<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 1998
COMMISSION FILE NO. 1-10403
TEPPCO PARTNERS, L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 76-0291058
(STATE OF INCORPORATION (I.R.S. EMPLOYER
OR ORGANIZATION) IDENTIFICATION NUMBER)
COMMISSION FILE NO. 1-13603
TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 76-0329620
(STATE OF INCORPORATION (I.R.S. EMPLOYER
OR ORGANIZATION) IDENTIFICATION NUMBER)
2929 ALLEN PARKWAY
P.O. BOX 2521
HOUSTON, TEXAS 77252-2521
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(713) 759-3636
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether each 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
----- -----
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PRELIMINARY NOTE
TEPPCO Partners, L.P. (the "Parent Partnership") is a holding company
that owns all of its assets and conducts all of its business through TE Products
Pipeline Company, Limited Partnership (the "Operating Partnership"), and TEPPCO
Colorado, LLC ("TEPPCO Colorado"), which is a wholly-owned subsidiary of the
Operating Partnership. The Operating Partnership is owned 99% by the Parent
Partnership and 1% by Texas Eastern Products Pipeline Company, which serves as
general partner of the Parent Partnership and the Operating Partnership. No
separate financial information for the Operating Partnership has been provided
or incorporated by reference in this report because: (i) the Parent Partnership
does not itself conduct any operations but rather all operations of the Parent
Partnership and its subsidiaries are conducted by the Operating Partnership and
its subsidiary; (ii) the Parent Partnership has no material assets other than
its ownership interest in the Operating Partnership; and (iii) all of the assets
and liabilities shown in the consolidated financial statements for the Parent
Partnership are located at the Operating Partnership and TEPPCO Colorado.
Collectively, the Parent Partnership, the Operating Partnership and TEPPCO
Colorado are referred to as "the Partnership."
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TEPPCO PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
------------ ------------
(UNAUDITED)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents .............................. $ 26,796 $ 43,961
Short-term investments ................................. 2,105 2,105
Accounts receivable, trade ............................. 13,263 19,826
Inventories ............................................ 22,174 21,094
Other .................................................. 3,923 4,173
--------- ---------
Total current assets ................................ 68,261 91,159
--------- ---------
Property, plant and equipment, at cost (Net of accumulated
depreciation and amortization of $176,058 and $170,063) 568,425 567,681
Investments .............................................. 10,010 10,010
Intangible assets ........................................ 38,000 --
Other assets ............................................. 5,695 5,059
--------- ---------
Total assets ........................................ $ 690,391 $ 673,909
========= =========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Current maturities, First Mortgage Notes ............... $ -- $ 17,000
Accounts payable and accrued liabilities ............... 7,829 9,615
Accounts payable, general partner ...................... 3,323 3,735
Accrued interest ....................................... 4,792 10,539
Other accrued taxes .................................... 5,325 6,246
Other .................................................. 4,519 6,740
--------- ---------
Total current liabilities ........................... 25,788 53,875
--------- ---------
First Mortgage Notes...................................... -- 309,512
Senior Notes ............................................. 389,699 --
Other long-term debt ..................................... 38,000 --
Other liabilities and deferred credits ................... 4,905 4,462
Minority interest ........................................ 2,345 3,093
Partners' capital:
General partner's interest ............................. (771) 5,760
Limited partners' interests ............................ 230,425 297,207
--------- ---------
Total partners' capital ............................. 229,654 302,967
--------- ---------
Total liabilities and partners' capital ............. $ 690,391 $ 673,909
========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
3
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TEPPCO PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1998 1997
------------- -------------
<S> <C> <C>
Operating revenues:
Transportation - Refined products ............................... $ 22,462 $ 21,704
Transportation - LPGs ........................................... 21,815 23,939
Mont Belvieu operations ......................................... 2,670 2,763
Other - net .................................................... 3,258 7,019
-------- --------
Total operating revenues ..................................... 50,205 55,425
-------- --------
Costs and expenses:
Operating, general and administrative ........................... 15,844 15,450
Operating fuel and power ........................................ 6,190 6,788
Depreciation and amortization ................................... 6,080 5,768
Taxes - other than income taxes ................................. 2,577 2,474
-------- --------
Total costs and expenses ..................................... 30,691 30,480
-------- --------
Operating income ............................................. 19,514 24,945
Interest expense .................................................. (7,156) (8,604)
Interest costs capitalized ........................................ 284 655
Other income - net ................................................ 647 981
-------- --------
Income before minority interest and extraordinary loss on debt
extinguishment .............................................. 13,289 17,977
Minority interest ................................................. (134) (182)
-------- --------
Income before extraordinary loss on debt extinguishment ...... 13,155 17,795
Extraordinary loss on debt extinguishment, net of minority interest (72,767) --
-------- --------
Net income (loss) ............................................ $(59,612) $ 17,795
======== ========
Basic and diluted income (loss) per Limited Partner Unit:
Income before extraordinary loss on debt extinguishment ....... $ 0.81 $ 1.14
Extraordinary loss on debt extinguishment .................... (4.56) --
-------- --------
Net income (loss) ............................................ $ (3.75) $ 1.14
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
4
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TEPPCO PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1998 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ............................................ $ (59,612) $ 17,795
Adjustments to reconcile net income (loss) to cash provided by
operating activities:
Depreciation and amortization ............................. 6,080 5,768
Extraordinary loss on early extinguishment of debt,
net of minority interest ................................ 72,767 --
Decrease in accounts receivable, trade .................... 6,563 2,266
Decrease (increase) in inventories ........................ (1,080) 1,303
Decrease (increase) in other current assets ............... 250 (1,197)
Decrease in accounts payable and accrued expenses ......... (11,087) (13,124)
Other ..................................................... 165 (155)
--------- ---------
Net cash provided by operating activities ............... 14,046 12,656
--------- ---------
Cash flows from investing activities:
Proceeds from investments .................................... -- 7,970
Insurance proceeds related to damaged asset .................. -- 1,046
Purchase of fractionators and related intangible assets,
net of noncash portion .................................. (2,000) --
Capital expenditures ......................................... (4,949) (8,139)
--------- ---------
Net cash provided by (used in) investing activities ..... (6,949) 877
--------- ---------
Cash flows from financing activities:
Principal payment, First Mortgage Notes ...................... (326,512) (13,000)
Prepayment premium, First Mortgage Notes ..................... (70,093) --
Issuance of Senior Notes ..................................... 389,694 --
Debt issuance costs, Senior Notes ............................ (3,641) --
Distributions ................................................ (13,710) (11,777)
--------- ---------
Net cash used in financing activities ................... (24,262) (24,777)
--------- ---------
Net decrease in cash and cash equivalents ...................... (17,165) (11,244)
Cash and cash equivalents at beginning of period ............... 43,961 34,047
--------- ---------
Cash and cash equivalents at end of period ..................... $ 26,796 $ 22,803
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS:
Interest paid during the period (net of capitalized interest) .. $ 12,525 $ 16,438
========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
5
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TEPPCO PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION
TEPPCO Partners, L.P. is a Delaware limited partnership which operates
through TE Products Pipeline Company, Limited Partnership, a Delaware limited
partnership (the "Operating Partnership"), in which TEPPCO Partners, L.P. holds
a 99% interest as the sole limited partner. TEPPCO Colorado, LLC, a Delaware
limited liability company, is a wholly-owned subsidiary of the Operating
Partnership. Texas Eastern Products Pipeline Company (the "Company"), an
indirect wholly-owned subsidiary of Duke Energy Corporation ("Duke Energy"),
owns a 1% general partner interest in both TEPPCO Partners, L.P. and the
Operating Partnership, and has agreed not to voluntarily withdraw as the general
partner subject to certain limited exceptions, prior to January 1, 2000. The
Company's 1% general partner interest in the Operating Partnership, is accounted
for as a minority interest.
The accompanying unaudited consolidated financial statements reflect
all adjustments, which are, in the opinion of management, of a normal and
recurring nature and necessary for a fair statement of the financial position of
the Partnership as of March 31, 1998, and the results of operations and cash
flows for the periods presented. The results of operations for the three months
ended March 31, 1998, are not necessarily indicative of results of operations
for the full year 1998. The interim financial statements should be read in
conjunction with the Partnership's consolidated financial statements and notes
thereto presented in the TEPPCO Partners, L.P. Annual Report on Form 10-K for
the year ended December 31, 1997. Certain amounts from the prior year have been
reclassified to conform to current presentation.
Basic net income per Limited Partner Unit is computed by dividing net
income, after deduction of the general partner's interest, by the weighted
average number of Limited Partner Units outstanding (a total of 14,500,000 Units
as of March 31, 1998). The general partner's percentage interest in net income
is based on its percentage of cash distributions from Available Cash for each
period (see Note 7. Cash Distributions). The general partner was allocated $5.3
million (8.87%) of the net loss for the three months ended March 31, 1998, and
$1.2 million (6.72%) of the net income for the three months ended March 31,
1997.
Diluted net income per Limited Partner Unit is similar to the
computation of basic net income per Limited Partner Unit above, except that the
denominator was increased to include the dilutive effect of outstanding Unit
options by application of the treasury stock method. For the quarters ended
March 31, 1998 and 1997, the denominator was increased by 23,169 Units and
16,159 Units, respectively.
NOTE 2. ACCOUNTING POLICY CHANGE
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income." This statement establishes standards for reporting and
display of comprehensive income and its components in a full set of financial
statements. The Partnership adopted SFAS No. 130 during the first quarter of
1998 without impact on its financial condition or results of operations.
In June 1997, the FASB also issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." This statement establishes
standards for reporting information about operating segments in annual financial
statements and requires that enterprises report selected information about
operating segments in interim reports. The Partnership will adopt this standard
in 1998. As SFAS No. 131 establishes standards for reporting and display, the
Partnership does not expect the adoption of this statement to have a material
impact on its financial condition or results of operations.
6
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TEPPCO PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
NOTE 3. RELATED PARTY TRANSACTIONS
As of March 31, 1998, TEPPCO Colorado purchased two fractionation
facilities located in Weld County, Colorado, from Duke Energy Field Services,
Inc. ("DEFS"), a wholly-owned subsidiary of Duke Energy. TEPPCO Colorado and
DEFS entered into a twenty year Fractionation Agreement, whereby TEPPCO Colorado
will receive a variable fee for all fractionated volumes delivered to DEFS. The
purchase price of these transactions was $40 million. Intangible assets include
$38 million of value assigned to the Fractionation Agreement, which will be
amortized on a straight-line method over the term of the Fractionation
Agreement. The remaining purchase price of $2.0 million was allocated to the
fractionator facilities purchased. TEPPCO Colorado and DEFS also entered into a
Operations and Management Agreement, whereby DEFS will operate and maintain the
fractionation facilities. TEPPCO Colorado will pay DEFS a set volumetric rate
for all fractionated volumes delivered to DEFS. As the transactions occurred as
of March 31, 1998, no effect of these transactions was included in the
Partnership's consolidated statements of income for the quarter ended March 31,
1998.
NOTE 4. INVESTMENTS
SHORT-TERM INVESTMENTS
The Partnership routinely invests cash in liquid short-term investments
as part of it cash management program. Investments with maturities at date of
purchase of 90 days or less are considered cash equivalents. At March 31, 1998,
short-term investments included $2.1 million of investment-grade corporate
notes, which mature within one year. All short-term investments are classified
as held-to-maturity securities and are stated at amortized cost. The aggregate
fair value of such securities approximates amortized cost at March 31, 1998.
LONG-TERM INVESTMENTS
At March 31, 1998, the Partnership had $10.0 million invested in
investment-grade corporate notes, which have varying maturities from 1999
through 2002. These securities are classified as held-to-maturity securities and
are stated at amortized cost. The aggregate fair value of such securities
approximates amortized cost at March 31, 1998.
NOTE 5. INVENTORIES
Inventories are carried at the lower of cost (based on weighted average
cost method) or market. The major components of inventories were as follows (in
thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
---------- ----------
<S> <C> <C>
Gasolines .......................................... $ 6,103 $ 3,779
Propane ............................................ 5,650 6,872
Butanes ............................................ 3,602 3,152
Fuel oils .......................................... 565 82
Other products ..................................... 2,740 3,099
Materials and supplies ............................. 3,514 4,110
-------- --------
Total .................................... $ 22,174 $ 21,094
======== ========
</TABLE>
The costs of inventories were lower than market at March 31, 1998, and
December 31, 1997.
7
<PAGE> 8
TEPPCO PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
NOTE 6. LONG TERM DEBT
SENIOR NOTES
On January 27, 1998, the Operating Partnership completed the issuance
of $180 million principal amount of 6.45% Senior Notes due 2008, and $210
million principal amount of 7.51% Senior Notes due 2028 (collectively the
"Senior Notes"). The 6.45% Senior Notes due 2008 are not subject to redemption
prior to January 15, 2008. The 7.51% Senior Notes due 2028 may be redeemed at
any time after January 15, 2008, at the option of the Operating Partnership, in
whole or in part, at a premium. Net proceeds from the issuance of the Senior
Notes totaled approximately $386 million and was used to repay in full the $61.0
million principal amount of the 9.60% Series A First Mortgage Notes, due 2000,
and the $265.5 million principal amount 10.20% Series B First Mortgage Notes,
due 2010. The premium for the early redemption of the First Mortgage Notes
totaled $70.1 million. The Partnership recorded an extraordinary charge of $73.5
million during the first quarter of 1998 (including $0.7 million allocated to
minority interest), which represents the redemption premium of $70.1 million and
unamortized debt issue costs related to the First Mortgage Notes of $3.4
million.
The Senior Notes do not have sinking fund requirements. Interest on the
Senior Notes is payable semiannually in arrears on January 15 and July 15 of
each year, commencing July 15, 1998. The Senior Notes are unsecured obligations
of the Operating Partnership and will rank on a parity with all other unsecured
and unsubordinated indebtedness of the Operating Partnership. The indenture
governing the Senior Notes contains covenants, including, but not limited to,
covenants limiting (i) the creation of liens securing indebtedness and (ii) sale
and leaseback transactions. However, the indenture does not limit the
Partnership's ability to incur additional indebtedness.
OTHER LONG TERM DEBT
In connection with the purchase of the fractionation assets from DEFS
as of March 31, 1998, TEPPCO Colorado received a $38 million bank loan from
SunTrust Bank. Proceeds from the loan were received on April 21, 1998, and
therefore were not included on the consolidated statement of cash flows as of
March 31, 1998. The loan bears interest at a rate of 6.53%, which is payable
quarterly beginning in July 1998. The principal balance of the loan is payable
in full on April 21, 2001. The Operating Partnership is guarantor on the loan.
TEPPCO Colorado will pay interest to DEFS at a per annum rate of 5.75% on the
amount of the total purchase price outstanding for the period from March 31,
1998 until April 21, 1998.
NOTE 7. CASH DISTRIBUTIONS
The Partnership makes quarterly cash distributions of all of its
Available Cash, generally defined as consolidated cash receipts less
consolidated cash disbursements and cash reserves established by the general
partner in its sole discretion.
On February 6, 1998, the Partnership paid a cash distribution of $0.85
per Unit for the fourth quarter of 1997. Additionally, on April 17, 1998, the
Partnership declared a cash distribution of $0.85 per Unit for the quarter ended
March 31, 1998. The distribution was paid on May 8, 1998, to Unitholders of
record on April 30, 1998.
The Company receives incremental incentive distributions of 15%, 25%
and 50% of the amount by which quarterly distributions of Available Cash exceed
$0.55, $0.65 and $0.90 per Unit, respectively. During the three months ended
March 31, 1998 and 1997, incentive distributions paid to the Company totaled
$1.1 million and $0.7 million, respectively.
8
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TEPPCO PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
NOTE 8. COMMITMENTS AND CONTINGENCIES
The Partnership is involved in various claims and legal proceedings
incidental to its business. In the opinion of management, these claims and legal
proceedings will not have a material adverse effect on the Partnership's
consolidated financial position or results of operations.
The operations of the Partnership are subject to federal, state and
local laws and regulations relating to protection of the environment. Although
the Partnership believes the operations of the pipeline system are in material
compliance with applicable environmental regulations, risks of significant costs
and liabilities are inherent in pipeline operations, and there can be no
assurance that significant costs and liabilities will not be incurred. Moreover,
it is possible that other developments, such as increasingly strict
environmental laws and regulations and enforcement policies thereunder, and
claims for damages to property or persons resulting from the operations of the
pipeline system, could result in substantial costs and liabilities to the
Partnership. The Partnership does not anticipate that changes in environmental
laws and regulations will have a material adverse effect on its financial
position, operations or cash flows in the near term.
The Partnership and the Indiana Department of Environmental Management
("IDEM") have entered into an Agreed Order that will ultimately result in a
remediation program for any on-site and off-site groundwater contamination
attributable to the Partnership's operations at the Seymour, Indiana, terminal.
The Partnership is currently negotiating with IDEM the clean-up levels to be
attained at the Seymour terminal. The Partnership estimates that the costs of
the remediation program to be proposed by the Partnership for the Seymour
terminal will not exceed the amount accrued therefore (approximately $1.7
million at March 31, 1998). In the opinion of the Company, the completion of the
remediation program to be proposed by the Partnership, if such program is
approved by IDEM, will not have a material adverse impact on the Partnership's
financial condition, results of operations or liquidity.
In 1997, the Company initiated a program to prepare the Partnership's
process controls and business computer systems for the "Year 2000 issue."
Process controls are the automated equipment including hardware and software
systems which run operational activities. Business computer systems are the
computer hardware and software used by the Partnership. The Partnership expects
to incur internal staff costs as well as consulting and other expenses related
to testing and conversion of these assets. The Company continues to evaluate
appropriate courses of corrective action, including replacement of certain
systems whose associated costs would be recorded as assets and amortized. The
Company estimates that the amounts required to be expensed during 1998 and 1999
will range between approximately $4.0 million and $6.0 million. Testing and
conversion is expected to be completed by mid-year 1999. The Partnership has
initiated formal communications with all of its significant suppliers and large
customers to determine the extent to which the Partnership is vulnerable to
those third parties' failure to remediate their own Year 2000 issue. However,
there can be no guarantee that the systems of other companies, on which the
Partnership's systems rely, will be timely converted by another company, or a
conversion that is incompatible with the Partnership's systems, would not have a
material adverse effect on the Partnership.
Substantially all of the petroleum products transported and stored by
the Partnership are owned by the Partnership's customers. At March 31, 1998, the
Partnership had approximately 12.2 million barrels of products in its custody
owned by customers. The Partnership is obligated for the transportation, storage
and delivery of such products on behalf of its customers. The Partnership
maintains insurance adequate to cover product losses through circumstances
beyond its control.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The Partnership's operations consist primarily of the transportation,
storage and terminaling of petroleum products. Operations are somewhat seasonal
with higher revenues generally realized during the first and fourth quarters of
each year. Refined products volumes are generally higher during the second and
third quarters because of greater demand for gasolines during the spring and
summer driving seasons. LPGs volumes are generally higher from November through
March due to higher demand in the Northeast for propane, a major fuel for
residential heating.
The Partnership's revenues are derived primarily from the
transportation of refined products and LPGs, the storage and short-haul shuttle
transportation of LPGs at the Mont Belvieu, Texas, complex, sale of product
inventory and other ancillary services. Labor and electric power costs comprise
the two largest operating expense items of the Partnership. Effective March 31,
1998, the Partnership's operations included the fractionation of natural gas
liquids (see Note 3 in Item 1. Related Party Transactions).
The following information is provided to facilitate increased
understanding of the 1998 and 1997 interim consolidated financial statements and
accompanying notes presented in Item 1. Material period-to-period variances in
the consolidated statements of income are discussed under "Results of
Operations." The "Financial Condition and Liquidity" section analyzes cash flows
and financial position. Discussion included in "Other Matters" addresses key
trends, future plans and contingencies. Throughout these discussions, management
addresses items that are reasonably likely to materially affect future liquidity
or earnings.
RESULTS OF OPERATIONS
For the quarter ended March 31, 1998, the Partnership reported a net
loss of $59.6 million. The net loss included an extraordinary loss for early
extinguishment of debt of $72.8 million, net of $0.7 million allocated to
minority interest. Excluding the extraordinary loss, net income would have been
$13.2 million for the first quarter of 1998, compared with net income of $17.8
million for the first quarter of 1997. The $4.6 million decrease in income
before loss on debt extinguishment resulted primarily from a $5.2 million
decrease in operating revenues, a $0.2 million increase in costs and expenses, a
$0.4 million decrease in interest capitalized and a $0.3 million decrease in
other income - net. These variances were partially offset by a $1.4 million
decrease in interest expense. See discussion below of factors affecting net
income for the comparative periods.
See volume and average tariff information below:
<TABLE>
<CAPTION>
QUARTER ENDED
MARCH 31, PERCENTAGE
----------------------------- INCREASE
1998 1997 (DECREASE)
------------ ------------ -----------
<S> <C> <C> <C>
VOLUMES DELIVERED
(in thousands of barrels)
Refined products 24,511 25,205 (3%)
LPGs 10,151 12,064 (16%)
Mont Belvieu operations 5,944 6,188 (4%)
----------- ---------- ---------
Total 40,606 43,457 (7%)
=========== ========== =========
AVERAGE TARIFF PER BARREL
Refined products $ 0.92 $ 0.86 7%
LPGs 2.15 1.98 9%
Mont Belvieu operations 0.16 0.16 --
Average system tariff per barrel $ 1.11 $ 1.07 4%
=========== ========== =========
</TABLE>
10
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS - (CONTINUED)
Refined products transportation revenues increased $0.8 million for the
quarter ended March 31, 1998, compared with the prior-year quarter, as a result
of a 7% increase in the refined products average tariff per barrel, partially
offset by a 3% decrease in volumes delivered. The increase in the refined
products average tariff per barrel resulted primarily from new tariff structures
for volumes transported on the expanded portion between Shreveport, Louisiana,
and El Dorado, Arkansas, which was placed in service on March 31, 1997, higher
tariff rates on barrels originating from the pipeline connection with Colonial
Pipeline Company's ("Colonial") pipeline at Beaumont, Texas and tariff rate
increases on selective refined products tariffs, averaging 1.7%, effective July
1, 1997. The 3% decrease in volumes delivered resulted primarily from
unfavorable Midwest price differentials for motor fuel, distillate and natural
gasoline. Additionally, short-haul barge deliveries of methyl tertiary butyl
ether ("MTBE") at the Partnership's marine terminal near Beaumont, Texas,
decreased from the prior year. These decreases were partially offset by
increased deliveries of motor fuel and distillate as a result of increased
marketing at a third party delivery facility at West Memphis, Arkansas.
LPGs transportation revenues decreased $2.1 million for the quarter
ended March 31, 1998, compared with the first quarter of 1997, due to a 16%
decrease in volumes delivered, partially offset by a 9% increase in the LPGs
average system tariff per barrel. Propane deliveries in the Midwest and
Northeast market areas decreased 1.3 million barrels, or 15%, which corresponds
closely to the 14% decrease in degree days in these market areas during the
first quarter. Short-haul propane deliveries decreased 1.3 million barrels, or
70%, as a result of operational constraints at a petrochemical facility on the
upper Texas Gulf Coast served by the Partnership. Butane deliveries increased
0.7 million barrels, or 45%, due to favorable Midwest price differentials and
the resumption of operations during the second quarter of 1997 at a Northeast
area refinery served by the Partnership. The 9% increase in the LPGs average
tariff per barrel resulted from the increase in the long-haul butane deliveries
and the decrease in the short-haul propane deliveries.
Other operating revenues decreased $3.8 million during the quarter
ended March 31, 1998, as compared to the same period in 1997, due primarily to
decreased product inventory volumes sold, unfavorable product location exchange
differentials incurred to position system inventory, and lower refined products
terminaling revenues.
Costs and expenses increased $0.2 million for the quarter ended March
31, 1998, compared with the first quarter of 1997, due primarily to a $0.4
million increase in operating, general and administrative expenses and a $0.3
million increase in depreciation and amortization expense, partially offset by a
$0.6 million volume-related decrease in operating fuel and power expense. The
increase in other operating, general and administrative expenses was primarily
attributable to increased expense related to the capacity lease with Colonial,
which commenced in May 1997. Depreciation and amortization expense increased as
a result of the completion of capital projects subsequent to the first quarter
of 1997.
Interest expense decreased $1.4 million during the first quarter of
1998, compared with the first quarter of 1997, due to the $13.0 million
principal payment on the First Mortgage Notes in March 1997, and the payment on
January 27, 1998 of the remaining $326.5 million principal balance of the First
Mortgage Notes, partially offset by interest expense on the Senior Notes from
January 27, 1998 to March 31, 1998. Capitalized interest decreased $0.4 million
from the prior year first quarter as a result of lower construction balances
related to capital projects.
FINANCIAL CONDITION AND LIQUIDITY
Net cash from operations for the quarter ended March 31, 1998, totaled
$14.0 million, comprised of $19.2 million of income before extraordinary loss on
early extinguishment of debt and charges for depreciation and amortization,
partially offset by $5.2 million used for working capital changes. This compares
with cash flows from operations of $12.7 million for the first quarter of 1997,
which was comprised of $23.6 million of income before charges for depreciation
and amortization, partially offset by $10.9 million from working capital
changes.
11
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FINANCIAL CONDITION AND LIQUIDITY - (CONTINUED)
The decrease in cash used for working capital changes during the first quarter
of 1998, as compared with the first quarter of 1997, resulted primarily from
lower interest payments during 1998 and increased collection of accounts
receivable balances. Net cash from operations for the quarter ended March 31,
1998 included interest payments related to the First Mortgage Notes of $12.8
million paid on January 27, 1998 in connection with repayment of the outstanding
balance of the First Mortgage Notes. Net cash from operations for the quarter
ended March 31, 1997 included interest payments related to the First Mortgage
Notes of $17.1 million paid in March 1997.
Cash flows used in investing activities during the first quarter of
1998 included $4.9 million of capital expenditures and $2.0 million as the
initial cash payment of the purchase price of the fractionation assets and
related intangible assets. Cash flows provided by investing activities during
the first quarter of 1997 resulted from $8.0 million of matured investments and
$1.0 million of insurance proceeds related to the replacement value of a 20-inch
diameter auxiliary pipeline at the Red River in central Louisiana, which was
damaged in 1994 and subsequently removed from service, partially offset by $8.1
million of capital expenditures. Capital expenditures are expected to total
approximately $23 million for the full year of 1998. The Partnership revises
capital spending periodically in response to changes in cash flows and
operations. Interest income earned on all investments is included in cash from
operations.
On January 27, 1998, the Operating Partnership completed the issuance
of $180 million principal amount of 6.45% Senior Notes due 2008, and $210
million principal amount of 7.51% Senior Notes due 2028 (collectively the
"Senior Notes"). The 6.45% Senior Notes due 2008 are not subject to redemption
prior to January 15, 2008. The 7.51% Senior Notes due 2028 may be redeemed at
any time after January 15, 2008, at the option of the Operating Partnership, in
whole or in part, at a premium. Net proceeds from the issuance of the Senior
Notes totaled approximately $386 million and was used to repay in full the $61.0
million principal amount of the 9.60% Series A First Mortgage Notes, due 2000,
and the $265.5 million principal amount of the 10.20% Series B First Mortgage
Notes, due 2010. The premium for the early redemption of the First Mortgage
Notes totaled $70.1 million. The repayment of the First Mortgage Notes and the
issuance of the Senior Notes reduced the level of cash required for debt service
until 2008. The Partnership recorded an extraordinary charge of $73.5 million
during the first quarter of 1998 (including $0.7 million allocated to minority
interest), which represents the redemption premium of $70.1 million and
unamortized debt issue costs related to the First Mortgage Notes of $3.4
million.
The Senior Notes do not have sinking fund requirements. Interest on the
Senior Notes is payable semiannually in arrears on January 15 and July 15 of
each year, commencing July 15, 1998. The Senior Notes are unsecured obligations
of the Operating Partnership and will rank on a parity with all other unsecured
and unsubordinated indebtedness of the Operating Partnership. The indenture
governing the Senior Notes contains covenants, including, but not limited to,
covenants limiting (i) the creation of liens securing indebtedness and (ii) sale
and leaseback transactions. However, the indenture does not limit the
Partnership's ability to incur additional indebtedness.
In connection with the purchase of the fractionation assets from DEFS
as of March 31, 1998, TEPPCO Colorado received a $38 million bank loan from
SunTrust Bank. Proceeds from the loan were received on April 21, 1998, and
therefore were not included on the consolidated statement of cash flows as of
March 31, 1998. The loan bears interest at a rate of 6.53%, which is payable
quarterly beginning in July 1998. The principal balance of the loan is payable
in full on April 21, 2001. The Operating Partnership is guarantor on the loan.
TEPPCO Colorado will pay interest to DEFS at a per annum rate of 5.75% on the
amount of the total purchase price outstanding for the period from March 31,
1998 until April 21, 1998.
The Partnership paid the fourth quarter 1997 cash distribution of $13.7
million ($0.85 per Limited Partner Unit) on February 6, 1998. Additionally, on
April 17, 1998, the Partnership declared a cash distribution of $0.85
12
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FINANCIAL CONDITION AND LIQUIDITY - (CONTINUED)
per Limited Partner Unit for the three months ended March 31, 1998. The
distribution was paid on May 8, 1998 to Unitholders of record on April 30,
1998.
OTHER MATTERS
The operations of the Partnership are subject to federal, state and
local laws and regulations relating to protection of the environment. Although
the Partnership believes the operations of the Pipeline System are in material
compliance with applicable environmental regulations, risks of significant costs
and liabilities are inherent in pipeline operations, and there can be no
assurance that significant costs and liabilities will not be incurred. Moreover,
it is possible that other developments, such as increasingly strict
environmental laws and regulations and enforcement policies thereunder, and
claims for damages to property or persons resulting from the operations of the
Pipeline System, could result in substantial costs and liabilities to the
Partnership. The Partnership does not anticipate that changes in environmental
laws and regulations will have a material adverse effect on it financial
position, operations or cash flows in the near term.
The Partnership and the Indiana Department of Environmental Management
("IDEM") have entered into an Agreed Order that will ultimately result in a
remediation program for any on-site and off-site groundwater contamination
attributable to the Partnership's operations at the Seymour, Indiana, terminal.
The Partnership is currently negotiating with IDEM the clean-up levels to be
attained at the Seymour terminal. The Partnership estimates that the costs of
the remediation program to be proposed by the Partnership for the Seymour
terminal will not exceed the amount accrued therefore (approximately $1.7
million at March 31, 1998). In the opinion of the Company, the completion of the
remediation program to be proposed by the Partnership, if such program is
approved by IDEM, will not have a material adverse impact on the Partnership's
financial condition, results of operations or liquidity.
In 1997, the Company initiated a program to prepare the Partnership's
process controls and business computer systems for the "Year 2000 issue."
Process controls are the automated equipment including hardware and software
systems which run operational activities. Business computer systems are the
computer hardware and software used by the Partnership. The Partnership expects
to incur internal staff costs as well as consulting and other expenses related
to testing and conversion of these assets. The Company continues to evaluate
appropriate courses of corrective action, including replacement of certain
systems whose associated costs would be recorded as assets and amortized. The
Company estimates that the amounts required to be expensed during 1998 and 1999
will range between approximately $4.0 million and $6.0 million. Testing and
conversion is expected to be completed by mid-year 1999. The Partnership has
initiated formal communications with all of its significant suppliers and large
customers to determine the extent to which the Partnership is vulnerable to
those third parties' failure to remediate their own Year 2000 issue. However,
there can be no guarantee that the systems of other companies, on which the
Partnership's systems rely, will be timely converted by another company, or a
conversion that is incompatible with the Partnership's systems, would not have a
material adverse effect on the Partnership.
The matters discussed herein include "forward-looking statements"
within the meaning of various provisions of the Securities Act of 1933 and the
Securities Exchange Act of 1934. All statements, other than statements of
historical facts, included in this document that address activities, events or
developments that the Partnership expects or anticipates will or may occur in
the future, including such things as estimated future capital expenditures
(including the amount and nature thereof), business strategy and measures to
implement strategy, competitive strengths, goals, expansion and growth of the
Partnership's business and operations, plans, references to future success,
references to intentions as to future matters and other such matters are
forward-looking statements. These statements are based on certain assumptions
and analyses made by the Partnership in light of its experience and its
perception of historical trends, current conditions and expected future
developments as well as other factors it believes are appropriate under the
circumstances. However, whether actual results and developments will
13
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OTHER MATTERS - (CONTINUED)
conform with the Partnership's expectations and predictions is subject to a
number of risks and uncertainties, including general economic, market or
business conditions, the opportunities (or lack thereof) that may be presented
to and pursued by the Partnership, competitive actions by other pipeline
companies, changes in laws or regulations, and other factors, many of which are
beyond the control of the Partnership. Consequently, all of the forward-looking
statements made in this document are qualified by these cautionary statements
and there can be no assurance that actual results or developments anticipated by
the Partnership will be realized or, even if substantially realized, that they
will have the expected consequences to or effect on the Partnership or its
business or operations. For additional discussion of such risks and
uncertainties, see TEPPCO Partners, L.P.'s 1997 Annual Report on Form 10-K.
14
<PAGE> 15
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
Exhibit
Number Description
3.1 Certificate of Limited Partnership of the
Partnership (Filed as Exhibit 3.2 to the
Registration Statement of TEPPCO Partners, L.P.
(Commission File No. 33-32203) and incorporated
herein by reference).
3.2* Certificate of Formation of TEPPCO Colorado, LLC.
4.1 Form of Certificate representing Units (Filed as
Exhibit 4.1 to the Registration Statement of TEPPCO
Partners, L.P. (Commission File No. 33-32203) and
incorporated herein by reference).
4.2 Agreement of Limited Partnership of TEPPCO Partners,
L.P., dated March 7, 1990 (Filed as Exhibit 4(a) to
Form 10-Q of TEPPCO Partners, L.P. (Commission File
No. 1-10403) for the quarter ended March 31, 1990
and incorporated herein by reference).
4.3 Form of Indenture between TE Products Pipeline
Company, Limited Partnership and The Bank of New
York, as Trustee, dated as of January 27, 1998
(Filed as Exhibit 4.3 to TE Products Pipeline
Company, Limited Partnership's Registration
Statement on Form S-3 (Commission File No.
333-38473) and incorporated herein by reference).
10.1 Agreement of Limited Partnership of TE Products
Pipeline Company, Limited Partnership, dated March
7, 1990 (Filed as Exhibit 28 to Form 10-Q of TEPPCO
Partners, L.P. (Commission File No. 1-10403) for the
quarter ended March 31, 1990 and incorporated herein
by reference).
10.2 Assignment and Assumption Agreement, dated March 24,
1988, between Texas Eastern Transmission Corporation
and the Company (Filed as Exhibit 10.8 to the
Registration Statement of TEPPCO Partners, L.P.
(Commission File No. 33-32203) and incorporated
herein by reference).
10.3 Texas Eastern Products Pipeline Company 1997
Employee Incentive Compensation Plan executed on
July 14, 1997 (Filed as Exhibit 10 to Form 10-Q of
TEPPCO Partners, L.P. (Commission File No. 1-10403)
for the quarter ended September 30, 1997 and
incorporated herein by reference).
10.4 Agreement Regarding Environmental Indemnities and
Certain Assets (Filed as Exhibit 10.5 to Form 10-K
of TEPPCO Partners, L.P. (Commission File No.
1-10403) for the year ended December 31, 1990 and
incorporated herein by reference).
10.5 Texas Eastern Products Pipeline Company Management
Incentive Compensation Plan executed on January 30,
1992 (Filed as Exhibit 10 to Form 10-Q of TEPPCO
Partners, L.P. (Commission File No. 1-10403) for the
quarter ended March 31, 1992 and incorporated herein
by reference).
10.6 Texas Eastern Products Pipeline Company Long-Term
Incentive Compensation Plan executed on October 31,
1990 (Filed as Exhibit 10.9 to Form 10-K of TEPPCO
Partners, L.P. (Commission File No. 1-10403) for the
year ended December 31, 1990 and incorporated herein
by reference).
10.7 Form of Amendment to Texas Eastern Products Pipeline
Company Long-Term Incentive Compensation Plan (Filed
as Exhibit 10.7 to Form 10-K of TEPPCO Partners,
L.P. (Commission File No. 1-10403) for the year
ended December 31, 1995 and incorporated herein by
reference).
15
<PAGE> 16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (CONTINUED).
10.8 Employees' Savings Plan of Panhandle Eastern
Corporation and Participating Affiliates (Effective
January 1, 1991) (Filed as Exhibit 10.10 to Form
10-K of TEPPCO Partners, L.P. (Commission File No.
1-10403) for the year ended December 31, 1990 and
incorporated herein by reference).
10.9 Retirement Income Plan of Panhandle Eastern
Corporation and Participating Affiliates (Effective
January 1, 1991) (Filed as Exhibit 10.11 to Form
10-K of TEPPCO Partners, L.P. (Commission File No.
1-10403) for the year ended December 31, 1990 and
incorporated herein by reference).
10.10 Panhandle Eastern Corporation -- Executive Benefit
Equalization Plan as amended November 29, 1989;
effective January 1, 1990 (Filed as Exhibit 10.05 to
Form 10-K of Panhandle Eastern Corporation
(Commission File No. 1-8157) for the year ended
December 31, 1989 and incorporated herein by
reference).
10.11 Employment Agreement with William L. Thacker, Jr.
(Filed as Exhibit 10 to Form 10-Q of TEPPCO
Partners, L.P. (Commission File No. 1-10403) for the
quarter ended September 30, 1992 and incorporated
herein by reference).
10.12 Texas Eastern Products Pipeline Company 1994 Long
Term Incentive Plan executed on March 8, 1994 (Filed
as Exhibit 10.1 to Form 10-Q of TEPPCO Partners,
L.P. (Commission File No. 1-10403) for the quarter
ended March 31, 1994 and incorporated herein by
reference).
10.13 Panhandle Eastern Corporation Key Executive Deferred
Compensation Plan established effective January 1,
1994 (Filed as Exhibit 10.2 to Form 10-Q of TEPPCO
Partners, L.P. (Commission File No. 1-10403) for the
quarter ended March 31, 1994 and incorporated herein
by reference).
10.14* Asset Purchase Agreement between Duke Energy Field
Services, Inc. and TEPPCO Colorado, LLC, dated March
31, 1998.
10.15* Credit Agreement between TEPPCO Colorado, LLC,
SunTrust Bank, Atlanta, and Certain Lenders, dated
April 21, 1998.
22.1 Subsidiaries of the Partnership (Filed as Exhibit
22.1 to the Registration Statement of TEPPCO
Partners, L.P. (Commission File No. 33-32203) and
incorporated herein by reference).
27* Financial Data Schedules as of and for the three
months ended March 31, 1998.
---------------------
* Filed herewith.
(b) Reports on Form 8-K filed during the quarter ended March 31, 1998:
TEPPCO Partners, L.P. filed a report on Form 8-K on January 16,
1998 under Item 5, Other Events.
Items 1, 2, 3, 4 and 5 of Part II were not applicable and have been omitted.
16
<PAGE> 17
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrants have duly caused this report to be signed on its behalf by the
undersigned duly authorized officer and principal financial officer.
TEPPCO Partners, L.P.
(Registrant)
By: Texas Eastern Products Pipeline Company,
General Partner
CHARLES H. LEONARD
--------------------------------------------
Charles H. Leonard
Senior Vice President, Chief Financial Officer
and Treasurer
TE Products Pipeline Company, Limited Partnership
(Registrant)
By: Texas Eastern Products Pipeline Company,
General Partner
CHARLES H. LEONARD
--------------------------------------------
Charles H. Leonard
Senior Vice President, Chief Financial Officer
and Treasurer
Date: May 11, 1998
17
<PAGE> 18
INDEX TO EXHIBITS
Exhibit
Number Description
3.1 Certificate of Limited Partnership of the
Partnership (Filed as Exhibit 3.2 to the
Registration Statement of TEPPCO Partners, L.P.
(Commission File No. 33-32203) and incorporated
herein by reference).
3.2* Certificate of Formation of TEPPCO Colorado, LLC.
4.1 Form of Certificate representing Units (Filed as
Exhibit 4.1 to the Registration Statement of TEPPCO
Partners, L.P. (Commission File No. 33-32203) and
incorporated herein by reference).
4.2 Agreement of Limited Partnership of TEPPCO Partners,
L.P., dated March 7, 1990 (Filed as Exhibit 4(a) to
Form 10-Q of TEPPCO Partners, L.P. (Commission File
No. 1-10403) for the quarter ended March 31, 1990
and incorporated herein by reference).
4.3 Form of Indenture between TE Products Pipeline
Company, Limited Partnership and The Bank of New
York, as Trustee, dated as of January 27, 1998
(Filed as Exhibit 4.3 to TE Products Pipeline
Company, Limited Partnership's Registration
Statement on Form S-3 (Commission File No.
333-38473) and incorporated herein by reference).
10.1 Agreement of Limited Partnership of TE Products
Pipeline Company, Limited Partnership, dated March
7, 1990 (Filed as Exhibit 28 to Form 10-Q of TEPPCO
Partners, L.P. (Commission File No. 1-10403) for the
quarter ended March 31, 1990 and incorporated herein
by reference).
10.2 Assignment and Assumption Agreement, dated March 24,
1988, between Texas Eastern Transmission Corporation
and the Company (Filed as Exhibit 10.8 to the
Registration Statement of TEPPCO Partners, L.P.
(Commission File No. 33-32203) and incorporated
herein by reference).
10.3 Texas Eastern Products Pipeline Company 1997
Employee Incentive Compensation Plan executed on
July 14, 1997 (Filed as Exhibit 10 to Form 10-Q of
TEPPCO Partners, L.P. (Commission File No. 1-10403)
for the quarter ended September 30, 1997 and
incorporated herein by reference).
10.4 Agreement Regarding Environmental Indemnities and
Certain Assets (Filed as Exhibit 10.5 to Form 10-K
of TEPPCO Partners, L.P. (Commission File No.
1-10403) for the year ended December 31, 1990 and
incorporated herein by reference).
10.5 Texas Eastern Products Pipeline Company Management
Incentive Compensation Plan executed on January 30,
1992 (Filed as Exhibit 10 to Form 10-Q of TEPPCO
Partners, L.P. (Commission File No. 1-10403) for the
quarter ended March 31, 1992 and incorporated herein
by reference).
10.6 Texas Eastern Products Pipeline Company Long-Term
Incentive Compensation Plan executed on October 31,
1990 (Filed as Exhibit 10.9 to Form 10-K of TEPPCO
Partners, L.P. (Commission File No. 1-10403) for the
year ended December 31, 1990 and incorporated herein
by reference).
10.7 Form of Amendment to Texas Eastern Products Pipeline
Company Long-Term Incentive Compensation Plan (Filed
as Exhibit 10.7 to Form 10-K of TEPPCO Partners,
L.P. (Commission File No. 1-10403) for the year
ended December 31, 1995 and incorporated herein by
reference).
<PAGE> 19
10.8 Employees' Savings Plan of Panhandle Eastern
Corporation and Participating Affiliates (Effective
January 1, 1991) (Filed as Exhibit 10.10 to Form
10-K of TEPPCO Partners, L.P. (Commission File No.
1-10403) for the year ended December 31, 1990 and
incorporated herein by reference).
10.9 Retirement Income Plan of Panhandle Eastern
Corporation and Participating Affiliates (Effective
January 1, 1991) (Filed as Exhibit 10.11 to Form
10-K of TEPPCO Partners, L.P. (Commission File No.
1-10403) for the year ended December 31, 1990 and
incorporated herein by reference).
10.10 Panhandle Eastern Corporation -- Executive Benefit
Equalization Plan as amended November 29, 1989;
effective January 1, 1990 (Filed as Exhibit 10.05 to
Form 10-K of Panhandle Eastern Corporation
(Commission File No. 1-8157) for the year ended
December 31, 1989 and incorporated herein by
reference).
10.11 Employment Agreement with William L. Thacker, Jr.
(Filed as Exhibit 10 to Form 10-Q of TEPPCO
Partners, L.P. (Commission File No. 1-10403) for the
quarter ended September 30, 1992 and incorporated
herein by reference).
10.12 Texas Eastern Products Pipeline Company 1994 Long
Term Incentive Plan executed on March 8, 1994 (Filed
as Exhibit 10.1 to Form 10-Q of TEPPCO Partners,
L.P. (Commission File No. 1-10403) for the quarter
ended March 31, 1994 and incorporated herein by
reference).
10.13 Panhandle Eastern Corporation Key Executive Deferred
Compensation Plan established effective January 1,
1994 (Filed as Exhibit 10.2 to Form 10-Q of TEPPCO
Partners, L.P. (Commission File No. 1-10403) for the
quarter ended March 31, 1994 and incorporated herein
by reference).
10.14* Asset Purchase Agreement between Duke Energy Field
Services, Inc. and TEPPCO Colorado, LLC, dated March
31, 1998.
10.15* Credit Agreement between TEPPCO Colorado, LLC,
SunTrust Bank, Atlanta, and Certain Lenders, dated
April 21, 1998.
22.1 Subsidiaries of the Partnership (Filed as Exhibit
22.1 to the Registration Statement of TEPPCO
Partners, L.P. (Commission File No. 33-32203) and
incorporated herein by reference).
27* Financial Data Schedules as of and for the three
months ended March 31, 1998.
---------------------
* Filed herewith.
<PAGE> 1
EXHIBIT 3.2
CERTIFICATE OF FORMATION
OF
TEPPCO COLORADO, LLC
This Certificate of Formation of TEPPCO Colorado, LLC (the
"LLC"), dated March 26, 1997, is being duly executed and filed by Darice Angel,
as an authorized person, to form a limited liability company under the Delaware
Limited Liability Company Act (6 Del.C. 18-101, et seq.).
FIRST. The name of the limited liability company formed
hereby is TEPPCO Colorado, LLC.
SECOND. The address of the registered office of the LLC in
the State of Delaware is c/o The Corporation Trust Company, Corporation Trust
Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801.
THIRD. The name and address of the registered agent for
service of process on the LLC in the State of Delaware is c/o The Corporation
Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New
Castle County, Delaware 19801.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate of Formation as of the date first above written.
/s/ DARICE ANGEL
----------------------------------------
Name: Darice Angel
Authorized Person
<PAGE> 2
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
------------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF LIMITED
LIABILITY COMPANY OF "TEPPCO COLORADO, LLC", FILED IN THIS OFFICE ON THE
TWENTY-SIXTH DAY OF MARCH, A.D. 1998, AT 2:30 O'CLOCK P.M.
[STATE SEAL]
[SEAL] /s/ EDWARD J. FREEL
-----------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION:
DATE: 3-26-98
<PAGE> 1
EXHIBIT 10.14
ASSET PURCHASE AGREEMENT
BETWEEN
DUKE ENERGY FIELD SERVICES, INC.
AND
TEPPCO COLORADO, LLC
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Article I
Definitions and Construction......................................... 1
1.1 DEFINED TERMS................................................................................. 1
1.2 OTHER DEFINITIONAL PROVISIONS................................................................. 6
1.3 HEADINGS...................................................................................... 6
1.4 OTHER TERMS................................................................................... 6
Article II
Purchase and Sale of Assets......................................... 7
2.1 PURCHASE AND SALE OF ASSETS................................................................... 7
2.2 THERE IS NO SECTION 2.2 TO THIS AGREEMENT..................................................... 7
2.3 PURCHASE PRICE................................................................................ 7
2.4 PRORATIONS OF EXPENSES AND CERTAIN PROPERTY TAXES............................................. 7
2.5 TAXES AND RECORDING FEES...................................................................... 8
2.6 ALLOCATION OF PURCHASE PRICE.................................................................. 8
2.7 TITLE AND RISK OF LOSS........................................................................ 9
Article III
Retained Obligations............................................. 9
Article IV
Closing Date and Effective Time....................................... 9
Article V
Representations and Warranties of Seller................................... 10
5.1 CORPORATE MATTERS............................................................................. 10
5.2 VALIDITY OF AGREEMENT; NO CONFLICT............................................................ 10
5.3 GOVERNMENTAL CONSENTS, APPROVALS AND AUTHORIZATIONS........................................... 11
5.4 TITLE TO AND CONDITION OF PROPERTIES.......................................................... 11
5.5 CONTRACTS AND COMMITMENTS..................................................................... 12
5.6 OPERATING DATA AND INFORMATION................................................................ 14
5.7 TAXES......................................................................................... 14
5.8 NO VIOLATIONS OR LITIGATION................................................................... 14
5.9 NO ADVERSE CHANGES OR EVENTS.................................................................. 14
5.10 ENVIRONMENTAL MATTERS......................................................................... 15
5.11 PRODUCT LIABILITY............................................................................. 16
5.12 NO UNTRUE STATEMENTS.......................................................................... 16
5.13 SELLER'S EMPLOYEE BENEFIT LIABILITIES......................................................... 16
5.14 FINDER'S FEES................................................................................. 16
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
Article VI
Representations and Warranties of Buyer................................... 17
6.1 CORPORATE MATTERS............................................................................. 17
6.2 VALIDITY OF AGREEMENT; NO CONFLICT............................................................ 17
6.3 FINDER'S FEE.................................................................................. 17
Article VII
Conditions Precedent............................................. 17
7.1 CONDITIONS TO OBLIGATIONS OF BUYER AT CLOSING................................................. 17
7.2 CONDITIONS TO OBLIGATIONS OF SELLER AT CLOSING................................................ 18
Article VIII
HSR FILING; Access to Information by Buyer; Matters Pending Closing..................... 20
8.1 HSR Filing.................................................................................... 20
8.2 PRIOR TO CLOSING.............................................................................. 20
8.3 PUBLIC ANNOUNCEMENTS.......................................................................... 20
8.4 ACTIONS PENDING CLOSING....................................................................... 20
Article IX
Noncompetition Agreement........................................... 22
9.1 NONCOMPETITION COVENANT....................................................................... 22
9.2 REASONABLENESS OF COVENANT.................................................................... 22
9.3 INJUNCTIVE RELIEF............................................................................. 22
Article X
Additional Agreements............................................ 22
10.1 DELIVERY OF CORPORATE DOCUMENTS............................................................... 22
10.2 FURTHER ASSURANCES............................................................................ 22
10.3 COOPERATION AFTER CLOSING..................................................................... 23
10.4 CONTINUATION OF OPERATIONS; RIGHT OF FIRST REFUSAL............................................ 24
10.5 Additional Undertakings....................................................................... 25
10.6 Identification of Buyer's Property............................................................ 25
10.7 Interim Operations............................................................................ 25
Article XI
Indemnification............................................... 25
11.1 SELLER'S INDEMNITY............................................................................ 25
11.2 ENVIRONMENTAL INDEMNIFICATION................................................................. 25
11.3 BUYER'S INDEMNITY............................................................................. 26
11.4 PROCEDURE..................................................................................... 26
11.5 INDEMNIFICATION THRESHOLD..................................................................... 28
11.6 EXPRESS NEGLIGENCE............................................................................ 28
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C> <C>
Article XII
Termination................................................. 28
12.1 Efforts to Satisfy Conditions................................................................. 28
12.2 Termination................................................................................... 28
12.3 LIABILITY UPON TERMINATION.................................................................... 28
Article XIII
NATURE OF STATEMENTS AND SURVIVAL
OF COVENANTS, REPRESENTATIONS,
WARRANTIES AND AGREEMENTS....................................................................................... 29
Article XIV
Expenses.................................................... 29
Article XV
Disputes ................................................... 29
15.1 Negotiation................................................................................... 29
15.2 Failure to Resolve............................................................................ 30
15.3 Arbitration................................................................................... 30
15.4 Recovery of Costs and Attorneys' Fees......................................................... 31
15.5 Choice of Forum............................................................................... 31
15.6 Jury Waivers.................................................................................. 31
15.7 Limitation of Damages......................................................................... 31
15.8 Governing Law................................................................................. 32
15.9 .............................................................................................. 32
Article XVI
General Provisions.......................................... 32
16.1 FURTHER ASSURANCES............................................................................ 32
16.2 NOTICES....................................................................................... 32
16.3 GOVERNING LAW................................................................................. 33
16.4 ENTIRE AGREEMENT.............................................................................. 33
16.5 ASSIGNMENT.................................................................................... 34
16.6 SUCCESSORS.................................................................................... 34
16.7 AMENDMENTS; WAIVER............................................................................ 34
16.8 COUNTERPARTS.................................................................................. 34
16.9 WAIVER........................................................................................ 34
16.10 SEVERABILITY.................................................................................. 34
16.11 NO THIRD PARTY BENEFICIARIES.................................................................. 34
16.12 NEGOTIATED TRANSACTION........................................................................ 34
</TABLE>
-iii-
<PAGE> 5
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") entered into and
effective as of March 31, 1998, by and between Duke Energy Field Services, Inc.,
a Colorado corporation ("Seller") and TEPPCO Colorado, LLC, a Delaware limited
liability company ("Buyer").
W I T N E S S E T H:
WHEREAS, Seller is engaged in the fractionation of natural gas liquids
through the operation of certain fractionation assets located in Weld County,
Colorado as hereinafter more specifically described; and
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase
from Seller, the Transferred Assets (as herein defined) upon the terms and
subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
promises and obligations contained herein, and intending to be legally bound,
Buyer and Seller agree as follows:
ARTICLE I
DEFINITIONS AND CONSTRUCTION
1.1 DEFINED TERMS. The capitalized terms used in this Agreement
shall have the meanings ascribed to them as follows:
"Affiliate" means, when used with respect to a specified
Person, any other Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the
specified Person. For purposes of this definition "control", when used
with respect to any specified Person, means the power to direct the
management and policies of the Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have the meanings
correlative to the foregoing. Notwithstanding the foregoing, the term
"Affiliate" when applied to the Seller shall not include Duke Energy
Trading and Marketing, L.L.C., a Delaware limited liability company
("DETM"), the Buyer, Texas Eastern Products Pipeline Company, a
Delaware corporation ("TEPPCO"), TEPPCO Partners L.P., a Delaware
limited partnership (the "Partnership") or any entities owned, directly
or indirectly by the Partnership (collectively, with TEPPCO and the
Partnership, but excluding DETM, the "TEPPCO Entities); and as applied
to the Buyer, shall not include the Seller, Duke Energy Corporation, a
Delaware corporation, or any entities owned, directly or indirectly by
Duke Energy Corporation other than the TEPPCO Entities;
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"Business Day" means any day on which federal commercial banks
are open for business for the purpose of sending and receiving wire
transfers in Houston, Texas;
"Buyer" shall have the meaning given to that term in the
preamble and any successor or assign permitted by this Agreement;
"Buyer's Damages" shall have the meaning given such term in
Section 11.1 hereof;
"Buyer Indemnitees" shall have the meaning given such term in
Section 11.1 hereof;
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, 42 U.S.C. Section 9601 et
seq.;
"Claim" means any demand, demand letter, claim or notice of
noncompliance or violation (written or oral) or Proceeding;
"Claim Notice" shall have the meaning given such term in
Section 11.4 hereof;
"Closing" shall have the meaning given to that term in Article
IV;
"Closing Date" shall have the meaning given to that term in
Article IV;
"Code" means the Internal Revenue Code of 1986, as amended, or
any amending or superseding tax laws of the United States of America;
"Conveyance Documents" means all bills of sale, assignments
and other good and sufficient instruments of transfer, conveyance and
assignment, to effect or evidence the sale, conveyance, assignment,
transfer and delivery of the Transferred Assets to Buyer and to vest in
Buyer title to the Transferred Assets in accordance with this
Agreement;
"Dedicated Lands" shall have the meaning given such term in
the Frac Agreement.
"Disclosure Letter" shall mean the disclosure schedule of even
date with this Agreement prepared and delivered to Buyer by Seller.
"Effective Time" shall mean 11:59 p.m. (Denver, Colorado Time)
on March 31, 1998.
"Environmental Laws" shall mean all federal, state, or
municipal laws, rules, regulations, statutes, ordinances, or orders of
any Governmental Authority relating to (a) the control of any potential
pollutant or protection of the air, water, or land, (b) solid, gaseous
or liquid waste generation, handling, treatment,
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storage, disposal or transportation and (c) exposure to hazardous,
toxic or other substances alleged to be harmful. "Environmental Laws"
shall include, but not be limited to, the Clean Air Act, 42 U.S.C.
Section 7401 et seq., the Clean Water Act, 33 U.S.C. Section 1251 et
seq., RCRA, the Superfund Amendments and Reauthorization Act, 42 U.S.C.
Section 11001, et seq., the Toxic Substances Control Act, 15 U.S.C.
Section 2601 et seq., the Water Pollution Control Act, 33 U.S.C.
Section 1251 et seq., the Safe Drinking Water Act, 42 U.S.C. Section
300f et seq. and CERCLA. The term "Environmental Laws" shall also
include all state, local and municipal laws, rules, regulations,
statutes, ordinances and orders dealing with the same subject matter or
promulgated by any governmental or quasi-governmental agency thereunder
or to carry out the purposes of any federal, state, local and municipal
law;
"Environmental Liabilities" shall mean any and all
liabilities, responsibilities, claims, suits, losses, costs (including
remedial, removal, response, abatement, clean-up, investigative, or
monitoring costs and any other related costs and expenses), other
causes of action recognized now or at any later time, damages,
settlements, expenses, charges, assessments, liens, penalties, fines,
pre-judgment and post-judgment interest, attorneys' fees and other
legal fees (a) pursuant to any agreement, order, notice, or
responsibility, directive (including directives embodied in
Environmental Laws), injunction, judgment, or similar documents
(including settlements), or (b) pursuant to any claim by a Governmental
Authority or other Person for personal injury, property damage, damage
to natural resources, remediation, or payment or reimbursement of
response costs incurred or expended by the Governmental Authority or
Person pursuant to common law or statute;
"Environmental Losses" shall have the meaning given to that
term in Section 11.2;
"Environmental Permit" shall mean any permit, license,
approval, registration, identification number or other authorization
with respect to the ownership or operation of the Transferred Assets or
the Plants under any applicable law, regulation or other requirement of
the United States or any other country or of any state, municipality or
other subdivision thereof relating to the control of any pollutant or
protection of health or the environment, including laws, regulations or
other requirements relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants or hazardous or toxic
materials or wastes into ambient air, surface water, groundwater or
land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling
of chemical substances, pollutants, contaminants or hazardous or toxic
materials or wastes;
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended;
"Frac Agreement" shall mean the Fractionation Agreement in the
form attached hereto as Exhibit A.
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"Governmental Authority" means any entity of or pertaining to
government, including any federal, state, local, other governmental or
administrative authority, agency, court, tribunal, arbitrator,
commission, board or bureau;
"Hazardous Materials" shall mean any (a) petroleum or
petroleum products, (b) hazardous substances as defined by Section
101(14) of CERCLA and (c) any other chemical, substance or waste that
is regulated by any Governmental Authority under any Environmental Law;
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvement Act of 1976.
"Indemnified Party" shall have the meaning given to that term
in Section 11.4;
"Indemnifying Party" shall have the meaning given that term in
Section 11.4;
"Intellectual Property" means any and all technical
information, know-how, trade secrets, shop rights, designs, plans,
manuals, computer software (to the extent transferrable at no cost to
Seller), specifications and other proprietary and nonproprietary
technology, data and information used in connection with the operation
of the Transferred Assets;
"IRS" means the Internal Revenue Service of the United States
of America;
"Lease Agreement" means that certain Lease Agreement between
Buyer and Seller in the form attached hereto as Exhibit B, which
relates to the Greeley fractionation facility;
"Lien" means, except for the Permitted Encumbrances, any lien,
mortgage, pledge, claim, charge, security interest or other
encumbrance, option, defect or other rights of any third person of any
nature whatsoever;
"Losses" means any and all damages, losses, liabilities,
demands, payments, obligations, penalties, assessments, costs,
disbursements or expenses (including interest, awards, judgments,
settlements, fines, costs of remediation, diminutions in value, fees,
disbursements and expenses of attorneys, accountants and other
professional advisors and of expert witnesses and costs of
investigation and preparation of any kind or nature whatsoever);
"Material Adverse Effect" shall mean a single event,
occurrence or fact that, alone or together with all other events,
occurrences and facts, could reasonably be expected to result in a
material loss to or material diminution in value of the Transferred
Assets to a purchaser thereof or prohibit or delay the consummation of
the transactions contemplated hereby; provided that the term
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"Material Adverse Effect" shall not include changes in general
economic, industry or market conditions, or changes in law,
Environmental Laws or regulatory policy.
"O&M Agreement" shall mean the Operation and Maintenance
Agreement in the form attached hereto as Exhibit C.
"Offer Notice" shall have the meaning given such term in
Section 10.4.
"Party" means Seller or Buyer; and "Parties" means Seller and
Buyer;
"Permit" means any license, permit or authority granted by any
Governmental Authority;
"Permitted Encumbrances" means (a) Liens for current taxes and
assessments not yet due or which Seller is contesting in good faith,
(b) inchoate mechanic and materialmen liens for construction in
progress, (c) inchoate workmen, repairmen, warehousemen, customer,
employee and carriers liens arising in the ordinary course of business,
(d) Liens created by Buyer and (e) Liens and imperfections of title
that, singly or in the aggregate, would not have a Material Adverse
Effect;
"Person" means any individual, corporation, partnership, joint
venture, association, limited liability company, joint stock company,
trust, unincorporated organization, Governmental Authority or
government (or agency or political subdivision thereof);
"Plants" means Seller's Greeley Natural Gas Processing Plant
and Spindle Natural Gas Processing Plant, including all improvements
and fixtures, located in the SW1/4 of Section 25, T5N, R66W and the
SW1/4 of Section 34, T2N, R67W in Weld County, Colorado, respectively,
but excluding the Transferred Assets;
"Proceeding" means any action, suit, claim, investigation,
review or other judicial or administrative proceeding, at law or in
equity, before or by any Governmental Authority;
"Producer Contracts" shall mean those contracts listed in
Section 5.5(b) of the Disclosure Letter.
"Project Agreements" shall have the meaning given such term in
Section 10.4.
"Purchase Document" means any of this Agreement, the Lease
Agreement, the Sublease Agreement the O&M Agreement and the Frac
Agreement, and "Purchase Documents" means all of the foregoing
agreements.
"Purchase Price" shall have the meaning given to that term in
Section 2.3;
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"RCRA" means the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. Section 6901 et seq.;
"Records" means all agreements, documents, books, records and
files relating to the Transferred Assets, including without limitation,
accounting records, operating records, charts, maps, surveys, drawings,
prints and any physical embodiment of the Intellectual Property,
however, Records shall not include the corporate, financial, tax and
legal files and records, and gas purchase, processing and/or gathering
agreements of Seller;
"Retained Liabilities" shall have the meaning given to that
term in Article III;
"Seller" shall have the meaning given to that term in the
preamble;
"Seller's Damages" shall have the meaning given such term in
Section 11.3 hereof;
"Seller Indemnitees" shall have the meaning given such term in
Section 11.3 hereof;
"Sublease Agreement" means that certain Sublease Agreement
between Buyer and Seller in the form attached hereto as Exhibit D,
which relates to the Spindle fractionation facility;
"Tax" or "Taxes" means any United States or foreign federal,
state or local income tax, ad valorem tax, excise tax, sales tax, use
tax, franchise tax, real or personal property tax, transfer tax, gross
receipts tax or other tax, assessment, duty, fee, levy or other
governmental charge, together with and including, any and all interest,
fines, penalties, assessments, and additions to Tax resulting from,
relating to, or incurred in connection with any of those or any contest
or dispute thereof;
"Tax Consideration" shall have the meaning given to that term
in Section 2.6;
"Tax Return" means any report, statement, form, return or
other document or information required to be supplied to a taxing
authority in connection with Taxes; and
"Transfer Documents" shall have the meaning given to that term
in Section 16.4; and
"Transferred Assets" shall mean all of the equipment and other
tangible assets which are located within the areas outlined in red and
the equipment listed in red print on the attached Exhibits E and F;.
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1.2 OTHER DEFINITIONAL PROVISIONS.
(a) As used in this Agreement, unless expressly stated
otherwise, references to (a) "including" mean "including, without limitation",
and the words "hereof", "herein", and "hereunder", and similar words, refer to
this Agreement as a whole and not to any particular Article, provision, section
or paragraph of this Agreement and (b) "or" mean "either or both". Unless
otherwise specified, all references in this Agreement to Sections, paragraphs,
Exhibits or Schedules are deemed references to the corresponding Sections,
paragraphs, Exhibits or Schedules in this Agreement.
(b) Whenever a statement is qualified by the term "knowledge,"
"best knowledge" or similar term or phrase, it is intended to indicate actual
knowledge on the part of a Person or its officers, directors, plant managers and
department heads.
1.3 HEADINGS. The headings of the Sections of this Agreement and
of the Schedules and Exhibits are included for convenience only and shall not be
deemed to constitute part of this Agreement or to affect the construction or
interpretation hereof or thereof.
1.4 OTHER TERMS. Other terms may be defined elsewhere in the text
of this Agreement and shall have the meaning indicated throughout this
Agreement.
ARTICLE II
PURCHASE AND SALE OF ASSETS
2.1 PURCHASE AND SALE OF ASSETS.
(a) At the Closing, but effective for all purposes as of the
Effective Time, Seller shall sell, transfer, assign, convey, set over, grant,
bargain and deliver to Buyer free and clear of all Liens (other than Permitted
Encumbrances), and Buyer shall purchase and acquire from Seller, all right,
title and interest in and to the Transferred Assets.
(b) Seller shall use its best efforts to obtain the consents
of third parties as are necessary for the assignment of the Transferred Assets.
To the extent that any of the Transferred Assets are not assignable by the terms
thereof or consents to the assignment thereof cannot be obtained, the
Transferred Assets shall be held by Seller in trust for Buyer and shall be
performed by Buyer in the name of Seller and all benefits and obligations
derived thereunder shall be for the account of Buyer, provided that where
entitlement of Buyer to those Transferred Assets hereunder is not recognized by
any third party, Seller shall, at the request of Buyer, enforce in a reasonable
manner, at the cost of Seller, any and all rights of Seller against the third
party.
2.2 THERE IS NO SECTION 2.2 TO THIS AGREEMENT.
2.3 PURCHASE PRICE. The purchase price for the Transferred Assets
shall be $40,000,000 (Forty Million Dollars) (the "Purchase Price"), payable as
set forth below by check or wire transfer in immediately available funds to an
account or accounts designated in writing by Seller to Buyer prior to the
respective date of payment.
(a) $2,000,000 (Two Million Dollars) (the "Initial Payment")
shall be paid to Seller simultaneously with the execution of this
Agreement. The Initial
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Payment will be promptly returned by Seller to Buyer by wire transfer
in immediately available funds to an account or accounts designated by
Buyer to Seller, together with interest thereon at a per annum rate of
5.75% for the period beginning on the date the Initial Payment is made
by Buyer to Seller and ending on the date such amount is returned to
Buyer by Seller, if and only if, one or more of the conditions set
forth in Section 7.1 is not satisfied and this Agreement is terminated.
(b) $38,000,000 (Thirty-Eight Million Dollars) shall be
payable at Closing, together with interest thereon at a per annum rate
of 5.75% for the period beginning on the date on which the Effective
Time occurs and ending on the Closing Date.
2.4 PRORATIONS OF EXPENSES AND CERTAIN PROPERTY TAXES.
(a) Seller warrants to Buyer that the Transferred Assets are
not, and on the Effective Time will not be, subject to or liable for
any special assessments or similar types of impositions. Any general
property Tax assessed against or pertaining to the Transferred Assets
for the taxable period that includes the Effective Time shall be
prorated between Buyer and Seller as of the Effective Time. For
purposes of this proration, such taxes for 1998 shall be assumed to be
$45,000.
(b) Except as otherwise provided in this Agreement, Seller and
Buyer agree that amounts payable with respect to utility charges and
other items of expense attributable to the operation of the Transferred
Assets shall be prorated as of the Effective Time to the extent the
charges and expenses cannot be identified as to the Party who received
the benefits to which the charges and expenses relate. To the extent
the amounts are estimated at Closing and the prorations are inaccurate,
Seller and Buyer agree to make such payment to the other after the
amounts are correctly computed, that is necessary to allocate the
charges properly between Seller and Buyer as of the Effective Time.
2.5 TAXES AND RECORDING FEES.
(a) Seller shall be responsible for all transfer, sales, use,
excise, stamp and similar Taxes arising out of or with respect to the
transactions contemplated by this Agreement. Seller and Buyer each
agree (i) to report the federal, state and local income Tax and other
Tax consequences of the transactions contemplated herein, and in
particular, to report information required by Code Section 1060(b), in
a manner consistent with the allocation or the Purchase Price in
accordance with Section 2.6 and (ii) that neither Party will take any
position inconsistent therewith upon examination of any Tax Return, in
any refund claim, in any litigation, investigation, or otherwise.
(b) Buyer and Seller acknowledge and agree that the Purchase
Price includes and is inclusive of any and all sales, use, transfer or
other similar Taxes imposed as a result of the consummation of the
transactions contemplated by
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this Agreement, and Seller hereby agrees to indemnify Buyer against,
and agrees to protect, save and hold Buyer harmless from, any loss,
liability, obligation or claim (whether or not ultimately successful)
for sales, use, transfer or other similar Taxes (and any interest,
penalties, additions to Tax and fines thereon or related thereto)
imposed as a result of the consummation of the transactions
contemplated by this Agreement, but not including any income, franchise
or similar tax of Buyer.
(c) Buyer shall pay any and all recording, filing or other
fees relating to the conveyance or transfer of the Transferred Assets
from Seller to Buyer.
2.6 ALLOCATION OF PURCHASE PRICE. For federal income Tax purposes
(including Buyer's and Seller's compliance with the reporting requirements of
Section 1060 of the Code), each of Seller and Buyer shall agree within thirty
(30) calendar days following the Closing as to the allocation of the
consideration (including the Purchase Price) deemed to have been paid for
federal income Tax purposes by Buyer to Seller pursuant to this Agreement (the
"Tax Consideration") among the Transferred Assets (the "Allocation"), which
allocation shall be final and binding on Seller and Buyer. Seller and Buyer
agree to cooperate in good faith with each other in connection with the
preparation and filing of any information required to be furnished to the IRS
under Section 1060 of the Code (including Section 1060(b) and (e) of the Code)
and any applicable regulations thereunder. Without limiting the generality of
the preceding sentence, Buyer and Seller agree to (i) report the allocations to
the IRS on Form 8594 and, if required, supplemental Forms 8594, in accordance
with the instructions to Form 8594 and the provisions of Section 1060 of the
Code and the applicable regulations thereunder and (ii) coordinate their
respective preparation and filing of each the Form 8594 and any other forms or
information statements or schedules required to be filed under Section 1060 of
the Code and the applicable regulations thereunder so that the allocations and
information reflected on the forms, statements and schedules shall be
consistent.
2.7 TITLE AND RISK OF LOSS. Title and risk of loss with respect to
the Transferred Assets shall pass to Buyer at the Effective Time; provided,
however, that should the Closing not occur, title and risk of loss shall be
deemed to remain in Seller for all purposes and for all periods of time.
ARTICLE III
RETAINED OBLIGATIONS
LIABILITIES NOT ASSUMED BY BUYER. Seller shall pay and discharge in due
course all of its liabilities, debts and obligations, whether known or unknown,
now existing or hereafter arising, contingent or liquidated as the same relate
to the Transferred Assets for all periods of time prior to the Effective Time
(the "Retained Liabilities"), and neither Buyer nor any of its Affiliates shall
assume, or in any way be liable or responsible for, any of the Retained
Liabilities. Without limiting the generality of the foregoing, the Retained
Liabilities shall include, without limitation, the following:
(a) any liability or obligation of Seller arising out of or in
connection with the negotiation and preparation of this Agreement and
the consummation and performance of the transactions contemplated
hereby, whether or not the
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transactions are consummated, including any Tax liability so arising
(excluding income, franchise or similar Taxes of Buyer);
(b) any liability or obligation for any and all Taxes of, or
pertaining or attributable to, (i) Seller or (ii) the ownership or
operation of the Transferred Assets for any period or portion thereof
that ends on or before the Effective Time (including any and all Taxes
described in clauses (i) and (ii) of this paragraph (b) for which
liability is or may be sought to be imposed on Buyer under any
successor liability, transferee liability or similar provision of any
applicable federal, foreign, state or local law (including Section
111.020 of the Texas Tax Code));
(c) any liability or obligation relating to any
indemnification or warranty obligation of Seller created by it on or
before the Effective Time and any obligation for product liability for
products manufactured or produced or for services rendered by Seller,
in whole or in part, on or prior to the Effective Time;
(d) any liability to which any of the Parties may become
subject as a result of any failure to effect the transactions
contemplated by this Agreement in compliance with the bulk sales
provisions of the Uniform Commercial Code as in effect in any state or
any similar statute as enacted in any jurisdiction; and
(e) all other liabilities and obligations of Seller to any
Person related to the Transferred Assets.
ARTICLE IV
CLOSING DATE AND EFFECTIVE TIME
The closing of the purchase and sale of the Transferred Assets (the
"Closing") shall take place at the offices of Fulbright & Jaworski L.L.P., 1301
McKinney Street, Suite 5100, Houston, Texas, or at such other place as the
Parties may mutually agree to in writing. The Closing shall take place at 10:00
a.m. on the latter of (i) five (5) Business Days after the date Seller and Buyer
obtain all necessary regulatory approvals, if any, required by each of them
respectively, pursuant to this Agreement or (ii) thirty (30) calendar days after
the date hereof. The date of the Closing is referred to herein as the "Closing
Date". Regardless of the actual Closing Date, the transactions contemplated by
this Agreement shall be effective as of the Effective Time.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as set forth in the Disclosure Letter (whereunder disclosure
under any Section thereof shall constitute disclosure under all other Sections
thereof provided appropriate cross-references are included to such other
Sections) delivered to Buyer herewith, Seller represents and warrants to, and
agrees and covenants with, Buyer as follows:
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5.1 CORPORATE MATTERS. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Colorado
and has all requisite corporate power and authority to own, operate and lease
its properties and assets and to carry on its business in the places and in the
manner currently conducted. Buyer has been provided with a true and correct copy
of Seller's Articles of Incorporation and Bylaws as currently in effect. Seller
owns directly all of the Transferred Assets and has all requisite corporate
power and authority to enter into this Agreement and to perform its obligations
hereunder.
5.2 VALIDITY OF AGREEMENT; NO CONFLICT.
(a) This Agreement has been duly authorized, executed and
delivered by Seller and is a legal, valid and binding obligation of
Seller, enforceable against it in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws from time to time in effect
that affect creditors' rights generally and by legal and equitable
limitations on the availability of specific remedies.
(b) The execution, delivery and performance of this Agreement
by Seller and the other agreements and documents to be delivered by
Seller to Buyer hereunder, the consummation of the transactions
contemplated hereby or thereby, and the compliance with the provisions
hereof or thereof, by Seller will not, with or without the passage of
time or the giving of notice or both:
(i) conflict with, constitute a breach, violation or
termination of any provision of, or give rise to any right of
termination, cancellation or acceleration, or loss of any
right or benefit or both, under, any or agreement to which
Seller is a party or by which it or the Transferred Assets are
bound;
(ii) conflict with or violate the Articles of
Incorporation or Bylaws of Seller;
(iii) result in the creation or imposition of any Lien on
any of the Transferred Assets; or
(iv) to Seller's knowledge, violate any law, statute,
ordinance, regulation, judgment, writ, injunction, rule,
decree, order or any other restriction of any kind or
character applicable to Seller or its properties or assets.
5.3 GOVERNMENTAL CONSENTS, APPROVALS AND AUTHORIZATIONS.
(a) Except as set forth in Section 5.3(a) of the Disclosure
Letter, no order, license, consent, waiver, authorization or approval
of, or exemption by, or the giving of notice to, or the registration
with, or the taking of any other action in respect of, any Person not a
Party, including any Governmental Authority, and no filing, recording,
publication or registration in any public office or any other place is
now, or under existing law in the future will be, necessary on
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behalf of Seller to authorize the execution, delivery and performance
of this Agreement or any other agreement contemplated hereby to be
executed and delivered by it and the consummation of the transactions
contemplated hereby or thereby (including assignment of the Transferred
Assets), or to effect the legality, validity, binding effect or
enforceability thereof, other than any requirement that is applicable
to Buyer or as a result of any other facts that specifically relate to
the business or activities in which Buyer is or proposes to be engaged.
(b) Except for items that will not have a Material Adverse
Effect, all licenses, permits, concessions, warrants, franchises and
other governmental authorizations and approvals, of all Governmental
Authorities required or necessary for Seller to own and operate the
Transferred Assets in the places and in the manner currently conducted
have been duly obtained, are in full force and effect and are set forth
truly, correctly and completely in Section 5.3(b) of the Disclosure
Letter, which Section 5.3(b) shall be attached to this Agreement on its
execution or delivered to Buyer sufficiently prior to the Closing Date
for Buyer to adequately review the same. Seller has received no
notification concerning, and Seller has no knowledge of, violations
that are in existence or that have been recorded with respect to those
licenses, permits or other authorizations and no proceeding is pending
or, to the knowledge of Seller, threatened with respect to the
revocation or limitation of any of the licenses, permits or other
authorizations. To Seller's knowledge, Seller has complied with all
laws, rules, regulations and orders applicable to the ownership and
operation of the Transferred Assets.
5.4 TITLE TO AND CONDITION OF PROPERTIES.
(a) The real property described in the Lease Agreement and the
Sublease Agreement constitutes the only interest in real property
included in or required for the continued operation of the Transferred
Assets.
(b) A complete listing of the Transferred Assets is set forth
in Exhibits E and F, and all of the Transferred Assets are located on
the lands covered by the Lease Agreement and the Sublease Agreement and
is in Seller's possession and control. Seller has good and marketable
title to all the Transferred Assets, free and clear of all Liens.
(c) Seller has not received any notice of infringement,
misappropriation or conflict from any other Person with respect to the
operation of the Plants or the Transferred Assets except as noted in
Section 5.4(c) of the Disclosure Letter, and the operation of the
Transferred Assets has not infringed, misappropriated or otherwise
conflicted with any patents, patent applications, patent rights,
trademarks, trademark applications, service marks, service mark
applications, copyrights, trade names, unregistered copyrights, trade
secrets or know-how of any other Person.
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(d) The operation of the Transferred Assets in the ordinary
course of business is not dependent upon the right to use the property
of Persons other than Seller, except such property as is leased or
licensed to Seller and to Buyer pursuant to any of the Transferred
Assets, which leases and licenses are disclosed in Section 5.5(a) of
the Disclosure Letter. No Person, other than Seller, owns or has any
interest in any Transferred Asset or any asset currently used by Seller
in the operation of the Transferred Assets or the Plants, except such
assets as are leased or licensed to Seller pursuant to any of the
Transferred Assets.
(e) The Transferred Assets are in good operating condition and
repair, in accordance with standards generally acceptable in the
industry, ordinary wear and tear accepted, are free of material
defects, are adequate and sufficient for the operations of such Seller
as currently conducted and have maximum aggregate operating capacity of
504,000 Gallons (as defined in the Frac Agreement) per day. Such
structures, equipment and other properties and their use conform in all
respects to all applicable laws, except for such noncompliance as will
have no Material Adverse Effect.
(f) Upon consummation of the transactions contemplated by this
Agreement, Buyer shall have a nonexclusive right to use the
Intellectual Property in connection with its ownership and operation of
the Transferred Assets, including the operation of such assets by third
parties.
5.5 CONTRACTS AND COMMITMENTS.
(a) Except as set forth in Section 5.5(a) of the Disclosure
Letter and for the Retained Liabilities, none of the Transferred Assets
are subject to:
(i) any agreement, contract or commitment requiring the
expenditure or series of related expenditures of funds in
excess of $10,000;
(ii) any agreement, contract or commitment requiring the
payment for goods or services whether or not the goods or
services are actually provided or the provision of goods or
services at a price less than Seller's cost of producing the
goods or providing the services;
(iii) any loan or advance to, or investment in, any Person
or any agreement, contract, commitment or understanding
relating to the making of any loan, advance or investment;
(iv) any contract, agreement, indenture, note or other
instrument relating to the borrowing of money or any guarantee
or other contingent liability in respect of any indebtedness
or obligation of any Person (other than the endorsement of
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negotiable instruments for deposit or collection in the
ordinary course of business);
(v) any management service, union, employment, consulting
or other similar type contract or agreement;
(vi) any agreement, contract or commitment that would
limit the freedom of Buyer or any Affiliate thereof following
the Effective Time to own, operate, sell, transfer, pledge or
otherwise dispose of or encumber any of the Transferred Assets
or to compete with any Person or to engage in any business or
activity in any geographic area;
(vii) any agreement, lease, contract or commitment or
series of related agreements, leases, contracts or commitments
not entered into in the ordinary course of business or, except
for agreements to purchase or sell goods and services entered
into in the ordinary course of business of Seller, not
cancelable by Seller without penalty to Seller or within 30
days;
(viii) any agreement or contract that would obligate or
require Buyer or any subsequent owner of any of the
Transferred Assets to provide for indemnification or
contribution with respect to any matter;
(ix) any license, royalty or similar agreement; or
(x) any other agreement, contract or commitment that
might reasonably be expected to have a Material Adverse
Effect.
(b) Section 5.5(b) of the Disclosure Letter lists, and
identifies as such, all contracts between Seller or its Affiliates and
producers of natural gas from the Dedicated Lands (the "Producer
Contracts"). Pursuant to these Producer Contracts, Seller fractionated
through the Transferred Assets no less than 120,000,000 Gallons (as
defined in the Frac Agreement) of liquids in 1997. Seller has provided
Buyer complete access to all such Producer Contracts.
(c) Seller is not in breach of any material provision of, or
is not in default (or knows of any event or circumstance that with
notice, or lapse of time or both, would constitute an event of default)
under the terms of any of the contracts listed in Section 5.5(a) and
(b) of the Disclosure Letter and all of such contracts are in full
force and effect. Seller is not aware of any pending or threatened
disputes with respect to any of such contracts..
(d) Except as set forth in Section 5.5(d) of the Disclosure
Letter, the enforceability of the contracts listed in Section 5.5(a)
and (b) of the Disclosure Letter will not be affected in any manner by
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby and
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none of the contracts require the consent or waiver of any Person or
Governmental Authority prior to the sale, assignment, transfer,
conveyance or delivery thereof pursuant to this Agreement.
5.6 OPERATING DATA AND INFORMATION. Attached as Section 5.6 of the
Disclosure Letter are historical operating data and information for the periods
January 1, 1993 through December 31, 1997 relating to the Transferred Assets,
and including volumes of liquids fractionated through the Transferred Assets for
the periods indicated. Such operating data and information are accurate and
complete with respect to such periods. Subsequent to such periods, there have
been no adverse changes in the volumes of liquids fractionated in the
Transferred Assets and Seller has no knowledge of any fact or circumstance which
would result in a material decrease in such volumes.
5.7 TAXES. Except as set forth in Section 5.7 of the Disclosure
Letter:
(a) all Taxes assessed and due and owing against the
Transferred Assets or the operation thereof on or before the Effective
Time have been or will be timely paid in full on or before the Closing
Date; and
(b) all withholding Tax and Tax deposit requirements imposed
on Seller and applicable to the Transferred Assets or the operation
thereof for any and all periods prior to and including the Effective
Time have been or will be timely satisfied in full on or before the
Closing Date.
5.8 NO VIOLATIONS OR LITIGATION.
(a) Seller has not violated, and the consummation of the
transactions contemplated hereby will not cause any violation of, any
order of any Governmental Authority or any law, ordinance, regulation,
order, requirement, statute, rule, permit, concession, grant,
franchise, license or other governmental authorization relating or
applicable to the ownership or operation of any of the Transferred
Assets or that would have a Material Adverse Effect.
(b) Except as set forth in Section 5.8(b) of the Disclosure
Letter, there is no Claim, including no governmental investigation or
examination, or any change in any zoning or building ordinance pending
or, to Seller's knowledge, threatened against or affecting any of the
Transferred Assets or the ownership or operation of such assets, at law
or in equity, before or by any Governmental Authority and no basis
exists for any such Claim.
5.9 NO ADVERSE CHANGES OR EVENTS. Since December 31, 1997, the
Transferred Assets have been consistently operated only in the ordinary course,
consistent with past practices, and there has not been:
(a) any adverse change in the financial condition, assets,
liabilities (contingent or otherwise), results of operations or
prospects of the Transferred Assets except for the changes that in the
aggregate have not had a Material Adverse Effect, or any occurrence,
circumstance or combination thereof that
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might reasonably be expected to have a Material Adverse Effect before
or after the Effective Time;
(b) any damage, destruction or loss, whether or not covered by
insurance, adversely affecting the Transferred Assets;
(c) any mortgage, pledge or creation of any Lien (other than a
Permitted Encumbrance) with respect to any of the Transferred Assets;
(d) any sale, transfer or other disposition of any of the
Transferred Assets ;
(e) any material change in the customary methods used in
operating the Transferred Assets;
(f) any change in the data required to be set forth on any
Exhibit or Schedule to this Agreement, or any other event or condition
of any character whatsoever pertaining to the Transferred Assets that
has had or reasonably may be expected to have a Material Adverse
Effect; or
(g) any adverse change in the Producer's Contracts which, in
the aggregate, might reasonably be expected to have a Material Adverse
Effect.
5.10 ENVIRONMENTAL MATTERS. Except as set forth in Section 5.10 of
the Disclosure Letter:
(a) There are no prior owners of the Transferred Assets.
Seller has not caused or allowed the generation, use, treatment,
storage, or disposal of Hazardous Materials at any site or facility
owned, leased or operated in connection with the ownership or operation
of the Transferred Assets except in accordance with all applicable
Environmental Laws or except to the extent the same would not have a
Material Adverse Effect or would not result in any liability,
contingent or otherwise, to Buyer or its Affiliates;
(b) To its knowledge, Seller does not own or lease any real
property, improvements or related assets that form a part of the
Transferred Assets that have been subject to the release of any
Hazardous Materials;
(c) To its knowledge, Seller has secured all Environmental
Permits necessary for the ownership or operation of the Transferred
Assets, and Seller is in compliance with the Environmental Permits;
(d) To its knowledge, Seller has not received any notice, nor
is it aware, of any proposal to amend, revoke or replace any
Environmental Permit relating to any of the Transferred Assets, or
requiring the issuance of any additional Environmental Permit in
connection therewith;
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<PAGE> 21
(e) To its knowledge, Seller has not received inquiry or
notice nor does it have any reason to suspect or believe it will
receive inquiry or notice of any actual or potential Proceedings or
losses related to or arising under any Environmental Law;
(f) To its knowledge, Seller is not currently operating or
required to be operating under any compliance order, schedule, decree
or agreement, any consent decree, order or agreement, or corrective
action decree, order or agreement issued or entered into under any
federal, state or local statute, regulation or ordinance regarding the
environment or health or safety in the work place;
(g) Seller has not transported, arranged for the
transportation of or disposed of any substance in a manner that may
lead to claims against Buyer for clean-up costs, remedial work, damages
to natural resources or for personal injury claims, nor does it have
any knowledge of any other Person who has undertaken such activities
which may lead to such claims against Buyer; and
(h) Seller has conducted the operations of the Transferred
Assets in compliance with all applicable limitations, restrictions,
conditions, standards, prohibitions, requirements and obligations
established under Environmental Laws, except where such non-compliance
would not, either individually or in the aggregate, have a Material
Adverse Effect.
5.11 PRODUCT LIABILITY. To Seller's knowledge and except as
disclosed in Section 5.11 of the Disclosure Letter there are no facts or events
forming the basis of any present claim against Seller not fully covered by
insurance, except for deductibles and self-insurance retentions, for personal
injury or property damage alleged to be caused by products produced or services
rendered by or on behalf of Seller in connection with its ownership or operation
of the Transferred Assets.
5.12 NO UNTRUE STATEMENTS. This Agreement, the Exhibits and
Schedules hereto, and all other documents and certificates delivered to Buyer
and its representatives in connection with this Agreement or the transactions
contemplated hereby, do not and will not contain when delivered any untrue
statement of any material fact and do not and will not omit to state a material
fact necessary to make the statements contained herein or therein not
misleading. There is no material fact that has not been disclosed in writing to
Buyer by Seller that has or will have a Material Adverse Effect.
5.13 SELLER'S EMPLOYEE BENEFIT LIABILITIES. Buyer shall not be
liable or obligated under any employee benefit plan or for any other employee
benefits that may have been established by Seller for its employees. Without
limiting the generality of the foregoing, Seller acknowledges and agrees that
Buyer does not assume the sponsorship of, the responsibility of contributions
to, or any liabilities in connection with any employee benefit plan maintained
by Seller for active employees, retirees, former employees, their beneficiaries
or any other person, including any employee pension benefit plan within the
meaning of section 3(2) of ERISA, employee welfare plan within the meaning of
section 3(1) of ERISA and any personnel policy, stock option plan, bonus plan or
arrangement, incentive award plan or arrangement, vacation
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policy, severance pay plan, policy or agreement, deferred compensation
agreement, executive compensation or supplemental income arrangement, consulting
agreement, employment agreement and each other employee benefit plan, agreement,
arrangement, program, practice or understanding.
5.14 FINDER'S FEES. No investment banker, broker or finder has
acted directly or indirectly for Seller or any Affiliate of Seller in connection
with this Agreement or the transactions contemplated hereby. No other investment
banker, broker, finder or other Person is entitled to any brokerage or finder's
fee or similar commission in respect thereof based in any way on agreements,
arrangements or understandings made by or on behalf of Seller or any of its
Affiliates. Seller agrees to indemnify and hold Buyer harmless from and against
any and all claims, liabilities or obligations with respect to all fees,
commissions or expenses asserted by any Person on the basis of any act,
statement, agreement or commitment alleged to have been made by Seller or any of
its Affiliates with respect to any such fee, expense or commission.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
6.1 CORPORATE MATTERS. Buyer is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Buyer has all requisite limited liability company power and authority
to enter into this Agreement and to perform its obligations under this
Agreement.
6.2 VALIDITY OF AGREEMENT; NO CONFLICT. This Agreement has been
duly authorized, executed and delivered by Buyer and is a legal, valid and
binding obligation of Buyer, enforceable against it in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws from time to time in
effect that affect creditors' rights generally and by legal and equitable
limitations on the availability of specific remedies. The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
by Buyer will not violate any provision of, or constitute a default under, any
contract or other agreement to which Buyer is a party or by which it is bound,
or conflict with its Limited Liability Company Agreement.
6.3 FINDER'S FEE. No investment banker, broker or finder has acted
directly or indirectly for Buyer or any Affiliate of Buyer in connection with
this Agreement or the transactions contemplated hereby. No other investment
banker, broker, finder or other Person is entitled to any brokerage or finder's
fee or similar commission in respect thereof based in any way on agreements,
arrangements or understandings made by or on behalf of Buyer or any of its
Affiliates. Buyer agrees to indemnify and hold Seller harmless from and against
any and all claims, liabilities or obligations with respect to all fees,
commissions or expenses asserted by any Person on the basis of any act,
statement, agreement or commitment alleged to have been made by Buyer or any of
its Affiliates with respect to any such fee, expense or commission.
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ARTICLE VII
CONDITIONS PRECEDENT
7.1 CONDITIONS TO OBLIGATIONS OF BUYER AT CLOSING. The obligation
of Buyer to purchase the Transferred Assets as contemplated hereby is, at the
option of Buyer, subject to the satisfaction on or before the Closing Date of
the conditions set forth below, any of which may be waived by Buyer in writing;
provided, that Buyer's election to proceed with the Closing of the transactions
contemplated hereby shall not be deemed a waiver of any breach of any
representation, warranty, covenant or agreement herein, whether or not known to
Seller or existing on the Closing Date, and the action shall not prejudice
Buyer's right to recover damages for any breach.
(a) Representations, Warranties and Covenants. Seller shall
have performed, satisfied, and complied in all material respects with
all covenants, agreements, and conditions required by this Agreement to
be performed, satisfied, or complied with by it on or before the
Closing, and all representations and warranties of Seller contained in
this Agreement or in any certificate, document, instrument or writing
delivered to Buyer by or on behalf of Seller under this Agreement shall
be true and correct on and as of the Closing Date with the same force
and effect as though they had been made on the Closing Date, and Buyer
shall have received a certificate, dated as of the Closing Date, signed
by a duly authorized officer of Seller certifying the same.
(b) Resolutions. Buyer shall have received a certificate,
dated as of the Closing Date, signed by Seller's Secretary or Assistant
Secretary certifying (i) the accuracy and completeness of the copies
of, as well as the current effectiveness of, the resolutions to be
attached thereto of the Board of Directors of Seller authorizing the
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated herein, (ii) the
incumbency of the officers executing this Agreement on behalf of Seller
and any documents to be executed and delivered by Seller at the
Closing, and (iii) that attached to the certificate are true and
correct copies of the charter documents and Bylaws of Seller, as in
force and effect on the Closing Date.
(c) Good Standing. Seller shall have delivered to Buyer
certificates issued by appropriate Governmental Authorities evidencing
the good standing and existence of Seller, as of a date not more than
thirty (30) calendar days prior to the Closing Date, in Colorado.
(d) Instruments of Transfer. Seller shall have executed,
acknowledged and delivered to Buyer the Conveyance Documents, in form
and substance reasonably satisfactory to Buyer, as shall be necessary
or reasonably desirable to vest in Buyer all right, title and interest
in and to the Transferred Assets.
(e) No Adverse Effect. There shall have been no Material
Adverse Effect .
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(f) Consents. All consents, licenses and approvals from all
third Persons necessary or appropriate for Buyer to consummate the
transactions contemplated by this Agreement, including those listed in
Section 5.3(a) of the Disclosure Letter, shall have been received.
(g) Delivery of Other Agreements. Seller shall have executed
and delivered to Buyer all other Purchase Documents to which it is a
party.
(h) No Litigation. No Proceeding that is meritorious in the
opinion of counsel to Buyer shall have been instituted or threatened
relating to this Agreement or the transactions contemplated hereby, and
no Governmental Authority shall have taken any other action to
challenge or delay the transactions contemplated hereby.
(i) HSR Act. Any required waiting period under the HSR Act
shall have expired or early termination shall have been granted with
respect to such periods.
7.2 CONDITIONS TO OBLIGATIONS OF SELLER AT CLOSING. The obligation
of Seller to transfer the Transferred Assets as contemplated hereby is, at the
option of Seller, subject to the satisfaction on or before the Closing Date of
the conditions set forth below, any of which may be waived by Seller in writing;
provided, however, Seller's election to proceed with the Closing of the
transactions contemplated hereby shall not be deemed a waiver of any breach of
any representation, warranty or covenant herein, whether or not known to Seller
or existing on the Closing Date, and the action shall not prejudice Seller's
right to recover damages for any breach.
(a) Representations, Warranties and Covenants. Buyer shall
have performed, satisfied, and complied in all material respects with
all covenants, agreements, and conditions required by this Agreement to
be performed, satisfied, or complied with by it on or before the
Closing, and the representations and warranties of Buyer in this
Agreement or in any certificate, document, instrument or writing
delivered to Seller by or on behalf of Buyer under this Agreement shall
be true and correct on and as of the Closing Date with the same force
and effect as though they had been made on the Closing Date, and Seller
shall have received a certificate, dated as of the Closing Date, signed
by the President or a Vice President of Buyer certifying the same.
(b) Resolutions. Seller shall have received a certificate,
dated as of the Closing Date, signed by Buyer's Secretary or Assistant
Secretary certifying (i) the accuracy and completeness of the copies
of, as well as the current effectiveness of, the resolutions to be
attached thereto of the Board of Directors of Buyer authorizing the
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated herein, (ii) the
incumbency of the officers executing this Agreement on behalf of Buyer
and any documents to be executed and delivered by Buyer at the Closing,
and (iii) that attached to the certificate are true and correct copies
of the charter documents of Buyer, as in force and effect on the
Closing Date.
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(c) Good Standing. Buyer shall have delivered to Seller
certificates issued by appropriate Governmental Authorities evidencing
the good standing and existence of Buyer, as of a date not more than
thirty (30) calendar days prior to the Closing Date, in Colorado and
Delaware. To the extent provided for under applicable law, Buyer shall
also have delivered to Seller certificates or other writings issued by
appropriate Governmental Authorities evidencing that all applicable
state franchise Taxes have been paid.
(d) Delivery of Other Agreements. Buyer shall have executed
and delivered to Seller all other Purchase Documents to which it is a
party.
(e) No Litigation. No Proceeding that is meritorious in the
opinion of counsel to Seller shall have been instituted or threatened
relating to this Agreement or the transactions contemplated hereby, and
no Governmental Authority shall have taken any other action to
challenge or delay the transactions contemplated hereby.
(f) Consents. All consents, licenses and approvals from all
third Persons necessary or appropriate for Seller to consummate the
transactions contemplated by this Agreement, including those listed in
Section 5.3(a) of the Disclosure Letter, shall have been received.
(g) HSR Act. Any required waiting period under the HSR Act
shall have expired or early termination with respect to such period
shall have been granted.
(h) Purchase Price. Buyer shall have delivered to Seller on
the Closing Date the Purchase Price in accordance with Section 2.3.
ARTICLE VIII
HSR FILING; ACCESS TO INFORMATION BY BUYER; MATTERS PENDING CLOSING
8.1 HSR Filing. Each Party shall (i) file on or before March 31,
1998 with the Department of Justice ("DOJ") and the Federal Trade Commission
("FTC") the notification and report form required for the transactions
contemplated hereunder by the HSR Act, requesting early termination of the
waiting period thereunder, (ii) respond promptly to any inquiries from the DOJ
or the FTC in connection with such filings and (iii) comply in all material
respects with the requirements of the HSR Act. Subject to regulatory
constraints, Seller and Buyer shall cooperate with each other and promptly
furnish all information to the other Party that is necessary in connection with
the Parties' compliance with the HSR Act. Seller and Buyer shall coordinate
their initial filing of the notification and report form so that such filings
are made simultaneously. Seller and Buyer shall each keep the other Party fully
advised with respect to any requests from or communications with the DOJ or FTC
and shall consult with the other Party with respect to all filings and responses
thereto.
8.2 PRIOR TO CLOSING. Until the Closing, during normal business
hours, Seller will allow Buyer and its employees, officers, accountants,
attorneys, agents, investment bankers and
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other authorized representatives to examine all financial, operating and other
data and information relating to the ownership and operation of the Transferred
Assets as Buyer shall from time to time reasonably request and will afford Buyer
and its employees, officers, accountants, attorneys, agents and other authorized
representatives access to Seller's offices, properties, books, records,
contracts and documents and will be given the opportunity to ask questions of,
and receive answers from, representatives of Seller with respect to the Business
and the Transferred Assets. No investigations by Buyer or its employees,
representatives or agents shall reduce or otherwise affect the obligation or
liability of Seller with respect to any representations, warranties, covenants
or agreements made herein or in any Exhibit, Schedule or other certificate,
instrument, agreement or document executed and delivered in connection with this
Agreement. Each Party will cooperate with the other Party and its employees,
officers, accountants, attorneys, agents and other authorized representatives in
the preparation of any documents or other materials that may be required by any
Governmental Authority.
8.3 PUBLIC ANNOUNCEMENTS. Until the Closing or termination hereof,
Buyer and Seller will consult in advance on the necessity for, and the timing
and content of, any communications to be made to the public and, subject to
legal constrains, to the form and content of any application or report to be
made to any Governmental Authority that relates to the transactions contemplated
by this Agreement and, except with respect to public announcements or
disclosures that are, in the opinion of the Party proposing to make the
announcement or disclosure, legally required to be made, all public
announcements and disclosures shall require the consent of Buyer and Seller,
which consent shall not be unreasonably withheld.
8.4 ACTIONS PENDING CLOSING. From the date hereof until the
Closing, except as contemplated by this Agreement, Seller represents, warrants
and covenants that, unless the prior written consent of Buyer is obtained, it
will not take any direct or indirect action that would result in a violation of
any of the following:
(a) Seller will operate the Transferred Assets diligently and
in the usual, regular and ordinary manner.
(b) Seller will not enter into or modify any contract or
commitment not in the usual and ordinary course of its business
consistent with past business practices, including without limitation,
the Producer Contracts, or engage in any transaction not in the usual
and ordinary course of its business consistent with past business
practices that would have an adverse effect on the throughput of
volumes through the Transferred Assets.
(c) Seller will not enter into any contract or commitment for
the purchase of merchandise that would require any payment by Buyer
after the Closing.
(d) Seller will not:
(i) create, assume or permit to exist any Lien upon any of
the Transferred Assets, whether now owned or hereafter
acquired;
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(ii) sell, assign, lease or otherwise transfer or dispose
of any of the Transferred Assets; or
(iii) enter into any transaction, contract or commitment
that, by reason of its size or otherwise, affects the
Transferred Assets and is not in the ordinary course of
business as customarily and now conducted.
(e) All tangible property of Seller that constitute part of
the Transferred Assets will be maintained in good working order,
condition and repair, ordinary wear and tear excepted, in accordance
with past practice, and in compliance with all applicable agreements,
laws and regulations.
(f) Seller will maintain insurance on the Transferred Assets
in accordance with Seller's past practices and will not permit any
insurance policy naming it as a beneficiary or a loss payee to be
canceled or terminated or any of the coverage thereunder to lapse
unless simultaneously with such termination or cancellation replacement
policies providing substantially the same coverage are in full force
and effect.
(g) To the extent related to the ownership and operation of
the Transferred Assets, Seller will maintain its books, accounts and
records in the usual, regular and ordinary manner, on a basis
consistent with prior years and in a businesslike manner in accordance
with sound commercial practice, and will not introduce any method of
accounting inconsistent with that used in prior periods, and will
comply with all laws applicable to it and to the conduct of its
business.
(h) To the extent related to the ownership and operation of
the Transferred Assets, Seller will timely file all Tax Returns and all
reports required to be filed with any federal, state or local
governmental agency or regulatory body.
(i) Seller will not enter into any transaction, make any
agreement or commitment or take any other action that would result in
any of the representations or warranties contained in this Agreement
not being true and correct as of the Closing Date.
ARTICLE IX
NONCOMPETITION AGREEMENT
9.1 NONCOMPETITION COVENANT. Seller agrees that, for a period
beginning on the Effective Time and ending on the earlier of termination of the
Frac Agreement or the twentieth (20th) anniversary of the Effective Time,
neither it nor any of its Affiliates will engage or participate in, or carry on,
directly or indirectly, either as proprietor, partner, stockholder, agent,
consultant, advisor, trustee, Affiliate or otherwise, whether or not for
compensation, the ownership or operation of any natural gas liquid fractionation
facilities (other than the Transferred Assets pursuant to the O&M Agreement)
which frac natural gas liquids produced from the Dedicated Lands.
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9.2 REASONABLENESS OF COVENANT. Seller acknowledges that the
covenant provided in Section 9.1 hereof is manifestly reasonable on its face and
is no more restrictive than is required for the protection of Buyer in its
acquisition and operation of the Transferred Assets in that such covenant is
given in consideration for Buyer's performance of its obligations under this
Agreement and the other agreements called for herein. In the event the
provisions of Section 9.1 should ever be deemed to exceed the time and
geographic limitations permitted by applicable law, then such provisions shall
be reformed to the maximum time or geographic limitations permitted by
applicable law.
9.3 INJUNCTIVE RELIEF. It is specifically understood and agreed
that any breach or threatened breach of the provisions of Section 9.1 hereof is
likely to result in irreparable harm to Buyer and that an action at law for
damages alone will be an inadequate remedy for such breach or threatened breach,
and that Buyer would suffer irreparable harm in the event Seller fails to comply
with its obligations hereunder. Therefore, in addition to any other remedy that
may be available to it, Buyer shall be entitled to enforce the specific
performance of Section 9.1 by Seller and to seek both temporary and permanent
injunctive relief (to the extent permitted by law) without the necessity of
proving actual damages, and such other relief as the court may allow. The
provisions of Article XV shall not be applicable to this Article IX or to the
enforcement of its provisions.
ARTICLE X
ADDITIONAL AGREEMENTS
10.1 DELIVERY OF CORPORATE DOCUMENTS. Seller shall deliver to Buyer
a copy of all Records, including computer disks reflecting any books or records,
documents or other papers, or other information or data relating to the
ownership or operation of the Transferred Assets stored on any electronic media,
including computers. Seller agrees that, Buyer and its authorized
representatives, upon the execution of Seller's standard confidentiality
agreement, shall have the right to inspect and, at Buyer's expense, copy, at any
time during regular business hours for any proper purpose, the corporate,
accounting, auditing and tax books, records (including work papers) and other
books and records relating to the ownership and operation of the Transferred
Assets as are retained by Seller or its Affiliates.
10.2 FURTHER ASSURANCES. Seller shall execute, acknowledge and
deliver or cause to be executed, acknowledged and delivered to Buyer at Closing
the Conveyance Documents and other instruments of transfer, assignment and
conveyance, in form and substance satisfactory to counsel for Buyer, as shall be
necessary or desirable to vest in Buyer all the right, title and interest in and
to the Transferred Assets free and clear of all Liens (including the release of
all Liens of record) and shall use commercially reasonable efforts to cause to
be taken the other action as Buyer reasonably may require to more effectively
implement and carry into effect the transactions contemplated by this Agreement.
10.3 COOPERATION AFTER CLOSING.
(a) Seller and Buyer shall cooperate with each other during
the period ending twenty (20) years after the Closing in clearing the
title to any of the Transferred Assets to Buyer pursuant hereto if
Seller's title to any such property
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as of the Closing Date, shall be defective, not marketable or
nonassignable. In this connection, Seller shall take all commercially
reasonable action, including the furnishing of documents and evidences
of title and assistance in the preparation and trial of any necessary
litigation, to clear title to any the property, all of which shall be
at the expense of Seller.
(b) For the greater of five years from the Closing Date and
the period as may be required by any statute, regulation or
Governmental Authority or any then pending litigation, Buyer shall
permit Seller and its representatives reasonable access to the Records
that are transferred to Buyer in connection herewith in anticipation
of, or preparation for, existing or future litigation or any Tax audit
which Seller or any of its Affiliates is involved and which is related
to the Business or the Transferred Assets, during regular business
hours and upon reasonable notice at Buyer's principal places of
business or at any location where the Records are stored; provided that
(i) any access shall be had or done in a manner so as to not interfere
with the normal conduct of the Business, (ii) Buyer shall not be
required to provide access to any confidential record or records, the
disclosure of which would violate any statute or regulation or
applicable confidentiality agreement with any Person, and (iii) Buyer
shall not be required to provide access to any confidential record or
records, the disclosure of which would cause Buyer or any of its
Affiliates to waive its attorney-client privilege or attorney work
product privilege.
(c) For the greater of five years from the Closing Date and
the period as may be required by any statute, regulation or
Governmental Authority or any then pending litigation, Seller shall
permit Buyer and its representatives reasonable access to the general
business records and files of Seller in anticipation of, or preparation
for, existing or future litigation or any Tax audit in which Buyer or
any of its affiliates is involved and which is related to the Business
or the Transferred Assets, during regular business hours and upon
reasonable notice at Seller's principal places of business or at any
location where the records or files are stored; provided that (i) any
access shall be had or done in a manner so as to not interfere with the
normal conduct of Seller's business, (ii) Seller shall not be required
to provide access to any confidential record or records, the disclosure
of which would violate any statute or regulation or applicable
confidentiality agreement with any Person, and (iii) Seller shall not
be required to provide access to any confidential records or files, the
disclosure of which would cause Seller or any of its Affiliates to
waive its attorney-client privilege or attorney work product privilege.
10.4 CONTINUATION OF OPERATIONS; RIGHT OF FIRST REFUSAL.
(a) Nothing in this Agreement, in any Exhibit or Schedule
hereto, or in any agreement, instrument or other document executed or
delivered in connection with this Agreement shall require Buyer to
continue its business or operations or to manage and operate the
Transferred Assets. Seller acknowledges and agrees that Buyer, in its
sole discretion, may continue, manage, modify or discontinue its
operations, liquidate or otherwise change or cease its operations.
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(b) Notwithstanding the foregoing, should Buyer elect to
discontinue, liquidate, materially change or cease operation of the
Transferred Assets, it will give Seller at least ninety (90) days prior
written notice thereof, and Seller shall have a period of thirty (30)
days after receipt of Buyer's notice to deliver a written notice to
Buyer that it elects to acquire the Transferred Assets. If Seller
elects to acquire the Transferred Assets, Buyer shall, upon receipt of
payment from Seller of the fair market value (as defined below) of the
Transferred Assets, convey the same to Seller free and clear of all
Liens and Claims created by, through or under Buyer. For purposes of
this Section 10.4, "fair market value" shall be the fair market value
of the Transferred Assets as of the date of the notice from Buyer and
as determined by an independent appraiser acceptable to both parties,
such acceptance not to be unreasonably withheld. Such independent
appraiser shall be someone with at least ten years experience in the
gas processing industry.
(c) Should Buyer wish to sell or otherwise transfer the
Transferred Assets or to sell or otherwise transfer such assets
together with the Frac Agreement, the O&M Agreement, the Lease
Agreement and/or the Sublease Agreement (collectively the "Project
Agreements") either directly or indirectly through a merger,
consolidation, amalgamation or otherwise, or should Buyer receive an
offer, to purchase any of the Transferred Assets and/or the Project
Agreements, whether directly or indirectly through a merger,
consolidation, amalgamation or otherwise, which offer Buyer wishes to
accept, Buyer shall furnish to Seller in writing the material
provisions of such proposed sale, transfer or purchase (the "Offer
Notice"). Seller shall have thirty (30) days after receipt of the Offer
Notice to give written notice of its election to acquire such assets
and/or agreements described in the Offer Notice for the consideration
and subject to the terms and conditions set forth in the Offer Notice.
If Seller fails to respond within such thirty (30) day period or elects
not to acquire such assets and/or agreements, Buyer shall be free for a
period of six (6) months from the end of such thirty (30) day period to
transfer the Transferred Assets and/or the Project Agreements, as may
be the case, for consideration and under terms and conditions no less
favorable to Buyer than those set forth in the Offer Notice.
(d) Notwithstanding the foregoing provisions of this Section
10.4, Buyer shall be free to sell or otherwise transfer the Transferred
Assets and/or the Subject Agreements to any Affiliate of either Buyer
or Seller with no obligation to advise Seller of such sale or transfer
and without the creation of the rights provided Seller in this Section
10.4.
(e) Any purchase by Seller under this Section 10.4 shall close
within sixty (60) days of Seller's notice of acceptance. Such period of
time shall be extended as reasonably necessary to obtain all required
regulatory approvals, if any. Buyer and Seller shall use all reasonable
efforts to effectuate any such transfer. The failure of Seller to close
within such time period, unless due to the fault of Buyer, shall permit
Buyer to sell or transfer the assets in question without obligation to
Seller.
(f) In the event of a sale or transfer to Seller pursuant to
10.4(b) or (c), both Parties will be released from all obligations
under the Project Documents except for
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those that continue beyond termination of their respective agreement,
and Seller shall be released from the obligations of Article IX hereof.
10.5 Additional Undertakings. Seller will deliver to Buyer,
sufficiently prior to the Closing Date so that Buyer may have reasonable
opportunity to inspect same, a true and correct, detailed list of (i) all
permits and other items described in Section 5.3(b), and (ii) all items
comprising the Transferred Assets, each list providing such information as Buyer
may reasonably request. Additionally, Seller will deliver to Buyer within six
(6) months of the Closing Date a list of all Producer Contracts in effect as of
the Effective Date, including accurate and complete information with respect to
the contract number, date, contract parties, term of agreement and whether such
Producer Contract provides for fractionation of liquids by Seller or an
Affiliate for each such contract.
10.6 Identification of Buyer's Property. Seller will cooperate with
Buyer in permitting Buyer to place appropriate signs or other notices on the
Transferred Assets to indicate ownership of such assets by Buyer. Such signs or
other notices shall be reasonable in terms of size and location.
10.7 Interim Operations. During the period beginning on the
Effective Date and ending on the Closing Date, Seller agrees that it will
operate the Transferred Assets as called for by the O&M Agreement as if such
agreement were in effect. The Parties agree that during this interim operating
period the Parties will receive the economic benefit of such operations of the
Transferred Assets as fully and completely as if the Purchase Documents were in
effect. Should the Closing not occur, however, the operations of the Transferred
Assets during this interim period shall be solely for the account of Seller.
ARTICLE XI
INDEMNIFICATION
11.1 SELLER'S INDEMNITY. Assuming the Closing occurs and subject to
the provisions of this Article XI, Seller agrees to indemnify, defend and hold
Buyer and its Affiliates and their respective officers, directors, shareholders,
unitholders, members, managers, agents, employees, representatives, successors
and assigns (said persons being sometimes referred to in this Section 11.1 as
"Buyer Indemnitees") harmless from and against and in respect of any Claims and
Losses (collectively the "Buyer's Damages"), arising out of or resulting from,
and shall pay the Buyer Indemnitees the full amount of Buyer's Damages that
Buyer Indemnitees may be obligated to pay on account of:
(a) any misrepresentation, breach of warranty or failure to
perform any covenant or agreement made or undertaken by Seller in this
Agreement or any misrepresentation in or omission from any other
agreement, certificate, Schedule, Exhibit or writing delivered to Buyer
pursuant to this Agreement;
(b) the Retained Liabilities; or
(c) The ownership or operation of the Transferred Assets , or
the creation, existence or occurrence of any fact or event on or prior
to the Effective Time related to the operation of the Transferred
Assets.
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11.2 ENVIRONMENTAL INDEMNIFICATION. Assuming the Closing occurs,
Seller agrees to indemnify, defend and hold each Buyer Indemnitee harmless from
and against and in respect of any and all Environmental Liabilities that may be
imposed upon or incurred by Buyer, arising out of or in connection with (a) the
acts or omissions of any Person prior to the Effective Time relating to the
ownership or operation of the Transferred Assets, or any business conducted at
the Plants; (b) any act or omission of Seller relating to the Plants (other than
an act or omission by Buyer in the operation of the Transferred Assets after the
Effective Time, but excluding Buyer's failure to detect or remedy any existing
environmental conditions or any Environmental Liabilities existing on or prior
to the Effective Time); or (c) any breach by Seller of a representation or
warranty contained in Section 5.10 (collectively, "Environmental Losses").
11.3 BUYER'S INDEMNITY. Assuming the Closing occurs and subject to
the provisions of this Article XI and the provisions of the other Purchase
Documents (the indemnification provisions of which shall control over the
provisions of this Section 11.3), Buyer agrees to indemnify, defend and hold
Seller and its Affiliates and their respective officers, directors,
shareholders, unitholders, members, managers, agents, employees,
representatives, successors and assigns (said persons being sometimes referred
to in this Section 11.3 as the "Seller Indemnitees") harmless from and against
any Claims and Losses (collectively "Seller's Damages"), arising out of or
resulting from, and shall pay the Seller Indemnitees the full amount of Seller's
Damages that the Seller Indemnitees may be obligated to pay on account of:
(a) any misrepresentation, breach of warranty or failure to
perform any covenant or agreement made or undertaken by Buyer in this
Agreement or any misrepresentation in or omission from any other
agreement, certificate, Schedule, Exhibit or writing delivered to
Seller pursuant to this Agreement;
(b) The ownership or operation of the Transferred Assets, or
the creation, existence or occurrence of any fact or event subsequent
to the Effective Time related to the operation of the Transferred
Assets; or
(c) Any and all Environmental Liabilities that may be imposed
upon or incurred by Seller, arising out of or in connection with the
acts or omissions of any Person (other than Seller) on and after the
Effective Time relating to the Transferred Assets,
11.4 PROCEDURE. All claims for indemnification by a party under
this Article XI (the party claiming indemnification and the party against whom
such claims are asserted being hereinafter called the "Indemnified Party" and
the "Indemnifying Party", respectively) shall be asserted and resolved as
follows:
(a) In the event that any Claim for which an Indemnifying
Party would be liable to an Indemnified Party hereunder is asserted
against or sought to be collected from such Indemnified Party by a
third party, such Indemnified Party shall, within 45 calendar days of
the receipt thereof, give notice (the "Claim Notice") to the
Indemnifying Party of such Claim, specifying the nature of and specific
basis for such Claim and the amount or the estimated amount thereof to
the extent then feasible, which estimate shall not be binding upon the
Indemnifying Party in its effort to collect the final amount of such
Claim. The failure to give any such notice shall not affect the
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rights of the Indemnified Party to indemnification hereunder unless the
Indemnified Party has proceeded to contest, defend or settle the Claim
with respect to which it has failed to give prior notice to the
Indemnifying Party. Additionally, to the extent the Indemnifying Party
is prejudiced thereby, the failure to so notify the Indemnifying Party
of any such Claims shall relieve the Indemnifying Party from liability
that it may have to the Indemnified Party under the indemnification
provisions contained in this Article XI, but only to the extent of the
loss directly attributable to such failure to notify, and shall not
relieve the Indemnifying Party from any liability that it may have to
the Indemnified Party otherwise than under this Article XI.
(b) The Indemnifying Party shall be given the opportunity, at
its cost and expense, to contest and defend by all appropriate legal
proceedings any Claim with respect to which it is called upon to
indemnify the Indemnified Party under the provisions of this Agreement;
provided, however, that notice of the intention so to contest and
defend shall be delivered by the Indemnifying Party to the Indemnified
Party within thirty (30) days following receipt of the notice provided
for in Section 11.4(a) above. If the Indemnifying Party does not give
notice to the Indemnified Party of its election to contest and defend
any such Claim within such period then the Indemnifying Party shall be
bound by the result obtained with respect thereto by the Indemnified
Party and shall be responsible for all costs incurred in connection
therewith. The Claim which the Indemnifying Party elects to contest and
defend may be conducted in the name and on behalf of the Indemnifying
Party or the Indemnified Party as may be appropriate. Such Claim shall
be conducted by counsel employed by the Indemnifying Party who shall be
reasonably satisfactory to the Indemnified Party, and the Indemnified
Party shall have the right to participate in such Claim and to be
represented by counsel of its own choosing at its cost and expense. If
the Indemnified Party joins in any such Claim, the Indemnifying Party
shall have full authority to determine all action to be taken with
respect thereto; provided that if the Indemnifying Party reserves its
rights with respect to its indemnification obligations under this
Agreement as to such Claim, then the Indemnified Party shall have the
full authority to determine all action to be taken with respect
thereto. At any time after the commencement of defense of any Claim,
the Indemnifying Party may request the Indemnified Party to agree in
writing to the abandonment of such contest or to the payment or
compromise by the Indemnifying Party of the asserted Claim, provided
the Indemnifying Party agrees in writing to be solely liable for all
losses relating to such Claim; whereupon such action shall be taken
unless the Indemnified Party determines that the contest should be
continued and notifies the Indemnifying Party in writing within fifteen
(15) days of such request from the Indemnifying Party. In the event
that the Indemnified Party determines that the contest should be
continued, the amount for which the Indemnifying Party would otherwise
be liable hereunder shall not exceed the amount which the Indemnifying
Party had agreed to pay in payment or consideration of such Claim,
provided the other party to the contested Claim had agreed in writing
to accept such amount in payment or compromise of the Claim as of the
time the Indemnifying Party made its request therefor to the
Indemnified Party, and further provided that, under such proposed
compromise, the Indemnified Party would be fully and completely
released from any further liability or obligation with respect to the
matters which are the subject of such contested Claim.
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(c) If requested by the Indemnifying Party, the Indemnified
Party agrees, at the Indemnifying Party's expense, to cooperate with
the Indemnifying Party and its counsel in contesting any Claim that the
Indemnifying Party elects to contest, or, if appropriate and related to
the Claim in question, in making any counterclaim against the person
asserting the third party Claim, or any cross-complaint against any
person other than an affiliate of the Indemnified Party.
(d) If any Indemnified Party should have a Claim against the
Indemnifying Party hereunder that does not involve a Claim being
asserted against or sought to be collected from it by a third party,
the Indemnified Party shall send a Claim Notice with respect to such
Claim to the Indemnifying Party. If the Indemnifying Party disputes
such Claim, such dispute shall be resolved in the manner set forth in
Article XV hereof.
(e) The Indemnified Party agrees to afford the Indemnifying
Party and its counsel the opportunity, at the Indemnifying Party's
expense, to be present at, and to participate in, conferences with all
Persons, asserting any Action against the Indemnified Party and
conferences with representatives of or counsel for such Persons.
11.5 INDEMNIFICATION THRESHOLD. Neither Seller nor Buyer shall be
obligated to indemnify the other Party until the Buyer's Damages or Seller's
Damages, as may be the case, have exceeded in the aggregate $100,000, and then
such Indemnifying Party's obligation to indemnify shall apply only to such
excess amounts.
11.6 EXPRESS NEGLIGENCE. TO THE EXTENT A PARTY HEREUNDER IS
ENTITLED TO INDEMNIFICATION UNDER THIS ARTICLE XI, SUCH INDEMNIFICATION SHALL
APPLY NOTWITHSTANDING THE NEGLIGENCE, GROSS NEGLIGENCE, WILLFUL OR OTHER ACT BY
THE PARTY TO BE SO INDEMNIFIED AND NOTWITHSTANDING SUCH ACT MAY OCCUR IN THE
FUTURE, IT BEING THE INTENT OF THE PARTIES HERETO THAT SUCH INDEMNIFICATION
SHALL APPLY TO ALL SUCH ACTS.
ARTICLE XII
TERMINATION
12.1 Efforts to Satisfy Conditions. Buyer and Seller agree to use
their commercially reasonable efforts to bring about the satisfaction of the
conditions specified in Article VII hereof.
12.2 Termination. The obligations to close the transactions
contemplated by this Agreement may be terminated by:
(a) mutual agreement of Buyer and Seller;
(b) Buyer, if a material default shall be made in the
observance or performance by Seller of any agreements and covenants of
Seller herein contained, or if there shall have been a breach by Seller
of any warranties and representations and the same is not cured within
thirty days after receipt of notice from Buyer;
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(c) Seller, if a material default shall be made by Buyer in
the observance or performance by Buyer of any agreements and covenants
of Buyer herein contained, or if there shall have been a breach by
Buyer of any warranties and representations and the same is not cured
within thirty days after receipt of notice from Seller;
(d) Buyer, if Seller has been unable to satisfy all conditions
to the Closing set forth in Section 7.1 by June 1, 1998; or
(e) Seller, if Buyer has been unable to satisfy all conditions
to the Closing set forth in Section 7.2 by June 1, 1998.
12.3 LIABILITY UPON TERMINATION. If the obligation to close the
transactions contemplated by this Agreement is terminated pursuant to any
provision of Section 12.2, then neither party shall be under any liability to
the other party hereto other than as provided in Section 2.3(a) hereof;
provided, however, that nothing herein shall relieve any party from liability
for any breach of or default under this Agreement occurring prior to such
termination. Except as set forth in this Section 12.3, the rights of the parties
shall not terminate upon the failure to close the transactions contemplated
hereby. Buyer shall have the right to specific performance if the Agreement is
not otherwise terminated.
ARTICLE XIII
NATURE OF STATEMENTS AND SURVIVAL
OF COVENANTS, REPRESENTATIONS,
WARRANTIES AND AGREEMENTS
All statements of fact contained in any written statement, certificate,
instrument or document delivered by or on behalf of Seller or Buyer pursuant to
this Agreement or in connection with the transactions contemplated hereby shall
be deemed representations and warranties of Seller or Buyer, respectively. All
representations, warranties, covenants and agreements made by the Parties in
this Agreement or pursuant hereto shall survive the Closing without limit,
except as hereinafter provided, notwithstanding any investigation heretofore or
hereafter made by or on behalf of any of them and shall not be deemed merged
into any instruments or agreements delivered at Closing. All representations and
warranties of the Parties shall survive until the tenth anniversary of the
Effective Time.
ARTICLE XIV
EXPENSES
Except as otherwise set forth herein, and whether or not the
transactions contemplated by this Agreement shall be consummated, each Party
agrees to pay, without right of reimbursement from any other Party, the costs
incurred by the Party incident to the preparation and execution of this
Agreement and performance of its obligations hereunder, including the fees and
disbursements of legal counsel, accountants and consultants employed by the
Party in connection with the transactions contemplated by this Agreement.
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Notwithstanding the foregoing, each Party agrees to share equally the filing fee
for filings made pursuant to the HSR Act.
ARTICLE XV
DISPUTES
15.1 Negotiation. In the event of any controversy or claim, whether
based in contract, tort or otherwise, arising out of or relating to this
Agreement or the scope, breach, termination or validity of this Agreement (a
"Claim"), the Parties shall promptly seek to resolve any such Claim by
negotiations between senior executives of the Parties who have authority to
settle the Claim. When a Party believes there is a Claim under this Agreement,
that Party will give the other Party written notice of the Claim. Within thirty
(30) days after receipt of such notice, the receiving Party shall submit to the
other a written response. Both the notice and response shall include (i) a
statement of each Party's position and a summary of the evidence and arguments
supporting its position, and (ii) the name, title, fax number, and telephone
number of the executive who will represent that Party. In the event the Claim
involves a claim arising out of the actions of any person or entity not a
signatory to this Agreement, the receiving Party shall have such additional time
as necessary, not to exceed an additional thirty (30) days, to investigate the
Claim before submitting a written response. The executives shall meet at a
mutually acceptable time and place within fifteen (15) days after the date of
the response and thereafter as often as they reasonably deem necessary to
exchange relevant information and to attempt to resolve the Claim. If one of the
executives intends to be accompanied at a meeting by an attorney, the other
executive shall be given at least five (5) working days' notice of such
intention and may also be accompanied by an attorney. All negotiations and
communications pursuant to this Article 15 shall be treated and maintained by
the Parties as confidential information and shall be treated as compromise and
settlement negotiations for the purposes of the Federal and State Rules of
Evidence .
15.2 Failure to Resolve. If the Claim has not been resolved within
sixty (60) days after the date of the response given pursuant to Section 15.1
above, or such additional time, if any, that the Parties mutually agree to in
writing, or if the Party receiving such notice denies the applicability of the
provisions of Section 15.1 or otherwise refuses to participate under the
provisions of Section 15.1, either Party may initiate binding arbitration
pursuant to the provisions of Section 15.3 below.
15.3 Arbitration. Any Claims not settled pursuant to the foregoing
provisions shall be submitted to binding arbitration in accordance with the
following provisions. Arbitration shall be the sole and exclusive remedy of the
Parties in connection with any Claims hereunder.
(a) The Party desiring to initiate arbitration in connection with
any Claim shall send, via certified mail, written notice of
demand of arbitration to the other Party and the name of the
arbitrator appointed by the Party demanding arbitration
together with a statement of the matter in controversy.
(b) Within fifteen (15) days after receipt of such demand, the
receiving Party shall name its arbitrator. If the receiving
Party fails or refuses to name its arbitrator within such
15-day period, the second arbitrator shall be appointed, upon
request of the Party demanding arbitration, by the Chief U.S.
District Court
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Judge for the District of Colorado or such other person
designated by such judge. The two arbitrators so selected
shall within fifteen (15) days after their designation select
a third arbitrator; provided, however, that if the two
arbitrators are not able to agree on a third arbitrator within
such 15-day period, either Party may request the Chief U.S.
District Court Judge for the District of Colorado or such
other person designated by such judge to select the third
arbitrator as soon as possible. In the event the Judge
declines to appoint an arbitrator, appointment shall be made,
upon application of either Party, pursuant to the Commercial
Arbitration Rules of the American Arbitration Association. If
any arbitrator refuses or fails to fulfill his or her duties
hereunder, such arbitrator shall be replaced by the Party
which selected such arbitrator (or if such arbitrator was
selected by another Person, through the procedure which such
arbitrator was selected) pursuant to the foregoing provisions.
(d) Each arbitrator selected by the Parties shall be a certified
public accountant or licensed attorney with at least fifteen
(15) years of oil and gas experience as a certified public
accountant and/or practicing attorney. The arbitrators
selected by the Parties are not required to be neutral, but
the third arbitrator shall be neutral and shall be a certified
public accountant. If neither of the arbitrators appointed by
or on behalf of the Parties is a retired judge, then the third
arbitrator shall be a retired judge.
(e) The Parties hereto hereby request and consent to the three (3)
arbitrators conducting a hearing in Denver, Colorado no later
than sixty (60) days following their selection or thirty (30)
days after all prehearing discovery has been completed,
whichever is later, at which the Parties shall present such
evidence and witnesses as they may choose, with or without
counsel.
(f) Arbitration shall be conducted in accordance with the
Commercial Arbitration Rules and procedures of the American
Arbitration Association.
(g) The Federal Rules of Civil Procedure, as modified or
supplemented by the local rules of civil procedure for the
U.S. District Court of Colorado, shall apply in the
arbitration. The Parties shall make their witnesses available
in a timely manner for discovery pursuant to such rules. If a
Party fails to comply with this discovery agreement within the
time established by the arbitrators, after resolving any
discovery disputes, the arbitrators may take such failure to
comply into consideration in reaching their decision. All
discovery disputes shall be resolved by the arbitrators
pursuant to the procedures set forth in the Federal Rules of
Civil Procedure.
(h) Adherence to formal rules of evidence shall not be required.
The arbitrators shall consider any evidence and testimony that
they determine to be relevant.
(i) The Parties hereto hereby request that the arbitrators render
their decision within thirty (30) calendar days following
conclusion of the hearing.
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(j) Any decision by a majority of the arbitration panel shall be
final, binding and non-appealable. Any such decision may be
filed in any court of competent jurisdiction and may be
enforced by any Party as a final judgment in such court. There
shall be no grounds for appeal of any arbitration award
hereunder.
(k) The defenses of statute of limitations and laches shall be
tolled from and after the date a Party gives the other Party
written notice of a Claim as provided in Section 15.1 above
until such time as the Claim has been resolved pursuant to
Section 15.1 , or an arbitration award has been entered
pursuant to Section 15.3.
15.4 Recovery of Costs and Attorneys' Fees. In the event
arbitration (or, despite the Parties agreement to the Claims through binding
arbitration, litigation) arising out of this Agreement is initiated by either
Party, the prevailing Party, after the entry of a final non-appealable order,
shall be entitled to recover from the other Party, as a part of said order, all
court costs, fees and expenses of such arbitration (or litigation), including,
without limitation, reasonable attorneys' fees.
15.5 Choice of Forum. If, despite the Parties' agreement to submit
any Claims to binding arbitration, there are any court proceedings arising out
of or relating to this Agreement or the transactions contemplated hereby, such
proceedings shall be brought and tried in the federal or state courts situated
in the City and County of Denver, Colorado.
15.6 Jury Waivers. THE PARTIES HEREBY WAIVE ANY AND ALL RIGHTS TO
DEMAND A TRIAL BY JURY.
15.7 Limitation of Damages. WHETHER OR NOT OCCASIONED BY A DEFAULT
OR OTHER BREACH OF THIS AGREEMENT, NEITHER PARTY SHALL BE LIABLE TO THE OTHER
PARTY FOR SPECIAL, EXEMPLARY OR PUNITIVE DAMAGES, LOSS OF PROFITS, OR
CONSEQUENTIAL DAMAGES.
15.8 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW
OF THE STATE OF COLORADO, WITHOUT REGARD TO ANY CONFLICT-OF-LAWS PROVISION
THEREOF THAT WOULD OTHERWISE REQUIRE THE APPLICATION OF THE LAW OF ANY OTHER
JURISDICTION.
15.9 LIMITATION OF DAMAGES. WHETHER OR NOT OCCASIONED BY A DEFAULT
OR OTHER BREACH OF THIS FRAC AGREEMENT, NEITHER PARTY SHALL BE LIABLE TO THE
OTHER FOR SPECIAL DAMAGES, EXEMPLARY OR PUNITIVE DAMAGES, LOSS OF PROFITS, OR
CONSEQUENTIAL DAMAGES.
ARTICLE XVI
GENERAL PROVISIONS
16.1 FURTHER ASSURANCES. At any time or from time to time at and
after the Closing, each of the Parties shall, at the request of the other,
execute and deliver or cause to
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be executed and delivered all the assignments, consents, documents and
instruments, and take or cause to be taken all the other reasonable actions as
may be necessary or desirable to more fully and effectively carry out the
intents and purposes of this Agreement.
16.2 NOTICES. All notices, requests, demands and other
communications required or permitted to be given under this Agreement shall be
deemed to have been duly given if in writing and delivered personally or sent
via first-class, postage prepaid, registered or certified mail (return receipt
requested), or by overnight delivery service or facsimile transmission addressed
as follows:
If to Seller:
Duke Energy Field Services, Inc.
370 - 17th Street, Suite 900
Denver, Colorado 80202
Telephone: (303) 595-3331
Facsimile: (303) 893-2613
Attn: President
and copy to:
Duke Energy Field Services, Inc.
370 - 17th Street, Suite 900
Denver, Colorado 80202
Telephone: (303) 595-3331
Facsimile: (303) 893-8902
Attn: General Counsel
If to Buyer:
TEPPCO Colorado, LLC
2929 Allen Parkway, Suite 3200
Houston, Texas 77019
Attention: President
Telephone: (713) 759-3636
Facsimile: (713) 759-3957
-35-
<PAGE> 40
and copy to:
Texas Eastern Products Pipeline Company
2929 Allen Parkway, Suite 3200
Houston, Texas 77019
Attention: General Counsel
Telephone: (713) 759-3968
Facsimile: (713) 759-3645
Any Party may change the address to which the communications are to be
directed to it by giving notice to the other in the manner provided in this
Section 16.2. Notice by mail shall be deemed to have been given and received on
the third calendar day after posting. Notice by overnight delivery service,
facsimile transmission or personal delivery shall be deemed given on the date of
actual delivery.
16.3 GOVERNING LAW. This Agreement and the performance of the
transactions contemplated hereby shall be governed by and construed and enforced
in accordance with the laws of the State of Colorado, without regard to any
conflict-of-laws provision thereof that would otherwise require the application
of the law of any other jurisdiction.
16.4 ENTIRE AGREEMENT. This Agreement and the Exhibits hereto,
together with the other agreements, conveyance documents and other transfer
documents pursuant to which the Transferred Assets are to be transferred (the
"Transfer Documents"), the other Purchase Agreements and all certificates,
documents, instruments and writings that are delivered pursuant hereto and
thereto sets forth the entire agreement and understanding of the Parties with
respect of the transactions contemplated hereby and supersede all prior
agreements, arrangements and understandings relating to the subject matter
hereof. No representation, promise, inducement or statement of intention with
respect to the subject matter of this Agreement has been made by any Party that
is not embodied in this Agreement and Exhibits hereto, the other Purchase
Agreements, the Transfer Documents, the certificates, documents, instruments and
writings that are delivered pursuant hereto and thereto, and none of the Parties
shall be bound by or liable for any alleged representation, promise, inducement
or statement of intention not so set forth.
16.5 ASSIGNMENT. Neither Party to this Agreement may sell,
transfer, assign, pledge or hypothecate its rights, interests or obligations
under this Agreement without the consent of the other Party.
16.6 SUCCESSORS. This Agreement shall inure to the benefit of, be
binding upon, and be enforceable by the Parties hereto and their respective
successors and permitted assigns.
-36-
<PAGE> 41
16.7 AMENDMENTS; WAIVER. This Agreement may be amended, superseded
or canceled, and any of the terms hereof may be waived, only by a written
instrument specifically stating that it amends, supersedes or cancels this
Agreement or waives any of the terms herein, executed by all Parties or, in the
case of a waiver, by the Party waiving compliance. The failure of any Party at
any time to require performance of any provision herein shall in no manner
affect the right at a later time to enforce the same. No waiver by any Party of
any condition, or of any breach of any term, covenant, representation or
warranty, shall be deemed or constitute a waiver of any other condition, or
breach of any other term, covenant, representation or warranty, nor shall the
waiver constitute a continuing waiver unless otherwise expressly provided.
16.8 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
16.9 WAIVER. The waiver of any breach of any term or condition of
this Agreement shall not be deemed to constitute the waiver of any other breach
of the same or any other term or condition.
16.10 SEVERABILITY. Any provision hereof that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
16.11 NO THIRD PARTY BENEFICIARIES. Except to the extent a third
party is expressly given rights herein, any agreement contained, expressed or
implied in this Agreement shall be only for the benefit of the Parties hereto
and their respective legal representatives, successors and assigns, and such
agreements shall not inure to the benefit of the obligees of any indebtedness of
any Party hereto, it being the intention of the Parties hereto that no person or
entity shall be deemed a third party beneficiary of this Agreement, except to
the extent a third party is expressly given rights herein.
16.12 NEGOTIATED TRANSACTION. The provisions of this Agreement were
negotiated by the Parties hereto, and this Agreement shall be deemed to have
been drafted by all of the Parties hereto.
-37-
<PAGE> 42
IN WITNESS WHEREOF, the Parties have duly executed this Agreement as of
the date first set forth above.
SELLER:
DUKE ENERGY FIELD SERVICES, INC.
By: /s/ DAVID G. THOMPSON
--------------------------------------
Name: David G. Thompson
------------------------------------
Title: Senior Vice President
-----------------------------------
BUYER:
TEPPCO COLORADO, LLC.
By: /s/ CHARLES H. LEONARD
--------------------------------------
Name: Charles H. Leonard
------------------------------------
Title: Manager
-----------------------------------
-38-
<PAGE> 43
Disclosure Letter
to
Asset Purchase Agreement
between
Duke Energy Field Services, Inc.
and
TEPPCO Colorado, LLC
March 31, 1998
<PAGE> 44
Section 5.3(a)
To the Disclosure Letter dated March 31, 1998
1. Hart-Scott-Rodino Antitrust Improvement Act of 1976.
<PAGE> 45
Section 5.3(b)
To the Disclosure Letter dated March 31, 1998
To be completed prior to Closing Date.
<PAGE> 46
Section 5.4(c)
To the Disclosure Letter dated March 31, 1998
This Section 5.4(c) is Intentionally left blank.
<PAGE> 47
Section 5.5(a)
To the Disclosure Letter dated March 31, 1998
1. Spindle Lease Agreement.
2. Award of Arbitration between Nordic Petroleums, Inc.
(Claimant) and Natural Gas Associates, Inc, dated July 18,
1986.
<PAGE> 48
SECTION 5.5(b)
To the Disclosure Letter dated March 31, 1998
WELD SYSTEM
GPA.001.K Acelte Oil
GPA.002.K Snyder Oil Company (was JRC)
GPA.003.K Buck Ltd.
GPA.005.K Sovereign Oil Co.
GPA.006.K Cody/Nordell
GPA.007.K Golden Buckeye (Combined w/GPA.001.L)
GPA.008.KP MGF Oil (A1)
GPA.010.KP Kauffman & Weinberger
GPA.013.KP Rocky Mountain Production Co.
GPA.016.K Great Western Oil Co., Inc.
GPA.017.K Energy Minerals Corp.
GPA.028.K CDM Oil & Gas
GPA.029.KP Centennial Petroleum, Inc.
GPA.029.KP Decalta International Corp.
GPA.032.K Machil-Ross Petroleum
GPA.034.KPT Noarko Resources, Inc.
GPA.035 Shepler & Thomas, Inc.
GPA.038.K Discovery Oil, Ltd.
GPA.039.K Blue Chip Oil, Inc.
GPA.042.K H&C Colton Company
GPA.043.K H&C Colton Company
GPA.044.K Colton & Colton
GPA.045.KP Morgan Energy Corp.
GRA.045.KP Sunshine Valley Petroleum
GPA.049.KPT Rex Monahan
GPA.057.K Basin Exploration, Inc.
GPA.062.K Martinex Corporation
GPA.064.K Weeks Energy Minerals Corp.
GPA.066.K Martinex Corporation
GPA.068.K Morgan Energy
GPA.069.K Eddy Oil Company
GPA.070.K Universal Oil & Gas
GPA.071.K Snyder Oil Company (was JRC)
GPA.072.K Amoco Production Company
GPA.073.KP HELMMCO, Private & Gary-Williams
GPA.076.K Snyder Oil Company (was Energy Oil, Inc.)
GPA.078.K Richardson Oil
GPA.079.K Basin Exploration
GPA.081.K Richardson Oil
GPA.083.K Clark Energy Corporation
GPA.094.K Sunshine Valley Petroleum
GPA.095.K Conquest Oil Company
GPA.096.K Mizel Petro Resources
GPA.099.K Lyco Energy
GPA.101.K Universal Oil & Gas, Inc.
GPA.102.KP Kauffman & Weinberger
GPA.103.K Rock Oil Corporation
GPA.105.K Universal Oil & Gas
GPA.106.K Sunshine Valley Petroleum
GPA.107.KP Shenandoah Production Co.
GPA.108.K Bataa Oil, Inc.
GPA.110.K Blue Chip Oil, Inc.
<PAGE> 49
WELD SYSTEM (Continued)
GPA.111.KP Basin Exploration, Inc.
GPA.113.K Morgan Energy Corp.
GPA.114.K Decalta International
GPA.117.K Bataa Oil, Inc.
GPA.119.K Barrett Energy Co.
GPA.120.K Mission Oil Corporation (replaces GPA.030.K)
GPA.121.K Gerrity Drilling
GPA.123.K Golden Buckeye (Combined with GPA.001.L)
GPA.124.K Amoco Production Co.
(Residue Gas Trans/Purchase)
GPA.125.K Kersey Limited Pshp.
GPA.127.K Eddy Oil Company
GPA.128.K Lyco Energy
GPA.130.K Barrett Energy Co.
GPA.132.K Lyco Acquisition 1984-1
GPA.135.K Eddy Oil Company
GPA.137.K Energy Search & Mgmt.
GPA.138.K The Gerrity Company, Inc.
GPA.139.K Eagle Oil & Gas
GPA.141.K Richardson Oil Company
GPA.142.KP Barrett Energy Company
GPA.143.KP The Quinoco Companies
GPA.144.K Basin Exploration, Inc.
GPA.145.K Elk Exploration
GPA.146.K Bataa, Inc.
GPA.149.K Conquest Oil Company
GPA.154.K Bellwether Expl. Co.
GPA.156.K Eagle Oil & Gas, Inc.
GPA.157.K Cimmarron Oil Inc.
GPA.158.K Misahar Investments, Inc.
GPA.160.K High Country Resources
GPA.161.KP Nielson Enterprises, Inc.
GPA.162.KP Boomer-Sooner Field
GPA.163.K Brown Investment Company
GPA.164.K Morgan Richardson Oper.
GPA.165.K Intermountain Oil Co.
GPA.168.K Berthoud Gas Company
GPA.167.K Bataa Oil, Inc.
GPA.168.K B.E.A. Johnson, Inc.
GPA.169.K Diamond A Corporation
GPA.170.K Basic Earth Science Systems
GPA.175.K Pacific Midland Prod.
GPA.176.K Parker & Parsley
GPA.178.K The Robert W. Gerrity Co.
GPA.179.K Francis Energy, Inc.
GPA.180.K Bataa Oil, Inc.
GPA.183.K Colorado Plains Mgmt. & Invest.
GPA.185.K Mandell-Denver Corporation
GPA.186.K Mazuma Turnkey Contractors, Inc.
GPA.187.K Mazuma Turnkey Contractors, Inc.
GPA.188.K Francis Energy, Inc.
GPA.189.K Francis Energy, Inc.
GPA.193.K Acelte Energy Corporation
GPA.195.K Macey & Mershon Oil Inc.
GPA.197.K Freedom Energy, Inc.
GPA.198.KP Omimex Petroleum, Inc. (Renegade)
GPA.202.K Industrial Gas Associates, Inc.
GPA.210.K K.P. Kauffman Company, Inc.
-2-
<PAGE> 50
WELD SYSTEM (Continued)
GPA.211.K Western Gas Supply Company
GPA.212.K Elk Exploration, Inc.
GPA.213.KP Geo-Tech Production, Inc.
GPA.214.KP Omimex Petroleum, Inc.
GPA.216.K Fountainhead Resources, Ltd.
GPA.217.K Lyco Energy Corporation
GPA.223.K Go Pumping and Consulting, Inc.
GPA.224.K Kloxin Energy, Inc.
GPA.227.K The Robert Gerrity Company
GPA.228.K The Robert Gerrity Company
GPA.229.K Mendell-Denver Corporation
GPA.230.K K.P. Kaufman Company, Inc.
GPA.231.K K.P. Kaufman Company, Inc.
GPA.232.K Basin Exploration, Inc. (Nielson acreage)
GPA.233.K Basin Exploration, Inc. (Byron "J" Sand acreage)
GPA.235.K The Gerrity Oil and Gas Corp.
GPA.236.K Bataa Oil, Inc.
GPA.238.K Greeley Gas Company
GPA.239.K Francis Energy, Inc. (Lesser/Spomer Wells)
GPA.240.K Francis Energy, Inc. (Plumb No. 1 Well)
GPA.241.K Farmoil, Inc.
GPA.242.K Unioil, Inc.
GPA.243.K Martin Exploration Mgmt. Corp.
GPA.244.K Mendell-Denver Corporation
GPA.246.K Western Production Company
GPA.247.K Timka Resources, Ltd.
GPA.248.K Diamondback Oil Corporation
GPA.249.K Blue Chip Oil, Inc.
GPA.250.K Francis Energy, Inc.
GPA.251.K Snyder Oil Company
GPA.253.K Snyder Operating Partnership
(Natural Gas Exchange Agr.)
GPA.255.K Elk Exploration, Inc.
GPA.257.K Morning Fresh Farms, Inc.
GPA.258.K Western Production Company
GPA.260.K Valley Operating, Inc.
GPA.264.K Gerrity Oil & Gas Corporation
GPA.269.K Richardson Operating Company
GPA.267.K K.P. Kauffman Company, Ltd.
GPA.268.K Habersham Energy Company
GPA.269.K Oaks Resources Management, Inc.
GPA.270.K Sandlin Oil Corporation
GPA.271.K Martin Exploration Mgmt. Corp.
GPA.272.K North American Resources
GPA.273.K Credo Petroleum Corporation
GPA.274.K EFTS II, Inc.
GPA.275.K CFG Energy, Inc.
GPA.276.K Vessels
GPA.277.K Parker & Parsley Petroleum Co.
GPA.278.K Cache Exploration
GPA.279.K Basin Exploration, Inc.
GPA.280.K Mendell Petroleum Corporation
GPA.281.K Mineral Resources, Inc.
GPA.283.K Basin Exploration, Inc.
GPA.284.K Barrett Resources Corporation
GPA.285.K Byron Oil Industries, Inc.
GPA.286.K Markus Production, Inc.
GPA.287.K Phil Shepardson
GPA.288.K Freedom Energy, Inc.
-3-
<PAGE> 51
GPA.289.K Basin Exploration, Inc.
GPA.290.K Stephen B. Evans & Co., Alarado Resources Limited and
Alarado Resources Corp.
GPA.291.K Snyder Oil Corporation
GPA.292.K Gusoil-1981, Gusoil-1982 &
K.P. Kaufman Company, Inc.
GPA.293.K Heflin Energy Corporation
GPA.294.K Suzanne D. Bucy
GPA.295.K HS Resources, Inc.
GPA.296.K Blue Chip Oil, Inc.
GPA.297.K Kaiser-Francis Oil Company
GPA.298.K Lyco Energy Corporation
GPA.299.K Prima Energy
GPA.300.K Bataa Oil, Inc.
GPA.301.K Unioil, Inc.
GPA.303.K Basin Exploration
GPA.304.K Bataa Oil, Inc.
GPA.305.K Patina Oil & Gas Corporation (formerly Gerrity)
GPA.306.K Patina Oil & Gas Corporation (formerly Gerrity)
GPA.307.K Prima Oil & Gas Company
GPA.308.K Matrix Energy, L.L.C.
GPA.309.K CDM Oil & Gas
GPA.003.E WEDCO Resources Corp.
GPA.005.E Sentry Oil Corp.
GPA.006.E CWI Oil and Gas
GPA.007.E Trailblazer Oil and Gas (FILES I, II, III)
GPA.010.E Hershey Oil
GPA.011.E Emerald Corporation (f/k/a Petromax)
GPA.013.E PRC Oil and Gas Company
GPA.014.E Catamount Exploration, Inc. (Replaced GPA.069.E)
GPA.015.E Hershey Oil Corporation
GPA.017.E Decalta International Corp.
GPA.020.E Frizzell Oil Company
GPA.021.E R.A. Resource, Inc.
GPA.023.E SHF Partnership
GPA.024.E Bellwether Exploration Co.
GPA.025.E HI-TEC Energy, Inc.
GPA.026.E Frontier Oil & Gas
GPA.027.E Snyder Oil Company
GPA.028.E R.A. Resources, Inc.
GPA.029.E Frizzell Oil Company
GPA.030.E Vantage Oil, Inc.
GPA.032.E R.A. Resources, Inc.
GPA.034.E Vantage Oil, Inc.
GPA.035.E Snyder Oil Company
GPA.037.E Sunset Hill Oil Co., Inc.
GPA.038.E Energex, Inc.
GPA.039.E Gusher Oil & Gas Co., Inc.
GPA.040.E Maze Expl./Golden Buckeye (Combined w/GPA.001.L)
GPA.041.E Barrett Energy Resources
GPA.043.E Aztec Resources Corp.
GPA.044.E Morgan Energy Corp.
GPA.045.E Cache Exploration
GPA.046.E Conquest Oil
GPA.047.E Sunshine Valley Petroleum
GPA.049.E Blue Chip Oil Co.
GPA.052.E Conquest Oil Co.
GPA.053.E Sunshine Valley Petroleum Corporation
GPA.054.E Lone Star Oil Company
-4-
<PAGE> 52
WELD SYSTEM (Continued)
GPA.055.E Sunshine Valley Corp.
GPA.059.E Bellwether Exploration
GPA.063.E Cowan Oil Company
GPA.064.E Grady Oil Company
GPA.065.E Jenex Petroleum Corp. (First City Wells)
GPA.067.E Blue Chip Oil, Inc.
GPA.068.E Jenex Petroleum Corporation (Metro Wells)
GPA.069.E Nautilus Equipment, Inc. (Replaces GPA.014.E)
GPA.071.E Energy Minerals Corporation
GPA.072.E Elwood Oil Company
GPA.073.E Lysander Resources
GPA.074.E Blue Chip Oil, Inc.
GPA.076.E Pantera Energy Corporation
GPA.078.E Blue Chip Oil, Inc.
GPA.080.E Brooks Exploration Inc.
GPA.081.E Brooks Exploration Inc.
GPA.082.E Kauffman & Weinberger, Inc.
GPA.083.E H&R Well Service
GPA.084.E Mendell-Denver Corporation
GPA.085.E Francis Energy, Inc.
GPA.086.E Rico Resources
GPA.001.BT Meco Operating Corporation
GPA.002.BT Reider Oil Corporation
GPA.003.BT Discovery Oil, Ltd.
GPA.004.BT Shepler & Thomas
GPA.005.BT Monfort of Colorado
GPA.006.BT Sovereign Oil Company
GPA.008.BT Jenex Petroleum Corporation (was Petromax)
GPA.009.BT Morning Fresh Farm
GPA.010.BT Duke L. Phillips, Indiv.
GPA.011.BT Elmer E. & Roy Lundvall
GPA.012.BT Rex Monahan, Individual
GPA.014.BT Power Energy Resources
GPA.015.BT Valley View Exploration
GPA.016.BT Belwether Exploration Co.
GPA.019.BT Martin Exploration Mgmt.
GPA.020.BT R.A. Resources
GPA.024.BT Morgan Energy Corporation
GPA.027.BT Sunshine Valley Petroleum
GPA.028.BT Morgan Energy Corporation
GPA.029.BT Richardson Oil Company
GPA.030.BT Lundvall and Associates
GPA.032.BT Bataa Oil, Inc.
GPA.033.BT Martinex Corporation
GPA.034.BT Morgan Energy Corp.
GPA.035.BT Basin Exploration
GPA.036.BT Gerrity Drilling
GPA.037.BT L.M.S. American Holdings
GPA.038.BT BP-34 Limited
GPA.043.BT The Gerrity Company, Inc.
GPA.044.BT Mayers & Company (replaced GPA.018.BT)
GPA.046.BT Lundvall and Associates
GPA.047.BT R.A. Resources, Inc.
GPA.048.BT Oxford Ltd. Partnership
GPA.049.BT Colo. Energy Resources
GPA.051.BT HS Resources, Inc. (Successor to Elk Exploration)
GPA.053.BT Conquest Oil Company
GPA.054.BT Cannon Resources, Inc.
GPA.058.BT New London Oil
-5-
<PAGE> 53
WELD SYSTEM (Continued)
GPA.059.BT Cache Exploration, Inc.
GPA.060.BT New London Oil, Inc.
GPA.061.BT New London Oil, Inc.
GPA.062.BT Eddy Oil Company
GPA.063.BT Lundvall and Associates
GPA.001.EV Elk Exploration, Inc. FILE I & II (Wal-Mart)
GPA.004.EV Eddy Oil Company
GPA.005.EV Unioil
(Unioil Agreements dtd 11/24/84, combined)
GPA.006.EV R.A. Resources, Inc.
GPA.007.EV Barrett Energy Company
GPA.001.L Prima Oil & Gas Company
GPA.002.L Cache Resources/Cache Exp.
GPA.003.L Bellwether Exploration
GPA.004.L Sovereign Oil Company
GPA.005.L Clark Energy Corporation
GPA.006.L R.A. Resources, Inc.
GPA.007.L Coors Energy Company
GPA.008.L Unioil
GPA.009.L Andrau Enterprises, Inc.
GPA.010.L Greeley Gas Company
GPA.011.L Sentry Oil Corporation
GPA.012.L Petro Noel, Inc.
GPA.013.L Eddy Oil
GPA.014.L Elwood Oil Company
GPA.015.L Vantage Oil, Inc.
GPA.016.L Calvin Petroleum Corp.
GPA.017.L Wichita Industries, Inc.
GPA.018.L Andrau Enterprises, Inc.
GPA.019.L Calvin Petroleum Corp.
GPA.020.L Conquest Oil, Inc.
GPA.021.L Basin Exploration, Inc.
GPA.022.L Jason Exploration, Inc.
GPA.024.L Pantera
GPA.025.L Sunshine Valley
GPA.026.L North Colorado Medical Center
GPA.027.L University of Northern Colorado
GPA.028.L Reider Oil
GPA.029.L Lyco Energy
GPA.030.L Snyder Oil Company (f/k/a Energy Oil)
GPA.031.L Four Star Exploration
GPA.032.L Mountain Industrial Gas
GPA.033.L Ideal Basic Industries
GPA.034.L H&C Colton
GPA.035.L Thompson Valley Gas, Inc.
GPA.036.L Cannon Resources, Inc.
GPA.037.L Bristol Production, Inc.
GPA.038.L Energy Minerals Corp.
GPA.039.L Jenex Petroleum Corp.
GPA.040.L Silverado Oil, Inc.
GPA.041.L Eddy Oil Company
GPA.041.L Parker & Parsley
GPA.043.L Cannon Resources, Inc.
GPA.044.L Eagle Oil & Gas, Inc.
GPA.045.L New London Oil
GPA.049.L Elwood Oil Company
GPA.050.L Cache Exploration
GPA.051.L Cowan Oil Company
GPA.053.L Simmons Energy Company
-6-
<PAGE> 54
WELD SYSTEM (Continued)
GPA.056.L Jenex Petroleum Corporation
GPA.057.L Silverado Oil, Inc.
GPA.058.L Coors Energy Company
GPA.059.L Cache Exploration, Inc.
GPA.060.L Prima Exploration
GPA.003BGC Morgan Energy Corporation
GPA.013.BGC Howard Buehler
GPA.015.BGC Sovereign Oil Company
GPA.016.BGC DJ Energy, Inc.
GPA.002.FR San Juan Consortium
GPA.001.PAN Energy Minerals Corporation
GPA.002.PAN Petroleum Energy Corporation
GPA.003.PAN Aexco Petroleum, Inc.
GPA.004.PAN Shepler & Thomas
GPA.005.PAN Davis Oil Company
GPA.006.PAN Polfam Exploration Company
GPA.007.PAN Schmid Properties
GPA.008.PAN Bellwether Exploration Company
GPA.009.PAN Jubilee Pipeline
GPA.010.PAN D&S Oilfield
GPA.012.PAN Colorado Interstate Gas Company
GPA.013.PAN Energy Minerals
GPA.014.PAN Agland, Incorporated
GPA.015.PAN Vessels Oil and Gas Company
GPA.016.PAN Industrial Gas Services, Inc.
GPA.017.PAN Industrial Gas Services, Inc.
GPA.018.PAN Sentry Oil Corporation
GPA.019.PAN Pipeline Corporation of Colorado
GPA.020.PAN Sun Exploration and Production Co.
GPA.021.PAN Classic Petroleum Corp.
GPA.022.PAN Energy Minerals Corporation
GPA.023.PAN Lynx Exploration Company
GPA.024.PAN Regal Petroleum, Ltd.
GPA.025.PAN Regal Petroleum, Ltd.
GPA.026.PAN Petroleum Energy Corporation
GPA.027.PAN Sunset Hill Oil Co.
GPA.028.PAN Colorado Gathering and Processing
GPA.029.PAN Diversified Operating Corporation
GPA.030.PAN Cache Exploration, Inc.
GPA.031.PAN Lysander Resources, Inc.
GPA.032.PAN Diversified Operating Corporation
GPA.033.PAN Jenex Petroleum Corp.
GPA.034.PAN Pan Western 1986 Drilling Program
GPA.035.PAN Alfred Ward & Son
GPA.037.PAN Eagle Energy, Inc.
GPA.037.PAN Merrion Oil & Gas Corporation
GPA.038.PAN Bristol Production, Inc.
GPA.039.PAN Red Wave, Ltd.
GPA.040.PAN American Penn Energy, Inc.
GPA.041.PAN MGF Oil Corporation
GPA.043.PAN Fina Oil & Chemical Company
GPA.044.PAN Energy Minerals/Merrion Oil
GPA.045.PAN Benton Petroleum Company
GPA.046.PAN Weldmor Limited Partnership
GPA.047.PAN Energy Minerals Corporation
GPA.048.PAN Walsh Production, Inc.
GPA.049.PAN Aexco Petroleum, Inc.
GPA.050.PAN Damson Gas Processing Corp.
GPA.053.PAN Pan Western Energy
-7-
<PAGE> 55
WELD SYSTEM (Continued)
GPA.057.PAN Randy Hrvek, Individual
GPA.064.PAN Fina Oil and Chemical Company
GPA.065.PAN Walsh Production, Inc.
GPA.067.PAN Walsh Production, Inc.
GPA.069.PAN Walsh Production, Inc.
GPA.071.PAN Lomita Operating
GPA.072.PAN Cache Exploration, Inc.
GPA.074.PAN Lomita Operating Company
GPA.075.PAN Fina Oil and Chemical Company
GPA.076.PAN Arllan, Inc.
GPA.078.PAN Walsh Production, Inc.
GPA.079.PAN DeClar Oil & Gas, Inc.
GPA.080.PAN Lander Petroleum Co.
GPA.081.PAN Everett Frerichs Oil Properties
GPA.082.PAN H&R Well Services, Inc.
GPA.083.PAN Jenex Petroleum
GPA.084.PAN Petcon Associates Ltd.
GPA.085.PAN Diversified Operating Corporation
GPA.086.PAN Petcon Associates Ltd.
GPA.087.PAN OM Shree Investment Group
GPA.088.PAN Jerry Pettyjohn d/b/a Rocket Petroleum
GPA.089.PAN Tindal Operating Company
GPA.090.PAN Rex Monahan
GPA.091.PAN Diversified Operating Corporation
SPINDLE SYSTEM
GPA.001.S Basin Operating Company
GPA.002.S Colorado Interstate Gas Company
GPA.002.S Colorado Interstate Gas Company
GPA.004.S North American Resources Company
GPA.005.S Martin Oil Services, Inc. (CIG No. 681)
GPA.006.S Martin Oil Services, Inc. (CIG No. 679)
GPA.007.S Machil-Ross Petroleum Company (CIG No. 1047)
GPA.008.S Energy Minerals Corporation (CIG No. 408)
GPA.009.S Kenneth A. Ross, Jr. (CIG No. 402)
GPA.010.S Energy Minerals Corporation (CIG No. 1079)
GPA.011.S Ray O. Brownlle (CIG No. 539)
GPA.012.S Energy Minerals Corporation (CIG No. 1078)
GPA.013.S Snyder Oil Corporation (Amoco/Calvin)
GPA.014.S Vessels Oil & Gas Company
(Natural Gas Exchange Agreement)
GPA.015.S North American Resources Company
GPA.016.S Oaks Resources Management, Inc.
GPA.017.S Meyer Oil Company
GPA.018.S Energy Minerals Corporation
GPA.020.S Basin Exploration
GPA.022.S Amoco Production Company
GPA.024.S Martin Exploration Management Co.
GPA.025.S Heflin Energy Corporation
GPA.026.S Crystal Oil Co.
GPA.027.S K.P. Kaufman Company, Inc. (duplicate file B.8.15.5)
GPA.028.S Top Operating Company
GPA.029.S Machil-Ross Petroleum Company
ROGGEN SYSTEM
GPA.001.R Snyder Oil Corporation
GPA.002.R Basin Exploration, Inc.
GPA.003.R Bataa Oil
-8-
<PAGE> 56
ROGGEN SYSTEM (Continued)
GPA.004.R Bataa Oil
GPA.005.R Churchill Energy, Inc.
GPA.006.R Freedom Energy, Inc.
GPA.007.R Gerrity Oil & Gas Corporation
GPA.008.R Homestead Oil, Inc. (Prima)
GPA.009.R HS Resources
GPA.010.R HS Resources
GPA.011.R Parker and Parsley Devel/Costilla
GPA.012.R Prima Oil & Gas Company
GPA.013.R Prima Oil & Gas Company
GPA.014.R Prima Oil & Gas Company
GPA.015.R Churchill Energy, Inc.
GPA.001.RP Argonex Company
GPA.002.RP Arlian Inc.
GPA.003.RP Arlian Inc.
GPA.004.RP Bolling Oil Properties Inc.
GPA.005.RP Bolling Oil Properties Inc.
GPA.006.RP Cascade Oil & Gas, Inc.
GPA.007.RP Cascade Oil & Gas, Inc.
GPA.008.RP Diversified Operating
GPA.009.RP Diversified Operating
GPA.010.RP Geotech Productions Inc.
GPA.011.RP Geotech Productions Inc.
GPA.012.RP H & R Well Service
GPA.013.RP H & R Well Service (Robin)
GPA.014.RP Habersham Energy
GPA.015.RP HS Resources
GPA.016.RP HS Resources
GPA.017.RP HS Resources
GPA.018.RP Jerry Pettyjohn
GPA.019.RP KP Kaufman
GPA.020.RP Kaiser Francis Oil Company/Welp King
GPA.021.RP Kaiser Francis Oil Company
GPA.022.RP Kaiser Francis Oil Company
GPA.023.RP Larry Brandly
GPA.024.RP Omimex Petroleum
GPA.025.RP Overland Resources
GPA.026.RP P & M Petroleum Management
GPA.027.RP Pozo Resources
GPA.028.RP Prospect Oil, Inc.
GPA.029.RP Prospect Oil, Inc.
GPA.030.RP RC Qualls
GPA.031.RP Resource Technology/Rochester
GPA.032.RP Smith Energy Corp.
GPA.033.RP Smith Energy Corp.
GPA.034.RP Smith Energy Corp.
GPA.035.RP Smith Oil Properties/H & R (Robin)
GPA.036.RP Smith Oil Properties
GPA.037.RP Smith Oil Properties
GPA.038.RP Southmark Acquisitions/P & P
GPA.039.RP T.P. Operating, Inc.
GPA.040.RP Thorofare Resources, Inc.
GPA.041.RP Thorofare Resources, Inc.
GPA.042.RP Thorofare Resources, Inc.
GPA.043.RP Union Pacific Resources Co.
GPA.044.RP DJ Production Services, Inc.
GPA.045.RP Diversified Operating Corporation
GPA.046.RP R.C. Qualls Operating
GPA.047.RP T.P. Operating, Inc.
-9-
<PAGE> 57
ROGGEN SYSTEM (Continued)
GPA.048.RP Diversified Operating Corporation
GPA.049.RP Thorofare Resources, Inc.
GPA.050.RP Arlian, Inc.
GPA.051.RP Arlian, Inc.
GPA.052.RP Omimex International Corp.
GPA.053.RP P&M Petroleum Management
GPA.054.RP Smith Oil Properties, Inc.
GPA.055.RP Smith Oil Properties, Inc.
GPA.056.RP Smith Energy Corporation
GPA.057.RP Cascade Oil & Gas, Inc.
GPA.058.RP Larry Brandly
GPA.059.RP G & R Oil Properties, Inc. (Smtih Energy Corp.)
GPA.060.RP Overland Resources, Ltd.
GPA.061.RP Sovereign Energy L.L.C.
GPA.062.RP Kaiser-Francis Oil Company
GPA.063.RP K.P. Kauffamn Company, Inc.
GPA.064.RP Blue Creek, Inc.
GPA.065.RP Argonex Company
GPA.001RW Frank H. Walsh
GPA.002RW Roggen/Redwave Ltd
GPA.001.RPD Geotech Productions, Inc.
GPA.002.RPD Termo Co.
GPA.001.REG Freedom Energy, Inc.
GPA.002.REG Gerrity Oil & Gas Company
GPA.003.REG Windsor Gas Processing
-10-
<PAGE> 58
Section 5.5(d)
To the Disclosure Letter dated March 31, 1998
This Section 5.5(d) is intentionally left blank.
<PAGE> 59
Section 5.6
To the Disclosure Letter dated March 31, 1998
See attached.
<PAGE> 60
DUKE ENERGY FIELD SERVICES
Weld County Frac / Teppco
Gallons thru
Weld/Spindle
Fracs
-----
1993:
31 1/93 10,280,494
28 2/93 9,810,378
31 3/93 11,903,376
30 4/93 11,400,414
31 5/93 10,241,436
30 6/93 11,278,513
31 7/93 11,331,309
31 8/93 Spindle Frac 11,952,113
30 9/93 12,955,751
31 10/93 13,335,863
30 11/93 12,159,365
31 12/93 12,841,199
-----------
365 139,490,053
1994:
31 1/94 12,729,734
28 2/94 11,462,719
31 3/94 13,482,514
30 4/94 13,031,809
31 5/94 13,511,928
30 6/94 12,767,841
31 7/94 13,246,825
31 8/94 13,182,141
30 9/94 12,311,183
31 10/94 13,144,135
30 11/94 13,273,861
31 12/94 13,173,023
-----------
365 155,317,713
1995:
31 1/95 12,460,977
28 2/95 11,162,928
31 3/95 12,694,270
30 4/95 12,593,754
31 5/95 12,866,513
30 6/95 11,437,069
31 7/95 11,632,921
31 8/95 11,765,828
30 9/95 11,075,157
31 10/95 Roggen Purch 11,668,519
30 11/95 11,946,479
31 12/95 12,317,301
-----------
365 143,621,716
<PAGE> 61
Gallons thru
Weld/Spindle
Fracs
-----
1996:
31 1/96 11,280,575
28 2/96 10,512,118
31 3/96 11,165,131
30 4/96 10,326,611
31 5/96 11,274,169
30 6/96 10,966,910
31 7/96 11,240,743
31 8/96 11,200,899
30 9/96 11,036,549
31 10/96 11,431,839
30 11/96 10,738,358
31 12/96 11,170,282
-----------
365 132,344,184
1997:
31 1/97 10,691,615
28 2/97 10,689,315
31 3/97 11,969,680
30 4/97 11,203,803
31 5/97 11,616,822
30 6/97 11,502,882
31 7/97 12,253,532
31 8/97 13,401,847
30 9/97 12,539,071
31 10/97 12,918,550
30 11/97 12,380,471
31 12/97 13,524,823
-----------
365 144,692,411
<PAGE> 62
Section 5.7
To the Disclosure Letter dated March 31, 1998
This Section 5.7 is intentionally left blank.
<PAGE> 63
Section 5.8(b)
To the Disclosure Letter dated March 31, 1998
#1 OSHA Stipulation dated March 1998.
#2 Pending Claim of the OCAW before the NLRB claiming unfair labor practices
in connection with information requests.
<PAGE> 64
Section 5.10
To the Disclosure Letter dated March 31, 1998
This Section 5.10 is intentionally left blank.
<PAGE> 65
Section 5.11
To the Disclosure Letter dated March 31, 1998
This Section 5.11 is intentionally left blank.
<PAGE> 66
EXHIBIT A
================================================================================
FRACTIONATION AGREEMENT
BETWEEN
DUKE ENERGY FIELD SERVICES, INC.,
AND
TEPPCO COLORADO, LLC
MARCH 31, 1998
================================================================================
<PAGE> 67
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I DEFINITIONS............................................................................... 1
1.1 Certain Defined Terms..................................................................... 1
A. "Adjustment Period" .............................................................. 1
B. "Affiliate" ...................................................................... 1
C. "Asset Purchase Agreement" ....................................................... 2
D. "Claims" ......................................................................... 2
E. "Compensable Amendment" .......................................................... 2
F. "Components" ..................................................................... 2
G. "Day" ............................................................................ 2
H. "Dedicated Assets" ............................................................... 2
I. "Dedicated Gas" .................................................................. 2
J. "Dedicated Gathering Pipelines" .................................................. 3
K. "Dedicated Lands" ................................................................ 3
L. "Dedicated Plants" ............................................................... 3
M. "Dedicated Producer Contracts" ................................................... 3
N. "Delivery Points" ................................................................ 3
O. "Disputed Claims" ................................................................ 3
P. "Duke Energy Indemnified Parties" ................................................ 3
Q. "Force Majeure" .................................................................. 3
R. "Fractionation Fee" .............................................................. 3
S. "Fractionators" .................................................................. 3
T. "Gallon" ......................................................................... 3
U. "Governmental Authority" ......................................................... 4
V. "Greeley Fractionator" ........................................................... 4
W. "Greeley Plant" .................................................................. 4
X. "Initial Period" ................................................................. 4
Y. "Lease" .......................................................................... 4
Z. "Liquidated Damages Formula" ..................................................... 4
AA. "Lost Specification Products" .................................................... 4
BB. "O&M Agreement" .................................................................. 4
CC. "O&M Fee" ........................................................................ 4
DD. "Person" ......................................................................... 4
EE. "Project Agreements" ............................................................. 4
FF. "Raw Product" .................................................................... 5
GG. "Receipt Points" ................................................................. 5
HH. "Sale" ........................................................................... 5
II. "Sale Notice" .................................................................... 5
JJ. "Specification Products" ......................................................... 5
KK. "Spindle Fractionator" ........................................................... 5
LL. "Spindle Plant" .................................................................. 5
MM. "Sublease" ....................................................................... 5
</TABLE>
-ii-
<PAGE> 68
<TABLE>
<S> <C>
NN. "TEPPCO Indemnified Parties" ..................................................... 5
OO. "Year" ........................................................................... 5
1.2 References................................................................................ 5
1.3 Headings.................................................................................. 6
ARTICLE II TERM AND TERMINATION...................................................................... 6
2.1 Term...................................................................................... 6
2.2 Termination by TEPPCO..................................................................... 6
2.3 Termination by Duke Energy................................................................ 7
2.4 Payment of Liquidated Damages............................................................. 7
ARTICLE III DUKE ENERGY'S RIGHTS AND OBLIGATIONS...................................................... 7
3.1 Commitment to Process Dedicated Gas and Deliver Raw
Product................................................................................... 7
3.2 Exclusions................................................................................ 8
3.3 Delivery of Raw Product................................................................... 8
3.4 No Reduction of Raw Product Volume........................................................ 8
3.5 Obligation to Obtain Right to Fractionate................................................. 9
3.6 Sale or Conveyance of Dedicated Assets by Duke Energy..................................... 9
ARTICLE IV TEPPCO'S RIGHTS AND OBLIGATIONS........................................................... 11
4.1 Commitment to Fractionate................................................................. 11
4.2 Delivery of Specification Products........................................................ 11
4.3 Installation of Equipment, Improvements and Modifications................................. 11
ARTICLE V TITLE; RISK OF LOSS....................................................................... 12
ARTICLE VI MEASUREMENT, QUALITY AND DELIVERY PRESSURE OF
RAW PRODUCT............................................................................... 12
6.1 Measurement............................................................................... 12
6.2 Quality................................................................................... 12
6.3 Delivery Pressure......................................................................... 12
6.4 Greeley Frac Measurement.................................................................. 13
6.5 Spindle Frac Measurement.................................................................. 13
ARTICLE VII COMPENSATION TO TEPPCO.................................................................... 14
7.1 Fractionation Fee for Initial Period...................................................... 14
7.2 Fractionation Fee for Remainder of Term................................................... 14
ARTICLE VIII TAXES AND OTHER PAYMENTS.................................................................. 14
ARTICLE IX ACCOUNTING PROCEDURE...................................................................... 14
9.1 Billing................................................................................... 14
9.2 Audit Rights.............................................................................. 15
</TABLE>
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<PAGE> 69
<TABLE>
<S> <C> <C>
ARTICLE X PAYMENT AND INTEREST ON LATE PAYMENTS..................................................... 15
10.1 Payment................................................................................... 15
10.2 Interest on Late Payments................................................................. 15
ARTICLE XI FORCE MAJEURE............................................................................. 15
11.1 Effect of Force Majeure................................................................... 15
11.2 Definition of Force Majeure............................................................... 16
11.3 Exceptions to Force Majeure............................................................... 16
11.4 Strikes and Lockouts...................................................................... 16
ARTICLE XII INDEMNIFICATION........................................................................... 16
ARTICLE XIII DISPUTES.................................................................................. 17
13.1 Dispute Resolution; Arbitration........................................................... 17
13.2 Failure to Resolve Through Negotiations................................................... 17
13.3 Arbitration............................................................................... 17
13.4 Recovery of Costs and Attorneys' Fees..................................................... 19
13.5 Choice of Forum........................................................................... 19
13.6 Jury Waivers.............................................................................. 19
13.7 Limitation of Damages..................................................................... 19
13.8 Governing Law............................................................................. 19
ARTICLE XIV REPRESENTATIONS AND WARRANTIES............................................................ 20
14.1 Representations and Warranties of Duke Energy............................................. 20
14.2 Representations and Warranties of TEPPCO.................................................. 21
ARTICLE XV GENERAL PROVISIONS........................................................................ 22
15.1 Notices................................................................................... 22
15.2 Waiver.................................................................................... 23
15.3 Entire Agreement.......................................................................... 23
15.4 Successors and Assigns.................................................................... 23
15.5 Conflicts................................................................................. 23
15.6 Laws and Regulations...................................................................... 23
15.7 Recording................................................................................. 24
15.8 Severability.............................................................................. 24
15.9 Time of Essence........................................................................... 24
15.10 Captions.................................................................................. 24
15.11 Schedules and Exhibits.................................................................... 24
15.12 No Partnership............................................................................ 24
15.13 No Third Party Beneficiaries.............................................................. 24
15.14 Mutual Cooperation; Further Assurances.................................................... 24
15.15 Survival.................................................................................. 24
15.16 Other Project Agreements.................................................................. 24
15.17 Amendments; Changes; Modifications........................................................ 25
</TABLE>
-iv-
<PAGE> 70
FRACTIONATION AGREEMENT
THIS FRACTIONATION AGREEMENT (this "Agreement") is made and entered
into this 21st day of April, 1998, but effective 11:59 p.m. (Denver, Colorado
time) on the 31st day of March 1998 (the "Effective Date"), by and between Duke
Energy Field Services, Inc., a Colorado corporation ("Duke Energy") and TEPPCO
Colorado, LLC, a Delaware limited liability company ("TEPPCO"). Each of TEPPCO
and Duke Energy are sometimes referred to individually as a "Party" and
collectively as the "Parties."
RECITALS
A. Duke Energy has quantities of Raw Product (as defined herein) which are
available for fractionation.
B. TEPPCO is the owner of the Fractionators (as defined herein).
C. It is the mutual desire of Duke Energy and TEPPCO that TEPPCO receive
Duke Energy's Raw Product at the Receipt Points (as defined herein) and
deliver to Duke Energy, Specification Products (as defined herein) at
the Delivery Points (as defined herein).
D. Simultaneously with the execution of this Agreement, Duke Energy and
TEPPCO have entered into that certain Operation and Maintenance
Agreement dated of even date herewith (the "O&M Agreement"), pursuant
to which Duke Energy shall operate and maintain the Fractionators in
accordance with the terms thereof.
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of
which are hereby acknowledged, the Parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Defined Terms. Unless the context otherwise requires, the
following terms shall have the respective meanings set forth in this Section
1.1:
A. "Adjustment Period" shall have the meaning given such term in
Section 3.4 hereof.
B. "Affiliate" shall mean, when used with respect to a specified
Person, any other Person directly controlled by or under the
specified Person.
<PAGE> 71
For purposes of this definition "control", when used with respect
to any specified Person, means the power to direct the management
and policies of the Person whether through the ownership of
voting securities or by contract; and the term "controlled" have
the meanings correlative to the foregoing. Notwithstanding the
foregoing, the term "Affiliate" when applied to Duke Energy shall
not include Duke Energy Trading & Marketing, L.L.C. ("DETM"),
TEPPCO, Texas Eastern Products Pipeline Company, a Delaware
corporation ("Texas Eastern"), TEPPCO Partners L.P., a Delaware
limited partnership (the "Partnership") or any entities owned,
directly or indirectly by the Partnership (collectively with
Texas Eastern and the Partnership but excluding DETM, the "TEPPCO
Entities"); and as applied to TEPPCO, shall not include Duke
Energy, Duke Energy Corporation, a Delaware corporation, or any
entities owned, directly or indirectly by Duke Energy Corporation
other than the TEPPCO Entities.
C. "Asset Purchase Agreement" shall mean that certain Asset Purchase
Agreement dated March 31, 1998, by and between Duke Energy, as
"Seller," and TEPPCO, as "Buyer".
D. "Claims" shall have the meaning given such term in Article VIII
hereof.
E. "Compensable Amendment" shall mean an amendment or modification
to a Dedicated Producer Contract that could cause a reduction in
the volume of Specification Product delivered by TEPPCO to Duke
Energy hereunder for which TEPPCO would have, if not for such
amendment or modification, received a Fractionation Fee
hereunder.
F. "Components" shall mean the individual hydrocarbon constituents
of ethane, propane, isobutane, normal butane, isopentane, normal
pentane, hexanes and other heavier hydrocarbons.
G. "Day" shall mean a period of time commencing at 8:00 a.m.
(Denver, Colorado time) on a calendar day and ending at 8:00 a.m.
(Denver, Colorado time) on the next succeeding calendar day.
H. "Dedicated Assets" shall have the meaning given such term in
Section 3.6 hereof.
I. "Dedicated Gas" shall mean all natural gas that Duke Energy or
any of its Affiliates now or hereafter owns or has the
contractual right to
<PAGE> 72
fractionate the natural gas liquids derived therefrom and which
is (i) produced from the Dedicated Lands, (ii) transported
through any of the Dedicated Gathering Pipelines, (iii) subject
to the Dedicated Producer Contracts or (iv) processed in any of
the Dedicated Plants.
J. "Dedicated Gathering Pipelines" shall mean all present and
future natural gas gathering pipelines which are now or hereafter
owned or controlled, in whole or in part, by Duke Energy or any
of its Affiliates and located on the Dedicated Lands.
K. "Dedicated Lands" shall mean the lands described on the attached
Exhibit A.
L. "Dedicated Plants" shall mean all present and future natural gas
processing plants which are now or hereafter owned or controlled,
in whole or in part, by Duke Energy or any of its Affiliates and
located on the Dedicated Lands, including, without limitation,
the natural gas processing plants described on the attached
Exhibit B.
M. "Dedicated Producer Contracts" shall mean all present and future
contracts under which Duke Energy or any of its Affiliates has
the right to fractionate natural gas liquids derived from natural
gas insofar as it is produced from any of the Dedicated Lands,
including without limitation, the contracts more particularly
described on the attached Exhibit C.
N. "Delivery Points" shall mean the points identified as the
Delivery Points on the drawings set forth on the attached
Exhibits D-1, D-2, D- 3, D-4, E-1 and E-2, being the points at
which the Specification Products are delivered from the
Fractionators into Duke Energy's facilities.
O. "Disputed Claims" shall have the meaning given such term in
Section 13.1 hereof.
P. "Duke Energy Indemnified Parties" shall have the meaning given
such term in Section 12.2 hereof.
Q. "Force Majeure" shall have the meaning given such term in Section
11.2 hereof.
-3-
<PAGE> 73
R. "Fractionation Fee" shall have the meaning given such term in
Section 7.1 hereof.
S. "Fractionators" shall mean the Greeley Fractionator and the
Spindle Fractionator.
T. "Gallon" shall mean the unit of volume used for the purpose of
measurement of liquid. One U.S. liquid gallon contains 231 cubic
inches when the liquid is at a temperature of sixty degrees
Fahrenheit (60(degree)F) and at the equilibrium vapor pressure of
the liquid being measured.
U. "Governmental Authority" shall mean any entity of or pertaining
to government, including any federal, state, local, other
governmental or administrative authority, agency, court,
tribunal, arbitrator, commission, board or bureau.
V. "Greeley Fractionator" shall mean the fractionation facilities
located within Area 1 and Area 2 identified in red on the
attached Exhibit D and all piping connecting the equipment listed
in red on the attached Exhibit D, which are located within the
Greeley Plant, which fractionation facilities are used for the
purpose of fractionation of Raw Product into Specification
Products.
W. "Greeley Plant" shall mean Duke Energy's Greeley Natural Gas
Processing Plant located in the SW1/4 of Section 25, Township 5
North, Range 66 West, Weld County, Colorado.
X. "Initial Period" shall mean the period of time beginning on the
Effective Date through and including March 31, 2008.
Y. "Lease" shall mean that certain Lease Agreement dated of even
date herewith by and between Duke Energy, as "Lessor," and
TEPPCO, as "Lessee."
Z. "Liquidated Damages Formula" shall have the meaning given such
term in Section 3.6 hereof.
AA. "Lost Specification Products" shall mean those volumes of
Specification Products that are not delivered by TEPPCO to Duke
Energy hereunder because of a Compensable Amendment or a Sale of
all or any part of the Dedicated Assets, as the case maybe.
-4-
<PAGE> 74
BB. "O&M Agreement" shall have the meaning given such term in the
Recitals hereof.
CC. "O&M Fee" shall have the meaning given such term in the O&M
Agreement.
DD. "Person" shall mean any individual, corporation, partnership,
joint venture, association, limited liability company, joint
stock company, trust, unincorporated organization, Governmental
Authority or government (or agency or political subdivision
thereof).
EE. "Project Agreements" shall mean collectively, this Agreement, the
Lease, the Sublease and the O&M Agreement.
FF. "Raw Product" shall mean the mixture of Components remaining
after the processing of the Dedicated Gas.
GG. "Receipt Points" shall mean the points identified as the Receipt
Points on the drawings set forth on the attached Exhibits D-1,
D-3 and E-1, being the inlet of the Fractionators.
HH. "Sale" shall have the meaning given such term in Section 3.6
hereof.
II. "Sale Notice" shall have the meaning given such term in Section
3.6 hereof.
JJ. "Specification Products" shall mean the Components fractionated
from the Raw Product delivered to the Fractionators.
KK. "Spindle Fractionator" shall mean the fractionation facilities
identified in red on the attached Exhibit E, which are located
within the Spindle Plant, which fractionation facilities are used
for the purpose of fractionation of Raw Product into
Specification Products.
LL. "Spindle Plant" shall mean Duke Energy's Spindle Natural Gas
Processing Plant located in the SW1/4 of Section 34, Township 2
North, Range 67 West, Weld County, Colorado.
MM. "Sublease" shall mean that certain Sublease Agreement dated of
even date herewith by and between Duke Energy, as "Sublessor,"
and TEPPCO, as "Sublessee."
-5-
<PAGE> 75
NN "TEPPCO Indemnified Parties" shall have the meaning given such
term in Article VIII hereof.
OO. "Year" shall mean a period of 365 consecutive Days; provided,
however that any year which contains the date of February 29
shall consist of 366 consecutive Days.
1.2 References. As used in this Agreement, unless expressly stated
otherwise, references to (a) "including" mean "including, without limitation",
and the words "hereof", "herein", and "hereunder", and similar words, refer to
this Agreement as a whole and not to any particular Article, provision, section
or paragraph of this Agreement and (b) "or" mean "either or both". Unless
otherwise specified, all references in this Agreement to Sections, paragraphs,
Exhibits or Schedules are deemed references to the corresponding Sections,
paragraphs, Exhibits or Schedules in this Agreement.
1.3 Headings. The headings of the Sections of this Agreement and of the
Schedules and Exhibits are included for convenience only and shall not be deemed
to constitute part of this Agreement or to affect the construction or
interpretation hereof or thereof.
ARTICLE II
TERM AND TERMINATION
2.1 Term. This Agreement shall be effective as of March 31, 1998 at
11:59 p.m. (Denver, Colorado time), and shall continue in effect for a primary
term ending March 31, 2018 at 11:59 p.m. (Denver, Colorado time), and shall
continue in effect from Year to Year thereafter; provided that either Party
shall have the right to terminate this Agreement effective March 31, 2018 at
11:59 p.m. (Denver, Colorado time), or any anniversary of such date by giving
the other Party at least six (6) months prior written notice.
2.2 Termination by TEPPCO. At the option of TEPPCO, the Project
Agreements shall all, but not less than all, terminate upon the happening of one
or more of the following events:
A. Proceedings shall be commenced by or against Duke Energy for any
relief under any bankruptcy or insolvency law, or any law relating
to the relief of debtors, readjustment of indebtedness,
reorganization, arrangement, composition, or extension; and, if
such proceedings have been commenced by a Person other than Duke
Energy, such proceeding shall not have been dismissed, nullified,
stayed, or otherwise rendered
-6-
<PAGE> 76
ineffective (but then only so long as such stay shall continue in
force or such ineffectiveness shall continue) within ninety (90)
days after such proceedings shall have been commenced.
B. A decree or order of a court having jurisdiction in the premises
for the appointment of a receiver or liquidator or trustee or
assignee in bankruptcy or insolvency of Duke Energy or of a
substantial part of Duke Energy's property, or for the winding up
or liquidation of its affairs, shall have been entered, and such
decree or order shall have remained in force undischarged and
unstayed for a period of ninety (90) days, or any substantial part
of the property of Duke Energy shall be sequestered or attached and
shall not be returned to the possession of Duke Energy or released
from such attachment within ninety (90) days thereafter.
C. Duke Energy shall make a general assignment for the benefit of
creditors or shall admit in writing its inability to pay its debts
generally as they become due.
D. The filing of a certificate of dissolution by Duke Energy under the
laws of the state of its incorporation, or the entering of a final
order dissolving Duke Energy by any court of competent
jurisdiction.
E. There is a material default (other than the payment of money) by
Duke Energy under any of the Project Documents and such default
remains uncured for a period of thirty (30) days after the receipt
by Duke Energy from TEPPCO of written notice describing such
default in reasonable detail, or if the default is such that it
cannot be cured within such thirty (30) day period, Duke Energy
fails to commence action within such thirty (30) day period which
is calculated to cure such default and thereafter diligently pursue
such action to completion.
F. Duke Energy fails to make any payment when due under any of the
Project Agreements and such failure continues for thirty (30) days
after the receipt by Duke Energy from TEPPCO of written notice
thereof.
2.3 Termination by Duke Energy. At the option of Duke Energy, the
Project Agreements shall all, but not less than all, terminate upon the
happening of the following event:
-7-
<PAGE> 77
A. TEPPCO fails to make any payment when due under any of the Project
Agreements and such failure continues for thirty (30) days after
the receipt by TEPPCO from Duke Energy of written notice thereof.
2.4 Payment of Liquidated Damages. Upon termination of the Project
Agreements by TEPPCO pursuant to Section 2.2 hereof, (i) Duke Energy shall pay
to TEPPCO within ten (10) days after any such termination, liquidated damages
calculated in accordance with the Liquidated Damages Formula and (ii) TEPPCO
shall convey the Fractionators to Duke Energy, free of all liens and
encumbrances created by, through or under TEPPCO. The Parties agree that the
actual damages to TEPPCO in the event of the breach of any of the Project
Documents by Duke Energy are impractical to ascertain and the amount of the
liquidated damages as determined in accordance with this Section 2.4 is a
reasonable estimate thereof and TEPPCO's sole and exclusive remedy with respect
thereto.
ARTICLE III
DUKE ENERGY'S RIGHTS AND OBLIGATIONS
3.1 Commitment to Process Dedicated Gas and Deliver Raw Product. Duke
Energy shall cause the Dedicated Gas to be processed and all Raw Product to be
delivered to TEPPCO at the Receipt Points for fractionation under the terms of
this Agreement, except as excluded pursuant to Section 3.2; provided, however,
if due to legitimate operational constraints or restrictions Duke Energy is
unable to process certain volumes of Dedicated Gas and deliver the Raw Product
derived therefrom to TEPPCO, then, provided that Duke Energy (i) notifies TEPPCO
of the occurrence of such operational constraints or restrictions as soon as
reasonably possible and (ii) uses commercially reasonable efforts to remove such
operational constraints and/or restrictions as soon as reasonably possible, Duke
Energy shall be relieved of its obligation to deliver such volumes of Raw
Product to TEPPCO for fractionation hereunder to the extent, and only to the
extent, that such operational constraints or restrictions exist and prevent such
delivery. TEPPCO acknowledges that as of the date hereof, Duke Energy is
diverting certain volumes of Dedicated Gas to Amoco's Wattenberg Natural Gas
Processing Plant due to legitimate operational constraints.
3.2 Exclusions. Any volumes of Raw Product in excess of those which
TEPPCO is able to physically accept for delivery and fractionate pursuant to
Article IV, are excepted from Duke Energy's commitment in Section 3.1.
3.3 Delivery of Raw Product. Duke Energy shall use commercially
reasonable efforts to deliver Raw Product to TEPPCO at the Receipt Points at a
flow rate that the Fractionators are physically capable of handling.
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3.4 No Reduction of Raw Product Volume.
(a) If Duke Energy enters into a Compensable Amendment, then Duke
Energy shall keep TEPPCO whole for any loss of Specification Products
attributable thereto by paying to TEPPCO, within thirty (30) days after any such
loss first occurs, liquidated damages calculated in accordance with the
Liquidated Damages Formula, assuming that (i) V is equal to the annual
Specification Product volume (in Gallons) that would have been lost during the
immediately preceding Year if such loss had occurred one Year earlier, (ii) N is
equal to the Fractionation Fee that would have been paid on the Lost
Specification Products attributable to such Compensable Amendment and (iii) A is
equal to the contract Year in which such loss occurs; provided, however, if the
cumulative effect of all losses occurring during any twelve (12) month period
(an "Adjustment Period") attributable to Compensable Amendments is a reduction
in the volumes of Specification Products delivered by TEPPCO to Duke Energy
during the Adjustment Period by an amount in excess of twenty-five percent (25%)
of the volumes of Specification Products delivered by TEPPCO to Duke Energy in
the twelve (12) month period immediately preceding such Adjustment Period, then
TEPPCO shall have the right, at its option, to terminate the Project Agreements
and Duke Energy shall pay to TEPPCO within ten (10) days after any such
termination, liquidated damages calculated in accordance with the Liquidated
Damages Formula; and further provided, and except as provided in (c) below Duke
Energy shall not be required to pay a Fractionation Fee to TEPPCO on Lost
Specification Products on which Duke Energy had previously paid liquidated
damages to TEPPCO. The Parties agree that the actual damages to TEPPCO in the
event of a Compensable Amendment are impractical to ascertain and the amount of
the liquidated damages as determined in accordance with this Section 3.4 is a
reasonable estimate thereof and TEPPCO's sole and exclusive remedy with respect
thereto.
(b) Duke covenants and agrees to deliver to TEPPCO (i) copies of all
Compensable Amendments promptly after execution thereof and (ii) upon TEPPCO's
request, copies of other amendments to the Dedicated Producer Contracts.
(c) If, subsequent to a loss attributable to a Compensable Amendment,
the volumes of Raw Product attributable to such Compensable Amendment are later
delivered by Duke Energy to TEPPCO for fractionation in the Fractionators, then
Duke Energy shall pay to TEPPCO a Fractionation Fee on the amount, if any, by
which (i) the actual volumes of Lost Specification Products attributable to such
Compensable Amendment in each Year during the remainder of the term hereof
exceeds (ii) the volumes of Lost Specification Products attributable to such
Compensable Amendment on which TEPPCO was paid liquidated damages pursuant to
the Liquidated Damages Formula for each such Year.
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3.5 Obligation to Obtain Right to Fractionate. With respect to any
future agreement that Duke Energy or any of its Affiliates enters into
pertaining to natural gas that (i) is produced from the Dedicated Lands, (ii) is
transported through any of the Dedicated Gathering Pipelines, (iii) becomes
subject to a Dedicated Producer Contract or (iv) is processed in any of the
Dedicated Plants, Duke Energy shall use commercially reasonable efforts to
obtain, or cause its Affiliate to obtain, the right to process such natural gas
and fractionate the natural gas liquids derived therefrom.
3.6 Sale or Conveyance of Dedicated Assets by Duke Energy. If, during
the term of this Agreement, Duke Energy or any of its Affiliates desires to
sell, assign, convey or otherwise transfer (a "Sale") any of their respective
control, rights, titles or other interests in and to all or any part of any of
this Agreement, the Dedicated Gas, Dedicated Producer Contracts, the Dedicated
Gathering Pipelines and/or the Dedicated Plants (collectively, the "Dedicated
Assets") then Duke Energy shall notify TEPPCO in writing of any such Sale (a
"Sale Notice") and the identity of the purchaser at least sixty (60) days prior
to the proposed closing of any such sale. The rights of TEPPCO with respect to
any such Sale shall then be determined by the nature of such Sale as follows:
A. If such Sale involves all or a material part of (i) the Dedicated
Assets and/or (ii) Duke Energy's interest in this Agreement, upon
the receipt of a Sale Notice, TEPPCO shall have the right to
terminate this Agreement effective as of the closing of such Sale
by delivering written notice of termination to Duke Energy within
thirty (30) days after receipt of the Sale Notice. If TEPPCO elects
to terminate this Agreement pursuant to the immediately preceding
sentence, then Duke Energy and TEPPCO shall be relieved of all
further obligations and liabilities under the Project Agreements as
of the closing of the Sale, except for those obligations and
liabilities that survive termination, and within ten (10) days
after such termination, (i) Duke Energy shall pay to TEPPCO
liquidated damages calculated in accordance with the formula set
forth on the attached Exhibit F (the "Liquidated Damages Formula")
and (ii) TEPPCO shall convey the Fractionators to Duke Energy, free
of all liens and encumbrances created by, through or under TEPPCO.
If TEPPCO fails to timely respond to a Sale Notice or responds and
elects to not terminate this Agreement:
(1) if such Sale involves an assignment of all of Duke Energy's
interest in this Agreement, then, as of the closing of such
Sale, Duke Energy shall be relieved of all further
obligations and
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liabilities under this Agreement accruing after the date of
any such assignment, and
(a) if such Sale also includes the Greeley Plant, then, as
of the closing, Duke Energy shall be relieved of all
further obligations and liabilities accruing after the
date of assignment under (1) the Lease and (2) the O&M
Agreement to the extent applicable to the Greeley
Fractionator; and
(b) if such Sale also includes the Spindle Plant, then, as
of the closing, Duke Energy shall be relieved of all
further obligations and liabilities accruing after the
date of assignment under (1) the Sublease and (2) the
O&M Agreement to the extent applicable to the Spindle
Fractionator as of the closing of the Sale; or
(2) if such Sale does not involve an assignment of Duke
Energy's interest in this Agreement, and as a result of
such Sale, there are Lost Specification Products, then
Duke Energy shall keep TEPPCO whole for such loss by
paying to TEPPCO, within thirty (30) days after the closing
of such Sale, liquidated damages calculated in accordance
with the Liquidated Damages Formula, assuming that (i) V is
equal to the annual Specification Product volume (in
Gallons) attributable to the Dedicated Assets sold for
the Year immediately preceding the date of closing of such
Sale, (ii) N is equal to the Fractionation Fee that would
have been paid on the Lost Specification Products
attributable to such Sale and (iii) A is equal to the
contract Year in which the date of closing of such Sale
occurs.
B. If such Sale does not involve a material part of the Dedicated
Assets or Duke Energy's interest in this Agreement, and as a result
of such Sale, there are Lost Specification Products, then Duke
Energy shall keep TEPPCO whole for such loss by paying to TEPPCO,
within thirty (30) days after the closing of such Sale, liquidated
damages calculated in accordance with the Liquidated Damages
Formula, assuming that (i) V is equal to the annual Specification
Product volume (in Gallons) attributable to the Dedicated Assets
sold for the Year immediately preceding the date of closing of such
Sale, (ii) N is equal to the Fractionation Fee that would have been
paid on the Lost Specification Products attributable to such Sale
and (iii) A is equal to the contract Year in which the date of
closing of such Sale occurs.
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As used in this Section 3.6, the term "material" shall mean, individually or in
the aggregate, any Sale or Sales of Dedicated Assets which produce, gather,
transport and/or process natural gas and/or natural gas liquids which contribute
more than ten percent (10%) of the Raw Product volumes as reasonably estimated
at the time of the Sale. The Parties agree that the actual damages to TEPPCO in
the event of a Sale are impractical to ascertain and the amount of the
liquidated damages as determined in accordance with this Section 3.6 is a
reasonable estimate thereof and TEPPCO's sole and exclusive remedy with respect
thereto.
ARTICLE IV
TEPPCO'S RIGHTS AND OBLIGATIONS
4.1 Commitment to Fractionate. Subject to the physical capacity and
capabilities of the Fractionators, TEPPCO shall accept delivery of and provide
fractionation on a firm basis for (i) up to a maximum of 378,000 Gallons per Day
of Raw Product delivered by Duke Energy to TEPPCO at the Receipt Point for the
Greeley Fractionator and (ii) up to a maximum of 126,000 Gallons per Day of Raw
Product delivered by Duke Energy to TEPPCO at the Receipt Point for the Spindle
Fractionator. Volumes of Raw Product in excess of such amounts per Day will be
accepted by TEPPCO for fractionation on a space available basis at the
Fractionators. With respect to Lost Specification Products for which Duke Energy
has previously paid liquidated damages to TEPPCO, TEPPCO will fractionate such
Lost Specification Products should they again be delivered to TEPPCO but will
not be obligated to pay an O&M Fee to Duke Energy pursuant to the terms of the
O&M Agreement except on volumes for which a Fractionation Fee is paid pursuant
to Section 3.4(c) hereof.
4.2 Delivery of Specification Products. Subject to the physical
capacity and capabilities of the Fractionators and normal processing and
measurement gains and losses, TEPPCO shall deliver to Duke Energy at the
Delivery Points the Specification Products which Duke Energy requests to be
fractionated.
4.3 Installation of Equipment, Improvements and Modifications. TEPPCO
shall have the right to install additional equipment and/or make improvements or
modifications to the Fractionators, provided that the same shall not
unreasonably interfere with Duke Energy's operations at the Greeley Plant and/or
Spindle Plant or reduce past operating efficiencies of the Fractionators.
ARTICLE V
TITLE; RISK OF LOSS
Duke Energy represents and warrants to TEPPCO that it has the right to
cause to be fractionated the Raw Product delivered hereunder. Prior to delivery
of the Raw Product to TEPPCO at the Receipt Points, custody and risk of loss to
the Raw Product shall remain with Duke Energy. Custody and risk of loss of the
Raw Product shall transfer to TEPPCO at the Receipt Points, subject to Duke
Energy's right to receive Specification Products attributable thereto at the
Delivery Points.
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Custody and risk of loss of the Product shall transfer back to Duke Energy when
the Specification Products are delivered to Duke Energy at the Delivery Points.
Title to the Raw Product and the Specification Products shall remain in Duke
Energy at all times. TEPPCO shall at no time take title to the Raw Product or
the resulting Specification Products. TEPPCO shall not encumber or cause to be
encumbered Specification Products returned to Duke Energy.
ARTICLE VI
MEASUREMENT, QUALITY AND DELIVERY PRESSURE OF RAW PRODUCT
6.1 Measurement. Volumes of Specification Products shall be measured
according to one of the following procedures:
(a) By scaled weight based on GPA Standard 8186-86 (Measurement of
Liquid Hydrocarbons by Truck Scales);
(b) By mass measurement based on Chapter 4 (Proving Systems), Chapter 5
(Liquid Metering) and Chapter 14.7 (Mass Measurement of Natural Gas Liquids) of
the American Petroleum Institute Manual of Petroleum Measurement Standards and
(ii) calculated based on Chapter 14.4 (Converting Mass of Natural Gas Liquids
and Vapors to Equivalent Liquid Volumes) of the American Petroleum Institute
Manual of Petroleum Measurement Standards; or
(c) Ethane (C2) shall be measured in a vapor phase by orifice
measurement based on API Chapter 21 (Flow Measurement Using Electronic Metering
Systems) and API Chapter 14-3 (Natural Gas Fluids Measurement, Concentric,
Square-Edged Orifice Meters).
6.2 Quality. Raw Product delivered by Duke Energy to TEPPCO at the
Receipt Points shall not be deleterious to the operation of, or otherwise cause
damage to, the Fractionators. TEPPCO shall have the right to reject, and refuse
to fractionate, any Raw Product which does not meet such standards.
6.3 Delivery Pressure. Raw Product shall be delivered by Duke Energy to
TEPPCO at the Receipt Points at sufficient pressure to maintain the Raw Product
in a liquid state at all times. TEPPCO shall have the right to reject, and
refuse to fractionate, any Raw Product which is not in a liquid state.
6.4 Greeley Frac Measurement. Gallons of Specification Products
delivered by TEPPCO at the Greeley Fractionator shall be measured and calculated
as follows:
(a) With respect to ethane recovered as a vapor, the vapors shall be
measured to determine the volume measured in thousand cubic feet
("MCF") and sampled to determine the gallons per MCF ("GPM"); then
the gallons are determined by
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multiplying the number of MCF's contained in the vapor stream
times the GPM's which are attributable to C2 (ethane) and heavier
components of the vapor.
(b) The Specification Product recovered as a liquid shall be measured
as follows: the ending tankage inventory minus beginning tankage
inventory plus sales of the Specification Product less the
Specification Product delivered to the Greeley Fractionator from
the Spindle Plant.
(c) The formula for the foregoing calculations is set forth on the
attached Exhibit H.
6.5 Spindle Frac Measurement. Gallons of Specification Products
delivered by TEPPCO at the Spindle Fractionator shall be measured and calculated
as follows:
(a) With respect to ethane recovered as a vapor, the vapors shall be
measured to determine the volume measured in thousand cubic feet
("MCF") and sampled to determine the gallons per MCF ("GPM"); then
the gallons are determined by multiplying the number of MCF's
contained in the vapor stream times the GPM's which are
attributable to C2 (ethane) and heavier components of the vapor.
(b) The Specification Product recovered as a liquid shall be measured
as follows: the ending tankage inventory minus beginning tankage
inventory plus sales of the Specification Product (including
deliveries to the Greeley Fractionator) plus sales of
Specification Product delivered to the Amoco Pipeline.
(c) The formula for the foregoing calculations is set forth on the
attached Exhibit I.
ARTICLE VII
COMPENSATION TO TEPPCO
7.1 Fractionation Fee for Initial Period. As full consideration for the
fractionation services provided hereunder, Duke Energy shall pay to TEPPCO a fee
(the "Fractionation Fee") for each Gallon of Specification Product delivered to
Duke Energy by TEPPCO at the Delivery Points (as measured in accordance with
Article VI herein) during the Initial Period as follows:
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<TABLE>
<CAPTION>
Gallons/Year Ending on Each Fractionation
Anniversary of the Effective Date Fee/Gallon
- --------------------------------- ------------
<S> <C>
first 25 million Gallons $0.0825
next 25 million Gallons (25,000,001 to 50,000,000) $0.0725
next 25 million Gallons (50,000,001 to 75,000,000) $0.0675
next 25 million Gallons (75,000,001 to 100,000,000) $0.0600
next 35 million Gallons (100,000,001 to 135,000,000) $0.0000
over 135 million Gallons $0.0100
</TABLE>
7.2 Fractionation Fee for Remainder of Term. As full consideration for
the fractionation services provided hereunder, Duke Energy shall pay to TEPPCO a
Fractionation Fee of $0.0425 for each Gallon of Specification Product delivered
to Duke Energy by TEPPCO at the Delivery Points (as measured in accordance with
Article VI herein) during the period of time beginning on the day after the
expiration of the Initial Period through and including the last day of the term
of this Agreement.
ARTICLE VIII
TAXES AND OTHER PAYMENTS
Duke Energy shall be responsible for the payment of all royalties,
overriding royalties, and other payments due or to become due on the Dedicated
Gas, Raw Product and/or Specification Products. Any tax (except any future tax
on the fractionation of natural gas liquids which shall be borne and paid
equally by the Parties) applicable to the Dedicated Gas, the Raw Product or the
Specification Products, including but not limited to, any tax applicable to
stored volumes of Raw Product or Specification Products, shall be borne and paid
by Duke Energy unless such tax is by law imposed upon TEPPCO, in which event,
such tax shall be paid by TEPPCO and charged to and reimbursed by Duke Energy.
ARTICLE IX
ACCOUNTING PROCEDURE
9.1 Billing. Statements shall be prepared by Duke Energy and furnished
to TEPPCO before the 20th day of each month for volumes of Specification
Products delivered to Duke Energy at the Delivery Points (as measured in
accordance with Article VI herein) during the prior month, which volumes shall
serve as an estimate of the volumes of Specification Products that will be
delivered to Duke Energy at the Delivery Points during such current month.
Within five (5) days after TEPPCO's receipt of such statement, TEPPCO shall
deliver to Duke Energy an invoice for the Fractionation Fee payable by Duke
Energy to TEPPCO using the volumes of estimated Specification Products covered
by such statement, as adjusted to correct for the effect of the estimate of
volumes contained in the statement delivered during the immediately preceding
month.
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9.2 Audit Rights. In accordance with the Confidentiality Agreement of
even date herewith between the Parties, each Party shall have, at its expense,
the right at all times to examine the books and records of the other Party,
during normal working hours, to the extent necessary to verify the accuracy of
any invoice, statement, charge, computation or demand made under or pursuant to
this Agreement. Each Party agrees to keep records and books of account in
accordance with generally accepted accounting principles in the industry. The
Parties agree that the sole and exclusive remedy and measure of damages for any
improper payments under this Agreement shall be the payment of the amount of
underpayment or the recovery of the amount of overpayment, as the case may be,
during the two (2) year period immediately preceding the date on which a Party
notifies the other Party in writing of an error, mistake, inaccuracy or other
claim with respect to any such invoice, statement, charge, computation or
demand.
ARTICLE X
PAYMENT AND INTEREST ON LATE PAYMENTS
10.1 Payment. Payment for all invoices delivered hereunder will be due
within ten (10) days after receipt.
10.2 Interest on Late Payments. All past due payments hereunder shall
bear interest from the date due until paid at a rate equal to the lesser of (a)
a per annum rate equal to the prime rate of interest charged by Citibank, N.A.
plus five percent (5%) or (b) the maximum non-usurious rate of interest
permitted to be charged under applicable law.
ARTICLE XI
FORCE MAJEURE
11.1 Effect of Force Majeure. In the event of Duke Energy or TEPPCO
being rendered unable, wholly or in part, by Force Majeure (as defined herein)
to carry out its obligations under this Agreement, other than to make payments
due hereunder, it is agreed that on such Party's giving notice and full
particulars (including all supporting documentation) of such Force Majeure to
the other Party as soon as practicable after the occurrence of the cause relied
on, then the obligations of the Parties, so far as they are affected by such
Force Majeure, shall be suspended during the continuance of any inability so
caused but for no longer period. The non-performing Party shall use commercially
reasonable efforts to mitigate the effects of the Force Majeure and remedy its
inability to perform as soon as reasonably possible.
11.2 Definition of Force Majeure. The term "Force Majeure" shall mean
any circumstances beyond the reasonable control of the Party experiencing such
inability to perform, whether of the kind enumerated herein or not, including
but not limited to, acts of God, strikes, lockouts or industrial disputes or
disturbances, civil disturbances, arrest and restraint of rulers or people,
interruptions by government or court orders, necessity for compliance with any
present and future valid orders of court, or any law, statute, ordinance or
regulation promulgated by any
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Governmental Authority having proper jurisdiction, acts of the public enemy,
wars, riots, blockades, insurrections, including inability to secure materials
by reason of allocations promulgated by any authorized Governmental Authority,
epidemics, landslides, lightning, earthquakes, fires, storms, floods, washouts,
inclement weather which necessitates extraordinary measures and expense to
construct facilities and/or maintain operations, explosions, partial or entire
failure of gas supply, breakage or accident to machinery or lines of pipe,
freezing or excessive heating of wells or pipelines, inability to obtain or
delays in obtaining easements or rights-of-way, the shutting in of facilities
for the making of repairs, alterations or maintenance to wells, pipelines or
plants.
11.3 Exceptions to Force Majeure. Neither Party shall be entitled to
the benefit of the provisions of this Article XI under either or both of the
following circumstances:
(a) To the extent that the inability to perform was caused by the
Party claiming Force Majeure having failed to remedy the
condition by taking all reasonable acts, short of litigation,
if such remedy requires litigation, and having failed to
resume performance of such commitments or obligations with
reasonable dispatch; or
(b) If the inability to perform was caused by lack of funds, or
with respect to the payment of any amount or amounts then due
hereunder.
11.4 Strikes and Lockouts. Settlement of strikes and lockouts shall be
entirely within the discretion of the Party affected, and the duty that any
event of Force Majeure shall be remedied with all reasonable dispatch shall not
require the settlement of strikes and lockouts by acceding to the demands of the
Parties directly or indirectly involved in such strikes or lockouts when such
course is inadvisable in the discretion of the Party having such difficulty.
ARTICLE XII
INDEMNIFICATION
Indemnification provisions pertaining to this Agreement are set forth
in the O&M Agreement.
ARTICLE XIII
DISPUTES
13.1 Dispute Resolution; Arbitration. In the event of any controversy
or claim, whether based in contract, tort or otherwise, arising out of or
relating to this Agreement or the scope, breach, termination or validity of this
Agreement (a "Disputed Claim"), the Parties shall promptly seek to resolve any
such Disputed Claim by negotiations between senior executives of the Parties who
have authority to settle the Disputed Claim. When a Party believes there is a
Disputed Claim under this Agreement, that Party will give the other Party
written notice of the Disputed Claim. Within thirty (30) days after receipt of
such notice, the receiving Party shall submit to the other a written response.
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Both the notice and response shall include (i) a statement of each Party's
position and a summary of the evidence and arguments supporting its position,
and (ii) the name, title, fax number, and telephone number of the executive who
will represent that Party. In the event the Disputed Claim involves a claim
arising out of the actions of any Person not a signatory to this Agreement, the
receiving Party shall have such additional time as necessary, not to exceed an
additional thirty (30) Days, to investigate the Disputed Claim before submitting
a written response. The executives shall meet at a mutually acceptable time and
place within fifteen (15) days after the date of the response and thereafter as
often as they reasonably deem necessary to exchange relevant information and to
attempt to resolve the Disputed Claim. If one of the executives intends to be
accompanied at a meeting by an attorney, the other executive shall be given at
least five (5) working Days' notice of such intention and may also be
accompanied by an attorney. All negotiations and communications pursuant to this
Article XIII shall be treated and maintained by the Parties as confidential
information and shall be treated as compromise and settlement negotiations for
the purposes of the Federal and State Rules of Evidence.
13.2 Failure to Resolve Through Negotiations. If the Disputed Claim has
not been resolved within sixty (60) days after the date of the response given
pursuant to Section 13.1 above, or such additional time, if any, that the
Parties mutually agree to in writing, or if the Party receiving such notice
denies the applicability of the provisions of Section 13.1 or otherwise refuses
to participate under the provisions of Section 13.1, either Party may initiate
binding arbitration pursuant to the provisions of Section 13.3 below.
13.3 Arbitration. Any Disputed Claims not settled pursuant to the
foregoing provisions shall be submitted to binding arbitration in accordance
with the following provisions. Arbitration shall be the sole and exclusive
remedy of the Parties in connection with any Disputed Claims hereunder.
(a) The Party desiring to initiate arbitration in connection with any
Disputed Claim shall send, via certified mail, written notice of
demand of arbitration to the other Party and the name of the
arbitrator appointed by the Party demanding arbitration together
with a statement of the matter in controversy.
(b) Within fifteen (15) days after receipt of such demand, the
receiving Party shall name its arbitrator. If the receiving Party
fails or refuses to name its arbitrator within such fifteen (15)
day period, the second arbitrator shall be appointed, upon request
of the Party demanding arbitration, by the Chief U.S. District
Court Judge for the District of Colorado or such other person
designated by such judge. The two arbitrators so selected shall
within fifteen (15) days after their designation select a third
arbitrator; provided, however, that if the two arbitrators are not
able to agree on a third arbitrator within such fifteen (15) day
period, either Party may request the Chief U.S. District Court
Judge for the District of Colorado or such other person
designated by such judge to select the third arbitrator as soon
as possible. In the event the Judge declines
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to appoint an arbitrator, appointment shall be made, upon
application of either Party, pursuant to the Commercial
Arbitration Rules of the American Arbitration Association. If any
arbitrator refuses or fails to fulfill his or her duties
hereunder, such arbitrator shall be replaced by the Party which
selected such arbitrator (or if such arbitrator was selected by
another Person, through the procedure which such arbitrator was
selected) pursuant to the foregoing provisions.
(c) Each arbitrator selected by the Parties shall be a certified
public accountant or licensed attorney with at least fifteen (15)
years of oil and gas experience as a certified public accountant
and/or practicing attorney. The arbitrators selected by the
Parties are not required to be neutral, but the third arbitrator
shall be neutral and shall be a certified public accountant. If
neither of the arbitrators appointed by or on behalf of the
Parties is a retired judge, then the third arbitrator shall be a
retired judge.
(d) The Parties hereto hereby request and consent to the three (3)
arbitrators conducting a hearing in Denver, Colorado, no later
than sixty (60) days following their selection or thirty (30) days
after all prehearing discovery has been completed, whichever is
later, at which the Parties shall present such evidence and
witnesses as they may choose, with or without counsel.
(e) Arbitration shall be conducted in accordance with the Commercial
Arbitration Rules and procedures of the American Arbitration
Association.
(f) The Federal Rules of Civil Procedure, as modified or supplemented
by the local rules of civil procedure for the U.S. District Court
of Colorado, shall apply in the arbitration. The Parties shall
make their witnesses available in a timely manner for discovery
pursuant to such rules. If a Party fails to comply with this
discovery agreement within the time established by the
arbitrators, after resolving any discovery disputes, the
arbitrators may take such failure to comply into consideration in
reaching their decision. All discovery disputes shall be resolved
by the arbitrators pursuant to the procedures set forth in the
Federal Rules of Civil Procedure.
(g) Adherence to formal rules of evidence shall not be required. The
arbitrators shall consider any evidence and testimony that they
determine to be relevant.
(h) The Parties hereto hereby request that the arbitrators render
their decision within thirty (30) Days following conclusion of the
hearing.
(i) Any decision by a majority of the arbitration panel shall be
final, binding and non-appealable. Any such decision may be filed
in any court of competent jurisdiction
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and may be enforced by any Party as a final judgment in such
court. There shall be no grounds for appeal of any arbitration
award hereunder.
(j) The defenses of statute of limitations and laches shall be tolled
from and after the date a Party gives the other Party written
notice of a Disputed Claim as provided in Section 13.1 above until
such time as the Disputed Claim has been resolved pursuant to
Section 13.1, or an arbitration award has been entered pursuant to
Section 13.3.
13.4 Recovery of Costs and Attorneys' Fees. In the event arbitration or
(despite the Parties agreement to resolve the Disputed Claims through binding
arbitration) litigation arising out of this Agreement is initiated by either
Party, the prevailing Party, after the entry of a final non-appealable order,
shall be entitled to recover from the other Party, as a part of said order, all
court costs, fees and expenses of such arbitration (or litigation), including,
without limitation, reasonable attorneys' fees.
13.5 Choice of Forum. If, despite the Parties' agreement to submit any
Disputed Claims to binding arbitration, there are any court proceedings arising
out of or relating to this Agreement or the transactions contemplated hereby,
such proceedings shall be brought and tried in the federal or state courts
situated in the City and County of Denver, Colorado.
13.6 Jury Waivers. THE PARTIES HEREBY WAIVE ANY AND ALL RIGHTS TO
DEMAND A TRIAL BY JURY.
13.7 Limitation of Damages. WHETHER OR NOT OCCASIONED BY A DEFAULT OR
OTHER BREACH OF THIS AGREEMENT, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY
FOR SPECIAL, EXEMPLARY OR PUNITIVE DAMAGES, LOSS OF PROFITS, OR CONSEQUENTIAL
DAMAGES EXCEPT FOR LIQUIDATED DAMAGES PAID BY DUKE ENERGY TO TEPPCO PURSUANT TO
SECTION 3.6 HEREOF.
13.8 Governing Law. This Agreement shall be construed and enforced in
accordance with, and the rights of the Parties shall be governed by, the law of
the state of Colorado, without regard to any conflict-of-laws provision thereof
that would otherwise require the application of the law of any other
jurisdiction.
ARTICLE XIV
REPRESENTATIONS AND WARRANTIES
14.1 Representations and Warranties of Duke Energy. Duke Energy
represents and warrants to TEPPCO as follows:
(a) Organization and Qualification. Duke Energy is a corporation
duly organized and validly existing in good standing under the laws of the state
of Colorado, is duly qualified to do business in each jurisdiction where its
failure to so qualify would have a material adverse effect on
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its business, operations or financial condition, and has the corporate power and
authority to execute and deliver this Agreement and enter into and perform its
obligations hereunder.
(b) Authority; Enforceability. The execution, delivery and
performance hereof by Duke Energy have been duly authorized by all necessary
corporate action on the part of Duke Energy, are not inconsistent with Duke
Energy's articles of incorporation, bylaws or other similar governing documents,
do not and will not contravene any law or governmental rule, regulation or order
now in effect applicable to it, do not and will not contravene any provision of,
or constitute a default under, or result in the creation of any lien under, any
indenture, mortgage, contract or other instrument to which Duke Energy is a
party or by which it is bound or any judgment, injunction, order or decree
applicable to it, and do not and will not require the approval or consent of any
trustee or holder of indebtedness or obligations of Duke Energy. This Agreement
has been duly executed and delivered by Duke Energy. Assuming due authorization,
execution and delivery hereof by TEPPCO, upon execution and delivery hereof,
this Agreement will constitute the legal, valid and binding agreement of Duke
Energy, enforceable in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, reorganization, insolvency or similar
laws generally affecting the enforcement of creditors' rights and by the
availability of equitable remedies.
(c) Consents. No consents or approval of, giving of notice to,
registration with, or taking of any other action in respect of or by any
Governmental Authority is required with respect to the execution, delivery or
performance hereof by Duke Energy or, if any such approval, notice, registration
or action is required, it has been duly given or obtained.
(d) Actions. There are no actions, suits or proceedings pending
or, to the knowledge of Duke Energy, threatened against or affecting Duke Energy
in any court or before any governmental commission, board or authority or
arbitration board or tribunal which in the reasonable judgment of Duke Energy
would materially adversely affect Duke Energy's financial condition or business
or the transactions contemplated hereby.
(e) Dedicated Producer Contracts. The list of contracts described
on the attached Exhibit C is a complete, true and correct list of all Dedicated
Producer Contracts in effect as of the date hereof.
14.2 Representations and Warranties of TEPPCO. TEPPCO represents and
warrants to Duke Energy as follows:
(a) Organization and Qualification. TEPPCO is a limited liability
company duly organized and validly existing under the laws of the state of
Delaware, is duly qualified to do business in each jurisdiction where its
failure to so qualify would have a material adverse effect on its business,
operations or financial condition, and has the limited liability company power
and authority to execute and deliver this Agreement and enter into and perform
its obligations hereunder.
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(b) Authority; Enforceability. The execution, delivery and
performance hereof by TEPPCO have been duly authorized by all necessary limited
liability company action on the part of TEPPCO, are not inconsistent with
TEPPCO's governing documents, do not and will not contravene any law or
governmental rule, regulation or order now in effect applicable to it, do not
and will not contravene any provision of, or constitute a default under, or
result in the creation of any lien under, any indenture, mortgage, contract or
other instrument to which TEPPCO is a party or by which it is bound or any
judgment, injunction, order or decree applicable to it, and do not and will not
require the approval or consent of any trustee or holder of indebtedness or
obligations of TEPPCO. This Agreement has been duly executed and delivered by
TEPPCO. Assuming due authorization, execution and delivery hereof by Duke
Energy, upon execution and delivery hereof, this Agreement will constitute the
legal, valid and binding agreement of TEPPCO, enforceable in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
reorganization, insolvency or similar laws generally affecting the enforcement
of creditors' rights and by the availability of equitable remedies.
(c) Consents. No consent or approval of, giving of notice to,
registration with, or taking of any other action in respect of or by any
Governmental Authority is required with respect to the execution, delivery or
performance hereof by TEPPCO or, if any such approval, notice, registration or
action is required, it has been duly given or obtained.
(d) Actions. There are no actions, suits or proceedings pending
or, to the knowledge of TEPPCO, threatened against or affecting TEPPCO in any
court or before any governmental commission, board or authority or arbitration
board or tribunal which in the reasonable judgment of TEPPCO would materially
adversely affect TEPPCO's financial condition or business or the transactions
contemplated hereby.
ARTICLE XV
GENERAL PROVISIONS
15.1 Notices. All notices, requests, demands and other communications
required or permitted to be given under this Agreement shall be deemed to have
been duly given if in writing and delivered personally or sent via first-class,
postage prepaid, registered or certified mail (return receipt requested), or by
overnight delivery service or facsimile transmission addressed as follows:
If to Duke Energy:
Duke Energy Field Services, Inc.
370 - 17th Street, Suite 900
Denver, Colorado 80202
Attention: President
Telephone: (303) 595-3331
Facsimile: (303) 893-2613
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<PAGE> 92
and copy to:
Duke Energy Field Services, Inc.
370 - 17th Street, Suite 900
Denver, Colorado 80202
Attention: General Counsel
Telephone: (303) 595-3331
Facsimile: (303) 893-8913
If to TEPPCO:
TEPPCO Colorado, LLC
2929 Allen Parkway, Suite 3200
Houston, Texas 77019
Attention: President
Telephone: (713) 759-3636
Facsimile: (713) 759-3957
and copy to:
Texas Eastern Products Pipeline Company
2929 Allen Parkway, Suite 3200
Houston, Texas 77019
Attention: General Counsel
Telephone: (713) 759-3968
Facsimile: (713) 759-3645
Any Party may change the address to which the communications are to be
directed to it by giving notice to the other in the manner provided in this
Section 15.1. Notice by mail shall be deemed to have been given and received on
the third calendar day after posting. Notice by overnight delivery service,
facsimile transmission or personal delivery shall be deemed given on the date of
actual delivery.
15.2 Waiver. No course of dealing and no delay on the part of either
Party in exercising any right, power or remedy shall operate as a waiver thereof
or otherwise prejudice such Party's rights, powers or remedies. No term or
condition of this Agreement shall be deemed to have been waived nor shall there
be any estoppel to enforce any provision of this Agreement except by written
instrument of the Parties charged with such waiver or estoppel. The waiver of
any breach of any term, condition or provision of this Agreement shall not be
construed as a waiver of any prior, concurrent or subsequent breach of the same
or any other term, condition or provision hereof.
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<PAGE> 93
15.3 Entire Agreement. The Project Agreements and any related documents
between the Parties of even date herewith, including exhibits and schedules
attached thereto, constitute the final and entire agreement between the Parties
concerning the subject matter thereof, and supersedes all prior and
contemporaneous agreements and undertakings of the Parties in connection
therewith. The Project Agreements may not be contradicted by evidence of prior,
contemporaneous or subsequent oral agreements of the Parties. There are no oral
agreements between the Parties.
15.4 Successors and Assigns. Assignment provisions pertaining to this
Agreement are set forth in the O&M Agreement.
15.5 Conflicts. In the event of any conflict between the provisions of
this Agreement and any exhibits or schedules attached hereto, the provisions of
this Agreement shall prevail.
15.6 Laws and Regulations. This Agreement and the performance hereof
shall be subject to all valid and applicable federal and state laws and to the
valid and applicable orders, laws, rules, and regulations of any state or
federal authority having jurisdiction, but nothing contained herein shall be
construed as a waiver of any right to question or contest any such order, law,
rule, or regulation in any forum having jurisdiction.
15.7 Recording. Duke Energy and TEPPCO shall execute, acknowledge,
deliver and record a "short form" memorandum of this Agreement in the form of
the attached Exhibit G, which shall be placed of record in the counties in which
the Dedicated Lands are situated. Promptly upon request by either Party at any
time following the expiration or earlier termination of this Agreement, however
such termination may be brought about, Duke Energy and TEPPCO shall execute and
deliver to each other an instrument, in recordable form, evidencing the
termination of this Agreement.
15.8 Severability. The invalidity or unenforceability of any provision
of this Agreement shall in no way affect the validity or enforceability of any
other provision hereof.
15.9 Time of Essence. Time is of the essence in the performance of all
obligations falling due hereunder.
15.10 Captions. The headings to Articles, Sections and other
subdivisions of this Agreement are inserted for convenience of reference only
and will not affect the meaning or interpretation of this Agreement.
15.11 Schedules and Exhibits. All schedules and exhibits hereto which
are referred to herein are hereby made a part hereof and incorporated herein by
such reference.
15.12 No Partnership. The relationship between Duke Energy and TEPPCO
at all times shall not be deemed a partnership or joint venture.
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15.13 No Third Party Beneficiaries. Subject to the provisions of
Section 15.4 hereof, this Agreement inures to the sole and exclusive benefit of
Duke Energy and TEPPCO, their respective successors, legal representatives and
assigns, and confers no benefit on any third party.
15.14 Mutual Cooperation; Further Assurances. Upon request by either
Party from time to time during the term of this Agreement, each Party agrees to
execute and deliver all such other and additional instruments, notices and other
documents and do all such other acts and things as may be necessary to carry out
the purposes of this Agreement and to more fully assure the Parties' rights and
interests provided for hereunder. Duke Energy and TEPPCO each agree to cooperate
with the other on all matters relating to required permits and regulatory
compliance by either Duke Energy or TEPPCO in respect of the Fractionators so as
to ensure continued full operation of the Fractionators by TEPPCO pursuant to
the terms of this Agreement.
15.15 Survival. Survival provisions pertaining to this Agreement are
set forth in the O&M Agreement.
15.16 Other Project Agreements. In the event of any conflict between
the provisions of any of the Project Agreements with each other or with the
Asset Purchase Agreement, the provisions of the O&M Agreement shall control over
the inconsistent provisions of any of the other Project Documents or the Asset
Purchase Agreement.
15.17 Amendments; Changes; Modifications. This Agreement may not be
effectively amended, changed, modified, altered or terminated, except as
provided herein, without the written consent of the Parties and such consent
shall be effective only in the specific instance and for the specific purpose
for which it is given.
The Parties hereto have executed this Agreement to be effective as of
the day first hereinabove written.
DUKE ENERGY:
DUKE ENERGY FIELD SERVICES, INC.
By:
------------------------------
Name:
---------------------------
Title:
---------------------------
TEPPCO:
TEPPCO COLORADO, LLC
By:
------------------------------
Name:
---------------------------
Title:
---------------------------
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EXHIBIT A
DEDICATED LANDS
The lands within the following townships are dedicated to the Frac Agreement
Township 9 North, Range 58 West, 6th P.M., Morgan County, Colorado;
Township 9 North, Range 59 West, 6th P.M., Morgan County, Colorado;
Township 9 North, Range 60 West, 6th P.M., Weld County, Colorado;
Township 9 North, Range 61 West, 6th P.M., Weld County, Colorado;
Township 9 North, Range 62 West, 6th P.M., Weld County, Colorado;
Township 9 North, Range 63 West, 6th P.M., Weld County, Colorado;
Township 9 North, Range 64 West, 6th P.M., Weld County, Colorado;
Township 9 North, Range 65 West, 6th P.M., Weld County, Colorado;
Township 9 North, Range 66 West, 6th P.M., Weld County, Colorado;
Township 9 North, Range 67 West, 6th P.M., Weld County, Colorado;
Township 9 North, Range 68 West, 6th P.M., Larimer County, Colorado;
Township 9 North, Range 69 West, 6th P.M., Larimer County, Colorado;
Township 8 North, Range 58 West, 6th P.M., Morgan County, Colorado;
Township 8 North, Range 59 West, 6th P.M., Morgan County, Colorado;
Township 8 North, Range 60 West, 6th P.M., Weld County, Colorado;
Township 8 North, Range 61 West, 6th P.M., Weld County, Colorado;
Township 8 North, Range 62 West, 6th P.M., Weld County, Colorado;
Township 8 North, Range 63 West, 6th P.M., Weld County, Colorado;
Township 8 North, Range 64 West, 6th P.M., Weld County, Colorado;
Township 8 North, Range 65 West, 6th P.M., Weld County, Colorado;
Township 8 North, Range 66 West, 6th P.M., Weld County, Colorado;
Township 8 North, Range 67 West, 6th P.M., Weld County, Colorado;
Township 8 North, Range 68 West, 6th P.M., Larimer County, Colorado;
Township 8 North, Range 69 West, 6th P.M., Larimer County, Colorado;
Township 7 North, Range 58 West, 6th P.M., Morgan County, Colorado;
Township 7 North, Range 59 West, 6th P.M., Morgan County, Colorado;
Township 7 North, Range 60 West, 6th P.M., Weld County, Colorado;
Township 7 North, Range 61 West, 6th P.M., Weld County, Colorado;
Township 7 North, Range 62 West, 6th P.M., Weld County, Colorado;
Township 7 North, Range 63 West, 6th P.M., Weld County, Colorado;
Township 7 North, Range 64 West, 6th P.M., Weld County, Colorado;
Township 7 North, Range 65 West, 6th P.M., Weld County, Colorado;
Township 7 North, Range 66 West, 6th P.M., Weld County, Colorado;
Township 7 North, Range 67 West, 6th P.M., Weld County, Colorado;
Township 7 North, Range 68 West, 6th P.M., Larimer County, Colorado;
Township 7 North, Range 69 West, 6th P.M., Larimer County, Colorado;
<PAGE> 96
Township 6 North, Range 58 West, 6th P.M., Morgan County, Colorado;
Township 6 North, Range 59 West, 6th P.M., Morgan County, Colorado;
Township 6 North, Range 60 West, 6th P.M., Weld County, Colorado;
Township 6 North, Range 61 West, 6th P.M., Weld County, Colorado;
Township 6 North, Range 62 West, 6th P.M., Weld County, Colorado;
Township 6 North, Range 63 West, 6th P.M., Weld County, Colorado;
Township 6 North, Range 64 West, 6th P.M., Weld County, Colorado;
Township 6 North, Range 65 West, 6th P.M., Weld County, Colorado;
Township 6 North, Range 66 West, 6th P.M., Weld County, Colorado;
Township 6 North, Range 67 West, 6th P.M., Weld County, Colorado;
Township 6 North, Range 68 West, 6th P.M., Larimer County, Colorado;
Township 6 North, Range 69 West, 6th P.M., Larimer County, Colorado;
Township 5 North, Range 58 West, 6th P.M., Morgan County, Colorado;
Township 5 North, Range 59 West, 6th P.M., Morgan County, Colorado;
Township 5 North, Range 60 West, 6th P.M., Weld County, Colorado;
Township 5 North, Range 61 West, 6th P.M., Weld County, Colorado;
Township 5 North, Range 62 West, 6th P.M., Weld County, Colorado;
Township 5 North, Range 63 West, 6th P.M., Weld County, Colorado;
Township 5 North, Range 64 West, 6th P.M., Weld County, Colorado;
Township 5 North, Range 65 West, 6th P.M., Weld County, Colorado;
Township 5 North, Range 66 West, 6th P.M., Weld County, Colorado;
Township 5 North, Range 67 West, 6th P.M., Weld County, Colorado;
Township 5 North, Range 68 West, 6th P.M., Larimer County, Colorado;
Township 5 North, Range 69 West, 6th P.M., Larimer County, Colorado;
Township 4 North, Range 58 West, 6th P.M., Morgan County, Colorado;
Township 4 North, Range 59 West, 6th P.M., Morgan County, Colorado;
Township 4 North, Range 60 West, 6th P.M., Weld County, Colorado;
Township 4 North, Range 61 West, 6th P.M., Weld County, Colorado;
Township 4 North, Range 62 West, 6th P.M., Weld County, Colorado;
Township 4 North, Range 63 West, 6th P.M., Weld County, Colorado;
Township 4 North, Range 64 West, 6th P.M., Weld County, Colorado;
Township 4 North, Range 65 West, 6th P.M., Weld County, Colorado;
Township 4 North, Range 66 West, 6th P.M., Weld County, Colorado;
Township 4 North, Range 67 West, 6th P.M., Weld County, Colorado;
Township 4 North, Range 68 West, 6th P.M., Weld County, Colorado;
Township 4 North, Range 69 West, 6th P.M., Boulder County, Colorado;
Township 3 North, Range 58 West, 6th P.M., Weld County, Colorado;
Township 3 North, Range 59 West, 6th P.M., Weld County, Colorado;
Township 3 North, Range 60 West, 6th P.M., Weld County, Colorado;
Township 3 North, Range 61 West, 6th P.M., Weld County, Colorado;
Township 3 North, Range 62 West, 6th P.M., Weld County, Colorado;
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Township 3 North, Range 63 West, 6th P.M., Weld County, Colorado;
Township 3 North, Range 64 West, 6th P.M., Weld County, Colorado;
Township 3 North, Range 65 West, 6th P.M., Weld County, Colorado;
Township 3 North, Range 66 West, 6th P.M., Weld County, Colorado;
Township 3 North, Range 67 West, 6th P.M., Weld County, Colorado;
Township 3 North, Range 68 West, 6th P.M., Weld County, Colorado;
Township 3 North, Range 69 West, 6th P.M., Boulder County, Colorado;
Township 2 North, Range 58 West, 6th P.M., Weld County, Colorado;
Township 2 North, Range 59 West, 6th P.M., Weld County, Colorado;
Township 2 North, Range 60 West, 6th P.M., Weld County, Colorado;
Township 2 North, Range 61 West, 6th P.M., Weld County, Colorado;
Township 2 North, Range 62 West, 6th P.M., Weld County, Colorado;
Township 2 North, Range 63 West, 6th P.M., Weld County, Colorado;
Township 2 North, Range 64 West, 6th P.M., Weld County, Colorado;
Township 2 North, Range 65 West, 6th P.M., Weld County, Colorado;
Township 2 North, Range 66 West, 6th P.M., Weld County, Colorado;
Township 2 North, Range 67 West, 6th P.M., Weld County, Colorado;
Township 2 North, Range 68 West, 6th P.M., Weld County, Colorado;
Township 2 North, Range 69 West, 6th P.M., Boulder County, Colorado;
Township 1 North, Range 58 West, 6th P.M., Weld County, Colorado;
Township 1 North, Range 59 West, 6th P.M., Weld County, Colorado;
Township 1 North, Range 60 West, 6th P.M., Weld County, Colorado;
Township 1 North, Range 61 West, 6th P.M., Weld County, Colorado;
Township 1 North, Range 62 West, 6th P.M., Weld County, Colorado;
Township 1 North, Range 63 West, 6th P.M., Weld County, Colorado;
Township 1 North, Range 64 West, 6th P.M., Weld County, Colorado;
Township 1 North, Range 65 West, 6th P.M., Weld County, Colorado;
Township 1 North, Range 66 West, 6th P.M., Weld County, Colorado;
Township 1 North, Range 67 West, 6th P.M., Weld County, Colorado;
Township 1 North, Range 68 West, 6th P.M., Weld County, Colorado;
Township 1 North, Range 69 West, 6th P.M., Boulder County, Colorado;
Township 1 South, Range 58 West, 6th P.M., Adams County, Colorado;
Township 1 South, Range 59 West, 6th P.M., Adams County, Colorado;
Township 1 South, Range 60 West, 6th P.M., Adams County, Colorado;
Township 1 South, Range 61 West, 6th P.M., Adams County, Colorado;
Township 1 South, Range 62 West, 6th P.M., Adams County, Colorado;
Township 1 South, Range 63 West, 6th P.M., Adams County, Colorado;
Township 1 South, Range 64 West, 6th P.M., Adams County, Colorado;
Township 1 South, Range 65 West, 6th P.M., Adams County, Colorado;
Township 1 South, Range 66 West, 6th P.M., Adams County, Colorado;
Township 1 South, Range 67 West, 6th P.M., Adams County, Colorado;
Township 1 South, Range 68 West, 6th P.M., Adams County, Colorado;
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Township 1 South, Range 60 West, 6th P.M., Adams County, Colorado;
Township 2 South, Range 58 West, 6th P.M., Adams County, Colorado;
Township 2 South, Range 59 West, 6th P.M., Adams County, Colorado;
Township 2 South, Range 60 West, 6th P.M., Adams County, Colorado;
Township 2 South, Range 61 West, 6th P.M., Adams County, Colorado;
Township 2 South, Range 62 West, 6th P.M., Adams County, Colorado;
Township 2 South, Range 63 West, 6th P.M., Adams County, Colorado;
Township 2 South, Range 64 West, 6th P.M., Adams County, Colorado;
Township 3 South, Range 58 West, 6th P.M., Adams County, Colorado;
Township 3 South, Range 59 West, 6th P.M., Adams County, Colorado;
Township 3 South, Range 60 West, 6th P.M., Adams County, Colorado;
Township 3 South, Range 61 West, 6th P.M., Adams County, Colorado;
Township 3 South, Range 62 West, 6th P.M., Adams County, Colorado;
Township 3 South, Range 63 West, 6th P.M., Adams County, Colorado.
A-4
<PAGE> 99
EXHIBIT B
DEDICATED PLANTS
<TABLE>
<CAPTION>
PLANT NAME LEGAL DESCRIPTION (ALL LOCATED WITHIN WELD COUNTY, COLORADO)
<S> <C>
Eaton Plant Section 34, Township 7 North, Range 66 West
Mewbourn Plant Section 35, Township 4 North, Range 66 West
Greeley Plant Section 25, Township 5 North, Range 66 West
Lucerne Plant Section 28, Township 6 North, Range 65 West
Spindle Plant Section 34, Township 2 North, Range 67 West
</TABLE>
<PAGE> 100
EXHIBIT C
DEDICATED PRODUCER CONTRACTS
WELD SYSTEM
GPA.001.K Aceite Oil
GPA.002.K Snyder Oil Company (was JRC)
GPA.003.K Buck Ltd.
GPA.005.K Sovereign Oil Co.
GPA.006.K Cody/Nordell
GPA.007.K Golden Buckeye (Combined
w/GPA.001.L)
GPA.008.KP MGF Oil (AI)
GPA.010.KP Kauffman & Weinberger
GPA.013.KP Rocky Mountain Production Co.
GPA.016.K Great Western Oil Co., Inc.
GPA.017.K Energy Minerals Corp.
GPA.028.K CDM Oil & Gas
GPA.029.KP Centennial Petroleum, Inc.
GPA.029.KP Decalta International Corp.
GPA.032.K Machii-Ross Petroleum
GPA.034.KPT Noarko Resources, Inc.
GPA.035 Shepler & Thomas, Inc.
GPA.038.K Discovery Oil, Ltd.
<PAGE> 101
GPA.039.K Blue Chip Oil, Inc.
GPA.042.K H&C Colton Company
GPA.043.K H&C Colton Company
GPA.044.K Colton & Colton
GPA.045.KP Morgan Energy Corp.
GPA.045.KP Sunshine Valley Petroleum
GPA.049.KPT Rex Monahan
GPA.057.K Basin Exploration, Inc.
GPA.062.K Martinex Corporation
GPA.064.K Weeks Energy Minerals Corp.
GPA.066.K Martinex Corporation
GPA.068.K Morgan Energy
GPA.069.K Eddy Oil Company
GPA.070.K Universal Oil & Gas
GPA.071.K Snyder Oil Company (was JRC)
GPA.072.K Amoco Production Company
GPA.073.KP HELMMCO, Private & Gary-Williams
GPA.076.K Snyder Oil Company
(was Energy Oil, Inc.
GPA.078.K Richardson Oil
GPA.079.K Basin Exploration
GPA.081.K Richardson Oil
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GPA.083.K Clark Energy Corporation
GPA.094.K Sunshine Valley Petroleum
GPA.095.K Conquest Oil Company
GPA.096.K Mizel Petro Resources
GPA.099.K Lyco Energy
GPA.101.K Universal Oil & Gas, Inc.
GPA.102.KP Kauffman & Weinberger
GPA.103.K Rock Oil Corporation
GPA.105.K Universal Oil & Gas
GPA.106.K Sunshine Valley Petroleum
GPA.107.KP Shenandoah Production Co.
GPA.108.K Bataa Oil, Inc.
GPA.110.K Blue Chip Oil, Inc.
GPA.111.KP Basin Exploration, Inc.
GPA.113.K Morgan Energy Corp.
GPA.114.K Decalta International
GPA.117.K Bataa Oil, Inc.
GPA.120.K Mission Oil Corporation
(replaces GPA.030.K)
GPA.121.K Gerrity Drilling
GPA.123.K Golden Buckeye
(Combined with GPA.001.L)
GPA.124.K Amoco Production Co.
(Residue Gas Trans/Purchase)
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GPA.125.K Kersey Limited Pshp.
GPA.127.K Eddy Oil Company
GPA.128.K Lyco Energy
GPA.130.K Barrett Energy Co.
GPA.132.K Lyco Acquisition 1984-1
GPA.135.K Eddy Oil Company
GPA.137.K Energy Search & Mgmt.
GPA.138.K The Gerrity Company, Inc.
GPA.139.K Eagle Oil & Gas
GPA.141.K Richardson Oil Company
GPA.142.KP Barrett Energy Company
GPA.143.KP The Quinoco Companies
GPA.144.K Basin Exploration, Inc.
GPA.145.K Elk Exploration
GPA.146.K Bataa, Inc.
GPA.149.K Conquest Oil Company
GPA.154.K Bellwether Expl. Co.
GPA.156.K Eagle Oil & Gas, Inc.
GPA.157.K Cimmarron Oil Inc.
GPA.158.K Misahar Investments,Inc.
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GPA.160.K High Country Resources
GPA.161.KP Nielson Enterprises, Inc.
GPA.162.KP Boomer-Sooner Field
GPA.163.K Brown Investment Company
GPA.164.K Morgan Richardson Oper.
GPA.165.K Intermountain Oil Co.
GPA.166.K Berthoud Gas Company
GPA.167.K Bataa Oil, Inc.
GPA.168.K B.E.A. Johnson, Inc.
GPA.169.K Diamond A Corporation
GPA.170.K Basic Earth Science Systems
GPA.175.K Pacific Midland Prod.
GPA.176.K Parker & Parsley
GPA.178.K The Robert W. Gerrity Co.
GPA.179.K Francis Energy, Inc.
GPA.18O.K Bataa Oil, Inc.
GPA.183.K Colorado Plains Mgmt. & Invest.
GPA.185.K Mendell-Denver Corporation
GPA.186.K Mazuma Turnkey Contractors,Inc.
GPA.187.K Mazuma Turnkey Contractors,Inc.
GPA.188.K Francis Energy, Inc.
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GPA.189.K Francis Energy, Inc.
GPA.193.K Aceite Energy Corporation
GPA.195.K Macey & Mershon Oil Inc.
GPA.197.K Freedom Energy, Inc.
GPA.198.KP Omimex Petroleum, Inc. (Renegade)
GPA.202.K Industrial Gas Associates, Inc.
GPA.210.K K.P. Kauffman Company, Inc.
GPA.211.K Western Gas Supply Company
GPA.212.K Elk Exploration, Inc.
GPA.213.KP Geo-Tech Production, Inc.
GPA.214.KP Omimex Petroleum, Inc.
GPA.216.K Fountainhead Resources, Ltd.
GPA.217.K Lyco Energy Corporation
GPA.223.K Go Pumping and Consulting, Inc.
GPA.224.K Kloxin Energy, Inc.
GPA.227.K The Robert Gerrity Company
GPA.228.K The Robert Gerrity Company
GPA..229.K Mendell-Denver Corporation
GPA.230.K K.P. Kauffman Company, Inc.
GPA.231.K K.P. Kauffman Company, Inc.
GPA.232.K Basin Exploration, Inc.
(Nielson acreage)
C-6
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GPA.233.K Basin Exploration, Inc.
(Byron "J" Sand acreage)
GPA.235.K The Gerrity Oil and Gas Corp.
GPA.236.K Bataa Oil, Inc.
GPA.238.K Greeley Gas Company
GPA.239.K Francis Energy, Inc.
(Lesser/Spomer Wells)
GPA.240.K Francis Energy, Inc.
(Plumb No. 1 Well)
GPA.241.K Farmoil, Inc.
GPA.242.K Unioil, Inc.
GPA.243.K Martin Exploration Mgmt. Corp.
GPA.244.K Mendell-Denver Corporation
GPA.246.K Western Production Company
GPA.247.K Timka Resources, Ltd.
GPA.248.K Diamondback Oil Corporation
GPA.249.K Blue Chip Oil, Inc.
GPA.250.K Francis Energy, Inc.
GPA.251.K Snyder Oil Company
GPA.253.K Snyder Operating Partnership
(Natural Gas Exchange Agr.)
GPA.255.K Elk Exploration, Inc.
GPA.257.K Morning Fresh Farms, Inc.
GPA.258.K Western Production Company
C-7
<PAGE> 107
GPA.260.K Valley Operating, Inc.
GPA.264.K Gerrity Oil & Gas Corporation
GPA.269.K Richardson Operating Company
GPA.267.K K. P. Kauffman Company, Ltd.
GPA.268.K Habersham Energy Company
GPA.269.K Oaks Resources Management, Inc.
GPA.270.K Sandlin Oil Corporation
GPA.271.K Martin Exploration Mgmt. Corp.
GPA.272.K North American Resources
GPA.273.K Credo Petroleum Corporation
GPA.274.K EFTS II, Inc.
GPA.275.K CFG Energy, Inc.
GPA.276.K Vessels
GPA.277.K Parker & Parsley Petroleum Co.
GPA.278.K Cache Exploration
GPA.279.K Basin Exploration, Inc.
GPA.280.K Mendell Petroleum Corporation
GPA.281.K Mineral Resources, Inc.
GPA.283.K Basin Exploration, Inc.
GPA.284.K Barrett Resources Corporation
GPA.285.K Byron Oil Industries, Inc.
C-8
<PAGE> 108
GPA.286.K Markus Production, Inc.
GPA.287.K Phil Shepardson
GPA.288.K Freedom Energy, Inc.
GPA.289.K Basin Exploration, Inc.
GPA.290.K Stephen B. Evans & Co.,
Alarado Resources Limited and
Alarado Resources Corp.
GPA.291.K Snyder Oil Corporation
GPA.292.K Gusoil-1981, Gusoil-1982 &
K.P. Kauffman Company, Inc.
GPA.293.K Heflin Energy Corporation
GPA.294.K Suzanne D. Bucy
GPA.295.K HS Resources, Inc.
GPA.296.K Blue Chip Oil, Inc.
GPA.297.K Kaiser-Francis Oil Company
GPA.298.K Lyco Energy Corporation
GPA.299.K Prima Energy
GPA.300.K Bataa Oil, Inc.
GPA.301.K Unioil, Inc.
GPA.303.K Basin Exploration
GPA.304.K Bataa Oil, Inc.
GPA.305.K Patina Oil & Gas Corporation
(formerly Gerrity)
C-9
<PAGE> 109
GPA.306.K Patina Oil & Gas Corporation
(formerly Gerrity)
GPA.307.K Prima Oil & Gas Company
GPA.308.K Matrix Energy, L.L.C.
GPA.309.K CDM Oil & Gas
GPA.003.E WEDCO Resources Corp.
GPA.005.E Sentry Oil Corp.
GPA.006.E CWI Oil and Gas
GPA.007.E Trailblazer Oil and Gas
(FILES I, II, III)
GPA.010.E Hershey Oil
GPA.011.E Emerald Corporation (f/k/a Petromax)
GPA.013.E PRC Oil and Gas Company
GPA.014.E Catamount Exploration, Inc.
(Replaced GPA.069.E)
GPA.015.E Hershey Oil Corporation
GPA.017.E Decalta International Corp.
GPA.020.E Frizzell Oil Company
GPA.021.E R.A. Resources, Inc.
GPA.023.E SHF Partnership
GPA.024.E Bellwether Exploration Co.
GPA.025.E HI-TEC Energy, Inc.
GPA.026.E Frontier Oil & Gas
C-10
<PAGE> 110
GPA.027.E Snyder Oil Company
GPA.028.E R.A. Resources, Inc.
GPA.029.E Frizzell Oil Company
GPA.030.E Vantage Oil, Inc.
GPA.032.E R.A. Resources, Inc.
GPA.034.E Vantage Oil, Inc.
GPA.035.E Snyder Oil Company
GPA.037.E Sunset Hill Oil Co., Inc.
GPA.038.E Energex, Inc.
GPA.039.E Gusher Oil & Gas Co., Inc.
GPA.040.E Maze Expl./Golden Buckeye (Combined
w/GPA.001.L)
GPA.041.E Barrett Energy Resources
GPA.043.E Aztec Resources Corp.
GPA.044.E Morgan Energy Corp.
GPA.045.E Cache Exploration, Inc.
GPA.046.E Conquest Oil
GPA.047.E Sunshine Valley Petroleum
GPA.049.E Blue Chip Oil, Inc.
GPA.052.E Conquest Oil Co.
GPA.053.E Sunshine Valley Petroleum Corporation
GPA.054.E Lone Star Oil Company
C-11
<PAGE> 111
GPA.055.E Sunshine Valley Corp.
GPA.059.E Bellwether Exploration
GPA.063.E Cowan Oil Company
GPA.064.E Grady Oil Company
GPA.065.E Jenex Petroleum Corp. (First City Wells)
GPA.067.E Blue Chip Oil, Inc.
GPA.068.E Jenex Petroleum Corporation (Metro Wells)
GPA.069.E Nautilus Equipment, Inc. (Replaces
GPA.014.E)
GPA.071.E Energy Minerals Corporation
GPA.072.E Elwood Oil Company
GPA.073.E Lysander Resources
GPA.074.E Blue Chip Oil, Inc.
GPA.076.E Pantera Energy Corporation
GPA.078.E Blue Chip Oil, Inc.
GPA.080.E Brooks Exploration Inc.
GPA.081.E Brooks Exploration Inc.
GPA.082.E Kauffman & Weinberger, Inc.
GPA.083.E H&R Well Service
GPA.084.E Mendell-Denver Corporation
GPA.085.E Francis Energy, Inc.
GPA.086.E Rico Resources
C-12
<PAGE> 112
GPA.001.BT Meco Operating Corporation
GPA.002.BT Reider Oil Corporation
GPA.003.BT Discovery Oil, Ltd.
GPA.004.BT Shepler & Thomas-
GPA.005.BT Monfort of Colorado
GPA.006.BT Sovereign Oil Company
GPA.008.BT Jenex Petroleum Corporation
(was Petromax)
GPA.009.BT Morning Fresh Farm
GPA.010.BT Duke L. Phillips, Indiv.
GPA.011.BT Elmer E. & Roy Lundvall
GPA.012.BT Rex Monahan, Individual
GPA.014.BT Power Energy Resources
GPA.015.BT Valley View Exploration
GPA.016.BT Belwether Exploration Co.
GPA.019.BT Martin Exploration Mgmt.
GPA.020.BT R.A. Resources
GPA.024.BT Morgan Energy Corporation
GPA.027.BT Sunshine Valley Petroleum
GPA.028.BT Morgan Energy Corporation
GPA.029.BT Richardson Oil Company
GPA.030.BT Lundvall and Associates
C-13
<PAGE> 113
GPA.032.BT Bataa Oil, Inc.
GPA.033.BT Martinex Corporation
GPA.034.BT Morgan Energy Corp.
GPA.035.BT Basin Exploration
GPA.036.BT Gerrity Drilling
GPA.037.BT L.M.S. American Holdings
GPA.038.BT BP-34 Limited
GPA.043.BT The Gerrity Company, Inc.
GPA.044.BT Mayers & Company
(replaced GPA.018.BT)
GPA.046.BT Lundvall and Associates
GPA.047.BT R.A. Resources, Inc.
GPA.048.BT Oxford Ltd. Partnership
GPA.049.BT Colo. Energy Resources
GPA.051.BT HS Resources, Inc.
(Successor to Elk Exploration)
GPA.053.BT Conquest Oil Company
GPA.054.BT Cannon Resources, Inc.
GPA.058.BT New London Oil
GPA.059.BT Cache Exploration, Inc.
GPA.060.BT New London Oil, Inc.
GPA.061.BT New London Oil, Inc.
GPA.062.BT Eddy Oil Company
C-14
<PAGE> 114
GPA.063.BT Lundvall and Associates
GPA.001.EV Elk Exploration, Inc.
FILE I & II (Wal-Mart)
GPA.004.EV Eddy Oil Company
GPA.005.EV Unioil (Unioil Agreements dtd
11/24/84, combined)
GPA.006.EV R.A. Resources, Inc.
GPA.007.EV Barrett Energy Company
GPA.001.L Prima Oil & Gas Company
GPA.002.L Cache Resources/Cache Exp.
GPA.003.L Bellwether Exploration
GPA.004.L Sovereign Oil Company
GPA.005.L Clark Energy Corporation
GPA.006.L R.A. Resources, Inc.
GPA.007.L Coors Energy Company
GPA.008.L Unioil
GPA.009.L Andrau Enterprises, Inc.
GPA.010.L Greeley Gas Company
GPA.011.L Sentry Oil Corporation
GPA.012.L Petro Noel, Inc.
GPA.013.L Eddy Oil
GPA.014.L Elwood Oil Company
C-16
<PAGE> 115
GPA.015.L Vantage Oil, Inc.
GPA.016.L Calvin Petroleum Corp.
GPA.017.L Wichita Industries, Inc.
GPA.018.L Andrau Enterprises, Inc.
GPA.019.L Calvin Petroleum Corp.
GPA.020.L Conquest Oil, Inc.
GPA.021.L Basin Exploration, Inc.
GPA.022.L Jason Exploration, Inc.
GPA.024.L Pantera
GPA.025.L Sunshine Valley
GPA.026.L North Colorado Medical Center
GPA.027.L University of Northern Colorado
GPA.028.L Reider Oil
GPA.029.L Lyco Energy
GPA.030.L Snyder Oil Company (f/k/a Energy Oil)
GPA.031.L Four Star Exploration
GPA.032.L Mountain Industrial Gas
GPA.033.L Ideal Basic Industries
GPA.034.L H&C Colton
GPA.035.L Thompson Valley Gas, Inc.
GPA.036.L Cannon Resources, Inc.
C-16
<PAGE> 116
GPA.037.L Bristol Production, Inc.
GPA.038.L Energy Minerals Corp.
GPA.039.L Jenex Petroleum Corp.
GPA.040.L Silverado Oil, Inc.
GPA.041.L Eddy Oil Company
GPA.041.L Parker & Parsley
GPA.043.L Cannon Resources, Inc.
GPA.044.L Eagle Oil & Gas, Inc.
GPA.045.L New London Oil
GPA.049.L Elwood Oil Company
GPA.050.L Cache Exploration
GPA.051.L Cowan Oil Company
GPA.053.L Simmons Energy Company
GPA.056.L Jenex Petroleum Corporation
GPA.057.L Silverado Oil, Inc.
GPA.058.L Coors Energy Company
GPA.059.L Cache Exploration, Inc.
GPA.060.L Prima Exploration
GPA.003BGC Morgan Energy Corporation
GPA.013.BGC Howard Buehler
GPA.015.BGC Sovereign Oil Company
C-17
<PAGE> 117
GPA.016.BGC DJ Energy, Inc.
GPA.002.FR San Juan Consortium
GPA.001.PAN Energy Minerals Corporation
GPA.002.PAN Petroleum Energy Corporation
GPA.003.PAN Aexco Petroleum, Inc.
GPA.004.PAN Shepler & Thomas
GPA.005.PAN Davis Oil Company
GPA.006.PAN Polfam Exploration Company
GPA.007.PAN Schmid Properties
GPA.008.PAN Bellwether Exploration Company
GPA.009.PAN Jubilee Pipeline
GPA.010.PAN D&S Oilfield
GPA.012.PAN Colorado Interstate Gas Company
GPA.013.PAN Energy Minerals
GPA.014.PAN Agland, Incorporated
GPA.015.PAN Vessels Oil and Gas Company
GPA.016.PAN Industrial Gas Services, Inc.
GPA.017.PAN Industrial Gas Services, Inc.
GPA.018.PAN Sentry Oil Corporation
GPA.019.PAN Pipeline Corporation of Colorado
GPA.020.PAN Sun Exploration and Production Co.
C-18
<PAGE> 118
GPA.021.PAN Classic Petroleum Corp.
GPA.022.PAN Energy Minerals Corporation
GPA.023.PAN Lynx Exploration Company
GPA.024.PAN Regal Petroleum, Ltd.
GPA.025.PAN Regal Petroleum, Ltd.
GPA.026.PAN Petroleum Energy Corporation
GPA.027.PAN Sunset Hill Oil Co.
GPA.028.PAN Colorado Gathering and Processing
GPA.029.PAN Diversified Operating Corporation
GPA.030.PAN Cache Exploration, Inc.
GPA.031.PAN Lysander Resources, Inc.
GPA.032.PAN Diversified Operating Corporation
GPA.033.PAN Jenex Petroleum Corp.
GPA.034.PAN Pan Western 1986 Drilling Program
GPA.035.PAN Alfred Ward & Son
GPA.037.PAN Eagle Energy, Inc.
GPA.037.PAN Merrion Oil & Gas Corporation
GPA.038.PAN Bristol Production, Inc.
GPA.039.PAN Red Wave, Ltd.
GPA.040.PAN American Penn Energy, Inc.
GPA.041.PAN MGF Oil Corporation
C-19
<PAGE> 119
GPA.043.PAN Fina Oil & Chemical Company
GPA.044.PAN Energy Minerals/Merrion Oil
GPA.045.PAN Benton Petroleum Company
GPA.046.PAN Weldmor Limited Partnership
GPA.047.PAN Energy Minerals Corporation
GPA.048.PAN Walsh Production, Inc.
GPA.049.PAN Aexco Petroleum, Inc.
GPA.050.PAN Damson Gas Processing Corp.
GPA.053.PAN Pan Western Energy
GPA.057.PAN Randy Hrvek, Individual
GPA.064.PAN Fina Oil and Chemical Company
GPA.065.PAN Walsh Production, Inc.
GPA.067.PAN Walsh Production, Inc.
GPA.069.PAN Walsh Production, Inc.
GPA.071.PAN Lomita Operating
GPA.072.PAN Cache Exploration, Inc.
GPA.074.PAN Lomita Operating Company
GPA.075.PAN Fina Oil and Chemical Company
GPA.076.PAN Arlian, Inc.
GPA.078.PAN Walsh Production, Inc.
GPA.079.PAN DeClar Oil & Gas, Inc.
C-20
<PAGE> 120
GPA.080.PAN Lander Petroleum Co.
GPA.081.PAN Everett Frerichs Oil Properties
GPA.082.PAN H&R Well Services, Inc.
GPA.083.PAN Jenex Petroleum
GPA.084.PAN Petcon Associates Ltd.
GPA.085.PAN Diversified Operating Corporation
GPA.086.PAN Petcon Associates, Ltd.
GPA.087.PAN OM Shree Investment Group
GPA.088.PAN Jerry Pettyjohn d/b/a Rocket Petroleum
GPA.089.PAN Tindal Operating Company
GPA.090.PAN Rex Monahan
GPA.091.PAN Diversified Operating Corporation
SPINDLE SYSTEM
GPA.001.S Basin Operating Company
GPA.002.S Colorado Interstate Gas Company
GPA.002.S Colorado Interstate Gas Company
GPA.004.S North American Resources Company
GPA.005.S Martin Oil Service, Inc. (CIG No. 681)
GPA.006.S Martin Oil Service, Inc. (CIG No. 679)
GPA.007.S Machii-Ross Petroleum Company (CIG
No. 1047)
C-21
<PAGE> 121
GPA.008.S Energy Minerals Corporation (CIG No. 408)
GPA.009.S Kenneth A. Ross, Jr. (CIG No. 402)
GPA.010.S Energy Minerals Corporation (CIG No. 1079)
GPA.011.S Ray O. Brownlie (CIG No. 539)
GPA.012.S Energy Minerals Corporation (CIG No. 1078)
GPA.013.S Snyder Oil Corporation (Amoco/Calvin)
GPA.014.S Vessels Oil & Gas Company
(Natural Gas Exchange Agreement)
GPA.015.S North American Resources Company
GPA.016.S Oaks Resources Management, Inc.
GPA.017.S Meyer Oil Company
GPA.018.S Energy Minerals Corporation
GPA.020.S Basin Exploration
GPA.022.S Amoco Production Company
GPA.024.S Martin Exploration Management Co.
GPA.025.S Heflin Energy Corporation
GPA.026.S Crystal Oil Co.
GPA.027.S K.P. Kauffman Company, Inc. (duplicate
file B.8.15.5)
GPA.028.S Top Operating Company
GPA.029.S Machii-Ross Petroleum Company
ROGGEN SYSTEM
GPA.001.R Snyder Oil Corporation
GPA.002.R Basin Exploration, Inc.
C-22
<PAGE> 122
GPA.003.R Bataa Oil
GPA.004.R Bataa Oil
GPA.005.R Churchill Energy, Inc.
GPA.006.R Freedom Energy, Inc.
GPA.007.R Gerrity Oil & Gas Corporation
GPA.008.R Homestead Oil Inc. (Prima)
GPA.009.R HS Resources
GPA.010.R HS Resources
GPA.011.R Parker and Parsley Devel/Costilla
GPA.012.R Prima Oil & Gas Company
GPA.013.R Prima Oil & Gas Company
GPA.014.R Prima Oil & Gas Company
GPA.015.R Churchill Energy, Inc.
GPA.001.RP Argonex Company
GPA.002.RP Arlian Inc.
GPA.003.RP Arlian Inc.
GPA.004.RP Bolling Oil Properties Inc.
GPA.005.RP Bolling Oil Properties Inc.
GPA.006.RP Cascade Oil & Gas, Inc.
GPA.007.RP Cascade Oil & Gas, Inc.
GPA.008.RP Diversified Operating
GPA.009.RP Diversified Operating
GPA.010.RP Geotech Productions Inc.
GPA.011.RP Geotech Productions Inc.
GPA.012.RP H & R Well Service
GPA.013.RP H & R Well Service (Robin)
GPA.014.RP Habersham Energy
GPA.015.RP HS Resources
GPA.016.RP HS Resources
GPA.017.RP HS Resources
GPA.018.RP Jerry Pettyjohn
GPA.019.RP KP Kaufman
GPA.020.RP Kaiser Francis Oil Company/Weip King
GPA.021.RP Kaiser Francis Oil Company
GPA.022.RP Kaiser Francis Oil Company
GPA.023.RP Larry Brandly
GPA.024.RP Omimex Petroleum
GPA.025.RP Overland Resources
GPA.026.RP P & M Petroleum Management
GPA.027.RP Pozo Resources
GPA.028.RP Prospect Oil, Inc.
GPA.029.RP Prospect Oil, Inc.
C-23
<PAGE> 123
GPA.030.RP RC Qualls
GPA.031.RP Resource Technology/Rochester
GPA.032.RP Smith Energy Corp.
GPA.033.RP Smith Energy Corp.
GPA.034.RP Smith Energy Corp.
GPA.035.RP Smith Oil Properties/H & R (Robin)
GPA.036.RP Smith Oil Properties
GPA.037.RP Smith Oil Properties
GPA.038.RP Southmark Acquisitions/P & P
GPA.039.RP T.P. Operating, Inc.
GPA.040.RP Thorofare Resources, Inc.
GPA.041.RP Thorofare Resources, Inc.
GPA.042.RP Thorofare Resources, Inc.
GPA.043.RP Union Pacific Resources Co.
GPA.044.RP DJ Production Services, Inc.
GPA.045.RP Diversified Operating Corporation
GPA.046.RP R.C. Qualls Operating
GPA.047.RP T.P. Operating, Inc.
GPA.048.RP Diversified Operating Corporation
GPA.049.RP Thorofare Resources, Inc.
GPA.050.RP Arlian, Inc.
GPA.051.RP Arlian, Inc.
GPA.052.RP Omimex International Corp.
GPA.053.RP P&M Petroleum Management
GPA.054.RP Smith Oil Properties, Inc.
GPA.055.RP Smith Oil Properties, Inc.
GPA.056.RP Smith Energy Corporation
GPA.057.RP Cascade Oil & Gas, Inc.
GPA.058.RP Larry Brandly
GPA.059.RP G & R Oil Properties, Inc. (Smith
Energy Corp.)
GPA.060.RP Overland Resources, Ltd.
GPA.061.RP Sovereign Energy, L.L.C.
GPA.062.RP Kaiser-Francis Oil Company
GPA.063.RP K.P. Kauffman Company, Inc.
GPA.064.RP Blue Creek, Inc.
GPA.065.RP Argonex Company
GPA.001RW Frank H. Walsh
GPA.002RW Roggen/Redwave Ltd
GPA.001.RPD Geotech Productions, Inc.
GPA.002.RPD Termo Co.
GPA.001.REG Freedom Energy, Inc.
GPA.002.REG Gerrity Oil & Gas Company
GPA.003.REG Windsor Gas Processing
C-24
<PAGE> 124
EXHIBIT D
[Plot Plan of Greeley Fractionator]
<PAGE> 125
EXHIBIT E
[Plot Plan of Spindle Fractionator]
D-2
<PAGE> 126
EXHIBIT F
LIQUIDATED DAMAGES FORMULA
L (X+1-A) (X-A)
(Sigma) Y = (V x (0.98) ) x N x (1/(1.135) )
A (X)
Where:
A = The Contract Year during which termination of the Agreement occurs.
L = 20 (the last Contract Year of the Agreement).
Y = Discounted annual liquidated damages for Contract Year X.
X = The particular Contract Year for which liquidated damages are being
calculated.
V = The Specification Product volume (in Gallons) delivered by TEPPCO
to Duke Energy during the Contract Year immediately preceding
Contract Year A.
N = The Fractionation Fee in Contract Year X minus $0.005 (in $ per
Gallon).
Contract Year = Any Year during the term of the Agreement that begins
on an anniversary date of the Effective Date.
Capitalized terms used but not defined in this Exhibit F have the
definitions given those terms in the Agreement.
<PAGE> 127
EXHIBIT F
EXAMPLE OF LIQUIDATED DAMAGES
(FOR SECTION 3.4)
NOTE: This example assumes Total Specification Products in Year 4 of 150 MMG.
<TABLE>
<S> <C> <C> <C> <C> <C>
CONTRACT YEAR OF TERMINATION: 5 A LIQUIDATED DAMAGES($MM) 1.072
LAST YEAR OF CONTRACT: 20 L
CONTRACT FEE($/g) 0.0100
NET FEE($/g): 0.0050 N =Fee in Years 1-10; Years 11-20=0.0375
VOLUME(MM/GAL) LOST IN CONT. YFL 4 = 10 V(A-1)
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
CONTRACT YEAR 0 1 2 3 4 5 6 7 8 9 10
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VOLUME(MM/GAL) 0 0 0 0 9.800 9.608 9.419 9.235 9.054 8.876
- ----------------------------------------------------------------------------------------------------------------------------
PROTECTED NET FEE ($MM) 0 0 0 0 0.049 0.048 0.047 0.046 0.045 0.044
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
UNDISC. CASH FLOW ($MM) 0 0 0 0 0.049 0.048 0.047 0.046 0.045 0.044
- ----------------------------------------------------------------------------------------------------------------------------
CUM. CASH FLOW ($MM) 0 0 0 0 0.049 0.097 0.144 0.190 0.236 0.280
- ----------------------------------------------------------------------------------------------------------------------------
DISC. CASH FLOW ($MM) 0 0 0 0 0.049 0.042 0.037 0.032 0.027 0.024
- ----------------------------------------------------------------------------------------------------------------------------
CUM. DISC. CASH FLOW ($MM) 0 0 0 0 0.049 0.091 0.128 0.159 0.187 0.210
- ----------------------------------------------------------------------------------------------------------------------------
VALUE OF Y(X) ($MM) 0 0 0 0 0.049 0.042 0.037 0.032 0.027 0.024
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
CONTRACT YEAR 11 12 13 14 15 16 17 18 19 20
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VOLUME(MM/GAL) 8.702 8.531 8.364 8.200 8.039 7.882 7.727 7.576 7.427 7.282
- --------------------------------------------------------------------------------------------------------------------------------
PROTECTED NET FEE ($MM) 0.326 0.320 0.314 0.308 0.301 0.296 0.290 0.284 0.279 0.273
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
UNDISC. CASH FLOW ($MM) 0.326 0.320 0.314 0.308 0.301 0.296 0.290 0.284 0.279 0.273
- --------------------------------------------------------------------------------------------------------------------------------
CUM. CASH FLOW ($MM) 0.606 0.926 1.240 1.547 1.849 2.144 2.434 2.718 2.997 3.270
- --------------------------------------------------------------------------------------------------------------------------------
DISC. CASH FLOW ($MM) 0.153 0.132 0.114 0.098 0.085 0.073 0.063 0.055 0.047 0.047
- --------------------------------------------------------------------------------------------------------------------------------
CUM. DISC. CASH FLOW ($MM) 0.363 0.495 0.609 0.707 0.792 0.865 0.929 0.984 1.031 1.072
- --------------------------------------------------------------------------------------------------------------------------------
VALUE OF Y(X) ($MM) 0.020 0.018 0.015 0.013 0.011 0.010 0.008 0.007 0.006 0.005
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
F-2
<PAGE> 128
EXHIBIT G
MEMORANDUM OF FRACTIONATION AGREEMENT
THIS MEMORANDUM OF FRACTIONATION AGREEMENT (this "Memorandum") is made
and entered into this 21st day of April, 1998, but effective 11:59 p.m. (Denver,
Colorado time) on the 31st day of March 1998 (the "Effective Date"), by and
between Duke Energy Field Services, Inc., a Colorado corporation ("Duke Energy")
and TEPPCO Colorado, LLC, a Delaware limited liability company ("TEPPCO"). Each
of TEPPCO and Duke Energy are sometimes referred to individually as a "Party"
and collectively as the "Parties."
WHEREAS, Duke Energy and TEPPCO entered into that certain Fractionation
Agreement on April 21, 1998, but effective as of the Effective Date (the
"Agreement"); and
WHEREAS, any capitalized term used but not defined in this Memorandum
shall have the meaning ascribed to such term in the Agreement;
WHEREAS, the Parties desire to file this Memorandum of record in the
real property records of Weld County, Colorado, to give notice of the existence
of the Agreement and certain provisions contained therein;
NOW THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereto agree as
follows:
1. Notice. Notice is hereby given of the existence of the Agreement and
certain provisions contained therein which are summarized in Sections 2 through
5 below.
2. Certain Defined Terms. Unless the context otherwise requires, the
following terms shall have the respective meanings set forth in this Section 1:
A. "Dedicated Gas" shall mean all natural gas that Duke Energy or
any of its Affiliates now or hereafter owns or has the
contractual right to fractionate the natural gas liquids
derived therefrom and which is (i) produced from the Dedicated
Lands, (ii) transported through any of the Dedicated Gathering
Pipelines, (iii) subject to the Dedicated Producer Contracts
or (iv) processed in any of the Dedicated Plants.
B. "Dedicated Gathering Pipelines" shall mean all present and
future natural gas gathering pipelines which are now or
hereafter owned or controlled, in whole or in part, by Duke
Energy or any of its Affiliates and located on the Dedicated
Lands.
C. "Dedicated Lands" shall mean the lands described on the
attached Exhibit A.
<PAGE> 129
D. "Dedicated Plants" shall mean all present and future natural
gas processing plants which are now or hereafter owned or
controlled, in whole or in part, by Duke Energy or any of its
Affiliates and located on the Dedicated Lands, including,
without limitation, the natural gas processing plants
described on the attached Exhibit B.
E. "Dedicated Producer Contracts" shall mean all present and
future contracts under which Duke Energy or any of its
Affiliates has the right to fractionate natural gas liquids
derived from natural gas insofar as it is produced from any of
the Dedicated Lands, including without limitation, the
contracts more particularly described on the attached Exhibit
C.
F. "Fractionators" shall mean the Greeley Fractionator and the
Spindle Fractionator.
G. "Greeley Fractionator" shall mean the fractionation facilities
owned by TEPPCO and located within Duke Energy's Greeley
Natural Gas Processing Plant located in the SW1/4 of Section
25, Township 5 North, Range 66 West, Weld County, Colorado.
H. "Spindle Fractionator" shall mean the fractionation facilities
owned by TEPPCO and located within Duke Energy's Spindle
Natural Gas Processing Plant located in the SW1/4 of Section
34, Township 2 North, Range 67 West, Weld County, Colorado.
3. Term. The Agreement shall be effective as of March 31, 1998 at 11:59
p.m. (Denver, Colorado time), and shall continue in effect for a primary term
ending March 31, 2018 at 11:59 p.m. (Denver, Colorado time), and shall continue
in effect from Year to Year thereafter; provided that either Party shall have
the right to terminate the Agreement effective March 31, 2018 at 11:59 p.m.
(Denver, Colorado time), or any anniversary of such date by giving the other
Party at least six (6) months prior written notice.
4. Commitment to Process Dedicated Gas and Deliver Raw Product. Subject
to the terms and conditions of the Agreement, Duke Energy shall cause the
Dedicated Gas to be processed and all Raw Product to be delivered to TEPPCO at
the Receipt Points for fractionation under the terms of the Agreement.
5. Commitment to Fractionate. Subject to the payment of the
Fractionation Fee by Duke Energy to TEPPCO, the other terms and conditions of
the Agreement and the physical capacity and capabilities of the Fractionators,
TEPPCO shall accept delivery of and provide fractionation on a firm basis for
(i) up to a maximum of 378,000 Gallons per Day of Raw Product delivered by Duke
Energy to TEPPCO at the Receipt Point for the Greeley Fractionator and (ii) up
to a maximum of 126,000 Gallons per Day of Raw Product delivered by Duke Energy
to TEPPCO at the Receipt Point for the Spindle Fractionator.
G-2
<PAGE> 130
6. No Amendment to Agreement. This Memorandum is executed and recorded
solely for the purpose of giving notice and shall not amend nor modify the
Agreement in any way.
7. Further Information. Further information concerning the Agreement is
available from either (i) Duke Energy Field Services, Inc., 370 Seventeenth
Street, Suite 900, Denver, Colorado 80202 or (ii) TEPPCO Colorado, LLC, 2929
Allen Parkway, Suite 3200, Houston, Texas 77019.
The Parties hereto have executed this Memorandum to be effective as of
the day first hereinabove written.
DUKE ENERGY:
DUKE ENERGY FIELD SERVICES, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
TEPPCO:
TEPPCO COLORADO, LLC
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
G-3
<PAGE> 131
STATE OF TEXAS )
)
COUNTY OF HARRIS )
Before me, , a Notary Public in and for the State of Texas, on this
______ day of April, 1998, personally appeared , known to me to be the of Duke
Energy Field Services, Inc., a Colorado corporation, on behalf of said
corporation and acknowledged to me that he executed this Memorandum for the
considerations and purposes therein set forth.
Given under my hand and seal of office this ______ day of April, 1998.
--------------------------------------------
Notary Public in and for the State of Texas
--------------------------------------------
Printed or Typed Name of Notary
My Commission Expires:
--------------------------------------------
G-4
<PAGE> 132
STATE OF TEXAS )
)
COUNTY OF HARRIS )
Before me, _______ , a Notary Public in and for the State of Texas, on
this ______ day of April, 1998, personally appeared __________ , known to me
to be the __________ of TEPPCO Colorado, LLC, a Delaware limited liability
company, on behalf of said limited liability company and acknowledged to me
that he executed this Memorandum for the considerations and purposes therein
set forth.
Given under my hand and seal of office this ______ day of April, 1998.
--------------------------------------------
Notary Public in and for the State of Texas
--------------------------------------------
Printed or Typed Name of Notary
My Commission Expires:
--------------------------------------------
G-5
<PAGE> 133
EXHIBIT H
ATTACHED TO AND MADE PART OF THAT CERTAIN FRACTIONATION AGREEMENT DATED
APRIL 21, 1998 BETWEEN TEPPCO COLORADO LLC AND DUKE ENERGY FIELD SERVICES, INC.
Components Used For Calculating Delivered Specification Product at Greeley
Fractionator:
A - Vaporized ethane in mcf delivered through an orifice meter to the Greeley
Gas Plant residue gas stream
B - GPM of ethane and heavier components, as determined by samples obtained from
the vaporized ethane stream delivered during the month
C - Ending Specification Product inventory stored in the tankage at the Greeley
Plant, as determined by a month-end guaging of the tanks
D - Beginning Specification Product inventory stored in the tankage at the
Greeley Plant, as determined by a month-end guaging of the tanks conducted
during the prior month
E - Specification Product sales for the month which have been measured using the
certified scales at the Greeley Plant
F - Specification Product delivered to the Greeley Fractionator from the Spindle
Fractionator, as measured using the certified scales at the Greeley Plant
EXAMPLE OF MONTHLY TOTAL PRODUCTION REPORT TO BE PROVIDED:
Total Fractionator Production:
<TABLE>
<CAPTION>
BEGINNING INVENTORY: Y-Grade C2 C3 IC4 NC4 IC5 NC5
------- ------- ---------- --------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Greeley Frac 176,100 163,800 32,313 65,487 15,890 15,034
Spindle Frac 67,414 31,000 6,322 12,406 3,822 3,454
--------- --------- ------- --------- ------- -------
0 194,800 38,635 77,893 19,712 18,488
PRODUCTION:
Eaton Plant(Tkd In) 341,024 427,593 88,979 194,608 47,159 50,563
Lucerne Plant(Tkd In) 324,183 431,577 99,015 207,411 57,944 58,402
Mewbourne "A" 566,798 722,833 184,385 325,072 121,716 99,334
Mewbourne "B" 640,911 1,004,335 186,752 354,781 87,375 74,173
Spindle Plant 1,532,445 1,201,601 215,722 415,605 120,770 107,558
Greeley 752,173 623,881 159,017 385,978 148,873 129,945
--------- --------- ------- --------- ------- -------
Production Gallons: 4,157,534 4,411,820 933,870 1,883,455 583,837 519,975
OTHER SOURCES:
Stabilizer - Liquids to Ygrade 7,062 53,080 42,715 122,108 87,139 103,769
Walsh Lilli Plant 0 0 0 0 0 0
KN Silo 3,102 6,469 1,706 4,387 1,052 1,303
Bear Paw 0 0 0 0 0 0
Roggen B/G 0 0 0 0 0 0
--------- --------- ------- --------- ------- -------
TOTAL RECEIPT: 4,167,698 4,471,369 978,291 2,009,950 672,028 625,047
TOTAL DELIVERIES & SALES:
Cogen/CIG/WestGas 4,150,992
Sales - Sold Locally(Greeley) 2,525,705 643,417 611,504 589,737
Sales - Sold Locally(Isopentane) 0 0
Exchanges 1,626,790
Greeley Heat 1,918
Refrigeration 8,380
Propane for Trucks 27,946
Conway Sales - Gre/Spindle(Amoco) 12,105 207,408 18,695 36,683 13,145 12,004
Roggen Storage 0 123,420 0 0 0 0
Frontier - (Butane Mix) 2,431 15,183 518,699 1,057,753 8,210 883
Coastal - (Butane Mix) 1,633 10,515 350,049 711,000 5,864 644
Centennial - (Butane Mix) 40 108 6,285 12,260 180 25
Ultramar Diamond Shamrock - (Butane Mix) 497 3,196 105,638 214,164 1,694 184
Frontier/Coastal - (Butane Mix) 0 0 0 0 0 0
4,167,698 4,550,569 999,366 2,031,860 672,510 625,244
--------- --------- ------- --------- ------- -------
ENDING INVENTORY:
Greeley Frac 201,900 83,100 14,846 50,554 17,579 16,708
Spindle Frac 56,651 32,500 2,714 5,429 1,651 1,583
--------- ------- --------- ------- ------
115,600 17,560 55,983 19,230 18,290
<CAPTION>
BEGINNING INVENTORY: C6+ Total
------- ------
<S> <C> <C>
Greeley Frac 14,076 306,600
Spindle Frac 2,996 60,000
------- ----------
17,072 366,600
PRODUCTION:
Eaton Plant(Tkd In) 47,519 1,197,445
Lucerne Plant(Tkd In) 52,727 1,231,259
Mewbourne "A" 100,613 2,120,751
Mewbourne "B" 47,528 2,395,855
Spindle Plant 80,594 3,674,294
Greeley 116,554 2,316,421
------- ----------
Production Gallons: 445,535 12,936,025
OTHER SOURCES:
Stabilizer - Liquids to Ygrade 153,432 569,305
Walsh Lilli Plant 0 0
KN Silo 1,474 19,493
Bear Paw 0 0
Roggen B/G 0 0
------- ----------
TOTAL RECEIPT: 600,441 13,524,823
TOTAL DELIVERIES & SALES:
Cogen/CIG/WestGas 4,150,992
Sales - Sold Locally(Greeley) 4,370,364
Sales - Sold Locally(Isopentane) 0 0
Exchanges 1,626,790
Greeley Heat 1,918
Refrigeration 8,380
Propane for Trucks 27,946
Conway Sales - Gre/Spindle(Amoco) 10,478 310,518
Roggen Storage 0 123,420
Frontier - (Butane Mix) 33 1,603,192
Coastal - (Butane Mix) 25 1,079,730
Centennial - (Butane Mix) 0 18,898
Ultramar Diamond Shamrock - (Butane Mix) 4 325,377
Frontier/Coastal - (Butane Mix) 0 0
------- ----------
600,277 13,647,525
ENDING INVENTORY:
Greeley Frac 16,113 198,899
Spindle Frac 1,123 44,999
------- ----------
17,235 243,898
</TABLE>
H-2
<PAGE> 134
EXHIBIT I
ATTACHED TO AND MADE PART OF THAT CERTAIN FRACTIONATION AGREEMENT DATED
APRIL 21, 1998 BETWEEN TEPPCO COLORADO LLC AND DUKE ENERGY FIELD SERVICES, INC.
Components Used For Calculating Delivered Specification Product at Spindle
Fractionator:
A - Vaporized ethane in mcf delivered through an orifice meter to the Spindle
Gas Plant residue gas stream
B - GPM of ethane and heavier components, as determined by samples obtained from
the vaporized ethane stream delivered during the month
C - Ending Specification Product inventory stored in the tankage at the Spindle
Plant, as determined by a month-end guaging of the tanks
D - Beginning Specification Product inventory stored in the tankage at the
Spindle Plant, as determined by a month-end guaging of the tanks conducted
during the prior month
E - Specification Product sales for the month which have been measured using the
certified scales at the Spindle Plant
F - Specification Product delivered to the Greeley Fractionator, as measured
using the certified scales at the Greeley Plant
G - Specification Product delivered to the Amoco Products Pipeline for the
month, as measured by Amoco Products Pipeline
MONTHLY DETAIL TO BE PROVIDED:
Spindle allocated gallons to producers:
<TABLE>
<CAPTION>
C2 C3 IC4 NC4 IC5 NC5 C6+ Total
------ ------- ------- ------- ------- ------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Propane trucked out to customers 15,655 936,400 4,735 5,895 1,353 1,353 966 966,357
BG trucked to North Fractionator 3,417 39,519 208,630 405,854 118,320 105,225 78,854 959,819
Product sent down APL 2,788 166,779 843 1,050 241 241 172 172,115
B/G sent down APL 921 29,868 4,951 9,597 2,846 2,504 1,926 52,613
Plant Refrigeration 136 8,120 41 51 12 12 8 8,380
Vehicle Usage 180 10,789 55 68 16 16 11 11,134
Storage @ Spindle Plant
C3 Beginning 31,000
Ending 32,500
------
1,500 24 1,454 7 9 2 2 2 1,500
BG Beginning 29,000
Ending 12,500
------
(16,500) (59) (679) (3,587) (6,977) (2,034) (1,809) (1,356) (16,501)
Storage @ Amoco Unloading
C3 Beginning 16,802
Ending 26,451
------
9,649 156 9,350 47 59 14 14 10 9,649
--------- --------- ------- ------- ------- ------- ------ ---------
23,218 1,201,601 215,722 415,605 120,770 107,558 80,594 2,165,066
STABILIZER 0 0 0 0 0 0
ETHANE 1,509,227 1,509,227
--------- --------- ------- ------- ------- ------- ------ ---------
Total Spindle Production 1,532,445 1,201,601 215,722 415,605 120,770 107,558 80,594 3,674,293
(included on Total schedule @ Greeley)
</TABLE>
<PAGE> 135
EXHIBIT B
================================================================================
LEASE AGREEMENT
BETWEEN
DUKE ENERGY FIELD SERVICES, INC.,
AS LESSOR
AND
TEPPCO COLORADO, LLC,
AS LESSEE
MARCH 31, 1998
================================================================================
<PAGE> 136
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE I DEFINITIONS AND CONSTRUCTION.............................................................. 1
1.1 Certain Defined Terms..................................................................... 1
"Day" .................................................................................... 1
"Frac Agreement" ......................................................................... 1
"Fractionation Plant" .................................................................... 1
"Governmental Authority" ................................................................. 1
"O&M Agreement" .......................................................................... 2
"Permitted Encumbrances" ................................................................. 2
"Premises" ............................................................................... 2
"Project Agreements" ..................................................................... 2
"Purchase Agreement" ..................................................................... 2
"Rent" ................................................................................... 2
"Sublease" ............................................................................... 2
"Year" ................................................................................... 2
1.2 References................................................................................ 2
1.3 Headings.................................................................................. 2
ARTICLE II DEMISE OF PREMISES AND TERM............................................................... 2
2.1 Demise of Premises and Term............................................................... 2
ARTICLE III RENT...................................................................................... 3
3.1 Rent...................................................................................... 3
3.2 Place of Payment.......................................................................... 3
ARTICLE IV CONDUCT OF BUSINESS....................................................................... 3
4.1 Use of Premises........................................................................... 3
4.2 Surrender of Premises..................................................................... 3
ARTICLE V TAXES, ASSESSMENTS........................................................................ 3
5.1 Duke Energy's Obligation to Pay........................................................... 3
5.2 Manner of Payment......................................................................... 4
ARTICLE VI REPRESENTATIONS AND WARRANTIES............................................................ 4
6.1 Representations and Warranties of Duke Energy............................................. 4
ARTICLE VII EMINENT DOMAIN............................................................................ 4
7.1 Total Condemnation of Premises............................................................ 4
7.2 Partial Condemnation...................................................................... 4
7.3 Damages................................................................................... 5
ARTICLE VIII GENERAL PROVISIONS........................................................................ 5
8.1 Estoppel Certificates..................................................................... 5
8.2 Warranty of Peaceful Possession........................................................... 5
</TABLE>
<PAGE> 137
<TABLE>
<S> <C> <C>
8.3 Recording................................................................................. 5
8.4 Notice. ................................................................................. 6
8.5 Waiver.................................................................................... 7
8.6 Entire Agreement.......................................................................... 7
8.7 Successors and Assigns.................................................................... 7
8.8 Conflicts................................................................................. 7
8.9 Laws and Regulations...................................................................... 7
8.10 Severability.............................................................................. 7
8.11 Time of Essence........................................................................... 8
8.12 Captions.................................................................................. 8
8.13 Schedules and Exhibits.................................................................... 8
8.14 No Partnership............................................................................ 8
8.15 No Third Party Beneficiaries.............................................................. 8
8.16 Mutual Cooperation; Further Assurances.................................................... 8
8.17 Survival.................................................................................. 8
8.18 Other Project Agreements.................................................................. 8
</TABLE>
-ii-
<PAGE> 138
LEASE AGREEMENT
THIS LEASE AGREEMENT (this "Lease") is made and entered into this 21st
day of April, 1998, but effective 11:59 p.m. (Denver, Colorado time) on the 31st
day of March, 1998, between Duke Energy Field Services, Inc., a Colorado
corporation (herein called "Duke Energy") and TEPPCO Colorado LLC, a Delaware
limited liability company (herein called "TEPPCO"). Each of TEPPCO and Duke
Energy are sometimes referred to individually as a "Party" and collectively as
the "Parties."
W I T N E S S E T H:
WHEREAS, Duke Energy owns the Premises (hereinafter defined); and
WHEREAS, Duke Energy desires to lease the Premises to TEPPCO, and
TEPPCO desires to lease the Premises from Duke Energy upon the terms and
conditions hereinafter set forth.
NOW, THEREFORE, for and in consideration of the premises, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and of the mutual agreements hereinafter set forth, Duke Energy
and TEPPCO covenant and agree as follows:
ARTICLE I
DEFINITIONS AND CONSTRUCTION
1.1 Certain Defined Terms. Unless the context otherwise requires,
the following terms shall have the respective meanings set forth in this
Section 1.1:
"Day" shall mean a period of time commencing at 8:00 a.m.
(Denver, Colorado time) on a calendar day and ending at 8:00 a.m. (Denver,
Colorado time) on the next succeeding calendar day.
"Frac Agreement" means that certain Fractionation Agreement
dated of even date herewith by and between Duke Energy and TEPPCO.
"Fractionation Plant" means TEPPCO's fractionation plant
located on the Premises.
"Governmental Authority" means any entity of or pertaining to
government, including any federal, state, local, other governmental or
administrative authority, agency, court, tribunal, arbitrator, commission, board
or bureau.
"O&M Agreement" means that certain Operation and Maintenance
Agreement dated of even date herewith by and between Duke Energy and TEPPCO.
<PAGE> 139
"Permitted Encumbrances" shall have the meaning ascribed to
such term in Section 6.1.
"Premises" means that certain tract or parcel of land located
in Weld County, Colorado, more particularly described on Exhibit A attached
hereto and made a part hereof for all purposes.
"Project Agreements" shall mean collectively, this Lease, the
O&M Agreement, the Frac Agreement and the Sublease.
"Purchase Agreement" shall mean that certain Asset Purchase
Agreement dated March 31, 1998, by and between Duke Energy, as "Seller," and
TEPPCO, as "Buyer".
"Rent" shall have the meaning ascribed to such term in
Section 3.1.
"Sublease" means that certain Sublease Agreement dated of even
date herewith by and between Duke Energy and TEPPCO.
"Year" shall mean a period of 365 consecutive Days; provided,
however that any year which contains the date of February 29 shall consist of
366 consecutive Days.
1.2 References. As used in this Lease, unless expressly stated
otherwise, references to (a) "including" mean "including, without limitation",
and the words "hereof", "herein", and "hereunder", and similar words, refer to
this Lease as a whole and not to any particular Article, provision, section or
paragraph of this Lease and (b) "or" mean "either or both". Unless otherwise
specified, all references in this Lease to Sections, paragraphs, Exhibits or
Schedules are deemed references to the corresponding Sections, paragraphs,
Exhibits or Schedules in this Lease.
1.3 Headings. The headings of the Sections of this Lease and of
the Schedules and Exhibits are included for convenience only and shall not be
deemed to constitute part of this Lease or to affect the construction or
interpretation hereof or thereof.
ARTICLE II
DEMISE OF PREMISES AND TERM
2.1 Demise of Premises and Term. In consideration of the rents,
covenants, and agreements set forth herein and subject to the terms and
conditions hereof, Duke Energy hereby leases to TEPPCO and TEPPCO hereby leases
from Duke Energy, the Premises for a term commencing on March 31, 1998 at 11:59
p.m. (Denver, Colorado time) and, unless terminated in accordance with Article
II of the Frac Agreement, continue in effect for a primary term ending March 31,
2018 at 11:59 p.m. (Denver, Colorado time), and shall continue in effect from
Year to Year thereafter; provided that either Party shall have the right to
terminate this Lease effective March 31, 2018 at 11:59 p.m. or any anniversary
of such date by giving the other Party at least six (6) months prior written
notice.
-2-
<PAGE> 140
ARTICLE III
RENT
3.1 Rent. As rental for the Premises during the term of this
Lease, TEPPCO agrees to pay to Duke Energy for each month of the term of this
Lease One Thousand and 00/100 ($1,000.00) (the "Rent") on or before the first
(1st) day of each month of the term of this Lease. Rent shall be prorated for
any partial month during the term of this Lease.
3.2 Place of Payment. All Rent shall be payable in lawful money of
the United States of America, at Duke Energy's address set forth in Section 8.4
herein.
ARTICLE IV
CONDUCT OF BUSINESS
4.1 Use of Premises. TEPPCO shall have the right to use the
Premises for the purpose of fractionating natural gas liquids.
4.2 Surrender of Premises. TEPPCO shall at the expiration of the
term of this Lease, or at any earlier termination of this Lease, surrender the
Premises to Duke Energy in as good condition as it received the same; provided,
however, TEPPCO shall deliver written notice to Duke Energy prior to termination
of the Lease if TEPPCO will remove the Fractionation Plant and any other
alterations, additions, improvements or other changes to the Premises made by
TEPPCO during the term of this Lease; provided that TEPPCO shall have the right
to, and must remove, the Fractionation Plant, if at all, within one (1) year
after termination of this Lease, but no earlier than one (1) year after delivery
of written notice as provided above. If TEPPCO fails to deliver notice as
provided in the preceding sentence, TEPPCO shall surrender the Fractionation
Plant and any such alterations, additions, improvements or other changes to Duke
Energy upon termination of this Lease.
ARTICLE V
TAXES, ASSESSMENTS
5.1 Duke Energy's Obligation to Pay. Duke Energy shall pay during
the term of this Lease, all federal, state and local real and personal property
ad valorem taxes, assessments, and other governmental charges, general and
special, ordinary and extraordinary, including but not limited to assessments
for public improvements or benefits assessed against the Premises, or
improvements situated thereon, including, without limitation, the Fractionation
Plant, that are payable to any lawful authority assessed against or with respect
to the Premises or the use or operation thereof, including, but not limited to,
any federal, state or local income, gross receipts, withholding, franchise,
excise, sales, use, value added, recording, transfer or stamp tax, levy, duty,
charge or withholding of any kind imposed or assessed by any federal, state or
local government, agency or authority, together with any addition to tax,
penalty, fine or interest thereon, other than state or U.S. federal income tax
imposed upon the taxable income of TEPPCO and any franchise taxes imposed upon
TEPPCO (such taxes and assessments being hereinafter called "Taxes"). In the
event Duke Energy fails to pay such Taxes prior to the time the same become
delinquent, TEPPCO may pay the same and (provided
-3-
<PAGE> 141
TEPPCO shall have delivered to Duke Energy evidence of such payment) deduct the
amount of such payment from the Rent owed hereunder.
5.2 Manner of Payment. Duke Energy shall pay all Taxes directly
to the applicable taxing authority prior to delinquency and shall promptly
thereafter provide TEPPCO with evidence of such payment. The certificate issued
or given by the appropriate officials authorized or designated by law to issue
or give the same or to receive payment of such Taxes shall be prima facie
evidence of the existence, payment, nonpayment and amount of such Taxes. Duke
Energy, if Duke Energy shall so desire, may contest the validity or amount of
any such Taxes, at Duke Energy's sole cost and expense, by appropriate
proceedings, diligently conducted in good faith. Duke Energy may defer payment
of such Taxes during the pendency of such contest, provided that nothing herein
contained shall be construed to allow such Taxes to remain unpaid for such
length of time as shall permit the Premises, or any part thereof, to be sold by
any Governmental Authority or a lien with respect thereto foreclosed for the
nonpayment of the same.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.1 Representations and Warranties of Duke Energy. Duke Energy
represents and warrants to TEPPCO that Duke Energy has good and marketable title
to the Premises subject only to: (a) liens for current taxes and assessments not
yet due or which Duke Energy is contesting in good faith, (b) inchoate mechanic
and materialmen liens for construction in progress, (c) inchoate workmen,
repairmen, warehousemen, customer, employee and carriers liens arising in the
ordinary course of business and (d) liens created by TEPPCO (collectively, the
"Permitted Encumbrances").
ARTICLE VII
EMINENT DOMAIN
7.1 Total Condemnation of Premises. If the whole of the Premises
are acquired or condemned by eminent domain for any public or quasi-public use
or purpose, then this Lease shall terminate as of the date title vests in any
public agency. All rentals and other charges owing hereunder shall be prorated
as of such date.
7.2 Partial Condemnation. If any part of the Premises is acquired
or condemned as set forth in Section 5.1, and if in TEPPCO's reasonable opinion
such partial taking or condemnation renders the Premises unsuitable for the
business of TEPPCO, then this Lease shall terminate at TEPPCO's election as of
the date title vests in any public agency, provided TEPPCO delivers to Duke
Energy written notice of such election to terminate within thirty (30) days
following the date title vests in such public agency. In the event of such
termination, all rentals and other charges owing hereunder shall be prorated as
of such effective date of termination.
7.3 Damages. Duke Energy shall be entitled to any award and all
damages payable as a result of any condemnation or taking of the fee of the
Premises. TEPPCO shall have the right to claim and recover from the condemning
authority, but not from Duke Energy, such compensation
-4-
<PAGE> 142
as may be separately awarded or recoverable by TEPPCO in TEPPCO's own right on
account of any and all damage to the Fractionation Plant and/or TEPPCO's
business by reason of the condemnation, including loss of value of any unexpired
portion of the term of the Lease, and for or on account of any cost or loss to
which TEPPCO might be put in removing TEPPCO's personal property, fixtures,
leasehold improvements and equipment, including, without limitation, the
Fractionation Plant, from the Premises.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Estoppel Certificates. TEPPCO and Duke Energy shall, at any
time and from time to time upon not less than ten (10) days prior written
request from the other Party, execute, acknowledge and deliver to the other a
statement in writing (i) certifying that this Lease is unmodified and in full
force and effect (or, if modified, stating the nature of such modification and
certifying that this Lease, as so modified, is in full force and effect) and the
date to which Rent and other charges are paid, and (ii) acknowledging that there
are not, to the executing Party's knowledge, any uncured defaults on the part of
the other Party hereunder (or specifying such defaults, if any are claimed). Any
such statement may be conclusively relied upon by any prospective purchaser or
encumbrancer of the Premises or the leasehold.
Duke Energy's or TEPPCO's failure to deliver such statement within such
ten (10) day period shall be conclusive upon that Party (i) that this Lease is
in full force and effect without modification, except as may be represented by
the other Party, and (ii) that there are not uncured defaults in performance by
the other Party.
Nothing in this Section 8.1 shall be construed to waive the conditions
elsewhere contained in this Lease applicable to assignment or subletting of the
Premises by TEPPCO.
8.2 Warranty of Peaceful Possession. Duke Energy covenants and
warrants that TEPPCO, upon paying the Rent reserved hereunder and observing and
performing all of the covenants, conditions and provisions on TEPPCO's part to
be observed and performed hereunder, may peaceably and quietly have, hold,
occupy, use and enjoy, and shall have the full, exclusive and unrestricted use
and enjoyment of, all the Premises during the term of the Lease for the purposes
permitted herein, and Duke Energy agrees to warrant and forever defend title to
the Premises against the claims of any and all persons whomsoever lawfully
claiming or to claim the same or any part thereof, subject only to the Permitted
Encumbrances and the provisions of this Lease.
8.3 Recording. Duke Energy and TEPPCO shall execute, acknowledge,
deliver and record a "short form" memorandum of this Lease in the form of
Exhibit B attached hereto and made a part hereof for all purposes. Promptly upon
request by Duke Energy at any time following the expiration or earlier
termination of this Lease, however such termination may be brought about, TEPPCO
shall execute and deliver to Duke Energy an instrument, in recordable form,
evidencing the termination of this Lease and the release by TEPPCO of all of
TEPPCO's right, title and interest in and to the Premises existing under and by
virtue of this Lease.
-5-
<PAGE> 143
8.4 Notice. All notices, requests, demands and other
communications required or permitted to be given under this Lease shall be
deemed to have been duly given if in writing and delivered personally or sent
via first-class, postage prepaid, registered or certified mail (return receipt
requested), or by overnight delivery service or facsimile transmission addressed
as follows:
If to Duke Energy:
Duke Energy Field Services, Inc.
370 - 17th Street, Suite 900
Denver, Colorado 80202
Attention: President
Telephone: (303) 595-3331
Facsimile: (303) 893-2613
and copy to:
Duke Energy Field Services, Inc.
370 - 17th Street, Suite 900
Denver, Colorado 80202
Attention: General Counsel
Telephone: (303) 595-3331
Facsimile: (303) 893-8913
If to TEPPCO:
TEPPCO Colorado, LLC
2929 Allen Parkway, Suite 3200
Houston, Texas 77019
Attention: President
Telephone: (713) 759-3636
Facsimile: (713) 759-3957
and copy to:
Texas Eastern Products Pipeline Company
2929 Allen Parkway, Suite 3200
Houston, Texas 77019
Attention: General Counsel
Telephone: (713) 759-3968
Facsimile: (713) 759-3645
Any Party may change the address to which the communications are to be
directed to it by giving notice to the other in the manner provided in this
Section 8.4. Notice by mail shall be deemed to have been given and received on
the third calendar day after posting. Notice by overnight delivery
-6-
<PAGE> 144
service, facsimile transmission or personal delivery shall be deemed given on
the date of actual delivery.
8.5 Waiver. No course of dealing and no delay on the part of
either Party in exercising any right, power or remedy shall operate as a waiver
thereof or otherwise prejudice such Party's rights, powers or remedies. No term
or condition of this Lease shall be deemed to have been waived nor shall there
be any estoppel to enforce any provision of this Lease except by written
instrument of the Parties charged with such waiver or estoppel. The waiver of
any breach of any term, condition or provision of this Lease shall not be
construed as a waiver of any prior, concurrent or subsequent breach of the same
or any other term, condition or provision hereof.
8.6 Entire Agreement. The Project Agreements and any related
documents between the Parties of even date herewith, including exhibits and
schedules attached thereto, constitute the final and entire agreement between
the Parties concerning the subject matter thereof, and supersedes all prior and
contemporaneous agreements and undertakings of the Parties in connection
therewith. The Project Agreements may not be contradicted by evidence of prior,
contemporaneous or subsequent oral agreements of the Parties. There are no oral
agreements between the Parties.
8.7 Successors and Assigns. Assignment provisions pertaining to
this Lease are set forth in the O&M Agreement.
8.8 Conflicts. In the event of any conflict between the provisions
of this Lease and any exhibits or schedules attached hereto, the provisions of
this Lease shall prevail.
8.9 Laws and Regulations. This Lease and the performance hereof
shall be subject to all valid and applicable federal and state laws and to the
valid and applicable orders, laws, rules, and regulations of any state or
federal authority having jurisdiction, but nothing contained herein shall be
construed as a waiver of any right to question or contest any such order, law,
rule, or regulation in any forum having jurisdiction.
8.10 Severability. The invalidity or unenforceability of any
provision of this Lease shall in no way affect the validity or enforceability of
any other provision hereof.
8.11 Time of Essence. Time is of the essence in the performance of
all obligations falling due hereunder.
8.12 Captions. The headings to Articles, Sections and other
subdivisions of this Lease are inserted for convenience of reference only and
will not affect the meaning or interpretation of this Lease.
8.13 Schedules and Exhibits. All schedules and exhibits hereto
which are referred to herein are hereby made a part hereof and incorporated
herein by such reference.
8.14 No Partnership. The relationship between Duke Energy and
TEPPCO at all times shall not be deemed a partnership or joint venture.
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<PAGE> 145
8.15 No Third Party Beneficiaries. Subject to the provisions of
Section 8.7 hereof, this Lease inures to the sole and exclusive benefit of Duke
Energy and TEPPCO, their respective successors, legal representatives and
assigns, and confers no benefit on any third party.
8.16 Mutual Cooperation; Further Assurances. Upon request by either
Party from time to time during the term of this Lease, each Party agrees to
execute and deliver all such other and additional instruments, notices and other
documents and do all such other acts and things as may be necessary to carry out
the purposes of this Lease and to more fully assure the Parties' rights and
interests provided for hereunder. Duke Energy and TEPPCO each agree to cooperate
with the other on all matters relating to required permits and regulatory
compliance by either Duke Energy or TEPPCO in respect of the Premises.
8.17 Survival. Survival provisions pertaining to this Lease are set
forth in the O&M Agreement.
8.18 Other Project Agreements. In the event of any conflict between
the provisions of any of the Project Agreements with each other or with the
Purchase Agreement, the provisions of the O&M Agreement shall control over the
inconsistent provisions of any of the other Project Documents or the Purchase
Agreement.
8.19 Amendments; Changes; Modifications. This Lease may not be
effectively amended, changed, modified, altered or terminated, except as
provided herein, without the written consent of the Parties and such consent
shall be effective only in the specific instance and for the specific purpose
for which it is given.
The parties hereto have executed this Lease to be effective as of the
day first hereinabove written.
Duke Energy:
DUKE ENERGY FIELD SERVICES, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
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<PAGE> 146
TEPPCO:
TEPPCO COLORADO, LLC
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
-9-
<PAGE> 147
EXHIBIT A
PREMISES
A portion of the Southwest Quarter (SW1/4) of Section 25 (Sec. 25), Township
Five North (T5N), Range Sixty Six (R66W) West of the Sixth Principal Meridian
(6th P.M.), County of Weld, State of Colorado, more particularly described as
follows:
Commencing at the Southwest corner (SW Crn) of said Section 25 and assuming the
West line of said section as bearing North 00(degrees)00'00" East with all
other bearings contained herein relative thereto;
Thence North 00(degrees)00'00" East a distance of 348.27 feet;
Thence North 90(degrees)00'00" East a distance of 957.61 feet to the True Point
of Beginning;
Thence North 00(degrees)43'56" East a distance of 55.11 feet;
Thence South 88(degrees)55'04" East a distance of 129.52 feet;
Thence South 00(degrees)26'43" West a distance of 53.09 feet;
Thence North 89(degrees)48'39" West a distance of 129.79 feet back to the True
Point of Beginning;
Containing 7,015 square feet (0.161 acres), more or less.
[SEAL]
/s/ KENNETH A. PERRY 4-6-98
- -------------------------------------------------------
Kenneth A. Perry, P.L.S. 25961
For and on behalf of Henkels & McCoy, Inc.
A portion of the Southwest Quarter (SW1/4) of Section 25 (Sec. 25), Township
Five North (T5N), Range Sixty Six (R66W) West of the Sixth Principal Meridian
(6th P.M.), County of Weld, State of Colorado, more particularly described as
follows:
Commencing at the Southwest corner (SW Crn) of said Section 25 and assuming the
West line of said section as bearing North 00(degrees)00'00" East with all
other bearings contained herein relative thereto;
Thence North 00(degrees)00'00" East a distance of 272.25 feet;
Thence North 90(degrees)00'00" East a distance of 986.44 feet to the True Point
of Beginning;
Thence North 00(degrees)51'22" East a distance of 60.45 feet;
Thence South 89(degrees)45'12" East a distance of 117.12 feet;
Thence South 00(degrees)31'05" West a distance of 61.40 feet;
Thence North 89(degrees)17'15" West a distance of 117.47 feet back to the True
Point of Beginning;
Containing 7,146 square feet (0.164 acres), more or less.
[SEAL]
/s/ KENNETH A. PERRY 4-6-98
- -------------------------------------------------------
Kenneth A. Perry, P.L.S. 25961 Date
For and on behalf of Henkels & McCoy, Inc.
<PAGE> 148
EXHIBIT B
MEMORANDUM OF LEASE AGREEMENT
THIS MEMORANDUM OF LEASE AGREEMENT (this "Memorandum") is made and
entered into this 21st day of April, 1998, but effective 11:59 p.m. (Denver,
Colorado time) on the 31st day of March 1998 (the "Effective Date"), by and
between Duke Energy Field Services, Inc., a Colorado corporation ("Duke Energy")
and TEPPCO Colorado, LLC, a Delaware limited liability company ("TEPPCO"). Each
of TEPPCO and Duke Energy are sometimes referred to individually as a "Party"
and collectively as the "Parties."
WHEREAS, Duke Energy and TEPPCO entered into that certain Lease
Agreement on April 21, 1998, but effective as of the Effective Date (the
"Agreement"); and
WHEREAS, any capitalized term used but not defined in this Memorandum
shall have the meaning ascribed to such term in the Agreement;
WHEREAS, the Parties desire to file this Memorandum of record in the
real property records of Weld County, Colorado, to give notice of the existence
of the Agreement and certain provisions contained therein;
NOW THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereto agree as
follows:
1. Notice. Notice is hereby given of the existence of the
Agreement and certain provisions contained therein which are summarized in
Section 2 below.
2. Demise of Premises and Term. In consideration of the rents,
covenants, and agreements set forth in the Agreement and subject to the terms
and conditions of the Agreement, Duke Energy has leased to TEPPCO and TEPPCO has
leased from Duke Energy, that certain tract or parcel of land located in Weld
County, Colorado, more particularly described on Exhibit A attached hereto and
made a part hereof for all purposes for a term commencing on March 31, 1998 at
11:59 p.m. (Denver, Colorado time) and, unless terminated in accordance with the
terms and conditions of the Agreement, shall continue in effect for a primary
term ending March 31, 2018 at 11:59 p.m. (Denver, Colorado time), and shall
continue in effect from Year to Year thereafter; provided that either Party has
the right to terminate the Agreement effective March 31, 2018 at 11:59 p.m. or
any anniversary of such date by giving the other Party at least six (6) months
prior written notice.
3. No Amendment to Agreement. This Memorandum is executed and
recorded solely for the purpose of giving notice and shall not amend nor modify
the Agreement in any way.
<PAGE> 149
4. Further Information. Further information concerning the
Agreement is available from either (i) Duke Energy Field Services, Inc., 370
Seventeenth Street, Suite 900, Denver, Colorado 80202 or (ii) TEPPCO Colorado,
LLC, 2929 Allen Parkway, Suite 3200, Houston, Texas 77019.
The Parties hereto have executed this Memorandum to be effective as of
the day first hereinabove written.
DUKE ENERGY:
DUKE ENERGY FIELD SERVICES, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
TEPPCO:
TEPPCO COLORADO, LLC
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
B-2
<PAGE> 150
STATE OF TEXAS )
)
COUNTY OF HARRIS )
Before me, ____________, a Notary Public in and for the State of Texas,
on this ______ day of April, 1998, personally appeared ___________, known to me
to be the ____________ of Duke Energy Field Services, Inc., a Colorado
corporation, on behalf of said corporation and acknowledged to me that he
executed this Memorandum for the considerations and purposes therein set forth.
Given under my hand and seal of office this ______ day of April, 1998.
---------------------------------------------
Notary Public in and for the State of Texas
---------------------------------------------
Printed or Typed Name of Notary
My Commission Expires:
---------------------------------------------
STATE OF TEXAS )
)
COUNTY OF HARRIS )
Before me, ____________, a Notary Public in and for the State of Texas,
on this ______ day of April, 1998, personally appeared ____________, known to me
to be the ____________ of TEPPCO Colorado, LLC, a Delaware limited liability
company, on behalf of said limited liability company and acknowledged to me that
he executed this Memorandum for the considerations and purposes therein set
forth.
Given under my hand and seal of office this ______ day of April, 1998.
---------------------------------------------
Notary Public in and for the State of Texas
---------------------------------------------
Printed or Typed Name of Notary
My Commission Expires:
---------------------------------------------
B-3
<PAGE> 151
EXHIBIT C
================================================================================
OPERATION AND MAINTENANCE AGREEMENT
BY AND BETWEEN
DUKE ENERGY FIELD SERVICES, INC.
AND
TEPPCO COLORADO, LLC
MARCH 31, 1998
================================================================================
<PAGE> 152
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE 1 DEFINITIONS.......................................................................... 2
1.1 Definitions ......................................................................... 2
1.2 References........................................................................... 6
1.3 Headings............................................................................. 6
ARTICLE 2 SERVICES AND RELATIONSHIP............................................................ 6
2.1 Services............................................................................. 6
2.2 Other Agreements..................................................................... 6
2.3 Independent Contractor............................................................... 7
2.4 TEPPCO's Access...................................................................... 7
2.5 Obligation to Provide Associated Services and Facilities............................. 7
ARTICLE 3 EMPLOYEES, CONSULTANTS, AND SUBCONTRACTORS........................................... 7
3.1 Employees, Consultants, and Subcontractors........................................... 7
3.2 Affiliates........................................................................... 8
3.3 Standards for Performance of Duke Energy, its Employees, and
Contractors.......................................................................... 8
ARTICLE 4 OPERATION AND MAINTENANCE COSTS...................................................... 8
4.1 Operating and Other Costs............................................................ 8
4.2 O&M Fee.............................................................................. 8
4.3 Insurable Loss to the Fractionators.................................................. 8
4.4 Capital Expenditures................................................................. 9
4.5 Insurance............................................................................ 9
ARTICLE 5 INDEMNIFICATION...................................................................... 9
5.1 Indemnification by Duke Energy....................................................... 9
5.2 Indemnification by TEPPCO............................................................ 10
ARTICLE 6 TERM AND TERMINATION................................................................. 11
6.1 Term................................................................................. 11
6.2 Termination.......................................................................... 11
ARTICLE 7 BILLING AND PAYMENT.................................................................. 11
7.1 Statements and Billings.............................................................. 11
7.2 Audit Rights......................................................................... 11
ARTICLE 8 SURVIVAL OF OBLIGATIONS.............................................................. 12
ARTICLE 9 WARRANTY............................................................................. 12
9.1 Warranty............................................................................. 12
9.2 Consequence of Breach................................................................ 12
9.3 Vendor Warranties.................................................................... 13
</TABLE>
<PAGE> 153
<TABLE>
<S> <C> <C>
ARTICLE 10 DISPUTES.................................................................... 13
10.1 Dispute Resolution; Arbitration...................................................... 13
10.2 ..................................................................................... 13
10.3 ..................................................................................... 13
10.4 Recovery of Costs and Attorneys' Fees................................................ 15
10.5 Choice of Forum...................................................................... 15
10.6 Jury Waivers......................................................................... 15
10.7 Limitation of Damages................................................................ 16
10.8 Governing Law........................................................................ 16
ARTICLE 11 MISCELLANEOUS............................................................... 16
11.1 Notices.............................................................................. 16
11.2 Waiver............................................................................... 17
11.3 Amendments; Changes; Modifications................................................... 17
11.4 Successors and Assigns............................................................... 17
11.5 Conflicts............................................................................ 17
11.6 Entire Agreement..................................................................... 18
11.7 Laws and Regulations................................................................. 18
11.8 Severability......................................................................... 18
11.9 Time of Essence...................................................................... 18
11.10 Captions............................................................................. 18
11.11 Schedules and Exhibits............................................................... 18
11.12 No Partnership....................................................................... 18
11.13 No Third Party Beneficiaries......................................................... 18
11.14 Mutual Cooperation; Further Assurances............................................... 18
11.15 Other Project Agreements............................................................. 19
</TABLE>
-ii-
<PAGE> 154
OPERATION AND MAINTENANCE AGREEMENT
THIS OPERATION AND MAINTENANCE AGREEMENT (the "O&M Agreement") is made
and entered into this 21st day of April, 1998, but effective as of the 31st day
of March, 1998, by and between Duke Energy Field Services, Inc. ("Duke Energy"),
a Colorado corporation and TEPPCO Colorado, LLC, a Delaware limited liability
company ("TEPPCO"). Each of TEPPCO and Duke Energy are sometimes referred to
individually as a "Party" and collectively as the "Parties."
RECITALS
A. Duke Energy owns and operates the Greeley Natural Gas Processing Plant
located in the SW1/4 of Section 25, T5N, R66W (the "Greeley Plant") and
the Spindle Natural Gas Processing Plant located in the SW1/4 of
Section 34, T2N, R67W (the "Spindle Plant"), both of which are located
in Weld County, Colorado.
B. Pursuant to an Asset Purchase Agreement dated March 31, 1998 (the
"Purchase Agreement"), between the Parties, TEPPCO has acquired from
Duke Energy a fractionation facility located at the Greeley Plant and a
fractionation facility located at the Spindle Plant (collectively, the
"Fractionators").
C. As contemplated in the Purchase Agreement, the Parties have entered
into (i) a Fractionation Agreement of even date herewith (the "Frac
Agreement") whereby TEPPCO will fractionate natural gas liquids for
Duke Energy for the consideration expressed therein, (ii) a Lease
Agreement of even date herewith (the "Lease Agreement") whereby TEPPCO
will lease certain real property on which the Fractionator at the
Greeley Plant site is located, and (iii) a Sublease Agreement of even
date herewith (the "Sublease Agreement") whereby TEPPCO will lease
certain real property on which the Fractionator at the Spindle Plant
site is located.
D. Prior to the execution of the Project Agreements Duke Energy owned and
operated and currently operates the Fractionators, and represents that
it is qualified and capable to continue to operate and maintain the
Fractionators.
E. The Parties desire for Duke Energy to operate and maintain the
Fractionators in accordance with this O&M Agreement.
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of
which are hereby acknowledged, the Parties agree as follows:
<PAGE> 155
ARTICLE 1
DEFINITIONS
1.1 Except as otherwise defined herein, capitalized terms used in this O&M
Agreement shall have the same meanings as in the Frac Agreement. In
addition, the following words and terms shall have the meanings set
forth herein:
"Affiliate" shall mean, when used with respect to a specified
Person, any other Person directly controlled by or under the specified
Person. For purposes of this definition "control", when used with
respect to any specified Person, means the power to direct the
management and policies of the Person whether through the ownership of
voting securities or by contract; and the term "controlled" have the
meanings correlative to the foregoing. Notwithstanding the foregoing,
the term "Affiliate" when applied to Duke Energy shall not include Duke
Energy Trading & Marketing, L.L.C. ("DETM"), TEPPCO, Texas Eastern
Products Pipeline Company, a Delaware corporation ("Texas Eastern"),
TEPPCO Partners L.P., a Delaware limited partnership (the
"Partnership") or any entities owned, directly or indirectly by the
Partnership (collectively with Texas Eastern and the Partnership but
excluding DETM, the "TEPPCO Entities"); and as applied to TEPPCO, shall
not include Duke Energy, Duke Energy Corporation, a Delaware
corporation, or any entities owned, directly or indirectly by Duke
Energy Corporation other than the TEPPCO Entities.
"Associated Equipment and Services" shall have the meaning
given such term in Section 2.5.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, 42 U.S.C. ss. 9601 et seq.
"Claims" shall have the meaning given such term in Section
5.1.
"Disputed Claims" shall have the meaning given such term in
Section 10.1.
"Duke Energy Indemnified Parties" shall have the meaning given
such term in Section 5.2.
"Emergencies" shall mean the occurrence, condition, or
reasonable anticipation of an occurrence or condition, which might (1)
threaten life, property, or the environment, (2) render a Fractionator
incapable of
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<PAGE> 156
normal operation, or (3) be required in order to comply with law or an
order of a Governmental Authority with jurisdiction over a
Fractionator.
"Employees" shall mean those persons who are hired as
employees to perform Duke Energy's Services under this O&M Agreement on
either a full-time or part-time basis, whether or not any such person
is hired directly by Duke Energy or made available by an Affiliate of
Duke Energy on either a full-time or part-time basis.
"Environmental Laws" shall mean all federal, state, or
municipal laws, rules, regulations, statutes, ordinances, or orders of
any Governmental Authority relating to (a) the control of any potential
pollutant or protection of the air, water, or land, (b) solid, gaseous
or liquid waste generation, handling, treatment, storage, disposal or
transportation and (c) exposure to hazardous, toxic or other substances
alleged to be harmful. "Environmental Laws" shall include, but not be
limited to, the Clean Air Act, 42 U.S.C. ss. 7401 et seq., the Clean
Water Act, 33 U.S.C. ss. 1251 et seq., RCRA, the Superfund Amendments
and Reauthorization Act, 42 U.S.C. ss. 11001, et seq., the Toxic
Substances Control Act, 15 U.S.C. ss. 2601 et seq., the Water Pollution
Control Act, 33 U.S.C. ss. 1251 et seq., the Safe Drinking Water Act,
42 U.S.C. ss. 300f et seq. and CERCLA. The term "Environmental Laws"
shall also include all state, local and municipal laws, rules,
regulations, statutes, ordinances and orders dealing with the same
subject matter or promulgated by any governmental or quasi-governmental
agency thereunder or to carry out the purposes of any federal, state,
local and municipal law.
"Environmental Liabilities" shall mean any and all
liabilities, responsibilities, claims, suits, losses, costs (including
remedial, removal, response, abatement, clean-up, investigative, or
monitoring costs and any other related costs and expenses), other
causes of action recognized now or at any later time, damages,
settlements, expenses, charges, assessments, liens, penalties, fines,
pre-judgment and post-judgment interest, attorneys' fees and other
legal fees (a) pursuant to any agreement, order, notice, or
responsibility, directive (including directives embodied in
Environmental Laws), injunction, judgment, or similar documents
(including settlements), or (b) pursuant to any claim by a Governmental
Authority or other Person for personal injury, property damage, damage
to natural resources, remediation, or payment or reimbursement of
response costs incurred or expended by the Governmental Authority or
Person pursuant to common law or statute.
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<PAGE> 157
"Frac Agreement" shall have the meaning given such term in the
recitals hereof.
"GAAP" shall mean generally accepted accounting principles
consistently applied.
"Governmental Authority" shall mean any entity of or
pertaining to government, including any federal, state, local, other
governmental or administrative authority, agency, court, tribunal,
arbitrator, commission, board or bureau.
"Greeley Plant" shall have the meaning given such term in the
recitals hereof.
"Lease Agreement" shall have the meaning given such term in
the recitals hereof.
"O&M Fee" shall have the meaning given such term in Section
4.2.
"Permit" shall mean any license, permit or authority granted
by any Governmental Authority.
"Person" shall mean any individual, corporation, partnership,
joint venture, association, limited liability company, joint stock
company, trust unincorporated organization, Governmental Authority or
government (or agency or political subdivision thereof).
"Premises" shall mean collectively, the "Premises" as defined
in the Lease Agreement and the "Premises" as defined in the Sublease
Agreement.
"Project Agreements" shall mean collectively, this O&M
Agreement, the Frac Agreement, the Lease Agreement and the Sublease
Agreement.
"Purchase Agreement" shall have the meaning given such term in
the recitals hereof.
"Representatives" shall have the meaning given such term in
Section 2.4.
"Services" shall mean all management, operations and
maintenance services necessary or advisable in order to safely,
dependably and efficiently manage, operate and maintain the
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<PAGE> 158
Fractionators. Without limiting the generality of the foregoing,
"Services" shall include each of the following being performed in a
manner consistent with good industry practice:
(a) Comply with all local, state and federal rules,
regulations and laws, including the Environmental Laws, and
obtain and maintain all Permits required for the maintenance
and operation of the Fractionators.
(b) Maintain adequate and sufficient records and
provide all data and/or reports reasonably required by TEPPCO,
and as required by all federal, state and local agencies with
jurisdiction over a Fractionator.
(c) Maintain current revisions of all drawings and
specifications, technical documents, instruction books,
equipment diagrams and other information relating to the
Fractionators.
(d) Maintain appropriate levels of spare parts and
materials required for the maintenance and proper operation of
the Fractionators.
(e) Take all actions as may be necessary or
appropriate to maintain the Fractionators in good operating
condition and repair.
(f) In the event of Emergencies, perform all actions
reasonable and appropriate to protect the Fractionators and
all related facilities, equipment, supplies and personnel and
notify TEPPCO as soon as reasonably possible at the telephone
number for Emergencies set forth in Section 11.1 hereof.
(g) Establish and maintain an effective work force
required for the management, operation and maintenance of the
Fractionators through proper hiring, training, supervising and
qualifying procedures, and administer all matters pertaining
to labor relations, working conditions, employee benefits,
safety and all related matters in connection with these duties
in accordance with applicable laws.
(h) Subject to Section 2.4 herein, provide reasonable
access to the Fractionators and all records relating to the
operation and maintenance of the Fractionators to all agents,
representatives and inspectors of TEPPCO and, if required by
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<PAGE> 159
applicable law or otherwise approved by Duke Energy,
Governmental Authorities.
(i) Keep and maintain the Fractionators free and
clear of, or discharge in the ordinary course of business, all
liens and encumbrances resulting from performance of services
by Duke Energy or its contractors and subcontractors.
(j) Keep TEPPCO informed of the operating status of
the Fractionators through reports as may be reasonably
requested and agreed upon from time to time. In addition to
the foregoing, Duke Energy will immediately notify TEPPCO by
telephone within 48 hours of any shutdown, bring down or
scheduled or unscheduled maintenance occurrence which impacts
the capacity or operations of the Fractionators and which is
reasonably anticipated to exceed 24 hours.
(k) Take such actions as shall be necessary to
maintain the aggregate capacity of the Fractionators to as
close as possible to its current estimated maximum capacity of
504,000 Gallons per day.
(l) Fully perform and comply with all duties,
obligations and liabilities of TEPPCO under (i) Sections 4.1
and 4.2 and Article V of the Frac Agreement, (ii) Sections 4.1
and 4.2 (except for any obligations to send notices under
Section 4.2) of the Lease Agreement and (iii) Sections 4.1 and
4.2 (except for any obligations to send notices under Section
4.2) of the Sublease Agreement.
(m) Carry out the other obligations of Duke Energy as
set forth in this O&M Agreement.
"Spindle Plant" shall have the meaning given such term in the
recitals hereof.
"Sublease Agreement" shall have the meaning given such term in
the recitals hereof.
"TEPPCO Indemnified Parties" shall have the meaning given that term in
Section 5.1.
1.2 References. As used in this Agreement, unless expressly stated
otherwise, references to (a) "including" mean "including, without
limitation", and the words "hereof", "herein", and "hereunder", and
similar words, refer to this Agreement
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<PAGE> 160
as a whole and not to any particular Article, provision, section or
paragraph of this Agreement and (b) "or" mean "either or both". Unless
otherwise specified, all references in this Agreement to Sections,
paragraphs, Exhibits or Schedules are deemed references to the
corresponding Sections, paragraphs, Exhibits or Schedules in this
Agreement.
1.3 Headings. The headings of the Sections of this Agreement and of the
Schedules and Exhibits are included for convenience only and shall not
be deemed to constitute part of this Agreement or to affect the
construction or interpretation hereof or thereof.
ARTICLE 2
SERVICES AND RELATIONSHIP
2.1 Services. Duke Energy shall perform the Services in such a way as to
safely, dependably and efficiently operate and maintain the
Fractionators in a prudent manner, consistent with good, industry
practices.
2.2 Other Agreements. Notwithstanding any provision to the contrary in any
of the Project Agreements, Duke Energy agrees that is shall have sole
responsibility to fully perform and comply with all duties, obligations
and liabilities of TEPPCO under (i) Sections 4.1 and 4.2 and Article V
of the Frac Agreement, (ii) Sections 4.1 and 4.2 (except for any
obligations to send notices under Section 4.2) of the Lease Agreement
and (iii) Sections 4.1 and 4.2 (except for any obligations to send
notices under Section 4.2) of the Sublease Agreement.
2.3 Independent Contractor. In performing the Services, Duke Energy shall
be an independent contractor and not an employee, agent, or servant of
TEPPCO, and this O&M Agreement does not create any partnership or joint
venture between Duke Energy and TEPPCO.
2.4 TEPPCO's Access. This Section 2.4 shall be the sole governing provision
of this O&M Agreement and Other Agreements pertaining to TEPPCO, its
employees, agents and other representatives' (the "Representatives")
access to the Fractionators. Notwithstanding any provision in this O&M
Agreement and Other Agreements to the contrary, TEPPCO and the
Representatives shall only have the right to access to the
Fractionators, the Spindle Plant site and the Greeley Plant site in
accordance with this Section 2.4. TEPPCO and the Representatives shall
have access to the Fractionators, Plant site and the Greeley Plant site
only during normal business hours, when accompanied by the
representative of Duke Energy who has been so designated by Duke
Energy, and upon at least 24 hours advance notice to Duke Energy,
except in the event of an Emergency, in which case Duke Energy shall
provide to TEPPCO and its Representatives access to the Fractionators,
the Spindle
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Plant site and/or the Greeley Plant site, as the case may be, at any
time of the day and as soon as reasonably possible. TEPPCO and the
Representatives shall comply with all of Duke Energy's safety rules and
procedures during any such access.
2.5 Obligation to Provide Associated Services and Facilities. The Parties
hereto acknowledge that (i) the equipment that comprises the
Fractionators is insufficient to fully complete the fractionation
process and (ii) the Fractionators must be used in conjunction with
other equipment owned by Duke Energy to enable TEPPCO to fractionate
the Raw Product in accordance with the terms of the Frac Agreement.
Accordingly, Duke Energy agrees to provide, as part of the O&M Fee,
such additional equipment and services as are reasonably necessary to
enable TEPPCO to fractionate the Raw Product in accordance with the
terms hereof, including, without limitation, the furnishing of
electricity, hot oil circulation, refrigeration and control systems
(collectively, the "Associated Equipment and Services"). Duke Energy
shall, at all times during the term of this Agreement, maintain the
assets necessary to provide the Associated Equipment and Services in
good working order and repair. If Duke Energy fails to provide any
Associated Equipment and Services in accordance with the terms of this
Agreement, then in addition to any other rights or remedies TEPPCO may
have for any such failure, TEPPCO shall have the right to obtain
specific performance of the provision of such Associated Equipment and
Services.
ARTICLE 3
EMPLOYEES, CONSULTANTS, AND SUBCONTRACTORS
3.1 Employees, Consultants, and Subcontractors. Duke Energy shall hire,
employ, and have supervision over such persons as may be required to
enable Duke Energy to perform the Services required hereunder
(including consultants, professionals, subcontractors, services, or
other organizations). Duke Energy shall pay all expenses in connection
therewith, including, but not limited to compensation, salaries, wages,
bonuses, benefits, social security taxes, workers' compensation
insurance, retirement, and insurance benefits and other such expenses.
3.2 Affiliates. Notwithstanding Section 3.1 above, Duke Energy is
authorized to utilize, as it deems necessary, the services of any
Affiliate.
3.3 Standards for Performance of Duke Energy, its Employees, and
Contractors. Duke Energy shall perform the Services and carry out its
responsibilities, devoting appropriate time and talents to the
operations of the Fractionators in a good and businesslike manner and
in accordance with good and prudent practices within the industry. In
connection therewith, Duke Energy shall provide supervisory,
administrative, and technical services to TEPPCO and shall perform such
services with the same degree of diligence and care that it would
exercise if the Fractionators were owned solely by Duke Energy. All
persons engaged by Duke Energy hereunder shall be duly trained,
qualified and experienced to perform such responsibilities. Duke Energy
shall require all contractors, and such contractors shall use
reasonable efforts to require all subcontractors, to carry insurance of
the types and amounts
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set forth in the attached Schedule 3.3. All materials and workmanship
used or provided in performing the Services shall be in accordance with
applicable governmental standards and regulations.
ARTICLE 4
OPERATION AND MAINTENANCE COSTS
4.1 Operating and Other Costs. Duke Energy shall pay and be responsible for
all costs, expenses, expenditures and fees incurred in connection with
the provision of the Services or otherwise required for the management,
operation and maintenance of the Fractionators, except as otherwise
provided in Section 4.5 below. In this regard, any loss of products due
to operations or measurement shall be the responsibility of Duke
Energy.
4.2 O&M Fee. TEPPCO shall pay to Duke Energy, each month, a fee equal to
$0.005 times the number of Gallons of Specification Product (as
calculated pursuant to the Frac Agreement) which is delivered by TEPPCO
to Duke Energy at the Delivery Points each month pursuant to the terms
of the Frac Agreement (the "O&M Fee") except as otherwise provided in
Section 4.1 of the Frac Agreement. Except as otherwise provided in this
Article 4, the O&M Fee shall constitute payment by TEPPCO to Duke
Energy for all costs, expenses, expenditures, and fees incurred in
connection with the provision of the Services.
4.3 Insurable Loss to the Fractionators. Except to the extent covered by
the insurance carried by Duke Energy pursuant to Section 4.5 below or
any insurance carried by TEPPCO, TEPPCO shall be responsible for all
costs and expenses necessary for the repair or replacement of all or
portions of the Fractionators made necessary because of an insurable
loss, including, without limitation, losses incurred by fire, flood,
storm, theft or accident; provided, however, in the event that the
Fractionators are damaged because of the negligent act or omission of
any of the Duke Energy Indemnified Parties, then Duke Energy shall be
responsible for any deductible under any such insurance, whether
carried by Duke Energy or TEPPCO. TEPPCO may carry at its own expense
such insurance as it deems necessary or appropriate to protect against
such potential losses.
4.4 Capital Expenditures. Duke Energy shall be responsible for any single
item of capital expenditure (as determined by GAAP) which is less than
$100,000. With respect to any capital expenditure (as determined by
GAAP) which exceeds $100,000, TEPPCO shall be liable for the total
amount of such expenditures from the first dollar thereof; provided,
however, before incurring any such expenditures, Duke Energy shall
obtain TEPPCO's written approval of such expenditures, such approval
not to be unreasonably withheld. The Parties acknowledge and agree that
notwithstanding any provision in the other Project Agreements to the
contrary, that TEPPCO shall not increase the capacity of the
Fractionators without Duke Energy's prior written consent.
4.5 Insurance. Duke Energy shall carry the insurance described on the
attached Schedule 4.5 and such other insurance as it may consider
necessary or appropriate and shall be responsible for all costs and
expenses of premiums payable for such insurance. Under no circumstances
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shall Duke Energy be required to carry insurance for business
interruption or be liable to TEPPCO for damages attributable to
business interruption or loss of profits. With respect to the insurance
policies carried by each Party hereunder, such insurance policies shall
provide (i) that the other Party shall be named as an additional
insured, (ii) for a waiver of rights of subrogation from the insurer,
(iii) that the other Party shall be given thirty (30) days' notice
prior to cancellation, (iv) that the other Party receive notice in the
event of non-payment of premiums and (v) that the other Party be named
as a loss payee as its interest may appear.
ARTICLE 5
INDEMNIFICATION
5.1 Indemnification by Duke Energy. Duke Energy agrees to indemnify,
protect, save and keep harmless TEPPCO and its Affiliates and their
respective officers, directors, shareholders, unitholders, members,
managers, agents, employees, representatives, contractors and
subcontractors (other than any of the Duke Energy Indemnified Parties),
successors and assigns (collectively, the "TEPPCO Indemnified Parties")
from and against any and all liabilities, obligations, losses, damages,
penalties, claims (including, without limitation, claims involving
strict or absolute liability in tort), actions, suits, costs, expenses
and disbursements (including, without limitation, reasonable legal fees
and expenses) of any kind and nature whatsoever (collectively, the
"Claims") which may be imposed on, incurred by or asserted against any
of the TEPPCO Indemnified Parties, in any way relating to or arising
out of:
(a) the possession, custody, processing or use of the
Dedicated Gas, the Raw Product and/or the Specification Products,
including, without limitation, the payment of any taxes, royalties,
overriding royalties or other payments due or to become due thereon;
(b) any misrepresentation or breach of warranty made by Duke
Energy in any of the Project Agreements;
(c) any failure to perform any covenant or agreement made or
undertaken by Duke Energy in any of the Project Agreements, including,
without limitation, the performance of any covenant or agreement of
TEPPCO under any of the Project Agreements which has been expressly
assumed by Duke Energy under this O&M Agreement;
(d) the possession, use or operation of the Fractionators or
the Premises prior to the date hereof or during the term of any of the
Project Agreements or any accident or occurrence in connection
therewith prior to the date hereof or during the term of any of the
Project Agreements;
(e) the possession, use or operation of the Greeley Plant, the
Spindle Plant, the Greeley Plant site and/or the Spindle Plant site or
any accident or occurrence in connection therewith both before and
after the date hereof; or
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(f) any Environmental Liabilities relating to the Premises,
the Fractionators, the Greeley Plant, the Spindle Plant, the Greeley
Plant site or the Spindle Plant site or the operation or use thereof
prior to the date hereof or during the term of any of the Project
Agreements, or resulting from any facts existing or events occurring
prior to the date hereof or during the term of any of the Project
Agreements, regardless of when such liability arises;
provided, however, Duke Energy shall not be required to indemnify the
TEPPCO Indemnified Parties for any Claim resulting from the willful
misconduct or negligence of any of the TEPPCO Indemnified Parties. To
the extent that the TEPPCO Indemnified Parties in fact receive full
indemnification payments from Duke Energy under the indemnification
provisions hereof, Duke Energy shall be subrogated to the TEPPCO
Indemnified Parties' rights with respect to the transaction or event
requiring or giving rise to such indemnity.
5.2 Indemnification by TEPPCO. TEPPCO agrees to indemnify, protect, save
and keep harmless Duke Energy and its Affiliates and their respective
officers, directors, shareholders, unitholders, members, managers,
agents, employees, representatives, contractors, subcontractors,
successors and assigns (collectively, the "Duke Energy Indemnified
Parties") from and against any and all Claims which may be imposed on,
incurred by or asserted against any of the Duke Energy Indemnified
Parties, in any way relating to or arising out of:
(a) any misrepresentation or breach of warranty made by TEPPCO
in any of the Project Agreements;
(b) any failure to perform any covenant or agreement made or
undertaken by TEPPCO in any of the Project Agreements to the extent
that compliance with or performance of any such covenant or agreement
has not been expressly assumed by Duke Energy in this O&M Agreement; or
(c) the willful misconduct or negligence of any of the TEPPCO
Indemnified Parties in connection with any matter pertaining to the
Premises, the Fractionators, the Raw Product or the Product;
provided, however, TEPPCO shall not be required to indemnify the Duke
Energy Indemnified Parties for any Claim resulting from the willful
misconduct or negligence of any of the Duke Energy Indemnified Parties.
To the extent that the Duke Energy Indemnified Parties in fact receive
full indemnification payments from TEPPCO under the indemnification
provisions hereof, TEPPCO shall be subrogated to the Duke Energy
Indemnified Parties' rights with respect to the transaction or event
requiring or giving rise to such indemnity.
ARTICLE 6
TERM AND TERMINATION
6.1 Term. This O&M Agreement shall be effective as of March 31, 1998 at
11:59 p.m. (Denver, Colorado time) and, unless terminated in accordance
with Section 6.2, continue in effect for
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a primary term ending March 31, 2018 at 11:59 p.m. (Denver, Colorado
time), and shall continue in effect from Year to Year thereafter;
provided that either Party shall have the right to terminate this O&M
Agreement effective March 31, 2018 at 11:59 p.m. or any anniversary of
that date by giving the other Party at least six (6) months prior
written notice.
6.2 Termination. Termination provisions pertaining to this O&M Agreement
are set forth in the Frac Agreement.
ARTICLE 7
BILLING AND PAYMENT
7.1 Statements and Billings. Duke Energy shall invoice TEPPCO by the 25th
day of each month for amounts due Duke Energy under this O&M Agreement
for the prior month. Each such invoice shall contain a detailed
description of the monthly charges to TEPPCO and will indicate whether
or not such amount has been deducted from amounts owed to TEPPCO under
the Frac Agreement. If such amounts are not deducted from amounts owed
to TEPPCO under the Frac Agreement, payment will be due within twenty
(20) days after receipt of the invoice.
7.2 Audit Rights. In accordance with the Confidentiality Agreement of even
date herewith between the Parties, each Party shall have, at its
expense, the right at all times to examine the books and records of the
other Party, during normal working hours, to the extent necessary to
verify the accuracy of any invoice, statement, charge, computation or
demand made under or pursuant to this O&M Agreement. Each Party agrees
to keep records and books of account in accordance with generally
accepted accounting principles in the industry. The Parties agree that
the sole and exclusive remedy and measure of damages for any improper
payments under this agreement shall be the payment of the amount of
underpayment or the recovery of the amount of overpayment, as the case
may be, during the two (2) year period immediately preceding the date
on which a Party notifies the other Party in writing of an error,
mistake, inaccuracy or other claim with respect to any such invoice,
statement, charge, computation or demand.
ARTICLE 8
SURVIVAL OF OBLIGATIONS
Any obligation owed by a Party to the other Party under any of the
Project Agreements (whether the same shall be known or unknown at the
termination hereof, or whether the circumstances, events, or basis of the same
shall be known or unknown at the termination hereof), including indemnification
obligations, shall survive termination of any of the Project Agreements.
ARTICLE 9
WARRANTY
9.1 Warranty. Duke Energy warrants that the Services shall be performed in
accordance with the terms and conditions of this Agreement, including
all standards set forth herein. Except
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as otherwise provided in this O&M Agreement, TEPPCO agrees that there
are no warranties, either express or implied, made with respect to Duke
Energy's performance under this O&M Agreement or the Other Agreements
and TEPPCO expressly recognizes and agrees that Duke Energy does not
promise that the Services and work will be performed in a perfect
manner. Duke Energy SPECIFICALLY DISCLAIMS ANY AND ALL IMPLIED
WARRANTIES THAT MAY RESULT FROM ANY RELATIONSHIP BETWEEN TEPPCO AND
DUKE ENERGY OR FROM THE DRAWINGS OR MODELS OF THE WORK OR OTHERWISE,
INCLUDING, BUT NOT LIMITED TO, ANY AND ALL IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. TEPPCO ALSO HEREBY
WAIVES THE PROVISIONS OF ANY DECEPTIVE TRADE PRACTICE ACT OR SIMILAR
ACT IN ALL APPLICABLE JURISDICTIONS.
9.2 Consequence of Breach. In the event Duke Energy breaches any warranty
described in Section 9.1 above, Duke Energy shall re-perform any
defective service, replace any unfit or unqualified personnel and train
new personnel, and repair or replace any components of the
Fractionators damaged as a consequence of such breach. Any such
re-performance, training, repair or replacement by Duke Energy pursuant
to this Section 9.2 shall be at Duke Energy's sole cost and expense.
9.3 Vendor Warranties. Duke Energy will extend to TEPPCO the benefit of all
warranties of any kind, whether express or implied, which arise out of
or are given to Duke Energy by other persons in connection with the
sale of goods and services to Duke Energy with respect to the
Fractionators.
ARTICLE 10
DISPUTES
10.1 Dispute Resolution; Arbitration. In the event of any controversy or
claim, whether based in contract, tort or otherwise, arising out of or
relating to this O&M Agreement or the scope, breach, termination or
validity of this O&M Agreement (a "Disputed Claim"), the Parties shall
promptly seek to resolve any such Disputed Claim by negotiations
between senior executives of the Parties who have authority to settle
the Disputed Claim. When a Party believes there is a Disputed Claim
under this O&M Agreement, that Party will give the other Party written
notice of the Disputed Claim. Within thirty (30) days after receipt of
such notice, the receiving Party shall submit to the other a written
response. Both the notice and response shall include (i) a statement of
each Party's position and a summary of the evidence and arguments
supporting its position, and (ii) the name, title, fax number, and
telephone number of the executive who will represent that Party. In the
event the Disputed Claim involves a claim arising out of the actions of
any person or entity not a signatory to this O&M Agreement, the
receiving Party shall have such additional time as necessary, not to
exceed an additional thirty (30) days, to investigate the Disputed
Claim before submitting a written response. The executives shall meet
at a mutually acceptable time and place within fifteen (15) days after
the date of the response and thereafter as often as they reasonably
deem necessary to exchange relevant information and to attempt to
resolve the Disputed Claim.
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If one of the executives intends to be accompanied at a meeting by an
attorney, the other executive shall be given at least five (5) working
days' notice of such intention and may also be accompanied by an
attorney. All negotiations and communications pursuant to this Article
10 shall be treated and maintained by the Parties as confidential
information and shall be treated as compromise and settlement
negotiations for the purposes of the Federal and State Rules of
Evidence .
10.2 If the Disputed Claim has not been resolved within sixty (60) days
after the date of the response given pursuant to Section 10.1 above, or
such additional time, if any, that the Parties mutually agree to in
writing, or if the Party receiving such notice denies the applicability
of the provisions of Section 10.1 or otherwise refuses to participate
under the provisions of Section 10.1, either Party may initiate binding
arbitration pursuant to the provisions of Section 10.3 below.
10.3 Any Disputed Claims not settled pursuant to the foregoing provisions
shall be submitted to binding arbitration in accordance with the
following provisions. Arbitration shall be the sole and exclusive
remedy of the Parties in connection with any Disputed Claims hereunder.
(a) The Party desiring to initiate arbitration in connection with
any Disputed Claim shall send, via certified mail, written
notice of demand of arbitration to the other Party and the
name of the arbitrator appointed by the Party demanding
arbitration together with a statement of the matter in
controversy.
(b) Within fifteen (15) days after receipt of such demand, the
receiving Party shall name its arbitrator. If the receiving
Party fails or refuses to name its arbitrator within such
15-day period, the second arbitrator shall be appointed, upon
request of the Party demanding arbitration, by the Chief U.S.
District Court Judge for the District of Colorado or such
other person designated by such judge. The two arbitrators so
selected shall within fifteen (15) days after their
designation select a third arbitrator; provided, however, that
if the two arbitrators are not able to agree on a third
arbitrator within such 15-day period, either Party may request
the Chief U.S. District Court Judge for the District of
Colorado or such other person designated by such judge to
select the third arbitrator as soon as possible. In the event
the Judge declines to appoint an arbitrator, appointment shall
be made, upon application of either Party, pursuant to the
Commercial Arbitration Rules of the American Arbitration
Association. If any arbitrator refuses or fails to fulfill his
or her duties hereunder, such arbitrator shall be replaced by
the Party which selected such arbitrator (or if such
arbitrator was selected by another Person, through the
procedure which such arbitrator was selected) pursuant to the
foregoing provisions.
(c) Each arbitrator selected by the Parties shall be a certified
public accountant or licensed attorney with at least fifteen
(15) years of oil and gas experience as a certified public
accountant and/or practicing attorney. The arbitrators
selected by the Parties are not required to be neutral, but
the third arbitrator shall be neutral and shall be a certified
public accountant. If neither of the arbitrators appointed by
or on
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behalf of the Parties is a retired judge, then the third
arbitrator shall be a retired judge.
(d) The Parties hereto hereby request and consent to the three (3)
arbitrators conducting a hearing in Denver, Colorado no later
than sixty (60) days following their selection or thirty (30)
days after all prehearing discovery has been completed,
whichever is later, at which the Parties shall present such
evidence and witnesses as they may choose, with or without
counsel.
(e) Arbitration shall be conducted in accordance with the
Commercial Arbitration Rules and procedures of the American
Arbitration Association.
(f) The Federal Rules of Civil Procedure, as modified or
supplemented by the local rules of civil procedure for the
U.S. District Court of Colorado, shall apply in the
arbitration. The Parties shall make their witnesses available
in a timely manner for discovery pursuant to such rules. If a
Party fails to comply with this discovery agreement within the
time established by the arbitrators, after resolving any
discovery disputes, the arbitrators may take such failure to
comply into consideration in reaching their decision. All
discovery disputes shall be resolved by the arbitrators
pursuant to the procedures set forth in the Federal Rules of
Civil Procedure.
(g) Adherence to formal rules of evidence shall not be required.
The arbitrators shall consider any evidence and testimony that
they determine to be relevant.
(h) The Parties hereto hereby request that the arbitrators render
their decision within thirty (30) calendar days following
conclusion of the hearing.
(i) Any decision by a majority of the arbitration panel shall be
final, binding and non-appealable. Any such decision may be
filed in any court of competent jurisdiction and may be
enforced by any Party as a final judgment in such court. There
shall be no grounds for appeal of any arbitration award
hereunder.
(j) The defenses of statute of limitations and laches shall be
tolled from and after the date a Party gives the other Party
written notice of a Disputed Claim as provided in Section 10.1
above until such time as the Disputed Claim has been resolved
pursuant to Section 10.1 , or an arbitration award has been
entered pursuant to Section 10.3.
10.4 Recovery of Costs and Attorneys' Fees. In the event arbitration (or,
despite the Parties agreement to the Disputed Claims through binding
arbitration, litigation) arising out of this O&M Agreement is initiated
by either Party, the prevailing Party, after the entry of a final
non-appealable order, shall be entitled to recover from the other
Party, as a part of said order, all court costs, fees and expenses of
such arbitration (or litigation), including, without limitation,
reasonable attorneys' fees.
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10.5 Choice of Forum. If, despite the Parties' agreement to submit any
Disputed Claims to binding arbitration, there are any court proceedings
arising out of or relating to this O&M Agreement or the transactions
contemplated hereby, such proceedings shall be brought and tried in the
federal or state courts situated in the City and County of Denver,
Colorado.
10.6 Jury Waivers. THE PARTIES HEREBY WAIVE ANY AND ALL RIGHTS TO DEMAND A
TRIAL BY JURY.
10.7 Limitation of Damages. WHETHER OR NOT OCCASIONED BY A DEFAULT OR OTHER
BREACH OF THIS O&M AGREEMENT, NEITHER PARTY SHALL BE LIABLE TO THE
OTHER PARTY FOR SPECIAL, EXEMPLARY OR PUNITIVE DAMAGES, LOSS OF
PROFITS, OR CONSEQUENTIAL DAMAGES.
10.8 Governing Law. This O&M Agreement shall be construed and enforced in
accordance with, and the rights of the Parties shall be governed by,
the law of the state of Colorado, without regard to any
conflict-of-laws provision thereof that would otherwise require the
application of the law of any other jurisdiction.
ARTICLE 11
MISCELLANEOUS
11.1 Notices. All notices, requests, demands and other communications
required or permitted to be given under this Agreement shall be deemed
to have been duly given if in writing and delivered personally or sent
via first-class, postage prepaid, registered or certified mail (return
receipt requested), or by overnight delivery service or facsimile
transmission addressed as follows:
If to Duke Energy:
Duke Energy Field Services, Inc.
370 - 17th Street, Suite 900
Denver, Colorado 80202
Attention: President
Telephone: (303) 595-3331
Facsimile: (303) 893-2613
and copy to:
Duke Energy Field Services, Inc.
370 - 17th Street, Suite 900
Denver, Colorado 80202
Attention: General Counsel
Telephone: (303) 595-3331
Facsimile: (303) 893-8913
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If to TEPPCO:
TEPPCO Colorado, LLC
2929 Allen Parkway, Suite 3200
Houston, Texas 77019
Attention: President
Telephone: (713) 759-3636
Emergency Telephone: (713) 759-3636
Facsimile: (713) 759-3957
and copy to:
Texas Eastern Products Pipeline Company
2929 Allen Parkway, Suite 3200
Houston, Texas 77019
Attention: General Counsel
Telephone: (713) 759-3968
Facsimile: (713) 759-3645
Any Party may change the address to which the communications are to be
directed to it by giving notice to the other in the manner provided in
this Section 11.1. Notice by mail shall be deemed to have been given
and received on the third calendar day after posting. Notice by
overnight delivery service, facsimile transmission or personal delivery
shall be deemed given on the date of actual delivery.
11.2 Waiver. No course of dealing and no delay on the part of either Party
in exercising any right, power or remedy shall operate as a waiver
thereof or otherwise prejudice such Party's rights, powers or remedies.
No term or condition of this O&M Agreement shall be deemed to have been
waived nor shall there be any estoppel to enforce any provision of this
O&M Agreement except by written instrument of the Parties charged with
such waiver or estoppel. The waiver of any breach of any term,
condition or provision of this O&M Agreement shall not be construed as
a waiver of any prior, concurrent or subsequent breach of the same or
any other term, condition or provision hereof.
11.3 Amendments; Changes; Modifications. This O&M Agreement may not be
effectively amended, changed, modified, altered or terminated, except
as provided herein, without the written consent of the Parties and such
consent shall be effective only in the specific instance and for the
specific purpose for which it is given.
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11.4 Successors and Assigns. The Project Agreements shall inure to the
benefit of and be binding upon the Parties and their respective
successors and permitted assigns, whether so expressed or not.
Notwithstanding, neither Party may assign any of the Project Agreements
or any rights, duties or obligations thereunder, provided, however, in
the event of any assignment or proposed assignment of any of the
Project Agreements by TEPPCO, Duke Energy shall have the right to
exercise its right to purchase the Fractionators pursuant to Section
10.4 of the Purchase Agreement between the Parties and in the event of
any assignment of any of the Project Agreements by Duke Energy, Duke
Energy shall remain liable for its obligations under the Project
Agreements in the same manner as provided under Section 3.6 of the Frac
Agreement.
11.5 Conflicts. In the event of any conflict between the provisions of this
O&M Agreement and any exhibits or schedules attached hereto, the
provisions of this O&M Agreement shall prevail.
11.6 Entire Agreement. The Project Agreements and any related documents
between the Parties of even date herewith, including exhibits and
schedules attached thereto, constitute the final and entire agreement
between the Parties concerning the subject matter thereof, and
supersedes all prior and contemporaneous agreements and undertakings of
the Parties in connection therewith. The Project Agreements may not be
contradicted by evidence of prior, contemporaneous or subsequent oral
agreements of the Parties. There are no oral agreements between the
Parties.
11.7 Laws and Regulations. This O&M Agreement and the performance hereof
shall be subject to all valid and applicable federal and state laws and
to the valid and applicable orders, laws, rules, and regulations of any
state or federal authority having jurisdiction, but nothing contained
herein shall be construed as a waiver of any right to question or
contest any such order, law, rule, or regulation in any forum having
jurisdiction.
11.8 Severability. The invalidity or unenforceability of any provision of
this O&M Agreement shall in no way affect the validity or
enforceability of any other provision hereof.
11.9 Time of Essence. Time is of the essence in the performance of all
obligations falling due hereunder.
11.10 Captions. The headings to Articles, Sections and other subdivisions of
this O&M Agreement are inserted for convenience of reference only and
will not affect the meaning or interpretation of this O&M Agreement.
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11.11 Schedules and Exhibits. All schedules and exhibits hereto which are
referred to herein are hereby made a part hereof and incorporated
herein by such reference.
11.12 No Partnership. The relationship between Duke Energy and TEPPCO at all
times shall not be deemed a partnership or joint venture.
11.13 No Third Party Beneficiaries. Subject to the provisions of Section 11.4
hereof, this O&M Agreement inures to the sole and exclusive benefit of
Duke Energy and TEPPCO, their respective successors, legal
representatives and assigns, and confers no benefit on any third party.
11.14 Mutual Cooperation; Further Assurances. Upon request by either Party
from time to time during the term of this O&M Agreement, each Party
agrees to execute and deliver all such other and additional
instruments, notices and other documents and do all such other acts and
things as may be necessary to carry out the purposes of this O&M
Agreement and to more fully assure the Parties' rights and interests
provided for hereunder. Duke Energy and TEPPCO each agree to cooperate
with the other on all matters relating to required permits and
regulatory compliance by either Duke Energy or TEPPCO in respect of the
Fractionators so as to ensure continued full operation of the
Fractionators by Duke Energy pursuant to the terms of this O&M
Agreement.
11.15 Other Project Agreements. In the event of any conflict between the
provisions of any of the Project Agreements with each other or with the
Purchase Agreement, the provisions of this O&M Agreement shall control
over the inconsistent provisions of any of the other Project Documents
or the Purchase Agreement.
The Parties hereto have executed this O&M Agreement as of the date
first hereinabove written.
DUKE ENERGY:
DUKE ENERGY FIELD SERVICES, INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
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<PAGE> 173
TEPPCO:
TEPPCO COLORADO, LLC
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
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<PAGE> 174
EXHIBIT D
================================================================================
SUBLEASE AGREEMENT
BETWEEN
DUKE ENERGY FIELD SERVICES, INC.,
AS SUBLESSOR
AND
TEPPCO COLORADO, LLC,
AS SUBLESSEE
MARCH 31, 1998
================================================================================
<PAGE> 175
SUBLEASE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I DEFINITIONS AND CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II ASSIGNMENT AND SUBLEASE AND TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 Demise of Premises and Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE III RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1 Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.2 Place of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE IV CONDUCT OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.1 Use of Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.2 Surrender of Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE V TAXES, ASSESSMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5.1 Duke Energy's Obligation to Pay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5.2 Manner of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE VI REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
6.1 Representations and Warranties of Duke Energy . . . . . . . . . . . . . . . . . . . . . . . . . 4
6.2 Covenants of Duke Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE VII EMINENT DOMAIN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
7.1 Total Condemnation of Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
7.2 Partial Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
7.3 Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE VIII GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
8.1 Estoppel Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
8.2 Warranty of Peaceful Possession. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
8.3 Recording. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
8.4 Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
8.5 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
8.6 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
8.7 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
8.8 Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
8.9 Laws and Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
8.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
<PAGE> 176
<TABLE>
<S> <C> <C>
8.11 Time of Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
8.12 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
8.13 Schedules and Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
8.14 No Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
8.15 No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
8.16 Mutual Cooperation; Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
8.17 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
8.18 Other Project Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
</TABLE>
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<PAGE> 177
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT (this "Sublease") is made and entered into to
this 21st day of April, 1998, but effective 11:59 p.m. (Denver, Colorado time)
on the 31st day of March, 1998, between Duke Energy Field Services, Inc., a
Colorado corporation (herein called "Duke Energy"), and TEPPCO Colorado, LLC, a
Delaware limited liability company (herein called "TEPPCO"). Each of TEPPCO
and Duke Energy are sometimes referred to individually as a "Party" and
collectively as the "Parties."
W I T N E S S E T H:
WHEREAS, Duke Energy is the lessee under the Sickler Lease
(hereinafter defined), which covers, among other lands, the Premises
(hereinafter defined); and
WHEREAS, Duke Energy desires to sublease the Premises to TEPPCO, and
TEPPCO desires to sublease the Premises from Duke Energy upon the terms and
conditions hereinafter set forth.
NOW, THEREFORE, for and in consideration of the premises, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and of the mutual agreements hereinafter set forth, Duke
Energy and TEPPCO covenant and agree as follows:
ARTICLE I
DEFINITIONS AND CONSTRUCTION
1.1 Certain Defined Terms. Unless the context otherwise
requires, the following terms shall have the respective meanings set forth in
this Section 1.1:
"Day" means a period of time commencing at 8:00 a.m.
(Denver, Colorado time) on a calendar day and ending at 8:00 a.m. (Denver,
Colorado time) on the next succeeding calendar day.
"Frac Agreement" means that certain Fractionation
Agreement dated of even date herewith by and between Duke Energy and TEPPCO.
"Fractionation Plant" means TEPPCO's fractionation plant
located on the Premises.
"Governmental Authority" means any entity of or pertaining
to government, including any federal, state, local, other governmental or
administrative authority, agency, court, tribunal, arbitrator, commission,
board or bureau.
<PAGE> 178
"Lease" means that certain Lease Agreement dated of even
date herewith by and between Duke Energy and TEPPCO.
"O&M Agreement" means that certain Operation and
Maintenance Agreement dated of even date herewith by and between Duke Energy
and TEPPCO.
"Permitted Encumbrances" shall have the meaning ascribed
to such term in Section 6.1.
"Premises" means that certain tract or parcel of land
located in Weld County, Colorado, more particularly described on Exhibit A
attached hereto and made a part hereof for all purposes.
"Project Agreements" means collectively, this Sublease,
the O&M Agreement, the Frac Agreement and the Lease.
"Purchase Agreement" shall mean that certain Asset
Purchase Agreement dated March 31, 1998, by and between Duke Energy, as
"Seller," and TEPPCO, as "Buyer".
"Rent" shall have the meaning ascribed to such term in
Section 3.1.
"Sickler Lease" means that certain Lease dated December 9,
1977, by and between Sheldon R. Sickler and Anna Mae Sickler, as "lessor," and
Amoco Production Company, as "lessee," which was recorded on May 22, 1978, in
Book 832 at Reception No. 1754168 in the real estate records of Weld County,
Colorado, as amended by that certain Lease Amendment dated August 28, 1992, by
and between Anna Mae Sickler, as "lessor," and Associated Natural Gas, Inc., as
"lessee."
"Taxes" shall have the meaning ascribed to such term in
Section 5.1.
"Year" shall mean a period of 365 consecutive Days;
provided, however that any year which contains the date of February 29 shall
consist of 366 consecutive Days.
1.2 References. As used in this Sublease, unless expressly
stated otherwise, references to (a) "including" mean "including, without
limitation", and the words "hereof", "herein", and "hereunder", and similar
words, refer to this Sublease as a whole and not to any particular Article,
provision, section or paragraph of this Sublease and (b) "or" mean "either or
both". Unless otherwise specified, all references in this Sublease to
Sections, paragraphs, Exhibits or Schedules are deemed references to the
corresponding Sections, paragraphs, Exhibits or Schedules in this Sublease.
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<PAGE> 179
1.3 Headings. The headings of the Sections of this Sublease
and of the Schedules and Exhibits are included for convenience only and shall
not be deemed to constitute part of this Sublease or to affect the construction
or interpretation hereof or thereof.
ARTICLE II
ASSIGNMENT AND SUBLEASE AND TERM
2.1 Demise of Premises and Term. In consideration of the
rents, covenants, and agreements set forth herein and subject to the terms and
conditions hereof and the Sickler Lease, Duke Energy hereby assigns and
subleases to TEPPCO and TEPPCO hereby subleases from Duke Energy, the Premises
for a term commencing on March 31, 1998 at 11:59 p.m. (Denver, Colorado time)
and, unless terminated in accordance with Article II of the Frac Agreement,
continue in effect for a primary term ending March 31, 2018 at 11:59 p.m.
(Denver, Colorado time), and shall continue in effect from Year to Year
thereafter; provided that either Party shall have the right to terminate this
Sublease effective March 31, 2018 at 11:59 p.m. or any anniversary of such date
by giving the other Party at least six (6) months prior written notice.
ARTICLE III
RENT
3.1 Rent. As rental for the Premises during the term of this
Sublease, TEPPCO agrees to pay to Duke Energy for each month of the term of
this Sublease One Thousand and 00/100 ($1,000.00) (the "Rent") on or before the
first (1st) day of each month of the term of this Sublease. Rent shall be
prorated for any partial month during the term of this Sublease.
3.2 Place of Payment. All Rent shall be payable in lawful
money of the United States of America, at Duke Energy's address set forth in
Section 8.4 herein.
ARTICLE IV
CONDUCT OF BUSINESS
4.1 Use of Premises. Subject to the provisions of the Sickler
Lease, TEPPCO shall have the right to use the Premises for the purpose of
fractionating natural gas liquids.
4.2 Surrender of Premises. TEPPCO shall at the expiration of
the term of this Sublease, or at any earlier termination of this Sublease,
surrender the Premises to Duke Energy in as good condition as it received the
same; provided, however, TEPPCO shall deliver written notice to Duke Energy
prior to termination of the Sublease if TEPPCO will remove the Fractionation
Plant and any other alterations, additions, improvements or other changes to
the Premises made by TEPPCO during the term of this Sublease; provided that
TEPPCO shall have the right to, and must remove, the Fractionation Plant, if at
all, within one (1) year after termination of this Sublease, but no earlier
than one (1) year after delivery of written notice as provided above. If
TEPPCO fails to
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<PAGE> 180
deliver notice as provided in the preceding sentence, TEPPCO shall surrender
the Fractionation Plant and any such alterations, additions, improvements or
other changes to Duke Energy upon termination of this Sublease.
ARTICLE V
TAXES, ASSESSMENTS
5.1 Duke Energy's Obligation to Pay. Duke Energy shall pay
during the term of this Sublease, all federal, state and local real and
personal property ad valorem taxes, assessments, and other governmental
charges, general and special, ordinary and extraordinary, including but not
limited to assessments for public improvements or benefits assessed against the
Premises, or improvements situated thereon, including, without limitation, the
Fractionation Plant, that are payable to any lawful authority assessed against
or with respect to the Premises or the use or operation thereof, including, but
not limited to, any federal, state or local income, gross receipts,
withholding, franchise, excise, sales, use, value added, recording, transfer or
stamp tax, levy, duty, charge or withholding of any kind imposed or assessed by
any federal, state or local government, agency or authority, together with any
addition to tax, penalty, fine or interest thereon, other than state or U.S.
federal income tax imposed upon the taxable income of TEPPCO and any franchise
taxes imposed upon TEPPCO (such taxes and assessments being hereinafter called
"Taxes"). In the event Duke Energy fails to pay such Taxes prior to the time
the same become delinquent, TEPPCO may pay the same and (provided TEPPCO shall
have delivered to Duke Energy evidence of such payment) deduct the amount of
such payment from the Rent owed hereunder.
5.2 Manner of Payment. Duke Energy shall pay all Taxes
directly to the applicable taxing authority prior to delinquency and shall
promptly thereafter provide TEPPCO with evidence of such payment. The
certificate issued or given by the appropriate officials authorized or
designated by law to issue or give the same or to receive payment of such Taxes
shall be prima facie evidence of the existence, payment, nonpayment and amount
of such Taxes. Duke Energy, if Duke Energy shall so desire, may contest the
validity or amount of any such Taxes, at Duke Energy's sole cost and expense,
by appropriate proceedings, diligently conducted in good faith. Duke Energy
may defer payment of such Taxes during the pendency of such contest, provided
that nothing herein contained shall be construed to allow such Taxes to remain
unpaid for such length of time as shall permit the Premises, or any part
thereof, to be sold by any Governmental Authority or a lien with respect
thereto foreclosed for the nonpayment of the same.
ARTICLE VI
REPRESENTATIONS, WARRANTIES AND COVENANTS
6.1 Representations and Warranties of Duke Energy. Duke
Energy represents and warrants to TEPPCO that (i) Duke Energy has good and
marketable title to the leasehold interest under the Sickler Lease, (ii) Duke
Energy has the right to enter into this Sublease without obtaining the consent
of the lessor under the Sickler Lease and (iii) TEPPCO shall have the right to
the quiet,
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<PAGE> 181
peaceful and undisturbed use of the Premises subject only to: (a) liens for
current taxes and assessments not yet due or which Duke Energy is contesting in
good faith, (b) inchoate mechanic and materialmen liens for construction in
progress, (c) inchoate workmen, repairmen, warehousemen, customer, employee and
carriers liens arising in the ordinary course of business and (d) liens created
by TEPPCO (collectively, the "Permitted Encumbrances").
6.2 Covenants of Duke Energy. Duke Energy covenants and
agrees with TEPPCO that Duke Energy shall observe and timely perform all of the
obligations and liabilities of the lessor under the Sickler Lease.
ARTICLE VII
EMINENT DOMAIN
7.1 Total Condemnation of Premises. If the whole of the
Premises are acquired or condemned by eminent domain for any public or
quasi-public use or purpose, then this Sublease shall terminate as of the date
title vests in any public agency. All rentals and other charges owing
hereunder shall be prorated as of such date.
7.2 Partial Condemnation. If any part of the Premises is
acquired or condemned as set forth in Section 7.1, and if in TEPPCO's
reasonable opinion such partial taking or condemnation renders the Premises
unsuitable for the business of TEPPCO, then this Sublease shall terminate at
TEPPCO's election as of the date title vests in any public agency, provided
TEPPCO delivers to Duke Energy written notice of such election to terminate
within thirty (30) days following the date title vests in such public agency.
In the event of such termination, all rentals and other charges owing hereunder
shall be prorated as of such effective date of termination.
7.3 Damages. Duke Energy shall be entitled to any award and
all damages payable as a result of any condemnation or taking of its leasehold
interest in the Premises. TEPPCO shall have the right to claim and recover
from the condemning authority, but not from Duke Energy, such compensation as
may be separately awarded or recoverable by TEPPCO in TEPPCO's own right on
account of any and all damage to the Fractionation Plant and/or TEPPCO's
business by reason of the condemnation, including loss of value of any
unexpired portion of the term of the Sublease, and for or on account of any
cost or loss to which TEPPCO might be put in removing TEPPCO's personal
property, fixtures, leasehold improvements and equipment, including, without
limitation, the Fractionation Plant, from the Premises.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Estoppel Certificates. TEPPCO and Duke Energy shall, at
any time and from time to time upon not less than ten (10) days prior written
request from the other Party, execute, acknowledge and deliver to the other a
statement in writing (i) certifying that this Sublease is
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<PAGE> 182
unmodified and in full force and effect (or, if modified, stating the nature of
such modification and certifying that this Sublease, as so modified, is in full
force and effect) and the date to which Rent and other charges are paid, and
(ii) acknowledging that there are not, to the executing Party's knowledge, any
uncured defaults on the part of the other Party hereunder (or specifying such
defaults, if any are claimed). Any such statement may be conclusively relied
upon by any prospective purchaser or encumbrancer of the Premises or the
leasehold.
Duke Energy's or TEPPCO's failure to deliver such statement within
such ten (10) day period shall be conclusive upon that Party (i) that this
Sublease is in full force and effect without modification, except as may be
represented by the other Party, and (ii) that there are not uncured defaults in
performance by the other Party.
Nothing in this Section 8.1 shall be construed to waive the conditions
elsewhere contained in this Sublease applicable to assignment or subletting of
the Premises by TEPPCO.
8.2 Warranty of Peaceful Possession. Duke Energy covenants
and warrants that TEPPCO, upon paying the Rent reserved hereunder and observing
and performing all of the covenants, conditions and provisions on TEPPCO's part
to be observed and performed hereunder, may peaceably and quietly have, hold,
occupy, use and enjoy, and shall have the full, exclusive and unrestricted use
and enjoyment of, all the Premises during the term of the Sublease for the
purposes permitted herein, and Duke Energy agrees to warrant and forever defend
title to the Premises against the claims of any and all persons whomsoever
lawfully claiming or to claim the same or any part thereof, subject only to the
Permitted Encumbrances and the provisions of this Sublease.
8.3 Recording. Duke Energy and TEPPCO shall execute,
acknowledge, deliver and record a "short form" memorandum of this Sublease in
the form of Exhibit B attached hereto and made a part hereof for all purposes.
Promptly upon request by Duke Energy at any time following the expiration or
earlier termination of this Sublease, however such termination may be brought
about, TEPPCO shall execute and deliver to Duke Energy an instrument, in
recordable form, evidencing the termination of this Sublease and the release by
TEPPCO of all of TEPPCO's right, title and interest in and to the Premises
existing under and by virtue of this Sublease.
8.4 Notice. All notices, requests, demands and other
communications required or permitted to be given under this Sublease shall be
deemed to have been duly given if in writing and delivered personally or sent
via first-class, postage prepaid, registered or certified mail (return receipt
requested), or by overnight delivery service or facsimile transmission
addressed as follows:
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<PAGE> 183
If to Duke Energy:
Duke Energy Field Services, Inc.
370 - 17th Street, Suite 900
Denver, Colorado 80202
Attention: President
Telephone: (303) 595-3331
Facsimile: (303) 893-2613
and copy to:
Duke Energy Field Services, Inc.
370 - 17th Street, Suite 900
Denver, Colorado 80202
Attention: General Counsel
Telephone: (303) 595-3331
Facsimile: (303) 893-8913
If to TEPPCO:
TEPPCO Colorado, LLC
2929 Allen Parkway, Suite 3200
Houston, Texas 77019
Attention: President
Telephone: (713) 759-3636
Facsimile: (713) 759-3957
and copy to:
Texas Eastern Products Pipeline Company
2929 Allen Parkway, Suite 3200
Houston, Texas 77019
Attention: General Counsel
Telephone: (713) 759-3968
Facsimile: (713) 759-3645
Any Party may change the address to which the communications are to be
directed to it by giving notice to the other in the manner provided in this
Section 8.4. Notice by mail shall be deemed to have been given and received on
the third calendar day after posting. Notice by overnight delivery service,
facsimile transmission or personal delivery shall be deemed given on the date
of actual delivery.
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<PAGE> 184
8.5 Waiver. No course of dealing and no delay on the part of
either Party in exercising any right, power or remedy shall operate as a waiver
thereof or otherwise prejudice such Party's rights, powers or remedies. No
term or condition of this Sublease shall be deemed to have been waived nor
shall there be any estoppel to enforce any provision of this Sublease except by
written instrument of the Parties charged with such waiver or estoppel. The
waiver of any breach of any term, condition or provision of this Sublease shall
not be construed as a waiver of any prior, concurrent or subsequent breach of
the same or any other term, condition or provision hereof.
8.6 Entire Agreement. The Project Agreements and any related
documents between the Parties of even date herewith, including exhibits and
schedules attached thereto, constitute the final and entire agreement between
the Parties concerning the subject matter thereof, and supersedes all prior and
contemporaneous agreements and undertakings of the Parties in connection
therewith. The Project Agreements may not be contradicted by evidence of
prior, contemporaneous or subsequent oral agreements of the Parties. There are
no oral agreements between the Parties.
8.7 Successors and Assigns. Assignment provisions pertaining
to this Sublease are set forth in the O&M Agreement.
8.8 Conflicts. In the event of any conflict between the
provisions of this Sublease and any exhibits or schedules attached hereto, the
provisions of this Sublease shall prevail.
8.9 Laws and Regulations. This Sublease and the performance
hereof shall be subject to all valid and applicable federal and state laws and
to the valid and applicable orders, laws, rules, and regulations of any state
or federal authority having jurisdiction, but nothing contained herein shall be
construed as a waiver of any right to question or contest any such order, law,
rule, or regulation in any forum having jurisdiction.
8.10 Severability. The invalidity or unenforceability of any
provision of this Sublease shall in no way affect the validity or
enforceability of any other provision hereof.
8.11 Time of Essence. Time is of the essence in the
performance of all obligations falling due hereunder.
8.12 Captions. The headings to Articles, Sections and other
subdivisions of this Sublease are inserted for convenience of reference only
and will not affect the meaning or interpretation of this Sublease.
8.13 Schedules and Exhibits. All schedules and exhibits hereto
which are referred to herein are hereby made a part hereof and incorporated
herein by such reference.
8.14 No Partnership. The relationship between Duke Energy and
TEPPCO at all times shall not be deemed a partnership or joint venture.
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<PAGE> 185
8.15 No Third Party Beneficiaries. Subject to the provisions
of Section 8.7 hereof, this Sublease inures to the sole and exclusive benefit
of Duke Energy and TEPPCO, their respective successors, legal representatives
and assigns, and confers no benefit on any third party.
8.16 Mutual Cooperation; Further Assurances. Upon request by
either Party from time to time during the term of this Sublease, each Party
agrees to execute and deliver all such other and additional instruments,
notices and other documents and do all such other acts and things as may be
necessary to carry out the purposes of this Sublease and to more fully assure
the Parties' rights and interests provided for hereunder. Duke Energy and
TEPPCO each agree to cooperate with the other on all matters relating to
required permits and regulatory compliance by either Duke Energy or TEPPCO in
respect of the Premises.
8.17 Survival. Survival provisions pertaining to this Sublease
are set forth in the O&M Agreement.
8.18 Other Project Agreements. In the event of any conflict
between the provisions of any of the Project Agreements with each other or with
the Purchase Agreement, the provisions of the O&M Agreement shall control over
the inconsistent provisions of any of the other Project Documents or the
Purchase Agreement.
8.19 Amendments; Changes; Modifications. This Sublease may not
be effectively amended, changed, modified, altered or terminated, except as
provided herein, without the written consent of the Parties and such consent
shall be effective only in the specific instance and for the specific purpose
for which it is given.
The parties hereto have executed this Sublease to be effective as of
the day first hereinabove written.
DUKE ENERGY:
DUKE ENERGY FIELD SERVICES, INC.
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
[Signatures continued on page 10]
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<PAGE> 186
TEPPCO:
TEPPCO COLORADO, LLC
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
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<PAGE> 187
EXHIBIT A
PREMISES
A portion of the Southwest Quarter (SW1/4) of Section 34 (Sec. 34), Township
Two North (T2N), Range Sixty Seven (R67W) West of the Sixth Principal Meridian
(6th P.M.), County of Weld, State of Colorado, more particularly described as
follows:
Commencing at the Southwest corner (SW Crn) of said Section 34 and assuming the
West line of said section as bearing North 00(degrees)00'00" East with all
other bearings contained herein relative thereto;
Thence North 00(degrees)00'00" East a distance of 232.9 feet;
Thence North 90(degrees)00'00" East a distance of 455.67 feet to the True Point
of Beginning;
Thence North 00(degrees)30'50" West a distance of 16.84 feet;
Thence North 89(degrees)26'35" East a distance of 20.39 feet;
Thence North 00(degrees)36'48" West a distance of 71.37 feet;
Thence North 89(degrees)44'50" East a distance of 63.22 feet;
Thence South 00(degrees)11'42" East a distance of 88.39 feet;
Thence South 89(degrees)47'50" West a distance of 82.92 feet back to the True
Point of Beginning;
Containing 5,906 square feet (0.136 acres), more or less.
[SEAL]
/s/ KENNETH A. PERRY 4-6-98
- -------------------------------------------------------
Kenneth A. Perry, P.L.S. 25961 Date
For and on behalf of Henkels & McCoy, Inc.
<PAGE> 188
EXHIBIT B
MEMORANDUM OF SUBLEASE AGREEMENT
THIS MEMORANDUM OF SUBLEASE AGREEMENT (this "Memorandum") is made and
entered into this 21st day of April, 1998, but effective 11:59 p.m. (Denver,
Colorado time) on the 31st day of March 1998 (the "Effective Date"), by and
between Duke Energy Field Services, Inc., a Colorado corporation ("Duke
Energy") and TEPPCO Colorado, LLC, a Delaware limited liability company
("TEPPCO"). Each of TEPPCO and Duke Energy are sometimes referred to
individually as a "Party" and collectively as the "Parties."
WHEREAS, Duke Energy and TEPPCO entered into that certain Sublease
Agreement on April 21, 1998, but effective as of the Effective Date (the
"Agreement"); and
WHEREAS, any capitalized term used but not defined in this Memorandum
shall have the meaning ascribed to such term in the Agreement;
WHEREAS, the Parties desire to file this Memorandum of record in the
real property records of Weld County, Colorado, to give notice of the existence
of the Agreement and certain provisions contained therein;
NOW THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereto agree as
follows:
1. Notice. Notice is hereby given of the existence of the
Agreement and certain provisions contained therein which are summarized in
Sections 2 and 3 below.
2. Certain Defined Terms. Unless the context otherwise requires,
the following terms shall have the respective meanings set forth in this
Section 2:
A. "Sickler Lease" means that certain Lease dated December 9,
1977, by and between Sheldon R. Sickler and Anna Mae Sickler,
as "lessor," and Amoco Production Company, as "lessee," which
was recorded on May 22, 1978, in Book 832 at Reception No.
1754168 in the real estate records of Weld County, Colorado,
as amended by that certain Lease Amendment dated August 28,
1992, by and between Anna Mae Sickler, as "lessor," and
Associated Natural Gas, Inc., as "lessee."
3. Demise of Premises and Term. In consideration of the rents,
covenants, and agreements set forth in the Agreement and subject to the terms
and conditions of the Agreement and the Sickler Lease, Duke Energy has assigned
and subleased to TEPPCO and TEPPCO has subleased from Duke Energy, that certain
tract or parcel of land located in Weld County, Colorado, more
<PAGE> 189
particularly described on Exhibit A attached hereto and made a part hereof for
all purposes for a term commencing on March 31, 1998 at 11:59 p.m. (Denver,
Colorado time) and, unless terminated in accordance with the terms and
conditions of the Agreement, shall continue in effect for a primary term ending
March 31, 2018 at 11:59 p.m. (Denver, Colorado time), and shall continue in
effect from Year to Year thereafter; provided that either Party has the right
to terminate the Agreement effective March 31, 2018 at 11:59 p.m. or any
anniversary of such date by giving the other Party at least six (6) months
prior written notice.
4. No Amendment to Agreement. This Memorandum is executed and
recorded solely for the purpose of giving notice and shall not amend nor modify
the Agreement in any way.
5. Further Information. Further information concerning the
Agreement is available from either (i) Duke Energy Field Services, Inc., 370
Seventeenth Street, Suite 900, Denver, Colorado 80202 or (ii) TEPPCO Colorado,
LLC, 2929 Allen Parkway, Suite 3200, Houston, Texas 77019.
The Parties hereto have executed this Memorandum to be effective as of
the day first hereinabove written.
DUKE ENERGY:
DUKE ENERGY FIELD SERVICES, INC.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
TEPPCO:
TEPPCO COLORADO, LLC
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
B-2
<PAGE> 190
STATE OF TEXAS )
)
COUNTY OF HARRIS )
Before me, ____________________________, a Notary Public in and for
the State of Texas, on this ______ day of April, 1998, personally appeared
________________________________, known to me to be the
________________________________ ___ of Duke Energy Field Services, Inc., a
Colorado corporation, on behalf of said corporation and acknowledged to me that
he executed this Memorandum for the considerations and purposes therein set
forth.
Given under my hand and seal of office this ______ day of April, 1998.
-----------------------------------------------
Notary Public in and for the State of Texas
-----------------------------------------------
Printed or Typed Name of Notary
My Commission Expires:
-----------------------------------------------
STATE OF TEXAS )
)
COUNTY OF HARRIS )
Before me, ____________________________, a Notary Public in and for
the State of Texas, on this ______ day of April, 1998, personally appeared
________________________________, known to me to be the
________________________________ ___ of TEPPCO Colorado, LLC, a Delaware
limited liability company, on behalf of said limited liability company and
acknowledged to me that he executed this Memorandum for the considerations and
purposes therein set forth.
Given under my hand and seal of office this ______ day of April, 1998.
-----------------------------------------------
Notary Public in and for the State of Texas
-----------------------------------------------
Printed or Typed Name of Notary
My Commission Expires:
-----------------------------------------------
B-3
<PAGE> 1
EXHIBIT 10.15
CONFORMED*
CREDIT AGREEMENT
between
TEPPCO COLORADO, LLC,
as Borrower,
SUNTRUST BANK, ATLANTA,
as Agent,
and
CERTAIN LENDERS,
as Lenders
$38,000,000
APRIL 21, 1998
[SUNTRUST LOGO] [TEPPCO LOGO]
__________________________________
* CONFORMED AS EXECUTED.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
SECTION 1 DEFINITIONS AND TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Time References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.3 Other References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.4 Accounting Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2 TERM LOAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 3 PAYMENT TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.1 Notes and Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.2 Interest and Principal Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.3 Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.4 Interest Recapture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.5 Interest Calculations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.6 Maximum Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.7 Funding Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.8 Order of Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.9 Sharing of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.10 Offset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.11 Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.12 Foreign Lenders, Participants, and Assignees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.13 Discharge and Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 4 CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 5 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.1 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.2 Subsidiaries and Names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.3 Existence, Authority, and Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.4 Authorization and Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.5 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.6 Current Financials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.7 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.8 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.9 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.10 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.11 Employee Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.12 Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.13 Properties; Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.14 Government Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.15 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.16 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.17 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.18 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.19 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 6 AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.1 Certain Items Furnished . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.2 Use of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.3 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.4 Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
TABLE OF CONTENTS
<PAGE> 3
<TABLE>
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6.5 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.6 Payment of Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.7 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.8 Maintenance of Existence, Assets, and Business . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.9 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.10 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.11 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 7 NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.1 Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.2 Senior Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.3 Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.4 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.5 Employee Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.6 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.7 Compliance with Legal Requirements and Documents . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.8 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.9 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.10 Disposition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.11 Mergers, Consolidations, and Dissolutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.12 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.13 Fiscal Year and Accounting Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.14 New Businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.15 Government Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.16 Strict Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 8 FINANCIAL COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.1 Leverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.2 Debt/EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 9 EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.1 Payment of Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.2 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.3 Debtor Relief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.4 Judgments and Attachments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.5 Government Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.6 Misrepresentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.7 Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.8 Other Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.9 Validity and Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 10 RIGHTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
10.1 Remedies Upon Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
10.2 Company Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
10.3 Not in Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
10.4 Course of Dealing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
10.5 Cumulative Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
10.6 Application of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
10.7 Expenditures by Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
10.8 Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 11 AGENT AND LENDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
11.1 Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
11.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
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<TABLE>
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11.3 Proportionate Absorption of Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.4 Delegation of Duties; Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.5 Limitation of Agent's Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.6 Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
11.7 Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
11.8 Relationship of Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
11.9 Benefits of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 12 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
12.1 Nonbusiness Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
12.2 Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
12.3 Form and Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
12.4 Exceptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
12.5 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
12.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
12.7 Invalid Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
12.8 Amendments, Supplements, Waivers, Consents, and Conflicts . . . . . . . . . . . . . . . . . . . . . 26
12.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
12.10 Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
12.11 Venue and Service of Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
12.12 NON-RECOURSE TO GENERAL PARTNER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
12.13 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
12.14 Entirety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SCHEDULES AND EXHIBITS
----------------------
Schedule 2 - Lenders and Commitments
Schedule 4 - Closing Documents
Schedule 5.2 - Companies and Names
Schedule 5.8 - Litigation
Schedule 5.10 - Environmental Matters
Schedule 5.11 - Employee-Plan Matters
Schedule 5.12 - Existing Debt
Schedule 5.13 - Existing Liens
Schedule 5.15 - Affiliate Transactions
Exhibit A - Term Note
Exhibit B - Guaranty
Exhibit C - Compliance Certificate
Exhibit D - Opinion of Counsel
Exhibit E - Assignment and Assumption Agreement
</TABLE>
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<PAGE> 5
CREDIT AGREEMENT
THIS AGREEMENT is entered into as of April 21, 1998, between TEPPCO
COLORADO, LLC, a Delaware limited liability company ("BORROWER"), Lenders
(defined below), and SUNTRUST BANK, ATLANTA, as Agent for Lenders.
Borrower has requested that Lenders make a $38,000,000 term loan (the
"TERM LOAN") to Borrower to be funded in a single advance on the Closing Date
and used by Borrower to purchase two fixed assets known as fractionators
(together with all directly related equipment and accessions, the
"FRACTIONATORS"). Lenders are willing to extend the Term Loan to Borrower upon
and subject to the terms and conditions of this agreement.
ACCORDINGLY, for adequate and sufficient consideration, Borrower,
Lenders, and Agent agree as follows:
SECTION 1 DEFINITIONS AND TERMS.
1.1 DEFINITIONS. As used in the Credit Documents:
"AFFILIATE" of a Person means any other individual or entity who
directly or indirectly controls, is controlled by, or is under common control
with that Person. For purposes of this definition (a) "control," "controlled
by," and "under common control with" mean possession, directly or indirectly,
of power to direct or cause the direction of management or policies (whether
through ownership of voting securities or other interests, by contract, or
otherwise), and (b) General Partner, Parent, and Guarantor, Borrower, and all
other Subsidiaries of Parent are Affiliates with each other.
"AGENT" means, at any time, SunTrust Bank, Atlanta (or its successor
appointed under SECTION 11), acting as administrative, managing, and
syndication agent for Lenders under the Credit Documents.
"ASSIGNEE" is defined in SECTION 12.10(C).
"ASSIGNMENT" is defined in SECTION 12.10(C).
"BORROWER" is defined in the preamble to this agreement.
"BUSINESS DAY" means any day other than Saturday, Sunday, and any
other day that commercial banks are authorized by Legal Requirement to be
closed in Georgia.
"CAPITAL LEASE" means any capital lease or sublease that is required
by GAAP to be capitalized on a balance sheet.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, 42 U.S.C. Sections 9601 et seq.
"CLOSING DATE" means the date agreed to by Borrower and Agent for
disbursement of the Term Loan, which must be a Business Day occurring no later
than April 30, 1998, but not before all of the conditions precedent in this
agreement for that disbursement have been satisfied.
"COMMITMENT" means, at any time and for any Lender, the amount stated
beside that Lender's name on the most- recently amended SCHEDULE 2.
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"COMMITMENT PERCENTAGE" means, for any Lender and at any time, the
proportion (stated as a percentage) that its Commitment bears to the total
Commitments of all Lenders.
"COMPANIES" means, at any time, Guarantor and each of its
Subsidiaries.
"COMPLIANCE CERTIFICATE" means a certificate substantially in the form
of EXHIBIT C and signed by a Responsible Officer.
"CONSTITUENT DOCUMENTS" means, for any Person, the documents for its
formation and organization, which, for example, for a (a) corporation are its
corporate charter and bylaws, (b) for a partnership is its partnership
agreement, (c) for a limited-liability company are its certificate of
organization and regulations, and (d) for a trust is the trust agreement or
indenture under which it is created.
"CREDIT DOCUMENTS" means (a) this agreement, certificates and reports
delivered by or on behalf of any Company, Parent, or General Partner under this
agreement, and exhibits and schedules to this agreement, (b) all agreements,
documents, and instruments in favor of Agent or Lenders (or Agent on behalf of
Lenders) ever delivered by or on behalf of any Company, Parent, or General
Partner in connection with or under this agreement or otherwise delivered by or
on behalf of any Company, Parent, or General Partner in connection with all or
any part of the Obligation, and (c) all renewals, extensions, and restatements
of, and amendments and supplements to, any of the foregoing.
"CURRENT FINANCIALS" means, unless otherwise specified, either (a)
Parent's consolidated Financials for the year ended December 31, 1997, or (b)
at any time after annual Financials are first delivered under SECTION 6.1,
Parent's annual Financials then most recently delivered to Lenders under
SECTION 6.1(A), together with Parent's quarterly Financials then most recently
delivered to Lenders under SECTION 6.1(B).
"DEBT" means (for any Person, at any time, and without duplication)
(a) all obligations for borrowed money, (b) all obligations evidenced by bonds,
debentures, notes, or similar instruments, (c) all obligations to pay the
deferred purchase price of property or services except trade accounts payable
arising in the ordinary course of business, (d) all obligations arising under
acceptance facilities or facilities for the discount or sale of accounts
receivable, (e) all direct or contingent obligations in respect of letters of
credit, (f) each obligation for Hedging Exposure of $10,000,000 or more, (g)
Capital Lease obligations, (h) all obligations under synthetic leases, (i)
obligations of the type described in any of CLAUSES (A) through (H) above that
are secured (or for which the holder of any such obligation has an existing
Right, contingent or otherwise, to be so secured) by any Lien existing on
property owned or acquired by that Person, and (j) all obligations pursuant to
guaranties, endorsements, and other contingent obligations for the obligations
of others, the type of which obligations are otherwise described in any of
CLAUSES (A) through (I) above.
However, solely for purposes of calculating the ratios under SECTIONS 8.1 and
8.2, the Debt in (x) CLAUSES (A), (B), (C), (D), (E), and (G) is limited to the
unpaid principal amount or component thereof , and (y) CLAUSE (I) is limited to
the lesser of either the unpaid amount of such obligations from time to time
outstanding or the fair-market value of the property securing such obligations.
"DEBTOR LAWS" means the Bankruptcy Code of the United States of
America and all other applicable liquidation, conservatorship, bankruptcy,
moratorium, rearrangement, receivership, insolvency, reorganization, suspension
of payments, or similar Legal Requirements affecting creditors' Rights.
"DEFAULT PERCENTAGE" means, for any Lender and at any time, the
proportion (stated as a percentage) that the Principal Debt owed to it bears to
the Principal Debt owed all Lenders.
"DEFAULT RATE" means, for any day, an annual interest rate equal from
day to day to the lesser of either (a) the sum of the Fixed Rate plus 2% or (b)
the Maximum Rate.
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CREDIT AGREEMENT
<PAGE> 7
"DISTRIBUTION" means, with respect to any shares of any capital stock,
other equity securities, or ownership interests issued by a Person (a) the
retirement, redemption, purchase, or other acquisition for value of those
securities or interests, (b) the declaration or payment of any dividend on or
with respect to those securities or interests, (c) any Investment by that
Person in the holder of any of those securities or interests, and (d) any other
payment by that Person with respect to those securities or interests.
"EBITDA" means -- for any Person, for any period, and without
duplication -- the sum of (a) Net Income, plus (b) to the extent actually
deducted in calculating Net Income (i) Interest Expense, (ii) Tax Expense,
(iii) depreciation, and (iv) amortization.
"EMPLOYEE PLAN" means any employee-pension-benefit plan covered by
Title IV of ERISA and established or maintained by Guarantor or any ERISA
Affiliate (other than a Multiemployer Plan).
"ENVIRONMENTAL LAW" means any applicable Legal Requirement that
relates to protection of the environment or to the regulation of any Hazardous
Substances, including CERCLA, the Hazardous Materials Transportation Act (49
U.S.C. Section 1801 et seq.), the Resource Conservation and Recovery Act (42
U.S.C. Section 6901 et seq.), the Clean Water Act (33 U.S.C. Section 1251 et
seq.), the Clean Air Act (42 U.S.C. Section 7401 et seq.), the Toxic
Substances Control Act (15 U.S.C. Section 2601 et seq.), the Federal
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Section 136 et seq.),
the Emergency Planning and Community Right-to-Know Act (42 U.S.C. Section
11001 et seq.), the Safe Drinking Water Act (42 U.S.C. Section 201 and Section
300f et seq.), the Rivers and Harbors Act (33 U.S.C. Section 401 et seq.), the
Oil Pollution Act (33 U.S.C. Section 2701 et seq.), analogous state and local
Legal Requirements, and any analogous future enacted or adopted Legal
Requirement.
"ENVIRONMENTAL LIABILITY" means any liability, loss, fine, penalty,
charge, lien, damage, cost, or expense of any kind to the extent that it
results (a) from the violation of any Environmental Law, (b) from the Release
or threatened Release of any Hazardous Substance, or (c) from actual or
threatened damages to natural resources.
"ENVIRONMENTAL PERMIT" means any permit, or license, from any Person
defined in CLAUSE (A) of the definition of Governmental Authority that is
required under any Environmental Law for the lawful conduct of any business,
process, or other activity.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"ERISA AFFILIATE" means any Person that, for purposes of Title IV of
ERISA, is a member of Guarantors's controlled group or is under common control
with Guarantor within the meaning of Section 414 of the IRC.
"EVENT OF DEFAULT" is defined in SECTION 9.
"FED-FUNDS RATE" means, for any day, the annual rate (rounded upwards,
if necessary, to the nearest 0.01%) determined (which determination is
conclusive and binding, absent manifest error) by Agent to be equal to (a) the
weighted average of the rates on overnight federal-funds transactions with
member banks of the Federal Reserve System arranged by federal-funds brokers on
that day, as published by the Federal Reserve Bank of New York on the next
Business Day, or (b) if those rates are not published for any day, the average
of the quotations at approximately 10:00 a.m. received by Agent from three
federal-funds brokers of recognized standing selected by Agent in its sole
discretion.
"FINANCIALS" of a Person means balance sheets, profit and loss
statements, reconciliations of capital and surplus, and statements of cash flow
prepared (a) according to GAAP (subject to year end audit adjustments with
respect to interim Financials) and (b) except as stated in SECTION 1.4, in
comparative form to prior year-end figures or corresponding periods of the
preceding fiscal year or other relevant period, as applicable.
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CREDIT AGREEMENT
<PAGE> 8
"FIXED RATE" means 6.53% per annum.
"FRACTIONATORS" is defined in the recitals to this agreement.
"GAAP" means generally accepted accounting principles of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and the Financial Accounting Standards Board that are applicable
from time to time.
"GENERAL PARTNER" means Texas Eastern Products Pipeline Company, a
Delaware corporation.
"GOVERNMENT SECURITIES" means (to the extent they mature within one
year from the date in question) readily marketable (a) direct full faith and
credit obligations of the United States of America or obligations guaranteed by
the full faith and credit of the United States of America, and (b) obligations
of an agency or instrumentality of, or corporation owned, controlled, or
sponsored by, the United States of America that are generally considered in the
securities industry to be implicit obligations of the United States of America.
"GOVERNMENTAL AUTHORITY" means any (a) local, state, territorial,
federal, or foreign judicial, executive, regulatory, administrative,
legislative, or governmental agency, board, bureau, commission, department, or
other instrumentality, (b) private arbitration board or panel, or (c) central
bank.
"GUARANTOR" means TE Products Pipeline Company, Limited Partnership, a
Delaware limited partnership.
"GUARANTY" means a guaranty substantially in the form of EXHIBIT B.
"HAZARDOUS SUBSTANCE" means any substance that is designated, defined,
classified, or regulated as a hazardous waste, hazardous material, pollutant,
contaminant, explosive, corrosive, flammable, infectious, carcinogenic,
mutagenic, radioactive, or toxic or hazardous substance under any Environmental
Law, including, without limitation, any hazardous substance within the meaning
of Section 101(14) of CERCLA.
"HEDGING AGREEMENT" means, for any Person, any present or future,
whether master or single, agreement, document or instrument providing for, or
constituting an agreement to enter into (a) commodity hedges in the normal
course of business in accordance with practices of that Person for hedging
material purchases, (b) arrangement for foreign- currency-exchange protection,
(c) Rate-Protection Arrangement, and (d) interest-rate-hedging products
involving payment premium for which that Person has no future liability.
"HEDGING EXPOSURE" means at any time (a) for a Rate-Protection
Arrangement, the related Rate-Protection Exposure, and (b) for any other
Hedging Agreement, the amount, if any, that would be payable to the counter
party to that Hedging Agreement if it were terminated at that time.
"INTEREST EXPENSE" means -- for any Person, for any period, and
without duplication -- all interest on the outstanding principal portion or
component of its Debt, whether paid in cash or accrued as a liability and
payable in cash during any subsequent period (including, without limitation,
the interest component of Capital Leases), as determined by GAAP, and any
premium or penalty incurred upon the repayment, redemption, or repurchase of
Debt.
"INVESTMENT" means, in respect of any Person, any loan, advance,
extension of credit, or capital contribution to that Person, any other
investment in that Person, or any purchase or commitment to purchase any equity
securities or Debt issued by that Person or substantially all of the assets or
a division or other business unit of that Person. However, the term investment
does not include any extension of trade debt in the ordinary course of business
or, as a result of collection efforts, the receipt of any equity in or property
of a Person.
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CREDIT AGREEMENT
<PAGE> 9
"IRC" means the Internal Revenue Code of 1986.
"LEGAL REQUIREMENTS" means all applicable statutes, laws, treaties,
ordinances, rules, regulations, orders, writs, injunctions, decrees, judgments,
opinions, and interpretations of any Governmental Authority.
"LENDERS" means the financial institutions (including, without
limitation, Agent, in its capacity as a Lender, in respect of its Commitment)
initially named on SCHEDULE 2 or, to the extent they constitute permitted
assignees pursuant to the terms of this agreement, on the most-recently-amended
SCHEDULE 2, if any, delivered by Agent under this agreement, and, subject to
this agreement, their respective successors and permitted assigns (but not any
Participant who is not otherwise a party to this agreement in the capacity as
Lenders).
"LIEN" means any lien, mortgage, security interest, pledge,
assignment, charge, title retention agreement, or encumbrance of any kind and
any other arrangement for a creditor's claim to be satisfied from assets or
proceeds prior to the claims of other creditors or the owners (other than title
of the lessor under an operating lease).
"LITIGATION" means any action by or before any Governmental Authority.
"MATERIAL-ADVERSE EVENT" means any circumstance or event that,
individually or collectively, is, or is reasonably expected to result (at any
time before the Commitments are fully cancelled or terminated and the
Obligation is fully paid and performed) in, any (a) material impairment of (i)
the ability of Borrower or Guarantor to perform any of their respective payment
or other material obligations under any Credit Document, or (ii) the ability of
Agent or any Lender to enforce any of those obligations or any of their
respective Rights under the Credit Documents (other than as a result of its own
act or omission), (b) material and adverse effect on the financial condition of
Parent and its Subsidiaries as a whole as represented to Lenders in the Current
Financials most recently delivered before the date of this agreement, or (c)
Event of Default or Potential Default.
"MATURITY DATE" means the earlier of either (a) April 21, 2001, or (b)
the effective date that Lenders' Commitments to lend have been terminated or
canceled or that the Principal Debt has been accelerated as provided in this
agreement and is immediately due and payable.
"MAXIMUM AMOUNT" and "MAXIMUM RATE" respectively mean, for a Lender,
the maximum non-usurious amount and the maximum non-usurious rate of interest
that, under applicable Legal Requirement, that Lender is permitted to contract
for, charge, take, reserve, or receive on the Obligation.
"MULTIEMPLOYER PLAN" means a multiemployer plan as defined in Sections
3(37) or 4001(a)(3) of ERISA or Section 414(f) of the IRC to which Guarantor or
any ERISA Affiliate is making, or has made, or is accruing, or has accrued, an
obligation to make contributions.
"NET INCOME" means, for any Person and any period, that Person's
profit or loss (a) after deducting all of its operating expenses, provision for
Taxes and reserves (including reserves for deferred income Taxes), and all
other deductions in accordance with GAAP, but (b) excluding (i) extraordinary
items, (ii) in the case of Parent, any equity interest in the unremitted
earnings of any Person that is not a Subsidiary of Parent, (iii) the profit or
loss of any Person accrued before the date that (A) it becomes a Subsidiary of
Parent, (B) it is merged with Parent or any of its Subsidiaries, or (C) its
assets are acquired by Parent of any of its Subsidiaries.
"NOTE" means a Term Note substantially in the form of EXHIBIT A.
"OBLIGATION" means all present and future (a) Debts, liabilities, and
obligations of Borrower to Agent or any Lender that arises under any Credit
Document, whether principal, interest, fees, costs, attorneys' fees, or
otherwise, (b) Rate-Protection Exposure of any Rate-Protection Party that is a
Lender or an Affiliate (with
5
CREDIT AGREEMENT
<PAGE> 10
whom Borrower has contractually entered into such Hedging Agreement in
connection with this agreement) of a Lender, and (c) renewals, extensions, and
modifications of any of the foregoing.
"OSHA" means the Occupational Safety and Health Act of 1970, 29 U.S.C.
Section 651 et seq.
"PARENT" means TEPPCO Partners, L.P., a Delaware limited partnership.
"PARTICIPANT" is defined in SECTION 14.10(B).
"PBGC" means the Pension Benefit Guaranty Corporation.
"PERMITTED DEBT" is defined in SECTION 7.1.
"PERMITTED LIENS" is defined in SECTION 7.4.
"PERMITTED INVESTMENT" is defined in SECTION 7.8.
"PERSON" means any individual, entity, or Governmental Authority.
"POTENTIAL DEFAULT" means any event, occurrence, or circumstance, the
existence of which upon any required notice, time lapse, or both, would become
an Event of Default.
"PREDECESSOR" means any Person for whose obligations and liabilities
any Company is reasonably expected to be liable as the result of any merger, de
facto merger, stock purchase, asset purchase or divestiture, combination, joint
venture, investment, reclassification, or other similar business transaction.
"PRINCIPAL DEBT" means, at any time, the unpaid principal balance of
the Term Loan.
"RATE-PROTECTION ARRANGEMENT" means any interest-rate swap, cap,
collar, or similar arrangement.
"RATE-PROTECTION EXPOSURE" means, for any Rate-Protection Arrangement
and at any time, the amount, if any, that would be payable to the
Rate-Protection Party in that Rate-Protection Arrangement for any "agreement
value" as though that Rate-Protection Arrangement were terminated at that time,
in each case (a) calculated as provided in the International Swap Dealers
Association Inc. Code of Standard Wording, Assumptions, and Provisions for
SWAPS in effect on the date such arrangement is entered into, and (b)
determined by Agent in good faith in reliance upon any information (including
any information provided by the Rate-Protection Party) that Agent believes
(with no obligation to verify accuracy) to be accurate.
"RATE-PROTECTION PARTY" means, at any time, any party that has entered
into a Rate-Protection Arrangement with Borrower.
"REAL PROPERTY" means any land, buildings, fixtures, and other
improvements to land now or in the future directly or indirectly owned by any
Company, leased to or otherwise operated by any Company, or subleased by any
Company to any other Person.
"RELEASE" means any "release" as defined under any Environmental Law.
"REPRESENTATIVES" means officers, directors, employees, accountants,
attorneys, and agents.
"REQUIRED LENDERS" means, at any time, any combination of Lenders
holding (directly or indirectly) at least either 100% (if there are one or two
Lenders) or 66 2/3% (if there are three or more Lenders) of either (a) the
total Commitments while there is no Principal Debt or (b) the Principal Debt
while there is any Principal Debt.
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CREDIT AGREEMENT
<PAGE> 11
"RESPONSIBLE OFFICER" means General Parent's chairman, president,
chief executive officer, chief financial officer, or treasurer.
"RIGHTS" means rights, remedies, powers, privileges, and benefits.
"SENIOR NOTES" means the 6.45% Senior Notes Due 2008 in the original
aggregate principal amount of $180,000,000 and the 7.51.% Senior Notes Due 2028
in the original aggregate principal amount of $210,000,000 each case issued by
Guarantor under the Indenture dated as of January 27, 1998, between Guarantor
and The Bank of New York, Trustee.
"SOLVENT" means, as to any Person, that (a) the aggregate fair market
value of its assets exceeds its liabilities, (b) it has sufficient cash flow to
enable it to pay its Debts as they mature, and (c) it does not have
unreasonably small capital to conduct its businesses.
"SUBSIDIARY" of any Person means any corporation, limited liability
company, general or limited partnership, or other entity of which more than 50%
(in number of votes) of the stock (or equivalent interests) is owned of record
or beneficially, directly or indirectly, by that Person.
"TANGIBLE-NET WORTH" means, at any time and for any Person, the sum of
(i) its stockholders', members', or partners' equity, as the case may be, minus
(ii) the total (without duplication of deductions already made in arriving at
that equity) of the book value of all assets that would be treated as
intangible assets under GAAP, including goodwill, trademarks, trade names,
copyrights, patents, and unamortized debt discount and expense.
"TAXES" means, for any Person, taxes, assessments, or other
governmental charges or levies imposed upon it, its income, or any of its
properties, franchises, or assets.
"TAX EXPENSE" means -- for any Person, for any period, and without
duplication -- the Taxes on income accrued during that period.
"TERM LOAN" is defined in the recitals of this agreement.
1.2 TIME REFERENCES. Unless otherwise specified, in the Credit
Documents (a) time references (e.g., 10:00 a.m.) are to time in Atlanta,
Georgia, on the applicable date, and (b) in calculating a period from one date
to another, the word "from" means "from and including" and the word "to" or
"until" means "to but excluding."
1.3 OTHER REFERENCES. Unless otherwise specified, in the Credit
Documents (a) where appropriate, the singular includes the plural and vice
versa, and words of any gender include each other gender, (b) where
appropriate, words include their respective cognate expressions, (c) heading
and caption references may not be construed in interpreting provisions, (d)
monetary references are to currency of the United States of America, (e)
section, paragraph, annex, schedule, exhibit, and similar references are to the
particular Credit Document in which they are used, (f) references to
"telecopy," "facsimile," "fax," or similar terms are to facsimile or telecopy
transmissions, (g) references to "including" mean including without limiting
the generality of any description preceding that word, (h) the rule of
construction that references to general items that follow references to
specific items are limited to the same type or character of those specific
items is not applicable in the Credit Documents, (i) references to "writing"
include printing, typing, lithography, and other means of reproducing words in
a tangible, visible form, (j) references to any Person include that Person's
heirs, personal representatives, successors, trustees, receivers, and permitted
assigns, (k) references to any Legal Requirement include every amendment or
supplement to it, rule and regulation adopted under it, and successor or
replacement for it, (l) references to any Governmental Authority include any
Person succeeding to its relevant function, and (m) references to any Credit
Document or other document include (to the extent not prohibited by the terms
of the Credit Documents) every renewal and extension of it, amendment and
supplement to it, and replacement or substitution for it.
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CREDIT AGREEMENT
<PAGE> 12
1.4 ACCOUNTING PRINCIPLES. Unless otherwise specified, in the
Credit Documents (a) GAAP determines all accounting and financial terms and
compliance with financial covenants, (b) GAAP in effect on the date of this
agreement determines compliance with financial covenants, (c) otherwise, all
accounting principles applied in a current period must be comparable in all
material respects to those applied during the preceding comparable period, and
(d) all financial terms and compliance with reporting and financial covenants
must be on a consolidated basis, as applicable.
SECTION 2 TERM LOAN. Subject to the provisions in the Credit Documents,
each Lender severally but not jointly agrees to lend to Borrower that Lender's
Commitment Percentage of the Term Loan in a single advance on the Closing Date.
If Borrower pays or prepays any portion of the Term Loan, that portion may not
be reborrowed.
SECTION 3 PAYMENT TERMS.
3.1 NOTES AND PAYMENTS. The Term Loan is evidenced by the Notes,
one payable to each Lender in the stated amount of its Commitment. Borrower
must make each payment and prepayment on the Obligation to Agent's principal
office in Atlanta, Georgia, in immediately available funds by 1:00 p.m. on the
day due; otherwise, but subject to SECTION 3.6, those funds continue to accrue
interest as if they were received on the next Business Day. Agent shall
promptly pay to each Lender the part of any payment or prepayment to which that
Lender is entitled under this agreement on the same day Agent receives the
funds from Borrower. Unless Agent has received notice from Borrower before the
date on which any payment is due under this agreement that Borrower will not
make that payment in full, then on the date that payment is due Agent may
assume that Borrower has made the full payment due and Agent may, in reliance
upon that assumption, cause to be distributed to each Lender on that date the
amount then due to each Lender. If and to the extent Borrower does not make
the full payment due to Agent, each Lender shall repay to Agent on demand the
amount distributed to that Lender by Agent together with interest for each day
from the date that Lender received payment from Agent until the date that
Lender repays Agent (unless such repayment is made on the same day as such
distribution), at an interest rate equal to the Fed-Funds Rate.
3.2 INTEREST AND PRINCIPAL PAYMENTS. Accrued interest on the
Principal Debt is due and payable on the 21st calendar day of each January,
April, July, and October (commencing on the first of those dates that follows
the Closing Date) and on the Maturity Date. The Principal Debt is due and
payable on the Maturity Date. Concurrently with the sale, assignment, lease,
transfer, or other disposition of either Fractionator, Borrower shall
mandatorily prepay all of the Obligation. Borrower may, by giving notice to
Agent no later than five Business Days before the date of the prepayment,
prepay, without penalty and in whole or part, the Principal Debt so long as (i)
the notice by Borrower specifies the amount to be prepaid, (ii) each voluntary
partial prepayment must be in a principal amount of not less than $5,000,000,
or a greater integral multiple of $1,000,000, plus accrued interest, on the
amount prepaid, to the date of the prepayment, and (iii) Borrower shall pay the
amounts due in respect of that prepayment under SECTION 3.7.
3.3 INTEREST RATES. Except as provided in the next sentence, the
Principal Debt bears interest at an annual rate equal to the lesser of either
the Fixed Rate or the Maximum Rate. To the extent lawful, all past-due
Principal Debt and past-due interest accruing on the Principal Debt bears
interest from the date due (stated or by acceleration) at the Default Rate
until paid, regardless whether payment is made before or after entry of a
judgment. Each change in the Maximum Rate is effective, without notice to
Borrower or any other Person, upon the effective date of change.
3.4 INTEREST RECAPTURE. If the designated interest rate
applicable to any amount exceeds the Maximum Rate, the interest rate on that
amount is limited to the Maximum Rate, but any subsequent reductions in the
designated rate shall not reduce the interest rate thereon below the Maximum
Rate until the total amount of accrued interest equals the amount of interest
that would have accrued if that designated rate had always been in effect. If
at maturity (stated or by acceleration), or at final payment of the Notes, the
total interest paid or accrued is less than the interest that would have
accrued if the designated rates had always been in effect, then, at that time
and to the extent lawful, Borrower shall pay an amount equal to the difference
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CREDIT AGREEMENT
<PAGE> 13
between (a) the lesser of either the amount of interest that would have accrued
if the designated rates had always been in effect or the amount of interest
that would have accrued if the Maximum Rate had always been in effect, and (b)
the amount of interest actually paid or accrued on the Notes.
3.5 INTEREST CALCULATIONS. Interest will be calculated on the
basis of actual number of days (including the first day but excluding the last
day) elapsed but computed as if each calendar year consisted of 360 days
(unless the calculation would result in an interest rate greater than the
Maximum Rate, in which event interest will be calculated on the basis of a year
of 365 or 366 days, as the case may be). All interest rate determinations and
calculations by Agent are conclusive and binding absent manifest error.
3.6 MAXIMUM RATE. Regardless of any provision contained in any
Credit Document, no Lender is entitled to contract for, charge, take, reserve,
receive, or apply, as interest on all or any part of the Obligation, any amount
in excess of the Maximum Rate, and, if any Lender ever does so, then any excess
shall be treated as a partial prepayment of principal (without regard to
SECTION 3.7) and any remaining excess shall be refunded to Borrower. In
determining if the interest paid or payable exceeds the Maximum Rate, Borrower
and Lenders shall, to the maximum extent lawful, (a) characterize any
nonprincipal payment as an expense, fee, or premium rather than as interest,
(b) exclude voluntary prepayments and their effects, and (c) amortize, prorate,
allocate, and spread the total amount of interest throughout the entire
contemplated term of the Term Loan. However, if the Obligation is paid in full
before the end of its full contemplated term, and if the interest received for
its actual period of existence exceeds the Maximum Amount, then Lenders shall
refund any excess (and Lenders may not, to the extent lawful, be subject to any
penalties provided by any Legal Requirements for contracting for, charging,
taking, reserving, or receiving interest in excess of the Maximum Amount). If
the Legal Requirements of the State of Texas are applicable for purposes of
determining the "Maximum Rate" or the "Maximum Amount," then those terms mean
the "indicated rate ceiling" from time to time in effect under Article
5069-1.04, Title 79, Revised Civil Statutes of Texas, as amended.
3.7 FUNDING LOSS. Borrower indemnifies and holds harmless each
Lender for any and all Rate Protection Exposure that any Lender may incur in
respect of any Rate-Protection Arrangement to which any Lender is a party
(whether or not Borrower or Guarantor is party to it) in connection with the
Term Loan and arising as a result of any prepayment of the Term Loan, whether
voluntary or by acceleration. Any Lender incurring such a loss, cost, or
reduction may deliver to Borrower (through Agent) a certificate setting forth
in reasonable detail the calculation of the amount necessary to compensate it
(which certificate is conclusive and binding absent manifest error), and
Borrower shall pay that amount to that Lender within ten Business Days after
receiving that certificate and other information that Borrower may reasonably
request. The provisions of and undertakings and indemnification in this
section survive the satisfaction and payment of the Obligation and termination
of this agreement.
3.8 ORDER OF APPLICATION. Each payment (including proceeds from
the exercise of any Rights) of the Obligation shall be applied either (a) if no
Event of Default or Potential Default exists, then in the order and manner as
Borrower directs, or (b) if an Event of Default or Potential Default exists or
if Borrower fails to give direction, then in the following order: (i) To all
fees, expenses, and indemnified amounts for which Agent has not been paid or
reimbursed in accordance with the Credit Documents and -- except while an Event
of Default under SECTION 9.1 exists -- as to which Borrower has been invoiced
and has failed to pay within ten Business Days of that invoice; (ii) to all
fees, expenses, and indemnified amounts for which any Lender has not been paid
or reimbursed in accordance with the Credit Documents (and if any payment is
less than all unpaid or unreimbursed fees and expenses, then that payment shall
be paid against unpaid and unreimbursed fees and expenses in the order of
incurrence or due date) and -- except while an Event of Default under SECTION
9.1 exists -- as to which Borrower has been invoiced and has failed to pay
within ten Business Days of that invoice; (iii) to accrued interest on the
Principal Debt; (iv) to the Principal Debt; and (v) to the remaining
Obligation in the order and manner Required Lenders deem appropriate.
3.9 SHARING OF PAYMENTS. Except as otherwise specifically
provided (a) principal and interest payments shall be shared by Lenders in
accordance with their respective Commitment Percentages while no Event of
Default exists or their respective Default Percentages while an Event of
Default exists, and (b) each
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other payment on the Obligation shall be shared by Lenders in the proportion
that the Obligation is owed to Lenders on the date of the payment. If any
Lender obtains any payment or prepayment with respect to the Obligation
(whether voluntary, involuntary, or otherwise, including, without limitation,
as a result of exercising its Rights under the SECTION 3.10) that exceeds the
part of that payment or prepayment that it is then entitled to receive under
the Credit Documents, then that Lender shall purchase from the other Lenders
participations that will cause the purchasing Lender to share the excess
payment or prepayment ratably with each other Lender. If all or any portion of
any excess payment or prepayment is subsequently recovered from the purchasing
Lender, then the purchase shall be rescinded and the purchase price restored to
the extent of the recovery. Borrower agrees that any Lender purchasing a
participation from another Lender under this section may, to the fullest extent
lawful, exercise all of its Rights of payment (including the Right of offset)
with respect to that participation as fully as if that Lender were the direct
creditor of Borrower in the amount of that participation.
3.10 OFFSET. If an Event of Default exists, each Lender is
entitled to exercise (for the benefit of all Lenders in accordance with the
foregoing section) the Rights of offset and banker's Lien against each and
every account and other property, or any interest therein, that Borrower or
Guarantor may now or in the future have with, or which is now or in the future
in the possession of, that Lender to the extent of the full amount of the
Obligation then matured and owed (directly or participated) to it.
3.11 CAPITAL ADEQUACY. If any change in any present Legal
Requirement, any change in the interpretation or application of any present
Legal Requirement, or any future Legal Requirement regarding capital adequacy
applicable to a Lender or its parent company, or if compliance by any Lender
with any request, directive, or requirement imposed in the future by any
Governmental Authority regarding capital adequacy, or if any change in its
written policies or in the risk category of this transaction resulting from any
of the preceding changes, in any of the foregoing events or circumstances,
reduces the rate of return on its capital resulting from any of the preceding
changes as a consequence of its obligations under this agreement to a level
below that which it otherwise could have achieved (taking into consideration
its policies with respect to capital adequacy) by an amount deemed by it to be
material (and it may, in determining the amount, utilize reasonable assumptions
and allocations of costs and expenses and use any reasonable averaging or
attribution method), then (unless the effect is already reflected in the rate
of interest then applicable under this agreement) Agent or that Lender (through
Agent) shall notify Borrower and deliver to Borrower a certificate setting
forth in reasonable detail the calculation of the amount necessary to
compensate it (which certificate is conclusive and binding absent manifest
error), and Borrower shall pay that amount to Agent or that Lender within ten
Business Days after demand. The provisions of and undertakings and
indemnification in this section survive the satisfaction and payment of the
Obligation and termination of this agreement for one year.
3.12 FOREIGN LENDERS, PARTICIPANTS, AND ASSIGNEES. Each Lender,
Participant (by accepting a participation interest under this agreement), and
Assignee (by executing an Assignment) that is not organized under the laws of
the United States of America or one of its states (a) represents to Agent and
Borrower that (i) no Taxes are required to be withheld by Agent or Borrower
with respect to any payments to be made to it in respect of the Obligation and
(ii) it has furnished to Agent and Borrower two duly completed copies of either
U.S. Internal Revenue Service Form 4224, Form 1001, Form W-8, or any other form
acceptable to Agent and Borrower that entitles it to a complete exemption from
U.S. federal withholding Tax on all interest or fee payments under the Credit
Documents, and (b) covenants to (i) provide Agent and Borrower a new Form 4224,
Form 1001, Form W-8, or other form acceptable to Agent and Borrower upon the
expiration or obsolescence according to Legal Requirement of any previously
delivered form, duly executed and completed by it, entitling it to a complete
exemption from U.S. federal withholding Tax on all interest and fee payments
under the Credit Documents, and (ii) comply from time to time with all Legal
Requirements with regard to the withholding Tax exemption. If any of the
foregoing is not true at any time or the applicable forms are not provided,
then Borrower and Agent (without duplication) may deduct and withhold from
interest and fee payments under the Credit Documents any Tax at the maximum
rate under the IRC or other applicable Legal Requirement, and amounts so
deducted and withheld shall be treated as paid to that Lender, Participant, or
assignee, as the case may be, for all purposes under the Credit Documents.
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3.13 DISCHARGE AND REINSTATEMENT. Each Company's obligations under
the Credit Documents to which it is a party remain in full force and effect
until no Lender has any commitment to extend credit under the Credit Documents
and the Obligation is fully paid (except for provisions under the Credit
Documents which by their terms expressly survive payment of the Obligation and
termination of the Credit Documents). If any payment under any Credit Document
is ever rescinded or must be restored or returned for any reason, then all
Rights and obligations under the Credit Documents to receive and to enforce the
receipt of that payment are automatically reinstated as though the payment had
not been made when due.
SECTION 4 CONDITIONS PRECEDENT. No Lender is obligated to extend its
Commitment Percentage of the Term Loan unless (a) Agent has received all of the
items described in SCHEDULE 4, (b) all of the representations and warranties of
the Companies in the Credit Documents are true and correct, and (c) no
Material-Adverse Event exists. Each condition precedent in this agreement
(including those on SCHEDULE 4) is material to the transactions contemplated by
this agreement, and time is of the essence with respect to each condition
precedent.
SECTION 5 REPRESENTATIONS AND WARRANTIES. Borrower represents and
warrants to Agent and Lenders as follows:
5.1 PURPOSE. Borrower will only use the proceeds of the Term Loan
to acquire the Fractionators.
5.2 SUBSIDIARIES AND NAMES. SCHEDULE 5.2 describes (a) all of
Guarantor's direct and indirect Subsidiaries, (b) every name or trade name used
by Borrower or Guarantor during the five-year period before the date of this
agreement, and (c) every change of Borrower's or Guarantor's name during the
four-month period before the date of this agreement.
5.3 EXISTENCE, AUTHORITY, AND GOOD STANDING. Each Company is duly
organized, validly existing, and in good standing under the Legal Requirements
of its jurisdiction of formation. Except where not a Material-Adverse Event,
each Company is duly qualified to transact business and is in good standing in
each jurisdiction where the nature and extent of its business and properties
require due qualification and good standing (each of which jurisdictions is
identified on SCHEDULE 5.2). Each Company possesses all requisite authority
and power to conduct its business as is now being conducted and as proposed
under the Credit Documents to be conducted and to own and operate its assets as
now owned and operated and as proposed to be owned and operated under the
Credit Documents.
5.4 AUTHORIZATION AND CONTRAVENTION. The execution and delivery
by each Company of each Credit Document to which it is a party and the
performance by it of its obligations under those Credit Documents (a) are
within its corporate, partnership, or comparable organizational powers, (b)
have been duly authorized by all necessary corporate, partnership, or
comparable organizational action, (c) require no action by or filing with any
Governmental Authority (except any action or filing that has been taken or made
on or before the Closing Date), (d) do not violate any provision of any of its
Constituent Documents, and (e) except violations that individually or
collectively are not a Material-Adverse Event, do not violate any provision of
Legal Requirement applicable to it or any material agreement to which it is a
party.
5.5 BINDING EFFECT. Upon execution and delivery by all parties to
it, each Credit Document will constitute a legal and binding obligation of each
Company party to it, enforceable against it in accordance with that Credit
Document's terms except as that enforceability may be limited by Debtor Laws
and general principles of equity.
5.6 CURRENT FINANCIALS. The Current Financials were prepared in
accordance with GAAP and present fairly, in all material respects, the
consolidated financial condition, results of operations, and cash flows of
Parent and its Subsidiaries as of, and for the portion of the fiscal year
ending on their dates (subject only to normal year-end adjustments for interim
statements). Except for transactions directly related to, specifically
contemplated by, or expressly permitted by the Credit Documents, no material
adverse changes have occurred in such consolidated financial condition from
that shown in the Current Financials.
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<PAGE> 16
5.7 SOLVENCY. Borrower and Guarantor are each Solvent.
5.8 LITIGATION. Except as disclosed on SCHEDULE 5.8 and matters
covered (subject to reasonable and customary deductible and retention) by
insurance or indemnification agreements (a) no Company is subject to, or aware
of the threat of, any Litigation that is reasonably likely to be determined
adversely to any Company and, if so adversely determined, is a Material-Adverse
Event, and (b) no outstanding and unpaid judgments against any Company exist
that would be a Material-Adverse Event.
5.9 TAXES. Except where not a Material-Adverse Event (a) all Tax
returns of each Company required to be filed have been filed (or extensions
have been granted) before delinquency, and (b) all Taxes imposed upon each
Company that are due and payable have been paid before delinquency except as
being contested as permitted by SECTION 6.5.
5.10 ENVIRONMENTAL MATTERS. Except as disclosed on SCHEDULE 5.10
(a) no Company has received notice from any Governmental Authority that it has
actual or potential Environmental Liability and no Company has knowledge that
it has any Environmental Liability, which actual or potential Environmental
Liability in either case constitutes a Material-Adverse Event, and (b) no
Company has received notice from any Governmental Authority that any Real
Property is affected by, and no Company has knowledge that any Real Property is
affected by, any Release of any Hazardous Substance which constitutes a
Material-Adverse Event.
5.11 EMPLOYEE PLANS. Except as disclosed on SCHEDULE 5.11 or where
not a Material-Adverse Event (a) no Employee Plan subject to ERISA has incurred
an "accumulated funding deficiency" (as defined in Section 302 of ERISA or
Section 512 of the IRC), (b) neither Borrower nor any ERISA Affiliate has
incurred liability -- except for liabilities for premiums that have been paid
or that are not past due -- under ERISA to the PBGC in connection with any
Employee Plan, (c) neither Borrower nor any ERISA Affiliate has withdrawn in
whole or in part from participation in a Multiemployer Plan in a manner that
has given rise to a withdrawal liability under Title IV of ERISA, (d) neither
Borrower nor any ERISA Affiliate has engaged in any "prohibited transaction"
(as defined in Section 406 of ERISA or Section 4975 of the IRC), (e) no
"reportable event" (as defined in Section 4043 of ERISA) has occurred excluding
events for which the notice requirement is waived under applicable PBGC
regulations, (f) neither Borrower nor any ERISA Affiliate has any liability, or
is subject to any Lien, under ERISA or the IRC to or on account of any Employee
Plan, (g) each Employee Plan subject to ERISA and the IRC complies in all
material respects, both in form and operation, with ERISA and the IRC, and (h)
no Multiemployer Plan subject to the IRC is in reorganization within the
meaning of Section 418 of the IRC. None of the matters disclosed on SCHEDULE
5.11 give rise to any other "reportable events," as defined above.
5.12 DEBT. No Company has any Debt except as described on SCHEDULE
5.12.
5.13 PROPERTIES; LIENS. Each Company has good and indefeasible
title to all of its property reflected on the Current Financials as being owned
by it except for property that is obsolete or that has been disposed of in the
ordinary course of business between the date of the Current Financials and the
date of this agreement or, after the date of this agreement, as permitted by
SECTIONS 7.10 and 7.11. No Lien exists on any property of any Company except
as described on SCHEDULE 5.13 and other Permitted Liens. Except for the Senior
Notes, no Company is party or subject to any agreement, instrument, or order
which in any way restricts any Company's ability to allow Liens to exist upon
any of its assets except relating to Permitted Liens.
5.14 GOVERNMENT REGULATIONS. No Company is subject to regulation
under the Investment Company Act of 1940 or the Public Utility Holding Company
Act of 1935.
5.15 TRANSACTIONS WITH AFFILIATES. Except as otherwise disclosed
on SCHEDULE 5.15 or permitted by SECTION 7.6, no Company is a party to a
material transaction with any of its Affiliates.
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5.16 LEASES. Except where not a Material-Adverse Event (a) each
Company enjoys peaceful and undisturbed possession under all leases necessary
for the operation of its properties and assets, and (b) all material leases
under which any Company is a lessee are in full force and effect.
5.17 LABOR MATTERS. Except where not a Material-Adverse Event (a)
no actual or threatened strikes, labor disputes, slow downs, walkouts, work
stoppages, or other concerted interruptions of operations that involve any
employees employed at any time in connection with the business activities or
operations at the Real Property exist, (b) hours worked by and payment made to
the employees of any Company or any Predecessor have not been in violation of
the Fair Labor Standards Act or any other applicable Legal Requirements
pertaining to labor matters, (c) all payments due from any Company for employee
health and welfare insurance, including, without limitation, workers
compensation insurance, have been paid or accrued as a liability on its books,
(d) the business activities and operations of each Company are in compliance
with OSHA and other applicable health and safety Legal Requirements.
5.18 INTELLECTUAL PROPERTY. Except where not a Material-Adverse
Event (a) each Company owns or has the right to use all material licenses,
patents, patent applications, copyrights, service marks, trademarks, trademark
applications and trade names necessary to continue to conduct its businesses as
presently conducted by it and proposed to be conducted by it immediately after
the date of this agreement, (b) each Company is conducting its business without
infringement or claim of infringement of any license, patent, copyright,
service mark, trademark, trade name, trade secret or other intellectual
property right of others, and (c) no infringement or claim of infringement by
others of any material license, patent, copyright, service mark, trademark,
trade name, trade secret or other intellectual property of any Company exists.
5.19 FULL DISCLOSURE. Each fact or condition relating to the
Companies or to Borrower's or Guarantor's financial condition, business, or
property that is a Material-Adverse Event has been disclosed in writing to
Agent. All information previously furnished by any Company to Agent in
connection with the Credit Documents was (and all information furnished in the
future by any Company to Agent will be) true and accurate in all material
respects or based on reasonable estimates on the date the information is stated
or certified.
SECTION 6 AFFIRMATIVE COVENANTS. As long as any Lender is committed to
lend under this agreement and until the Obligation has been fully paid and
performed, Borrower covenants and agrees with Agent and Lenders that, without
first obtaining Required Lenders' consent to the contrary:
6.1 CERTAIN ITEMS FURNISHED. Borrower shall cause the following
to be furnished to each Lender:
(a) ANNUAL FINANCIALS. Promptly after preparation but no
later than 90 days after the last day of each fiscal year of Parent,
Financials showing the consolidated and consolidating financial
condition and results of operations of Parent and its Subsidiaries as
of, and for the year ended on, that last day, accompanied by (i) the
opinion, without material qualification, of KPMG Peat Marwick LLP or
other firm of nationally-recognized independent certified public
accountants reasonably acceptable to Required Lenders, based on an
audit using generally accepted auditing standards, that those
Financials were prepared in accordance with GAAP and present fairly,
in all material respects, the consolidated and consolidating financial
condition and results of operations of Parent and its Subsidiaries,
and (ii) a related Compliance Certificate.
(b) QUARTERLY FINANCIALS. Promptly after preparation but
no later than 45 days after the last day of each of the first three
fiscal quarters of Parent each year, Financials showing the
consolidated and consolidating financial condition and results of
operations of Parent and its Subsidiaries for that fiscal quarter and
for the period from the beginning of the current fiscal year to the
last day of that fiscal quarter, accompanied by a related Compliance
Certificate.
(c) OTHER REPORTS. Promptly after preparation and
distribution, accurate and complete copies of all reports and other
material communications about material financial matters or material
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<PAGE> 18
corporate plans or projections by or for any Company for distribution
to any Governmental Authority or any creditor, other than credit,
trade, and other reports prepared and distributed in the ordinary
course of business and information otherwise furnished to Agent and
Lenders under this agreement.
(d) EMPLOYEE PLANS. As soon as possible and within 30
days after any Company knows that any event which would constitute a
reportable event under Section 4043(b) of Title IV of ERISA with
respect to any Employee Plan subject to ERISA has occurred, or that
the PBGC has instituted or will institute proceedings under ERISA to
terminate that plan, deliver a certificate of a Responsible Officer of
Borrower setting forth details as to that reportable event and the
action which Borrower or an ERISA Affiliate, as the case may be,
proposes to take with respect to it, together with a copy of any
notice of that reportable event which may be required to be filed with
the PBGC, or any notice delivered by the PBGC evidencing its intent to
institute those proceedings or any notice to the PBGC that the plan is
to be terminated, as the case may be. For all purposes of this
section, each Company is deemed to have all knowledge of all facts
attributable to the plan administrator under ERISA.
(e) OTHER NOTICES. Notice, promptly after Borrower
knows, of (i) the existence and status of any Litigation that is
reasonably likely to be adversely determined and, if determined
adversely to any Company, would be a Material-Adverse Event, (ii) any
change in any material fact or circumstance represented or warranted
by any Company in any Credit Document, (iii) an Event of Default or
Potential Default, specifying the nature thereof and what action the
Companies have taken, are taking, or propose to take.
(f) LIEN RELEASES. Within 90 days after the date of this
agreement, evidence reasonably satisfactory to Agent that all Lien
filings in respect of the Mortgage, Security Agreement and Fixture
Filing (as renewed, extended, amended, supplemented, and assigned)
dated as of February 28, 1990, from Guarantor, and originally in favor
of NationsBank of Texas, N.A., as Trustee, have been terminated or
released.
(g) OTHER INFORMATION. Promptly when reasonably
requested by Agent or any Lender, such information (not otherwise
required to be furnished under this agreement) about any Company's
business affairs, assets, and liabilities.
6.2 USE OF CREDIT. Borrower shall use the proceeds of the Term
Loan only for the purposes represented in this agreement.
6.3 BOOKS AND RECORDS. Each Company shall maintain books,
records, and accounts necessary to prepare Financials in accordance with GAAP.
6.4 INSPECTIONS. Upon reasonable request and subject to
compliance with applicable safety standards, with contractual privilege and
non-disclosure agreements, and with the same conditions applicable to any
Company in respect of property of that Company on the premises of other
Persons, each Company shall allow Agent or any Lender (or their respective
Representatives) to inspect any of its properties, to review reports, files,
and other records and to make and take away copies thereof, to conduct
reasonable tests or investigations, and to discuss any of its affairs,
conditions, and finances with its other creditors, directors, officers,
employees, or representatives from time to time, during reasonable business
hours.
6.5 TAXES. Each Company shall promptly pay when due any and all
Taxes except Taxes that are being contested in good faith by lawful proceedings
diligently conducted, against which reserve or other provision required by GAAP
has been made, and in respect of which levy and execution of any Lien
sufficient to be enforced has been and continues to be stayed.
6.6 PAYMENT OF OBLIGATION. Each Company shall promptly pay (or
renew and extend) all of its material obligations as they become due (unless
the obligations are being contested in good faith by, if required, appropriate
proceedings).
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6.7 EXPENSES. Within ten Business Days after demand accompanied
by an invoice describing the costs, fees, and expenses in reasonable detail
(and subject to any limitations separately agreed to in writing by Borrower and
Agent in respect of costs, fees, and expenses of Agent or any of its
Representatives), Borrower shall pay (a) all costs, fees, and reasonable
expenses paid or incurred by Agent incident to any Credit Document (including,
without limitation, the reasonable fees and expenses of Agent's counsel in
connection with the negotiation, preparation, delivery, and execution of the
Credit Documents and any related amendment, waiver, or consent) and (b) all
reasonable costs and expenses incurred by Agent or any Lender in connection
with the enforcement of the obligations of any Company under the Credit
Documents or the exercise of any Rights under the Credit Documents (including,
without limitation, reasonable allocated costs of in-house counsel, other
reasonable attorneys' fees, and court costs), all of which are part of the
Obligation, bearing interest, (if not paid within ten Business Days after
demand accompanied by an invoice describing the costs, fees, and expenses in
reasonable detail) on the portion thereof from time to time unpaid at the
Default Rate until paid.
6.8 MAINTENANCE OF EXISTENCE, ASSETS, AND BUSINESS. Each Company
shall (a) except in connection with dispositions permitted under SECTION 7.10
and mergers, consolidations, and dissolutions permitted under SECTION 7.11,
maintain its existence and good standing in its state of formation, and (b)
except where not a Material-Adverse Event (i) maintain its authority to
transact business and good standing in all other states, (ii) maintain all
licenses, permits, and franchises (including, without limitation, Environmental
Permits) necessary for its business, and (iii) keep all of its material assets
that are useful in and necessary to its business in good working order and
condition (ordinary wear and tear excepted) and make all necessary repairs and
replacements.
6.9 INSURANCE. Each Company shall, at its cost and expense,
maintain with financially sound, responsible, and reputable insurance companies
or associations (or, as to workers' compensation or similar insurance, with an
insurance fund or by self-insurance authorized by the jurisdictions in which it
operates) insurance concerning its properties (including, in the case of
Borrower, the Fractionators) and businesses against casualties and
contingencies and of types and in amounts (and with co-insurance and
deductibles) as is customary in the case of similar businesses.
6.10 ENVIRONMENTAL MATTERS. Each Company shall (a) operate and
manage its businesses and otherwise conduct its affairs in compliance with all
Environmental Laws and Environmental Permits except to the extent noncompliance
does not constitute a Material-Adverse Event, (b) promptly deliver to Agent a
copy of any notice received from any Governmental Authority alleging that any
Company is not in compliance with any Environmental Law or Environmental Permit
if the allegation constitutes a Material-Adverse Event, and (c) promptly
deliver to Agent a copy of any notice received from any Governmental Authority
alleging that any Company has any potential Environmental Liability if the
allegation constitutes a Material-Adverse Event.
6.11 INDEMNIFICATION.
(a) AS USED IN THIS SECTION: (I)"INDEMNITEE" MEANS AGENT,
EACH LENDER, EACH PRESENT AND FUTURE AFFILIATE (WITH WHOM BORROWER OR
GUARANTOR HAS ENTERED INTO A WRITTEN CONTRACTUAL ARRANGEMENT) OF AGENT
OR ANY LENDER, EACH PRESENT AND FUTURE REPRESENTATIVE OF AGENT, ANY
LENDER, OR ANY OF THOSE AFFILIATES, AND EACH PRESENT AND FUTURE
SUCCESSOR AND PERMITTED ASSIGN OF AGENT, ANY LENDER, OR ANY OF THOSE
AFFILIATES OR REPRESENTATIVES; AND (II) "INDEMNIFIED LIABILITIES"
MEANS ALL PRESENT AND FUTURE, KNOWN AND UNKNOWN, FIXED AND CONTINGENT,
ADMINISTRATIVE, INVESTIGATIVE, JUDICIAL, AND OTHER CLAIMS, DEMANDS,
ACTIONS, CAUSES OF ACTION, INVESTIGATIONS, SUITS, PROCEEDINGS, AMOUNTS
PAID IN SETTLEMENT, DAMAGES, JUDGMENTS, PENALTIES, COURT COSTS,
LIABILITIES, AND OBLIGATIONS -- AND ALL PRESENT AND FUTURE COSTS AND
REASONABLE EXPENSES, AND DISBURSEMENTS (INCLUDING, WITHOUT LIMITATION,
ALL REASONABLE ATTORNEYS' FEES AND EXPENSES WHETHER OR NOT SUIT OR
OTHER PROCEEDING EXISTS OR ANY INDEMNITEE IS PARTY TO ANY SUIT OR
OTHER PROCEEDING) IN ANY WAY RELATED TO ANY OF THE FOREGOING -- THAT
MAY AT ANY TIME BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST ANY
INDEMNITEE AND IN ANY WAY ARISING
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<PAGE> 20
OUT OF ANY (A) CREDIT DOCUMENT, TRANSACTION CONTEMPLATED BY ANY CREDIT
DOCUMENT, OR REAL PROPERTY, (B) ENVIRONMENTAL LIABILITY IN ANY WAY
RELATED TO ANY COMPANY, PREDECESSOR, REAL PROPERTY, OR ACT, OMISSION,
STATUS, OWNERSHIP, OR OTHER RELATIONSHIP, CONDITION, OR CIRCUMSTANCE
CONTEMPLATED BY, CREATED UNDER, OR ARISING PURSUANT TO OR IN
CONNECTION WITH ANY CREDIT DOCUMENT, OR (C) INDEMNITEE'S SOLE OR
CONCURRENT ORDINARY NEGLIGENCE.
(b) BORROWER SHALL INDEMNIFY EACH INDEMNITEE FROM AND
AGAINST, PROTECT AND DEFEND EACH INDEMNITEE FROM AND AGAINST, HOLD
EACH INDEMNITEE HARMLESS FROM AND AGAINST, AND ON DEMAND PAY OR
REIMBURSE EACH INDEMNITEE FOR, ALL INDEMNIFIED LIABILITIES.
(c) THE FOREGOING PROVISIONS (I) ARE NOT LIMITED IN
AMOUNT EVEN IF THAT AMOUNT EXCEEDS THE OBLIGATION,(II) INCLUDE,
WITHOUT LIMITATION, REASONABLE FEES AND EXPENSES OF ATTORNEYS AND
OTHER COSTS AND EXPENSES OF LITIGATION OR PREPARING FOR LITIGATION AND
DAMAGES OR INJURY TO PERSONS, PROPERTY, OR NATURAL RESOURCES ARISING
UNDER ANY STATUTORY OR COMMON LEGAL REQUIREMENT, PUNITIVE DAMAGES,
FINES, AND OTHER PENALTIES, AND (III) ARE NOT AFFECTED BY THE SOURCE
OR ORIGIN OF ANY HAZARDOUS SUBSTANCE, AND (IV) ARE NOT AFFECTED BY ANY
INDEMNITEE'S INVESTIGATION, ACTUAL OR CONSTRUCTIVE KNOWLEDGE, COURSE
OF DEALING, OR WAIVER.
(d) HOWEVER, NO INDEMNITEE IS ENTITLED TO BE INDEMNIFIED
UNDER THE CREDIT DOCUMENTS FOR ITS OWN GROSS NEGLIGENCE OR WILFUL
MISCONDUCT.
(e) THE PROVISIONS OF AND INDEMNIFICATION AND OTHER
UNDERTAKINGS UNDER THIS SECTION SURVIVE THE SALE OR OTHER TRANSFER OF
ANY REAL PROPERTY TO ANY PERSON, THE SATISFACTION OF THE OBLIGATION,
AND THE TERMINATION OF THE CREDIT DOCUMENTS FOR ONE YEAR.
SECTION 7 NEGATIVE COVENANTS. As long as any Lender is committed to
lend under this agreement and until the Obligation has been fully paid and
performed, Borrower covenants and agrees with Agent and Lenders that, without
first obtaining Required Lenders' consent to the contrary the Companies
designated in the following sections of this SECTION 7 may not directly or
indirectly do any of the following or commit (other than a commitment that is
not binding on any Company until any prior written consent of Required Lenders
is first obtained) to do any of the following:
7.1 DEBT. No Company may have any Debt except the following (the
"PERMITTED DEBT"):
(a) OBLIGATION. The Obligation and Guaranty under this
agreement.
(b) EXISTING DEBT. The Debt described on SCHEDULE 5.12
(other than any such Debt that is described on that schedule as to be
paid with the proceeds of the Term Loan), together with all renewals,
extensions, amendments, modifications, and refinancings of (but not
any principal increases to) any of that Debt.
(c) INTERCOMPANY. Debt of Borrower to Guarantor or of
Guarantor to Borrower.
(d) OTHER DEBT OF GUARANTOR. Other Debt of Guarantor
that shall not exceed $10,000,000 total- principal amount outstanding,
together with renewals, extensions, amendments, modifications, and
refinancings of that Debt subject to the foregoing limitations of this
CLAUSE (D).
(e) HEDGING AGREEMENTS. Solely in respect of Guarantor,
Hedging Agreements.
7.2 SENIOR NOTES. No Company may amend or modify the terms of the
Senior Notes or the related Indenture except as permitted by the express terms
thereof without the consent of the holders thereof.
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7.3 PREPAYMENTS. No Company may prepay or redeem or cause to be
prepaid or redeemed any principal of, or any interest on, any of its Debt
except (a) the Obligation and (b) any of its other Debt if (i) no Event of
Default or Potential Default exists immediately before, or will occur as a
result of (or otherwise will exist immediately after), the prepayment or
redemption, and (ii) in respect of any prepayment or redemption of the Senior
Notes, Borrower concurrently prepays to Lenders an amount of Principal Debt
that is in the same proportion to the amount of Principal Debt concurrent with
or before that prepayment as the amount of principal of the Senior Notes then
being prepaid or redeemed bears to the total principal amount of the Senior
Notes immediately before that prepayment or redemption.
7.4 LIENS. No Company may (a) create, incur, or suffer or permit
to be created or incurred or to exist any Lien upon any of its assets except
Permitted Liens or (b) enter into or permit to exist any arrangement or
agreement that directly or indirectly prohibits any Company from creating or
incurring any Lien on any of its assets except (i) the Credit Documents, (ii)
any lease that places a Lien prohibition on only the property subject to that
lease, and (iii) arrangements and agreements that apply only to property
subject to Permitted Liens. The following are "PERMITTED LIENS":
(a) EXISTING LIENS. The existing Liens that are
described on SCHEDULE 5.13 (to the extent that such schedule does not
indicate they are to be extinguished as a condition precedent to, or
concurrent with, the disbursement of the Term Loan under this
agreement) and all renewals, extensions, amendments, and modifications
of any of them to the extent that the total-principal amount each
individually secures never exceeds the total-principal amount secured
by it on the date of this agreement.
(b) THIS TRANSACTION. Liens, if any, ever granted to
Agent in favor of Lenders to secure all of any part of the Obligation.
(c) SETOFFS. Subject to any limitations imposed upon
them in the Credit Documents, rights of set off or recoupment and
banker's Liens.
(d) INSURANCE. Pledges or deposits made to secure
payment of workers' compensation, unemployment insurance, or other
forms of governmental insurance or benefits or to participate in any
fund in connection with workers' compensation, unemployment insurance,
pensions, or other social security programs.
(e) BIDS AND BONDS. Good-faith pledges or deposits (i)
for 10% or less of the amounts due under (and made to secure) any
Company's performance of bids, tenders, contracts (except for the
repayment of borrowed money), (ii) in respect of any operating lease,
that are for up to but not more than the greater of either 10% of the
total rental obligations for the term of the lease or 50% of the total
rental obligations payable during the first year of the lease, or
(iii) made to secure statutory obligations, surety or appeal bonds, or
indemnity, performance, or other similar bonds benefitting any Company
in the ordinary course of its business.
(f) PROPERTY RESTRICTIONS. Zoning and similar
restrictions on the use of, and easements, restrictions, covenants,
title defects, and similar encumbrances on, Real Property that do not
materially impair the use of the Real Property and that are not
violated by existing or proposed structures or land use.
(g) INCHOATE LIENS. If no Lien has been filed in any
jurisdiction or agreed to (i) claims and Liens for Taxes not yet due
and payable, (ii) mechanic's Liens and materialman's Liens for
services or materials and similar Liens incident to construction and
maintenance of real property, in each case for which payment is not
yet due and payable, (iii) landlord's Liens for rental not yet due and
payable, and (iv) Liens of warehousemen and carriers and similar Liens
securing obligations that are not yet due and payable.
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CREDIT AGREEMENT
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(h) MISCELLANEOUS. Any of the following to the extent
that the validity or amount is being contested in good faith and by
appropriate and lawful proceedings diligently conducted, reserve or
other appropriate provision (if any) required by GAAP has been made,
levy and execution has not issued or continues to be stayed, and they
do not individually or collectively detract materially from the value
of the property of the Person in question or materially impair the use
of that property in the operation of its business: (i) Claims and
Liens for Taxes; (ii) claims and Liens upon, and defects of title to,
real or personal property, including any attachment of personal or
real property or other legal process before adjudication of a dispute
on the merits; (iii) claims and Liens of mechanics, materialmen,
warehousemen, carriers, landlords, or other like Liens; (iv) Liens
incident to construction and maintenance of real property; and (v)
adverse judgments, attachments, or orders on appeal for the payment of
money.
7.5 EMPLOYEE PLANS. Except as disclosed on SCHEDULE 5.11 or where
not a Material-Adverse Event, no Company may permit any of the events or
circumstances described in SECTION 5.11 to exist or occur.
7.6 TRANSACTIONS WITH AFFILIATES. No Company may enter into any
material transaction with any of its Affiliates except (a) those described on
SCHEDULE 5.15, (b) transactions between Borrower and Guarantor, (c)
transactions permitted under SECTIONS 7.1 or 7.8, (d) transactions in the
ordinary course of business and upon fair and reasonable terms not materially
less favorable than it could obtain or could become entitled to in an
arm's-length transaction with a Person that was not its Affiliate, and (e)
compensation arrangements in the ordinary course of business with directors and
officers of the Companies.
7.7 COMPLIANCE WITH LEGAL REQUIREMENTS AND DOCUMENTS. No Company
may (a) violate the provisions of any Legal Requirements (including, without
limitation, OSHA and Environmental Laws) applicable to it or of any material
agreement to which it is a party if that violation alone, or when aggregated
with all other violations, would be a Material-Adverse Event, (b) violate in
any material respect any provision of its Constituent Documents, or (c) repeal,
replace, or amend any provision of its Constituent Documents if that action
would be a Material-Adverse Event.
7.8 INVESTMENTS. No Company may make any Investments except the
following (the "PERMITTED INVESTMENTS"):
(a) INVESTMENT POLICY. Investments specifically
permitted by General Partner's short-term cash and long-term
investment policies, true and correct copies of which have been
provided to Agent as they are from time to time in effect.
(b) INTERCOMPANY. Investments by Borrower in Guarantor
or by Guarantor in Borrower.
For purposes of this SECTION 7, the total amount outstanding of any Investment
by any Person in any other Person is to be determined net of repayments and
dividends to, and sales of securities of the second Person by, the first
Person.
7.9 DISTRIBUTIONS. No Company may declare, make, or pay any
Distribution except (i) Distributions by any Subsidiary of Borrower to Borrower
or by any Subsidiary of Guarantor to Guarantor, and (ii) other Distributions by
Guarantor pursuant to the provisions of its limited partnership agreement as
they are in effect on the date of this agreement.
7.10 DISPOSITION OF ASSETS. No Company may sell, assign, lease,
transfer, or otherwise dispose of any of its assets (including equity interests
in any other Company) except:
(a) BORROWER. Any such disposition by Borrower of either
Fractionator so long as Borrower makes the mandatory prepayment of the
Obligation required by SECTION 3.2.
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CREDIT AGREEMENT
<PAGE> 23
(b) GUARANTOR. Any such disposition by Guarantor (i) in
the ordinary course of business for a fair and adequate consideration,
(ii) of assets that are either obsolete or no longer in use and that
are not significant to the continuation of Guarantor's business or
unnecessary to its business operations, (iii) to Borrower, and (iv) of
other assets, the net proceeds of which shall not exceed $25,000,000
in the aggregate.
7.11 MERGERS, CONSOLIDATIONS, AND DISSOLUTIONS. No Company may
merge or consolidate with any other Person or dissolve except (a) if no Event
of Default or Potential Default exists or will exist as a result of it, any
merger or consolidation, between Companies (so long as, if Guarantor is
involved, it is the survivor, and if Borrower is involved other than with
Guarantor, it is the survivor), and (b) dissolution of any Company (other than
Borrower or Guarantor) if substantially all of its assets have been conveyed to
any other Company or disposed of as permitted in SECTION 7.10.
7.12 ASSIGNMENT. No Company may assign or transfer any of its
Rights, duties, or obligations under any of the Credit Documents.
7.13 FISCAL YEAR AND ACCOUNTING METHODS. No Company may change its
fiscal year for accounting purposes or any material aspect of its method of
accounting except to conform any new Subsidiary's accounting methods to
Parent's accounting methods.
7.14 NEW BUSINESSES. No Company may engage in any business except
the businesses in which it is presently engaged and any other reasonably
related business.
7.15 GOVERNMENT REGULATIONS. No Company may conduct its business
in a way that it becomes regulated under the Investment Company Act of 1940 or
the Public Utility Holding Company Act of 1935.
7.16 STRICT COMPLIANCE. No Company may indirectly do anything that
it may not directly do under any covenant in any Credit Document.
SECTION 8 FINANCIAL COVENANTS. As long as any Lender is committed to
lend under this agreement and until the Obligation has been fully paid and
performed, Borrower covenants and agrees with Agent and Lenders that, without
first obtaining Required Lenders' consent to the contrary, the following may
not occur or exist as applicable to Parent and its Subsidiaries and as
determined as of the last day of each fiscal quarter of Parent:
8.1 LEVERAGE RATIO. The ratio of Debt to the sum of Tangible Net
Worth plus Debt may never exceed the following, as applicable:
<TABLE>
<CAPTION>
Quarter(s) Ending Ratio
<S> <C>
06/30/98 through 03/31/99 0.68 to 1.00
06/30/99 and thereafter 0.65 to 1.00
</TABLE>
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CREDIT AGREEMENT
<PAGE> 24
8.2 DEBT/EBITDA. The ratio of Debt to EBITDA (for the four-
quarterly period ending on that last day) may never exceed the following,
as applicable:
<TABLE>
<CAPTION>
Quarter(s) Ending Ratio
<S> <C>
06/30/98 through 03/31/99 4.25 to 1.00
06/30/99 and thereafter 4.00 to 1.00
</TABLE>
SECTION 9 EVENTS OF DEFAULT. The term "EVENT OF DEFAULT" means the
occurrence of any one or more of the following:
9.1 PAYMENT OF OBLIGATION. Borrower's failure or refusal to pay
(a) principal of any Note on or before the date due or (b) any other part of
the Obligation on or before three Business Days after the date due.
9.2 COVENANTS. Any Company's failure or refusal to punctually and
properly perform, observe, and comply with any covenant (other than covenants
to pay the Obligation) applicable to it:
(a) In SECTIONS 7 or 8; or
(b) In SECTION 6.1, and that failure or refusal continues
for ten days after the earlier of either any Company knows of it or
any Company is notified of it by Agent or any Lender; or
(c) In any other provision of any Credit Document, and
that failure or refusal continues for 30 days after the earlier of
either any Company knows of it or any Company is notified of it by
Agent or any Lender; or
9.3 DEBTOR RELIEF. Any Borrower, Guarantor, or Parent (a) is not
Solvent, (b) fails to pay its Debts generally as they become due, (c)
voluntarily seeks, consents to, or acquiesces in the benefit of any Debtor
Relief Legal Requirement, or (d) becomes a party to or is made the subject of
any proceeding (except as a creditor or claimant) provided for by any Debtor
Law (unless, if the proceeding is involuntary, the applicable petition is
dismissed within 60 days after its filing).
9.4 JUDGMENTS AND ATTACHMENTS. Where the amounts in controversy
or of any judgments, as the case may be, exceed -- from and after the Closing
Date and individually or collectively for all of the Companies -- $1,000,000
for Borrower or $25,000,000 for Guarantor, either such Company fails (a) to
have discharged, within 60 days after its commencement, any attachment,
sequestration, or similar proceeding against any of its assets or (b) to pay
any money judgment against it within ten days before the date on which any of
its assets may be lawfully sold to satisfy that judgment.
9.5 GOVERNMENT ACTION. Where it is a Material-Adverse Event (a) a
final non-appealable order is issued by any Governmental Authority (including,
but not limited to, the United States Justice Department) seeking to cause any
Company to divest a significant portion of its assets under any antitrust,
restraint of trade, unfair competition, industry regulation, or similar Legal
Requirements, or (b) any Governmental Authority condemns, seizes, or otherwise
appropriates, or takes custody or control of all or any substantial portion of
any Company's assets.
9.6 MISREPRESENTATION. Any representation or warranty made by any
Company in any Credit Document at any time proves to have been materially
incorrect when made.
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CREDIT AGREEMENT
<PAGE> 25
9.7 CHANGE OF CONTROL. Any one or more of the following occurs or
exists: (a) Guarantor ceases to be the managing member of Borrower; (b) Parent
ceases to own at least 98.9899% of the limited partner interests in Guarantor;
or (c) Texas Eastern Products Pipeline Company or any other Subsidiary of Duke
Energy Corporation ceases to be the sole general partner of either Parent or
Guarantor or both.
9.8 OTHER DEBT. In respect of any Senior Notes or in respect of
any other Debt owed by any Company (other than the Obligation) individually or
collectively of at least $10,000,000 (a) any Company fails to make any payment
when due (inclusive of any grace, extension, forbearance, or similar period),
or (b) any default or other event or condition occurs or exists beyond the
applicable grace or cure period, the effect of which is to cause or to permit
any holder of that Debt to cause (whether or not it elects to cause) any of
that Debt to become due before its stated maturity or regularly scheduled
payment dates, or (c) any of that Debt is declared to be due and payable or
required to be prepaid by any Company before its stated maturity.
9.9 VALIDITY AND ENFORCEABILITY. Once executed, this agreement,
any Note or the Guaranty ceases to be in full force and effect in any material
respect or is declared to be null and void or its validity or enforceability is
contested in writing by any Company party to it or any Company party to it
denies in writing that it has any further liability or obligations under it
except in accordance with that document's express provisions or as the
appropriate parties under SECTION 12.8 below may otherwise agree in writing.
SECTION 10 RIGHTS AND REMEDIES.
10.1 REMEDIES UPON EVENT OF DEFAULT.
(a) DEBTOR RELIEF. If an Event of Default exists under
SECTION 9.3, the commitment to extend credit under this agreement
automatically terminates, the entire unpaid balance of the Principal
Debt and an accrued and unpaid portion of the remaining Obligation
automatically becomes due and payable without any action of any kind
whatsoever.
(b) OTHER EVENTS OF DEFAULT. If any Event of Default exists,
subject to the terms of SECTION 11.5(B), Agent may (with the consent
of, and must, upon the request of, Required Lenders), upon notice to
Borrower, do any one or more of the following: (i) If the maturity of
the Obligation has not already been accelerated under SECTION 10.1(A),
declare the entire unpaid balance of all or any part of the Principal
Debt and an accrued and unpaid portion of the remaining Obligation
immediately due and payable, whereupon it is due and payable; (ii)
terminate the commitments of Lenders to extend credit under this
agreement; (iii) reduce any claim to judgment; and (iv) exercise any
and all other legal or equitable Rights afforded by the Credit
Documents, by applicable Legal Requirements, or in equity.
(c) OFFSET. If an Event of Default exists, to the extent
lawful, upon notice to Borrower, each Lender may exercise the Rights
of offset and banker's lien against each and every account and other
property, or any interest therein, which Borrower may now or hereafter
have with, or which is now or hereafter in the possession of, that
Lender to the extent of the full amount of the Obligation then matured
and owed to that Lender.
10.2 COMPANY WAIVERS. To the extent lawful, Borrower waives all
other presentment and demand for payment, protest, notice of intention to
accelerate, notice of acceleration, and notice of protest and nonpayment, and
agrees that its liability with respect to all or any part of the Obligation is
not affected by any renewal or extension in the time of payment of all or any
part of the Obligation, by any indulgence, or by any release or change in any
security for the payment of all or any part of the Obligation.
10.3 NOT IN CONTROL. Nothing in any Credit Documents gives or may
be deemed to give to Agent or any Lender the Right to exercise control over any
Company's Real Property, other assets, affairs, or management or to preclude or
interfere with any Company's compliance with any Legal Requirement or require
any act or omission by any Company that may be harmful to Persons or property.
Any "Material-
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CREDIT AGREEMENT
<PAGE> 26
Adverse Event" or other materiality or substantiality qualifier of any
representation, warranty, covenant, agreement, or other provision of any Credit
Document is included for credit documentation purposes only and does not imply
or be deemed to mean that Agent or any Lender acquiesces in any non-compliance
by any Company with any Legal Requirement, document, or otherwise or does not
expect the Companies to promptly, diligently, and continuously carry out all
appropriate removal, remediation, compliance, closure, or other activities
required or appropriate in accordance with all Environmental Laws. Agent's and
Lenders' power is limited to the Rights provided in the Credit Documents. All
of those Rights exist solely (and may be exercised in manner calculated by
Agent or Lenders in their respective good faith business judgment) to assure
payment and performance of the Obligation.
10.4 COURSE OF DEALING. The acceptance by Agent or Lenders of any
partial payment on the Obligation is not a waiver of any Event of Default then
existing. No waiver by Agent, Required Lenders, or Lenders of any Event of
Default is a waiver of any other then-existing or subsequent Event of Default.
No delay or omission by Agent, Required Lenders, or Lenders in exercising any
Right under the Credit Documents impairs that Right or is a waiver thereof or
any acquiescence therein, nor will any single or partial exercise of any Right
preclude other or further exercise thereof or the exercise of any other Right
under the Credit Documents or otherwise.
10.5 CUMULATIVE RIGHTS. All Rights available to Agent, Required
Lenders, and Lenders under the Credit Documents are cumulative of and in
addition to all other Rights granted to Agent, Required Lenders, and Lenders at
law or in equity, whether or not the Obligation are due and payable and whether
or not Agent, Required Lenders, or Lenders have instituted any suit for
collection, foreclosure, or other action in connection with the Credit
Documents.
10.6 APPLICATION OF PROCEEDS. Any and all proceeds ever received
by Agent or Lenders from the exercise of any Rights pertaining to the
Obligation shall be applied to the Obligation according to SECTION 3.
10.7 EXPENDITURES BY LENDERS. Any costs and reasonable expenses
spent or incurred by Agent or any Lender in the exercise of any Right under any
Credit Document is payable by Borrower to Agent within ten Business Days after
it has given demand and copies of supporting invoices or statements (if any),
becomes part of the Obligation, and bears interest at the Default Rate from the
date spent until the date repaid.
10.8 LIMITATION OF LIABILITY. No Agent or Lender shall be liable
to any Company for any amounts representing indirect, special, or consequential
damages suffered by any Company, except where such amounts are based
substantially on willful misconduct by that Agent or that Lender, but then only
to the extent any damages resulting from such wilful misconduct are covered by
that Agent's and that Lenders' fidelity bond or other insurance.
SECTION 11 AGENT AND LENDERS.
11.1 AGENT.
(a) APPOINTMENT. Each Lender appoints Agent (including,
without limitation, each successor Agent in accordance with this
SECTION 11) as its nominee and agent to act in its name and on its
behalf (and Agent and each such successor accepts that appointment):
(i) To act as its nominee and on its behalf in and under all Credit
Documents; (ii) to arrange the means whereby its funds are to be made
available to Borrower under the Credit Documents; (iii) to take any
action that it properly requests under the Credit Documents (subject
to the concurrence of other Lenders as may be required under the
Credit Documents); (iv) to receive all documents and items to be
furnished to it under the Credit Documents; (v) to be the secured
party, mortgagee, beneficiary, recipient, and similar party in respect
of collateral, if any, for the benefit of Lenders; (vi) to promptly
distribute to it all material information, requests, documents, and
items received from Borrower under the Credit Documents; (vii) to
promptly distribute to it its ratable part of each payment or
prepayment (whether
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CREDIT AGREEMENT
<PAGE> 27
voluntary, as proceeds of collateral upon or after foreclosure, as
proceeds of insurance thereon, or otherwise) in accordance with the
terms of the Credit Documents; and (viii) to deliver to the
appropriate Persons requests, demands, approvals, and consents
received from it. However, Agent may not be required to take any
action that exposes it to personal liability or that is contrary to
any Credit Document or applicable Legal Requirement.
(b) SUCCESSOR. Agent may, subject to Borrower's prior
written consent that may not be unreasonably withheld, assign all of
its Rights and obligations as Agent under the Credit Documents to any
of its Affiliates, which Affiliate shall then be the successor Agent
under the Credit Documents. Agent may also, upon 30 days prior notice
to Borrower, voluntarily resign. If the initial or any successor
Agent ever ceases to be a party to this agreement or if the initial or
any successor Agent ever resigns then Required Lenders shall (which,
if no Event of Default or Potential Default exists, is subject to
Borrower's approval that may not be unreasonably withheld) appoint the
successor Agent from among Lenders (other than the resigning Agent).
If Required Lenders fail to appoint a successor Agent within 30 days
after the resigning Agent has given notice of resignation, then the
resigning Agent may, on behalf of Lenders, upon 30 days prior notice
to Borrower, appoint a successor Agent, which must be a commercial
bank having a combined capital and surplus of at least $1,000,000,000
(as shown on its most recently published statement of condition).
Upon its acceptance of appointment as successor Agent, the successor
Agent succeeds to and becomes vested with all of the Rights of the
prior Agent, and the prior Agent is discharged from its duties and
obligations of Agent under the Credit Documents, and each Lender shall
execute the documents that any Lender, the resigning Agent, or the
successor Agent reasonably request to reflect the change. After any
Agent's resignation as Agent under the Credit Documents, the
provisions of this section inure to its benefit as to any actions
taken or not taken by it while it was Agent under the Credit
Documents.
(c) RIGHTS AS LENDER. Agent, in its capacity as a
Lender, has the same Rights under the Credit Documents as any other
Lender and may exercise those Rights as if it were not acting as
Agent. The term "Lender", unless the context otherwise indicates,
includes Agent. Agent's resignation or removal does not impair or
otherwise affect any Rights that it has or may have in its capacity as
an individual Lender. Each Lender and Borrower agree that Agent is
not a fiduciary for Lenders or for Borrower but is simply acting in
the capacity described in this agreement to alleviate administrative
burdens for Borrower and Lenders, that Agent has no duties or
responsibilities to Lenders or Borrower except those expressly set
forth in the Credit Documents, and that Agent in its capacity as a
Lender has the same Rights as any other Lender.
(d) OTHER ACTIVITIES. Agent or any Lender may now or in
the future be engaged in one or more loan, letter of credit, leasing,
or other financing transactions with Borrower, act as trustee or
depositary for Borrower, or otherwise be engaged in other transactions
with Borrower (collectively, the "OTHER ACTIVITIES") not the subject
of the Credit Documents. Without limiting the Rights of Lenders
specifically set forth in the Credit Documents, neither Agent nor any
Lender is responsible to account to the other Lenders for those other
activities, and no Lender shall have any interest in any other
Lender's activities, any present or future guaranties by or for the
account of Borrower that are not contemplated by or included in the
Credit Documents, any present or future offset exercised by Agent or
any Lender in respect of those other activities, any present or future
property taken as security for any of those other activities, or any
property now or hereafter in Agent's or any other Lender's possession
or control that may be or become security for the obligations of
Borrower arising under the Credit Documents by reason of the general
description of indebtedness secured or of property contained in any
other agreements, documents, or instruments related to any of those
other activities (but, if any payments in respect of those guaranties
or that property or the proceeds thereof is applied by Agent or any
Lender to reduce the Obligation, then each Lender is entitled to share
ratably in the application as provided in the Credit Documents).
11.2 EXPENSES. Each Lender shall pay its Commitment Percentage of
any reasonable expenses (including court costs, reasonable attorneys' fees and
other costs of collection) incurred by Agent or in
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CREDIT AGREEMENT
<PAGE> 28
connection with any of the Credit Documents if Agent is not reimbursed from
other sources within 30 days after incurrence. Each Lender is entitled to
receive its Commitment Percentage of any reimbursement that it makes to Agent
if Agent is subsequently reimbursed from other sources.
11.3 PROPORTIONATE ABSORPTION OF LOSSES. Except as otherwise
provided in the Credit Documents, nothing in the Credit Documents gives any
Lender any advantage over any other Lender insofar as the Obligation is
concerned or relieves any Lender from ratably absorbing any losses sustained
with respect to the Obligation (except to the extent unilateral actions or
inactions by any Lender result in Borrower or any other obligor on the
Obligation having any credit, allowance, setoff, defense, or counterclaim
solely with respect to all or any part of that Lender's part of the
Obligation).
11.4 DELEGATION OF DUTIES; RELIANCE. Lenders may perform any of
their duties or exercise any of their Rights under the Credit Documents by or
through Agent, and Lenders and Agent may perform any of their duties or
exercise any of their Rights under the Credit Documents by or through their
respective Representatives. Agent, Lenders, and their respective
Representatives (a) are entitled to rely upon (and shall be protected in
relying upon) any written or oral statement believed by it or them to be
genuine and correct and to have been signed or made by the proper Person and,
with respect to legal matters, upon opinion of counsel selected by Agent or
that Lender (but nothing in this CLAUSE (A) permits Agent to rely on (i) oral
statements if a writing is required by this agreement or (ii) any other writing
if a specific writing is required by this agreement), (b) are entitled to deem
and treat each Lender as the owner and holder of its portion of the Obligation
for all purposes until, written notice of the assignment or transfer is given
to and received by Agent (and any request, authorization, consent, or approval
of any Lender is conclusive and binding on each subsequent holder, assignee, or
transferee of or Participant in that Lender's portion of the Obligation until
that notice is given and received), (c) are not deemed to have notice of the
occurrence of an Event of Default unless a responsible officer of Agent, who
handles matters associated with the Credit Documents and transactions
thereunder, has actual knowledge or Agent has been notified by a Lender or
Borrower, and (d) are entitled to consult with legal counsel (including counsel
for Borrower), independent accountants, and other experts selected by Agent and
are not liable for any action taken or not taken in good faith by it in
accordance with the advice of counsel, accountants, or experts.
11.5 LIMITATION OF AGENT'S LIABILITY.
(a) EXCULPATION. Neither Agent nor any of its Affiliates or
Representatives will be liable to any Lender for any action taken or
omitted to be taken by it or them under the Credit Documents in good
faith and believed by it or them to be within the discretion or power
conferred upon it or them by the Credit Documents or be responsible
for the consequences of any error of judgment (except for gross
negligence or willful misconduct), and neither Agent nor any of its
Affiliates or Representatives has a fiduciary relationship with any
Lender by virtue of the Credit Documents (but nothing in this
agreement negates the obligation of Agent to account for funds
received by it for the account of any Lender).
(b) INDEMNITY. Unless indemnified to its satisfaction
against loss, cost, liability, and expense, Agent may not be compelled
to do any act under the Credit Documents or to take any action toward
the execution or enforcement of the powers thereby created or to
prosecute or defend any suit in respect of the Credit Documents. If
Agent requests instructions from Lenders, or Required Lenders, as the
case may be, with respect to any act or action in connection with any
Credit Document, Agent is entitled to refrain (without incurring any
liability to any Person by so refraining) from that act or action
unless and until it has received instructions. In no event, however,
may Agent or any of its Representatives be required to take any action
that it or they determine could incur for it or them criminal or
onerous civil liability. Without limiting the generality of the
foregoing, no Lender has any right of action against Agent as a result
of Agent's acting or refraining from acting under this agreement in
accordance with instructions of Required Lenders.
24
CREDIT AGREEMENT
<PAGE> 29
(c) RELIANCE. Agent is not responsible to any Lender or any
Participant for, and each Lender represents and warrants that it has
not relied upon Agent in respect of, (i) the creditworthiness of
Parent or any Company and the risks involved to that Lender, (ii) the
effectiveness, enforceability, genuineness, validity, or the due
execution of any Credit Document, (iii) any representation, warranty,
document, certificate, report, or statement made therein or furnished
thereunder or in connection therewith, (iv) the adequacy of any
collateral now or hereafter securing the Obligation or the existence,
priority, or perfection of any Lien now or hereafter granted or
purported to be granted on the collateral under any Credit Document,
or (v) observation of or compliance with any of the terms, covenants,
or conditions of any Credit Document on the part of Parent or any
Company. EACH LENDER AGREES TO INDEMNIFY AGENT AND ITS
REPRESENTATIVES AND HOLD THEM HARMLESS FROM AND AGAINST (BUT LIMITED
TO SUCH LENDER'S COMMITMENT PERCENTAGE OF) ANY AND ALL LIABILITIES,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS,
COSTS, REASONABLE EXPENSES, AND REASONABLE DISBURSEMENTS OF ANY KIND
OR NATURE WHATSOEVER THAT MAY BE IMPOSED ON, ASSERTED AGAINST, OR
INCURRED BY THEM IN ANY WAY RELATING TO OR ARISING OUT OF THE CREDIT
DOCUMENTS OR ANY ACTION TAKEN OR OMITTED BY THEM UNDER THE CREDIT
DOCUMENTS IF AGENT AND ITS REPRESENTATIVES ARE NOT REIMBURSED FOR SUCH
AMOUNTS BY ANY COMPANY. ALTHOUGH AGENT AND ITS REPRESENTATIVES HAVE
THE RIGHT TO BE INDEMNIFIED UNDER THIS AGREEMENT BY LENDERS FOR ITS OR
THEIR OWN ORDINARY NEGLIGENCE, AGENT AND ITS REPRESENTATIVES DO NOT
HAVE THE RIGHT TO BE INDEMNIFIED UNDER THIS AGREEMENT FOR ITS OR THEIR
OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
11.6 EVENT OF DEFAULT. While an Event of Default exists, Lenders
agree to promptly confer in order that Required Lenders or Lenders, as the case
may be, may agree upon a course of action for the enforcement of the Rights of
Lenders. Agent is entitled to act or refrain from taking any action (without
incurring any liability to any Person for so acting or refraining) unless and
until it has received instructions from Required Lenders. In actions with
respect to any Company's property, Agent is acting for the ratable benefit of
each Lender.
11.7 LIMITATION OF LIABILITY. No Lender or any Participant will
incur any liability to any other Lender or Participant except for acts or
omissions in bad faith, and neither Agent nor any Lender or Participant will
incur any liability to any other Person for any act or omission of any other
Lender or any Participant.
11.8 RELATIONSHIP OF LENDERS. The Credit Documents do not create a
partnership or joint venture among Agent and Lenders or among Lenders.
11.9 BENEFITS OF AGREEMENT. None of the provisions of this section
inure to the benefit of any Company or any other Person except Agent and
Lenders. Therefore, no Company or any other Person is responsible or liable
for, entitled to rely upon, or entitled to raise as a defense, in any manner
whatsoever, the failure of Agent or any Lender to comply with these provisions.
SECTION 12 MISCELLANEOUS.
12.1 NONBUSINESS DAYS. Any payment or action that is due under any
Credit Document on a non-Business Day may be delayed until the next-succeeding
Business Day (but interest accrues on any payment until it is made).
12.2 COMMUNICATIONS. Unless otherwise specified, any communication
from one party to another under any Credit Document must be in writing (which
may be by fax) to be effective and is deemed given (a) if by fax, when
transmitted to the appropriate fax number (which, without affecting the date
when deemed given, must be promptly confirmed by telephone), (b) if by mail, on
the third Business Day after it is enclosed in an envelope and properly
addressed, stamped, sealed, and deposited in the appropriate official postal
service, or (c) if by any other means, when actually delivered. Until changed
by notice under this agreement, the
25
CREDIT AGREEMENT
<PAGE> 30
address, fax number, and telephone number for Borrower and Agent are stated
beside their respective signatures to this agreement and for each Lender are
stated beside its name on SCHEDULE 2.
12.3 FORM AND NUMBER. The form, substance, and number of
counterparts of each writing to be furnished under this agreement must be
satisfactory to Agent and Borrower.
12.4 EXCEPTIONS. An exception to any Credit Document covenant or
agreement does not permit violation of any other Credit Document covenant or
agreement.
12.5 SURVIVAL. All Credit Document provisions survive all closings
and are not affected by any investigation by any party.
12.6 GOVERNING LAW. Unless otherwise specified, each Credit
Document must be construed, and its performance enforced, under the Laws of the
State of Texas and the United States of America.
12.7 INVALID PROVISIONS. If any provision of a Credit Document is
judicially determined to be unenforceable, then all other provisions of it
remain enforceable. If the provision determined to be unenforceable is a
material part of that Credit Document, then, to the extent lawful, it shall be
replaced by a judicially-construed provision that is enforceable but otherwise
as similar in substance and content to the original provision as the context of
it reasonably allows.
12.8 AMENDMENTS, SUPPLEMENTS, WAIVERS, CONSENTS, AND CONFLICTS.
(a) ALL LENDERS. Any amendment or supplement to, or
waiver or consent under, any Credit Document that purports to
accomplish any of the following must be by a writing executed by
Borrower and executed (or approved in writing, as the case may be) by
all Lenders: (i) Extends the due date for, decreases the amount or
rate of calculation of, or waives the late or non-payment of, any
scheduled payment or mandatory prepayment of principal or interest of
any of the Obligation or any fees payable ratably to Lenders under the
Credit Documents, except, in each case, any adjustments or reductions
that are contemplated by any Credit Document; (ii) changes the
definition of "COMMITMENT," "COMMITMENT PERCENTAGE," "DEFAULT
PERCENTAGE," or "REQUIRED LENDERS"; (iii) increases any part of any
Lender's Commitment; (iv) fully or partially releases the Guaranty,
except, in each case, as expressly provided by any Credit Document or
as a result of a merger, consolidation, or dissolution expressly
permitted in the Credit Documents; (v) consents to any assignment by
Borrower under SECTION 12.10(A); or (vi) changes this CLAUSE (A) or
any other matter specifically requiring the consent of all Lenders
under any Credit Document.
(b) AGENT. Any amendment or supplement to, or waiver or
consent under, any Credit Document that purports to accomplish any of
the following must be by a writing executed by Borrower and executed
(or approved in writing, as the case may be) by Agent: (i) Extends the
due date for, decreases the amount or rate of calculation of, or
waives the late or non-payment of, any fees payable to Agent under any
Credit Document, except, in each case, any adjustments or reductions
that are contemplated by any Credit Document; (ii) increases Agent's
obligations beyond its agreements under any Credit Document; or (iii)
changes this CLAUSE (B) or any other matter specifically requiring the
consent of Agent under any Credit Document.
(c) REQUIRED LENDERS. Except as specified above (i) the
provisions of this agreement may be amended and supplemented, and
waivers and consents under it may be given, in writing executed by
Borrower and Required Lenders and otherwise supplemented only by
documents delivered in accordance with the express terms of this
agreement, and (ii) each other Credit Document may only be amended and
supplemented, and waivers and consents under it may be given, in a
writing executed by the parties to that Credit Document that is also
executed or approved by Required Lenders and otherwise supplemented
only by documents delivered in accordance with the express terms of
that other Credit Document.
26
CREDIT AGREEMENT
<PAGE> 31
(d) WAIVERS. No course of dealing or any failure or
delay by Agent, any Lender, or any of their respective Representatives
with respect to exercising any Right of Agent or any Lender under any
Credit Document operates as a waiver of that Right. A waiver must be
in writing and signed by the parties otherwise required by this
SECTION 12.8 to be effective and will be effective only in the
specific instance and for the specific purpose for which it is given.
(e) CONFLICTS. Although this agreement and other Credit
Documents may contain additional and different terms and provisions,
any conflict or ambiguity between the express terms and provisions of
this agreement and express terms and provisions in any other Credit
Document is controlled by the express terms and provisions of this
agreement.
12.9 COUNTERPARTS. Any Credit Document may be executed in a number
of identical counterparts (including, at Agent's discretion, counterparts or
signature pages executed and transmitted by fax) with the same effect as if all
signatories had signed the same document. All counterparts must be construed
together to constitute one and the same instrument. Certain parties to this
agreement may execute multiple signature pages to this agreement as well as one
or more complete counterparts of it, and Borrower and Agent are authorized to
execute, where applicable, those separate signature pages and insert them,
along with signature pages of other parties to this agreement, into one or more
complete counterparts of this agreement that contain signatures of all parties
to it.
12.10 PARTIES.
(a) PARTIES AND BENEFICIARIES. Each Credit Document
binds and inures to the parties to it and each of their respective
successors and permitted assigns. Only those Persons may rely upon or
raise any defense about this agreement. No Company may assign or
transfer any Rights or obligations under any Credit Document without
first obtaining all Lenders' consent, and any purported assignment or
transfer without all Lenders' consent is void. No Lender may
transfer, pledge, assign, sell any participation in, or otherwise
encumber its portion of the Obligation except as permitted by CLAUSES
(C) or (D) below, neither of which provisions permit any Lender to
transfer, pledge, assign, sell any participation in, or otherwise
encumber any of its portion of the Obligation for consideration that,
directly or indirectly, reflects a discount from face value (i.e.,
full principal amount involved plus accrued and unpaid interest and
fees related to it) without first having offered that transfer,
pledge, assignment, participation, or encumbrance to all other Lenders
ratably according to their Commitment Percentages or Default
Percentages, as the case may be.
(b) RELATIONSHIP OF PARTIES. The relationship between
each Lender and each applicable Company is that of creditor/secured
party and obligor, respectively. Financial covenant and reporting
provisions in the Credit Documents are intended solely for the benefit
of each Lender to protect its interest as a creditor/secured party.
Nothing in the Credit Documents may be construed as (i) permitting or
obligating any Lender to act as a financial or business advisor or
consultant to any Company, (ii) permitting or obligating any Lender to
control any Company or conduct its operations, (iii) creating any
fiduciary obligation of any Lender to any Company, or (iv) creating
any joint venture, agency, or other relationship between the parties
except as expressly specified in the Credit Documents.
(c) PARTICIPATIONS. Any Lender may (subject to the
provisions of this section, in accordance with applicable Legal
Requirement, in the ordinary course of its business, at any time, and
with notice to Borrower) sell to one or more Persons (each a
"PARTICIPANT") participating interests in its portion of the
Obligation. The selling Lender remains a "Lender" under the Credit
Documents, the Participant does not become a "Lender" under the Credit
Documents, and the selling Lender's obligations under the Credit
Documents remain unchanged. The selling Lender remains solely
responsible for the performance of its obligations and remains the
holder of its share of the Principal Debt for all purposes under the
Credit Documents. Borrower and Agent shall continue to deal solely
27
CREDIT AGREEMENT
<PAGE> 32
and directly with the selling Lender in connection with that Lender's
Rights and obligations under the Credit Documents, and each Lender
must retain the sole right and responsibility to enforce due
obligations of the Companies. Participants have no Rights under the
Credit Documents except as provided in the except clause of the last
sentence of this SECTION 12.10(C). Subject to the following, each
Lender may obtain (on behalf of its Participants) the benefits of
SECTION 3 with respect to all participations in its part of the
Obligation outstanding from time to time so long as Borrower is not
obligated to pay any amount in excess of the amount that would be due
to that Lender under SECTION 3 calculated as though no participations
have been made. No Lender may sell any participating interest under
which the Participant has any Rights to approve any amendment,
modification, or waiver of any Credit Document except as to matters in
SECTION 12.8(A)(I) and (II).
(d) ASSIGNMENTS. Each Lender may make assignments to the
Federal Reserve Bank, provided that any related costs, fees, and
expenses incurred by such Lender in connection with such assignment or
the re- assignment back to it free of any interests of the Federal
Reserve Bank, shall be for the sole account of Lender. Each Lender
may also assign to one or more assignees (each an "ASSIGNEE") all or
any part of its Rights and obligations under the Credit Documents so
long as (i) the assignor Lender and Assignee execute and deliver to
Agent and Borrower for their consent and acceptance (that may not be
unreasonably withheld in any instance and is not required by Borrower
if an Event of Default exists) an assignment and assumption agreement
in substantially the form of EXHIBIT F (an "ASSIGNMENT") and pay to
Agent a processing fee of $2,500 (which payment obligation is the sole
liability, joint and several, of that Lender and Assignee), (ii) the
assignment must be for a minimum total Commitment of $5,000,000, and,
if the assigning Lender retains any Commitment, it must be a minimum
total Commitment of $10,000,000, and (iii) the conditions for that
assignment set forth in the applicable Assignment are satisfied. The
Effective Date in each Assignment must (unless a shorter period is
agreeable to Borrower and Agent) be at least five Business Days after
it is executed and delivered by the assignor Lender and the Assignee
to Agent and Borrower for acceptance. Once that Assignment is
accepted by Agent and Borrower, and subject to all of the following
occurring, then, on and after the Effective Date stated in it (i) the
Assignee automatically becomes a party to this agreement and, to the
extent provided in that Assignment, has the Rights and obligations of
a Lender under the Credit Documents, (ii) in the case of an Assignment
covering all of the remaining portion of the assignor Lender's Rights
and obligations under the Credit Documents, the assignor Lender ceases
to be a party to the Credit Documents, (iii) Borrower shall execute
and deliver to the assignor Lender and the Assignee the appropriate
Notes in accordance with this agreement following the transfer, (iv)
upon delivery of the Notes under CLAUSE (III) preceding, the assignor
Lender shall return to Borrower all Notes previously delivered to that
Lender under this agreement, and (v) SCHEDULE 2 is automatically
deemed to be amended to reflect the name, address, telecopy number,
and Commitment of the Assignee and the remaining Commitment (if any)
of the assignor Lender, and Agent shall prepare and circulate to
Borrower and Lenders an amended SCHEDULE 2 reflecting those changes.
Notwithstanding the foregoing, no Assignee may be recognized as a
party to the Credit Documents (and the assigning Lender shall continue
to be treated for all purposes as the party to the Credit Documents)
with respect to the Rights and obligations assigned to that Assignee
until the actions described in CLAUSES (III) and (IV) have occurred.
The Obligation is registered on the books of Borrower as to both
principal and any stated interest, and transfers of (as opposed to
participations in) principal and interest of the Obligation may only
be made in accordance with this section.
12.11 VENUE AND SERVICE OF PROCESS. BORROWER IN EACH CASE FOR ITSELF
AND ITS SUCCESSORS AND ASSIGNS, IRREVOCABLY (A) SUBMITS TO THE NONEXCLUSIVE
JURISDICTION OF THE STATE AND FEDERAL COURTS IN TEXAS, (B) WAIVES, TO THE
FULLEST EXTENT LAWFUL, ANY OBJECTION THAT IT MAY NOW OR IN THE FUTURE HAVE TO
THE LAYING OF VENUE OF ANY LITIGATION ARISING OUT OF OR IN CONNECTION WITH ANY
CREDIT DOCUMENT AND THE OBLIGATION BROUGHT IN THE DISTRICT COURTS OF DALLAS
COUNTY, TEXAS, OR IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT
OF TEXAS, DALLAS DIVISION, (C) WAIVES ANY CLAIMS THAT ANY LITIGATION BROUGHT IN
ANY OF THE FOREGOING COURTS HAS BEEN BROUGHT IN AN INCONVENIENT FORUM, (D)
CONSENTS TO THE SERVICE OF PROCESS OUR OF ANY OF THOSE COURTS IN ANY LITIGATION
BY THE MAILING OF COPIES OF THAT PROCESS
28
CREDIT AGREEMENT
<PAGE> 33
BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, POSTAGE PREPAID, BY HAND
DELIVERY, OR BY DELIVERY BY A NATIONALLY- RECOGNIZED COURIER SERVICE, AND
SERVICE SHALL BE DEEMED COMPLETE UPON DELIVERY OF THE LEGAL PROCESS AT ITS
ADDRESS FOR PURPOSES OF THIS AGREEMENT, AND (E) AGREES THAT ANY LEGAL
PROCEEDING AGAINST ANY PARTY TO ANY CREDIT DOCUMENT ARISING OUT OF OR IN
CONNECTION WITH THE CREDIT DOCUMENTS OR THE OBLIGATION MAY BE BROUGHT IN ONE OF
THE FOREGOING COURTS. The scope of each of the foregoing waivers is intended
to be all encompassing of any and all disputes that may be filed in any court
and that relate to the subject matter of this transaction, including, without
limitation, contract claims, tort claims, breach of duty claims, and all other
common law and statutory claims. BORROWER ACKNOWLEDGES THAT THESE WAIVERS ARE
A MATERIAL INDUCEMENT TO AGENT'S AND EACH LENDER'S AGREEMENT TO ENTER INTO A
BUSINESS RELATIONSHIP, THAT AGENT AND EACH LENDER HAS ALREADY RELIED ON THESE
WAIVERS IN ENTERING INTO THIS AGREEMENT, AND THAT AGENT AND EACH LENDER WILL
CONTINUE TO RELY ON EACH OF THESE WAIVERS IN RELATED FUTURE DEALINGS. BORROWER
FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THESE WAIVERS WITH ITS
LEGAL COUNSEL, AND THAT IT KNOWINGLY AND VOLUNTARILY AGREES TO EACH WAIVER
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. The waivers in this section are
irrevocable, meaning that they may not be modified either orally or in writing,
and these waivers apply to any future renewals, extensions, amendments,
modifications, or replacements in respect of the applicable Credit Document.
In connection with any Litigation, this agreement may be filed as a written
consent to a trial by the court.
12.12 NON-RECOURSE TO GENERAL PARTNER. NEITHER GENERAL PARTNER NOR
ANY DIRECTOR, OFFICER, EMPLOYEE, STOCKHOLDER, OR AGENT OF GENERAL PARTNER SHALL
HAVE ANY LIABILITY FOR ANY OBLIGATIONS OF BORROWER OR GUARANTOR UNDER THIS
AGREEMENT OR ANY OTHER CREDIT DOCUMENT OR FOR ANY CLAIM BASED ON, IN RESPECT OF
OR BY REASON OF, SUCH OBLIGATIONS OR THEIR CREATION, INCLUDING ANY LIABILITY
BASED UPON, OR ARISING BY OPERATION OF LAW AS A RESULT OF, THE STATUS OR
CAPACITY OF GENERAL PARTNER AS THE "GENERAL PARTNER" OF GUARANTOR. BY
EXECUTING THIS AGREEMENT, AGENT AND EACH LENDER, EXPRESSLY WAIVES AND RELEASES
ALL SUCH LIABILITY. THIS WAIVER AND RELEASE SHALL BE A PART OF THE
CONSIDERATION FOR GUARANTOR'S EXECUTION AND DELIVERY OF THE GUARANTY.
12.13 CONFIDENTIALITY. Agent and each Lender agrees (on behalf of
itself and each of its Affiliates, and its and each of their respective
Representatives) to keep and maintain any non-public information supplied to it
by or on behalf of any Company which is identified as being confidential and
shall not use any such information for any purpose other than in connection
with the administration or enforcement of this transaction. However, nothing
herein shall limit the disclosure of any such information (a) to the extent
required by Legal Requirement, (b) to counsel of Agent or any Lender in
connection with the transactions provided for in this agreement, (c) to bank
examiners, auditors and accountants, or (d) any Assignee or Participant (or
prospective Assignee or Participant) so long as such Assignee or Participant
(or prospective Assignee or Participant) first enters into a confidentiality
agreement with Agent or such Lender. Upon full payment of the Obligation,
Agent and each Lender shall, if requested by any Company at the expense of any
Company, return all (and not retain any) copies of such confidential
information to the requesting Company.
12.14 ENTIRETY. THE CREDIT DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN BORROWER, LENDERS, AND AGENT WITH RESPECT TO THEIR SUBJECT MATTER 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.
REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGE FOLLOWS.
29
CREDIT AGREEMENT
<PAGE> 34
EXECUTED as of the date first stated in this Credit Agreement.
<TABLE>
<S> <C>
TEPPCO Colorado, LLC TEPPCO COLORADO, LLC, as Borrower
c/o Texas Eastern Products,
Pipeline Company By: TE Products Pipeline Company, Limited
America Tower Building Partnership, as Sole Member
2929 Allen Parkway
Houston, TX 77019 By: Texas Eastern Products Pipeline
Attn: Charles H. Leonard, Company, as General Partner
Senior Vice President,
Chief Financial Officer, and
Treasurer By /s/ Charles H. Leonard
----------------------------------
Phone: 713-759-3999 Charles H. Leonard, Senior Vice
Fax: 713-759-3957 President, Chief Financial
Officer, and Treasurer
SunTrust Bank, Atlanta SUNTRUST BANK, ATLANTA, as
25 Park Place Agent and Sole Lender
24th Floor, MC-120
Atlanta, GA 30303
Attn: John A. Fields, Jr.,
Vice President By /s/ John A. Fields, Jr.
--------------------------------------------
Phone: 404-724-3667 John A. Fields, Jr., Vice President
Fax: 404-827-6270
By /s/ F. McClellan Deaver, III
--------------------------------------------
F. McClellan Deaver, III, Group Vice
President
</TABLE>
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 35
SCHEDULE 2
LENDERS AND COMMITMENTS
<TABLE>
COMMITMENT
LENDER COMMITMENT PERCENTAGE
------ ---------- ----------
<S> <C> <C>
SunTrust Bank, Atlanta $38,000,000 100.00%
25 Park Place
24th Floor, MC-120
Atlanta, GA 30303
Attn: John A. Fields, Jr.
Vice President
Phone: 404-724-3667
Fax: 404-827-6270
TOTAL COMMITMENTS $38,000,000 100.00%
</TABLE>
<PAGE> 36
SCHEDULE 4
CLOSING DOCUMENTS
Unless otherwise specified, all dated either April 21, 1998 (the "CLOSING
DATE"), or a date no earlier than 30 days before the Closing Date (a "CURRENT
DATE").
H&B [1.] CREDIT AGREEMENT (the "CREDIT AGREEMENT") dated as of the
Closing Date between TEPPCO COLORADO, LLC, a Delaware limited
liability company ("BORROWER"), certain Lenders, SUNTRUST BANK,
ATLANTA, as Agent (the defined terms in which have the same
meanings when used in this schedule), accompanied by:
H&B SCHEDULE 2 - Lenders and Commitments
H&B SCHEDULE 4 - Closing Documents
Borrower SCHEDULE 5.2 - Companies and Names
Borrower SCHEDULE 5.8 - Litigation
Borrower SCHEDULE 5.10 - Environmental Matters
Borrower SCHEDULE 5.11 - Employee-Plan Matters
Borrower SCHEDULE 5.12 - Existing Debt
Borrower SCHEDULE 5.13 - Existing Liens
Borrower SCHEDULE 5.15 - Affiliate Transactions
H&B EXHIBIT A - Term Note
H&B EXHIBIT B - Guaranty
H&B EXHIBIT C - Compliance Certificate
F&J EXHIBIT D - Opinion of Counsel
H&B EXHIBIT E - Assignment and Assumption Agreement
H&B [2.] TERM NOTE dated the Closing Date, executed by Borrower,
substantially in the form of EXHIBIT A to the Credit Agreement,
payable to the order of SunTrust Bank, Atlanta, as the sole
Lender, in the stated principal amount of $38,000,000.
H&B [3.] GUARANTY dated as of the Closing Date, in substantially the
form of EXHIBIT B to the Credit Agreement, and executed by TE
PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP ("GUARANTOR").
Borrower [4.] COMPLIANCE CERTIFICATE as of the Closing Date.
5. CERTIFICATE OF FORMATION of Borrower certified by the Delaware
Secretary of State as of March 26, 1998.
Borrower [6.] AGREEMENT OF LIMITED PARTNERSHIP of Guarantor certified by the
Delaware Secretary of State as of a Current Date.
Borrower [7.] AGREEMENT OF LIMITED PARTNERSHIP of TEPPCO Partners, L.P.
("PARENT"), certified by the Delaware Secretary of State as of
a Current Date.
Borrower [8.] CERTIFICATE OF INCORPORATION for Texas Eastern Products
Pipeline Company ("GENERAL PARTNER") certified by the Delaware
Secretary of State as of a Current Date.
_______________________
[ ] Indicate items not complete at the time this version of this schedule
was prepared, along with the initials of the party or counsel
responsible for them.
Schedule 4
<PAGE> 37
Borrower [10.] OFFICERS' CERTIFICATE dated as of the Closing Date, executed by
the President or a Vice President and by the Secretary of an
Assistant Secretary of General Partner certifying (a) resolutions
adopted by General Partner's directors authorizing the executing
and delivery of the Credit Documents on behalf of General
Partner, Guarantor, and Borrower, as the case may be, (b) the
incumbency and signatures of officers of General Partner
authorized to execute and deliver any Credit Document, and (c)
the accuracy and completeness of the following that must
accompany that certificate:
Annex A - Resolutions of General Partner's Directors
Annex B - Certificate of Incorporation of General Partner
Annex C - Bylaws of General Partner
Annex D - Agreement of Limited Partnership of Parent
Annex E - Agreement of Limited Partnership of Guarantor
Annex F - Certificate of Formation of Borrower
Annex G - Limited Liability Company Agreement of Borrower
F&J [11.] OPINION dated the Closing Date, of Fulbright & Jaworski LLP,
counsel to General Partner, Guarantor, and Borrower, addressed to
Agent and Lenders, and in substantially the form of Exhibit E to
the Credit Agreement.
Borrower [12.] INSURANCE POLICY OR BINDER dated a Current Date and reflecting
the insurance coverage on the Fractionators required by
Section 8.9 of the Credit Agreement.
13. UNIFORM COMMERCIAL CODE SEARCH REPORTS from the filing officers
of the following representative jurisdictions for the following
Persons as debtors as of the following dates:
<TABLE>
<CAPTION>
===================================================================================================================================
Search File
Person Jurisdiction Date File Number Date Description
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Borrower Texas 04/06/98 No documents on file.
- -----------------------------------------------------------------------------------------------------------------------------------
Colorado 04/03/98 No documents on file.
- -----------------------------------------------------------------------------------------------------------------------------------
Guarantor Texas 04/06/98 No documents on file.
- -----------------------------------------------------------------------------------------------------------------------------------
New York 04/10/98 056047 03/20/95 NationsBank of Texas, N.A., as Trustee, as
Secured Party in respect of mortgage over
pipeline system
- -----------------------------------------------------------------------------------------------------------------------------------
Ohio 04/01/98 AL70722 03/17/95 NationsBank of Texas, N.A., as Trustee, as
Secured Party in respect of mortgage over
pipeline system
- -----------------------------------------------------------------------------------------------------------------------------------
Parent Texas 04/06/98 No documents on file.
- -----------------------------------------------------------------------------------------------------------------------------------
General Partner Texas 04/06/98 No documents on file.
- -----------------------------------------------------------------------------------------------------------------------------------
New York 04/10/98 206410 09/29/93 Adirondack Leasing Associates Ltd. as
Secured Party in respect of Konica and a
PFU
- -----------------------------------------------------------------------------------------------------------------------------------
Ohio 04/01/98 No documents on file.
===================================================================================================================================
</TABLE>
Borrower [14.] EVIDENCE satisfactory to Agent that The Bank of New York as the
final Trustee in respect of the Mortgage, Security Agreement and
Fixture Filing (as renewed, extended, amended, supplemented, and
assigned) dated as of February 28, 1990, from Guarantor, and
originally
3 SCHEDULE 4
<PAGE> 38
Borrower [9.] CERTIFICATES OF APPROPRIATE GOVERNMENTAL AUTHORITIES of the
following jurisdictions, dated Current Dates, with respect to
the existence, authority to transact business, and good standing
of the following Persons:
<TABLE>
<CAPTION>
==============================================================
Person Jurisdiction(s) Date
==============================================================
<S> <C> <C>
Borrower Delaware
- --------------------------------------------------------------
Colorado
- --------------------------------------------------------------
Guarantor Delaware
- --------------------------------------------------------------
Arkansas
- --------------------------------------------------------------
Illinois
- --------------------------------------------------------------
Indiana
- --------------------------------------------------------------
Kentucky
- --------------------------------------------------------------
Louisiana
- --------------------------------------------------------------
Missouri
- --------------------------------------------------------------
New York
- --------------------------------------------------------------
Ohio
- --------------------------------------------------------------
Pennsylvania
- --------------------------------------------------------------
Rhode Island
- --------------------------------------------------------------
Texas
- --------------------------------------------------------------
West Virginia
- --------------------------------------------------------------
Parent Delaware
- --------------------------------------------------------------
Texas
- --------------------------------------------------------------
General Partner Delaware
- --------------------------------------------------------------
Arkansas
- --------------------------------------------------------------
Illinois
- --------------------------------------------------------------
Indiana
- --------------------------------------------------------------
Kentucky
- --------------------------------------------------------------
Louisiana
- --------------------------------------------------------------
Missouri
- --------------------------------------------------------------
New York
- --------------------------------------------------------------
Ohio
- --------------------------------------------------------------
Pennsylvania
- --------------------------------------------------------------
Rhode Island
- --------------------------------------------------------------
Texas
- --------------------------------------------------------------
West Virginia
==============================================================
</TABLE>
2 SCHEDULE 4
<PAGE> 39
SCHEDULE 5.2
COMPANIES AND NAMES
<TABLE>
<CAPTION>
=============================================================================================================================
Jurisdiction Qualified Other Names Name Change
Company of to do Used in In Last Owned By
Formation Business Past 5 Years 4 Months
=============================================================================================================================
<S> <C> <C> <C> <C> <C>
TE Products Delaware Arkansas None None Texas Eastern Products
Pipeline Company, Illinois Pipeline Company (1.0101%
Limited Partnership Indiana general partner interest and
Kentucky 98.9899% limited partner
Louisiana interest)
Missouri
New York
Ohio
Pennsylvania
Rhode Island
Texas, and
West Virginia
- -----------------------------------------------------------------------------------------------------------------------------
TEPPCO Colorado, Delaware Colorado None None TE Products Pipeline
LLC Company, Limited Partnership
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 40
SCHEDULE 5.8
LITIGATION
NONE.
<PAGE> 41
SCHEDULE 5.10
ENVIRONMENTAL MATTERS
TE Products Pipeline Company, Limited Partnership ("Partnership") and the
Indiana Department of Environmental Management ("IDEM") have entered into an
Agreed Order that will ultimately result in a remediation program for any
on-site and off-site groundwater contamination attributable to the Partnership's
operations at the Seymour, Indiana, terminal. As part of the Agreed Order, the
Partnership has completed the remedial investigation sampling for groundwater
contamination. In November 1997, IDEM approved the final remedial investigation
report for the Seymour terminal. The Partnership is currently negotiation with
IDEM the clean-up levels to be attained at the Seymour terminal. The Partnership
estimates that the costs of the remediation program to be proposed by the
Partnership for the Seymour terminal will not exceed the amount accrued
therefore (approximately $1.7 million at December 31, 1997). The completion of
the remediation program to be proposed by the Partnership, if such program is
approved by IDEM, should not have a material adverse impact on the Partnership.
The Partnership received a compliance order from the Louisiana Department of
Environmental Quality ("DEQ") during 1994 relative to a potential environmental
contamination at the Partnership's Arcadia, Louisiana facility, which may be
attributable to the operations of the Partnership and surrounding petroleum
terminals of other companies. The Partnership has finalized a negotiated
compliance order with DEQ that will allow the Partnership to continue with a
remediation plan similar to the one previously agreed to by DEQ and implemented
by Texas Eastern Products Pipeline Company. The completion of the remediation
program being proposed by the Partnership should not have a future material
adverse impact of the Partnership.
The Partnership is currently reviewing the possibility of undertaking a
voluntary remediation of its Lebanon, Ohio terminal, for possible contamination
by petroleum products. It is not anticipated that any such remediation program
will have a future material adverse impact on the Partnership.
<PAGE> 42
SCHEDULE 5.11
EMPLOYEE-PLAN MATTERS
NONE.
<PAGE> 43
SCHEDULE 5.12
EXISTING DEBT
TE Products Pipeline Company, Limited Partnership
<TABLE>
<S> <C> <C> <C>
$180,000,000 6.45% Senior Notes Due 2008
$210,000,000 7.51% Senior Notes Due 2028
</TABLE>
<PAGE> 44
SCHEDULE 5.13
EXISTING LIENS
There are no existing Liens except Permitted Liens. There may exist certain
mortgage filings, deeds of trust and UCC lien filings in various states that
pertain to the Series A First Mortgage Notes and Series B First Mortgage Notes
(collectively "Mortgage Notes"), which Mortgage Notes were paid in full on
January 27, 1998. The Bank of New York is currently prosecuting the filing of
releases for any liens associated with such Mortgage Notes.
<PAGE> 45
SCHEDULE 5.15
AFFILIATE TRANSACTIONS
Asset Purchase Agreement between Duke Energy Field Services, Inc. ("DEFS") and
TEPPCO Colorado, LLC ("TEPPCO Colorado") for the purchase of two (2)
fractionation units located in Weld County, Colorado. The terms of the Asset
Purchase Agreement incorporate additional agreements between DEFS and TEPPCO
Colorado, including the Fractionation Agreement, the Operation and Maintenance
Agreement, the Lease Agreement and the Sublease Agreement.
<PAGE> 46
EXHIBIT A
TERM NOTE
$38,000,000 April 21,1998
FOR VALUE RECEIVED, TEPPCO COLORADO, LLC, a Delaware limited liability
company ("MAKER"), promises to pay to the order of SUNTRUST BANK, ATLANTA
("PAYEE"), the principal amount of $38,000,000, together with interest on the
unpaid amounts thereof from time to time outstanding.
This note is a "Note" under the Credit Agreement (as renewed, extended,
amended, or restated, the "Credit Agreement") dated as of April 21, 1998,
between Maker, Payee, certain other Lenders from time to time, and SunTrust
Bank, Atlanta, as Agent for Lenders. All of the terms defined in the Credit
Agreement have the same meanings when used, unless otherwise defined, in this
note.
This note incorporates by reference the principal and interest payment
terms in the Credit Agreement for this note, including, without limitation, the
final maturity date for this note, which is the Maturity Date. Principal and
interest are payable to the holder of this note by payment to Agent at its
offices at 25 Park Place, Atlanta, Georgia 30303 or at any other address of
which Agent may notify Maker in writing.
This note also incorporates by reference all other provisions in the
Credit Agreement applicable to this note including provisions for disbursement
of principal, applicable interest rates before and after certain Events of
Default, voluntary and mandatory prepayments, acceleration of maturity,
exercise of Rights, payment of attorney's fees, courts costs, and other costs
of collection, certain waivers by Maker and other obligors, assurances and
security, choice of Texas and United States federal law, usury savings, and
other matters applicable to Credit Documents under the Credit Agreement.
TEPPCO COLORADO, LLC, as Maker
By: TE PRODUCTS PIPELINE COMPANY,
LIMITED PARTNERSHIP, as sole Member
By: TEXAS EASTERN PRODUCTS
PIPELINE COMPANY, as General Partner
By: /s/ CHARLES H. LEONARD
--------------------------------
Charles H. Leonard, Senior Vice
President, Chief Financial
Officers, and Treasurer
EXHIBIT A
<PAGE> 47
EXHIBIT B
GUARANTY
THIS GUARANTY is executed as of April 21, 1998, by TE PRODUCTS PIPELINE
COMPANY, LIMITED PARTNERSHIP, a Delaware limited partnership ("GUARANTOR"), for
the benefit of SUNTRUST BANK, ATLANTA (in its capacity as Agent for the Lenders
now or in the future party to the Credit Agreement described below, "AGENT").
TEPPCO Colorado, LLC, a Delaware limited liability company
("BORROWER"), Agent, and Lenders have executed the Credit Agreement (as renewed,
extended, amended, or restated, the "CREDIT AGREEMENT") dated as of April 21,
1998. Guarantor is the sole member and owner of a significant portion of the
equity interests in Borrower. The execution and delivery of this guaranty are
requirements to Agent's and Lenders' execution of the Credit Agreement and other
Credit Documents (see PARAGRAPH 1 below for definitions), are integral to the
transactions contemplated by the Credit Documents, and are conditions precedent
to Lenders' obligations to lend under the Credit Agreement.
ACCORDINGLY, for adequate and sufficient consideration, Guarantor
guarantees to Agent and Lenders the prompt payment of the Guaranteed Obligation
(defined below) at, and at all times after, its various applicable maturities
(by acceleration or otherwise) as follows:
1. DEFINITIONS. Terms defined in the Credit Agreement have the same
meanings when used (unless otherwise defined) in this guaranty. As used in this
guaranty:
"AGENT" is defined in the preamble to this guaranty and includes its
successor appointed under SECTION 11 of the Credit Agreement and acting as Agent
for Lenders under the Credit Documents.
"BORROWER" is defined in the recitals to this guaranty and includes,
without limitation, Borrower, Borrower as a debtor-in-possession, and any
receiver, trustee, liquidator, conservator, custodian, or similar party
appointed for Borrower or for all or substantially all of Borrower's assets
under any Debtor Law.
"CREDIT AGREEMENT" is defined in the recitals to this guaranty.
"GUARANTEED OBLIGATION" means the Obligation, as defined in the Credit
Agreement, including, without limitation, all present and future amounts that
would become due but for the operation of ss.ss. 502 or 506 or any other
provision of Title 11 of the United States Code and all present and future
accrued and unpaid interest (including, without limitation, all post-petition
interest if Borrower voluntarily or involuntarily becomes subject to any Debtor
Law).
"GUARANTOR" is defined in the preamble to this guaranty.
2. GUARANTY. This is an absolute, irrevocable, and continuing guaranty.
This guaranty remains in effect until the Guaranteed Obligation is fully paid
and performed, and all commitments to lend under the Credit Agreement have
terminated. Any permitted holder or assignee of the Guaranteed Obligation may
enforce this guaranty. Guarantor may not rescind or revoke its obligations with
respect to the Guaranteed Obligation.
3. CONSIDERATION. Guarantor represents and warrants that (a) the value
of the consideration received and to be received by it is reasonably worth at
least as much as its liability under this guaranty and (b) its liability under
this Guaranty may reasonably be expected to directly or indirectly benefit it.
4. CUMULATIVE RIGHTS. If Guarantor becomes liable for any indebtedness
owing by Borrower to Agent or any Lender, other than under this guaranty, that
liability may not be in any manner impaired or
EXHIBIT B
<PAGE> 48
affected by this guaranty. The Rights of Agent or Lenders under this guaranty
are cumulative of any and all other Rights that Agent or Lenders may ever have
against Guarantor. The exercise by Agent or Lenders of any Right under this
guaranty or otherwise does not preclude the concurrent or subsequent exercise of
any other Right.
5. PAYMENT UPON DEMAND. Guarantor shall, upon demand to it and without
further notice of dishonor and without any notice having been given to Guarantor
previous to that demand of either the acceptance by Agent or Lenders of this
guaranty or the creation or incurrence of any Guaranteed Obligation, pay the
amount of the Guaranteed Obligation then matured, due, and payable to Agent and
Lenders. It is not necessary for Agent or Lenders, in order to enforce that
payment by Guarantor, first or contemporaneously to accelerate payment of any of
the Guaranteed Obligation, to institute suit or exhaust remedies against
Borrower or others liable on any Guaranteed Obligation, or to enforce Rights
against any collateral securing any Guaranteed Obligation. If Guarantor fails to
timely perform any of its obligations under this guaranty, it agrees to pay to
Agent all reasonable costs and expenses (including reasonable attorney's fees)
incurred by Agent in the enforcement of this guaranty.
6. SUBORDINATION. All principal of and interest on all indebtedness,
liabilities, and obligations of Borrower to Guarantor (the "SUBORDINATED DEBT"),
whether direct, indirect, fixed, contingent, liquidated, unliquidated, joint,
several, or joint and several, now or in the future existing, due or to become
due to Guarantor, or held or to be held by Guarantor, whether created directly
or acquired by assignment or otherwise, and whether evidenced by written
instrument or not, is expressly subordinated to the full and final payment of
the Guaranteed Obligation (and Guarantor agrees not to accept any payment of any
Subordinated Debt from Borrower) during any period when an Event of Default or
Potential Default exists. If Guarantor receives any payment of any Subordinated
Debt in violation of the preceding subordination provision, then Guarantor shall
hold that payment in trust for Agent and Lenders and promptly turn it over to
Agent, in the form received (with any necessary endorsements), to be applied to
the Guaranteed Obligation.
7. SUBROGATION AND CONTRIBUTION. Until no Lender is obligated to lend
under the Credit Agreement and the Guaranteed Obligation has been fully paid and
performed (a) Guarantor may not assert, enforce, or otherwise exercise any Right
of subrogation to any of the Rights or Liens of Agent or Lenders or any other
beneficiary against Borrower or any other obligor on the Guaranteed Obligation
or any collateral or other security or any Right of recourse, reimbursement,
subrogation, contribution, indemnification, or similar Right against Borrower or
any other obligor on any Guaranteed Obligation or any guarantor of it, (b)
Guarantor defers all of the foregoing Rights (whether they arise in equity,
under contract, by statute, under common law, or otherwise), and (c) Guarantor
defers the benefit of, and any Right to participate in, any collateral or other
security given to Agent or Lenders or any other beneficiary to secure payment of
any Guaranteed Obligation.
8. NO RELEASE. Guarantor's obligations under this guaranty are not
released, diminished, or impaired by the occurrence of any one or more of the
following events: (a) Any taking or accepting of any other security or assurance
for any Guaranteed Obligation; (b) any release, surrender, exchange,
subordination, impairment, or loss of any collateral securing any Guaranteed
Obligation; (c) any full or partial release of the liability of any other
obligor on the Obligation (other than as the result of payment on the Guaranteed
Obligation); (d) the modification of, or waiver of compliance with, any terms of
any other Credit Document; (e) any present or future insolvency, bankruptcy, or
lack of corporate, partnership, or limited liability company power of any other
obligor at any time liable for any Guaranteed Obligation; (f) any renewal,
extension, or rearrangement of any Guaranteed Obligation or any adjustment,
indulgence, forbearance, or compromise that may be granted or given by Agent or
any Lender to any other obligor on any Guaranteed Obligation; (g) any neglect,
delay, omission, failure, or refusal of Agent or any Lender to take or prosecute
any action in connection with any Guaranteed Obligation; (h) any failure of
Agent or any Lender to notify Guarantor of any renewal, extension, or assignment
of any Guaranteed Obligation, or the release of any security or of any other
action taken or refrained from being taken by Agent or any Lender against
Borrower, or any new agreement between Agent, any Lender, and Borrower, it being
understood that neither Agent nor any Lender is required to give Guarantor any
notice of any kind under any circumstances whatsoever with respect to or in
connection with any Guaranteed Obligation, other than any notice specifically
required to be given to
EXHIBIT B
2
<PAGE> 49
Guarantor by applicable Legal Requirements or elsewhere in this guaranty; (i)
the unenforceability of any Guaranteed Obligation against any other obligor
because it exceeds the amount permitted by applicable Legal Requirements, the
act of creating it is ultra vires, the officers creating it exceeded their
authority or violated their fiduciary duties in connection with it, or
otherwise; or (j) any payment of any Guaranteed Obligation to Agent or Lenders
is held to constitute a preference under any Debtor Law or for any other reason
Agent or any Lender is required to refund that payment or make payment to
someone else (and in each such instance this guaranty shall be reinstated in an
amount equal to that payment).
9. WAIVERS. Guarantor waives (to the extent lawful and until full
payment of the Guaranteed Obligation):
(a) All defenses to the enforcement of this guaranty (and
Rights which may be asserted as defenses to the enforcement of this
guaranty) including, but not limited to (i) any Right to revoke this
guaranty with respect to future indebtedness arising under the Credit
Agreement; (ii) any Right to require Agent or Lenders to do any of the
following before Guarantor is obligated to pay any Guaranteed
Obligation or before Agent or Lenders may proceed against Guarantor;
(A) sue or exhaust remedies against Borrower and other guarantors or
obligors, (B) sue on an accrued right of action in respect of any
Guaranteed Obligation or bring any other action, exercise any other
right, or exhaust all other remedies, or (C) enforce rights against
Borrower's assets or the collateral pledged by Borrower to secure any
Guaranteed Obligation; (iii) any right relating to the timing, manner,
or conduct of Agent's or Lenders' enforcement of rights against
Borrower's assets or the collateral pledged by Borrower to secure any
Guaranteed Obligation; (iv) if Guarantor and Borrower (or a third
party) have each pledged assets to secure any Guaranteed Obligation,
any right to require Agent and Lenders to proceed first against the
other collateral before proceeding against collateral pledged by
Guarantor; (v) notice that this guaranty has been accepted by Agent and
Lenders and notice of any indebtedness to which this guaranty may
apply; (vi) any right of Guarantor to receive notice from Agent or
Lenders of changes which affect the creditworthiness of Borrower; and
(vii) except for any notice specifically required by this guaranty,
presentation, presentment, demand for payment, protest, notice of
protest, notice of dishonor or nonpayment of any indebtedness, notice
of intent to accelerate, notice of acceleration, notice of any suit or
other action by Lender against Borrower, Guarantor, or any other Person
and any notice to any party liable for the obligation which is the
subject of the suit or action; and
(b) Each of the foregoing rights or defenses regardless
whether they arise under (i) Section 34.01 et seq. of the Texas
Business and Commerce Code, as amended, (ii) Section 17.001 of the
Texas Civil Practice and Remedies Code, as amended, (iii) Rule 31 of
the Texas Rules of Civil Procedure, as amended, or (iv) common law, in
equity, under contract, by statute, or otherwise.
10. CREDIT AGREEMENT PROVISIONS. Guarantor acknowledges that certain
(a) representations and warranties in the Credit Agreement are applicable to it
and confirms that each such representation and warranty is true and correct, and
(b) covenants, agreements, and other provisions in the Credit Agreement are
applicable to it or are imposed upon it and agrees to promptly and properly
comply with or be bound by each of them.
11. RELIANCE AND DUTY TO REMAIN INFORMED. Guarantor confirms that it
has executed and delivered this guaranty after reviewing the terms and
conditions of the Credit Documents and all other information as it has deemed
appropriate in order to make its own credit analysis and decision to execute and
deliver this guaranty. Guarantor confirms that it has made its own independent
investigation with respect to Borrower's creditworthiness and is not executing
and delivering this guaranty in reliance on any representation or warranty by
Agent or any Lender as to that creditworthiness. Guarantor expressly assumes all
responsibilities to remain informed of the financial condition of Borrower and
any circumstances affecting Borrower's ability to perform under the Credit
Documents to which it is a party or any collateral securing any Guaranteed
Obligation.
EXHIBIT B
3
<PAGE> 50
12. NO REDUCTION. The Guaranteed Obligation may not be reduced,
discharged, or released because or by reason of any existing or future offset,
claim, or defense (except for the defense of complete and final payment of the
Guaranteed Obligation) of Borrower or any other obligor against Agent or Lenders
or against payment of the Guaranteed Obligation, whether that offset, claim, or
defense arises in connection with the Guaranteed Obligation or otherwise. Those
claims and defenses include, without limitation, failure of consideration,
breach of warranty, fraud, bankruptcy, incapacity/infancy, statute of
limitations, lender liability, accord and satisfaction, usury, forged
signatures, mistake, impossibility, frustration of purpose, and
unconscionability.
13. CREDIT DOCUMENT. This guaranty is a Credit Document and is subject
to the applicable provisions of SECTIONS 1 and 12 of the Credit Agreement, all
of which are incorporated into this guaranty by reference the same as if set
forth in this guaranty verbatim.
14. COMMUNICATIONS. For purposes of SECTION 12.2 of the Credit
Agreement, Guarantor's address and fax number are the same as Borrowers.
15. AMENDMENTS, ETC. No amendment, waiver, or discharge to or under
this guaranty is valid unless it is in writing and is signed by the party
against whom it is sought to be enforced and is otherwise in conformity with the
requirements of SECTION 12.8 of the Credit Agreement.
16. ENTIRETY. THIS GUARANTY AND ANY OTHER CREDIT DOCUMENTS TO WHICH
GUARANTOR IS A PARTY REPRESENT THE FINAL AGREEMENT BETWEEN GUARANTOR, AGENT, AND
LENDERS WITH RESPECT TO THE SUBJECT MATTER OF THIS GUARANTY AND ANY SUCH OTHER
CREDIT DOCUMENT 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.
17. AGENT AND LENDERS. Agent is the agent for each Lender under the
Credit Agreement. All Rights granted to Agent under or in connection with this
guaranty are for each Lender's ratable benefit. Agent may, without the joinder
of any Lender, exercise any Rights in Agent's or Lenders' favor under or in
connection with this guaranty. Agent's and each Lender's Rights and obligations
vis-a-vis each other may be subject to one or more separate agreements between
those parties. However, Guarantor is not required to inquire about any such
agreement or is subject to any terms of it unless Guarantor specifically joins
it. Therefore, neither Guarantor nor its successors or assigns is entitled to
any benefits or provisions of any such separate agreement or is entitled to rely
upon or raise as a defense any party's failure or refusal to comply with the
provisions of it.
18. PARTIES. This guaranty benefits Agent, Lenders, and their
respective successors and permitted assigns and binds Guarantor and its
successors and assigns. Upon appointment of any successor Agent under, and
pursuant to the terms of, the Credit Agreement, all of the Rights of Agent under
this guaranty automatically vests in that new Agent as successor Agent on behalf
of Lenders without any further act, deed, conveyance, or other formality other
than that appointment. The Rights of Agent and Lenders under this guaranty may
be transferred with any permitted assignment of any Guaranteed Obligation. The
Credit Agreement contains provisions governing assignments of the Guaranteed
Obligation and of Rights and obligations under this guaranty.
19. NON-RECOURSE TO GENERAL PARTNER. NEITHER GENERAL PARTNER NOR ANY
DIRECTOR, OFFICER, EMPLOYEE, STOCKHOLDER, OR AGENT OF GENERAL PARTNER SHALL HAVE
ANY LIABILITY FOR ANY OBLIGATIONS OF GUARANTOR UNDER THIS GUARANTY OR ANY OTHER
CREDIT DOCUMENT OR FOR ANY CLAIM BASED ON, IN RESPECT OF OR BY REASON OF, SUCH
OBLIGATIONS OR THEIR CREATION, INCLUDING ANY LIABILITY BASED UPON, OR ARISING BY
OPERATION OF LAW AS A RESULT OF, THE STATUS OR CAPACITY OF GENERAL PARTNER AS
THE "GENERAL PARTNER" OF GUARANTOR. BY ACCEPTING THIS GUARANTY, AGENT, FOR
ITSELF AND EACH LENDER, EXPRESSLY WAIVES AND RELEASES ALL SUCH LIABILITY. THIS
WAIVER AND RELEASE SHALL BE A PART OF THE CONSIDERATION FOR GUARANTOR'S
EXECUTION AND DELIVERY OF THIS GUARANTY.
EXHIBIT B
4
<PAGE> 51
20. VENUE AND SERVICE OF PROCESS. GUARANTOR, IN EACH CASE FOR ITSELF
AND ITS SUCCESSORS AND ASSIGNS, IRREVOCABLY (A) SUBMITS TO THE NONEXCLUSIVE
JURISDICTION OF THE STATE AND FEDERAL COURTS IN TEXAS, (B) WAIVES, TO THE
FULLEST EXTENT LAWFUL, ANY OBJECTION THAT IT MAY NOW OR IN THE FUTURE HAVE TO
THE LAYING OF VENUE OF ANY LITIGATION ARISING OUT OF OR IN CONNECTION WITH THIS
GUARANTY AND THE GUARANTEED OBLIGATION BROUGHT IN THE DISTRICT COURTS OF DALLAS
COUNTY, TEXAS, OR IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT
OF TEXAS, DALLAS DIVISION, (C) WAIVES ANY CLAIMS THAT ANY LITIGATION BROUGHT IN
ANY OF THE FOREGOING COURTS HAS BEEN BROUGHT IN AN INCONVENIENT FORUM, (D)
CONSENTS TO THE SERVICE OF PROCESS OUR OF ANY OF THOSE COURTS IN ANY LITIGATION
BY THE MAILING OF COPIES OF THAT PROCESS BY CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, POSTAGE PREPAID, BY HAND DELIVERY, OR BY DELIVERY BY A
NATIONALLY-RECOGNIZED COURIER SERVICE, AND SERVICE SHALL BE DEEMED COMPLETE UPON
DELIVERY OF THE LEGAL PROCESS AT ITS ADDRESS FOR PURPOSES OF THIS AGREEMENT, AND
(E) AGREES THAT ANY LEGAL PROCEEDING AGAINST ANY PARTY TO ANY CREDIT DOCUMENT
ARISING OUT OF OR IN CONNECTION WITH THE CREDIT DOCUMENTS OR THE OBLIGATION MAY
BE BROUGHT IN ONE OF THE FOREGOING COURTS. The scope of each of the foregoing
waivers is intended to be all encompassing of any and all disputes that may be
filed in any court and that relate to the subject matter of this transaction,
including, without limitation, contract claims, tort claims, breach of duty
claims, and all other common law and statutory claims. GUARANTOR ACKNOWLEDGES
THAT THESE WAIVERS ARE A MATERIAL INDUCEMENT TO AGENT'S AND EACH LENDER'S
AGREEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT AGENT AND EACH LENDER HAS
ALREADY RELIED ON THESE WAIVERS IN ENTERING INTO THE CREDIT AGREEMENT, AND THAT
AGENT AND EACH LENDER WILL CONTINUE TO RELY ON EACH OF THESE WAIVERS IN RELATED
FUTURE DEALINGS. GUARANTOR FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED
THESE WAIVERS WITH ITS LEGAL COUNSEL, AND THAT IT KNOWINGLY AND VOLUNTARILY
AGREES TO EACH WAIVER FOLLOWING CONSULTATION WITH LEGAL COUNSEL. The waivers in
this paragraph are irrevocable, meaning that they may not be modified either
orally or in writing, and these waivers apply to any future renewals,
extensions, amendments, modifications, or replacements in respect of this
guaranty. In connection with any Litigation, this agreement may be filed as a
written consent to a trial by the court.
REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGE FOLLOWS.
EXHIBIT B
5
<PAGE> 52
EXECUTED as of the date first stated in this guaranty.
TE PRODUCTS PIPELINE COMPANY, LIMITED
PARTNERSHIP, as Guarantor
By: TEXAS EASTERN PRODUCTS PIPELINE
COMPANY, as General Partner
By /s/ CHARLES H. LEONARD
-----------------------------------
Name: Charles H. Leonard
--------------------------------
Title: Senior Vice President, CEO,
Treasurer
--------------------------------
EXECUTED by Agent solely in acknowledgment of PARAGRAPH 16 above.
SUNTRUST BANK, ATLANTA, as Agent
By /s/ JOHN A. FIELDS, JR.
-----------------------------------
John A. Fields, Jr., Vice President
By /s/ F. MCCLELLAN DEAVER, III
-----------------------------------
Name: F. McClellan Deaver, III
---------------------------------
Title: Group Vice President
--------------------------------
EXHIBIT B
SIGNATURE PAGE
6
<PAGE> 53
EXHIBIT C
COMPLIANCE CERTIFICATE
FOR THE FISCAL QUARTER/YEAR ENDED __________________ (the "SUBJECT PERIOD")
AGENT: SunTrust Bank, Atlanta DATE: _________________________
BORROWER: TEPPCO Colorado, LLC
================================================================================
This certificate is delivered under the Credit Agreement (as renewed,
extended, amended, or restated, the "CREDIT AGREEMENT") dated as of April 21,
1998 between Borrower, Agent, and certain Lenders, all defined terms in which
have the same meanings when used, unless otherwise defined, in this
certificate.
In my capacity as an officer of the General Partner of TEPPCO Partners,
L.P., a Delaware limited partnership ("PARENT"), I certify to Agent and Lenders
on the date of this certificate that (a) I am an officer of the General Partner
of Parent, (b) the financial statements attached to this certificate were
prepared in accordance with GAAP and present fairly the consolidated and
consolidating financial condition and results of operations of Parent and its
Subsidiaries as of, and for the fiscal quarter or year, as the case may be,
ended on, the last day of the Subject Period, (c) a review of the activities of
the Companies during the Subject Period has been made under my supervision with
a view to determining whether, during the Subject Period, the Companies
performed and complied with all of their obligations under the Credit
Documents, and, during the Subject Period, to my knowledge no Event of Default
(nor any Potential Default) has occurred which has not been cured or waived
(except the Events of Default or Potential Default, if any, described on the
schedule to this certificate), and (d) to my knowledge, the status of
compliance by the Parent with SECTIONS 8.1 and 8.2 of the Credit Agreement at
the end of the Subject Period is as described on the scheulde to this
certificate.
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
EXHIBIT C
<PAGE> 54
SCHEDULE TO COMPLIANCE CERTIFICATE
(For Fiscal Quarter/Year Ended ________________________)
A. Describe Potential Defaults and Events of Default, if any, pursuant
to CLAUSE (c)(ii) of the attached certificate. If none, so state.
B. Reflect compliance with SECTIONS 8.1 and 8.2 at the end of
the Subject Period on a consolidated basis pursuant to CLAUSE (d) of the
attached certificate.
TABLE 1
<TABLE>
<CAPTION>
===================================================================== ======================= ============================
Covenant At end of Subject Period
===================================================================== ======================= ============================
<S> <C> <C>
SECTION 8.1 Leverage Ratio
--------------------------------------------------------------------- ----------------------- ----------------------------
(a) Debt as of the last day of the Subject Period $
--------------------------------------------------------------------- ----------------------- ----------------------------
(b) Stockholders equity as of the last day of the Subject $
Period
--------------------------------------------------------------------- ----------------------- ----------------------------
(c) Book value of intangible assets $
--------------------------------------------------------------------- ----------------------- ----------------------------
(d) Tangible Net Worth -- Line (b) minus Line (c) $
--------------------------------------------------------------------- ----------------------- ----------------------------
(e) Line (d) plus Line (a) $
--------------------------------------------------------------------- ----------------------- ----------------------------
(f) Ratio of Line (a) to Line (e) $
--------------------------------------------------------------------- ----------------------- ----------------------------
(g) Maximum -- see Table 2 ____ to 1.00
--------------------------------------------------------------------- ----------------------- ----------------------------
SECTION 8.2 Debt/EBITDA Ratio
--------------------------------------------------------------------- ----------------------- ----------------------------
(a) Debt as of the last day of the Subject Period $
--------------------------------------------------------------------- ----------------------- ----------------------------
(b) Net Income for 12 months ending with Subject Period $
--------------------------------------------------------------------- ----------------------- ----------------------------
(c) Interest Expense for 12 months ending with Subject Period $
--------------------------------------------------------------------- ----------------------- ----------------------------
(d) Tax Expenses for 12 months ending with Subject Period $
--------------------------------------------------------------------- ----------------------- ----------------------------
(e) Depreciation for 12 months ending with Subject Period $
--------------------------------------------------------------------- ----------------------- ----------------------------
(f) Amortization for 12 months ending with Subject Period $
--------------------------------------------------------------------- ----------------------- ----------------------------
(g) EBITDA -- total of Lines (b), (c), (d), (e), and (f) $
--------------------------------------------------------------------- ----------------------- ----------------------------
(h) Ration of Line (a) to Line (g) ____ to 1.00
--------------------------------------------------------------------- ----------------------- ----------------------------
(i) Maximum -- see Table 3 ____ to 1.00
--------------------------------------------------------------------- ----------------------- ----------------------------
</TABLE>
EXHIBIT C
<PAGE> 55
TABLE 2 -- LEVERAGE RATIO
<TABLE>
<CAPTION>
==================================================================== ========================================
Quarter(s) Ending Ratio
==================================================================== ========================================
<S> <C>
06/30/98 through 03/31/99 0.68 to 1.00
-------------------------------------------------------------------- ----------------------------------------
06/30/99 and thereafter 0.65 to 1.00
-------------------------------------------------------------------- ----------------------------------------
</TABLE>
TABLE 3 -- DEBT TO EBITDA RATIO
<TABLE>
<CAPTION>
==================================================================== ========================================
Quarter(s) Ending Ratio
==================================================================== ========================================
<S> <C>
06/30/98 through 03/31/99 4.25 to 1.00
-------------------------------------------------------------------- ----------------------------------------
06/30/99 and thereafter 4.00 to 1.00
-------------------------------------------------------------------- ----------------------------------------
</TABLE>
EXHIBIT C
<PAGE> 56
EXHIBIT D
[FULBRIGHT & JAWORSKI LETTERHEAD]
April 21, 1998
SunTrust Bank, Atlanta
25 Park Place
Atlanta, Georgia 30303
Re: Credit Agreement dated as of April 21, 1998 (the "Agreement"), between
TEPPCO Colorado LLC, a Delaware limited liability company (the "Company"),
and SunTrust Bank, Atlanta, a Georgia banking corporation, in its capacity
as agent thereunder (in such capacity, the "Agent"), and in its capacity as
the sole, initial lender party thereunder (the "Initial Lender")
Ladies and Gentlemen:
We have acted as counsel to Company, TE Products Pipeline Company, Limited
Partnership, a Delaware limited partnership (the "Guarantor"), and Texas Eastern
Products Pipeline Company, a Delaware corporation (the "General Partner"), in
connection with the Agreement and that certain Guaranty of even date with the
Agreement (the "Guaranty"), executed by Guarantor and in favor of Agent.
Capitalized terms used but not defined herein have the meanings given them in
the Agreement (including, without limitation, the term "Lenders", as therein
defined), or if not therein defined, the meanings given them in the Guaranty.
The opinions expressed herein are being furnished to you pursuant to Item 11 on
Schedule 4 of the Agreement.
In rendering the opinions expressed herein, we have (i) relied as to
factual matters, to the extent we deemed appropriate, upon the representations
contained in (A) the Agreement (including the Schedules thereto), (B) the
Guaranty, (C) certificates of representatives of Company, Guarantor and General
Partner (collectively the "Loan Parties" and individually a "Loan Party") and
(D) certificates and other communications of public officials, and (ii)
examined the Agreement, the Guaranty, that certain promissory note of even date
with the Agreement (the "Note"), in the stated principal amount of $38,000,000,
executed by Company and payable to the order of Initial Lender (the Agreement,
the Note and the Guaranty are referred to herein collectively as the "Financing
Documents" and individually as a "Financing Document", as the context may
require) and such records, certificates, instruments, agreements and other
documents as are in our judgment necessary or appropriate to enable us to render
the opinions expressed herein.
In such reliance and in making such examination, we have assumed the
authenticity of all records, certificates, instruments, agreements and other
documents (including, without limitation, the Financing Documents) submitted to
us as originals, the conformity with the originals of all records,
certificates, instruments, agreements and other documents (including, without
limitation, the Financing Documents) submitted to us as certified or
photostatic copies thereof, and the authenticity of the originals of such
latter records, certificates, instruments, agreements and other documents. In
addition, we have assumed the legal capacity of each natural person identified,
or indicated as having executed, in any of those records, certificates,
instruments, agreements and other documents and the genuineness of all
signatures on all such records, certificates, instruments, agreements and other
documents.
<PAGE> 57
SunTrust Bank, Atlanta
April 21, 1998
Page 2
In rendering the opinions expressed herein, we also have assumed, without
investigation, that each of the Financing Documents is the legal, valid and
binding obligation of each Person expressed to be a party thereto other than
any Loan Party (each such party, an "Other Party"), enforceable against and by
each Other Party in accordance with its terms.
Based upon the foregoing and in the reliance thereon, and subject to and
qualified by the assumptions, qualifications, limitations and exceptions set
forth herein, and having due regard for such legal considerations as we deem
relevant, we are of the opinion that:
1. Company has been duly formed and is validly existing in good
standing as a limited liability company under the Delaware Limited
Liability Company Act (6 Del.C Sections 18-101, et seq.) (the "LLC Act").
2. Guarantor has been duly formed and is validly existing in
good standing as a limited partnership under the Delaware Revised Uniform
Limited Partnership Act (6 Del.C Sections 17-101, et seq.) (the "LP Act").
Guarantor is qualified as a foreign limited partnership to transact
business in the State of Texas.
3. General Partner has been duly incorporated and is validly
existing in good standing as a corporation under the General Corporation
Law of the State of Delaware (the "GCL"). General Partner is qualified as a
foreign corporation to transact business, and is in good standing, in the
State of Texas.
4. The execution and delivery by Company of each Financing
Document to which it is a party, and the performance by Company of its
obligations thereunder, are within Company's limited liability company
power and authority and have been duly authorized by all necessary limited
liability company action.
5. The execution and delivery by Guarantor of the Guaranty,
and the performance by Guarantor of its obligations thereunder, are within
Guarantor's limited partnership power and authority and have been duly
authorized by all necessary limited partnership action.
6. General Partner has the corporate power and authority to act
(i) as the general partner of Guarantor and (ii) as the general partner of
Guarantor in Guarantor's capacity as the sole member of Company, and the
execution and delivery by General Partner, (y) as the general partner of
Guarantor and (z) as the general partner of Guarantor in Guarantor's
capacity as the sole member of Company, of each Financing Document, and, as
general partner of Guarantor, to cause Guarantor, in Guarantor's limited
partnership capacity or in Guarantor's capacity as the sole member of
Company (as the case may be), to perform its respective obligations under
each Financing Document to which it is a party, are within General
Partner's corporate power and authority and have been duly authorized by
all necessary corporate action.
7. Each Financing Document to which Company is a party has
been duly executed and delivered by Company.
8. The Guaranty has been duly executed and delivered by
Guarantor.
<PAGE> 58
SunTrust Bank, Atlanta
April 21, 1998
Page 3
9. Each Financing Document has been duly executed and
delivered by the General Partner, as the general partner of Guarantor or as
the general partner of Guarantor in Guarantor's capacity as the sole member
of Company, as the case may be
10. Each of the Financing Documents to which Company is a party
constitutes the legal, valid and binding obligation of the Company,
enforceable against Company in accordance with its terms.
11. The Guaranty constitutes the legal, valid and binding
obligation of Guarantor, enforceable against Guarantor in accordance with
its terms.
12. Neither the execution and delivery by Company of any of the
Financing Documents to which it is a party, nor the performance by Company
of its obligations thereunder, will (i) result in a breach of, or
constitute a default under, the terms of any agreement or instrument that
has been identified to us by Company as material or (ii) violate (a) any
statutory law or regulation, (b) any decree or order of any court,
governmental agency or arbitrator that is known by us to be applicable to
Company or (c) the certificate of formation or limited liability agreement
of Company.
13. Neither the execution and delivery by Guarantor of the
Guaranty, nor the performance by Guarantor of its obligations thereunder,
will (i) result in a breach of, or constitute a default under, the terms of
any agreement or instrument binding on Guarantor filed as an exhibit to
Guarantor's Annual Report on Form 10-K for the year ended December 31, 1997
or (ii) violate (a) any statutory law or regulation, (b) any decree or
order of any court, governmental agency or arbitrator that is known by us
to be applicable to Guarantor or (iii) the certificate of formation or
agreement of limited partnership of Guarantor.
14. Neither the execution and delivery by General Partner, (i)
as the general partner of Guarantor or (ii) as the general partner of the
Guarantor in Guarantor's capacity as the sole member of Company, of any
Financing Document, nor the performance by General Partner, (y) as the
general partner of Guarantor or (z) as the general partner of Guarantor in
Guarantor's capacity as the sole member of Company, to cause Guarantor, in
Guarantor's capacity as a limited partnership or in Guarantor's capacity as
the sole member of the Company, to perform its obligations thereunder, will
(i) result in a breach of, or constitute a default under, the terms of the
Senior Notes or the Indenture pursuant to which the Senior Notes were
issued or any other agreement or instrument binding on Guarantor filed as
an exhibit to Guarantor's Annual Report on Form 10-K for the year ended
December 31, 1997 or (ii) violate (a) any statutory law or regulation, (b)
any decree or order of any court, governmental agency or arbitrator that is
known by us to be applicable to General Partner or (c) the certificate of
incorporation or bylaws of General Partner.
15. No consent, approval, authorization or waiver of, or notice
to or filing with, or other action by, any governmental authority is
required by any statutory law or regulation as a condition to the execution
and delivery by Company of any Financing Document to which it is a party,
or to the performance by Company of its obligations thereunder, except such
as have been obtained.
<PAGE> 59
SunTrust Bank, Atlanta
April 21, 1998
Page 4
16. No consent, approval, authorization or waiver of, or notice
to or filing with, or other action by, any governmental authority is
required by any statutory law or regulation as a condition to the execution
and delivery by Guarantor of the Guaranty, or the performance by Guarantor
of its obligations thereunder, except such as have been obtained.
17. No consent, approval, authorization or waiver of, or notice
to or filing with, or other action by, any governmental authority is
required by any statutory law or regulation as a condition to the execution
and delivery by General Partner, (i) as general partner of Guarantor, or
(ii) as the general partner of Guarantor in Guarantor's capacity as the
sole member of Company of any Financing Document or the performance by
General Partner, (y) as the general partner of Guarantor or (z) as the
general partner of Guarantor in Guarantor's capacity as the sole member of
Company, to cause Guarantor, in Guarantor's limited partnership capacity or
Guarantor's capacity as the sole member of the Company, as the case may be,
to perform its obligations thereunder, except as such as have been
obtained.
18. Neither Company nor Guarantor is an "investment company" or
a company "controlled" by an "investment company", as such terms are
defined in the Investment Company Act of 1940, as amended.
19. Neither Company nor Guarantor 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", as
such terms are defined in the Public Utility Holding Company Act of 1935,
as amended ("PUHCA").
The opinions expressed herein are further subject to, and qualified by,
the following assumptions, exceptions, qualifications and limitations:
A. The opinions expressed herein are limited exclusively to the laws of
the State of Texas, the GCL, the LLC Act, the LP Act and the federal statutory
laws and regulations of the United States of America. In respect to such laws,
in addition to the limitations set forth herein, such reference is limited to
laws which are normally applicable to the transactions provided for in the
Financing Documents. References herein to the "laws" of a jurisdiction are to
the laws of that jurisdiction, other than the statutes and ordinances, the
administrative decisions, and the rules and regulations of counties, towns,
municipalities and special political subdivisions (whether created or enabled
through legislative action at the federal, state or regional level), and
judicial decisions to the extent that they deal with any of the foregoing.
B. The opinions expressed in paragraphs 10 and 11 above are further
subject to the following:
(i) The enforceability of the Financial Documents may be limited or
affected by (a) bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or transfer or similar laws (including court decisions) relating to
or affecting the rights and remedies of creditors generally or providing for
the relief of debtors, (b) general principles of equity, including, without
limitation, requirements of good faith, fairness and reasonableness, and the
possible unavailability of specific performance or injunctive relief
(regardless of whether enforceability is considered in a proceeding in equity
or at law), and (c) the refusal of a particular court to grant (1) equitable
remedies, including, without limitation, specific performance and injunctive
relief, or (2) a particular remedy sought by Lender
<PAGE> 60
SunTrust Bank, Atlanta
April 21, 1998
Page 5
under any Financing Document as opposed to another remedy provided for therein
or another remedy available at law or in equity.
(ii) In rendering the opinions expressed in paragraphs 10 and 11 above, we
express no opinion as to the availability of certain equitable remedies,
including specific performance, and further, we express no opinion as to the
enforceability of any provisions of any Financing Document that:
(a) purports to (1) establish or satisfy evidentiary standards, (2)
waive or otherwise affect any right, notice or defense that cannot be
waived or otherwise affected as a matter of law, (3) negate the effect of
any course of dealing or any exercise, or failure or delay to exercise, any
right, power, privilege or remedy, (4) relate to indemnities, exculpation
or contribution to the extent prohibited by public policy or require
indemnification or contribution (as applicable) for liability on account of
fraud, negligence, gross negligence, willful misconduct, breach of the
performance of an agreed undertaking, violation of law or illegal conduct
(or the public policy underlying such action or conduct) of a Person
seeking or asserting the benefit of such indemnity, exculpation or
contribution provision, (5) limit liability of any Person to claims for
gross negligence or willful misconduct, (6) grant to Lender the right to
offset special deposits against obligations owed under any Financing
Document, (7) permit the enforcement of rights and remedies by or on behalf
of any Lender after the Obligations have been satisfied, (8) authorize
conclusive determinations by any party or to permit a party to make
determinations in its sole discretion, (9) restrict or otherwise affect
jurisdiction, venue, submission to, or acceptance of, a court's
jurisdiction, objections to the laying of venue or submission or acceptance
of jurisdiction, limitation periods or other procedural rights in any
proceeding, (10) waive or otherwise restrict or deny access to claims,
causes of action or remedies that may be available or asserted in any
action, (11) restrict access to legal or equitable remedies;
(b) states that (1) prohibition, illegality, invalidity or
unenforceability of any provision of such Financing Document in any
jurisdiction shall not (A) invalidate the remaining provisions of such
Financing Document or (B) affect that provision in any other jurisdiction,
or (2) the right of Lender to exercise any right or remedy on the basis of
any misrepresentation or breach of warranty is not affected by any action
by Lender;
(c) permits an action against any Person to be brought in the courts
of the State of Texas (1) if such Person has not been served with process
in that action in accordance with applicable rules of procedure or (2) if
the court in which the action is brought does not have jurisdiction of the
subject matter of the action;
(d) permits an action against any Person to be brought in the
federal courts of the United States of America sitting in the State of
Texas (1) if such Person has not been served with process in accordance
with applicable rules of procedure or (2) if those courts do not have
jurisdiction of the subject matter of the action;
(e) provides for irrevocability of the appointment of any agent or
attorney for service of process or otherwise; or
(f) requires the reimbursement to any Person whose breach of a
recognizable standard of performance or care in acting or failing timely or
otherwise properly to act substantially contributed to the basis for which
such reimbursement is sought;
<PAGE> 61
SunTrust Bank, Atlanta
April 21, 1998
Page 6
provided, however, in our opinion, the unenforceability of those remedial and
other provisions referred to in the preceding clauses does not render void or
invalid the remaining provisions of the Financing Documents and does not,
subject to the other qualifications, exceptions, limitations and assumptions
set forth herein, make the remedies generally afforded by the Financing
Documents inadequate for the realization of the substantive principal legal
benefits purported to be provided by the Financing Documents (except for the
economic consequences resulting from any delay or procedure imposed by
applicable law).
(iii) The opinions expressed are subject to the further exception
that the enforceability of the several Financing Documents may be subject to
standards of reasonableness, care and diligence and of "good faith" limitations
and obligations, such as those provided in Sections 1.102(c), 1.203 and 1.208
of the Uniform Commercial Code as adopted and amended in the State of Texas.
C. We do not express any opinion with respect to any exhibit or schedule
to, or other agreement referred to in, any of the Financing Documents.
D. In rendering the foregoing opinions, we have not, pursuant to our
engagement, endeavored to express any opinions, and we express no opinions, and
none are intended to be implied hereby nor shall be inferred herefrom, as to
(i) the various state and federal laws, statutes, regulations, interpretations,
opinions, directives, orders, rulings, authorities or similar matters
regulating or governing Lender (collectively, the "Rules") and/or its entry
into, execution, delivery or performance of the Financing Documents, or the
transactions provided for therein, or the conduct of its business related
thereto, or (ii) Lender's compliance with any of the Rules in connection with
any Financing Document, or the transactions provided for therein.
E. In rendering the opinions expressed in paragraph 1 above relating to
the existence and good standing of Company, we have relied solely upon a review
of the Certificate of State of Delaware, Office of Secretary of State dated
April 20, 1998 (Delaware existence and good standing).
F. In rendering the opinions expressed in paragraph 2 above relating to
the existence, good standing and foreign qualification of Guarantor, we have
relied solely upon a review of certificates of public officials as follows: (i)
Certificate of State of Delaware, Office of Secretary of State dated April 20,
1998 (Delaware existence and good standing); and (ii) Certificate of State of
Texas, Secretary of State dated April 20, 1998 (Texas foreign qualification).
G. In rendering the opinions expressed in paragraph 3 above relating to
the existence, good standing and foreign qualification and good standing of
General Partner, we have relied solely upon a review of certificates of public
officials as follows: (i) Certificate of State of Delaware, Office of Secretary
of State dated April 20, 1998 (Delaware existence and good standing); (ii)
Certificate of State of Texas, Secretary of State dated April 20, 1998 (Texas
foreign qualification); and (iii) Certificate of the Office of the Comptroller
of Public Accounts of the State of Texas dated April 20, 1998 (Texas good
standing).
H. In rendering the opinions expressed in paragraph 19 above, we have
assumed that each Affiliate of Company (other than Guarantor) and of Guarantor
(other than Company) is exempt from regulation under PUHCA.
<PAGE> 62
SunTrust Bank, Atlanta
April 21, 1998
Page 7
I. As used herein, the phrase "to our knowledge" or words of similar
import means conscious awareness of facts or other information by the lawyers
in our firm who, based on our records as of 12:00 Noon on April 20, 1998 have
devoted substantive attention to legal matters on behalf of Company, Guarantor
or General Partner since January 1, 1997.
The opinions expressed herein are solely for the benefit of, any may only
be relied upon by, Agent and present and future Lenders and Participants, in
connection with the above transaction. Neither this opinion letter nor any
except hereof (nor any reproduction of any of the foregoing) may be furnished
to (except in connection with a legal or arbitral proceeding or as may be
required by applicable law, and in any such events, as shall be directed and
required incident thereto pursuant to a duly issued subpoena, writ, order or
other legal process), or relied upon by, any other Person without the prior
written consent of this Firm. The opinions expressed herein are as of the date
hereof (and not as of any other date, including, without limitation, the
effective date of any Financing Document if a date other than the date hereof)
or, to the extent a reference to a certificate or other document is made
herein, to such date, and we make no undertaking to amend or supplement such
opinions as facts and circumstances come to our attention or changes in the law
occur which could affect such opinions.
Very truly yours,
/s/ FULBRIGHT & JAWORSKI L.L.P.
-------------------------------
Fulbright & Jaworski L.L.P.
<PAGE> 63
EXHIBIT E
ASSIGNMENT AGREEMENT
THIS AGREEMENT is entered into as of _________________ between
____________________ ("ASSIGNOR"), and ________________________ ("ASSIGNEE").
TEPPCO COLORADO, LLC, a Delaware limited liability company
("BORROWER", certain Lenders, and SUNTRUST BANK, ATLANTA (in its capacity as
Agent for Lenders, "AGENT"), are party to the Credit Agreement (as renewed,
extended, amended, or restated, the "CREDIT AGREEMENT") dated as of April 21,
1998, all of the defined terms in which have the same meanings when used, unless
otherwise defined, in this agreement. This agreement is entered into as required
by SECTION 12.10(d) of the Credit Agreement and is not effective (unless
otherwise provided in that section) until consented to by Borrower and Agent,
which consents may not under the Credit Agreement be unreasonably withheld.
ACCORDINGLY, for adequate and sufficient consideration, Assignor and
Assignee agree as follows:
1. ASSIGNMENT. By this agreement, and effective as of ____________
(which must be at lease five Business Days after the execution and delivery of
this agreement to both Agent and, if required, Borrower, for consent, the
"EFFECTIVE DATE"), Assignor sells and assigns to Assignee (without recourse to
Assignor) and Assignee purchases and assumes from Assignor a % interest (the
"ASSIGNED INTEREST"), which, if not equal to 100%, must be a percentage, when
computed as an aggregate dollar amount, that is at least $5,000,000 in and to
all of Assignor's Rights and obligations under the Credit Agreement as of the
Effective Date, including, without limitation, the Assigned Interest in (a)
Assignor's Commitment as of the Effective Date, (b) each Note held by Assignor
as of the Effective Date, (c) all Principal Debt owed to Assignor on the
Effective Date, and (d) all interest accruing in respect of the Assigned
Interest after the Effective Date.
2. ASSIGNOR PROVISIONS. Assignor (a) represents and warrants to
Assignee that, as of the Effective Date, Assignor is the legal and beneficial
owner of the Assigned Interest, which is free and clear of any adverse claim,
and (b) makes no representation or warranty to Assignee and assumes no
responsibility to Assignee with respect to (i) any statements, warranties, or
representations made in or in connection with any Credit Document, (ii) the
execution, legality, validity, enforceability, genuineness, sufficiency, or
value of any Credit Document, or (iii) the financial condition of Parent or any
Company or the performance or observance by any Company of any of its
obligations under any Credit Document.
3. ASSIGNEE PROVISIONS. Assignee (a) represents and warrants to
Assignor, Borrower, and Agent that Assignee is legally authorized to enter into
this agreement, (b) confirms that it has received a copy of the Credit
Agreement, copies of the Current Financials, and such other documents and
information as it deems appropriate to make its own credit analysis and decision
to enter into this agreement, (c) agrees with Assignor, Borrower, and Agent that
Assignee shall (independently and without reliance upon Agent, Assignor, or any
other Lender and based on such documents and information as Assignee deems
appropriate at the time) continue to make its own credit decisions in taking or
not taking action under the Credit Documents, (d) appoints and authorizes Agent
to take such action as Agent on its behalf and to exercise such powers under the
Credit Documents as are delegated to Agent by the terms of the Credit Documents
and all other reasonably-incidental powers, and (e) agrees with Assignor,
Borrower and Agent that Assignee shall perform and comply with all provisions of
the Credit Documents applicable to Lenders in accordance with their respective
terms. If Assignee is not organized under the laws of the United States of
America or one of its states, it (i) represents and warrants to Assignor, Agent,
and
EXHIBIT E
<PAGE> 64
Borrower that no Taxes are required to be withheld by Assignor, Agent, or
Borrower with respect to any payments to be made to it in respect of the
Obligation, and it has furnished to Agent and Borrower two duly completed copies
of either U.S. Internal Revenue Service Form 4224, Form 1001, Form W-8, or any
other form acceptable to Agent that entitles Assignee to exemption from U.S.
federal withholding Tax on all interest payments under the Credit Documents,
(ii) covenants to provide Agent and Borrower a new Form 4224, Form 1001, Form
W-8, or other form acceptable to Agent upon the expiration or obsolescence of
any previously delivered form according to law, duly executed and completed by
it, and to comply from time to time with all laws with regard to the withholding
Tax exemption, and (iii) agrees with Agent and Borrower that, if any of the
foregoing is not true or the applicable forms are not provided, then Agent and
Borrower (without duplication) may deduct and withhold from interest payments
under the Credit Documents any United States federal-income Tax at the full rate
applicable under the IRC.
4. CREDIT AGREEMENT AND COMMITMENTS. From and after the Effective Date
(a) Assignee shall be a party to the Credit Agreement and (to the extent
provided in this agreement) have the Rights and obligations of a Lender under
the Credit Documents and (b) Assignor shall (to the extent provided in this
agreement) relinquish its Rights and be released from its obligations under the
Credit Documents. On the Effective Date, after giving effect to this agreement,
but without giving effect to any other assignments that have not yet become
effective, Assignor's total Commitment (which, if positive, must be at least
$10,000,000) and Assignee's total Commitment will be $_________________.
5. NOTES. Assignor and Assignee request Borrower to issue new Notes to
Assignor and Assignee in the amounts of their respective Commitments under
PARAGRAPH 4 above and otherwise issued in accordance with the Credit Agreement.
Upon delivery of those Notes, Assignor shall return to Borrower all Notes
previously delivered to Assignor under the Credit Agreement.
6. PAYMENTS AND ADJUSTMENTS. From and after the Effective Date, Agent
shall make all payments in respect of the Assigned Interest (including payments
of principal, interest, fees, and other amounts) to Assignee. Assignor and
Assignee shall make all appropriate adjustments in payments for periods before
the Effective Date by Agent or with respect to the making of this assignment
directly between themselves.
7. CONDITIONS PRECEDENT. PARAGRAPHS 1 through 6 above are not effective
until (a) counterparts of this agreement are executed and delivered by Assignor
and Assignee to (and are executed in the spaces below by) Borrower and Agent and
(b) Agent receives from Assignor a $2,500 processing fee.
8. INCORPORATED PROVISIONS. Although this agreement is not a Credit
Document, the provisions of SECTIONS 1 and 12 of the Credit Agreement applicable
to Credit Documents are incorporated into this instrument by reference as if
this agreement were a Credit Document and those provisions were set forth in
this agreement verbatim.
9. COMMUNICATIONS. For purposes of SECTION 12.2 of the Credit
Agreement, Assignee's address, telephone number, and telecopy number (until
changed under that section) are beside its signature below.
10. AMENDMENTS, ETC. No amendment, waiver, or discharge to or under
this agreement is valid unless in a writing that is signed by the party against
whom it is sought to be enforced and is otherwise in conformity with the
requirements of the Credit Agreement.
11. ENTIRETY. THIS AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN
ASSIGNOR AND ASSIGNEE ABOUT ITS SUBJECT MATTER AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
EXHIBIT E
<PAGE> 65
SUBSEQUENT ORAL AGREEMENTS OF ASSIGNOR AND ASSIGNEE. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN ASSIGNOR AND ASSIGNEE.
12. PARTIES. This agreement binds and benefits Assignor, Assignee, and
their respective successors and assigns that are permitted under the Credit
Agreement.
EXECUTED as of the date first stated in this Assignment Agreement.
[ASSIGNOR] [ASSIGNEE]
By By
------------------------------ -----------------------------
Name: Name:
----------------------- -----------------------
Title: Title:
--------------------- ----------------------
Address
------------------------
Phone
---------------------------
Fax
-----------------------------
As of the Effective Date, Borrower and Agent consent to this agreement
and the transactions contemplated in it.
TEPPCO COLORADO, LLC, as Maker SUNTRUST BANK, ATLANTA, as Agent
By: TE PRODUCTS PIPELINE COMPANY,
LIMITED PARTNERSHIP, as Sole Member By
-----------------------------
By: TEXAS EASTERN PRODUCTS Name:
PIPELINE COMPANY, as General -----------------------
Partner Title:
----------------------
By By
------------------------------ -----------------------------
Name: Name:
----------------------- -----------------------
Title: Title:
--------------------- ----------------------
EXHIBIT E
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000857644
<NAME> TEPPCO PARTNERS, L.P.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 26,796
<SECURITIES> 2,105
<RECEIVABLES> 13,263
<ALLOWANCES> 0
<INVENTORY> 22,174
<CURRENT-ASSETS> 68,261
<PP&E> 744,483
<DEPRECIATION> 176,058
<TOTAL-ASSETS> 690,391
<CURRENT-LIABILITIES> 25,788
<BONDS> 389,699
0
0
<COMMON> 0
<OTHER-SE> 229,654
<TOTAL-LIABILITY-AND-EQUITY> 690,391
<SALES> 0
<TOTAL-REVENUES> 50,205
<CGS> 0
<TOTAL-COSTS> 30,691
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,156
<INCOME-PRETAX> 13,289
<INCOME-TAX> 0
<INCOME-CONTINUING> 13,155
<DISCONTINUED> 0
<EXTRAORDINARY> (72,767)
<CHANGES> 0
<NET-INCOME> (59,612)
<EPS-PRIMARY> (3.75)
<EPS-DILUTED> (3.75)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001045548
<NAME> TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNER.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 26,796
<SECURITIES> 2,105
<RECEIVABLES> 13,263
<ALLOWANCES> 0
<INVENTORY> 22,174
<CURRENT-ASSETS> 68,261
<PP&E> 744,483
<DEPRECIATION> 176,058
<TOTAL-ASSETS> 690,391
<CURRENT-LIABILITIES> 25,788
<BONDS> 389,699
0
0
<COMMON> 0
<OTHER-SE> 229,654
<TOTAL-LIABILITY-AND-EQUITY> 690,391
<SALES> 0
<TOTAL-REVENUES> 50,205
<CGS> 0
<TOTAL-COSTS> 30,691
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,156
<INCOME-PRETAX> 13,289
<INCOME-TAX> 0
<INCOME-CONTINUING> 13,155
<DISCONTINUED> 0
<EXTRAORDINARY> (72,767)
<CHANGES> 0
<NET-INCOME> (59,612)
<EPS-PRIMARY> (3.75)
<EPS-DILUTED> (3.75)
</TABLE>
