Stolen Notes 19
(S) 2.10. Form and Authentication of Notes 20
(S) 2.11. Terms of the 1997 Notes 20
ARTICLE THREE - AUTHENTICATION AND DELIVERY OF NOTES 21
(S) 3.01. Notes Limited 21
(S) 3.02. Authentication of 1997 Notes 21
(S) 3.03. Requirements for Authentication of Additional Notes 21
(S) 3.04. Payment Dates 23
ARTICLE FOUR - AFFIRMATIVE COVENANTS 24
(S) 4.01. Financial Statements; Other Reporting Requirements 24
(S) 4.02. Requirements Upon Qualification Under Trust Indenture Act 26
(S) 4.03. Information Regarding Noteholders 26
(S) 4.04. Information Required by Rule 144A 26
(S) 4.05. Inspection of Property 27
(S) 4.06. Covenant to Secure Notes Equally 27
(S) 4.07. Maintenance of Properties 27
(S) 4.08. Maintenance of Insurance 27
(S) 4.09. Compliance With Laws; Licenses and Permits 27
(S) 4.10. ERISA Compliance 28
(S) 4.11. Payment of Taxes and Other Claims 28
(S) 4.12. Partnership or Corporate Existence 28
(S) 4.13. Release of Original Indenture Lien 28
ARTICLE FIVE - NEGATIVE COVENANTS 29
(S) 5.01. Total Indebtedness to EBITDA Ratio 29
(S) 5.02. Limitation on Liens 29
(S) 5.03. Limitation on Priority Debt 32
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
(S) 5.04. Limitation on Sale of Assets 32
(S) 5.05. Maintenance of Affiliate Status 32
(S) 5.06. Limitation on Consolidation, Merger or Asset Transfer 32
(S) 5.07. Limitation on Sale-Leaseback Transactions 33
(S) 5.08. Authentication and Delivery of Notes; Compliance with
Indenture 34
(S) 5.09. Change of Business 34
ARTICLE SIX - PREPAYMENT OR REDEMPTION OF NOTES 34
(S) 6.01. Required Prepayments with Respect to 1997 Notes 34
(S) 6.02. Optional Prepayments with Respect to 1997 Notes 35
(S) 6.03. Notice of Optional Prepayment with Respect to 1997 Notes 35
(S) 6.04. Partial Prepayments Pro Rata 35
(S) 6.05. Retirement of 1997 Notes 35
ARTICLE SEVEN - EVENTS OF DEFAULT 36
(S) 7.01. Acceleration 36
(S) 7.02. Rescission of Acceleration 39
(S) 7.03. Notice of Acceleration or Rescission 40
(S) 7.04. Other Remedies 40
(S) 7.05. Control of Proceedings 40
(S) 7.07. Action by Trustee Without Possession of Notes 41
(S) 7.08. Filing of Documents by Trustee; Attorney-in-Fact 41
(S) 7.09. No Waiver 42
(S) 7.10. Notes Deemed Not Outstanding 42
(S) 7.11. Exercise of Rights 42
(S) 7.12. Remedies Subject to Applicable Laws 42
ARTICLE EIGHT - EVIDENCE OF RIGHTS OF NOTEHOLDERS 42
ARTICLE NINE - IMMUNITY OF PARTNERS, STOCKHOLDERS AND OFFICERS
AND DIRECTORS OF THE GENERAL PARTNER 43
ARTICLE TEN - THE TRUSTEE 44
(S) 10.01. Rights of Trustee 44
(S) 10.02. Extent of Trustee Liability 46
(S) 10.03. Notice of Defaults 47
(S) 10.04. Conflicting Interest of Trustee 47
(S) 10.05. Qualifications of Trustee; Resignation 47
(S) 10.06. Resignation and Removal; Successor Trustee 48
(S) 10.07. Acceptance by Successor Trustee 49
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C>
(S) 10.08. Merger or Consolidation 49
(S) 10.09. Trustee as Creditor 49
(S) 10.10. Reporting Requirements 53
(S) 10.11. Preservation of Noteholder Information 53
(S) 10.12. Dealings With Company 54
(S) 10.13. Compliance With SEC Rules and Regulations 54
ARTICLE ELEVEN - SUPPLEMENTAL INDENTURES 55
(S) 11.01. Permitted Purposes 55
(S) 11.02. Authorization of Trustee 56
(S) 11.03. Compliance With Trust Indenture Act 56
(S) 11.04. Delivery to Noteholders 56
ARTICLE TWELVE - MEETINGS OF NOTEHOLDERS 57
(S) 12.01. Modifications of Indenture 57
(S) 12.02. Calling of Meetings; Voting 57
(S) 12.03. Attendance at Meetings 58
(S) 12.04. Chairman and Secretary; Inspector of Votes 58
(S) 12.05. Quorum; Adjournment 59
(S) 12.06. Modifications of Indenture 59
(S) 12.07. Record of Meeting; Adoption and Approval 60
(S) 12.08. Written Consent 60
(S) 12.09. Endorsement of New Notes 60
ARTICLE THIRTEEN - MISCELLANEOUS PROVISIONS 61
(S) 13.01. Benefits Restricted 61
(S) 13.02. Canceled Notes 61
(S) 13.03. Severability; Conflicting Provisions 61
(S) 13.04. Expenses 62
(S) 13.05. Payments 62
(S) 13.06. Payments Due on Non-Business Days 62
(S) 13.07. Certificates; Opinions 63
(S) 13.08. Notices 64
(S) 13.09. Successors and Assigns 64
(S) 13.10. Counterparts 64
(S) 13.11. GOVERNING LAW 64
(S) 13.12. Headings 64
</TABLE>
v
<PAGE>
AMENDED AND RESTATED INDENTURE, dated as of December 16, 1997 (this
"INDENTURE"), made by and between BUCKEYE PIPE LINE COMPANY, L.P., a limited
partnership duly organized and existing under the laws of the State of Delaware
(the "COMPANY"), and PNC Bank, National Association, formerly Pittsburgh
National Bank, a national banking association duly organized and existing under
the laws of the United States, having its principal corporate trust office at
One Oliver Plaza, Pittsburgh, Pennsylvania 15265 (the "TRUSTEE");
WHEREAS, the Company, the Trustee and J.G. Routh, as Individual
Trustee, entered into that certain Indenture of Mortgage and Deed of Trust and
Security Agreement dated as of December 15, 1986, as amended by that certain
First Supplemental Indenture of Mortgage and Deed of Trust and Security
Agreement dated as of December 1, 1987, that certain Second Supplemental
Indenture of Mortgage and Deed of Trust and Security Agreement dated as of
November 30, 1992, that certain Third Supplemental Indenture of Mortgage and
Deed of Trust and Security Agreement dated as of December 31, 1993, that certain
Fourth Supplemental Indenture of Mortgage and Deed of Trust and Security
Agreement dated as of March 15, 1994, that certain Fifth Supplemental Indenture
of Mortgage and Deed of Trust and Security Agreement dated as of March 30, 1994
and that certain Sixth Supplemental Indenture of Mortgage and Deed of Trust and
Security Agreement (the "SIXTH SUPPLEMENT") dated as of even date herewith (as
thereby amended, the "ORIGINAL INDENTURE");
WHEREAS, the Company issued and sold under the Original Indenture the
Company's First Mortgage Notes, of which as of the date hereof and immediately
prior to the execution and delivery of the aforementioned Sixth Supplement and
the issuance of the hereinafter described 1997 Notes thereunder, there remained
outstanding the following: (i) $152,100,000 aggregate principal amount of the
Company's 11.18% Series J First Mortgage Notes due 2006, (ii) $11,000,000
aggregate principal amount of the Company's 7.11% Series K First Mortgage Notes
due 2007, (iii) $11,000,000 aggregate principal amount of the Company's 7.15%
Series L First Mortgage Notes due 2008, (iv) $13,000,000 aggregate principal
amount of the Company's 7.19% Series M First Mortgage Notes due 2009 and (v)
$15,000,000 aggregate principal amount of the Company's 7.93% Series N First
Mortgage Notes due 2010 (collectively, the "OUTSTANDING FIRST MORTGAGE NOTES");
WHEREAS, prior to the date hereof, the Company offered to purchase all
of the Outstanding First Mortgage Notes from the holders thereof, and all
holders of Outstanding First Mortgage Notes accepted such offer except Jefferson
Pilot Life Insurance Company, Ohio National Life Insurance Company and Pan
American Life Insurance Company, the holders of $10,805,000 aggregate principal
amount of the Company's 11.18% Series J First Mortgage Notes due 2006 (the "Non-
Accepting Notes");
WHEREAS, on the date hereof, simultaneously with the issuance and sale
by the Company of the 1997 Notes in the aggregate principal amount of
$240,000,000 under the 1997 Note Agreement and the Sixth Supplement, the Company
is (i) purchasing or redeeming and (in each case) canceling all Outstanding
First Mortgage Notes other than the Non-Accepting Notes, and (ii)
<PAGE>
defeasing the Non-Accepting Notes in accordance with the provisions of Article
Fourteen of the Original Indenture and that certain Defeasance Trust Agreement
of even date herewith between the Company and the Trustees, so that the 1997
Notes shall be the only Notes Outstanding (as defined in the Original Indenture)
under the Original Indenture;
WHEREAS, the Company and the Trustee wish to enter into this Indenture
in amendment and restatement of the Original Indenture in its entirety in order
to release and discharge the Mortgaged Property (as defined in the Original
Indenture) from the Lien of the Original Indenture and to otherwise amend and
modify its terms as set forth herein;
WHEREAS, the Company has duly obtained the consent of the Holder of
all of the 1997 Notes to such amendment and restatement of the Original
Indenture;
WHEREAS, all necessary action has been duly taken by the Company to
authorize the execution and delivery of this Indenture;
WHEREAS, the 1997 Notes entitled to the benefits of this Indenture
consist of four series, the Notes of each series being designated and referred
to in this Indenture as set forth in (S) 2.11 and having the aggregate principal
amount, maturing at the date, and bearing interest, payable monthly on the 16th
day of each calendar month during each year, at the annual rate set forth in (S)
2.11, and being subject to prepayment with respect to the required prepayments
specified in (S) 6.01 and the optional prepayments permitted by (S) 6.02; and
WHEREAS, the 1997 Notes are substantially in the form following
respectively with changes only as to series designations and interest rates:
[FORM OF NOTE OF SERIES 1997A THROUGH SERIES 1997D]
BUCKEYE PIPE LINE COMPANY, L.P.
(A limited partnership organized under
the laws of the State of Delaware)
SENIOR NOTE, ____% SERIES 1997__ DUE DECEMBER 16, 2024
No._____________ [Date]
$_______________ PPN___________
FOR VALUE RECEIVED, BUCKEYE PIPE LINE COMPANY, L.P., a limited
partnership organized and existing under the laws of the State of Delaware (the
"COMPANY"), hereby promises to pay to ______________________________________, or
registered assigns, the principal sum of ___________________________ DOLLARS
($______________) on December 16, 2024, with interest (computed on the basis of
a 360-day year--30-day month) (a) on the unpaid balance thereof at the rate of
____% per annum from the date hereof, payable monthly on the 16th day of each
calendar month during each year, commencing with the 16th day of the
2
<PAGE>
calendar month immediately succeeding the date hereof, until the principal
hereof shall have become due and payable, and (b) on any overdue payment
(including any overdue prepayment) of principal, any overdue payment of interest
and any overdue payment of any Yield-Maintenance Amount (as defined in the
Indenture referred to below), payable monthly as aforesaid (or, at the option of
the registered holder hereof, on demand), at a rate per annum from time to time
equal to the greater of (i) 2.0% over the above rate or (ii) 2.0% over the rate
of interest publicly announced by The Bank of New York from time to time in New
York City as its Prime Rate.
Except as provided in (S) 13.05 of the Indenture hereinafter referred
to, payments of principal of, interest on and any Yield-Maintenance Amount
payable with respect to this Note are to be made in lawful money of the United
States of America at the principal corporate trust office of the Trustee
hereinafter mentioned or any successor as Trustee under such Indenture.
This Note is one of a series designated as the "___% Senior Notes,
Series 1997__ due December 16, 2024" of the Company limited in aggregate
principal amount to $________ and issued under and entitled to the benefits of
that certain Indenture of Mortgage and Deed of Trust and Security Agreement
dated as of December 15, 1986, as amended by that certain First Supplemental
Indenture of Mortgage and Deed of Trust and Security Agreement dated as of
December 1, 1987, that certain Second Supplemental Indenture of Mortgage and
Deed of Trust and Security Agreement dated as of November 30, 1992, that certain
Third Supplemental Indenture of Mortgage and Deed of Trust and Security
Agreement dated as of December 31, 1993, that certain Fourth Supplemental
Indenture of Mortgage and Deed of Trust and Security Agreement dated as of March
15, 1994, that certain Fifth Supplemental Indenture of Mortgage and Deed of
Trust and Security Agreement dated as of March 30, 1994, and that certain Sixth
Supplemental Indenture of Mortgage and Deed of Trust and Security Agreement,
dated as of December 16, 1997, and as amended and restated in its entirety by
that certain Amended and Restated Indenture dated as of December 16, 1997,
between the Company and PNC Bank, National Association (the "TRUSTEE") (as
thereby amended and restated, and as the same may be further amended, restated
or otherwise modified from time to time, the "INDENTURE"). Contemporaneously
with the issuance of the Notes of this series, the Company is issuing under the
Indenture Notes of three other series which, together with the Notes of this
series (collectively, the "1997 NOTES"), are in the aggregate principal amount
of $240,000,000. The Indenture provides for the issuance of Additional Notes
thereunder (the 1997 Notes and the Additional Notes are referred to herein as
the "NOTES"), subject to the limitations described therein, to be entitled on an
equal basis with the 1997 Notes to the benefits of the Indenture. Reference is
made to the Indenture and all Indentures Supplemental thereto for a description
of the rights of the Holders of the Notes and of the Trustee in respect thereof.
The Notes of the several series issued under the Indenture may vary in aggregate
principal amount, may mature at different times, may bear interest at different
rates and may otherwise differ as in the Indenture provided.
The Company agrees to make required prepayments of principal on the
dates and in the amounts specified in the Indenture. This Note is also subject
to optional prepayment, in whole or from time to time in part, on the terms
specified in the Indenture.
3
<PAGE>
To the extent permitted by, and as provided in, the Indenture,
modifications or alterations of the Indenture, or of any Indenture Supplemental
thereto, and of the rights and obligations of the Company and of the Holders of
the Notes may be made with the consent of the Company upon the written consent
of the Holders of not less than 51% in aggregate principal amount of the 1997
Notes then Outstanding and the Holders of not less than 51% in aggregate
principal amount of the Notes of each other series issued under the Indenture
and then Outstanding, or by an affirmative vote of the Holders of not less than
51% in aggregate principal amount of the 1997 Notes then Outstanding and 51% in
aggregate principal amount of the Notes of each other series issued under the
Indenture and then Outstanding and entitled to vote thereon, at a meeting of
Noteholders called and held as provided in the Indenture or as otherwise
provided in the Indenture; provided, however, that no such modification or
alteration shall be made without the consent of the Holder hereof which will (a)
affect the right of such Holder to receive payment of principal of, or interest
or Yield-Maintenance Amount (if any) on, this Note, or to institute suit for the
enforcement of such payment on or after the respective due dates expressed
herein, or (b) reduce the percentage of the aggregate principal amount of Notes
required to authorize any such modification or alteration.
In case an Event of Default, as defined in the Indenture, shall occur
and be continuing, the principal of all the Notes at any such time outstanding
under the Indenture may be declared or may become due and payable upon the
conditions and in the manner and with the effect provided in the Indenture.
This Note is transferable by the Holder hereof, in person or by duly
authorized attorney, on books of the Company to be kept for that purpose at the
principal corporate trust office of the Trustee, upon surrender and cancellation
of this Note and on presentation of a duly executed written instrument of
transfer, and thereupon a new Note or Notes of the same series, of the same
aggregate principal amount and in authorized denominations, will be issued to
the transferee or transferees in exchange therefor; and this Note, with or
without others of the same series, may in like manner be exchanged for one or
more new Notes of the same series of other authorized denominations but of the
same aggregate principal amount; all upon payment of the charges and subject to
the terms and conditions set forth in the Indenture.
The Company and the Trustee may deem and treat the Person in whose
name this Note is registered as the absolute owner hereof for the purpose of
receiving payment of, or on account of, the principal hereof and interest due
hereon, and for all other purposes, and neither the Company nor the Trustee
shall be affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of, or the
interest or Yield-Maintenance Amount (if any) on, this Note, or for any claim
based hereon or on the Indenture or any Indenture Supplemental thereto, against
any partner, past, present or future, of the Company (including the General
Partner), or of any predecessor or successor, heir or assignee of any such
partner as such, or any stockholder, director, officer or employee of any such
partner, either directly or through the Company or any such predecessor or
successor, whether by virtue of any constitution, statute or rule of law, or by
the enforcement of any assessment or penalty or otherwise, all such
4
<PAGE>
liability, whether at common law, in equity, by any constitution, statute or
otherwise, being released by every owner hereof by the acceptance of this Note
and as part of the consideration for the issue hereof, and being likewise
released by the terms of the Indenture.
Capitalized terms used herein and not otherwise defined herein shall
have the meanings set forth in the Indenture.
This Note shall not be entitled to any benefits under the Indenture or
any Indenture Supplemental thereto, or become valid or obligatory for any
purpose, until PNC Bank, National Association, the Trustee under the Indenture,
or a successor Trustee thereto under the Indenture, shall have signed the
certificate imprinted hereon.
THIS NOTE IS INTENDED TO BE PERFORMED IN THE STATE OF NEW YORK AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAW OF SUCH STATE,
WITHOUT GIVING EFFECT (TO THE EXTENT PERMITTED BY APPLICABLE LAW) TO ITS
CONFLICTS OF LAW PRINCIPLES.
IN WITNESS WHEREOF, Buckeye Pipe Line Company, L.P. has caused this
Note to be signed in its name by its General Partner.
Dated: ___________ BUCKEYE PIPE LINE COMPANY, L.P.
By: Buckeye Pipe Line Company,
a Delaware Corporation,
as General Partner
By:_________________________
[Vice] President
(Corporate Seal)
Attest:
________________________________
[Assistant] Secretary of
Buckeye Pipe Line
Company, a Delaware
Corporation
5
<PAGE>
[FORM OF TRUSTEE'S CERTIFICATE]
This Note is one of the 1997 Notes, of the series designated therein,
described in the within-mentioned Indenture.
PNC BANK, NATIONAL ASSOCIATION,
Trustee
By:___________________________________
Authorized Signatory
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That Buckeye Pipe Line Company, L.P., in consideration of the premises
and of the mutual covenants herein contained and of the purchase and acceptance
of the Notes by the Holders thereof and of the sum of One Dollar to it duly paid
by the Trustee at or before the execution and delivery of this Indenture, and
for other valuable consideration, the receipt whereof is hereby acknowledged,
and in order to declare the terms and conditions upon and subject to which the
Notes are issued, has executed and delivered this Indenture in amendment and
restatement of the Original Indenture, and such Original Indenture is hereby
amended and restated in its entirety as follows:
IT IS HEREBY COVENANTED, DECLARED AND AGREED, by and between the
parties hereto, that all the Notes are to be issued, authenticated and delivered
subject to the further covenants, conditions, uses and trusts hereinafter set
forth; and the Company, for itself and its successors, does hereby covenant and
agree to and with the Trustee and its successors in said trust for the benefit
of those who shall hold the Notes, or any of them, as follows:
ARTICLE ONE
DEFINITIONS; ACCOUNTING PRINCIPLES
(S) 1.01. Certain Definitions. The terms defined in this (S) 1.01
shall, for all purposes of this Indenture and of all Indentures Supplemental
hereto hereafter entered into in accordance with the provisions hereof, have the
meanings herein specified, unless the context otherwise specifies or requires.
Unless herein otherwise defined, all terms used in this Indenture which are
defined in the Trust Indenture Act of 1939, shall have the meanings assigned to
them in such Act, unless the context otherwise specifies or requires.
"ADDITIONAL NOTES" shall mean any Notes authorized and delivered under
this Indenture or an Indenture Supplemental hereto other than the 1997 Notes.
6
<PAGE>
"AFFILIATE" shall mean any Person directly or indirectly controlling,
controlled by, or under direct or indirect common control with, the Company,
except a Subsidiary. A Person shall be deemed to control another Person if such
Person possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of such other Person, whether through
the ownership of voting securities, by contract or otherwise.
"BANKRUPTCY LAW" shall have the meaning specified in paragraph (h) of
(S) 7.01.
"BOARD OF DIRECTORS" shall mean the board of directors of the General
Partner or, in the case of any authority delegated to the Executive Committee of
the General Partner, such Executive Committee of the General Partner.
"BP MICHIGAN" shall Buckeye Pipe Line Company of Michigan, L.P., a
Delaware limited partnership.
"BP PIPELINE SYSTEM" shall mean the pipeline facilities operated by
the Company for the gathering, transmission and distribution of crude oil and
refined petroleum products.
"BUSINESS DAY" shall mean any day other than a Saturday, a Sunday or a
day on which commercial banks in New York City or the city in which the
principal corporate trust office of the Trustee is located are required or
authorized to be closed.
"CALLED PRINCIPAL" shall mean, with respect to any 1997 Note, the
principal of such Note that is to be prepaid pursuant to (S) 6.02 or is declared
to be immediately due and payable pursuant to (S) 7.01, as the context requires.
"CAPITAL IMPROVEMENTS" shall mean additions, improvements and repairs
to the Pipeline Assets, the cost of which is capitalized on the books of the
Company or any of its Restricted Affiliates in accordance with GAAP or
applicable rules and regulations of governmental agencies having rate making
jurisdiction over the Pipeline Systems.
"CAPITALIZED LEASE OBLIGATION" shall mean any rental obligation which,
under generally accepted accounting principles, would be required to be
capitalized on the books of the Company or any Subsidiary, taken at the amount
thereof accounted for as indebtedness (net of interest expense) in accordance
with such principles.
"CERTIFIED RESOLUTION" shall mean a copy of a resolution of the Board
of Directors certified by the Secretary or an Assistant Secretary of the General
Partner, under its corporate seal, to have been duly adopted and to be in full
force and effect on the date of such certification.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
7
<PAGE>
"COMPANY" shall mean Buckeye Pipe Line Company, L.P., a limited
partnership organized under the laws of the State of Delaware.
"CONSOLIDATED INTEREST EXPENSE" shall mean, with respect to any
period, the sum (without duplication, and in each case eliminating all
offsetting debits and credits between the Company and its Restricted Affiliates
and all other items required to be eliminated in the course of the preparation
of consolidated or combined financial statements of the Company and its
Restricted Affiliates in accordance with GAAP) of all interest and prepayment
charges in respect of the Company and its Restricted Affiliates (including
imputed interest in respect of Capitalized Lease Obligations and net costs of
Swaps); provided, that (i) there shall be excluded any interest paid or payable
with respect to the Defeased Notes and (ii) Consolidated Interest Expense shall
be subject to adjustment as provided in (S) 1.02.
"CONSOLIDATED NET INCOME" shall mean, with respect to any period, the
net income (or loss) of the Company and its Restricted Affiliates for such
period (taken as a cumulative whole), as determined in accordance with GAAP,
after eliminating all offsetting debits and credits between the Company and its
Restricted Affiliates and all other items required to be eliminated in the
course of the preparation of consolidated or combined financial statements of
the Company and its Restricted Affiliates in accordance with GAAP, provided that
(i) there shall be excluded any income or gain (or loss) during such period from
any change in accounting principles, from any extraordinary non-cash items or,
in the case of a successor to the Company or any Restricted Subsidiary by
consolidation or merger or as a transferee of its assets, any earnings of the
successor entity prior to such consolidation, merger or transfer of assets; (ii)
there shall be excluded any income from interest received in respect of
obligations of the United States Treasury held by the Trustee in trust in
connection with the Defeased Notes; (iii) interest expense arising from payment
by the Company of the Yield-Maintenance Premium (as defined in the Original Note
Indenture) or other premium paid to purchase the First Mortgage Notes shall not
be deducted in calculating Consolidated Net Income; and (iv) Consolidated Net
Income shall be subject to adjustment as provided in paragraph (S) 1.02.
"CONSOLIDATED TANGIBLE ASSETS" shall mean the consolidated or combined
total assets of the Company and its Restricted Affiliates less, without
duplication, (i) intangible assets including, without limitation, goodwill,
research and development costs, trademarks, trade names, patents, franchises,
copyrights, licenses, experimental or organizational expense, unamortized debt
discount and expense carried as an asset, all reserves and any write-up in the
book value of assets made after September 30, 1997 (other than write-ups of
assets of a going concern business made within 12 months after the acquisition
of such business), net of accumulated amortization, and (ii) all reserves for
depreciation and other asset valuation reserves (but excluding reserves for
federal, state and other income taxes).
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"COUNSEL" shall mean an attorney at law, licensed to practice before
the highest court of any State of the United States of America. Counsel may
include a Person who may be of counsel to, or employed by, the Company, the
General Partner, or any Affiliate of either of them, appointed by the General
Partner and acceptable to the Trustee.
"DEFAULT" has the meaning set forth in the definition of "EVENT OF
DEFAULT" in this (S) 1.01.
["DEFEASED NOTES" SHALL MEAN THE COMPANY'S 11.18% SERIES J FIRST
MORTGAGE NOTES DUE 2006, IN THE ORIGINAL AGGREGATE PRINCIPAL AMOUNT OF
$___________, DEFEASED ON THE DATE HEREOF IN ACCORDANCE WITH THE PROVISIONS OF
THE DEFEASANCE TRUST AGREEMENT AND ARTICLE FOURTEEN OF THE ORIGINAL INDENTURE.]
"DISCOUNTED VALUE" shall mean, with respect to the Called Principal of
any 1997 Note, the amount obtained by discounting all Remaining Scheduled
Payments with respect to such Called Principal from their respective scheduled
due dates to the Settlement Date with respect to such Called Principal, in
accordance with accepted financial practice and at a discount factor (applied on
the same periodic basis as that on which interest on such Note is payable) equal
to the Reinvestment Yield with respect to such Called Principal.
"EBITDA" shall mean for the Company and its Restricted Affiliates with
respect to any period, the sum of Consolidated Net Income plus, to the extent
deducted in the determination of Consolidated Net Income, (i) all provisions for
federal, state and other income tax, (ii) Consolidated Interest Expense, and
(iii) provisions for depreciation and amortization, less extraordinary items,
gains on sales of assets and income from discontinued operations, which in the
aggregate will be deducted only to the extent they are positive, less, in the
case of items (i) through (iii), deductions for amounts attributable to minority
interests in Subsidiaries; provided, that EBITDA shall be subject to adjustment
as provided in paragraph (S) 1.02.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA AFFILIATE" shall mean any corporation which is a member of the
same controlled group of corporations as the Company within the meaning of
section 414(b) of the Code, or any trade or business which is under common
control with the Company within the meaning of section 414(c) of the Code.
"EVENT OF DEFAULT" shall mean any of the events specified in (S) 7.01
hereof, provided that there has been satisfied any requirement in connection
with such event for the giving of notice, or the lapse of time, or the happening
of any further condition, event or act, and "DEFAULT" shall mean any of such
events, whether or not any such requirement has been satisfied.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
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"GENERAL PARTNER" shall mean Buckeye Pipe Line Company, a Delaware
corporation, the general partner of the Company and of BP Michigan and Laurel.
"INDEBTEDNESS" shall mean, with respect to any Person or consolidated
or combined group of Persons, the following: (i) all items (excluding items of
contingency reserves or of reserves for deferred income taxes) which under GAAP
are shown on the balance sheet as a liability (including, without limitation,
Capitalized Lease Obligations, but excluding trade accounts payable in the
ordinary course of business and accrued expenses shown as current liabilities);
(ii) indebtedness secured by any Lien existing on property owned subject to such
Lien, whether or not the indebtedness secured thereby shall have been assumed;
(iii) guarantees, endorsements (other than endorsement of negotiable instruments
for collection in the ordinary course of business) and other contractual
commitments (whether direct or indirect in connection with obligations, stock or
dividends of any Person); (iv) mandatorily redeemable preferred stock; (v)
Swaps; and (vi) unfunded pension liabilities.
"INDENTURE" shall mean this instrument and all Indentures
Supplemental hereto.
"INSTITUTIONAL NOTEHOLDER" shall have the meaning set forth in
(S) 12.05.
"LAUREL" shall mean Laurel Pipe Line Company, L.P., a Delaware
limited partnership.
"LAUREL PIPELINE SYSTEM" shall mean the pipeline facilities operated
by Laurel for the gathering, transmission and distribution of crude oil and
refined petroleum products.
"LIEN" shall mean any mortgage, pledge, priority, security interest,
encumbrance, contractual deposit arrangement, lien (statutory or otherwise) or
charge of any kind (including any agreement to give any of the foregoing, any
conditional sale or other title retention agreement, any production payment, any
lease in the nature thereof, and the filing of or agreement to give any
financing statement under the Uniform Commercial Code of any jurisdiction) or
any other type of preferential arrangement for the purpose, or having the
effect, of protecting a creditor against loss or securing the payment or
performance of an obligation.
"MATERIAL ADVERSE EFFECT" shall mean (i) an impairment of the
operation by the Company and its Restricted Affiliates of the Pipeline Systems
which materially adversely affects the manner in which the Pipeline Systems,
taken as a whole, have been operated by the Company and its Restricted
Affiliates (whether due to damage to, or a defect in the right, title or
interest of the Company or any of its Restricted Affiliates in and to, any of
the Pipeline Assets or for any other reason) or (ii) a material decline in the
financial condition or results of operations or business prospects of the
Company and its Restricted Affiliates, taken as a whole, or (iii) an inability
of the Company to make timely payments of principal and interest on the Notes,
in each case as a result (whether or not simultaneous) of the occurrence of one
or more events and/or the materialization or
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failure to materialize of one or more conditions and/or the taking of or failure
to take one or more actions described in this Indenture by reference to a
Material Adverse Effect.
"MULTIEMPLOYER PLAN" shall mean any Plan which is a "multiemployer
plan" (as such term is defined in section 4001(a)(3) of ERISA).
"1997 NOTE AGREEMENT" shall mean the Note Agreement dated as of
December 16, 1997 between the Company and The Prudential Insurance Company of
America.
"1997 NOTES" shall have the meaning set forth in (S) 2.12.
"NOTE" or "NOTES" shall mean any Note or Notes, as the case may be,
authenticated and delivered under this Indenture.
"NOTEHOLDERS" or "HOLDERS OF THE NOTES" or "HOLDERS" shall mean the
Registered Owners of the Notes. Any reference to a particular percentage or
proportion of the Noteholders, or to a particular percentage or proportion of
the Holders of Notes of a particular series, shall mean the Holders at the
particular time of the specified percentage or proportion in aggregate principal
amount of all Notes then Outstanding under this Indenture, or of all Notes of
the particular series then Outstanding under this Indenture, as the case may be,
exclusive of Notes or of Notes of the particular series, as the case may be, the
record or beneficial ownership of which is held by the Company or any of its
Affiliates.
"OFFICERS' CERTIFICATE" shall mean a certificate signed by the
President or a Vice President of the General Partner and the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary of the General
Partner.
"ORIGINAL INDENTURE" shall have the meaning set forth in the recitals
to this Indenture.
"OUTSTANDING" when used with respect to Notes shall mean as of any
particular time all Notes theretofore authenticated and delivered under this
Indenture, except (i) Notes canceled at or prior to the particular time and (ii)
Notes in lieu of and in substitution for which other Notes shall have been
authenticated and delivered under the circumstances and in the manner provided
in Article Two.
"PARTNERSHIP AGREEMENT" shall mean the Amended and Restated Agreement
of Limited Partnership of the Company, dated November 18, 1986, as amended by
that certain Amendment No. 1 to Amended and Restated Agreement of Limited
Partnership dated as of August 12, 1997, and as further amended, restated or
otherwise modified from time to time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
successor entity.
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"PERSON" shall mean an individual, a corporation, a partnership, a
joint venture, a limited liability company, an association, a trust or any other
entity or organization, including a government or political subdivision or an
agency or instrumentality thereof.
"PIPELINES" shall mean pipelines for the gathering, transmission or
distribution of crude oil or refined petroleum products.
"PIPELINE ASSETS" shall mean properties or assets comprising parts of,
or used or useful in connection with, the Pipeline Systems.
"PIPELINE SYSTEMS" shall mean the BP Pipeline System, the Laurel
Pipeline System and any other pipeline facilities at any time operated by the
Company or any of its Restricted Affiliates for the gathering, transmission and
distribution of crude oil and refined petroleum products.
"PLAN" shall mean any "employee pension benefit plan" (as such term is
defined in section 3 of ERISA) which is or has been established or maintained,
or to which contributions are or have been made, by the Company or any ERISA
Affiliate.
"PRIORITY DEBT" shall mean, without duplication, the sum of (i) all
Indebtedness of the Company secured by Liens permitted to exist pursuant to
clauses (o) and (s) of (S) 5.02, (ii) all Indebtedness of Restricted Affiliates
(other than Indebtedness owed to the Company or a wholly owned Restricted
Subsidiary of the Company), and (iii) all Sale-Leaseback Attributable Debt of
the Company and its Restricted Affiliates.
"PRIOR LIENS" shall mean any mortgages, liens or other encumbrances
not created by the Company or any or its Restricted Affiliates, which at any
time are liens upon the lands over which the Company or any of its Restricted
Affiliates holds easements or rights-of-way for Pipeline purposes, or upon
properties with respect to which the Company's or such Restricted Affiliate's
interest is subordinate to any such lien, and which do not secure bonds, notes,
other indebtedness, taxes, assessments or other charges which have been assumed
or guaranteed by the Company or any of its Restricted Affiliates or for which
the Company or any of its Restricted Affiliates has otherwise become liable or
on which the Company or any of its Restricted Affiliates customarily pays
interest charges.
"PRIOR LIEN OBLIGATIONS" shall mean obligations secured by "PRIOR
LIENS".
"PUBLIC PARTNERSHIP" shall mean Buckeye Partners, L.P., a Delaware
limited partnership.
"REGISTERED OWNER" shall mean the Person or Persons in whose name or
names a Note shall be registered on the books of the Company kept for that
purpose in accordance with the terms of this Indenture.
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"REINVESTMENT YIELD" shall mean, with respect to the Called Principal
of any 1997 Note, 0.50% plus the yield to maturity implied by (i) the yields
reported, as of 10:00 A.M. (New York City local time) on the Business Day next
preceding the Settlement Date with respect to such Called Principal, on the
display designated as "page 678" on the Telerate Service (or such other display
as may replace page 678 on the Telerate Service) for actively traded U.S.
Treasury securities having a maturity equal to the Remaining Average Life of
such Called Principal as of such Settlement Date, or if such yields shall not be
reported as of such time or the yields reported as of such time shall not be
ascertainable, (ii) the Treasury Constant Maturity Series yields reported, for
the latest day for which such yields shall have been so reported as of the
Business Day next preceding the Settlement Date with respect to such Called
Principal, in Federal Reserve Statistical Release H.15 (519) (or any comparable
successor publication) for actively traded U.S. Treasury securities having a
constant maturity equal to the Remaining Average Life of such Called Principal
as of such Settlement Date. Such implied yield shall be determined, if
necessary, by (a) converting U.S. Treasury bill quotations to bond-equivalent
yields in accordance with accepted financial practice and (b) interpolating
linearly between yields reported for various maturities.
"REMAINING AVERAGE LIFE" shall mean, with respect to the Called
Principal of any 1997 Note, the number of years (calculated to the nearest one-
twelfth year) obtained by dividing (i) such Called Principal into (ii) the sum
of the products obtained by multiplying (a) each Remaining Scheduled Payment of
such Called Principal (but not of interest thereon) by (b) the number of years
(calculated to the nearest one-twelfth year) which will elapse between the
Settlement Date with respect to such Called Principal and the scheduled due date
of such Remaining Scheduled Payment.
"REMAINING SCHEDULED PAYMENTS" shall mean, with respect to the Called
Principal of any 1997 Note, all payments of such Called Principal and interest
thereon that would be due on or after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior to its
scheduled due date.
"REQUIRED HOLDER(S)" shall mean, with respect to the Notes of any
series issued hereunder, the Holder or Holders of at least 51% of the aggregate
principal amount of the Notes such series from time to time Outstanding.
"RESPONSIBLE OFFICER" shall mean the chief executive officer, chief
operating officer, chief financial officer or chief accounting officer of the
General Partner or any other officer of the General Partner involved principally
in its financial administration or its controllership function.
"RESPONSIBLE OFFICERS OF THE TRUSTEE" shall mean the chairman of the
board of directors, the vice-chairman of the board of directors. the president,
the chairman of the trust committee, every vice-president, every assistant vice-
president, the secretary, every assistant secretary, the treasurer, every trust
officer, every assistant trust officer, and every other officer and assistant
officer of the Trustee customarily performing functions similar to those
performed by the persons who at the time shall be such officers respectively or
to whom any corporate trust matter is referred because of his knowledge of and
familiarity with a particular subject.
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"RESTRICTED AFFILIATES" shall mean the Restricted Subsidiaries,
Laurel and BP Michigan.
"RESTRICTED SUBSIDIARY" shall mean a Subsidiary of the Company that
has not been designated by the Board of Directors at its creation as an
Unrestricted Subsidiary. The Company may thereafter redesignate an Unrestricted
Subsidiary as a Restricted Subsidiary and it will thereafter be a Restricted
Subsidiary; provided, that such Restricted Subsidiary may not thereafter be
redesignated as an Unrestricted Subsidiary, and provided, further, that no
Subsidiary may be designated as an Unrestricted Subsidiary at any time other
than at its creation.
"SALE-LEASEBACK ATTRIBUTABLE DEBT" shall mean, as to any particular
lease relating to a Sale-Leaseback Transaction, the amount of the net sale
proceeds derived from the sale or transfer by the Company or any Restricted
Affiliate of the property involved.
"SALE-LEASEBACK TRANSACTION" shall mean a transaction or series of
transactions pursuant to which the Company or any Restricted Affiliate shall
sell or transfer to any Person any property, whether now owned or hereafter
acquired, and as part of the same transaction or series of transactions, the
Company or any Restricted Affiliate shall rent or lease as lessee, or similarly
acquire the right to possession or use of, such property or one or more
properties which it intends to use for the same purpose or purposes as such
property.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SETTLEMENT DATE" shall mean, with respect to the Called Principal of
any 1997 Note, the date on which such Called Principal is to be prepaid pursuant
to (S) 6.02 or is declared to be immediately due and payable pursuant to (S)
7.01, as the context requires.
"SIGNIFICANT HOLDER" shall mean any Holder of at least 5% of the
aggregate principal amount of Notes then Outstanding.
"SIXTH SUPPLEMENT" shall have the meaning set forth in the recitals
to this Indenture.
"SUBSIDIARY" shall mean any corporation or other entity of which the
Company owns, directly or indirectly, at least 80% of the voting securities or
interests therein.
"SUPPLEMENTAL INDENTURE" or "INDENTURE SUPPLEMENTAL" shall mean any
Indenture hereafter duly authorized and entered into in accordance with the
provisions of this Indenture.
"SWAPS" shall mean with respect to any Person, payment obligations
with respect to interest rate swaps, currency swaps and similar obligations
obligating such Person to make payments, whether periodically or upon the
happening of a contingency. For the purposes of this Indenture, the amount of
the obligation under any Swap shall be the amount determined in respect thereof
as of the end of the then most recently ended fiscal quarter of such Person,
based on the
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assumption that such Swap had terminated at the end of such fiscal quarter, and
in making such determination, if any agreement relating to such Swap provides
for the netting of amounts payable by and to such Person thereunder or if any
such agreement provides for the simultaneous payment of amounts by and to such
Person, then in each such case, the amount of such obligation shall be the net
amount so determined.
"TOTAL INDEBTEDNESS" shall mean the total Indebtedness of the Company
and its Restricted Affiliates, on a consolidated or combined basis, excluding
Indebtedness of the Company represented by the Defeased Notes.
"TRANSFEREE" shall mean any direct or indirect transferee of all or
any part of any Note purchased by you under this Agreement.
"TRUSTEE" shall mean PNC Bank, National Association, or the Trustee
under this Indenture for the time being, whether original or successor.
"TRUST INDENTURE ACT" shall mean the Trust Indenture Act of 1939, as
amended.
"UNRESTRICTED SUBSIDIARY" shall mean a Subsidiary of the Company that
has been designated by the Board of Directors as an "Unrestricted Subsidiary" at
the time of its creation; provided that no Indebtedness or other obligation of
such Unrestricted Subsidiary may be assumed or guaranteed by the Company or any
Restricted Subsidiary, nor may any asset of the Company or any Restricted
Subsidiary, directly or indirectly, contingently or otherwise, become encumbered
or otherwise subject to the satisfaction thereof.
"YIELD-MAINTENANCE AMOUNT" shall mean (i) with respect to any 1997
Note, an amount equal to the excess, if any, of the Discounted Value of the
Called Principal of such 1997 Note over the sum of (a) such Called Principal
plus (b) interest accrued thereon as of (including interest due on) the
Settlement Date with respect to such Called Principal, and (ii) with respect to
any Additional Note, the "Yield-Maintenance Amount" as defined in the
Supplemental Indenture under which such Additional Note is authorized, issued
and delivered. The Yield-Maintenance Amount shall in no event be less than
zero.
(S) 1.02. ACCOUNTING PRINCIPLES. All references in this Agreement to
"GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" or to "GAAP" shall be deemed to refer
to generally accepted accounting principles in effect in the United States at
the time of application thereof, as set forth in the opinions and pronouncements
of the Accounting Principles Board and the American Institute of Certified
Public Accountants, consistently applied. Unless otherwise specified herein, all
accounting terms used herein shall be interpreted, all determinations with
respect to accounting matters hereunder shall be made, and all unaudited
financial statements and certificates and reports as to financial matters
required to be furnished hereunder shall be prepared, in accordance with GAAP,
applied on a basis consistent with the most recent audited consolidated
financial statements of the Company and its Restricted Affiliates delivered
pursuant to paragraph (b) of (S) 4.01 or, if no such
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statements have been so delivered, the most recent audited financial statements
of the Public Partnership. Notwithstanding anything in this Indenture to the
contrary, for purposes of the financial covenant set forth in (S) 5.01, EBITDA,
Total Indebtedness, Consolidated Net Income and Consolidated Interest Expense,
for the period of the most recently ended four consecutive fiscal quarters of
the Company prior to the fiscal quarter of the Company in which any Person
becomes a Restricted Affiliate, or is merged into or consolidated with the
Company or a Restricted Affiliate, or all or substantially all of the assets of
which have been acquired by the Company or a Restricted Affiliate, shall be
deemed to include the Indebtedness, net income and interest expense, as
applicable, of such Person (or the consolidated Indebtedness, consolidated net
income and consolidated interest expense of such Person and its subsidiaries, as
the case may be) during such four consecutive fiscal quarters, with each such
item calculated as though such Person (or such Person and its subsidiaries, as
the case may be) had been a Restricted Affiliate at all times during such
period, or had been merged into or consolidated with the Company or a Restricted
Affiliate, or all or substantially all of the assets of which had been acquired
by the Company or a Restricted Affiliate on the day immediately preceding the
commencement of such period, subject, however, to adjustment as agreed to in
writing by the Company, the Holder(s) of not less than 51% in aggregate
principal amount of 1997 Notes then Outstanding and the Required Holder(s) of
each other series of Notes issued hereunder.
ARTICLE TWO
DESCRIPTION AND MANNER OF EXECUTION, AUTHENTICATION
AND REGISTRATION OF NOTES
(S) 2.01. SERIES; DESIGNATIONS. The Notes may, at the election
of the Board of Directors, be in one or more series and shall be designated
generally as the Senior Notes of the Company, with such further appropriate
particular designation added to, or incorporated in, or eliminated from, such
title, for the Notes of any particular series, as the Board of Directors may
determine. Each Note shall bear upon the face thereof the designation so
selected for the series to which it belongs. All Notes of any one series at any
time simultaneously Outstanding shall be identical in respect of date of
maturity, the place or places of payment of principal and of interest, the rate
or rates of interest and dates of interest payments and the terms of required
and optional prepayment or redemption, if prepayable or redeemable, the terms of
convertibility, if convertible, and in respect of sinking fund and analogous
provisions (if any). The Notes of each series may be issued in denominations of
$1,000 and any integral multiple thereof or in such denominations as are
otherwise provided for in the Supplemental Indenture authorizing the issuance
thereof.
(S) 2.02. VARIATIONS AND SPECIAL PROVISIONS. Subject to the provisions
contained in this Indenture with respect to the 1997 Notes, the Notes of any
series:
(a) shall be issued in registered form only, be limited to the
aggregate principal amount stated in the Supplemental Indenture authorizing
the issuance thereof, bear interest
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at such rate or rates and be payable, as to principal, interest and
premium, if any, at such time or times and at such place or places as may
be determined by the Board of Directors and expressed in such Notes;
(b) shall be payable in any coin or currency of the United States of
America, which at the time of payment is legal tender for public or private
debts;
(c) may be prepayable or redeemable, at the option of the Company, at
such prepayment premium or redemption price or prices, at such time or
times, upon such notice, in such manner and upon such other terms and
conditions not inconsistent with the provisions of this Indenture, as may
be determined by the Board of Directors and expressed or referred to in
such Notes;
(d) may be convertible into or exchangeable for, at the option of the
Holders thereof, equity interests in any entity, at such times and upon
such terms and conditions and subject to such adjustments as may be
determined by the Board of Directors and expressed or referred to in such
Notes;
(e) may contain such provisions, if any, for the establishment of a
purchase, sinking, amortization, improvement, or analogous fund therefor,
in such amounts, at such time or times, in such manner and upon such other
terms and conditions, and for the retirement or redemption of such Notes by
the operation of any such fund or otherwise, at such price or prices, in
such amounts, at such time or times, in such manner and upon such other
terms and conditions as may be determined by the Board of Directors and
expressed or referred to in such Notes;
(f) may contain such provisions with respect to serial maturities,
interest rate, prepayment premium or redemption price or prices,
convertibility, anticipation of maturity on the happening of a specified
event, and such other special terms and conditions, not contrary to the
provisions hereof, as may be determined by the Board of Directors and
expressed or referred to in such Notes; and
(g) shall be in the form or forms provided in the Supplemental
Indenture providing for the issuance of Notes of such series, which form or
forms shall be in substantially the same forms as are set forth in the
recitals hereto with respect to the 1997 Notes, with such omissions
therefrom, variations therein and additions thereto as shall be
appropriate.
(S) 2.03. BOOKS FOR REGISTRATION AND TRANSFER OF NOTES. The Company
shall cause the Trustee to keep, at the principal corporate trust office of the
Trustee, books for the registration and transfer of Notes entitled to
registration and transfer; and, upon presentation for such purpose at such
office, the Company will register or transfer or cause to be registered or
transferred therein, as hereinafter provided and under such reasonable
regulations as it may prescribe, any Notes entitled
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to be so registered or transferred. Similar books shall also be kept at such
other place or places as the General Partner may determine, for the registration
and transfer of the Notes of any particular series, open in like manner for
inspection by the Trustee, in which the Notes of such series may be registered
and transferred upon the terms and in the manner in this Article Two provided;
and such other place or places may (but need not) be appropriately recited in
the Notes of such series.
(S) 2.04. TRANSFER AND DATE OF NOTES. Any Note may be transferred at
the principal corporate trust office of the Trustee as provided in (S) 2.03,
upon the surrender of such Note for cancellation accompanied by delivery of a
written instrument of transfer in a form approved by the Company, duly executed
by the Holder of such Note, and thereupon the Company shall execute, in the name
of the transferee or transferees and the Trustee shall authenticate and deliver,
a new Note, or new Notes, of like form, of the same series for the same
aggregate principal amount. A Note, with or without others of like form, series
and maturity, may, upon surrender thereof to the Company, be exchanged for one
or more such Notes for the same aggregate principal amount, of the series and
maturity, in authorized denominations. Except as provided in (S) 2.06, every
Note shall be dated as of the date it is authenticated and delivered (except
that if any Note shall be authenticated and delivered on any interest payment
date it shall be dated as of the day next following such interest payment date)
and shall bear interest from the interest payment date next preceding the date
of such Note to which interest has been paid or the date of original delivery of
the Notes of such series if no interest has been paid on Notes of such series.
(S) 2.05. DEEMED OWNERS OF NOTES. The Person in whose name a Note is
registered shall be deemed and regarded as the absolute owner thereof for all
purposes of this Indenture; and all payments of the principal of and interest
(and Yield-Maintenance Amount, if any) on such Note shall be made only to or
upon the order in writing of such Registered Owner thereof. All such payments
shall be valid and effectual to satisfy and discharge the liability upon such
Notes to the extent of the sum or sums so paid.
(S) 2.06. MANNER AND CONDITIONS OF EXCHANGE. Any Notes to be
transferred or exchanged shall be surrendered at such office or agency of the
Company as shall be designated by the Board of Directors for the purpose, and
accompanied, in the case of a transfer, by duly executed instruments of
transfer, and the Company shall execute, and the Trustee shall authenticate and
deliver in exchange therefor, the Note or Notes which the Noteholder making the
exchange shall be entitled to receive.
Each Note issued in exchange or in substitution for the whole, or any
part, of one or more other Notes of the same series, shall carry all of the
rights to interest accrued and unpaid, and to accrue, which were carried by the
whole, or such part, as the case may be, of such one or more other Notes, and
notwithstanding anything contained in this Indenture, such Notes shall be so
dated that neither gain nor loss in interest shall result from such exchange or
substitution.
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All Notes so surrendered for exchange or transfer shall be presented
to the Trustee for cancellation, and the Trustee shall forthwith cancel the
same, and, on the written request of the Company, deliver the same to the
Company.
All Notes executed, authenticated and delivered in exchange for Notes
so surrendered, or upon transfer of Notes, shall be the valid obligations of the
Company, evidencing the same Indebtedness as the Notes surrendered, and shall be
entitled to the benefits of this Indenture to the same extent as the Notes in
exchange for which they were authenticated and delivered.
(S) 2.07. NUMBERS, DESIGNATIONS, LEGENDS, ETC. Any Note may bear
such numbers, letters, or other marks of identification or designation, and may
be endorsed with, or have incorporated in the text thereof, such legends or
recitals with respect to transferability or in respect of the Note or Notes for
which it is exchangeable and may contain such provisions, specifications and
descriptive words, not inconsistent with the provisions of this Indenture, as
may be determined by the Board of Directors, as may be required to comply with
the rules and regulations of any stock exchange upon which the Notes of such
series are, or are to be, listed or to conform with any usage with respect
thereto.
(S) 2.08. EXECUTION OF NOTES. All the Notes shall, from time to time,
be executed on behalf of the Company by the General Partner by the signature of
its President or one of its Vice-Presidents and its Secretary or one of its
Assistant Secretaries.
In case any of the officers who shall have signed any of said Notes
shall cease to be such officers of the General Partner before the Notes so
signed and sealed shall have been actually authenticated by the Trustee or
delivered by the Company, such Notes nevertheless may be authenticated and
delivered with the same force and effect as though the person or persons who
signed such Notes had not ceased to be such officer or officers; and any such
Note may be signed on behalf of the Company by such persons as at the actual
date of the execution of such Note shall be the proper officers of the General
Partner, although at the nominal date of such Note any such person shall not
have been such officer.
(S) 2.09. MUTILATED, DESTROYED, LOST OR STOLEN NOTES. Upon receipt by
the General Partner and the Trustee of evidence satisfactory to both of them
that any Note has been mutilated, destroyed, lost or stolen, and of indemnity
satisfactory to both of them, except that an Institutional Noteholder may
provide an agreement of indemnity, the General Partner, in its discretion, may
cause to be executed, and thereupon the Trustee shall authenticate and deliver,
a new Note of the same series and of like tenor (which may bear such notation as
may be required by the rules of any stock exchange upon which the Notes of such
series are listed or are to be listed), in exchange and substitution for, and
upon surrender and cancellation of, the mutilated Note or in lieu of, and in
substitution for, the Notes so destroyed, lost or stolen. Any Note issued under
the provisions of this (S) 2.09 in lieu of any Notes alleged to be destroyed,
lost or stolen, shall constitute an original additional contractual obligation
on the part of the Company whether or not the Notes so alleged to be destroyed,
lost or stolen be at any time enforceable by anyone, and shall be equally and
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proportionately entitled to the benefits of this Indenture with all other Notes
issued under this Indenture.
All mutilated Notes surrendered to the Trustee pursuant to the
provisions of this (S) 2.09 shall be canceled by the Trustee and delivered to
the Company.
(S) 2.10. FORM AND AUTHENTICATION OF NOTES. Subject to the
qualifications hereinbefore in this Article Two set forth, the Notes to be
entitled to the benefits of this Indenture shall be substantially of the tenor
and effect hereinbefore recited; and no Notes shall be entitled to the benefit
hereof, or shall be, or become, valid or obligatory for any purpose unless there
shall be endorsed thereon a certificate of authentication, substantially in the
form hereinbefore recited, executed by the Trustee, and such certificate on any
Notes issued by the Company shall be conclusive evidence, and the only competent
evidence, that it has been duly authenticated and delivered hereunder.
(S) 2.11. TERMS OF THE 1997 NOTES. The 1997 Notes entitled to the
benefits of this Indenture consist of the Series 1997A through Series 1997D
Notes, aggregating $240,000,000 principal amount, each series designated as set
forth in the following table:
<TABLE>
<CAPTION>
ANNUAL MAXIMUM
REFERRED TO INTEREST AGGREGATE
DESIGNATION HEREIN AS MATURITY RATE PRINCIPAL AMOUNT/*/
----------- ----------- -------- -------- -------------------
<S> <C> <C> <C> <C>
Senior Notes, Series A Notes December 16, 2024 6.98% $125,000,000
6.98% Series
1997A due 2024
Senior Notes, Series B Notes December 16, 2024 6.89% $100,000,000
6.89% Series
1997B due 2024
Senior Notes, Series C Notes December 16, 2024 6.95% $ 10,000,000
6.95% Series
1997C due 2024
Senior Notes, Series D Notes December 16, 2024 6.96% $ 5,000,000
6.96% Series
1997D due 2024
</TABLE>
- ------------------
/*/ Except as expressly provided in (S) 2.04, (S) 2.06 and (S) 2.09.
and the Notes of each such series are substantially in the form set forth in the
recitals hereto, are issuable in denominations of $1,000 and any integral
multiple thereof, were executed, authenticated and delivered in accordance with,
and subject to, all of the terms, conditions and covenants of the
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Original Indenture, are subject to and entitled to the benefits of all of the
terms and conditions of this Indenture, and have the following further terms and
provisions:
(a) Interest on the principal amount of each of the 1997 Notes from
the date of original issue until due and payable, is payable, at the rate
specified in the Note, monthly on the 16th day of each calendar month in
each year and on any overdue payment (including any overdue prepayment) of
principal, any overdue payment of interest and any overdue payment of any
Yield-Maintenance Amount, payable monthly as aforesaid (or, at the option
of the registered holder hereof, on demand), at a rate per annum from time
to time equal to the greater of (i) 2.0% over the rate specified above with
respect to each series of Notes or (ii) 2.0% over the rate of interest
publicly announced by The Bank of New York from time to time in New York
City as its Prime Rate, as shall be determined by the Trustee.
(b) The 1997 Notes are subject to prepayment only with respect to the
required prepayments specified in (S) 6.01 hereof and the optional
prepayments permitted by (S) 6.02 hereof.
ARTICLE THREE
AUTHENTICATION AND DELIVERY OF NOTES
(S) 3.01. NOTES LIMITED. The aggregate principal amount of Notes
which may be Outstanding under this Indenture at any time (after giving effect
to the authentication and delivery of Additional Notes, the authentication and
delivery of which are being requested and the prepayment or redemption of any
Notes prepaid or redeemed out of the proceeds of such Additional Notes) is
limited to $335,000,000. Except as otherwise herein expressly provided, all
Notes issued hereunder shall in all respects be equally and ratably entitled to
the benefits of this Indenture without preference, priority or distinction, so
that all Notes at any time Outstanding hereunder shall have the same rights
under and by virtue of this Indenture, with like effect as if they had all been
executed, authenticated and delivered simultaneously on the date hereof, whether
the same or any of them shall actually be sold or disposed of at such date, or
whether they, or any of them, shall be sold or disposed of at some future date,
or whether they, or any of them, shall have been authorized to be authenticated
and delivered under (S) 3.02, or may be authorized to be authenticated and
delivered hereafter pursuant to other provisions of this Indenture.
(S) 3.02. AUTHENTICATION OF 1997 NOTES. The 1997 Notes have been duly
and validly authorized and executed by the Company and delivered to the Trustee
and authenticated and delivered by the Trustee pursuant to the terms and
conditions of Sixth Amendment and the Original Indenture, as amended and
supplemented by the Sixth Supplement.
(S) 3.03. REQUIREMENTS FOR AUTHENTICATION OF ADDITIONAL NOTES. The
Company shall file or deposit with the Trustee, upon any application for the
authentication of Additional Notes:
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(a) A Certified Resolution authorizing the execution and requesting
the authentication and delivery of the Additional Notes applied for in the
principal amount therein specified, designating the series of such Notes,
as created by the terms of an Indenture Supplemental hereto in which are
set out the terms and provisions of such series of Notes, the form thereof,
and such other provisions applicable to such Notes as the Company may
choose; provided that nothing contained in such Supplemental Indenture
shall be inconsistent with any provision of this Indenture, unless the
Required Holder(s) of each series of Notes then Outstanding shall approve,
and naming the officer or officers of the General Partner to whom or upon
whose order such Notes shall be delivered.
(b) An Officers' Certificate, dated as of the date of such
application, stating in substance that:
(i) so far as known to such officers, the Company is not, and by
the making or granting of the application or the issuance and sale of
the Notes for which application is made, will not be, in Default in
the performance of any of the terms and covenants of this Indenture;
and, in the opinion of such officers, all conditions precedent
provided for in this Indenture relating to the authentication and
delivery of the Additional Notes applied for have been complied with;
and
(ii) there will not occur as a result of the issuance of the
Additional Notes applied for any Material Adverse Effect.
(c) A Supplemental Indenture providing for the issuance of the Notes
of such series.
(d) An opinion of Counsel, dated as of the date of such application,
to the effect that:
(i) the issue of the Additional Notes, the authentication and
delivery of which are being applied for, has been duly authorized by
all governmental authorities the consent of which is requisite to the
legal issue of such Notes or that no such consent is required; and,
unless such opinion shall show that no consent of any governmental
authority is requisite to the legal issue of the Additional Notes
applied for, it shall specify any orders, certificates or other
documents by which such consent is evidenced; and
(ii) assuming the accuracy of the statements made in the
Officers' Certificate furnished pursuant to (S) 3.03(b) and 3.03(e),
all conditions precedent provided for in this Indenture relating to
the authentication and delivery of the Additional Notes applied for
have been complied with, and the Company is duly authorized and
entitled to the authentication and delivery of the Additional Notes
applied for in accordance with the provisions of this Indenture and to
issue such
22
<PAGE>
Additional Notes under the laws of the State of Delaware and the
applicable laws of any other jurisdiction; upon the issue of such
Notes, such Notes will be valid and binding obligations of the Company
and entitled to the benefits of this Indenture; and the aggregate
principal amount of Notes Outstanding under this Indenture (after
giving effect to the issuance of such Additional Notes and the
prepayment or redemption of any Notes being prepaid or redeemed out of
the proceeds of such Additional Notes) will not exceed the amount at
the time permitted by law or this Indenture.
(e) Either:
(i) an Officers' Certificate (A) stating the purpose for which
the net proceeds of the issuance and sale of the Notes will be
applied, and (B) stating that the aggregate principal amount of the
Notes that will be Outstanding under this Indenture immediately after
the issuance of the Notes applied for (other than Notes issued in
exchange or substitution for Outstanding Notes pursuant to (S) 2.04,
2.06 and 2.09 and Additional Notes issued pursuant to this (S) 3.03 to
provide funds required for the prepayment or redemption of Notes
pursuant to this Indenture) will not exceed the sum of $275,000,000;
or
(ii) upon any application for the authentication of Additional
Notes the net proceeds of the issuance and sale of which are to be
used to prepay or redeem Outstanding Notes, an Officers' Certificate
specifying (A) that the net proceeds of the sale of the Notes applied
for shall be applied in full to the prepayment or redemption of Notes
pursuant to the terms of this Indenture, (B) the principal amount or
the Notes to be prepaid or redeemed, (C) the prepayment or redemption
date and the prepayment premium or redemption price of the Notes to be
prepaid or called for redemption, (D) that the prepayment or
redemption requirements applicable to the Notes to be prepaid or
called for redemption have been complied with, and (E) upon the issue
and sale of the Notes applied for, an Officers' Certificate specifying
the net proceeds of the sale of such Notes, and deposit with the
Trustee the net proceeds of the sale of the Notes applied for and, to
the extent such net proceeds are insufficient for the prepayment or
redemption of the Notes to be prepaid or called for redemption, such
additional funds as shall be required to effect such prepayment or
redemption.
(S) 3.04. PAYMENT DATES. Interest on all Notes shall be payable
only on the 16th day of each calendar month in any calendar year, and any
mandatory prepayments of Notes shall be made only on December 16 in any calendar
year.
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<PAGE>
ARTICLE FOUR
AFFIRMATIVE COVENANTS
The Company hereby covenants, warrants and agrees as follows:
(S) 4.01. Financial Statements; Other Reporting Requirements. The
Company will file with the Trustee and deliver to each Significant Holder in
duplicate:
(a) as soon as practicable and in any event within 60 days after the
end of each quarterly period (other than the last quarterly period) in each
fiscal year, consolidating schedules and combined statements of income,
partners' equity and cash flows of the Company and its Restricted
Affiliates for the period from the beginning of the current fiscal year to
the end of such quarterly period, and a consolidating schedule and combined
balance sheet of the Company and its Restricted Affiliates as at the end of
such quarterly period, setting forth in each case in comparative form
figures for the corresponding period in the preceding fiscal year, all in
reasonable detail and satisfactory in form to the Required Holder(s) and
certified by an authorized financial officer of the Company, subject to
changes resulting from year-end adjustments;
(b) as soon as practicable and in any event within 120 days after the
end of each fiscal year, consolidating schedules and combined statements of
income, partners' equity and cash flows of the Company and its Restricted
Affiliates for such year, and a consolidating schedule and combined balance
sheet of the Company and its Restricted Affiliates as at the end of such
year, setting forth in each case in comparative form corresponding combined
figures from the preceding annual audit, all in reasonable detail and
satisfactory in form to the Required Holder(s) of each series of Notes
issued hereunder and, as to the combined statements, reported on by
independent public accountants of recognized national standing selected by
the Company, whose report shall be without limitation as to the scope of
the audit and satisfactory in substance to the Required Holder(s) of each
series of Notes issued hereunder and, as to the consolidating schedules,
certified by an authorized financial officer of the Company;
(c) promptly upon transmission thereof, copies of all financial
statements, proxy statements, notices and reports as the Public Partnership
shall send to its public unitholders and copies of all registration
statements (without exhibits) and all reports which it files with the
Securities and Exchange Commission (or any governmental body or agency
succeeding to the functions of the Securities and Exchange Commission);
(d) promptly upon receipt thereof, a copy of each other report
submitted to the Company or any of its Restricted Affiliates by independent
accountants in connection with any annual, interim or special audit made by
them of the books of the Company or any of its Restricted Affiliates;
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<PAGE>
(e) as soon as practicable and in any event within ten days after any
Responsible Officer of the Company obtains knowledge (i) of any condition
or event which, in the opinion of management of the Company or any of its
Restricted Affiliates, could reasonably be expected to have a Material
Adverse Effect, other than conditions or events that are not particular to
the Company and its Restricted Affiliates, such as conditions or events
generally affecting the economy or the industries in which the Company and
its Restricted Affiliates are engaged (provided, that such conditions or
events do not affect the Company or any Restricted Affiliate to a
materially greater extent than others in the industries in which the
Company and its Restricted Affiliates are engaged); (ii) that any Person
has given any notice to the Company or any Restricted Affiliate or taken
any other action with respect to a claimed default or event or condition of
the type referred to in paragraph (c) of (S) 7.01; (iii) of the institution
of any litigation involving claims against the Company or any Restricted
Affiliate equal to or greater than $5,000,000 with respect to any single
cause of action or of any adverse determination in any court proceeding in
any litigation involving a potential liability to the Company or any
Restricted Affiliate equal to or greater than $5,000,000 with respect to
any single cause of action which makes the likelihood of an adverse
determination in such litigation against the Company or any Restricted
Affiliate substantially more probable; (iv) of the institution of any
litigation involving the Company or any of its Restricted Affiliates, or of
any adverse determination in any court proceeding in any such litigation,
which could reasonably be expected to have a Material Adverse Effect; or
(v) of any regulatory proceeding in which the Company or any of its
Restricted Affiliates is a party or otherwise subject which could
reasonably be expected to have a Material Adverse Effect, an Officers'
Certificate specifying the nature and period of existence of any such
condition or event, or specifying the notice given or action taken by such
Person and the nature of any such claimed default, event or condition, or
specifying the details of such proceeding, litigation or dispute and what
action the Company or a Restricted Affiliate has taken, is taking or
proposes to take with respect thereto;
(f) promptly after the filing or receiving thereof, copies of all
material reports and notices which the Company or any Restricted Affiliate
files under ERISA with the IRS or the PBGC or the U.S. Department of Labor
or which the Company or any Restricted Affiliate receives from any of the
foregoing entities;
(g) promptly, and in any event within ten days after a Responsible
Officer of the Company becomes aware of any of the following, an Officer's
Certificate setting forth the nature thereof and the action, if any, that
the Company or an ERISA Affiliate proposes to take with respect thereto:
(i) with respect to any Plan, any reportable event, as defined in section
4043 of ERISA and the regulations thereunder, for which notice thereof has
not been waived pursuant to such regulations as in effect on the date
hereof; or (ii) the taking by the PBGC of steps to institute, or the
threatening by the PBGC of the institution of, proceedings under section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by the Company or an ERISA Affiliate
of a notice from a Multiemployer Plan that such action has been taken by
the PBGC with re-
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<PAGE>
spect to such Multiemployer Plan; or (iii) any event, transaction or
condition that could result in the incurrence of any liability by the
Company or an ERISA Affiliate pursuant to Title I or IV of ERISA; and
(h) with reasonable promptness, such other information respecting the
condition or operations, financial or otherwise, of the Company or any of
its Restricted Affiliates as any Significant Holder or the Trustee on
behalf of the Holders may reasonably request.
Together with each delivery of financial statements required by paragraphs (a)
and (b) of this (S) 4.01, the Company will file with the Trustee and deliver to
each Significant Holder an Officer's Certificate demonstrating (with
computations in reasonable detail) compliance by the Company and its
Subsidiaries with the provisions of (S) 5.01, paragraph (p) of (S) 5.02 and
(S) 5.03 and stating that there exists no Event of Default or Default, or, if
any Event of Default or Default exists, specifying the nature and period of
existence thereof and what action the Company has taken or proposes to take with
respect thereto. Together with each delivery of financial statements required by
paragraph (b) of this (S) 4.01, the Company will file with the Trustee and
deliver to each Significant Holder a certificate of such accountants stating
that, in making the audit necessary for their report on such financial
statements, they have obtained no knowledge of any Event of Default or Default,
or, if they have obtained knowledge of any Event of Default or Default,
specifying the nature and period of existence thereof. Such accountants,
however, shall not be liable to anyone by reason of their failure to obtain
knowledge of any Event of Default or Default which would not be disclosed in the
course of an audit conducted in accordance with GAAP.
(S) 4.02. REQUIREMENTS UPON QUALIFICATION UNDER TRUST INDENTURE
ACT. In the event that this Indenture shall have been qualified under the Trust
Indenture Act of 1939, the Company will (a) file with the Securities and
Exchange Commission in accordance with the rules and regulations prescribed from
time to time by said Commission and deliver to the Noteholders, such additional
information, documents and reports with respect to compliance by the Company
with the conditions and covenants provided for in this Indenture as may be
required by such rules and regulations, (b) file with the Trustee and deliver to
the Noteholders copies of all such information, documents and reports filed with
the Securities and Exchange Commission, and (iii) deliver to the Noteholders
such summaries of any information, documents and reports required to be filed
with the Trustee pursuant to the provisions of paragraphs (b) and (c) of
(S) 4.01 as may be required by the rules and regulations prescribed from time to
time by the Securities and Exchange Commission.
(S) 4.03. INFORMATION REGARDING NOTEHOLDERS. The Company will
furnish or cause to be furnished to the Trustee at such times as the Trustee may
request in writing, all information in the possession or control of the Company
as to the names and addresses of the Holders of Notes.
(S) 4.04. INFORMATION REQUIRED BY RULE 144A. The Company will, upon
the request of the Holder of any Note, provide such Holder, and any qualified
institutional buyer designated by such Holder, such financial and other
information as such Holder may reasonably determine to be necessary in order to
permit compliance with the information requirements of Rule 144A under the
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Securities Act in connection with the resale of Notes. For the purpose of this
(S) 4.04, the term "qualified institutional buyer" shall have the meaning
specified in Rule 144A under the Securities Act.
(S) 4.05. INSPECTION OF PROPERTY. The Company will permit, and will
cause each of its Restricted Affiliates to permit, any Person designated by any
Significant Holder in writing, at the Company's expense during the continuance
of a Default or Event of Default and otherwise at such Significant Holder's
expense, to visit and inspect any of the properties of the Company and its
Restricted Affiliates, to examine the corporate books and financial records of
the General Partner, the Company and its Restricted Affiliates and make copies
thereof or extracts therefrom and to discuss the affairs, finances and accounts
of any of such Persons with the principal officers of the General Partner, the
Company or its Restricted Affiliates and their independent public accountants,
all at such reasonable times and as often as such Significant Holder may
reasonably request.
(S) 4.06. COVENANT TO SECURE NOTES EQUALLY. The Company will, if it
or any Restricted Affiliate shall create or assume any Lien upon any of its
property or assets, whether now owned or hereafter acquired, other than Liens
permitted by the provisions of (S) 5.02 (unless prior written consent to the
creation or assumption thereof shall have been obtained pursuant to (S) 5.02),
make or cause to be made effective provision whereby the Notes will be secured
by such Lien equally and ratably with any and all other Indebtedness thereby
secured so long as any such other Indebtedness shall be so secured.
(S) 4.07. MAINTENANCE OF PROPERTIES. The Company will maintain and
keep, or cause to be maintained and kept, the respective properties of the
Company and its Restricted Affiliates in good repair, working order and
condition (other than ordinary wear and tear), so that the business carried on
in connection therewith may be properly conducted at all times, provided that
this paragraph shall not prevent the Company or any Restricted Affiliate from
discontinuing the operation and the maintenance of any of its properties if such
discontinuance is desirable in the conduct of its business and such
discontinuance could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(S) 4.08. MAINTENANCE OF INSURANCE. The Company will maintain and
will cause each of its Restricted Affiliates to maintain, with financially sound
and reputable insurers, insurance with respect to their respective properties
and businesses against such casualties and contingencies, of such types, on such
terms and in such amounts (including deductibles, co-insurance and self-
insurance, if adequate reserves are maintained with respect thereto) as is
customary in the case of entities of established reputations engaged in the same
or a similar business and similarly situated.
(S) 4.09. COMPLIANCE WITH LAWS; LICENSES AND PERMITS. The Company will
, and will cause each of its Restricted Affiliates to, comply with all laws,
ordinances or governmental rules or regulations to which each of them is subject
(including, without limitation, those relating to protection of the
environment), and to obtain and maintain in effect all licenses, certificates,
permits, franchises and other governmental authorizations necessary to the
ownership of their respective
27
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properties or to the conduct of their respective businesses, in each case to the
extent necessary to ensure that noncompliance with such laws, ordinances or
governmental rules or regulations or failures to obtain or maintain in effect
such licenses, certificates, permits, franchises and other governmental
authorizations could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(S) 4.10. ERISA COMPLIANCE. The Company will, and will cause each
ERISA Affiliate to, at all times: (a)with respect to each Plan, make timely
payments of contributions required to meet the minimum funding standard set
forth in ERISA or the Code with respect thereto and, with respect to any
Multiemployer Plan, make timely payment of contributions required to be paid
thereto as provided by Section 515 of ERISA, and (b) comply with all other
provisions of ERISA, except for such failures to make contributions and failures
to comply as could not have a Material Adverse Effect.
(S) 4.11. PAYMENT OF TAXES AND OTHER CLAIMS. The Company will, and
will cause each of its Restricted Affiliates to, file all tax returns required
to be filed in any jurisdiction and to pay and discharge (or cause to be paid
and discharged) all Taxes shown to be due and payable on such returns and all
other Taxes imposed on them or any of their properties, assets, income or
franchises, to the extent such Taxes have become due and payable and before they
have become delinquent and all claims for which sums have become due and payable
that have or might become a Lien on properties or assets of the Company or any
Restricted Affiliate, provided that neither the Company nor any Restricted
Affiliate need pay any such Taxes or claims if (a) the amount, applica bility or
validity thereof is contested by the Company or such Restricted Affiliate on a
timely basis in good faith and in appropriate proceedings, and the Company or
such Restricted Affiliate has established adequate reserves therefor in
accordance with GAAP on its books or (b) the nonpayment of all such Taxes and
claims in the aggregate could not reasonably be expected to have a Material
Adverse Effect.
(S) 4.12. PARTNERSHIP OR CORPORATE EXISTENCE. Subject to (S) 5.06,
the Company will, and will cause each of its Restricted Affiliates to, preserve
and keep in full force and effect its partnership, corporate or other applicable
organizational existence and all its rights and franchises, except in the case
of such rights and franchises where the failure to do so could not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(S) 4.13. RELEASE OF ORIGINAL INDENTURE LIEN. On or before June 30,
1998, the Company shall have (i) caused all terminations, releases and other
instruments to be recorded, registered and filed in such manner and in such
governmental offices as may in the opinion of Counsel be required by law in
order to fully release, terminate and discharge all properties and assets of the
Company, wherever located, from the Lien of the Original Indenture (excluding
any Lien of the Trustee encumbering the Defeasance Trust (as defined in the
Defeasance Trust Agreement) and all funds and securities therein for the benefit
of the holders of the Defeased Notes), and (ii) filed with the Trustee and
delivered to each Significant Holder an Officer's Certificate to such effect,
28
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setting forth in detail all recording and other pertinent information with
respect to such release, termination and discharge.
ARTICLE FIVE
NEGATIVE COVENANTS
(S) 5.01. TOTAL INDEBTEDNESS TO EBITDA RATIO. The Company may incur
and permit to remain outstanding Indebtedness at any time and from time to time,
but will not permit, at any time, the ratio of (a) Total Indebtedness to (b)
EBITDA for the most recently ended four consecutive fiscal quarters to be
greater than 5.00 to 1.00.
(S) 5.02. LIMITATION ON LIENS. The Company will not and will not
permit any Restricted Affiliate to create, assume or suffer to exist any Lien
upon any of its properties or assets, whether now owned or hereafter acquired
(whether or not provision is made for the equal and ratable securing of the
Notes in accordance with the provisions of (S) 4.06), except the following:
(a) Prior Liens;
(b) statutory Liens incidental to the conduct of business or the
ownership of properties of the Company and its Restricted Affiliates
(including Liens in connection with worker's compensation, unemployment
insurance and other like laws (other than ERISA Liens), warehousemen's and
mechanics' and materialmen's liens and statutory landlord's liens) which in
each case are incurred in the ordinary course of business and not in
connection with the borrowing of money, the obtaining of advances or credit
or the payment of the deferred purchase price of property and which do not
in any event materially impair the value or use of the property encumbered
thereby in the operation of the businesses of the Company and its
Restricted Affiliates; provided in each case, that the obligation secured
is not overdue or, if overdue, (i) is being contested by the Company or a
Restricted Affiliate on a timely basis in good faith and in appropriate
proceedings, and the Company or a Restricted Affiliate has established
adequate reserves therefor in accordance with GAAP on the books of the
Company or such Restricted Affiliate or (ii) such Liens in the aggregate do
not have a Material Adverse Effect;
(c) the right reserved to, or vested in, any municipality or public
authority or in any other Person by the terms of any right, power,
franchise, privilege, grant, license, permit, easement or lease or by any
provision of law, to terminate such right, power, franchise, privilege,
grant, license, permit, easement or lease or to purchase or recapture, or
to designate a purchaser of, any of the properties or assets of the Company
and its Restricted Affiliates;
(d) the lien of taxes and assessments which are not at the time
delinquent;
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(e) the lien of taxes and assessments which are delinquent but the
validity of which is being contested at the time by the Company or any of
its Restricted Affiliates in good faith, provided that the Company or such
Restricted Affiliate shall have established such reserves in such amounts
as may be required under GAAP;
(f) any lien or privilege vested in any grantor, lessor or licensor or
permittor for rent or other charges due or for any other obligations or
acts to be performed, the payment of which rent or other charges or
performance of which other obligations or acts is required under leases,
easements, rights-of-way, leases, licenses, franchises, privileges, grants
or permits, so long as payment of such rent or the performance of such
other obligations or acts is not delinquent or the requirement for such
payment or performance is being contested in good faith by appropriate
proceedings,
(g) defects and irregularities in the titles to any property which do
not have a Material Adverse Effect;
(h) easements, exceptions or reservations in any property of the
Company or any of its Restricted Affiliates granted or reserved for the
purpose of pipelines, roads, the removal of oil, gas, coal or other
minerals, and other like purposes or for the joint or common use of real
property, facilities and equipment, which do not have a Material Adverse
Effect;
(i) rights reserved to or vested in any grantor, lessor, licensor,
municipality or public authority to control or regulate any property of the
Company or any of its Restricted Affiliates or to use any such property,
provided, that the Company or such Restricted Affiliate shall not be in
default in respect of any material obligation (except that the Company or
such Restricted Affiliate may be contesting any such obligation in good
faith) to such grantor, lessor, licensor, municipality or public authority;
and provided, further, that such control, regulation or use will not have a
Material Adverse Effect;
(j) any obligations or duties to any municipality or public authority
with respect to any lease, easement, right-of-way, license, franchise,
privilege, permit or grant;
(k) the Liens of any judgments in an aggregate amount not in excess of
$500,000, or the Lien of any judgment the execution of which has been
stayed, or which has been appealed and secured, if necessary, by the filing
of an appeal bond;
(1) Liens or burdens imposed by any law or governmental regulation,
including, without limitation, those imposed by environmental and zoning
laws, ordinances, and regulations; provided, in each case, the Company or
any of its Restricted Affiliates is not in default in any material
obligation (except that the Company or such Restricted Affiliate may be
contesting any such obligation in good faith) to such Person in respect of
such property; provided, further, that the existence of such Liens and
burdens do not have a Material Adverse Effect;
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(m) any pledge or deposit to secure payment of workers' compensation
or insurance premiums, or in connection with tenders, bids, contracts or
leases; or any deposits to secure public or statutory obligations; any
pledge or deposit in connection with contracts with or made at the request
of the United States of America or any state or agency or political
subdivision thereof or for any purposes similar to any of those referred to
in this paragraph (m); provided, in each case, the Company or such
Restricted Affiliate is not in default in any material obligation (except
that the Company or such Restricted Affiliate may be contesting any such
obligation in good faith) in respect thereof;
(n) any mortgage, pledge, lien, charge, security interest or similar
encumbrance necessary to secure a stay of any legal or equitable process in
a proceeding to enforce a liability or obligation contested in good faith
by the Company or any of its Restricted Affiliates or required in
connection with the institution by the Company or any of its Restricted
Affiliates of any legal or equitable proceeding to enforce a right or to
obtain a remedy claimed in good faith by the Company or any of its
Restricted Affiliates or in connection with any order or decree in any such
proceeding or required in connection with the contest of any tax or other
governmental charge or the making of a deposit with or the giving of any
form of security to any governmental agency or any body created or approved
by law or governmental regulation in order to entitle the Company or any of
its Restricted Affiliates to maintain self-insurance; provided that the
existence of such security interest does not have a Material Adverse
Effect, and provided, in each case, the Company or such Restricted
Affiliate is not in default in any material obligation (except that the
Company or such Restricted Affiliate may be contesting any such obligation
in good faith) in respect thereof;
(o) Liens securing Indebtedness of the Company or any of its
Restricted Affiliates incurred or assumed in connection with the
construction or acquisition of Capital Improvements, provided that such
Indebtedness would be permitted under (S) 5.03 hereof, and provided,
further, that any such Lien shall not extend to any property other than
property the construction or acquisition of which is financed by such
Indebtedness;
(p) Liens securing all or any part of the purchase price, or securing
Indebtedness of the Company or any of its Restricted Affiliates incurred or
assumed to pay all or any part of the purchase price of property acquired
by the Company or its Restricted Subsidiaries, or Liens existing on such
property immediately prior to its acquisition, including, without
limitation, the Liens described in paragraph (o) of this (S) 5.02,
provided, that (i) that any such Lien shall extend solely to the property
so acquired, (ii) the principal amount of Indebtedness secured by any such
Lien shall not exceed 100% of the fair market value of such property (as
determined in good faith by the Board of Directors) at the time of
acquisition, (iii) any such Lien not existing on such property immediately
prior to its acquisition shall be created at the time of acquisition of
such property or within 180 days thereafter and (iv) the aggregate amount
of all outstanding Indebtedness secured by such Liens shall not at any time
exceed 30% of Consolidated Tangible Assets;
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(q) Liens arising in connection with Sale-Leaseback Transactions
permitted under (S) 5.07;
(r) any Lien of the Trustee encumbering the Defeasance Trust (as
defined in the Defeasance Trust Agreement) and all funds and securities
therein for the benefit of the holders of the Defeased Notes; and
(s) other Liens on the property of the Company or any of its
Restricted Affiliates, provided that the Indebtedness secured thereby would
be permitted under (S) 5.03.
(S) 5.03. LIMITATION ON PRIORITY DEBT. The Company will not at any
time permit Priority Debt to exceed 10% of Consolidated Tangible Assets as of
the last day of the immediately preceding fiscal quarter.
(S) 5.04. LIMITATION ON SALE OF ASSETS. The Company will not, and will
not permit any of its Restricted Affiliates to, directly or indirectly, sell,
transfer or otherwise dispose of any assets of the Company or any of the
Restricted Affiliates (including, without limitation, stock or other securities
issued by, or other equity interests in, a subsidiary), provided that the
Company and any of its Restricted Affiliates may sell, transfer or otherwise
dispose of assets that are not material to the ability of the Company and its
Restricted Affiliates to generate EBITDA.
(S) 5.05. MAINTENANCE OF AFFILIATE STATUS. Laurel and BP Michigan
shall not at any time cease to be Affiliates of the Company; provided, that (i)
either may merge or consolidate with or into other Persons as and to the extent
permitted under (S) 5.06 and (ii) BP Michigan may be dissolved by its partners.
(S) 5.06. LIMITATION ON CONSOLIDATION, MERGER OR ASSET TRANSFER. The
Company will not, and will not permit any of its Restricted Affiliates to, merge
or consolidate with or into any Person or convey, transfer or otherwise dispose
of all or substantially all of its assets to any Person, except that:
(a) any Restricted Affiliate may merge with the Company (provided that
the Company shall be the continuing or surviving Person) or with any one or
more other Restricted Affiliates, or may convey, transfer or otherwise
dispose of all or substantially all of its assets to the Company or to
another Restricted Affiliate; provided, that no Default or Event of Default
shall exist, either prior to or immediately after giving effect to such
merger, consolidation or asset conveyance, transfer or other disposition;
(b) the Company may merge or consolidate with or into any other
partnership or corporation or convey, transfer or otherwise dispose of all
or substantially all of its assets to any other partnership or corporation;
provided, that: (i) the successor formed by such consolidation or the
survivor of such merger or the partnership or corporation that acquires by
conveyance, transfer or other disposition all or substantially all of the
assets of the
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Company, as the case may be, shall be organized and existing under the laws
of a state of the United States and shall have a majority of its assets and
business located in the United States, (ii) if the Company is not such
successor or survivor, the successor, survivor or acquirer shall have
expressly assumed all obligations of the Company under or with respect to
the Notes, this Indenture and any other agreement entered into in
connection with the transactions contemplated hereby, such Person shall
have caused to be delivered to each Noteholder an opinion of nationally
recognized independent counsel, or other independent counsel reasonably
acceptable to the Required Holder(s), to the effect that all agreements and
instruments effecting such assumption are enforceable in accordance with
their terms and comply with the terms hereof and (iii) no Default or Event
of Default shall exist, either prior to or immediately after giving effect
to such merger, consolidation or asset conveyance, transfer or other
disposition; and
(c) any Restricted Affiliate may merge or consolidate with or into any
other Person or convey, transfer or otherwise dispose of all or
substantially all of its assets to any other Person; provided that (i) the
successor formed by such consolidation or the survivor of such merger or
the Person that acquires all or substantially all of such assets shall be a
Restricted Affiliate of the Company organized and existing under the laws
of a state of the United States and shall have a majority of its assets and
business located in the United States, and (ii) no Default or Event of
Default shall exist, either prior to or immediately after giving effect to
such merger, consolidation or asset conveyance, transfer or other
disposition.
(S) 5.07. LIMITATION ON SALE-LEASEBACK TRANSACTIONS. The Company will
not, and will not permit any Restricted Affiliate to, enter into any Sale-
Leaseback Transaction, unless:
(a) such Sale-Leaseback Transaction occurs within one year after the
later of (i) completion of the acquisition of the applicable property by
the Company or such Restricted Affiliate or (ii) commencement of full
operation with respect to such property; or
(b) such Sale-Leaseback Transaction involves a lease for a term of not
more than three years; or
(c) the net sale proceeds derived from the sale or transfer by the
Company or such Restricted Affiliate of the property involved are used
solely (i) to prepay or retire funded Indebtedness of the Company ranking
pari passu with the Indebtedness evidenced by the Notes or (ii) for Capital
Improvements with respect to the Pipeline Systems made in the ordinary
course of the business of the Company or such Restricted Affiliate; or
(d) the Sale-Leaseback Attributable Debt attributable to such Sale-
Leaseback Transaction would be permitted under (S) 5.03.
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(S) 5.08. AUTHENTICATION AND DELIVERY OF NOTES; COMPLIANCE WITH
INDENTURE. The Company will not execute, or permit to be authenticated and
delivered, any Notes hereunder in any manner other than in accordance with the
provisions of this Indenture and the agreements with respect thereto herein
contained, and will not suffer or permit any Default to occur under this
Indenture, but will, and will cause each of its Restricted Affiliates to,
faithfully observe and perform all the conditions, covenants and requirements of
this Indenture and all Indentures Supplemental hereto, if any.
(S) 5.09. CHANGE OF BUSINESS. The Company will not, and will not
permit any Restricted Affiliate to, change in any material respect the nature of
its respective business or operations from those in which the Company or such
Restricted Affiliate was engaged in as of December 31, 1996 and activities
relating directly thereto, and will not engage, and will not permit any
Restricted Affiliate to engage, directly or indirectly, in any material business
activity, or purchase or otherwise acquire any material property, in any case
not directly related to the conduct of the above-described business or
operations.
ARTICLE SIX
PREPAYMENT OR REDEMPTION OF NOTES
The 1997 Notes shall be subject to prepayment or redemption only with
respect to the required prepayments specified in (S) 6.01 and the optional
prepayments permitted by (S) 6.02.
(S) 6.01. REQUIRED PREPAYMENTS WITH RESPECT TO 1997 NOTES. Until
the Notes shall be paid in full, the Company shall apply:
(a) to the prepayment of the Series A Notes, without premium, the sum
of $25,000,000 on December 16 in each of the years 2020 to 2023, inclusive,
and such principal amounts of the Series A Notes, together with interest
thereon to the prepayment dates, shall become due on such prepayment dates;
(b) to the prepayment of the Series B Notes, without premium, the sum
of $20,000,000 on December 16 in each of the years 2020 to 2023, inclusive,
and such principal amounts of the Series B Notes, together with interest
thereon to the prepayment dates, shall become due on such prepayment dates;
(c) to the prepayment of the Series C Notes, without premium, the sum
of $2,000,000 on December 16 in each of the years 2020 to 2023, inclusive,
and such principal amounts of the Series C Notes, together with interest
thereon to the prepayment dates, shall become due on such prepayment dates;
and
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(d) to the prepayment of the Series D Notes, without premium, the sum
of $1,000,000 on December 16 in each of the years 2020 to 2023, inclusive,
and such principal amounts of the Series D Notes, together with interest
thereon to the prepayment dates, shall become due on such prepayment dates.
The remaining outstanding principal amount of the 1997 Notes of each series,
together with interest accrued thereon, shall become due on the maturity date of
the 1997 Notes of such series.
(S) 6.02. OPTIONAL PREPAYMENTS WITH RESPECT TO 1997 NOTES. The
1997 Notes shall be subject to prepayment, in whole at any time or from time to
time in part (in multiples of $5,000,000), at the option of the Company, at 100%
of the principal amount so prepaid plus interest thereon to the prepayment date
and the Yield-Maintenance Amount, if any, with respect to each Note. Any
partial prepayment of the 1997 Notes pursuant to this (S) 6.02 shall be applied
in satisfaction of required payments of principal in inverse order of their
scheduled due dates.
(S) 6.03. NOTICE OF OPTIONAL PREPAYMENT WITH RESPECT TO 1997 NOTES.
The Company shall file with the Trustee and give the Holder of each of the 1997
Notes irrevocable written notice of any prepayment pursuant to (S) 6.02 not less
than 10 Business Days prior to the prepayment date, specifying such prepayment
date and the principal amount of the 1997 Notes, and of the 1997 Notes held by
such Holder, to be prepaid on such date and stating that such prepayment is to
be made pursuant to paragraph (S) 6.02. Notice of prepayment having been given
as aforesaid, the principal amount of the 1997 Notes specified in such notice,
together with interest thereon to the prepayment date and together with the
Yield-Maintenance Amount, if any, with respect thereto, shall become due and
payable on such prepayment date. The Company shall, on or before the day on
which it gives written notice of any prepayment pursuant to (S) 6.02, give
telephonic notice of the principal amount of the 1997 Notes to be prepaid and
the prepayment date to each Holder of 1997 Notes which shall have designated a
recipient of such notices in the Purchaser Schedule attached to the 1997 Note
Agreement or by notice in writing to the Company.
(S) 6.04. PARTIAL PREPAYMENTS PRO RATA. Upon any partial
prepayment of the 1997 Notes pursuant to (S) 6.01 or (S) 6.02, the principal
amount so prepaid shall be allocated to all 1997 Notes at the time Outstanding
(including, for the purpose of this (S) 6.04 only, all 1997 Notes prepaid or
otherwise retired or purchased or otherwise acquired by the Company or any of
its Subsidiaries or Affiliates other than by prepayment pursuant to (S) 6.01 or
(S) 6.02) in proportion to the respective outstanding principal amounts thereof.
(S) 6.05. RETIREMENT OF 1997 NOTES. The Company shall not, and
shall not permit any of its Subsidiaries or Affiliates to, prepay or otherwise
retire in whole or in part prior to their stated final maturity (other than by
prepayment pursuant to (S) 6.01 or (S) 6.02 or upon acceleration of such final
maturity pursuant to (S) 7.01), or purchase or otherwise acquire, directly or
indirectly, 1997 Notes held by any Holder unless the Company or such Subsidiary
or Affiliate shall have offered to prepay or otherwise retire or purchase or
otherwise acquire, as the case may be, the same proportion of the aggregate
principal amount of 1997 Notes held by each other Holder of 1997 Notes at the
time
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Outstanding upon the same terms and conditions. Any Notes so prepaid or
otherwise retired or purchased or otherwise acquired by the Company or any of
its Subsidiaries or Affiliates shall not be deemed to be Outstanding for any
purpose under this Agreement, except as provided in (S) 6.04.
(S) 6.06. PREPAYMENT OR REDEMPTION OF ADDITIONAL NOTES. Additional
Notes of any series shall be subject to prepayment or redemption only as and to
the extent permitted under the terms of the Supplemental Indenture pursuant to
which such Additional Notes were authorized, issued and delivered.
ARTICLE SEVEN
EVENTS OF DEFAULT
(S) 7.01. ACCELERATION. If any of the following events shall occur and
be continuing for any reason whatsoever (and whether such occurrence shall be
voluntary or involuntary or come about or be effected by operation of law or
otherwise):
(a) the Company defaults in the payment of any principal of or Yield-
Maintenance Amount payable with respect to any Note when the same shall
become due, either by the terms thereof or otherwise as herein provided; or
(b) the Company defaults in the payment of any interest on any Note
for more than five days after the date due; or
(c) the Company or any Restricted Affiliate defaults (whether as
primary obligor or as guarantor or other surety) in any payment of
principal of or interest on any other obligation for money borrowed (or any
Capitalized Lease Obligation, any obligation under a conditional sale or
other title retention agreement, any obligation issued or assumed as full
or partial payment for property whether or not secured by a purchase money
mortgage or any obligation under notes payable or drafts accepted
representing extensions of credit) beyond any period of grace provided with
respect thereto, or the Company or any Restricted Affiliate fails to
perform or observe any other agreement, term or condition contained in any
agreement under which any such obligation is created (or if any other event
thereunder or under any such agreement shall occur and be continuing) and
the effect of such failure or other event is to cause, or to permit the
holder or holders of such obligation (or a trustee on behalf of such holder
or holders) to cause, such obligation to become due (or to be repurchased
by the Company or any Restricted Affiliate) prior to any stated maturity,
provided that the aggregate amount of all obligations as to which such a
payment default shall occur and be continuing or such a failure or other
event causing or permitting acceleration (or resale to the Company or any
Subsidiary) shall occur and be continuing exceeds $25,000,000; or
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(d) any representation or warranty made by the Company herein or by
the Company or any of its officers in the 1997 Note Agreement or any other
writing furnished in connection with or pursuant to this Indenture shall be
false in any material respect on the date as of which made; or
(e) the Company fails to perform or observe any term, covenant or
agreement contained in Article Five hereof, or fails to cause any
Restricted Affiliate, or any Restricted Affiliate fails, to observe or
comply with any such term, covenant or agreement applicable to such
Restricted Affiliate; or
(f) the Company fails to perform or observe any other agreement,
covenant, term or condition contained herein and such failure shall not be
remedied within 30 days after any Responsible Officer obtains actual
knowledge thereof, or fails to cause any Restricted Affiliate, or any
Restricted Affiliate fails, to observe or comply with any such other
agreement, covenant, term or condition applicable to such Restricted
Affiliate within 30 days after any Responsible Officer obtains actual
knowledge thereof; or
(g) the Company or any Restricted Affiliate makes an assignment for
the benefit of creditors or is generally not paying its debts as such debts
become due; or
(h) any decree or order for relief in respect of the Company or any
Restricted Affiliate is entered under any bankruptcy, reorganization,
compromise, arrangement, insolvency, readjustment of debt, dissolution or
liquidation or similar law, whether now or hereafter in effect (the
"BANKRUPTCY LAW"), of any jurisdiction; or
(i) the Company or any Restricted Affiliate petitions or applies to
any tribunal for, or consents to, the appointment of, or taking possession
by, a trustee, receiver, custodian, liquidator or similar official of the
Company or any Restricted Affiliate, or of any substantial part of the
assets of the Company or any Restricted Affiliate, or commences a voluntary
case under the Bankruptcy Law of the United States or any proceedings
relating to the Company or any Restricted Affiliate under the Bankruptcy
Law of any other jurisdiction; or
(j) any such petition or application is filed, or any such proceedings
are commenced, against the Company or any Restricted Affiliate and the
Company or such Restricted Affiliate by any act indicates its approval
thereof, consent thereto or acquiescence therein, or an order, judgment or
decree is entered appointing any such trustee, receiver, custodian,
liquidator or similar official, or approving the petition in any such
proceedings, and such order, judgment or decree remains unstayed and in
effect for more than 30 days; or
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(k) any order, judgment or decree is entered in any proceedings
against the Company or any Restricted Affiliate decreeing the dissolution
of the Company or such Restricted Affiliate and such order, judgment or
decree remains unstayed and in effect for more than 60 days; or
(l) any order, judgment or decree is entered in any proceedings
against the Company or any Restricted Affiliate decreeing a split-up of the
Company or such Restricted Affiliate which requires the divestiture of
assets representing a substantial part, or the divestiture of the stock or
other equity interests of a Restricted Affiliate whose assets represent a
substantial part, of the consolidated or combined assets of the Company and
its Restricted Affiliates (determined in accordance with GAAP) or which
requires the divestiture of assets, or stock or other equity interests of a
Restricted Affiliate, which are material to the ability of the Company and
its Restricted Affiliates to generate EBITDA, and such order, judgment or
decree remains unstayed and in effect for more than 60 days; or
(m) any judgment or order, or series of judgments or orders, in an
amount in excess of $25,000,000 is rendered against the Company or any
Restricted Affiliate and either (i) enforcement proceedings have been
commenced by any creditor upon such judgment or order or (ii) within 60
days after entry thereof, such judgment is not discharged or execution
thereof stayed pending appeal, or within 60 days after the expiration of
any such stay, such judgment is not discharged; or
(n) (i) any Plan shall fail to satisfy the minimum funding standards
of ERISA or the Code for any plan year or part thereof or a waiver of such
standards or extension of any amortization period is sought or granted
under section 412 of the Code, (ii) a notice of intent to terminate any
Plan shall have been or is reasonably expected to be filed with the PBGC or
the PBGC shall have instituted proceedings under ERISA section 4042 to
terminate or appoint a trustee to administer any Plan or the PBGC shall
have notified the Company or any ERISA Affiliate that a Plan may become a
subject of any such proceedings, (iii) the aggregate "amount of unfunded
benefit liabilities" (within the meaning of section 4001(a)(18) of ERISA)
under all Plans, determined in accordance with Title IV of ERISA, shall
exceed $250,000, (iv) the Company or any ERISA Affiliate shall have
incurred or is reasonably expected to incur any liability pursuant to Title
I or IV of ERISA or the penalty or excise tax provisions of the Code
relating to employee benefit plans, (v) the Company or any ERISA Affiliate
withdraws from any Multiemployer Plan, or (vi) the Company or any ERISA
Affiliate establishes or amends any employee welfare benefit plan that
provides post-employment welfare benefits in a manner that would increase
the liability of the Company or any other ERISA Affiliate thereunder; and
any such event or events described in clauses (i) through (vi) above,
either individually or together with any other such event or events, could
reasonably be expected to have a Material Adverse Effect (as used in this
clause (n), the terms "EMPLOYEE BENEFIT PLAN" and "EMPLOYEE WELFARE BENEFIT
PLAN" shall have the respective meanings assigned to such terms in section
3 of ERISA); or
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(o) the General Partner ceases to be the sole general partner of the
Company;
then (i) if such event is an Event of Default specified in paragraph (a) or (b)
of this (S) 7.01, the Holder of any Note (other than the Company or any of its
Subsidiaries or Affiliates) may at its option, by notice in writing to the
Company and the Trustee, cause the Trustee to declare such Note to be, and such
Note shall thereupon be and become, immediately due and payable at par together
with interest accrued thereon, without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Company, (ii) if such
event is an Event of Default specified in paragraph (h), (i) or (j) of this (S)
7.01 with respect to the Company, all of the Notes at the time Outstanding shall
automatically become immediately due and payable together with interest accrued
thereon and together with the Yield-Maintenance Amount, if any, with respect to
each Note, without presentment, demand, protest or notice of any kind, all of
which are hereby waived by the Company, and (iii) if such event is not an Event
of Default specified in paragraph (h), (i) or (j) of this (S) 7.01 with respect
to the Company, the Holder(s) of not less than 51% in aggregate principal amount
of all of the Notes then Outstanding may at its or their option, by notice in
writing to the Company and the Trustee, cause the Trustee to declare all of the
Notes to be, and all of the Notes shall thereupon be and become, immediately due
and payable together with interest accrued thereon and together with the Yield-
Maintenance Amount, if any, with respect to each Note, without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Company.
The Company acknowledges, and the parties hereto agree, that each
Holder of a Note has the right to maintain its investment in the Notes free from
repayment by the Company (except, with respect to the 1997 Notes, as
specifically provided for in (S) 6.01 and (S) 6.02 and, with respect to any
Additional Notes, as specifically provided for in the Supplemental Indenture
pursuant to which such Additional Notes are authorized, issued and delivered)
and that the provision for payment of the Yield-Maintenance Amount by the
Company in the event that the Notes are prepaid or are accelerated as a result
of an Event of Default, is intended to provide compensation for the deprivation
of such right under such circumstances.
(S) 7.02. RESCISSION OF ACCELERATION. At any time after any or all of
the Notes have been declared immediately due and payable pursuant to (S) 7.01,
the Holder(s) of not less than 51% in aggregate principal amount of all of the
Notes then Outstanding may, by notice in writing to the Company and the Trustee,
cause the Trustee to rescind and annul such declaration and its consequences if
(a) the Company shall have paid all overdue interest on the Notes, the principal
of and Yield-Maintenance Amount, if any, payable with respect to any Notes which
have become due otherwise than by reason of such declaration, and interest on
such overdue interest and overdue principal and Yield-Maintenance Amount at the
rate specified in the Notes, (b) the Company shall not have paid any amounts
which have become due solely by reason of such declaration, (c) all Events of
Default and Defaults, other than non-payment of amounts which have become due
solely by reason of such declaration, shall have been cured or waived pursuant
to (S) 12.06, and (iv) no judgment or decree shall have been entered for the
payment of any amounts due pursuant to the Notes or this Indenture. No such
rescission or annulment shall extend to or affect any subsequent Event of
Default or Default or impair any right arising therefrom.
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(S) 7.03. NOTICE OF ACCELERATION OR RESCISSION. Whenever any
Note shall be declared immediately due and payable pursuant to (S) 7.01 or any
such declaration shall be rescinded and annulled pursuant to (S) 7.02, the
Company shall forthwith file with the Trustee and give written notice thereof to
the Holder of each Note at the time Outstanding.
(S) 7.04. OTHER REMEDIES. If any Event of Default or Default
shall occur and be continuing, then, and in every such case, the Trustee may in
its discretion, and shall, at the request in writing of any Holder of a Note,
proceed to protect and enforce its rights and the rights of such Noteholder
under this Indenture and such Note by exercising such remedies as are available
to such holder in respect thereof under applicable law, either by suit in equity
or by action at law, or both, whether for specific performance of any covenant
or other agreement contained in this Indenture or in aid of the exercise of any
power granted in this Indenture. No remedy conferred in this Indenture upon the
Trustee or any Holder of a Note is intended to be exclusive of any other remedy,
and each and every such remedy shall be cumulative and shall be in addition to
every other remedy conferred herein or now or hereafter existing at law or in
equity or by statute or otherwise.
(S) 7.05. CONTROL OF PROCEEDINGS. Subject to the provisions of
(S) 10.01, the Holder(s) of not less than 51% in aggregate principal amount of
all of the Notes then Outstanding shall have the right, by an instrument in
writing executed and delivered to the Trustee, to direct the time, method and
place of conducting any proceeding for any remedy open to the Trustee and of
exercising any power or trust conferred upon the Trustee under this Indenture;
provided, however, that, subject to the provisions of (S) 10.02, the Trustee
shall have the right to decline to follow any such directions if the Trustee
shall be advised by Counsel that the action or proceeding so directed may not
lawfully be taken, or if the Trustee in good faith shall determine that the
action or proceeding so directed would be unjustifiable or prejudicial to non-
assenting Noteholders.
(S) 7.06. CONDITIONS TO SUIT BY INDIVIDUAL NOTEHOLDERS. No Holder of
any Note shall have the right to institute any suit, action or proceeding in
equity or at law for the enforcement of any remedy under or upon this Indenture,
unless (i) such Holder previously shall have given to the Trustee written notice
of some existing Default and of the continuance thereof, as hereinbefore
provided, (ii) the Holders of at least 25% of the aggregate principal amount of
the Notes at the time Outstanding shall have made written request upon the
Trustee and shall have afforded to the Trustee a reasonable opportunity either
to proceed to exercise the powers hereinbefore granted, or to institute such
action, suit or proceeding in their own names, (iii) such Holder or Holders
shall have offered to the Trustee security and indemnity satisfactory to the
Trustee against the costs, expenses and liabilities to be incurred therein or
thereby, and (iv) the Trustee shall have refused or neglected to comply with
such request within a reasonable time; and, subject to the provisions of (S)
10.02, such notification, request and offer to indemnity are hereby declared, in
every such case, at the option of the Trustee, to be conditions precedent to the
execution of the powers and trusts of this Indenture by any Noteholder or for
any other remedy hereunder taken by any Noteholder; it being understood and
intended that no one or more Holders of Notes shall have any right in any
manner whatever hereunder or under the Notes by his or their action to enforce
any right hereunder, except in the
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manner herein provided, and that all proceedings hereunder, at law or in equity,
shall be instituted, had and maintained in the manner herein provided and for
the ratable benefit of all Holders of such Notes. Nothing herein contained
shall, however, affect or impair the right of any Noteholder, which is absolute
and unconditional, to enforce the payment of the principal of, and interest on,
such Notes at and after the maturity of such principal or interest, or the
obligation of the Company, which is also absolute and unconditional, to pay the
principal of, and interest on, each of the Notes to the respective Holders
thereof, in either case at the time and place expressed in the Notes.
Anything to the contrary notwithstanding contained in this (S) 7.06,
the parties to this Indenture and the Noteholders agree that the court may in
its discretion require, in any suit for the enforcement of any right or remedy
under this Indenture, or in any suit against the Trustee for any action taken or
omitted by them, or either of them, as Trustee, the filing by any party litigant
in such suit of an undertaking to pay the costs of such suit, and that such
court may in its discretion assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in such suit, having due regard to
the merits and good faith of the claims or defenses made by such party litigant;
provided, however, that the provisions of this paragraph shall not apply to any
suit instituted, directly or through an agent or agents, by the Trustee, to any
suit instituted by any Noteholder or group of Noteholders holding in the
aggregate at least 25% of the aggregate principal amount of the Notes
Outstanding, or to any suit instituted by any Noteholder for the enforcement of
the payment of the principal of or interest or Yield-Maintenance Amount, if any,
on its Notes at and after maturity of such principal or interest as expressed in
such Notes.
(S) 7.07. ACTION BY TRUSTEE WITHOUT POSSESSION OF NOTES. All
rights of action under this Indenture or under any of the Notes enforceable by
the Trustee may be enforced by the Trustee without the possession of any such
Notes, or the production thereof on the trial or other proceedings relative
thereto, and any such suit or proceedings instituted by the Trustee shall be
brought in its own name as Trustee for the ratable benefit of the Holders of the
Notes, subject to the provisions of this Indenture.
(S) 7.08. FILING OF DOCUMENTS BY TRUSTEE; ATTORNEY-IN-FACT. The
Trustee shall be entitled and empowered in its own name or as trustee of an
express trust, or as attorney-in-fact for the Holders of the Notes, or in any
one or more of such capacities, to file such proof of debt, amendment of proof
of debt, claim, petition or other document as may be necessary or advisable in
order to have the claims of the Trustee and of the Holders of the Notes allowed
in any equity receivership, insolvency, bankruptcy, liquidation, readjustment,
reorganization or other similar proceedings relative to the Company or any other
obligor upon the Notes or its creditors or affecting its property. The Trustee
is hereby irrevocably appointed (and the successive respective Holders of the
Notes by taking and holding the same shall be conclusively deemed to have so
appointed the Trustee) the true and lawful attorney-in-fact of the respective
Holders of the Notes, with authority to make and file in the respective names of
the Holders of the Notes, or on behalf of the Holders of the Notes as a class,
subject to deduction from any such claims of the amounts of any claims filed by
any of the Holders of the Notes, any proof of debt, amendment of proof of debt,
claims, petition or other documents in any such proceedings and to receive
payment of any sums becoming
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distributable on account thereof, and to execute any other papers and documents
and to do and perform any and all acts and things for and on behalf of such
Holders of the Notes, as may be necessary or advisable in the opinion of the
Trustee in order to have the respective claims of the Trustee and of the Holders
of the Notes against the Company or its property allowed in any such proceeding,
and to receive payment of or on account of such claims; provided, however, that
nothing contained in this Indenture shall be deemed to give to the Trustee any
right to accept or consent to any plan of reorganization or otherwise by action
of any character in any such proceeding to waive or change in any way any right
of any Noteholder.
(S) 7.09. NO WAIVER. No delay or omission of the Trustee or of the
Noteholders to exercise any right or power accruing upon any Event of Default
shall impair any such right or power or shall be construed to be a waiver of any
such Event of Default or acquiescence therein; and every right and power given
by this Article Seven to the Trustee may be exercised from time to time and as
often as may be deemed expedient by the Trustee.
(S) 7.10. NOTES DEEMED NOT OUTSTANDING. No Notes owned or held by, for
the account of or for the benefit of, the Company, the General Partner or any
Affiliate of either of them shall be deemed entitled to share in any payment or
distribution provided for in this Article Seven.
(S) 7.11. EXERCISE OF RIGHTS. Nothing in this Indenture contained
shall be construed as requiring the Trustee to pursue any particular remedy for
the purpose of procuring the satisfaction of the indebtedness issued hereunder,
but the Trustee may exercise all or any of the rights herein provided or which
may be given by statute, law or equity or otherwise, in its discretion.
(S) 7.12. REMEDIES SUBJECT TO APPLICABLE LAWS. All rights, remedies
and powers provided by this Article Seven may be exercised only to the extent
that the exercise thereof does not violate any applicable provision of law in
the premises, and all the provisions of this Article Seven are intended to be
subject to all applicable mandatory provisions of law that may be controlling in
the premises and to be limited to the extent necessary so that they will not
render this Indenture invalid, unenforceable or not entitled to be recorded or
filed under the provisions of any applicable law.
ARTICLE EIGHT
EVIDENCE OF RIGHTS OF NOTEHOLDERS
Any demand, request, consent or other instrument which this Indenture
may require or permit to be signed and executed by the Noteholders may be signed
in any number of concurrent instruments of similar tenor and may be signed or
executed by such Noteholders in person or by attorney appointed in writing.
Proof of the execution of any such demand, request, consent or other instrument,
or of a writing appointing any such attorney, or of the holding by any Person of
the Notes, shall, subject to the provisions of (S) 10.02, be sufficient for any
purpose of this Indenture if
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the fact and date of the execution by any Person of such demand, request,
consent or other instrument or writing and, in the case of an agent, fiduciary
or representative, the authority of such person may be proved by the certificate
of any notary public, or other officer authorized to take acknowledgments of
deeds to be recorded in any state, that the person signing the same acknowledged
to him the execution thereof, or by an affidavit of a witness of such execution.
The Trustee may nevertheless in its discretion require other or
further proof in cases where it deems other or further proof appropriate or
desirable. The ownership of Notes shall be proved by the registry books.
The Trustee shall not be bound to recognize any Person as a Noteholder
unless and until its title to the Note held by it is proved in the manner in
this Article Eight provided.
Subject to the provisions of Article Twelve, any demand, request or
consent of the Holder of any Note shall bind all future holders of the same Note
or any Note or Notes issued in exchange therefor in respect of anything done or
suffered by the Company or the Trustee in pursuance thereof.
ARTICLE NINE
IMMUNITY OF PARTNERS, STOCKHOLDERS AND
OFFICERS AND DIRECTORS OF THE GENERAL PARTNER
No recourse shall be had for the payment of the principal of, or the
interest or Yield-Maintenance Amount (if any) on, any Note, or for any claim
based thereon or on this Indenture or any Supplemental Indenture hereto, against
the General Partner or any limited partner of the Company or against any
stockholder or director or officer, past, present and future, of the General
Partner, or the incorporators, stockholders or officers and directors of any
predecessor or successor corporation to the General Partner, as such, either
directly or through the General Partner or any such predecessor or successor
corporation, whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise, all such
liability, whether at common law, in equity, by any constitution, statute or
otherwise, of the foregoing Persons being released as a condition of, and
consideration for, the execution of this Indenture and of the issuance of the
Notes.
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ARTICLE TEN
THE TRUSTEE
(S) 10.01. RIGHTS OF TRUSTEE. The Trustee accepts the trusts
created by this Indenture upon the terms and conditions hereof, including the
following, to all of which the parties hereto and the Holders from time to time
of the Notes agree:
(a) The Trustee shall be entitled to reasonable compensation for all
services rendered by it hereunder (which compensation shall not be limited
by any provision of law in regard to the compensation of a trustee of an
express trust), and such compensation, as well as the reasonable
compensation of its Counsel, and all other reasonable expenses incurred by
the Trustee hereunder, and all taxes which may have been assessed against
the Trustee as such or against any funds on deposit with the Trustee
hereunder which the Trustee may be required or permitted by law to deduct
from such deposit and to pay, the Company agrees to pay promptly on demand
from time to time as such services shall be rendered and as such expenses
shall be incurred. In default of such payment by the Company, the Trustee
shall have a Lien therefor on any moneys held by the Trustee hereunder
prior to any rights in such moneys of the Holders of the Notes. The
Company also agrees to indemnify the Trustee for and to hold it harmless
against, any loss, liability or expense incurred without negligence or bad
faith on the part of the Trustee, arising out of or in connection with the
acceptance or administration of this trust, as well as the costs and
expenses of defending against any claim of liability arising under or in
connection herewith.
(b) The Trustee may execute any of the trusts or powers hereof and
perform any duty hereunder either directly or by or through its agents or
attorneys.
(c) The Trustee shall not be responsible in any manner whatsoever for
the correctness of the recitals herein or in the Notes (except the
Trustee's certificate of authentication thereon) all of which are made by
the Company solely; and the Trustee shall not be responsible or accountable
in any manner whatsoever for or with respect to the validity or execution
or sufficiency of this Indenture, or of any Indenture Supplemental hereto,
or of the Notes, and the Trustee makes no representation with respect
thereto. The Trustee shall not be accountable for the use or application
by the Company of any Notes authenticated and delivered hereunder or of the
proceeds of such Notes, or for the use or application of any moneys paid
over by the Trustee in accordance with any provision of this Indenture.
(d) The Trustee shall not be under any obligation to exercise any of
the trusts or powers hereof at the request, order or direction of any of
the Noteholders, pursuant to the provisions of this Indenture, unless such
Noteholders shall have offered to the Trustee security or indemnity
satisfactory to it against the costs, expenses and liabilities to be
incurred therein or thereby; nothing herein contained shall, however,
relieve the Trustee
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of the obligation, upon the occurrence of an Event of Default (which has
not been cured), to exercise such of the rights and powers vested in it by
this Indenture, and to use the same degree of care and skill in their
exercise as a prudent person would exercise or use under the circumstances
in the conduct of his or her own affairs.
(e) The Trustee may consult with Counsel, and, to the extent permitted
by (S) 10.02, the opinion of such Counsel shall be full and complete
authorization and protection in respect of any action taken or suffered by
them hereunder in good faith and in accordance with the opinion of such
Counsel.
(f) The Trustee, to the extent permitted by (S) 10.02, may rely upon
the certificate of the Secretary or one of the Assistant Secretaries of the
General Partner, under its corporate seal, as to the adoption of any
resolution by the Board of Directors or stockholders of the General
Partner.
(g) Any action taken by the Trustee pursuant to any provision hereof
at the request or with the consent of any Person who at the time is the
Holder of any Note shall be conclusive and binding in respect of such Note
upon all future Holders thereof, whether or not such Note shall have noted
thereon the fact that such request or consent had been made or given.
(h) The Trustee, to the extent permitted by (S) 10.02, may
conclusively rely and shall be protected in acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request,
consent, order, Note or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party or parties
and is under no duty to verify the contents thereof by independent
investigation.
(i) All moneys received by the Trustee under or pursuant to any
provision of this Indenture (including any moneys received by the Trustee
as paying agent) shall be held by the Trustee in trust for the purposes for
which they were paid or are held, and, except as otherwise provided herein,
may be deposited by the Trustee, under such general conditions as may be
prescribed by law, in the Trustee's general banking department and the
Trustee shall not be liable for any interest thereon, except that so long
as the Company is not in Default hereunder, the Trustee will allow and
credit to the Company interest, if any, upon such moneys at such rate as
may then be customarily allowed by it for deposits of similar character.
(j) Subject to the provisions of (S) 10.02, the Trustee may, whenever
it shall deem it necessary or desirable that a matter be proved or
established prior to taking or suffering any action hereunder, deem such
matter to be conclusively proved and established by an Officers'
Certificate delivered to it (unless other evidence in respect thereof is
herein specifically prescribed), and such certificate shall be full warrant
to the Trustee for any action taken or suffered by it under the provisions
of this Indenture in reliance upon such certificate.
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(S) 10.02. EXTENT OF TRUSTEE LIABILITY. None of the provisions of
this Indenture shall be construed as relieving the Trustee from liability for
its own grossly negligent action, grossly negligent failure to act, or wilful
misconduct, except that anything in this Indenture contained to the contrary
notwithstanding:
(a) unless and until an Event of Default specified in (S) 7.01 hereof
shall have occurred and be continuing,
(i) the Trustee shall not be liable except for the performance of
such duties as are specifically set out in this Indenture, and no
implied covenants or obligations shall be read into this Indenture
against the Trustee, whose duties and obligations shall be determined
solely by the express provisions of this Indenture; and
(ii) the Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, in
the absence of bad faith on the part of the Trustee, upon certificates
or opinions furnished to it pursuant to the express provisions of and
conforming to the requirements of this Indenture; but in the case of
any such certificates or opinions, which, by the provisions of this
Indenture, are specifically required to be furnished to the Trustee,
the Trustee shall be under a duty to examine the same to determine
whether or not they conform to the requirements of this Indenture;
(b) the Trustee shall not be personally liable for any error of
judgment made in good faith by a Responsible Officer or Officers of the
Trustee, unless it shall be proved that the Trustee was grossly negligent
in ascertaining the pertinent facts; and
(c) the Trustee shall not be personally liable to any Holder of Notes
or to any other Person with respect to any action taken or omitted to be
taken by it in good faith, in accordance with the direction of the Required
Holder(s) of the Notes of all series relating to the time, method and place
of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred upon the Trustee by this Indenture.
If an Event of Default specified in (S) 7.01 hereof shall have
happened, then, so long as the same shall be continuing, the Trustee shall
exercise such of the rights and powers vested in it by this Indenture, and shall
use the same degree of care and skill in their exercise, as a prudent person
would exercise or use under the circumstances in the conduct of his or her own
affairs.
Notwithstanding any provisions of this Indenture authorizing the
Trustee conclusively to rely upon any resolutions, certificates, statements,
opinions, reports, orders or other instruments, the Trustee may, but to the
extent permitted by this (S) 10.02, need not, require any further evidence or
make any further investigation as to the facts or matters stated therein which
it may, in good faith, deem reasonable in the circumstances, and the Trustee
shall, if requested in writing so to do by the
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Required Holder(s) of the Notes of all series, require such further evidence or
make such further investigation, provided, however, that, if the payment within
a reasonable time to the Trustee of the cost, expenses and liabilities likely to
be incurred by it in making such investigation is not reasonably assured to it
under the terms of this Indenture, the Trustee may require reasonable indemnity
against such expense or liability as a condition to so proceeding.
If the Trustee shall determine or shall be requested, as aforesaid, to
make such further investigation, it shall be entitled to examine the books,
records and premises of the Company; and unless satisfied, with or without such
investigation, of the truth and accuracy of the matters stated in such
resolutions, certificates, statements, opinions, reports, orders or other
instruments, the Trustee shall be under no obligation to grant any application
or take or permit any action hereunder. The reasonable expense of every such
examination shall be paid by the Company, or, if paid by the Trustee, shall be
reimbursed by the Company, upon demand.
(S) 10.03. NOTICE OF DEFAULTS. The Trustee shall provide written
notice by mail to each Registered Owner of Notes of the happening of all
Defaults and Events of Default known to the Trustee, within 10 days after the
occurrence thereof; provided, that, except in the case of a Default resulting
from the failure to make any payment of principal or of interest or Yield-
Maintenance Amount, if any, on the Notes, the Trustee shall be protected in
withholding such notice if and provided, however, that the board of directors,
the executive committee or a trust committee of directors and/or Responsible
Officers of the Trustee in good faith determine that the withholding of such
notice is in the interests of the Noteholders.
Nothing herein contained shall require the Trustee to give any notice
of any Default or Event of Default which has been cured.
(S) 10.04. CONFLICTING INTEREST OF TRUSTEE. The Trustee and any
successor trustee shall comply at all times with Section 310 of the Trust
Indenture Act; provided, that this (S) 10.04 shall not be effective unless and
until this Indenture is qualified under the Trust Indenture Act.
(S) 10.05. QUALIFICATIONS OF TRUSTEE; RESIGNATION. If the Trustee
shall at any time cease to be a bank or trust company in good standing organized
and doing business under the laws of the United States or of any State and
having its principal office in The City of New York or Pittsburgh or in such
other city as the Company and the Required Holder(s) of all series of Notes
shall select and having a combined capital and surplus of not less than
$350,000,000 which is authorized under the laws of the jurisdiction of
incorporation to exercise corporate trust powers and is subject to supervision
or examination by Federal or State authority, then the Trustee shall resign
within thirty (30) days thereafter, such resignation to become effective upon
the appointment of a successor trustee and such successor's acceptance of such
appointment. If the Trustee publishes reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or examining
authority, the combined capital and surplus of the Trustee shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published.
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If the Trustee shall fail or refuse to resign within said period, or if, after
the provisions of (S) 10.04 shall have become effective, the Trustee has or
shall acquire any conflicting interest of the character specified in Section 310
of the Trust Indenture Act and shall fail or refuse either to eliminate such
conflicting interest or to resign within the period provided in respect of such
resignation, then in either such event (i) the Trustee shall, within ten (10)
days after the expiration of said period, transmit notice of such failure or
refusal to the Noteholders in the manner and to the extent provided in Section
313(e) of the Trust Indenture Act; and (ii) any Noteholder, who has been the
bona fide Holder of a Note for at least six months, may, subject to the
provisions of (S) 7.11 hereof and upon obtaining consent from Holders of at
least 25% of the aggregate principal amount of the Notes, on behalf of himself
and all others similarly situated, petition any court of competent jurisdiction
for the removal of the Trustee and the appointment of a successor, if such
Trustee fails, after written request therefor by such Noteholder, to comply with
the provisions of said (S) 10.04; provided, however, that no such petition may
be made by reason of any failure to comply with the provisions of (S) 10.04
until the provisions thereof shall have become effective.
(S) 10.06. RESIGNATION AND REMOVAL; SUCCESSOR TRUSTEE. The Trustee or
any successor may resign and be discharged from the trust hereby created by
giving notice thereof to the Company specifying the date when such resignation
shall take effect, and by giving notice thereof by mail to the Registered Owners
of all Notes. Except as otherwise required under the Trust Indenture Act with
respect to a resignation which takes place at any time after this Indenture has
been qualified under the Trust Indenture Act, such resignation shall take effect
on the date specified in such notice unless previously a successor shall have
been appointed as hereinafter provided, in which event such resignation shall
take effect upon the appointment of such successor.
The Trustee or any successor may be removed at any time by an
instrument or instruments in writing delivered to the Trustee and to the
Company, and a successor may be appointed by an instrument or instruments in
writing delivered to such successor and to the Company, in either case signed by
the Required Holder(s) of all series of Notes or by their duly authorized
attorneys-in-fact; but the Company, by an instrument executed by order of the
Board of Directors, shall appoint a successor to fill the vacancy until a
successor shall be appointed by the Noteholders or a court of competent
jurisdiction as herein authorized. Every successor to the Trustee so appointed
by the Noteholders, by a court of competent jurisdiction or by the Company,
shall be a bank or trust company in good standing organized and doing business
under the laws of the United States or of any State and having its principal
office in The City of New York or Pittsburgh or any other city as the Company
and the Required Holder(s) of all series of Notes shall select, and having a
combined capital and surplus of not less than $350,000,000, which is authorized
under the laws of the jurisdiction of incorporation to exercise corporate trust
powers and is subject to supervision or examination by a Federal or State
authority. If such successor publishes reports of condition at least annually,
pursuant to law or to the requirements of said supervising or examining
authority, the combined capital and surplus of such successor shall be deemed to
be its combined capital and surplus as set forth in its most recent report of
condition so published.
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If in a proper case no appointment of a successor shall be made
pursuant to the foregoing provisions of this Article Ten within six months after
a vacancy shall have occurred, the Holder of any Note or the retiring Trustee
may apply to any court of competent jurisdiction to appoint a successor. Said
court may thereupon, after such notice, if any, as such court may deem proper
and prescribe, appoint a successor.
(S) 10.07. ACCEPTANCE BY SUCCESSOR TRUSTEE. Any successor to the
Trustee appointed under any of the methods herein provided shall execute,
acknowledge and deliver to its predecessor trustee, and to the Company, an
instrument in writing accepting such appointment hereunder and thereupon such
successor, without any further act, deed or conveyance, shall become fully
vested with the rights, powers and trusts of its predecessor in the trust
hereunder with like effect as if originally named as Trustee herein, as the case
may be; but such predecessor shall, nevertheless, at the written request of the
successor, execute and deliver an instrument transferring to the successor all
the rights, powers and trusts of such predecessor hereunder and shall duly
assign, transfer and deliver all property and moneys held by it to its
successor. Should any instrument in writing from the Company be required by any
successor for more fully and effectually vesting in and confirming to it or him
all rights, powers and duties as trustee hereunder, the Company, upon the
request of such successor, shall make, execute and deliver the same. The
Company shall promptly give notice of the appointment of such successor by mail
to the Registered Owners of all Notes.
(S) 10.08. MERGER OR CONSOLIDATION. Any corporation into which the
Trustee or any successor to it in the trust created by this Indenture may be
merged, or with which it or any successor to it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Trustee or
any successor to it shall be a party, shall be the successor of the Trustee
under this Indenture without the execution or filing of any instruments or any
further act on the part of any of the parties hereto.
(S) 10.09. TRUSTEE AS CREDITOR. (a) If the Trustee in its
individual capacity shall be, or shall become, a creditor, directly or
indirectly, secured or unsecured, of the Company (other than in a relationship
of the nature specified in paragraph (f) of this (S) 10.09) within four months
prior to a default, as the term "DEFAULT" is defined in paragraph (e) of this
(S) 10.09 or subsequent to such a default, then, unless and until such default
shall be cured, the Trustee shall set apart and hold in a special account for
the benefit of the Trustee individually, the Holders of Notes and the holders of
any other indenture securities, as the term "OTHER INDENTURE SECURITIES" is
defined in said paragraph (e):
(i) an amount equal to any and all reductions in the amount due and
owing upon any claim as such creditor in respect of principal or interest,
effected after the beginning of such four months' period and valid as
against the Company and its other creditors, except any such reduction
resulting from the receipt or disposition of any property described in
clause (ii) of this paragraph (a), or from the exercise of any right of
set-off which the Trustee could have exercised, if any voluntary or
involuntary case had been commenced in respect of the Company under the
Federal bankruptcy laws, as now or hereafter constituted, or any other
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applicable Federal or State bankruptcy, insolvency or other similar law
upon the date of such default; and
(ii) all property received by the Trustee in respect of any claim as
such creditor, either as security therefor, or in satisfaction or
composition thereof or otherwise, after the beginning of such four months'
period, or an amount equal to the proceeds of any such property, if
disposed of, subject, however, to the rights, if any, of the Company and
its other creditors in such property or such proceeds.
(b) Nothing contained in this (S) 10.09 shall affect the right of the
Trustee:
(i) to retain for its own account (A) payments made on account of any
such claim by any Person (other than the Company) who is liable thereon,
(B) the proceeds of the bona fide sale of any such claim by the Trustee to
a third Person, and (C) distributions made in cash, securities or other
property in respect of claims filed against the Company in bankruptcy or
receivership or in proceedings for reorganization pursuant to the Federal
bankruptcy laws, as now or hereafter constituted, or applicable State law;
(ii) to realize, for its own account, upon any property held by it as
security for any such claim, if such property was so held prior to the
beginning of such four months' period;
(iii) to realize, for its own account, but only to the extent of the
claim hereinafter mentioned, upon any property held by it as security for
any such claim, if such claim was created after the beginning of such four
months' period and such property was received as security therefor
simultaneously with the creation thereof, and if the Trustee shall sustain
the burden of proving that at the time such property was so received the
Trustee had no reasonable cause to believe that a default, as defined in
paragraph (e) of this (S) 10.09, would occur within four months; or
(iv) to receive payment on any claim referred to in clause (ii) or
clause (iii) of this paragraph (b), against the release of any property
held as security for such claim as provided in said clause (ii) or said
clause (iii), as the case may be, to the extent of the fair value of such
property.
For the purposes of clauses (ii), (iii) and (iv) of this paragraph
(b), property substituted after the beginning of such four months' period for
property held as security at the time of such substitution shall, to the extent
of the fair value of the property released, have the same status as the property
released, and, to the extent that any claim referred to in any of such
paragraphs is created in renewal of, or in substitution for, or for the purpose
of repaying or refunding, any pre-existing claim of the Trustee as such
creditor, such claim shall have the same status as such pre-existing claim.
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(c) If the Trustee shall be required to account, as in this (S) 10.09
provided, the funds and property held in a special account pursuant to the
provisions of this (S) 10.09 and the proceeds thereof shall be apportioned among
the Trustee, the Holders of Notes and the holders of other indenture securities
in such manner that the Trustee, the Holders of Notes and the holders of other
indenture securities realize, as a result of payments from such special account
and payments of dividends on claims filed against the Company in receivership or
liquidation proceedings or any voluntary or involuntary case under the federal
bankruptcy laws, as now or hereafter constituted, or applicable state law, the
same percentage of their respective claims, figured before crediting to the
claim of the Trustee anything on account of the receipt by it from the Company
of the funds and property in such special account, and before crediting to the
respective claims of the Trustee, the Holders of Notes and the holders of other
indenture securities, dividends on claims filed against the Company in
receivership or liquidation proceedings or any voluntary or involuntary case
under the federal bankruptcy laws, as now or hereafter constituted, or
applicable state law, but after crediting thereon receipts on account of the
indebtedness represented by their respective claims from all sources other than
from such dividends and from the funds and property so held in such special
account. As used in this paragraph (c) with respect to any claim, the term
"DIVIDENDS" shall include any distribution with respect to such claim in
receivership or liquidation proceedings or any voluntary or involuntary case
under the federal bankruptcy laws, as now or hereafter constituted, or
applicable state law, whether such distribution is made in cash, securities or
other property, but shall not include any such distribution with respect to the
secured portion, if any, of such claim. The court in which such receivership or
liquidation proceeding or such voluntary or involuntary case under the federal
bankruptcy laws, as now or hereafter constituted, or applicable state law shall
be pending shall have jurisdiction (i) to apportion among the Trustee, the
Holders of Notes and holders of other indenture securities, in accordance with
the provisions of this paragraph (c), the funds and property held in such
special account and the proceeds thereof, or (ii) in lieu of such an
apportionment thereof, in whole or in part, to give to the provisions of this
paragraph (c) due consideration in determining the fairness of the distributions
to be made to the Trustee, the Holders of Notes and the holders of other
indenture securities with respect to their respective claims, in which event it
shall not be necessary to liquidate or to appraise the value of any securities
or other property held in such special account or as security for any such
claim, or to make a specific allocation of such distributions as between the
secured and unsecured portions of such claims, or otherwise to apply the
provisions of this paragraph (c) as a mathematical formula.
(d) In case the Trustee shall have resigned or been removed after the
beginning of such four months' period, the Trustee shall be subject to the
provisions of this (S) 10.09 as though such resignation or removal had not
occurred. If the Trustee shall have resigned or been removed prior to the
beginning of such four months' period, it shall be subject to the provisions of
this (S) 10.09 if and only if the receipt of property or reduction of claim
which would have given rise to the obligation to account, if the Trustee had
continued as such trustee hereunder, occurred after the beginning of such four
months' period and within four months after such resignation or removal.
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(e) As used in this (S) 10.09, the term "DEFAULT" means any failure to
make payment in full of principal of or interest on the Notes or an other
indenture securities, when and as such principal or interest becomes due and
payable; and the term "OTHER INDENTURE SECURITIES" means securities upon which
the Company is an obligor (as the term "OBLIGOR" is defined in the Trust
Indenture Act of 1939) outstanding under any other indenture which is qualified
under the Trust Indenture Act of 1939 and under which the Trustee is also
trustee and under which a default exists at the time of the apportionment of the
funds and property held in said special account.
(f) None of the foregoing provisions of this (S) 10.09 shall be
applicable in respect of a creditor relationship arising from:
(i) the ownership or acquisition of securities issued under any
indenture, or any security or securities having a maturity of one year or
more at the time of acquisition by the Trustee;
(ii) disbursements made in the ordinary course of business in the
capacity of trustee under an indenture, transfer agent, registrar,
custodian, paying agent, fiscal agent or depositary, or other similar
capacity;
(iii) an indebtedness created as a result of services rendered or
premises rented. or an indebtedness created as a result of goods or
securities sold in a cash transaction, as defined in this paragraph (f);
(iv) the ownership of stock or of other securities of a corporation
organized under the provisions of Section 25(a) of the Federal Reserve Act,
as amended, which is directly or indirectly a creditor of the Company; or
(v) the acquisition, ownership, acceptance, or negotiation of any
drafts, bills of exchange, acceptances or obligations which fall within the
classification of self-liquidating paper, as the term "SELF-LIQUIDATING
PAPER" is defined in this paragraph (f).
The term "SECURITY" or "SECURITIES" as used in this paragraph (f)
shall mean any note, stock, treasury stock, bond, debenture, evidence of
indebtedness, certificate of interest or participation in any profit sharing
agreement, collateral-trust certificate, preorganization certificate or
subscription, transferable share, investment contract, voting trust certificate,
certificate of deposit for a security, fractional undivided interest in oil, gas
or other mineral rights, or, in general, any interest or instrument commonly
known as a "SECURITY," or any certificate of interest or participation in,
temporary or interim certificate for, receipt for, guarantee of, or warrant or
right to subscribe to or purchase, any of the foregoing.
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The term "CASH TRANSACTION" as used in paragraph (iii) of this
paragraph (f) means any transaction in which full payment for goods or
securities sold is made within seven days after the delivery of the goods or
securities in currency or in checks or other orders drawn upon banks or bankers
and payable upon demand.
The term "SELF-LIQUIDATING PAPER" as used in paragraph (v) of this
paragraph (f) means any draft, bill of exchange, acceptance or obligation which
is made, drawn, negotiated or incurred by the Company for the purpose of
financing the purchase, processing, manufacture, shipment, storage or sale of
goods, wares or merchandise and which is secured by documents evidencing title
to, possession of or lien upon the goods, wares or merchandise or the
receivables or proceeds arising from the sale of the goods, wares or merchandise
previously constituting the security, provided that the security is received by
the Trustee simultaneously with the creation of the creditor relationship with
the Company arising from the making, drawing, negotiating or incurring of the
draft bill of exchange, acceptance or obligation.
In the event that any Person other than the Company shall at any time
become an obligor upon any of the Notes, so long as such Person shall continue
to be such obligor the provisions of this (S) 10.09, in addition to being
applicable to the Trustee and the Company, shall be applicable to the Trustee
and such obligor.
(S) 10.10. REPORTING REQUIREMENTS. The Trustee and any successor
trustee shall comply at all times with Section 313 of the Trust Indenture Act;
provided, that this (S) 10.10 shall not be effective unless and until this
Indenture is qualified under the Trust Indenture Act.
(S) 10.11. PRESERVATION OF NOTEHOLDER INFORMATION. (a) The Trustee
shall preserve, in as current a form as is reasonably practicable, all
information as to the names and addresses of the Holders of Notes (i) contained
in the most recent list furnished to it as provided in (S) 4.03 and (ii)
otherwise received by it.
The Trustee may (A) destroy any list furnished to it as provided in
(S) 4.03 upon receipt of a new list so furnished, (B) destroy any other
information received by it regarding the names and addresses of the Noteholders
upon delivering to itself as Trustee, not earlier than 45 days after an interest
payment date of the Notes, a list containing the names and addresses of the
Holders of the Notes obtained from such information since the delivery of the
next previous list, if any, and (C) destroy any list delivered to itself as
Trustee which was compiled from information received by it upon the receipt of a
new list so delivered.
(b) Within five Business Days after receipt by the Trustee of a
written application by any three or more Noteholders stating that the applicants
desire to communicate with other Noteholders with respect to their rights under
this Indenture or under the Notes, and accompanied by a copy of the form of
proxy or other communication which such applicants propose to transmit, and by
reasonable proof that each such applicant has owned a Note or Notes for a period
of at least six months preceding such application, the Trustee shall, as its
election. either (i) afford to such
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applicants access to the information preserved at the time by the Trustee in
accordance with the provisions of paragraph (a) of this (S) 10.11, or (ii)
inform such applicants as to the approximate number of Noteholders whose names
and addresses appear in the information preserved at the time by the Trustee in
accordance with the provisions of paragraph (a) of this (S) 10.11, and as to the
approximate cost of mailing to the Noteholders the form of proxy or other
communication, if any, specified in such application. If the Trustee shall elect
not to afford to such applicants access to such information, the Trustee shall,
upon the written request of each applicant, mail to all Noteholders whose names
and addresses appear in the information preserved at the time by the Trustee in
accordance with the provisions of paragraph (a) of this (S) 10.11 copies of the
form of proxy or other communication which is specified in such request, with
reasonable promptness after a tender to the Trustee of the material to be mailed
and the payment, or provision for the payment, of the reasonable expenses of
such mailing, unless within five days after such tender, the Trustee shall mail
to such applicants, and file with the Securities and Exchange Commission,
together with a copy of the material to be mailed, a written statement to the
effect that, in the opinion of the Trustee, such mailing would be contrary to
the best interests of the Noteholders or would be in violation of applicable
law. Such written statement shall specify the basis of such opinion. In such
event the applicant Noteholder shall be entitled to make application to the
Securities and Exchange Commission for an order directing the Trustee to mail
such material as aforesaid. If, after notice to the Trustee and hearing on the
request so made by the applicant Noteholder, the Securities and Exchange
Commission determines that the Trustee should be required to mail such material
as aforesaid, the Trustee agrees to comply with such determination with
reasonable promptness after such determination and the renewal of the aforesaid
tender.
The Trustee shall not be liable or accountable to the Company or to
any Noteholder by reason of the disclosure of any such information as to the
names and addresses of the Noteholders in accordance with the provisions of this
(S) 10.11, regardless of the source from which such information was derived, nor
by reason of the mailing of any material pursuant to request made under this (S)
10.11.
Notwithstanding any provision contained herein to the contrary, the
provisions of this (S) 10.11(b) shall not be effective unless and until this
Indenture is qualified under the Trust Indenture Act of 1939.
(S) 10.12. DEALINGS WITH COMPANY. The Trustee may acquire and hold
Notes and otherwise deal with the Company in the same manner and to the same
extent and with like effect as though it were not the Trustee hereunder;
subject, however, to the provisions of (S) 10.04, (S) 10.09 and (S) 10.10, if
such provisions are then in effect.
(S) 10.13. COMPLIANCE WITH SEC RULES AND REGULATIONS. The Trustee
may in good faith comply with any rule, regulation or order of the Securities
and Exchange Commission made pursuant to the terms and provisions of the Trust
Indenture Act of 1939 and shall be fully protected in so doing notwithstanding
that such rule, regulation or order may thereafter be amended or rescinded or
determined by judicial or other authority to be invalid for any reason, but
nothing
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herein contained shall require the Trustee to take any action or omit to
take any action in accordance with such rule, regulation or order, except as in
this Indenture otherwise required.
ARTICLE ELEVEN
SUPPLEMENTAL INDENTURES
(S) 11.01. PERMITTED PURPOSES. In addition to any Supplemental
Indenture otherwise authorized by this Indenture, the Company, when authorized
by resolution of the Board of Directors and the Trustee, from time to time and
at any time, subject to the conditions and restrictions in this Indenture
contained, may enter into an Indenture or Indentures Supplemental hereto and
which thereafter shall form a part hereof for any one or more or all of the
following purposes:
(a) to close this Indenture against, or to restrict, in addition to
the limitations and restrictions herein contained, the authentication and
delivery of Additional Notes hereunder by imposing additional conditions
and restrictions to be thereafter observed, whether applicable in respect
of all Notes authenticated and delivered and to be authenticated and
delivered hereunder or in respect of one or more series thereof, or
otherwise;
(b) to add, to the covenants and agreements of the Company in this
Indenture contained, other covenants and agreements thereafter to be
observed and to surrender any right or power herein reserved to or
conferred upon the Company although the freedom of action of the Company
may be materially restricted thereby;
(c) to make such provisions in regard to matters or questions arising
under this Indenture as may be necessary or desirable and not inconsistent
with this Indenture;
(d) to modify any of the provisions of this Indenture or to relieve
the Company from any of the obligations, conditions or restrictions herein
contained, provided that, except as permitted by Article Twelve, no such
modification shall be or become operative or effective which shall in any
manner impair any of the rights of the Noteholders or of the Trustee while
any Notes of any series established prior to the execution of such
Supplemental Indenture shall remain Outstanding, and provided, further,
that such Supplemental Indenture shall be specifically referred to in the
text of all Notes of any series established after the execution of such
Supplemental Indenture; and provided, also, that the Trustee may in its
discretion decline to enter into any such Supplemental Indenture which in
its opinion may not afford adequate protection to the Trustee when the same
shall become operative;
(e) to set forth the terms of any Additional Notes to be issued
hereunder;
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(f) to modify, amend or supplement this Indenture or any Supplemental
Indenture hereto in such a manner as to permit the qualification thereof
under the Trust Indenture Act of 1939 or any similar Federal statute
hereafter in effect, except that nothing herein contained shall authorize
the inclusion in any Supplemental Indenture hereto of the provision
referred to in Section 316(a)(2) of said Trust Indenture Act of 1939 or any
corresponding provision provided for in any similar Federal statute
hereafter in effect; or
(g) for any other purpose not inconsistent with the terms of this
Indenture, or for the purpose of curing any ambiguity or curing, correcting
or supplementing any defect or inconsistent provision contained in this
Indenture or any Supplemental Indenture;
and the Company hereby covenants that it will fully perform all the requirements
of any such Supplemental Indentures which may be in effect from time to time;
but no restriction or obligation imposed hereby or by any Supplemental Indenture
upon the Company in respect to any of the Notes or series of Notes then
Outstanding under this Indenture may, except as otherwise provided in this
Indenture, be waived or modified by such Supplemental Indentures, or otherwise.
Nothing in this Article Eleven contained shall affect or limit the right or
obligation of the Company to execute and deliver to the Trustee any instrument
of further assurance or other instrument which elsewhere in this Indenture it is
provided shall be delivered to the Trustee.
(S) 11.02. AUTHORIZATION OF TRUSTEE. The Trustee is hereby
authorized to join with the Company in the execution of any such Supplemental
Indenture authorized or permitted by the terms of this Indenture, and to make
the further agreements and stipulations which may be therein contained and
subject to the provisions of (S) 10.02, the Trustee may receive an opinion of
Counsel as conclusive evidence that any Supplemental Indenture executed pursuant
to the provisions of this Article Eleven complies with the requirements of this
Article Eleven.
(S) 11.03. COMPLIANCE WITH TRUST INDENTURE ACT. At any time after
this Indenture shall have been qualified under the Trust Indenture Act of 1939,
no Supplemental Indenture shall be entered into pursuant to any authorization
contained in this Indenture which shall not comply with the provisions of the
Trust Indenture Act of 1939 as then in effect unless no Notes are then
Outstanding under the Indenture and all Notes to be issued under the Indenture
as supplemented by such Supplemental Indenture shall either be themselves exempt
from the provisions of such Act or are to be issued in a transaction exempt
therefrom.
(S) 11.04. DELIVERY TO NOTEHOLDERS. Promptly upon the execution of
any Indenture Supplemental to this Indenture, the Trustee shall deliver by mail
to each Noteholder a copy of such Supplemental Indenture.
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ARTICLE TWELVE
MEETINGS OF NOTEHOLDERS
(S) 12.01. MODIFICATIONS OF INDENTURE. Modifications and alterations
of this Indenture, of any Supplemental Indenture hereto, and of the rights and
obligations of the Company and of the Holders of the Notes may be made as and to
the extent hereinafter provided in this Article Twelve.
(S) 12.02. CALLING OF MEETINGS; VOTING. The Trustee may at any time
call a meeting of the Noteholders, and it shall call such a meeting on the
written request of the Company. In the event of the Trustee's failing for ten
Business Days to call a meeting after being thereunto requested as above set
forth, the Company pursuant to resolution of the Board of Directors may call
such meeting. Such meeting may also be called at any time by the Holders of not
less than 10% of the aggregate principal amount of the Notes at the time
Outstanding. Every such meeting called at the instance of the Trustee shall be
held at the principal corporate trust office of the Trustee, but if called by or
at the request of the Company or by the Noteholders it shall be held at such
place in the Borough of Manhattan, the City of New York, as may be specified in
the notice calling such meeting or requesting such meeting to be called. If
such meeting is called by the Trustee, written notice thereof, stating the place
and time thereof and in general terms the business to be submitted, shall be
mailed by the Trustee not less than 30 days before such meeting,
(a) by mail to each Registered Owner of Notes, and
(b) by mail to the Company addressed to the General Partner at 3900
Hamilton Boulevard, Allentown, Pennsylvania 18103, Attention: President,
provided, however, that the mailing of any such notice shall in no case be a
condition precedent to the validity of any action taken at such meeting. Any
meeting of Noteholders shall be valid without notice if the Holders of all Notes
then Outstanding are present in person or by proxy and if the Company and the
Trustee are present by duly authorized representatives, or if notice is waived
before or after the meeting by the Company, the Holders of all Notes Outstanding
and by the Trustee.
All Holders of Notes at the time of such meeting shall be entitled to
vote thereat; except that
(i) the Trustee may, and, upon request of the Company or of the
Required Holder(s) of all series of Notes, shall fix a day not exceeding
ninety (90) days preceding the date for which the meeting is called as a
record date for the determination of Holders of Notes entitled to notice of
and to vote at such meeting and any adjournment thereof, and only such
Holders who shall have been Holders on the date so fixed, and who are
entitled to vote such Notes at the meeting, shall be entitled to receive
notice of such meeting, and Notes may
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be voted at such meeting and any adjournment thereof only by the Holders,
and their proxies, who shall have been Registered Owners of such Notes on
such record date, notwithstanding any transfer of any such Notes on the
books of the Company after such date; and
(ii) no one shall be entitled to vote in respect of any Note owned or
held by, for the account of or for the benefit or interest of, the Company
or any of its Affiliates.
(S) 12.03. ATTENDANCE AT MEETINGS. Attendance by Noteholders at any
meeting may be in person or by proxy.
Each person seeking to attend or vote at any meeting of Noteholders
must, if required by any Responsible Officer of the Trustee or authorized
representative of the Company, produce such proof of personal identity as shall
be satisfactory to the Inspectors of Votes (as hereinafter defined). Every
proxy shall be signed by the Noteholder himself or by his duly authorized
attorney, as the case may be, and shall be witnessed, and its genuineness if
questioned shall be established to the satisfaction of the Inspectors of Votes.
All proxies and certificates presented at any meeting shall be delivered to the
Inspectors of Votes and filed with the Trustee.
Officers and nominees of the Company and of the Trustee may attend at
any such meeting and take part therein, but shall not be entitled to vote
thereat except to the extent that they may be Noteholders or may hold proxies of
Noteholders.
(S) 12.04. CHAIRMAN AND SECRETARY; INSPECTOR OF VOTES. Persons named
by the Trustee, if represented at the meeting, shall act as temporary Chairman
and Secretary, respectively, of the meeting, but if the Trustee shall not be
represented or shall fail to nominate such persons or if any person so nominated
shall not be present, then the Noteholders and proxies present shall by a
majority vote, irrespective of the amount of their holdings, elect other persons
from those present to fill such vacancy or vacancies. A permanent Chairman and
a permanent Secretary of such meeting shall be elected from those present by the
Noteholders and proxies entitled to vote by more than 50% of the aggregate
principal amount of the Notes represented at the meeting. The Trustee, if
represented at the meeting, shall appoint two Inspectors of Votes (the
"INSPECTORS OF VOTES") who shall count all votes cast at such meeting, except
votes on the election of a Chairman and Secretary as aforesaid, and who shall
make and file with the Secretary of the meeting their verified written report in
duplicate of all such votes to cast at said meeting. If the Trustee shall not
be represented at the meeting or shall fail to nominate such Inspectors of Votes
or if either Inspector of Votes fails to attend the meeting, the vacancy shall
be filled by appointment by the temporary Chairman of the meeting. The Company
shall deliver to the Inspectors of Votes, after their designation and prior to
any vote of Noteholders which may be taken at such meeting upon any resolution
providing for a modification or alteration of this Indenture or any Indenture
Supplemental hereto or of the rights or obligations of the Company or of the
Holders of the Notes, an Officers' Certificate stating the aggregate principal
amount of Notes owned or held by, for the account of or for the benefit or
interest of, the Company or any Affiliate of the Company (whether held in the
treasury of the
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Company or any such Affiliate or pledged to secure any indebtedness) and
identifying such Notes by serial number or otherwise.
(S) 12.05. QUORUM; ADJOURNMENT. The Holders (or Persons entitled to
vote the same) of not less than 51% of the aggregate principal amount of the
Notes at the time Outstanding entitled to be voted at any such meeting must be
present at such meeting in person or by proxy in order to constitute a quorum
for the transaction of business, less than a quorum, however, having power to
adjourn. If such meeting is adjourned by less than a quorum for more than seven
days, notice thereof shall forthwith be mailed by the Trustee, if such meeting
shall have been called by the Trustee, to the persons specified in (S) 12.02(a)
and (S) 12.02(b). The failure to mail such notice as aforesaid shall in no case
affect the validity of any action taken at any meeting held pursuant to such
adjournment.
(S) 12.06. MODIFICATIONS OF INDENTURE. Any modifications or
alterations of this Indenture, of any Indenture Supplemental hereto, and of the
rights and obligations of the Company and of the Holders of the Notes may be
made at a meeting of Noteholders duly convened and held in accordance with the
provisions of this Article Eleven, but only by a resolution duly adopted by the
affirmative vote, in person or by proxy, of the Holders (or persons entitled to
vote the same) of at least 51% of the aggregate principal amount of the 1997
Notes at the time Outstanding and the Required Holder(s) of each other series of
Notes at the time Outstanding and in each case entitled to be voted upon any
such modification or alteration when such meeting is held and approved by
resolution of the Board of Directors as hereinafter specified; but no such
modification or alteration shall be made, without the consent of the Holder of
any Note Outstanding hereunder, which will (a) impair or affect the right of
such Holder to receive payment of the principal of (and Yield-Maintenance
Amount, if any) and interest on such Note or to institute suit for the
enforcement of any such payment, or (b) reduce the percentage of the principal
amount of Notes required for the authorization of any such modification or
alteration; nor shall any modification or alteration be made which will affect
the time, amount or allocation of any prepayments or redemption payments with
respect to any of the 1997 Notes or any other series of Notes Outstanding
hereunder without the affirmative vote, in person or by proxy, of all Holders of
1997 Notes at the time Outstanding or all Holders of such other series of Notes
(or persons entitled to vote the same) at the time Outstanding, as applicable;
nor shall any action permitted under this (S) 12.06 and taken at any meeting of
the Noteholders affect the rights under this Indenture or under any Indenture
Supplemental hereto of the Holders of the 1997 Notes or of one or more, but less
than all, of the other series of Notes Outstanding hereunder, unless such action
shall have received the affirmative vote, in person or by proxy, of the
Holder(s) of not less than 51% in aggregate principal amount of 1997 Notes then
outstanding (or persons entitled to vote the same), if so effected, and the
Required Holder(s) (or persons entitled to vote the same) of the Notes at the
time Outstanding of each other series so affected, in each case entitled to be
voted upon any such action when such meeting is held. For all purposes of this
Article Twelve, the Trustee shall be entitled to rely upon an opinion of Counsel
with respect to the extent, if any, as to which any action taken at such meeting
affects the rights under this Indenture or under any Indenture Supplemental
hereto of any Holders of Notes then Outstanding.
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(S) 12.07. RECORD OF MEETING; ADOPTION AND APPROVAL. A record in
duplicate of the proceedings of each meeting of Noteholders shall be prepared by
the Secretary of the meeting and shall have attached thereto the original
reports of the Inspectors of Votes, and affidavits by one or more persons having
knowledge of the facts setting forth a copy of the notice of the meeting and a
copy of the notice of the adjournment thereof, if required under (S) 12.05, and
showing that said notices were delivered as provided in (S) 12.02 and, in a
proper case, as provided in (S) 12.05. Such record shall be signed and verified
by the affidavits of the permanent Chairman, the permanent Secretary of the
meeting, and a duly authorized representative of the Trustee if such a
representative was present at the meeting, and one duplicate thereof shall be
delivered to the Company and the other to the Trustee for preservation by the
Trustee. Any record so signed and verified shall be proof of the matters
therein stated until the contrary is proved, and such meeting shall be deemed
conclusively to have been duly convened and held, and any resolution or
proceeding stated in such record to have been adopted or taken shall be deemed
conclusively to have been duly adopted or taken by such meeting. A true copy of
any resolution adopted by such meeting shall be mailed by the Trustee to the
Noteholders (but failure to mail copies of such resolution as aforesaid shall
not affect the validity thereof). Proof of such publication and mailing by the
affidavit or affidavits of some person or persons having knowledge of the facts
shall be filed with the Trustee. No such Noteholders' resolution shall be
binding unless approved by the Board of Directors as evidenced by a Certified
Resolution filed with the Trustee, and any resolution of Noteholders so adopted
and approved by the Board of Directors shall be deemed conclusively to be
binding upon the Company, the Trustee and the Holders of all Notes, except as
otherwise specifically provided in this Article Twelve; provided, that no such
resolution of the Noteholders, or of the Board of Directors, shall in any manner
be so construed as to change or modify any of the rights or obligations of the
Trustee without its written assent thereto. Nothing in this Article Twelve
contained shall be deemed or construed to authorize or permit, by reason of any
call of a meeting of Noteholders or of any right expressly or impliedly
conferred hereunder to make such call, any hindrance or delay in the exercise of
any right or rights conferred upon or reserved to the Trustee or to the
Noteholders under any of the provisions of this Indenture or of the Notes.
(S) 12.08. WRITTEN CONSENT. Anything in this Article Twelve
contained to the contrary notwithstanding, the Trustee shall be entitled to rely
upon, in taking or refraining from taking any action as to which the approval of
the Noteholders is required, upon receipt of the written consent or consents of
the Holders of the requisite percentages of the aggregate principal amount of
the 1997 Notes then Outstanding or Notes of another series then Outstanding, as
applicable, and in each case entitled to consent, in lieu of a vote of the
Noteholders at a meeting duly called and held for that purpose.
(S) 12.09. ENDORSEMENT OF NEW NOTES. Notes authenticated and
delivered after the date of any Noteholders' meeting or consent may bear a
notation, in form approved by the Trustee, as to the action taken and, in such
case, upon demand of the Holder of any Note Outstanding at the date of any such
meeting and presentation of such Holder's Note for the purpose at the principal
corporate trust office of the Trustee, the Company shall cause suitable notation
to be made on such Note by endorsement or otherwise as to any action taken at
any meeting of Noteholders theretofore
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held or in any consent theretofore given. If the Company or the Trustee shall so
determine, new Notes so modified that they will, in the opinion of the Trustee
and the Board of Directors, conform to such Noteholders' resolutions, shall be
prepared, authenticated and delivered, and such new Notes shall be exchanged for
Notes of the same series and maturity then Outstanding hereunder, upon demand
of, and without cost to, the Holders thereof, upon surrender of such Notes. The
Company or the Trustee may require Notes to be presented for notation or
exchange as aforesaid if either shall see fit to do so. Instruments supplemental
to this Indenture embodying any modification or alteration of his Indenture or
of any Indenture Supplemental hereto, or of the rights and obligations of the
Company or of the Holders of the Notes at any Noteholders' meeting approved by
resolution of the Board of Directors as aforesaid, may be executed by the
Trustee and the Company; and upon demand of the Trustee, or if so specified in
any resolution adopted by any such Noteholders' meeting, shall be executed by
the Company and the Trustee.
ARTICLE THIRTEEN
MISCELLANEOUS PROVISIONS
(S) 13.01. BENEFITS RESTRICTED. Nothing in this Indenture, expressed
or implied, is intended or shall be construed to confer upon, or give to, any
Person, other than the parties hereto, and the Holders of the Notes, any right,
remedy or claim under or by reason of this Indenture or any covenant, condition
or stipulation hereof; and the covenants, stipulations and agreements in this
Indenture contained are and shall be for the sole and exclusive benefit of the
parties hereto, their successors and assigns, and the Holders of the Notes.
(S) 13.02. CANCELED NOTES. Whenever in this Indenture or in any
Indenture Supplemental hereto provision is made for the destruction or
cancellation by the Trustee and the delivery to the Company of any Notes, the
Trustee may, in lieu of such delivery, destroy such Notes and deliver a
certificate of such destruction to the Company.
(S) 13.03. SEVERABILITY; CONFLICTING PROVISIONS. In case any one or
more of the provisions contained in this Indenture or in the Notes should be
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby.
In the event that this Indenture shall have been qualified under the
Trust Indenture Act of 1939, then, if any provision of this Indenture limits,
qualifies or conflicts with another provision included in this Indenture which
is required to be included in this Indenture by any of Sections 310-317,
inclusive, of the Trust Indenture Act of 1939, such required provision shall
control.
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(S) 13.04. EXPENSES. Except as otherwise provided in the 1997 Note
Agreement with respect to the initial preparation, negotiation, execution and
delivery of this Indenture, the 1997 Note Agreement and the 1997 Notes, the
Company agrees, whether or not the transactions hereby contemplated shall be
consummated, to pay, and save the Noteholders harmless against liability for the
payment of, all out-of-pocket expenses arising in connection with this
transaction, all taxes, together in each case with interest and penalties, if
any, and any income tax payable by the Noteholders in respect of any
reimbursement of such expenses, which may be payable in respect of the execution
and delivery of this Indenture or any Supplemental Indenture, or the execution,
delivery or acquisition of any Note issued under or pursuant to this Indenture,
all stenographic, printing and reproduction costs and expenses (including,
without limitation, all charges for delivery of any documents and agreements or
any drafts thereof), including, without limitation, the reasonable fees and
expenses of the Noteholders' special counsel in connection with the foregoing
agreements and instruments and any subsequent modification of any thereof or
consent under any thereof and the costs and expenses, including reasonable
attorneys' fees, incurred by the Noteholders in enforcing any of their rights
hereunder or thereunder, including without limitation costs and expenses
incurred in any bankruptcy case. The obligations of the Company under this (S)
13.04 shall survive the transfer by the Noteholders and payment of any Note.
(S) 13.05. PAYMENTS. The Trustee agrees that, so long as any
Institutional Investor holds any Notes (herein called an "INSTITUTIONAL
NOTEHOLDER"), it will make payments of principal and interest and Yield-
Maintenance Amount, if any, on the Notes held by such Noteholder not later than
12:00 o'clock noon, local time of the Institutional Noteholder, in the case of
any payment to a place within the United States, or New York time, in the case
of any other payment, on the date such payment is due, in immediately available
funds, at the Institutional Noteholder's option, by wire transfer to the
Institutional Noteholder's account as specified in writing by the Institutional
Noteholder or by check mailed or delivered to the Institutional Noteholder at
such account or address as the Institutional Noteholder may designate in
writing, in each case notwithstanding any contrary provisions contained herein
or in the Notes or in the 1997 Note Agreement or any other Note purchase
agreement with respect to the place of payment. All payments of principal and
interest and Yield-Maintenance Amount, if any, shall be made without presentment
or surrender of such Notes or in such manner as the Holder may designate in
writing notwithstanding any contrary provision herein or in any Note or the 1997
Note Agreement or any other Note purchase agreement. Each Noteholder shall,
before disposing of any Note, make a notation thereon (or on a schedule attached
thereto) of all principal payments previously made thereon and of the date to
which interest thereon has been paid.
(S) 13.06. PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this
Indenture, the Notes, the 1997 Note Agreement or any other Note purchase
agreement to the contrary notwithstanding, any payment of principal of or
interest on, or Yield-Maintenance Amount payable with respect to, any Note that
is due on a date other than a Business day shall be made on the next succeeding
Business Day. If the date for any payment is extended to the next succeeding
Business Day by reason of the preceding sentence, the period of such extension
shall not be included in the computation of the interest payable on such
Business Day.
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<PAGE>
(S) 13.07. CERTIFICATES; OPINIONS. Except as otherwise expressly
provided in this Indenture, or in any Indenture Supplemental hereto, any
request, opinion, consent, demand, notice, order, appointment, or other
direction required or permitted to be made or given by the Company, shall be
deemed to have been sufficiently made or given if executed on behalf of the
Company by the President or any of the Vice Presidents and the Secretary or any
of the Assistant Secretaries or the Treasurer or any of the Assistant Treasurers
of the General Partner.
Any opinion of Counsel required to be furnished pursuant to any of the
provisions of this Indenture may, in lieu of stating the facts required by the
provisions hereof, state that the required conditions will be fulfilled on the
execution and delivery of designated instruments, which instruments shall be
delivered in form approved by such Counsel prior to or concurrently with the
taking or suffering by the Trustee of the action as a condition precedent to
which such opinion is required to be furnished under the terms of this
Indenture.
Upon any application by the Company to the Trustee to take any action
under any of the provisions of this Indenture, the Company shall furnish to the
Trustee an Officers' Certificate of the General Partner and an opinion of
Counsel, each stating that all conditions precedent provided for in this
Indenture (including compliance with any covenants which constitute a condition
precedent) with respect to such application have been complied with, whether or
not the furnishing of such documents shall be specifically required by the
provisions of this Indenture relating to such particular application.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include (i) a
statement that the person making such certificate or opinion has read such
covenant or condition; (ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based; (iii) a statement that, in the opinion of
such person, he has made such examination or investigation as is necessary to
enable him to express an informed opinion as to whether or not such covenant or
condition has been complied with; and (iv) a statement as to whether or not, in
the opinion of such person, such condition or covenant has been complied with.
Any certificate or opinion of an officer of the General Partner may be
based, insofar as it relates to legal matters, upon a certificate or opinion of
or upon representations by Counsel, unless such officer knows that the
certificates or opinion or representations with respect to the matters upon
which his or her opinion may be based as aforesaid are erroneous, or in the
exercise of reasonable care should have known that the same were erroneous.
Any certificate or opinion of Counsel may be based, insofar as it
relates to factual matters, or information in possession of the Company or the
General Partner, upon the certificate or opinion of or representations by an
officer or officers of the General Partner unless such Counsel knows or had
reason to know that the certificate or opinion or representations with respect
to the matters upon which his opinion may be based as aforesaid are erroneous.
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(S) 13.08. NOTICES. Any notice to or demand upon the Trustee may be
served or presented, and such demand may be made, at the principal corporate
trust office of the Trustee. Any notice to or demand upon the Company shall be
deemed to have been sufficiently given or served by the Trustee, for all
purposes, by being deposited, postage prepaid, in a post-office letter box
addressed to the General Partner at 3900 Hamilton Boulevard, Allentown,
Pennsylvania 18103, Attention: President, or to the Company at such other
address as may be filed in writing by the Company with the Trustee.
(S) 13.09. SUCCESSORS AND ASSIGNS. Whenever in this Indenture any of
the parties hereto is named or referred to, the successors and assigns of such
party shall be deemed to be included, and all the covenants, promises and
agreements in this Indenture contained by or on behalf of the Company, or by or
on behalf of the Trustee shall bind and inure to the benefit of the respective
successors and assigns, whether so expressed or not.
(S) 13.10. COUNTERPARTS. This Indenture is being executed in several
counterparts, each of which is an original and all of which are identical. Each
counterpart of this Indenture is to be deemed an original hereof and all
counterparts collectively are to be deemed but one instrument.
(S) 13.11. GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED WITH AND
ENFORCEABLE IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING
EFFECT (TO THE EXTENT PERMITTED BY APPLICABLE LAW) TO ITS PRINCIPLES OF
CONFLICTS OF LAW.
(S) 13.12. HEADINGS. The descriptive headings of the several
Articles and Sections of this Indenture were formulated, used and inserted in
this Indenture for convenience only and shall not be deemed to affect the
meaning or construction of any of the provisions hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGES FOLLOW]
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Indenture to be
executed on its behalf by its General Partner, by the President or one of the
Vice Presidents of the General Partner, and the corporate seal of the General
Partner to be hereto affixed and said seal and this Indenture to be attested by
the General Partner's Secretary or one of its Assistant Secretaries, and the
Trustee, in evidence of its acceptance of the trust hereby created, has caused
this Indenture to be executed on its behalf by one of its Vice Presidents, and
its corporate seal to be hereto affixed and said seal and this Indenture to be
attested by one of its Assistant Secretaries; all as of the sixteenth day of
December, one thousand nine hundred and ninety-seven.
BUCKEYE PIPE LINE COMPANY, L.P.
Witness
By: BUCKEYE PIPE LINE COMPANY,
- ---------------------------- a Delaware corporation, as general
partner
- ----------------------------
Witness
By: /s/ Steven C. Ramsey
- ---------------------------- ------------------------------------
Steven C. Ramsey
____________________________ Senior Vice President - Finance
(Corporate Seal)
Attest:
/s/ Stephen C. Muther
----------------------------------------
Stephen C. Muther
Secretary
65
<PAGE>
Witness PNC BANK, NATIONAL ASSOCIATION,
as Trustee
- ----------------------------
- ---------------------------- By: /s/ R.E. Ernst
-------------------------------------
R.E. Ernst
Witness Vice President
- ----------------------------
(Corporate Seal)
- ---------------------------- Attest:
/s/ F.J. Deramo
----------------------------------------
Name: F.J. Deramo
Title:
66
<PAGE>
_________________________________________________________________
_________________________________________________________________
BUCKEYE PIPE LINE COMPANY, L.P.
$240,000,000
SENIOR NOTES DUE DECEMBER 16, 2024
_______________
NOTE AGREEMENT
_______________
DATED AS OF DECEMBER 16, 1997
_________________________________________________________________
_________________________________________________________________
<PAGE>
TABLE OF CONTENTS
(Not Part of Agreement)
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. AUTHORIZATION OF ISSUE OF NOTES................................... 1
1A. Authorization of Issue of Notes.............................. 1
1B. Indenture.................................................... 2
2. Purchase and Sale of Notes........................................ 2
3. CONDITIONS PRECEDENT.............................................. 2
3. Conditions to Closing............................................. 2
3A. Certain Documents.......................................... 2
3B. Opinion of Purchaser's Special Counsel..................... 4
3C. Representations and Warranties; No Default; Compliance..... 4
3D. Purchase Permitted By Applicable Laws...................... 5
3E. Proceedings and Documents.................................. 5
3F. Possession of Franchises, Permits, etc..................... 5
3G. Equipment and Personal Property Not Damaged or Destroyed... 5
3H. Transactional Litigation................................... 5
3I. Private Placement Numbers.................................. 6
3J. Purchase or Defeasance of Outstanding First Mortgage Notes. 6
3K. Release and Discharge of Original Indenture Lien........... 6
3L. Amendment of Public Partnership Agreement.................. 7
3M. Fees....................................................... 7
4. Prepayments....................................................... 7
5. Representations and Warranties.................................... 7
5A. Organization and Qualification............................. 7
5B. Subsidiaries; Restricted Affiliates........................ 7
5C. Valid and Binding Obligations.............................. 7
5D. Litigation................................................. 8
5E. Outstanding Debt........................................... 8
5F. Taxes...................................................... 8
5G. Title to Pipeline Assets................................... 8
5H. Historic Financial Statements.............................. 8
5I. Conflicting Agreements and Other Matters................... 9
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
5J. Offering of Notes.......................................... 9
5K. Use of Proceeds; Regulation G, etc......................... 10
5L. Governmental Consent....................................... 10
5M. Holding Company and Investment Company Status.............. 10
5N. No Conflicting Requirements................................ 10
5O. Compliance with Laws....................................... 10
5P. Accuracy of Certificates, etc.............................. 11
5Q. ERISA Matters.............................................. 11
6. Representations of the Purchaser.................................. 11
6A. Nature of Purchase......................................... 11
6B. Source of Funds............................................ 11
7. Definitions....................................................... 12
8. Miscellaneous..................................................... 13
8A. Note Payments.............................................. 13
8B. Expenses; Indemnification.................................. 14
8C. Consent to Amendments...................................... 15
8D. Survival of Representations and Warranties................. 15
8E. Successors and Assigns..................................... 15
8F. Notices.................................................... 15
8G. Descriptive Headings....................................... 15
8H. Satisfaction Requirement................................... 16
8I. Governing Law.............................................. 16
8J. Severability............................................... 16
8K. Reproduction and Counterparts.............................. 16
PURCHASER SCHEDULE
SCHEDULE 5Q -- ERISA MATTERS
EXHIBIT A -- FORM OF INDENTURE
EXHIBIT B-1 -- FORM OF OPINION OF COMPANY'S COUNSEL
EXHIBIT B-2 -- FORM OF OPINION OF COMPANY'S LOCAL COUNSEL
EXHIBIT B-2 -- FORM OF OPINION OF COMPANY'S DELAWARE COUNSEL
EXHIBIT B-4 -- FORM OF OPINION OF TRUSTEE'S COUNSEL
</TABLE>
ii
<PAGE>
BUCKEYE PIPE LINE COMPANY, L.P.
3900 HAMILTON BOULEVARD
ALLENTOWN, PENNSYLVANIA 18103
As of December 16, 1997
The Prudential Insurance Company of America
c/o Prudential Capital Group
Four Gateway Center
100 Mulberry Street
Newark, New Jersey 07102
$240,000,000 SENIOR NOTES DUE 2024
----------------------------------
Ladies and Gentlemen:
The undersigned, Buckeye Pipe Line Company, L.P., a Delaware limited
partnership (the "COMPANY"), hereby agrees with you as set forth below.
Capitalized terms used and not otherwise defined herein shall have the meanings
assigned to them in the Amended and Restated Indenture dated of even date
herewith, the form of which is attached hereto as Exhibit A. Reference is made
to paragraph 7 hereof for definitions of certain capitalized terms used herein.
PARAGRAPH 1. AUTHORIZATION OF ISSUE OF NOTES.
1A. AUTHORIZATION OF ISSUE OF NOTES. The Company has authorized the issue
of its senior promissory notes in the aggregate principal amount of
$240,000,000, to be dated the date of issue thereof, to be substantially in the
form specified in the Indenture, to mature December 16, 2024, and to be issued
in the series and to bear interest at the rates set forth below (and on overdue
payments at the rate specified therein):
<TABLE>
<CAPTION>
Principal Amount
Series to be Issued
- ----------------------------------------------- ----------------
<S> <C>
6.98% Series 1997A Senior Notes due 2024 $125,000,000
6.89% Series 1997B Senior Notes due 2024 $100,000,000
6.95% Series 1997C Senior Notes due 2024 $ 10,000,000
6.96% Series 1997D Senior Notes due 2024 $ 5,000,000
</TABLE>
1
<PAGE>
The term "NOTES" as used herein shall include each such senior promissory note
delivered pursuant to any provision of this Agreement and each such senior
promissory note delivered in substitution or exchange for any other Note
pursuant to any such provision. Notes which bear interest at the same rate are
herein called a "SERIES" of Notes.
1B. INDENTURE. The Notes shall be issued under the Sixth Supplement
and the Original Indenture, as modified and supplemented by the Sixth
Supplement.
PARAGRAPH 2. PURCHASE AND SALE OF NOTES.
2. PURCHASE AND SALE OF NOTES. The Company hereby agrees to sell to you
and, subject to the terms and conditions herein set forth, you agree to purchase
from the Company the aggregate principal amount of each Series of Notes set
forth above in paragraph 1A at 100% of such aggregate principal amount. The
Company will deliver to you, at the offices of Baker & Botts, L.L.P., 599
Lexington Avenue, Suite 2900, New York, New York 10022-6030, one or more Notes
of each Series registered in your name, evidencing the aggregate principal
amount of Notes of such Series to be purchased by you and in the denomination or
denominations specified in the Purchaser Schedule attached hereto, against
payment of the purchase price thereof by depositing with the Trustee immediately
available funds for credit to the Trustee's trust account no. 2-037341 at PNC
Bank, National Association, ABA No. 043 000 096, on the date of closing, which
shall be December 16, 1997 or any other date on or before December 16, 1997 upon
which the Company and you may mutually agree (the "CLOSING" or the "DATE OF
CLOSING").
PARAGRAPH 3. CONDITIONS PRECEDENT.
3. CONDITIONS TO CLOSING. Your obligation to purchase and pay for the
Notes to be purchased by you hereunder is subject to the satisfaction, on or
before the Date of Closing, of the following conditions:
3A. CERTAIN DOCUMENTS. You shall have received the following, each dated
the Date of the Closing:
(i) The Notes to be purchased by you.
(ii) The Indenture and the Sixth Supplement, each duly authorized,
executed and delivered by the parties thereto.
2
<PAGE>
(iii) Certified copies of the resolutions of the Board of Directors
of the General Partner approving on behalf of the Company this Agreement,
the Indenture, the Sixth Supplement, the Notes and the Defeasance Trust
Agreement, and of all documents evidencing other necessary partnership or
corporate action and governmental approvals, if any, with respect to this
Agreement, the Indenture, the Sixth Supplement, the Notes and the
Defeasance Trust Agreement.
(iv) A certificate of the Secretary or an Assistant Secretary of the
General Partner certifying the names and true signatures of the officers of
the General Partner authorized to sign this Agreement, the Indenture, the
Sixth Supplement, the Notes, the Defeasance Trust Agreement and the other
documents to be delivered hereunder.
(v) Copies, each as amended to date, of the General Partner's (a)
Certificate of Incorporation, certified by the Secretary of State of the
State of Delaware within 10 Business Days of the Date of Closing, and (b)
bylaws, certified by the Secretary or an Assistant Secretary of the General
Partner as of the Date of Closing.
(vi) A favorable opinion of Morgan, Lewis & Bockius, LLP, counsel to
the Company, the Public Partnership, the General Partner and the Public
Partnership's General Partner, satisfactory to you and substantially in the
form of Exhibit B-1 attached hereto and as to such other matters as you may
reasonably request.
(vii) A favorable opinion of special counsel for the Company in each
of the states in which are located property or assets of the Company
subject to the Lien of the Original Indenture, satisfactory to you and
substantially in the form of Exhibit B-2 attached hereto and as to such
other matters as you may reasonably request.
(viii) A favorable opinion of Richards, Layton & Finger, P.A.,
special Delaware counsel to the Company and the Public Partnership,
satisfactory to you and substantially in the form of Exhibit B-3 attached
hereto and as to such other matters as you may reasonably request.
(ix) A favorable opinion of Eckert, Seamans, Cherin & Mellott, LLC,
counsel for the Trustee, satisfactory to you and substantially in the form
of Exhibit B-4 attached hereto and as to such other matters as you may
reasonably request.
(x) Certified copies of the Certificate of Limited Partnership of the
Company, Laurel and BP Michigan, each as amended to date, certified by the
Secretary of State of the State of Delaware within 10 Business Days of the
Date of Closing.
(xi) Certified copies of the Partnership Agreement, the Public
Partnership Agreement and the partnership agreements governing Laurel and
BP Michigan, each as amended to date, the terms and conditions of which
shall be in full force and effect, and no
3
<PAGE>
term of which shall have been amended, modified or waived, except with your
prior written consent.
(xii) Certified copies of all management agreements by and between
(a) the General Partner and the Company, (b) the General Partner and Laurel
and (c) the General Partner and BP Michigan, each as amended to date, the
terms and conditions of which shall be in full force and effect, and no
term of which shall have been amended, modified or waived, except with your
prior written consent.
(xiii) A certified copy of the Defeasance Trust Agreement, the terms
and conditions of which shall be in full force and effect, and no term of
which shall have been amended, modified or waived, except with your prior
written consent.
(xiv) Certified copies of Requests for Information or Copies (Form
UCC-11), or equivalent reports, listing all effective financing statements
which name the Company, Laurel or BP Michigan (under the present name and
any previous name of each) as debtor and which are filed in all
jurisdictions in which the Company, Laurel or BP Michigan own property or
conduct business, together with copies of such financing statements.
(xv) Certified copies of all consents, authorizations, waivers, or
approvals of any public utility or similar commission or any other
governmental authority in any jurisdiction in which the Company, Laurel or
BP Michigan transacts business, and which are required to be obtained at or
prior to Closing in connection with the consummation of the transactions
contemplated by this Agreement, the Notes, the Indenture, the Sixth
Supplement and the Defeasance Trust Agreement.
3B. OPINION OF PURCHASER'S SPECIAL COUNSEL. You shall have received from
Baker & Botts, L.L.P., who are acting as special counsel for you in connection
with this transaction, a favorable opinion satisfactory to you as to such
matters incident to the matters herein contemplated as you may reasonably
request.
3C. REPRESENTATIONS AND WARRANTIES; NO DEFAULT; COMPLIANCE. Each of the
representations and warranties of the Company contained in paragraph 5 of this
Agreement shall be true on and as of the Date of Closing with the same effect as
though such representations and warranties had been made on and as of the Date
of Closing; there shall exist on the Date of Closing no Event of Default or
Default; on the Date of Closing all agreements to be performed by the Company
under this Agreement and the Indenture on or before the Date of Closing shall
have been performed in all material respects; all conditions to be satisfied
hereunder on or before the Date of Closing shall have been satisfied in all
material respects; there shall have been no material adverse change in the
business or condition, financial or otherwise, of the Company and its Restricted
Affiliates considered as a whole since December 31, 1996 or any condition, event
or act which would materially adversely affect the Company's ability to perform
its obligations pursuant to this
4
<PAGE>
Agreement, the Indenture, the Sixth Supplement or the Notes; and the Company
shall have delivered to you an Officer's Certificate, dated the Date of Closing,
to all such effects.
3D. PURCHASE PERMITTED BY APPLICABLE LAWS. The offer by the Company of,
and the purchase of and payment for the Notes to be purchased by you on the Date
of Closing on the terms and conditions herein provided (including the use of the
proceeds of such Notes by the Company) shall not violate any applicable law or
governmental regulation (including, without limitation, section 5 of the
Securities Act or Regulation G or X of the Board of Governors of the Federal
Reserve System) and shall not subject you to any tax, penalty, liability or
other onerous condition under or pursuant to any applicable law or governmental
regulation, and you shall have received such certificates or other evidence as
you may request to establish compliance with this condition.
3E. PROCEEDINGS AND DOCUMENTS. All opinions, certificates, letters,
searches and other instruments and all partnership, corporate and other
proceedings in connection with the transactions contemplated by this Agreement,
the Indenture, the Sixth Supplement and the Defeasance Trust Agreement shall be
satisfactory in form and substance to you and your special counsel. You shall
have received copies of all instruments and other evidence as you may reasonably
request, in form and substance satisfactory to you and your special counsel,
with respect to such transactions and the taking of all corporate proceedings in
connection therewith. If any provision of this Agreement shall require the
certification of the existence or nonexistence of any particular fact or impose
as a condition the existence or nonexistence of such fact, then you shall be
free to establish to your satisfaction the existence or nonexistence of such
fact.
3F. POSSESSION OF FRANCHISES, PERMITS, ETC. On the Date of Closing, the
Company, Laurel and BP Michigan shall collectively possess all franchises,
rights, certificates, variances, licenses and permits, federal, state or local,
and all other authorizations, consents and approvals from administrative,
regulatory or governmental bodies, necessary for the use, occupancy, ownership
and maintenance of the Pipeline Systems, and the operation of the respective
businesses of the Company, Laurel and BP Michigan (except such as are of a
routine nature not customarily obtained, effected or made prior to transactions
such as those contemplated hereby or are of an administrative nature expected to
be obtained in the ordinary course of business subsequent to the Closing, or if
not obtained, effected or made, would not have a Material Adverse Effect), and
the General Partner, on behalf of the Company, Laurel and BP Michigan, shall
have delivered to you an Officer's Certificate, dated the Date of Closing, to
such effect.
3G. EQUIPMENT AND PERSONAL PROPERTY NOT DAMAGED OR DESTROYED. On the Date
of Closing, (i) the Company and Laurel shall be operating the Pipeline Systems
in the ordinary course of business; (ii) the Pipeline Systems shall not have
been materially injured or damaged by fire or other casualty; and (iii) you
shall have received an Officer's Certificate to such effect from the General
Partner, on behalf of the Company and Laurel.
3H. TRANSACTIONAL LITIGATION. On the Date of Closing, there shall not be
threatened or pending any suit, action, proceeding or investigation, whether at
law, in equity or otherwise, before
5
<PAGE>
any court, arbitrator, administrative agency or other regulatory or governmental
authority of any jurisdiction which (i) brings into question, or involves the
question of, the authenticity, validity or enforceability, in any respect
material to the Partnership and its Restricted Affiliates considered as a whole,
of (a) any transaction contemplated by this Agreement, the Indenture, the Sixth
Supplement, the Notes or the Defeasance Trust Agreement or (b) the certificates,
permits, policies, appraisals, authorizations and other documents and
instruments referred to in this Agreement, or (ii) makes a material challenge to
the ownership or operation by the Company of the BP Pipeline System or by Laurel
of the Laurel Pipeline System.
3I. PRIVATE PLACEMENT NUMBERS. A Private Placement number issued by
Standard & Poor's CUSIP Service Bureau (in cooperation with the Securities
Valuation Office of the National Association of Insurance Commissioners) shall
have been obtained for each Series of Notes.
3J. PURCHASE OR DEFEASANCE OF OUTSTANDING FIRST MORTGAGE NOTES. The
Company shall have made an offer, on terms satisfactory to you, to each holder
of Outstanding First Mortgage Notes (other than you) to purchase all Outstanding
First Mortgage Notes then held by such holder, and one of the following shall
have occurred with respect to each such holder and its Outstanding First
Mortgage Notes:
(i) (a) such holder shall have accepted the Company's offer to
purchase such holder's Outstanding First Mortgage Notes, (b) the Company
shall have deposited with the Trustee funds sufficient to consummate such
purchase, and (c) such holder shall have delivered to the Trustee (x) its
Outstanding First Mortgage Notes for cancellation, or (y) its written
undertaking, satisfactory to the General Partner, you and the Trustee to
deliver such Outstanding First Mortgage Notes to the Trustee for
cancellation promptly after the Closing or (z) certification that such
Outstanding First Mortgage Notes have been mutilated, destroyed, lost or
stolen, together with an agreement of indemnity from such holder (both
satisfactory to the General Partner, you and the Trustee); or
(ii) such holder shall have rejected the Company's offer to purchase
such holder's Outstanding First Mortgage Notes, and (a) all conditions
precedent provided for in the Original Indenture relating to the defeasance
of such Outstanding First Mortgage Notes shall have been complied with, and
(b) such Outstanding First Mortgage Notes shall have been duly and validly
defeased in accordance with the provisions of the Original Indenture and
the Defeasance Trust Agreement.
3K. RELEASE AND DISCHARGE OF ORIGINAL INDENTURE LIEN. The Trustee shall
have executed and delivered to the Company a general release and discharge, in
form and substance satisfactory to you, with respect to the Lien of the Original
Indenture.
6
<PAGE>
3L. AMENDMENT OF PUBLIC PARTNERSHIP AGREEMENT. The Public Partnership
Agreement shall have been duly amended, in a manner satisfactory to you, to
provide that all references therein to the "Mortgage Note Indenture" shall
thereafter be deemed references to the Original Indenture as amended and
restated in its entirety by the Indenture, as such Indenture is amended,
restated, supplemented or otherwise modified from time to time in accordance
with the provisions thereof.
3M. FEES. You shall have received from the Company (i) the structuring
fee provided for in the agreement in principle dated November 14, 1997 between
you and the Company and (ii) all other fees which are due and payable on or
before the Closing Date pursuant to any written agreement between you and the
Company.
PARAGRAPH 4. PREPAYMENTS.
4. PREPAYMENTS. The Notes shall be subject to prepayment as provided in
Article Six of the Indenture.
PARAGRAPH 5. REPRESENTATIONS AND WARRANTIES.
5. REPRESENTATIONS AND WARRANTIES. The Company represents and warrants
as follows:
5A. ORGANIZATION AND QUALIFICATION. Each of the Company, Laurel and BP
Michigan is a limited partnership duly organized and existing under the laws of
the State of Delaware. Each of the Company, Laurel and BP Michigan has the
partnership power and authority to own its property and to carry on its business
as now being conducted. Each of the Company, Laurel and BP Michigan is duly
qualified to transact business in every jurisdiction in which the nature of the
business conducted by it makes such qualification necessary, except in such
jurisdictions in which, in the aggregate, the failure of the Company, Laurel and
BP Michigan to be qualified will not subject them to any liability or disability
which could have a Material Adverse Effect.
5B. SUBSIDIARIES; RESTRICTED AFFILIATES. As of the Date of Closing, the
Company has no Subsidiaries; Laurel has no Subsidiaries other than BP Michigan,
in which Laurel has a 98.01% limited partnership interest; and Laurel and BP
Michigan are the sole Restricted Affiliates of the Company.
5C. VALID AND BINDING OBLIGATIONS. The Company has the partnership power
and authority to enter into this Agreement, the Indenture, the Sixth Supplement
and the Defeasance Trust Agreement, to issue the Notes and to perform its
obligations under this Agreement, the Indenture, the Sixth Supplement, the
Defeasance Trust Agreement and the Notes. This Agreement constitutes, and the
Indenture, Sixth Supplement and Defeasance Trust Agreement upon execution and
delivery and the Notes upon execution, authentication and delivery, will
constitute, the Company's valid and binding obligations, enforceable in
accordance with their respective terms, subject, as to enforcement
7
<PAGE>
to bankruptcy, insolvency, reorganization and other laws of general
applicability relating or affecting creditors' rights and to general equity
principles.
5D. LITIGATION. There is no action, suit, investigation or proceeding
pending or, to the knowledge of the Company or the General Partner, threatened
against the Company, Laurel, BP Michigan or any properties or rights of the
Company, Laurel or BP Michigan, by or before any court, arbitrator or
administrative or governmental body which could, in the reasonable judgment of
the Company, have a Material Adverse Effect, or which in any manner questions
the validity of this Agreement, the Indenture, the Sixth Supplement, the
Defeasance Trust Agreement or the Notes, or any of the transactions contemplated
hereby or thereby or in connection herewith or therewith, and there is no basis
known to the Company or the General Partner for any such action, suit,
investigation or proceeding.
5E. OUTSTANDING DEBT. Neither the Company nor Laurel nor BP Michigan has
outstanding any Indebtedness except as permitted by the Indenture. There exists
no default under the provisions of any instrument evidencing such Indebtedness
or of any agreement relating thereto.
5F. TAXES. Each of the Company, Laurel and BP Michigan has filed all
federal, state and other income tax returns which, to the knowledge of the
Company or the General Partner, are required to be filed, and each has paid all
taxes as shown on such returns and on all assessments received by it to the
extent that such taxes have become due, except such taxes as are being contested
in good faith by appropriate proceedings and for which adequate reserves have
been established in accordance with GAAP.
5G. TITLE TO PIPELINE ASSETS. Neither the Company nor Laurel has caused
any title search to be made in connection with this Agreement; however, based
on, among other things, the operating history of the Pipeline Systems and such
investigation of the instruments conveying to the Company or Laurel or otherwise
evidencing the ownership or lease of, easement over, on or under, right to use,
or other interest in, any of the Pipeline Assets for the purpose of determining
what action would be required to perfect the interest of the Company or Laurel,
as applicable, therein, the Company is not aware of any defect in or challenge
to its or Laurel's ownership of or rights or other interests in any of the
Pipeline Assets (other than defects or challenges which will not have a Material
Adverse Effect, and each of the Company and Laurel will on the Date of Closing
and at all times thereafter have sufficient title to its properties and possess
all authorizations, rights and franchises from state and local governmental and
regulatory authorities necessary to conduct its business substantially in
accordance with past practice, subject only to Liens permitted under (S) 5.02 of
the Indenture, encumbrances, restrictions and other imperfections and other than
authorizations, rights and franchises which in the aggregate are expected not to
have a Material Adverse Effect.
5H. HISTORIC FINANCIAL STATEMENTS. The Company has furnished you with the
following financial statements, certified by the principal financial officer of
the General Partner: consolidated balance sheets of the Company, Laurel and BP
Michigan as at the last day in each of the three fiscal years of the Company,
Laurel and BP Michigan most recently completed prior to the Date of
8
<PAGE>
Closing, and consolidated statements of income and cash flows of the Company,
Laurel and BP Michigan for each such year. Such financial statements (including
any related schedules and/or notes) are true and correct in all material
respects, have been prepared in accordance with GAAP consistently followed
throughout the periods involved, and show all liabilities, direct and
contingent, of the Company, Laurel and BP Michigan required to be shown in
accordance with such principles. The balance sheets fairly present the financial
position of the Company, Laurel and BP Michigan as at the dates thereof, and the
consolidated statements of income and cash flows fairly present in all material
respects the results of the operations and cash flows of the Company, Laurel and
BP Michigan for the periods indicated.
5I. CONFLICTING AGREEMENTS AND OTHER MATTERS. Except for this Agreement,
the Indenture and that certain Pipeline Capacity Agreement dated as of October
11, 1994 between the Company and Laurel, a true, correct and complete copy of
which has previously been furnished to you, and the transactions contemplated by
each of the foregoing, neither the Company nor Laurel nor BP Michigan is a party
to any contract or agreement or subject to any organizational or governance
document or other restriction which, either individually or in the aggregate,
materially adversely affects its business, property, assets, or financial
condition. Neither execution or delivery of this Agreement, the Indenture, the
Sixth Supplement, any of the Notes or the Defeasance Trust Agreement, nor the
offering, issuance and sale of the Notes, nor fulfillment of nor compliance with
the terms and provisions of this Agreement, the Indenture, the Sixth Supplement,
the Notes and the Defeasance Trust Agreement will conflict with, or result in a
breach of the terms, conditions or provisions or constitute a default under, or
result in any violation of, or result in the creation of any lien upon any of
the properties or assets of the Company, Laurel or BP Michigan pursuant to, the
Partnership Agreement, the Public Partnership Agreement or the partnership
agreements of Laurel or BP Michigan, or any award of any arbitrator or any other
agreement (including an agreement with general or limited partners of the
Company, Laurel or BP Michigan), instrument, order, judgment, decree, statute,
law, rule or regulation to which the Company, Laurel or BP Michigan is subject
(other than conflicts, breaches, defaults, violations or liens which will not
have a Material Adverse Effect). Except for the Public Partnership Agreement,
this Agreement, the Indenture and the instruments relating thereto, neither the
Company nor Laurel nor BP Michigan is a party to, or otherwise subject to any
provision contained in, any instrument evidencing Indebtedness of' the Company,
Laurel or BP Michigan, any agreement relating thereto or any other contract or
agreement which limits the amount of, or otherwise imposes restrictions on the
incurring of Indebtedness.
5J. OFFERING OF NOTES. Neither the Company nor any agent acting on its
behalf has, directly or indirectly, offered any of the Notes or any similar
security of the Company for sale to, or solicited any offers to buy any of the
Notes or any similar security of the Company from, or otherwise approached or
negotiated with respect thereto with, anyone other than institutional investors
or entities acting on behalf of institutional investors and, assuming the
accuracy of the representations contained in paragraph 6 of this Agreement,
neither the Company nor any agent acting on its behalf has taken or will take
any action which would subject the offering, issuance or sale of any of the
Notes to the provisions of Section 5 of the Securities Act of 1933, as amended,
or to the provisions of any securities or Blue Sky law of any applicable
jurisdiction.
9
<PAGE>
5K. USE OF PROCEEDS; REGULATION G, ETC. The Company does not own or have
any present intention of acquiring any "margin stock" as defined in Regulation G
(12 CFR Part 207) of the Board of Governors of' the Federal Reserve System
(herein called "MARGIN STOCK"). All or substantially all the proceeds of the
sale of the Notes will be used by the Company to refinance the Outstanding First
Mortgage Notes, with the remainder, if any, used for general working capital
purposes. None of such proceeds will be used, directly or indirectly, for the
purpose, whether immediate, incidental or ultimate, of purchasing or carrying
any margin stock or for the purpose of maintaining, reducing or retiring any
indebtedness which was originally incurred to purchase or carry margin stock or
for any other purpose which might constitute this transaction a "purpose credit"
within the meaning of said Regulation G.
5L. GOVERNMENTAL CONSENT. Neither the execution and delivery of this
Agreement, the Indenture, the Sixth Supplement or the Defeasance Trust
Agreement, nor the defeasance of the Outstanding First Mortgage Notes to be
defeased, nor the offer, issue, sale or delivery of any of the Notes or
fulfillment of or compliance with the terms and provisions of this Agreement,
the Indenture, the Sixth Supplement, the Notes or the Defeasance Trust
Agreement, is such as to require any consent, approval or other action by or any
notice to or filing with any court or administrative or governmental body (other
than consents, approvals, other actions, notices or filings which (i) have been
or prior to the Date of Closing will be, obtained, effected or made, (ii) are of
a routine nature not customarily obtained, effected or made prior to
transactions such as those contemplated hereby or are of an administrative
nature expected to be obtained in the ordinary course of business subsequent to
the Date of Closing, or (iii) if not obtained, effected or made, would not,
individually or in the aggregate, have a Material Adverse Effect).
5M. HOLDING COMPANY AND INVESTMENT COMPANY STATUS. Neither the Company
nor Laurel nor BP Michigan is a "holding company", or an "affiliate" of a
"holding company" or a "subsidiary company" of a "holding company", or a "public
utility", within the meaning of the Public Utility Holding Company Act of' 1935,
as amended, or a "public utility" within the meaning of the Federal Power Act,
as amended. Neither the Company nor Laurel nor BP Michigan is an "investment
company" within the meaning of the Investment Company Act of 1940, as amended,
or an "investment adviser" within the meaning of the Investment Advisers Act of
1940, as amended.
5N. NO CONFLICTING REQUIREMENTS. Neither the Company nor Laurel nor BP
Michigan is in violation of or in default under any term or provision of any
charter, bylaw, partnership agreement, mortgage, indenture, agreement,
instrument, statute, rule, regulation, judgment, decree, order, writ or
injunction applicable to it, such that such violations or defaults might
materially and adversely affect the ability of the Company to perform its
obligations under this Agreement, the Indenture, the Sixth Supplement, the Notes
or the Defeasance Trust Agreement or the satisfaction of any of the conditions
to your obligation to purchase the Notes to be purchased by you on the Date of
Closing.
5O. COMPLIANCE WITH LAWS. Each of the Company, Laurel and BP Michigan is
in compliance with all applicable laws, rules and regulations (including
environmental protection laws
10
<PAGE>
and regulations), other than such laws, rules or regulations the validity or
applicability of which it is contesting in good faith by appropriate proceedings
or the noncompliance with which would not have a Material Adverse Effect.
5P. ACCURACY OF CERTIFICATES, ETC. Neither (i) this Agreement nor (ii)
taken as a whole, all other documents, certificates and written statements
furnished to you by or on behalf of the Company, Laurel and BP Michigan in
connection with the execution and delivery of this Agreement or pursuant thereto
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained herein and therein, in light
of the circumstances under which they were made, not misleading, in either case
which has not been corrected, supplemented or remedied by subsequent documents
furnished or statements made in writing to you.
5Q. ERISA MATTERS. Schedule 5Q lists all employee benefit plans, as
defined in Section 3(3) of ERISA, maintained for the Company, Laurel or BP
Michigan or to which either of them contribute. The Annual Report on Form 10-K
of the Public Partnership for fiscal year 1996 filed with the Securities and
Exchange Commission accurately sets forth on a consolidated basis the status of
all accrued employee benefit liabilities of the Public Partnership and its
subsidiaries (including the Company and its Restricted Affiliates) as at
December 31, 1996.
PARAGRAPH 6. REPRESENTATIONS OF THE PURCHASER.
6. REPRESENTATIONS OF THE PURCHASER. You represent as follows:
6A. NATURE OF PURCHASE. You are not acquiring the Notes to be purchased
by you hereunder with a view to or for sale in connection with any distribution
thereof within the meaning of the Securities Act of 1933, as amended, provided
that the disposition of your property shall at all times be and remain within
your control.
6B. SOURCE OF FUNDS. The funds being used by you to pay the purchase
price of the Notes being purchased by you hereunder constitute assets (i)
allocated to your "insurance company general account" (as such term is defined
under Section V of the United States Department of Labor's Prohibited
Transaction Class Exemption ("PTCE") 95-60), and as of the date of the purchase
of the Notes you satisfy all of the applicable requirements for relief under
Sections I and IV of PTCE 95-60 or (ii) allocated to a separate account
maintained by you in which no employee benefit plan, other than employee benefit
plans identified on a list which has been furnished by you to the Company,
participates to the extent of 10% or more. For the purpose of this paragraph
6B, the terms "SEPARATE ACCOUNT" and "EMPLOYEE BENEFIT PLAN" shall have the
respective meanings specified in section 3 of ERISA.
11
<PAGE>
PARAGRAPH 7. DEFINITIONS.
7. DEFINITIONS. For the purpose of this Agreement, the terms defined in
the introductory sentence and in paragraphs 1 and 2 shall have the respective
meanings specified therein, and the following terms shall have the meanings
specified with respect thereto below (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"AUTHORIZED OFFICER" shall mean, in the case of the Company, Laurel or
BP Michigan, the chief executive officer, the chief operating officer, the chief
financial officer, the chief accounting officer, the Senior Vice President-
Finance, the Treasurer and any vice president of the General Partner designated
as an "Authorized Officer" of the Company, Laurel or BP Michigan, as applicable,
for the purpose of this Agreement in an Officer's Certificate executed by the
General Partner's chief operating officer or chief financial officer and
delivered to you.
"CLOSING" or "DATE OF CLOSING" shall have the meaning specified in
paragraph 2.
"DEFEASANCE TRUST AGREEMENT" shall mean that certain Trust Agreement
dated as of even date herewith between the Company and the Trustee.
"DOLLARS" and "$" shall mean the lawful money of the United States of
America.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"FIRST MORTGAGE NOTES" shall mean and include all first mortgage notes
of the Company authenticated and delivered under the Original Indenture.
"INDENTURE" shall mean that certain Amended and Restated Indenture
executed and delivered of even date herewith, the form of which is attached
hereto as Exhibit A, as amended, supplemented and otherwise modified from time
to time in accordance with its terms.
"LAUREL" shall mean Laurel Pipe Line Company, L.P., a Delaware limited
partnership.
"NOTES" shall have the meaning specified in paragraph 1A.
"OFFICER'S CERTIFICATE" shall mean a certificate signed in the name of
the Company, Laurel or BP Michigan, as applicable, by an Authorized Officer of
the General Partner.
"ORIGINAL INDENTURE" shall mean that certain Indenture of Mortgage and
Deed of Trust and Security Agreement, dated as of December 15, 1986, made by the
Company to Pittsburgh National Bank (now known as PNC Bank, National
Association) and J.G. Routh, as Trustees, as amended and supplemented by that
certain First Supplemental Indenture of Mortgage and Deed of
12
<PAGE>
Trust and Security Agreement dated as of December 1, 1987, that certain Second
Supplemental Indenture of Mortgage and Deed of Trust and Security Agreement
dated as of November 30, 1992, that certain Third Supplemental Indenture of
Mortgage and Deed of Trust and Security Agreement dated as of December 31, 1993,
that certain Fourth Supplemental Indenture of Mortgage and Deed of Trust and
Security Agreement dated as of March 15, 1994, that certain Fifth Supplemental
Indenture of Mortgage and Deed of Trust and Security Agreement dated as of March
30, 1994 and that certain Sixth Supplemental Indenture of Mortgage and Deed of
Trust and Security Agreement dated as of even date herewith (the "SIXTH
SUPPLEMENT").
"PERSON" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust, a limited liability company, an unincorporated
organization and a government or any department or agency thereof.
"PUBLIC PARTNERSHIP AGREEMENT" shall mean the Amended and Restated
Agreement of Limited Partnership of Buckeye Partners, L.P., dated as of December
23, 1986, as previously amended and as in effect on the date hereof.
"REQUIRED HOLDER(S)" shall mean the holder or holders of at least 51%
of the aggregate principal amount of the Notes from time to time outstanding.
"SERIES" shall have the meaning specified in paragraph 1A.
"SIXTH SUPPLEMENT" shall have the meaning set forth in the definition
of "Original Indenture."
"TRANSFEREE" shall mean any direct or indirect transferee of all or
any part of any Note purchased by you under this Agreement.
PARAGRAPH 8. MISCELLANEOUS.
8. MISCELLANEOUS.
8A. NOTE PAYMENTS. The Company agrees that, so long as you shall hold any
Note, it will instruct the Trustee to make payments of principal of, interest on
and any Yield-Maintenance Amount payable with respect to such Note, which comply
with the terms of this Agreement, by wire transfer of immediately available
funds for credit (not later than 12:00 noon, New York City time, on the date
due) to your account or accounts as specified in the Purchaser Schedule attached
hereto, or such other account or accounts in the United States as you may
designate in writing, notwithstanding any contrary provision herein, in the
Indenture or in any Note with respect to the place of payment. You agree that,
before disposing of any Note, you will make a notation thereon (or on a schedule
attached thereto) of all principal payments previously made thereon and of the
date to which interest thereon has been paid. The Company agrees to afford the
benefits of this paragraph
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<PAGE>
8A to any Transferee which shall have made the same agreement as you have made
in this paragraph 8A.
8B. EXPENSES; INDEMNIFICATION.
(i) You acknowledge that you have agreed to pay all out-of-pocket
expenses (including the fees and expenses of any special counsel engaged by
you) incurred by you in connection with the initial preparation,
negotiation, execution and delivery of this Agreement, the Indenture, the
Sixth Supplement, the Defeasance Trust Agreement and the Notes. The
Company agrees, whether or not the transactions contemplated hereby shall
be consummated, to pay, and save you and any Transferee harmless against
liability for the payment of, all other out-of-pocket expenses arising in
connection with such transactions, including, without limitation, (a) the
execution, delivery, recording and filing of release instruments with
respect to the Lien of the Original Indenture, (b) all fees and expenses of
the Trustee (including the fees and expenses of its special counsel and all
local counsel engaged by the Trustee or such special counsel), (c) all
document production and duplication charges, (d) the fees and expenses of
any special counsel engaged by you, such Transferee or the Trustee in
connection with any subsequent proposed modification of, or proposed
consent under, this Agreement or the Indenture, whether or not such
proposed modification shall be effected or proposed consent granted, and
(e) the costs and expenses, including attorneys' fees and expenses,
incurred by you, such Transferee or the Trustee in enforcing (or
determining whether or how to enforce) any rights under this Agreement, the
Notes or the Indenture or in responding to any subpoena or other legal
process or informal investigative demand issued in connection with this
Agreement, the Indenture or the transactions contemplated hereby or
thereby or by reason of your or such Transferee's having acquired any Note,
including without limitation costs and expenses incurred in any bankruptcy
case.
(ii) Each of the Company and the General Partner agrees to indemnify
and hold harmless you, any Transferee, the Trustee, and each of the
aforementioned parties' respective Affiliates, partners, successors,
assigns, agents and employees (each an "INDEMNITEE" and collectively, the
"INDEMNITEES") from and against any and all liabilities, losses, damages,
costs and expenses of any kind or nature whatsoever, including, without
limitation, the reasonable fees and disbursements of counsel, which may be
incurred by any Indemnitee in connection with any investigative,
administrative or judicial proceeding (whether or not any of such
Indemnitees shall be designated a party thereto) relating to or arising out
of this Agreement, the Notes, the Indenture or any transaction relating
hereto or thereto (excluding, however, liabilities, losses, damages, costs
and expenses incurred by any Indemnitee solely in connection with a
controversy between such Indemnitee and another Indemnitee); provided that
no Indemnitee shall have the right to be indemnified hereunder for its own
gross negligence or willful misconduct as determined by a court of
competent jurisdiction. Any amounts at any time and from time to time owing
to any Indemnitee under this clause
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<PAGE>
(ii) of paragraph 8B shall be due and payable on the fifth Business Day
after presentment by such Indemnitee to the Company or the General Partner
of a statement therefor.
The obligations of the Company and the General Partner under this paragraph 8B
shall survive the transfer of any Note or portion thereof or interest therein by
you or any Transferee and the payment of any Note.
8C. CONSENT TO AMENDMENTS. Except as provided in (S) 11.06 of the
Indenture, this Agreement may be amended, and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, if the Company shall obtain the written consent to such amendment, action or
omission to act, of the Required Holder(s) except that, without the written
consent of the holder or holders of all Notes at the time outstanding, no
amendment to this Agreement shall change the maturity of any Note, or change the
principal of, or the rate or time of payment of interest on or any Yield-
Maintenance Amount payable with respect to any Note, or affect the time, amount
or allocation of any prepayments, or change the proportion of the principal
amount of the Notes required with respect to any consent, amendment, waiver or
declaration. Each holder of any Note at the time or thereafter outstanding
shall be bound by any consent authorized by this paragraph 8C, whether or not
such Note shall have been marked to indicate such consent, but any Notes issued
thereafter may bear a notation referring to any such consent. No course of
dealing between the Company and the holder of any Note nor any delay in
exercising any rights hereunder or under any Note shall operate as a waiver of
any rights of any holder of such Note. As used herein and in the Notes, the
term "THIS AGREEMENT" and references thereto shall mean this Agreement as it may
from time to time be amended or supplemented.
8D. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties contained herein or made in writing by or on behalf of the Company in
connection herewith shall survive the execution and delivery of this Agreement
and the Notes, the transfer by you of any Note or portion thereof or interest
therein and the payment of any Note, and may be relied upon by any Transferee,
regardless of any investigation made at any time by or on behalf of you or any
Transferee.
8E. SUCCESSORS AND ASSIGNS. All covenants and other agreements in this
Agreement contained by or on behalf of either of the parties hereto shall bind
and inure to the benefit of the respective successors and assigns of the parties
hereto (including, without limitation, any Transferee) whether so expressed or
not.
8F. NOTICES. All notices or other communications provided for hereunder
shall be in writing and sent by first class mail or nationwide overnight
delivery service (with charges prepaid) and (i) if to you, addressed to you at
the address specified for such communications in the Purchaser Schedule attached
hereto, or at such other address as you shall have specified to the Company in
writing, (ii) if to any other holder of any Note, addressed to such other holder
at such address as such other holder shall have specified to the Company in
writing or, if any such other holder shall not have so specified an address to
the Company, then addressed to such other holder in care of the last
15
<PAGE>
holder of such Note which shall have so specified an address to the Company, and
(iii) if to the Company, addressed to it at 3900 Hamilton Boulevard, Allentown,
Pennsylvania 18103, Attention: Senior Vice President-Finance, or at such other
address as the Company shall have specified to the holder of each Note in
writing.
8G. DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
8H. SATISFACTION REQUIREMENT. If any agreement, certificate or other
writing, or any action taken or to be taken, is by the terms of this Agreement
required to be satisfactory to you or to the Required Holder(s), the
determination of such satisfaction shall be made by you or the Required
Holder(s), as the case may be, in the sole and exclusive judgment (exercised in
good faith) of the Person or Persons making such determination.
8I. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF
THE STATE OF NEW YORK, WITHOUT GIVING EFFECT (TO THE EXTENT PERMITTED BY
APPLICABLE LAW) TO ITS CONFLICTS OF LAW PRINCIPLES. This Agreement may not be
changed orally, but (subject to the provisions of paragraph 8C) only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification or discharge is sought.
8J. SEVERABILITY. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
8K. REPRODUCTION AND COUNTERPARTS. This Agreement and all documents
relating hereto, including, without limitation, (i) consents, waivers and
modifications which may hereafter be executed, (ii) documents received by you at
the Closing (except the Notes themselves), and (iii) financial statements,
certificates and other information previously or hereafter furnished to you ,
may be reproduced by you by any photographic, photostatic, microfilm, microcard,
miniature photographic or other similar process and may destroy any original
document so reproduced. The Company agrees and stipulates that, to the extent
permitted by applicable law, any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence) and that any enlargement,
facsimile or further reproduction of such reproduction shall likewise be
admissible in evidence. This Agreement may be signed in counterparts, each of
which would be deemed an original and all of which together shall constitute but
one instrument.
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<PAGE>
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to the
Company, whereupon this letter shall become a binding agreement between the
Company and you.
Very truly yours,
BUCKEYE PIPE LINE COMPANY, L.P.
By: Buckeye Pipe Line Company,
a Delaware corporation, as General Partner
By: /s/ STEVEN C. RAMSEY
-----------------------------------
Name: Steven C. Ramsey
Title: Senior VP Finance
The foregoing Agreement is
hereby accepted as of the
date first above written.
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ ROBERT G. GWIN
------------------------------------
Vice President
17
<PAGE>
PURCHASER SCHEDULE
Aggregate
Principal
Amount of
Notes to be Note Denom-
Purchased ination(s)
----------- -----------
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
(1)(A) 6.98% SERIES 1997A NOTES: $125,000,000 $125,000,000
(No. 1997AR-1)
All payments on account of Series 1997A
Notes held by such purchaser shall be
made by wire transfer of immediately
available funds for credit to:
Account No. 890-0304-391
The Bank of New York
New York, New York
(ABA No.: 021-000-018)
Each such wire transfer shall set forth the name of the Company, a
reference to "6.98% Series 1997A Senior Notes due December 16, 2024,
Security No. !INV5815!", and the due date and application (as among
principal, interest and Yield-Maintenance Amount) of the payment being
made.
(1)(B) 6.89% SERIES 1997B NOTES: $100,000,000 $100,000,000
(No. 1997BR-1)
All payments on account of Series 1997B
Notes held by such purchaser shall be
made by wire transfer of immediately
available funds for credit to:
Account No. 890-0304-391
The Bank of New York
New York, New York
(ABA No.: 021-000-018)
Each such wire transfer shall set forth the name of the Company, a
reference to "6.89% Series 1997B Senior Notes due December 16, 2024,
Security No. !INV5815!", and the due date and application (as among
principal, interest and Yield Maintenance Amount) of the payment being
made.
PS-1
<PAGE>
(1)(C) 6.95% SERIES 1997C NOTES: $10,000,000 $10,000,000
(No. 1997CR-1)
All payments on account of Series 1997C
Notes held by such purchaser shall be
made by wire transfer of immediately
available funds for credit to:
Account No. 890-0304-944
The Bank of New York
New York, New York
(ABA No.: 021-000-018)
Each such wire transfer shall set forth the name of the Company, a
reference to "6.95% Series 1997C Senior Notes due December 16, 2024,
Security No. !INV5816!", and the due date and application (as among
principal, interest and Yield Maintenance Amount) of the payment being
made.
(1)(D) 6.96% SERIES 1997D NOTES: $5,000,000 $5,000,000
(No. 1997DR-1)
All payments on account of Series 1997D
Notes held by such purchaser shall be
made by wire transfer of immediately
available funds for credit to:
Account No. 890-0304-391
The Bank of New York
New York, New York
(ABA No.: 021-000-018)
Each such wire transfer shall set forth the name of the Company, a
reference to "6.96% Series 1997D Senior Notes due December 16, 2024,
Security No. !INV5815", and the due date and application (as among
principal, interest and Yield Maintenance Amount) of the payment being
made.
(2) Address for all notices relating to payments with respect
to all Notes of any Series held by such Purchaser:
The Prudential Insurance Company of America
c/o Prudential Capital Group
Four Gateway Center
100 Mulberry Street
Newark, New Jersey 07102
Attention: Investment Operations Group
(Attention: Manager)
(3) Address for all other communications and notices:
The Prudential Insurance Company of America
c/o Prudential Capital Group
2200 Ross Avenue, Suite 4200E
Dallas, Texas 75201
Attention: Managing Director
PS-2
<PAGE>
(4) Recipient of telephonic prepayment notices:
Manager, Investment Operations Group
(201) 802-5260
(5) Tax Identification No.: 22-1211670
PS-3
<PAGE>
SCHEDULE 5Q
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ERISA MATTERS
<PAGE>
EXHIBIT A
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[FORM OF INDENTURE]
<PAGE>
EXHIBIT B-1
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[FORM OF OPINION OF COMPANY'S COUNSEL]
<PAGE>
EXHIBIT B-2
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[FORM OF OPINION OF COMPANY'S LOCAL COUNSEL]
<PAGE>
EXHIBIT B-3
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[FORM OF OPINION OF COMPANY'S DELAWARE COUNSEL]
<PAGE>
EXHIBIT B-4
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[FORM OF OPINION OF TRUSTEE'S COUNSEL]
<PAGE>
DEFEASANCE TRUST AGREEMENT
--------------------------
THIS DEFEASANCE TRUST AGREEMENT, dated as of December 16, 1997 (this
"Agreement"), between and among Buckeye Pipe Line Company, L.P., a Delaware
limited partnership (the "Company"), and PNC Bank, National Association, a
national banking association (the "Trustee" or the "Escrow Trustee"), and
Douglas A. Wilson, an individual (as "Individual Trustee" and together with the
Trustee, the "Trustees").
WITNESSETH:
WHEREAS, the Company, PNC Bank, National Association (formerly Pittsburgh
National Bank), as Trustee, and Douglas A. Wilson (successor to J.G. Routh), as
Individual Trustee, are parties to that certain Indenture of Mortgage and Deed
of Trust and Security Agreement, dated as of December 15, 1986, as amended by
that certain First Supplemental Indenture of Mortgage and Deed of Trust and
Security Agreement, dated as of December 1, 1987, that certain Second
Supplemental Indenture of Mortgage and Deed of Trust and Security Agreement,
dated as of November 30, 1992, that certain Third Supplemental Indenture of
Mortgage and Deed of Trust and Security Agreement, dated as of December 31,
1993, that certain Fourth Supplemental Indenture of Mortgage and Deed of Trust
and Security Agreement, dated as of March 15, 1994, that certain Fifth
Supplemental Indenture of Mortgage and Deed of Trust and Security Agreement,
dated as of March 30, 1994 (as so amended, the "Original Indenture"; capitalized
terms used herein without definition shall have the meanings assigned to such
terms in the Original Indenture);
WHEREAS, the Company issued and sold under the Original Indenture the
Company's First Mortgage Notes, of which as of the date hereof there presently
remains outstanding the following: (i) $152,100,000 aggregate principal amount
of the Company's 11.18% Series J First Mortgage Notes due 2006 (the "Series J
Notes"), (ii) $11,000,000 aggregate principal amount of the Company's 7.11%
Series K First Mortgage Notes due 2007, (iii) $11,000,000 aggregate principal
amount of the Company's 7.15% Series L First Mortgage Notes due 2008, (iv)
$13,000,000 aggregate principal amount of the Company's 7.19% Series M First
Mortgage Notes due 2009, and (v) $15,000,000 aggregate principal amount of the
Company's 7.93% Series N First Mortgage Notes due 2010 (collectively, the
"Outstanding First Mortgage Notes");
WHEREAS, prior to the date hereof, the Company offered to purchase or
called for redemption, as applicable, all of the Outstanding First Mortgage
Notes from the holders thereof, and all holders of the Outstanding First
Mortgage Notes have accepted such offer to purchase or consented to such
redemption, except those parties (the "Non-Accepting Holders") identified on
Exhibit A, which Non-Accepting Holders hold collectively $10,805,000 of the
aggregate principal amount of the Series J Notes;
WHEREAS, on the date hereof, the Company desires to defease the Series J
Notes held by the Non-Accepting Holders (such Series J Notes are referred to
herein as the "Defeased Notes") in accordance with the provisions of Article
Fourteen of the Original Indenture and, in
<PAGE>
connection therewith, to enter into this Agreement with the Trustees to
establish a special trust fund from which the holders of Defeased Notes are to
receive scheduled payments of principal (including, without limitation, payments
of principal in connection with sinking fund payments required by the terms of
the Defeased Notes and the Original Indenture) and interest, in accordance with
the terms of the Defeased Notes.
NOW, THEREFORE, in consideration for the mutual covenants contained herein
and intending to be legally bound hereby, the parties hereto covenant and agree
as follows:
Section 1. Creation of Trust and Defeasance Trust. There is hereby
created and established a special trust fund (the "Defeasance Trust") with the
Escrow Trustee designated "Buckeye Pipe Line Company Series J Notes 1997
Defeasance", which shall be held in trust for the benefit of the holders of the
Defeased Notes, until disbursed in accordance with the provisions hereof. The
Defeasance Trust shall be held by the Escrow Trustee separate and apart from
other funds of the Escrow Trustee and the Company.
Section 2. Escrow Deposit. The Company has deposited in the Defeasance
Trust, and the Escrow Trustee hereby acknowledges receipt of $13,286,450 in
cash in the Defeasance Trust, which amount is to be used to provide for
scheduled payments of principal (including, without limitation, payments of
principal in connection with sinking fund payments required by the terms of the
Defeased Notes and the Original Indenture) and interest on the Defeased Notes in
accordance with the terms thereof. The Escrow Trustee shall invest the
Defeasance Trust solely in obligations of the United States Treasury in the
principal amounts and maturities set forth in Exhibit B attached hereto (such
United States Treasury obligations are referred to herein as the "Escrow
Obligations") and the Escrow Trustee shall hold the Escrow Obligations as part
of the Defeasance Trust to be held in trust for the benefit of the holders of
the Defeased Notes for the purposes described in this Agreement.
Section 3. Application of Escrow Obligations. As shown on Exhibit C
and based upon the verification of Deloitte & Touche LLP, the Escrow Obligations
by their terms mature and bear interest payable in such amounts and at such
times as are required to make scheduled payments from the Defeasance Trust of
principal (including, without limitation, payments of principal in connection
with sinking fund payments required by the terms of the Defeased Notes and the
Original Indenture) and interest in accordance with the terms of the Defeased
Notes as the same shall become due and payable on the due dates set forth in the
Defeased Notes.
Section 4. Irrevocable Instruction to Pay to Holders of Defeased Notes.
The Company hereby irrevocably directs the Escrow Trustee to apply the amounts
received as principal, interest and maturity value of the Escrow Obligations to
the scheduled payments of principal (including, without limitation, payments of
principal in connection with sinking fund payments required by the terms of the
Defeased Notes and the Original Indenture) and interest on the Defeased Notes,
in the amounts and on the respective sinking fund payment, interest payment and
maturity dates set forth therein. The foregoing direction shall include,
without limitation, the
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<PAGE>
irrevocable direction and authorization by the Company to the Escrow Trustee to
provide the requisite notice of scheduled sinking fund redemption payments in
accordance with the terms of the Defeased Notes and the Original Indenture.
Section 5. Final Disposition. Within three Business Days after payment
of all of the outstanding principal of and interest on all of the Defeased Notes
(the final payments of which are scheduled to occur on December 15, 2006), all
and any moneys and funds remaining in the Defeasance Trust shall be transferred
and paid over by the Escrow Trustee to the Company and the obligations of the
Escrow Trustee shall then terminate.
Section 6. Defeasance Trust Irrevocable. The establishment of and
deposit into the Defeasance Trust, the directions of the Company to the Escrow
Trustee to pay the principal and premium, as applicable, of and interest on the
Defeased Notes and to give notice of redemption, and the trusts contained or
created in or by this Agreement, shall be irrevocable. The Escrow Trustee
agrees to hold the Defeasance Trust in trust for the holders of the Defeased
Notes
Section 7. Continuing Application of Certain Provisions of Original
Indenture. Notwithstanding any amendment or modification to the terms of the
Original Indenture, the Trustees shall continue to comply with, and agree
hereunder to be bound by, the provisions of Articles One, Five, Nine, Ten, and
Fifteen, and Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 2.09, 2.10, 2.12(a),
2.12(c), 11.01, 11.02, 11.04, 11.05, 11.06, 11.07, 11.08, 11.11 and 11.12 of the
Original Indenture, until such time as the Escrow Trustee's obligations
hereunder shall have terminated.
Section 8. Indemnification. The Company hereby agrees to indemnify,
protect and hold harmless the Escrow Trustee from any and all actions, claims or
other rights asserted against it in the course of performing its duties
hereunder, including all reasonable costs, expenses and legal fees and expenses
incurred in defending such actions, provided, however, that the Company shall
not indemnify the Escrow Agent for any act constituting its own gross negligence
or willful misconduct.
Section 9. Payments to Escrow Trustee. The Company shall cause all
reasonable costs, fees and expenses of the Escrow Trustee in connection with
this Agreement to be paid and the Escrow Trustee shall look only to the Company
for payment of such costs, fees and expenses. The Escrow Trustee further agrees
that it will not use any portion of the Defeasance Trust or any income derived
therefrom for payment of such costs, fees and expenses and that it has no lien
on, security interest in or claim on the Defeasance Trust or any income derived
therefrom for payment of such costs, fees or expenses.
Section 10. No Third Party Beneficiaries Except Holders of Defeased
Notes. Nothing herein, expressed or implied, is intended or shall be construed
to confer upon or give to any person other than the parties hereto and the
holders of Defeased Notes, any right, remedy or claim hereunder or under any
covenant, condition or stipulation hereof; and the covenants,
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<PAGE>
stipulations and agreements contained herein are and shall be enforceable only
by the parties hereto, their successors and assigns.
Section 11. Effect of Illegality. In case any one or more of the provisions
contained herein shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions hereof, and this Agreement shall be
construed and enforced as if such invalid or illegal or unenforceable provision
had never been contained herein.
Section 12. Notices to Parties. Any notice to or demand upon the Escrow
Trustee or the Company under this Agreement shall be in writing and may be
served, presented, or made at the following addresses or at such other address
as shall last have been filed in writing with the parties for such purposes:
To the Company:
3900 Hamilton Boulevard
Allentown, Pennsylvania 18103
Attn: Senior Vice President - Finance
To the Escrow Trustee:
One Oliver Plaza
Pittsburgh, Pennsylvania 15265
Section 13. Modification and Amendment; Assignment. Modification or
amendment of this Agreement shall not be permitted except to clarify ambiguities
in this Agreement and any such modification or amendment shall only be made with
the prior written consent of the Company and the Escrow Trustee. This Agreement
shall be binding upon and shall inure to the benefit of the successors and
permitted assigns of each of the parties hereto; provided however, that this
Agreement may not be assigned by any party hereto without the prior written
consent of each of the other parties.
Section 14. Governing Law. The laws of the State of New York, without
regard to principles of conflicts of laws, shall govern the construction of this
Agreement.
Section 15. Counterpart Execution. This Agreement may be executed in
any number of counterparts, each of which when so executed and delivered shall
be an original, but such counterparts shall together constitute but one and the
same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to
be executed by their duly authorized officers as of the date first above
written.
BUCKEYE PIPE LINE COMPANY, L.P.
Attest: By: Buckeye Pipe Line Company, General
Partner
______________________________ By:___________________________
Name: Name:
Title: Title:
PNC BANK, NATIONAL ASSOCIATION
Attest: as Trustee and as Escrow Trustee
______________________________ By:___________________________
Name: Name: R.E. Ernst
Title: Title: Vice President
Witness:
______________________________ _______________________
Name: Douglas A. Wilson, as Individual Trustee
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<PAGE>
AMENDMENT NO. 1 TO AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP OF BUCKEYE PIPE LINE COMPANY, L.P.
THIS AMENDMENT is made as of August 12, 1997, by and between Buckeye
Pipe Line Company, a Delaware corporation ("BPLC" or the "General Partner") and
Buckeye Partners, L.P., a Delaware limited partnership (the "Limited Partner").
WHEREAS, BPLC is the general partner of Buckeye Pipe Line Company,
L.P., a Delaware limited partnership (the "Partnership");
WHEREAS, the Limited Partner is the limited partner of the
Partnership;
WHEREAS, the Partnership is governed under an Amended and Restated
Agreement of Limited Partnership, dated as of December 23, 1986 (the
"Partnership Agreement");
WHEREAS, the Partnership, the General Partner, the Limited Partner and
each of the Limited Partner's other operating partnerships, Buckeye Management
Company, a Delaware corporation and general partner of the Limited Partner
("BMC"), and BMC Acquisition Company, a Delaware corporation and parent of BMC
("BAC"), have entered into an Exchange Agreement, of even date herewith, the
provisions of which require the amendment of certain provisions of the
Partnership Agreement;
WHEREAS, Section 13.1 of the Partnership Agreement provides that the
General Partner may amend any provision of the Partnership Agreement without the
consent of the Limited Partner to reflect any change that in the good faith
opinion of the General Partner does not adversely affect the Limited Partner in
any material respect; and
WHEREAS, the General Partner has determined that this Amendment does
not adversely affect the Limited Partner in any material respect.
NOW, THEREFORE, intending to be legally bound, the Partnership
Agreement is hereby amended as follows:
1. All terms used in this Amendment but not otherwise defined in
this Amendment shall have the meanings set forth for such terms in the
Partnership Agreement.
2. The definition of "Designated Expenses" in Article I of the
Partnership Agreement is hereby amended and restated in its entirety to read as
follows:
"Designated Expenses" means all costs and expenses (direct or
indirect) incurred by the General Partner which are directly or
indirectly related to
<PAGE>
the formation, capitalization, business or activities of the
Partnership (including, without limitation, expenses, direct or
indirect, reasonably allocated to the General Partner by its
Affiliates); provided, however, that Designated Expenses shall
not include (a) any cost or expense for which the General Partner
is not entitled to be reimbursed by reason of the proviso at the
end of Section 7.10(b); (b) any cost or expense for which the
General Partner and its Affiliates are not entitled to be
reimbursed pursuant to the terms of the Exchange Agreement; or
(c) severance costs not permitted to be reimbursed pursuant to
the Management Agreement in connection with the withdrawal of the
General Partner.
3. Article I of the Partnership Agreement is hereby amended to add
the following definition:
"Exchange Agreement" means the Exchange Agreement, dated as of
August 12, 1997, among the Partnership, the General Partner, the
Limited Partner, the Limited Partner's other operating
partnerships, the MLP General Partner and BMC Acquisition
Company.
4. The following phrase is hereby added to the end of Section 4.1(b)
of the Partnership Agreement:
, unless the General Partner receives an Opinion of Counsel that
the failure to make such additional Capital Contribution would
not result in the Partnership being treated as an association
taxable as a corporation for federal income tax purposes.
5. Any provision of the Partnership Agreement which is inconsistent
with the provisions of this Amendment shall be deemed amended to effectuate the
intention expressed herein. Every other provision of the Partnership Agreement
shall remain unchanged and in full force and effect.
6. The General Partner may amend any provision of the Management
Agreement which the General Partner in its sole discretion believes is necessary
or desirable to conform it to the provisions of this Amendment.
7. This Amendment shall be governed by and construed and enforced in
accordance with the laws of the State of Delaware.
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<PAGE>
IN WITNESS WHEREOF, this Amendment has been executed as of the day and
year first above written.
BUCKEYE PIPE LINE COMPANY,
as General Partner
By:__________________________________
Name:
Title:
BUCKEYE PARTNERS, L.P.
By: BUCKEYE MANAGEMENT COMPANY,
Its General Partner
By:__________________________________
Name:
Title:
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<PAGE>
AMENDMENT TO MANAGEMENT AGREEMENT
THIS AMENDMENT dated as of August 12, 1997 is entered into among
Buckeye Management Company, a Delaware corporation (the "General Partner"),
BUCKEYE PIPE LINE COMPANY, a Delaware corporation ("BPLC") and GLENMOOR PARTNERS
LLP ("Glenmoor"), a Pennsylvania limited liability partnership
WITNESSETH:
WHEREAS, the General Partner, BPLC and Glenmoor are parties to a
Management Agreement, dated as of March 22, 1996 (the "Management Agreement");
and
WHEREAS, the parties to the Management Agreement desire to amend the
Management Agreement in connection with the ESOP Restructuring more fully
described in the Buckeye Partners, L.P. Proxy Statement dated June 24, 1997 to
reflect the fact that certain partners of Glenmoor who are also executive
officers or director-level managers of BPLC and who are currently employed by
Glenmoor will become employed by Buckeye Pipe Line Services Company, a Delaware
corporation, on the date hereof;
NOW THEREFORE, intending to be legally bound, the Management Agreement
is hereby amended as follows:
1. The first word of the last sentence of Article I of the
Management Agreement is hereby changed from "Employees" to "Partners."
2. The last three sentences of Article II of the Management
Agreement are hereby deleted in their entirety.
3. All terms used herein but not otherwise defined herein shall have
the meaning set forth for such terms in the Management Agreement.
4. Any provision of the Management Agreement which is inconsistent
with the provisions of this Amendment shall be deemed amended to effectuate the
intention expressed herein. Every other provision of the Management Agreement
shall remain unchanged and in full force and effect.
5. This Amendment shall be governed by and construed and enforced in
accordance with the laws of the Commonwealth of Pennsylvania.
<PAGE>
IN WITNESS WHEREOF, this Amendment has been executed as of the day and
year first above written.
BUCKEYE MANAGEMENT COMPANY
By:
--------------------------------
Name:
Title:
BUCKEYE PIPE LINE COMPANY
By:
--------------------------------
Name:
Title:
GLENMOOR PARTNERS LLP
By:
--------------------------------
Name:
Title:
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<PAGE>
AMENDMENT NO. 1 TO AMENDED AND RESTATED INCENTIVE
COMPENSATION AGREEMENT
THIS AMENDMENT is made as of August 12, 1997 by Buckeye Management Company,
a Delaware corporation ("BMC" and the "General Partner"), and Buckeye Partners,
L.P., a Delaware limited partnership (the "Partnership").
WHEREAS, BMC and the Partnership have entered into an Amended and Restated
Incentive Compensation Agreement, dated as of March 22, 1996 (the "Agreement");
WHEREAS, BMC and the Partnership desire to amend the Agreement in
connection with the issuance of limited partnership units ("LP Units") of the
Partnership to Buckeye Pipe Line Services Company, a Pennsylvania corporation,
sponsor of the BMC Acquisition Company Employee Stock Ownership Plan (the
"ESOP"), in exchange for 63,000 shares of BMC Acquisition Company Series A
Convertible Preferred Stock, stated value $1,000 per share (the "ESOP LP
Units");
WHEREAS, Section 3.6 of the Agreement provides that the Agreement may be
amended only after complying with Section 17.4(a) of the Amended and Restated
Agreement of Limited Partnership, dated as of December 15, 1986, as amended (the
"Partnership Agreement"), which provides that, without the prior approval of a
two-thirds interest of the limited partners of the Partnership, the General
Partner shall not amend the Agreement in any material respect, unless such
amendment does not, in the good faith opinion of the General Partner, adversely
affect the limited partners of the Partnership in any material respect;
WHEREAS, the Board of Directors of the General Partner, on behalf of the
General Partner, and a special committee of disinterested directors of the Board
of Directors of the General Partner (the "Special Committee"), on behalf of the
Partnership, have approved this Amendment;
WHEREAS, the Special Committee has further determined that this Amendment
does not adversely affect the limited partners of the Partnership in any
material respect.
NOW THEREFORE, intending to be legally bound, the Agreement is hereby
amended as follows:
1. A new definition of "ESOP LP Units" shall be added to Article I which
shall mean the LP Units issued to Buckeye Pipe Line Services Company, regardless
of whether such LP Units continue to be held by Buckeye Pipe Line Services
Company.
<PAGE>
2. Section 1.7 of the Agreement is hereby amended and restated in its
entirety as follows:
"Quarterly Cash To Be Distributed" for any quarter means the Available
Cash for such quarter (excluding cash to be distributed in a Special
Distribution) less retentions of Available Cash necessary to pay the
General Partner incentive compensation pursuant to this Agreement and
less cash distributed by the Partnership to the holders of the ESOP LP
Units.
3. Section 1.8 of the Agreement is hereby amended and restated in its
entirety as follows:
"Special Cash To Be Distributed" means the cash or fair market value
of securities to be distributed in a Special Distribution, less cash
or fair market value of securities distributed by the Partnership to
the holders of ESOP LP Units.
4. Section 1.9 of the Agreement is hereby amended and restated in its
entirety as follows:
"Special Distribution" means any special cash distribution to
Unitholders in excess of $10 million from the proceeds of a financing,
sale of assets or disposition (or a series of related financings,
sales of assets or dispositions) or a special distribution of
marketable securities with a fair market value in excess of $10
million; provided, however, that no such special distribution from the
proceeds of a financing shall be made without the approval of the
disinterested directors of the board of directors of the General
Partner or a committee thereof.
5. Section 2.1 of the Agreement is hereby amended and restated in its
entirety as follows:
"Quarterly Incentive Compensation" If Quarterly Cash To Be Distributed
for any calendar quarter exceeds the Aggregate Target Quarterly
Amount, the Partnership shall, subject to Section 2.3, pay the General
Partner incentive compensation equal to the sum of (a) 15% of the
portion of the Quarterly Cash To Be Distributed which (i) exceeds $.65
per LP Unit and (ii) does not exceed $.70 per LP Unit; (b) 25% of the
portion of the Quarterly Cash To Be Distributed which (i) exceeds $.70
per LP Unit and (ii) does not exceed $.75 per LP Unit; (c) 30% of the
portion of the Quarterly Cash To Be Distributed which (i) exceeds $.75
per LP Unit and (ii) does not exceed $.80 per LP Unit; (d) 35% of the
portion of the Quarterly Cash To Be Distributed which (i) exceeds $.80
per LP Unit and (ii) does not exceed $.85 per LP Unit, (e) 40% of the
portion of the Quarterly Cash To Be Distributed which (i) exceeds $.85
per LP Unit and (ii) does not exceed $1.05 per LP Unit; and (f) 45% of
the portion of the Quarterly Cash To Be Distributed which exceeds
$1.05 per LP Unit.
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<PAGE>
6. All terms used herein but not otherwise defined herein shall have the
meaning ascribed to them in the Agreement.
7. Any provision of the Agreement which is inconsistent with the
provisions of this Amendment shall be deemed amended to effectuate the intention
expressed herein. Every other provision of the Agreement shall remain unchanged
and in full force and effect.
IN WITNESS WHEREOF, this Amendment has been duly executed by the parties
hereto as of the date first above written.
BUCKEYE MANAGEMENT COMPANY
By: _________________________________
Name:
Title:
BUCKEYE PARTNERS, L.P.
BY: BUCKEYE MANAGEMENT COMPANY,
AS GENERAL PARTNER
By: _________________________________
Name:
Title:
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<PAGE>
AMENDMENT NO. 2 TO AMENDED AND RESTATED INCENTIVE COMPENSATION AGREEMENT
THIS AMENDMENT is made as of January 20, 1998, by Buckeye Management
Company, a Delaware corporation ("BMC" and the "General Partner"), and Buckeye
Partners, L.P., a Delaware limited partnership (the "Partnership").
WHEREAS, BMC and the Partnership have entered into an Amended and Restated
Incentive Compensation Agreement, dated as of March 22, 1996, as amended by
Amendment No. 1 to the Incentive Compensation Agreement, dated as of August 12,
1997 (the "Agreement");
WHEREAS, BMC and the Partnership desire to amend the Agreement to reflect
the issuance of limited partnership units ("LP Units") of the Partnership in
connection with a two-for-one LP Unit split payable to holders of record of LP
Units on January 29, 1998;
WHEREAS, Section 3.6 of the Agreement provides that the Agreement may be
amended only after complying with Section 17.4(a) of the Amended and Restated
Agreement of Limited Partnership, dated as of December 15, 1986, as amended (the
"Partnership Agreement"), which provides that, without the prior approval of a
two-thirds interest of the limited partners of the Partnership, the General
Partner shall not amend the Agreement in any material respect, unless such
amendment does not, in the good faith opinion of the General Partner, adversely
affect the limited partners of the Partnership in any material respect;
WHEREAS, the Board of Directors of the General Partner, on behalf of the
General Partner and the Partnership, have approved this Amendment;
WHEREAS, the Board of Directors of the General Partner, on behalf of the
General Partner, has further determined that this Amendment does not adversely
affect the limited partners of the Partnership in any material respect.
NOW THEREFORE, intending to be legally bound, the Agreement is hereby
amended as follows:
1. Section 1.4 of the Agreement is hereby amended and restated in its
entirety as follows:
"IPO Price" is $10.00 per Unit.
2. Section 1.10 of the Agreement is hereby amended and restated in its
entirety as follows:
<PAGE>
"Target Quarterly Amount" is $.325 per quarter.
3. Section 2.1 of the Agreement is hereby amended and restated in its
entirety as follows:
"Quarterly Incentive Compensation" If Quarterly Cash To Be Distributed
for any calendar quarter exceeds the Aggregate Target Quarterly
Amount, the Partnership shall, subject to Section 2.3, pay the General
Partner incentive compensation equal to the sum of (a) 15% of the
portion of the Quarterly Cash To Be Distributed which (i) exceeds
$.325 per LP Unit and (ii) does not exceed $.35 per LP Unit; (b) 25%
of the portion of the Quarterly Cash To Be Distributed which (i)
exceeds $.35 per LP Unit and (ii) does not exceed $.375 per LP Unit;
(c) 30% of the portion of the Quarterly Cash To Be Distributed which
(i) exceeds $.375 per LP Unit and (ii) does not exceed $.40 per LP
Unit; (d) 35% of the portion of the Quarterly Cash To Be Distributed
which (i) exceeds $.40 per LP Unit and (ii) does not exceed $.425 per
LP Unit, (e) 40% of the portion of the Quarterly Cash To Be
Distributed which (i) exceeds $.425 per LP Unit and (ii) does not
exceed $.525 per LP Unit; and (f) 45% of the portion of the Quarterly
Cash To Be Distributed which exceeds $.525 per LP Unit.
4. The following new Section 2.5 is hereby added to the Agreement:
"2.5 Certain Events. If there is a change in the LP Units to divide
the outstanding LP Units into a greater number of LP Units or to
combine outstanding LP Units into a smaller number of LP Units, in
each case in accordance with the terms and conditions of the
Partnership Agreement, the amounts reflected in Sections 1.4, 1.10 and
2.1 hereof shall be adjusted automatically to reflect such division or
combination and shall apply to all subsequent calculations of
incentive compensation payable to the General Partner."
5. All terms used herein but not otherwise defined herein shall have the
meaning ascribed to them in the Agreement.
6. Any provision of the Agreement which is inconsistent with the
provisions of this Amendment shall be deemed amended to effectuate the intention
expressed herein. Every other provision of the Agreement shall remain unchanged
and in full force and effect.
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<PAGE>
IN WITNESS WHEREOF, this Amendment has been duly executed by the parties
hereto as of the date first above written.
BUCKEYE MANAGEMENT COMPANY
By: _________________________________
Name:
Title:
BUCKEYE PARTNERS, L.P.
BY: BUCKEYE MANAGEMENT COMPANY,
AS GENERAL PARTNER
By: _________________________________
Name:
Title:
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<PAGE>
SERVICES AGREEMENT
------------------
THIS SERVICES AGREEMENT (this "Agreement"), dated as of August 12, 1997, is
entered into among BUCKEYE MANAGEMENT COMPANY, a Delaware corporation (the
"General Partner"), BUCKEYE PIPE LINE COMPANY, a Delaware corporation (the
"Manager"), and BUCKEYE PIPE LINE SERVICES COMPANY, a Pennsylvania corporation
(the "Provider").
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, the Manager owns a 1% general partnership interest in, and serves
as sole general partner of, Buckeye Pipe Line Company, L.P., Buckeye Pipe Line
Company of Michigan, 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 (except Buckeye Pipe Line
Company of Michigan, L.P., which is owned 98.01% by the Partnership and 1.99% by
the Manager); and
WHEREAS, the General Partner and the Manager desire to engage and appoint
the Provider to provide certain services to the Partnership and the Operating
Partnerships in accordance with the terms set forth below.
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby,
agree as follows:
ARTICLE I
Appointment of the Provider
---------------------------
The General Partner and the Manager hereby appoint the Provider to provide
certain services in connection with the operation of the business of the
Partnership and the Operating Partnerships, subject to the control and oversight
of the General Partner and the Manager, and the Provider accepts its appointment
by the General Partner and the Manager.
<PAGE>
ARTICLE II
Term of Agreement
-----------------
The term of this Agreement (the "Service Term") shall commence on the date
hereof and shall continue until all principal, interest and premium is paid in
full under the Amended and Restated Note Agreement of even date herewith among
the BMC Acquisition Company Employee Stock Ownership Plan (the "ESOP"), The
Prudential Insurance Company of America and Pruco Life Insurance Company, unless
earlier terminated (i) by the General Partner for Cause or (ii) by the General
Partner in the event that the General Partner is removed as general partner of
the Partnership for any reason. For purposes of this Agreement, "Cause" shall
mean the failure of the Provider to comply with the terms and conditions set
forth in this Agreement or to follow the lawful directives of the General
Partner or the Manager in connection with the performance by the Provider of its
duties and responsibilities under this Agreement, as determined by the
nonmanagement directors of the Board of Directors of the General Partner in
their sole discretion.
ARTICLE III
Duties and Responsibilities Of the Provider
-------------------------------------------
3.01 Duties and Responsibilities. During the Service Term, the Provider
shall perform such duties and responsibilities as are necessary or appropriate
to conduct the day-to-day business operations of the Partnership and the
Operating Partnerships and as are assigned to the Provider by the General
Partner or the Manager. The General Partner or the Manager may from time to
time expand, limit or otherwise modify the duties and responsibilities of the
Provider by timely notice to the Provider in writing. All activities of the
Provider under this Agreement shall be performed under the direct supervision of
the General Partner or the Manager.
3.02 Employees. Upon commencement of the Service Term, the Provider shall
employ all employees currently employed by the Manager as employees at will.
The Provider shall offer such employees compensation substantially the same as
their current compensation from the Manager, subject to annual compensation
adjustments in the ordinary course of business. The Provider shall assume all
liabilities and acquire all assets in connection with all current employee
benefit plans for the benefit of such employees, including, without limitation,
sponsorship of the BMC Acquisition Company Employee Stock Ownership Plan. The
Provider shall grant each such employee credit for service with the Manager for
all purposes under such employee benefits plans.
3.03 Officers and Directors. During the Service Term, the Provider shall
cause the officers of the Manager to be the officers of the Provider and Neil
Hahl to serve as the
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<PAGE>
Independent Director (as defined in the Articles of Incorporation of the
Provider), unless otherwise approved in writing by the General Partner.
3.04 Equitable Relief. The Provider acknowledges that the provisions of
Section 3.03 are, in view of the nature of this transaction, reasonable and
necessary to protect the legitimate interests of the General Partner, the
Manager, the Partnership and the Operating Partnerships, and that any violation
of any provision of that Section will result in irreparable injury to the
General Partner, the Manager, the Partnership and the Operating Partnerships.
The Provider also acknowledges that in the event of any such violation, the
General Partner and the Manager shall be entitled to preliminary and permanent
injunctive relief without the necessity of proving actual damages, and to an
equitable accounting of all earnings, profits and other benefits arising from
any such violation, which rights shall be cumulative and in addition to any
other rights or remedies to which the General Partner or the Manager may be
entitled. The Provider agrees that in the event of any such violation, an
action may be commenced for any such preliminary and permanent injunctive relief
and other equitable relief in the United States District Court for the Eastern
District of Pennsylvania or the state court of competent jurisdiction sitting in
Delaware County or in Lehigh County, Pennsylvania or in any other court of
competent jurisdiction. The Provider hereby waives, to the fullest extent
permitted by law, any objection that the Provider may now or hereafter have to
such jurisdiction or to the laying of the venue of any such suit, action or
proceeding brought in such a court and any claim that such suit, action or
proceeding has been brought in an inconvenient forum. The Provider agrees that
effective service of process may be made upon the Provider under the notice
provisions contained in Section 8.02 of this Agreement.
3.05 Survival of Covenants. Sections 3.03 and 3.04 shall survive the
termination of this Agreement.
ARTICLE IV
Insurance
---------
The General Partner shall include the Provider as an additional insured
under all liability insurance policies maintained by the General Partner. Such
policies shall indemnify the Provider and its officers, directors and employees
against covered claims and expenses which may be incurred by the Provider and
its officers, directors and employees in connection with the activities of the
Partnership or the Operating Partnerships in accordance with the terms of such
policies on the same basis as the Manager would have been covered thereunder.
-3-
<PAGE>
ARTICLE V
Services Fee
------------
The General Partner and the Manager shall pay the Provider a fee for
performing its duties and responsibilities under this Agreement equal to the
reasonable costs and expenses incurred by the Provider which are directly or
indirectly related to the business or activities of the Partnership and the
Operating Partnerships, respectively (including, without limitation, any amounts
related to the payment of taxes when due related to the business of the
Partnership or the Operating Partnerships or to the ESOP and any top-up
contribution by the Provider to the ESOP), and the Manager shall reimburse the
Provider for all costs and expenses incurred by the Provider in connection with
the formation, capitalization, business or other activities of the Provider
pursuant to this Agreement. Except as set forth in the preceding sentence, the
Provider will not have the right to receive any other compensation for
performing its duties and responsibilities under this Agreement.
ARTICLE VI
Indemnification
---------------
The General Partner and the Manager shall jointly and severally indemnify,
protect and hold the Provider and its affiliates harmless from any and all
claims, demands, suits or actions (including attorneys' fees and expenses) which
may be asserted against the Provider arising out of the performance of services
pursuant to this Agreement or otherwise in connection with the Partnership or
the Operating Partnerships, except for any claims, demands, suits or actions
arising out of the willful misconduct of the Provider which is contrary to
express instructions from the General Partner or the Manager.
ARTICLE VII
No Interest Conveyed to the Provider
------------------------------------
This Agreement is a services agreement only and does not convey to the
Provider any right, title or interest in or to any assets of the Partnership or
the Operating Partnerships. This Agreement is not intended to form a joint
venture or a partnership.
-4-
<PAGE>
ARTICLE VII
General Provisions
------------------
8.01 Third Party Beneficiary. The Partnership and the Operating
Partnerships shall be deemed third party beneficiaries of the duties and
responsibilities of the Provider under this Agreement and shall have the right
as such to enforce this Agreement directly against the Provider; however, there
shall be no other third party beneficiaries to this Agreement.
8.02 Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be delivered
personally, sent by telecopier, by first class mail or by a nationally
recognized overnight courier, postage prepaid. All such notices, requests,
demands and other communications shall be addressed to the respective parties at
the addresses set forth below, or to such other address or person as any party
may designate by notice to the other parties in accordance herewith:
If to the General Partner: Buckeye Management Company
Five Radnor Corporate Center
Suite 445
100 Matsonford Road
Radnor, PA 19087
Attn: Chairman
Telecopier No.: (610) 971-9296
If to the Manager: Buckeye Pipe Line Company
3900 Hamilton Boulevard
Allentown, PA 18103
Attn: President
Telecopier No.: (610) 770-4549:
In either case, with a copy to: Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, PA 19103-6993
Attn: Howard L. Meyers
Telecopier No.: (215) 963-5299
If to the Provider: Buckeye Pipe Line Services Company
3900 Hamilton Boulevard
Allentown, PA 18103
Attn: President
Telecopier No.: (610) 770-4549
-5-
<PAGE>
With a copy to: LaSalle National Trust, N.A.
135 South LaSalle Street
Chicago, IL 60674
Attn: Corporate Trust Department
Telecopier No.: (312) 904-2446
and
McBride Baker & Coles
500 West Madison Street
40th Floor
Chicago, IL 60661
Attn: David Ackerman, Esquire
Telecopier No.: (312) 993-9350
8.03 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.
8.04 Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their successors but shall not be assignable
except upon the consent in writing of the parties hereto.
8.05 Integration. This Agreement constitutes the entire agreement among
the parties pertaining to the subject matter hereof and supersedes all prior
agreements and understandings pertaining thereto.
8.06 Waiver and Amendment. 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. Any amendment to this Agreement shall be effective only
if in a writing signed by each of the parties hereto.
8.07 Counterparts. This Agreement may be executed in any number of
counterparts, all of which together shall constitute one agreement binding on
the parties hereto.
8.08 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.
8.09 Applicable Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the Commonwealth of Pennsylvania.
-6-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of the date first above written.
BUCKEYE MANAGEMENT COMPANY
By:
----------------------------
Name:
Title:
BUCKEYE PIPE LINE COMPANY
By:
-----------------------------
Name:
Title:
BUCKEYE PIPE LINE SERVICES COMPANY
By:
------------------------------
Name:
Title:
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<PAGE>
EXCHANGE AGREEMENT
------------------
THIS EXCHANGE AGREEMENT (this "Agreement"), dated as of August 12, 1997, is
entered into among BUCKEYE MANAGEMENT COMPANY, a Delaware corporation (the
"General Partner"), BUCKEYE PARTNERS, L.P., a Delaware limited partnership (the
"Partnership"), BUCKEYE PIPE LINE COMPANY, a Delaware corporation (the
"Manager"), and BUCKEYE PIPE LINE COMPANY, L.P., a Delaware limited partnership,
BUCKEYE PIPE LINE COMPANY OF MICHIGAN, L.P., a Delaware limited partnership,
LAUREL PIPE LINE COMPANY, L.P., a Delaware limited partnership, EVERGLADES PIPE
LINE COMPANY, L.P., a Delaware limited partnership and BUCKEYE TANK TERMINALS
COMPANY, L.P., a Delaware limited partnership (together, the "Operating
Partnerships") and BMC ACQUISITION COMPANY, a Delaware corporation and owner of
all of the outstanding common stock of the General Partner ("BAC").
WITNESSETH:
WHEREAS, the Partnership is a publicly traded limited partnership in which
the General Partner is the general partner;
WHEREAS, the Operating Partnerships are owned 99% by the Partnership, and
1% by the Manager, which acts as general partner of the Operating Partnerships
(except Buckeye Pipe Line Company of Michigan, L.P., which is owned 98.01% by
the Partnership and 1.99% by the Manager);
WHEREAS, the Partnership is governed pursuant to an Amended and Restated
Agreement of Limited Partnership (the "Master Partnership Agreement"), dated as
of December 23, 1986, as amended, between the General Partner and the limited
partners of the Partnership (the "Limited Partners"); the Operating
Partnerships, other than Laurel, are governed pursuant to similar Amended and
Restated Agreements of Limited Partnership, each dated as of December 23,1986,
as amended, between the Manager and the Partnership; and Laurel is governed
pursuant to an Amended and Restated Agreement of Limited Partnership dated
October 21, 1992, between the Manager and the Partnership (collectively, the
"Operating Partnership Agreements");
WHEREAS, a special committee (the "Special Committee") of disinterested
directors of the General Partner has determined that it is in the best interests
of the Partnership (i) to issue limited partnership units of the Partnership
("LP Units") to Buckeye Pipe Line Services Company, a Pennsylvania corporation
(the "Company") whose shares of capital stock are owned by the BMC Acquisition
Company Employee Stock Ownership Plan (the "ESOP"), in exchange for 63,000
shares of BMC Acquisition Company Series A Convertible Preferred Stock, stated
value $1,000 per share (the "BAC Preferred Stock"), (ii) to have the Partnership
convert the BAC
<PAGE>
Preferred Stock into BMC Acquisition Company Common Stock ("BAC Common Stock"),
and (iii) to contribute the BAC Common Stock to the Operating Partnerships
(collectively, the "Restructuring");
WHEREAS, pursuant to the LP Unit Subscription Agreement dated
contemporaneously herewith (the "LP Unit Subscription Agreement"), the
Partnership has issued 1,286,573 LP Units to the Company in exchange for the BAC
Preferred Stock;
WHEREAS, pursuant to a notice to BAC of even date herewith, the Partnership
has converted the BAC Preferred Stock received pursuant to the LP Unit
Subscription Agreement into 484,616 shares of BAC Common Stock (the "Exchange
Shares");
WHEREAS, the Partnership has contributed an undivided interest in the
Exchange Shares to the Operating Partnerships; and
WHEREAS, the Operating Partnerships desire to transfer and assign the
Exchange Shares to the Manager in exchange for the release of certain
obligations that the Partnership has to the General Partner and the Operating
Partnerships have to the Manager, and BAC, the General Partner and the Manager
wish for the Manager to receive the Exchange Shares and to release such
obligations of the Partnership and the Operating Partnerships, and for the
Exchange Shares to be transferred by the Manager to the General Partner and by
the General Partner to BAC, which shall thereafter hold the Exchange Shares as
treasury stock.
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby,
agree as follows:
ARTICLE I
THE EXCHANGE
Upon the terms and subject to the conditions of this Agreement, the
Operating Partnerships hereby agree to transfer and assign the Exchange Shares
to the Manager in exchange for the release of certain obligations of the
Partnership to the General Partner and of the Operating Partnerships to the
Manager, as set forth in Article II below.
ARTICLE II
RELEASE OF OBLIGATIONS
2.01 Obligations to Reimburse for Executive Compensation. (a) Upon the
terms and subject to the conditions of this Agreement, BAC, the General Partner
and the Manager, for themselves and their affiliates, successors and assigns,
hereby and irrevocably release, relinquish and discharge the Partnership and the
Operating Partnerships from any and all liability, obligation, claim, demand,
action or suit of any kind or nature, in law or in equity, whatsoever,
2
<PAGE>
known or unknown, which may be asserted for or on account of or arising out of
or in any manner relating to the Partnership's and/or the Operating
Partnerships' obligations pursuant to Section 7.4(b) of the Master Partnership
Agreement and the Operating Partnership Agreements or otherwise to reimburse
BAC, the General Partner or the Manager for total compensation paid for
executive level duties performed for the General Partner or the Manager with
respect to the functions of operations, finance, legal, marketing and business
development, and treasury, as well as President of the Manager following the
date hereof. The parties hereto acknowledge that the individuals who presently
perform these executive level functions are: Michael P. Epperly, Steven C.
Ramsey, Stephen C. Muther, William H. Shea, Jr., David J. Martinelli and C.
Richard Wilson, respectively, and their total compensation in all forms on a pro
forma annualized basis for 1996 was $2,300,000. Nothing in this Section 2.01(a)
shall be deemed to waive the obligations of the Partnership and the Operating
Partnerships to reimburse the General Partner and the Manager for (i) employee
fringe benefits and retirement benefits for their executives relating to
services performed prior to the date hereof, (ii) obligations under severance
agreements with their executives to the extent currently reimbursable under the
Master Partnership Agreement or (iii) any obligations in respect of their
executives which are not related to compensation, including, without limitation,
indemnification obligations.
(b) BAC, the General Partner and the Manager agree, unless the General
Partner is removed as general partner of the Partnership, to perform the
executive level functions referred to in Section 2.01(a) for the benefit of the
Partnership and the Operating Partnerships in a manner satisfactory to the board
of directors of the General Partner, which shall be of a quality, scope and
nature equivalent to the executive level functions currently performed by the
Manager.
2.0 ESOP Contributions Generally. (a) From the date of this Agreement
until all principal, interest and premium is paid in full under the Amended and
Restated Note Agreement of even date herewith among the ESOP, The Prudential
Insurance Company of America and Pruco Life Insurance Company (the "Note
Agreement") (the "ESOP Period"), and only following the exhaustion of the "Top
Up Reserve Fund" provided for in paragraph (b) below, the Partnership and the
Operating Partnerships shall reimburse the General Partner and the Manager,
respectively, for (i) cash contributions made by the Company to the ESOP
pursuant to the terms thereof, as necessary for the ESOP to make all payments of
principal, interest (including additional interest payable as the result of an
interest rate increase under paragraph 7 of the Note Agreement) and premium due
under the Note Agreement (excluding, however, the accelerated portion of any
payments which have become due and payable upon acceleration of such
indebtedness as the result of a default under the Note Agreement), (ii) any
income taxes incurred by the Company on the sale of LP Units made to satisfy the
redemption obligations described in Section 2.03 below, and (iii) routine
administrative charges and expenses common to employee stock ownership plans
incurred in connection with the operation of the ESOP, in each case, to the
extent distributions from LP Units owned by the Company are not sufficient to
make all such payments. Following the ESOP Period, the Partnership and the
Operating Partnerships shall have no further obligations to reimburse the
General Partner or the Manager for contributions to the ESOP.
3
<PAGE>
(b) Top Up Reserve Fund. For purposes of this Agreement, the "Top Up
Reserve Fund" shall mean the amount set forth on a statement delivered by the
General Partner to the Partnership on the date hereof which is equal to the
amount of all reimbursements associated with the ESOP made to the General
Partner by the Partnership prior to the date hereof, minus the actual cash
payments by the ESOP for principal and interest payments and routine
administrative charges and expenses actually incurred by the ESOP.
2.03 No ESOP Contributions for Departing Employees. The General Partner
and the Manager acknowledge that neither the Partnership nor the Operating
Partnerships shall be obligated to reimburse BAC, the General Partner or the
Manager for obligations to redeem the ESOP accounts of departing employees upon
the termination of their employment with the Company, or for any other costs or
expenses of or relating to the operation of the ESOP other than those specified
in Section 2.02(a) above.
2.04 Representations and Warranties. BAC, the General Partner and the
Manager hereby represent and warrant to the Partnership and the Operating
Partnerships that (a) neither the Company nor any entity treated as a single
employer with the Company under Sections 414(b), 414(c), 414(m), or 414(o) of
the Internal Revenue Code of 1986, as amended (the "Code"), or Section 4001(b)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
has incurred any liability under any provision of ERISA or other applicable law
relating to the ESOP; (b) the ESOP has been administered, in all material
respects, in compliance with its terms and complies, both in form and operation,
with the applicable provisions of ERISA (including, without limitation, the
funding and prohibited transactions provisions thereof), the Code and other
applicable laws; (c) the ESOP has been determined by the Internal Revenue
Service to be qualified within the meaning of Section 401 of the Code, and
neither BAC, the General Partner nor the Manager is aware of any fact or
circumstances which would adversely affect the qualified status of the ESOP; and
(d) the restructuring of the ESOP contemplated by this agreement does not
constitute a "prohibited transaction" under ERISA.
2.05 Certain Agreements. (a) The parties acknowledge that nothing in the
Services Agreement (the "Services Agreement") of even date herewith among the
General Partner, the Manager and the Company shall be deemed to enlarge the
obligation of the Partnership to reimburse the General Partner under the Master
Partnership Agreement or the obligation of the Operating Partnerships to
reimburse the Manager under the Operating Partnership Agreements. Furthermore,
the Partnership and the Operating Partnerships shall have no obligation to
reimburse the General Partner or the Manager for the amounts paid to the Company
pursuant to Article V of the Services Agreement unless such amounts were paid as
reimbursement for costs and expenses for which the General Partner or the
Manager would be entitled to reimbursement under the Master Partnership
Agreement or the Operating Partnership Agreements, as such agreements are
modified by the terms hereof, if the General Partner or the Manager had incurred
such costs and expenses directly. In addition, the Partnership and the
Operating Partnerships shall have no obligation to reimburse the General Partner
or the Manager for amounts paid to the Company pursuant to Article VI of the
Services Agreement unless such amounts were paid as
4
<PAGE>
indemnification for damages and expenses for which the General Partner or the
Manager would be entitled to indemnification under the Master Partnership
Agreement or the Operating Partnership Agreements if the General Partner or the
Manager had incurred such damages or expenses directly.
(b) The Partnership and each of the Operating Partnerships hereby
waive any right of offset or counterclaim or similar right it may have against
the General Partner or the Manager (including, without limitation, as a result
of any Forfeiture Payment (as hereinafter defined) due from the General Partner
and the Manager pursuant to Section 3.01), with respect to their respective
obligations to reimburse the General Partner or the Manager, as the case may be,
for contributions to the ESOP pursuant to Section 2.02 hereof.
(c) The parties acknowledge that the Partnership and the Operating
Partnerships are not obligated to reimburse the General Partner or the Manager
if any tax is owed by BAC, the General Partner or the Manager pursuant to
Section 83 of the Internal Revenue Code as a result of the Restructuring.
ARTICLE III
FORFEITURE
3.01 Failure to Act as General Partner Over the ESOP Period. Except to the
extent this obligation is assumed by a successor general partner pursuant to
Section 3.02, if, prior to the end of the ESOP Period, the General Partner
ceases to be the general partner of the Partnership or the Manager ceases to be
the general partner of all of the Operating Partnerships (the "Termination
Date") for any reason other than in connection with the dissolution of the
Partnership under Section 14.1(d) of the Master Partnership Agreement, BAC, the
General Partner and the Manager shall jointly and severally be obligated to pay
to the Operating Partnerships in cash in a lump sum payment an aggregate amount
(the "Forfeiture Payment") equal to the product of (A) the greater of (i)
$64,200,000 or (ii) the fair market value (as determined by an independent
appraiser selected by the Partnership) of the Exchange Shares, which shall be
held by BAC as treasury stock until the end of the ESOP Period on the
Termination Date (before giving effect to the termination) multiplied by (B) the
fraction, the numerator of which is the amount of time (expressed in whole
years) before the expiration of the scheduled amortization of the ESOP loan, and
the denominator of which is 15. Any payment made pursuant to this Section 3.01
by BAC, the General Partner or the Manager will not be reimbursable by the
Partnership or the Operating Partnerships.
3.02 Assumption of Forfeiture Obligation by a Successor General Partner.
If the General Partner is removed as general partner of the Partnership or the
Manager is removed as general partner of one or more of the Operating
Partnerships during the ESOP Period (but not if the General Partner or the
Manager voluntarily withdraws as general partner) pursuant to Section 13.1(b) of
the Master Partnership Agreement, the General Partner may cause the successor
5
<PAGE>
general partner of the Partnership and the Manager may cause the successor
general partner of the Operating Partnerships to assume their respective
obligations, liabilities and duties under this Agreement.
3.03 ESOP Loan Secured. The Partnership and the Operating Partnerships
acknowledge that BAC, the General Partner and the Manager have each executed and
delivered a Guaranty Agreement pursuant to which each has guaranteed the payment
and performance of all obligations under the Note Agreement and related
documents (the "Note Obligations"), that such guaranty obligations are secured
by substantially all assets of BAC, the General Partner and the Manager and,
that, as a result, all claims of the Partnership and the Operating Partnerships
against BAC, the General Partner and the Manager in respect of the Forfeiture
Payment will effectively be subordinated to the Note Obligations.
ARTICLE IV
TAX INDEMNITY AGREEMENT
4.01 Indemnification by the General Partner and the Manager. BAC, the
General Partner and the Manager shall, jointly and severally, reimburse and
indemnify and hold the Partnership and each Operating Partnership harmless
against and in respect of any and all damage, loss, liability, deficiency,
settlement payments, interest (including any increase in the rate of interest
paid on any loan to the ESOP), penalties, obligations, levies or expenses
(including without limitation reasonable legal fees and expenses) (collectively,
"Damages") in connection with, resulting from or relating to one of (i) the
failure of the lenders to the ESOP to qualify pursuant to Section 133 of the
Internal Revenue Code for the interest received exclusion in connection with the
loan to the ESOP as a result of the Restructuring or (ii) any excise tax imposed
as a result of the Restructuring (each, a "Tax Risk"). The Partnership and the
Operating Partnerships shall pay to the ESOP or the lenders to the ESOP (in the
case of the Tax Risk described above in clause (i) of this Section 4.01), or to
the appropriate taxing authority or other third party (in the case of the Tax
Risk described above in clause (ii) of this Section 4.01) any Damages in the
event that a Tax Risk is incurred, subject to the foregoing reimbursement
obligation. Neither BAC, the General Partner, the Manager nor their affiliates
shall be entitled to reimbursement from the Partnership or any Operating
Partnership for any indemnification payment made pursuant to this Article IV.
4.02 Selection of Tax Risk. The disinterested directors of the board of
directors of the General Partner shall determine the Tax Risk for which the
Partnership and the Operating Partnerships shall be entitled to indemnification
from BAC, the General Partner and the Manager and such directors may make such
determination at any time. Such determination shall be communicated to the
entire board of directors in writing and once so communicated may not be
modified or revoked.
6
<PAGE>
4.03 Loan From Partnership. Subject to Section 7.7(g) of the Master
Partnership Agreement, in the event that a Tax Risk is incurred, and the
Partnership or the Operating Partnerships incur the Damages associated
therewith, the General Partner shall issue to the Partnership a promissory note
(the "Note") for the amount of the Damages, with interest calculated at the rate
(including points or other financing charges or fees) that the General Partner
would be charged by an unrelated lender on a comparable loan. The Note shall be
payable by right of offset of the amounts due to the General Partner under the
Amended and Restated Incentive Compensation Agreement dated as of March 22,
1996, as amended from time to time, until the Note is paid in full.
ARTICLE V
THE CLOSING
5.01 Date and Time. The closing for the transactions contemplated hereby
(the "Closing") shall be held at the offices of Morgan, Lewis & Bockius LLP in
Philadelphia contemporaneously with the execution of this Agreement.
5.02 Economic Effect. The parties desire to give economic effect to the
transactions contemplated by this Agreement as of 11:59 p.m. on the date of
Closing.
5.03 Closing Deliveries. At the Closing, the Operating Partnerships shall
deliver to the Manager certificates representing the Exchange Shares, duly
endorsed for transfer to the Manager or with separate stock transfer powers
attached thereto and signed in blank.
ARTICLE VI
GENERAL PROVISIONS
6.01 Entire Agreement. This Agreement supersedes all prior discussions and
agreements among the parties hereto with respect to the subject matter hereof
and contains the sole and entire agreement among the parties hereto with respect
to the subject matter hereof.
6.02 Headings. The heading used in this Agreement have been inserted for
convenience of reference only and do not define or limit the provisions hereof.
6.03 Waiver and Amendment. 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. Any amendment to this Agreement shall be effective only
if in a writing signed by each of the parties hereto.
7
<PAGE>
6.04 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.
6.05 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to a contract
executed and performed in such State, without giving effect to the conflicts of
laws principles thereof.
6.06 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
8
<PAGE>
IN WITNESS WHEREOF, each party hereto has caused this Agreement to be
signed by its officer duly authorized as of the date first above written.
BUCKEYE MANAGEMENT COMPANY
BY:
------------------------------
NAME:
TITLE:
BUCKEYE PARTNERS, L.P.
BY: BUCKEYE MANAGEMENT COMPANY,
AS GENERAL PARTNER
BY:
------------------------------
NAME:
TITLE:
BUCKEYE PIPE LINE COMPANY
BY:
------------------------------
NAME:
TITLE:
BUCKEYE PIPE LINE COMPANY
OF MICHIGAN, L.P.
BY: BUCKEYE PIPE LINE COMPANY,
AS GENERAL PARTNER
BY:
------------------------------
NAME:
TITLE:
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<PAGE>
LAUREL PIPE LINE COMPANY, L.P.
BY: BUCKEYE PIPE LINE COMPANY,
AS GENERAL PARTNER
BY:
------------------------------
NAME:
TITLE:
EVERGLADES PIPE LINE COMPANY, L.P.
BY: BUCKEYE PIPE LINE COMPANY,
AS GENERAL PARTNER
BY:
------------------------------
NAME:
TITLE:
BUCKEYE TANK TERMINALS
COMPANY, L.P.
BY: BUCKEYE PIPE LINE COMPANY,
AS GENERAL PARTNER
BY:
------------------------------
NAME:
TITLE:
BUCKEYE PIPE LINE COMPANY, L.P.
BY: BUCKEYE PIPE LINE COMPANY,
AS GENERAL PARTNER
BY:
------------------------------
NAME:
TITLE:
BMC ACQUISITION COMPANY
BY:
------------------------------
NAME:
TITLE:
10
<PAGE>
SEVERANCE AGREEMENT
Agreement made as of the 6th day of May, 1997, among Buckeye
Management Company, a Delaware corporation ("BMC"), Buckeye Pipe Line Services
Company, a Delaware corporation ("BPLSC") (BMC and BPLSC being hereinafter
collectively referred to as the "Company"), BMC Acquisition Company, a Delaware
corporation and the owner of BMC ("BAC"), and C. Richard Wilson ("Wilson").
WHEREAS, BPLSC is a newly created corporation that is entering into
the business of managing oil pipeline businesses within the Buckeye Partners,
L.P. ("BPLP") group of operating partnerships (the "Partnerships") with which
BAC is associated through its subsidiary BMC, the general partner of BPLP; and
WHEREAS, Wilson is an executive of BMC and is also being hired by
BPLSC as its President and Chief Operating Officer, and in connection therewith,
Wilson will devote substantially all of his business, time and efforts to its
business affairs, and will also serve in executive capacities for BAC, BMC and
BPLSC; and
WHEREAS, the Company recognizes that the departure or distraction of
key management personnel would be detrimental to the business of the Company;
and
WHEREAS, the boards of directors of BAC, BMC and BPLSC have determined
that appropriate steps should be taken to reinforce and encourage the continued
attention and dedication of key members of the Company's management to their
assigned duties without distraction; and
<PAGE>
WHEREAS, in consideration of Wilson's employment with BMC, his
accepting employment with BPLSC and agreeing not to compete with the Company in
the event that Wilson's employment is terminated, BMC and BPLSC, jointly and
severally, agree that Wilson shall receive the compensation set forth in this
Agreement against the adverse financial and career impact on Wilson in the event
Wilson's employment with the Company is terminated without cause, and BAC wishes
to guarantee such obligations;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements hereinafter set forth and intending to be legally bound
hereby, the parties hereto agree as follows:
1. Definitions. For all purposes of this Agreement, the following
terms shall have the meanings specified in this Section unless the context
clearly otherwise requires:
(a) "Board" shall mean the board of directors of BMC.
(b) "Cause" shall mean 1) misappropriation of funds or any act of
common law fraud, 2) habitual insobriety or substance abuse, 3) conviction of a
felony or any crime involving moral turpitude, or 4) willful misconduct or gross
negligence by Wilson in the performance of his duties, the willful failure of
Wilson to perform a material function of Wilson's duties hereunder, or Wilson's
engaging in a conflict of interest or other breach of fiduciary duty.
(c) "Change of Control" shall be deemed to have taken place if any
Person, as such term is used in sections 13(d) and 14(d) of the Securities
Exchange Act of 1934 (the "Exchange Act"), except the Company or any employee
benefit plan of the Company (or of any Affiliate or Associate, as defined in
Rule 12b-2 of the General Rules and Regulations under the Exchange Act, or any
Person or entity organized, appointed or established by the Company for or
pursuant to the terms of any such employee benefit plan), together with all
Affiliates and
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Associates of such Person, shall become the Beneficial Owner, or the holder of
proxies, in the aggregate of 80% or more of the limited partnership units (the
"Units") of BPLP then outstanding; provided, however, that no "Change of
Control" shall be deemed to occur during any period in which any such Person,
and its Affiliates and Associates, are bound by the terms of a standstill
agreement under which such parties have agreed not to acquire more than 80% of
the Units then outstanding or to solicit proxies.
(d) "Compensation" shall mean $345,875.00.
(e) "Good Reason Termination" shall mean a Termination of Employment
initiated by Wilson upon one or more of the following occurrences:
(A) any failure of the Company to comply with and satisfy any
of the terms of this Agreement;
(B) any significant reduction by the Company of the authority,
duties or responsibilities of Wilson's principal assignment with the
Company or a reduction in Wilson's compensation opportunity;
provided, however, that this clause (B) shall apply only in the
event that such reduction occurs following a Change of Control;
(C) any removal by the Company of Wilson from the employment
grade or officer positions which Wilson holds as of the effective
date hereof except in connection with promotions to higher office;
provided, however, that in the absence of a Change of Control solely
changing Wilson's reporting relationships shall not be grounds for a
"Good Reason Termination" hereunder;
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(D) following a Change of Control, a transfer of Wilson,
without his express written consent, to a location that is more than
100 miles from his principal place of business immediately preceding
the Change of Control; or
(E) following a Change of Control, Wilson determines, in his
sole discretion in the period between the beginning of the 13th
month and the end of the 18 month after a Change of Control, that
circumstances have so changed that he is not willing to continue in
his position with the Company and elects a Termination of
Employment.
(f) "Phase Out Date" shall mean the first day of the calendar month
coincident with or next following Wilson's 62nd birthday.
(g) "Subsidiary" shall mean any corporation in which BAC, BPLSC or
BMC directly or indirectly, owns at least a 50% interest or an unincorporated
entity of which BAC, BPLSC or BMC, directly or indirectly, owns at least 50% of
the profits or capital interests.
(h) "Termination Date" shall mean the date of receipt of the Notice
of Termination described in Section 2 hereof or any later date specified
therein, as the case may be.
(i) "Termination of Employment" shall mean the termination of Wilson's
actual employment relationship with the Company.
2. Notice of Termination. Any Termination of Employment shall be
communicated by a Notice of Termination in accordance with Section 16 hereof.
For purposes of this Agreement, a "Notice of Termination" means a written notice
which, in the case of a Good Reason Termination by Wilson (i) indicates the
specific reasons for the termination, (ii) briefly summarizes the facts and
circumstances deemed to provide a basis for termination of Wilson's employment,
and (iii) if the Termination Date is other than the date of receipt of such
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<PAGE>
notice, specifies the Termination Date (which date shall not be more than 15
days after the giving of such notice).
3. Severance Compensation upon Termination.
(a) In the event of Wilson's involuntary Termination of Employment
for any reason other than Cause or in the event of a Good Reason Termination,
based only on occurrences described in clauses (A), (C) (and subject to the
proviso contained in clause (C)) or (E) of Section 1(e), the Company shall pay
to Wilson, upon the execution of a release, in form and substance reasonably
satisfactory to the Chairman of the Board, subject to customary employment taxes
and deductions, within 15 days after the Termination Date a single sum in cash
equal to 1.5 multiplied by Wilson's Compensation but, except as provided below,
all other benefit coverages, retirement benefit accruals and fringe benefit
eligibility shall cease upon the Termination Date subject to applicable rights
under ERISA and COBRA.
(b) Subject to the provisions of Section 10 hereof and in lieu of any
payments under paragraph (a) above, in the event of Wilson's involuntary
Termination of Employment for any reason other than Cause or in the event of a
Good Reason Termination (other than pursuant to clause (E) of Section 1(e)), in
either case within two years following a Change of Control, the Company shall
pay to Wilson, within fifteen days after the Termination Date (or as soon as
possible thereafter in the event that the procedures set forth in Section 10(b)
hereof cannot be completed within 15 days), a single sum in cash equal to 2.99
multiplied by Wilson's Compensation.
(c) Notwithstanding paragraph (a) and (b) above, for 18 months if a
payment is made under paragraph (a) or 36 months if a payment is made under
paragraph (b), without regard to the fact that payment is to be made in a single
sum, Wilson shall be entitled to
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continued coverage under the Company's medical and dental benefits plan at the
same level of coverage (and required employee contributions, if any) as Wilson
was receiving at the time of his Termination Date, subject to the Company's
right to make changes to such plan for all of its executive level employees
generally and further subject to the Company's right to provide Wilson with
cash, on a tax equivalent basis, such that Wilson is able to purchase comparable
coverage on his own; provided, however, that this obligation of the Company
shall cease upon Wilson's obtaining new employment that provides Wilson with
eligibility for medical benefits without a pre-existing condition limitation;
and, provided, further, that such extended coverage shall be in addition to, and
not as a substitute for, Wilson's COBRA rights which shall apply at the end of
such extended coverage. In the event that, at his Termination Date, Wilson has
attained age 50, but not 55, Wilson shall be treated as a retiree of the
Company, including for purposes of the Company's retiree medical and life
insurance plan, and, for purposes of the Company's Benefit Equalization Plan, as
if his Termination of Employment occurred on his attainment of age 55. Wilson
(or his surviving spouse) will be entitled to commence his benefit under such
Plan on or after attaining age 55, with his benefit calculated as if the
Termination Date had occurred at age 55 but based on his service to the Company
only through the Termination Date.
(d) In the event Wilson's Phase Out Date would occur prior to 18
months (36 months if following a Change of Control) after the Termination Date,
the aggregate cash amount determined as set forth in (a) or (b) above, as
applicable, shall be reduced to an amount equal to such aggregate cash amount
multiplied by a fraction, the numerator of which shall be the number of days
from the Termination Date to Wilson's Phase Out Date and the denominator of
which shall be 548 (1095 if following a Change of Control).
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(e) BAC hereby guarantees the payments and benefits required under
this Section and agrees to pay, or cause the payment of, such payments and
benefits in the event that the Company fails to do so.
4. Other Payments. The payment due under Section 3 hereof shall
be in addition to and not in lieu of any payments or benefits accrued for Wilson
through the Termination Date under any other plan, policy or program of the
Company except that no payments shall be due to Wilson under the Company's then
severance pay plan for employees.
5. Enforcement.
(a) In the event that the Company shall fail or refuse to make payment
of any amounts due Wilson under Sections 3 and 4 hereof within the respective
time periods provided therein, the Company shall pay to an escrow agent, who
shall invest such sum with interest to be paid to the prevailing party, any
amount remaining unpaid under Section 3 or 4. In such event, the parties shall
then engage in 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, one of whom shall be selected by the Company and one by Wilson, 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 Wilson prevails on at least one material issue which is the
subject of such arbitration, the Company shall be responsible for all of
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<PAGE>
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 equally share the fees of the
American Arbitration Association.
(b) In the event that an arbitration under paragraph (a) takes place
following a Change of Control, the Company shall pay Wilson on demand the amount
necessary to reimburse Wilson in full for all reasonable expenses (including all
attorneys' fees and legal expenses) incurred by Wilson in enforcing any of the
obligations of the Company under this Agreement subject to Wilson's duty to
repay such sums to the Company in the event that he does not prevail on any
material issue which is the subject of such arbitration.
6. No Mitigation. Wilson shall not be required to mitigate the
amount of any payment or benefit provided for in this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment or benefit provided
for herein be reduced by any compensation earned by other employment or
otherwise.
7. Non-exclusivity of Rights. Nothing in this Agreement shall
prevent or limit Wilson's continuing or future participation in or rights under
any benefit, bonus, incentive or other plan or program provided by the Company
or any of its Subsidiaries or Affiliates, and for which Wilson may qualify, from
the date hereof through the Termination Date; provided, however, that Wilson
hereby waives Wilson's right to receive any payments under any severance pay
plan or similar program applicable to other employees of the Company.
8. No Set-Off. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by
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<PAGE>
any circumstances, including, without limitation, any set-off, counterclaim,
recoupment, defense or other right which the Company may have against Wilson or
others.
9. Taxes. Any payment required under this Agreement shall be subject
to all requirements of the law with regard to the withholding of taxes, filing,
making of reports and the like, and the Company shall use its best efforts to
satisfy promptly all such requirements.
10. Certain Reduction of Payments.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event that it shall be determined that any payment or distribution by the
Company to or for the benefit of Wilson, whether paid or payable or distributed
or distributable pursuant to the terms of this Agreement or otherwise (a
"Payment"), would constitute an "excess parachute payment" within the meaning of
Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), and
that it would be economically advantageous to Wilson to reduce the Payment to
avoid or to reduce the taxation of excess parachute payments under Section 4999
of the Code, the aggregate present value of amounts payable or distributable to
or for the benefit of Wilson pursuant to this Agreement (such payments or
distributions pursuant to this Agreement are hereinafter referred to as
"Agreement Payments") shall be reduced (but not below zero) to the Reduced
Amount. The "Reduced Amount" shall be an amount expressed in present value which
maximizes the aggregate present value of Agreement Payments without causing any
Payment to be subject to the taxation under Section 4999 of the Code. For
purposes of this Section 10, present value shall be determined in accordance
with Section 280G(d)(4) of the Code. Each of BPLSC, BAC and BMC covenant and
agree that it shall use its best efforts to obtain a vote of more than 75% of
its owners, or of the unitholders of BPLP, as applicable, pursuant to the
requirements of Section 280G(b)(5)(B) of the Code, in order to preclude the
limitations of this
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<PAGE>
Section from applying; provided, however, that nothing contained herein shall
result in BPLSC, BAC, BMC or BPLP being required to pay any taxes imposed on
Wilson by reason of the provisions of Section 4999 of the Code.
(b) All determinations to be made under this Section 10 shall be made
by Deloitte & Touche (or the Company's independent public accountant immediately
prior to the change of control if other than Deloitte & Touche (the "Accounting
Firm")), which firm shall provide its determinations and any supporting
calculations both to the Company and Wilson within 10 days of the Termination
Date. Any such determination by the Accounting Firm shall be binding upon the
Company and Wilson. Within five days after this determination, the Company
shall pay (or cause to be paid) or distribute (or cause to be distributed) to or
for the benefit of Wilson such amounts as are then due to Wilson under this
Agreement.
(c) As a result of the uncertainty in the application of Section 280G
of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Agreement Payments, as the case may be, will have
been made by the Company which should not have been made ("Overpayment") or that
additional Agreement Payments which have not been made by the Company could have
been made ("Underpayment"), in each case, consistent with the calculations
required to be made hereunder. Within two years after the Termination of
Employment, the Accounting Firm shall review the determination made by it
pursuant to the preceding paragraph. In the event that the Accounting Firm
determines that an Overpayment has been made, any such Overpayment shall be
treated for all purposes as a loan to Wilson which Wilson shall repay to the
Company together with interest at the applicable federal rate provided for in
Section 7872(f)(2) of the Code (the "Federal Rate"); provided, however, that no
amount shall be payable by Wilson to the Company if and to the extent such
payment would not reduce
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<PAGE>
the amount which is subject to taxation under Section 4999 of the Code. In the
event that the Accounting Firm determines that an Underpayment has occurred, any
such Underpayment shall be promptly paid by the Company to or for the benefit of
Wilson together with interest at the Federal Rate.
(d) All of the fees and expenses of the Accounting Firm in performing
the determinations referred to in subsections (b) and (c) above shall be borne
solely by the Company. The Company agrees to indemnify and hold harmless the
Accounting Firm of and from any and all claims, damages and expenses resulting
from or relating to its determinations pursuant to subsections (b) and (c)
above, except for claims, damages or expenses resulting from the gross
negligence or willful misconduct of the Accounting Firm.
11. Confidential Information. Wilson recognizes and acknowledges
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 and its
Subsidiaries and Affiliates and of 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").
Wilson 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 any person for
any reason whatsoever without the prior written
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authorization of the Board, unless such information is in the public domain
through no fault of Wilson or except as may be required by law.
12. Non-Competition.
(a) During his employment by the Company and for a period of 18 months
thereafter, Wilson will not, unless acting with the prior written consent of the
Chairman of the Board, directly or indirectly, own, manage, operate, join,
control, finance or participate in the ownership, management, operation, control
or financing of, or be connected as an officer, director, employee, partner,
principal, agent, representative, consultant or otherwise with or use or permit
his name to be used in connection with, any business or enterprise engaged in by
the Company or any of its Subsidiaries or Affiliates or the Partnerships, either
during his employment by the Company or on the Termination Date, 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 in any business that is a customer of such business or enterprise if the
Company or any of its Subsidiaries or Affiliates or the Partnerships derive at
least five percent of its respective gross revenues either during his employment
by the Company or on the Termination Date, as applicable, from such customer.
It is recognized by Wilson that the business of the Company and its Subsidiaries
and Affiliates and the Partnerships and Wilson's connection therewith is or will
be involved in activity throughout the Geographic Area, and that more limited
geographical limitations on this non-competition covenant are therefore not
appropriate. Wilson also shall not, directly or indirectly, during such 18
month period (a) solicit or divert business from, or attempt to convert any
client, account or customer of the Company or any of its Subsidiaries or
Affiliates or the Partnerships, whether existing at the date hereof or acquired
during Wilson's employment nor (b) following Wilson's employment,
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solicit or attempt to hire any then employee of the Company or of any of its
Subsidiaries or Affiliates or the Partnerships.
(b) The foregoing restriction shall not be construed to prohibit the
ownership by Wilson of less than five percent (5%) of any class of securities of
any corporation 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 Wilson nor any group
of persons including Wilson in any way, either directly or indirectly, manages
or exercises control of any such corporation, guarantees any of its financial
obligations, otherwise takes any part in its business, other than exercising his
rights as a shareholder, or seeks to do any of the foregoing.
13. Equitable Relief.
(a) Wilson acknowledges that the restrictions contained in Sections 11
and 12 hereof are reasonable and necessary to protect the legitimate interests
of the Company and its affiliates, 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 will result in irreparable injury to the
Company. Wilson represents that his experience and capabilities are such that
the restrictions contained in Section 12 hereof will not prevent Wilson from
obtaining employment or otherwise earning a living at the same general level of
economic benefit as anticipated by this Agreement. Wilson further represents
and acknowledges that (i) he has been advised by the Company to consult his own
legal counsel in respect of this Agreement, and (ii) that he has had full
opportunity, prior to execution of this Agreement, to review thoroughly this
Agreement with his counsel.
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(b) Wilson agrees that the Company 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 11 or 12 hereof, which rights
shall be cumulative and in addition to any other rights or remedies to which the
Company may be entitled. In the event that any of the provisions of Sections 11
or 12 hereof 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.
(c) Wilson irrevocably and unconditionally (i) agrees that any suit,
action or other legal proceeding arising out of Section 11 or 12 hereof,
including without limitation, any action commenced by the Company 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 jurisdiction or will not 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
Wilson may have to the laying of venue of any such suit, action or proceeding in
any such court. Wilson 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 Section 16 hereof.
(d) Wilson agrees that he will provide, and that the Company may
similarly provide, a copy of Sections 11 and 12 hereof to any business or
enterprise (i) which he may directly or indirectly own, manage, operate,
finance, join, control or participate in the
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<PAGE>
ownership, management, operation, financing, control or control of, or (ii) with
which he may be connected as an officer, director, employee, partner, principal,
agent, representative, consultant or otherwise, or in connection with which he
may use or permit his name to be used; provided, however, that this provision
shall not apply in respect of Section 13 hereof after expiration of the time
period set forth therein.
14. Term of Agreement. The term of this Agreement shall be for
five years commencing on the date hereof and shall automatically be renewed for
additional periods of one year until the Company notifies Wilson in writing, at
least 90 days in advance of expiration, that this Agreement will not be renewed.
If any notice of non-renewal occurs within two years after a Change of Control,
such notice shall constitute an involuntary Termination of Employment for
purposes of Section 3 above. Notwithstanding anything herein to the contrary,
this Agreement shall terminate if the employment of Wilson with the Company
shall terminate for any reason other than as provided herein.
15. Successor Company. The Company shall require any successor or
successors (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company, by agreement in form and substance satisfactory to Wilson, to
acknowledge expressly that this Agreement is binding upon and enforceable
against the Company in accordance with the terms hereof, and to become jointly
and severally obligated with the Company to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform if
no such succession or successions had taken place. Failure of the Company to
obtain such agreement prior to the effectiveness of any such succession shall be
a breach of this Agreement. As used in this
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Agreement, the Company shall mean the Company as hereinbefore defined and any
such successor or successors to its business and/or assets, jointly and
severally.
16. Notice. All notices and other communications required or
permitted hereunder or necessary or convenient in connection herewith shall be
in writing and shall be delivered personally or mailed by registered or
certified mail, return receipt requested, or by overnight express courier
service, as follows:
If to the Company, to:
Buckeye Management Company
5 Radnor Corporate Center, Suite 445
Radnor, PA 19087
Attention: Chairman
If to Wilson, to:
2876 Parkview Circle
Emmaus, PA 18049
or to such other names or addresses as the Company or Wilson, as the case may
be, shall designate by notice to the other party hereto in the manner specified
in this Section. Any such notice shall be deemed delivered and effective when
received in the case of personal delivery, five days after deposit, postage
prepaid, with the U.S. Postal Service in the case of registered or certified
mail, or on the next business day in the case of overnight express courier
service.
17. 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.
18. Contents of Agreement, Amendment and Assignment.
(a) This Agreement supersedes all prior agreements, sets forth the
entire understanding between the parties hereto with respect to the subject
matter hereof and cannot be
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changed, modified, extended or terminated except upon written amendment executed
by Wilson and the Company and only if approved by the Board. The provisions of
this Agreement may provide for payments to Wilson under certain compensation or
bonus plans under circumstances where such plans would not provide for payment
thereof. It is the specific intention of the parties that the provisions of this
Agreement shall supersede any provisions to the contrary in such plans, and such
plans shall be deemed to have been amended to correspond with this Agreement
without further action by the Company.
(b) Nothing in this Agreement shall be construed as giving Wilson
any right to be retained in the employ of the Company.
(c) 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,
representatives, successors and assigns of the parties hereto, except that the
duties and responsibilities of Wilson and the Company hereunder shall not be
assignable in whole or in part.
19. Severability. If any provision of this Agreement or
application thereof to anyone or under any circumstances shall be determined to
be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provisions or applications of this Agreement which can be given
effect without the invalid or unenforceable provision or application.
20. Remedies Cumulative; No Waiver. No right conferred upon Wilson
by this Agreement is intended to be exclusive of any other right or remedy, and
each and every such right or remedy shall be cumulative and shall be in addition
to any other right or remedy given hereunder or now or hereafter existing at law
or in equity. No delay or omission by Wilson in
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exercising any right, remedy or power hereunder or existing at law or in equity
shall be construed as a waiver thereof.
21. Miscellaneous. All section headings are for convenience only.
This Agreement may be executed in several 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.
22. Wilson's Acknowledgment. By executing this Agreement as of the
date first above written, Wilson acknowledges that he has no grounds for
asserting that a Good Reason Termination exists as of that date and, therefore,
that no obligation under Section 3 exists at the current time. In addition,
Wilson also acknowledges that the closing of the transaction pursuant to which
BPLSC is being created and his employment is being transferred to BPLSC shall
not be a Change of Control, an involuntary termination of Wilson by BMC or BPLSC
or grounds for Wilson to invoke a Good Reason Termination.
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IN WITNESS WHEREOF, the undersigned, intending to be legally bound,
have executed this Agreement as of the date first above written.
ATTEST:
[Seal] BUCKEYE PIPE LINE SERVICE COMPANY
/S/ Jean L. Schmidt /S/ Stephen C. Muther
- --------------------------- --------------------------------
Witness Senior Vice President, Administration and
General Counsel
ATTEST:
[Seal] BMC ACQUISITION COMPANY
/S/ Jean L. Schmidt By /S/ Steven C. Ramsey
- --------------------------- ------------------------------------
Witness Senior Vice President, Finance and
Chief Financial Officer
ATTEST:
[Seal] BUCKEYE MANAGEMENT COMPANY
Jean L. Schmidt By /S/ Stephen C. Muther
- --------------------------- ------------------------------------
Witness Senior Vice President, Administration and
General Counsel
/S/ Beverly J. Killeen /S/ C.Richard Wilson
- --------------------------------- -------------------------------------
Witness
-19-
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<TOTAL-REVENUES> 184,981
<CGS> 0
<TOTAL-COSTS> 112,906
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,187
<INCOME-PRETAX> 48,807
<INCOME-TAX> 0
<INCOME-CONTINUING> 48,807
<DISCONTINUED> 0
<EXTRAORDINARY> 42,424
<CHANGES> 0
<NET-INCOME> 6,383
<EPS-PRIMARY> 0.25
<EPS-DILUTED> 0.25
</TABLE>
