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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, 1998
OR
/ / Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from to
Commission file number 1-9356
Buckeye Partners, L.P.
(Exact name of registrant as specified in its charter)
Delaware 23-2432497
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification number)
5 Radnor Corporate Center
100 Matsonford Road
Radnor, Pennsylvania 19087
(Address of principal executive offies) (Zip Code)
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 15, 1999, the aggregate market value of the registrant's LP Units
held by non-affiliates was $667 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 15, 1999: 26,757,206
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TABLE OF CONTENTS
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PART I
Item 1. Business .................................................................. 2
Item 2. Properties ................................................................ 11
Item 3. Legal Proceedings ......................................................... 12
Item 4. Submission of Matters to a Vote of Security Holders ....................... 13
PART II
Item 5. Market for the Registrant's LP Units and Related Unitholder Matters........ 14
Item 6. Selected Financial Data ................................................... 14
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations .................................................... 15
Item 8. Financial Statements and Supplementary Data ............................... 23
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure ..................................................... 45
PART III
Item 10. Directors and Executive Officers of the Registrant ........................ 45
Item 11. Executive Compensation .................................................... 47
Item 12. Security Ownership of Certain Beneficial Owners and Management ............ 48
Item 13. Certain Relationships and Related Transactions ............................ 49
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K .......... 52
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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 3,105 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 in
November 1986 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"). 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.
During March 1996, BMC Acquisition Company ("BAC"), a Delaware corporation
organized in 1996, acquired all of the common stock of BMC 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 officers of BMC and trusts for the benefit of their
families and members of senior management of Buckeye Pipe Line Services
Company, a Pennsylvania corporation ("Services Company"). Glenmoor currently
provides management services to BMC, the General Partner 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 General Partner'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 BMC and the
General Partner to provide services to the Partnership and the Operating
Partnerships for a 13.5 year term. Services Company is reimbursed by BMC or the
General Partner for its direct and indirect expenses. BMC and the General
Partner are in turn reimbursed by the Partnership and the Operating
Partnerships for such expenses other than certain executive compensation and
fringe benefit costs. See "Certain Relationships and Related Transactions."
In connection with an internal restructuring, effective December 31, 1998,
Buckeye Management Company ("BMC"), transferred its general partnership
interest in the Partnership, as well as certain other assets and liabilities,
to its wholly-owned subsidiary, Buckeye Pipe Line
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Company (the "General Partner"). Buckeye Pipe Line Company will serve as sole
general partner of the Partnership and will continue to serve as sole general
partner of each Operating Partnership. As of December 31, 1998, the General
Partner owned approximately a 1 percent general partnership interest in the
Partnership and approximately a 1 percent general partner interest in each
Operating Partnership.
Refined Products Business
The Partnership receives petroleum products from refineries, connecting
pipelines and marine terminals, and transports those products to other
locations. In 1998, refined petroleum products transportation accounted for
substantially all of the Partnership's consolidated revenues and consolidated
operating income.
Effective for the December 31, 1998 financial statements, the Partnership
adopted Financial Accounting Standards Board Statement No. 131, "Disclosures
about Segments of an Enterprise and Related Information." The Partnership has
one segment, transportation of refined petroleum products.
The Partnership transported an average of approximately 1,031,200 barrels
per day of refined products in 1998. 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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1998 1997 1996
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Volume Percent Volume Percent Volume Percent
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Gasoline ....................... 518.8 50% 507.8 50% 497.9 49%
Jet Fuels ...................... 257.2 25 255.4 25 244.5 24
Middle Distillates (2) ......... 230.3 23 238.8 23 238.7 24
Other Products ................. 24.9 2 22.0 2 26.0 3
------- -- ------- -- ------- --
Total .......................... 1,031.2 100% 1,024.0 100% 1,007.1 100%
======= === ======= === ======= ===
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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 1,004 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.
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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 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 112 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 and 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.
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In 1998, the Operating Partnerships had approximately 97 customers, most
of which were either major integrated oil companies or large refined product
marketing companies. The largest two customers accounted for 8.1 percent and
6.8 percent, respectively, of consolidated revenues, while the 20 largest
customers accounted for 76.2 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 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. In addition, consolidation among refiners and marketers
that has accelerated in recent years has altered distribution patterns,
reducing demand for transportation services in some markets and increasing them
in other markets.
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 fuel.
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 BMC, the General Partner and Services Company.
At December 31, 1998, Services Company had a total of 517 full-time employees,
150 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.
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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 1998, total capital expenditures
were $22.8 million. Projected capital expenditures for 1999 amount to
approximately $22.3 million and are expected to be funded from cash generated
by operations and Buckeye's bank line of credit. Planned capital expenditures
in 1999 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
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 Gross Domestic Product 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.
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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 is 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, which is
anticipated to occur by July 2000. 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, state and local 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 laws and
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") amended 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
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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 generate "hazardous substances".
As a result, to the extent a hazardous substance generated by the Operating
Partnerships or their predecessors 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 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 required states to develop facility-wide permitting programs over
the past several years to comply with new federal programs. Existing operating
and air-emission requirements like those currently imposed on the Operating
Partnerships are being reviewed by appropriate state agencies in connection
with the new facility-wide permitting program. It is possible that new or more
stringent controls will be imposed upon the Operating Partnerships through this
permit review process.
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 entered into an
Administrative Consent Order ("ACO") with the New Jersey Department of
Environmental Protection and Energy under the New Jersey Environmental Cleanup
Responsibility Act of 1983 ("ECRA") relating to 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 conditions 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 1998,
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 General Partner 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
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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 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 ADVISOR
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." 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. 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.
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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, 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 basis limitations. 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 Expense
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
10
<PAGE>
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.
State Tax Treatment
During 1998, 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.
Certain Tax Consequences to Unitholders
Upon formation of the Partnership in 1986, the General Partner elected
twelve-year straight-line depreciation for tax purposes. For this reason,
starting in 1999, the amount of depreciation available to the Partnership will
be reduced significantly and taxable income will increase accordingly.
Unitholders, however, will continue to offset Partnership income with
individual LP Unit depreciation under their IRC section 754 election. Each
Unitholder's tax situation will differ depending upon the price paid and when
LP Units were purchased. Generally, those who purchased LP Units in the past
few years will have adequate depreciation to offset a considerable portion of
Partnership income, while those who purchased LP Units more than several years
ago will experience the full increase in taxable income. Unitholders are
reminded that, in spite of the additional taxable income beginning in 1999, the
current level of cash distributions exceed expected tax payments. Furthermore,
sale of LP Units will result in ordinary income tax recapture. UNITHOLDERS ARE
ENCOURAGED TO CONSULT THEIR PROFESSIONAL TAX ADVISORS REGARDING THE TAX
IMPLICATIONS TO THEIR INVESTMENT IN LP UNITS.
Certain Amendments to the Partnership Agreement
In July 1998, through a consent solicitation approved by more than
two-thirds of the LP Unitholders, amendments to the Partnership Agreement were
adopted to (i) remove the limitation on the number of LP Units that may be
issued without the approval of the Unitholders; (ii) eliminate the restrictions
on the amount of debt that can be incurred by the Partnership or its Operating
Partnerships and (iii) remove the limitations on the amount of capital
expenditures that can be made by the Partnership or the Operating Partnerships
in any calendar year.
Item 2. Properties
As of December 31, 1998, the principal facilities of the Operating
Partnerships included 3,487 miles of 6-inch to 24-inch diameter pipeline, 34
pumping stations, 84 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. Like 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
11
<PAGE>
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.
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.
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.
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.
12
<PAGE>
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."
In February 1999, the General Partner entered into a stipulation and order
of settlement with the New York State Office of Real Property Services and the
City of New York settling various real property tax certiorari proceedings. The
Partnership had challenged its real property tax assessments for a number of
past tax years on that portion of its pipeline that is located in public
right-of-way in New York City. The settlement agreement is expected to result
in a gain of approximately $11.0 million for the Partnership in the second
quarter of 1999. In addition, based upon the settlement, the Partnership
expects that its real property tax expense will be reduced by approximately
$1.0 million in 1999, with continued tax savings realized in the years 2000
through 2003. The settlement is contingent upon various conditions set forth in
the stipulation and order of settlement.
In June 1998, a putative class action complaint (Shakeredge v. Martinelli,
et al) was filed in the Delaware Court of Chancery against the Partnership,
BMC, Glenmoor and the directors of BMC alleging that the Consent Solicitation
Statement relating to various Partnership Agreement amendments was materially
false and misleading, because it failed to disclose that the incentive payments
made to the General Partner by the Partnership may be affected by an increase
in the number of LP Units outstanding; that the elimination of the restrictions
contained in the Partnership Agreement will remove the checks and balances
imposed on the Partnership and the General Partner; and whether the defendants
were planning or considering any specific transactions that would be affected
by the removal of the restrictions at the time of the Consent Solicitation
Statement. The complaint seeks, among other things, an injunction prohibiting
the consummation of the consent solicitation or giving effect to any other
proposed amendments to the Partnership Agreement. An answer was filed by the
General Partner and the other defendants in July 1998. No other filings or
proceedings have occurred in the case. BMC and the other defendants believe
that the Consent Solicitation Statement disclosed all material information to
the Unitholders and that the complaint is without merit.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the holders of LP Units during the
fourth quarter of the fiscal year ended December 31, 1998.
13
<PAGE>
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. In January 1998, the General Partner approved a
two-for-one unit split that became effective February 13, 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 1998 and 1997, as reported on the New York Stock Exchange Composite
Tape, were as follows:
<TABLE>
<CAPTION>
1998 1997
-------------------------- --------------------------
Quarter High Low High Low
- ---------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
First .......... 30.0625 27.5000 24.9385 20.1250
Second ......... 29.8750 27.0000 22.6250 21.2500
Third .......... 30.2500 26.0000 26.7500 22.5625
Fourth ......... 31.1250 26.0625 30.0000 24.6875
</TABLE>
During the months of December 1998 and January 1999, 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 18,000.
Cash distributions paid during 1997 and 1998 were as follows:
<TABLE>
<CAPTION>
Amount
Record Date Payment Date Per Unit
- --------------------------- ------------------- -----------
<S> <C> <C>
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
February 23, 1998 ......... February 27, 1998 $ 0.525
May 6, 1998 ............... May 29, 1998 $ 0.525
August 5, 1998 ............ August 31, 1998 $ 0.525
November 4, 1998 .......... November 30, 1998 $ 0.525
</TABLE>
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 4, 1999, the Partnership announced a quarterly distribution of
$0.525 per LP Unit payable on February 26, 1999 to Unitholders of record on
February 16, 1999.
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, 1998, 1997, 1996, 1995 and 1994. The tables should be read in
conjunction with the consolidated financial statements and notes thereto
included elsewhere in this Report.
14
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------------------
1998 1997 1996 1995 1994
------------- ------------- ------------- ------------- -------------
(In thousands, except per unit amounts)
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Revenue ................................... $ 184,477 $ 184,981 $ 182,955 $ 183,462 $ 186,338
Depreciation and amortization (1) ......... 16,432 13,177 11,333 11,202 11,203
Operating income .......................... 74,358 72,075 68,784 71,504 72,481
Interest and debt expense (2) ............. 15,886 21,187 21,854 21,710 24,931
Income from continuing operations before
extraordinary loss ....................... 52,007 48,807 49,337 49,840 48,086
Net income ................................ 52,007 6,383 49,337 49,840 45,817
Income per unit from continuing opera-
tions before extraordinary loss .......... 1.93 1.92 2.03 2.05 1.98
Net income per unit ....................... 1.93 0.25 2.03 2.05 1.89
Distributions per unit .................... 2.10 1.72 1.50 1.40 1.40
</TABLE>
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------------------------
1998 1997 1996 1995 1994
------------- ------------- ------------- ------------- -------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets .............................. $ 618,099 $ 615,062 $ 567,837 $ 552,646 $ 534,765
Long-term debt ............................ 240,000 240,000 202,100 214,000 214,000
General Partner's capital ................. 2,390 2,432 2,760 2,622 2,460
Limited Partners' capital ................. 296,095 300,346 273,219 259,563 243,516
</TABLE>
- ---------------
(1) Depreciation and amortization includes $4,698,000 in 1998 and $1,806,000 in
1997 for amortization of a deferred charge related to the ESOP
Restructuring.
(2) In December 1997 Buckeye issued $240,000,000 of Senior Notes bearing
interest ranging from 6.39 percent to 6.98 percent. Concurrently with the
issuance of the Senior Notes, Buckeye extinguished $202,100,000 of First
Mortgage Notes bearing interest ranging from 7.11 percent to 11.18
percent.
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
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."
15
<PAGE>
1998 Compared With 1997
Revenue for the year ended December 31, 1998 was $184.5 million, $0.5
million or 0.3 percent less than revenue of $185.0 million for 1997. Volumes
delivered during 1998 averaged 1,031,200 barrels per day, 7,200 barrels per day
or 0.7 percent greater than volume of 1,024,000 barrels per day delivered in
1997. The combination of higher volumes and lower revenues in 1998 as compared
to 1997 is the result of several factors. In 1998, the Partnership experienced
a slight shift in deliveries from longer-haul, higher tariff movements to
shorter-haul, lower tariff movements. In addition, certain tariffs designed to
recover capital costs expired in 1998 and were replaced by lower tariffs. The
Partnership also had greater costs associated with product downgrades resulting
from normal operating activities. Gasoline volumes and revenue increased over
1997 levels. New business was gained at Midland, Pennsylvania as a result of a
new connection, and market share throughout Pennsylvania continued to grow in
1998. In addition, increased volumes in the Detroit and Flint, Michigan areas
added to the favorable variance. Offsetting these increases were declines in
volume to the upstate New York area. Distillate volumes and revenue declined
over 1997 levels. Demand was weak throughout most areas due to abnormally warm
weather primarily during the first quarter of 1998. Turbine fuel volumes
increased slightly over 1997 levels although overall revenue declined. Demand
was strong at Newark Airport but was offset by declines at Pittsburgh due to
reductions in both military and commercial airline activity. LPG volumes and
revenue increased over 1997 levels due to the capture of new business in Ohio.
Tariff rate increases implemented in 1998 also had a favorable impact on 1998
revenues. See "Tariff Changes".
Costs and expenses during 1998 were $110.1 million, $2.8 million or 2.5
percent less than costs and expenses of $112.9 million during 1997. During
1998, as part of a restructuring, the Partnership incurred severance and
related expenses of $2.1 million and an additional $1.3 million expense
associated with the realignment of senior management. Payroll overhead expenses
declined as a result of the ESOP Restructuring in 1997 and a full year effect
of the elimination of certain executive compensation costs formerly charged to
the Partnership. Such senior executive compensation costs have not been charged
to the Partnership since August 12, 1997. See "Executive Compensation". The
Partnership also realized cost reductions in outside service expense and
incurred less power expense during 1998. Partially offsetting these reductions
was the full year effect of amortization of the deferred charge related to the
issuance of LP Units under the ESOP restructuring.
Other income (expenses) consist of interest income, interest and debt
expense, minority interests and other. Total other expenses decreased by $0.9
million. Interest expense declined by $5.3 million due to the early
extinguishment of higher interest rate debt with the proceeds of lower interest
rate debt during December 1997. Partially offsetting these declines in expenses
were increased incentive compensation payments to BMC as a result of greater
cash distributions to Unitholders (see "Certain Relationships and Related
Transactions") and an increase in minority interest expense related to greater
net income. Income from invested cash also declined from 1997 levels.
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 was 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 continued to grow
at a steady rate, while at Detroit the increases were attributable primarily to
the installation of new facilities and the addition of a new shipper. Gasoline
volumes also increased over 1996 levels. The increase in gasoline volumes were
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, declined slightly due to
the loss of longer-haul, higher tariff volumes particularly to the upstate New
York
16
<PAGE>
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 following 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 BMC 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.
Tariff Changes
Effective January 1, 1998 certain of the Operating Partnerships
implemented tariff increases that were expected to generate approximately $2.5
million in additional revenue per year. The Operating Partnerships did not
increase tariff rates during 1997.
In 1996, certain tariffs were increased that, at the time of filing, were
expected to generate approximately $2.9 million in additional revenue per year.
Competition and Other Business Conditions
Several major refiners and marketers of petroleum products announced
strategic alliances or mergers in 1997 and 1998. These alliances or mergers
have the potential to alter refined product supply and distribution patterns
within the Operating Partnerships' market area resulting in both gains and
losses of volume and revenue. While the General Partner believes that
individual delivery locations within its market area may have significant gains
or losses, it is not possible to predict the overall impact these alliances or
mergers would have on the Operating Partnerships' business. However, the
General Partner does not believe that these alliances or mergers will have a
material adverse effect on the Partnership's results of operations or financial
condition.
17
<PAGE>
Liquidity and Capital Resources
The Partnership's financial condition at December 31, 1998, 1997 and 1996
is highlighted in the following comparative summary:
Liquidity and Capital Indicators
<TABLE>
<CAPTION>
As of December 31,
--------------------------------------------
1998 1997 1996
------------ ------------- -------------
<S> <C> <C> <C>
Current ratio .................................... 0.8 to 1 1.2 to 1 1.3 to 1
Ratio of cash and temporary investments and trade
receivables to current liabilities ............. 0.5 to 1 0.8 to 1 1.1 to 1
Working capital (deficit) (in thousands) ......... ($ 6,266) $5,045 $13,660
Ratio of total debt to total capital ............. .44 to 1 .44 to 1 .43 to 1
Book value (per Unit) ............................ $ 11.06 $ 11.23 $ 11.33
</TABLE>
Cash Provided by Operations
During 1998, cash provided by operations of $80.6 million was derived
principally from $68.4 million of net income before depreciation and
amortization. Depreciation and amortization increased by $3.3 million as a
result of the amortization for a full year of a deferred charge associated with
the ESOP Restructuring and depreciation related to capital additions. Changes
in current assets and current liabilities resulted in a net cash source of
$12.3 million. The cash source from the change in current assets and
liabilities resulted primarily from maturities of temporary investments, the
continued improvement in the collection of trade receivables, a reduction in
prepaid and other current assets and an increase in current liabilities payable
to the General Partner. Distributions paid to Unitholders in 1998 amounted to
$56.2 million, an increase of $12.3 million over 1997, and capital expenditures
were $22.8 million, an increase of $3.0 million over 1997.
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, resulting primarily from the
elimination of the current portion of long term debt and continued improvement
in the collection of trade receivables, offset by the net payment of $3.0
million of accrued and other current liabilities. Cash and cash equivalents
declined by $10.1 million and temporary investments declined by $11.7 million
during the year. Distributions paid to Unitholders in 1997 amounted to $44.3
million, an increase of $7.8 million over 1996, and capital expenditures were
$19.8 million, an increase of $5.0 million from 1996.
Also, during 1997, cash provided from the issuance of $240 million of
Senior Notes and an additional $4.5 million provided from operations was used
to pay the remaining $202.1 million due under the First Mortgage Notes and
$42.4 million in prepayment penalty and related refinancing costs. Changes in
non-current assets and liabilities resulted in a net use of cash of $1.6
million, including a decline of 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
18
<PAGE>
sale of property included in net income and changes in other non-current assets
and liabilities. Distributions paid to Unitholders in 1996 amounted to $36.5
million, an increase of $2.5 million over 1995, and capital expenditures were
$14.9 million, a decrease of $2.5 million from 1995.
Debt Obligations and Credit Facilities
At December 31, 1998, the Partnership had $240.0 million in outstanding
long-term debt, all of which was represented by Senior Notes (Series 1997A
through 1997D) (the "Senior Notes").
During December 1997, Buckeye issued 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 $4.5 million of 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 in 1997, Buckeye was required to pay to the holders of the First Mortgage
Notes a prepayment premium equal to the difference between the cash flows under
the 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 1997 income statement as an extraordinary loss. In connection with the
issuance of the Senior Notes, the indenture (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.
The Indenture, as amended in connection with the issuance of the Senior
Notes, contains covenants which affect Buckeye, Laurel and Buckeye Pipe Line
Company of Michigan, L.P. (the "Indenture Parties"). Generally, the 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.
During December 1998, Buckeye established a line of credit from commercial
banks (the "Credit Agreement") which permits borrowings of up to $100 million
subject to certain limitations contained in the Credit Agreement. Borrowings
bear interest at the bank's base rate or at a rate based on the London
interbank rate at the option of Buckeye. The Credit Agreement expires December
16, 2003. At December 31, 1998 there were no borrowings outstanding under the
Credit Agreement.
The Credit Agreement contains covenants which affect Buckeye and the
Partnership. Generally, the Credit Agreement (a) limits outstanding
indebtedness of Buckeye based upon certain financial ratios contained in the
Credit Agreement, (b) prohibits Buckeye from creating or incurring certain
liens on its property, (c) prohibits the Partnership or Buckeye from disposing
of property which is material to its operations, and (d) limits consolidation,
merger and asset transfers by Buckeye and the Partnership.
The ratio of total debt to total capital was 44 percent at December 31,
1998 and 1997 and 43 percent at December 31, 1996. For purposes of the
calculation of this ratio, total capital consists of current and long-term
debt, minority interests and partners' capital.
19
<PAGE>
Capital Expenditures
At December 31, 1998, property, plant and equipment was approximately 86
percent of total consolidated assets. This compares to 85 percent and 90
percent for the years ended December 31, 1997 and 1996, 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 $22.8 million, $19.8 million
and $14.9 million for 1998, 1997 and 1996, respectively. Projected capital
expenditures for 1999 are approximately $22.3 million and are expected to be
funded from cash generated by operations and Buckeye's bank line of credit. 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 approximately
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.
Environmental Matters
The Operating Partnerships are subject to federal, state and local laws
and regulations relating to the protection of the environment. These laws and
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 1998, the Operating
Partnerships incurred operating expenses of $1.8 and capital expenditures of
$1.7 million for environmental matters. Capital expenditures of $1.2 million
for environmental related projects are included in the Partnership's plans for
1999. 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 BMC, the General Partner and the shareholders of BMC. BMC borrowed
$63 million pursuant to a 15-year term loan from a third-party lender. BMC 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 BMC approved the ESOP
Restructuring. The ESOP Restructuring was approved by a majority of the holders
of the LP Units at a special meeting
20
<PAGE>
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 BMC 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 BMC and certain of its
affiliates.
Total ESOP related costs charged to earnings during 1998 were $1.2
million, representing a non-cash accrual of the estimated difference between
distributions to be paid on the LP Units and the total debt service
requirements under the ESOP loan (the "top-up provision").
Total ESOP related costs charged to earnings through August 12, 1997, the
date of the ESOP Restructuring, were $5.0 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 shares of BAC Preferred Stock released and allocated to
employees accounts through August 12, 1997, and administrative costs of $0.2
million. Subsequent to August 12, 1997, ESOP related costs charged to the
Partnership in 1997 were $0.1 million in administrative costs and an additional
$0.4 million for a top-up provision. 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 earning 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.
As a result of the ESOP Restructuring, 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
Accounting for Derivative Instruments and Hedging Activities
In June 1998, the Financial Accounting Standards Board issued Statement
No. 133, "Accounting for Derivative Instruments and Hedging Activities" which
established accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as "derivatives") and for hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those
instruments at fair value. This standard will be effective for the
Partnership's financial statements in the year 2000. The General Partner has
not yet assessed the impact of this new standard on the Partnership's financial
statements.
Information Systems--Year 2000 Compliance
In 1998, the Partnership established a comprehensive plan to assess the
impact of the Year 2000 issue on the software and hardware utilized by the
Partnership's internal operations and
21
<PAGE>
pipeline control systems. As part of that assessment, a team is in the process
of reviewing and documenting the status of the Partnership's systems for Year
2000 compliance. The key information systems under review include financial
systems, pipeline operating systems, and the Partnership's SCADA (Supervisory
Control and Data Acquisition) system. In connection with each of these areas,
consideration is being given to hardware, operating systems, applications,
database management, system interfaces, electronic transmission and outside
vendors.
The Partnership relies on third-party suppliers for certain systems,
products and services including telecommunications. The Partnership has
received certain information concerning Year 2000 status from a group of
critical suppliers and vendors, and anticipates receiving additional
information in the near future that will assist the Partnership in determining
the extent to which the Partnership may be vulnerable to those third parties'
failure to remediate their year 2000 issues.
At this time, the Partnership believes that the total cost for known or
anticipated remediation of its information systems to make them Year 2000
compliant will not be material. Management of the Partnership believes it has
an effective program in place to resolve the Year 2000 issue in a timely
manner. Completion of the plan and testing of replacement or modified systems
is anticipated for the third quarter of 1999. Nevertheless, since it is not
possible to anticipate all possible future outcomes, especially when third
parties are involved, there could be circumstances in which the Partnership
would be unable to take customer orders, ship petroleum products, invoice
customers or collect payments. The effect on the Partnership's liabilities and
revenues due to a failure of its systems or a third-party system cannot be
predicted.
The Company has contingency plans for some pipeline critical applications,
involving manual operations, and is working on additional contingency plans to
address unavoided or unavoidable risks associated with Year 2000 issues.
Forward-Looking Statements
Information contained above in this Management's Discussion and Analysis
and elsewhere in this Report on Form 10-K with respect to expected financial
results and future events is forward-looking, based on our estimates and
assumptions and subject to risk and uncertainties. For those statements, we
claim the protection of the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995.
The following important factors could affect our future results and could
cause those results to differ materially from those expressed in our
forward-looking statements: (1) adverse weather conditions resulting in reduced
demand; (2) changes in laws and regulations, including safety, tax and
accounting matters; (3) competitive pressures from alternative energy sources;
(4) liability for environmental claims; (5) improvements in energy efficiency
and technology resulting in reduced demand; (6) labor relations; (7) changes in
real property tax assessments, (8) regional economic conditions; (9) the
success of the Partnership and its suppliers in achieving Year 2000 compliance;
and (10) interest rate fluctuations and other capital market conditions.
These factors are not necessarily all of the important factors that could
cause actual results to differ materially from those expressed in any of our
forward-looking statements. Other unknown or unpredictable factors could also
have material adverse effects on future results. We undertake no obligation to
update publicly any forward-looking statement whether as a result of new
information or future events.
22
<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 ...................................... 24
Consolidated Statements of Income--For the years ended December 31,
1998, 1997 and 1996 .............................................. 25
Consolidated Balance Sheets--December 31, 1998 and 1997 ........... 26
Consolidated Statements of Cash Flows--For the years ended December
31, 1998, 1997 and 1996 .......................................... 27
Notes to Consolidated Financial Statements ........................ 28
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.
23
<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, 1998
and 1997, and the related consolidated statements of income and cash flows for
each of the three years in the period ended December 31, 1998. 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, 1998 and 1997, and the results of its operations
and cash flows for each of the three years in the period ended December 31,
1998 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
January 28, 1999 (March 5, 1999 as to Note 19)
24
<PAGE>
BUCKEYE PARTNERS, LP
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per unit amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
Notes 1998 1997 1996
------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue .................................................... 2 $ 184,477 $ 184,981 $ 182,955
--------- --------- ---------
Costs and expenses
Operating expenses ...................................... 3,14 79,439 86,833 87,855
Depreciation and amortization ........................... 2,5,6 16,432 13,177 11,333
General and administrative expenses ..................... 14 14,248 12,896 14,983
--------- --------- ---------
Total costs and expenses ...................... ........ 110,119 112,906 114,171
--------- --------- ---------
Operating income ........................................... 74,358 72,075 68,784
--------- --------- ---------
Other income (expenses)
Interest income ......................................... 251 2,046 1,589
Interest and debt expense ............................... (15,886) (21,187) (21,854)
Minority interests and other ............................ 14 (6,716) (4,127) 818
--------- --------- ---------
Total other income (expenses) ................. ........ (22,351) (23,268) (19,447)
--------- --------- ---------
Income before extraordinary loss ........................... 52,007 48,807 49,337
Extraordinary loss on early extinguishment of debt ......... 8 -- (42,424) --
--------- --------- ---------
Net income ................................................. $ 52,007 $ 6,383 $ 49,337
========= ========= =========
Net income allocated to General Partner .................... 15 $ 470 $ 85 $ 493
Net income allocated to Limited Partners ................... 15 $ 51,537 $ 6,298 $ 48,844
Earnings per Partnership Unit
Income allocated to General and Limited Partners per
Partnership Unit:
Income before extraordinary loss ........................ $ 1.93 $ 1.92 $ 2.03
Extraordinary loss on early extinguishment of
debt .................................................. -- (1.67) --
--------- --------- ---------
Net income ................................................. $ 1.93 $ 0.25 $ 2.03
========= ========= =========
Earnings per Partnership Unit--assuming dilution
Income allocated to General and Limited Partners per
Partnership Unit:
Income before extraordinary loss ........................ $ 1.92 $ 1.91 $ 2.02
Extraordinary loss on early extinguishment of
debt .................................................. -- (1.66) --
--------- --------- ---------
Net income ................................................. $ 1.92 $ 0.25 $ 2.02
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
25
<PAGE>
BUCKEYE PARTNERS, LP
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
December 31,
-------------------------
Notes 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Assets
Current assets
Cash and cash equivalents .......................... 2 $ 8,341 $ 7,349
Temporary investments .............................. 2 -- 2,854
Trade receivables .................................. 2 7,578 10,195
Inventories ........................................ 2 2,988 2,087
Prepaid and other current assets ................... 4 5,320 7,297
-------- --------
Total current assets ............................ 24,227 29,782
Property, plant and equipment, net .................. 2, 5 532,696 520,941
Other non-current assets ............................ 6, 12 61,176 64,339
-------- --------
Total assets .................................... $618,099 $615,062
======== ========
Liabilities and partners' capital
Current liabilities
Accounts payable ................................... $ 4,369 $ 3,664
Accrued and other current liabilities .............. 3, 7, 15 26,124 21,073
-------- --------
Total current liabilities ....................... 30,493 24,737
Long-term debt ..................................... 8 240,000 240,000
Minority interests ................................. 2,501 2,535
Other non-current liabilities ...................... 9, 10, 14 46,620 45,012
Commitments and contingent liabilities ............. 3 -- --
-------- --------
Total liabilities ............................... 319,614 312,284
-------- --------
Partners' capital ..................................... 15
General Partner .................................... 2,390 2,432
Limited Partners ................................... 296,095 300,346
-------- --------
Total partners' capital ......................... 298,485 302,778
-------- --------
Total liabilities and partners' capital ......... $618,099 $615,062
======== ========
</TABLE>
See notes to consolidated financial statements.
26
<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 1998 1997 1996
------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Income before extraordinary loss ...................... $ 52,007 $ 48,807 $ 49,337
--------- ---------- ---------
Adjustments to reconcile income to net cash
provided by operating activities:
Extraordinary loss on early extinguishment of
debt ............................................... 8 -- (42,424) --
Gain on sale of property, plant and equipment ........ (195) (11) (2,651)
Depreciation and amortization ........................ 5,6 16,432 13,177 11,333
Minority interests ................................... 594 96 506
Distributions to minority interests .................. (628) (474) (374)
Change in assets and liabilities:
Temporary investments .............................. 2,854 11,674 (13,633)
Trade receivables .................................. 2,617 2,341 3,759
Inventories ........................................ (901) (355) (171)
Prepaid and other current assets ................... 1,977 418 (443)
Accounts payable ................................... 705 (615) 1,873
Accrued and other current liabilities .............. 5,051 (3,015) 1,072
Other non-current assets (1) ....................... (1,535) 319 (1,798)
Other non-current liabilities ...................... 1,608 (1,566) (1,680)
--------- ---------- ---------
Total adjustments from operating activities ....... 28,579 (20,435) (2,207)
--------- ---------- ---------
Net cash provided by operating activities ......... 80,586 28,372 47,130
--------- ---------- ---------
Cash flows from investing activities:
Capital expenditures .................................. (22,750) (19,841) (14,881)
Net proceeds from (expenditures for) disposal of
property, plant and equipment ........................ (544) (814) 4,497
--------- ---------- ---------
Net cash used in investing activities ............. (23,294) (20,655) (10,384)
--------- ---------- ---------
Cash flows from financing activities:
Capital contribution .................................. -- 5 10
Proceeds from exercise of unit options ................ 366 516 974
Proceeds from issuance of long-term debt .............. 8 -- 240,000 --
Payment of long-term debt ............................. 8 -- (214,000) --
Distributions to Unitholders .......................... 15,16 (56,666) (44,305) (36,527)
--------- ---------- ---------
Net cash used in financing activities ............. (56,300) (17,784) (35,543)
--------- ---------- ---------
Net increase (decrease) in cash and cash equivalents..... 2 992 (10,067) 1,203
Cash and cash equivalents at beginning of year .......... 2 7,349 17,416 16,213
--------- ---------- ---------
Cash and cash equivalents at end of year ................ $ 8,341 $ 7,349 $ 17,416
========= ========== =========
Supplemental cash flow information:
Cash paid during the year for interest (net of
amount capitalized) .................................. $ 15,918 $ 21,432 $ 21,900
Non-cash change in financing activities:
Issuance of LP Units in exchange for BAC stock ........ 12 -- $ 64,200 --
Non-cash change in operating activities:
(1) Deferred charge from issuance of LP Units ......... 6,12 -- $ 64,200 --
</TABLE>
See notes to consolidated financial statements.
27
<PAGE>
BUCKEYE PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998 AND 1997 AND
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
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."
In connection with an internal restructuring, effective December 31, 1998,
Buckeye Management Company ("BMC") transferred its general partnership interest
in the Partnership, as well as certain other assets and liabilities, to its
wholly-owned subsidiary, Buckeye Pipe Line Company (the "General Partner").
Buckeye Pipe Line Company will now serve as sole general partner of the
Partnership and will continue to serve as sole general partner of each
Operating Partnership. As of December 31, 1998, the General Partner owned
approximately a 1 percent general partnership interest in the Partnership and
approximately a 1 percent general partnership interest in each Operating
Partnership, for an effective 2 percent interest in the Partnership.
Buckeye is one of the largest independent pipeline common carriers of
refined petroleum products in the United States, with 3,105 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 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 BMC from a subsidiary of American Financial Group, Inc. ("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 and trusts for the benefit of their
families and by certain director-level employees of Buckeye Pipe Line Services
Company ("Services Company").
On August 12, 1997, the General Partner'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 General Partner
and became the sponsor of all of the employee benefit plans previously
maintained by the General Partner. Services Company also entered into a
Services Agreement with BMC and the General Partner to provide services to the
Partnership and the Operating Partnerships for a 13.5 year term. Services
Company is reimbursed by BMC or the General Partner 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 14).
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.
28
<PAGE>
BUCKEYE PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
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
consolidated Partnership's continuing customer base numbers approximately 97,
no customer during 1998 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.
29
<PAGE>
BUCKEYE PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
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, 1998 and 1997, the Partnership's reported amount
of net assets for financial reporting purposes exceeded its tax basis by
approximately $285 million and $253 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 the 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.
Pensions
Services Company maintains a defined contribution plan, defined benefit
plans (see Note 10) and an employee stock ownership plan (see Note 12) 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 10). Certain other retired
employees are covered by a health and welfare plan under a union agreement.
Comprehensive Income
The Partnership has not reported comprehensive income due to the absence
of items of other comprehensive income in any period presented.
Accounting for Derivative Instruments and Hedging Activities
In June 1998, the Financial Accounting Standards Board issued Statement
No. 133, "Accounting for Derivative Instruments and Hedging Activities" which
established accounting and reporting
30
<PAGE>
BUCKEYE PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
standards for derivative instruments, including certain derivative instruments
embedded in other contracts (collectively referred to as "derivatives"), and
for hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. This standard will be effective for the
Partnership's financial statements in the year 2000. The General Partner has
not yet assessed the impact of this new standard on the Partnership's financial
statements.
Segment Reporting and Related Information
Effective for the December 31, 1998 financial statements, the Partnership
adopted Financial Accounting Standards Board Statement No. 131, "Disclosures
about Segments of an Enterprise and Related Information." The Partnership has
one reportable segment, transportation of refined petroleum products.
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 $1.8 million, $2.7 million and
$3.1 million for 1998, 1997 and 1996, 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 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 potentially
responsible parties 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
31
<PAGE>
BUCKEYE PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
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 received an
interest only contract from Aurora National Life Assurance Company (the "Aurora
GIC") in substitution for its Executive Life GIC. The Aurora GIC provided 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
received certain additional cash payments through the maturity date of the
contract. The Plan also received a payment of approximately $2 million in
March, 1998, from the Pennsylvania Life and Health Insurance Guaranty
Association for partial reimbursement of losses of Plan participants who were
Pennsylvania residents on December 6, 1991.
In May 1991, in order to safeguard the basic retirement and savings
benefits of its employees, BMC (as General Partner) entered into an arrangement
with the Plan that would guarantee 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. On September 3, 1998, the Aurora GIC
matured and BMC has met its guaranty obligation to the Plan. Total costs
incurred in connection with the guaranty obligation were approximately $0.4
million and were reimbursed by the Partnership.
4. PREPAID AND OTHER CURRENT ASSETS
Prepaid and other current assets consist primarily of receivables from
third parties for pipeline relocations and other work either completed or
in-progress. Prepaid and other current assets also include prepaid insurance,
prepaid taxes and other miscellaneous items.
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
December 31,
-------------------------
1998 1997
----------- -----------
(In thousands)
<S> <C> <C>
Land ................................................ $ 9,498 $ 9,504
Buildings and leasehold improvements ................ 27,569 27,510
Machinery, equipment and office furnishings ......... 533,063 524,735
Construction in progress ............................ 30,676 17,484
-------- --------
600,806 579,233
Less accumulated depreciation .................... 68,110 58,292
-------- --------
Total ............................................ $532,696 $520,941
======== ========
</TABLE>
Depreciation expense was $11,734,000, $11,371,000 and $11,333,000 for the
years 1998, 1997 and 1996, respectively.
6. OTHER NON-CURRENT ASSETS
Other non-current assets consist of the following:
<TABLE>
<CAPTION>
December 31,
-----------------------
1998 1997
---------- ----------
(In thousands)
<S> <C> <C>
Deferred charge (see Note 12) ......... $57,696 $62,394
Other ................................. 3,480 1,945
------- -------
Total .............................. $61,176 $64,339
======= =======
</TABLE>
32
<PAGE>
BUCKEYE PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
The $64.2 million market value of the LP Units issued in connection with
the restructuring of the ESOP in August 1997 (the "ESOP Restructuring") was
recorded as a deferred charge and is being amortized on the straight line basis
over 13.5 years (See Note 12). Amortization of the deferred charge related to
the ESOP Restructuring was $4,698,000 in 1998 and $1,806,000 in 1997.
7. ACCRUED AND OTHER CURRENT LIABILITIES
Accrued and other current liabilities consist of the following:
<TABLE>
<CAPTION>
December 31,
---------------------
1998 1997
--------- ---------
(In thousands)
<S> <C> <C>
Taxes--other than income .................... $ 8,729 $ 9,157
Accrued charges due General Partner ......... 8,724 3,231
Environmental liabilities ................... 2,121 3,141
Interest .................................... 699 732
Accrued operating power ..................... 1,080 819
Accrued outside services .................... 352 365
Other ....................................... 4,419 3,628
------- -------
Total .................................... $26,124 $21,073
======= =======
</TABLE>
8. LONG-TERM DEBT AND CREDIT FACILITIES
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
-------------------------
1998 1997
----------- -----------
(In thousands)
<S> <C> <C>
Senior Notes:
6.98% Series 1997A due December 16, 2024 (subject to
$25.0 million annual sinking fund requirement com-
mencing December 16, 2020) .......................... $125,000 $125,000
6.89% Series 1997B due December 16, 2024 (subject to
$20.0 million annual sinking fund requirement
commencing December 16, 2020) ....................... 100,000 100,000
6.95% Series 1997C due December 16, 2024 (subject to
$2.0 million annual sinking fund requirement
commencing December 16, 2020) ....................... 10,000 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 5,000
-------- --------
Total ............................................... $240,000 $240,000
======== ========
</TABLE>
At December 31, 1998, 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.
33
<PAGE>
BUCKEYE PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
The fair value of the Partnership's debt is estimated to be $241 million
and $240 million as of December 31, 1998 and 1997, respectively. The values at
December 31, 1998 and 1997 were calculated using interest rates currently
available to the Partnership for issuance of debt with similar terms and
remaining maturities.
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 bearing interest ranging from 7.11 percent to 11.18 percent. 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.
The indenture, as amended in connection with the issuance of the Senior
Notes (the "Indenture") contains covenants which affect Buckeye, Laurel and
Buckeye Pipe Line Company of Michigan, L.P. (the "Indenture Parties").
Generally, the 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.
During December 1998, Buckeye established a line of credit from commercial
banks (the "Credit Agreement") which permits borrowings of up to $100 million
subject to certain limitations contained in the Credit Agreement. Borrowings
bear interest at the bank's base rate or at a rate based on the London
interbank rate at the option of Buckeye. The Credit Agreement expires December
16, 2003. At December 31, 1998 there were no borrowings outstanding under the
Credit Agreement.
The Credit Agreement contains certain covenants which affect Buckeye and
the Partnership. Generally, the Credit Agreement (a) limits outstanding
indebtedness of Buckeye based upon certain financial ratios contained in the
Credit Agreement, (b) prohibits Buckeye from creating or incurring certain
liens on its property, (c) prohibits the Partnership or Buckeye from disposing
of property which is material to its operations, and (d) limits consolidation,
merger and asset transfers by Buckeye and the Partnership.
9. OTHER NON-CURRENT LIABILITIES
Other non-current liabilities consist of the following:
<TABLE>
<CAPTION>
December 31,
-----------------------
1998 1997
---------- ----------
(In thousands)
<S> <C> <C>
Accrued employee benefit liabilities ......... $36,919 $36,319
Accrued top-up reserve ....................... 1,656 460
Accrued non-current taxes .................... 2,450 3,183
Other ........................................ 5,595 5,050
------- -------
Total ..................................... $46,620 $45,012
======= =======
</TABLE>
10. PENSIONS AND OTHER POSTRETIREMENT BENEFITS
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
34
<PAGE>
BUCKEYE PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
contracts, under which Services Company contributes 5 percent of each covered
employee's salary. Services Company also sponsors 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.
Services Company also 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.
A reconciliation of the beginning and ending balances of the benefit
obligations under the noncontributory pension plans and the postretirement
health care and life insurance plan is as follows:
<TABLE>
<CAPTION>
Postretirement
Pension Benefits Benefits
----------------------- -----------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
(In thousands)
<S> <C> <C> <C> <C>
Change in benefit obligation
Benefit obligation at beginning of
year .................................... $ 14,469 $11,764 $ 24,943 $ 23,562
Service cost .............................. 511 291 540 507
Interest cost ............................. 888 819 1,707 1,720
Actuarial (gain) loss ..................... (1,353) (437) 3,317 626
Change in assumptions ..................... 1,229 2,832 -- --
Adjusted benefit payments ................. (622) (800) (1,114) (1,472)
-------- ------- -------- --------
Benefit obligation at end of year ......... $ 15,122 $14,469 $ 29,393 $ 24,943
======== ======= ======== ========
</TABLE>
A reconciliation of the beginning and ending balances of the fair value of
plan assets under the noncontributory pension plans and the postretirement
health care and life insurance plan is as follows:
<TABLE>
<CAPTION>
Postretirement
Pension Benefits Benefits
-------------------------- -----------------------------
1998 1997 1998 1997
------------ ----------- ------------- -------------
(In thousands)
<S> <C> <C> <C> <C>
Change in plan assets
Fair value of plan assets at
beginning of year ..................... $ 6,993 $ 6,305 $ -- $ --
Actuarial return on plan assets ......... 1,264 1,278 -- --
Revaluation of asset .................... 951 -- -- --
Employer contribution ................... 270 510 1,114 1,472
Benefits paid ........................... (614) (1,100) (1,114) (1,472)
-------- -------- --------- ---------
Fair value of plan assets at end of
year .................................. $ 8,864 $ 6,993 $ -- $ --
======== ======== ========= =========
Funded status ........................... $ (6,258) $ (5,043) $ (29,393) $ (24,943)
Unrecognized prior service cost ......... (751) (837) (2,898) (3,478)
Unrecognized actuarial loss ............. 945 391 1,832 (1,467)
Unrecognized net asset at
transition ............................ (782) (942) -- --
-------- -------- --------- ---------
Accrued benefit cost .................... $ (6,846) $ (6,431) $ (30,459) $ (29,888)
======== ======== ========= =========
</TABLE>
35
<PAGE>
BUCKEYE PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
The weighted average assumptions used in accounting for the
noncontributory pension plans and the postretirement health care and life
insurance plan were as follows:
<TABLE>
<CAPTION>
Postretirement
Pension Benefits Benefits
--------------------- ---------------------
1998 1997 1998 1997
--------- --------- --------- ---------
Weighted-average assumptions as of
December 31
<S> <C> <C> <C> <C>
Discount rate .......................... 6.5% 7.0% 7.0% 7.0%
Expected return on plan assets ......... 8.5% 8.5% N/A N/A
Rate of compensation increase .......... 4.5% 5.0% N/A N/A
</TABLE>
The assumed rate of cost increase in the postretirement health care and
life insurance plan in 1998 was 8.0 percent and 9.0 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.
Assumed healthcare cost trend rates have a significant effect on the
amounts reported for the healthcare plans. The effect of a 1 percent change in
the health care cost trend rate for each future year would have had the
following effects on 1998 results:
<TABLE>
<CAPTION>
1-Percentage 1-Percentage
Point Increase Point Decrease
---------------- ---------------
(In thousands)
<S> <C> <C>
Effect on total service cost and interest cost
components ........................................ $ 429 $ (346)
Effect on postretirement benefit obligation ......... $4,650 $ (3,830)
</TABLE>
The components of the net periodic benefit cost recognized for the
noncontributory pension plans and the postretirement health care and life
insurance plan were as follows:
<TABLE>
<CAPTION>
Pension Benefits Postretirement Benefits
------------------------------- ---------------------------------
1998 1997 1996 1998 1997 1996
--------- --------- --------- ---------- ---------- ---------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Components of net periodic
benefit cost
Service cost ........................... $ 511 $ 291 $ 485 $ 540 $ 507 $ 500
Interest cost .......................... 888 819 889 1,707 1,720 1,651
Expected return on plan assets ......... (656) (531) (694) -- -- --
Amortization of unrecognized
transition asset ..................... (160) (160) (160) -- -- --
Amortization of prior service cost ..... (86) (70) (70) (580) (580) (580)
Amortization of unrecognized
losses ............................... 189 68 67 18 5 11
------ ------ ------ ------ ------ ------
Net periodic benefit cost .............. $ 686 $ 417 $ 517 $1,685 $1,652 $1,582
====== ====== ====== ====== ====== ======
</TABLE>
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 $126,000, $129,000 and $144,000 for 1998, 1997
and 1996, respectively.
36
<PAGE>
BUCKEYE PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
In addition, Services Company 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 $106,000, $110,000 and $133,000 for 1998, 1997
and 1996, respectively.
11. 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 was amended and restated on July 14, 1998. 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 granted prior to
1998 were 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 Distribution Equivalents are 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. Options granted after 1997 do not have a Distribution Equivalent
feature. 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 granted prior to 1998 vested in varying
amounts beginning generally three years after the date of grant. Options
granted after 1997 vest in three years. Options granted in 1998 are exercisable
for a period of seven years following the date on which they vest. Options
granted prior to 1998 are exercisable for a period of five years following the
date on which they vest. The Partnership recorded compensation expense related
to the Option Plan of $34,000, $179,000 and $283,000 in 1998, 1997 and 1996,
respectively. Compensation and benefit costs of executive officers were not
charged to the Partnership after August 12, 1997 (See Note 14). If compensation
cost for the Option Plan had been determined based on the fair value at the
time of the grant dates for awards consistent with SFAS 123, the Partnership's
net income and earnings per share would have been as indicated by the pro-forma
amounts below:
<TABLE>
<CAPTION>
1998 1997 1996
------------ ----------- ------------
(In thousands
except per Unit amounts)
<S> <C> <C> <C>
Net income
As reported ....................... $ 52,007 $ 6,383 $ 49,337
Pro forma ......................... $ 52,006 $ 6,387 $ 49,318
Basic earnings per unit
As reported and Pro forma ......... $ 1.93 $ 0.25 $ 2.03
Diluted earnings per unit
As reported and Pro forma ......... $ 1.92 $ 0.25 $ 2.02
</TABLE>
37
<PAGE>
BUCKEYE PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Options granted in 1998 vest after 3 years following the date of the
grant. 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 granted prior
to 1998 vests after three, four and five years following the date of the grant.
The assumptions used for options granted in 1998, 1997 and 1996 are indicated
below.
<TABLE>
<CAPTION>
Risk-free Interest Rate Expected Life (Years)
------------------------------- ------------------------------
Year of Dividend Vesting Period Vesting Period
Option Grant Yield Volatility 3 Years 4 Years 5 Years 3 Years 4 Years 5 Years
- -------------- ---------- ------------ --------- --------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1998 7.1% 24.7% 5.5% N/A N/A 3.50 N/A N/A
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
</TABLE>
Options granted in 1998 assume a dividend yield of 7.1 percent. No
dividend yield was assumed on options granted prior to 1998 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, 1998, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------------------ ------------------------ -------------------------
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 ..... 221,140 $ 15.51 197,340 $ 15.36 186,240 $ 14.18
Granted .............................. 20,300 29.50 51,900 21.07 72,000 19.00
Exercised ............................ (21,000) 11.78 (28,100) 13.74 (60,900) 12.06
------- ------- -------
Outstanding at end of year ........... 220,440 15.71 221,140 15.51 197,340 15.36
======= ======= =======
Options exercisable at year-end ...... 49,540 20,140 5,040
Weighted average fair value of
options granted during the year ..... $ 3.75 $ 5.62 $ 4.41
</TABLE>
The following table summarizes information relating to LP Unit options
outstanding under the Option Plan at December 31, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------------------------- ------------------------------
Options Weighted Average Weighted Options Weighted
Range of Outstanding Remaining Average Exercisable Average
Exercise Prices at 12/31/98 Contractual Life Exercise Price at 12/31/98 Exercise Price
- ------------------ ------------- ------------------ ---------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
$6.00 to $10.00 8,340 3.2 Years $ 7.48 8,340 $ 7.48
$10.01 to $15.00 128,600 5.8 Years 13.16 29,500 12.62
$15.01 to $20.00 63,200 7.0 Years 17.55 11,700 15.59
$20.01 to $30.00 20,300 9.5 Years 29.50 -- --
------- ------
Total 220,440 6.4 Years 15.71 49,540 12.45
======= ======
</TABLE>
At December 31, 1998, there were 330,100 LP Units available for future
grants under the Option Plan.
38
<PAGE>
BUCKEYE PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
12. EMPLOYEE STOCK OWNERSHIP PLAN
In connection with the Acquisition, the ESOP was formed for the benefit of
employees of BMC, the General Partner and shareholders of BMC. BMC borrowed $63
million pursuant to a 15-year term loan from a third-party lender. BMC 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 BMC 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 BMC for certain executive compensation costs was permanently
released, the incentive compensation paid by the Partnership to BMC 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 BMC and certain of
its affiliates.
Total ESOP related costs charged to earnings during 1998 were $1,196,000,
representing a non-cash accrual of the current year's portion of the estimated
difference between the total distributions to be received on the LP Units and
the total debt service requirements under the ESOP loan (the "top-up
provision").
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 the accrual of
a $460,000 top-up provision. 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 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.
As a result of the ESOP Restructuring 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.
39
<PAGE>
BUCKEYE PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
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. Services
Company stock, allocated to employees, receives stock dividends in lieu of
cash, while cash dividends are used to pay principal and interest on the ESOP
loan.
13. LEASES AND COMMITMENTS
The Operating Partnerships lease certain land and rights-of-way. Minimum
future lease payments for these leases as of December 31, 1998 are
approximately $2.8 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 General Partner 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, 1998
were as follows: $610,000 for 1999, $408,000 for 2000, $371,000 for 2001,
$359,000 for 2002, $333,000 for 2003 and $954,000 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
thirteen 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 $7,192,000, $6,606,000 and
$5,276,000 for 1998, 1997 and 1996, respectively.
14. RELATED PARTY TRANSACTIONS
The Partnership and the Operating Partnerships are managed by the General
Partner. Under certain partnership agreements and management agreements, BMC,
the General Partner, Services Company 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 Acquisition in March 1996, the Partnership
Agreement was amended to (a) extend the period under which the General Partner
would agree to act as general 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 by any successor general partner of the Partnership, and (c) reduce
the threshold for payment of Restricted Payments by BMC or the General Partner
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.
40
<PAGE>
BUCKEYE PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
In March 1996, the Incentive Compensation Agreement was amended and
restated to delete American Financial as a party to the agreement and clarify
that the 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.
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 connection with the ESOP Restructuring, the General Partner's
employees were transferred to Services Company. Services Company employs all of
the employees previously employed by the General Partner and has become the
sponsor of all of the employee benefit plans previously maintained by the
General Partner. Services Company also entered into a Services Agreement with
BMC and the General Partner to provide services to the Partnership and the
Operating Partnerships over a 13.5 year term. Services Company is reimbursed by
BMC or the General Partner for its direct and indirect expenses, other than as
described below with respect to certain executive compensation. BMC and the
General Partner are reimbursed by the Partnership and the Operating
Partnerships. Costs reimbursed to BMC, the General Partner or Services Company
by the Partnership and the Operating Partnerships totaled $54.4 million, $57.2
million and $61.1 million in 1998, 1997 and 1996, respectively. The
reimbursable costs include insurance, general and administrative costs,
compensation and benefits payable to officers and employees of BMC, the General
Partner 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 BMC were not charged to the
Partnership after August 12, 1997 pursuant to the Exchange Agreement entered
into among BMC, 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
by Services Company on such LP Units are used to fund obligations of the ESOP.
Distributions paid to Services Company totaled $5,390,000 during 1998 and
$2,483,000 for the period August 12, 1997 through December 31, 1997.
In August 1997, the Incentive Compensation Agreement was further amended
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. Included in minority interests and
other expenses are incentive compensation payments of $6.4 million, $3.0
million and $1.3 million in 1998, 1997 and 1996, respectively.
The management agreements between the General Partner 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 General
Partner 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 BMC and its affiliates are not entitled to be
reimbursed pursuant to the terms of the Exchange Agreement.
41
<PAGE>
BUCKEYE PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
In July 1998, through a consent solicitation approved by more than
two-thirds of the LP Unitholders, amendments to the Partnership Agreement were
adopted to (i) remove the limitation on the number of limited partnership units
of the Partnership that may be issued without the approval of the Unitholders;
(ii) eliminate the restrictions on the amount of debt that can be incurred by
the Partnership or its Operating Partnerships and (iii) remove the limitations
on the amount of capital expenditures that can be made by the Partnership or
the Operating Partnerships in any calendar year.
In December 1998, the Partnership Agreement was amended and restated to
reflect the transfer of the general partnership interest in the Partnership
from BMC to the General Partner.
15. PARTNERS' CAPITAL
Changes in partners' capital for the years ended December 31, 1996, 1997,
and 1998 were as follows:
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
----------- -------------- --------------
(In thousands, except for Units)
<S> <C> <C> <C>
Partners' capital at January 1, 1996 ........... $ 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
Net Income ..................................... 470 51,537 52,007
Distributions .................................. (512) (56,154) (56,666)
Proceeds from exercise of unit options ......... -- 366 366
-------- ----------- -----------
Partners capital December 31, 1998 ............. $ 2,390 $ 296,095 $ 298,485
======== =========== ===========
Units outstanding at January 1, 1996 ........... 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
Units issued pursuant to the unit option and
distribution equivalent plan ................. -- 21,000 21,000
-------- ----------- -----------
Units outstanding at December 31, 1998 ......... 243,914 26,742,606 26,986,520
======== =========== ===========
</TABLE>
42
<PAGE>
BUCKEYE PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Historical Partnership Unit information has been restated to reflect a
two-for-one unit split approved effective February 13, 1998.
The net income per unit for 1998, 1997 and 1996 was calculated using the
weighted average outstanding units of 26,982,099, 25,385,042 and 24,346,706,
respectively.
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 any additional LP Units of a
class or series having preferences or other special or senior rights over the
LP Units.
16. 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 1998, quarterly distributions of $0.525 per GP and LP
Unit were paid in February, May, August and November. 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. All
such distributions were paid on the then outstanding GP and LP Units. Cash
distributions aggregated $56,666,000 in 1998, $44,305,000 in 1997 and
$36,527,000 in 1996.
17. QUARTERLY FINANCIAL DATA (NOT COVERED BY INDEPENDENT AUDITORS' REPORT)
Summarized quarterly financial data for 1998 and 1997 are set forth below.
Quarterly results were influenced by seasonal factors inherent in the
Partnership's business.
<TABLE>
<CAPTION>
1st 2nd 3rd
Quarter Quarter Quarter
-------------------------- -------------------------- --------------------------
1998 1997 1998 1997 1998 1997
------------ ------------ ------------ ------------ ------------ ------------
(In thousands, except per unit amounts)
<S> <C> <C> <C> <C> <C> <C>
Revenue .................... $ 43,048 $ 43,815 $ 47,034 $ 46,398 $ 47,716 $ 47,333
Operating income ........... 16,361 16,844 18,863 16,646 20,088 18,593
Income before
extraordinary loss ........ 10,916 11,526 13,446 11,381 14,436 12,730
Net income ................. 10,916 11,526 13,446 11,381 14,436 12,730
Earnings per Partnership
Unit:
Income before
extraordinary loss ........ 0.40 0.47 0.50 0.47 0.53 0.49
Net income per Unit ........ 0.40 0.47 0.50 0.47 0.53 0.49
Earnings per Partnership
Unit-assuming dilution:
Income before
extraordinary loss ........ 0.40 0.47 0.50 0.47 0.53 0.49
Net income ................. 0.40 0.47 0.50 0.47 0.53 0.49
<CAPTION>
4th
Quarter Total
-------------------------- ----------------------------
1998 1997 1998 1997
------------ ------------ ------------- -------------
(In thousands, except per unit amounts)
<S> <C> <C> <C> <C>
Revenue .................... $ 46,679 $ 47,435 $ 184,477 $ 184,981
Operating income ........... 19,046 19,992 74,358 72,075
Income before
extraordinary loss ........ 13,209 13,170 52,007 48,807
Net income ................. 13,209 (29,254) 52,007 6,383
Earnings per Partnership
Unit:
Income before
extraordinary loss ........ 0.49 0.49 1.93 1.92
Net income per Unit ........ 0.49 (1.08) 1.93 0.25
Earnings per Partnership
Unit-assuming dilution:
Income before
extraordinary loss ........ 0.49 0.49 1.92 1.91
Net income ................. 0.49 (1.08) 1.92 0.25
</TABLE>
The earnings per Partnership Unit presented above reflect a two-for-one
unit split effective February 13, 1998.
43
<PAGE>
BUCKEYE PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
18. EARNINGS PER UNIT
The following is a reconciliation of basic and dilutive income before
extraordinary loss per Partnership Unit for the years ended December 31, 1998,
1997 and 1996:
<TABLE>
<CAPTION>
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 ..... $52,007 $48,807 $49,337
------- ------- -------
Basic earnings per
Partnership Unit ....... 52,007 26,982 $ 1.93 48,807 25,385 $ 1.92 49,337 24,347 $ 2.03
====== ====== ======
Effect of dilutive
securities--options..... -- 104 -- 107 -- 62
------- ------ ------- ------ ------- ------
Diluted earnings per
Partnership Unit ....... $52,007 27,086 $ 1.92 $48,807 25,492 $ 1.91 $49,337 24,409 $ 2.02
======= ====== ====== ======= ====== ====== ======= ====== ======
</TABLE>
Options reported as dilutive securities are related to unexercised options
outstanding under the Option Plan (see Note 11).
19. SUBSEQUENT EVENTS
In February 1999, the General Partner entered into a stipulation and order
of settlement with the New York State Office of Real Property Services and the
City of New York settling various real property tax certiorari proceedings. The
Partnership had challenged its real property tax assessments for a number of
past tax years on that portion of its pipeline that is located in public
right-of-way in New York City. The settlement agreement is expected to result
in a gain of approximately $11.0 million for the Partnership in the second
quarter of 1999. The settlement is contingent upon various conditions set forth
in the stipulation and order of settlement.
In March 1999, the Partnership acquired the fuels division of American
Refining Group, Inc. ("ARG") for cash consideration of $12.6 million. The
assets acquired by the Partnership from ARG include a refined petroleum
products terminal and a transmix processing facility located in Indianola,
Pennsylvania, a transmix processing facility located in Hartford, Illinois and
related assets, including inventories and accounts receivable. The Partnership
will operate such business under the name of Buckeye Refining Company, LLC.
44
<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 perform all management functions for the
Partnership and the Operating Partnerships in their capacities as officers and
directors of the General Partner and Services Company. Directors and officers
of the General Partner are selected by BMC. 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, 71 Mr. Martinelli has been Chairman of the Board and Chief
Chairman of the Board, Executive Officer of the General Partner and BMC for more
Chief Executive Officer than five years. He has been a Director of BMC since October
and Director* 1986. Mr. Martinelli served as President of BMC 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 direc-
tor 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, 54 Mr. Wilson became Vice Chairman of the Board of the General
Vice Chairman Partner on December 31, 1998. He has been a director of the
Director* General Partner for more than five years. Mr. Wilson was Chief
Operating Officer of the General Partner from July 1987 until
July 1998 and President from February 1991 until July 1998. He
was elected Vice Chairman of the Board of BMC in July 1998,
Chief Operating Officer of BMC in January 1997 and President
of BMC in March 1996. Mr. Wilson has been a director of BMC
since February 1995.
Brian F. Billings, 60 Mr. Billings became a director of the General Partner on
Director December 31, 1998. Mr. Billings has been a director of BMC
since October 1986. He served as Chairman of the General Part-
ner until February 1995. Mr. Billings was President of PCEM
from December 1986 to 1995.
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
Name, Age and Present Business Experience During
Position with General Partner Past Five Years
- ------------------------------- ----------------------------------------------------------------
<S> <C>
Neil M. Hahl, 50 Mr. Hahl became a director of the General Partner and BMC in
Director* September 1997. He is President of The Weitling Group, a busi-
ness consulting firm and a Director of American Capital Strate-
gies, Ltd., a specialty finance firm. Mr. Hahl was previously a
director of BMC from February 1989 until March, 1996 and
served as President of BMC 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.
Edward F. Kosnik, 54 Mr. Kosnik became a director of the General Partner on Decem-
Director ber 31, 1998. Mr. Kosnik has been a director of BMC since
October 1986. Since June 1997, he has been President of Ber-
wind Corporation, a diversified company. Mr. Kosnik was
Senior Executive Vice President and Chief Operating Officer of
Alexander & Alexander Services, Inc. from May 1996 until Janu-
ary 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.
Jonathan O'Herron, 69 Mr. O'Herron became a director of the General Partner on
Director December 31, 1998. Mr. O'Herron has been a director of BMC
since September 1997. He had been Managing Director of Laz-
ard Freres & Company, LLC for more than five years.
William C. Pierce, 58 Mr. Pierce became a director of the General Partner on Decem-
Director ber 31, 1998. Mr. Pierce had been a director of BMC since Feb-
ruary 1987. He was Executive Vice President and Group Execu-
tive of Chemical Bank and Chemical Banking Corporation from
November 1992 until his retirement in July 1994.
Ernest R. Varalli, 68 Mr. Varalli has been a director of the General Partner and BMC
Director* since July 1987. He was Executive Vice President, Chief Finan-
cial 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, 77 Mr. Young became a director of the General Partner on Decem-
Director ber 31, 1998. Mr. Young had been a director of BMC 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 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.
46
<PAGE>
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.
Executive Officers of the General Partner
Set forth below is certain information concerning the executive officers
the General Partner who also serve in similar positions in Services Company.
<TABLE>
<CAPTION>
Name, Age and Present Business Experience During
Position Past Five Years
- --------------------------- -----------------------------------------------------------------
<S> <C>
William H. Shea, Jr., 44 Mr. Shea was named President and Chief Operating Officer of
President and Chief the General Partner and BMC in July 1998. Mr. Shea had been
Operating Officer named Executive Vice President of the General Partner in Sep-
tember 1997 and previously served as Vice President of Market-
ing and Business Development of the General Partner 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 is the son-in-law of
Mr. Alfred W. Martinelli.
David J. Martinelli, 38 Mr. Martinelli was named Senior Vice President and Treasurer
Senior Vice President of the General Partner in July 1998 and previously served as
and Treasurer Vice President and Treasurer of the General Partner from June
1996. Mr. Martinelli served as Assistant Treasurer of the Gen-
eral Partner from March 1996 to June 1996. He was employed
in a corporate financial position with Salomon Brothers Inc
from 1993 until 1996. He is the son of Mr. Alfred W. Martinelli.
Stephen C. Muther, 49 Mr. Muther has been Senior Vice President--Administration,
Senior Vice President-- General Counsel and Secretary of the General Partner since
Administration, February 1995. Mr. Muther served as General Counsel, Vice
General Counsel President--Administration and Secretary of the General Part-
and Secretary ner from May 1990 to February 1995.
Steven C. Ramsey, 44 Mr. Ramsey has been Senior Vice President--Finance and Chief
Senior Vice President-- Financial Officer of the General Partner since February 1995.
Finance and Chief Mr. Ramsey served as Vice President and Treasurer of the Gen-
Financial Officer eral Partner from February 1991 to February 1995.
</TABLE>
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 fees as directors. Directors'
fees paid by BMC in 1998 to its directors amounted to $147,800. Mr. Hahl
received $118,100 for consulting services, and Mr. Varalli was paid a
consulting fee in the amount of $112,500. Each of these payments were
reimbursed by the Partnership. Members of the Board of Directors of Services
Company are not compensated for their services as directors.
47
<PAGE>
Executive Compensation
Prior to the consummation of the ESOP Restructuring on August 12, 1997,
executive officers of the General Partner and other employees of the General
Partner received compensation and benefits 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 for certain compensation and
fringe benefit costs for executive level duties performed by the General
Partner with respect to operations, finance, legal, marketing and business
development, and treasury, as well as the President of the General Partner. See
"Certain Relationships and Related Transactions."
Executive Officer Severance Agreements
BMC, Services Company and Glenmoor entered into severance agreements in
May 1997 with four executive officers of the General Partner providing for the
payment of severance compensation equal to the amount of annual base salary and
incentive compensation then being paid to such individuals (the "Severance
Compensation Amount"). Such officers were C. Richard Wilson, then President and
Chief Operating Officer; Michael P. Epperly, then Senior Vice
President--Operations; Steven C. Ramsey, Senior Vice President--Finance; and
Stephen C. Muther, Senior Vice President - Administration, General Counsel and
Secretary. The severance agreements provide for 1.5 times the Severance
Compensation Amount upon termination of such 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. Any costs incurred under
the severance agreements was to be reimbursed by the Partnership.
In April 1998, in connection with the realignment of senior management,
Mr. Wilson was named Vice Chairman and was succeeded as President and Chief
Operating Officer of the General Partner by William H. Shea, Jr. Mr. Epperly's
position was eliminated, and his responsibilities were assigned to other
officers. The General Partner entered into agreements with each of Messrs.
Wilson and Epperly under which they would receive the equivalent of the
Severance Compensation Amount and certain additional compensation pending their
retirement. Thereafter, each of Messrs. Wilson and Epperly agreed to provide
certain consulting services to the General Partner for a period of 60 months
for a fixed annual fee. Total costs incurred in 1998 under Messrs. Wilson's and
Epperly's severance agreements amounted to $0.9 million. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Results of Operations".
Director Recognition Program
The General Partner has adopted the Director Recognition Program (the
"Recognition Program") that had been instituted by BMC 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 or BMC. A minimum of three full years of service as a member of
the Board of Directors 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 March 15, 1999. No other person or group is known to be the
beneficial owner of more than 5 percent of the LP Units as of March 15, 1999.
48
<PAGE>
The following table sets forth certain information, as of March 15, 1999,
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 by all directors and
executive officers of the General Partner 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 owned beneficially, as of March 15, 1999, 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)
Neil M. Hahl ....................................................... 2,000(2)
Edward F. Kosnik ................................................... 10,000(2)
Alfred W. Martinelli ............................................... 9,000(2)
Stephen C. Muther .................................................. 13,500
Jonathan O'Herron .................................................. 14,800
William C. Pierce .................................................. 1,600(2)
Steven C. Ramsey ................................................... 14,000
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 13 persons, including those named above) .......... 107,100
</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 pursuant to the Amended and Restated Agreement of Limited Partnership
(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 General Partner
and the Operating Partnerships (the "Management Agreements"). BMC, which had
been general partner of the Partnership, contributed its general partnership
interest and certain other assets to the General Partner effective December 31,
1998. The General Partner is a wholly-owned subsidiary of BMC.
Under the Partnership Agreement and the Operating Partnership Agreements,
as well as the Management Agreements, the General Partner 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 (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.
49
<PAGE>
On March 22, 1996, BAC, now Glenmoor, acquired all of the common stock of
BMC from a subsidiary of American Financial for $63 million. The purchase price
was financed in part through the ESOP. 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.
Glenmoor is entitled to receive an annual management fee for certain
management functions it provides to the General Partner pursuant to a
Management Agreement among Glenmoor, BMC and the General Partner. The amount is
approved each year by the disinterested directors of the General Partner. The
management fee includes a Senior Administrative Charge of not less than
$975,000, reimbursement for certain compensation costs and expenses and
participation of Glenmoor employees in the General Partner's employee benefit
plans, including the ESOP. Amounts paid to Glenmoor in 1998 for management fees
equaled $2.4 million, including $1.0 for Senior Administrative Charge and $1.4
million of reimbursed expenses. Amounts paid in 1997 to Glenmoor for management
fees equaled $3.1 million, including $1.0 million for the Senior Administrative
Charge and $2.1 million of reimbursed expenses.
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 BAC with a beneficial ownership
interest in LP Units. The Partnership issued 2,573,146 LP Units to Services
Company in consideration 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.
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, BMC,
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 provision"), 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.
In connection with the ESOP Restructuring, the General Partner's employees
were transferred to Services Company. Services Company employs all of the
employees previously employed by the General Partner and has become the sponsor
of all of the employee benefit plans previously maintained by the General
Partner. Services Company also entered into a Services Agreement with BMC and
the General Partner to provide services to the Partnership and the Operating
Partnerships over a 13.5 year term. Services Company is reimbursed by BMC or
the General Partner for its direct and indirect expenses. Costs reimbursed to
BMC, the General Partner or Services Company by the Partnership and the
Operating Partnerships totaled $54.4 million and $57.2 million in 1998 and
1997, respectively. Compensation and benefit costs of certain executive
officers of BMC or the General Partner were not charged to the Partnership
after August 12, 1997 pursuant to the Exchange Agreement.
50
<PAGE>
The following chart depicts the ownership relationships among the Partnership,
the General Partner and various other parties:
____________ ____________ _____________________
| | | | | |
| Public | | | | |
|Unitholders | | ESOP | | Glenmoor |
|____________| |____________| |_____________________|
| | |
| | 100% | 100%
| | |
| ____________ _____________________
| | | | |
| | Services | | |
| | Company | | BMC |
| |____________| |_____________________|
\ / |
\ / |
90% \ / 9% | 100%
\ / |
______________ _____________________
| | 1% | |
| Buckeye |__________________|Buckeye Pipe Line Co.|
|Partners, L.P.| | (General Partner) |
|______________| |_____________________|
| |
| 99% |
| |
______________ |
| | 1% |
| Operating |_____________________________|
| Partnerships |
|______________|
As part of the ESOP Restructuring, the Incentive Compensation Agreement
was amended to change the target and payment thresholds, and 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 the date of the closing of the initial public
offering in December 1986. Incentive compensation paid by the Partnership for
quarterly cash distributions totaled $6,405,000 and $3,042,000 in 1998 and 1997
respectively. No special cash distributions have ever been paid by the
Partnership.
On December 31, 1998, BMC transferred its general partnership interest and
certain other assets relating to the Partnership to the General Partner and the
General Partner assumed certain liabilities and obligations of BMC, including
the liabilities and obligations of BMC under the Exchange Agreement, the
Services Agreement and the Incentive Compensation Agreement.
On February 4, 1999, the General Partner announced a quarterly
distribution of $0.525 per GP and LP Unit payable on February 26, 1999. 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.
51
<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 23.
(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)
- ----------------
<S> <C>
*3.1 -- Amended and Restated Agreement of Limited Partnership of the
Partnership, dated as of December 31, 1998.
*3.2 -- Certificate of Amendment to Amended and Restated Certificate of
Limited Partnership of the Partnership, dated as of December 31, 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. (8) (Exhibit 4.1)
4.2 -- Note Agreement, dated as of December 16, 1997, between Buckeye
and The Prudential Insurance Company of America. (8) (Exhibit 4.2)
4.3 -- Defeasance Trust Agreement, dated as of December 16, 1997, between
and among PNC Bank, National Association, and Douglas A. Wilson, as
Trustees. (8) (Exhibit 4.3)
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. ss.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. (8) (Exhibit 10.2)
10.3 -- Management Agreement, dated November 18, 1986, between the
Manager and Buckeye. (1)(3) (Exhibit 10.4)
10.4 -- Amended and Restated Management Agreement, dated November 18,
1986 between the General Partner, Buckeye and Glenmoor. (7)
(Exhibit 10.2)
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
Exhibit Number
(Referenced to
Item 601 of
Regulation S-K)
- ------------------
<S> <C>
10.5 -- Amendment to Management Agreement dated as of August 12, 1997
between the General Partner, Buckeye and Glenmoor. (8) (Exhibit
10.5)
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 March 22, 1997 between the General Partner
and the Partnership. (8) (Exhibit 10.7)
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. (8) (Exhibit 10.8)
10.9 -- Services Agreement, dated as of August 12, 1997, among the General
Partner, the Manager and Services Company. (8) (Exhibit 10.9)
10.10 -- Exchange Agreement, dated as of August 12, 1997, among the General
Partner, the Manager the Partnership and the Operating Partnership.
(8) (Exhibit 10.10)
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. (8) (Exhibit 10.13)
*10.14 -- Contribution, Assignment and Assumption Agreement, dated as of
December 31, 1998, between Buckeye Management Company and
Buckeye Pipe Line Company.
*10.15 -- Director Recognition Program of the General Partner.
*10.16 -- Credit Agreement dated as of December 16, 1998 among Buckeye Pipe
Line Company, L.P., Buckeye Partners, L.P., First Union National Bank
as Agent, The First National Bank of Chicago as Documentation Agent
and the Lenders party thereto.
*10.17 -- Guaranty Agreement dated December 16, 1998 by Buckeye Partners,
L.P. in favor of First Union National Bank, as agent for the lenders that
are or become parties to the Credit Agreement dated as of December
16, 1998 among Buckeye Pipe Line Company, L.P., Buckeye Partners,
L.P., First Union National Bank as Agent, The First National Bank of
Chicago as Documentation Agent and the Lenders party thereto.
21.1 -- List of subsidiaries of the Partnership. (7) (Exhibit 21.1)
*27 -- Financial Data Schedule.
</TABLE>
53
<PAGE>
- ---------------
(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.
(8) 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
1997.
* Filed herewith
(b) Reports on Form 8-K filed during the quarter ended December 31, 1998:
None
54
<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 Pipe Line Company,
as General Partner
Dated: March 17, 1999 By: /s/ ALFRED W. MARTINELLI
-------------------------------------
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.
Dated: March 17, 1999 By: /s/ BRIAN F. BILLINGS
-------------------------------------
Brian F. Billings
Director
Dated: March 17, 1999 By: /s/ NEIL M. HAHL
-------------------------------------
Neil M. Hahl
Director
Dated: March 17, 1999 By: /s/ EDWARD F. KOSNIK
-------------------------------------
Edward F. Kosnik
Director
Dated: March 17, 1999 By: /s/ JONATHAN O'HERRON
-------------------------------------
Jonathan O'Herron
Director
Dated: March 17, 1999 By: /s/ ALFRED W. MARTINELLI
-------------------------------------
Alfred W. Martinelli
Chairman of the Board and Director
(Principal Executive Officer)
Dated: March 17, 1999 By: /s/ WILLIAM C. PIERCE
-------------------------------------
William C. Pierce
Director
Dated: March 17, 1999 By: /s/ ERNEST R. VARALLI
-------------------------------------
Ernest R Varalli
Director
Dated: March 17, 1999 By: /s/ C. RICHARD WILSON
-------------------------------------
C. Richard Wilson
Director
Dated: March 17, 1999 By: /s/ ROBERT H. YOUNG
-------------------------------------
Robert H. Young Director
55
<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, 1998 and 1997, and for each of the
three years in the period ended December 31, 1998, and have issued our report
thereon dated January 28, 1999; 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 28, 1999
S-1
<PAGE>
SCHEDULE I
BUCKEYE PARTNERS, L.P.
Registrant's Condensed Financial Statements
(In thousands)
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
---------------------------
1998 1997
------------ ------------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents ....................................... $ 30 $ 469
Temporary investments ........................................... -- 740
Other current assets ............................................ 44 554
--------- ---------
Total current assets .......................................... 74 1,763
Investments in and advances to subsidiaries (at equity) ......... 298,566 302,265
--------- ---------
Total assets .................................................. $ 298,640 $ 304,028
========= =========
Liabilities and partners' capital
Current liabilities .............................................. $ 155 $ 1,250
--------- ---------
Partners' capital
General Partner ................................................. 2,390 2,432
Limited Partners ................................................ 296,095 300,346
--------- ---------
Total partners' capital ....................................... 298,485 302,778
--------- ---------
Total liabilities and partners' capital ....................... $ 298,640 $ 304,028
========= =========
</TABLE>
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------
1998 1997 1996
-------------- ---------- --------------
<S> <C> <C> <C>
Equity in income of subsidiaries .................. $ 58,415 $ 9,418 $ 50,674
Operating (expenses) credits ...................... (6) 17 (8)
Interest income ................................... 3 48 55
Interest and debt expense ......................... -- (58) (58)
Incentive compensation to General Partner ......... (6,405) (3,042) (1,326)
--------- -------- ---------
Net income .................................. $ 52,007 $ 6,383 $ 49,337
========= ======== =========
</TABLE>
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------
1998 1997 1996
----------- ------------ -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income ................................................. $ 52,007 $ 6,383 $ 49,337
Adjustments to reconcile net income to net cash provided by
operating activities:
Decrease (increase) in investment in subsidiaries ......... 3,699 37,555 (13,590)
Change in assets and liabilities:
Temporary investments ................................... 740 4,533 (4,378)
Other current assets .................................... 510 (481) (29)
Current liabilities ..................................... (1,095) (4,947) 1,204
--------- --------- ---------
Net cash provided by operating activities ............... 55,861 43,043 32,544
Cash flows from financing activities:
Capital contributions ...................................... -- 5 10
Proceeds from exercise of unit options ..................... 366 516 974
Distributions to Unitholders ............................... (56,666) (44,305) (36,527)
--------- --------- ---------
Net decrease in cash and cash equivalents .................. (439) (741) (2,999)
Cash and cash equivalents at beginning of period ........... 469 1,210 4,209
--------- --------- ---------
Cash and cash equivalents at end of period ................. $ 30 $ 469 $ 1,210
========= ========= =========
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>
CONFORMED COPY
================================================================================
AMENDED AND RESTATED AGREEMENT
OF
LIMITED PARTNERSHIP
OF
BUCKEYE PARTNERS, L.P.
(As Amended and Restated as of December 31, 1998)
================================================================================
<PAGE>
BUCKEYE PARTNERS, L.P.
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
"Affiliate"....................................................................1
"Agent" ......................................................................2
"Agreed Value".................................................................2
"Agreement"....................................................................2
"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".................................................................3
"Designated Expenses"..........................................................3
"Eighty Percent Interest"......................................................3
"ESOP" ......................................................................3
"ESOP Loan"....................................................................3
"Exchange Act".................................................................3
"Exchange Agreement"...........................................................3
"General Partner"..............................................................3
"GP Unit"......................................................................3
"Incentive Compensation Agreement".............................................3
"Indemnitee"...................................................................4
"Issue Price"..................................................................4
"Limited Partner"..............................................................4
"Liquidator"...................................................................4
"LP Certificate"...............................................................4
"LP Unit"......................................................................4
"Majority Interest"............................................................4
"Management Agreements"........................................................4
"Manager"......................................................................4
i
<PAGE>
"NASDAQ" ......................................................................4
"National Securities Exchange..................................................4
"Net Agreed Value".............................................................4
"Operating Partnership Agreements".............................................4
"Operating Partnerships".......................................................4
"Opinion of Counsel"...........................................................4
"Organizational Limited Partner"...............................................5
"Partner"......................................................................5
"Partnership"..................................................................5
"Partnership Interest".........................................................5
"Partnership Securities".......................................................5
"Percentage Interest"..........................................................5
"Person" ......................................................................5
"Pipe Line"....................................................................5
"Recapture Income".............................................................5
"Record Date"..................................................................5
"Record Holder" or "Holder"....................................................5
"Restricted Payment"...........................................................5
"Securities Act"...............................................................5
"Time of Delivery".............................................................5
"Transfer Agent"...............................................................5
"Two-Thirds Interest"..........................................................6
"Unit" ......................................................................6
"Unit Price" ..................................................................6
"Units Register" ..............................................................6
"Unrealized Gain"..............................................................6
"Unrealized Loss"..............................................................6
ARTICLE II
ORGANIZATIONAL MATTERS
2.1 Formation....................................................6
2.2 Name.........................................................7
2.3 Principal Office; Registered Office..........................7
2.4 Power of Attorney............................................7
2.5 Term.........................................................8
2.6 Organizational Limited Partner...............................8
2.7 Organizational Certificate...................................8
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................................9
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
7.4 Compensation and Reimbursement of the General Partner.......18
iii
<PAGE>
7.5 Purchase or Sale of LP Units and Other Partnership Securities..18
7.6 Partnership Funds..............................................18
7.7 Outside Activities; Contracts with Affiliates; Loans to or
from Affiliates..............................................19
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. ................21
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.............................................23
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 Certain Amendments.............................................35
17.3 Sale of Assets.................................................35
17.4 Restricted Payments by General Partner or Manager..............35
ARTICLE XVIII
RIGHT TO PURCHASE UNITS
18.1 Right to Purchase Units........................................36
18.2 Notice of Election to Purchase.................................36
18.3 Purchase and Transfer of Units.................................36
ARTICLE XIX
GENERAL PROVISIONS
19.1 Opinions Regarding Taxation as a Partnership...................37
19.2 Personal Property..............................................37
19.3 Addresses and Notices..........................................37
19.4 Headings.......................................................37
19.5 Binding Effect.................................................38
19.6 Integration....................................................38
19.7 Waiver.........................................................38
19.8 Counterparts...................................................38
19.9 Severability...................................................38
19.10 Applicable Law.................................................38
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 31, 1998, is entered into by and among BUCKEYE PIPE LINE COMPANY, a
Delaware corporation, PENNSYLVANIA COMPANY, a Delaware corporation, and the
additional Persons that become Partners of the Partnership as provided herein.
BACKGROUND
On December 31, 1998, Buckeye Management Company assigned and
transferred certain assets and liabilities, including all of its GP Units (as
defined in Article I below), to Buckeye Pipe Line Company. Buckeye Pipe Line
Company accepted the transfer of those certain assets and liabilities and the GP
Units, and became the general partner of Buckeye Partners, L.P. The Partnership
Agreement is hereby being amended and restated to reflect (i) the assignment and
transfer of certain assets and liabilities, including the transfer of all of its
GP Units, by Buckeye Management Company, and (ii) the assumption by Buckeye Pipe
Line Company of the role of successor general partner of Buckeye Partners, L.P.
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
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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.
"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).
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"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 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.
"General Partner" means Pipe Line, in its capacity as the general
partner of the Partnership, and any successor to Pipe Line 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.
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"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, 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.
"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
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
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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.
"Partnership Securities" has the meaning specified in Section 4.3.
"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.
"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.
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"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 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).
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"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 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:
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(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 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.
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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.
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
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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 equity security that the Partnership may
lawfully issue, any secured or unsecured debt obligations of the Partnership, or
debt obligations of the Partnership convertible into any class or series of
equity securities of the Partnership (collectively, "Partnership Securities"),
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.
(b) Without limiting the generality of the foregoing (but subject to
the provisions of Section 17.1), the additional Partnership Securities to be
issued by the Partnership under this Section 4.3 may contain provisions with
respect to (i) the allocation of items of Partnership income, gain, loss,
deduction and credit; (ii) the right to share in Partnership distributions;
(iii) rights upon dissolution and liquidation of the Partnership; (iv) whether
any such issue of Partnership Securities may be acquired by the Partnership, by
purchase, redemption or otherwise, and if so, the price at which, and the terms
and conditions upon which, such Partnership Securities may be purchased,
redeemed or otherwise acquired by the Partnership; (v) the conversion rights
applicable to any such issue of Partnership Securities, and if so, the rate at
which, and the terms and conditions upon which, such Partnership Securities may
be converted into any other class or series of Partnership Securities; (vi) the
terms and conditions upon which any such Partnership Securities will be issued,
assigned, or transferred; and (vii) the right, if any, of the holders of any
such issue of Partnership Securities to vote on Partnership matters.
(c) 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
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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 being so issued, all
without the approval of any Limited Partners, except as provided in Section
17.1.
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 and Other Partnership Securities. The
General Partner may, on behalf of the Partnership, purchase or otherwise acquire
or sell or otherwise dispose of LP Units and other Partnership Securities. As
long as LP Units are held by the Partnership or any of the Operating
Partnerships, such LP Units or other Partnership Securities 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 and other Partnership Securities 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.
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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.
(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
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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.
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
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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 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).
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(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 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.
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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 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
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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.
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
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number of such LP Units being so issued. LP Certificates shall be executed on
behalf of the 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) Pipe Line 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) the 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. Pipe Line further agrees that it shall not
withdraw as general partner of any Operating Partnership, except in connection
with its withdrawal 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 take the
action proposed are dated as of a date not more than 90 days prior to the date
sufficient
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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 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 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.
17.3 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.
17.4 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.
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(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.
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
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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 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.
37
<PAGE>
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 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.
38
<PAGE>
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 PIPE LINE COMPANY,
as General Partner
By: /s/ William H. Shea, Jr.
--------------------------------------------
Title: President and Chief Operating Officer
39
<PAGE>
CERTIFICATE OF AMENDMENT
TO
AMENDED AND RESTATED
CERTIFICATE OF LIMITED PARTNERSHIP
OF
BUCKEYE PARTNERS, L.P.
The undersigned, desiring to amend the Amended and Restated
Certificate of Limited Partnership of Buckeye Partners, L.P. (the "Partnership")
pursuant to the provisions of Section 17-202 of the Revised Uniform Limited
Partnership Act of the State of Delaware does hereby certify as follows:
FIRST: The name of the limited partnership is Buckeye Partners, L.P.
SECOND: The Amended and Restated Certificate of Limited Partnership
(the "Certificate") was filed in the Office of the Secretary of State of
Delaware on February 4, 1998.
THIRD: The previous general partner of the Partnership, Buckeye
Management Company, having transfered its interest in the Partnership to a
successor general partner, Buckeye Pipe Line Company, hereby amends and restates
Section 4 of the Certificate in its entirety to read as follows:
General Partner. The name and the business address of
the sole general partner of the Partnership is: Buckeye Pipe
Line Company, a Delaware corporation, 3900 Hamilton Boulevard,
Allentown, Pennsylvania 18103.
IN WITNESS WHEREOF, the undersigned General Partner has duly
executed this Certificate of Amendment to Amended and Restated Certificate of
Limited Partnership as of the date and year first aforesaid.
BUCKEYE PIPE LINE COMPANY,
a Delaware Corporation, as sole General
Partner
By: /s/ Steven C. Ramsey
------------------------------------
Name: Steven C. Ramsey
Title: Senior Vice President, Finance
and Chief Financial Officer
<PAGE>
CONTRIBUTION, ASSIGNMENT AND ASSUMPTION AGREEMENT
This CONTRIBUTION, ASSIGNMENT AND ASSUMPTION AGREEMENT (this
"Agreement"), dated as of December 31, 1998, is made by and between Buckeye
Management Company, a Delaware corporation (the "Corporation"), and Buckeye Pipe
Line Company, a Delaware corporation and wholly-owned subsidiary of the
Corporation ("Pipe Line").
W I T N E S S E T H
WHEREAS, the Corporation holds a 1% general partnership
interest (the "GP Interest") in Buckeye Partners, L.P., a Delaware limited
partnership (the "Partnership"), and serves as the sole general partner of the
Partnership;
WHEREAS, the Corporation desires to contribute to Pipe Line
certain assets, including the Corporation's GP Interest, and Pipe Line desires
to assume the role of successor general partner of the Partnership under the
Amended and Restated Agreement of Limited Partnership, as amended and restated
as of July 17, 1998 (the "Partnership Agreement"), as well as certain other
liabilities of the Corporation, upon the terms and subject to the conditions set
forth herein; and
WHEREAS, Section 11.1 of the Partnership Agreement allows the
Corporation to transfer the GP Interest to Pipe Line; and
WHEREAS, Section 11.2 of the Partnership Agreement provides
that any transferee of the GP Interest pursuant to Section 11.1 shall
automatically be admitted to the Partnership as successor general partner of the
Partnership, and that the transferor of such GP Interest shall automatically
cease to be the general partner of the Partnership.
NOW THEREFORE, in consideration of the foregoing and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound hereby, the parties hereto
hereby agree as follows:
1. Contribution and Assignment. The Corporation hereby grants, bargains, sells,
conveys, assigns, transfers and delivers all of the assets described on Exhibit
A hereto (the "Assets") to Pipe Line, and its successors and assigns, and Pipe
Line hereby accepts such Assets, as a contribution to capital, at and as of the
date hereof.
2. Assumption of Liabilities. As consideration for the grant, bargain, sale,
conveyance, assignment, transfer and delivery made under Section 1 hereof, Pipe
Line hereby assumes and agrees to perform and fully discharge all of the
liabilities described on Exhibit B
<PAGE>
hereto (the "Liabilities"). Pipe Line hereby agrees to indemnify, defend and
hold harmless the Corporation, its successors and assigns, of and from any and
all costs, liabilities and expense, including court costs and attorneys fees,
arising from or connected with the Liabilities hereby assumed.
3. Further Assurances. The Corporation hereby covenants and agrees that, at any
time and from time to time after the delivery of this Agreement, at Pipe Line's
request and expense, the Corporation, its successors and assigns will do,
execute, acknowledge and deliver, or will cause to be done, executed,
acknowledged and delivered, any and all such further acts, conveyances,
transfers, assignments, powers of attorney and assurances as Pipe Line
reasonably may require to more effectively grant, convey, assign, transfer, set
over to or vest in Pipe Line the Assets, or to better enable Pipe Line to
realize upon or otherwise enjoy the Assets or to carry into effect the intent
and purposes of this Agreement.
4. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without reference to the
choice of law principles thereof.
5. Counterparts. This Agreement may be executed in two counterparts, each of
which shall be deemed an original, but all of which shall be considered one and
the same agreement.
2
<PAGE>
IN WITNESS WHEREOF, this Agreement has been signed by or on
behalf of each of the parties as of the date first written above.
BUCKEYE MANAGEMENT COMPANY
By /s/ William H. Shea, Jr.
------------------------------------------------
Name: William H. Shea, Jr.
Title: President and Chief Operating Officer
BUCKEYE PIPE LINE COMPANY
By /s/ Steven C. Ramsey
------------------------------------------------
Name: Steven C. Ramsey
Title: Senior Vice President, Finance and Chief
Financial Officer
3
<PAGE>
EXHIBIT A
ASSETS
1. Units representing the 1% general partnership interest in Buckeye Partners,
L.P., together with all right, title and interest of the Corporation in, to and
under that certain Amended and Restated Agreement of Limited Partnership of
Buckeye Partners, L.P., as amended and restated as of July 17, 1998;
2. All rights, title and interest of the Corporation in and to the Debt Service
Reserve Account maintained under the Amended and Restated Collateral Assignment
of Deposit Accounts, dated as of August 12, 1997 (the ACollateral Assignment@),
among CoreStates Bank, N.A., as Collateral Trustee, the Corporation, and certain
of its affiliates;
3. All goodwill of the Corporation;
4. All right, title and interest of the Corporation in, to and under that
certain Amended and Restated Incentive Compensation Agreement dated as of March
22, 1996, as amended as of August 12, 1997, between the Corporation and Buckeye
Partners, L.P.;
5. All right, title and interest of the Corporation in, to and under that
certain Management Agreement dated as of January 1, 1998, among the Corporation,
Buckeye Pipe Line Company, and Glenmoor, Ltd.;
6. All right, title and interest of the Corporation in, to and under that
certain Services Agreement, dated as of August 12, 1997, among the Corporation,
Buckeye Pipe Line Company and Buckeye Pipe Line Services Company; and
7. All right, title and interest of the Corporation in, to and under that
certain Exchange Agreement, dated as of August 12, 1997, among the Corporation,
Buckeye Partners, L.P., Buckeye Pipe Line Company, Buckeye Pipe Line Company,
L.P., Buckeye Pipe Line Company of Michigan, L.P., Laurel Pipe Line Company,
L.P., Everglades Pipe Line Company, L.P., Buckeye Tank Terminals, L.P., and BMC
Acquisition Company (now known as Glenmoor, Ltd.).
<PAGE>
EXHIBIT B
LIABILITIES
1. All liabilities and obligations of the Corporation under that certain Amended
and Restated Incentive Compensation Agreement dated as of March 22, 1996, as
amended as of August 12, 1997, between the Corporation and Buckeye Partners,
L.P., arising after the date hereof;
2. All liabilities and obligations of the Corporation under that certain
Management Agreement dated as of January 1, 1998, among the Corporation, Buckeye
Pipe Line Company, and Glenmoor, Ltd., arising after the date hereof; and
3. All liabilities and obligations of the Corporation under that certain
Services Agreement, dated as of August 12, 1997, among the Corporation, Buckeye
Pipe Line Company and Buckeye Pipe Line Services Company, arising after the date
hereof;
4. All liabilities and obligations of the Corporation under that certain
Exchange Agreement, dated as of August 12, 1997, among the Corporation, Buckeye
Partners, L.P., Buckeye Pipe Line Company, Buckeye Pipe Line Company, L.P.,
Buckeye Pipe Line Company of Michigan, L.P., Laurel Pipe Line Company, L.P.,
Everglades Pipe Line Company, L.P., Buckeye Tank Terminals, L.P., and BMC
Acquisition Company (now known as Glenmoor, Ltd.), arising after the date
hereof.
5. All liabilities and obligations of the Corporation as the general partner
under the Amended and Restated Agreement of Limited Partnership of Buckeye
Partners, L.P., as amended and restated as of July 17, 1998, arising after the
date hereof.
<PAGE>
BUCKEYE PIPE LINE COMPANY
DIRECTOR RECOGNITION PROGRAM
----------------------------
As of January 1, 1999
In recognition of the services provided to Buckeye Pipe Line Company
("BPL") and Buckeye Management Company ("BMC"), its predecessor as general
partner of Buckeye Partners, L.P. (the "Partnership"), by the directors of BPL
and in order to enable BPL to attract and retain high caliber individuals to
serve as directors, BPL deems it appropriate to provide its directors with
certain recognition benefits. Accordingly, the Buckeye Pipe Line Company
Director Recognition Program (the "Program") is hereby established under the
terms and conditions hereinafter set forth. The Program replaces and supersedes
a similar program administered by BMC, and BPL has assumed all of BMC's
liabilities and obligations under the BMC program. No additional benefits shall
be payable by BMC thereunder.
1. Participation in the Program.
-----------------------------
Any member of the Board of Directors of BPL other than a
director who is concurrently serving as an officer or employee of BPL or its
affiliates shall be eligible to participate in the Program (a "Participant").
Any Participant who retires as a director of BMC after having met the applicable
eligibility requirements set forth in Paragraph 2 shall be entitled to the
benefits set forth in Paragraph 3. For purposes of the Program, a Participant's
retirement as a BPL director means his voluntary resignation as a BPL director
or not being nominated for reelection as a BPL director after having served the
minimum period of eligibility set forth in Paragraph 3. A director who is
removed for cause as provided in Section 3.05 of the By-Laws of BPL shall not be
eligible for any benefits under the Program.
2. Eligibility Requirements.
-------------------------
To be eligible for the benefit set forth in Paragraph 3, a BPL
director must have served for at least three full years while qualifying as a
Participant. For purposes of qualifying as a Participant, service as a director
of BMC prior to December 31, 1998, shall be deemed to be service as a director
of BPL. Notwithstanding anything in the Program to the contrary, a Participant
will not be eligible for any benefits under the Program if the Board of
Directors of BPL or a court of competent jurisdiction determines at any time
that such Participant, while acting in such Participant's capacity as a director
of BPL, failed to act in good faith and in a manner he reasonably believed to be
in the best interests, or not opposed to the best interests, of BPL or the
Partnership, or their respective subsidiaries and affiliates or with respect to
any
<PAGE>
criminal action, acted under circumstances where he had reasonable cause to
believe that his conduct was unlawful.
3. Recognition Benefit.
--------------------
Upon retirement as a BPL director, a Participant will receive
in a lump sum payment an amount equal to one of the following:
(a) one times the annual director's fee (excluding attendance
and committee fees) in effect at the time of his retirement, provided
he has been a BPL director for at least three full years but less than
five years;
(b) two times the annual director's fee (excluding attendance
and committee fees) in effect at the time of his retirement, provided
he has been a BPL director for at least five full years but less than
ten years; or
(c) three times the annual director's fee (excluding
attendance and committee fees ) in effect at the time of his
retirement, provided he has been a BPL director for ten full years or
greater.
4. Death Benefit.
--------------
In the event a Participant's death occurs before his
retirement but after such Participant has qualified as a Participant for at
least three full years, a death benefit equal to the benefit payable under
Paragraph 3 (as if such Participant had retired on the date of death) will be
paid to the designated beneficiary or estate of such Participant.
5. Condition to Receipt of Recognition Benefit.
--------------------------------------------
As a condition to receipt of the retirement benefit set forth
in Paragraph 3, a BPL director must agree in writing that for a period of three
years following his retirement:
(a) he will, without further compensation (except
reimbursement of reasonable expenses), provide consulting services upon
reasonable request to BPL (such services shall not exceed the
equivalent of 10 days per year);
(b) he will not, without the prior written consent of BPL's
Chairman, compete with BPL or the Partnership, or their respective
subsidiaries and affiliates, or become an employee or consultant to, or
serve on the board of directors of, any corporation that is engaged in
competition with BPL or the Partnership, or their respective
subsidiaries and affiliates; and
- 2 -
<PAGE>
(c) he will not disclose any confidential or proprietary
information of BPL or the Partnership, or of their respective
subsidiaries and affiliates, or intentionally engage in any activity
causing injury to BPL or the Partnership, or their respective
subsidiaries and affiliates.
6. Emeritus Status.
----------------
Upon retirement as a BPL director, a Participant who was a
member of the BPL Board of Directors for at least ten full years may be
designated by the Board as "Director Emeritus".
Director Emeritus status provides that a former director will
be entitled to receive Board docket and other informational materials routinely
provided to members of the BPL Board of Directors, will be entitled to attend,
at BPL's expense, the meeting of the Board of Directors that is designated as
its annual meeting, and will receive recognition of his Emeritus Director status
in the annual report of the Partnership.
7. Administration.
---------------
The Chairman of the Board of BPL will administer the Program. He shall
have full power and authority to administer the Program and to make, adopt,
construe, and enforce rules and regulations not inconsistent with the provisions
of the Program. The Chairman shall adopt and prescribe the contents of all forms
required in connection with the administration of the Program. He shall have the
fullest discretion permissible under law in the discharge of his duties. The
Chairman's interpretations and decisions with respect to the Program hereunder
shall be final and conclusive as to the rights of the Participants.
8. Authority to Amend or Terminate.
--------------------------------
BPL, by action of its Board of Directors, may amend or terminate the
Program at any time. Notwithstanding the above, no amendment or termination
shall operate to reduce or eliminate the benefit of any individual who is a
Participant and has retired at the time such amendment or termination is
approved.
9. Miscellaneous.
--------------
(a) No Right to Continue on Board. None of the establishment
of the Program, the payment of any benefit hereunder, or any action of
BPL in connection therewith shall be held or construed to confer upon
any individual any right to be elected as a member of the Board of
Directors of BPL.
- 3 -
<PAGE>
(b) Rights and Obligations. The rights and obligations under
the Program shall be binding on a Participant's heirs, executors and
administrators and on the successors and assigns of BPL.
(c) Construction. Where applicable, the singular shall be
construed as the plural and the masculine shall be construed as
feminine. The headings and captions herein (i) are provided for
reference and convenience only, (ii) shall not be considered part of
the Program, and (iii) shall not be employed in the construction of the
Program.
(d) Withholding. If BPL is required to withhold amounts under
applicable federal, state or local tax laws, rules or regulations, BPL
shall be entitled to deduct and withhold such amounts from any cash
payment made under the Program.
(e) Funding of Benefit. In order to meet its deferred
obligation hereunder, BPL may, but shall not be required to, set aside
an amount necessary to provide the benefits provided herein (including
the establishment of trusts). In any event, BPL's obligation to pay
benefits hereunder shall constitute a general unsecured obligation,
payable solely out of its general assets, and no Participant shall have
the right to any specific assets of BPL.
(f) Governing Law. The Program shall be construed in
accordance with and governed by the laws of the State of Delaware.
(g) Designated Expense. The Board of Directors has determined
that the costs and expenses of the Program are being incurred by BPL
for the benefit of the Partnership, and all amounts payable under the
Program shall be "Designated Expenses" under the Partnership's Amended
and Restated Limited Partnership Agreement.
- 4 -
<PAGE>
CREDIT AGREEMENT
Dated as of December 16, 1998
Among
BUCKEYE PIPE LINE COMPANY, L.P.,
as Borrower,
BUCKEYE PARTNERS, L.P.,
as Guarantor,
FIRST UNION NATIONAL BANK,
as Administrative Agent,
THE FIRST NATIONAL BANK OF CHICAGO,
as Documentation Agent
and
THE LENDERS SIGNATORY HERETO
$100,000,000 REVOLVING CREDIT FACILITY
<PAGE>
TABLE OF CONTENTS
ARTICLE I
Definitions and Accounting Matters
Page
----
Section 1.01 Terms Defined Above............................................1
Section 1.02 Certain Defined Terms..........................................1
Section 1.03 Accounting Terms and Determinations...........................16
ARTICLE II
Commitments
Section 2.01 Loans and Letters of Credit...................................17
Section 2.02 Borrowings, Continuations and Conversions of
Revolving Credit Loans; Letters of Credit.....................18
Section 2.03 Changes of Commitments........................................20
Section 2.04 Fees..........................................................21
Section 2.05 Several Obligations...........................................22
Section 2.06 Notes.........................................................22
Section 2.07 Prepayments...................................................23
Section 2.08 Assumption of Risks...........................................23
Section 2.09 Obligation to Reimburse and to Prepay.........................24
Section 2.10 Lending Offices...............................................25
ARTICLE III Payments of Principal and Interest
Section 3.01 Repayment of Loans............................................26
Section 3.02 Interest......................................................26
ARTICLE IV
Payments; Pro Rata Treatment; Computations; Etc.
Section 4.01 Payments......................................................27
Section 4.02 Pro Rata Treatment............................................27
Section 4.03 Computations..................................................27
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<PAGE>
Section 4.04 Non-receipt of Funds by the Agent.............................28
Section 4.05 Set-off, Sharing of Payments, Etc.............................28
Section 4.06 Taxes.........................................................29
ARTICLE V
Capital Adequacy
Section 5.01 Additional Costs..............................................32
Section 5.02 Limitation on LIBOR Loans.....................................33
Section 5.03 Illegality....................................................34
Section 5.04 Base Rate Loans Pursuant to Sections 5.01, 5.02 and 5.03......34
Section 5.05 Compensation..................................................34
Section 5.06 Replacement Lenders...........................................35
ARTICLE VI
Conditions Precedent
Section 6.01 Initial Funding...............................................36
Section 6.02 Initial and Subsequent Loans and Letters of Credit............37
Section 6.03 Conditions Precedent for the Benefit of Lenders...............38
Section 6.04 No Waiver.....................................................38
ARTICLE VII
Representations and Warranties
Section 7.01 Existence.....................................................38
Section 7.02 Financial Condition...........................................38
Section 7.03 Litigation....................................................39
Section 7.04 No Breach.....................................................39
Section 7.05 Authority.....................................................39
Section 7.06 Approvals.....................................................39
Section 7.07 Use of Loans..................................................40
Section 7.08 ERISA.........................................................40
Section 7.09 Taxes.........................................................41
Section 7.10 Titles, etc...................................................41
Section 7.11 No Material Misstatements.....................................42
Section 7.12 Investment Company Act........................................42
Section 7.13 Public Utility Holding Company Act............................42
-ii-
<PAGE>
Section 7.14 Subsidiaries..................................................42
Section 7.15 Location of Business and Offices..............................42
Section 7.16 Defaults......................................................42
Section 7.17 Environmental Matters.........................................42
Section 7.18 Compliance with the Law.......................................43
Section 7.19 Insurance.....................................................44
Section 7.20 Material Agreements...........................................44
Section 7.21 Partnership Agreement.........................................44
Section 7.22 Ownership of Parties..........................................44
ARTICLE VIII
Affirmative Covenants
Section 8.01 Reporting Requirements........................................45
Section 8.02 Litigation....................................................46
Section 8.03 Maintenance, Etc..............................................47
Section 8.04 Environmental Matters.........................................47
Section 8.05 Further Assurances............................................48
Section 8.06 Performance of Obligations....................................48
Section 8.07 ERISA Information and Compliance..............................48
Section 8.08 Year 2000 Compatibility.......................................49
ARTICLE IX
Negative Covenants
Section 9.01 Debt..........................................................49
Section 9.02 Liens.........................................................50
Section 9.03 Investments, Loans and Advances...............................50
Section 9.04 Distributions and Redemptions.................................51
Section 9.05 Sales and Leasebacks..........................................51
Section 9.06 Nature of Business............................................52
Section 9.07 Limitation on Leases..........................................52
Section 9.08 Mergers, Etc..................................................52
Section 9.09 Proceeds of Notes; Letters of Credit..........................52
Section 9.10 ERISA Compliance..............................................52
Section 9.11 Sale or Discount of Receivables...............................54
Section 9.12 Funded Debt Ratio.............................................54
Section 9.13 Fixed Charge Coverage Ratio...................................54
Section 9.14 Sale of Properties............................................54
Section 9.15 Environmental Matters.........................................54
Section 9.16 Transactions with Affiliates..................................54
Section 9.17 Partnership Agreements........................................54
Section 9.18 Senior Notes..................................................55
-iii-
<PAGE>
ARTICLE X
Events of Default; Remedies
Section 10.01 Events of Default............................................55
Section 10.02 Remedies.....................................................57
ARTICLE XI
The Agent
Section 11.01 Appointment, Powers and Immunities...........................57
Section 11.02 Reliance by Agent............................................58
Section 11.03 Defaults.....................................................58
Section 11.04 Rights as a Lender...........................................58
Section 11.05 INDEMNIFICATION..............................................59
Section 11.06 Non-Reliance on Agent and other Lenders......................59
Section 11.07 Action by Agent..............................................59
Section 11.08 Resignation or Removal of Agent..............................60
ARTICLE XII
Miscellaneous
Section 12.01 Waiver.......................................................60
Section 12.02 Notices......................................................60
Section 12.03 Payment of Expenses, Indemnities, etc........................61
Section 12.04 Amendments, Etc..............................................63
Section 12.05 Successors and Assigns.......................................63
Section 12.06 Assignments and Participations...............................63
Section 12.07 Invalidity...................................................65
Section 12.08 Counterparts.................................................65
Section 12.09 References...................................................65
Section 12.10 Survival.....................................................65
Section 12.11 Captions.....................................................65
Section 12.12 NO ORAL AGREEMENTS...........................................66
Section 12.13 GOVERNING LAW; SUBMISSION TO JURISDICTION....................66
Section 12.14 Interest.....................................................67
Section 12.15 Confidentiality..............................................68
Section 12.16 EXCULPATION PROVISIONS.......................................68
-iv-
<PAGE>
ANNEXES, EXHIBITS AND SCHEDULES
Annex I - List of Percentage Shares and Revolving Credit Commitments
Exhibit A-1 - Form of Revolving Credit Note
Exhibit A-2 - Form of Swing Line Note
Exhibit B - Form of Borrowing, Continuation and Conversion Request
Exhibit C - Form of Compliance Certificate
Exhibit D - Form of Assignment Agreement
Exhibit E - Unrestricted Subsidiaries designated on the Closing Date
Schedule 7.02 - Liabilities
Schedule 7.03 - Litigation
Schedule 7.10 - Titles, etc.
Schedule 7.14 - Subsidiaries and Partnerships
Schedule 7.17 - Environmental Matters
Schedule 7.21 - Material Agreements
Schedule 9.01 - Debt
Schedule 9.02 - Liens
Schedule 9.03 - Investments, Loans and Advances
-vi-
<PAGE>
THIS CREDIT AGREEMENT dated as of December 16, 1998 is among: BUCKEYE
PIPE LINE COMPANY, L.P., a limited partnership formed under the laws of the
State of Delaware (the "Borrower"); BUCKEYE PARTNERS, L.P., a limited
partnership formed under the laws of the State of Delaware ("Buckeye Partners");
each of the lenders that is a signatory hereto or which becomes a signatory
hereto as provided in Section 12.06 (individually, together with its successors
and assigns, a "Lender" and, collectively, the "Lenders"); FIRST UNION NATIONAL
BANK, a national banking association (in its individual capacity, "First
Union"), as administrative agent for the Lenders (in such capacity, together
with its successors in such capacity, the "Agent"); and THE FIRST NATIONAL BANK
OF CHICAGO, a national banking association, as documentation agent.
R E C I T A L S
A. The Borrower has requested that the Lenders provide certain loans to
and extensions of credit on behalf of the Borrower; and
B. The Lenders have agreed to make such loans and extensions of credit
subject to the terms and conditions of this Agreement.
C. In consideration of the mutual covenants and agreements herein
contained and of the loans, extensions of credit and commitments hereinafter
referred to, the parties hereto agree as follows:
ARTICLE I
Definitions and Accounting Matters
Section 1.01 Terms Defined Above. As used in this Agreement, the terms
"Agent," "Borrower," "Buckeye Partners," "Lender," "Lenders," and "First Union"
shall have the meanings indicated above.
Section 1.02 Certain Defined Terms. As used herein, the following terms
shall have the following meanings (all terms defined in this Article I or in
other provisions of this Agreement in the singular to have equivalent meanings
when used in the plural and vice versa):
"Additional Costs" shall have the meaning assigned such term in Section
5.01(a).
"Affected Loans" shall have the meaning assigned such term in Section
5.04.
"Affiliate" of any Person shall mean (i) any Person directly or
indirectly controlled by, controlling or under common control with such first
Person, (ii) any director or officer of such first Person or of any Person
referred to in clause (i) above and (iii) if any Person in clause (i) above is
an individual, any member of the immediate family (including parents, spouse and
children) of such individual and any trust whose principal beneficiary is such
individual or one or more members of such immediate family and any Person who is
controlled by any such member or trust. For purposes of this definition, any
Person which owns directly or indirectly 10% or more of the securities having
ordinary voting power for the election of directors or other governing body of a
corporation or 10%
<PAGE>
or more of the partnership or other ownership interests of any other Person
(other than as a limited partner of such other Person) will be deemed to
"control" (including, with its correlative meanings, "controlled by" and "under
common control with") such corporation or other Person.
"Agreement" shall mean this Credit Agreement, as the same may from time
to time be amended or supplemented.
"Aggregate Revolving Credit Commitments" at any time shall equal the
sum of the Revolving Credit Commitments of the Lenders ($100,000,000), as the
same may be reduced pursuant to Section 2.03(a).
"Applicable Lending Office" shall mean, for each Lender and for each
Type of Loan, the lending office of such Lender (or an Affiliate of such Lender)
designated for such Type of Loan on the signature pages hereof or such other
offices of such Lender (or of an Affiliate of such Lender) as such Lender may
from time to time specify to the Agent and the Borrower as the office by which
its Loans of such Type are to be made and maintained.
"Applicable Margin" shall mean for each period identified below the
applicable per annum percentage set forth at the appropriate intersection in the
table shown below, based on the Funded Debt Ratio, for the four quarterly
periods ending on and determined as of the immediately preceding Quarterly Date:
- --------------------------------------------------------------------------------
Funded Debt Ratio Base Rate Loan LIBOR Loan
- --------------------------------------------------------------------------------
Greater than or equal to 4.5:1.0 0.000% 1.000%
- --------------------------------------------------------------------------------
Less than 4.5:1.0, but greater 0.000% 0.775%
than or equal to 4.0:1.0
- --------------------------------------------------------------------------------
Less than 4.0:1.0, but greater 0.000% 0.525%
than or equal to 3.5:1.0
- --------------------------------------------------------------------------------
Less than 3.5:1.0, but greater 0.000% 0.400%
than or equal to 3.0:1.0
- --------------------------------------------------------------------------------
Less than 3.0:1.0, but greater 0.000% 0.325%
than or equal to 2.5:1.0
- --------------------------------------------------------------------------------
Less than 2.5:1.0 0.000% 0.250%
- --------------------------------------------------------------------------------
The Applicable Margin shall be established following each Quarterly Date (each,
a "Determination Date"). Any change in the Applicable Margin following each
Determination Date shall be determined based upon the information and
computations set forth in the Compliance Certificate furnished to the Agent
pursuant to Section 8.01, subject to review and approval of such computations by
the Agent. Each change in the Applicable Margin shall be effective as of the
fifth Business Day following the date such Compliance Certificate and related
financial statements are received (including, without limitation, in respect of
LIBOR Loans then outstanding notwithstanding that such change occurs during an
Interest Period), and shall remain in effect until the date that is the fifth
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Business Day following the first to occur of the date on which a new Compliance
Certificate (i) is delivered for which a change in the Applicable Margin occurs
or (ii) is required to be delivered; provided, however; if the Borrower shall
fail to deliver any required Compliance Certificate within the time period
required by Section 8.01, then, five Business Days after delivery of notice to
the Borrower by the Agent of non-receipt of such Compliance Certificate, the
Applicable Margin shall be the highest percentage amount stated for each Type of
Loan as set forth in the above table until the appropriate Compliance
Certificate is so delivered. From the Closing Date to the first Determination
Date, the Applicable Margin for LIBOR Loans shall be 0.325%.
"Assignment" shall have the meaning assigned such term in Section
12.06(b).
"Base Rate" shall mean, with respect to any Base Rate Loan, for any
day, the higher of (i) the Federal Funds Rate for any such day plus 1/2 of 1% or
(ii) the Prime Rate for such day. Each change in any interest rate provided for
herein based upon the Base Rate resulting from a change in the Base Rate shall
take effect at the time of such change in the Base Rate.
"Base Rate Loans" shall mean Loans that bear interest at rates based
upon the Base Rate.
"BMC" shall mean Buckeye Management Company, a Delaware corporation.
"Borrower Partnership Agreement" shall mean the Amended and Restated
Agreement of Limited Partnership of Buckeye Pipe Line Company, L.P., dated as of
December 23, 1986, as amended from time to time.
"Buckeye Partners Partnership Agreement" shall mean the Amended and
Restated Agreement of Limited Partnership of Buckeye Partners dated as of July
17, 1998, as amended from time to time.
"Business Day" shall mean any day other than a day on which commercial
banks are authorized or required to close in New York and, where such term is
used in the definition of "Quarterly Date" or if such day relates to a borrowing
or continuation of, a payment or prepayment of principal of or interest on, or a
conversion of or into, or the Interest Period for, a LIBOR Loan or a notice by
the Borrower with respect to any such borrowing or continuation, payment,
prepayment, conversion or Interest Period, any day which is also a day on which
dealings in Dollar deposits are carried out in the London interbank market.
"Change of Control" shall mean either (i) a change resulting when any
Unrelated Person or any Unrelated Persons acting together which would constitute
a Group together with any Affiliates thereof (in each case also constituting
Unrelated Persons) shall at any time Beneficially Own more than 50% of the
aggregate voting power of all classes of Voting Stock of BMC, (ii) BMC or a
wholly-owned Subsidiary of BMC shall cease to own 100% of the general
partnership interest of Buckeye Partners, (iii) BMC shall cease to own 100% of
the outstanding stock of Buckeye Pipe Line Company on a fully diluted basis, or
(iv) Buckeye Pipe Line Company shall cease to own 100% of the general
partnership interest of the Borrower. As used herein (a) "Beneficially Own"
means "beneficially own" as defined in Rule 13d-3 of the Securities Exchange Act
of 1934, as amended, or any successor provision thereto; provided, however,
that, for purposes of this definition, (a) a Person shall not be deemed to
Beneficially Own securities tendered pursuant to a tender or exchange
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<PAGE>
offer made by or on behalf of such Person or any of such Person's Affiliates
until such tendered securities are accepted for purchase or exchange; (b)
"Group" means a "group" for purposes of Section 13(d) of the Securities Exchange
Act of 1934, as amended; (c) "Unrelated Person" means at any time any Person
other than (A) Glenmoor, Ltd. and the stockholders thereof as of the date
hereof, (B) their respective spouses, lineal descendants, and spouses of their
lineal descendants, (C) the estates of the Persons described in clauses (A) and
(B), and (D) trusts established solely for the benefit of any Person or Persons
described in clauses (A) and (B); and (d) "Voting Stock" of any Person shall
mean capital stock of such Person which ordinarily has voting power for the
election of directors (or persons performing similar functions) of such Person,
whether at all times or only so long as no senior class of securities has such
voting power by reason of any contingency.
"Closing Date" shall mean December 16, 1998.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time and any successor statute.
"Commitment" shall mean, for any Lender, its obligation to make
Revolving Credit Loans and to participate in Swing Line Loans as provided in
Section 2.01(b) and Letters of Credit as provided in Section 2.01(c), up to such
Lender's Revolving Credit Commitment.
"Compliance Certificate" shall mean a certificate from the Borrower or
Buckeye Partners substantially in the form of Exhibit C.
"Consolidated Net Income" shall mean, with respect to any Person for
any period, the aggregate of the net income (or loss) of such Person and its
Consolidated Subsidiaries after allowances for taxes for such period, determined
on a consolidated basis in accordance with GAAP; provided that there shall be
excluded from such net income (to the extent otherwise included therein) the
following: (i) the net income of any other Person in which such Person or any of
its Consolidated Subsidiaries has an interest (which interest does not cause the
net income of such other Person to be consolidated with the net income of such
Person and its Consolidated Subsidiaries in accordance with GAAP), except to the
extent of the amount of dividends or distributions actually paid in such period
by such other Person to such Person or to a Consolidated Subsidiary of such
Person, as the case may be; (ii) the net income (but not loss) of any
Consolidated Subsidiary of such Person to the extent that the declaration or
payment of dividends or similar distributions or transfers or loans by that
Consolidated Subsidiary is not at the time permitted by operation of the terms
of its charter or any agreement, instrument or Governmental Requirement
applicable to such Consolidated Subsidiary, or is otherwise restricted or
prohibited in each case determined in accordance with GAAP; (iii) the net income
(or loss) of any other Person acquired in a pooling-of-interests transaction for
any period prior to the date of such transaction; (iv) any extraordinary gains
or losses, including gains or losses attributable to Property sales not in the
ordinary course of business; and (v) the cumulative effect of a change in
accounting principles resulting in any gains or losses attributable to writeups
or write downs of assets or liabilities.
"Consolidated Subsidiaries" shall mean each Subsidiary of any Person
(whether now existing or hereafter created or acquired) the financial statements
of which shall be (or should have been) consolidated with the financial
statements of such Person in accordance with GAAP.
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<PAGE>
"Debt" shall mean, for any Person the sum of the following (without
duplication): (i) all obligations of such Person for borrowed money or evidenced
by bonds, debentures, notes or other similar instruments (including principal,
interest, fees and charges); (ii) all obligations of such Person (whether
contingent or otherwise) in respect of bankers' acceptances, letters of credit,
surety or other bonds and similar instruments; (iii) all obligations of such
Person to pay the deferred purchase price of Property or services (other than
for borrowed money); (iv) all obligations under leases which shall have been, or
should have been, in accordance with GAAP, recorded as capital leases in respect
of which such Person is liable (whether contingent or otherwise); (v) all
obligations under operating leases which require such Person or its Affiliate to
make rental payments over the term of such lease, based on the purchase price or
appraised value of the Property subject to such lease plus a marginal interest
rate, and used primarily as a financing vehicle for, or to monetize, such
Property; (vi) all Debt (as described in the other clauses of this definition)
and other obligations of others secured by a Lien on any asset of such Person,
whether or not such Debt is assumed by such Person; (vii) all Debt (as described
in the other clauses of this definition) and other obligations of others
guaranteed by such Person or in which such Person otherwise assures a creditor
against loss of the debtor or obligations of others; (viii) all obligations or
undertakings of such Person to maintain or cause to be maintained the financial
position or covenants of others or to purchase the Debt or Property of others;
(ix) obligations to deliver goods or services not in the ordinary course of
business in consideration of advance payments; (x) obligations to pay for goods
or services not in the ordinary course of business whether or not such goods or
services are actually received or utilized by such Person; (xi) any capital
stock of such Person in which such Person has a mandatory obligation to redeem
such stock; (xii) any Debt of a Special Entity for which such Person is liable
either by agreement or because of a Governmental Requirement; and (xiii) all
obligations of such Person under Hedging Agreements.
"Default" shall mean an Event of Default or an event which with notice
or lapse of time or both would become an Event of Default.
"Dollars" and "$" shall mean lawful money of the United States of
America.
"EBITDA" shall mean for any Person for any period, the sum of
Consolidated Net Income for such period plus the following expenses or charges
to the extent deducted from Consolidated Net Income in such period: interest,
taxes, depreciation, depletion and amortization; provided, however, with respect
to the Borrower, if during any period the Borrower acquires any Person and such
Person becomes a Restricted Affiliate or the Borrower acquires all or
substantially all of the assets of any Person, the EBITDA attributable to such
Person or assets for such period determined on a pro forma basis (which
determination, in each case, shall be subject to the approval of the Required
Lenders, not to be unreasonably withheld) may be included in EBITDA for the
calculation of the Funded Debt Ratio.
"Environmental Laws" shall mean any and all Governmental Requirements
pertaining to health or the environment in effect in any and all jurisdictions
in which the Borrower or any Subsidiary is conducting or at any time has
conducted business, or where any Property of the Borrower or any Subsidiary is
located, including without limitation, the Oil Pollution Act of 1990 ("OPA"),
the Clean Air Act, as amended, the Comprehensive Environmental, Response,
Compensation, and Liability Act of 1980 ("CERCLA"), as amended, the Federal
Water Pollution
-5-
<PAGE>
Control Act, as amended, the Occupational Safety and Health Act of 1970, as
amended, the Resource Conservation and Recovery Act of 1976 ("RCRA"), as
amended, the Safe Drinking Water Act, as amended, the Toxic Substances Control
Act, as amended, the Superfund Amendments and Reauthorization Act of 1986, as
amended, the Hazardous Materials Transportation Act, as amended, and other
environmental conservation or protection laws. The term "oil" shall have the
meaning specified in OPA, the terms "hazardous substance" and "release" (or
"threatened release") have the meanings specified in CERCLA, and the terms
"solid waste" and "disposal" (or "disposed") have the meanings specified in
RCRA; provided, however, that (i) in the event either OPA, CERCLA or RCRA is
amended so as to broaden the meaning of any term defined thereby, such broader
meaning shall apply subsequent to the effective date of such amendment and (ii)
to the extent the laws of the state in which any Property of the Borrower or any
Subsidiary is located establish a meaning for "oil," "hazardous substance,"
"release," "solid waste" or "disposal" which is broader than that specified in
either OPA, CERCLA or RCRA, such broader meaning shall apply.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time and any successor statute.
"ERISA Affiliate" shall mean each trade or business (whether or not
incorporated) which together with the Borrower or any Subsidiary would be deemed
to be a "single employer" within the meaning of section 4001(b)(1) of ERISA or
subsections (b), (c), (m) or (o) of section 414 of the Code.
"ERISA Event" shall mean (i) a "Reportable Event" described in Section
4043 of ERISA and the regulations issued thereunder, (ii) the withdrawal of the
Borrower, any Subsidiary or any ERISA Affiliate from a Plan during a plan year
in which it was a "substantial employer" as defined in Section 4001(a)(2) of
ERISA, (iii) the filing of a notice of intent to terminate a Plan or the
treatment of a Plan amendment as a termination under Section 4041 of ERISA, (iv)
the institution of proceedings to terminate a Plan by the PBGC or (v) any other
event or condition which might constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any Plan.
"Event of Default" shall have the meaning assigned such term in Section
10.01.
"Excepted Liens" shall mean:
(i) Prior Liens;
(ii) statutory Liens incidental to the conduct of business or
the ownership of Properties of the Borrower and the 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 Borrower and the Restricted
Affiliates; provided in each case, that the obligation secured is
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<PAGE>
not overdue or, if overdue, (i) is being contested by the Borrower or a
Restricted Affiliate on a timely basis in good faith and in appropriate
proceedings, and the Borrower or a Restricted Affiliate has established
adequate reserves therefor in accordance with GAAP on the books of the
Borrower or such Restricted Affiliate or (ii) such Liens in the
aggregate do not secure obligations in the aggregate in excess of
$1,000,000;
(iii) 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 Borrower and the Restricted Affiliates;
(iv) the lien of taxes and assessments which are not at the
time delinquent;
(v) the lien of taxes and assessments which are delinquent,
but the validity of which is being diligently contested at the time by
the Borrower or any of the Restricted Affiliates in good faith,
provided that the Borrower or such Restricted Affiliate shall have
established such reserves in such amounts as may be required under
GAAP;
(vi) 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;
(vii) defects and irregularities in the titles to its
Properties which do not in the aggregate have a Material Adverse
Effect;
(viii) easements, exceptions or reservations in any Property
of the Borrower or any of the 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 in the
aggregate have a Material Adverse Effect;
(ix) rights reserved to or vested in any grantor, lessor,
licensor, municipality or public authority to control or regulate any
Property of the Borrower or any of the Restricted Affiliates or to use
any such Property, provided, that the Borrower or such Restricted
Affiliate shall not be in default in respect of any material obligation
(except that the Borrower 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, the
such control, regulation or use will not in the aggregate have a
Material Adverse Effect;
(x) 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;
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<PAGE>
(xi) 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;
(xii) 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 Borrower or any of the Restricted Affiliates is not
in default in any material obligation (except that the Borrower 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 in the aggregate
have a Material Adverse Effect;
(xiii) 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 America or
any state or agency or political subdivision thereof or for any
purposes similar to any of those referred to in this clause (xiii);
provided, in each case, the Borrower or such Restricted Affiliate is
not in default in any material obligation (except that the Borrower or
such Restricted Affiliate may be contesting any such obligation in good
faith) in respect thereof;
(xiv) 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 Borrower of
any of the Restricted Affiliates to maintain self-insurance;
(xv) Liens securing Debt of the Borrower or any of the
Restricted Affiliates incurred or assumed in connection with the
construction or acquisition of capital Improvements; provided that such
Debt would be permitted under Section 9.01(e) 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
Debt;
(xvi) Liens securing all or any part of the purchase price, or
securing Debt of the Borrower or any of the Restricted Affiliates
incurred or assumed to pay all or any part of the purchase price of
Property acquired by the Borrower or the Restricted Affiliates, or
Liens existing on such Property immediately prior to its acquisition,
including, without limitation, the Liens described in clause (xv) of
this definition, provided, that (i) that any such Liens shall extend
solely to the Property so acquired, (ii) the principal amount of Debt
secured by any such Lien shall not exceed 100% of the fair market value
of such Property (as reasonably determined by the Board of Directors of
the General Partner) 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
60 days thereafter and (iv) the aggregate amount of all outstanding
Debt secured by such Liens shall be permitted under Section 9.01(e);
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(xv) Liens arising in connection with Sale-Leaseback
Transactions permitted under Section 9.05; provided that such Lien
shall not extend to any Property other than Property being leased; and
(xvi) 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.
"Federal Funds Rate" shall mean, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight federal funds transactions with a
member of the Federal Reserve System arranged by federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that (i) if the date for which such rate is
to be determined is not a Business Day, the Federal Funds Rate for such day
shall be such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day, and (ii) if such rate is not so
published for any day, the Federal Funds Rate for such day shall be the average
rate charged to the Agent on such day on such transactions as determined by the
Agent.
"Fee Letter" shall mean that certain letter agreement from FUCM and
First Union to the Borrower dated August 28, 1998 concerning certain fees in
connection with this Agreement and any agreements or instruments executed in
connection therewith, as the same may be amended or replaced from time to time.
"Financial Statements" shall mean the financial statement or statements
of Buckeye Partners and its Consolidated Subsidiaries described or referred to
in Section 7.02.
"FUCM" shall mean First Union Capital Markets, a division of Wheat
First Securities, Inc., a Virginia corporation.
"Funded Debt" shall mean for any Person, Debt of such Person, less all
obligations of such Person to pay the deferred purchase price of Property or
services obtained in the ordinary course of business.
"Funded Debt Ratio" shall mean the ratio (calculated quarterly at the
end of each fiscal quarter) of (i) the consolidated Funded Debt of Buckeye
Partners (excluding Unrestricted Subsidiaries and Affiliates of Buckeye Partners
that are not Restricted Affiliates) for the four fiscal quarters ending on such
date to (ii) the consolidated EBITDA of Buckeye Partners (excluding Unrestricted
Subsidiaries and Affiliates of Buckeye Partners that are not Restricted
Affiliates) for such four fiscal quarters.
"GAAP" shall mean generally accepted accounting principles in the
United States of America in effect from time to time.
"General Partner" shall mean Buckeye Pipe Line Company, a Delaware
corporation, general partner of the Borrower.
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<PAGE>
"Governmental Authority" shall include the country, the state, county,
city and political subdivisions in which any Person or such Person's Property is
located or which exercises valid jurisdiction over any such Person or such
Person's Property, and any court, agency, department, commission, board, bureau
or instrumentality of any of them including monetary authorities which exercises
valid jurisdiction over any such Person or such Person's Property. Unless
otherwise specified, all references to Governmental Authority herein shall mean
a Governmental Authority having jurisdiction over, where applicable, the
Borrower, its Subsidiaries or any of their Property or the Agent, any Lender or
any Applicable Lending Office.
"Governmental Requirement" shall mean any law, statute, code,
ordinance, order, determination, rule, regulation, judgment, decree, injunction,
franchise, permit, certificate, license, authorization or other directive or
requirement (whether or not having the force of law), including, without
limitation, Environmental Laws, energy regulations and occupational, safety and
health standards or controls, of any Governmental Authority.
"Guarantor" shall mean Buckeye Partners and any other Person that
executes a Guaranty Agreement.
"Guaranty Agreement" shall mean an agreement executed by each Guarantor
in form and substance satisfactory to the Agent unconditionally guaranteeing
payment of the Indebtedness, as the same may be amended, modified or
supplemented from time to time.
"Hedging Agreements" shall mean any commodity, interest rate or
currency swap, cap, floor, collar, forward agreement or other exchange or
protection agreements or any option with respect to any such transaction.
"Highest Lawful Rate" shall mean, with respect to each Lender, the
maximum nonusurious interest rate, if any, that at any time or from time to time
may be contracted for, taken, reserved, charged or received on the Notes or on
other Indebtedness under laws applicable to such Lender which are presently in
effect or, to the extent allowed by law, under such applicable laws which may
hereafter be in effect and which allow a higher maximum nonusurious interest
rate than applicable laws now allow.
"Indebtedness" shall mean any and all amounts owing or to be owing by
the Borrower, the Guarantors or any Restricted Affiliate to the Agent, the
Issuing Bank and/or the Lenders in connection with the Loan Documents, the
Letter of Credit Agreements, and any Hedging Agreements now or hereafter arising
between the Borrower and any Lender or its Affiliate and permitted by the terms
of this Agreement and all renewals, extensions and/or rearrangements of any of
the foregoing.
"Indemnified Parties" shall have the meaning assigned such term in
Section 12.03(a)(ii).
"Indemnity Matters" shall mean any and all actions, suits, proceedings
(including any investigations, litigation or inquiries), claims, demands and
causes of action made or threatened against a Person and, in connection
therewith, all losses, liabilities, damages (excluding, however, indirect and
consequential damages and lost profits) or reasonable costs and expenses of any
kind
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or nature whatsoever incurred by such Person whether caused by the sole or
concurrent negligence of such Person seeking indemnification.
"Indenture" shall mean that certain Amended and Restated Indenture
dated as of December 16, 1997 between the Borrower and PNC Bank, National
Association, as Trustee, as amended and supplemented from time to time.
"Initial Funding" shall mean the funding of the initial Loans or
issuance of the initial Letters of Credit upon satisfaction of the conditions
set forth in Sections 6.01 and 6.02.
"Interest Period" shall mean, with respect to any LIBOR Loan, the
period commencing on the date such LIBOR Loan is made and ending on the
numerically corresponding day in the first, second, third or sixth calendar
month thereafter, as the Borrower may select as provided in Section 2.02 (or
such longer period as may be requested by the Borrower and agreed to by the
Required Lenders), except that each Interest Period which commences on the last
Business Day of a calendar month (or on any day for which there is no
numerically corresponding day in the appropriate subsequent calendar month)
shall end on the last Business Day of the appropriate subsequent calendar month.
Notwithstanding the foregoing: (i) no Interest Period may end after the
Revolving Credit Termination Date; (ii) no Interest Period for any LIBOR Loan
may end after the due date of any installment, if any, provided for in Section
3.01 to the extent that such LIBOR Loan would need to be prepaid prior to the
end of such Interest Period in order for such installment to be paid when due;
(iii) each Interest Period which would otherwise end on a day which is not a
Business Day shall end on the next succeeding Business Day (or, if such next
succeeding Business Day falls in the next succeeding calendar month, on the next
preceding Business Day); and (iv) no Interest Period shall have a duration of
less than one month and, if the Interest Period for any LIBOR Loans would
otherwise be for a shorter period, such Loans shall not be available hereunder.
"Issuing Bank" shall mean First Union or any other Lender agreed to
between the Borrower and the Agent to issue Letters of Credit.
"LC Commitment" at any time shall mean $20,000,000.
"LC Exposure" at any time shall mean the aggregate face amount of all
undrawn and uncancelled Letters of Credit and the aggregate of all amounts drawn
under all Letters of Credit and not yet reimbursed.
"Letter of Credit Agreements" shall mean the written agreements with
the Issuing Bank, as issuing lender for any Letter of Credit, executed in
connection with the issuance by the Issuing Bank of the Letters of Credit, such
agreements to be on the Issuing Bank's customary form for letters of credit of
comparable amount and purpose as from time to time in effect or as otherwise
agreed to by the Borrower and the Issuing Bank.
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"Letters of Credit" shall mean the letters of credit issued pursuant to
Section 2.01(c) and all reimbursement obligations pertaining to any such letters
of credit, and "Letter of Credit" shall mean any one of the Letters of Credit
and the reimbursement obligations pertaining thereto.
"LIBOR" shall mean the rate of interest determined on the basis of the
rate for deposits in Dollars for a period equal to the applicable Interest
Period commencing on the first day of such Interest Period appearing on Dow
Jones Market Service Page 3750 as of 11:00 a.m. (London time) two (2) Business
Days prior to the first day of the applicable Interest Period. In the event that
such rate does not appear on Dow Jones Market Service Page 3750, "LIBOR" shall
be determined by the Agent to be the rate per annum at which deposits in Dollars
are offered by leading reference banks in the London interbank market to First
Union at approximately 11:00 a.m. (London time) two Business Days prior to the
first day of the applicable Interest Period for a period equal to such Interest
Period and in an amount substantially equal to the amount of the applicable
Loan.
"LIBOR Loans" shall mean Loans the interest rates on which are
determined on the basis of rates referred to in the definition of "LIBOR Rate".
"LIBOR Rate" shall mean, with respect to any LIBOR Loan, a rate per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) determined by
the Agent to be equal to the quotient of (i) LIBOR for such Loan for the
Interest Period for such Loan divided by (ii) 1 minus the Reserve Requirement
for such Loan for such Interest Period.
"Lien" shall mean any interest in Property securing an obligation owed
to, or a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute or contract, and whether such
obligation or claim is fixed or contingent, and including but not limited to the
lien or security interest arising from a mortgage, encumbrance, pledge, security
agreement, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes. The term "Lien" shall include reservations, exceptions,
encroachments, easements, rights of way, covenants, conditions, restrictions,
leases and other title exceptions and encumbrances affecting Property. For the
purposes of this Agreement, the Borrower or any Subsidiary shall be deemed to be
the owner of any Property which it has acquired or holds subject to a
conditional sale agreement, or leases under a financing lease or other
arrangement pursuant to which title to the Property has been retained by or
vested in some other Person in a transaction intended to create a financing.
"Loan Documents" shall mean this Agreement, the Notes, the Letters of
Credit, the Guaranty Agreement, the Letter of Credit Agreements, the Fee Letter,
and any and all other agreements or instruments now or hereafter executed and
delivered by the Borrower or any other Person (other than participation or
similar agreements between any Lender and any other lender or creditor with
respect to any Indebtedness pursuant to this Agreement) in connection with, or
as security for or guarantee of the payment or performance of the Notes or this
Agreement, or reimbursement obligations under the Letters of Credit, as such
agreements may be amended, supplemented or restated from time to time.
"Loans" shall mean the loans as provided for by Sections 2.01(a) and
(b). "Loans" shall include the Revolving Credit Loans and the Swing Line Loans.
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"Material Adverse Effect" shall mean any material and adverse effect on
(i) the financial condition or results of operations of the Borrower, the
Restricted Subsidiaries, and Buckeye Partners, taken as a whole, different from
those reflected in the Financial Statements or from the facts represented or
warranted in any Loan Document, or (ii) the ability of the Borrower, the
Restricted Subsidiaries and Buckeye Partners, taken as a whole, to carry out
their business as at the Closing Date or as proposed as of the Closing Date to
be conducted or meet their obligations under the Loan Documents on a timely
basis.
"Multiemployer Plan" shall mean a Plan defined as such in Section 3(37)
or 4001(a)(3) of ERISA.
"Notes" shall mean the Notes provided for by Section 2.06, together
with any and all renewals, extensions for any period, increases, rearrangements,
substitutions or modifications thereof. The "Notes" shall include the Revolving
Credit Notes and the Swing Line Note.
"Other Taxes" shall have the meaning assigned such term in Section
4.06(b).
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions.
"Percentage Share" shall mean the percentage of the Aggregate Revolving
Credit Commitments to be provided by a Lender under this Agreement as indicated
on Annex I hereto, as modified from time to time to reflect any assignments
permitted by Section 12.06(b).
"Person" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, trust, unincorporated organization or
government or any agency, instrumentality or political subdivision thereof, or
any other form of entity.
"Plan" shall mean any employee pension benefit plan, as defined in
Section 3(2) of ERISA, which (i) is currently or hereafter sponsored, maintained
or contributed to by the Borrower, any Subsidiary or an ERISA Affiliate or (ii)
was at any time during the preceding six calendar years sponsored, maintained or
contributed to, by the Borrower, any Subsidiary or an ERISA Affiliate.
"Post-Default Rate" shall mean, in respect of any principal of any Loan
or any other amount payable by the Borrower under this Agreement or any other
Loan Document , a rate per annum during the period commencing on the date of
occurrence of an Event of Default until such amount is paid in full or all
Events of Default are cured or waived equal to 2% per annum above the Base Rate
as in effect from time to time plus the Applicable Margin (if any), but in no
event to exceed the Highest Lawful Rate; provided however, for a LIBOR Loan, the
"Post-Default Rate" for such principal shall be, for the period commencing on
the date of occurrence of an Event of Default and ending on the earlier to occur
of the last day of the Interest Period therefor or the date all Events of
Default are cured or waived, 2% per annum above the interest rate for such Loan
as provided in Section 3.02(a)(ii), but in no event to exceed the Highest Lawful
Rate.
"Prime Rate" shall mean the rate of interest from time to time
announced publicly by the Agent at the Principal Office as its prime commercial
lending rate. Such rate is set by the Agent as
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a general reference rate of interest, taking into account such factors as the
Agent may deem appropriate, it being understood that many of the Agent's
commercial or other loans are priced in relation to such rate, that it is not
necessarily the lowest or best rate actually charged to any customer and that
the Agent may make various commercial or other loans at rates of interest having
no relationship to such rate.
"Principal Office" shall mean the principal office of the Agent,
presently located at 301 South College Street, Charlotte, North Carolina 28288.
"Prior Liens" shall mean any Liens not created by the Borrower or any
Restricted Affiliate, which at any time are Liens upon the lands over which the
Borrower or any Restricted Affiliate holds easements or rights-of-way for
Pipeline purposes, or upon Properties with respect to which the Borrower'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 Borrower or any Restricted
Affiliate or for which the Borrower or any Restricted Affiliate has otherwise
become liable or on which the Borrower or any Restricted Affiliate customarily
pays interest charges.
"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"Quarterly Dates" shall mean the last Business Day of each March, June,
September and December, in each year, the first of which shall be December 31,
1998.
"Regulation D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System (or any successor), as the same may be amended or
supplemented from time to time.
"Regulatory Change" shall mean, with respect to any Lender, any change
after the Closing Date in any Governmental Requirement (including Regulation D)
or the adoption or making after such date of any interpretations, directives or
requests applying to a class of lenders (including such Lender or its Applicable
Lending Office) of or under any Governmental Requirement (whether or not having
the force of law) by any Governmental Authority charged with the interpretation
or administration thereof.
"Required Lenders" shall mean, at any time while no Loans are
outstanding, Lenders having at least fifty-one percent (51%) of the Aggregate
Commitments and, at any time while Loans are outstanding, Lenders holding at
least fifty-one percent (51%) of the outstanding aggregate principal amount of
the Loans and LC Exposure (without regard to any sale by a Lender of a
participation in any Loan under Section 12.06(c)).
"Required Payment" shall have the meaning assigned such term in Section
4.04.
"Reserve Requirement" shall mean, for any Interest Period for any LIBOR
Loan, the average maximum rate at which reserves (including any marginal,
supplemental or emergency reserves) are required to be maintained during such
Interest Period under Regulation D by member banks of the Federal Reserve System
in New York City with deposits exceeding one billion Dollars against
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"Eurocurrency liabilities" (as such term is used in Regulation D). Without
limiting the effect of the foregoing, the Reserve Requirement shall reflect any
other reserves required to be maintained by such member banks by reason of any
Regulatory Change against (i) any category of liabilities which includes
deposits by reference to which LIBOR is to be determined as provided in the
definition of "LIBOR" or (ii) any category of extensions of credit or other
assets which include a LIBOR Loan.
"Responsible Officer" shall mean, as to any Person, the Chief Executive
Officer, the President or any Vice President of such Person and, with respect to
financial matters, the term "Responsible Officer" shall include the Chief
Financial Officer of such Person. Unless otherwise specified, all references to
a Responsible Officer herein shall mean a Responsible Officer of the Borrower.
"Restricted Affiliates" shall mean the Restricted Subsidiaries, Buckeye
Tank Terminals, L.P., Everglades Pipe Line Company, L.P., Laurel Pipe Line
Company, L.P., and Buckeye Pipe Line Company of Michigan, L.P.
"Restricted Subsidiary" shall mean a Subsidiary of the Borrower or
Buckeye Partners that has not been designated by the Board of Directors of the
General Partner or of the general partner of Buckeye Partners, at its creation
or acquisition, as an Unrestricted Subsidiary. The Borrower or Buckeye Partners
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. To qualify as a
Restricted Subsidiary, such Subsidiary shall be in a line of business as is
permitted for the Borrower under the Borrower Partnership Agreement or for
Buckeye Partners under the Buckeye Partners Partnership Agreement and shall have
executed a Guaranty Agreement, and at the time such Subsidiary is designated as
a Restricted Subsidiary no Default shall exist or result from such designation.
"Revolving Credit Commitment" shall mean, as to each Lender, the amount
set forth opposite such Lender's name on Annex I under the caption "Revolving
Credit Commitment" (as the same may be reduced pursuant to Section 2.03(a) pro
rata to each Lender based on its Percentage Share), as modified from time to
time to reflect any assignments permitted by Section 12.06(b).
"Revolving Credit Loans" shall mean Loans made pursuant to Section
2.01(a).
"Revolving Credit Notes" shall mean the promissory note or notes
(whether one or more) of the Borrower described in Section 2.06 and being in the
form of Exhibit A-1.
"Revolving Credit Termination Date" shall mean the earlier to occur of
(i) the fifth anniversary of the Closing Date or (ii) the date that the
Commitments are sooner terminated pursuant to Sections 2.03(a) or 10.02.
"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 to the Borrower or any Restricted
Affiliate of the Property involved.
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"Sale-Leaseback Transaction" shall mean a transaction or series of
transactions pursuant to which the Borrower 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
Borrower 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.
"SEC" shall mean the Securities and Exchange Commission or any
successor Governmental Authority.
"Senior Notes" shall mean the 6.98% Series 1997A notes in the aggregate
principal amount of $125,000,000, the 6.89% Series 1997B notes in the aggregate
principal amount of $100,000,000, the 6.95% Series 1997C notes in the aggregate
principal amount of $10,000,000, and the 6.96% Series 1997D notes in the
aggregate principal amount of $5,000,000, each due December 16, 2024 and issued
pursuant to the Indenture.
"Special Entity" shall mean any joint venture, limited liability
company or partnership, general or limited partnership or any other type of
partnership or company other than a corporation in which Buckeye Partners or one
or more of its other Subsidiaries is a member, owner, partner or joint venturer
and owns, directly or indirectly, at least a majority of the equity of such
entity or controls such entity, but excluding any tax partnerships that are not
classified as partnerships under state law. For purposes of this definition, any
Person which owns directly or indirectly an equity investment in another Person
which allows the first Person to manage or elect managers who manage the normal
activities of such second Person will be deemed to "control" such second Person
(e.g. a sole general partner controls a limited partnership).
"Subsidiary" shall mean (i) any corporation of which at least a
majority of the outstanding shares of stock having by the terms thereof ordinary
voting power to elect a majority of the board of directors of such corporation
(irrespective of whether or not at the time stock of any other class or classes
of such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time directly or indirectly owned or
controlled by the Borrower or Buckeye Partners or one or more of their
Subsidiaries or by the Borrower or Buckeye Partners and one or more of their
Subsidiaries and (ii) any Special Entity. Unless otherwise indicated herein,
each reference to the term "Subsidiary" shall mean a Subsidiary of the
Guarantor.
"Swing Line Commitment" shall mean, for the Swing Line Lender, its
obligation to make Swing Line Loans up to $5,000,000.
"Swing Line Facility" shall mean the facility pursuant to Section
2.01(b).
"Swing Line Lender" shall mean First Union or such other Lender as
Agent, Borrower and such Lender shall agree.
"Swing Line Loans" shall mean the Loans made pursuant to Section
2.01(b).
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"Swing Line Note" shall mean the promissory note or notes (whether one
or more) of the Borrower described in Section 2.01(b) and being substantially in
the form of Exhibit A-2.
"Taxes" shall have the meaning assigned such term in Section 4.06(a).
"Type" shall mean, with respect to any Loan, a Base Rate Loan or a
LIBOR Loan.
"Unrestricted Subsidiary" shall mean those Persons listed on Exhibit E
and any Subsidiary of the Borrower that has been designated by the Board of
Directors of the General Partner as an "Unrestricted Subsidiary" at the time of
its creation or acquisition; provided that no Debt or other obligation of such
Unrestricted Subsidiary may be assumed or guaranteed by the Borrower or any
Restricted Subsidiary, nor may any asset of the Borrower or any Restricted
Subsidiary, directly or indirectly, contingently or otherwise, become encumbered
or otherwise subject to the satisfaction thereof.
Section 1.03 Accounting Terms and Determinations. 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 financial statements and certificates and reports as to
financial matters required to be furnished to the Agent or the Lenders hereunder
shall be prepared, in accordance with GAAP, applied on a basis consistent with
the audited financial statements of the Borrower referred to in Section 7.02
(except for changes concurred with by the Borrower's independent public
accountants).
ARTICLE II
Commitments
Section 2.01 Loans and Letters of Credit.
(a) Revolving Credit Loans. Each Lender severally agrees, on
the terms and conditions of this Agreement, to make loans to the
Borrower during the period from and including (i) the Closing Date or
(ii) such later date that such Lender becomes a party to this Agreement
as provided in Section 12.06(b), to and up to, but excluding, the
Revolving Credit Termination Date in an aggregate principal amount at
any one time outstanding up to, but not exceeding, the amount of such
Lender's Revolving Credit Commitment as then in effect; provided,
however, that the aggregate principal amount of all such Revolving
Credit Loans by all Lenders hereunder at any one time outstanding, plus
the LC Exposure, plus the amount outstanding under the Swing Line
Facility shall not exceed the Aggregate Revolving Credit Commitments.
Subject to the terms of this Agreement, during the period from the
Closing Date to and up to, but excluding, the Revolving Credit
Termination Date, the Borrower may borrow, repay and reborrow the
amount described in this Section 2.01(a).
(b) Swing Line Loans.
(i) Notwithstanding any other provision of this
Agreement to the contrary, in order to administer the
revolving facility under Section 2.01(a) above in
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an efficient manner and to minimize the transfer of funds
between the Agent and the Lenders, the Swing Line Lender shall
make available Swing Line Loans to the Borrower at the
election of Borrower prior to the Revolving Credit Termination
Date. The Swing Line Lender shall not make any Swing Line Loan
pursuant hereto (i) if the Borrower is not in compliance with
all the conditions to the making of Loans set forth in this
Agreement, (ii) if after giving effect to such Swing Line
Loan, the outstanding Swing Line Loans exceed the Swing Line
Commitment, or (iii) if after giving effect to such Swing Line
Loan, the sum of all Revolving Credit Loans and Swing Line
Loans then outstanding, plus LC Exposure exceeds the Aggregate
Revolving Credit Commitments. Loans made pursuant to this
Section 2.01(b) shall be limited to Loans bearing interest at
the Base Rate or such other rate of interest as agreed upon by
the Borrower and the Swing Line Lender. The indebtedness of
the Borrower to the Swing Line Lender resulting from the
advances under this Section 2.01(b) shall be evidenced by the
Swing Line Note made by the Borrower, which Swing Line Note
shall be in a principal amount equal to the Swing Line
Commitment.
(ii) Subject to the terms of this Agreement, during
the period from the Closing Date to but excluding, the
Revolving Credit Termination Date, the Borrower may borrow,
repay and reborrow Swing Line Loans under this Section
2.01(b). Each repayment of a Swing Line Loan shall be in
integral multiples of $100,000 or the unpaid amount of the
Swing Line Loans outstanding. The minimum outstanding amount
of Swing Line Loans shall be $100,000.
(iii) If the Borrower instructs the Swing Line Lender
to debit its demand deposit account in an amount of any
payment with respect to a Swing Line Loan, or the Swing Line
Lender otherwise receives repayment after 12:00 noon Charlotte
time, on a Business Day, such payment shall be deemed received
on the next Business Day.
(iv) The Borrower and each Lender which is or may
become a party hereto acknowledge that all Swing Line Loans
are to be made solely by the Swing Line Lender to the
Borrower, but that each Lender shall share the risk of loss
with respect to such Loans in an amount equal to such Lender's
Percentage Share of such Swing Line Loan. Upon demand made by
the Swing Line Lender, each Lender (including the Swing Line
Lender) shall, according to its Percentage Share of such Swing
Line Loan, promptly provide to the Swing Line Lender its
purchase price therefor in an amount equal to its Percentage
Share therein, in which case such Swing Line Loan shall be
deemed from and after such date a Loan made under Section
2.01(a). The obligation of each Lender to so provide its
purchase price to the Swing Line Lender shall be absolute and
unconditional and shall not be affected by the occurrence of
an Event of Default or any other occurrence or event.
(c) Letters of Credit. During the period from and including
the Closing Date to, but excluding, the Revolving Credit Termination
Date, the Issuing Bank, as issuing bank for the Lenders, agrees to
extend credit for the account of the Borrower at any time and from
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time to time by issuing, renewing, extending or reissuing Letters of
Credit; provided however, the LC Exposure at any one time outstanding
shall not exceed the lesser of (i) the LC Commitment or (ii) the
Aggregate Revolving Credit Commitments, as then in effect, minus the
aggregate principal amount of all Loans then outstanding. The Lenders
shall participate in such Letters of Credit according to their
respective Percentage Shares. Each of the Letters of Credit shall (i)
be issued by the Issuing Bank, (ii) contain such terms and provisions
as are reasonably required by the Issuing Bank, (iii) be for the
account of the Borrower and (iv) expire not later than the earlier of
(A) one year from the date of issuance or (B) five days before the
Revolving Credit Termination Date.
(d) Limitation on Types of Loans. Subject to the other terms
and provisions of this Agreement, at the option of the Borrower, the
Loans (other than Swing Line Loans) may be Base Rate Loans or LIBOR
Loans; provided that, without the prior written consent of the Required
Lenders, no more than five (5) LIBOR Loans may be outstanding at any
time.
Section 2.02 Borrowings, Continuations and Conversions of Revolving
Credit Loans; Letters of Credit.
(a) Borrowings. The Borrower shall give the Agent (which shall
promptly notify the Lenders) advance notice as hereinafter provided of
each borrowing under Section 2.01(a), which shall specify (i) the
aggregate amount of such borrowing, (ii) the Type and (iii) the date
(which shall be a Business Day) of the Loans to be borrowed, and (iv)
(in the case of LIBOR Loans) the duration of the Interest Period
therefor.
(b) Minimum Amounts. All Base Rate Loan borrowings (other than
Swing Line Loans) shall be in amounts of at least $1,000,000 or the
remaining balance of the Aggregate Revolving Credit Commitments, if
less, or any whole multiple of $1,000,000 in excess thereof, and all
LIBOR Loans shall be in amounts of at least $5,000,000 or any whole
multiple of $1,000,000 in excess thereof. All Swing Line Loans shall be
in amounts of at least $100,000 or any whole multiple of $100,000 in
excess thereof.
(c) Notices. All borrowings, continuations and conversions
shall require advance written notice to the Agent (which shall promptly
notify the Lenders) in the form of Exhibit B (or telephonic notice
promptly confirmed by such a written notice), which in each case shall
be irrevocable, from the Borrower to be received by the Agent not later
than 10:00 a.m. Charlotte time on the date of each Base Rate Loan
borrowing and not later than 10:00 a.m. Charlotte time at least three
Business Days prior to the date of each LIBOR Loan borrowing,
continuation or conversion. Without in any way limiting the Borrower's
obligation to confirm in writing any telephonic notice, the Agent may
act without liability upon the basis of telephonic notice believed by
the Agent in good faith to be from the Borrower prior to receipt of
written confirmation. In each such case, the Borrower hereby waives the
right to dispute the Agent's record of the terms of such telephonic
notice except in the case of gross negligence or willful misconduct by
the Agent.
(d) Continuation Options. Subject to the provisions made in
this Section 2.02(d), the Borrower may elect to continue all or any
part of any LIBOR Loan beyond the expiration
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of the then current Interest Period relating thereto by giving advance
notice as provided in Section 2.02(c) to the Agent (which shall
promptly notify the Lenders) of such election, specifying the amount of
such Loan to be continued and the Interest Period therefor. In the
absence of such a timely and proper election, the Borrower shall be
deemed to have elected to convert such LIBOR Loan to a Base Rate Loan
pursuant to Section 2.02(e). All or any part of any LIBOR Loan may be
continued as provided herein, provided that (i) any continuation of any
such Loan shall be (as to each Loan as continued for an applicable
Interest Period) in amounts of at least $5,000,000 or any whole
multiple of $1,000,000 in excess thereof and (ii) no Default shall have
occurred and be continuing. If a Default shall have occurred and be
continuing, each LIBOR Loan shall be converted to a Base Rate Loan on
the last day of the Interest Period applicable thereto.
(e) Conversion Options. The Borrower may elect to convert all
or any part of any LIBOR Loan on the last day of the then current
Interest Period relating thereto to a Base Rate Loan by giving advance
notice to the Agent (which shall promptly notify the Lenders) of such
election. Subject to the provisions made in this Section 2.02(e), the
Borrower may elect to convert all or any part of any Base Rate Loan
(other than a Swing Line Loan) at any time and from time to time to a
LIBOR Loan by giving advance notice as provided in Section 2.02(c) to
the Agent (which shall promptly notify the Lenders) of such election.
All or any part of any outstanding Loan may be converted as provided
herein, provided that (i) any conversion of any Base Rate Loan into a
LIBOR Loan shall be (as to each such Loan into which there is a
conversion for an applicable Interest Period) in amounts of at least
$5,000,000 or any whole multiple of $1,000,000 in excess thereof and
(ii) no Default shall have occurred and be continuing. If a Default
shall have occurred and be continuing, no Base Rate Loan may be
converted into a LIBOR Loan.
(f) Advances. Not later than 11:00 a.m. Charlotte time for
LIBOR Loans and 1:00 p.m. Charlotte time for Base Rate Loans on the
date specified for each borrowing hereunder, each Lender shall make
available the amount of the Loan to be made by it on such date to the
Agent, to an account which the Agent shall specify, in immediately
available funds, for the account of the Borrower. The amounts so
received by the Agent shall, subject to the terms and conditions of
this Agreement, be made available to the Borrower by depositing the
same, in immediately available funds, in an account of the Borrower,
designated by the Borrower and maintained at the Principal Office.
(g) Letters of Credit. The Borrower shall give the Issuing
Bank advance notice to be received by the Issuing Bank not later than
11:00 a.m. Charlotte time not less than three (3) Business Days prior
thereto of each request for the issuance, and at least ten (10)
Business Days prior to the date of the renewal or extension, of a
Letter of Credit hereunder which request shall specify (i) the amount
of such Letter of Credit, (ii) the date (which shall be a Business Day)
such Letter of Credit is to be issued, renewed or extended, (iii) the
duration thereof, (iv) the name and address of the beneficiary thereof,
(v) the form of the Letter of Credit and (vi) such other information as
the Agent may reasonably request, all of which shall be reasonably
satisfactory to the Agent. Subject to the terms and conditions of this
Agreement, on the date specified for the issuance, renewal or extension
of a Letter of Credit, the Agent shall issue, renew or extend such
Letter of Credit to the beneficiary thereof.
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In conjunction with the issuance of each Letter of Credit, the
Borrower shall execute a Letter of Credit Agreement. In the event of
any conflict between any provision of a Letter of Credit Agreement and
this Agreement, the Borrower, the Issuing Bank, the Agent and the
Lenders hereby agree that the provisions of this Agreement shall
govern.
The Issuing Bank will send to the Borrower and each Lender,
immediately upon issuance of any Letter of Credit, or an amendment
thereto, a true and complete copy of such Letter of Credit, or such
amendment thereto.
Section 2.03 Changes of Commitments.
(a) The Borrower shall have the right to terminate or to
reduce the amount of the Aggregate Revolving Credit Commitments at any
time, or from time to time, upon not less than three (3) Business Days'
prior notice to the Agent (which shall promptly notify the Lenders) of
each such termination or reduction, which notice shall specify the
effective date thereof and the amount of any such reduction (which
shall not be less than $2,000,000 or any whole multiple of $2,000,000
in excess thereof) and shall be irrevocable and effective only upon
receipt by the Agent.
(b) The Aggregate Revolving Credit Commitments once terminated
or reduced may not be reinstated.
Section 2.04 Fees.
(a) Facility Fee. The Borrower shall pay to the Agent for the
account of each Lender a facility fee equal to the product of the
Aggregate Revolving Credit Commitments times the applicable per annum
percentage set forth at the appropriate intersection in the table shown
below based on the Funded Debt Ratio for the four quarterly periods
ending and determined as of the immediately preceding Quarterly Date:
----------------------------------------------------------------
Funded Debt Ratio Facility Fee Percentage
----------------------------------------------------------------
Greater than or equal to 4.5:1.0 0.250%
----------------------------------------------------------------
Less than 4.5:1.0, but greater 0.225%
than or equal to 4.0:1.0
----------------------------------------------------------------
Less than 4.0:1.0, but greater 0.225%
than or equal to 3.5:1.0
----------------------------------------------------------------
Less than 3.5:1.0, but greater 0.175%
than or equal to 3.0:1.0
----------------------------------------------------------------
Less than 3.0:1.0, but greater 0.125%
than or equal to 2.5:1.0
----------------------------------------------------------------
Less than 2.5:1.0 0.100%
----------------------------------------------------------------
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The applicable facility fee percentage shall be established as of each
Quarterly Date (the "Determination Date"). Any change in the applicable
facility fee percentage following each Determination Date shall be
determined based upon the computations set forth in the Compliance
Certificate furnished to the Agent pursuant to Section 8.01, subject to
review and approval of such computations by the Agent; provided,
however, if the Borrower shall fail to deliver a Compliance Certificate
within the time period required by Section 8.01, then, five Business
Days after delivery of notice to the Borrower by the Agent of
non-receipt of such Compliance Certificate, the applicable facility fee
percentage shall be the highest percentage amount set forth in the
above table until the appropriate Compliance Certificate is so
delivered.
Accrued facility fees shall be payable quarterly in arrears on each
Quarterly Date and on the earlier of the date the Aggregate Revolving
Credit Commitments are terminated or the Revolving Credit Termination
Date.
(b) Letter of Credit Fees.
(i) The Borrower agrees to pay the Agent, for the account of
each Lender, commissions for issuing the Letters of Credit on the daily
average amount outstanding of the maximum liability of the Issuing Bank
existing from time to time under such Letter of Credit (calculated
separately for each Letter of Credit) at a rate per annum equal to the
Applicable Margin then in effect for LIBOR Loans. Each Letter of Credit
shall be deemed to be outstanding up to the full face amount of the
Letter of Credit until the Issuing Bank has received the canceled
Letter of Credit or a written cancellation of the Letter of Credit from
the beneficiary of such Letter of Credit in form and substance
acceptable to the Issuing Bank, or for any reductions in the amount of
the Letter of Credit (other than from a drawing), written notification
from the beneficiary of such Letter of Credit. Such commissions are
payable quarterly in arrears on each Quarterly Date and upon
cancellation or expiration of each such Letter of Credit.
(ii) The Borrower agrees to pay the Issuing Bank, for its own
account, an issuing fee for issuing Letters of Credit on the daily
average outstanding of the maximum liability of the Issuing Bank
existing from time to time under such Letter of Credit (calculated
separately for each Letter of Credit) at the rate of 0.125% per annum,
payable quarterly in arrears on each Quarterly Date and upon
cancellation or expiration of each such Letter of Credit.
(iii) In addition to the fees in Subsections 2.04(b)(i) and
(ii), the Borrower agrees to pay the Issuing Bank on demand the Issuing
Bank's customary letter of credit fees, including, without limitation,
amendment fees, negotiation and drawing fees, and other fees
customarily payable with respect to each Letter of Credit.
(c) Fee Letter. The Borrower shall pay to FUCM for its account
such other fees as are set forth in the Fee Letter on the dates
specified therein to the extent not paid prior to the Closing Date.
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Section 2.05 Several Obligations. The failure of any Lender to
make any Loan to be made by it or to provide funds for disbursements or
reimbursements under Letters of Credit on the date specified therefor shall not
relieve any other Lender of its obligation to make its Loan or provide funds on
such date, but no Lender shall be responsible for the failure of any other
Lender to make a Loan to be made by such other Lender or to provide funds to be
provided by such other Lender.
Section 2.06 Notes.
(a) Revolving Credit Notes. The Revolving Credit Loans (other
than Swing Line Loans) made by each Lender shall be evidenced by a
single promissory note of the Borrower in substantially the form of
Exhibit A-1, dated (i) the Closing Date or (ii) the effective date of
an Assignment pursuant to Section 12.06(b), payable to the order of
such Lender in a principal amount equal to its Revolving Credit
Commitment as originally in effect and otherwise duly completed and
such substitute Notes as required by Section 12.06(b). The date,
amount, Type, interest rate and Interest Period of each Loan made by
each Lender, and all payments made on account of the principal thereof,
shall be recorded by such Lender on its books for its Note, and, prior
to any transfer may be endorsed by such Lender on the schedule attached
to such Note or any continuation thereof or on any separate record
maintained by such Lender. Failure to make any such notation or to
attach a schedule shall not affect any Lender's or the Borrower's
rights or obligations in respect of such Loans or affect the validity
of such transfer by any Lender of its Note.
(b) Swing Line Note. The Swing Line Loans made by the Swing
Line Lender shall be evidenced by a single promissory note of the
Borrower substantially in the form of Exhibit A-2, dated the Closing
Date, payable to the order of the Swing Line Lender in a principal
amount equal to the Swing Line Commitment and otherwise duly completed.
Section 2.07 Prepayments.
(a) Voluntary Prepayments. The Borrower may prepay the Base
Rate Loans upon not less than one (1) Business Day's prior notice to
the Agent (which shall promptly notify the Lenders), which notice shall
specify the prepayment date (which shall be a Business Day) and the
amount of the prepayment (which shall be at least $1,000,000 or whole
multiples of $500,000 in excess thereof for Revolving Credit Loans that
are Base Rate Loans and at least $500,000 or whole multiples of
$100,000 in excess thereof for Swing Line Loans, or the remaining
aggregate principal balance outstanding on the Notes prepaid) and shall
be irrevocable and effective only upon receipt by the Agent, provided
that interest on the principal prepaid, accrued to the prepayment date,
shall be paid on the prepayment date. The Borrower may prepay LIBOR
Loans on the same conditions as for Base Rate Loans (except that prior
notice to the Agent shall be not less than three (3) Business Days for
LIBOR Loans and such payment shall be at least $5,000,000 or whole
multiples of $1,000,000 in excess thereof) and in addition such
prepayments of LIBOR Loans shall be subject to the terms of Section
5.05 and shall be in an amount equal to all of the LIBOR Loans for the
Interest Period prepaid.
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(b) Mandatory Prepayments. If, after giving effect to any
termination or reduction of the Aggregate Revolving Credit Commitments
pursuant to Section 2.03(a), the outstanding aggregate principal amount
of the Loans plus the LC Exposure exceeds the Aggregate Revolving
Credit Commitments, the Borrower shall (i) prepay the Revolving Credit
Loans on the date of such termination or reduction in an aggregate
principal amount equal to the excess, together with interest on the
principal amount paid accrued to the date of such prepayment, (ii) if
any excess remains after prepaying all Revolving Credit Loans, prepay
the Swing Line Loans on the date of such termination or reduction in an
aggregate principal amount equal to such remaining excess, together
with interest on the principal amount paid accrued to the date of such
prepayment, and (iii) if any excess remains after prepaying all of the
Loans because of LC Exposure, pay to the Agent on behalf of the Lenders
an amount equal to the excess to be held as cash collateral as provided
in Section 2.09(b) hereof.
(c) Generally. Prepayments permitted or required under this
Section 2.07 shall be without premium or penalty, except as required
under Section 5.05 for prepayment of LIBOR Loans. Any prepayments on
the Loans may be reborrowed subject to the then effective Aggregate
Revolving Credit Commitments.
Section 2.08 Assumption of Risks. The Borrower assumes all
risks of the acts or omissions of any beneficiary of any Letter of Credit or any
transferee thereof with respect to its use of such Letter of Credit. Neither the
Issuing Bank (except in the case of gross negligence or willful misconduct on
the part of the Issuing Bank or any of its agents or employees), its
correspondents nor any Lender shall be responsible for the validity, sufficiency
or genuineness of certificates or other documents or any endorsements thereon,
even if such certificates or other documents should in fact prove to be invalid,
insufficient, fraudulent or forged; for errors, omissions, interruptions or
delays in transmissions or delivery of any messages by mail, telex, or
otherwise, whether or not they be in code; for errors in translation or for
errors in interpretation of technical terms; the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign any
Letter of Credit or the rights or benefits thereunder or proceeds thereof, in
whole or in part, which may prove to be invalid or ineffective for any reason;
the failure of any beneficiary or any transferee of any Letter of Credit to
comply fully with conditions required in order to draw upon any Letter of
Credit; or for any other consequences arising from causes beyond the Issuing
Bank's control or the control of the Issuing Bank's correspondents. In addition,
neither the Issuing Bank, the Agent nor any Lender shall be responsible for any
error, neglect, or default of any of the Issuing Bank's correspondents; and none
of the above shall affect, impair or prevent the vesting of any of the Issuing
Bank's, the Agent's or any Lender's rights or powers hereunder or under the
Letter of Credit Agreements, all of which rights shall be cumulative. The
Issuing Bank and its correspondents may accept certificates or other documents
that appear on their face to be in order, without responsibility for further
investigation of any matter contained therein regardless of any notice or
information to the contrary. In furtherance and not in limitation of the
foregoing provisions, the Borrower agrees that any action, inaction or omission
taken or not taken by the Issuing Bank or by any correspondent for the Issuing
Bank in good faith in connection with any Letter of Credit, or any related
drafts, certificates, documents or instruments, shall be binding on the Borrower
and shall not put the Issuing Bank or its correspondents under any resulting
liability to the Borrower.
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Section 2.09 Obligation to Reimburse and to Prepay.
(a) If a disbursement by the Issuing Bank is made under any
Letter of Credit, the Borrower shall pay to the Agent within two (2)
Business Days after notice of any such disbursement is received by the
Borrower, the amount of each such disbursement made by the Issuing Bank
under the Letter of Credit (if such payment is not sooner effected as
may be required under this Section 2.09 or under other provisions of
the Letter of Credit), together with interest on the amount disbursed
from and including the date of disbursement until payment in full of
such disbursed amount at a varying rate per annum equal to (i) the then
applicable interest rate for Base Rate Loans through the second
Business Day after notice of such disbursement is received by the
Borrower and (ii) thereafter, the Post-Default Rate for Base Rate Loans
(but in no event to exceed the Highest Lawful Rate) for the period from
and including the third Business Day following the date of such
disbursement to and including the date of repayment in full of such
disbursed amount. The obligations of the Borrower under this Agreement
with respect to each Letter of Credit shall be absolute, unconditional
and irrevocable and shall be paid or performed strictly in accordance
with the terms of this Agreement under all circumstances whatsoever,
including, without limitation, but only to the fullest extent permitted
by applicable law, the following circumstances: (i) any lack of
validity or enforceability of this Agreement, any Letter of Credit or
any of the other Loan Documents; (ii) any amendment or waiver of
(including any default), or any consent to departure from this
Agreement (except to the extent permitted by any amendment or waiver),
any Letter of Credit or any of the other Loan Documents; (iii) the
existence of any claim, set-off, defense or other rights which the
Borrower may have at any time against the beneficiary of any Letter of
Credit or any transferee of any Letter of Credit (or any Persons for
whom any such beneficiary or any such transferee may be acting), the
Issuing Bank, the Agent, any Lender or any other Person, whether in
connection with this Agreement, any Letter of Credit, the other Loan
Documents, the transactions contemplated hereby or any unrelated
transaction; (iv) any statement, certificate, draft, notice or any
other document presented under any Letter of Credit proves to have been
forged, fraudulent, insufficient or invalid in any respect or any
statement therein proves to have been untrue or inaccurate in any
respect whatsoever; (v) payment by the Issuing Bank under any Letter of
Credit against presentation of a draft or certificate which appears on
its face to comply, but does not comply, with the terms of such Letter
of Credit; and (vi) any other circumstance or happening whatsoever,
whether or not similar to any of the foregoing.
Notwithstanding anything in this Agreement to the contrary, the
Borrower will not be liable for payment or performance that results
from the gross negligence or willful misconduct of the Issuing Bank,
except (i) where the Borrower or any Subsidiary actually recovers the
proceeds for itself or the Issuing Bank of any payment made by the
Issuing Bank in connection with such gross negligence or willful
misconduct or (ii) in cases where the Agent makes payment to the named
beneficiary of a Letter of Credit.
(b) In the event of the occurrence of any Event of Default, a
payment or prepayment pursuant to Section 2.07(b) or the maturity of
the Notes, whether by acceleration or otherwise, an amount equal to the
LC Exposure (or the excess in the case of Section 2.07(b)) shall be
deemed to be forthwith due and owing by the Borrower to the Issuing
Bank,
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the Agent and the Lenders as of the date of any such occurrence; and
the Borrower's obligation to pay such amount shall be absolute and
unconditional, without regard to whether any beneficiary of any such
Letter of Credit has attempted to draw down all or a portion of such
amount under the terms of a Letter of Credit, and, to the fullest
extent permitted by applicable law, shall not be subject to any defense
or be affected by a right of set-off, counterclaim or recoupment which
the Borrower may now or hereafter have against any such beneficiary,
the Issuing Bank, the Agent, the Lenders or any other Person for any
reason whatsoever. Such payments shall be held by the Issuing Bank on
behalf of the Lenders as cash collateral securing the LC Exposure in an
account or accounts at the Principal Office; and the Borrower hereby
grants to and by its deposit with the Agent grants to the Agent a
security interest in such cash collateral. In the event of any such
payment by the Borrower of amounts contingently owing under outstanding
Letters of Credit and in the event that thereafter drafts or other
demands for payment complying with the terms of such Letters of Credit
are not made prior to the respective expiration dates thereof, the
Agent agrees, if no Event of Default has occurred and is continuing or
if no other amounts are outstanding under this Agreement, the Notes or
the other Loan Documents, to remit to the Borrower amounts for which
the contingent obligations evidenced by the Letters of Credit have
ceased.
(c) Each Lender severally and unconditionally agrees that it
shall promptly reimburse the Issuing Bank an amount equal to such
Lender's Percentage Share of any disbursement made by the Issuing Bank
under any Letter of Credit that is not reimbursed according to this
Section 2.09.
Section 2.10 Lending Offices. The Loans of each Type made by each
Lender shall be made and maintained at such Lender's Applicable Lending Office
for Loans of such Type.
ARTICLE III
Payments of Principal and Interest
Section 3.01 Repayment of Loans.
(a) Revolving Credit Loans. On the Revolving Credit Termination Date
the Borrower shall repay the outstanding aggregate principal and accrued and
unpaid interest under the Notes.
(b) Generally. The Borrower will pay to the Agent, for the account of
each Lender, the principal payments required by this Section 3.01.
Section 3.02 Interest.
(a) Interest Rates. The Borrower will pay to the Agent, for
the account of each Lender or the Swing Line Lender, as appropriate,
interest on the unpaid principal amount of each Loan made by such
Lender for the period commencing on the date such Loan is made to, but
excluding, the date such Loan shall be paid in full, at the following
rates per annum:
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(i) if such a Loan is a Base Rate Loan, the Base Rate
(as in effect from time to time) plus the Applicable Margin, but in no
event to exceed the Highest Lawful Rate; and
(ii) if such a Loan is a LIBOR Loan, for each
Interest Period relating thereto, the LIBOR Rate for such Loan plus the
Applicable Margin (as in effect from time to time), but in no event to
exceed the Highest Lawful Rate.
(b) Post-Default Rate. Notwithstanding the foregoing, the
Borrower will pay to the Agent, for the account of each Lender interest
at the applicable Post-Default Rate on any principal of any Loan made
by such Lender, and (to the fullest extent permitted by law) on any
other amount payable by the Borrower hereunder, under any Loan Document
or under any Note held by such Lender to or for account of such Lender,
for the period commencing on the date of an Event of Default until the
same is paid in full or all Events of Default are cured or waived.
(c) Due Dates. Accrued interest on Base Rate Loans shall be
payable on each Quarterly Date commencing on December 31, 1998, and
accrued interest on each LIBOR Loan shall be payable on the last day of
the Interest Period therefor and, if such Interest Period is longer
than three months at three-month intervals following the first day of
such Interest Period, except that interest payable at the Post-Default
Rate shall be payable from time to time on demand and interest on any
LIBOR Loan that is converted into a Base Rate Loan (pursuant to Section
5.04) shall be payable on the date of conversion (but only to the
extent so converted). Any accrued and unpaid interest on the Loans
shall be paid on the Revolving Credit Termination Date.
(d) Determination of Rates. Promptly after the determination
of any interest rate provided for herein or any change therein, the
Agent shall notify the Lenders to which such interest is payable and
the Borrower thereof. Each determination by the Agent of an interest
rate or fee hereunder shall, except in cases of manifest error, be
final, conclusive and binding on the parties.
ARTICLE IV
Payments; Pro Rata Treatment; Computations; Etc.
Section 4.01 Payments. Except to the extent otherwise provided
herein, all payments of principal, interest and other amounts to be made by the
Borrower under this Agreement, the Notes and the Letter of Credit Agreements
shall be made in Dollars, in immediately available funds, to the Agent at such
account as the Agent shall specify by notice to the Borrower from time to time,
not later than 11:00 a.m. Charlotte time on the date on which such payments
shall become due (each such payment made after such time on such due date to be
deemed to have been made on the next succeeding Business Day). Such payments
shall be made without (to the fullest extent permitted by applicable law)
defense, set-off or counterclaim. Each payment received by the Agent under this
Agreement or any Note for account of a Lender shall be paid promptly to such
Lender in
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immediately available funds. Except as otherwise provided in the definition of
"Interest Period", if the due date of any payment under this Agreement or any
Note would otherwise fall on a day which is not a Business Day such date shall
be extended to the next succeeding Business Day and interest shall be payable
for any principal so extended for the period of such extension. At the time of
each payment to the Agent of any principal of or interest on any borrowing, the
Borrower shall notify the Agent of the Loans to which such payment shall apply.
In the absence of such notice the Agent may specify the Loans to which such
payment shall apply, but to the extent possible such payment or prepayment will
be applied first to the Loans comprised of Base Rate Loans.
Section 4.02 Pro Rata Treatment. Except for Swing Line Loans
and to the extent otherwise provided herein each Lender agrees that: (i) each
borrowing from the Lenders under Section 2.01 and each continuation and
conversion under Section 2.02 shall be made from the Lenders pro rata in
accordance with their Percentage Share, each payment of fees under Section
2.04(a) and Section 2.04(b)(i) shall be made for account of the Lenders pro rata
in accordance with their Percentage Share, and each termination or reduction of
the amount of the Aggregate Maximum Credit Amounts under Section 2.03(a) shall
be applied to the Commitment of each Lender, pro rata according to the amounts
of its respective Commitment; (ii) each payment of principal of Loans by the
Borrower shall be made for account of the Lenders pro rata in accordance with
the respective unpaid principal amount of the Loans held by the Lenders; (iii)
each payment of interest on Loans by the Borrower shall be made for account of
the Lenders pro rata in accordance with the amounts of interest due and payable
to the respective Lenders; and (iv) each reimbursement by the Borrower of
disbursements under Letters of Credit shall be made for account of the Issuing
Bank or, if funded by the Lenders, pro rata for the account of the Lenders, in
accordance with the amounts of reimbursement obligations due and payable to each
respective Lender.
Section 4.03 Computations. Interest on LIBOR Loans and fees
shall be computed on the basis of a year of 360 days and actual days elapsed
(including the first day but excluding the last day) occurring in the period for
which such interest is payable, unless such calculation would exceed the Highest
Lawful Rate, in which case interest shall be calculated on the per annum basis
of a year of 365 or 366 days, as the case may be. Interest on Base Rate Loans
shall be computed on the basis of a year of 365 or 366 days, as the case may be,
and actual days elapsed (including the first day but excluding the last day)
occurring in the period for which such interest is payable.
Section 4.04 Non-receipt of Funds by the Agent. Unless the
Agent shall have been notified by a Lender or the Borrower prior to the date on
which such notifying party is scheduled to make payment to the Agent (in the
case of a Lender) of the proceeds of a Loan or a payment under a Letter of
Credit to be made by it hereunder or (in the case of the Borrower) a payment to
the Agent for account of one or more of the Lenders hereunder (such payment
being herein called the "Required Payment"), which notice shall be effective
upon receipt, that it does not intend to make the Required Payment to the Agent,
the Agent may assume that the Required Payment has been made and may, in
reliance upon such assumption (but shall not be required to), make the amount
thereof available to the intended recipient(s) on such date and, if such Lender
or the Borrower (as the case may be) has not in fact made the Required Payment
to the Agent, the recipient(s) of such payment shall, on demand, repay to the
Agent the amount so made available together with interest thereon in respect of
each day during the period commencing on the date such amount was so made
available by the Agent until, but excluding, the date the Agent recovers such
amount at a rate per
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annum which, for any Lender as recipient, will be equal to the Federal Funds
Rate, and for the Borrower as recipient, will be equal to the Base Rate plus the
Applicable Margin.
Section 4.05 Set-off, Sharing of Payments, Etc.
(a) The Borrower agrees that, in addition to (and without
limitation of) any right of set-off, bankers' lien or counterclaim a
Lender may otherwise have, each Lender shall have the right and be
entitled (after consultation with the Agent), at its option, to offset
balances held by it or by any of its Affiliates for account of the
Borrower, any Guarantor or any Restricted Affiliate at any of its
offices, in Dollars or in any other currency, against any principal of
or interest on any of such Lender's Loans, or any other amount payable
to such Lender hereunder, which is not paid when due (regardless of
whether such balances are then due to the Borrower), in which case it
shall promptly notify the Borrower and the Agent thereof, provided that
such Lender's failure to give such notice shall not affect the validity
thereof.
(b) If any Lender shall obtain payment of any principal of or
interest on any Loan made by it to the Borrower under this Agreement
(or reimbursement as to any Letter of Credit) through the exercise of
any right of set-off, banker's lien or counterclaim or similar right or
otherwise, and, as a result of such payment, such Lender shall have
received a greater percentage of the principal or interest (or
reimbursement) then due hereunder by the Borrower to such Lender than
the percentage received by any other Lenders, it shall promptly (i)
notify the Agent and each other Lender thereof and (ii) purchase from
such other Lenders participations in (or, if and to the extent
specified by such Lender, direct interests in) the Loans (or
participations in Letters of Credit) made by such other Lenders (or in
interest due thereon, as the case may be) in such amounts, and make
such other adjustments from time to time as shall be equitable, to the
end that all the Lenders shall share the benefit of such excess payment
(net of any expenses which may be incurred by such Lender in obtaining
or preserving such excess payment) pro rata in accordance with the
unpaid principal and/or interest on the Loans held by each of the
Lenders (or reimbursements of Letters of Credit). To such end all the
Lenders shall make appropriate adjustments among themselves (by the
resale of participations sold or otherwise) if such payment is
rescinded or must otherwise be restored. The Borrower agrees that any
Lender so purchasing a participation (or direct interest) in the Loans
made by other Lenders (or in interest due thereon, as the case may be)
may exercise all rights of set-off, banker's lien, counterclaim or
similar rights with respect to such participation as fully as if such
Lender were a direct holder of Loans (or Letters of Credit) in the
amount of such participation. Nothing contained herein shall require
any Lender to exercise any such right or shall affect the right of any
Lender to exercise, and retain the benefits of exercising, any such
right with respect to any other indebtedness or obligation of the
Borrower. If under any applicable bankruptcy, insolvency or other
similar law, any Lender receives a secured claim in lieu of a set-off
to which this Section 4.05 applies, such Lender shall, to the extent
practicable, exercise its rights in respect of such secured claim in a
manner consistent with the rights of the Lenders entitled under this
Section 4.05 to share the benefits of any recovery on such secured
claim.
Section 4.06 Taxes.
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(a) Payments Free and Clear. Any and all payments by the
Borrower hereunder shall be made, in accordance with Section 4.01, free
and clear of and without deduction for any and all present or future
taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, in the case of each
Lender, the Issuing Bank and the Agent, taxes imposed on its income,
and franchise or similar taxes imposed on it, by (i) any jurisdiction
(or political subdivision thereof) of which the Agent, the Issuing Bank
or such Lender, as the case may be, is a citizen or resident or in
which such Lender has an Applicable Lending Office, (ii) the
jurisdiction (or any political subdivision thereof) in which the Agent,
the Issuing Bank or such Lender is organized, or (iii) any jurisdiction
(or political subdivision thereof) in which such Lender, the Issuing
Bank or the Agent is presently doing business which taxes are imposed
solely as a result of doing business in such jurisdiction (all such
non-excluded taxes, levies, imposts, deductions, charges, withholdings
and liabilities being hereinafter referred to as "Taxes"). If the
Borrower shall be required by law to deduct any Taxes from or in
respect of any sum payable hereunder to the Lenders, the Issuing Bank
or the Agent (i) the sum payable shall be increased by the amount
necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section
4.06) such Lender, the Issuing Bank or the Agent (as the case may be)
shall receive an amount equal to the sum it would have received had no
such deductions been made, (ii) the Borrower shall make such deductions
and (iii) the Borrower shall pay the full amount deducted to the
relevant taxing authority or other Governmental Authority in accordance
with applicable law.
(b) Other Taxes. In addition, to the fullest extent permitted
by applicable law, the Borrower agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes,
charges or similar levies that arise from any payment made hereunder or
from the execution, delivery or registration of, or otherwise with
respect to, this Agreement, any Assignment or any other Loan Document
(hereinafter referred to as "Other Taxes").
(c) INDEMNIFICATION. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, THE BORROWER WILL INDEMNIFY EACH LENDER AND THE ISSUING
BANK AND THE AGENT FOR THE FULL AMOUNT OF TAXES (AS DEFINED ABOVE) AND
OTHER TAXES (INCLUDING, BUT NOT LIMITED TO, ANY TAXES OR OTHER TAXES
IMPOSED BY ANY GOVERNMENTAL AUTHORITY ON AMOUNTS PAYABLE UNDER THIS
SECTION 4.06) PAID BY SUCH LENDER, THE ISSUING BANK OR THE AGENT (ON
THEIR BEHALF OR ON BEHALF OF ANY LENDER), AS THE CASE MAY BE, AND ANY
LIABILITY (INCLUDING PENALTIES, INTEREST AND EXPENSES) ARISING
THEREFROM OR WITH RESPECT THERETO, WHETHER OR NOT SUCH TAXES OR OTHER
TAXES WERE CORRECTLY OR LEGALLY ASSERTED UNLESS THE PAYMENT OF SUCH
TAXES WAS NOT CORRECTLY OR LEGALLY ASSERTED AND SUCH LENDER'S PAYMENT
OF SUCH TAXES OR OTHER TAXES WAS THE RESULT OF ITS GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT. ANY PAYMENT PURSUANT TO SUCH INDEMNIFICATION SHALL
BE MADE WITHIN THIRTY (30) DAYS AFTER THE DATE ANY LENDER, THE ISSUING
BANK OR THE AGENT, AS THE CASE MAY BE, MAKES WRITTEN DEMAND THEREFOR.
IF ANY LENDER OR THE AGENT RECEIVES A REFUND OR CREDIT IN RESPECT OF
ANY TAXES OR OTHER TAXES FOR WHICH SUCH LENDER, ISSUING BANK OR THE
AGENT HAS RECEIVED PAYMENT FROM THE BORROWER IT SHALL PROMPTLY NOTIFY
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THE BORROWER OF SUCH REFUND OR CREDIT AND SHALL, IF NO EVENT OF DEFAULT
HAS OCCURRED AND IS CONTINUING, WITHIN THIRTY (30) DAYS AFTER RECEIPT
OF A REQUEST BY THE BORROWER (OR PROMPTLY UPON RECEIPT, IF THE BORROWER
HAS REQUESTED APPLICATION FOR SUCH REFUND OR CREDIT PURSUANT HERETO),
PAY AN AMOUNT EQUAL TO SUCH REFUND OR CREDIT TO THE BORROWER WITHOUT
INTEREST (BUT WITH ANY INTEREST SO REFUNDED OR CREDITED), PROVIDED THAT
THE BORROWER, UPON THE REQUEST OF SUCH LENDER, THE ISSUING BANK OR THE
AGENT, AGREES TO RETURN SUCH REFUND OR CREDIT (PLUS PENALTIES, INTEREST
OR OTHER CHARGES) TO SUCH LENDER OR THE AGENT IN THE EVENT SUCH LENDER
OR THE AGENT IS REQUIRED TO REPAY SUCH REFUND OR CREDIT.
(d) Lender Representations.
(i) Each Lender represents that it is either (1) a
banking association or corporation organized under the laws of
the United States of America or any state thereof or (2) it is
entitled to complete exemption from United States withholding
tax imposed on or with respect to any payments, including
fees, to be made to it pursuant to this Agreement (A) under an
applicable provision of a tax convention to which the United
States of America is a party or (B) because it is acting
through a branch, agency or office in the United States of
America and any payment to be received by it hereunder is
effectively connected with a trade or business in the United
States of America. Each Lender that is not a banking
association or corporation organized under the laws of the
United States of America or any state thereof agrees to
provide to the Borrower and the Agent on the Closing Date, or
on the date of its delivery of the Assignment pursuant to
which it becomes a Lender, and at such other times as required
by United States law or as the Borrower or the Agent shall
reasonably request, two accurate and complete original signed
copies of either (A) Internal Revenue Service Form 4224 (or
successor form) certifying that all payments to be made to it
hereunder will be effectively connected to a United States
trade or business (the "Form 4224 Certification") or (B)
Internal Revenue Service Form 1001 (or successor form)
certifying that it is entitled to the benefit of a provision
of a tax convention to which the United States of America is a
party which completely exempts from United States withholding
tax all payments to be made to it hereunder (the "Form 1001
Certification"). In addition, each Lender agrees that if it
previously filed a Form 4224 Certification, it will deliver to
the Borrower and the Agent a new Form 4224 Certification prior
to the first payment date occurring in each of its subsequent
taxable years; and if it previously filed a Form 1001
Certification, it will deliver to the Borrower and the Agent a
new certification prior to the first payment date falling in
the third year following the previous filing of such
certification. Each Lender also agrees to deliver to the
Borrower and the Agent such other or supplemental forms as may
at any time be required as a result of changes in applicable
law or regulation in order to confirm or maintain in effect
its entitlement to exemption from United States withholding
tax on any payments hereunder, provided that the circumstances
of such Lender at the relevant time and applicable laws permit
it to do so. If a Lender determines, as a result of any change
in either (i) a Governmental Requirement or (ii) its
circumstances, that it is unable to submit
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any form or certificate that it is obligated to submit
pursuant to this Section 4.06, or that it is required to
withdraw or cancel any such form or certificate previously
submitted, it shall promptly notify the Borrower and the Agent
of such fact. If a Lender is organized under the laws of a
jurisdiction outside the United States of America, unless the
Borrower and the Agent have received a Form 1001 Certification
or Form 4224 Certification satisfactory to them indicating
that all payments to be made to such Lender hereunder are not
subject to United States withholding tax, the Borrower shall
withhold taxes from such payments at the applicable statutory
rate. Each Lender agrees to indemnify and hold harmless the
Borrower or Agent, as applicable, from any United States
taxes, penalties, interest and other expenses, costs and
losses incurred or payable by (i) the Agent as a result of
such Lender's failure to submit any form or certificate that
it is required to provide pursuant to this Section 4.06 or
(ii) the Borrower or the Agent as a result of their reliance
on any such form or certificate which such Lender has provided
to them pursuant to this Section 4.06.
(ii) For any period with respect to which a Lender
has failed to provide the Borrower with the forms or
certificates required pursuant to this Section 4.06, if any,
(other than if such failure is due to a change in a
Governmental Requirement occurring subsequent to the date on
which a form originally was required to be provided), such
Lender shall not be entitled to indemnification under Section
4.06 with respect to taxes imposed by the United States which
taxes would not have been imposed but for such failure to
provide such forms; provided, however, that if a Lender, which
is otherwise exempt from or subject to a reduced rate of
withholding tax, becomes subject to taxes because of its
failure to deliver a form required hereunder, the Borrower
shall take such steps as such Lender shall reasonably request
to assist such Lender to recover such taxes.
(iii) Any Lender claiming any additional amounts
payable pursuant to this Section 4.06 shall use reasonable
efforts (consistent with legal and regulatory restrictions) to
file any certificate or document requested by the Borrower or
the Agent or to change the jurisdiction of its Applicable
Lending Office or to contest any tax imposed if the making of
such a filing or change or contesting such tax would avoid the
need for or reduce the amount of any such additional amounts
that may thereafter accrue and would not, in the sole
determination of such Lender, be otherwise disadvantageous to
such Lender.
ARTICLE V
Capital Adequacy
Section 5.01 Additional Costs.
(a) LIBOR Regulations, etc. The Borrower shall pay directly to
each Lender from time to time such amounts as such Lender may
reasonably determine to be necessary
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to compensate such Lender for any costs which it determines are
attributable to its making or maintaining of any LIBOR Loans or issuing
or participating in Letters of Credit hereunder or its obligation to
make any LIBOR Loans or issue or participate in any Letters of Credit
hereunder, or any reduction in any amount receivable by such Lender
hereunder in respect of any of such LIBOR Loans, Letters of Credit or
such obligation (such increases in costs and reductions in amounts
receivable being herein called "Additional Costs"), resulting from any
Regulatory Change which: (i) changes the basis of taxation of any
amounts payable to such Lender under this Agreement or any Note in
respect of any of such LIBOR Loans or Letters of Credit (other than
taxes imposed on the overall net income of such Lender or of its
Applicable Lending Office for any of such LIBOR Loans by the
jurisdiction in which such Lender has its principal office or
Applicable Lending Office); or (ii) imposes or modifies any reserve,
special deposit, minimum capital, capital ratio or similar requirements
relating to any extensions of credit or other assets of, or any
deposits with or other liabilities of such Lender, or the Commitment or
Loans of such Lender or the London interbank market; or (iii) imposes
any other condition affecting this Agreement or any Note (or any of
such extensions of credit or liabilities) or such Lender's Commitment
or Loans. Each Lender will notify the Agent and the Borrower of any
event occurring after the Closing Date which will entitle such Lender
to compensation pursuant to this Section 5.01(a) as promptly as
practicable after it obtains knowledge thereof and determines to
request such compensation, and will designate a different Applicable
Lending Office for the Loans of such Lender affected by such event if
such designation will avoid the need for, or reduce the amount of, such
compensation and will not, in the sole opinion of such Lender, be
disadvantageous to such Lender, provided that such Lender shall have no
obligation to so designate an Applicable Lending Office located in the
United States. If any Lender requests compensation from the Borrower
under this Section 5.01(a), the Borrower may, by notice to such Lender,
suspend the obligation of such Lender to make additional Loans of the
Type with respect to which such compensation is requested until the
Regulatory Change giving rise to such request ceases to be in effect
(in which case the provisions of Section 5.04 shall be applicable).
(b) Capital Adequacy. Without limiting the effect of the
foregoing provisions of this Section 5.01 (but without duplication),
the Borrower shall pay directly to any Lender from time to time on
request such amounts as such Lender may reasonably determine to be
necessary to compensate such Lender or its parent or holding company
for any costs which it determines are attributable to the maintenance
by such Lender or its parent or holding company (or any Applicable
Lending Office), pursuant to any Governmental Requirement following any
Regulatory Change, of capital in respect of its Commitment, its Note,
its Loans, or any interest held by it in any Letter of Credit, such
compensation to include, without limitation, an amount equal to any
reduction of the rate of return on assets or equity of such Lender or
its parent or holding company (or any Applicable Lending Office) to a
level below that which such Lender or its parent or holding company (or
any Applicable Lending Office) could have achieved but for such
Governmental Requirement. Such Lender will notify the Borrower that it
is entitled to compensation pursuant to this Section 5.01(b) as
promptly as practicable after it determines to request such
compensation.
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(c) Compensation Procedure. Any Lender notifying the Borrower
of the incurrence of additional costs under this Section 5.01 shall in
such notice to the Borrower and the Agent set forth in reasonable
detail the basis and amount of its request for compensation.
Determinations and allocations by each Lender for purposes of this
Section 5.01 of the effect of any Regulatory Change pursuant to Section
5.01(a), or of the effect of capital maintained pursuant to Section
5.01(b), on its costs or rate of return of maintaining Loans or its
obligation to make Loans or issue Letters of Credit, or on amounts
receivable by it in respect of Loans or Letters of Credit, and of the
amounts required to compensate such Lender under this Section 5.01,
shall be conclusive and binding for all purposes, provided that such
determinations and allocations are made on a reasonable basis. Any
request for additional compensation under this Section 5.01 shall be
paid by the Borrower within thirty (30) days of the receipt by the
Borrower of the notice described in this Section 5.01(c).
(d) The Lenders shall determine the applicability of, and the
amount due under, this Section 5.01 consistent with the manner in which
they apply similar provisions and calculate similar amounts payable to
them by other borrowers having in their credit agreements provisions
comparable to this Section.
Section 5.02 Limitation on LIBOR Loans. Anything herein to the
contrary notwithstanding, if, on or prior to the determination of any LIBOR Rate
for any Interest Period:
(i) the Agent determines (which determination shall be
conclusive, absent manifest error) that quotations of interest rates
for the relevant deposits referred to in the definition of "LIBOR Rate"
in Section 1.02 are not being provided in the relevant amounts or for
the relevant maturities for purposes of determining rates of interest
for Eurodollar Loans as provided herein; or
(ii) the Agent determines (which determination shall be
conclusive, absent manifest error) that the relevant rates of interest
referred to in the definition of "Eurodollar Rate" in Section 1.02 upon
the basis of which the rate of interest for Eurodollar Loans for such
Interest Period is to be determined are not sufficient to adequately
cover the cost to the Lenders of making or maintaining Eurodollar
Loans;
then the Agent shall give the Borrower prompt notice thereof, and so long as
such condition remains in effect, the Lenders shall be under no obligation to
make additional Eurodollar Loans. The Lenders shall determine the applicability
of this Section 5.02 consistent with the manner in which they apply similar
provisions to other borrowers having in their credit agreements provisions
comparable to this Section.
Section 5.03 Illegality. Notwithstanding any other provision
of this Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to honor its obligation to make or maintain Eurodollar
Loans hereunder, then such Lender shall promptly notify the Borrower thereof and
such Lender's obligation to make Eurodollar Loans shall be suspended until such
time as such Lender may again make and maintain Eurodollar Loans (in which case
the provisions of Section 5.04 shall be applicable).
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Section 5.04 Base Rate Loans Pursuant to Sections 5.01, 5.02
and 5.03. If the obligation of any Lender to make Eurodollar Loans shall be
suspended pursuant to Sections 5.01, 5.02 or 5.03 ("Affected Loans"), all
Affected Loans which would otherwise be made by such Lender shall be made
instead as Base Rate Loans (and, if an event referred to in Section 5.01(b) or
Section 5.03 has occurred and such Lender so requests by notice to the Borrower,
all Affected Loans of such Lender then outstanding shall be automatically
converted into Base Rate Loans on the date specified by such Lender in such
notice) and, to the extent that Affected Loans are so made as (or converted
into) Base Rate Loans, all payments of principal which would otherwise be
applied to such Lender's Affected Loans shall be applied instead to its Base
Rate Loans.
Section 5.05 Compensation. The Borrower shall pay to each
Lender within thirty (30) days of receipt of written request of such Lender
(which request shall set forth, in reasonable detail, the basis for requesting
such amounts and which shall be conclusive and binding for all purposes provided
that such determinations are made on a reasonable basis), such amount or amounts
as shall compensate it for any loss, cost, expense or liability which such
Lender reasonably determines are attributable to:
(i) any payment, prepayment or conversion of a Eurodollar Loan
properly made by such Lender or the Borrower for any reason (including,
without limitation, the acceleration of the Loans pursuant to Section
10.01) on a date other than the last day of the Interest Period for
such Loan; or
(ii) any failure by the Borrower for any reason (including but
not limited to, the failure of any of the conditions precedent
specified in Article VI to be satisfied) to borrow, continue or convert
a Eurodollar Loan from such Lender on the date for such borrowing,
continuation or conversion specified in the relevant notice given
pursuant to Section 2.02(c).
Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
which would have accrued on the principal amount so paid, prepaid or converted
or not borrowed for the period from the date of such payment, prepayment or
conversion or failure to borrow to the last day of the Interest Period for such
Loan (or, in the case of a failure to borrow, the Interest Period for such Loan
which would have commenced on the date specified for such borrowing) at the
applicable rate of interest for such Loan provided for herein over (ii) the
interest component of the amount such Lender would have bid in the London
interbank market for Dollar deposits of leading banks in amounts comparable to
such principal amount and with maturities comparable to such period (as
reasonably determined by such Lender).
Section 5.06 Replacement Lenders.
(a) If any Lender has notified the Borrower and the Agent of
its incurring additional costs under Section 5.01 or has required the
Borrower to make payments for Taxes under Section 4.06, then the
Borrower may, unless such Lender has notified the Borrower and the
Agent that the circumstances giving rise to such notice no longer
apply, terminate, in whole but not in part, the Commitment of any
Lender (other than the Agent) (the
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"Terminated Lender") at any time upon five (5) Business Days' prior
written notice to the Terminated Lender and the Agent (such notice
referred to herein as a "Notice of Termination").
(b) In order to effect the termination of the Commitment of
the Terminated Lender, the Borrower shall: (i) obtain an agreement with
one or more Lenders to increase their Commitment or Commitments and/or
(ii) request any one or more other banking institutions to become
parties to this Agreement in place and instead of such Terminated
Lender and agree to accept a Commitment or Commitments; provided,
however, that such one or more other banking institutions are
reasonably acceptable to the Agent and become parties by executing an
Assignment (the Lenders or other banking institutions that agree to
accept in whole or in part the Commitment of the Terminated Lender
being referred to herein as the "Replacement Lenders"), such that the
aggregate increased and/or accepted Commitments of the Replacement
Lenders under clauses (i) and (ii) above equal the Commitment of the
Terminated Lender.
(c) The Notice of Termination shall include the name of the
Terminated Lender, the date the termination will occur (the "Lender
Termination Date"), and the Replacement Lender or Replacement Lenders
to which the Terminated Lender will assign its Commitment and, if there
will be more than one Replacement Lender, the portion of the Terminated
Lender's Commitment to be assigned to each Replacement Lender.
(d) On the Lender Termination Date, (i) the Terminated Lender
shall by execution and delivery of an Assignment assign its Commitment
to the Replacement Lender or Replacement Lenders (pro rata, if there is
more than one Replacement Lender, in proportion to the portion of the
Terminated Lender's Commitment to be assigned to each Replacement
Lender) indicated in the Notice of Termination and shall assign to the
Replacement Lender or Replacement Lenders each of its Loans (if any)
then outstanding and participation interests in Letters of Credit (if
any) then outstanding pro rata as aforesaid), (ii) the Terminated
Lender shall endorse its Note, payable without recourse, representation
or warranty to the order of the Replacement Lender or Replacement
Lenders (pro rata as aforesaid), (iii) the Replacement Lender or
Replacement Lenders shall purchase the Notes held by the Terminated
Lender (pro rata as aforesaid) at a price equal to the unpaid principal
amount thereof plus interest and facility and other fees accrued and
unpaid to the Lender Termination Date, and (iv) the Replacement Lender
or Replacement Lenders will thereupon (pro rata as aforesaid) succeed
to and be substituted in all respects for the Terminated Lender with
like effect as if becoming a Lender pursuant to the terms of Section
12.06(b), and the Terminated Lender will have the rights and benefits
of an assignor under Section 12.06(b). To the extent not in conflict,
the terms of Section 12.06(b) shall supplement the provisions of this
Section 5.06(d). For each assignment made under this Section 5.06, the
Replacement Lender shall pay to the Agent the processing fee provided
for in Section 12.06(b). The Borrower will be responsible for the
payment of any breakage costs associated with termination and
Replacement Lenders, as set forth in Section 5.05.
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ARTICLE VI
Conditions Precedent
Section 6.01 Initial Funding.
The obligation of the Lenders to make the Initial Funding is
subject to the receipt by the Agent and the Lenders of all fees payable pursuant
to Section 2.04 on or before the Closing Date and the receipt by the Agent on
the Closing Date or any other date on or before the date of Initial Funding of
the following documents and satisfaction of the other conditions provided in
this Section 6.01, each of which shall be satisfactory to the Agent in form and
substance:
(a) A certificate of the Secretary or an Assistant Secretary
of the General Partner setting forth (i) resolutions of its board of
directors with respect to the authorization of the Borrower to execute
and deliver the Loan Documents to which it is a party and to enter into
the transactions contemplated in those documents, (ii) the officers of
the General Partner (y) who are authorized to sign the Loan Documents
to which Borrower is a party and (z) who will, until replaced by
another officer or officers duly authorized for that purpose, act as
its representatives for the purposes of signing documents and giving
notices and other communications in connection with this Agreement and
the transactions contemplated hereby, (iii) specimen signatures of the
authorized officers, and (iv) the articles or certificate of
incorporation and bylaws of the General Partner and the Borrower
Partnership Agreement, certified as being true and complete. The Agent
and the Lenders may conclusively rely on such certificate until the
Agent receives notice in writing from the Borrower to the contrary.
(b) A certificate of the Secretary or an Assistant Secretary
of BMC setting forth (i) resolutions of its board of directors with
respect to the authorization of the Guarantor to execute and deliver
the Loan Documents to which it is a party and to enter into the
transactions contemplated in those documents, (ii) the officers of the
Guarantor (y) who are authorized to sign the Loan Documents to which
Guarantor is a party and (z) who will, until replaced by another
officer or officers duly authorized for that purpose, act as its
representatives for the purposes of signing documents and giving
notices and other communications in connection with this Agreement and
the transactions contemplated hereby, (iii) specimen signatures of the
authorized officers, and (iv) the articles or certificate of
incorporation and bylaws of BMC and the Guarantor Partnership
Agreement, certified as being true and complete. The Agent and the
Lenders may conclusively rely on such certificate until they receive
notice in writing from the Guarantor to the contrary.
(c) Certificates of the appropriate state agencies with
respect to the existence, qualification and good standing, as
appropriate, of the Borrower, the Guarantor, the General Partner and
BMC.
(d) A Compliance Certificate duly and properly executed by a
Responsible Officer and dated as of the date of the Initial Funding.
(e) The Notes, duly completed and executed.
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(f) The Loan Documents, duly completed and executed in
sufficient number of counterparts as reasonably requested by the Agent.
(g) Opinions of Morgan, Lewis & Bockius LLP, counsel to the
Borrower and Buckeye Partners and certain local counsel to the Borrower
and Buckeye Partners, each in form and substance satisfactory to the
Agent, as to such matters incident to the transactions herein
contemplated as the Agent may reasonably request.
(h) A certificate of insurance coverage of the Borrower
evidencing that the Borrower is carrying insurance in accordance with
Section 7.19.
(i) The Agent shall have been furnished with appropriate UCC
search certificates reflecting no Liens other than Excepted Liens.
(j) The Agent shall have reviewed the environmental files of
the Borrower, Buckeye Partners and the Restricted Affiliates and shall
be satisfied with the results of its review.
(k) Such other documents as the Agent or any Lender or special
counsel to the Agent may reasonably request.
Section 6.02 Initial and Subsequent Loans and Letters of
Credit. The obligation of the Lenders to make Loans to the Borrower upon the
occasion of each borrowing hereunder and to issue, renew, extend or reissue
Letters of Credit for the account of the Borrower (including the Initial
Funding) is subject to the further conditions precedent that, as of the date of
such Loans and after giving effect thereto:
(a) no Default shall have occurred and be continuing;
(b) no Material Adverse Effect shall have occurred and be continuing;
and
(c) the representations and warranties made by the Borrower in Article
VII and in any other Loan Document shall be true on and as of the date of the
making of such Loans or issuance, renewal, extension or reissuance of a Letter
of Credit with the same force and effect as if made on and as of such date and
following such new borrowing, except to the extent such representations and
warranties are expressly limited to an earlier date or the Required Lenders may
expressly consent in writing to the contrary.
Each request for a borrowing or issuance, renewal, extension or
reissuance of a Letter of Credit by the Borrower hereunder shall constitute a
certification by the Borrower to the effect set forth in Section 6.02(c) (both
as of the date of such notice and, unless the Borrower otherwise notifies the
Agent prior to the date of and immediately following such borrowing or issuance,
renewal, extension or reissuance of a Letter of Credit as of the date thereof).
Section 6.03 Conditions Precedent for the Benefit of Lenders.
All conditions precedent to the obligations of the Lenders to make any Loan are
imposed hereby solely for the
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benefit of the Lenders, and no other Person may require satisfaction of any such
condition precedent or be entitled to assume that the Lenders will refuse to
make any Loan in the absence of strict compliance with such conditions
precedent.
Section 6.04 No Waiver. No waiver of any condition precedent
shall preclude the Agent or the Lenders from requiring such condition to be met
prior to making any subsequent Loan or preclude the Lenders from thereafter
declaring that the failure of the Borrower to satisfy such condition precedent
constitutes a Default.
ARTICLE VII
Representations and Warranties
Each of the Borrower and each Guarantor represents and warrants to the
Agent and the Lenders that (each representation and warranty herein is given as
of the Closing Date and shall be deemed repeated and reaffirmed on the dates of
each borrowing and issuance, renewal, extension or reissuance of a Letter of
Credit as provided in Section 6.02):
Section 7.01 Existence. Each of the Borrower, the Guarantors,
and the Restricted Affiliates: (i) is duly organized, legally existing and, as
applicable, in good standing under the laws of the jurisdiction of its
formation; (ii) has all requisite power, and has all material governmental
licenses, authorizations, consents and approvals necessary to own its assets and
carry on its business as now being or as proposed to be conducted and, with
respect to Restricted Affiliates, where a failure to have such items would have
a Material Adverse Effect; and (iii) is qualified to do business in all
jurisdictions in which the nature of the business conducted by it makes such
qualification necessary and where failure so to qualify would have a Material
Adverse Effect.
Section 7.02 Financial Condition. The audited consolidated
balance sheet of Buckeye Partners and its Consolidated Subsidiaries as at
December 31, 1997 and the related consolidated statement of income, equity and
cash flow of Buckeye Partners and its Consolidated Subsidiaries for the fiscal
year ended on said date, with the opinion thereon of Deloitte & Touche LLP
heretofore furnished to each of the Lenders and the unaudited consolidated
balance sheet of Buckeye Partners and its Consolidated Subsidiaries as at
September 30, 1998 and their related consolidated statements of income, equity
and cash flow of Buckeye Partners and its Consolidated Subsidiaries for the nine
month period ended on such date heretofore furnished to the Agent, are complete
and correct and fairly present in all material respects the consolidated
financial condition of Buckeye Partners and its Consolidated Subsidiaries as at
said dates and the results of its operations for the fiscal year and the nine
month period on said dates, all in accordance with GAAP, as applied on a
consistent basis (subject, in the case of the interim financial statements, to
normal year-end adjustments and the lack of footnotes). Neither Buckeye Partners
nor any Subsidiary has on the Closing Date any material Debt, contingent
liabilities, liabilities for taxes, unusual forward or long-term commitments or
unrealized or anticipated losses from any unfavorable commitments, except as
referred to or reflected or provided for in the Financial Statements or in
Schedule 7.02. Since December 31, 1997, there has been no change or event having
a Material Adverse Effect which is continuing. Since the date of the Financial
Statements, neither the business nor the
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Properties (taken as a whole) of the Borrower, any Guarantor or any Restricted
Affiliate have been materially and adversely affected as a result of any fire,
explosion, earthquake, flood, drought, windstorm, accident, strike or other
labor disturbance, embargo, requisition or taking of Property or cancellation of
contracts, permits or concessions by any Governmental Authority, riot,
activities of armed forces or acts of God or of any public enemy which is
continuing.
Section 7.03 Litigation. Except as disclosed to the Lenders in
Schedule 7.03 hereto or as disclosed in Buckeye Partners Form 10-K for the year
ended December 31, 1997 filed with the SEC (a true and complete copy of which
has been delivered to the Agent), at the Closing Date there is no litigation,
legal, administrative or arbitral proceeding, investigation or other action of
any nature pending or, to the knowledge of the Borrower threatened against or
affecting the Borrower, Buckeye Partners or any Restricted Affiliates which
involves the possibility of any judgment or liability against the Borrower, the
Guarantor or any Restricted Affiliates not fully covered by insurance (except
for normal deductibles), and which, if determined adversely, would have a
Material Adverse Effect.
Section 7.04 No Breach. Neither the execution and delivery of
the Loan Documents, nor compliance with the terms and provisions hereof will
conflict with or result in a breach of, or require any consent which has not
been obtained as of the Closing Date under, the respective partnership
agreements of the Borrower, Buckeye Partners or any Restricted Affiliate, or any
Governmental Requirement or any agreement or instrument to which the Borrower,
the Guarantor or any Restricted Affiliate is a party or by which it is bound or
to which it or its Properties are subject, or constitute a default under any
such agreement or instrument, or result in the creation or imposition of any
Lien upon any of the revenues or assets of the Borrower, the Guarantor or any
Restricted Affiliate pursuant to the terms of any such agreement or instrument
other than the Liens created by the Loan Documents.
Section 7.05 Authority. The Borrower, each Guarantor and each
Restricted Affiliate have all necessary power and authority to execute, deliver
and perform its obligations under the Loan Documents to which it is a party; and
the execution, delivery and performance by the Borrower, each Guarantor and each
Restricted Affiliate of the Loan Documents to which it is a party, have been
duly authorized by all necessary action on its part; and the Loan Documents
constitute the legal, valid and binding obligations of the Borrower, each
Guarantor and each Restricted Affiliate, enforceable in accordance with their
terms, except as limited by bankruptcy, insolvency, reorganization, moratorium
or other similar laws of general application relating to or affecting creditors'
rights and general principles of equity.
Section 7.06 Approvals. Except for those authorizations that
have been obtained, no authorizations, approvals or consents of, and no filings
or registrations with, any Governmental Authority are necessary for the
execution, delivery or performance by the Borrower, the Guarantors or the
Restricted Affiliates of the Loan Documents or for the validity or
enforceability thereof.
Section 7.07 Use of Loans. The proceeds of the Loans and
Letters of Credit shall be used for acquisitions and general partnership
purposes. The Borrower is not engaged principally, or as one of its important
activities, in the business of extending credit for the purpose, whether
immediate, incidental or ultimate, of buying or carrying margin stock (within
the meaning of Regulation
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T, U or X of the Board of Governors of the Federal Reserve System) and no part
of the proceeds of any Loan hereunder will be used to buy or carry any margin
stock.
Section 7.08 ERISA.
(a) The Borrower, each Subsidiary of the Borrower and each
ERISA Affiliate have complied in all material respects with ERISA and,
where applicable, the Code regarding each Plan.
(b) Each Plan is, and has been, maintained in substantial
compliance with ERISA and, where applicable, the Code.
(c) To the knowledge of the Borrower, no act, omission or
transaction has occurred which could result in imposition on the
Borrower, any Subsidiary of the Borrower or any ERISA Affiliate
(whether directly or indirectly) of (i) either a civil penalty assessed
pursuant to section 502(c), (i) or (l) of ERISA or a tax imposed
pursuant to Chapter 43 of Subtitle D of the Code or (ii) breach of
fiduciary duty liability damages under section 409 of ERISA.
(d) No Plan (other than a defined contribution plan) or any
trust created under any such Plan has been terminated since September
2, 1974. No material liability to the PBGC (other than for the payment
of current premiums which are not past due) by the Borrower, any
Subsidiary of the Borrower or any ERISA Affiliate has been or is
expected by the Borrower, any Subsidiary of the Borrower or any ERISA
Affiliate to be incurred with respect to any Plan. No ERISA Event with
respect to any Plan has occurred.
(e) Full payment when due has been made of all amounts which
the Borrower or any ERISA Affiliate is required under the terms of each
Plan or applicable law to have paid as contributions to such Plan, and
no accumulated funding deficiency (as defined in section 302 of ERISA
and section 412 of the Code), whether or not waived, exists with
respect to any Plan.
(f) The actuarial present value of the benefit liabilities
under all Plans which are subject to Title IV of ERISA do not, as of
the end of the Borrower's most recently ended fiscal year, exceed the
current value of the assets (computed on a plan termination basis in
accordance with Title IV of ERISA) of such Plans allocable to such
benefit liabilities by more than $2,000,000 in the aggregate. The term
"actuarial present value of the benefit liabilities" shall have the
meaning specified in section 4041 of ERISA.
(g) None of the Borrower, any Subsidiary of the Borrower or
any ERISA Affiliate sponsors, maintains, or contributes to an employee
welfare benefit plan, as defined in section 3(1) of ERISA, including,
without limitation, any such plan maintained to provide benefits to
former employees of such entities, that may not be terminated by the
Borrower, such Subsidiary or such ERISA Affiliate in its sole
discretion at any time without any material liability.
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(h) None of the Borrower, any Subsidiary of the Borrower or
any ERISA Affiliate sponsors, maintains or contributes to, or has at
any time in the preceding six calendar years, sponsored, maintained or
contributed to, any Multiemployer Plan.
(i) Neither the Borrower, any Subsidiary of the Borrower or
any ERISA Affiliate is required to provide security under section
401(a)(29) of the Code due to a Plan amendment that results in an
increase in current liability for the Plan.
Section 7.09 Taxes. Each of the Borrower, the Guarantors and
the Restricted Affiliates has filed all United States Federal income tax returns
and all other tax returns which are required to be filed by them and have paid
all material taxes due pursuant to such returns or pursuant to any assessment
received by the Borrower, any Guarantor or any Restricted Affiliate. The
charges, accruals and reserves on the books of the Borrower, the Guarantors and
the Restricted Affiliates in respect of taxes and other governmental charges
are, in the opinion of the Borrower, adequate. No tax lien has been filed and,
to the knowledge of the Borrower, no claim is being asserted with respect to any
such tax, fee or other charge.
Section 7.10 Titles, etc.
(a) Except as set out in Schedule 7.10, each of the Borrower,
the Guarantors and the Restricted Affiliates has good and defensible
title to its material (individually or in the aggregate) Properties,
free and clear of all Liens, except Liens permitted by Section 9.02.
(b) All leases and agreements necessary for the conduct of the
business of the Borrower, the Guarantors and the Restricted Affiliates
are valid and subsisting, in full force and effect, except as could not
reasonably be expected to have a Material Adverse Effect, and there
exists no default or event or circumstance which with the giving of
notice or the passage of time or both would give rise to a default
under any such lease or leases, which would affect in any material
respect the conduct of the business of the Borrower, the Guarantors or
the Restricted Affiliates.
(c) The rights, Properties and other assets presently owned,
leased or licensed by the Borrower, the Guarantors and the Restricted
Affiliates including, without limitation, all easements and rights of
way, include all rights, Properties and other assets necessary to
permit the Borrower, each Guarantor and each Restricted Affiliates to
conduct its business in all material respects in the same manner as its
business has been conducted prior to the Closing Date.
(d) All of the assets and Properties of the Borrower, the
Guarantors and the Restricted Affiliates which are reasonably necessary
for the operation of their business are in all material respects in
good working condition and are maintained in accordance with prudent
business standards.
Section 7.11 No Material Misstatements. No written
information, statement, exhibit, certificate, document or report furnished to
the Agent and the Lenders (or any of them) by the Borrower, any Guarantor or any
Restricted Affiliate in connection with the negotiation of this Agreement
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contained any material misstatement of fact or omitted to state a material fact
or any fact necessary to make the statement contained therein not materially
misleading in the light of the circumstances in which made. There is no fact
peculiar to the Borrower, Buckeye Partners or any Restricted Affiliate which has
a Material Adverse Effect or in the future is reasonably likely to have (so far
as the Borrower can now foresee) a Material Adverse Effect and which has not
been set forth in this Agreement or the other documents, certificates and
statements furnished to the Agent by or on behalf of the Borrower, Buckeye
Partners or any Restricted Affiliate prior to, or on, the Closing Date in
connection with the transactions contemplated hereby.
Section 7.12 Investment Company Act. None of the Borrower, any
Guarantor or any Restricted Affiliate is an "investment company" or a company
"controlled" by an "investment company," within the meaning of the Investment
Company Act of 1940, as amended.
Section 7.13 Public Utility Holding Company Act. None of the
Borrower, any Guarantor or any Restricted Affiliate is a "holding company," or a
"subsidiary company" of a "holding company," or an "affiliate" of a "holding
company" or of 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.
Section 7.14 Subsidiaries. Except as set forth on Schedule
7.14 or otherwise as disclosed to the Agent in writing, neither Buckeye Partners
nor the Borrower has any Subsidiaries.
Section 7.15 Location of Business and Offices. Each of Buckeye
Partner's and the Borrower's principal place of business and chief executive
offices are located at their respective addresses stated on the signature page
of this Agreement or as otherwise disclosed in writing to the Agent. The
principal place of business and chief executive office of each Restricted
Affiliate are located at the addresses stated on Schedule 7.14 or as otherwise
disclosed in writing to the Agent.
Section 7.16 Defaults. None of the Borrower, any Guarantor or
any Restricted Affiliate is in default nor has any event or circumstance
occurred which, but for the expiration of any applicable grace period or the
giving of notice, or both, would constitute a default under any material
agreement or instrument to which it is a party or by which it is bound which
default would have a Material Adverse Effect. No Default hereunder has occurred
and is continuing.
Section 7.17 Environmental Matters. Except (i) as provided in
Schedule 7.17 (ii) as disclosed in the Form 10-K for the year ended December 31,
1997 filed by Buckeye Partners with the SEC, or (iii) as would not have a
Material Adverse Effect (or with respect to (c), (d) and (e) below, where the
failure to take such actions would not have a Material Adverse Effect):
(a) Neither any Property of the Borrower, any Guarantor or any
Restricted Affiliate nor the operations conducted thereon violate any
order or requirement of any court or Governmental Authority or any
Environmental Laws;
(b) Without limitation of clause (a) above, no Property of the
Borrower, any Guarantor or any Restricted Affiliate nor the operations
currently conducted thereon or, to the best knowledge of the Borrower,
by any prior owner or operator of such Property or
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operation, are in violation of or subject to any existing, pending or
threatened action, suit, investigation, inquiry or proceeding by or
before any court or Governmental Authority or to any remedial
obligations under Environmental Laws;
(c) All notices, permits, licenses or similar authorizations,
if any, required to be obtained or filed in connection with the
operation or use of any and all Property of the Borrower, each
Guarantor and each Restricted Affiliate, including without limitation
past or present treatment, storage, disposal or release of a hazardous
substance or solid waste into the environment, have been duly obtained
or filed, and each of the Borrower, the Guarantors and the Restricted
Affiliates are in compliance with the terms and conditions of all such
notices, permits, licenses and similar authorizations;
(d) All hazardous substances, solid waste, and oil and gas
exploration and production wastes, if any, generated at any and all
Property of the Borrower, any Guarantor or any Restricted Affiliate
have in the past been transported, treated and disposed of in
accordance with Environmental Laws and so as not to pose an imminent
and substantial endangerment to public health or welfare or the
environment, and, to the best knowledge of the Borrower, all such
transport carriers and treatment and disposal facilities have been and
are operating in compliance with Environmental Laws and so as not to
pose an imminent and substantial endangerment to public health or
welfare or the environment, and are not the subject of any existing,
pending or threatened action, investigation or inquiry by any
Governmental Authority in connection with any Environmental Laws;
(e) The Borrower, the Guarantors and the Restricted Affiliates
have taken all steps reasonably necessary to determine and have
determined that no hazardous substances, solid waste, or oil and gas
exploration and production wastes, have been disposed of or otherwise
released and there has been no threatened release of any hazardous
substances on or to any Property of the Borrower, any Guarantor, or any
Restricted Affiliate except in compliance with Environmental Laws and
so as not to pose an imminent and substantial endangerment to public
health or welfare or the environment;
(f) To the extent applicable, all Property of the Borrower,
each Guarantor and each Restricted Affiliate currently satisfies all
design, operation, and equipment requirements imposed by the OPA or
scheduled as of the Closing Date to be imposed by OPA during the term
of this Agreement, and the Borrower does not have any reason to believe
that such Property, to the extent subject to OPA, will not be able to
maintain compliance with the OPA requirements during the term of this
Agreement; and
(g) None of the Borrower, any Guarantor or any Restricted
Affiliate has any known contingent liability in connection with any
release or threatened release of any oil, hazardous substance or solid
waste into the environment.
Section 7.18 Compliance with the Law. None of the Borrower,
any Guarantor or any Restricted Affiliate has violated any Governmental
Requirement or failed to obtain any license, permit, franchise or other
governmental authorization necessary for the ownership of any of its Properties
or the conduct of its business, which violation or failure would have (in the
event such
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violation or failure were asserted by any Person through appropriate action) a
Material Adverse Effect.
Section 7.19 Insurance. The Borrower and each of the
Restricted Affiliates maintains, 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. All such policies are in full force and effect, all
premiums with respect thereto covering all periods up to and including the date
of the closing have been paid, and no notice of cancellation or termination has
been received with respect to any such policy. Such policies are sufficient for
compliance with all requirements of law and of all agreements to which the
Borrower, any Guarantor, or any Restricted Affiliate is a party; are valid,
outstanding and enforceable policies; provide adequate insurance coverage in at
least such amounts and against at least such risks (but including in any event
public liability) as are usually insured against in the same general area by
companies engaged in the same or a similar business for the assets and
operations of the Borrower, each Guarantor and each Restricted Affiliate.
Section 7.20 Material Agreements. The Borrower has heretofore
delivered to the Agent a complete and correct copy of the Indenture and the Note
Agreement relating to the Senior Notes, each as amended and in effect on the
Closing Date.
Section 7.21 Partnership Agreement. Neither the Borrower
Partnership Agreement nor the Buckeye Partners Partnership Agreement has been
terminated, and each is in full force and effect as of the date hereof and no
default has occurred and is continuing thereunder which would have a Material
Adverse Effect.
Section 7.22 Ownership of Parties.
(a) The Borrower is a limited partnership formed under the
laws of the State of Delaware, and is owned 1% (general partnership
interest) by the General Partner, and 99% (limited partnership
interests) by Buckeye Partners.
(b) Each of the Restricted Affiliates (excluding Restricted
Subsidiaries) is a limited partnership, owned 1% (general partnership
interest) by the General Partner and 99% (limited partnership
interests) by Buckeye Partners, other than Buckeye Pipe Line Company of
Michigan, L.P., the limited partnership interests of which are owned
0.99% by the General Partner and 98.01% by Laurel Pipe Line Company,
L.P.
(c) Buckeye Partners is a limited partnership formed under the
laws of the State of Delaware and owned 1% (general partnership
interest) by BMC or a wholly-owned Subsidiary of BMC and 99% (limited
partnership interests) by public holders of limited partnership units.
(d) BMC owns 100% of the capital stock of the General Partner.
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ARTICLE VIII
Affirmative Covenants
The Borrower and Buckeye Partners each covenant and agree that, so long
as any of the Commitments are in effect and until payment in full of all Loans
hereunder, all interest thereon and all other amounts payable by the Borrower
hereunder and the Guarantors under the Guaranty Agreements:
Section 8.01 Reporting Requirements. The Borrower and Buckeye
Partners shall deliver, or shall cause to be delivered, to the Agent with
sufficient copies of each for the Lenders:
(a) Annual Financial Statements. As soon as available and in
any event within 120 days after the end of each fiscal year of Buckeye
Partners, the audited consolidated and, within 100 days after the end
of each fiscal year of Buckeye Partners, unaudited consolidating
statements of income, equity, changes in financial position and cash
flow of Buckeye Partners and its Consolidated Subsidiaries for such
fiscal year, and the related consolidated and consolidating balance
sheets of Buckeye Partners and its Consolidated Subsidiaries as at the
end of such fiscal year, and setting forth in each case in comparative
form the corresponding figures for the preceding fiscal year, and, in
the case of the audited statements, accompanied by the related opinion
of independent public accountants of recognized national standing
acceptable to the Agent which opinion shall state that said financial
statements fairly present in all material respects the consolidated and
consolidating financial condition and results of operations of Buckeye
Partners and its Consolidated Subsidiaries as at the end of, and for,
such fiscal year and that such financial statements have been prepared
in accordance with GAAP, except for such changes in such principles
with which the independent public accountants shall have concurred and
such opinion shall not contain a "going concern" or like qualification
or exception, and a certificate of such accountants stating that, in
making the examination necessary for their opinion, they obtained no
knowledge, except as specifically stated, of any Default.
(b) Quarterly Financial Statements. As soon as available and
in any event within 60 days after the end of each of the first three
fiscal quarterly periods of each fiscal year of Buckeye Partners,
consolidated and consolidating statements of income, equity, changes in
financial position and cash flow of Buckeye Partners and its
Consolidated Subsidiaries for such period and for the period from the
beginning of the respective fiscal year to the end of such period, and
the related consolidated and consolidating balance sheets as at the end
of such period, and setting forth in each case in comparative form the
corresponding figures for the corresponding period in the preceding
fiscal year, accompanied by the certificate of a Responsible Officer of
BMC, which certificate shall state that said financial statements
fairly present in all material respects the consolidated and
consolidating financial condition and results of operations of Buckeye
Partners and its Consolidated Subsidiaries in accordance with GAAP, as
at the end of, and for, such period (subject to normal year-end audit
adjustments and the lack of footnotes).
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(c) Notice of Default, Etc. Promptly after a Responsible
officer of the Borrower or of Buckeye Partners knows that any Default
or any Material Adverse Effect has occurred, a notice of such Default
or Material Adverse Effect, describing the same in reasonable detail
and the action the Borrower or Buckeye Partners proposes to take with
respect thereto.
(d) Other Accounting Reports. Promptly upon receipt thereof, a
copy of each other report or letter submitted to the Borrower, Buckeye
Partners or any Subsidiary by independent accountants in connection
with any annual, interim or special audit made by them of the books of
the Borrower, Buckeye Partners and its Subsidiaries, and a copy of any
response by any Guarantor or any Subsidiary, to such letter or report.
(e) Governmental Authorities. Promptly upon receipt thereof, a
copy of any notice from any Governmental Authority (except where
involving a routine or ordinary course matter, which in any case is
immaterial), and promptly upon a Responsible Officer of the Borrower's
or of Buckeye Partners' knowledge thereof, notice of any material
dispute with any Governmental Authority involving the Borrower, any
Guarantor or any Restricted Affiliate.
(f) Notices Under Other Loan Agreements. Promptly after the
furnishing thereof, copies of any statement, report or notice furnished
by the Borrower or Buckeye Partners to any Person pursuant to the terms
of any indenture, loan or credit or other similar agreement, other than
this Agreement and not otherwise required to be furnished to the
Lenders pursuant to any other provision of this Section 8.01.
(g) Other Matters. From time to time such other information
regarding the business, affairs or financial condition of the Borrower,
any Guarantor, any Restricted Affiliate or any Subsidiary (including,
without limitation, any Plan or Multiemployer Plan and any reports or
other information required to be filed under ERISA) as the Agent may
reasonably request.
The Borrower and Buckeye Partners will each furnish to the Agent, at the time
each set of financial statements is furnished to the Agent pursuant to paragraph
(a) or (b) above, a Compliance Certificate executed by a Responsible Officer of
the General Partner and BMC, respectively (i) certifying as to the matters set
forth therein and stating that no Default has occurred and is continuing (or, if
any Default has occurred and is continuing, describing the same in reasonable
detail), and (ii) setting forth in reasonable detail the computations necessary
to determine whether the Borrower is in compliance with Sections 9.12 and 9.13
as of the end of the respective fiscal quarter or fiscal year.
Section 8.02 Litigation. The Borrower and Buckeye Partners
shall promptly give, and shall cause any Restricted Affiliate to give to the
Agent notice of: (i) all legal or arbitral proceedings, and of all proceedings
before any Governmental Authority affecting the Borrower, the Guarantor or any
Restricted Affiliate, except proceedings which, if adversely determined, would
not have a Material Adverse Effect, and (ii) any litigation or proceeding
against or adversely affecting the Borrower, the Guarantor or any Restricted
Affiliate in which the amount involved exceeds $5,000,000 and is not covered in
full by insurance (subject to normal and customary deductibles and for which the
insurer has not assumed the defense), or in which injunctive or similar relief
is sought.
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The Borrower will promptly notify the Agent and each of the Lenders of any
claim, judgment, Lien or other encumbrance affecting any Property of the
Borrower, the Guarantor or any Restricted Affiliate if the value of the claim,
judgment, Lien, or other encumbrance affecting such Property shall exceed
$5,000,000.
Section 8.03 Maintenance, Etc.
(a) Generally. Each of Buckeye Partners and the Borrower
shall: preserve and maintain its partnership or corporate existence and
all of its material rights, privileges and franchises and shall cause
the Restricted Affilitates to do so; keep books of record and account
in which full, true and correct entries will be made of all dealings or
transactions in relation to its business and activities; comply with
all Governmental Requirements if failure to comply with such
requirements will have a Material Adverse Effect; pay and discharge all
taxes, assessments and governmental charges or levies imposed on it or
on its income or profits or on any of its Property prior to the date on
which penalties attach thereto, except for any such tax, assessment,
charge or levy the payment of which is being contested in good faith
and by proper proceedings and against which adequate reserves are being
maintained; upon reasonable notice, permit representatives of the Agent
or any Lender, during normal business hours, to examine, copy and make
extracts from its books and records, to inspect its Properties, and to
discuss its business and affairs with its officers, all to the extent
reasonably requested by such Lender or the Agent (as the case may be);
and keep, or cause to be kept, insured by financially sound and
reputable insurers all Property of a character usually insured by
Persons engaged in the same or similar business similarly situated
against loss or damage of the kinds and in the amounts customarily
insured against by such Persons and carry such other insurance as is
usually carried by such Persons including, without limitation,
environmental risk insurance to the extent reasonably available.
(b) Proof of Insurance. Contemporaneously with the delivery of
the financial statements required by Section 8.01(a) to be delivered
for each year, the Borrower and Buckeye Partners will furnish or cause
to be furnished, and will cause to be furnished for the Restricted
Affiliates, to the Agent certificates of insurance coverage from an
insurer in form and substance reasonably satisfactory to the Agent and,
if requested, will furnish the Agent copies of the applicable policies.
(c) Operation of Properties. Each of the Borrower and Buckeye
Partners will and will cause each Restricted Affiliate to, operate its
Properties or cause such Properties to be operated in a careful and
efficient manner in accordance with the practices of the industry and
in compliance with all applicable contracts and agreements and in
compliance in all material respects with all Governmental Requirements.
Section 8.04 Environmental Matters.
(a) Establishment of Procedures. Each of the Borrower and
Buckeye Partners will and will cause each Restricted Affiliate to,
establish and implement such procedures as may be reasonably necessary
to determine and assure that any failure of the following does not have
a Material Adverse Effect: (i) all Property of the Borrower, the
Guarantors and the
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Restricted Affiliates, and the operations conducted thereon and other
activities of the Borrower, the Guarantors and the Restricted
Affiliates, are in compliance with and do not violate the requirements
of any Environmental Laws, (ii) no oil, hazardous substances or solid
wastes are disposed of or otherwise released on or to any Property
owned by the Borrower, any Guarantor or any Restricted Affiliate except
in compliance with Environmental Laws, (iii) no hazardous substance
will be released on or to any such Property in a quantity equal to or
exceeding that quantity which requires reporting pursuant to Section
103 of CERCLA, and (iv) no oil, oil and gas exploration and production
wastes or hazardous substance is released on or to any such Property so
as to pose an imminent and substantial endangerment to public health or
welfare or the environment.
(b) Notice of Action. The Borrower and Buckeye Partners will,
and will cause any Restricted Affiliate to, promptly notify the Agent
and the Lenders in writing of any threatened action or investigation by
any Governmental Authority of which a Responsible Officer of the
Borrower, any Guarantor or any Restricted Affiliate has knowledge in
connection with any Environmental Laws, excluding routine testing and
corrective action.
(c) Future Acquisitions. The Borrower and Buckeye Partners
will, will cause each Restricted Affiliate to, provide environmental
audits and tests in accordance with American Society for Testing and
Materials standards as reasonably requested by the Agent or any Lender
through the Agent (or as otherwise required to be obtained by the Agent
or the Lenders by any Governmental Authority) in connection with any
future acquisitions of any material Properties by the Borrower, any
Guarantor or any Restricted Affiliate.
Section 8.05 Further Assurances. The Borrower and Buckeye
Partners will promptly cure any defects in the creation and issuance of the
Notes and the execution and delivery of the other Loan Documents. Each of the
Borrower and Buckeye Partners, at its expense, will promptly execute and deliver
(or cause to be promptly executed and delivered) to the Agent upon reasonable
request all such other documents, agreements and instruments to comply with or
accomplish the covenants and agreements of the Borrower and Buckeye Partners, as
the case may be, in the Loan Documents, or to, correct any omissions in the Loan
Documents, or to state more fully the obligations set out herein or in any of
the other Loan Documents, or to make any recordings, to file any notices or
obtain any consents, all as may be necessary or appropriate in connection
therewith.
Section 8.06 Performance of Obligations. The Borrower will pay
the Notes according to the reading, tenor and effect thereof; and the Borrower
will do and perform every act and discharge all of the obligations to be
performed and discharged by it under this Agreement, at the time or times and in
the manner specified.
Section 8.07 ERISA Information and Compliance. The Borrower
will promptly furnish and will cause any ERISA Affiliate to promptly furnish to
the Agent with sufficient copies to the Lenders (i) promptly after the filing
thereof with the United States Secretary of Labor, the Internal Revenue Service
or the PBGC, copies of each annual and other material report with respect to
each Plan or any trust created thereunder, (ii) immediately upon a Responsible
Officer becoming aware of the occurrence of any ERISA Event or of any
"prohibited transaction," as described in
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section 406 of ERISA or in section 4975 of the Code, in connection with any Plan
or any trust created thereunder, a written notice signed by a Responsible
Officer specifying the nature thereof, what action the Borrower or the ERISA
Affiliate is taking or proposes to take with respect thereto, and, when known,
any action taken or proposed by the Internal Revenue Service, the Department of
Labor or the PBGC with respect thereto, and (iii) immediately upon receipt
thereof, copies of any notice of the PBGC's intention to terminate or to have a
trustee appointed to administer any Plan. With respect to each Plan (other than
a Multiemployer Plan), the Borrower will, and will cause each ERISA Affiliate
to, (i) satisfy in full and in a timely manner, without incurring any late
payment or underpayment charge or penalty and without giving rise to any lien,
all of the contribution and funding requirements of section 412 of the Code
(determined without regard to subsections (d), (e), (f) and (k) thereof) and of
section 302 of ERISA (determined without regard to sections 303, 304 and 306 of
ERISA), and (ii) pay, or cause to be paid, to the PBGC in a timely manner,
without incurring any late payment or underpayment charge or penalty, all
premiums required pursuant to sections 4006 and 4007 of ERISA.
Section 8.08 Year 2000 Compatibility. Each of the Borrower and Buckeye
Partners shall take all action reasonably necessary, shall cause each Restricted
Affiliate to take all action reasonably necessary, to assure that its computer
based systems are able to operate and effectively process data, including dates,
on and after January 1, 2000 or that sufficient back-up plans are in place that
no such computer failure will materially and adversely affect the operations of
the Borrower, Buckeye Partners or any Restricted Affiliate. Upon request of the
Agent, each of the Borrower and Buckeye Partners shall, and shall cause each
Restricted Affiliate to, promptly provide the Agent assurance reasonably
acceptable to the Agent of the Borrower's, each Guarantor's and each Restricted
Affiliate's Year 2000 compatibility.
ARTICLE IX
Negative Covenants
The Borrower and Buckeye Partners each covenant and agree that, so long
as any of the Commitments are in effect and until payment in full of Loans
hereunder, all interest thereon and all other amounts payable by the Borrower
hereunder and the Guarantors under the Guaranty Agreements, without the prior
written consent of the Required Lenders:
Section 9.01 Debt. None of the Borrower, any Guarantor or any
Restricted Affiliate will incur, create, assume or permit to exist any Debt,
except:
(a) the Notes or other Indebtedness or any guaranty of or
suretyship arrangement for the Notes or other Indebtedness;
(b) Debt of the Borrower existing on the Closing Date which is
reflected in the Financial Statements or is disclosed in Schedule 9.01,
and any renewals or extensions (but not increases) thereof;
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(c) accounts payable (for the deferred purchase price of
Property or services) from time to time incurred in the ordinary course
of business which, if material and greater than 90 days past the
invoice or billing date, are being contested in good faith by
appropriate proceedings if reserves adequate under GAAP shall have been
established therefor;
(d) Debt of the Borrower or Buckeye Partners requiring no
principal payments (whether at stated maturity or by virtue of
scheduled amortization, required prepayment or redemption) due until at
least one year after the Revolving Credit Termination Date and issued
under the Indenture or otherwise on terms and conditions (excluding
interest rates) no less favorable to the Borrower or Buckeye Partners
than this Agreement;
(e) Debt not otherwise permitted by this Section 9.01 which in
the aggregate shall not exceed $15,000,000 outstanding at any one time;
(f) Debt of the Borrower under Hedging Agreements entered into
as a part of its normal business operations as a risk management
strategy and/or hedge against changes resulting from market conditions
related to the Borrower's operations; and
(g) Debt as a result of (and to the extent permitted by)
Sections 9.03(g), (h) and (i).
Section 9.02 Liens. None of the Borrower, any Guarantor or any
Restricted Affiliate will create, incur, assume or permit to exist any Lien on
any of its Properties (now owned or hereafter acquired), except:
(a) Liens securing the payment of any Indebtedness;
(b) Excepted Liens;
(c) Liens disclosed on Schedule 9.02; and
(d) Liens originally created to secure purchase money Debt
permitted under Section 9.01(e), which in each case shall not exceed
100% of the lesser of the total purchase price and the fair market
value of the Property acquired as determined at the time of
acquisition; provided, that, (i) the Property to be purchased with the
proceeds of such Debt shall be purchased not more than sixty (60) days
prior to the date of the creation of such Lien and (ii) such Lien
encumbers only the Property so acquired.
Section 9.03 Investments, Loans and Advances. None of the
Borrower any Guarantor or any Restricted Affiliate will make or permit to remain
outstanding any loans or advances to or investments in any Person, except that
the foregoing restriction shall not apply to:
(a) investments, loans or advances reflected in the Financial
Statements or which are disclosed to the Lenders in Schedule 9.03;
(b) accounts receivable arising in the ordinary course of
business;
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(c) direct obligations of the United States or any agency
thereof, or obligations guaranteed by the United States or any agency
thereof, in each case maturing within one year from the date of
creation thereof;
(d) commercial paper maturing within one year from the date of
creation thereof rated in the highest grade by Standard & Poor's
Corporation or Moody's Investors Service, Inc.;
(e) deposits maturing within one year from the date of
creation thereof with, including certificates of deposit issued by,
any Lender or any office located in the United States of any other bank
or trust company which is organized under the laws of the United States
or any state thereof, has capital, surplus and undivided profits
aggregating at least $100,000,000.00 (as of the date of such Lender's
or bank or trust company's most recent financial reports) and has a
short term deposit rating of no lower than A2 or P2, as such rating is
set forth from time to time, by Standard & Poor's Corporation or
Moody's Investors Service, Inc., respectively;
(f) deposits in money market funds investing exclusively in
investments described in Section 9.03(c), 9.03(d) or 9.03(e);
(g) investments, loans or advances made in or to the Borrower,
Buckeye Partners, any Restricted Subsidiary, or any Restricted
Affiliate that has executed a Guaranty Agreement;
(h) investments, loans or advances in or to any Person (other
than the Borrower, Buckeye Partners, a Restricted Subsidiary or any
Restricted Affiliate that has executed a Guaranty Agreement) not to
exceed $50,000,000 in the aggregate at any time outstanding; and
(i) other investments, loans and advances in or to any Person
not to exceed the amount of net proceeds received by Buckeye Partners
from an equity offering occurring substantially concurrent therewith.
Section 9.04 Distributions and Redemptions. If a Default
exists or would result therefrom, neither the Borrower nor Buckeye Partners will
purchase, redeem or otherwise acquire for value any of its equity interests now
or hereafter outstanding, return any capital or make any distribution of its
assets to its equity owners.
Section 9.05 Sales and Leasebacks. Neither the Borrower nor
Buckeye Partners will, 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 Borrower, Buckeye Partners or such Restricted Affiliate
or (ii) commencement of full operation with respect to such Property;
or
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(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 Borrower, Buckeye Partners or such Restricted Affiliate of the
Property involved are used solely (i) to prepay or retire Funded Debt
of the Borrower ranking pari passu with the Indebtedness or (ii) for
capital improvements with respect to the pipeline systems of the
Borrower or any Restricted Affiliate made in the ordinary course of
business of the Borrower or such Restricted Affiliate; or
(d) the Sale-Leaseback Attributable Debt attributable to such
Sale-Leaseback Transaction would be permitted under Section 9.01(e).
Section 9.06 Nature of Business. None of the Borrower, Buckeye
Partners or any Restricted Affiliate will allow any material change to be made
in the nature of its business as it exists on the Closing Date.
Section 9.07 Limitation on Leases. None of the Borrower, any
Guarantor or any Restricted Affiliate will create, incur, assume or permit to
exist any obligation by any of them for the payment of rent or hire of Property
of any kind whatsoever (real or personal including capital leases), under leases
or lease agreements which would cause the aggregate amount of all payments made
by the Borrower, the Guarantors and the Restricted Affiliates pursuant to all
such leases or lease agreements to exceed $15,000,000 (on a consolidated basis)
in any period of twelve consecutive calendar months during the life of such
leases.
Section 9.08 Mergers, Etc. None of the Borrower, any Guarantor
or any Restricted Affiliate will merge into or with or consolidate with any
other Person unless such entity is the survivor, or sell, lease or otherwise
dispose of (whether in one transaction or in a series of transactions) all or
substantially all of its Property or assets to any other Person; provided,
however, that any Restricted Affiliate may merge with or into the Borrower, any
Guarantor or any other Restricted Affiliate, even if it is not the surviving
entity of such merger.
Section 9.09 Proceeds of Notes; Letters of Credit. The
Borrower will not permit the proceeds of the Notes or Letters of Credit to be
used for any purpose other than those permitted by Section 7.07. Neither the
Borrower nor any Person acting on behalf of the Borrower has taken or will take
any action which might cause any of the Loan Documents to violate Regulation T,
U or X or any other regulation of the Board of Governors of the Federal Reserve
System or to violate Section 7 of the Securities Exchange Act of 1934 or any
rule or regulation thereunder, in each case as now in effect or as the same may
hereinafter be in effect.
Section 9.10 ERISA Compliance. The Borrower will not at any
time take any of the following actions that could reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect:
(a) Engage in, or permit any Subsidiary of the Borrower or
ERISA Affiliate to engage in, any transaction in connection with which
the Borrower, any Subsidiary of the
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Borrower or any ERISA Affiliate could be subjected to either a civil
penalty assessed pursuant to section 502(c), (i) or (l) of ERISA or a
tax imposed by Chapter 43 of Subtitle D of the Code;
(b) Terminate, or permit any Subsidiary of the Borrower or
ERISA Affiliate to terminate, any Plan in a manner, or take any other
action with respect to any Plan, which could result in any liability to
the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate to
the PBGC;
(c) Fail to make, or permit any Subsidiary of the Borrower or
ERISA Affiliate to fail to make, full payment when due of all amounts
which, under the provisions of any Plan, agreement relating thereto or
applicable law, the Borrower, a Subsidiary of the Borrower or any ERISA
Affiliate is required to pay as contributions thereto;
(d) Permit to exist, or allow any Subsidiary of the Borrower
or ERISA Affiliate to permit to exist, any accumulated funding
deficiency within the meaning of section 302 of ERISA or section 412 of
the Code, whether or not waived, with respect to any Plan;
(e) Permit, or allow any Subsidiary of the Borrower or ERISA
Affiliate to permit, the actuarial present value of the benefit
liabilities under any Plan maintained by the Borrower, any Subsidiary
of the Borrower or any ERISA Affiliate which is regulated under Title
IV of ERISA to exceed the current value of the assets (computed on a
plan termination basis in accordance with Title IV of ERISA) of such
Plan allocable to such benefit liabilities. The term "actuarial present
value of the benefit liabilities" shall have the meaning specified in
section 4041 of ERISA;
(f) Contribute to or assume an obligation to contribute to, or
permit any Subsidiary of the Borrower or ERISA Affiliate to contribute
to or assume an obligation to contribute to, any Multiemployer Plan;
(g) Acquire, or permit any Subsidiary of the Borrower or ERISA
Affiliate to acquire, an interest in any Person that causes such Person
to become an ERISA Affiliate with respect to the Borrower, any
Subsidiary of the Borrower or any ERISA Affiliate if such Person
sponsors, maintains or contributes to, or at any time in the six-year
period preceding such acquisition has sponsored, maintained, or
contributed to, (1) any Multiemployer Plan, or (2) any other Plan that
is subject to Title IV of ERISA under which the actuarial present value
of the benefit liabilities under such Plan exceeds the current value of
the assets (computed on a plan termination basis in accordance with
Title IV of ERISA) of such Plan allocable to such benefit liabilities;
(h) Incur, or permit any Subsidiary of the Borrower or ERISA
Affiliate to incur, a liability to or on account of a Plan under
sections 515, 4062, 4063, 4064, 4201 or 4204 of ERISA;
(i) Contribute to or assume an obligation to contribute to, or
permit any Subsidiary of the Borrower or ERISA Affiliate to contribute
to or assume an obligation to
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contribute to, any employee welfare benefit plan, as defined in section
3(1) of ERISA, including, without limitation, any such plan maintained
to provide benefits to former employees of such entities, that may not
be terminated by such entities in their sole discretion at any time
without any material liability; or
(j) Amend or permit any Subsidiary of the Borrower or ERISA
Affiliate to amend, a Plan resulting in an increase in current
liability such that the Borrower, any Subsidiary of the Borrower or any
ERISA Affiliate is required to provide security to such Plan under
section 401(a)(29) of the Code.
Section 9.11 Sale or Discount of Receivables. None of the
Borrower, any Guarantor or any Restricted Affiliate will discount or sell (with
or without recourse) any of its notes receivable or accounts receivable.
Section 9.12 Funded Debt Ratio. The Borrower will not permit
the Funded Debt Ratio as of the end of any fiscal quarter to be greater than
4.75 to 1.00.
Section 9.13 Fixed Charge Coverage Ratio. The Borrower will
not permit the Fixed Charge Coverage Ratio as of the end of any fiscal quarter
(calculated quarterly at the end of each fiscal quarter) to be less than 1.25 to
1.00. For the purposes of this Section 9.13, "Fixed Charge Coverage Ratio" shall
mean the ratio of (i) consolidated EBITDA of Buckeye Partners (excluding
Unrestricted Subsidiaries and Affiliates of Buckeye Partners that are not
Restricted Affiliates) for the four fiscal quarters ending on such date to (ii)
the sum of (a) all payments of principal (including the principal component of
any payments in respect of capital lease obligations) payable during the
succeeding four quarters, plus (b) interest expense for the four fiscal quarters
ended on such date, plus (c) capital expenditures for the four fiscal quarters
ended on such date, in each case, without duplication, for Buckeye Partners on a
consolidated basis (excluding Unrestricted Subsidiaries and Affiliates of
Buckeye Partners that are not Restricted Affiliates).
Section 9.14 Sale of Properties. None of the Borrower, any
Guarantor or any Restricted Affiliate will sell, assign, convey or otherwise
transfer any Property or any interest in any Property, unless such Property is
not material to the ability of the Borrower or any Restricted Affiliate to
generate EBITDA.
Section 9.15 Environmental Matters. None of the Borrower, any
Guarantor or any Restricted Affiliate will cause or permit any of its Property
to be in violation of, or do anything or permit anything to be done which will
subject any such Property to any remedial obligations under any Environmental
Laws, assuming disclosure to the applicable Governmental Authority of all
relevant facts, conditions and circumstances, if any, pertaining to such
Property where such violations or remedial obligations would have a Material
Adverse Effect.
Section 9.16 Transactions with Affiliates. None of the
Borrower, any Guarantor or any Restricted Affiliate will enter into any
transaction, including, without limitation, any purchase, sale, lease or
exchange of Property or the rendering of any service, with any Affiliate unless
such transactions are otherwise permitted under this Agreement, are in the
ordinary course of its business and are upon fair and reasonable terms no less
favorable to it than it would obtain in a comparable
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arm's length transaction with a Person not an Affiliate; provided, however, that
the foregoing shall not prohibit or prevent the Borrower, any Guarantor or any
Restricted Affiliate from performing under any agreement in effect on the
Closing Date.
Section 9.17 Partnership Agreements. Without the prior consent
of the Required Lenders, which shall not be unreasonably withheld, the Borrower
will not amend or permit to be amended in any material respect the Borrower
Partnership Agreement. Without the prior consent of the Required Lenders, which
shall not be unreasonably withheld, Buckeye Partners will not amend or permit to
be amended in any material respect the Buckeye Partners Partnership Agreement.
Section 9.18 Senior Notes. Without the prior consent of the
Required Lenders, which shall not be unreasonably withheld, the Borrower will
not amend or permit to be amended in any material respect the Senior Notes or
the Indenture, except that the Borrower may issue additional indebtedness under
supplemental indentures issued under the Indenture if otherwise permitted
hereunder and thereunder.
ARTICLE X
Events of Default; Remedies
Section 10.01 Events of Default. One or more of the following
events shall constitute an "Event of Default":
(a) the Borrower shall default in the payment or prepayment
when due of any principal of or interest on any Loan, or any
reimbursement obligation for a disbursement made under any Letter of
Credit, or any fees or other amount payable by it hereunder or under
any other Loan Document and such default, other than a default of a
payment or prepayment of principal (which shall have no cure period)
shall continue unremedied for a period of 3 Business Days; or
(b) the Borrower, any Guarantor or any Restricted Affiliate
shall default in the payment when due of any principal of or interest
on any of its other Debt aggregating $5,000,000 or more, or any event
specified in any note, agreement, indenture or other document
evidencing or relating to any such Debt shall occur if the effect of
such event (after the giving of notice or lapse of time or both, if
applicable) is to cause, or to permit the holder or holders of such
Debt (or a trustee or agent on behalf of such holder or holders) to
cause, such Debt to become due prior to its stated maturity; or
(c) any representation, warranty or certification made or
deemed made herein or in any other Loan Document by the Borrower, any
Guarantor or any Person on behalf of any Restricted Affiliate, or any
certificate furnished to any Lender or the Agent pursuant to the
provisions hereof or any other Loan Document, shall prove to have been
false or misleading as of the time made or furnished in any material
respect; or
(d) the Borrower, Buckeye Partners or any Restricted Affiliate
(despite the fact that such Restricted Affiliate is not a party to this
Agreement) shall default in the
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performance of any of its obligations under Article IX; or the
Borrower, Buckeye Partners or any Restricted Affiliate (despite the
fact that such Restricted Affiliate is not a party to this Agreement)
shall default in the performance of any of its obligations under
Article VIII, any other Article of this Agreement (other than under
Article IX) or any other Loan Document (other than the payment of
amounts due which shall be governed by Section 10.01(a)) and such
default shall continue unremedied for a period of thirty (30) days
after the earlier to occur of (i) notice thereof to the Borrower and
Buckeye Partners by the Agent or any Lender (through the Agent), or
(ii) a Responsible Officer of the Borrower or Buckeye Partners
otherwise obtaining actual knowledge of such default; or
(e) the Borrower shall admit in writing its inability to, or
be generally unable to, pay its debts as such debts become due; or
(f) the Borrower shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial part of its
property, (ii) make a general assignment of all or substantially all of
its assets for the benefit of its creditors, (iii) commence a voluntary
case under the Federal Bankruptcy Code (as now or hereafter in effect),
(iv) file a petition seeking to take advantage of any other law
relating to bankruptcy, insolvency, reorganization, winding-up,
liquidation or composition or readjustment of debts, (v) fail to
controvert in a timely and appropriate manner, or acquiesce in writing
to, any petition filed against it in an involuntary case under the
Federal Bankruptcy Code, or (vi) take any corporate action for the
purpose of effecting any of the foregoing; or
(g) a proceeding or case shall be commenced, without the
application or consent of the Borrower, in any court of competent
jurisdiction, seeking (i) its liquidation, reorganization, dissolution
or winding-up, or the composition or readjustment of its debts, (ii)
the appointment of a trustee, receiver, custodian, liquidator or the
like of the Borrower of all or any substantial part of its assets, or
(iii) similar relief in respect of the Borrower under any law relating
to bankruptcy, insolvency, reorganization, winding-up, or composition
or adjustment of debts, and such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or ordering any
of the foregoing shall be entered and continue unstayed and in effect,
for a period of 60 days; or (iv) an order for relief against the
Borrower shall be entered in an involuntary case under the Federal
Bankruptcy Code; or
(h) a judgment or judgments for the payment of money in excess
of $2,000,000 in the aggregate shall be rendered by a court against the
Borrower or any Subsidiary and the same shall not be discharged (or
provision shall not be made for such discharge), or a stay of execution
thereof shall not be procured, within thirty (30) days from the date of
entry thereof and the Borrower or such Subsidiary shall not, within
said period of 30 days, or such longer period during which execution of
the same shall have been stayed, appeal therefrom and cause the
execution thereof to be stayed during such appeal; or
(i) any Guaranty Agreement after delivery thereof shall for
any reason, except to the extent permitted by the terms thereof, cease
to be in full force and effect and valid,
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binding and enforceable in accordance with its terms, or the Borrower
or any Guarantor shall so state in writing; or
(j) a Change of Control shall occur; or
(k) any Guarantor takes, suffers or permits to exist any of
the events or conditions referred to in paragraphs (e), (f), (g) or (h)
or if any provision of any Guaranty Agreement related thereto shall for
any reason cease to be valid and binding on the relevant Guarantor or
if such Guarantor shall so state in writing; or
(l) any Restricted Affiliate takes, suffers or permits to
exist any of the events or conditions referred to in paragraphs (e),
(f), (g) or (h).
Section 10.02 Remedies.
(a) In the case of an Event of Default other than one referred
to in clauses (e), (f) or (g) of Section 10.01 or in either of clauses
(m) and (n) to the extent it relates to clauses (e), (f) or (g), the
Agent, upon request of the Required Lenders, shall, by notice to the
Borrower, cancel the Commitments and/or declare the principal amount
then outstanding of, and the accrued interest on, the Loans and all
other amounts payable by the Borrower hereunder and under the Notes
(including without limitation the payment of cash collateral to secure
the LC Exposure as provided in Section 2.09(b)) to be forthwith due and
payable, whereupon such amounts shall be immediately due and payable
without presentment, demand, protest, notice of intent to accelerate,
notice of acceleration or other formalities of any kind, all of which
are hereby expressly waived by the Borrower.
(b) In the case of the occurrence of an Event of Default
referred to in clauses (e), (f) or (g) of Section 10.01 or in either of
clauses (m) and (n) to the extent it relates to clauses (e), (f) or
(g), the Commitments shall be automatically canceled and the principal
amount then outstanding of, and the accrued interest on, the Loans and
all other amounts payable by the Borrower hereunder and under the Notes
(including without limitation the payment of cash collateral to secure
the LC Exposure as provided in Section 2.09(b)) shall become
automatically immediately due and payable without presentment, demand,
protest, notice of intent to accelerate, notice of acceleration or
other formalities of any kind, all of which are hereby expressly waived
by the Borrower.
(c) All proceeds received after maturity of the Notes, whether
by acceleration or otherwise shall be applied first to reimbursement of
expenses and indemnities provided for in this Agreement and the other
Loan Documents; second to accrued interest on the Notes; third to fees;
fourth pro rata to principal outstanding on the Notes and other
Indebtedness; fifth to serve as cash collateral to be held by the Agent
to secure the LC Exposure; and any excess shall be paid to the Borrower
or as otherwise required by any Governmental Requirement.
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ARTICLE XI
The Agent
Section 11.01 Appointment, Powers and Immunities. Each Lender
hereby irrevocably appoints and authorizes the Agent to act as its agent
hereunder and under the other Loan Documents with such powers as are
specifically delegated to the Agent by the terms of this Agreement and the other
Loan Documents, together with such other powers as are reasonably incidental
thereto. The Agent (which term as used in this sentence and in Section 11.05 and
the first sentence of Section 11.06 shall include reference to its Affiliates
and its and its Affiliates' officers, directors, employees, attorneys,
accountants, experts and agents): (i) shall have no duties or responsibilities
except those expressly set forth in the Loan Documents, and shall not by reason
of the Loan Documents be a trustee or fiduciary for any Lender; (ii) makes no
representation or warranty to any Lender and shall not be responsible to the
Lenders for any recitals, statements, representations or warranties contained in
this Agreement, or in any certificate or other document referred to or provided
for in, or received by any of them under, this Agreement, or for the value,
validity, effectiveness, genuineness, execution, effectiveness, legality,
enforceability or sufficiency of this Agreement, any Note or any other document
referred to or provided for herein or for any failure by the Borrower or any
other Person (other than the Agent) to perform any of its obligations hereunder
or thereunder or for the existence, value, perfection or priority of any
collateral security or the financial or other condition of the Borrower, the
Guarantors, BMC, any Restricted Affiliate or any other obligor or guarantor;
(iii) except pursuant to Section 11.07 shall not be required to initiate or
conduct any litigation or collection proceedings hereunder; and (iv) shall not
be responsible for any action taken or omitted to be taken by it hereunder or
under any other document or instrument referred to or provided for herein or in
connection herewith including its own ordinary negligence, except for its own
gross negligence or willful misconduct. The Agent may employ agents,
accountants, attorneys and experts and shall not be responsible for the
negligence or misconduct of any such agents, accountants, attorneys or experts
selected by it in good faith or any action taken or omitted to be taken in good
faith by it in accordance with the advice of such agents, accountants, attorneys
or experts. The Agent may deem and treat the payee of any Note as the holder
thereof for all purposes hereof unless and until a written notice of the
assignment or transfer thereof permitted hereunder shall have been filed with
the Agent. The Agent is authorized to release any collateral that is permitted
to be sold or released pursuant to the terms of the Loan Documents. The
Documentation Agent shall have no duties or responsibilities hereunder.
Section 11.02 Reliance by Agent. The Agent shall be entitled
to rely upon any certification, notice or other communication (including any
thereof by telephone, telex, telecopier, telegram or cable) believed by it to be
genuine and correct and to have been signed or sent by or on behalf of the
proper Person or Persons, and upon advice and statements of legal counsel,
independent accountants and other experts selected by the Agent.
Section 11.03 Defaults. The Agent shall not be deemed to have
knowledge of the occurrence of a Default (other than the non-payment of
principal of or interest on Loans or of fees or failure to reimburse for Letter
of Credit drawings) unless the Agent has received notice from a Lender or the
Borrower specifying such Default and stating that such notice is a "Notice of
Default." In the event that the Agent receives such a notice of the occurrence
of a Default, the Agent shall give prompt notice thereof to the Lenders. In the
event of a payment Default, the Agent shall give each Lender prompt notice of
each such payment Default.
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Section 11.04 Rights as a Lender. With respect to its
Commitments and the Loans made by it and its participation in the issuance of
Letters of Credit, First Union (and any successor acting as Agent) in its
capacity as a Lender hereunder shall have the same rights and powers hereunder
as any other Lender and may exercise the same as though it were not acting as
the Agent, and the term "Lender" or "Lenders" shall, unless the context
otherwise indicates, include the Agent in its individual capacity. First Union
(and any successor acting as Agent) and its Affiliates may (without having to
account therefor to any Lender) accept deposits from, lend money to and
generally engage in any kind of banking, trust or other business with the
Borrower (and any of its Affiliates) as if it were not acting as the Agent, and
First Union and its Affiliates may accept fees and other consideration from the
Borrower for services in connection with this Agreement or otherwise without
having to account for the same to the Lenders.
Section 11.05 INDEMNIFICATION. THE LENDERS AGREE TO INDEMNIFY
THE AGENT AND THE ISSUING BANK RATABLY IN ACCORDANCE WITH THEIR PERCENTAGE
SHARES FOR THE INDEMNITY MATTERS AS DESCRIBED IN SECTION 12.03 TO THE EXTENT NOT
INDEMNIFIED OR REIMBURSED BY THE BORROWER UNDER SECTION 12.03, BUT WITHOUT
LIMITING THE OBLIGATIONS OF THE BORROWER UNDER SAID SECTION 12.03 AND FOR ANY
AND ALL OTHER LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS OF ANY KIND AND NATURE
WHATSOEVER WHICH MAY BE IMPOSED ON, INCURRED BY OR ASSERTED AGAINST THE AGENT OR
THE ISSUING BANK IN ANY WAY RELATING TO OR ARISING OUT OF: (I) THIS AGREEMENT,
THE OTHER LOAN DOCUMENTS OR ANY OTHER DOCUMENTS CONTEMPLATED BY OR REFERRED TO
HEREIN OR THE TRANSACTIONS CONTEMPLATED HEREBY, BUT EXCLUDING, UNLESS A DEFAULT
HAS OCCURRED AND IS CONTINUING, NORMAL ADMINISTRATIVE COSTS AND EXPENSES
INCIDENT TO THE PERFORMANCE OF ITS AGENCY DUTIES HEREUNDER OR (II) THE
ENFORCEMENT OF ANY OF THE TERMS OF THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR OF
ANY SUCH OTHER DOCUMENTS; WHETHER OR NOT ANY OF THE FOREGOING SPECIFIED IN THIS
SECTION 11.05 ARISES FROM THE SOLE OR CONCURRENT NEGLIGENCE OF THE AGENT OR THE
ISSUING BANK, PROVIDED THAT NO LENDER SHALL BE LIABLE FOR ANY OF THE FOREGOING
TO THE EXTENT THEY ARISE FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE
AGENT.
Section 11.06 Non-Reliance on Agent and other Lenders. Each
Lender acknowledges and agrees that it has, independently and without reliance
on the Agent or any other Lender, and based on such documents and information as
it has deemed appropriate, made its own credit analysis of the Borrower and its
decision to enter into this Agreement, and that it will, independently and
without reliance upon the Agent or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own analysis and decisions in taking or not taking action under this Agreement.
The Agent shall not be required to keep itself informed as to the performance or
observance by the Borrower, the Guarantors or BMC of this Agreement, the Notes,
the other Loan Documents or any other document referred to or provided for
herein or to inspect the properties or books of the Borrower, the Guarantors or
BMC. Except for notices, reports and other documents and information expressly
required to be furnished to the Lenders by the Agent hereunder, the Agent shall
not have any duty or responsibility to provide any Lender with any credit or
other information concerning the affairs, financial condition or business of the
Borrower (or any of its Affiliates) which may come into the possession of the
Agent or any of its Affiliates. In this regard, each Lender acknowledges that
Vinson & Elkins L.L.P.
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is acting in this transaction as special counsel to the Agent only, except to
the extent otherwise expressly stated in any legal opinion or any Loan Document.
Each Lender will consult with its own legal counsel to the extent that it deems
necessary in connection with the Loan Documents and the matters contemplated
therein.
Section 11.07 Action by Agent. Except for action or other
matters expressly required of the Agent hereunder, the Agent shall in all cases
be fully justified in failing or refusing to act hereunder unless it shall (i)
receive written instructions from the Required Lenders (or all of the Lenders as
expressly required by Section 12.04) specifying the action to be taken, and (ii)
be indemnified to its satisfaction by the Lenders against any and all liability
and expenses which may be incurred by it by reason of taking or continuing to
take any such action. The instructions of the Required Lenders (or all of the
Lenders as expressly required by Section 12.04) and any action taken or failure
to act pursuant thereto by the Agent shall be binding on all of the Lenders. If
a Default has occurred and is continuing, the Agent shall take such action with
respect to such Default as shall be directed by the Required Lenders (or all of
the Lenders as required by Section 12.04) in the written instructions (with
indemnities) described in this Section 11.07, provided that, unless and until
the Agent shall have received such directions, the Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default as it shall deem advisable in the best interests of the Lenders.
In no event, however, shall the Agent be required to take any action which
exposes the Agent to personal liability or which is contrary to this Agreement
and the other Loan Documents or applicable law.
Section 11.08 Resignation or Removal of Agent. Subject to the
appointment and acceptance of a successor Agent as provided below, the Agent may
resign at any time by giving notice thereof to the Lenders and the Borrower, and
the Agent may be removed at any time with or without cause by the Required
Lenders. Upon any such resignation or removal, the Required Lenders shall have
the right to appoint a successor Agent. If no successor Agent shall have been so
appointed by the Required Lenders and shall have accepted such appointment
within thirty (30) days after the retiring Agent's giving of notice of
resignation or the Required Lenders' removal of the retiring Agent, then the
retiring Agent may, on behalf of the Lenders, appoint a successor Agent. Upon
the acceptance of such appointment hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations hereunder. After any
retiring Agent's resignation or removal hereunder as Agent, the provisions of
this Article XI and Section 12.03 shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was acting as
the Agent.
ARTICLE XII
Miscellaneous
Section 12.01 Waiver. No failure on the part of the Agent or
any Lender to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege under any of the Loan Documents shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege under any of the Loan Documents preclude any other or
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further exercise thereof or the exercise of any other right, power or privilege.
The remedies provided herein are cumulative and not exclusive of any remedies
provided by law.
Section 12.02 Notices. All notices and other communications
provided for herein and in the other Loan Documents (including, without
limitation, any modifications of, or waivers or consents under, this Agreement
or the other Loan Documents) shall be given or made by telex, telecopy, courier
or U.S. Mail or in writing and telexed, telecopied, mailed or delivered to the
intended recipient at the "Address for Notices" specified below its name on the
signature pages hereof or in the Loan Documents, except that for notices and
other communications to the Agent other than payment of money, the Borrower need
only send such notices and communications to the Agent care of the Houston
address of FUCM; or, as to any party, at such other address as shall be
designated by such party in a notice to each other party. Except as otherwise
provided in this Agreement or in the other Loan Documents, all such
communications shall be deemed to have been duly given when transmitted, if
transmitted before 1:00 p.m. local time on a Business Day (otherwise on the next
succeeding Business Day) by telex or telecopier and evidence or confirmation of
receipt is obtained, or personally delivered or, in the case of a mailed notice,
four (4) Business Days after the date deposited in the mails, postage prepaid,
in each case given or addressed as aforesaid.
Section 12.03 Payment of Expenses, Indemnities, etc.
(a) The Borrower agrees:
(i) whether or not the transactions hereby contemplated are
consummated, to pay all reasonable expenses of the Agent in the
administration (both before and after the execution hereof and
including advice of counsel as to the rights and duties of the Agent
and the Lenders with respect thereto) of, and in connection with the
negotiation, syndication, investigation, preparation, execution and
delivery of, recording or filing of, preservation of rights under,
enforcement of, and refinancing, renegotiation or restructuring of, the
Loan Documents and any amendment, waiver or consent relating thereto
(including, without limitation, travel, photocopy, mailing, courier,
telephone and other similar expenses of the Agent, the cost of
environmental audits, surveys and appraisals at reasonable intervals,
the reasonable fees and disbursements of counsel and other outside
consultants for the Agent and, in the case of enforcement, the
reasonable fees and disbursements of counsel for the Agent and any of
the Lenders); and promptly reimburse the Agent for all amounts
expended, advanced or incurred by the Agent or the Lenders to satisfy
any obligation of the Borrower or the Guarantors under this Agreement
or any other Loan Document, including without limitation, all costs and
expenses of foreclosure;
(ii) TO INDEMNIFY THE AGENT AND EACH LENDER AND EACH OF THEIR
AFFILIATES AND EACH OF THEIR OFFICERS, DIRECTORS, EMPLOYEES,
REPRESENTATIVES, AGENTS, ATTORNEYS, ACCOUNTANTS AND EXPERTS
("INDEMNIFIED PARTIES") FROM, HOLD EACH OF THEM HARMLESS AGAINST AND
PROMPTLY UPON DEMAND PAY OR REIMBURSE EACH OF THEM FOR, THE INDEMNITY
MATTERS WHICH MAY BE INCURRED BY OR ASSERTED AGAINST OR INVOLVE ANY OF
THEM (WHETHER OR NOT ANY OF THEM IS DESIGNATED A PARTY THERETO) AS A
RESULT OF, ARISING OUT OF OR IN ANY WAY RELATED TO (I) ANY ACTUAL OR
PROPOSED USE BY THE BORROWER OF THE PROCEEDS OF
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ANY OF THE LOANS OR LETTERS OF CREDIT, (II) THE EXECUTION, DELIVERY AND
PERFORMANCE OF THE LOAN DOCUMENTS BY BUCKEYE PARTNERS OR THE BORROWER,
(III) THE OPERATIONS OF THE BUSINESS OF THE BORROWER, ANY GUARANTOR AND
THE RESTRICTED AFFILIATES, (IV) THE FAILURE OF THE BORROWER, ANY
GUARANTOR OR ANY RESTRICTED AFFILIATE TO COMPLY WITH THE TERMS OF ANY
LOAN DOCUMENT, OR WITH ANY GOVERNMENTAL REQUIREMENT, (V) ANY INACCURACY
OF ANY REPRESENTATION OR ANY BREACH OF ANY WARRANTY OF THE BORROWER OR
THE GUARANTOR SET FORTH IN ANY OF THE LOAN DOCUMENTS, (VI) THE
ISSUANCE, EXECUTION AND DELIVERY OR TRANSFER OF OR PAYMENT OR FAILURE
TO PAY UNDER ANY LETTER OF CREDIT, OR (VIII) THE PAYMENT OF A DRAWING
UNDER ANY LETTER OF CREDIT NOTWITHSTANDING THE NON-COMPLIANCE,
NON-DELIVERY OR OTHER IMPROPER PRESENTATION OF THE MANUALLY EXECUTED
DRAFT(S) AND CERTIFICATION(S), (IX) ANY ASSERTION THAT THE LENDERS WERE
NOT ENTITLED TO RECEIVE THE PROCEEDS RECEIVED PURSUANT TO THE LOAN
DOCUMENTS OR (VIII) ANY OTHER ASPECT OF THE LOAN DOCUMENTS, INCLUDING,
WITHOUT LIMITATION, THE REASONABLE FEES AND DISBURSEMENTS OF COUNSEL
AND ALL OTHER EXPENSES INCURRED IN CONNECTION WITH INVESTIGATING,
DEFENDING OR PREPARING TO DEFEND ANY SUCH ACTION, SUIT, PROCEEDING
(INCLUDING ANY INVESTIGATIONS, LITIGATION OR INQUIRIES) OR CLAIM AND
INCLUDING ALL INDEMNITY MATTERS ARISING BY REASON OF THE ORDINARY
NEGLIGENCE OF ANY INDEMNIFIED PARTY, BUT EXCLUDING ALL INDEMNITY
MATTERS ARISING SOLELY BY REASON OF CLAIMS BETWEEN THE LENDERS OR ANY
LENDER AND THE AGENT OR A LENDER'S SHAREHOLDERS AGAINST THE AGENT OR
LENDER OR BY REASON OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT ON
THE PART OF THE INDEMNIFIED PARTY; AND
(iii) TO INDEMNIFY AND HOLD HARMLESS FROM TIME TO TIME THE
INDEMNIFIED PARTIES FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, COST
RECOVERY ACTIONS, ADMINISTRATIVE ORDERS OR PROCEEDINGS, DAMAGES AND
LIABILITIES TO WHICH ANY SUCH PERSON MAY BECOME SUBJECT (I) UNDER ANY
ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER, ANY GUARANTOR OR ANY
RESTRICTED AFFILIATE OR ANY OF THEIR PROPERTIES, INCLUDING WITHOUT
LIMITATION, THE TREATMENT OR DISPOSAL OF HAZARDOUS SUBSTANCES ON ANY OF
SUCH PROPERTIES, (II) AS A RESULT OF THE BREACH OR NON-COMPLIANCE BY
THE BORROWER OR ANY RESTRICTED AFFILIATE WITH ANY ENVIRONMENTAL LAW
APPLICABLE TO THE BORROWER, ANY GUARANTOR OR ANY RESTRICTED AFFILIATE,
(III) DUE TO PAST OWNERSHIP BY THE BORROWER, ANY GUARANTOR OR ANY
RESTRICTED AFFILIATE OF ANY OF THEIR PROPERTIES OR PAST ACTIVITY ON ANY
OF THEIR PROPERTIES WHICH, THOUGH LAWFUL AND FULLY PERMISSIBLE AT THE
TIME, COULD RESULT IN PRESENT LIABILITY, (IV) THE PRESENCE, USE,
RELEASE, STORAGE, TREATMENT OR DISPOSAL OF HAZARDOUS SUBSTANCES ON OR
AT ANY OF THE PROPERTIES OWNED OR OPERATED BY THE BORROWER, ANY
GUARANTOR OR ANY RESTRICTED AFFILIATE, OR (V) ANY OTHER ENVIRONMENTAL,
HEALTH OR SAFETY CONDITION IN CONNECTION WITH THE LOAN DOCUMENTS;
PROVIDED, HOWEVER, NO INDEMNITY SHALL BE AFFORDED UNDER THIS SECTION
12.03(A)(III) IN RESPECT OF ANY PROPERTY FOR ANY OCCURRENCE ARISING
FROM THE ACTS OR OMISSIONS OF THE AGENT OR ANY LENDER DURING THE PERIOD
AFTER WHICH SUCH PERSON, ITS SUCCESSORS OR ASSIGNS SHALL HAVE OBTAINED
POSSESSION OF SUCH PROPERTY (WHETHER BY
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FORECLOSURE OR DEED IN LIEU OF FORECLOSURE, AS MORTGAGEE-IN-POSSESSION
OR OTHERWISE).
(b) No Indemnified Party may settle any claim to be
indemnified without the consent of the indemnitor, such consent not to
be unreasonably withheld; provided, that the indemnitor may not
reasonably withhold consent to any settlement that an Indemnified Party
proposes, if the indemnitor does not have the financial ability to pay
all its obligations outstanding and asserted against the indemnitor at
that time, including the maximum potential claims against the
Indemnified Party to be indemnified pursuant to this Section 12.03.
(c) In the case of any indemnification hereunder, the Agent or
Lender, as appropriate shall give notice to the Borrower of any such
claim or demand being made against the Indemnified Party and the
Borrower shall have the non-exclusive right to join in the defense
against any such claim or demand provided that if the Borrower provides
a defense, the Indemnified Party shall bear its own cost of defense
unless there is a conflict between the Borrower and such Indemnified
Party.
(d) THE FOREGOING INDEMNITIES SHALL EXTEND TO THE INDEMNIFIED
PARTIES NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY KIND
OR CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN
AFFIRMATIVE ACT OR AN OMISSION, INCLUDING WITHOUT LIMITATION, ALL TYPES
OF NEGLIGENT CONDUCT IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF
ONE OR MORE OF THE INDEMNIFIED PARTIES OR BY REASON OF STRICT LIABILITY
IMPOSED WITHOUT FAULT ON ANY ONE OR MORE OF THE INDEMNIFIED PARTIES. TO
THE EXTENT THAT AN INDEMNIFIED PARTY IS FOUND TO HAVE COMMITTED AN ACT
OF GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, THIS CONTRACTUAL OBLIGATION
OF INDEMNIFICATION SHALL CONTINUE BUT SHALL ONLY EXTEND TO THE PORTION
OF THE CLAIM THAT IS DEEMED TO HAVE OCCURRED BY REASON OF EVENTS OTHER
THAN THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE INDEMNIFIED
PARTY.
(e) The Borrower's obligations under this Section 12.03 shall
survive any termination of this Agreement and the payment of the Notes
and shall continue thereafter in full force and effect.
(f) The Borrower shall pay any amounts due under this Section
12.03 within thirty (30) days of the receipt by the Borrower of notice
of the amount due.
Section 12.04 Amendments, Etc. Any provision of this Agreement
or any other Loan Document may be amended, modified or waived with the
Borrower's and the Required Lenders' prior written consent; provided that (i) no
amendment, modification or waiver which extends the final maturity of the Loans,
increases the Aggregate Revolving Credit Commitments, forgives the principal
amount of any Indebtedness outstanding under this Agreement, releases any
guarantor of the Indebtedness, reduces the interest rate applicable to the Loans
or the fees payable to the Lenders generally, affects this Section 12.04 or
Section 12.06(a) or modifies the definition of "Required Lenders" shall be
effective without consent of all Lenders; (ii) no amendment, modification or
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waiver which increases the Revolving Credit Commitment of any Lender shall be
effective without the consent of such Lender; and (iii) no amendment,
modification or waiver which modifies the rights, duties or obligations of the
Agent shall be effective without the consent of the Agent.
Section 12.05 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
Section 12.06 Assignments and Participations.
(a) The Borrower may not assign its rights or obligations
hereunder or under the Notes or any Letters of Credit without the prior
consent of all of the Lenders and the Agent.
(b) Any Lender may upon the written consent of the Agent
(which consent will not be unreasonably withheld) and, if no Event of
Default has occurred and is continuing, the Borrower (which consent
will not be unreasonably withheld), assign to one or more assignees all
or a portion of its rights and obligations under this Agreement
pursuant to an Assignment Agreement substantially in the form of
Exhibit D (an "Assignment"); provided, however, that (i) any such
assignment shall be in the amount of at least $5,000,000 or such lesser
amount to which the Borrower has consented, (ii) the assignee or
assignor shall pay to the Agent a processing and recordation fee of
$3,500 for each assignment and (iii) any assignment to an Affiliate of
such Lender will not require the consent of the Agent or the Borrower.
Any such assignment will become effective upon the execution and
delivery to the Agent of the Assignment and the consent of the Agent.
Promptly after receipt of an executed Assignment, the Agent shall send
to the Borrower a copy of such executed Assignment. Upon receipt of
such executed Assignment, the Borrower, will, at its own expense,
execute and deliver new Notes to the assignor and/or assignee, as
appropriate, in accordance with their respective interests as they
appear and the assigning Lender shall return to the Borrower the
replaced Note. Upon the effectiveness of any assignment pursuant to
this Section 12.06(b), the assignee will become a "Lender," if not
already a "Lender," for all purposes of this Agreement and the other
Loan Documents. The assignor shall be relieved of its obligations
hereunder to the extent of such assignment (and if the assigning Lender
no longer holds any rights or obligations under this Agreement, such
assigning Lender shall cease to be a "Lender" hereunder except that its
rights under Sections 4.06, 5.01, 5.05 and 12.03 shall not be
affected). The Agent will prepare on the last Business Day of each
month during which an assignment has become effective pursuant to this
Section 12.06(b), a new Annex I giving effect to all such assignments
effected during such month, and will promptly provide the same to the
Borrower and each of the Lenders.
(c) Each Lender may transfer, grant or assign participations
in all or any part of such Lender's interests hereunder pursuant to
this Section 12.06(c) to any Person, provided that: (i) such Lender
shall remain a "Lender" for all purposes of this Agreement and the
transferee of such participation shall not constitute a "Lender"
hereunder; and (ii) no participant under any such participation shall
have rights to approve any amendment to or waiver of any of the Loan
Documents except to the extent such amendment or waiver would (x)
forgive any principal owing on any Indebtedness or extend the final
maturity of the Loans, (y) reduce the interest rate (other than as a
result of waiving the applicability of any
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post-default increases in interest rates) or fees applicable to any of
the Commitments or Loans or Letters of Credit in which such participant
is participating, or postpone the payment of any thereof, or (z)
release any guarantor of the Indebtedness or release all or
substantially all of the collateral (except as provided in the Loan
Documents) supporting any of the Commitments or Loans or Letters of
Credit in which such participant is participating. In the case of any
such participation, the participant shall not have any rights under
this Agreement or any of the other Loan Documents (the participant's
rights against the granting Lender in respect of such participation to
be those set forth in the agreement with such Lender creating such
participation), and all amounts payable by the Borrower hereunder shall
be determined as if such Lender had not sold such participation,
provided that such participant shall be entitled to receive additional
amounts under Article V on the same basis as if it were a Lender and be
indemnified under Section 12.03 as if it were a Lender. In addition,
each agreement creating any participation must include an agreement by
the participant to be bound by the provisions of Section 12.15.
(d) The Lenders may furnish any information concerning the
Borrower, the Guarantors and the Restricted Affiliates in the
possession of the Lenders from time to time to assignees and
participants (including prospective assignees and participants);
provided that, such Persons agree to be bound by the provisions of
Section 12.15.
(e) Notwithstanding anything in this Section 12.06 to the
contrary, any Lender may assign and pledge its Note to any Federal
Reserve Bank. No such assignment and/or pledge shall release the
assigning and/or pledging Lender from its obligations hereunder.
(f) Notwithstanding any other provisions of this Section
12.06, no transfer or assignment of the interests or obligations of any
Lender or any grant of participations therein shall be permitted if
such transfer, assignment or grant would require the Borrower to file a
registration statement with the SEC or to qualify the Loans under the
"Blue Sky" laws of any state.
Section 12.07 Invalidity. In the event that any one or more of
the provisions contained in any of the Loan Documents or the Letters of Credit,
the Letter of Credit Agreements shall, for any reason, be held invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of the Notes, this Agreement or any other
Loan Document.
Section 12.08 Counterparts. This Agreement may be executed in
any number of counterparts, all of which taken together shall constitute one and
the same instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.
Section 12.09 References. The words "herein," "hereof,"
"hereunder" and other words of similar import when used in this Agreement refer
to this Agreement as a whole, and not to any particular article, section or
subsection. Any reference herein to a Section shall be deemed to refer to the
applicable Section of this Agreement unless otherwise stated herein. Any
reference herein to an exhibit or schedule shall be deemed to refer to the
applicable exhibit or schedule attached hereto unless otherwise stated herein.
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Section 12.10 Survival. The obligations of the parties under
Section 4.06, Article V, and Sections 11.05 and 12.03 shall survive the
repayment of the Loans and the termination of the Commitments. To the extent
that any payments on the Indebtedness or proceeds of any collateral are
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be repaid to a trustee, debtor in possession, receiver or other
Person under any bankruptcy law, common law or equitable cause, then to such
extent, the Indebtedness so satisfied shall be revived and continue as if such
payment or proceeds had not been received and the Agent's and the Lenders'
rights, powers and remedies under this Agreement and each other Loan Document
shall continue in full force and effect. In such event, each Loan Document shall
be automatically reinstated and the Borrower shall take such action as may be
reasonably requested by the Agent and the Lenders to effect such reinstatement.
Section 12.11 Captions. Captions and section headings
appearing herein are included solely for convenience of reference and are not
intended to affect the interpretation of any provision of this Agreement.
Section 12.12 NO ORAL AGREEMENTS. THE LOAN DOCUMENTS EMBODY
THE ENTIRE AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES AND SUPERSEDE ALL
OTHER AGREEMENTS AND UNDERSTANDINGS BETWEEN SUCH PARTIES RELATING TO THE SUBJECT
MATTER HEREOF AND THEREOF. THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 12.13 GOVERNING LAW; SUBMISSION TO JURISDICTION.
(a) THIS AGREEMENT AND THE NOTES (INCLUDING, BUT NOT LIMITED
TO, THE VALIDITY AND ENFORCEABILITY HEREOF AND THEREOF) SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK, OTHER THAN THE CONFLICT OF LAWS RULES THEREOF.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN
DOCUMENTS SHALL BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF
THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK,
AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE BORROWER,
BUCKEYE PARTNERS, THE AGENT AND EACH LENDER HEREBY ACCEPTS FOR ITSELF
AND (TO THE EXTENT PERMITTED BY LAW) IN RESPECT OF ITS PROPERTY,
GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS. EACH OF THE BORROWER, BUCKEYE PARTNERS, THE AGENT AND EACH
LENDER HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE
GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO
THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE
JURISDICTIONS. THIS SUBMISSION TO JURISDICTION IS NON-EXCLUSIVE AND
DOES NOT PRECLUDE THE PARTIES FROM OBTAINING JURISDICTION OVER OTHER
PARTIES IN ANY COURT OTHERWISE HAVING JURISDICTION.
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(c) EACH OF THE BORROWER AND BUCKEYE PARTNERS HEREBY
IRREVOCABLY DESIGNATES CT CORPORATION LOCATED AT 1633 BROADWAY, NEW
YORK, NEW YORK 10019, AS THE DESIGNEE, APPOINTEE AND AGENT OF ITSELF TO
RECEIVE, FOR AND ON BEHALF OF ITSELF, SERVICE OF PROCESS IN SUCH
RESPECTIVE JURISDICTIONS IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT
TO THE LOAN DOCUMENTS. IT IS UNDER STOOD THAT A COPY OF SUCH PROCESS
SERVED ON SUCH AGENT WILL BE PROMPTLY FORWARDED BY OVERNIGHT COURIER TO
EACH OF THE BORROWER AND BUCKEYE PARTNERS AT ITS ADDRESS SET FORTH
UNDER ITS SIGNATURE BELOW, BUT THE FAILURE OF ANY OF THE BORROWER AND
BUCKEYE PARTNERS TO RECEIVE SUCH COPY SHALL NOT AFFECT IN ANY WAY THE
SERVICE OF SUCH PROCESS. EACH OF THE BORROWER AND BUCKEYE PARTNERS
FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING
OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO
IT AT ITS SAID ADDRESS, SUCH SERVICE TO BECOME EFFECTIVE THIRTY (30)
DAYS AFTER SUCH MAILING.
(d) NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT OR ANY
LENDER OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED
AGAINST THE BORROWER OR ANY GUARANTOR IN ANY OTHER JURISDICTION.
(e) THE BORROWER, BUCKEYE PARTNERS, AND EACH LENDER HEREBY (I)
IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO THE FULLEST EXTENT PERMITTED
BY LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM
THEREIN; (II) IRREVOCABLY WAIVE, TO THE MAXIMUM EXTENT NOT PROHIBITED
BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH
LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES,
OR DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; (III) CERTIFY
THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OF COUNSEL FOR ANY
PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT
SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVERS, AND (IV) ACKNOWLEDGE THAT IT HAS BEEN INDUCED TO
ENTER INTO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND THE
TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 12.13.
Section 12.14 Interest. It is the intention of the parties
hereto that each Lender shall conform strictly to usury laws applicable to it.
Accordingly, if the transactions contemplated hereby would be usurious as to any
Lender under laws applicable to it (including the laws of the United States of
America and the State of New York or any other jurisdiction whose laws may be
mandatorily applicable to such Lender notwithstanding the other provisions of
this Agreement), then, in that event, notwithstanding anything to the contrary
in any of the Loan Documents or any agreement entered into in connection with or
as security for the Notes, it is agreed as follows: (i) the aggregate of all
consideration which constitutes interest under law applicable to any Lender that
is contracted for, taken, reserved, charged or received by such Lender under any
of the Loan Documents or agreements or otherwise in connection with the Notes
shall under no circumstances
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exceed the maximum amount allowed by such applicable law, and any excess shall
be canceled automatically and if theretofore paid shall be credited by such
Lender on the principal amount of the Indebtedness (or, to the extent that the
principal amount of the Indebtedness shall have been or would thereby be paid in
full, refunded by such Lender to the Borrower); and (ii) in the event that the
maturity of the Notes is accelerated by reason of an election of the holder
thereof resulting from any Event of Default under this Agreement or otherwise,
or in the event of any required or permitted prepayment, then such consideration
that constitutes interest under law applicable to any Lender may never include
more than the maximum amount allowed by such applicable law, and excess
interest, if any, provided for in this Agreement or otherwise shall be canceled
automatically by such Lender as of the date of such acceleration or prepayment
and, if theretofore paid, shall be credited by such Lender on the principal
amount of the Indebtedness (or, to the extent that the principal amount of the
Indebtedness shall have been or would thereby be paid in full, refunded by such
Lender to the Borrower). All sums paid or agreed to be paid to any Lender for
the use, forbearance or detention of sums due hereunder shall, to the extent
permitted by law applicable to such Lender, be amortized, prorated, allocated
and spread throughout the full term of the Loans evidenced by the Notes until
payment in full so that the rate or amount of interest on account of any Loans
hereunder does not exceed the maximum amount allowed by such applicable law. If
at any time and from time to time (i) the amount of interest payable to any
Lender on any date shall be computed at the Highest Lawful Rate applicable to
such Lender pursuant to this Section 12.14 and (ii) in respect of any subsequent
interest computation period the amount of interest otherwise payable to such
Lender would be less than the amount of interest payable to such Lender computed
at the Highest Lawful Rate applicable to such Lender, then the amount of
interest payable to such Lender in respect of such subsequent interest
computation period shall continue to be computed at the Highest Lawful Rate
applicable to such Lender until the total amount of interest payable to such
Lender shall equal the total amount of interest which would have been payable to
such Lender if the total amount of interest had been computed without giving
effect to this Section 12.14.
Section 12.15 Confidentiality. In the event that the Borrower
or any Guarantor provides to the Agent or the Lenders written confidential
information belonging to the Borrower or such Guarantor, if the Borrower or such
Guarantor shall denominate such information in writing as "confidential", the
Agent and the Lenders shall thereafter maintain such information in confidence
in accordance with the standards of care and diligence that each utilizes in
maintaining its own confidential information. This obligation of confidence
shall not apply to such portions of the information which (i) are in the public
domain, (ii) hereafter become part of the public domain without the Agent or the
Lenders breaching their obligation of confidence to the Borrower and such
Guarantor, (iii) are previously known by the Agent or the Lenders from some
source other than the Borrower or such Guarantor, (iv) are hereafter developed
by the Agent or the Lenders without using the Borrower's or such Guarantor's
information, (v) are hereafter obtained by or available to the Agent or the
Lenders from a third party who owes no obligation of confidence to the Borrower
or such Guarantor with respect to such information or through any other means
other than through disclosure by the Borrower or such Guarantor, (vi) are
disclosed with the Borrower's or the Guarantor's consent, (vii) must be
disclosed either pursuant to any Governmental Requirement or to Persons
regulating the activities of the Agent or the Lenders, or (viii) as may be
required by law or regulation or order of any Governmental Authority in any
judicial, arbitration or governmental proceeding. Further, except where
prohibited by applicable law, the Agent or a Lender may disclose any such
information to any other Lender, any independent petroleum engineers or
consultants, any
-69-
<PAGE>
independent certified public accountants, any legal counsel employed by such
Person in connection with this Agreement or any other Loan Document, including
without limitation, the enforcement or exercise of all rights and remedies
thereunder, or any assignee or participant (including prospective assignees and
participants) in the Loans; provided, however, that the Agent or the Lenders
shall receive a confidentiality agreement from the Person to whom such
information is disclosed such that said Person shall have the same obligation to
maintain the confidentiality of such information as is imposed upon the Agent or
the Lenders hereunder. Notwithstanding anything to the contrary provided herein,
this obligation of confidence shall cease three (3) years from the date the
information was furnished, unless the Borrower and the Guarantors request in
writing at least thirty (30) days prior to the expiration of such three year
period, to maintain the confidentiality of such information for an additional
three year period. Each of the Borrower and the Guarantors waives any and all
other rights it may have to confidentiality as against the Agent and the Lenders
arising by contract, agreement, statute or law except as expressly stated in
this Section 12.15.
Section 12.16 EXCULPATION PROVISIONS. EACH OF THE PARTIES
HERETO SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS AND AGREES THAT IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF
THE TERMS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; THAT IT HAS IN FACT
READ THIS AGREEMENT AND IS FULLY INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF
THE TERMS, CONDITIONS AND EFFECTS OF THIS AGREEMENT; THAT IT HAS BEEN
REPRESENTED BY INDEPENDENT LEGAL COUNSEL OF ITS CHOICE THROUGHOUT THE
NEGOTIATIONS PRECEDING ITS EXECUTION OF THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS; AND HAS RECEIVED THE ADVICE OF ITS ATTORNEY IN ENTERING INTO THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS; AND THAT IT RECOGNIZES THAT CERTAIN OF
THE TERMS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS RESULT IN ONE PARTY
ASSUMING THE LIABILITY INHERENT IN SOME ASPECTS OF THE TRANSACTION AND RELIEVING
THE OTHER PARTY OF ITS RESPONSIBILITY FOR SUCH LIABILITY. EACH PARTY HERETO
AGREES AND COVENANTS THAT IT WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF
ANY EXCULPATORY PROVISION OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS ON THE
BASIS THAT THE PARTY HAD NO NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT THE
PROVISION IS NOT "CONSPICUOUS."
[Signatures Begin Next Page]
-70-
<PAGE>
The parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
BORROWER: BUCKEYE PIPE LINE COMPANY, L.P.
By: Buckeye Pipe Line Company, its general
partner
By: /s/ Steven C. Ramsey
-------------------------------------
Name: Steven C. Ramsey
Title: Senior Vice President, Finance
Address for Notices:
3900 Hamilton Boulevard
Allentown, Pennsylvania 18103
Telecopier No.: 610/770-4581
Telephone No.: 610/770-4000
Attention: Senior Vice President, Finance
GUARANTOR: BUCKEYE PARTNERS, L.P.
By: Buckeye Management Company, its general
partner
By: /s/ Steven C. Ramsey
-------------------------------------
Name: Steven C. Ramsey
Title: Senior Vice President, Finance
Address for Notices:
3900 Hamilton Boulevard
Allentown, Pennsylvania 18103
Telecopier No.: 610/770-4581
Telephone No.: 610/770-4000
Attention: Senior Vice President, Finance
Signature Page - 1
<PAGE>
LENDER AND AGENT: FIRST UNION NATIONAL BANK
By: /s/ Robert R. Wetteroff
------------------------------------
Name: Robert R. Wetteroff
Title: Senior Vice President
Lending Office for Base Rate Loans and
LIBOR Loans:
301 South College Street, TW-10
Charlotte, North Carolina 28288-0608
Telecopier No.: 704/383-0288
Telephone No.: 704/383-0281
Attention: Syndication Agency Services
Address for Notices:
First Union Capital Markets
First City Tower, Suite 2255
1001 Fannin
Houston, Texas 77002
Telecopier No.: 713/650-6354
Telephone No.: 713/650-3619
Attention: Russell Clingman
Signature Page - 2
<PAGE>
LENDERS: THE FIRST NATIONAL BANK OF
CHICAGO
By: /s/ T. Thomas Cheng
------------------------------------
Name: T. Thomas Cheng
Title: First Vice President
Lending Office for Base Rate Loans and
Eurodollar Loans:
The First National Bank of Chicago
One First National Plaza, Suite 0634
Chicago, Illinois 60670
Address for Notices:
The First National Bank of Chicago
One First National Plaza, Suite 0634
Chicago, Illinois 60670
Telecopier No.: 312/732-4840
Telephone No.: 312/732-8573
Attention: Hien Le
Signature Page - 3
<PAGE>
SUNTRUST BANK, ATLANTA
By: /s/ W. David Wisdom
------------------------------------
Name: W. David Wisdom
Title: Group Vice President
By: /s/ Laura G. Harrison
------------------------------------
Name: Laura G. Harrison
Title: Assistant Vice President
Lending Office for Base Rate Loans and
Eurodollar Loans:
SunTrust Bank, Atlanta
25 Park Place, 21st Floor, center 122
Atlanta, Georgia 30303
Address for Notices:
SunTrust Bank, Atlanta
711 Fifth Avenue, 16th Floor
New York, New York 10022
Telecopier No.: 212/371-9386
Telephone No.: 212/583-2602
Attention: Lara McGinty, Associate
Signature Page - 4
<PAGE>
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ Daryl G. Patterson
------------------------------------
Name: Daryl G. Patterson
Title: Vice President
Lending Office for Base Rate Loans and
Eurodollar Loans:
Bank of America National Trust and Savings
Association
1850 Gateway Blvd.
Concord, California 94520
Address for Notices:
Bank of America National Trust and Savings
Association
1850 Gateway Blvd.
Concord, California 94520
Telecopier No.: 925/675-7531
Telephone No.: 925-675-7759
Attention: Daryl G. Patterson
With copy to:
Pamela K. Rodgers
Bank of America National Trust and Savings
Association
333 Clay Street, Suite 4550
Houston, Texas 77002
Telecopier No.: 713/651-4808
Telephone No.: 713/651-4880
Signature Page - 5
<PAGE>
ANNEX I
LIST OF PERCENTAGE SHARES AND
REVOLVING CREDIT COMMITMENTS
- --------------------------------------------------------------------------------
Name of Lender Percentage Share Revolving Credit Commitments
- --------------------------------------------------------------------------------
First Union National Bank 30% $30,000,000
- --------------------------------------------------------------------------------
The First National Bank of 25% $25,000,000
Chicago
- --------------------------------------------------------------------------------
Bank of America National 22.5% $22,500,000
Trust and Savings
Association
- --------------------------------------------------------------------------------
SunTrust Bank, Atlanta 22.5% $22,500,000
- --------------------------------------------------------------------------------
TOTAL 100% $100,000,000
- --------------------------------------------------------------------------------
Annex I-1
<PAGE>
EXHIBIT A-1
FORM OF REVOLVING CREDIT NOTE
$_____________________________ ___________________, 1998
FOR VALUE RECEIVED, BUCKEYE PIPE LINE COMPANY, L.P., a Delaware limited
partnership (the "Borrower") hereby promises to pay to the order of
______________________________ (the "Lender"), at the Principal Office of First
Union National Bank (the "Agent"), at 301 South College Street, Charlotte, North
Carolina 28288, the principal sum of _____________ Dollars ($____________) (or
such lesser amount as shall equal the aggregate unpaid principal amount of the
Loans made by the Lender to the Borrower under the Credit Agreement, as
hereinafter defined), in lawful money of the United States of America and in
immediately available funds, on the dates and in the principal amounts provided
in the Credit Agreement, and to pay interest on the unpaid principal amount of
each such Loan, at such office, in like money and funds, for the period
commencing on the date of such Loan until such Loan shall be paid in full, at
the rates per annum and on the dates provided in the Credit Agreement.
The date, amount, Type, interest rate, Interest Period and maturity of
each Loan made by the Lender to the Borrower, and each payment made on account
of the principal thereof, shall be recorded by the Lender on its books and,
prior to any transfer of this [Revolving Credit] Note, endorsed by the Lender on
the schedules attached hereto or any continuation thereof.
This Revolving Credit Note is one of the Notes referred to in the
Credit Agreement dated as of December ____, 1998 among the Borrower, Buckeye
Partners, L.P., the Lenders which are or become parties thereto (including the
Lender) and the Agent (as the same may be amended or supplemented from time to
time, the "Credit Agreement"), and evidences Loans made by the Lender
thereunder. Capitalized terms used in this Revolving Credit Note have the
respective meanings assigned to them in the Credit Agreement.
This Revolving Credit Note is issued pursuant to the Credit Agreement
and is entitled to the benefits provided for in the Credit Agreement and the
other Loan Documents. The Credit Agreement provides for the acceleration of the
maturity of this Revolving Credit Note upon the occurrence of certain events,
for prepayments of Loans upon the terms and conditions specified therein and
other provisions relevant to this Revolving Credit Note.
Exhibit A-1-1
<PAGE>
THIS REVOLVING CREDIT NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
BUCKEYE PIPE LINE COMPANY, L.P.
By: Buckeye Pipe Line Company, its
general partner
By:___________________________________
Name:
Title:
Exhibit A-1-2
<PAGE>
EXHIBIT A-2
FORM OF SWING LINE NOTE
$5,000,000 ___________________, 1998
FOR VALUE RECEIVED, BUCKEYE PIPE LINE COMPANY, L.P., a Delaware limited
partnership (the "Borrower") hereby promises to pay to the order of FIRST UNION
NATIONAL BANK (the "Swing Line Lender"), at its Principal Office at 301 South
College Street, Charlotte, North Carolina 28288, the principal sum of FIVE
MILLION DOLLARS ($5,000,000) or, if less, the outstanding principal amount
advanced under this Swing Line Note, in lawful money of the United States of
America and in immediately available funds, on the dates and in the principal
amounts provided in the Credit Agreement, and to pay interest on the unpaid
principal amount of each such Swing Line Loan, at such office, in like money and
funds, for the period commencing on the date of such Swing Line Loan until such
Swing Line Loan shall be paid in full, at the rates per annum and on the dates
provided in the Credit Agreement.
The date, amount, interest rate and maturity of each Swing Line Loan
made by the Swing Line Lender to the Borrower, and each payment made on account
of the principal thereof, shall be recorded by the Swing Line Lender on its
books and, prior to any transfer of this Swing Line Note, may be endorsed by the
Swing Line Lender on the schedules attached hereto or any continuation thereof
or on any separate record maintained by the Swing Line Lender.
This Swing Line Note is one of the Notes referred to in the Credit
Agreement dated as of December __, 1998 among the Borrower, Buckeye Partners,
L.P., the Lenders which are or become parties thereto (including the Swing Line
Lender) and the Agent, and evidences Swing Line Loans made by the Swing Line
Lender thereunder (such Amended and Restated Credit Agreement as the same may be
amended or supplemented from time to time, the "Credit Agreement"). Capitalized
terms used in this Swing Line Note have the respective meanings assigned to them
in the Credit Agreement.
This Swing Line Note is issued pursuant to the Credit Agreement and is
entitled to the benefits provided for in the Credit Agreement and the other Loan
Documents. The Credit Agreement provides for the acceleration of the maturity of
this Swing Line Note upon the occurrence of certain events, for prepayments of
Swing Line Loans upon the terms and conditions specified therein and other
provisions relevant to this Swing Line Note.
Exhibit A-2-1
<PAGE>
THIS SWING LINE NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.
BUCKEYE PIPE LINE COMPANY, L.P.
By: Buckeye Pipe Line Company, its
general partner
By:___________________________________
Name:
Title:
Exhibit A-2-2
<PAGE>
EXHIBIT B
FORM OF BORROWING, CONTINUATION AND CONVERSION REQUEST
_____________________, 199__
BUCKEYE PIPE LINE COMPANY, L.P., a Delaware limited partnership (the
"Borrower"), pursuant to the Credit Agreement dated as of December ____, 1998
among the Borrower, Buckeye Partners, L.P., First Union National Bank, as Agent
for the lenders (the "Lenders") which are or become parties thereto, and such
Lenders (together with all amendments or supplements thereto, the "Credit
Agreement"), hereby makes the requests indicated below (unless otherwise defined
herein, capitalized terms are defined in the Credit Agreement):
[ ] 1. Revolving Credit Loans:
(a) Aggregate amount of new Revolving Credit Loans to be
$_____________________;
(b) Requested funding date is _________________, 199__;
(c) $_____________________ of such borrowings are to be Eurodollar Loans;
$_____________________ of such borrowings are to be Base Rate Loans;
and
(d) Length of Interest Period for Eurodollar Loans is:
-------------------------.
[ ] 2. Swing Line Loans:
(a) Aggregate amount of new Swing Line Loans to be $___________________;
and
(b) Requested funding date is _________________, 199__;
[ ] 3. Eurodollar Loan Continuation for Eurodollar Loans maturing on
________________:
(a) Aggregate amount to be continued as Eurodollar Loans is $___________;
(b) Aggregate amount to be converted to Base Rate Loans is $____________;
Exhibit B-1
<PAGE>
(c) Length of Interest Period for continued Eurodollar Loans is
_____________________.
4. Conversion of Outstanding Base Rate Loans to Eurodollar Loans:
Convert $__________________ of the outstanding Base Rate Loans
to Eurodollar Loans on ____________________ with an Interest
Period of ____________________.
5. Conversion of outstanding Eurodollar Loans to Base Rate Loans:
Convert $__________________ of the outstanding Eurodollar
Loans with Interest Period maturing on ______________________,
199_, to Base Rate Loans.
The undersigned certifies that he is the _____________________ of the
general partner of Borrower, and that as such he is authorized to execute this
certificate on behalf of the Borrower. The undersigned further certifies,
represents and warrants on behalf of the Borrower that the Borrower is entitled
to receive the requested borrowing, continuation or conversion under the terms
and conditions of the Credit Agreement.
BUCKEYE PIPE LINE COMPANY, L.P.
By: Buckeye Pipe Line Company, its
general partner
By:___________________________________
Name:
Title:
Exhibit B-2
<PAGE>
EXHIBIT C
FORM OF COMPLIANCE CERTIFICATE
The undersigned each hereby respectively certify that it is the general
partner of BUCKEYE PIPE LINE COMPANY, L.P., a Delaware limited partnership (the
"Borrower") and that as such it is authorized to execute this certificate on
behalf of the Borrower and it is the general partner of BUCKEYE PARTNERS, L.P.,
a Delaware limited partnership (the "Buckeye Partners") and that as such it is
authorized to execute this certificate on behalf of Buckeye Partners. With
reference to the Credit Agreement dated as of December ____, 1998 among the
Borrower, Buckeye Partners, L.P., First Union National Bank, as Agent for the
lenders (the "Lenders") which are or become a party thereto, and such Lenders
(together with all amendments or supplements thereto being the "Credit
Agreement"), the undersigned, on behalf of the Borrower and Buckeye Partners,
respectively, represent and warrant as follows (each capitalized term used
herein having the same meaning given to it in the Credit Agreement unless
otherwise specified):
(a) The representations and warranties of the Borrower and
Buckeye Partners contained in Article VII of the Credit Agreement and
in the other Loan Documents and otherwise made in writing by or on
behalf of the Borrower and Buckeye Partners pursuant to the Credit
Agreement and the other Loan Documents were true and correct when made,
and are repeated at and as of the time of delivery hereof and are true
and correct at and as of the time of delivery hereof, except as such
representations and warranties are modified to give effect to the
transactions expressly permitted by the Credit Agreement.
(b) Each of the Borrower and Buckeye Partners has performed
and complied with all agreements and conditions contained in the Credit
Agreement and in the other Loan Documents required to be performed or
complied with by it prior to or at the time of delivery hereof.
(c) None of the Borrower, Buckeye Partners or any Restricted
Subsidiary of the Borrower or Buckeye Partners has incurred any
material liabilities, direct or contingent, since [date of last audited
financial statements delivered] except those set forth in Schedule 9.01
to the Credit Agreement and except those not prohibited by the terms of
the Credit Agreement or consented to by the Lenders in writing.
(d) Since [date of last audited financial statements
delivered], no change has occurred, either in any case or in the
aggregate, in the condition, financial or otherwise, of the Borrower,
Buckeye Partners or any Subsidiary of the Borrower or Buckeye Partners
which would have a Material Adverse Effect.
(e) There exists, and, after giving effect to the loan or
loans with respect to which this certificate is being delivered, will
exist, no Default under the Credit Agreement or any event or
circumstance which constitutes, or with notice or lapse of time (or
both) would constitute, an event of default under any loan or credit
Exhibit C-1
<PAGE>
agreement, indenture, deed of trust, security agreement or other
agreement or instrument evidencing or pertaining to any Debt of the
Borrower, Buckeye Partners or any Subsidiary of the Borrower or Buckeye
Partners, or under any material agreement or instrument to which the
Borrower, Buckeye Partners or any Subsidiary of the Borrower or Buckeye
Partners is a party or by which the Borrower, Buckeye Partners or any
Subsidiary of the Borrower or Buckeye Partners is bound.
(f) The financial statements furnished to the Agent with this
certificate fairly present the consolidated financial condition and
results of operations of Buckeye Partners and its Consolidated
Subsidiaries as at the end of, and for, the [fiscal quarter] [fiscal
year] ending _________________________ and such financial statements
have been prepared in accordance with the accounting requirements
specified in the Credit Agreement.
(g) Attached hereto are the detailed computations necessary to
determine whether the Borrower is in compliance with Sections 9.12 and
9.13 of the Credit Agreement as of the end of the [fiscal quarter]
[fiscal year] ending ____________________.
The officers signing this Certificate on behalf of the general partners
of the Borrower and Buckeye Partners each hereby certify that they hold the
officer set forth under their signature and are authorized to execute this
Certificate on behalf of such general partner.
EXECUTED AND DELIVERED this ____ day of ______________.
BUCKEYE PIPE LINE COMPANY, L.P.
By: Buckeye Pipe Line Company, its
general partner
By:___________________________________
Name:
Title:
BUCKEYE PARTNERS, L.P.
By: Buckeye Management Company, its general
partner
By:__________________________________
Name:
Title:
Exhibit C-2
<PAGE>
EXHIBIT D
FORM OF ASSIGNMENT AGREEMENT
ASSIGNMENT AGREEMENT ("Agreement") dated as of ________________, 199___
between: _________________________________ (the "Assignor") and
__________________________ (the "Assignee").
RECITALS
A. The Assignor is a party to the Credit Agreement dated as of November
____, 1998 (as amended and supplemented and in effect from time to time, the
"Credit Agreement") among Buckeye Pipe Line Company, L.P., a ___________ limited
partnership (the "Borrower"), Buckeye Partners, L.P., Buckeye Management
Company, each of the lenders that is or becomes a party thereto as provided in
Section 12.06 of the Credit Agreement (individually, together with its
successors and assigns, a "Lender", and collectively, together with their
successors and assigns, the "Lenders"), and First Union National Bank, in its
individual capacity, ("First Union") and as agent for the Lenders (in such
capacity, together with its successors in such capacity, the "Agent").
B. The Assignor proposes to sell, assign and transfer to the Assignee,
and the Assignee proposes to purchase and assume from the Assignor, [all][a
portion] of the Assignor's [Revolving] Credit Commitment, outstanding Loans and
its Percentage Share of the outstanding LC Exposure, all on the terms and
conditions of this Agreement.
C. In consideration of the foregoing and the mutual agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
Definitions.
Section 1.01 Definitions. All capitalized terms used but not defined
herein have the respective meanings given to such terms in the Credit Agreement.
Section 1.02 Other Definitions. As used herein, the following terms
have the following respective meanings:
"Assigned Interest" shall mean all of Assignor's (in its
capacity as a "Lender") rights and obligations (i) under the Credit
Agreement and the other Loan Documents in respect of the Revolving
Credit Commitment of the Assignor in the principal amount equal to
$____________________, including, without limitation, any obligation to
participate pro rata in any LC Exposure, and (ii) to make Loans under
the Revolving Credit Commitment and any right to receive payments for
the Loans outstanding under the Revolving Credit
Exhibit D-1
<PAGE>
Commitment assigned hereby of $____________ (the "Loan Balance"), plus
the interest and fees which will accrue from and after the Assignment
Date.
"Assignment Date" shall mean _____________________, 199___.
ARTICLE II
Sale and Assignment.
Section 2.01 Sale and Assignment. On the terms and conditions set forth
herein, effective on and as of the Assignment Date, the Assignor hereby sells,
assigns and transfers to the Assignee, and the Assignee hereby purchases and
assumes from the Assignor, all of the right, title and interest of the Assignor
in and to, and all of the obligations of the Assignor in respect of, the
Assigned Interest. Such sale, assignment and transfer is without recourse and,
except as expressly provided in this Agreement, without representation or
warranty.
Section 2.02 Assumption of Obligations. The Assignee agrees with the
Assignor (for the express benefit of the Assignor and the Borrower) that the
Assignee will, from and after the Assignment Date, perform all of the
obligations of the Assignor in respect of the Assigned Interest. From and after
the Assignment Date: (a) the Assignor shall be released from the Assignor's
obligations in respect of the Assigned Interest, and (b) the Assignee shall be
entitled to all of the Assignor's rights, powers and privileges under the Credit
Agreement and the other Loan Documents in respect of the Assigned Interest.
Section 2.03 Consent by Agent. By executing this Agreement as provided
below, in accordance with Section 12.06(b) of the Credit Agreement, the Agent
hereby acknowledges notice of the transactions contemplated by this Agreement
and consents to such transactions.
ARTICLE III
Payments.
Section 3.01 Payments. As consideration for the sale, assignment and
transfer contemplated by Section 2.01 hereof, the Assignee shall, on the
Assignment Date, assume Assignor's obligations in respect of the Assigned
Interest and pay to the Assignor an amount equal to the Loan Balance, if any. An
amount equal to all accrued and unpaid interest and fees shall be paid to the
Assignor as provided in Section 3.02 (iii) below. Except as otherwise provided
in this Agreement, all payments hereunder shall be made in Dollars and in
immediately available funds, without setoff, deduction or counterclaim.
Section 3.02 Allocation of Payments. The Assignor and the Assignee
agree that (i) the Assignor shall be entitled to any payments of principal with
respect to the Assigned Interest made prior to the Assignment Date, together
with any interest and fees with respect to the Assigned Interest accrued prior
to the Assignment Date, (ii) the Assignee shall be entitled to any payments of
Exhibit D-2
<PAGE>
principal with respect to the Assigned Interest made from and after the
Assignment Date, together with any and all interest and fees with respect to the
Assigned Interest accruing from and after the Assignment Date, and (iii) the
Agent is authorized and instructed to allocate payments received by it for
account of the Assignor and the Assignee as provided in the foregoing clauses.
Each party hereto agrees that it will hold any interest, fees or other amounts
that it may receive to which the other party hereto shall be entitled pursuant
to the preceding sentence for account of such other party and pay, in like money
and funds, any such amounts that it may receive to such other party promptly
upon receipt.
Section 3.03 Delivery of Notes. Promptly following the receipt by the
Assignor of the consideration required to be paid under Section 3.01 hereof, the
Assignor shall, in the manner contemplated by Section 12.06(b) of the Credit
Agreement, (i) deliver to the Agent (or its counsel) the Note held by the
Assignor and (ii) notify the Agent to request that the Borrower execute and
deliver new Notes to the Assignor, if Assignor continues to be a Lender, and the
Assignee, dated the date of this Agreement in the principal amount equal to the
Revolving Credit Commitment of the Assignor (if appropriate) and the Assignee
after giving effect to the sale, assignment and transfer contemplated hereby.
Section 3.04 Further Assurances. The Assignor and the Assignee hereby
agree to execute and deliver such other instruments, and take such other
actions, as either party may reasonably request in connection with the
transactions contemplated by this Agreement.
ARTICLE IV
Conditions Precedent.
Section 4.01 Conditions Precedent. The effectiveness of the sale,
assignment and transfer contemplated hereby is subject to the satisfaction of
each of the following conditions precedent:
(a) the execution and delivery of this Agreement by the
Assignor and the Assignee;
(b) the receipt by the Assignor of the payment required to be
made by the Assignee under Section 3.01 hereof; and
(c) the acknowledgment and consent by the Agent contemplated
by Section 2.03 hereof.
Exhibit D-3
<PAGE>
ARTICLE V
Representations and Warranties.
Section 5.01 Representations and Warranties of the Assignor. The
Assignor represents and warrants to the Assignee as follows:
(a) it has all requisite power and authority, and has taken
all action necessary to execute and deliver this Agreement and to
fulfill its obligations under, and consummate the transactions
contemplated by, this Agreement;
(b) the execution, delivery and compliance with the terms
hereof by Assignor and the delivery of all instruments required to be
delivered by it hereunder do not and will not violate any Governmental
Requirement applicable to it;
(c) this Agreement has been duly executed and delivered by it
and constitutes the legal, valid and binding obligation of the
Assignor, enforceable against it in accordance with its terms;
(d) all approvals and authorizations of, all filings with and
all actions by any Governmental Authority necessary for the validity or
enforceability of its obligations under this Agreement have been
obtained;
(e) the Assignor has good title to, and is the sole legal and
beneficial owner of, the Assigned Interest, free and clear of all
Liens, claims, participations or other charges of any nature
whatsoever; and
(f) the transactions contemplated by this Agreement are
commercial banking transactions entered into in the ordinary course of
the banking business of the Assignor.
Section 5.02 Disclaimer. Except as expressly provided in Section 5.01
hereof, the Assignor does not make any representation or warranty, nor shall it
have any responsibility to the Assignee, with respect to the accuracy of any
recitals, statements, representations or warranties contained in the Credit
Agreement or in any certificate or other document referred to or provided for
in, or received by any Lender under, the Credit Agreement, or for the value,
validity, effectiveness, genuineness, execution, effectiveness, legality,
enforceability or sufficiency of the Credit Agreement, the Notes or any other
document referred to or provided for therein or for any failure by the Borrower
or any other Person (other than Assignor) to perform any of its obligations
thereunder prior or for the existence, value, perfection or priority of any
collateral security or the financial or other condition of the Borrower or the
Subsidiaries [or any other obligor or guarantor], or any other matter relating
to the Credit Agreement or any other Loan Document or any extension of credit
thereunder.
Section 5.03 Representations and Warranties of the Assignee. The
Assignee represents and warrants to the Assignor as follows:
Exhibit D-4
<PAGE>
(a) it has all requisite power and authority, and has taken
all action necessary to execute and deliver this Agreement and to
fulfill its obligations under, and consummate the transactions
contemplated by, this Agreement;
(b) the execution, delivery and compliance with the terms
hereof by Assignee and the delivery of all instruments required to be
delivered by it hereunder do not and will not violate any Governmental
Requirement applicable to it;
(c) this Agreement has been duly executed and delivered by it
and constitutes the legal, valid and binding obligation of the
Assignee, enforceable against it in accordance with its terms;
(d) all approvals and authorizations of, all filings with and
all actions by any Governmental Authority necessary for the validity or
enforceability of its obligations under this Agreement have been
obtained;
(e) the Assignee has fully reviewed the terms of the Credit
Agreement and the other Loan Documents and has independently and
without reliance upon the Assignor, and based on such information as
the Assignee has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement;
(f) the Assignee hereby affirms that the representations
contained in Section 4.06(d)[(i)][ii)] of the Credit Agreement are true
and accurate as to it [IF (ii) IS SELECTED ADD: and, the Assignee has
contemporaneously herewith delivered to the Agent and the Borrower such
certifications as are required thereby to avoid the withholding taxes
referred to in Section 4.06]; and
(g) the transactions contemplated by this Agreement are
commercial banking transactions entered into in the ordinary course of
the banking business of the Assignee.
ARTICLE VI
Miscellaneous.
Section 6.01 Notices. All notices and other communications provided for
herein (including, without limitation, any modifications of, or waivers,
requests or consents under, this Agreement) shall be given or made in writing
(including, without limitation, by telex or telecopy) to the intended recipient
at its "Address for Notices" specified below its name on the signature pages
hereof or, as to either party, at such other address as shall be designated by
such party in a notice to the other party.
Section 6.02 Amendment, Modification or Waiver. No provision of this
Agreement may be amended, modified or waived except by an instrument in writing
signed by the Assignor and the Assignee, and consented to by the Agent.
Exhibit D-5
<PAGE>
Section 6.03 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. The representations and warranties made herein
by the Assignee are also made for the benefit of the Agent and the Borrower, and
the Assignee agrees that the Agent and the Borrower are entitled to rely upon
such representations and warranties.
Section 6.04 Assignments. Neither party hereto may assign any of its
rights or obligations hereunder except in accordance with the terms of the
Credit Agreement.
Section 6.05 Captions. The captions and section headings appearing
herein are included solely for convenience of reference and are not intended to
affect the interpretation of any provision of this Agreement.
Section 6.06 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be identical and all of which, taken
together, shall constitute one and the same instrument, and each of the parties
hereto may execute this Agreement by signing any such counterpart.
Section 6.07 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the law of the State of New York.
Section 6.08 Expenses. To the extent not paid by the Borrower pursuant
to the terms of the Credit Agreement, each party hereto shall bear its own
expenses in connection with the execution, delivery and performance of this
Agreement.
Section 6.09 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment
Agreement to be executed and delivered as of the date first above written.
ASSIGNOR:
________________________________
By:_____________________________
Name:
Title:
Exhibit D-6
<PAGE>
Address for Notices:
_______________________________
_______________________________
_______________________________
Telecopier No.:________________
Telephone No.: ________________
Attention: ____________________
Exhibit D-7
<PAGE>
ASSIGNEE:
________________________________
By:_____________________________
Name:
Title:
Address for Notices:
_______________________________
_______________________________
_______________________________
Telecopier No.:________________
Telephone No.: ________________
Attention: ____________________
ACKNOWLEDGED AND CONSENTED TO:
_____________________________,
as Agent
By:___________________________
Name:
Title:
Exhibit D-8
<PAGE>
EXHIBIT E
UNRESTRICTED SUBSIDIARIES
DESIGNATED ON THE CLOSING DATE
Exhibit E-1
<PAGE>
GUARANTY AGREEMENT
by
BUCKEYE PARTNERS, L.P.
in favor of
FIRST UNION NATIONAL BANK
December 16, 1998
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE 1
---------
General Terms
-------------
Section 1.1 Terms Defined Above....................................................................1
-------------------
Section 1.2 Certain Definitions....................................................................1
-------------------
Section 1.3 Credit Agreement Definitions...........................................................3
----------------------------
ARTICLE 2
---------
The Guaranty
------------
Section 2.1 Liabilities Guaranteed.................................................................3
----------------------
Section 2.2 Nature of Guaranty.....................................................................3
------------------
Section 2.3 Intentionally Deleted..................................................................3
---------------------
Section 2.4 Guarantor's Waivers....................................................................4
-------------------
Section 2.5 Maturity of Liabilities; Payment.......................................................4
--------------------------------
Section 2.6 Agent's Expenses.......................................................................4
----------------
Section 2.7 Liability..............................................................................4
---------
Section 2.8 Events and Circumstances Not Reducing or Discharging Guarantor's
----------------------------------------------------------------
Obligations.....................................................................................4
-----------
Section 2.9 Right of Subrogation and Contribution..................................................6
-------------------------------------
ARTICLE 3
---------
Representations and Warranties
------------------------------
Section 3.1 By Guarantor...........................................................................7
------------
Section 3.2 No Representation by Lenders...........................................................8
----------------------------
ARTICLE 4
---------
Subordination of Indebtedness
-----------------------------
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Section 4.1 Subordination of All Guarantor Claims..................................................8
-------------------------------------
Section 4.2 Claims in Bankruptcy...................................................................8
--------------------
Section 4.3 Payments Held in Trust.................................................................8
----------------------
Section 4.4 Liens Subordinate......................................................................8
-----------------
Section 4.5 Notation of Records....................................................................9
-------------------
ARTICLE 5
---------
Miscellaneous
-------------
Section 5.1 Successors and Assigns.................................................................9
----------------------
Section 5.2 Notices................................................................................9
-------
Section 5.3 Business and Financial Information.....................................................9
----------------------------------
Section 5.4 Construction...........................................................................9
------------
Section 5.5 Invalidity............................................................................10
----------
Section 5.6 ENTIRE AGREEMENT......................................................................10
----------------
</TABLE>
ii
<PAGE>
GUARANTY AGREEMENT
------------------
THIS GUARANTY AGREEMENT, dated as of December 16, 1998, by BUCKEYE
PARTNERS, L.P. (the "Guarantor"), is in favor of FIRST UNION NATIONAL BANK, as
agent (the "Agent") for the lenders (the "Lenders") that are or become parties
to the Credit Agreement defined below.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, on even date herewith, BUCKEYE PIPE LINE COMPANY, L.P., a
Delaware limited partnership (the "Borrower"), the Agent and the Lenders have
entered into that certain Credit Agreement (as the same may be amended,
supplemented or otherwise modified from time to time, the "Credit Agreement");
and
WHEREAS, one of the terms and conditions stated in the Credit Agreement
for the making of the loans described therein is the execution and delivery to
the Agent for the benefit of the Lenders of this Guaranty Agreement;
NOW, THEREFORE, (i) in order to comply with the terms and conditions of
the Credit Agreement, (ii) to induce the Lenders, at any time or from time to
time, to loan monies, with or without security to or for the account of Borrower
in accordance with the terms of the Credit Agreement, (iii) at the special
insistence and request of the Lenders, and (iv) for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
Guarantor hereby agrees as follows:
ARTICLE 1
---------
General Terms
-------------
Section 1.1 Terms Defined Above. As used in this Guaranty Agreement,
the terms "Agent", "Borrower", "Credit Agreement", "Guarantor" and "Lenders"
shall have the meanings indicated above.
Section 1.2 Certain Definitions. As used in this Guaranty Agreement,
the following terms shall have the following meanings, unless the context
otherwise requires:
"Contribution Obligation" shall mean an amount equal, at any time and
from time to time and for each respective Subsidiary Guarantor, to the product
of (i) its Contribution Percentage times (ii) the sum of all payments made
previous to or at the time of calculation by all Subsidiary Guarantors in
respect of the Liabilities, as a Subsidiary Guarantor (less the amount of any
such payments previously returned to any Subsidiary Guarantor by operation of
law or otherwise, but not including payments received by any Subsidiary
Guarantor by way of its rights of subrogation and contribution under Section 2.9
of the other Guaranty Agreements), provided, however, such Contribution
Obligation for any Subsidiary Guarantor shall in no event exceed such Subsidiary
Guarantor's Maximum Guaranteed Amount, as defined in the respective Guaranty
Agreement of such Subsidiary Guarantor.
<PAGE>
"Contribution Percentage" shall mean for any Subsidiary Guarantor for
any applicable date as of which such percentage is being determined, an amount
equal to the quotient of (i) the Net Worth of such Subsidiary Guarantor as of
such date, divided by (ii) the sum of the Net Worth of all the Subsidiary
Guarantors as of such date.
"Guarantor Claims" shall have the meaning indicated in Section 4.1
hereof.
"Guaranty Agreement" shall mean this Guaranty Agreement, and where the
context indicates, the Guaranty Agreement of any other Subsidiary Guarantor, as
the same may from time to time be amended, supplemented, or otherwise modified.
"Liabilities" shall mean (a) any and all indebtedness, obligations and
liabilities of the Borrower pursuant to the Credit Agreement, including without
limitation, (i) the unpaid principal of and interest on the Notes, including
without limitation, interest accruing subsequent to the filing of a petition or
other action concerning bankruptcy or other similar proceeding, (ii) payment of
and performance of any and all Hedging Agreements between the Borrower and any
of the Lenders or their Affiliates, (iii) payment of and performance of any and
all Letters of Credit, and (iv) any additional Loans made by the Lenders to the
Borrower; (b) any and all other indebtedness, obligations and liabilities of any
kind of the Borrower to the Lenders, now or hereafter existing, arising directly
between the Borrower and the Lenders or acquired outright, as a participation,
condi tionally or as collateral security from another by the Lenders, absolute
or contingent, joint and/or several, secured or unsecured, due or not due,
arising by operation of law or otherwise, or direct or indirect, including
indebtedness, obligations and liabilities to the Lenders of the Borrower as a
member of any partnership, syndicate, association or other group, and whether
incurred by the Borrower as principal, surety, endorser, guarantor,
accommodation party or otherwise and (c) all renewals, rearrangements,
substitutions, increases, extensions for any period, amendments or supplements
in whole or in part of the Notes or any documents evidencing the above.
"Maximum Guaranteed Amount" shall mean, for the Guarantor, the greater
of (i) the "reasonably equivalent value" or "fair consideration" (or equivalent
concept) received by the Guarantor in exchange for the obligation incurred
hereunder, within the meaning of any applicable state or federal fraudulent
conveyance or transfer laws; or (ii) the lesser of (A) the maximum amount that
will not render the Guarantor insolvent, or (B) the maximum amount that will not
leave the Guarantor with any property deemed an unreasonably small capital.
Clauses (A) and (B) are and shall be determined pursuant to and as of the
appropriate date mandated by such applicable state or federal fraudulent
conveyance or transfer laws and to the extent allowed by law take into account
the rights to contribution and subrogation under Section 2.9 in each Guaranty
Agreement so as to provide for the largest Maximum Guaranteed Amount possible.
"Net Payments" shall mean an amount equal, at any time and from time to
time and for each respective Subsidiary Guarantor, to the difference of (i) the
sum of all payments made previous to or at the time of calculation by such
Subsidiary Guarantor in respect to the Liabilities, as a Subsidiary Guarantor,
and in respect of its obligations contained in this Guaranty Agreement, less
(ii) the sum of all such payments previously returned to such Subsidiary
Guarantor by operation of law or otherwise and including payments received by
such Subsidiary Guarantor by way of its rights of subrogation and contribution
under Section 2.9 of the other Guaranty Agreements.
2
<PAGE>
"Net Worth" shall mean for any Subsidiary Guarantor, calculated on and
as of any applicable date on which such amount is being determined, the
difference between (i) the sum of all such Subsidiary Guarantor's property, at a
fair valuation and as of such date, minus (ii) the sum of all such Subsidiary
Guarantor's debts, at a fair valuation and as of such date, excluding the
Liabilities.
"Subsidiary Guarantors" shall mean the Guarantor and any other
Affiliate of the Borrower which executes a guaranty agreement securing the
Liabilities.
Section 1.3 Credit Agreement Definitions. Unless otherwise defined
herein, all terms beginning with a capital letter which are defined in the
Credit Agreement shall have the same meanings herein as therein.
ARTICLE 2
---------
The Guaranty
------------
Section 2.1 Liabilities Guaranteed. Guarantor hereby irrevocably and
unconditionally guarantees in favor of the Agent for the benefit of the Lenders
the prompt payment of the Liabilities when due, whether at maturity or
otherwise, provided, however, that, notwithstanding anything herein or in any
other Loan Document to the contrary, the maximum liability of Guarantor
hereunder shall in no event exceed the Maximum Guaranteed Amount.
Section 2.2 Nature of Guaranty. This Guaranty Agreement is an absolute,
irrevocable, completed and continuing guaranty of payment and not a guaranty of
collection, and no notice of the Liabilities or any extension of credit already
or hereafter contracted by or extended to Borrower need be given to Guarantor.
This Guaranty Agreement may not be revoked by Guarantor and shall continue to be
effective with respect to debt under the Liabilities arising or created after
any attempted revocation by Guarantor and shall remain in full force and effect
until the Liabilities are paid in full and the Commitments are terminated,
notwithstanding that from time to time prior thereto no Liabilities may be
outstanding. Borrower and the Lenders may modify, alter, rearrange, extend for
any period and/or renew from time to time, the Liabilities, and the Lenders may
waive any Default or Events of Default without notice to the Guarantor and in
such event Guarantor will remain fully bound hereunder on the Liabilities. This
Guaranty Agreement shall continue to be effective or be reinstated, as the case
may be, if at any time any payment of the Liabilities is res cinded or must
otherwise be returned by any of the Lenders upon the insolvency, bankruptcy or
reorganization of Borrower or otherwise, all as though such payment had not been
made. This Guaranty Agreement may be enforced by the Agent and any subsequent
holder of any of the Liabilities and shall not be discharged by the assignment
or negotiation of all or part of the Liabilities. Except as otherwise expressly
provided herein, Guarantor hereby expressly waives presentment, demand, notice
of non-payment, protest and notice of protest and dishonor, notice of Default or
Event of Default, notice of intent to accelerate the maturity and notice of
acceleration of the maturity and any other notice in connection with the
Liabilities, and also notice of acceptance of this Guaranty Agreement,
acceptance on the part of the Lenders being conclusively presumed by the
Lenders' request for this Guaranty Agreement and delivery of the same to the
Agent.
Section 2.3 Intentionally Deleted.
3
<PAGE>
Section 2.4 Guarantor's Waivers. Guarantor waives any right to require
any of the Lenders to (i) proceed against Borrower or any other person liable on
the Liabilities, (ii) enforce any of their rights against any other guarantor of
the Liabilities, (iii) proceed or enforce any of their rights against or exhaust
any security given to secure the Liabilities, (iv) have Borrower joined with
Guarantor in any suit arising out of this Guaranty Agreement and/or the
Liabilities, or (v) pursue any other remedy in the Lenders' powers whatsoever.
The Lenders shall not be required to mitigate damages or take any action to
reduce, collect or enforce the Liabilities. Guarantor waives any defense arising
by reason of any disability, lack of corporate authority or power, or other
defense of Borrower or any other guarantor of the Liabilities, and shall remain
liable hereon regardless of whether Borrower or any other guarantor be found not
liable thereon for any reason. Whether and when to exercise any of the remedies
of the Lenders under any of the Loan Documents shall be in the sole and absolute
discretion of the Agent, and no delay by the Agent in enforcing any remedy,
including delay in conducting a foreclosure sale, shall be a defense to the
Guarantor's liability under this Guaranty Agreement.
Section 2.5 Maturity of Liabilities; Payment. Guarantor agrees that if
the maturity of any of the Liabilities is accelerated by bankruptcy or
otherwise, such maturity shall also be deemed accelerated for the purpose of
this Guaranty Agreement without demand or notice to Guarantor. Guarantor will,
forthwith upon notice from the Agent, pay to the Agent the amount due and unpaid
by Borrower and guaranteed hereby. The failure of the Agent to give this notice
shall not in any way release Guarantor hereunder.
Section 2.6 Agent's Expenses. If Guarantor fails to pay the Liabilities
after notice from the Agent of Borrower's failure to pay any Liabilities at
maturity, and if the Agent obtains the services of an attorney for collection of
amounts owing by Guarantor hereunder, or obtaining advice of counsel in respect
of any of their rights under this Guaranty Agreement, or if suit is filed to
enforce this Guaranty Agreement, or if proceedings are had in any bankruptcy,
probate, receivership or other judicial proceedings for the establishment or
collection of any amount owing by Guarantor hereunder, or if any amount owing by
Guarantor hereunder is collected through such proceedings, Guarantor agrees to
pay to the Agent the Agent's reasonable attorneys' fees.
Section 2.7 Liability. It is expressly agreed that the liability of the
Guarantor for the payment of the Liabilities guaranteed hereby shall be primary
and not secondary.
Section 2.8 Events and Circumstances Not Reducing or Discharging
Guarantor's Obligations. Guarantor hereby consents and agrees to each of the
following to the fullest extent permitted by law, and agrees that Guarantor's
obligations under this Guaranty Agreement shall not be released, diminished,
impaired, reduced or adversely affected by any of the following, and waives any
rights (including without limitation rights to notice) which Guarantor might
otherwise have as a result of or in connection with any of the following:
(a) Modifications, etc. Any renewal, extension, modification,
increase, decrease, alteration or rearrangement of all or any part of
the Liabilities, or of the Notes, or the Credit Agreement or any
instrument executed in connection therewith, or any contract or
understanding between Borrower and any of the Lenders, or any other
Person, pertaining to the Liabilities;
4
<PAGE>
(b) Adjustment, etc. Any adjustment, indulgence, forbearance
or compromise that might be granted or given by any of the Lenders to
Borrower or Guarantor or any Person liable on the Liabilities;
(c) Condition of Borrower or Guarantor. The insolvency,
bankruptcy arrangement, adjustment, composition, liquidation,
disability, dissolution, death or lack of power of Borrower or
Guarantor or any other Person at any time liable for the payment of all
or part of the Liabilities; or any dissolution of Borrower or
Guarantor, or any sale, lease or transfer of any or all of the assets
of Borrower or Guarantor, or any changes in the shareholders, partners,
or members of Borrower or Guarantor; or any reorganization of Borrower
or Guarantor;
(d) Invalidity of Liabilities. The invalidity, illegality or
unenforceability of all or any part of the Liabilities, or any document
or agreement executed in connection with the Liabilities, for any
reason whatsoever, including without limitation the fact that the
Liabilities, or any part thereof, exceed the amount permitted by law,
the act of creating the Liabilities or any part thereof is ultra vires,
the officers or representatives executing the documents or otherwise
creating the Liabilities acted in excess of their authority, the
Liabilities violate applicable usury laws, the Borrower has valid
defenses, claims or offsets (whether at law, in equity or by agreement)
which render the Liabilities wholly or partially uncollectible from
Borrower, the creation, performance or repayment of the Liabilities (or
the execution, delivery and performance of any document or instrument
representing part of the Liabilities or executed in connection with the
Liabilities, or given to secure the repayment of the Liabilities) is
illegal, uncollectible, legally impossible or unenforceable, or the
Credit Agreement or other documents or instruments pertaining to the
Liabilities have been forged or otherwise are irregular or not genuine
or authentic;
(e) Release of Obligors. Any full or partial release of the
liability of Borrower on the Liabilities or any part thereof, of any
co-guarantors, or any other Person now or hereafter liable, whether
directly or indirectly, jointly, severally, or jointly and severally,
to pay, perform, guarantee or assure the payment of the Liabilities or
any part thereof, it being recognized, acknowledged and agreed by
Guarantor that Guarantor may be required to pay the Liabilities in full
without assistance or support of any other Person, and Guarantor has
not been induced to enter into this Guaranty Agreement on the basis of
a contemplation, belief, understanding or agreement that other parties
other than the Borrower will be liable to perform the Liabilities, or
the Lenders will look to other parties to perform the Liabilities.
(f) Other Security. The taking or accepting of any other
security, collateral or guaranty, or other assurance of payment, for
all or any part of the Liabilities;
5
<PAGE>
(g) Release of Collateral, etc. Any release, surrender,
exchange, subordination, deterioration, waste, loss or impairment
(including without limitation negligent, willful, unreasonable or
unjustifiable impairment) of any collateral, property or security, at
any time existing in connection with, or assuring or securing payment
of, all or any part of the Liabilities;
(h) Care and Diligence. The failure of the Lenders or any
other Person to exercise diligence or reasonable care in the
preservation, protection, enforcement, sale or other handling or
treatment of all or any part of such collateral, property or security;
(i) Status of Liens. The fact that any collateral, security,
security interest or lien contemplated or intended to be given, created
or granted as security for the repayment of the Liabilities shall not
be properly perfected or created, or shall prove to be unenforceable or
subordinate to any other security interest or lien, it being recognized
and agreed by Guarantor that Guarantor is not entering into this
Guaranty Agreement in reliance on, or in contemplation of the benefits
of, the validity, enforceability, collectibility or value of any of the
collateral for the Liabilities;
(j) Payments Rescinded. Any payment by Borrower to the Lenders
is held to constitute a preference under the bankruptcy laws, or for
any reason the Lenders are required to refund such payment or pay such
amount to Borrower or someone else; or
(k) Other Actions Taken or Omitted. Any other action taken or
omitted to be taken with respect to the Credit Agreement, the
Liabilities, or the security and collateral therefor, whether or not
such action or omission prejudices Guarantor or increases the
likelihood that Guarantor will be required to pay the Liabilities
pursuant to the terms hereof; it being the unambiguous and unequivocal
intention of Guarantor that Guarantor shall be obligated to pay the
Liabilities when due, notwithstanding any occurrence, circumstance,
event, action, or omission whatsoever, whether contemplated or
uncontemplated, and whether or not otherwise or particularly described
herein, except for the full and final payment and satisfaction of the
Liabilities.
Section 2.9 Right of Subrogation and Contribution. If Guarantor makes a
payment in respect of the Liabilities, it shall be subrogated to the rights of
the Lenders against the Borrower with respect to such payment and shall have the
rights of contribution against the other Subsidiary Guarantors set forth in
Section 2.9 of the Subsidiary Guarantors' Guaranty Agreements; provided that
Guarantor shall not enforce its rights to any payment by way of subrogation or
by exercising its rights of contribution or reimbursement or the right to
participate in any security now or hereafter held by or for the benefit of the
Lenders until the Liabilities have been paid in full. The Guarantor agrees that
after all the Liabilities have been paid in full that if its then current Net
Payments are less than the amount of its then current Contribution Obligation,
Guarantor shall pay to the other Subsidiary Guarantors an amount (together with
any payments required of the other Subsidiary Guarantors by Section 2.9 of each
other Guaranty Agreement) such that the Net Payments made by
6
<PAGE>
all Subsidiary Guarantors in respect of the Liabilities shall be shared among
all of the Subsidiary Guarantors in proportion to their respective Contribution
Percentage.
ARTICLE 3
---------
Representations and Warranties
------------------------------
Section 3.1 By Guarantor. In order to induce the Lenders to accept this
Guaranty Agreement, Guarantor represents and warrants to the Lenders (which
representations and warranties will survive the creation of the Liabilities and
any extension of credit thereunder) that:
(a) Benefit to Guarantor. Guarantor's guaranty pursuant to
this Guaranty Agreement reasonably may be expected to benefit, directly
or indirectly, Guarantor.
(b) Existence. Guarantor is a limited partnership duly
organized, legally existing and in good standing under the laws of the
State of Delaware and is duly qualified in all jurisdictions wherein
the property owned or the business transacted by it makes such
qualification necessary, except where the failure to be so qualified
would not have a Material Adverse Effect.
(c) Partnership Power and Authorization. Guarantor is duly
authorized and empowered to execute, deliver and perform this Guaranty
Agreement and all action on Guarantor's part requisite for the due
execution, delivery and performance of this Guaranty Agreement has been
duly and effectively taken.
(d) Binding Obligations. This Guaranty Agreement constitutes
valid and binding obligations of Guarantor, enforceable in accordance
with its terms (except that enforcement may be subject to any
applicable bankruptcy, insolvency, fraudulent conveyance, moratorium,
or similar laws generally affecting the enforcement of creditors'
rights).
(e) No Legal Bar or Resultant Lien. This Guaranty Agreement
will not violate any provisions of Guarantor's agreement of limited
partnership, or any contract, agreement, law, regulation, order,
injunction, judgment, decree or writ to which Guarantor is subject, or
result in the creation or imposition of any Lien upon any Properties of
Guarantor.
(f) No Consent. Guarantor's execution, delivery and
performance of this Guaranty Agreement does not require the consent or
approval of any other Person, including without limitation any
regulatory authority or governmental body of the United States or any
state thereof or any political subdivision of the United States or any
state thereof.
(g) Solvency. The Guarantor hereby represents that (i) it is
not insolvent as of the date hereof and will not be rendered insolvent
as a result of this Guaranty
7
<PAGE>
Agreement, (ii) it is not engaged in business or a transaction, or
about to engage in a business or a transaction, for which any property
or assets remaining with such Guarantor is unreasonably small capital,
and (iii) it does not intend to incur, or believe it will incur, debts
that will be beyond its ability to pay as such debts mature.
Section 3.2 No Representation by Lenders. Neither the Lenders nor any
other Person has made any representation, warranty or statement to the Guarantor
in order to induce the Guarantor to execute this Guaranty Agreement.
ARTICLE 4
---------
Subordination of Indebtedness
-----------------------------
Section 4.1 Subordination of All Guarantor Claims. As used herein, the
term "Guarantor Claims" shall mean all debts and liabilities of Borrower to
Guarantor, whether such debts and liabilities now exist or are hereafter
incurred or arise, or whether the obligation of Borrower thereon be direct,
contingent, primary, secondary, several, joint and several, or otherwise, and
irrespective of whether such debts or liabilities be evidenced by note,
contract, open account, or otherwise, and irrespective of the person or persons
in whose favor such debts or liabilities may, at their inception, have been, or
may hereafter be created, or the manner in which they have been or may hereafter
be acquired by Guarantor. The Guarantor Claims shall include without limitation
all rights and claims of Guarantor against Borrower arising as a result of
subrogation or otherwise as a result of Guarantor's payment of all or a portion
of the Liabilities. Until the Liabilities shall be paid and satisfied in full
and Guarantor shall have performed all of its obligations hereunder, except as
otherwise not prohibited by the Credit Agreement, Guarantor shall not receive or
collect, directly or indirectly, from Borrower or any other party any amount
upon the Guarantor Claims.
Section 4.2 Claims in Bankruptcy. In the event of receivership,
bankruptcy, reorganization, arrangement, debtor's relief, or other insolvency
proceedings involving Borrower as debtor, the Lenders shall have the right to
prove their claim in any proceeding, so as to establish its rights hereunder and
receive directly from the receiver, trustee or other court custodian, dividends
and payments which would otherwise be payable upon Guarantor Claims. Guarantor
hereby assigns such dividends and payments to the Lenders. Should the Agent or
any Lender receive, for application upon the Liabilities, any such dividend or
payment which is otherwise payable to Guarantor, and which, as between Borrower
and Guarantor, shall constitute a credit upon the Guarantor Claims, then upon
payment in full of the Liabilities, Guarantor shall become subrogated to the
rights of the Lenders to the extent that such payments to the Lenders on the
Guarantor Claims have contributed toward the liquidation of the Liabilities, and
such subrogation shall be with respect to that proportion of the Liabilities
which would have been unpaid if the Agent or a Lender had not received dividends
or payments upon the Guarantor Claims.
Section 4.3 Payments Held in Trust. In the event that notwithstanding
Sections 4.1 and 4.2 above, Guarantor should receive any funds, payments, claims
or distributions which is prohibited by such Sections, Guarantor agrees to hold
in trust for the Lenders an amount equal to the amount of all funds, payments,
claims or distributions so received, and agrees that it shall have absolutely
8
<PAGE>
no dominion over the amount of such funds, payments, claims or distributions
except to pay them promptly to the Agent, and Guarantor covenants promptly to
pay the same to the Agent.
Section 4.4 Liens Subordinate. Guarantor agrees that any liens,
security interests, judgment liens, charges or other encumbrances upon
Borrower's assets securing payment of the Guarantor Claims shall be and remain
inferior and subordinate to any liens, security interests, judgment liens,
charges or other encumbrances upon Borrower's assets securing payment of the
Liabilities, regardless of whether such encumbrances in favor of Guarantor, the
Agent or the Lenders presently exist or are hereafter created or attach. Without
the prior written consent of the Lenders, Guarantor shall not (a) exercise or
enforce any creditor's right it may have against the Borrower, or (b) foreclose,
repossess, sequester or otherwise take steps or institute any action or
proceeding (judicial or otherwise, including without limitation the commencement
of or joinder in any liquidation, bankruptcy, rearrangement, debtor's relief or
insolvency proceeding) to enforce any lien, mortgages, deeds of trust, security
interest, collateral rights, judgments or other encumbrances on assets of
Borrower held by Guarantor.
Section 4.5 Notation of Records. All promissory notes, accounts
receivable ledgers or other evidence of the Guarantor Claims accepted by or held
by Guarantor shall contain a specific written notice thereon that the
indebtedness evidenced thereby is subordinated under the terms of this Guaranty
Agreement.
ARTICLE 5
---------
Miscellaneous
-------------
Section 5.1 Successors and Assigns. This Guaranty Agreement is and
shall be in every particular available to the successors and assigns of the
Lenders and is and shall always be fully binding upon the legal representatives,
heirs, successors and assigns of Guarantor, notwithstanding that some or all of
the monies, the repayment of which this Guaranty Agreement applies, may be
actually advanced after any bankruptcy, receivership, reorganization, death,
disability or other event affecting Guarantor.
Section 5.2 Notices. Any notice or demand to Guarantor under or in
connection with this Guaranty Agreement may be given and shall conclusively be
deemed and considered to have been given and received in accordance with Section
12.02 of the Credit Agreement, addressed to Guarantor at the address on the
signature page hereof or at such other address provided to the Agent in writing.
Section 5.3 Business and Financial Information. The Guarantor will
promptly furnish to the Agent and the Lenders from time to time upon request
such information regarding the business and affairs and financial condition of
the Guarantor and its subsidiaries as the Agent and the Lenders may reasonably
request.
Section 5.4 Construction. This Guaranty Agreement is a contract made
under and shall be construed in accordance with and governed by the laws of the
State of New York.
9
<PAGE>
Section 5.5 Invalidity. In the event that any one or more of the
provisions contained in this Guaranty Agreement shall, for any reason, be held
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Guaranty
Agreement.
Section 5.6 ENTIRE AGREEMENT. THIS WRITTEN GUARANTY AGREEMENT EMBODIES
THE ENTIRE AGREEMENT AND UNDERSTANDING BETWEEN THE LENDERS AND THE GUARANTOR AND
SUPERSEDES ALL OTHER AGREEMENTS AND UNDERSTANDINGS BETWEEN SUCH PARTIES RELATING
TO THE SUBJECT MATTER HEREOF AND THEREOF. THIS WRITTEN GUARANTY AGREEMENT
REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
10
<PAGE>
WITNESS THE EXECUTION HEREOF, as of the date first above written.
BUCKEYE PARTNERS, L.P.
By: Buckeye Management Company,
its General Partner
By: /s/ Steven C. Ramsey
---------------------------------
Name: Steven C. Ramsey
Title: Senior Vice President, Finance
3900 Hamilton Boulevard
Allentown, Pennsylvania 18103
Telecopier No.: 610/770-4581
Telephone No.: 610/770-4000
Attention: Senior Vice President, Finance
Signature Page-1
<PAGE>
STATE OF PENNSYLVANIA ss.
ss.
COUNTY OF DELAWARE ss.
THIS INSTRUMENT was acknowledged before me this 16th day of December,
1998 by Steven C. Ramsey, Senior Vice President, Finance of Buckeye Management
Company, a Delaware corporation, general partner of Buckeye Partners, L.P., a
Delaware limited partnership, on behalf of such corporation as general partner
of such partnership.
Robin L. Clark
----------------------------
Notary Public in and for the
Commonwealth of Pennsylvania
SEAL:
Signature Page-2
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 8,341
<SECURITIES> 0
<RECEIVABLES> 7,578
<ALLOWANCES> 0
<INVENTORY> 2,988
<CURRENT-ASSETS> 24,227
<PP&E> 600,806
<DEPRECIATION> 68,110
<TOTAL-ASSETS> 618,099
<CURRENT-LIABILITIES> 30,493
<BONDS> 240,000
0
0
<COMMON> 0
<OTHER-SE> 298,485
<TOTAL-LIABILITY-AND-EQUITY> 618,099
<SALES> 0
<TOTAL-REVENUES> 184,477
<CGS> 0
<TOTAL-COSTS> 110,119
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,886
<INCOME-PRETAX> 52,007
<INCOME-TAX> 0
<INCOME-CONTINUING> 52,007
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 52,007
<EPS-PRIMARY> 1.93
<EPS-DILUTED> 1.92
</TABLE>
