<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 September 30, 1999
Commission File No. 1-10403
TEPPCO PARTNERS, L.P.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 76-0291058
(State of Incorporation (I.R.S. Employer
or Organization) Identification Number)
</TABLE>
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 the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
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<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TEPPCO PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ...................... $ 31,529 $ 47,423
Short-term investments ......................... 3,910 3,269
Accounts receivable, trade ..................... 182,424 113,541
Inventories .................................... 18,535 17,803
Other .......................................... 4,429 3,909
------------ ------------
Total current assets ........................ 240,827 185,945
------------ ------------
Property, plant and equipment, at cost
(Net of accumulated depreciation and
amortization of $212,924 and $193,858) ......... 711,868 671,611
Investments ...................................... 5,244 6,490
Intangible assets ................................ 35,405 36,842
Other assets ..................................... 16,932 16,031
------------ ------------
Total assets ................................ $ 1,010,276 $ 916,919
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable and accrued liabilities ....... $ 179,351 $ 117,933
Accounts payable, general partner .............. 4,275 2,815
Accrued interest ............................... 6,408 13,039
Other accrued taxes ............................ 8,541 6,739
Other .......................................... 16,587 9,649
------------ ------------
Total current liabilities ................... 215,162 150,175
------------ ------------
Senior Notes ..................................... 389,745 389,722
Other long-term debt ............................. 66,000 38,000
Other liabilities and deferred credits ........... 3,574 3,407
Minority interest ................................ 3,396 3,393
Redeemable Class B Units held by related party ... 105,507 105,036
Partners' capital:
General partner's interest ....................... 390 (380)
Limited partners' interests ...................... 226,502 227,566
------------ ------------
Total partners' capital ..................... 226,892 227,186
------------ ------------
Total liabilities and partners' capital ..... $ 1,010,276 $ 916,919
============ ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
2
<PAGE> 3
TEPPCO PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Operating revenues:
Sales of crude oil and petroleum products ........... $ 497,758 $ -- $ 1,118,288 $ --
Transportation - Refined products ................... 33,448 35,316 92,397 90,533
Transportation - LPGs ............................... 9,484 10,625 46,173 42,202
Transportation - Crude oil and NGLs ................. 2,963 -- 8,499 --
Mont Belvieu operations ............................. 3,329 2,848 9,584 7,936
Other - net ......................................... 7,386 5,440 20,868 15,323
------------ ------------ ------------ ------------
Total operating revenues .......................... 554,368 54,229 1,295,809 155,994
------------ ------------ ------------ ------------
Costs and expenses:
Purchases of crude oil and petroleum products ....... 490,604 -- 1,098,634 --
Operating, general and administrative ............... 24,358 18,366 69,661 51,182
Operating fuel and power ............................ 8,238 7,550 23,225 20,315
Depreciation and amortization ....................... 8,163 6,651 24,456 19,356
Taxes - other than income taxes ..................... 2,599 1,940 7,942 6,976
------------ ------------ ------------ ------------
Total costs and expenses .......................... 533,962 34,507 1,223,918 97,829
------------ ------------ ------------ ------------
Operating income .................................. 20,406 19,722 71,891 58,165
Interest expense ...................................... (8,085) (7,550) (23,407) (22,227)
Interest capitalized .................................. 705 121 1,194 638
Other income - net .................................... 481 571 1,612 2,251
------------ ------------ ------------ ------------
Income before minority interest and
extraordinary loss on debt extinguishment ...... 13,507 12,864 51,290 38,827
Minority interest ..................................... (137) (130) (519) (392)
------------ ------------ ------------ ------------
Income before extraordinary loss
on debt extinguishment ........................... 13,370 12,734 50,771 38,435
------------ ------------ ------------ ------------
Extraordinary loss on debt extinguishment,
net of minority interest ......................... -- -- -- (72,767)
------------ ------------ ------------ ------------
Net income (loss) ................................. $ 13,370 $ 12,734 $ 50,771 $ (34,332)
============ ============ ============ ============
Basic and diluted income (loss) per Limited Partner
and Class B Unit:
Income before extraordinary loss .................. $ 0.32 $ 0.39 $ 1.34 $ 1.19
Extraordinary loss on debt extinguishment ......... -- -- -- (2.26)
------------ ------------ ------------ ------------
Net income (loss) ................................. $ 0.32 $ 0.39 $ 1.34 $ (1.07)
============ ============ ============ ============
Weighted average Limited Partner and Class B Units
outstanding ........................................ 32,917 29,000 32,917 29,000
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
3
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TEPPCO PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) .......................................................... $ 50,771 $ (34,332)
Adjustments to reconcile net income (loss) to cash provided by operating
activities:
Depreciation and amortization ............................................. 24,456 19,356
Extraordinary loss on early extinguishment of debt, net
of minority interest ................................................... -- 72,767
Gain on sale of property, plant and equipment ............................. -- (356)
Equity in loss of affiliate ............................................... 339 182
Decrease (increase) in accounts receivable, trade ......................... (68,883) 3,788
Increase in inventories ................................................... (732) (795)
Decrease (increase) in other current assets ............................... (520) 1,818
Increase (decrease) in accounts payable and accrued expenses .............. 64,987 (5,427)
Other ..................................................................... (1,286) (1,615)
------------ ------------
Net cash provided by operating activities ............................... 69,132 55,386
------------ ------------
Cash flows from investing activities:
Proceeds from cash investments ............................................ 3,840 2,105
Purchases of cash investments ............................................. (3,235) --
Purchase of fractionator assets and related intangible assets ............. -- (40,000)
Proceeds from the sale of property, plant and equipment ................... -- 525
Purchase of crude oil system .............................................. (2,250) --
Capital expenditures ...................................................... (60,427) (15,200)
------------ ------------
Net cash used in investing activities ................................... (62,072) (52,570)
------------ ------------
Cash flows from financing activities:
Principal payment, First Mortgage Notes ................................... -- (326,512)
Prepayment premium, First Mortgage Notes .................................. -- (70,093)
Issuance of Senior Notes .................................................. -- 389,694
Debt issuance costs, Senior Notes ......................................... -- (3,651)
Proceeds from term loan ................................................... 25,000 38,000
Proceeds from revolving credit agreement .................................. 8,000 --
Repayments on revolving credit agreement .................................. (5,000) --
Distributions ............................................................. (50,954) (42,097)
------------ ------------
Net cash used in financing activities ................................... (22,954) (14,659)
------------ ------------
Net decrease in cash and cash equivalents ................................... (15,894) (11,843)
Cash and cash equivalents at beginning of period ............................ 47,423 43,961
------------ ------------
Cash and cash equivalents at end of period .................................. $ 31,529 $ 32,118
============ ============
Supplemental disclosure of cash flows:
Interest paid during the period (net of capitalized interest) ............... $ 28,501 $ 26,210
============ ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
4
<PAGE> 5
TEPPCO PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION
TEPPCO Partners, L.P. (the "Partnership"), a Delaware limited
partnership, was formed in March 1990. The Partnership operates through TE
Products Pipeline Company, Limited Partnership (the "Products OLP") and TCTM,
L.P. (the "Crude Oil OLP"). Collectively the Products OLP and the Crude Oil OLP
are referred to as "the Operating Partnerships." The Partnership owns a 99%
interest as the sole limited partner interest in both the Products OLP and the
Crude Oil OLP. Texas Eastern Products Pipeline Company (the "Company" or
"General Partner"), an indirect wholly-owned subsidiary of Duke Energy
Corporation ("Duke Energy"), owns a 1% general partner interest in the
Partnership and 1% general partner interest in each Operating Partnership. The
Company, as general partner, performs all management and operating functions
required for the Partnership pursuant to the Agreements of Limited Partnership
of the Partnership, the Products OLP and the Crude Oil OLP (the "Partnership
Agreements"). The general partner is reimbursed by the Partnership for all
reasonable direct and indirect expenses incurred in managing the Partnership.
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 September 30, 1999, and the results of operations and cash
flows for the periods presented. The results of operations for the nine months
ended September 30, 1999, are not necessarily indicative of results of
operations for the full year 1999. 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, 1998. Certain amounts from the prior year have
been reclassified to conform to current presentation.
The Partnership operates in two industry segments: refined products and
liquefied petroleum gases ("LPGs") transportation, and crude oil and natural gas
liquids ("NGLs") transportation and marketing. The Partnership's reportable
segments offer different products and services and are managed separately
because each requires different business strategies. The crude oil and NGLs
transportation segment was acquired as a unit, and the management at the time of
the acquisition was retained. The interstate transportation operations of both
segments, including rates charged to customers, are subject to regulations
prescribed by the Federal Energy Regulatory Commission ("FERC"). Refined
products, LPGs, crude oil and NGLs are referred to herein, collectively, as
"petroleum products" or "products."
Basic net income per Unit is computed by dividing net income, after
deduction of the general partner's interest, by the weighted average number of
Limited Partner and Class B Units outstanding (a total of 32,916,547 Units and
29,000,000 Units as of September 30, 1999 and 1998, respectively). 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 $6.5 million (12.89%) of the
net income for the nine months ended September 30, 1999, and $3.2 million
(9.38%) of the net loss for the nine months ended September 30, 1998.
Diluted net income per Unit is similar to the computation of basic net
income per 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 September 30, 1999 and 1998, the denominator was
increased by 26,142 Units and 41,884 Units, respectively. For the nine months
ended September 30, 1999 and 1998, the denominator was increased by 19,595 Units
and 46,468 Units, respectively.
5
<PAGE> 6
TEPPCO PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
NOTE 2. NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This statement establishes
standards for and disclosures of derivative instruments and hedging activities.
In July 1999, the FASB issued SFAS No. 137 to delay the effective date of SFAS
No. 133 until fiscal years beginning after June 15, 2000. The Partnership
expects to adopt this standard effective January 1, 2001. The Partnership has
not determined the impact of this statement on its financial condition and
results of operations.
NOTE 3. RELATED PARTY TRANSACTIONS
As of March 31, 1998, TEPPCO Colorado, LLC ("TEPPCO Colorado"), a
wholly-owned subsidiary of the Products OLP, 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 an
Operations and Management Agreement, whereby DEFS will operate and maintain the
fractionation facilities. TEPPCO Colorado pays DEFS a set volumetric rate for
all fractionated volumes delivered to DEFS.
Effective November 1, 1998, the Crude Oil OLP, through its wholly-owned
subsidiary TEPPCO Crude Oil, LLC ("TCO"), acquired substantially all of the
assets of Duke Energy Transport and Trading Company ("DETTCO") from Duke Energy
for approximately $106 million. In consideration for such assets, Duke Energy
received 3,916,547 Class B Limited Partnership Units ("Class B Units"). The
Class B Units are substantially identical to the 29,000,000 Limited Partner
Units, except they are not listed on the New York Stock Exchange. The Class B
Units may be convertible into Limited Partner Units upon approval by the Limited
Partner Unitholders. The Company does not currently anticipate seeking approval
for the conversion of the Class B Units prior to March 2000. After March 2000,
the holder of the Class B Units will have the right to sell them to the
Partnership at 95.5% of the market price of the Limited Partner Units at the
time of sale. As a result of such option, the Class B Units were not included in
partners' capital at September 30, 1999. Collectively, the Limited Partner Units
and Class B Units are referred to as "Units." The transaction was accounted for
under the purchase method of accounting. Accordingly, the results of the
acquisition are included in the consolidated statements of income for periods
from November 1, 1998.
NOTE 4. INVESTMENTS
SHORT-TERM INVESTMENTS
The Partnership routinely invests cash in liquid short-term investments
as part of its cash management program. Investments with maturities at date of
purchase of 90 days or less are considered cash equivalents. At September 30,
1999, short-term investments included $3.9 million of investment-grade corporate
notes, which mature within one year. Such investments at September 30, 1999
included a $0.9 million investment in Duke Power Company corporate notes. 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 September 30, 1999.
6
<PAGE> 7
TEPPCO PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
LONG-TERM INVESTMENTS
At September 30, 1999, the Partnership had $5.2 million invested in
investment-grade corporate notes, which have varying maturities through 2004.
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 September 30, 1999.
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>
SEPTEMBER 30, DECEMBER 31,
1999 1998
---------- ----------
<S> <C> <C>
Gasolines .............................. $ 924 $ 4,224
Propane ................................ 576 1,503
Butanes ................................ 2,392 1,654
Fuel oil ............................... 524 564
Crude oil .............................. 7,787 2,886
Other products ......................... 2,541 3,306
Materials and supplies ................. 3,791 3,666
---------- ----------
Total ........................ $ 18,535 $ 17,803
========== ==========
</TABLE>
The costs of inventories were lower than market at September 30, 1999,
and December 31, 1998.
NOTE 6. LONG TERM DEBT
SENIOR NOTES
On January 27, 1998, the Products OLP 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 Products OLP, 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. The Senior Notes are unsecured obligations of the Products OLP and
will rank on a parity with all other unsecured and unsubordinated indebtedness
of the Products OLP. 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.
7
<PAGE> 8
TEPPCO PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
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. TEPPCO
Colorado paid 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 SunTrust 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 Products OLP is guarantor on the loan.
On May 17, 1999, the Products OLP entered into a $75 million term loan
agreement to finance construction of three new pipelines between the
Partnership's terminal in Mont Belvieu, Texas and Port Arthur, Texas. The loan
agreement has a term of five years. SunTrust Bank is the administrator of the
loan. Approximately $39.7 million of construction cost was included in capital
expenditures during the first nine months of 1999, with a total of approximately
$44.6 million expected to be incurred in 1999, and the remainder in 2000. At
September 30, 1999, $25 million was outstanding under the term loan agreement.
Principal will be paid quarterly as follows, with the remaining principal
balance payable on May 17, 2004.
<TABLE>
<CAPTION>
QUARTERLY PERIODS ENDING PAYMENT AMOUNT
------------------------ --------------
<S> <C> <C>
June 2001 through March 2002 $2.50 million
June 2002 through March 2003 $3.75 million
June 2003 through March 2004 $5.00 million
</TABLE>
The interest rate for the $75 million term loan is based on the
borrower's option of either SunTrust Bank's prime rate, the federal funds rate
or LIBOR rate in effect at the time of the borrowings and is adjusted monthly,
bimonthly, quarterly or semi-annually. Interest is payable quarterly from the
time of borrowing. The current interest rate for amounts outstanding under the
term loan is 6.33%. Commitment fees for the term loan totaled approximately
$47,000 for the period from May 17, 1999 through September 30, 1999.
WORKING CAPITAL FACILITIES
On May 17, 1999, the Products OLP entered into a $25 million revolving
credit agreement and TCO entered into a $30 million revolving credit agreement.
SunTrust Bank is the administrative agent on both revolving credit agreements.
The $25 million revolving credit agreement has a five year term and the $30
million revolving credit agreement has a three year term. The interest rate on
both agreements is based on the borrower's option of either SunTrust Bank's
prime rate, the federal funds rate or LIBOR rate in effect at the time of the
borrowings and is payable quarterly. Interest rates are adjusted monthly,
bimonthly, quarterly or semi-annually. The Products OLP has not made any
borrowings under this revolving credit facility. TCO had $3 million principal
amount outstanding under its revolving credit agreement as of September 30,
1999. Commitment fees for the revolving credit agreements totaled approximately
$50,000 for the period from May 17, 1999 through September 30, 1999.
In connection with the purchase of the DETTCO assets by TCO, Duke
Capital also agreed to guarantee the payment by TCO and its subsidiaries under
certain commercial contracts between TCO and its subsidiaries and third parties.
Duke Capital will provide up to $100 million of guarantee credit to TCO and its
subsidiaries for a period of three years from November 30, 1998. Pursuant to
this agreement, the Partnership has agreed to pay Duke Capital a commitment fee
of $100,000 per year.
8
<PAGE> 9
TEPPCO PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
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 August 6, 1999, the Partnership paid the second quarter cash
distribution of $0.475 per Limited Partner Unit and Class B Unit to Unitholders
of record on July 30, 1999. Additionally, on October 18, 1999, the Partnership
declared a cash distribution of $0.475 per Limited Partner Unit and Class B Unit
for the quarter ended September 30, 1999. The distribution was paid on November
5, 1999, to Unitholders of record on October 29, 1999.
The Company receives incremental incentive distributions of 15%, 25%
and 50% of the amount by which quarterly distributions of Available Cash exceed
$0.275, $0.325 and $0.45 per Limited Partner Unit and Class B Unit,
respectively. During the nine months ended September 30, 1999 and 1998,
incentive distributions paid to the Company totaled $5.4 million and $3.6
million, respectively.
NOTE 8. SEGMENT DATA
The Partnership operates in two industry segments: refined products and
LPGs transportation, which operates through the Products OLP; and crude oil and
NGLs transportation and marketing, which operates through the Crude Oil OLP.
Operations of the Products OLP consist of interstate transportation,
storage and terminaling of petroleum products; short-haul shuttle transportation
of LPGs at the Mont Belvieu, Texas complex; sale of product inventory;
fractionation of natural gas liquids and other ancillary services. The Products
OLP is one of the largest pipeline common carriers of refined petroleum products
and LPGs in the United States. The Partnership owns and operates an approximate
4,300-mile pipeline system extending from southeast Texas through the central
and midwestern United States to the northeastern United States.
The Crude Oil OLP gathers, stores, transports and markets crude oil,
principally in Oklahoma and Texas; operates two trunkline NGL pipelines in South
Texas; and distributes lube oil to industrial and commercial accounts. The Crude
Oil OLP's gathering, transportation and storage assets include approximately
2,200 miles of pipeline and 1.3 million barrels of storage. The crude oil and
NGLs transportation and marketing segment was added with the acquisition from
DETTCO effective November 1, 1998.
9
<PAGE> 10
TEPPCO PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
The below table includes interim financial information by business
segment for the quarter and nine months ended September 30, 1999. Comparative
data has not been included as the Partnership operated as one business segment
prior to November 1, 1998.
<TABLE>
<CAPTION>
(in thousands): Products Crude Oil
OLP OLP Consolidated
------------ ------------ ------------
<S> <C> <C> <C>
Three Months Ended September 30, 1999:
Unaffiliated revenues ...................... $ 53,647 $ 500,721 $ 554,368
Operating expenses, including power ........ 29,670 496,129 525,799
Depreciation and amortization expense ...... 6,774 1,389 8,163
------------ ------------ ------------
Operating income ...................... 17,203 3,203 20,406
Interest expense, net ...................... (7,287) (93) (7,380)
Other income, net .......................... 243 101 344
------------ ------------ ------------
Net income ............................ $ 10,159 $ 3,211 $ 13,370
============ ============ ============
Nine Months Ended September 30, 1999:
Unaffiliated revenues ...................... $ 169,022 $ 1,126,787 $ 1,295,809
Operating expenses, including power ........ 84,713 1,114,749 1,199,462
Depreciation and amortization expense ...... 20,307 4,149 24,456
------------ ------------ ------------
Operating income ...................... 64,002 7,889 71,891
Interest expense, net ...................... (22,098) (115) (22,213)
Other income, net .......................... 817 276 1,093
------------ ------------ ------------
Net income ............................ $ 42,721 $ 8,050 $ 50,771
============ ============ ============
As of September 30, 1999:
Identifiable assets ........................ $ 711,527 $ 298,749 $ 1,010,276
Accounts receivable, trade ................. 15,606 166,818 182,424
Accounts payable and accrued liabilities ... $ 5,794 $ 173,557 $ 179,351
</TABLE>
NOTE 9. 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.
A Feasibility Study,
10
<PAGE> 11
TEPPCO PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
which includes the Partnership's proposed remediation program, has been approved
by IDEM. IDEM will issue a Record of Decision formally approving the remediation
program. After the Record of Decision has been issued, the Partnership will
enter into an Agreed Order for the continued operation and maintenance of the
program. The Partnership will evaluate the conditions of the Record of Decision
and make adjustments to the program as required. The amount accrued for the
program was approximately $0.4 million at September 30, 1999. In the opinion of
the Company, the completion of the remediation program being 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 is
utilizing both internal and external resources to identify, test, remediate or
replace all critical known or discovered non-compliant computerized systems and
applications. 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 Partnership has incurred
approximately $4.5 million of costs related to the Year 2000 issue. The Company
estimates the remaining amounts required to address the Year 2000 issue will be
as much as approximately $1.7 million. A portion of such costs would have been
incurred as part of normal system and application upgrades. In certain cases,
the timing of expenditures has been accelerated due to the Year 2000 issue.
Although the Company believes this estimate to be reasonable, due to the
complexities of the Year 2000 issue, there can be no assurance that the actual
costs related to the Year 2000 issue will not be significantly greater.
The Partnership has adopted a three-phase Year 2000 program consisting
of: Phase I - Preliminary Assessment; Phase II - Detailed Assessment and
Remediation Planning; and Phase III - Remediation Activities and Testing. The
Products OLP has completed Phase I and Phase II; and Phase III is approximately
95% complete. The Crude Oil OLP has completed Phase I; Phase II is approximately
93% complete; and Phase III is approximately 85% complete. Remediation
Activities and Testing of all major process controls and computer systems have
been completed. Remediation Activities and Testing of other software
applications and hardware will be complete by mid-December 1999.
With respect to its third-party relationships, the Partnership has
contacted its primary vendors, suppliers and service providers to assess their
software and hardware products previously sold to the Partnership and other
aspects of their state of Year 2000 readiness. Information continues to be
updated regularly, thus the Partnership anticipates receiving additional
information in the near future that will assist in determining the extent to
which the Partnership may be vulnerable to those third parties' failure to
identify and remediate their Year 2000 issues. However, there can be no
assurance that the systems or products of other companies, on which the
Partnership's systems rely, will be timely converted, or converted in a manner
that is compatible with the Partnership's systems, or that any such failures by
other companies would not have a material adverse effect on the Partnership.
Despite the Partnership's determined efforts to address and remediate
its Year 2000 issue, there can be no assurance that all process controls and
business computer systems will continue without interruption through January 1,
2000, and beyond. The complexity of identifying and testing all embedded
microprocessors that are installed in hardware throughout the products pipeline
system and crude oil system used for process or flow control, transportation,
security, communication and other systems may result in unforeseen operational
system shutdowns. Although the amount of potential liability and lost revenue
cannot be estimated, failures that result in substantial disruptions of business
activities could have a material adverse effect on the Partnership. In order to
mitigate
11
<PAGE> 12
TEPPCO PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
potential disruptions, the Partnership will prepare contingency plans
for its critical systems, processes and external relationships by December 1,
1999.
Tariff rates of interstate oil pipeline companies are currently
regulated by the FERC, primarily through an index methodology, whereby a
pipeline company is allowed to change its rates based on the change from
year-to-year in the Producer Price Index for finished goods less 1% ("PPI
Index"). In the alternative, interstate oil pipeline companies may elect to
support rate filings by using a cost-of-service methodology, competitive market
showings ("Market Based Rates") or agreements between shippers and the oil
pipeline company that the rate is acceptable ("Settlement Rates").
In May 1999, the Products OLP filed an application with the FERC to
charge Market Based Rates for substantially all refined products transportation
tariffs. The FERC approved a request of the Products OLP waiving the requirement
to adjust refined products transportation tariffs pursuant to the PPI Index
while its Market Based Rates application is under review. Under the PPI Index,
refined products transportation rates in effect on June 30, 1999 would have been
reduced by approximately 1.83% effective July 1, 1999. If any portion of the
Market Based Rates application is denied by the FERC, the Products OLP has
agreed to refund, with interest, such amounts collected under the tariff rates
in excess of the PPI Index. As a result of the refund obligation potential, the
Partnership has deferred all revenue recognition of rates charged in excess of
the PPI Index. At September 30, 1999, the amount for accrued rate refunds
totaled approximately $0.4 million.
In July 1999, certain shippers filed protests with the FERC on the
Products OLP's application for Market Based Rates in four destination markets.
The Partnership believes it will prevail in competitive market determination in
those destination markets under protest.
Substantially all of the petroleum products transported and stored by
the Partnership are owned by the Partnership's customers. At September 30, 1999,
the Partnership had approximately 17.9 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 it believes to be adequate to cover product
losses through circumstances beyond its control.
12
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
Through its ownership of the Products OLP and the Crude Oil OLP, the
Partnership operates in two industry segments - refined products and LPGs
transportation; and crude oil and NGLs transportation and marketing. The
Partnership's reportable segments offer different products and services and are
managed separately because each requires different business strategies.
The Products OLP segment is involved in the transportation, storage and
terminaling of petroleum products and the fractionation of NGLs. Revenues are
derived 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 Products OLP.
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 Crude Oil OLP segment is involved in the transportation and
marketing of crude oil and NGLs. Revenues are earned from the gathering,
storage, transportation and marketing of crude oil, NGLs and lube oils
principally in Oklahoma and Texas. Marketing operations consist primarily of
purchasing crude oil along its gathering and pipeline systems to facilitate the
aggregation and transportation and ultimate sale of crude oil to local
refineries or transportation to major oil hubs. Operations of this segment are
included from November 1, 1998, upon the acquisition from Duke Energy.
The following information is provided to facilitate increased
understanding of the 1999 and 1998 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
Summarized below is financial data by business segment (in thousands):
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------------- -----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Operating revenues:
Refined Products and LPGs Transportation .......... $ 53,647 $ 54,229 $ 169,022 $ 155,994
Crude Oil and NGLs Transportation and Marketing ... 500,721 -- 1,126,787 --
------------ ------------ ------------ ------------
Total .......................................... 554,368 54,229 1,295,809 155,994
------------ ------------ ------------ ------------
Operating income:
Refined Products and LPGs Transportation ........... 17,203 19,722 64,002 58,165
Crude Oil and NGLs Transportation and Marketing .... 3,203 -- 7,889 --
------------ ------------ ------------ ------------
Total .......................................... 20,406 19,722 71,891 58,165
------------ ------------ ------------ ------------
Income before extraordinary item:
Refined Products and LPGs Transportation .......... 10,159 12,734 42,721 38,435
Crude Oil and NGLs Transportation and Marketing ... 3,211 -- 8,050 --
------------ ------------ ------------ ------------
Total ........................................... $ 13,370 $ 12,734 $ 50,771 $ 38,435
------------ ------------ ------------ ------------
</TABLE>
13
<PAGE> 14
RESULTS OF OPERATIONS - (CONTINUED)
Net income for the quarter ended September 30, 1999 was $13.4 million,
compared with net income of $12.7 million for the 1998 third quarter. The
increase in net income resulted primarily from $3.2 million of net income
contributed by the crude oil and NGLs transportation and marketing segment,
which was acquired effective November 1, 1998, partially offset by a $2.6
million decrease of net income by the refined products and LPGs transportation
segment. The decrease in net income of the refined products and LPGs
transportation segment was primarily due to a $1.9 million increase in costs and
expenses and a $0.6 million decrease in operating revenues.
For the nine months ended September 30, 1999, the Partnership reported
net income of $50.8 million, compared with a net loss of $34.3 million for the
first nine months of 1998. The net loss in 1998 included an extraordinary charge
of $72.8 million for early extinguishment of debt, net of $0.7 million allocated
to minority interest. Excluding the extraordinary loss, net income would have
been $38.4 million for the first nine months of 1998. The $12.3 million increase
in income before the loss on debt extinguishment resulted from $8.1 million of
net income contributed by the crude oil and NGLs transportation and marketing
segment, which was acquired effective November 1, 1998, and a $4.3 million
increase of net income by the refined products and LPGs transportation segment.
The increase in net income of the refined products and LPGs transportation
segment resulted primarily from a $13.0 million increase in operating revenues
and a $0.6 million increase in interest capitalized, partially offset by a $7.2
million increase in costs and expenses, a $1.1 million increase in interest
expense and a $1.0 million decrease in other income - net. See discussion below
of factors affecting net income for the comparative periods by business segment.
REFINED PRODUCTS AND LPGS TRANSPORTATION SEGMENT
See volume and average tariff information below:
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30, PERCENTAGE SEPTEMBER 30, PERCENTAGE
----------------------------- INCREASE ----------------------------- INCREASE
1999 1998 (DECREASE) 1999 1998 (DECREASE)
------------ ------------ ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
VOLUMES DELIVERED
(in thousands of barrels)
Refined products 35,883 37,103 (3)% 99,856 96,797 3%
LPGs 6,404 6,845 (6)% 25,943 22,656 15%
Mont Belvieu operations 8,000 6,890 16% 20,767 18,352 13%
------------ ------------ ----- ------------ ------------ -----
Total 50,287 50,838 (1)% 146,566 137,805 6%
============ ============ ===== ============ ============ =====
AVERAGE TARIFF PER BARREL
Refined products $ 0.93 $ 0.95 (2)% $ 0.93 $ 0.94 (1)%
LPGs 1.48 1.55 (5)% 1.78 1.86 (4)%
Mont Belvieu operations 0.15 0.14 7% 0.16 0.15 7%
Average system tariff $ 0.88 $ 0.92 (4)% $ 0.97 $ 0.98 (1)%
============ ============ ===== ============ ============ =====
</TABLE>
Refined products transportation revenues decreased $1.9 million for the
quarter ended September 30, 1999, compared with the prior-year quarter, due to a
3% decrease in total refined products volumes delivered and a 2% decrease in the
refined products average tariff per barrel. Motor fuel volumes delivered
decreased 2.4 million barrels as a result of unfavorable price differentials in
the Midwest and reduced refinery production received into the Ark-La-Tex system.
Additionally, methyl tertiary butyl ether ("MTBE") volumes delivered decreased
0.4 million barrels as a result of the Partnership canceling its tariffs to
Midwest destinations, effective July 1, 1999. This action was taken with the
consent of MTBE shippers as a result of lower demand for MTBE transportation
caused by changing blending economics, and resulted in increased pipeline
capacity and tankage available for other products. Decreases in motor fuel and
MTBE were partially offset by a 1.1 million barrel increase in jet fuel volumes
delivered and a 1.0 million barrel increase in distillate volumes delivered
attributable to strong economic demand in the Midwest market areas. Jet fuel
volumes delivered also benefited as a result of new military supply agreements
that became effective in the fourth quarter of 1998. The decrease in the average
tariff per barrel was primarily attributable to the 1.83% general tariff
reduction pursuant to the Producer Price Index for finished goods less 1% ("PPI
Index"), effective July 1, 1999. The Partnership has deferred recognition of
approximately $0.4
14
<PAGE> 15
RESULTS OF OPERATIONS - (CONTINUED)
million of revenue with respect to potential refund obligations for rates
charged in excess of the PPI index while its application for Market Based Rates
is under review by FERC. See further discussion regarding Market Based Rates
included in "Other Matters - Market and Regulatory Environment."
LPGs transportation revenues decreased $1.1 million for the quarter
ended September 30, 1999, compared with the third quarter of 1998, as a result
of a 6% decrease in total LPGs volumes delivered and a 5% decrease in the LPGs
average tariff per barrel. The decrease was primarily attributable to a 0.2
million barrel decrease in long-haul propane volumes delivered in the Northeast
market area attributable to unfavorable price differentials versus competing
Canadian product. Additionally, short-haul propane volumes delivered decreased
0.5 million barrels as a result of lower deliveries along the upper Texas Gulf
Coast. These decreases were partially offset by a 0.2 million barrel increase in
propane volumes delivered in the Midwest market area primarily attributable to
higher demand from a petrochemical facility served by the Partnership. The
decrease in the LPGs average tariff per barrel resulted from the decrease in
long-haul volumes delivered in the Northeast market area in 1999 and tariff rate
reductions under the PPI Index, effective July 1, 1999.
For the nine months ended September 30, 1999, refined products
transportation revenues increased $1.9 million, compared with the corresponding
period in 1998, as a result of a 3% increase in total refined products volumes
delivered, partially offset by a 1% decrease in the average tariff per barrel.
Strong economic demand coupled with lower refinery production resulted in a 2.6
million barrel increase in distillate volumes delivered and a 2.6 million barrel
increase in jet fuel volumes delivered. These increases were partially offset by
a 0.8 million barrel decrease in MTBE volumes delivered as a result of lower
blending demand in the Chicago market area, a 0.7 million barrel decrease in
natural gasoline volumes delivered attributable to lower feed stock and blending
demand, and a 0.4 million barrel decrease in motor fuel volumes delivered due to
unfavorable Midwest price differentials. The decrease in the average tariff per
barrel resulted primarily from the general tariff reduction under the PPI Index,
effective July 1, 1999.
LPGs transportation revenues increased $4.0 million, during the nine
months ended September 30, 1999, compared with the same period in 1998, due to a
15% increase in total LPGs volumes delivered, partially offset by a 4% decrease
in the LPGs average tariff per barrel. Propane deliveries in the Northeast
market area increased 1.2 million barrels from higher weather-related demand in
the first quarter of 1999, partially offset by unfavorable price differentials
during the second and third quarters of 1999. Propane deliveries in the Midwest
market area and the upper Texas Gulf Coast increased 1.2 million barrels and 0.9
million barrels, respectively, from the prior year due primarily to increased
petrochemical feed stock demand. Butane volumes delivered were relatively
unchanged from the prior year due to lower refinery feed stock demand in the
Northeast, partially offset by increased demand from Midwest area refineries.
The 4% decrease in the average tariff per barrel resulted from the larger
percentage of short-haul barrels during 1999, coupled with the reduction in
tariffs rates pursuant to the PPI Index, effective July 1, 1999.
Revenues generated from Mont Belvieu operations increased during both
the quarter and nine months ended September 30, 1999, compared with the
corresponding periods in 1998, due primarily to increased storage revenue and
increased demand for shuttle deliveries of propane and butane.
Other operating revenues increased $1.9 million during the third
quarter of 1999, as compared with the third quarter of 1998, due primarily to a
$1.7 million increase in gains on the sale of product inventory attributable to
favorable market prices and increased revenue earned on contracts for butane
storage during the summer months.
During the nine months ended September 30, 1999, other operating
revenues increased $5.5 million, as compared to the same period in 1998, due
primarily to a $2.8 million increase in gains on the sale of product inventory,
a $1.8 million increase in operating revenues from the fractionator facilities
acquired on March 31, 1998, lower exchange losses incurred to position product
in the Midwest market area, and higher propane imports received at the marine
terminal at Providence, Rhode Island.
15
<PAGE> 16
RESULTS OF OPERATIONS - (CONTINUED)
Costs and expenses increased $1.9 million for the quarter ended
September 30, 1999, compared with the third quarter of 1998, primarily due to a
$1.1 million increase in operating, general and administrative expenses, a $0.3
million increase in operating fuel and power expense, and a $0.5 million
increase in taxes - other than income. The increase in operating, general and
administrative expenses was primarily attributable to a $0.7 million increase in
expenses associated with Year 2000 activities, a $0.5 million increase in rental
fees from higher volume through the connection from Colonial Pipeline at
Beaumont, and increased general and administrative supplies and services. These
increases were partially offset by a $0.5 million decrease in product
measurement losses. The increase in operating fuel and power expense was
primarily attributable to a heavier mix of products transported during the third
quarter of 1999. The increase in taxes - other than income was primarily due to
credits recorded during the third quarter of 1998 for the over accrual of
previous years' property taxes.
Costs and expenses increased $7.2 million for the nine-months ended
September 30, 1999, compared with the same period in 1998, due to a $4.0 million
increase in operating, general and administrative expenses, a $1.8 million
volume-related increase in operating fuel and power expense, a $1.0 million
increase in depreciation and amortization expense and a $0.4 million increase in
taxes - other than income. The increase in operating, general and administrative
expenses was primarily attributable to a $1.8 million increase in expenses
associated with Year 2000 activities; a $1.5 million increase in rental fees
from higher volume through the connection from Colonial Pipeline at Beaumont; a
$0.3 million insurance reimbursement received in June 1998 for past litigation
costs related to the Seymour, Indiana, terminal; nine months of fractionation
fees in 1999 related to the facilities acquired on March 31, 1998; and higher
general and administrative supplies and services. Depreciation and amortization
expense increased as a result of the completion of capital projects, coupled
with nine months of expense in 1999 for amortization of the value assigned to
the Fractionation Agreement. The increase in taxes - other than income increased
due to factor noted above during the third quarter of 1998.
Interest expense increased $1.1 million during the nine-months ended
September 30, 1999, compared with the prior year period. Approximately $0.6
million of the increase was attributable to nine months of interest expense in
1999 on the $38 million term-loan used to finance the purchase of the
fractionation assets on March 31, 1998. The remaining increase resulted from $25
million of borrowings during the second quarter of 1999 against the term loan to
finance construction of the pipelines between Mont Belvieu and Port Arthur,
Texas. Capitalized interest increased during both the quarter ended and nine
months ended September 30, 1999, compared with the corresponding periods in
1998, as a result of higher balances associated with construction-in-progress of
the new pipelines between Mont Belvieu and Port Arthur.
Other income decreased during both the quarter and nine-months ended
September 30, 1999, compared with the corresponding periods in 1998, due
primarily to lower interest income earned on cash investments in 1999, and a
$0.4 million gain on the disposition of non-carrier assets in June 1998.
16
<PAGE> 17
RESULTS OF OPERATIONS - (CONTINUED)
CRUDE OIL AND NGLS TRANSPORTATION AND MARKETING SEGMENT
Margin and volume information is presented below:
<TABLE>
<CAPTION>
NINE MONTHS
QUARTER ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1999
------------ ------------
<S> <C> <C>
Margins (dollars in thousands):
Crude oil transportation ............ $ 4,456 $ 13,406
Crude oil marketing ................. 3,461 8,450
NGL transportation .................. 1,592 4,554
LSI ................................. 607 1,742
------------ ------------
Total margin ................... $ 10,116 $ 28,152
============ ============
Barrels per day:
Crude oil transportation ............ 90,779 92,145
Crude oil marketing ................. 253,261 250,082
NGL transportation .................. 14,347 12,827
LSI volume (total gallons): ............ 2,290,440 6,423,375
Margin per barrel:
Crude oil transportation ............ $ 0.534 $ 0.533
Crude oil marketing ................. $ 0.149 $ 0.124
NGL transportation .................. $ 1.206 $ 1.301
LSI margin (per gallon): ............... $ 0.265 $ 0.271
</TABLE>
The crude oil and NGLs transportation and marketing segment was added
to the Partnership's operations with the acquisition of the DETTCO assets
effective November 1, 1998. The acquisition was accounted for as a purchase for
accounting purposes. Net income contributed by the crude oil transportation and
marketing segment for the quarter and nine-month periods ended September 30,
1999 totaled $3.2 million and $8.1 million, respectively.
Margin is a more meaningful measure of financial performance than
operating revenues and operating expenses due to the significant fluctuations in
revenues and expense that may occur with changes in the level of marketing
activity. Margin is calculated as revenues generated from crude oil and lube oil
sales and crude oil and NGLs transportation less the cost of crude oil and lube
oil purchases. During the three months ended September 30, 1999, crude oil
transportation and NGL transportation contributed 44% and 16% of the margin,
respectively, while crude oil marketing operations accounted for 34% of the
margin. Operations of LSI contributed $0.6 million, or 6%, of the margin for the
three month period ended September 30, 1999. During the nine months ended
September 30, 1999, crude oil transportation and NGL transportation contributed
48% and 16% of the margin, respectively, while crude oil marketing operations
accounted for 30% of the margin. Operations of LSI contributed $1.7 million, or
6%, of the margin for the nine month period ended September 30, 1999.
For the quarter ended September 30, 1999, operating, general and
administrative expenses, including operating fuel and power, of the crude oil
and NGLs transportation and marketing segment totaled $5.3 million, or 53% of
the margin. Depreciation and amortization expenses and taxes - other than income
totaled $1.6 million, or 16% of the margin for the third quarter. For the nine
months ended September 30, 1999, operating, general and administrative expenses,
including operating fuel and power, of the crude oil and NGLs transportation and
marketing segment totaled $15.6 million, or 55% of the margin. Depreciation and
amortization expenses and taxes - other than income totaled $4.7 million, or 17%
of the margin during the nine months ended September 30, 1999.
17
<PAGE> 18
FINANCIAL CONDITION AND LIQUIDITY
Net cash from operations for the nine-month period ended September 30,
1999, totaled $69.1 million, comprised of $75.2 million of income before charges
for depreciation and amortization, partially offset by $6.1 million of cash used
for working capital changes. This compares with cash flows from operations of
$55.4 million for the corresponding period in 1998, comprised of $57.8 million
of income before extraordinary loss on early extinguishment of debt and charges
for depreciation and amortization, partially offset by $2.4 million of cash used
for working capital changes. Net cash from operations for the nine months ended
September 30, 1999 and 1998, included interest payments of $29.7 million and
$26.8 million, respectively.
Cash flows used in investing activities during the first nine months of
1999 included $60.4 million of capital expenditures, $2.3 million for the
purchase of a 125-mile crude oil system in Southeast Texas, and $3.2 million of
additional cash investments. These decreases of cash were offset by $3.8 million
from investment maturities. Cash flows used in investing activities during the
first nine months of 1998 included $40.0 million for the purchase price of the
fractionation assets and related intangible assets and $15.2 million of capital
expenditures, partially offset by $2.1 million from investment maturities and
$0.5 million received from the sale of non-carrier assets.
In February 1999, the Partnership announced plans to construct three
new pipelines between the Partnership's terminal in Mont Belvieu, Texas and Port
Arthur, Texas. The project includes three 12-inch diameter common-carrier
pipelines and associated facilities. Each pipeline will be approximately 70
miles in length. Upon completion, the new pipelines will transport ethylene,
propylene and natural gasoline. The anticipated completion date is the fourth
quarter of 2000. The Partnership has entered into an agreement for turnkey
construction of the pipelines and related facilities and has separately entered
into agreements for guaranteed throughput commitments. The cost of this project
is expected to total approximately $74.5 million. Approximately $39.7 million of
construction cost was included in capital expenditures during the nine month
period ended September 30, 1999, with a total of approximately $44.6 million
expected to be incurred in 1999, and the remainder in 2000.
Exclusive of the pipeline construction between Mont Belvieu and Port
Arthur, the Partnership estimates that capital expenditures for 1999 will total
approximately $38 million. Approximately $25 million is expected to be used for
the Products OLP and $13 million is expected to be used for the Crude Oil OLP.
Approximately $23 million of planned expenditures of the Products OLP are
expected to be used for life-cycle replacements and to upgrade current
facilities, with the remaining $2 million expected to be used for
revenue-generating projects. Approximately $9 million of planned expenditures of
the Crude Oil OLP are expected to be used in revenue-generating and
cost-reduction projects, with the remainder to be used to maintain existing
operations. The Partnership revises capital spending estimates periodically in
response to changes in cash flows and operations.
On January 27, 1998, the Products OLP 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 Products OLP, 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 Products OLP and rank on a parity with all other unsecured and
unsubordinated
18
<PAGE> 19
FINANCIAL CONDITION AND LIQUIDITY - (CONTINUED)
indebtedness of the Products OLP. 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. The loan
bears interest at a rate of 6.53%, which is payable quarterly. The principal
balance of the loan is payable in full on April 21, 2001. The Products OLP is
guarantor on the loan.
On May 17, 1999, the Products OLP entered into a $75 million term loan
agreement to finance construction of three new pipelines between the
Partnership's terminal in Mont Belvieu, Texas and Port Arthur, Texas. The loan
agreement has a term of five years. SunTrust Bank is the administrator of the
loan. At September 30, 1999, $25 million has been borrowed under the term loan
agreement. Principal will be paid quarterly beginning in 2001. The interest rate
for the $75 million term loan is based on the borrower's option of either
SunTrust Bank's prime rate, the federal funds rate or LIBOR rate in effect at
the time of the borrowings and is adjusted monthly, bimonthly, quarterly or
semi-annually. Interest is payable quarterly from the time of borrowing. The
current interest rate for amounts outstanding under the term loan is 6.33%.
Commitment fees for the term loan agreement totaled approximately $47,000 for
the period from May 17, 1999 through September 30, 1999.
On May 17, 1999, the Products OLP entered into a $25 million revolving
credit agreement and TCO entered into a $30 million revolving credit agreement.
SunTrust Bank is the administrative agent on both revolving credit agreements.
The $25 million revolving credit agreement has a five year term and the $30
million revolving credit agreement has a three year term. The interest rate on
both agreements is based on the borrower's option of either SunTrust Bank's
prime rate, the federal funds rate or LIBOR rate in effect at the time of the
borrowings and is payable quarterly. Interest rates are adjusted monthly,
bimonthly, quarterly or semi-annually. The Products OLP has not borrowed any
amounts under the revolving credit facility. TCO had $3 million principal amount
outstanding under its revolving credit agreement as of September 30, 1999.
Commitment fees for the revolving credit agreements totaled approximately
$50,000 for the period from May 17, 1999 through September 30, 1999.
In connection with the purchase of the DETTCO assets by TCO, Duke
Capital also agreed to guarantee the payment by TCO and its subsidiaries under
certain commercial contracts between TCO and its subsidiaries and third parties.
Duke Capital will provide up to $100 million of guarantee credit to TCO and its
subsidiaries for a period of three years from November 30, 1998. Pursuant to
this agreement, the Partnership has agreed to pay Duke Capital a commitment fee
of $100,000 per year.
The Partnership paid cash distributions of $51.0 million during the
nine months ended September 30, 1999. Additionally, on October 18, 1999, the
Partnership declared a cash distribution of $0.475 per Limited Partner and Class
B Unit. The third quarter cash distribution was paid on November 5, 1999 to
Unitholders of record on October 29, 1999.
OTHER MATTERS
Environmental
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
19
<PAGE> 20
OTHER MATTERS - (CONTINUED)
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.
A Feasibility Study, which includes the Partnership's proposed remediation
program, has been approved by IDEM. IDEM will issue a Record of Decision
formally approving the remediation program. After the Record of Decision has
been issued, the Partnership will enter into an Agreed Order for the continued
operation and maintenance of the program. The Partnership will evaluate the
conditions of the Record of Decision and make adjustments to the program as
required. The amount accrued for the program was approximately $0.4 million at
September 30, 1999. In the opinion of the Company, the completion of the
remediation program being 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.
Year 2000 Issues
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 is
utilizing both internal and external resources to identify, test, remediate or
replace all critical known or discovered non-compliant computerized systems and
applications. 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 Partnership has incurred
approximately $4.5 million of costs related to the Year 2000 issue. The Company
estimates the remaining amounts required to address the Year 2000 issue will be
as much as approximately $1.7 million. A portion of such costs would have been
incurred as part of normal system and application upgrades. In certain cases,
the timing of expenditures has been accelerated due to the Year 2000 issue.
Although the Company believes this estimate to be reasonable, due to the
complexities of the Year 2000 issue, there can be no assurance that the actual
costs related to the Year 2000 issue will not be significantly greater.
The Partnership has adopted a three-phase Year 2000 program consisting
of: Phase I - Preliminary Assessment; Phase II - Detailed Assessment and
Remediation Planning; and Phase III - Remediation Activities and Testing. The
Products OLP has completed Phase I and Phase II; and Phase III is approximately
95% complete. The Crude Oil OLP has completed Phase I; Phase II is approximately
93% complete; and Phase III is approximately 85% complete. Remediation
Activities and Testing of all major process controls and computer systems have
been completed. Remediation Activities and Testing of other software
applications and hardware will be complete by mid-December 1999.
With respect to its third-party relationships, the Partnership has
contacted its primary vendors, suppliers and service providers to assess their
software and hardware products previously sold to the Partnership and other
aspects of their state of Year 2000 readiness. Information continues to be
updated regularly, thus the Partnership anticipates receiving additional
information in the near future that will assist in determining the extent to
which the Partnership may be vulnerable to those third parties' failure to
identify and remediate their Year 2000 issues. However, there can be no
assurance that the systems or products of other companies, on which the
Partnership's systems rely, will be timely converted, or converted in a manner
that is compatible with the Partnership's systems, or that any such failures by
other companies would not have a material adverse effect on the Partnership.
Despite the Partnership's determined efforts to address and remediate
its Year 2000 issue, there can be no assurance that all process controls and
business computer systems will continue without interruption through January 1,
2000, and beyond. The complexity of identifying and testing all embedded
microprocessors that are
20
<PAGE> 21
OTHER MATTERS - (CONTINUED)
installed in hardware throughout the products pipeline system and crude oil
system used for process or flow control, transportation, security, communication
and other systems may result in unforeseen operational system shutdowns.
Although the amount of potential liability and lost revenue cannot be estimated,
failures that result in substantial disruptions of business activities could
have a material adverse effect on the Partnership. In order to mitigate
potential disruptions, the Partnership will prepare contingency plans for its
critical systems, processes and external relationships by December 1, 1999.
Market and Regulatory Environment
In July 1999, the Partnership announced plans to build a new 360-mile
pipeline from Beaumont, Texas, to Little Rock, Arkansas. The new pipeline will
parallel the Partnership's two existing pipelines and will increase delivery
capability of refined petroleum products by 100,000 barrels per day. The
expansion will also include construction of additional storage tanks,
connections to other pipelines to increase volumes entering the pipeline system
and increased delivery capability in the Partnership's Midwest market areas. The
expansion is scheduled to be completed in 18 to 24 months. The Partnership
currently anticipates finalizing its evaluation of various construction
alternatives of the capacity expansion during the fourth quarter of 1999.
Tariff rates of interstate oil pipeline companies are currently
regulated by the FERC, primarily through an index methodology, whereby a
pipeline company is allowed to change its rates based on the change from
year-to-year in the Producer Price Index for finished goods less 1% ("PPI
Index"). In the alternative, interstate oil pipeline companies may elect to
support rate filings by using a cost-of-service methodology, competitive market
showings ("Market Based Rates") or agreements between shippers and the oil
pipeline company that the rate is acceptable ("Settlement Rates").
In May 1999, the Products OLP filed an application with the FERC to
charge Market Based Rates for substantially all refined products transportation
tariffs. The FERC approved a request of the Products OLP waiving the requirement
to adjust refined products transportation tariffs pursuant to the PPI Index
while its Market Based Rates application is under review. Under the PPI Index,
refined products transportation rates in effect on June 30, 1999 would have been
reduced by approximately 1.83% effective July 1, 1999. If any portion of the
Market Based Rates application is denied by the FERC, the Products OLP has
agreed to refund, with interest, such amounts collected under the tariff rates
in excess of the PPI Index. As a result of the refund obligation potential, the
Partnership has deferred all revenue recognition of rates charged in excess of
the PPI Index. At September 30, 1999, the amount for accrued rate refunds
totaled approximately $0.4 million.
In July 1999, certain shippers filed protests with the FERC on the
Products OLP's application for Market Based Rates in four destination markets.
The Partnership believes it will prevail in competitive market determination in
those destination markets under protest.
Effective July 1, 1999, the Products OLP established Settlement Rates
with all shippers that utilize certain LPGs transportation tariff rates, whereby
such rates in effect on June 30, 1999, would not be adjusted for a period of
either two or three years. Other LPGs transportation tariff rates under which
such agreements could not be reached with all shippers were reduced pursuant to
the PPI Index (approximately 1.83%), effective July 1, 1999. Effective July 1,
1999, the Products OLP canceled its tariff for deliveries of MTBE into the
Chicago market area reflecting reduced demand for transportation of MTBE into
such area. The MTBE tariffs were canceled with the consent of MTBE shippers and
resulted in increased pipeline capacity and tankage available for other
products.
Other
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This statement establishes
standards for and disclosures of derivative instruments and hedging activities.
In July 1999, the FASB issued SFAS No. 137 to delay the effective date of SFAS
No. 133 until fiscal years beginning after
21
<PAGE> 22
OTHER MATTERS - (CONTINUED)
June 15, 2000. The Partnership expects to adopt this standard effective January
1, 2001. The Partnership has not determined the impact of this statement on its
financial condition and results of operations.
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 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 1998 Annual Report on Form 10-K.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Partnership may be exposed to market risk through changes in
commodity prices and interest rates as discussed below. The Partnership has no
foreign exchange risks.
The Partnership mitigates exposure to commodity price fluctuations by
maintaining a balanced position between crude oil purchases and sales. As a
hedging strategy to manage crude oil price fluctuations, the Partnership enters
into futures contracts on the New York Mercantile Exchange, and makes limited
use of other derivative instruments. It is the Partnership's general policy not
to acquire crude oil, futures contracts or other derivative products for the
purpose of speculating on price changes, however, the Partnership may take
limited speculative positions to capitalize on crude oil price fluctuations. Any
contracts held for trading purposes or speculative positions are accounted for
using the mark-to-market method. Under this methodology, contracts are adjusted
to market value, and the gains and losses are recognized in current period
income. Comprehensive risk management policies have been established by the Risk
Management Committee to monitor and control these market risks. The Risk
Management Committee is comprised of senior executives of the Partnership.
Market risks associated with commodity derivatives were not material at
September 30, 1999.
At September 30, 1999, the Products OLP had outstanding $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").
Additionally, the Products OLP had a $38 million bank loan outstanding from
SunTrust Bank. The SunTrust loan bears interest at a fixed rate of 6.53% and is
payable in full in April 2001. At September 30, 1999, the estimated fair value
of the Senior Notes and the SunTrust loan was approximately $361.2 million and
$37.8 million, respectively.
At September 30, 1999, the Products OLP had $25 million outstanding
under a variable interest rate term loan and the Crude Oil OLP had $3 million
outstanding under its revolving credit agreement. The interest rates for these
credit facilities are based on the borrower's option of either SunTrust Bank's
prime rate, the federal funds rate or LIBOR rate in effect at the time of the
borrowings and is adjusted monthly, bimonthly, quarterly or
22
<PAGE> 23
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - (CONTINUED)
semi-annually. Utilizing the balances of variable interest rate debt outstanding
at September 30, 1999, and assuming market interest rates increase 1%, the
potential annual increase in interest expense is approximately $0.3 million.
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 (Filed as
Exhibit 3.2 to Form 10-Q of TEPPCO Partners, L.P. (Commission
File No. 1-10403) for the quarter ended March 31, 1998 and
incorporated herein by reference).
3.3 Second Amended and Restated Agreement of Limited Partnership
of TEPPCO Partners, L.P., dated November 30, 1998 (Filed as
Exhibit 3.3 to Form 10-K of TEPPCO Partners, L.P. (Commission
File No. 1-10403) for the year ended December 31, 1998 and
incorporated herein by reference).
3.4 Amended and Restated Agreement of Limited Partnership of TE
Products Pipeline Company, Limited Partnership, effective July
21, 1998 (Filed as Exhibit 3.2 to Form 8-K of TEPPCO Partners,
L.P. (Commission File No. 1-10403) dated July 21, 1998 and
incorporated herein by reference).
3.5 Agreement of Limited Partnership of TCTM, L.P., dated November
30, 1998 (Filed as Exhibit 3.3 to Form 10-K of TEPPCO
Partners, L.P. (Commission File No. 1-10403) for the year
ended December 31, 1998 and incorporated herein by reference).
4.1 Form of Certificate representing Limited Partner 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 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).
4.3 Form of Certificate representing Class B Units (Filed as
Exhibit 3.3 to Form 10-K of TEPPCO Partners, L.P. (Commission
File No. 1-10403) for the year ended December 31, 1998 and
incorporated herein by reference).
10.1 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).
10.2 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).
10.3 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).
23
<PAGE> 24
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - (CONTINUED)
10.4 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).
10.5 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).
10.6 Form of Amendment to Texas Eastern Products Pipeline Company
Long-Term Incentive Compensation Plan (Filed as Exhibit 10.7
to the Partnership's Form 10-K (Commission File No. 1-10403)
for the year ended December 31, 1995 and incorporated herein
by reference).
10.7 Employees' Savings Plan of Panhandle Eastern Corporation and
Participating Affiliates (Effective January 1, 1991) (Filed as
Exhibit 10.10 to the Partnership's Form 10-K (Commission File
No. 1-10403) for the year ended December 31, 1990 and
incorporated herein by reference).
10.8 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).
10.9 Panhandle Eastern Corporation Key Executive Retirement Benefit
Equalization Plan, adopted December 20, 1993; effective
January 1, 1994 (Filed as Exhibit 10.12 to Form 10-K of
Panhandle Eastern Corporation (Commission File No. 1-8157) for
the year ended December 31, 1993 and incorporated herein by
reference).
10.10 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).
10.11 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).
10.12 Texas Eastern Products Pipeline Company 1994 Long Term
Incentive Plan, Amendment 1, effective January 16, 1995 (Filed
as Exhibit 10.12 to Form 10-Q of TEPPCO Partners, L.P.
(Commission File No. 1-10403) for the quarter ended June 30,
1999 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 (Filed as
Exhibit 10.14 to Form 10-Q of TEPPCO Partners, L.P.
(Commission File No. 1-10403) for the quarter ended March 31,
1998 and incorporated herein by reference).
10.15 Credit Agreement between TEPPCO Colorado, LLC, SunTrust Bank,
Atlanta, and Certain Lenders, dated April 21, 1998 (Filed as
Exhibit 10.15 to Form 10-Q of TEPPCO Partners, L.P.
(Commission File No. 1-10403) for the quarter ended March 31,
1998 and incorporated herein by reference).
10.16 First Amendment to Credit Agreement between TEPPCO Colorado,
LLC, SunTrust Bank, Atlanta, and Certain Lenders, effective
June 29, 1998 (Filed as Exhibit 10.15 to Form 10-Q of TEPPCO
Partners, L.P. (Commission File No. 1-10403) for the quarter
ended June 30, 1998 and incorporated herein by reference).
24
<PAGE> 25
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - (CONTINUED)
10.17 Contribution Agreement between Duke Energy Transport and
Trading Company and TEPPCO Partners, L.P., dated October 15,
1998 (Filed as Exhibit 3.3 to Form 10-K of TEPPCO Partners,
L.P. (Commission File No. 1-10403) for the year ended December
31, 1998 and incorporated herein by reference).
10.18 Guaranty Agreement by Duke Energy Natural Gas Corporation for
the benefit of TEPPCO Partners, L.P., dated November 30, 1998,
effective November 1, 1998 (Filed as Exhibit 3.3 to Form 10-K
of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the
year ended December 31, 1998 and incorporated herein by
reference).
10.19 Revolving Credit Agreement between TCTM, L.P. as Borrower and
Duke Capital Corporation as Lender, dated November 30, 1998
(Filed as Exhibit 3.3 to Form 10-K of TEPPCO Partners, L.P.
(Commission File No. 1-10403) for the year ended December 31,
1998 and incorporated herein by reference).
10.20 Letter Agreement regarding Payment Guarantees of Certain
Obligations of TCTM, L.P. between Duke Capital Corporation and
TCTM, L.P., dated November 30, 1998 (Filed as Exhibit 3.3 to
Form 10-K of TEPPCO Partners, L.P. (Commission File No.
1-10403) for the year ended December 31, 1998 and incorporated
herein by reference).
10.21 Form of Employment Agreement between the Company and O. Horton
Cunningham, Ernest P. Hagan, Thomas R. Harper, David L.
Langley, Charles H. Leonard and James C. Ruth, dated December
1, 1998 (Filed as Exhibit 3.3 to Form 10-K of TEPPCO Partners,
L.P. (Commission File No. 1-10403) for the year ended December
31, 1998 and incorporated herein by reference).
10.22 Agreement Between Owner and Contractor between TE Products
Pipeline Company, Limited Partnership and Eagleton Engineering
Company, dated February 4, 1999 (Filed as Exhibit 10.21 to
Form 10-Q of TEPPCO Partners, L.P. (Commission File No.
1-10403) for the quarter ended March 31, 1999 and incorporated
herein by reference).
10.23 Services and Transportation Agreement between TE Products
Pipeline Company, Limited Partnership and Fina Oil and
Chemical Company, BASF Corporation and BASF Fina Petrochemical
Limited Partnership, dated February 9, 1999 (Filed as Exhibit
10.22 to Form 10-Q of TEPPCO Partners, L.P. (Commission File
No. 1-10403) for the quarter ended March 31, 1999 and
incorporated herein by reference).
10.24 Call Option Agreement, dated February 9, 1999 (Filed as
Exhibit 10.23 to Form 10-Q of TEPPCO Partners, L.P.
(Commission File No. 1-10403) for the quarter ended March 31,
1999 and incorporated herein by reference).
10.25 Texas Eastern Products Pipeline Company Retention Incentive
Compensation Plan, effective January 1, 1999 (Filed as Exhibit
10.24 to Form 10-Q of TEPPCO Partners, L.P. (Commission File
No. 1-10403) for the quarter ended March 31, 1999 and
incorporated herein by reference).
10.26 Credit Agreement between TE Products Pipeline Company, Limited
Partnership, SunTrust Bank, Atlanta, and Certain Lenders,
dated May 17, 1999 (Filed as Exhibit 10.26 to Form 10-Q of
TEPPCO Partners, L.P. (Commission File No. 1-10403) for the
quarter ended June 30, 1999 and incorporated herein by
reference).
10.27 Credit Agreement between TEPPCO Crude Oil, LLC, SunTrust Bank,
Atlanta, and Certain Lenders, dated May 17, 1999 (Filed as
Exhibit 10.27 to Form 10-Q of TEPPCO Partners, L.P.
(Commission File No. 1-10403) for the quarter ended June 30,
1999 and incorporated herein by reference).
10.28 Second Amendment to Credit Agreement between TEPPCO Colorado,
LLC, SunTrust Bank, Atlanta, and Certain Lenders, effective
May 17, 1999 (Filed as Exhibit 10.28 to Form 10-Q of TEPPCO
Partners, L.P. (Commission File No. 1-10403) for the quarter
ended June 30, 1999 and incorporated herein by reference).
*10.29 Form of Employment and Non-Compete Agreement between the
Company and Samuel N. Brown, J. Michael Cockrell and William
S. Dickey, effective January 1, 1999.
25
<PAGE> 26
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - (CONTINUED)
*10.30 Texas Eastern Products Pipeline Company Nonemployee Directors
Unit Accumulation Plan, effective April 1, 1999.
*10.31 Texas Eastern Products Pipeline Company Nonemployee Directors
Deferred Compensation Plan, effective November 1, 1999.
*10.32 Texas Eastern Products Pipeline Company Phantom Unit Retention
Plan, effective August 25, 1999.
21.1 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 Schedule as of and for the nine months ended
September 30, 1999.
-----------------
* Filed herewith.
(b) Reports on Form 8-K: None
Items 1, 2, 3, 4 and 5 of Part II were not applicable and have been omitted.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned duly authorized officer and principal financial officer.
TEPPCO Partners, L.P.
(Registrant)
By: Texas Eastern Products Pipeline Company,
General Partner
/s/ CHARLES H. LEONARD
--------------------------------------------------
Charles H. Leonard
Senior Vice President, Chief Financial Officer
and Treasurer
Date: November 9, 1999
26
<PAGE> 27
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
*10.29 Form of Employment and Non-Compete Agreement between the
Company and Samuel N. Brown, J. Michael Cockrell and William
S. Dickey, effective January 1, 1999.
*10.30 Texas Eastern Products Pipeline Company Nonemployee Directors
Unit Accumulation Plan, effective April 1, 1999.
*10.31 Texas Eastern Products Pipeline Company Nonemployee Directors
Deferred Compensation Plan, effective November 1, 1999.
*10.32 Texas Eastern Products Pipeline Company Phantom Unit Retention
Plan, effective August 25, 1999.
*27 Financial Data Schedule as of and for the nine months ended
September 30, 1999.
-----------------
* Filed herewith.
<PAGE> 1
EXHIBIT 10.29
EMPLOYMENT AND NON-COMPETE AGREEMENT
THIS EMPLOYMENT AND NONCOMPETE AGREEMENT (the "Agreement") is entered
into this ____ day of __________, 1999, by and between TEXAS EASTERN PRODUCTS
PIPELINE COMPANY, ("TEPPCO") a Delaware corporation with its principal executive
offices in Houston, Texas and _________________ ("Executive").
WHEREAS, TEPPCO desires to employ Executive to serve as
the _______________ of TEPPCO Crude Oil, LLC ("TCO"), a subsidiary of TEPPCO
Partners, L.P., ("Partnership") of which TEPPCO is the sole general partner, and
Executive desires to accept that position and serve in such capacity; and,
WHEREAS, the parties desire that this Agreement set forth the terms and
conditions of Executive's employment by TEPPCO and that it represents the entire
agreement of the parties with respect to that subject;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained herein, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Employment. TEPPCO hereby employs Executive, and Executive hereby
accepts such employment, upon the terms and conditions set forth herein.
2. Position and Duties.
(a) Duties. Executive is employed by TEPPCO to serve as
the ______________________ of TCO.
As __________________ of TCO, Executive shall perform
such duties as the _______________________ of
<PAGE> 2
TEPPCO ("CEO") may prescribe. Executive shall report
directly to the CEO.
(b) Engaging in Other Employment. While employed by
TEPPCO, Executive shall devote full time and
attention to TCO and shall not be employed by any
other person or entity. Executive may reasonably
participate as a member in community, civic or
similar organizations and may pursue personal
investments that do not interfere with the normal
business activities of Partnership or TCO.
(c) Loyal and Conscientious Performance. Executive shall
act at all times in compliance with the policies,
rules and decisions adopted from time-to-time by
TEPPCO and/or TCO and perform all duties and
obligations required of him by this Agreement in a
loyal and conscientious manner.
3. Term of Employment. The term of employment pursuant to this
Agreement shall commence as of January 1, 1999 and shall continue until
terminated as hereinafter provided.
4. Base Compensation. Executive's base annual salary is $_________.
This base compensation will be payable in equal installments as specified by the
policies of TEPPCO and subject to applicable state and federal income tax and
social security tax withholding requirements. Executive's base annual salary may
be increased by the Compensation Committee of the Board of Directors of TEPPCO,
who shall review Executive's salary and total compensation periodically.
5. Bonus. Executive shall be eligible to participate in the annual
bonus program for employees of TEPPCO primarily engaged in performing services
for TCO. Such bonus shall be
2
<PAGE> 3
determined under the terms of the Crude Oil Bonus Plan ("COBP") which shall be
approved by the Compensation Committee of TEPPCO's Board of Directors each year.
6. Phantom Unit Grants. TEPPCO shall grant Executive _______ phantom
units which units shall vest in equal shares of _______ units each over a period
of four (4) years on such terms and conditions as set forth in the specific
grant award agreement between the parties. Rights to any unvested units upon
termination of Executive's employment with TEPPCO shall be exclusively
determined pursuant to the specific grant award agreement.
7. Employee Benefits. Executive shall participate in all benefit plans
that are available to officers of TEPPCO who are primarily engaged in performing
services for TCO. The availability and terms of such employee benefits are set
by the Compensation Committee of the Board of Directors of TEPPCO and are
subject to change from time-to-time. There is no assurance that the employee
benefits will not be changed or eliminated. For purposes of determining
Executive's vacation benefits, Executive shall be credited with all continuous
service with any Duke Energy Corporation subsidiary or affiliate. Executive
shall also be eligible to participate in the Duke Energy Executive Cash Balance
and Executive Savings Plans if such plans are made available to the officers of
TEPPCO.
8. Noncompetition by Executive.
(a) Executive agrees that during his employment by TEPPCO
and for a period of one (1) year after his
termination of employment for any reason without
TEPPCO's prior written consent he will not, directly
or indirectly, either as principal, agent, manager,
employee, partner, shareholder, director, officer,
consultant or otherwise, (i) become engaged or
involved in any business (other than as a less than
5% equity owner of any corporation
3
<PAGE> 4
traded on any national, international or regional
stock exchange or over-the-counter market), that
competes with TCO or any person or entity that
controls, is controlled by or is under common control
with TCO (collectively, the "Company Affiliates") in
the mid-stream business of transportation,
distribution, gathering, or sale of crude oil and/or
natural gas liquids; or (ii) induce or attempt to
induce any customer, supplier, or employee of TEPPCO,
TCO or any Company Affiliates to reduce, terminate,
restrict, or otherwise alter its business
relationship with TEPPCO, TCO or any Company
Affiliates. If any provision or part of this Section
8 is held to be unenforceable because of the duration
of such provision or the area covered thereby, the
parties hereto agree to modify such provision, or
that the court making such determination shall have
the power to modify such provision, to reduce the
duration or area of such provision or both, or to
delete specific words or phrases herefrom
("blue-penciling"), and in its reduced or
blue-penciled form, such provision shall then be
enforceable and shall be enforced. If Executive
violates any of the restrictive covenants set forth
in this Section 8, then the time limitation otherwise
applicable shall be extended for a period of time
equal to the period of time during which such breach
or breaches occurred. The Parties intend the above
restrictions on competition to be completely
severable and independent, and any invalidity or
unenforceability of any one or more of such
restrictions shall not render invalid or
unenforceable any one or more of the other
restrictions. Notwithstanding the above, this
4
<PAGE> 5
restrictive covenant is not intended to restrict the
ability of Executive to compete with any TEPPCO or
Partnership subsidiary or affiliate with which he had
no connection or involvement during his employment by
TEPPCO.
(b) The provisions of Section 8(a) shall be limited in
scope and effective only within the States of
Oklahoma, Colorado, Texas and Louisiana. The parties
intend these geographic areas to be completely
severable and independent, and any invalidity or
unenforceability of this Agreement with respect to
any one area shall not render this Agreement
unenforceable as applied to any one or more of the
other areas.
(c) Executive acknowledges that TEPPCO may have no
adequate means to protect its rights under this
Section 8 other than by securing an injunction (a
court order prohibiting Executive from violating this
Agreement). Executive agrees that TEPPCO may enforce
this Agreement by obtaining a preliminary injunction
and any other appropriate equitable relief in any
court of competent jurisdiction. Executive
acknowledges that the recovery of damages will not be
an adequate means to redress a breach of this
Agreement, but nothing in this Section 8 shall
prohibit TEPPCO from pursuing any remedies in
addition to injunctive relief, including recovery of
damages.
(d) Executive acknowledges and agrees that TEPPCO would
not agree to hire Executive without the covenants
made by Executive in this Section 8, and that the
compensation and benefits provided in this Agreement
constitute
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<PAGE> 6
adequate and sufficient consideration for the
covenants made by Executive in this Section 8 and in
the remainder of this Agreement.
(e) Except as otherwise expressly provided herein,
Executive's obligations under this Section 8 shall
survive any termination of his employment.
9. Confidentiality. Executive shall not, at any time, use (other than
in the ordinary course of fulfilling his duties as an employee of TEPPCO),
divulge or otherwise disclose, either directly or indirectly, any confidential
or proprietary information (including without limitation any customer or
prospect list, supplier list, acquisition or merger targets, business plans or
strategies, data, records, or financial information) concerning the business,
policies or operations of TEPPCO, Partnership, TCO or Company Affiliates, which
Executive may have learned on or prior to the date hereof or during the term of
Executive's employment by TEPPCO (as employee, consultant, shareholder, officer,
controlling person, agent or otherwise) and which information is not generally
known to the public. Executive's obligations under this Section 9 shall survive
any termination of his employment.
10. Termination.
(a) Notwithstanding anything to the contrary contained
herein, Executive may terminate his employment at any
time by resigning, and Executive's employment may be
terminated by TEPPCO as follows:
(i) due to the death of Executive;
(ii) due to a disability which prevents Executive
from performing the essential functions of
his full duties for a period of ninety (90)
consecutive business days;
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<PAGE> 7
(iii) for cause, which shall mean (w) the willful
and continued failure by Executive to
substantially perform his duties with
TEPPCO, TCO or Company Affiliates (other
than any such failure resulting from his
incapacity due to physical or mental
illness) after demand for substantial
performance is delivered to him by the CEO
which specifically identifies the manner in
which the CEO believes the Executive has not
substantially performed his duties, (x) the
willful engaging by the Executive in gross
misconduct materially and demonstrably
injurious to the property or business of
TEPPCO, Partnership, TCO or any Company
Affiliates, (y) willful material violation
of the provisions of Section 8 and 9 hereof,
or (z) fraud, misappropriation or commission
of a felony. For purposes of this
subsection, no act or failure to act on the
Executive's part will be considered
"willful" unless done or omitted to be done,
by him not in good faith and without
reasonable belief that his action or
omission was in the best interest of the
TEPPCO, Partnership, TCO or Company
Affiliates or not opposed to the interests
of TEPPCO, Partnership, TCO or Company
Affiliates; or
(iv) for any reason other than death, disability
or for cause.
(b) In the event of Executive's resignation of employment
or TEPPCO's termination of Executive's employment
pursuant to subsections 10(a)(i), (ii) or (iii)
above, Executive shall be entitled only to his base
salary earned through the date of termination.
Executive's rights to any bonus shall be
7
<PAGE> 8
forfeited, but the termination shall not affect any
rights of Executive that have become vested under any
employee benefit plan or arrangement. In the event
that TEPPCO terminates Executive pursuant to
subsection 10(a)(iv) above, Executive shall be
entitled to his base salary earned through the date
of termination plus a severance payment calculated in
accordance with the provisions of Section 11(a)
hereof.
(c) This Agreement does not create any obligation on the
part of TEPPCO or Executive for continued employment
for a fixed period of time and in that regard,
Executive shall be an employee-at-will whose
employment can be terminated at any time for any
reason by TEPPCO or Executive. If TEPPCO decides to
terminate Executive, TEPPCO will cooperate with
Executive in determining when and how to announce
such termination. Executive shall not receive any
compensation for any period of time post-termination,
except for the severance payment calculated in
accordance with the provisions of Section 11(a)
hereof.
11. Severance Payment.
(a) In the event that within twelve (12) months after a
change of control occurs as set forth in subsection
11(b), Executive's employment shall be involuntarily
terminated or Executive shall have a reduction in
responsibility, he shall be entitled to a lump sum
severance payment equal to two (2) times his base
annual salary plus two (2) times bonus. For the
purposes of this Section 11(a), bonus is calculated
as 45% of Executive's base salary.
8
<PAGE> 9
(b) For the purposes of this Section 11, a "change in
control" shall be deemed to have occurred if:
(i) any person becomes the beneficial owner,
directly or indirectly, of securities of
Partnership representing 66 2/3% or more of
the Partnership's then outstanding units of
limited partnership interests (the "Units");
or
(ii) any person becomes the beneficial owner,
directly or indirectly, of 50% or more of
the Units and TEPPCO delivers notice of
withdrawal or is otherwise removed as the
general partner of the Partnership; or
(iii) the merger or consolidation of Partnership
with one or more corporations, business
trusts, common law trusts or unincorporated
businesses, including, without limitation, a
general partnership or limited partnership,
pursuant to a written agreement of merger or
consolidation in accordance with Article 16
of the Second Amended and Restated Agreement
of Limited Partnership of TEPPCO Partners,
L.P., dated November 30, 1998, as may from
time-to-time be amended and TEPPCO delivers
notice of withdrawal or is otherwise removed
as the general partner of the Partnership;
or
(iv) any person is or becomes the beneficial
owner, directly or indirectly, of securities
of TEPPCO representing more than 50% of
9
<PAGE> 10
the combined voting power of TEPPCO's then
outstanding voting securities; or
(v) all or substantially all of the assets and
business of TEPPCO, Partnership, TCO or
TCTM, L.P. ("Operating Partnership") are
sold, transferred or assigned to, or
otherwise acquired by, any other person or
persons; or
(vi) any person is or becomes the beneficial
owner, directly or indirectly, of the
membership interest in TCO.
(vii) the dissolution or liquidation of TCO,
Partnership, Operating Partnership, or
TEPPCO; or
(viii) adoption by the Board of Directors of TEPPCO
of a resolution to the effect that any
person has acquired effective control of the
business and affairs of TEPPCO, Partnership,
Operating Partnership or TCO.
(c) The term "beneficial owner" shall have the meaning
set forth in Section 13(d) of the Securities Exchange
Act of 1934, as amended and in the regulations
promulgated thereunder. The term "person" shall mean
an individual, corporation, partnership, limited
liability company, trust, unincorporated
organization, association or other entity, provided
that the term "person" shall not include (i) Duke
Energy Corporation ("Duke"), (ii) any affiliate of
Duke, or (iii) any employee benefit plan maintained
by Duke or any affiliate of Duke. The term
"affiliate" means when used with respect to a
specified person or entity, any other person or
entity directly
10
<PAGE> 11
or indirectly controlled by, controlling, or under
direct or indirect common control with the specified
person or entity. The term "control" or "controlled"
when used with respect to any specified person or
entity means the power to direct the management and
policies of the person or entity whether through the
ownership of voting securities, membership interest
or by contract.
12. Notice. Any notice to be given hereunder by either party to the
other party may be effectuated either by personal delivery in writing or by
mail, registered or certified, postage prepaid, with return receipt requested.
Mailed notices shall be addressed to the parties at the following addresses:
If to TEPPCO, TCO or any Company Affiliate:
Mr. William L. Thacker
President & CEO
Texas Eastern Products Pipeline Company
2929 Allen Parkway
Houston, Texas 77019
If to Executive:
--------------------------
--------------------------
--------------------------
13. Waiver of Breach. The waiver by any party to a breach of any
provision in this Agreement cannot operate or be construed as a waiver of any
subsequent breach by a party.
14. Severability. The invalidity or unenforceability of any particular
provision in this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if the invalid or
unenforceable provision were omitted.
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<PAGE> 12
15. Entire Agreement. Except as otherwise provided herein, this
Agreement contains the entire understanding of the parties as to the employment
of Executive, superseding all prior understandings and agreements, and no
modifications or amendments of the terms and conditions herein shall be
effective unless in writing and signed by the parties or their respective duly
authorized agents.
16. Governing Law. This Agreement shall be interpreted, construed and
governed according to the laws of the State of __________, without reference to
conflicts of law principles thereof.
17. Dispute Resolution. In the event any dispute arises concerning the
provisions of this Agreement or Executive's employment with TEPPCO, the parties
agree that such dispute shall be resolved in accordance with the Employment
Dispute Resolution procedures of the American Arbitration Association and that
any arbitration pursuant to such procedures shall be held in _________________,
___________.
18. Consent to Jurisdiction. Employee hereby consents to the
nonexclusive jurisdiction of any state court within ______________, _________ or
any federal court located within the same city for any proceeding instituted
hereunder or arising out of or in connection with this Agreement.
19. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their permitted successors,
assigns, legal representatives and heirs, but neither this Agreement nor any
rights hereunder shall be assignable by Executive.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
12
<PAGE> 13
TEXAS EASTERN PRODUCTS PIPELINE COMPANY
By:
-------------------------------------------
President and Chief Executive Officer
EXECUTIVE
- ----------------------------------------------
13
<PAGE> 1
EXHIBIT 10.30
TEXAS EASTERN PRODUCTS PIPELINE COMPANY
NONEMPLOYEE DIRECTORS UNIT ACCUMULATION PLAN
Texas Eastern Products Pipeline Company, a Delaware corporation (the
"Company"), hereby establishes, effective April 1, 1999, a Unit Accumulation
Plan (the "Plan"), providing for the automatic deferral of a certain portion of
each Director's annual stipend as described below:
1. Eligibility
Any member of the Board of Directors of the Company who is not
also an employee of Duke Energy Corporation, the Company, or
any other company affiliated with Duke Energy Corporation
("Director"), shall participate under the Plan
("Participant").
2. Fees to be Deferred and Length of Deferral
Each Director shall have a portion of his/her annual directors
fees paid in the form of TEPPCO Partners phantom LP Units
("Phantom Units"), which shall automatically be deferred until
the director terminates his/her services as a Director, or if
later, a specified age. Each Director shall be credited with
62.5 Phantom Units on the last day of each calendar quarterly
period (i.e. March 31, June 30, September 30 and December 31),
provided that Participant was a member of the Board of
Directors during such quarterly period.
3. Time and Method of Election to Defer
a. Each Participant may elect on an election form that
has been approved by the Committee to have the
amounts deferred under this Plan become payable upon
the later of termination as a Director or attainment
of a specified age; provided, however, that if the
Participant does not file an election, such amounts
shall become payable upon termination as a Director.
b. An election to defer distribution until a specified
age shall be irrevocable and shall apply to all
amounts deferred under this Plan unless revoked by a
new Deferral Election Form filed prior to December 31
of the year preceding the calendar year in which the
Participant ceases to be a Director.
4. Phantom Unit Account
The Company shall establish a Phantom Unit account ("TEPPCO LP
Account") in the name of each Participant, which shall be
deemed invested in, or liquidated from, whole and fractional
TEPPCO Partners LP Units, based upon the closing price of a
TEPPCO Partners LP Unit as reported on the NYSE Composite
Reporting System as of the trading day immediately following
the last day of each calendar quarterly
<PAGE> 2
period, or the last day of the year that immediately precedes
payment of the balance of the TEPPCO LP Account in a lump sum
or in an annual installment, whichever day is applicable. The
Participant's TEPPCO LP Account shall be increased to reflect
the TEPPCO Partners LP Units added on the last day of each
calendar quarterly period as set forth in Section 2 of this
Plan. The Participant's TEPPCO LP Account shall be adjusted
for (i) Distribution Equivalents as determined pursuant to
Section 9 of this Plan and (ii) investment gain or loss based
upon the performance of the TEPPCO Partners LP Units. The
Participant's TEPPCO LP Account shall be decreased to reflect
any payment of the balance thereof. TEPPCO LP Accounts shall
be maintained by the Company in accordance with such
accounting rules and procedures as the Company, in its sole
discretion, shall determine.
5. Time of Payment
The Company shall pay the balance of a Participant's TEPPCO LP
Account, in a lump sum, or in five annual installments, with
the lump sum payment or the first installment payment, as the
case maybe, being made by January 15 of the year next
following the later of the year in which the Participant's
service as a Director terminates or the Participant attains
the elected age on the Deferral Election form. Subsequent
installment payments (if any) shall be made by January 15 of
subsequent years. All such payments shall be in cash.
6. Form of Payment
A Participant shall elect to have payment of the balance of
the TEPPCO LP Account made in one of the following forms:
a. In a lump sum, the amount of which shall be the
balance of the Participant's TEPPCO LP Account, as
adjusted for Phantom Unit investment through the last
day of the preceding year, or
b. In five annual installments, the amount of each
installment shall be the balance of the Participant's
TEPPCO LP Account, as adjusted for Phantom Unit
investment through the last day of the preceding year
and for any installment previously paid, divided by
the number of installments not yet paid.
Participant's TEPPCO LP Account shall continue to be
credited with Distribution Equivalents until such
time as no balance remains in the account.
Notwithstanding the foregoing:
a. If at the close of the year during which the
Participant's service as a Director terminates or the
year in which the Participant attains the elected age
on the Deferral Election form, whichever is later,
the aggregate balance of the
2
<PAGE> 3
Participant's TEPPCO LP Account does not exceed
$10,000.00, the aggregate balance of the
Participant's TEPPCO LP Account shall be paid to the
Participant in a lump sum by January 15 of the next
following year; or
b. In the event of the Participant's death, the
aggregate balance of the Participant's TEPPCO LP
Account shall be paid to the Participant's
beneficiary in a lump sum by January 15 of the year
next following the year in which the Participant
died.
7. Death Beneficiary
A Participant may designate a beneficiary or beneficiaries to
receive the aggregate balance of the Participant's TEPPCO LP
Account that is unpaid at the time of Participant's death.
Such designation, including the revocation of any prior
designation by a superseding designation, shall be made by
completing the approved form and filing with the Secretary of
the Company. A beneficiary designation by a Participant who is
married at the time of his/her death which fails to name the
Participant's surviving spouse as the sole beneficiary shall
not be effective unless such surviving spouse has consented to
the designation in writing, witnessed by the Secretary of the
Company, another representative of the Committee or notary
public, acknowledging the effect of the designation. Spousal
consent shall not be required if, at the time of filing such
designation, the Participant established to the satisfaction
of the Secretary of the Company that the consent of the
Participant's spouse could not be obtained because there is no
spouse, the spouse could not be located or there exist such
other mitigating circumstances as may be prescribed by the
Secretary of the Company. Any spouse's consent (or
establishment that the consent could not be obtained) shall be
effective only with respect to that spouse. Any Participant
may change his/her beneficiary designation at any time by
filing with the Secretary of the Company a new beneficiary
designation (with such spousal consent as may be required).
Such designation shall not become effective until so filed and
unless so filed prior to the time of Participant's death. In
the event that a beneficiary designation is not in effect at
the time of Participant's death or in the event that no
designated beneficiary has survived the Participant's death,
the Participant's estate shall be the Participant's sole
beneficiary.
8. Payments to Minors and Incompetents
Should the Participant become incompetent or should the
Participant's beneficiary be a minor or incompetent, the
Company is authorized to make payment to a parent or guardian
of such minor or incompetent in full discharge of its
obligations to such minor or incompetent under the Plan.
3
<PAGE> 4
9. Distribution Equivalents
As soon as possible after each quarterly distribution date,
TEPPCO shall credit to each Participant's TEPPCO LP Account a
monetary amount ("Distribution Equivalents") equal to the
product of:
1. the total number of Phantom Units in Participant's
TEPPCO LP Account, multiplied by
2. the distribution paid with respect to a TEPPCO
Partners, L.P. Unit for such quarter.
On the date that a quarterly credit of Phantom Units is made
to a Participant's TEPPCO LP Account, any monetary balance in
such account will be converted to additional Phantom Units in
accordance with the provisions of Section 4 of this Plan.
10. Plan Administration
The Compensation Committee of the Board of Directors of the
Company (the "Committee") is the administrator of the Plan,
provided that any member of the Compensation Committee who is
eligible under the Plan shall not participate in any matters
or decisions constituting the administration of the Plan. As
Plan administrator, the Committee shall have full and
exclusive authority to control and manage the operation and
administration of the Plan. The Committee may adopt such
rules, and approve such forms, as may be necessary or
desirable for the administration of the Plan and may delegate
any of its duties and authority to others.
The Committee has the discretion:
1. To interpret and construe the terms and provisions of
the Plan (including any rules adopted for the Plan);
2. To correct any defect, supply any omission, or
reconcile any inconsistency in the Plan;
3. To decide any claim arising under the Plan; and
4. To make factual determinations in connection with any
of the foregoing.
A decision by the Committee with respect to any matter
pertaining to the Plan shall be conclusive and binding on all
interested parties.
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<PAGE> 5
11. Unfunded Plan
The Plan is unfunded. To the extent that a Participant or
beneficiary acquires a right to receive payments from the
Company under the Plan, such right shall not be greater than
the right of an unsecured general creditor of the Company and
such right shall be an unsecured claim against the general
assets of the Company. Title to and beneficial ownership of
any assets, whether cash or investments, which the Company may
set aside in a grantor trust or otherwise earmark to pay its
obligations hereunder will at all times remain the property of
the Company, and neither the Participant nor the Participant's
estate or other beneficiary shall have any property interest
whatsoever in any specific assets of the Company.
12. Nonassignability
The right of the Participant to receive payment from the
Company under the Plan shall not be assigned, transferred,
pledged, or encumbered except as provided by Section 7. Any
attempted assignment, transfer, pledge, or encumbrance in
violation of this Section 12 shall be null and void.
13. Amendment or Termination
The Plan may be amended from time to time or terminated by the
Board of Directors of the Company, except that no amendment or
termination shall, without the consent of the Participant,
impair the rights of the Participant to receive payment of the
aggregate balance of the Participant's TEPPCO LP Account.
14. Governing Law
The Plan, and all determinations made and actions taken
pursuant thereto, to extent not governed by the provisions of
the Internal Revenue Code or the securities laws of the United
States, shall be governed by and construed in accordance with
the laws of the state of Texas.
This Plan document has been executed on behalf of the Company this ____
day of __________________, 1999.
TEXAS EASTERN PRODUCTS PIPELINE COMPANY
By:
------------------------------------
Its:
-----------------------------------
5
<PAGE> 1
EXHIBIT 10.31
TEXAS EASTERN PRODUCTS PIPELINE COMPANY
NONEMPLOYEE DIRECTORS DEFERRED COMPENSATION PLAN
Texas Eastern Products Pipeline Company, a Delaware corporation (the
"Company"), hereby establishes, effective November 1, 1999, a Deferred
Compensation Plan (the "Plan"), providing for optional deferral of directors'
fees, as described below:
1. Eligibility
Any member of the Board of Directors of the Company who is not
also an employee of Duke Energy Corporation, the Company, or
any other company affiliated with Duke Energy Corporation
("Director"), is eligible to participate under the Plan
("Participant").
2. Compensation to be Deferred
A Director may elect to defer any whole percentage of all
directors' fees which may become payable to him or her with
respect to services as a Director during any calendar year
(the "year"). Directors' fees shall include retainer fees,
committee fees, and attendance fees, but shall not include any
expense reimbursement.
3. Time and Method of Election to Defer
a. In the first year in which a Participant becomes
eligible to participate in the Plan (including the
first year in which the Plan is in effect), the newly
eligible Participant may make an election to defer
directors' fees for services to be performed
subsequent to such deferral election by completing
the deferral election form that has been approved by
the Committee ("Deferral Election Form"), and filing
it with the Secretary of the Company within thirty
(30) days after the date the Participant becomes
eligible (or the date the Plan is first in effect).
b. A Participant may elect to defer directors' fees for
any subsequent year by completing the Deferral
Election Form and filing it with the Secretary of the
Company before December 31 of the year preceding the
year for which directors' fees shall be deferred.
c. A deferral election for a year shall be irrevocable
and shall remain in effect and be deemed a like
election for deferral of directors' fees for all
subsequent years unless revoked by a new Deferral
Election Form filed prior to December 31 of the year
preceding the first year for which the new deferral
election is to be effective. To the extent a deferral
election is not in effect for a year, directors' fees
for such year shall be paid by the Company in
accordance with its usual procedures.
<PAGE> 2
4. Phantom Investment
Each time a Participant files a Deferral Election Form, the
Company shall establish an account ("Deferred Compensation
Account") in the name of the Participant. The Participant's
Deferred Compensation Account shall be increased to reflect
the directors' fees deferred by the Participant pursuant to
the Deferral Election Form. The Participant's Deferred
Compensation Account shall be adjusted for investment gain or
loss based upon the phantom investment elected in the Deferral
Election Form. The Participant's Deferred Compensation Account
shall be decreased to reflect any payment of the balance
thereof. Deferred Compensation Accounts shall be maintained by
the Company in accordance with such accounting rules and
procedures as the Company, in its sole discretion, shall
determine. In the Deferral Election Form, the Participant
shall irrevocably elect from among the following options, the
phantom investment in the Deferred Compensation Account of the
directors' fees deferred thereby:
100% Fixed Income Phantom Investment
100% LP Unit Phantom Investment
50% Fixed Income/50% LP Unit Phantom Investment
Fixed Income Phantom Investment - quarterly interest on the
opening balance for the calendar quarter, at an annual rate of
7% or such other annual rate as a majority of the members of
the Compensation Committee of the Board of Directors who are
not eligible to participate under the Plan may, from time to
time, establish.
LP Unit Phantom Investment - deemed invested in, or liquidated
from, whole and fractional TEPPCO Partners LP Units, based
upon the closing price of a TEPPCO Partners LP Unit as
reported on the NYSE Composite Reporting System as of the
trading day immediately preceding the day on which the
directors' fees if not deferred would have been payable, the
day on which quarterly cash distributions are paid to holders
of TEPPCO Partners LP Units, or the last day of the year that
immediately precedes payment of the balance of the Deferred
Compensation Account in a lump sum or in an annual
installment, whichever day is applicable.
Combined Fixed Income and LP Unit Phantom Investment. should
the phantom investment in a Deferred Compensation Account be
50% Fixed Income/50% LP Unit, any payment of the balance of
the Deferred Compensation Account shall be considered taken,
to the extent possible, in equal amounts from each phantom
investment.
2
<PAGE> 3
5. Time of Payment
The Company shall pay the balance of a Participant's Deferred
Compensation Account, in a lump sum, or in five annual
installments as determined below, with the lump sum payment
or, the first installment payment, as the case may be, being
made by January 15 of the year next succeeding the year in
which the Participant's service as a Director terminates.
Subsequent installment payments shall be made by January 15 of
subsequent years.
6. Form of Payment
In the Deferral Election Form that results in the
establishment of the Deferred Compensation Account, a
Participant shall elect to have payment of the balance of the
Deferred Compensation Account made in one of the following
forms:
a. In a lump sum, the amount of which shall be the
balance of the Participant's Deferred Compensation
Account, as adjusted for phantom investment through
the last day of the preceding year; or
b. In five annual installments, the amount of each
installment shall be the balance of the Participant's
Deferred Compensation Account, as adjusted for
phantom investment through the last day of the
preceding year and for any installment previously
paid, divided by the number of installments not yet
paid.
Notwithstanding the foregoing:
a. If at the close of the year during which the
Participant's service as a Director terminates, the
aggregate balance of the Participant's Deferred
Compensation Accounts does not exceed $10,000.00, the
aggregate balance of the Participant's Deferred
Compensation Accounts shall be paid to the
Participant in a lump sum by January 15 of the next
succeeding year; or
b. In the event of the Participant's death, the
aggregate balance of the Participant's Deferred
Compensation Accounts shall be paid to the
Participant's beneficiary in a lump sum by January 15
of the year next succeeding the year in which the
Participant died.
7. Death Beneficiary
A Participant may designate a beneficiary or beneficiaries to
receive the aggregate balance of the Participant's Deferred
Compensation Account that is unpaid at the time of
Participant's death. Such designation, including the
revocation of any prior designation by a superseding
designation, shall be made by completing the
3
<PAGE> 4
approved form and filing with the Secretary of the Company. A
beneficiary designation by a Participant who is married at the
time of his/her death which fails to name the Participant's
surviving spouse as the sole beneficiary shall not be
effective unless such surviving spouse has consented to the
designation in writing, witnessed by the Secretary of the
Company, another representative of the Committee or notary
public, acknowledging the effect of the designation. Spousal
consent shall not be required if, at the time of filing such
designation, the Participant established to the satisfaction
of the Secretary of the Company that the consent of the
Participant's spouse could not be obtained because there is no
spouse, the spouse could not be located or there exist such
other mitigating circumstances as may be prescribed by the
Secretary of the Company. Any spouse's consent (or
establishment that the consent could not be obtained) shall be
effective only with respect to that spouse. Any Participant
may change his/her beneficiary designation at any time by
filing with the Secretary of the Company a new beneficiary
designation (with such spousal consent as may be required).
Such designation shall not become effective until so filed and
unless so filed prior to the time of Participant's death. In
the event that a beneficiary designation is not in effect at
the time of Participant's death or in the event that no
designated beneficiary has survived the Participant's death,
the Participant's estate shall be the Participant's sole
beneficiary.
8. Payments to Minors and Incompetents
Should the Participant become incompetent or should the
Participant's beneficiary be a minor or incompetent, the
Company is authorized to make payment to a parent or guardian
of such minor or incompetent in full discharge of its
obligations to such minor or incompetent under the Plan.
9. Distribution Equivalents
As soon as possible after each quarterly distribution date,
TEPPCO shall credit to each Participant's Deferred
Compensation Account, a monetary amount ("Distribution
Equivalents") equal to the product of:
(a) the total number of LP Unit phantom
investments in Participant's Deferred
Compensation Account, multiplied by
(b) the distribution paid with respect to a
TEPPCO Partners, L.P. Unit for such quarter.
On the date that a credit to Participant's Deferred
Compensation Account is made for LP Unit Phantom Investments
any monetary balance in such account attributable to
Distribution Equivalents will be converted to LP Unit Phantom
Investments in accordance with the provisions of Section 4
subtitled LP Unit Phantom Investment.
4
<PAGE> 5
10. Plan Administration
The Compensation Committee of the Board of Directors of the
Company (the "Committee") is the administrator of the Plan,
provided, that any member of the Committee who is eligible to
participate under the Plan shall not participate in any
decision on any matter regarding the administration of the
Plan. As Plan administrator, the Committee shall have full and
exclusive authority to control and manage the operation and
administration of the Plan. The Committee may adopt such
rules, and approve such forms, as may be necessary or
desirable for the administration of the Plan and may delegate
any of its duties and authority to others. The Committee has
the discretion:
a. To interpret and construe the terms and provisions of
the Plan (including any rules adopted for the Plan);
b. To correct any defect, supply any omission, or
reconcile any inconsistency in the Plan;
c. To decide any claim arising under the Plan; and
d. To make factual determinations in connection with any
of the foregoing.
A decision by the Committee with respect to any matter
pertaining to the Plan shall be conclusive and binding on all
interested parties.
11. Unfunded Plan
The Plan is unfunded. To the extent that a Participant or
beneficiary acquires a right to receive payments from the
Company under the Plan, such right shall not be greater than
the right of an unsecured general creditor of the Company and
such right shall be an unsecured claim against the general
assets of the Company.
Title to and beneficial ownership of any assets, whether cash
or investments, which the Company may set aside in a grantor
trust or otherwise earmark to pay its obligations hereunder
will at all times remain the property of the Company, and
neither the Participant nor the Participant's estate or other
beneficiary shall have any property interest whatsoever in any
specific assets of the Company.
12. Nonassignability
The right of the Participant to receive payment from the
Company under the Plan shall not be assigned, transferred,
pledged, or encumbered except as provided by Section 7. Any
attempted assignment, transfer, pledge, or encumbrance in
violation of this Section 12 shall be null and void.
5
<PAGE> 6
13. Amendment or Termination
The Plan may be amended from time to time or terminated by the
Board of Directors of the Company, except that no amendment or
termination shall, without the consent of the Participant,
impair the rights of the Participant to receive payment of the
aggregate balance of the Participant's Deferred Compensation
Accounts.
14. Governing Law
The Plan, and all determinations made and actions taken
pursuant thereto, to extent not governed by the provisions of
the Internal Revenue Code or the securities laws of the United
States, shall be governed by and construed in accordance with
the laws of the state of Texas.
This Plan document has been executed on behalf of the Company this
_____ day of _________________, 1999.
TEXAS EASTERN PRODUCTS
PIPELINE COMPANY
By:
-------------------------------
Its:
------------------------
6
<PAGE> 1
EXHIBIT 10.32
TEXAS EASTERN PRODUCTS PIPELINE COMPANY
PHANTOM UNIT RETENTION PLAN
PHANTOM UNIT AWARD AGREEMENT
THIS AGREEMENT is made as of the date set forth on the signature page
hereof, between Texas Eastern Products Pipeline Company, a Delaware corporation
("TEPPCO"), and the undersigned Participant (the "participant"). Except as
defined herein, capitalized terms shall have the same meaning ascribed to them
under the Texas Eastern Products Pipeline Company Retention Compensation Plan,
as from time to time amended (the "Plan").
1. Purpose. This Phantom Unit Award Agreement (the "Agreement") is
intended to evidence phantom units (each a "Phantom Unit" or "Phantom Units")
and distribution equivalents (each a "Distribution Equivalent") awarded to the
Participant under the Plan.
2. Award. Subject to the terms and conditions of the Plan and this
Agreement, TEPPCO hereby awards the Participant the number of Phantom Units set
forth in the related Phantom Unit Award Certificate (the "Certificate"), subject
to the conditions set forth in the Certificates.
3. Establishment of Phantom Unit Account. TEPPCO shall establish and
maintain an appropriate record (the "Phantom Unit Account") which shall from
time to time reflect the number of Phantom Units credited to Participant's
Account and the number redeemed for cash.
4. Adjustment in Phantom Units and Distribution Equivalents. In the
event that the number or kind of Limited Partnership Units shall be changed as a
result of a recapitalization, restructure or other such similar event, the
number of Phantom Units and Distribution Equivalents which have been awarded to
each Participant and the number of Phantom Units credited to each such
Participant's Phantom Unit Account under this Agreement, which have not been
redeemed, shall be appropriately adjusted, as determined by the Committee, to
reflect such change.
5. Distribution Equivalents. As soon as possible after each quarterly
distribution date, TEPPCO shall pay to the Participant if he or she is then an
Eligible Employee, or if he or she has terminated such employment under
circumstances which avoid the forfeiture of all or a portion of his or her
Phantom Units as provided in Section 6 hereof, a cash payment equal to the
product of:
(a) the total number of Phantom Units
awarded to the Participant, reduce by the number of
Phantom Units redeemed as of the appropriate
distribution record date, multiplied by
(b) the distribution paid with respect to a
Limited Partnership Unit for such quarter.
<PAGE> 2
6. Crediting and Redemption of Phantom Units.
(a) Except as otherwise provided in this section 6, as of the
crediting date set forth in the Certificate (the "Vesting Date"), Participant
shall be credited with such portion of the total Phantom Units awarded to the
Participant as set forth in the Certificate. Such Phantom Units shall be
credited to the Participant's Phantom Unit Account and shall become vested and
nonforfeitable.
(b) Subject to such terms and conditions as may be established
by the Committee pursuant to the Plan, on or after any Vesting Date, the
Participant may request redemption of the amount of any or all of the Phantom
Units credited to his Phantom Unit Account by filing a written request in such
form as the Committee may prescribe for such purpose.
(c) If the Participant's employment with TEPPCO is terminated,
any unredeemed Phantom Units credited to the Participant's Phantom Unit Account
shall be redeemed as of the date of such termination of employment.
(d) If Participant's employment is terminated due to
disability or death (collectively, "Severance"), any unredeemed Phantom Units
that are credited to a Participant's Phantom Unit Account at the time of such
Severance and any Phantom Units that have been awarded, but not credited, to a
Participant's Phantom Unit Account at such time of any such Severance shall be
immediately credited to Participant and shall be redeemed as of the date of such
Severance.
(e) Phantom Units will be redeemed in the form of cash payment
by TEPPCO. The cash value of each Phantom Unit will be based on the Market Value
of a Limited Partnership Unit as of the close of business on the date of
redemption or on the last preceding date on which Market Value can be
determined. Cash payments shall be made no later than 15 business days following
the redemption date.
(f) Except as provided in Section 6(d) above, any Phantom
Units which have not been credited to a Participant's Phantom Unit Account as of
the date the Participant terminates his or her employment for any reason and
ceases to be an Eligible Employee shall be forfeited as of the date of such
termination of employment.
(g) Notwithstanding anything to the contrary herein, the
Committee, in its sole and absolute discretion, may accelerate the crediting of
Phantom Units to a Participant's Phantom Unit Account and/or the redemption of
Phantom Units from any Participant in the event of circumstances of unusual
financial hardship to such Participant.
7. Distributions on Account of Death. Distribution of cash for Phantom
Units redeemed upon the death of a Participant shall be made to the
Participant's surviving spouse, or if no surviving spouse exists, to the estate
or legal representative of the Participant.
2
<PAGE> 3
8. Withholding of Taxes. TEPPCO shall deduct from the amount of all
benefits paid under this Agreement any taxes required to be withheld by the
Federal or any state or local government.
9. Limitation of Rights. Nothing in this Agreement, the Phantom Unit
Award Certificate or the Plan shall be construed to:
(a) give the Participant any right to be
awarded any Phantom Units or Distribution Equivalents
other than in the sole discretion of the Committee;
(b) give the Participant any right to have
his or her Phantom Unit Account credited with any
Phantom Units other than in the sole discretion of
the Committee;
(c) give the Participant any rights
whatsoever with respect to Limited Partnership Units;
or
(d) give the Participant or any other person
any interest in any fund or in any specified asset or
assets of TEPPCO.
10. Non-Alienation of Benefits. No right or benefit under this
Agreement shall be subject to anticipation, alienation, sale, assignment,
pledge, encumbrance or charge, and any attempt to anticipate, alienate, sell,
assign, pledge, encumber or charge, the same will be void. No right or benefit
hereunder shall in any manner be liable for or subject to any debts, contracts,
liabilities or torts of the person entitled to such benefits. If the Participant
or his beneficiary hereunder shall become bankrupt or attempt to anticipate,
alienate, assign, sell, pledge, encumber or charge any right or benefit
hereunder of if any creditor shall attempt to subject the same to writ of
garnishment, attachment, execution, sequestration, or any other form of process
or involuntary lien or seizure, then such right or benefit shall cease and
terminate.
11. Prerequisites to Benefits. No Participant, or any person claiming
through a Participant, shall have any right or interest in the amounts
represented by the Units or Distribution Equivalents awarded hereunder, unless
and until all the terms, conditions and provisions of this Agreement and the
Plan which affect the Participant or such other person shall have been complied
with as specified herein.
12. Successors and Assigns. This Agreement shall bind and inure to the
benefit of and be enforceable by Participant, TEPPCO and their respective
permitted successors and assigns (including personal representatives, heirs and
legatees), except that Participant may not assign any rights or obligations
under this Agreement except to the extent and in the manner expressly permitted
hereby.
3
<PAGE> 4
13. Governing Law. This Agreement shall be governed by, construed and
enforced in accordance with the internal laws of the State of Texas and, where
applicable, the laws of the United States.
14. Interpretation. Any discrepancies or conflicts between or among the
Plan; the Phantom Unit Award Certificate or this Agreement, shall be resolved in
favor of the Phantom Unit Award Certificate; this Agreement; and the Plan in
that order.
15. No Employment Obligation. The granting of the award of Phantom
Units pursuant to this Agreement shall not constitute an employment contract,
express or implied, nor impose upon TEPPCO or any affiliate of TEPPCO any
obligation to employ or continue to employ Participant. The right of TEPPCO or
any affiliate of TEPPCO to terminate the employment of Participant shall not be
diminished or affected by reason of the fact that the award has been granted to
him.
16. Forfeiture. Notwithstanding any other provisions of this Agreement,
if the Committee finds by a majority vote after full consideration of the facts
that Participant (a) committed or engaged in fraud, embezzlement, theft,
commission of a felony, or proven dishonesty in the course of his employment by
TEPPCO or an affiliate of TEPPCO, which conduct damaged TEPPCO or affiliate of
TEPPCO, or disclosed trade secrets of TEPPCO or an affiliate of TEPPCO; or (b)
participated, engaged in or had a material, financial or other interest, whether
as an executive, officer, director, consultant, contractor, unitholder, owner,
or otherwise, in any commercial endeavor which is competitive with the business
of the TEPPCO or an affiliate of TEPPCO without the written consent of TEPPCO or
the affiliate of TEPPCO, the Participant shall forfeit all existing unredeemed
Phantom Units whether credited or not. Clause (b) shall not be deemed to have
been violated solely by reason of Participant's ownership of units or securities
of any publicly owned entity, if that ownership does not result in effective
control of the entity.
The decision of the Committee as to the cause of Participant's
discharge, the damage done to TEPPCO or an affiliate of TEPPCO, and the extent
of Participant's competitive activity shall be final. No decision of the
Committee, however, shall affect the finality of the discharge of Participant by
TEPPCO or an affiliate of TEPPCO in any manner.
4
<PAGE> 5
This agreement is executed and delivered, in duplication, pursuant to
the Plan, the provisions of which are incorporated herein by reference.
TEXAS EASTERN PRODUCTS PIPELINE COMPANY
W. L. THACKER
------------------
ATTEST:
JAMES C. RUTH
- ------------------
Secretary
, Participant
--------------------
Address
City, State, Zip Code
5
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 31,529
<SECURITIES> 3,910
<RECEIVABLES> 182,424
<ALLOWANCES> 0
<INVENTORY> 18,535
<CURRENT-ASSETS> 240,827
<PP&E> 924,792
<DEPRECIATION> 212,924
<TOTAL-ASSETS> 1,010,276
<CURRENT-LIABILITIES> 215,162
<BONDS> 389,745
0
105,507
<COMMON> 0
<OTHER-SE> 226,892
<TOTAL-LIABILITY-AND-EQUITY> 1,010,276
<SALES> 1,118,288
<TOTAL-REVENUES> 1,295,809
<CGS> 1,098,634
<TOTAL-COSTS> 1,223,918
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,407
<INCOME-PRETAX> 51,290
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 50,771
<EPS-BASIC> 1.34
<EPS-DILUTED> 1.34
</TABLE>
