<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
EOTT ENERGY PARTNERS, L.P.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
EOTT ENERGY PARTNERS, L.P.
December , 1998
Dear EOTT Energy Partners, L.P. Unitholders:
You are cordially invited to attend the Special Meeting of Unitholders (the
"Special Meeting") of EOTT Energy Partners, L.P. ("EOTT" or the "Partnership"),
that will be held on Friday, February 12, 1999, at , Houston, Texas.
The meeting will start at 10:00 a.m., local time.
At this important meeting, you will be asked to consider and vote upon three
proposals. The first proposal relates to the authorization of an additional
10,000,000 Common Units. The second and third proposals are being submitted in
order to permit the authorization for listing on the New York Stock Exchange of
certain Common Units that may be issued by the Partnership. The second proposal,
if approved, will change the terms of the Special Units so that they are
convertible into Common Units and will permit those Common Units to be listed on
the New York Stock Exchange. The third proposal relates to the approval of a
recent acquisition of assets (the "Asset Acquisition") from Koch Pipeline
Company, L.P. ("Koch Pipeline") and Koch Oil Company, a division of Koch
Industries, Inc., in order to permit the listing on the New York Stock Exchange
of Common Units that may be issued upon conversion of Subordinated Units issued
to Koch Pipeline in connection with the transaction, Koch Pipeline and Koch Oil
Company, a division of Koch Industries, Inc., are referred to herein
collectively as "Koch."
I URGE YOU TO VOTE IN FAVOR OF THE PROPOSALS. Enron Corp. ("Enron"), the parent
company of EOTT Energy Corp. (the "General Partner"), has agreed that, if the
first two proposals are approved, it will extend through the fourth quarter of
2001 its commitment to provide cash to support distributions on Common Units.
The existing distribution support commitment expires at the end of the first
quarter of 1999. The extension would lend additional security to EOTT's
distributions through 2001. Furthermore, approval of the Common Units proposal
will strengthen EOTT's ability to pursue our growth strategy. It will give us an
opportunity to raise additional capital in order to reduce outstanding
indebtedness and interest expense, and it will provide us financial flexibility
in connection with acquisitions or other transactions. Approval of the third
proposal will permit the Partnership to fulfill its commitment to Koch with
respect to the listing of Common Units issuable upon conversion of the
Subordinated Units issued to Koch.
THE BOARD OF DIRECTORS OF THE GENERAL PARTNER, AFTER CAREFUL CONSIDERATION, BY
UNANIMOUS VOTE OF ALL DIRECTORS, RECOMMENDS THAT ALL THREE PROPOSALS BE APPROVED
BY THE UNITHOLDERS. The Audit Committee of the Board of Directors of the General
Partner, after careful consideration and receipt of an opinion from its
financial adviser regarding the fairness of the Support Agreement to the
Partnership and its public Unitholders from a financial point of view, has
determined that the Support Agreement is fair and reasonable to the Partnership
and its partners. The Board of Directors of the General Partner, after careful
consideration and receipt of an opinion from the Partnership's financial adviser
regarding the fairness of the Asset Acquisition to the holders of Common Units
from a financial point of view, determined that the Asset Acquisition was fair
and reasonable to the Partnership and its partners. See "The Asset Acquisition
Proposal."
<PAGE> 3
YOUR VOTE IS IMPORTANT. EVEN IF YOU PLAN TO ATTEND THE SPECIAL MEETING, I URGE
YOU TO MARK, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY. YOU WILL
RETAIN THE OPTION TO REVOKE IT AT ANY TIME BEFORE THE VOTE, OR TO VOTE YOUR
UNITS PERSONALLY ON REQUEST IF YOU ATTEND THE SPECIAL MEETING. FOR THE PROPOSALS
TO BE APPROVED, THEY MUST HAVE, DEPENDING UPON THE ISSUE PRESENTED, EITHER THE
SUPPORT OF THE MAJORITY OR TWO-THIRDS OF THE VOTES ENTITLED TO BE CAST.
I urge you to review carefully the attached Proxy Statement, which contains a
detailed description of the proposals to be voted upon at the Special Meeting.
Sincerely,
Michael D. Burke
President and Chief Executive Officer,
EOTT Energy Corp., as General Partner
<PAGE> 4
EOTT ENERGY PARTNERS, L.P.
1330 POST OAK BOULEVARD
HOUSTON, TEXAS 77056
NOTICE OF SPECIAL MEETING OF UNITHOLDERS
TO BE HELD ON FEBRUARY 12, 1999
To the Unitholders of EOTT Energy Partners, L.P.:
A Special Meeting of Unitholders of EOTT Energy Partners, L.P., a Delaware
limited partnership, will be held on Friday, February 12, 1999 at 10:00 a.m.
local time, at , Houston, Texas to consider and approve the following
actions:
1. A proposal (the "Common Units Proposal") that, if approved, will permit
future issuances of up to 10,000,000 additional Common Units for any
Partnership purpose. The Common Units Proposal requires the approval of the
holders of at least 66 2/3% of the Common Units and Special Units, voting
as a single class.
2. A proposal (the "Listing Proposal") that, if approved, will change the
terms of the Special Units so that they are convertible into Common Units
and will permit the listing on the New York Stock Exchange of Common Units
to be issued upon conversion of the outstanding Special Units. The Listing
Proposal requires the approval of the holders of a majority of the Common
Units voted at the Special Meeting.
3. A proposal (the "Asset Acquisition Proposal") to approve the acquisition
on December 1, 1998 of certain assets, including crude oil gathering and
transportation assets, from Koch Pipeline and Koch Oil Company, a division
of Koch Industries, Inc., in order to permit the listing on the New York
Stock Exchange of Common Units that may be issued upon conversion of
Subordinated Units issued to Koch Pipeline in connection with the
transaction. The Asset Acquisition Proposal requires the approval of the
holders of a majority of the Common Units voted at the Special Meeting,
excluding those held by Koch Pipeline.
UNITHOLDER APPROVAL OF THE FIRST TWO PROPOSALS WILL RESULT IN AN EXTENSION AND
INCREASE IN ENRON'S DISTRIBUTION SUPPORT OBLIGATION SO THAT ENRON WILL BE
OBLIGATED TO PROVIDE UP TO $29 MILLION IN DISTRIBUTION SUPPORT THROUGH THE
FOURTH QUARTER OF 2001.
Only holders of record of Common Units or Special Units at the close of business
on December 14, 1998, are entitled to notice of, and to vote at, the Special
Meeting and any adjournments or postponements thereof. Unitholders may vote in
person or by proxy. The accompanying form of proxy is solicited by the General
Partner.
Under applicable law, dissenters' appraisal rights do not apply to the holders
of Common Units or Special Units in connection with the proposals to be voted
upon at the Special Meeting.
<PAGE> 5
YOUR VOTE IS IMPORTANT. Depending upon the action to be approved, an affirmative
vote of either the majority or two-thirds of the votes entitled to be cast is
required. Even if you plan to attend the Special Meeting in person, please sign
and return the enclosed proxy to ensure that your Units will be represented at
the Special Meeting if you are unable to attend. If you do attend the Special
Meeting and wish to vote in person, you may withdraw your proxy and vote in
person.
By Order of the General Partner
Houston, Texas
December , 1998
<PAGE> 6
EOTT ENERGY PARTNERS, L.P.
1330 POST OAK BOULEVARD
HOUSTON, TEXAS 77056
-------------------------
PROXY STATEMENT
This Proxy Statement is being furnished to holders of Common Units and Special
Units (collectively, the "Voting Units") of EOTT Energy Partners, L.P. ("EOTT"
or the "Partnership") in connection with the solicitation of proxies by EOTT
Energy Corp., the general partner of the Partnership (the "General Partner"),
for use at a special meeting of Unitholders of the Partnership (the "Special
Meeting") to be held on February 12, 1999, and any adjournment thereof. At the
Special Meeting Unitholders will be asked to consider and vote upon (a) the
Common Units Proposal, which if approved will permit EOTT to issue up to
10,000,000 additional Common Units, (b) the Listing Proposal, which if approved
will change the terms of the Special Units so that they are convertible into
Common Units and will permit the Partnership to list on the New York Stock
Exchange (the "NYSE") the Common Units to be issued on conversion of the
outstanding Special Units, and (c) the Asset Acquisition Proposal, which if
approved will permit the Partnership to list on the NYSE the Common Units that
may be issued on conversion of the Subordinated Units that were issued to Koch
Pipeline on December 1, 1998 in connection with the Asset Acquisition.
Only holders of record of the Company's Voting Units as of December 14, 1998
(the "Record Date") are entitled to notice of the Special Meeting. Holders of
Common Units and Special Units as of the Record Date are entitled to vote as a
single class on the Common Units Proposal, holders of Common Units as of the
Record Date are entitled to vote on the Listing Proposal, and holders of Common
Units as of the Record Date other than Koch Pipeline are entitled to vote on the
Asset Acquisition Proposal. In each case, Unitholders entitled to vote are
entitled to one vote for each Unit held.
The expense of preparing, printing and mailing this Proxy Statement and the
proxies solicited hereby will be borne by EOTT. In addition to the use of the
mails, proxies may be solicited by employees of the General Partner, without
additional remuneration, in person or by telephone, telegraph or facsimile
transmission. EOTT will also request brokerage firms, banks, nominees,
custodians, and fiduciaries to forward proxy materials to the beneficial owners
of Voting Units as of the record date and will provide reimbursement for the
cost of forwarding the proxy materials in accordance with customary practice.
EOTT has retained D.F. King & Company, Inc., to aid in the solicitation of
proxies. Your cooperation in promptly signing and returning the enclosed proxy
card will help to avoid additional expenses. This Proxy Statement is being first
sent or given to Unitholders on or about December , 1998.
The Partnership was organized in 1994 to succeed to the oil trading and
transportation business of EOTT Energy Corp. The General Partner is a
wholly-owned subsidiary of Enron Corp. As used herein, unless the context
otherwise requires, "Enron" refers to Enron Corp. and its subsidiaries, and
"EOTT" and the "Partnership" refer to EOTT Energy Partners, L.P. and its
subsidiary operating limited partnerships. See "The Partnership."
-------------------------
The date of this Proxy Statement is December , 1998
<PAGE> 7
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT IN CONNECTION
WITH THE SOLICITATION OF PROXIES AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY EOTT. THE
DELIVERY OF THIS PROXY STATEMENT SHALL NOT UNDER ANY CIRCUMSTANCES CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF EOTT SINCE THE DATE
HEREOF OR THAT THE INFORMATION SET FORTH OR INCORPORATED BY REFERENCE HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
THIS PROXY STATEMENT INCORPORATES BY REFERENCE CERTAIN DOCUMENTS CONCERNING EOTT
THAT ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. EOTT UNDERTAKES TO PROVIDE
COPIES OF SUCH DOCUMENTS (OTHER THAN EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH
EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE), WITHOUT CHARGE, TO ANY
PERSON, INCLUDING ANY BENEFICIAL OWNER OF VOTING UNITS, TO WHOM THIS PROXY
STATEMENT IS DELIVERED, UPON WRITTEN OR ORAL REQUEST TO EOTT ENERGY PARTNERS,
L.P., 1400 SMITH STREET, HOUSTON, TEXAS 77002, ATTENTION: SHAREHOLDER RELATIONS,
(713) 853-6161. IN ORDER TO ENSURE DELIVERY OF DOCUMENTS PRIOR TO THE SPECIAL
MEETING, REQUESTS SHOULD BE RECEIVED BY , 1998.
AVAILABLE INFORMATION
The Partnership is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
filed by the Partnership can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Regional Offices at Seven World Trade
Center, Suite 1300, New York, New York 10048 and CitiCorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
material can be obtained by mail from the Public Reference Section of the
Commission at 450 West Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. In addition, reports, proxy statements and other information concerning
the Partnership may be inspected at the offices of the NYSE, 20 Broad Street,
New York, New York 10005. Certain of such reports, proxy statements and other
information filed by the Partnership are also available on the Internet at the
Commission's World Wide Web site at http://www.sec.gov.
<PAGE> 8
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Available Information............
Table of Contents................
Questions and Answers............
Forward Looking Statements.......
The Special Meeting..............
General........................
Unitholders Entitled to Vote...
Record Date....................
Proxies........................
Voting Procedures for
Beneficial
Owners......................
Solicitation...................
Adjournment....................
The Partnership..................
Enron's Commitment to Increase
and Extend Distribution
Support........................
The Common Units Proposal........
Limitations on the
Partnership's Authority to
Issue Units.................
Reasons for the Common Units
Proposal....................
Future Issuances of Common
Units.......................
The Listing Proposal.............
NYSE Listing Requirements......
Special Units to be Converted
into Common Units...........
Reasons for the Listing
Proposal....................
The Asset Acquisition Proposal...
Reasons for the Asset
Acquisition Proposal........
Effects of Negative Votes on the
Proposals......................
</TABLE>
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Effect of Negative Vote on the
Common Units Proposal.......
Effect of a Negative Vote on
the Listing Proposal........
Effect of a Negative Vote on
the Asset Acquisition
Proposal....................
Expiration of Distribution
Support Unless First Two
Proposals are Approved......
Interests of Certain Persons in
the Proposals..................
Recommendations and Opinion......
Recommendations of the Board of
Directors of the General
Partner.....................
Recommendations of the Audit
Committee of the Board of
Directors of the General
Partner.....................
Fairness Opinion of Financial
Adviser to the Audit
Committee...................
Fairness Opinion of Financial
Adviser to the General
Partner.....................
Security Ownership of Certain
Beneficial Owners and
Management.....................
Description of the Units.........
Independent Public Accountants...
Incorporation of Certain
Documents by Reference.........
Annex A -- Opinion of GulfStar
Group, Inc.
Annex B -- Opinion of PaineWebber
Incorporated
</TABLE>
i
<PAGE> 9
QUESTIONS AND ANSWERS
The following is qualified in its entirety by the more detailed information
contained in or incorporated by reference in this Proxy Statement. Unitholders
are urged to read carefully this Proxy Statement in its entirety.
Q: WHO IS SOLICITING MY PROXY?
A: EOTT Energy Corp., the General Partner of the Partnership, is sending you
this Proxy Statement in connection with its solicitation of proxies for use
at the Partnership's Special Meeting of Unitholders. Certain directors,
officers and employees of the General Partner and D.F. King & Company, Inc.
(a proxy solicitor) may also solicit proxies on our behalf by mail, phone,
fax or in person.
Q: WHEN AND WHERE WILL THE SPECIAL MEETING OCCUR?
A: February 12, 1999 at 10:00 a.m., local time, at , Houston, Texas.
Q: WHAT MAY I VOTE ON?
A: (1) The Common Units Proposal, which is a proposal to authorize the
Partnership to issue up to 10,000,000 additional Common Units to be used
for any Partnership purpose;
(2) The Listing Proposal, which is a proposal that will change the terms of
the Special Units so that they are convertible into Common Units and will
permit the listing on the NYSE of Common Units to be issued upon conversion
of the outstanding Special Units; and
(3) The Asset Acquisition Proposal, which is a proposal to approve the
acquisition of assets from Koch on December 1, 1998, in order to permit the
listing on the NYSE of Common Units that may be issued upon conversion of
the Subordinated Units issued to Koch Pipeline in connection with the Asset
Acquisition.
Q: WHO CAN VOTE?
A: Those who owned Common Units or Special Units as of the close of business
on December 14, 1998 (the "Record Date") are entitled to vote on the Common
Units Proposal. Only those who owned Common Units as of the close of
business on the Record Date are entitled to vote on the Listing Proposal.
Only those who owned Common Units as of the close of business on the Record
Date, other than Koch Pipeline, are entitled to vote on the Asset
Acquisition Proposal.
Q: HOW DO I VOTE?
A: Sign and date each proxy card you receive and return it in the prepaid
envelope. If you return your signed proxy card but do not mark the box
showing how you wish to vote, your Units will be voted FOR all three
proposals. You have the right to revoke your proxy at any time before the
meeting by:
(1) notifying the Secretary of the General Partner in writing;
(2) voting in person; or
(3) returning a later-dated proxy card.
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<PAGE> 10
Q: IF MY UNITS ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
UNITS FOR ME?
A: Your broker will vote your Units only if you provide instructions on how to
vote. You should instruct your broker how to vote your Units upon receipt
of your broker's request for voting instructions. Without your
instructions, your Units will not be voted. Any Units not voted on the
first proposal have the effect of a vote against the proposal.
Q: WHAT IS REQUIRED FOR APPROVAL OF THE PROPOSALS?
A: (1) The Common Units Proposal must be approved by the holders of at least
66 2/3% of the outstanding Common Units and Special Units voting as a
single class.
(2) The Listing Proposal must be approved by the holders of a majority of
the Common Units voted at the Special Meeting.
(3) The Asset Acquisition Proposal must be approved by the holders of a
majority of the Common Units voted at the Special Meeting, excluding those
held by Koch Pipeline.
Q: WHAT HAPPENS IF THE COMMON UNITS PROPOSAL IS APPROVED?
A: EOTT will be permitted to issue up to 10,000,000 additional Common Units
for any Partnership purpose. EOTT intends to issue Common Units in a public
offering, the proceeds of which will be used to repay acquisition
indebtedness. The remaining Common Units authorized pursuant to the Common
Units Proposal will be used for future acquisitions or other Partnership
purposes.
Q: WHAT HAPPENS IF THE COMMON UNITS PROPOSAL IS NOT APPROVED?
A: EOTT will only have the unrestricted right to issue 23,989 additional
Common Units, and Enron's distribution support commitment will not be
increased and extended as explained below.
Q: HAS THERE BEEN A RECENT DEVELOPMENT THAT HAS GIVEN IMPETUS TO THE COMMON
UNITS PROPOSAL?
A: The Asset Acquisition on December 1, 1998, substantially increased EOTT's
position in the industry. As partial consideration for the assets EOTT
issued 2,000,000 Common Units (1,996,000 of which were original issue) to
Koch Pipeline. At the same time, EOTT issued 1,150,000 Special Units to
Enron pursuant to the Support Agreement. These issuances significantly
reduced the number of Common Units (or other Units ranking on a parity with
the Common Units) that EOTT has available for issuance without a Unitholder
vote.
Q: WHAT HAPPENS IF THE LISTING PROPOSAL IS APPROVED?
A: The terms of the 2,980,011 Special Units outstanding and held by Enron will
be changed so that the Special Units will be converted into 2,980,011
Common Units, and those Common Units will be listed on the NYSE.
Q: WILL CONVERSION OF THE SPECIAL UNITS ADVERSELY IMPACT MY RIGHTS AS A COMMON
UNITHOLDER TO RECEIVE DISTRIBUTIONS FROM THE PARTNERSHIP OR MY VOTING
RIGHTS?
A: The rights of Common Unitholders to receive distributions and their voting
rights will not be affected by the vote.
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<PAGE> 11
Q: WHAT HAPPENS IF THE LISTING PROPOSAL IS NOT APPROVED?
A: The terms of the Special Units will be changed so that each Special Unit is
convertible, at the option of the holder, into the right to receive cash
from EOTT in an amount equal to the then fair market value of one Common
Unit. In addition, Enron's distribution support commitment will not be
increased and extended as explained below.
Q: WHAT HAPPENS TO ENRON'S DISTRIBUTION SUPPORT COMMITMENT IF THE FIRST TWO
PROPOSALS ARE APPROVED?
A: Enron's distribution support commitment will be increased and extended.
Enron's existing commitment to support distributions on Common Units
expires at the end of the first quarter of 1999, and the unused portion of
the existing commitment is approximately $7.1 million. On the earlier to
occur of the date the first two proposals are approved or May 17, 1999,
Enron will contribute to the Partnership the $21.9 million in Additional
Partnership Interests ("APIs") that are now outstanding and will exchange
any additional APIs (i.e. any APIs purchased through the date of the
Special Meeting) for Common Units at $19.00 per Unit. If the first two
proposals are approved, Enron will extend its distribution support
commitment through the fourth quarter of 2001. As a result of this
extension and Enron's transfer to the Partnership of all APIs outstanding,
Enron will have an obligation to purchase from EOTT up to $29 million in
APIs at any one time outstanding in order to support distributions of
Available Cash (as defined in the Partnership Agreement) to holders of
Common Units through the fourth quarter of 2001.
Q: WHAT HAPPENS TO ENRON'S DISTRIBUTION SUPPORT COMMITMENT IF EITHER OR BOTH
OF THE FIRST TWO PROPOSALS ARE NOT APPROVED?
A: Enron's commitment to provide distribution support will be limited to a
total of $7.1 million of distribution support with respect to the fourth
quarter of 1998 and the first quarter of 1999. Enron will have no
obligation to provide distribution support thereafter.
Q: WHAT HAPPENS IF THE ASSET ACQUISITION PROPOSAL IS APPROVED?
A: The Partnership will be able to list on the NYSE the 2,000,000 Common Units
that may be issued upon conversion of the 2,000,000 Subordinated Units
issued to Koch Pipeline in connection with the acquisition of assets from
Koch. Conversion of the Subordinated Units, however, will remain dependent
on the expiration of the Subordinated Period and the determinations made by
the General Partner as described under "Description of Units."
Q: WHAT HAPPENS IF THE ASSET ACQUISITION PROPOSAL IS NOT APPROVED?
A: The Partnership will be unable to list the Common Units that underlie the
2,000,000 Subordinated Units issued to Koch Pipeline. In such case, the
Partnership could be liable for any damages that may be suffered by Koch
Pipeline as a result of the Partnership's failure to list the underlying
Common Units.
Q: WHY IS MY VOTE IMPORTANT EVEN IF I OWN ONLY A VERY LIMITED NUMBER OF UNITS?
A: EOTT Units are held mostly by owners who hold only limited numbers of
Units, so very extensive participation by the Unitholders is necessary for
approval of the proposals.
3
<PAGE> 12
If you would like additional copies of this Proxy Statement or proxy cards or if
you have any questions about the Special Meeting, you should contact: D.F. King
& Company, Inc. at 1-800-207-3159.
FORWARD LOOKING STATEMENTS
This Proxy Statement includes forward looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. All
statements other than statements of historical facts included or incorporated by
reference in this Proxy Statement, including, without limitation, statements
regarding EOTT's future financial position, business strategy, budgets,
estimates of cash available for distribution to Unitholders, projected costs and
plans and objectives of management for future operations, are forward looking
statements. Although EOTT believes that its expectations reflected in such
forward looking statements are based on reasonable assumptions, no assurance can
be given that such expectations will prove to have been correct. Important
factors that could cause actual results to differ materially from the
expectations reflected in the forward looking statements herein include, but are
not limited to, EOTT's success in integrating the assets to be acquired from
Koch into EOTT's field and administrative operations, the ability of the
Partnership to continue purchasing crude oil under the contracts acquired,
prevailing market conditions (including purchase and sales prices for crude oil
in the areas in which EOTT operates), EOTT's success in hedging its positions
and other factors. All subsequent written or oral forward looking statements
attributable to EOTT, or persons acting on its behalf, are expressly qualified
in their entirety by the foregoing cautionary statements.
THE SPECIAL MEETING
GENERAL
The Special Meeting will be held for the purpose of considering the Common Units
Proposal, the Listing Proposal and the Asset Acquisition Proposal. The Special
Meeting is scheduled to be held on February 12, 1999 at 10:00 a.m., local time,
at , Houston, Texas.
UNITHOLDERS ENTITLED TO VOTE
Holders of record of Voting Units at the close of business on December 14, 1998,
the Record Date, will be entitled to notice of and to vote on the Common Units
Proposal at the Special Meeting. Holders of record of Common Units on the Record
Date will be entitled to notice of and to vote on the Listing Proposal. Holders
of Common Units as of the Record Date, other than Koch Pipeline, are entitled to
notice of and to vote on the Asset Acquisition Proposal. As of the Record Date,
11,996,000 Common Units (of which 2,000,000 Units were owned by Koch Pipeline)
and 2,980,011 Special Units were issued and outstanding, each of which is
entitled to one vote on each matter on which it is entitled to be voted.
RECORD DATE
The General Partner has fixed the close of business on December 14, 1998, as the
Record Date for the determination of holders of Voting Units entitled to notice
of, and to vote at, the
4
<PAGE> 13
Special Meeting or any adjournment(s) thereof. Only holders of record of Voting
Units at the close of business on the Record Date are entitled to notice of, and
to vote at, the Special Meeting. A complete list of such Unitholders will be
available for inspection at the offices of EOTT in Houston, Texas, during normal
business hours upon written demand by any EOTT Unitholder or the Unitholder's
agent or attorney beginning two business days after the date of this Proxy
Statement and continuing through the Special Meeting. Any Unitholder or
Unitholder's agent or attorney may, upon written notice and subject to Section
17-305 of the Delaware Revised Uniform Limited Partnership Act, copy the list of
Unitholders during regular business hours during the inspection period at the
Unitholder's expense. If you have Units registered in the name of a brokerage
firm or trustee and plan to attend the Special Meeting, please obtain from the
firm or trustee a letter, account statement or other evidence of your beneficial
ownership of those Units to facilitate your admittance to the meeting.
PROXIES
Any holder of outstanding Units entitled to vote on a matter may vote such
Unitholder's Units either in person or by duly authorized proxy. The giving of a
proxy by a Unitholder will not affect such Unitholder's right to vote such Units
if the Unitholder attends the Special Meeting and desires to vote in person.
Prior to the voting of a proxy, such proxy may be revoked by the Unitholder by
delivering written notice of revocation to the General Partner: Attn: Secretary,
by executing a subsequently dated proxy or by voting in person at the Special
Meeting. All Units represented by effective proxies on the enclosed form of
proxy received by EOTT will be voted at the Special Meeting in accordance with
the terms of such proxies. If no instructions are given, the proxies will be
voted FOR the approval of each of the proposals.
VOTING PROCEDURES FOR BENEFICIAL OWNERS
The enclosed proxy includes power to vote the number of Voting Units registered
in a holder's name, according to the books of EOTT's transfer agent. EOTT will
mail this Proxy Statement and a proxy to all persons who, according to the books
of EOTT's Transfer Agent, beneficially own Voting Units.
SOLICITATION
The expense of preparing, printing and mailing this Proxy Statement and the
proxies solicited hereby will be borne by EOTT. In addition to the use of the
mails, proxies may be solicited by employees of the General Partner, without
additional remuneration, in person or by telephone, telegraph or facsimile
transmission. EOTT will also request brokerage firms, banks, nominees,
custodians and fiduciaries to forward proxy materials to the beneficial owners
of Voting Units as of the record date and will provide reimbursement for the
cost of forwarding the proxy materials in accordance with customary practice.
EOTT has retained D.F. King & Company, Inc., to aid in the solicitation of
proxies. Your cooperation in promptly signing and returning the enclosed proxy
card will help to avoid additional expenses.
ADJOURNMENT
The Special Meeting may be adjourned to another date and/or place for any proper
purposes (including, without limitation, for the purpose of soliciting
additional proxies).
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THE PARTNERSHIP
EOTT Energy Partners, L.P. is a Delaware limited partnership formed in March
1994 to acquire and operate substantially all of the business and assets of EOTT
Energy Corp., which is the General Partner of EOTT and a wholly owned subsidiary
of Enron. Through its affiliated operating limited partnerships, EOTT Energy
Operating Limited Partnership, EOTT Energy Canada Limited Partnership and EOTT
Energy Pipeline Limited Partnership, EOTT is engaged in the purchasing,
gathering, transporting, trading, storage and resale of crude oil and related
activities. EOTT's principal executive offices are located at 1330 Post Oak
Boulevard, Suite 2700, Houston, Texas 77056, and its telephone number at such
offices is (713)993-5200.
The General Partner, EOTT Energy Corp., is a Delaware corporation that is a
wholly-owned subsidiary of Enron. The General Partner serves as the sole general
partner of EOTT and its affiliated operating limited partnerships. In addition
to its aggregate approximate 2% general partner interest in EOTT, the General
Partner owns an approximate 29% limited partner interest in EOTT in the form of
Subordinated Units. Enron, through its purchase of Common Units and Special
Units holds directly an approximate 14% interest in EOTT.
ENRON'S COMMITMENT TO INCREASE AND EXTEND DISTRIBUTION SUPPORT
In connection with the Partnership's initial public offering of Common Units in
March 1994, Enron and the Partnership entered into an Ancillary Agreement
pursuant to which, among other things, Enron agreed that it would contribute up
to $19 million to the Partnership in exchange for APIs if necessary to support
the Partnership's ability to pay the Minimum Quarterly Distribution on Common
Units ($0.475 per quarter, or $1.90 annualized) with respect to quarters ending
on or prior to March 31, 1997. In 1995, in connection with the decision of the
Partnership to exit its West Coast processing and asphalt marketing business,
Enron committed to increase its distribution support obligation to $29 million
and to extend the support period for one year through March 31, 1998. In 1997,
Enron committed to extend the cash distribution support for an additional year
until March 31, 1999.
Under the Ancillary Agreement, Enron's obligation is limited to the purchase of
$29 million in APIs at any time outstanding. There are approximately $21.9
million in APIs outstanding, so that the unused portion of Enron's commitment is
approximately $7.1 million. The unused portion of Enron's commitment will be
reduced if and to the extent Enron purchases additional APIs and increased if
and to the extent that the Partnership reacquires APIs. Enron's existing
commitment expires with the first quarter of 1999. UNLESS THE FIRST TWO
PROPOSALS ARE APPROVED AT THE SPECIAL MEETING, ENRON WILL HAVE NO OBLIGATION TO
PROVIDE CASH TO SUPPORT DISTRIBUTIONS ON COMMON UNITS WITH RESPECT TO ANY
QUARTER BEGINNING ON OR AFTER APRIL 1, 1999.
Pursuant to a Support Agreement dated September 21, 1998 (the "Support
Agreement"), Enron has agreed that, on the earlier to occur of the date both the
Common Units Proposal and the Listing Proposal are approved or May 17, 1999,
Enron will contribute to the Partnership the $21.9 million in APIs that are now
outstanding and will exchange any additional APIs (i.e. any APIs purchased
between the date hereof and the date of the Special Meeting) for Common Units at
$19.00 per Unit. Enron has further agreed that if both the Common Units Proposal
and the Listing Proposal are approved, Enron's commitment to
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provide cash to support distributions on Common Units will be extended through
the fourth quarter of 2001. As a result of Enron's contribution of APIs and the
extension of Enron's commitment, Enron will be obligated to provide cash
distribution support up to a maximum of $29 million outstanding for all quarters
ending on or prior to December 31, 2001, in each case in an amount necessary to
permit the Partnership to pay the Minimum Quarterly Distribution on Common Units
to the extent the Partnership's cash is insufficient to make such payments.
Pursuant to the Support Agreement, the Partnership also issued 1,150,000 Special
Units, which will be converted into Common Units if the Listing Proposal is
approved.
THE COMMON UNITS PROPOSAL
The Common Units Proposal, if approved by the requisite two-thirds vote of
holders of Voting Units, will permit the Partnership to issue an additional
10,000,000 Common Units (or an equivalent amount of other partnership interests
ranking on a parity with the Common Units), without a subsequent vote of
Unitholders. The Common Units Proposal, if approved, will give the Partnership
additional financial flexibility by permitting it to issue Common Units to raise
cash to reduce indebtedness, for acquisitions and for other Partnership
purposes. The increase and extension of Enron's commitment to provide cash to
support distributions on Common Units will not occur unless both the Common
Units Proposal and the Listing Proposal are approved at the Special Meeting. See
"Effects of Negative Votes on the Proposals."
LIMITATIONS ON THE PARTNERSHIP'S AUTHORITY TO ISSUE UNITS
The Amended and Restated Agreement of Limited Partnership of the Partnership
dated March 25, 1994, as amended (the "Partnership Agreement"), grants to the
General Partner the authority to cause the Partnership to issue partnership
interests for any Partnership purpose, subject to certain limitations. Section
4.2 of the Partnership Agreement prohibits (with certain exceptions) the
issuance during the Subordination Period (as defined in the Partnership
Agreement), of an aggregate of more than 5,000,000 additional Common Units or an
equivalent amount of other Units having rights to distributions or in
liquidation ranking on a parity with the Common Units, without the prior
approval of two-thirds of the Outstanding Common Units (as defined in the
Partnership Agreement).
In January 1996, the Partnership issued and sold to Enron 1,830,011 Common Units
for $29.8 million in cash in a private placement. The funds were used to repay
short-term indebtedness incurred in connection with an acquisition. In July
1996, EOTT created a new class of limited partner interest designated as Special
Units and exchanged the Special Units on a one-for-one basis for the 1,830,011
Common Units issued in January 1996. The Special Units rank pari passu with the
Common Units for purposes of distributions, rights upon liquidation, voting
rights and other matters under the Partnership Agreement. The exchange permitted
EOTT to avoid at that time the cost of NYSE listing of the Common Units issued
to Enron in connection with the financing of the acquisition, including the cost
associated with seeking Unitholder approval for the listing.
The Special Units are considered Common Units for earnings per Unit purposes and
for Partnership Agreement purposes, and the exchange had no adverse impact on
EOTT or on income or distributions per Common Unit. The Special Units are
entitled to vote together with the Common Units on all matters submitted to a
vote of holders of Common Units under
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the Partnership Agreement, other than the Listing Proposal or similar future
proposals submitted pursuant to NYSE rules.
Pursuant to a Purchase and Sale Agreement (the "Purchase Agreement") dated
September 21, 1998 among EOTT, EOTT Energy Operating Limited Partnership, Koch
Pipeline Company, L.P. and Koch Oil Company, a division of Koch Industries,
Inc., the Partnership acquired certain crude oil gathering and transportation
assets of Koch in exchange for 2,000,000 Common Units (1,996,000 of which were
original issue), 2,000,000 Subordinated Units and $184 million in cash.
Simultaneously with the execution of the Purchase Agreement, Enron and the
Partnership entered into the Support Agreement described under "Enron's
Commitment to Increase and Extend Distribution Support." Pursuant to the Support
Agreement, the Partnership agreed to submit the Common Units Proposal and the
Listing Proposal to a vote of the Unitholders. See "Reasons for the Common Units
Proposal," below.
The issuance of the 1,830,011 Common Units and the exchange of Special Units for
Common Units in 1996, the issuance of 1,996,000 Common Units to Koch under the
terms of the Purchase Agreement and the issuance of 1,150,000 Special Units
under the terms of the Support Agreement resulted in the issuance of a total of
4,976,011 Units pursuant to the authority granted pursuant to Section 4.2 of the
Partnership Agreement. This reduced to 23,989 the number of Common Units (or an
equivalent amount of other Units having rights to distributions or in
liquidation ranking on a parity with the Common Units) that, pursuant to Section
4.2 of the Partnership Agreement, the General Partner has the unrestricted
authority to cause EOTT to issue during the Subordination Period, without the
prior approval of at least two-thirds of the outstanding Common Units and
Special Units, voting as a class.
REASONS FOR THE COMMON UNITS PROPOSAL
Pursuant to the Support Agreement (a) Enron agreed to make loans to the
Partnership to fund the cash portion of the consideration to be paid to Koch at
the closing under the Purchase Agreement and to repay indebtedness incurred in a
prior acquisition of assets from Koch, (b) Enron agreed to increase and extend
the Partnership's credit facility with Enron, (c) the Partnership agreed to
issue 1,150,000 Special Units to Enron, (d) Enron agreed to contribute $21.9
million in APIs to the Partnership on the earlier of the date the first two
proposals are approved at the Special Meeting or May 17, 1999, (e) Enron agreed
that if the first two proposals are approved at the Special Meeting it will
extend its cash distribution support through the fourth quarter of 2001, and (f)
the Partnership agreed that, if any additional APIs are issued through the date
of the Special Meeting, it will issue additional Common Units at $19.00 per Unit
in exchange for such additional APIs if the first two proposals are approved.
Pursuant to the Support Agreement, EOTT borrowed from Enron $212.5 million,
consisting of a $100 million bridge loan and a $112.5 million term loan and
entered into a $1 billion credit facility with Enron, to replace its existing
$600 million credit facility. As a result of the purchase of assets from Koch,
the Partnership has significant additional indebtedness outstanding. Although
the purchase of assets from Koch and the Support Agreement also resulted in
additional equity outstanding, in the form of 1,996,000 additional Common Units,
and 2,000,000 additional Subordinated Units, for the reasons discussed below the
Partnership intends to issue additional equity for cash in order to reduce its
outstanding indebtedness.
Enron agreed to the terms of the Support Agreement only if EOTT would undertake
to raise additional capital in the form of equity and to use the proceeds from
the sale of equity to repay
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<PAGE> 17
a portion of the acquisition indebtedness. Enron was also willing to agree to
the Support Agreement only if the Partnership would have the flexibility to
issue additional Common Units in connection with future acquisitions or to repay
indebtedness, without the need for the expensive and time consuming process of
seeking a two-thirds vote of the holders of Voting Units. Thus, Enron agreed to
enter into the Support Agreement only if the Partnership would agree to submit
the Common Units Proposal and the Listing Proposal to a Unitholder vote.
On a pro forma basis as of September 30, 1998 after giving effect to the
incurrence of indebtedness and issuance of Units in connection with the
acquisition of assets from Koch and pursuant to the Support Agreement, the
Partnership had approximately $ million of debt and approximately $
million of equity.
FUTURE ISSUANCES OF COMMON UNITS
If the Common Units Proposal is approved by the requisite vote of the holders of
Voting Units, EOTT will be entitled to issue up to 10,000,000 additional Common
Units or an equivalent amount of other Units having rights to distributions or
in liquidation ranking on a parity with the Common Units, without the prior
approval of the holders of two-thirds of the Voting Units. This is in addition
to the remaining 23,989 Common Units (or their equivalent) that the Partnership
is now entitled to issue as provided in Section 4.2 of the Partnership
Agreement.
The General Partner intends to cause the Partnership to effect a public offering
of Common Units, the proceeds of which will be used to repay acquisition
indebtedness. The timing of any such offering will depend in part on the
conditions of the equity markets in the coming months, but the General Partner
anticipates that such offering will occur sometime in 1999. The General Partner
intends that the remaining Common Units (or their equivalent) authorized
pursuant to the Common Units Proposal will be used as acquisition currency in
connection with future acquisitions, to raise additional equity to repay
acquisition indebtedness or for other Partnership purposes.
Under Section 4.2 of the Partnership Agreement, the Partnership is entitled to
issue an unlimited number of additional Common Units or their equivalent during
the Subordination Period without a Unitholder vote if they are issued in
connection with an acquisition involving properties and assets that would have,
if acquired by the Partnership as of the date that is one year prior to the
first day of the quarter in which such acquisition is to be consummated,
resulted in an increase in (A) the amount of Available Cash generated by the
Partnership on a per-Unit basis with respect to each of the four most recently
completed quarters (determined on a pro forma basis assuming that all of the
Common Units to be issued in connection with such acquisition had been issued
and outstanding as of the commencement of such four-quarter period) over (B) the
actual amount of Available Cash generated by the Partnership on a per-Unit basis
with respect to each of such four quarters. The General Partner believes that
this provision is inadequate to give the Partnership the flexibility it needs to
make acquisitions because the test can be applied only in the case of
acquisitions where the seller has financial information prepared on a basis that
will permit pro forma comparisons. The acquisition of assets from Koch, for
example, could not be tested under the above test because the Partnership
acquired assets that represented only a portion of Koch's business. Thus, there
were no financial statements available that would demonstrate that the pro forma
tests were met. The General Partner believes that it will be in the best
interest of the Partnership to pursue other asset acquisitions that cannot be
tested under the above test
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because they will involve acquisitions of selected assets rather than
acquisitions of entire businesses. If the Common Units Proposal is approved, the
Partnership will have the flexibility to pursue such acquisitions without
seeking a vote of Unitholders.
THE LISTING PROPOSAL
The Listing Proposal, if approved by the requisite vote of holders of Common
Units, will change the terms of the Special Units so that they are convertible
into Common Units and will permit the listing on the NYSE of Common Units to be
issued by the Partnership on conversion of the outstanding Special Units. The
increase and extension of Enron's commitment to provide cash to support
distributions on Common Units will not occur unless the Common Units Proposal
and the Listing Proposal are approved at the Special Meeting. See "Effects of
Negative Votes on the Proposals."
NYSE LISTING REQUIREMENTS
The Common Units are listed and traded on the NYSE. The Partnership's listing
agreement with the NYSE requires that the Partnership list with the NYSE all
Common Units that it issues. The listing agreement requires the Partnership to
file subsequent listing applications in order to list the additional Common
Units. The NYSE shareholder approval rules provide that, under certain
circumstances, a listed company may not list additional securities unless it
obtains the approval of the holders of the class of listed securities. Those
circumstances include issuances of securities to affiliated companies in excess
of certain amounts. Under the NYSE rules, the Listing Proposal requires the
approval of the holders of a majority of the Common Units voted at the Special
Meeting.
SPECIAL UNITS TO BE CONVERTED INTO COMMON UNITS
In January 1996, the Partnership issued and sold to Enron 1,830,011 Special
Units for $29.8 million in cash in a private placement. The funds were used to
repay short-term indebtedness incurred in connection with an acquisition. Enron
purchased the Common Units based on the assumption that the Partnership would
cause such Units to be listed on the NYSE. Under an interpretation of the
then-existing NYSE rules by the staff of the NYSE, a company that issues listed
securities to an affiliate must obtain the approval of the holders of the class
of listed securities, even if those securities are issued for cash. Thus, under
the NYSE staff's interpretation, EOTT would be unable to list the Common Units
issued to Enron unless it submitted the matter to a vote of Unitholders.
In order to permit EOTT to avoid at that time the cost of calling a meeting of
holders of Common Units to ratify the issuance, Enron agreed to accept Special
Units in exchange for the Common Units. Thus, in July 1996, EOTT created a new
class of limited partner interests designated as Special Units and exchanged the
Special Units on a one-for-one basis for the 1,830,011 Common Units issued in
January 1996. Pursuant to the Support Agreement, the Partnership issued to Enron
an additional 1,150,000 Special Units at the closing of the acquisition of
assets from Koch. As a result, there are now outstanding 2,980,011 Special
Units, all of which are owned by Enron. The Special Units rank pari passu with
the Common Units in all distributions and upon liquidation and are entitled to
be voted as a class with the Common Units. The Special Units are considered
Common Units for earnings per Unit purposes and for Partnership Agreement
purposes.
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REASONS FOR THE LISTING PROPOSAL
In consideration of Enron's agreement to accept Special Units, the Partnership
agreed that Enron could, at any time, require the Partnership to submit to a
vote or consent of holders of Common Units the approval of a change in the terms
of the Special Units to provide that each Special Unit is convertible into one
Common Unit at the option of the holder of such Special Unit, such conversion
option to be exercisable by any holder of Special Units in whole or in part at
any time and from time to time. EOTT agreed that the vote or consent required
for such change will be the requisite vote required, under NYSE rules or NYSE
staff interpretations of such rules, for listing of the Common Units that would
be issued upon any such conversion. Upon receipt of the required vote or
consent, the terms of the Special Units will be changed so that they become
convertible as described above, and the Common Units issuable upon conversion of
the Special Units will be eligible for listing on the NYSE.
As part of its agreements with Enron regarding the issuance of Special Units,
the Partnership agreed that if Enron requires the Partnership to submit to a
vote or consent of its Unitholders the approval of a change in the terms of the
Special Units to provide that each Special Unit is convertible into one Common
Unit as described above and if the requisite vote is not received, then Enron
will have the right to convert the Special Units into cash in an amount per
Special Unit equal to the fair market value of one Common Unit, based on the
average closing price of the Common Units on the NYSE for the 20 trading day
period ending two days prior to the date of the conversion notice. Enron would
have the right to convert its Special Units in whole or in part at any time and
from time to time.
Approval of the Listing Proposal by the vote of the holders of a majority of the
Common Units voted at the Special Meeting will satisfy the requirements for
listing of the Common Units to be issued on conversion of the Special Units.
Therefore, if the Listing Proposal is approved at the Special Meeting, the
2,980,011 Special Units will become convertible into 2,980,011 Common Units, and
those Common Units will be listed on the NYSE. Enron has informed the
Partnership that, upon receipt of the requisite approval of the Listing
Proposal, it will immediately convert its Special Units into Common Units.
Conversion of Special Units into Common Units will have no impact on the right
of holders of Common Units to receive distributions or amounts payable in
liquidation, because the holders of Special Units already have rights to
participate in distributions equal to those of Common Unitholders. The impact of
conversion on voting rights is expected to be minimal, because the Special Units
are entitled to be voted together with the Common Units on all matters under the
Partnership Agreement, other than the Listing Proposal or similar future
proposals submitted pursuant to NYSE rules.
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THE ASSET ACQUISITION PROPOSAL
On December 1, 1998, the Partnership completed its acquisition of certain
assets, including crude oil gathering and transportation assets, from Koch. The
consideration for the purchase consisted of 2,000,000 Common Units, 2,000,000
Subordinated Units and $184 million in cash. The acquisition involved
approximately 3,900 miles of crude oil pipelines and lease purchase contracts
for approximately 220,000 barrels of oil per day from production in 11 central
and western states, including Texas, Oklahoma, Kansas and California. The assets
represented a significant addition to the assets acquired from Koch in West
Texas in July of 1998. The transaction almost tripled the Partnership's pipeline
mileage and almost doubled its lease barrel volumes. At the Closing of the
transaction, the Partnership borrowed $184 million in order to pay the cash
portion of the purchase price. The Partnership also increased its existing $600
million credit facility to $1 billion.
The Asset Acquisition Proposal, if approved by the requisite vote of holders of
Common Units, will permit the listing on the NYSE of the 2,000,000 Common Units
that may be issued upon conversion of the 2,000,000 Subordinated Units issued to
Koch Pipeline at the closing of the acquisition of assets from Koch.
REASONS FOR THE ASSET ACQUISITION PROPOSAL
The NYSE shareholder approval rules also apply to the listing of securities
issuable upon conversion of convertible securities if they exceed certain
amounts. In connection with the closing of the Asset Acquisition, the
Partnership agreed with the NYSE staff that the 2,000,000 Subordinated Units to
be issued to Koch Pipeline would not become convertible into Common Units unless
and until the Partnership satisfies, with respect to the 2,000,000 Common Units
that may be issued upon conversion thereof, all of the conditions to the NYSE
listing such 2,000,000 Common Units.
Approval of the Asset Acquisition Proposal by the holders of a majority of the
Common Units voted at the Special Meeting, excluding those held by Koch
Pipeline, will satisfy the requirements for listing of the Common Units that may
be issued upon conversion of the Subordinated Units issued to Koch Pipeline.
Therefore, if the Asset Acquisition Proposal is approved at the Special Meeting,
the 2,000,000 Common Units that may be issued upon conversion of the
Subordinated Units issued to Koch Pipeline will be listed. Conversion of the
Subordinated Units, however, will remain dependent on the expiration of the
Subordination Period and the determinations to be made by the General Partner as
described under "Description of the Units."
The Listing of the Common Units underlying the Subordinated Units will have no
impact on the right of holders of Common Units to receive distributions or
amount payable in liquidation. The rights of the holders of Subordinated Units
to receive distributions will change (so that they are on parity with the Common
Units) when and if the Subordination Period ends, even if the Subordinated Units
are not converted.
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EFFECT OF NEGATIVE VOTES ON THE PROPOSALS
EFFECT OF NEGATIVE VOTE ON THE COMMON UNITS PROPOSAL
If the Common Units Proposal is not approved by the requisite vote at the
Special Meeting, the Partnership will be unable to issue more than 23,989
additional Common Units (or partnership interests ranking on a parity with the
Common Units) during the Subordination Period without a further vote of
Unitholders, with limited exceptions. In particular, the Partnership will be
unable to use Common Units to raise funds to reduce indebtedness, with limited
exceptions. This will result in higher interest expense and limit the
Partnership's flexibility in raising capital or in making acquisitions.
EFFECT OF A NEGATIVE VOTE ON THE LISTING PROPOSAL
If the Listing Proposal is not approved by the requisite vote at the Special
Meeting, the terms of the Special Units will be changed so that each Special
Unit will be convertible at the option of the holder into the right to receive
cash from the Partnership in an amount equal to the then fair market value of
one Common Unit. If the Listing Proposal is not approved and the Special Units
are converted into the right to receive cash, the Partnership will have less
Available Cash for distribution to Unitholders, and in the case of such
conversion it is likely that the Partnership will be required to borrow or
dispose of assets to raise cash to pay amounts due upon such conversion. The
Partnership's capital will also be negatively affected. Enron has informed the
Partnership that in such case any decision by Enron to convert Special Units
into cash will depend on the then prevailing market price of the Common Units
and other factors and that Enron has not made any decision regarding when or
whether it would convert its Special Units into cash if the Listing Proposal is
not approved.
EFFECT OF A NEGATIVE VOTE ON THE ASSET ACQUISITION PROPOSAL
If the Asset Acquisition Proposal is not approved by the requisite vote at the
Special Meeting, the Partnership will be unable to list the Common Units that
underlie the Subordinated Units issued to Koch Pipeline. In such case, the
Partnership could be liable for any damages that may be suffered by Koch
Pipeline as a result of the Partnership's failure to list the underlying Common
Units.
EXPIRATION OF DISTRIBUTION SUPPORT UNLESS THE FIRST TWO PROPOSALS ARE APPROVED
Unless the first two proposals submitted to the vote of Unitholders at the
Special Meeting are approved by the requisite vote, Enron will not be required
to extend its distribution support commitment through the fourth quarter of
2001, and Enron will not be obligated to contribute the $21.9 million of APIs
now outstanding until May 17, 1999, after the distribution support commitment
expires. As a result, Enron's distribution support commitment will be limited to
$7.1 million to support distributions for the fourth quarter of 1998 and the
first quarter of 1999.
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INTERESTS OF CERTAIN PERSONS IN THE PROPOSALS
Enron, the parent company of the General Partner, has interests in the proposals
to be voted upon at the Special Meeting that are apart from its interest as a
Unitholder of EOTT and that differ from the interests of other Unitholders. As a
lender to EOTT, Enron has an interest in the Common Units Proposal because its
approval will permit the Partnership to raise additional equity to reduce
outstanding indebtedness. As the holder of the Special Units, Enron has an
interest in the Listing Proposal which, if approved, will permit it to convert
its Special Units into Common Units. As a party to the Ancillary Agreement and
the Support Agreement, Enron has an interest in the first two proposals in that
approval of such proposals will increase and extend Enron's distribution support
commitment.
RECOMMENDATIONS AND OPINION
RECOMMENDATION OF THE BOARD OF DIRECTORS OF THE GENERAL PARTNER
The Board of Directors of the General Partner has determined that all three
proposals are in the best interest of the Partnership and its Unitholders and,
by unanimous vote of all of the directors, has recommended that the Unitholders
vote in favor of all three proposals.
RECOMMENDATION OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS OF THE GENERAL
PARTNER
The Audit Committee of the Board of Directors of the General Partner (the "Audit
Committee") has determined that the Support Agreement is fair and reasonable to
the Partnership. In connection with its review of the terms of the Support
Agreement, the Audit Committee employed its own counsel and financial adviser to
assist it in its evaluation of such terms.
FAIRNESS OPINION OF FINANCIAL ADVISOR TO THE AUDIT COMMITTEE
Prior to making its determinations with respect to the Support Agreement, the
Audit Committee received the opinion of GulfStar Group, Inc., to the effect
that, as of the date of the opinion, the transactions contemplated by the
Support Agreement are fair to EOTT and its public Unitholders from a financial
point of view. The full text of the opinion, which described the assumptions
made, matters considered and limits on the review undertaken, is attached hereto
as Annex A to this Proxy Statement and is incorporated herein by reference.
GulfStar Group, Inc.'s opinion does not constitute a recommendation to any
holder of Voting Units as to how such holder should vote at the Special Meeting.
Holders of Voting Units are urged to read the opinion in its entirety.
FAIRNESS OPINION OF FINANCIAL ADVISOR TO THE BOARD OF DIRECTORS OF THE GENERAL
PARTNER
The Board of Directors of the General Partner retained PaineWebber Incorporated
as its exclusive financial advisor in connection with the Asset Acquisition. In
connection with such engagement, the Board of Directors of the General Partner
requested PaineWebber Incorporated to render an opinion as to whether or not the
proposed consideration to be paid to Koch
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by the Partnership pursuant to the Purchase Agreement is fair, from a financial
point of view, to the holders of Common Units.
The full text of the opinion of PaineWebber Incorporated, dated October 12,
1998, which sets forth the assumptions made, procedures followed, matters
considered and limitations on the review undertaken, is attached hereto as Annex
B to this Proxy Statement and is incorporated herein by reference (the
"PaineWebber Incorporated Opinion"). The holders of the Common Units are urged
to read such opinion carefully and in its entirety. References to the
PaineWebber Incorporated Opinion set forth in this Proxy Statement are qualified
in their entirety by reference to the full text of such opinion.
PaineWebber Incorporated delivered its opinion on October 12, 1998, to the
effect that, as of the date of the PaineWebber Incorporated Opinion, and based
on its review and assumptions and subject to the limitations summarized below,
the proposed consideration to be paid to Koch by the Partnership pursuant to the
Purchase Agreement is fair, from a financial point of view, to the holders of
Common Units. The PaineWebber Incorporated Opinion was prepared at the request
and solely for the information of the Board of Directors of the General Partner
and does not constitute a recommendation to any holder of Voting Units as to how
such holder should vote at the Special Meeting. The PaineWebber Incorporated
Opinion does not address the relative merits of the Asset Acquisition and other
asset acquisitions or business strategies discussed by the Board of Directors of
the General Partner as alternatives to the Asset Acquisition or the decision of
the Board of Directors of the General Partner to proceed with the A sset
Acquisition. The proposed consideration under the Purchase Agreement was
determined through arm's-length negotiations between the Partnership and Koch.
The Board of Directors of the General Partner did not place any limitations upon
PaineWebber Incorporated with respect to the procedures followed or factors
considered in rendering the PaineWebber Incorporated Opinion. It should be
understood that, although subsequent developments may affect the conclusions
reached in the PaineWebber Incorporated Opinio n, PaineWebber Incorporated does
not have any obligation to update, revise or reaffirm its opinion.
In arriving at its opinion, PaineWebber Incorporated, among other things: (i)
reviewed, among other public information, the Partnership's Annual Reports,
Forms 10-K and related financial information for the four fiscal years ended
December 31, 1997 and the Partnership's Form 10-Q and the related unaudited
financial information for the six months ended June 30, 1998; (ii) reviewed
certain information, including financial forecasts, relating to the business,
earnings, cash flow, assets and prospects of the Gathering Assets and the
Partnership, furnished to PaineWebber Incorporated by the Partnership; (iii)
conducted discussions with members of senior management of Koch and the
Partnership concerning their respective businesses and prospects; (iv) compared
the projected pro forma results of operations of the Gathering Assets, as
prepared by the Partnership, and the Partnership with that of certain companies
which PaineWebber Incorporated deemed to be relevant; (v) compared the propose d
financial terms of the Asset Acquisition contemplated by the Agreement with the
financial terms of certain other mergers and acquisitions which PaineWebber
Incorporated deemed to be relevant; (vi) considered the projected pro forma
effect of the Asset Acquisition on the Partnership's EBITDA, distributable cash
flow, distributable cash flow per unit and distributable coverage ratios; (vii)
reviewed the historical market prices and trading activity for the securities of
the Partnership; (viii) reviewed the Purchase Agreement; (ix) reviewed the
Support Agreement dated September 21, 1998 among Enron Corp. and the Partnership
15
<PAGE> 24
and assumed the implementation of the Support Agreement in connection with the
consummation of the Asset Acquisition; and (ix) reviewed such other financial
studies and analyses and performed such other investigations and took into
account such other matters as we deemed necessary including our assessment of
regulatory, economic, market and monetary conditions.
In preparing the PaineWebber Incorporated Opinion, PaineWebber Incorporated
relied on the accuracy and completeness of all information that was publicly
available, supplied or otherwise communicated to PaineWebber Incorporated by or
on behalf of Koch and the Partnership and PaineWebber Incorporated has not
assumed any responsibility to independently verify such information. PaineWebber
Incorporated notes that Koch did not provide PaineWebber with any financial
statements with respect to the Gathering Assets. With respect to the financial
forecasts examined by PaineWebber Incorporated, PaineWebber Incorporated has
assumed that they were reasonably prepared and reflect the best currently
available estimates and good faith judgments of the management of the
Partnership as to the future performance of the Partnership and the Gathering
Assets. PaineWebber Incorporated has also relied upon assurances of the
management of the Partnership that they are unaware of any facts that would make
the information or financial forecasts provided to PaineWebber Incorporated
incomplete or misleading. PaineWebber Incorporated has also assumed, with the
consent of the Board of Directors of the General Partner, that any material
liabilities (contingent or otherwise, known or unknown) are as set forth in the
consolidated financial statements of the Partnership and that there are no
material liabilities (contingent or otherwise, known or unknown) to be assumed
in the Asset Acquisition. PaineWebber Incorporated was not been engaged to make
nor did PaineWebber Incorporated make an independent evaluation or appraisal of
the assets or liabilities (contingent or otherwise) of the Company nor was
PaineWebber Incorporated furnished with any such evaluations or appraisals.
PaineWebber Incorporated did not render an opinion as to the fairness of the
Support Agreement. No opinion is expressed herein as to the price at which the
securities of the Partnership may trade at any time. The PaineWebber
Incorporated Opinion was based upon regulatory, economic, monetary, and market
conditions existing on the date thereof.
The General Partner, after interviewing other investment banking firms, selected
PaineWebber Incorporated to be its financial advisor in connection with the
Asset Acquisition because PaineWebber Incorporated is a prominent investment
banking and financial advisory firm with experience in the valuation of
businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, secondary distributions of securities, private
placements and valuations for corporate purposes.
Pursuant to an engagement letter between the Partnership and PaineWebber
Incorporated dated September 25, 1998, PaineWebber Incorporated has earned a fee
of $700,000 for the rendering of the PaineWebber Incorporated Opinion.
PaineWebber Incorporated's compensation for services in rendering the opinion
was not contingent upon the result of the opinion. In addition, PaineWebber
Incorporated will be reimbursed for certain of its related expenses. The
Partnership also agreed, under separate agreement, to indemnify PaineWebber
Incorporated, its affiliates and each of its directors, officers, agents and
employees and each person, if any, controlling PaineWebber Incorporated or any
of its affiliates against certain liabilities, including liabilities under
federal securities laws.
In the past, PaineWebber Incorporated and its affiliates have provided
investment banking services to the Partnership and affiliates of its General
Partner, and have received fees for the
16
<PAGE> 25
rendering of these services. PaineWebber Incorporated may provide financial
advisory services to, and presently has the right of first refusal to act as
lead managing underwriter and book-runner in connection with an underwritten
public offering of common units for, the Partnership in the future.
In the ordinary course of business, PaineWebber Incorporated and its affiliates
may trade the securities of the Partnership for its own account and for the
accounts of its customers and, accordingly, may at any time hold long or short
positions in such securities.
17
<PAGE> 26
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The General Partner knows of no one who beneficially owns in excess of five
percent of the Common Units of the Partnership except as set forth in the table
below.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND ADDRESS BENEFICIAL OWNERSHIP AS OF PERCENT PERCENT
OF BENEFICIAL OWNER TITLE OF CLASS DECEMBER 1, 1998 OF CLASS OF UNITS
- ------------------- -------------- -------------------------- -------- --------
<S> <C> <C> <C> <C>
Enron Corp. Common Units....... 296,800 2.47 1.24
1400 Smith Street Special Units...... 2,980,011 100.00 12.43
Subordinated
Houston, Texas 77002 Units............ 7,000,000(1) 77.78 29.19
General Partner
Interest......... 1(1)(2) 100.00 N/A
Koch Industries, Inc. Common Units....... 2,000,000 16.67 8.34
Subordinated
4111 East 37th Street North Units............ 2,000,000 22.22 8.34
Wichita, Kansas 67220
</TABLE>
- -------------------------
(1) Held by the General Partner, a subsidiary of Enron Corp.
(2) The reporting of the General Partner interest shall not be deemed to be a
concession that such interest represents a security.
18
<PAGE> 27
The following table sets forth certain information as of December 1, 1998,
regarding the beneficial ownership of (i) the Common Units and (ii) the common
stock of Enron Corp., the parent company of the General Partner, by all
directors of the General Partner, each of the named executive officers and all
directors and executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
------------------------------------------------------
SOLE VOTING
AND SHARED VOTING SOLE VOTING
INVESTMENT AND INVEST- LIMITED OR NO % OF
TITLE OF CLASS NAME POWER MENT POWER INVESTMENT POWER CLASS
-------------- ---- ----------- ------------- ---------------- -----
<S> <C> <C> <C> <C> <C>
EOTT Energy Partners,
L.P. Michael D. Burke... -- -- -- *
Common Units Mary E. Coombe..... 48,000 -- -- *
Stephen W. Duffy... 48,000 -- -- *
John H. Duncan..... 8,500 -- -- *
Edward O.
Gaylord............ 24,000 -- -- *
Stanley C.
Horton............. -- -- -- *
Douglas P. Huth.... 48,000 -- -- *
Kenneth L. Lay..... -- 5,000 -- *
Gary Luce.......... 93,610 -- -- *
Dee S. Osborne..... -- -- -- *
Daniel P. Whitty... -- -- -- *
All directors and executive officers as a
group (12 in number)...................... 270,110 5,000 -- 2.59%
Enron Corp. Michael D. Burke... 12,500 -- 10 *
Common Stock Mary E. Coombe..... 26,858 -- 13,340 *
Stephen W. Duffy... 8,000 -- 866 *
John H. Duncan..... 105,759 -- -- *
Edward O.
Gaylord............ -- -- 20 *
Stanley C.
Horton............. 304,036 3,070 14,755 *
Douglas P. Huth.... 11,288 -- 2,529 1.13%
Kenneth L. Lay..... 2,747,009 979,298 49,403 *
Gary Luce.......... 9,750 -- 1,773 *
Dee S. Osborne..... -- -- -- *
Daniel P. Whitty... -- -- -- *
All directors and executive officers as a
group (12 in number)...................... 3,225,200 982,368 82,696 1.29%
</TABLE>
- -------------------------
* Less than 1 percent
19
<PAGE> 28
EOTT ENERGY PARTNERS, L.P.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
EOTT ENERGY CORP., THE GENERAL PARTNER OF THE PARTNERSHIP
The undersigned hereby (a) acknowledges receipt of the Notice of Special
Meeting of EOTT Energy Partners, L.P., (the "Partnership") to be held at 10:00
a.m. local time, on February 12, 1999 at , Houston, Texas, (the "Special
Meeting"), (b) acknowledges receipt of the Proxy Statement of the General
Partner in connection therewith, dated December 14, 1998, (c) appoints Michael
D. Burke and Gary W. Luce, or either of them, each with full power to appoint
his substitute, as Proxies of the undersigned, and (d) authorizes the Proxies to
represent and vote, as designated on the reverse side hereof, all the Common
Units of the Partnership which the undersigned would be entitled to vote if
personally present at the Special Meeting, or any adjournment thereof.
The undersigned hereby revokes any proxy to vote Common Units held by the
undersigned previously given to the extent such proxy permits the holder thereof
to vote on the matter covered by this Proxy. THE UNDERSIGNED ACKNOWLEDGES THAT
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED UNITHOLDER AND THAT, IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED IN FAVOR OF THE PROPOSALS.
This proxy may be revoked at any time prior to the voting of this Proxy by
the execution and submission of a revised proxy or by voting in person at the
meeting.
PLEASE MARK, DATE AND SIGN THIS PROXY AND RETURN IT IN THE ACCOMPANYING POSTPAID
ENVELOPE.
(Continued and to be signed on the reverse side.)
SEE REVERSE SIDE
The Board of Directors of the General Partner recommends a vote "FOR" each of
the Proposals.
1. Approval of a proposal that, if approved, will permit the Partnership to
issue up to 10,000,000 additional Common Units (or an equivalent amount of
other partnership interests ranking in parity with the Common Units) for any
Partnership purpose, all as more particularly described in the Proxy
Statement.
[ ] FOR [ ] AGAINST
2. Approval of a proposal, that if approved, will change the terms of the
Special Units so that they are convertible into Common Units and will permit
the listing on the New York Stock Exchange of Common Units to be issued upon
conversion of the outstanding Special Units, all as more particularly
described in the Proxy Statement.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approval of a proposal to approve the acquisition on December 1, 1998 of
certain assets, including crude oil gathering and transportation assets,
from Koch Pipeline Company, L.P. and Koch Oil Company, a division of Koch
Industries, Inc., in order to permit the listing on the New York Stock
Exchange of Common Units that may be issued upon conversion of Subordinated
Units issued to Koch Pipeline in connection with the transaction, all as
more particularly described in this Proxy Statement.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Dated: , 1998
---------------------------------------
------------------------------------------
Signature(s) of Unitholder(s)
(Executors, administrators, guardians,
trustees, attorneys, and officers signing
for corporations or other organizations
should give full title. If a partnership
or jointly owned, each owner should sign.)
If you need assistance in voting your shares, please call D.F. King & Company,
Inc. at 1-800-207-3159.
<PAGE> 1
================================================================================
PURCHASE AND SALE AGREEMENT
BY AND AMONG
KOCH PIPELINE COMPANY, L.P.,
KOCH OIL COMPANY, A DIVISION OF
KOCH INDUSTRIES, INC.,
EOTT ENERGY PARTNERS, L.P.,
AND
EOTT ENERGY OPERATING LIMITED PARTNERSHIP
SEPTEMBER 21, 1998
================================================================================
<PAGE> 2
PURCHASE AND SALE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1-DEFINITIONS.........................................................................................1
1.01 DEFINITIONS...........................................................................................1
1.02 CONSTRUCTION..........................................................................................1
ARTICLE 2-PURCHASE AND SALE...................................................................................1
2.01 PURCHASE AND SALE.....................................................................................1
2.02 INTENT OF PARTIES; FURTHER ASSURANCES.................................................................6
2.03 CLARIFICATION REGARDING PARTIES TO AGREEMENT..........................................................6
2.04 AGREEMENT REGARDING RECORDS...........................................................................7
2.05 LIKE KIND EXCHANGE OPTION.............................................................................7
ARTICLE 3-CONSIDERATION FOR ASSETS............................................................................8
3.01 CONSIDERATION AT CLOSING..............................................................................8
3.02 ALLOCATION OF CONSIDERATION AMONG ASSETS..............................................................8
ARTICLE 4-CLOSING.............................................................................................8
4.01 TIME AND PLACE OF CLOSING.............................................................................8
4.02 CLOSING OBLIGATIONS...................................................................................8
ARTICLE 5-REPRESENTATIONS AND WARRANTIES OF SELLERS..........................................................10
5.01 ORGANIZATION AND QUALIFICATION.......................................................................11
5.02 AUTHORITY, APPROVAL AND ENFORCEABILITY...............................................................11
5.03 NO VIOLATION OR CONSENT..............................................................................11
5.04 ABSENCE OF CERTAIN CHANGES AND OPERATION OF ASSETS...................................................12
5.05 MATERIAL CONTRACTS, AGREEMENTS, PLANS AND COMMITMENTS................................................13
5.06 TITLE TO AND SUFFICIENCY OF REAL PROPERTY............................................................14
5.07 TITLE TO AND SUFFICIENCY OF TANGIBLE PERSONAL PROPERTY...............................................14
5.08 PERMITS..............................................................................................15
5.09 COMPLIANCE WITH LAW..................................................................................15
5.10 LITIGATION...........................................................................................15
5.11 ENVIRONMENTAL AND HEALTH MATTERS.....................................................................15
5.12 TAXES................................................................................................16
5.13 TARIFFS AND CERTIFICATES.............................................................................16
5.14 REGULATORY STATUS....................................................................................16
5.15 ACCURACY OF INFORMATION..............................................................................17
5.16 BROKERS..............................................................................................17
5.17 LABOR MATTERS........................................................................................17
5.18 YEAR 2000 MATTERS....................................................................................17
5.19 SECURITIES LAW MATTERS...............................................................................17
5.20 APPLICABLE CONTROL GROUP.............................................................................18
ARTICLE 6-REPRESENTATIONS AND WARRANTIES OF BUYER AND EOTT...................................................18
6.01 ORGANIZATION AND QUALIFICATION.......................................................................18
6.02 AUTHORITY, APPROVAL AND ENFORCEABILITY...............................................................18
6.03 NO VIOLATION OR CONSENT..............................................................................18
6.04 ACCURACY OF INFORMATION..............................................................................19
6.05 BROKERS..............................................................................................19
6.06 PUBLIC DOCUMENTS.....................................................................................19
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
6.07 ORGANIZATIONAL DOCUMENTS.............................................................................19
6.08 CAPITALIZATION.......................................................................................20
6.09 VALIDITY OF SECURITIES...............................................................................20
6.10 ABSENCE OF CERTAIN CHANGES...........................................................................20
6.11 REGISTRATION RIGHTS..................................................................................21
6.12 LITIGATION...........................................................................................21
ARTICLE 7-COVENANTS OF SELLERS...............................................................................21
7.01 OPERATION OF ASSETS PRIOR TO THE CLOSING DATE........................................................21
7.02 HSR ACT COMPLIANCE...................................................................................22
7.03 FULFILLMENT OF CLOSING CONDITIONS....................................................................22
7.04 ACCESS TO BUSINESS...................................................................................22
7.05 AGREEMENT REGARDING TITLE DEFECTS, CONSENTS AND EASEMENT GAPS........................................23
7.06 TITLE COMMITMENTS AND POLICIES.......................................................................24
7.07 PREFERENTIAL PURCHASE RIGHTS.........................................................................24
ARTICLE 8-COVENANTS OF BUYER.................................................................................25
8.01 HSR ACT COMPLIANCE...................................................................................25
8.02 FULFILLMENT OF CLOSING CONDITIONS....................................................................25
8.03 LISTING OF COMMON UNITS..............................................................................25
8.04 TARIFF ADOPTION......................................................................................25
ARTICLE 9-CONDITIONS TO CLOSING AND TERMINATION..............................................................25
9.01 CONDITIONS TO OBLIGATION OF BUYER....................................................................25
9.02 CONDITIONS TO OBLIGATION OF SELLERS..................................................................27
9.03 TERMINATION..........................................................................................28
9.04 EFFECT OF TERMINATION................................................................................29
9.05 SURVIVAL.............................................................................................29
ARTICLE 10-ADDITIONAL AGREEMENTS OF THE PARTIES..............................................................29
10.01 INDEMNIFICATION.....................................................................................29
10.02 AGREEMENT REGARDING KNOWN AND UNKNOWN ENVIRONMENTAL CONTAMINATION...................................34
10.03 COOPERATION AND PRESERVATION OF BOOKS AND RECORDS...................................................39
10.04 RECEIPTS AND CREDITS................................................................................40
10.05 APPORTIONMENT OF AD VALOREM AND PROPERTY TAXES......................................................40
10.06 TRANSFER TAXES......................................................................................40
10.07 EMPLOYMENT AND BENEFIT MATTERS......................................................................41
10.08 AGREEMENT REGARDING PHYSICAL INVENTORY AND MINIMUM INVENTORY REQUIREMENTS...........................43
10.09 IMBALANCES..........................................................................................43
10.10 DISCLAIMERS.........................................................................................43
10.11 USE OF KOCH'S NAME..................................................................................44
10.12 REGISTRATION RIGHTS OF SELLERS......................................................................44
10.13 POST-CLOSING ASSIGNMENT OF TELECOMMUNICATION RIGHTS.................................................47
10.14 COOPERATION REGARDING LITIGATION....................................................................48
10.15 AGREEMENT REGARDING CHASE PIPELINE..................................................................48
ARTICLE 11-MISCELLANEOUS.....................................................................................49
11.01 GOVERNING LAW.......................................................................................49
11.02 ENTIRE AGREEMENT....................................................................................49
11.03 WAIVER..............................................................................................49
11.04 CAPTIONS............................................................................................49
11.05 ASSIGNMENT..........................................................................................49
11.06 NOTICES.............................................................................................49
11.07 EXPENSES............................................................................................50
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
11.08 SEVERABILITY........................................................................................50
11.09 AMENDMENT...........................................................................................51
11.10 FURTHER ACTIONS.....................................................................................51
11.11 THIRD-PARTY BENEFICIARIES...........................................................................51
11.12 INJUNCTIVE RELIEF; CUMULATIVE REMEDIES..............................................................51
11.13 COUNTERPARTS; EXHIBITS..............................................................................51
11.14 PUBLICITY...........................................................................................51
11.15 GOOD FAITH..........................................................................................52
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C>
EXHIBITS:
A - Koch Pipeline Property
Part I: Narrative Description of Pipeline Systems
Part II: Map of Pipeline Systems
Part III: Koch Pipeline Fee Acreage
Part IV: Koch Pipeline Leases
Part V: Koch Pipeline Easements
Part VI: Certain Koch Pipeline Tangible Personal Property
Part VII: Certain Koch Pipeline Contracts
Part VIII: Certain Intellectual Property Rights and Software
B - Koch Oil Property
Part I: Narrative Description of Koch Oil Pipelines
Part II: Map of Koch Oil Pipelines
Part III: Koch Oil Fee Acreage
Part IV: Koch Oil Leases
Part V: Koch Oil Easements
Part VI: Certain Koch Oil Tangible Personal Property
Part VII: Certain Koch Oil Contracts
Part VIII: Certain Intellectual Property Rights and Software
C - Excluded Assets
4.02(c) - Form of Transition Services Agreement
4.02(d) - Form of Crude Oil Supply and Terminalling Agreement
4.02(l) - Principal Terms of Non-Competition Agreement and Preferred Supplier Agreement
SCHEDULES:
2.01(c) - Koch Oil Operations Areas
5.03 - Approvals and Notices
5.04 - Absence of Certain Changes
5.05 - Material Contracts
5.08 - Certain Matters Relating to Permits
5.09(b) - Physical Defects
5.10 - Litigation
5.11 - Environmental and Health Matters
6.10 - Absence of Certain Changes
10.07 - Employment and Benefit Matters
10.08 - Physical Inventory
</TABLE>
iv
<PAGE> 6
PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement ("Agreement") is made and entered into
on this 21st day of September, 1998, by and between KOCH PIPELINE COMPANY, L.P.,
a Delaware limited partnership ("Koch Pipeline"), KOCH OIL COMPANY, a division
of Koch Industries, Inc., a Kansas corporation ("Koch Oil"), EOTT ENERGY
OPERATING LIMITED PARTNERSHIP, a Delaware limited partnership ("EOTT"), and EOTT
ENERGY PARTNERS, L.P., a Delaware limited Partnership ("EEP" or "Buyer"). Koch
Pipeline and Koch Oil are sometimes herein referred to individually as a
"Seller" and collectively as the "Sellers." In addition, Koch Pipeline, Koch
Oil, EOTT and EEP are sometimes herein referred to individually as a "Party" and
collectively as the "Parties."
RECITAL
Buyer desires to purchase from Sellers, and Sellers desire to sell to
Buyer, certain properties and related assets on the terms and conditions set
forth in this Agreement.
AGREEMENTS
NOW, THEREFORE, for and in consideration of the premises, the mutual
covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
the Parties, the Parties hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.01 DEFINITIONS. Each capitalized term used herein shall have the
meaning given such term in Attachment I.
1.02 CONSTRUCTION. Unless the context requires otherwise: (a) the
gender (or lack of gender) of all words used in this Agreement includes the
masculine and feminine; (b) references to Articles and Sections refer to
Articles and Sections of this Agreement; (c) references to Attachments,
Schedules or Exhibits refer to the Attachments, Schedules and Exhibits attached
to this Agreement, each of which is made a part hereof for all purposes; and (d)
the word "including" means "including, without limitation."
ARTICLE 2
PURCHASE AND SALE
2.01 PURCHASE AND SALE. (a) On the Closing Date and subject to the
terms and conditions set forth in this Agreement, but effective as of (i) 12:01
a.m., Central Time, on the Closing Date if the Closing Date is on the first day
of a calendar month or (ii) 11:59 p.m., Central Time, on the
1
<PAGE> 7
Closing Date if the Closing Date is on the last day of a calendar month (the
effective time of such Closing being herein referred to as the "Effective
Time"), (A) Koch Pipeline agrees to sell, assign, transfer and convey, or cause
to be sold, assigned, transferred or conveyed, to Buyer (or Buyer's designee),
and Buyer agrees to purchase and pay for, the Koch Pipeline Property and (B)
Koch Oil agrees to sell, assign, transfer and convey, or cause to be sold,
assigned, transferred or conveyed, to Buyer (or Buyer's designee), and Buyer
agrees to purchase and pay for, the Koch Oil Property.
(b) As used herein, the term "Koch Pipeline Property" shall mean the
following property and assets (other than the Excluded Assets), whether real,
personal or mixed, known or unknown (including any rights to occupy real
property, whether by adverse possession, prescriptive rights or otherwise), all
of which are owned or held for use by Koch Pipeline and/or its Affiliates
primarily in connection with (i) the ownership and operation by Koch Oil and its
Affiliates of the Koch Oil Property or the conduct by Koch Oil of the Koch Oil
Operations or (ii) the ownership and operation of those certain crude oil
pipeline systems (collectively, the "Pipeline Systems") described in detail in
the narrative descriptions contained in Part I of Exhibit A and the maps
depicted on Part II of Exhibit A, including the following:
(i) The property held in fee by Koch Pipeline and described on
Part III of Exhibit A (collectively, the "Koch Pipeline Fee Acreage");
(ii) The station site leases and other leases (the "Koch
Pipeline Leases") more particularly described on Part IV of Exhibit A;
(iii) Any and all fixtures and appurtenances to real property
that are located on the Koch Pipeline Fee Acreage, Koch Pipeline Leases
or the Koch Pipeline Easements and which are primarily used or held for
use by Koch Pipeline and/or its Affiliates in connection with the
maintenance, ownership, and operation of the Pipeline Systems and/or
the Koch Oil Operations, including any buildings, pipelines,
structures, storage facilities, loading terminals, pumping facilities,
and tanks, but excluding the fixtures and appurtenances of others
located on such Real Property (collectively, the "Koch Pipeline
Improvements");
(iv) The easements, rights-of-way, property use agreements and
real property licenses (including right-of-way permits from railroads
and road crossing permits or other right-of-way permits from
Governmental Entities), more particularly described on Part V of
Exhibit A (the "Koch Pipeline Easements"). The Koch Pipeline Fee
Acreage, Koch Pipeline Leases, Koch Pipeline Improvements and Koch
Pipeline Easements are sometimes referred to collectively herein as the
"Koch Pipeline Real Property" and shall include any and all rights,
privileges, benefits, powers, tenements, hereditaments and
appurtenances conferred upon the owner and holder of such real property
interests;
(v) To the extent same do not constitute Koch Pipeline
Improvements, any and all fittings, meters, cathodic protection ground
beds, anodes, rectifiers, transformers, other cathodic or electric
protection devices, machinery, equipment (including spill response
equipment), pumps, engines, compressors, pipes, valves, connections,
regulators, gates, telecommunication facilities and equipment, lines,
wires, radios, spare parts, office equipment, computer hardware,
vehicles, furniture, supplies, chemicals, tools and all other tangible
personal property (other than tangible personal property held under
lease by Koch
2
<PAGE> 8
Pipeline) (A) presently located on the Koch Pipeline Real Property
and/or Koch Oil Real Property, but excluding the assets of others
located at such locations, or (B) wherever located, in each case if
such tangible personal property is used or held for use by Koch
Pipeline and/or its Affiliates primarily in connection with the
ownership and operation of the Pipeline Systems, including the
tangible personal property described on Part VI of Exhibit A (the
"Koch Pipeline Tangible Personal Property");
(vi) Custody of, and any ownership interest of Koch Pipeline
in and to, any line fill, crude oil, condensate or tank heels located,
as of the Effective Time, in the Pipeline Systems or any other
facilities comprising a part of the Koch Pipeline Property or the Koch
Oil Property, excepting overages or shortages attributable to the
period prior to the Closing Date, as more particularly provided for in
Section 10.09;
(vii) Any and all contracts, agreements, leases and other
legally binding rights and obligations of Koch Pipeline that are used
or held for use primarily in connection with the ownership and
operation of the Pipeline Systems, including any leases involving
tangible personal property and the agreements described on Part VII of
Exhibit A, but excluding those contracts and agreements constituting
Koch Pipeline Leases and Koch Pipeline Easements (the "Koch Pipeline
Contracts");
(viii) The intellectual property rights and related computer
software described on Part VIII of Exhibit A;
(ix) Any and all permits, licenses, certificates,
authorizations, registrations, orders, waivers, variances and approvals
granted by any Governmental Entity to Koch Pipeline or its predecessors
in interest, in each case to the extent same are assignable and are
used or held for use primarily in connection with the ownership and
operation of the Pipeline Systems and/or the Koch Oil Operations (as
distinct from general corporate and other similar authorizations not
specific to the ownership and operation of the Pipeline Systems and/or
the conduct of the Koch Oil Operations, such as qualifications to
transact business) (the "Koch Pipeline Permits"); and
(x) Such records and documents relating to the ownership,
condition or operation of the Koch Pipeline Property as the Parties may
determine pursuant to Section 2.04 to be a part of the Koch Pipeline
Property (the "Koch Pipeline Records"); it being agreed, however, that
Koch Pipeline shall be entitled to retain a copy of any Koch Pipeline
Records and that the Koch Pipeline Records shall not include any
records or documents that are (A) proprietary in nature, (B) covered by
the attorney-client privilege or work product doctrine or (C) not
readily severable from Sellers' general records.
(c) As used herein, the term "Koch Oil Property" means the following
property and assets (other than the Excluded Assets), whether real, personal or
mixed, known or unknown (including any rights to occupy real property, whether
by adverse possession, prescriptive rights or otherwise), all of which are owned
or held for use by Koch Oil and/or its Affiliates primarily in connection with,
(i) the ownership and operation by Koch Pipeline of the Pipeline Systems or the
Koch Pipeline Property, or (ii) Koch Oil's operations in the areas listed on
Schedule 2.01(c) that involve the purchase, sale, exchange, transportation,
gathering or storage of crude oil or condensate,
3
<PAGE> 9
including the ownership and operation of the pipeline systems described in
detail in the narrative descriptions contained in Part I of Exhibit B and the
maps depicted on Part II of Exhibit B, or (iii) Koch Oil's or its Affiliate's
ownership and operation of its Natural Gas Processing Plant in Kern County,
California (such operations of Koch Oil being herein referred to as the "Koch
Oil Operations"), including the following:
(i) The property held in fee by Koch Oil and described on Part
III of Exhibit B (collectively, the "Koch Oil Fee Acreage");
(ii) The station site leases and other leases (the "Koch Oil
Leases") more particularly described on Part IV of Exhibit B;
(iii) Any and all fixtures and appurtenances to real property
that are located on the Koch Oil Fee Acreage, the Koch Oil Leases or
the Koch Oil Easements and which are used or held for use by Koch Oil
and/or its Affiliates primarily in connection with the maintenance,
ownership, and operation of the Koch Oil Operations and/or the Pipeline
Systems, including, but not limited to, any buildings, pipelines,
structures, storage facilities, loading terminals, pumping facilities
and tanks, but excluding the fixtures and appurtenances of others
located on such Real Property (collectively, the "Koch Oil
Improvements");
(iv) The easements, rights-of-way, property use agreements and
real property licenses (including right-of-way permits from railroads
and road crossing or other right-of-way permits from Governmental
Entities), more particularly described on Part V of Exhibit B (the
"Koch Oil Easements"). The Koch Oil Fee Acreage, Koch Oil Leases, Koch
Oil Improvements and Koch Oil Easements are sometimes referred to
collectively herein as the "Koch Oil Real Property" and shall include
any and all rights, privileges, benefits, powers, tenements,
hereditaments and appurtenances conferred upon the owner and holder of
such real property interests;
(v) To the extent same do not constitute Koch Oil
Improvements, any and all fittings, meters, cathodic protection ground
beds, anodes, rectifiers, transformers, other cathodic or electric
protection devices, machinery, equipment (including spill response
equipment), pumps, engines, compressors, pipes, pipelines, valves,
connections, regulators, gates, telecommunication facilities and
equipment, lines, wires, radios, spare parts, office equipment,
computer hardware, vehicles, furniture, supplies, chemicals, tools and
all other tangible personal property (other than tangible personal
property held under lease by Koch Oil) (A) presently located on the
Koch Oil Real Property and/or the Koch Pipeline Real Property, but
excluding the assets of others located at such locations, or (B)
wherever located, in each case if such tangible personal property is
used or held for use by Koch Oil and/or its Affiliates primarily in
connection with the Koch Oil Operations, including the tangible
personal property described on Part VI of Exhibit B (the "Koch Oil
Tangible Personal Property");
(vi) The minimum crude oil and condensate inventories
described in Schedule 10.08;
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(vii) Any and all contracts, agreements and other legally
binding rights and obligations of Koch Oil that are used or held for
use primarily in connection with the Koch Oil Operations, including all
crude oil/condensate purchase, sale or exchange agreements (including
any related hedging agreements), all division and transfer orders, all
leases involving tangible personal property and the contracts and
agreements described on Part VII of Exhibit B, but excluding those
contracts and agreements constituting Koch Oil Leases and Koch Oil
Easements (the "Koch Oil Contracts");
(viii) The intellectual property rights and related computer
software described on Part VIII of Exhibit B;
(ix) Any and all permits, licenses, certificates,
authorizations, registrations, orders, waivers, variances and approvals
granted by any Governmental Entity to Koch Oil or its predecessors in
interest, in each case to the extent same are assignable and are used
or held for use primarily in connection with the Koch Oil Operations or
the ownership and operation of the Pipeline Systems (as distinct from
general corporate and other similar authorizations not specific to the
Koch Oil Operations or the ownership and operation of the Pipeline
Systems, such as qualifications to transact business) (the "Koch Oil
Permits"); and
(x) Such records and documents relating to the ownership,
condition or operation of the Koch Oil Property as the Parties may
determine pursuant to Section 2.04 to be a part of the Koch Oil
Property (the "Koch Oil Records"); it being agreed, however, that Koch
Oil shall be entitled to retain a copy of any Koch Oil Records and that
the Koch Oil Records shall not include any records or documents that
are (A) proprietary in nature, (B) covered by the attorney-client
privilege or work product doctrine or (C) not readily severable from
Sellers' general records.
(d) As used herein, the term "Excluded Assets" shall mean the following
assets and properties and any other assets and properties deemed to be Excluded
Assets hereunder:
(i) the specific assets and properties of Koch Pipeline, Koch
Oil or their Affiliates identified on Exhibit C;
(ii) except for the right to use generic names generally
associated with specific assets, any intellectual property rights of
Koch Pipeline or Koch Oil or their Affiliates consisting of logos,
emblems, signs, trademarks, trade names or service marks;
(iii) all cash, securities, cash equivalents and accounts
receivable of Sellers that relate to the ownership and operation of the
Assets prior to the Effective Time;
(iv) any Surface Leases, Easements, Contracts or Permits, the
assignment of which is prohibited by Legal Requirements or otherwise
(except to the extent the applicable waivers or consents have been or
are hereafter obtained and subject to the provisions herein regarding
the obligations of Sellers pertaining to consents);
(v) all funds held in suspense accounts by Sellers, and any
and all liability with respect to such suspended funds;
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(vi) (A) any assets held under any "employee benefit plan" (as
defined in section 3(3) of ERISA) and any compensation or benefit
arrangement, practice, program or policy ("arrangement") currently or
heretofore maintained by Sellers or an Affiliate of Sellers, (B) any
liabilities in respect of, or obligations under, any such employee
benefit plan or arrangement and (C) any contract or obligation
requiring the maintenance of or contribution to any such employee
benefit plan or arrangement; and
(vii) any assets or properties that become or constitute
"Excluded Assets" pursuant to the terms of Sections 2.02 or 7.07.
2.02 INTENT OF PARTIES; FURTHER ASSURANCES. (a) Buyer and Sellers
acknowledge and agree that it is their intent that the Assets include any and
all real or personal property owned by Sellers or their Affiliates (other than
the Excluded Assets and except for assets and properties sold in the ordinary
course of business since the Pricing Date) that is, or as of the Pricing Date
was, owned or held for use primarily in connection with the ownership, operation
or maintenance of the Pipeline Systems and/or the Koch Oil Operations. To the
extent title to any of the Assets is held by any Affiliate of Sellers, Sellers
shall cause title to such Assets to be vested in the applicable Seller prior to
Closing. It is agreed by the Parties that Buyer shall have the right at any time
prior to November 1, 1998, to notify Sellers that it does not desire to purchase
any shut-down or idled pipelines or gathering lines having a diameter of less
than 6 inches (provided that the aggregate length of the pipelines or gathering
lines so designated by Buyer may not exceed more than 5% of the total length of
all shut down or idled pipelines or gathering lines included as Assets hereunder
as of the date hereof having a diameter of less than 6 inches), whereupon such
identified pipelines and gathering lines shall thenceforth constitute Excluded
Assets for all purposes hereunder, with no corresponding decrease in the Cash
Consideration or the Equity Consideration. If after the Closing Date Sellers or
Buyer discover that the Assets (a) did not include any real or personal property
interests that the parties intended to be a part of the Assets or (b) did
include real or personal property interests that the parties intended not to be
a part of the Assets, the Parties agree to execute such additional conveyances
or other instruments, and take such other action, as may be necessary to cause
such real or personal property interests to be conveyed to the appropriate Party
or, if applicable, to enter into an acknowledgment by the Parties that such
assets were never conveyed to Buyer; it being expressly agreed that Buyer shall
have the right to reject or refuse to take assignment of any real and/or
personal property that was not intended by the Parties to be a part of the
Assets.
(b) The Parties agree to supplement or revise Exhibits A, B and C as
necessary prior to Closing in order to insure that the Assets and the Excluded
Assets are fully and properly described.
2.03 CLARIFICATION REGARDING PARTIES TO AGREEMENT. (a) The Parties
recognize, acknowledge and agree that Koch Oil and Koch Pipeline are separate
and distinct entities; for ease of administration, however, this Agreement
covers and relates to the specific assets being sold to Buyer by both Koch Oil
and Koch Pipeline. Koch Oil's responsibilities under this Agreement shall relate
only to the assets of Koch Oil being sold to Buyer hereunder. Koch Pipeline's
responsibilities under this Agreement shall relate only to the assets of Koch
Pipeline being sold to Buyer hereunder. In no manner or fashion is Koch Oil
guaranteeing the obligations of Koch Pipeline hereunder, and in no manner or
fashion is Koch Pipeline guaranteeing the obligations of Koch Oil hereunder.
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(b) In addition, the Parties recognize, acknowledge and agree that it
is the intention hereunder of Buyer to cause (i) EOTT Energy Pipeline Limited
Partnership, a Delaware limited partnership and affiliate of Buyer, as the
designee of Buyer, to acquire at Closing the common carrier property included in
the Assets and any rights and obligations of Buyer hereunder that relate thereto
and (ii) EOTT, as the designee of Buyer, to acquire the remainder of the Assets
and any rights and obligations of Buyer hereunder that relate thereto.
2.04 AGREEMENT REGARDING RECORDS. Within 60 days following Closing, the
Parties agree to meet and use good faith efforts to identify those records and
documents that shall constitute a part of the Koch Pipeline Records and the Koch
Oil Records. On or before the 180th day following Closing, the applicable Seller
shall provide copies of the applicable records and documents to Buyer; it being
understood and agreed, however, that Sellers shall provide originals (rather
than copies) of the Koch Pipeline Contracts, Koch Oil Contracts, Koch Pipeline
Permits, Koch Oil Permits, Koch Oil Easements, Koch Pipeline Easements, Koch
Pipeline Leases, Koch Oil Leases and the documents and instruments giving rise
to the interest of the Sellers in and to the Koch Pipeline Fee Acreage and the
Koch Oil Fee Acreage, in each case to the extent Sellers or their Affiliates
have such originals in their possession. Subject to the foregoing and the
exclusions set forth in the definitions of Koch Pipeline Property and Koch Oil
Property, it is the intention of Sellers to deliver to Buyer any and all
documents that Buyer may fairly and reasonably require in order to own and
operate the Assets after Closing. To the extent consistent with the intent of
this Section 2.04, Sellers further agree to deliver any applicable records
relating to the Assets that are discovered by Sellers to be in their possession
or the possession of their Affiliates after the date on which the Koch Pipeline
Records or Koch Oil Records are delivered to Buyer pursuant to the provisions
hereof.
2.05 LIKE KIND EXCHANGE OPTION. (a) Sellers and Buyer hereby agree that
Sellers, in lieu of the sale of that portion of the Assets being sold to Buyer
hereunder in exchange for the Cash Consideration, shall have the right at any
time before the 5th Business Day prior to Closing to assign the applicable
portion of its rights under this Agreement to a qualified intermediary in order
to accomplish part of the transactions contemplated hereunder in a manner that
will comply, either in whole or in part, with the requirements of a like kind
exchange pursuant to ss.1031 of the Code. In the event either Seller assigns a
portion of its rights under this Agreement pursuant to this Section 2.05, such
Seller agrees to notify Buyer in writing of such assignment before the 10th
Business Day prior to Closing and shall indemnify, defend and hold harmless the
Buyer Indemnified Parties from and against any and all Damages or Claims
suffered or incurred by the Buyer Indemnified Parties that arises out of or
relates to such like-kind exchange. If either Seller assigns a portion of its
rights under this Agreement as contemplated by this Section 2.05, Buyer agrees
to (i) consent to such Seller's assignment of its rights under this Agreement
pursuant to a form of consent reasonably acceptable to Buyer and (ii) deposit
the applicable portion of the Cash Consideration with the qualified escrow or
qualified trust account at Closing.
(b) Each Seller hereby acknowledges and agrees that any assignment by
such Seller of any portion of its rights pursuant to this Section 2.05 shall in
no way relieve such Seller from any of its obligations under this Agreement.
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ARTICLE 3
CONSIDERATION FOR ASSETS
3.01 CONSIDERATION AT CLOSING. Subject to the terms and conditions of
this Agreement, as consideration for the sale by Sellers of the Assets to Buyer,
Sellers shall receive the following consideration at Closing from Buyer:
(a) subject to adjustment pursuant to Section 7.07, an
aggregate cash payment equal to $184,000,000 (the "Cash
Consideration"); and
(b) one or more certificates representing, in the aggregate,
2,000,000 Common Units and 2,000,000 Subordinated Units in EEP (the
"Equity Consideration").
The Cash Consideration to be paid by Buyer to Sellers at Closing shall be made
by wire transfer of immediately available funds to a single account designated
by Koch Oil and Koch Pipeline, which designation shall be made not later than
two Business Days prior to the Closing Date. The Equity Consideration shall be
paid at Closing by the delivery of one or more certificates evidencing the
Equity Consideration to an Affiliate of Sellers, which Affiliate shall be
designated in a joint instruction from Koch Pipeline and Koch Oil to Buyer
delivered at least two Business Days prior to the Closing Date (such designated
Affiliate of Sellers being herein referred to as the "Initial Holder").
3.02 ALLOCATION OF CONSIDERATION AMONG ASSETS. Sellers and Buyer agree
that the allocation of the Cash Consideration and the Equity Consideration
hereunder shall be as set forth in Schedule 3.02 hereto. Such allocation shall
be binding on Buyer and Sellers for purposes of their respective federal, state
and local income tax returns. Sellers and Buyer shall report such allocation on
an IRS Form 8594 pursuant to Section 1060 of the Code.
ARTICLE 4 CLOSING
4.01 TIME AND PLACE OF CLOSING. Subject to the conditions stated in
this Agreement and unless Sellers and Buyer agree upon a different date, the
consummation of the transactions contemplated hereby (the "Closing") shall occur
on the later to occur of (a) December 1, 1998, or (b) the last day of the
calendar month during which all of the conditions to Closing set forth in
Sections 9.01 and 9.02 have been satisfied or waived. The date Closing actually
occurs is herein called the "Closing Date." The Closing shall be held at the
offices of the law firm of Vinson & Elkins LLP located at 1001 Fannin Street,
Suite 3300, Houston, Texas, or at such other location as may be mutually agreed
upon by Sellers and Buyer.
4.02 CLOSING OBLIGATIONS. At the Closing, the following events shall
occur:
(a) Koch Pipeline shall execute, acknowledge and deliver to
Buyer or its designated Affiliate a Conveyance, Assignment and Bill of
Sale conveying the Koch Pipeline Property to Buyer or its designated
Affiliate pursuant to which, among other things, Buyer or the
applicable designee of Buyer will, subject to the other terms hereof,
assume all obligations of Koch Pipeline under the Koch Pipeline
Contracts, Koch Pipeline Leases and
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Koch Pipeline Easements arising thereunder from and after the Effective
Time; such Conveyance, Assignment and Bill of Sale shall be
substantially similar to the form of Conveyance, Assignment and Bill of
Sale that was used for the West Texas Transaction and will contain full
subrogation rights, a customary special warranty of title as to all
Real Property conveyed thereunder and a general warranty of title as to
all other Koch Pipeline Property conveyed thereunder. The title
warranties contained in such Conveyance, Assignment and Bill of Sale
will be subject to a ten year limitation and to the agreed deductible
and cap for title matters as set forth in Section 7.05.
(b) Koch Oil shall execute, acknowledge and deliver to Buyer
or its designated Affiliate a Conveyance, Assignment and Bill of Sale
conveying the Koch Oil Property to Buyer or its designated Affiliate
pursuant to which, among other things, Buyer or the applicable designee
of Buyer will, subject to the other terms hereof, assume all
obligations of Koch Oil under the Koch Oil Contracts, Koch Oil Leases
and Koch Oil Easements arising thereunder from and after the Effective
Time; such Conveyance, Assignment and Bill of Sale shall be
substantially similar to the form of Conveyance, Assignment and Bill of
Sale that was used for the West Texas Transaction and will contain full
subrogation rights, a customary special warranty of title as to all
real property conveyed thereunder and a general warranty of title as to
all other property conveyed thereunder. The title warranties contained
in such Conveyance, Assignment and Bill of Sale will be subject to a
ten year limitation as to the agreed deductible and cap for title
matters as set forth in Section 7.05.; and
(c) Koch Pipeline and Buyer shall each execute and deliver to
the other a Transition Services Agreement substantially in the form of
Exhibit 4.02(c);
(d) Koch Oil and Buyer shall each execute and deliver to the
other a Crude Oil Supply and Terminalling Agreement in the form of
Exhibit 4.02(d);
(e) Koch Pipeline, Koch Oil and Buyer shall exchange the
certificates described in Sections 9.01(b) and 9.02(b);
(f) The Initial Holder shall execute and deliver to EOTT
Energy Corp., a Delaware corporation and the General Partner of the
EEP, such documents and instruments as are required pursuant to Section
12.4 of the EEP Partnership Agreement to reflect the admission of the
Initial Holder to EEP as an "Additional Limited Partner" thereunder in
respect of the Common Units and Subordinated Units issued to it at
Closing, and EEP shall cause the General Partner to consent to such
admission and reflect same in the books and records of the Partnership;
(g) Sellers and Buyer shall execute and deliver to each other
a letter agreement regarding certain tanks constituting a part of the
Assets, which letter agreement shall be substantially in the form as
the letter agreement regarding certain tanks that was entered into in
connection with the West Texas Transaction;
(h) Buyer shall pay the Cash Consideration to Sellers as
described in Section 3.01;
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(i) EEP shall deliver one or more certificates to the Initial
Holder evidencing the issuance to the Initial Holder of Common Units
and Subordinated Units as described in Section 3.01;
(j) Except for those consents and approvals that have not been
obtained by Closing and that are covered by Section 7.05, Sellers shall
deliver to Buyer originals of all consents, approvals and waivers
required to be obtained by Sellers from Governmental Entities or third
parties in order for Sellers to perform their respective obligations
hereunder at Closing, including the consents contemplated by Section
9.01(i);
(k) Sellers shall deliver to Buyer, and Buyer shall deliver to
Sellers, incumbency certificates with respect to any Persons executing
documents at Closing on their behalf;
(l) Each Seller shall deliver to Buyer a non-competition
agreement containing terms and provisions outlined in Exhibit 4.02(l);
(m) Buyer shall deliver to Sellers a legal opinion from the
law firm of Vinson & Elkins L.L.P., dated the Closing Date, to the
effect that the Initial Holder is not, by virtue of its ownership of
the Equity Consideration, an "affiliate" of EEP within the meaning of
the Securities Act; and
(n) Koch Pipeline, Koch Oil, EOTT and Buyer shall each execute
such other instruments and take such other action as may be reasonably
requested by the other Party or Parties in order to give full effect to
the obligations of such Party under this Agreement.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF SELLERS
Subject to the survival provisions set forth in Section 9.05 and the
limitations provided for in Article 10, Sellers hereby represent and warrant to
Buyer as set forth in this Article 5; it being expressly understood and agreed,
however, that the representations and warranties set forth below are not being
made jointly and severally by Sellers in favor of Buyer, but rather on a several
basis as follows: (i) the only representations and warranties being made by Koch
Pipeline in this Article 5 are those that are expressly stated as being made by
Koch Pipeline or any other representations and warranties solely to the extent
that such representations and warranties relate to the Koch Pipeline Property;
and (ii) the only representations and warranties being made by Koch Oil in this
Article 5 are those that are expressly stated as being made by Koch Oil or any
other representations and warranties solely to the extent that such
representations and warranties relate to the Koch Oil Property. Notwithstanding
anything in this Article 5 to the contrary, and without constituting a waiver by
Buyer of its right to maintain an action against Sellers for fraud, Sellers are
making no representations whatsoever as to the safety, condition, suitability,
usability, permitability or legal or regulatory compliance of Improvements or
Tangible Personal Property that were, as of March 31, 1998 and for reasons
unrelated to the transactions contemplated hereunder and other than in
connection with routine maintenance work, shut-down or idled by Sellers.
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5.01 ORGANIZATION AND QUALIFICATION. (a) Koch Pipeline is a limited
partnership duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the requisite partnership power to own, lease
and operate its properties and to carry on its business as now being conducted.
Koch Pipeline is duly qualified to do business and in good standing as a foreign
limited partnership in each of the states wherein the Koch Pipeline Property is
located.
(b) Koch Oil is a division of Koch Industries, Inc., a corporation duly
organized, validly existing and in good standing under the laws of the State of
Kansas and has the requisite corporate power to own, lease and operate its
properties and to carry on its business as now being conducted. Koch Oil is duly
qualified to do business and in good standing as a foreign corporation in each
of the states wherein the Koch Oil Property is located.
5.02 AUTHORITY, APPROVAL AND ENFORCEABILITY. (a) Koch Pipeline has all
requisite partnership power and authority to execute and deliver this Agreement
and to perform its obligations under this Agreement. The execution and delivery
of this Agreement by Koch Pipeline and the performance of the transactions
contemplated hereby by Koch Pipeline have been duly and validly approved by all
requisite partnership action, if any, necessary on behalf of Koch Pipeline. This
Agreement constitutes the legal, valid and binding obligation of Koch Pipeline,
enforceable against Koch Pipeline in accordance with its terms, subject to
applicable bankruptcy, insolvency or other similar laws relating to or affecting
the enforcement of creditors' rights generally and to general principles of
equity ("Creditor's Rights"). At the Closing all documents required hereunder to
be executed and delivered by Koch Pipeline will have been duly authorized,
executed and delivered by Koch Pipeline and will constitute legal, valid and
binding obligations of Koch Pipeline, enforceable against Koch Pipeline in
accordance with their terms, subject to Creditor's Rights.
(b) Koch Oil has all requisite corporate power and authority to execute
and deliver this Agreement and to perform its obligations under this Agreement.
The execution and delivery of this Agreement by Koch Oil and the performance of
the transactions contemplated hereby by Koch Oil have been duly and validly
approved by all requisite corporate action, if any, necessary on behalf of Koch
Oil. This Agreement constitutes the legal, valid and binding obligation of Koch
Oil, enforceable against Koch Oil in accordance with its terms, subject to
Creditor's Rights. At the Closing all documents required hereunder to be
executed and delivered by Koch Oil will have been duly authorized, executed and
delivered by Koch Oil and will constitute legal, valid and binding obligations
of Koch Oil, enforceable against Koch Oil in accordance with their terms,
subject to Creditor's Rights.
5.03 NO VIOLATION OR CONSENT. Except as set forth in Schedule 5.03 and
subject to the terms of Section 7.05, the execution and delivery by each Seller
of this Agreement or any other documents required hereunder to be executed and
delivered by such Seller at Closing or otherwise, and the consummation by such
Seller of the transactions contemplated hereby or thereby will not:
(a) conflict with or result in a breach, default or violation
of the certificate of incorporation, partnership agreement or other
organizational documents of such Seller, or entitle any Person to
exercise any preferential purchase right, option to purchase or similar
right with respect to any of the Koch Pipeline Property or the Koch Oil
Property;
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(b) conflict with or result in a breach, default or violation
of, or terminate or cause the acceleration of any obligation under, any
agreement or instrument to which it is a party or by which it or the
Assets are bound or subject;
(c) conflict with or result in a breach, default or violation
of any Legal Requirement or any judgment, decree, order, governmental
permit, certificate or license to which such Seller is a party or to
which it is subject or by which the Assets are bound or subject;
(d) result in the creation of any lien, charge, claim or other
encumbrance upon any of the Assets;
(e) except for compliance with the HSR Act, require such
Seller to obtain or make any waiver, consent, action, approval,
clearance or authorization of, or registration, declaration or filing
with, any Governmental Entity; or
(f) require such Seller to obtain the consent of or give
notice to any private nongovernmental third party not already obtained
or given.
Sellers further represent and warrant to Buyer that they have used commercially
reasonable efforts to identify all third party consents required to convey Real
Property in connection with the closing of the transactions contemplated
hereunder, the results of which are listed in Schedule 5.03.
5.04 ABSENCE OF CERTAIN CHANGES AND OPERATION OF ASSETS. Except as
disclosed in Schedule 5.04 and except for any decrease in the volumes of crude
oil or condensate, since March 31, 1998 (the "Pricing Date"):
(a) there has not been any material adverse change in the
makeup, condition or composition of the Assets, whether taken as a
whole or as to any material part thereof, other than changes resulting
from developments generally affecting other companies in the crude oil
pipeline industry;
(b) there has not been any damage, destruction or loss,
whether covered by insurance or not, to the Assets that has had, or is
reasonably likely to have, a material adverse effect on the ownership
or operation of the Assets;
(c) there has not been any waiver by either Seller of any
rights that, singularly or in the aggregate, has had, or is reasonably
likely to have, a material adverse effect on the ownership or operation
of the Assets; and
(d) except to the extent the failure to do so has not had, and
is not reasonably likely to have, a material adverse effect on the
ownership or operation of the Assets, each Seller has operated its
Assets in the ordinary course of business consistent with past
practices.
5.05 MATERIAL CONTRACTS, AGREEMENTS, PLANS AND COMMITMENTS. Part VII of
Exhibits A and B sets forth a complete list of all Contracts (true and complete
copies of which have been
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furnished or made available to Buyer) that are material to the ownership and
operation of the Assets. Schedule 5.05 contains a complete list of the following
types of Contracts constituting a part of the Assets (collectively, the
"Material Contracts"):
(a) other than Contracts for the purchase, sale, exchange,
transportation, gathering or storage of crude oil, any Contract that
involves aggregate expenditures by a Seller of more than $50,000 per
annum;
(b) any Contract:
(i) for the purchase, sale or exchange of 500 barrels
per day or more of crude oil having a term in excess of 90
days;
(ii) for the transportation or gathering of 500
barrels per day or more of crude oil having a term in excess
of 90 days; and
(iii) for the storage of 500 barrels per day or more
of crude oil having a term in excess of 90 days;
(c) any Contract, or other written agreement affecting the
Assets, between a Seller and any of its Affiliates;
(d) any Contract containing provisions that restrict the right
of a Seller to engage in any type of business or compete in any
geographic area and which provisions will be binding on Buyer following
Closing;
(e) any Contract, the performance of which by a Seller is
guaranteed by an Affiliate of such Seller or secured by a letter of
credit, surety or other arrangements;
(f) any Contract pursuant to which a Seller has guaranteed the
performance by another Person of any obligation of such Person; and
(g) any security agreement, mortgage or other agreement
creating a lien (other than Permitted Encumbrances) upon any of the
Assets in order to secure the obligations of a Seller under any
agreement or instrument not constituting a Contract.
All of the Material Contracts are, to the knowledge of Sellers, valid and
effective; in addition, no event has occurred that constitutes a material
default by any Seller under the Material Contracts. One of the Sellers is a
party to each of the Material Contracts and neither Seller has assigned or
otherwise transferred any interest therein or any of the rights and benefits
accruing thereunder.
5.06 TITLE TO AND SUFFICIENCY OF REAL PROPERTY. (a) Title to Real
Property. Except for any matters arising other than by, through or under Sellers
and except for Permitted Encumbrances, each Seller (i) has good and indefeasible
title in fee simple absolute to each tract of Fee Acreage owned by it, (ii) is
the lessee or has succeeded to the rights of the lessee under all of its Surface
Leases, and has good and indefeasible title to such leasehold interests, (iii)
is the grantee, or has succeeded to the rights of the grantee, under all of its
Easements and has good and indefeasible title to such
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Easements, and (iv) has good and indefeasible title, or a valid leasehold
interest in and to, all Improvements located on the Fee Acreage, Surface Leases
or Easements, in each case free and clear of any and all Encumbrances.
(b) Easements That Were Condemned. To the knowledge of each Seller,
such Seller has complied in all material respects with applicable law with
regard to any and all easements, rights-of-way, and other surface use agreements
or arrangements listed in Part V of Exhibit A (in the case of Koch Pipeline) or
Part V of Exhibit B (in the case of Koch Oil) that were condemned or could have
been condemned through the exercise of the power of eminent domain on the basis
of the operation of the applicable Assets as common carrier pipelines under
applicable law, and such Seller has operated the applicable Assets as common
carrier pipeline(s) on a continuous basis to the current date. In addition, to
the knowledge of Sellers, neither Seller has used any common carrier assets for
private purposes, and none of the Easements have been previously converted from
common carrier to private use.
(c) Sufficiency of Real Property and Related Matters. Except for the
Excluded Assets, the Real Property constitutes all of the real property that is
(i) owned and used or held for use by each Seller primarily in connection with
the ownership and operation of its Assets and (ii) necessary for the continued
ownership, use and operation of such Assets in the manner owned, used and
operated by such Seller on the Pricing Date. To the knowledge of Sellers, all of
the Improvements are situated on Fee Acreage, land covered by the Surface Leases
or Easements, and each Seller has full right and authority to own, use and
operate all of the Improvements, subject to the Permitted Encumbrances. Except
as set forth on Schedule 5.10, there is not pending, or to the knowledge of each
Seller, threatened condemnation or eminent domain proceedings affecting the Real
Property, nor has such Seller received written notification that any such
proceeding or assessment is contemplated. No commitments have been made by
either Seller or any of its Affiliates to any Governmental Entity or other
Person relating to the Real Property that would impose an obligation on Buyer
after the Effective Time to make any contribution or dedications of money or
land or to construct, install, or maintain any improvements of a public or
private nature on or off of the Real Property.
(d) Enforceability Of and Defaults Under Leases and Easements. Except
to the extent such invalidity or lack of effectiveness arises other than by,
through or under Sellers or their Affiliates, to the knowledge of Sellers, all
of the Surface Leases and Easements that are material to the ownership and
operation of the Assets are valid and effective. In addition, no event has
occurred that constitutes, or that with the giving of notice or the passage of
time would constitute, a material default by any Seller under such Surface
Leases or Easements.
5.07 TITLE TO AND SUFFICIENCY OF TANGIBLE PERSONAL PROPERTY. (a) Title
to Tangible Personal Property. Each Seller owns all of the Tangible Personal
Property, free and clear of all Encumbrances other than Permitted Encumbrances.
(b) Sufficiency of Tangible Personal Property and Related Matters.
Except for the Excluded Assets and except for assets and properties sold in the
ordinary course of business since the Pricing Date, the Tangible Personal
Property constitutes all of the tangible personal property and/or fixtures
(other than fixtures constituting real property) necessary for the continued
ownership, use and operation of the Assets in the manner owned, used and
operated by Sellers on the Pricing Date.
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Part VI of Exhibit A (in the case of the Koch Pipeline Tangible Personal
Property) and Part IV of Exhibit B (in the case of the Koch Oil Tangible
Personal Property) contains a true and complete list of all items of Tangible
Personal Property consisting of cars, trucks, trailers and other rolling stock,
together with all other items or categories of Tangible Personal Property that
are material to the ownership, use or operation of the Assets.
5.08 PERMITS. Except for Environmental Permits, each Seller is the
lawful licensee or permittee under all material Permits and none of the material
Permits have been assigned, transferred, revoked or permitted to lapse. Except
for Environmental Permits and except as disclosed on Schedule 5.08, to the
knowledge of Sellers, all fees and other payments due and owing in connection
with the material Permits have been or will be prior to the due date therefor
paid in full, and to the knowledge of Sellers, there are no unpaid fees or other
payments that could cause the lapse or revocation of any of the material
Permits.
5.09 COMPLIANCE WITH LAW. (a) To the knowledge of each Seller, such
Seller is in compliance in all material respects with all Legal Requirements
(other than Environmental Legal Requirements, which are covered by Section 5.11,
and Legal Requirements that relate to the physical condition of the Assets,
which are covered by Section 5.09(b)) applicable to the ownership, use or
operation of the Assets.
(b) To the knowledge of Sellers and except as listed on Schedule
5.09(b), there is no single physical defect in the Assets at a single location
that would require the expenditure of more than $50,000.00 in labor and
materials to correct such defect to the extent necessary to (i) rectify
non-compliance with applicable Legal Requirements or (ii) render the applicable
Asset operable in accordance with generally recognized industry standards.
5.10 LITIGATION. Except as described in Schedules 5.10 or 5.11, (a)
there are no civil, criminal, administrative, arbitration, or other proceedings
or governmental investigations pending, or, to the knowledge of Sellers,
threatened, against Sellers relating to the ownership or operation of the Assets
or that seek to restrain or enjoin the transactions contemplated by this
Agreement, and (b) to the knowledge of Sellers, neither Seller has received
written notice of any demand, suit, action, investigation or proceeding (whether
civil, criminal, administrative or otherwise) from any Person regarding
compliance with Legal Requirements (other than Environmental Legal Requirements)
in connection with the ownership and operation of the Assets.
5.11 ENVIRONMENTAL AND HEALTH MATTERS. To the knowledge of each Seller,
except as set forth in Schedule 5.11 or otherwise disclosed to Buyer in writing:
(a) The Assets and all operations thereon are currently in
compliance in all material respects with all applicable Environmental
Legal Requirements, and there are no conditions existing on or
resulting from activities on or use of the Assets (including, without
limitation, any use, transportation, disposal, or arrangement for
transportation or disposal of Hazardous Materials by Sellers) that may
give rise to any material on-site or offsite remedial obligations on
the part of the Buyer Indemnified Parties under any applicable
Environmental Legal Requirements.
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(b) Except for those releases and discharges that are
disclosed in Seller's leak records (a copy of which has been delivered
to Buyer prior to the date hereof), there are no past, present, or
threatened material releases, discharges, or disposal of any Hazardous
Materials in, on, under, about or migrating to or from the Assets;
(c) All material Environmental Permits required to be obtained
or filed in connection with the operation or use of the Assets have
been obtained or filed, are valid and effective or applications for
same have been filed;
(d) Except for written or oral communications that are subject
to the attorney client privilege or documents that are covered by the
work product doctrine, each Seller has made available or communicated
to Buyer all material information contained in any and all audits,
assessments, reports, studies and related information (collectively,
the "Reports") in the possession of, or prepared by, on behalf of, or
for the benefit of such Sellers that relate to (i) environmental
conditions in, on, under, or about the Assets or (ii) Hazardous
Materials removed offsite from the Assets, including any Reports
relating to Hazardous Materials in, on, under, about, or migrating to
or from the Assets, Hazardous Materials that such Seller has
transported or disposed or arranged for transport or disposal offsite
from the Assets; and
(e) Neither Seller has received written notice of any demand,
suit, action, investigation or proceeding (whether civil, criminal,
administrative or otherwise) from any Person regarding non-compliance
with Environmental Legal Requirements or Hazardous Material
contamination, in each case in connection with the ownership or
operation of the Assets.
5.12 TAXES. Except for Taxes being contested in good faith by
appropriate action, (a) each Seller has timely filed all necessary Tax returns
relating to the Assets, (b) each Seller has timely paid all Taxes relating to
the Assets, and (c) there is no outstanding contest or dispute with respect to
any Taxes relating to the Assets, whether paid, payable or asserted to be
payable by a taxing authority.
5.13 TARIFFS AND CERTIFICATES. To the extent same relate to the Assets,
each Seller heretofore has delivered to Buyer copies of such Seller's tariffs
accepted for filing by the applicable Governmental Entities and currently in
effect, whether or not any transportation rates set forth therein are subject to
refund.
5.14 REGULATORY STATUS. Each Seller is exempt from, or is otherwise not
subject to regulation as, (i) a "holding company," a "subsidiary company" of a
"holding company," an "affiliate" of a "holding company," or a "public utility
company," as each of such terms is defined in the Public Utility Holding Company
Act of 1935, as amended, and the rules and regulations thereunder, (ii) an
investment company or a company controlled by an investment company within the
meaning of the Investment Company Act of 1940, as amended, or (iii) a "public
utility" within the meaning of the Federal Power Act, as amended, and the rules
and regulations thereunder.
5.15 ACCURACY OF INFORMATION. Neither Seller has knowingly withheld
material factual information from, or knowingly provided materially false or
misleading factual information to, Buyer regarding the Assets or their
ownership, use or operation.
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5.16 BROKERS. Neither Seller has entered (directly or indirectly) into
any agreement with any Person that provides for the payment of any commission,
brokerage or "finder's fee" arising out of the transactions contemplated by this
Agreement for which Buyer might have any liability or obligation.
5.17 LABOR MATTERS. With respect to the ownership and operation of the
Assets, neither Seller is a party to any labor agreement with respect to its
employees with any labor organization, union, group or association, and there
are no employee unions, collective bargaining units, or recognized bargaining
associations under any relevant statute, rule or regulation. In addition, to
Sellers' knowledge, with respect to the Assets, no labor organization or group
of its employees has made a demand for recognition, has filed a petition seeking
a representation proceeding or given Sellers notice of any intention to hold an
election of a collective bargaining representative, and Sellers have not
authorized any employer associations or multi-employer organizations to
represent either of them in collective bargaining with any labor organization,
nor is there any contract requiring Sellers to recognize or bargain with any
labor organizations or unions. No collective bargaining agreement involving
employees employed in connection with the ownership or operation of the Assets
is being negotiated by either Seller. There is no labor strike, slowdown or
other work stoppage or labor disturbance pending or, to Sellers' knowledge,
threatened against either Seller, and there is no pending or, to the knowledge
of Sellers, threatened charge or complaint against either Seller by the National
Labor Relations Board or any comparable agency, in each case that relates to the
Assets.
5.18 YEAR 2000 MATTERS. To the knowledge of Sellers, Sellers have
advised Buyer of all material Year 2000 Issues (as defined below) relating to
the Assets. As used in this Agreement, "Year 2000 Issues" means, as related to
the Assets, all issues relating to (a) software, hardware, equipment and
microprocessors creating, storing and generating output data relating to or
including Millennial Dates (as defined below) and leap year dates without errors
or omissions, and (b) the occurrence in or use by such software, hardware,
equipment and microprocessors of Millennial Dates and leap year dates in a
manner that will not adversely affect the performance of such software,
hardware, equipment and microprocessors with respect to date dependent data,
compilations, output or other functions (including, without limitation,
calculating, computing, sequencing and storing instructions and data). As used
in this Agreement, "Millennial Dates" means dates (in any form, including two or
four digits) on or after September 9, 1999.
5.19 SECURITIES LAW MATTERS. Each of the Sellers has received and
carefully reviewed the provisions of the EEP Partnership Agreement and the
Public Documents and has had adequate opportunity to ask questions of and
receive answers from the Buyer's and EOTT's officers and directors concerning
the business, financial condition, properties, operations and prospects of EEP
and all such questions have been answered to each Seller's full satisfaction.
Each Seller represents that the Initial Holder is acquiring the Equity
Consideration for such Person's own account for investment purposes and not with
a present view to or in connection with the resale or other distribution
thereof. Each Seller understands that the Equity Consideration shall, upon its
issuance by EEP, be subject to the terms, conditions and restrictions of the EEP
Partnership Agreement and may not be sold or transferred in violation of
applicable federal or state securities laws.
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5.20 APPLICABLE CONTROL GROUP. Sellers believe that the individuals
listed as the "Applicable Control Group" in clause (b) of the definition of the
term "knowledge" have a high degree of familiarity with the Assets in order to
make the applicable representations hereunder.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF BUYER AND EOTT
Subject to the survival provisions set forth in Section 9.05, Buyer and
EOTT represent and warrant to Sellers that:
6.01 ORGANIZATION AND QUALIFICATION. Each of EOTT and Buyer is a
limited partnership duly organized, validly existing and in good standing under
the laws of the State of Delaware and has the requisite partnership power to
own, lease and operate its properties and to carry on its business as now being
conducted. Each of EOTT and Buyer is duly qualified to do business and in good
standing as a foreign limited partnership in all jurisdictions in which the
character of the properties now owned or leased by it or the nature of the
business conducted by it requires it to be so licensed or qualified.
6.02 AUTHORITY, APPROVAL AND ENFORCEABILITY. Each of EOTT and Buyer has
all requisite partnership power and authority to execute and deliver this
Agreement and to perform its obligations under this Agreement. The execution and
delivery of this Agreement by each of EOTT and Buyer and the performance of the
transactions contemplated hereby by such Party have been duly and validly
approved by all requisite partnership action, if any, necessary on behalf of
EOTT and Buyer. This Agreement constitutes the legal, valid and binding
obligation of each of EOTT and Buyer, enforceable against each such Party in
accordance with its terms, subject to Creditor's Rights. At the Closing all
documents required hereunder to be executed and delivered by EOTT and Buyer will
have been duly authorized, executed and delivered by each such Party and will
constitute legal, valid and binding obligations of such Party, enforceable
against such Party in accordance with their terms, subject to Creditor's Rights.
6.03 NO VIOLATION OR CONSENT. Provided that the Audit Committee
Approvals and the Board Approvals are obtained, neither the execution and
delivery of this Agreement by Buyer or EOTT, the execution and delivery by
either such Party of any documents required hereunder to be executed and
delivered by either such Party at Closing or otherwise, nor the consummation of
the transactions contemplated hereby or thereby will:
(a) conflict with or result in a breach, default or violation
of the partnership agreement or other organizational documents of Buyer
or EOTT;
(b) conflict with or result in a breach, default or violation
of any Legal Requirement or any agreement, document, instrument,
judgment, decree, order, governmental permit, certificate or license to
which Buyer or EOTT is a party or to which it is subject;
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(c) except for compliance with the HSR Act and filings
required by the SEC, require Buyer or EOTT to obtain or make any
waiver, consent, action, approval, clearance or authorization of, or
registration, declaration or filing with, any Governmental Entity; or
(d) require Buyer or EOTT to obtain the consent of or give
notice to any private nongovernmental third party not already obtained
or given.
6.04 ACCURACY OF INFORMATION. Neither Buyer nor EOTT have knowingly
withheld material factual information from, or knowingly provided materially
false or misleading factual information to, Sellers regarding this transaction.
To the current actual knowledge of Stephen M. Duffy, Gary Luce, Doug Huth, and
Joe Richards (it being agreed that such individuals shall be under no duty to
conduct any inquiry or investigation for purposes of this Section 6.04), Buyer
has advised Sellers of any material breach by Sellers of their representations
and warranties hereunder or any material inaccuracies in any of the Schedules
delivered by Sellers to Buyer hereunder.
6.05 BROKERS. Neither Buyer nor EOTT has incurred any obligation or
liability, contingent or otherwise, for brokers' or finders' fees in respect of
the matters provided for in this Agreement that will be the responsibility of
Sellers; and any such obligation or liability that might exist shall be the sole
obligation of Buyer or EOTT.
6.06 PUBLIC DOCUMENTS. EEP has filed with the Securities and Exchange
Commission ("SEC") and the New York Stock Exchange ("NYSE") all reports,
schedules, forms, statements and other documents required by the Securities
Exchange Act of 1934, as amended (the "Exchange Act") or the rules and
resolutions of the NYSE, to be filed by EEP since March 25, 1994 (collectively,
and in each case including all exhibits and schedules thereto and documents
incorporated by reference therein, the "Public Documents"). As of their
respective dates, except to the extent revised or superseded by a subsequent
filing with the SEC or the NYSE, the Public Documents complied in all material
respects with the requirements of the Securities Act of 1933, as amended (the
"Securities Act"), the Exchange Act or the rules and regulations of the NYSE, as
the case may be, and none of the Public Documents (including any and all
financial statements included therein) as of such dates contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The consolidated
financial statements of EEP included in all Public Documents, including any
amendments thereto, comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto.
6.07 ORGANIZATIONAL DOCUMENTS. (a) EEP has furnished to each Seller a
true, correct and complete copy of the certificate of limited partnership of EEP
and the EEP Partnership Agreement, together with all amendments thereto
(collectively, the "EEP Organizational Documents"). The EEP Organizational
Documents are in full force and effect as of the date hereof and, together with
all other documents and agreements referenced therein, constitute all of the
organizational and governing documents for EEP. The EEP Partnership Agreement
has been duly executed and delivered by each Affiliate of EEP that is a party
thereto and, to the knowledge of EEP, every other party thereto, and constitutes
the legal, valid and binding obligation of each such Affiliate of EEP and, to
the knowledge of EEP, every other party thereto, in each case subject to
Creditor's Rights. There are no proceedings or actions pending or contemplated
to dissolve EEP.
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(b) EEP has furnished to each Seller a true, correct and complete copy
of that certain Ancillary Agreement dated March 25, 1994, among Enron Corp.,
EOTT, Buyer, the General Partner and certain Affiliates of Buyer, as amended by
that certain Agreement to Increase and Extend Support dated as of August 8, 1995
by and among Enron Corp., EOTT, Buyer, the General Partner and certain
Affiliates of Buyer (the "Ancillary Agreement"), together with all amendments
thereto. The Ancillary Agreement is in full force and effect as of the date
hereof and has been duly executed and delivered by each of the parties thereto
and constitutes the legal, valid and binding obligation of each party thereto,
subject to Creditor's Rights.
6.08 CAPITALIZATION. (a) As of September 14, 1998, the total number of
issued and outstanding equity interests of EEP consisted of 10,000,000 Common
Units, 7,000,000 Subordinated Units, 1,830,011 Special Units, 21,927,641 APIs
and 1,082,000 options to purchase Subordinated Units pursuant to the EOTT Energy
Corp. Unit Option Plan. All of the issued and outstanding Subordinated Units,
Special Units and APIs are held by Enron Corp.
(b) Except as contemplated by the EEP Partnership Agreement, the
Ancillary Agreement, the Support Agreement, this Agreement or disclosed in EEP's
most recent filings on Form 10-K, (i) there are no outstanding rights,
subscriptions, calls, options, warrants, preemptive rights, conversion rights or
agreements granted or issued by or binding upon EEP for the purchase or
acquisition (contingent or otherwise) from EEP of any units or any other
securities and (ii) EEP is not subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of its units
or any security convertible into or exchangeable for any units. To the knowledge
of EEP, there is no voting trust, agreement or arrangement among any of the
beneficial holders of the units of EEP affecting the exercise of the voting
rights of such units or which in any way affect any limited partner's ability or
right to freely alienate or vote such units.
(c) Except for Enron Corp., there are no Record Holders (as such term
is defined in the EEP Partnership Agreement) of Common Units (including Special
Units) that hold more than 5% of the issued and outstanding Common Units
(including Special Units). To the knowledge of EEP based on public filings with
the SEC, as of September 14, 1998, except for Enron Corp., there was no
beneficial owner of more than 5% of the issued and outstanding Common Units
(including Special Units).
6.09 VALIDITY OF SECURITIES. All of the Common Units and Subordinated
Units to be issued to the designee of Sellers hereunder at Closing will, upon
their issuance, be duly authorized, validly issued, fully paid and
nonassessable.
6.10 ABSENCE OF CERTAIN CHANGES. Except as disclosed in the Public
Documents or in Schedule 6.10 and except for events or changes resulting from
developments generally affecting companies engaged in EEP's line of business,
since June 30, 1998, (a) EEP has not entered into any material transaction which
was not entered into in the ordinary course of its business; (b) there has been
no material adverse change in the financial condition or performance of EEP and
its consolidated subsidiaries taken as a whole; (c) there has been no damage to,
destruction of or loss of any of the properties or assets of EEP (whether or not
covered by insurance) materially adversely affecting the financial condition or
performance of EEP and its consolidated subsidiaries taken as a whole; (d) EEP
has not declared or paid any distributions other than in accordance with the EEP
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Partnership Agreement; (e) there has been no labor dispute involving EEP or any
of its employees that has had a material adverse effect on the ability of EEP
and its consolidated subsidiaries to conduct their business; (f) there has been
no change in the contingent obligations of EEP by way of guaranty, endorsement,
indemnity, warranty or otherwise that has had a material adverse effect on the
financial condition of EEP and its consolidated subsidiaries taken as a whole;
and (g) no event has occurred that might reasonably be expected to have a
material adverse effect on the financial condition or performance of EEP and its
consolidated subsidiaries taken as a whole or the ability of EEP and its
consolidated subsidiaries to conduct their business as it is currently being
conducted.
6.11 REGISTRATION RIGHTS. Except as contemplated by the EEP Partnership
Agreement or Section 10.12 below, EEP has not granted or agreed to grant to any
Person any rights relating to the registration of its securities under
applicable federal and state securities laws, including but not limited to
demand or piggy-back registration rights.
6.12 LITIGATION. There are no civil, criminal, administrative,
arbitration, or other proceedings or governmental investigations pending, or to
the knowledge of EEP, threatened, against EEP or any of its Affiliates that seek
to restrain or enjoin the transactions contemplated by this Agreement.
ARTICLE 7
COVENANTS OF SELLERS
7.01 OPERATION OF ASSETS PRIOR TO THE CLOSING DATE. Sellers (Koch
Pipeline with respect to the Koch Pipeline Property and Koch Oil with respect to
the Koch Oil Property) covenant and agree that, except as expressly provided in
this Agreement or as otherwise approved by Buyer in writing, at all times from
the date hereof through the Closing Date they shall comply with the following:
(a) Operation, Maintenance and Repair. The Koch Pipeline
Property and Koch Oil Property shall be kept, operated and maintained
in the ordinary course of business in accordance with the past
operating and maintenance practices of Sellers. Koch Pipeline shall
maintain the common carrier tariffs currently in effect with respect to
the Assets and shall operate the Pipeline Systems in accordance with
such tariffs. Except in the ordinary course of business consistent with
past practices, Sellers shall not remove any of the Assets from the
Real Property on which they are located.
(b) Customer Matters. Each Seller shall use commercially
reasonable efforts to continue to preserve the present customer and
supplier relations that have heretofore been developed by such Seller
in connection with the operation of the Assets.
(c) Performance of Obligations. Each Seller shall, in all
material respects and in a timely manner, make all payments due under
and otherwise perform all its other obligations under all Easements,
Surface Leases, Contracts and Permits in accordance with their
respective terms and not cancel, amend, modify, abandon, extend or
renew any of the same, or permit any of the same to lapse, other than
in the normal and ordinary course of business.
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(d) Dispositions, Encumbrances, and Other Undertakings. Each
Seller shall not take any action (including, without limitation, the
entry into any contract, agreement or instrument) the taking of which,
or omit to take any action the omission of which, would (i) encumber
the Assets (other than with Permitted Encumbrances), (ii) bind Buyer or
the Assets to a contract that would require capital expenditures in
excess of $50,000, (iii) be outside of the normal scope of maintaining
and operating the Assets, or (iv) dispose of any interest in any of the
Assets other than the in the ordinary course of business. Additionally,
the foregoing provisions of this Article 7 notwithstanding, with
respect to any matter which would constitute a Material Contract under
Section 5.05(b) above and which would also involve a volume of crude
oil or condensate in excess of 500 barrels per day, each Seller shall
take commercially reasonable steps to coordinate beforehand with Buyer
as to any such matter.
7.02 HSR ACT COMPLIANCE. Sellers shall (a) file a premerger
notification under the HSR Act with the Federal Trade Commission and the
Department of Justice as promptly as practical following the date hereof, (b)
request early termination of the waiting period under the HSR Act, and (c)
promptly comply with any requests for additional information or documentary
material thereunder; provided, however that nothing stated herein shall require
Sellers to respond to or participate in a "second request" process under the HSR
Act if, in the reasonable and good faith judgment of Sellers, (i) compliance
with such second request would be unduly burdensome on Sellers or (ii) such
"second request" process is not likely to be completed by December 31, 1998.
7.03 FULFILLMENT OF CLOSING CONDITIONS. Prior to and following Closing,
each Seller shall do the following:
(a) on a timely basis, give or cause to be given all such
notices, and subject to the limitations set forth in Section 7.05, use
commercially reasonable efforts to obtain or cause to be obtained all
consents and approvals, that are required to be given or obtained by
such Seller in connection with the consummation of the transactions
contemplated hereunder;
(b) use commercially reasonable efforts to fulfill or cause to
be fulfilled all other conditions to the Closing set forth in Sections
9.01(a), (b), (c) and (e) or 9.02, to the extent of its ability to
influence same; and
(c) take such actions as may be necessary to comply with any
bulk sales or plant closing laws that apply to or are triggered by the
transactions contemplated hereby, including any relevant provisions of
the Worker Adjustment and Retraining Notification Act of 1988.
7.04 ACCESS TO BUSINESS. (a) From and after the date hereof, upon
reasonable advance notice and during reasonable business hours, Buyer shall be
given full and complete access to the facilities, properties, personnel, books
and records of each Seller pertaining to the Assets; provided, however, that
such access may not unreasonably interfere with the ongoing operations of either
Seller and shall not include access to any records or documents of either Seller
that are (i) proprietary in nature or (ii) covered by the attorney-client
privilege or work-product doctrine. The access granted to Buyer pursuant to the
immediately preceding sentence shall include access in
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Houston, Texas, to Sellers' right-of-way records retention system and attendant
microfiche records. Each Seller shall furnish to Buyer, at Buyer's expense,
copies of such books and records pertaining to the Assets as Buyer shall
reasonably request in connection with its investigation of the Assets. In
addition, each Seller shall use commercially reasonable efforts to furnish to
Buyer such information as may be necessary to permit Buyer to timely comply with
any SEC filing requirements under the Securities Act and the Exchange Act with
respect to the Assets. Each Seller shall, upon reasonable advance notice, cause
the employees, counsel, accountants and other representatives of such Seller to
be available to Buyer at all reasonable times for such purposes. Except for
Phase II environmental assessments, which may not be conducted prior to Closing
without the prior written approval of the applicable Seller, prior to Closing
Buyer, at its own risk and expense, shall have the right to inspect the Fee
Acreage, Leased Land, Easements and other Assets to the extent Buyer deems
necessary in performing its environmental or operational review of the Assets.
If any confidentiality obligations prevent either Seller from disclosing any
information relating to the Assets to Buyer, such Seller shall cooperate with
Buyer to the extent possible to permit Buyer to obtain sufficient information
with respect to such matter as to permit Buyer to knowledgeably evaluate such
matter.
(b) Notwithstanding anything to the contrary contained in this
Agreement, Buyer agrees to protect, indemnify, defend and hold harmless the
Seller Indemnified Parties from and against any and all Claims or Damages
suffered or incurred by the Seller Indemnified Parties in connection with
personal injuries, including death, or property damage caused by or incurred in
connection with the negligence, gross negligence or willful misconduct of the
Buyer Indemnified Parties in connection with Buyer's due diligence review and
inspection of the Assets, EVEN IF SAME IS ATTRIBUTABLE TO THE NEGLIGENCE, GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF THE SELLER INDEMNIFIED PARTIES.
7.05 AGREEMENT REGARDING TITLE DEFECTS, CONSENTS AND EASEMENT GAPS. (a)
The Parties acknowledge that the assignment by Sellers of certain of the Surface
Leases, Easements, Contracts and Permits may require the consent of third
parties. With respect to any such Surface Leases, Easements, Contracts or
Permits owned by a Seller, such Seller agrees to use commercially reasonable
efforts to obtain or cause to be obtained the required consent prior to Closing
and, to the extent such consent is not obtained by Closing, for a reasonable
time following Closing.
(b) The Parties further acknowledge that at Closing there may be
certain segments of one or more of the Pipeline Systems with respect to which
the applicable Seller does not own a valid or enforceable right-of-way or
easement (herein referred to as an "Easement Gap").
(c) Without limiting any of Buyer's rights to maintain an action
against either Seller for fraud, Buyer acknowledges and agrees that Buyer's sole
and exclusive remedy with respect to any Easement Gaps, Unobtained Consents and
breach of the title representations and warranties contained in the last
sentence of Section 5.03, Sections 5.03(f), 5.06(a), (b) and (d), the second
sentence of Section 5.06(c) and 5.07(a) and the assignment instruments to be
delivered by Sellers to Buyer or its applicable designees at Closing
(collectively, the "Title Warranties") shall be the obligations of the Sellers
under this Section 7.05. Without limiting the obligations of Sellers under
Section 7.05(f), Buyer also agrees that its rights under this Section 7.05 shall
constitute its sole remedy with respect to any title defects consisting of
unobtained consents to the assignment by Seller's predecessors in interest of
any of the Assets to Sellers or any of Seller's predecessors in interest.
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(d) In each instance where the consents referenced above (i.e., the
consents referenced in the first sentence of Section 7.05(a) and the last
sentence of Section 7.05(c)) cannot be obtained prior to the Closing (an
"Unobtained Consent") and pending receipt of any such Unobtained Consents, it is
understood and agreed, subject to the other terms hereof, that as between Buyer
and Sellers, Buyer shall be permitted to occupy, use or otherwise receive the
benefit of the applicable Assets. If, after six months from the Closing Date,
any Unobtained Consents remain unobtained, the applicable Seller shall use
commercially reasonable efforts to enter into such permanent arrangements and
agreements with Buyer as may be necessary in order to permit Buyer to realize,
receive and enjoy rights and benefits that are substantially similar to those
that Buyer would have enjoyed had such consent been obtained.
(e) With respect to any (i) breach by Sellers of the Title Warranties,
(ii) Unobtained Consents pertaining to Real Property and (iii) Easement Gaps,
Sellers (each as to any such breaches of Title Warranties, Unobtained Consents
and Easement Gaps that relate to the Assets being sold by such Seller hereunder)
agree to reimburse the Buyer Indemnified Parties for, and indemnify, defend and
hold harmless the Buyer Indemnified Parties from and against, any and all Title
Costs suffered or incurred by such Buyer Indemnified Parties as a result of such
breaches of Title Warranties, Unobtained Consents and Easement Gaps; provided,
however, that (i) such reimbursement and indemnity obligation of Sellers shall
not apply to the first $1,000,000 of aggregate Title Costs suffered or incurred
by the Buyer Indemnified Parties, (ii) such reimbursement and indemnity
obligation shall be subject to the survival limitations set forth in Section
9.05 and (iii) in no event shall the aggregate liability of Sellers pursuant to
such reimbursement and indemnity obligation set forth in this Section 7.05(e)
exceed an amount equal to $10,000,000.
(f) Sellers acknowledge that with respect to certain of the Real
Property interests located in California that were obtained by Sellers from
Atlantic Richfield Company or one of its Affiliates (the "ARCO Properties"),
Sellers have not yet obtained certain third party consents in connection with
the acquisition thereof (such unobtained consents being herein referred to as
the "ARCO Consents"). Sellers agree to use commercially reasonable efforts to
obtain or cause to be obtained the ARCO Consents prior to Closing and, to the
extent any such consents are not obtained by Closing, for a reasonable time
following Closing. To the extent that third party consents are required in
connection with the assignment by Sellers of the ARCO Properties to Buyer (or
its applicable designee) hereunder from the same third parties that are being,
or will be, solicited by Sellers in order to obtain the ARCO Consents, Sellers
and Buyer agree to cooperate in good faith and coordinate their efforts with the
goal of obtaining the necessary consents at the lowest cost reasonably possible.
7.06 TITLE COMMITMENTS AND POLICIES. Sellers acknowledge that Buyer
shall have the right to obtain, at Buyer's own cost and expense, commitments for
title insurance and Title Policies at the Closing for all Fee Acreage and Leased
Lands. Sellers agree to cooperate in a commercially reasonable manner with Buyer
in connection with Buyer's efforts to obtain such commitments and policies, but
at no cost or expense to Sellers.
7.07 PREFERENTIAL PURCHASE RIGHTS. With respect to each party holding a
valid preferential purchase right covering all or a part of the Assets that is
triggered by the proposed transactions contemplated hereunder, the applicable
Seller shall send to the holder of such right a
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notice offering to sell to such holder, in accordance with the contractual
provisions applicable to such right, those Assets covered by such right on the
terms hereof and for the value allocated to such Assets as agreed to by Buyer
and Sellers. If, prior to Closing, any holder of a preferential purchase right
notifies any Seller that it intends to consummate the purchase of the Assets to
which such preferential purchase right applies, then those Assets shall be
excluded from the Assets to be conveyed to Buyer under this Agreement, and the
Cash Consideration shall be reduced by the value allocated to such excluded
Assets; provided, however, that if the holder of such preferential right fails
to consummate the purchase of the Assets covered by such right, then within 180
days following the Closing Date, the applicable Seller may so notify Buyer, and
within 15 days after Buyer's receipt of such notice from such Seller, such
Seller shall sell to Buyer, and Buyer shall purchase from such Seller, for a
price equal to the value allocated to such Assets and upon the other terms of
this Agreement (to the extent applicable), the Assets to which the preferential
purchase right applied.
ARTICLE 8
COVENANTS OF BUYER
8.01 HSR ACT COMPLIANCE. Buyer shall (a) file a premerger notification
under the HSR Act with the Federal Trade Commission and the Department of
Justice as promptly as practical following the date hereof, (b) request early
termination of the waiting period under the HSR Act, and (c) promptly comply
with any requests for additional information or documentary material thereunder;
provided, however that nothing stated herein shall require Buyer to respond to
or participate in a "second request" process under the HSR Act if, in the
reasonable and good faith judgment of Buyer, (i) compliance with such second
request would be unduly burdensome on Buyer or (ii) such "second request"
process is not likely to be completed by December 31, 1998.
8.02 FULFILLMENT OF CLOSING CONDITIONS. Buyer shall use commercially
reasonable efforts to fulfill or cause to be fulfilled all conditions to the
Closing set forth in Section 9.01 or 9.02, to the extent of its ability to
influence same. In addition, Buyer agrees to notify Sellers promptly following
the receipt of any of the approvals referenced in each of Sections 9.01(g), (h)
and (i).
8.03 LISTING OF COMMON UNITS. Buyer shall use commercially reasonable
efforts to cause the Common Units constituting a part of the Equity
Consideration to be listed on the NYSE on or before the Closing Date.
8.04 TARIFF ADOPTION. Buyer shall comply with any applicable Legal
Requirements with respect to the adoption of Sellers' tariffs relating to the
Pipeline Systems.
ARTICLE 9
CONDITIONS TO CLOSING AND TERMINATION
9.01 CONDITIONS TO OBLIGATION OF BUYER. The obligation of Buyer to
perform its obligations hereunder at Closing shall be subject to the
satisfaction of the conditions set forth below (which conditions may be waived
in whole or in part by Buyer in writing on or before the Closing Date).
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(a) Representations, Warranties and Covenants of Sellers. The
representations and warranties of each Seller hereunder shall be true
and correct in all material respects as of the Closing Date, and each
Seller shall have performed in all material respects all covenants
required of such Seller by this Agreement to be performed on or before
the Closing Date (it being agreed that covenants of Sellers set forth
in Section 4.02(a)-(l) shall be deemed to be material).
(b) Officer's Certificate. Each Seller shall have delivered to
Buyer a certificate of a corporate officer or other authorized person,
dated the Closing Date, certifying on behalf of such Seller that the
conditions set forth in Section 9.01(a) have been fulfilled.
(c) Third-Party Notices, Consents and Waivers. Except for
Unobtained Consents, each Seller shall have given or caused to be given
all such notices, and obtained or caused to be obtained all material
consents, waivers of preferential purchase rights and approvals, in
each case as may be required from any third parties not constituting
Governmental Entities as a result of the execution of this Agreement or
the occurrence of Closing.
(d) No Violations of Statutes, Orders, etc. There shall not be
in effect any law, statute, code, rule, regulation or ordinance that
makes it illegal for Buyer to perform its obligations hereunder at
Closing or any judgment, order, writ or decree that enjoins Buyer from
performing such obligations.
(e) Approvals of Governmental Entities. Provided that Buyer
has complied with its obligations under Article 8 with respect to such
matters, all legal requirements under the HSR Act for the valid
occurrence of Closing (including the expiration of any applicable
waiting periods) shall have been fulfilled and all other required
permits, consents, approvals and authorizations from Governmental
Entities shall have been obtained, except for Unobtained Consents.
(f) Litigation. No action or proceeding relating to the
transactions contemplated by this Agreement shall be pending or
threatened against Buyer in any court of law or by any Governmental
Entity on the Closing Date, wherein an unfavorable judgment, decree or
order is reasonably likely to prevent, make unlawful or materially
affect the consummation of the transactions contemplated by this
Agreement.
(g) Audit Committee Approvals. The Audit Committee of the
Board of Directors of the General Partner shall have received an
opinion from a financial advisor selected by it that the terms of the
Support Agreement are fair to EPP and the Limited Partners from a
financial point of view, such opinion shall not contain any exceptions
or explanations that are unacceptable to the Audit Committee, and the
Audit Committee shall have determined that the Support Agreement is
fair and reasonable to EPP (collectively, the "Audit Committee
Approvals").
(h) Board of Director Approvals. The Board of Directors of the
General Partner shall have received an opinion from a financial advisor
selected by it that the transactions
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contemplated by this Agreement are fair to EPP and its Partners, from a
financial point of view, such opinion shall not contain any exceptions
or explanations that are unacceptable to the Board of Directors, and
the Board of Directors shall have approved this Agreement and the
Support Agreement (collectively, the "Board Approvals").
(i) Certain Matters Relating to ARCO Properties. Sellers shall
have obtained, and furnished Buyer with evidence of the receipt of, (i)
to the extent required in connection with the transfer by Sellers to
Buyer or its designee of any of the Assets located in California, the
approval of the Department of Fish and Game of the State of California,
(ii) to the extent required, the approval of Atlantic Richfield Company
of the assignment by Koch Oil to Buyer or its designee of Koch Oil's
right to operate the North Coles Levee Plant No. 8 without unreasonable
interference from Atlantic Richfield Company in connection with the
management by Atlantic Richfield Company of the Coles Levee Ecosystem
Preserve and Atlantic Richfield Company's exercise of the rights
reserved by Atlantic Richfield Company pursuant to the transfer
document conveying the North Coles Levee Plant No. 8 to Sellers, or the
securing of such other arrangements as may be necessary to secure for
Buyer or its applicable designee equivalent rights, benefits and
privileges, and (iii) the agreement of Atlantic Richfield Company to
approve the transfer of, and cure any defects in, the easements granted
by Atlantic Richfield Company to Koch Oil for use by Koch Oil in
connection with the operation of and access to the North Coles Levee
Plant No. 8.
9.02 CONDITIONS TO OBLIGATION OF SELLERS. The obligation of each Seller
to perform its respective obligations hereunder at Closing shall be subject to
the satisfaction of the conditions set forth below (which conditions may be
waived in whole or in part by such Seller in writing on or before the Closing
Date).
(a) Representations, Warranties, and Covenants of Buyer and
EOTT. The representations and warranties of Buyer and EOTT hereunder
shall be true and correct in all material respects as of the Closing
Date, and each of Buyer and EOTT shall have performed in all material
respects all covenants required of such Party by this Agreement to be
performed on or before the Closing Date (it being agreed that the
obligations of Buyer and EOTT under Section 4.02(a)-(m) shall be deemed
to be material).
(b) Officer's Certificate. Buyer and EOTT shall have delivered
to Seller a certificate of a corporate officer of Buyer's and EOTT's
general partner, dated the Closing Date, certifying on behalf of Buyer
that the conditions set forth in 9.02(a) have been fulfilled.
(c) General Partner Approval. The General Partner of EEP shall
have approved the admission of the Initial Holder to EEP as a Limited
Partner in respect of the Units to be issued to it by EEP at Closing.
(d) No Violations of Statutes, Orders, etc. There shall not be
in effect any law, statute, code, rule, regulation or ordinance that
makes or will make it illegal for either Seller to perform its
obligations hereunder at Closing or any judgment, order, writ or decree
that enjoins either Seller from performing such obligations.
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(e) Approvals of Governmental Entities. Provided that each
Seller has complied with its obligations under Section 7.02 with
respect to such matters, all legal requirements under the HSR Act for
the valid occurrence of Closing (including the expiration of any
applicable waiting periods) shall have been fulfilled and all other
required permits, consents, approvals and authorizations from
Governmental Entities shall have been obtained, except for Unobtained
Consents.
(f) Litigation. No action or proceeding relating to the
transactions contemplated by this Agreement shall be pending or
threatened against either Seller in any court of law or by any
administrative or governmental agency on the Closing Date, wherein an
unfavorable judgment, decree or order is reasonably likely to prevent,
make unlawful or materially affect the consummation of the transactions
contemplated by this Agreement.
(g) Listing of Common Units. The Common Units constituting a
part of the Equity Consideration shall have been listed on the NYSE.
(h) Alleged Breaches of Representations and Warranties. Buyer
shall not have notified Sellers of alleged breaches by Sellers of
Sellers' representations and warranties hereunder (excepting Title
Warranties) that, in the aggregate, could reasonably be expected to
result in a claim for Damages by Buyer in excess of $5,000,000 (above
and beyond the $1,000,000 deductible provided for in Section
10.01(a)(2) on page 31 hereof).
9.03 TERMINATION. Anything herein to the contrary notwithstanding, this
Agreement may be terminated at any time prior to the Closing Date:
(a) by either Buyer or Sellers if the Closing shall not have
occurred on or before December 31, 1998 (or such later date as may be
agreed upon by the Parties);
(b) by Buyer or Sellers if a "second request" has been made
pursuant to the HSR Act and the Party desiring to terminate has
concluded, in its reasonable judgment, that (i) compliance with such
"second request" would be unduly burdensome on such Party or (ii) such
"second request" is not likely to be completed by December 31, 1998;
(c) by Buyer or either Seller, upon delivery of five Business
Days' prior written notice to the other Party, if events have occurred
that have made it impossible to satisfy a condition to the terminating
party's obligations hereunder that such terminating Party is not
willing to waive (and each Party agrees to promptly notify the other
Party or Parties if such Party discovers that events have taken place
that give such Party the right to terminate this Agreement pursuant to
this Section 9.03(c));
(d) by any Party at any time prior to Closing, upon delivery
of five Business Days' prior written notice to the other Party, if a
final order has been issued by a judicial or governmental authority
with appropriate jurisdiction prohibiting the consummation of the
transactions contemplated by this Agreement; or
(e) by mutual agreement of the Parties,
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provided, however, no Party may exercise any right of termination pursuant to
this Agreement if the event giving rise to such termination right resulted from
the failure by such Party to fulfill any material undertaking or commitment
provided for herein that is required to be fulfilled by such Party prior to the
Closing.
9.04 EFFECT OF TERMINATION. If this Agreement is terminated pursuant to
Section 9.03 or otherwise pursuant to the terms hereof, this Agreement shall
become void and of no further force or effect (except for the provisions of
Sections 5.16, 6.05, 7.04(b), 11.01, 11.07, 11.11 and 11.14, which shall, except
to the extent otherwise specifically provided, survive such termination and
continue in full force and effect). If this Agreement is terminated pursuant to
the provisions hereof, nothing herein shall relieve either Party from liability
for any breach of this Agreement occurring prior to such termination.
9.05 SURVIVAL. The representations, warranties, covenants and
obligations of the Parties under this Agreement shall survive the Closing and
may be enforced at any time upon reasonable notification (which notice shall
include reasonable detail regarding the basis for the claim and, to the extent
then available, the estimated Damages suffered by the Person making the claim);
provided, however, that any claim may be made only if the Party making the claim
shall have notified the responsible Party in writing on or before the applicable
date specified below:
(a) in the case of a claim under Section 5.11, and the
corresponding indemnity obligation with respect to such representation
and warranty as set forth in Section 10.01(a)(i), on or before the
Closing Date;
(b) in the case of a claim under Sections 5.01-5.05 (excluding
5.03(f)), 5.06(c) (other than the second sentence thereof), 5.07(b),
5.08-5.10, 5.13-5.19, and Section 5.20 (except as it relates to Section
10.02) and Article 6, and the corresponding indemnity obligations with
respect to such representations and warranties as set forth in Sections
10.01(a)(i) and 10.01(b)(i), on or before the second anniversary of the
Closing Date;
(c) in the case of the Title Warranties and Section 7.05, and
the corresponding indemnity obligation with respect thereto as set
forth in Section 10.01(a)(ii), on or before the 10th anniversary of the
Closing Date;
(d) in the case of any claim by Buyer pursuant to Section 5.20
as it relates to Section 10.02 and Section 10.02(e) as it relates to
Unknown Contamination, on or before the fifth anniversary of the
Closing Date; and
(e) in the case of all other provisions, upon the expiration
of the applicable statute of limitations.
ARTICLE 10
ADDITIONAL AGREEMENTS OF THE PARTIES
10.01 INDEMNIFICATION. The terms and provisions of this Article 10
shall apply separately to Koch Pipeline and Koch Oil, as their respective
assets, interests and obligations may be affected
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hereunder, and Buyer understands and agrees that Koch Pipeline shall not be
responsible for Koch Oil's obligations under this Article 10 and Koch Oil shall
not be responsible for Koch Pipeline's obligations under this Article 10.
(a) Subject to the survival provisions set forth in Section
9.05 and the limitations set forth in this Section 10.01(a), and except
to the extent any such Claims or Damages are covered by Buyer's
indemnity in favor of the Seller Indemnified Parties pursuant to
Section 10.01(b), each Seller agrees, severally and not jointly, to
indemnify, defend, hold harmless and release Buyer, EOTT, its general
partner and Affiliates, and its and their respective directors,
officers, employees and agents (collectively, the "Buyer Indemnified
Parties") from and against all Claims and Damages suffered or incurred
by the Buyer Indemnified Parties that arise out of, result from or are
payable as a result of the following:
(i) the breach of any representation or warranty made
by such Seller in Article 5 of this Agreement or in any
certificate or other document or instrument delivered by or on
behalf of such Seller to Buyer pursuant to this Agreement
(except for the Title Warranties, which are subject to the
separate indemnity and deductible in Section 7.05, and except
to the extent such breach is due to an Excluded Third-Party
Claim);
(ii) without limiting or expanding the obligations of
Sellers pursuant to the express terms of such covenants or
obligations, the failure of such Seller to perform any
covenant or obligation required to be performed by it under
Articles 2-4 and 7, Sections 10.03-10.09, 10.12, 10.13, 10.14
11.05, 11.07, 11.08, 11.10, 11.14 and 11.15 of this Agreement;
(iii) any and all obligations arising under law or
contract to any System Employee in connection with his or her
employment by such Seller or its Affiliates on or before the
Effective Time, or in connection with the termination by such
Seller or its Affiliates of his or her employment with such
Seller or any such Affiliate at any time, regardless of
whether such obligations would not have arisen had EOTT chosen
to employ any such employee following the Effective Time,
including, without limitation, any and all severance benefits,
medical or other insurance coverages, retirement benefits or
any other benefit or obligation of whatsoever nature, arising
out of the employment relationship between such Seller (or any
such Affiliate) and such employees;
(iv) except to the extent that any of the Buyer
Indemnified Parties are currently parties to such litigation
or hereafter become a party thereto due to actions or
omissions of the Buyer Indemnified Parties occurring after the
Effective Time, the matters identified on Schedule 5.10;
(v) if Closing occurs, any Claims made by third
parties (including Governmental Entities) against the Buyer
Indemnified Parties to the extent such Claims arise out of or
are attributable to the ownership, use, condition or operation
of the Assets on or before the Effective Time, but
specifically excluding any Claims to the extent they cover or
include harm suffered by a third party (including
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Governmental Entities) after the Effective Time that is
attributable to (A) the actions, omissions or operations of
Sellers prior to the Effective Time (but not the willful or
wanton misconduct of Sellers prior to the Effective Time) or
(B) the failure of any Seller Indemnified Parties to (1)
install and/or properly maintain and operate cathodic
protection systems or other corrosion control systems or
procedures on all or any part of the Koch Pipeline Property or
Koch Oil Property or (2) conduct "smart pigging" surveys or
other activities designed to ascertain the maintenance status
of all or any portion of the Koch Pipeline Property or the
Koch Oil Property (the matters covered by clauses (A) and (B)
preceding being herein referred to as the "Excluded
Third-Party Claims");
(vi) if Closing occurs, the ownership, use, condition
or operation of the Excluded Assets at any time before, on or
after the Effective Time; and
(vii) if Closing occurs, any fines or penalties
levied by a Governmental Entity with respect to the ownership,
use or operation of the Assets on or before the Effective Time
(it being agreed that Buyer shall, for purposes of this
Section 10.01(a)(vii), be deemed to be the owner and operator
of the Assets with respect to the period of time following the
Effective Time);
IN EACH CASE WITHOUT REGARD TO THE SOLE, PARTIAL OR CONCURRENT
NEGLIGENCE, GROSS NEGLIGENCE OR STRICT LIABILITY (BUT NOT THE WILLFUL
AND WANTON MISCONDUCT) OF THE BUYER INDEMNIFIED PARTIES; provided,
however, that the indemnity obligations of Sellers under this Section
10.01(a) shall be subject to the following limitations:
(1) the indemnity obligations of Sellers under this
Section 10.01(a) shall not be construed as relieving Buyer
from any of its indemnity obligations under Section 7.04(b);
and
(2) the Sellers shall only be obligated to indemnify
the Buyer Indemnified Parties for any Damages pursuant to
Section 10.01(a)(i) above to the extent the aggregate amount
of such Damages suffered or incurred by the Buyer Indemnified
Parties exceeds $1,000,000.
(b) Subject to the survival provisions set forth in Section
9.05 and except to the extent that any such Claims or Damages are
covered by Seller's indemnity in favor of the Buyer Indemnified Parties
pursuant to Section 10.01(a), Buyer agrees to forever indemnify,
defend, hold harmless and release each Seller and its Affiliates, and
their respective directors, officers, employees and agents
(collectively, the "Seller Indemnified Parties") from and against all
Claims and Damages arising out of or resulting from or payable as a
result of the following:
(i) the breach of any representation or warranty made
by Buyer in Article 6 of this Agreement or in any certificate
or other document or instrument delivered by or on behalf of
Buyer to Sellers pursuant to this Agreement;
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(ii) without limiting or expanding the obligations of
Buyer pursuant to the express terms of such covenants or
obligations, the failure of Buyer to perform any covenant or
obligation required to be performed by it under Articles 2-4
and 8, and Sections 10.03-10.09, 10.11-10.14, 11.05, 11.07,
11.08, 11.10, 11.14 and 11.15 of this Agreement;
(iii) if Closing occurs, any Excluded Third-Party
Claims;
(iv) if Closing occurs, any Claims made by third
parties (including Governmental Entities) against the Seller
Indemnified Parties to the extent such Claims arise out of or
are attributable to the ownership, use, condition or operation
of the Assets after the Effective Time; and
(v) If Closing occurs, any fines or penalties levied
by a Governmental Entity with respect to the ownership, use or
operation of the Assets after the Closing Date;
IN EACH CASE WITHOUT REGARD TO THE SOLE, PARTIAL OR CONCURRENT
NEGLIGENCE, GROSS NEGLIGENCE OR STRICT LIABILITY (BUT NOT THE WILLFUL
AND WANTON MISCONDUCT) OF THE SELLER INDEMNIFIED PARTIES; provided,
however, that the indemnity obligations of Buyer under this Section
10.01(b) shall not be construed as relieving Sellers from any of their
indemnity obligations under Section 10.02(b) in connection with any
post-Closing activities of Sellers on the properties constituting a
part of the Assets.
(c) The indemnities set forth in Section 10.01(a) and Section
10.01(b) shall not be applicable to Known Contamination and Unknown
Contamination, which are addressed exclusively in Section 10.02.
(d) In the event that any Claim for which either Seller, on
the one hand, or Buyer, on the other hand (each an "Indemnifying
Party") would be liable to the other Party or another indemnified
person (each, an "Indemnified Party") under this Section 10.01 is
asserted against or sought to be collected from such Indemnified Party
by a third party, the Indemnified Party shall promptly notify the
Indemnifying Party of such Claim, specifying the nature of and specific
basis for such Claim and the amount or the estimated amount thereof to
the extent then feasible (the "Claim Notice"); provided, that no
failure or delay in the giving of such Claim Notice shall relieve the
Indemnifying Party of any liability hereunder (except to the extent the
Indemnifying Party has suffered actual prejudice thereby). The
Indemnifying Party shall have 30 days from the delivery of the Claim
Notice (the "Notice Period") to notify the Indemnified Party whether or
not it desires, at the sole cost and expense of the Indemnifying Party,
to defend the Indemnified Party against such Claim; provided, however,
that any Indemnified Party is hereby authorized prior to and during the
Notice Period to file any motion, answer or other pleading that it
shall deem necessary or appropriate to protect its interests or those
of the Indemnifying Party and not prejudicial to the defense of such
Claim. If the Indemnifying Party notifies the Indemnified Party within
the Notice Period that it desires to defend the Indemnified Party
against such claim or demand and except as hereinafter provided, then
the Indemnifying Party shall have
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the right, at its own expense and after reasonable coordination with
the Indemnified Party, to assume the defense of any such Claim either
directly or through its insurer. In such case, but subject to Section
10.01(f) below, (i) the Indemnifying Party shall control the course of
and make all decisions concerning any such proceeding, select and
employ counsel (with the approval of the Indemnified Party, not to be
unreasonably withheld), and expeditiously settle or prosecute such
proceeding to a final conclusion, and (ii) the Indemnified Party may
participate in, but not control, any such defense or settlement at its
own cost and with its own counsel, and (iii) if requested by the
Indemnifying Party, the Indemnified Party agrees to cooperate with the
Indemnifying Party and its counsel in contesting any Claim that the
Indemnifying Party elects to contest, or, if appropriate and related to
the Claim in question, in making any counterclaim against the Person
asserting the third-Party Claim, or any cross-complaint against any
Person. To the extent the Indemnifying Party elects not to assume the
defense of any Claim, the Indemnified Party shall, at the cost and for
the account of the Indemnifying Party, assume all obligations with
respect thereto, and shall take such prudent steps as may be required
in connection therewith as though the indemnities did not exist and
such Claim were the Indemnified Party's responsibility. In such case,
the Indemnified Party shall have the right with respect to any Claim
for which it is assuming the defense to choose counsel and make
decisions regarding any such proceeding, provided that it shall keep
the Indemnifying Party advised with respect thereto. Subject to Section
10.01(f) below, the Indemnifying Party shall be bound by any and all
rulings, judgments, compromises and settlements reached by the
Indemnified Party in good faith.
(e) Buyer and each Seller agree that if it becomes an
Indemnified Party, it shall cooperate with the Indemnifying Party and
permit the Indemnifying Party reasonable access to the Indemnified
Party's books, records, facilities and employees for the purpose of
permitting the Indemnifying Party to perform its obligations under this
Section 10.01; provided, however, that the Indemnified Party shall not
be required to disclose to the Indemnifying Party any documents or
correspondence covered by the attorney-client privilege or the work
product doctrine, except pursuant to a joint defense agreement. To the
extent that any documents or correspondence are covered by the
attorney-client privilege or the work product doctrine, the Indemnified
Party shall notify the Indemnifying Party if the Indemnified Party
seeks to protect such privilege with respect to third parties. The
Indemnified Party shall disclose to the Indemnifying Party the
non-privileged contents of any such documents or correspondence. If
requested by the Indemnifying Party, the Indemnified Party and the
Indemnifying Party shall negotiate in good faith a joint defense
agreement with respect to the matter that is the subject of the
privileged communication or work product.
(f) No third-Party Claim may be made the subject of a consent
decree or otherwise settled or compromised without the prior written
consent of the Indemnifying Party, which consent shall not be
unreasonably withheld. No consent decree or other settlement or
compromise of any such Claim involving (i) the entry of a plea of
guilty or nolo contendere to any criminal charge, or (ii) any admission
of responsibility for which the Indemnified Party could be held
criminally liable, may be entered into without the prior written
consent of the Indemnified Party. Any consent decree or other
settlement or compromise involving or affecting Buyer's (or its
designee's) ownership, operation or use of the Assets shall require the
prior consent of Buyer (or its designee), which shall not be
unreasonably withheld.
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(g) Subject to the terms hereof, no investigation by an
Indemnified Party at or prior to the Closing shall relieve an
Indemnifying Party of any liability hereunder.
10.02 AGREEMENT REGARDING KNOWN AND UNKNOWN ENVIRONMENTAL
CONTAMINATION. (a) Definitions. As used herein, the following terms shall have
the meanings set forth below:
(i) "Unknown Contamination" shall mean Hazardous Material
contamination in, upon or under the Assets as of or prior to the
Effective Time that is not Known Contamination.
(ii) "Known Contamination" shall mean Hazardous Material
contamination in, upon or under the Assets as of or prior to the
Effective Time that requires remediation under applicable Environmental
Legal Requirements and is either (A) described or referred to in
Schedule 5.11, or (B) within the knowledge of Sellers.
(iii) "Unknown Contamination Event" shall mean the occurrence
of one or more specific instances of Unknown Contamination that arise
out of or relate to a specific incident, leak or release, or series of
related incidents, leaks or releases.
(iv) "Remediation Costs" shall mean, without duplication and
without double recovery, commercially reasonable costs and expenses
that are incurred reasonably and in good faith in the course of
remediating Known Contamination or Unknown Contamination. Remediation
Costs incurred by Buyer shall be evidenced to Sellers through
reasonable documentation. Remediation Costs shall not include (A) any
costs arising out of post-Effective Time events/matters to the extent
caused by the negligence of Buyer or its agents or contractors that
occurs after the Effective Time; (B) any costs associated with
accidents or other non-routine events that occur after the Effective
Time; (C) any costs (other than the costs for the jointly-selected
consultant on the applicable Remediation Plan) associated with any
discussions or negotiations with regard to such Remediation Plan, any
oversight activities related to such remediation work, or any
subsequent changes in the scope of remediation activities to be
undertaken pursuant to such Remediation Plan (unless such changes are
mutually agreed upon); (D) any of Buyer's or Sellers' internal costs
except to the extent that Buyer's employees are actually performing the
remediation on a particular remediation project; or (E) any costs to
the extent incurred in relation to environmental contamination that is
not Known Contamination or Unknown Contamination.
(v) "Remediation Plan" shall have the meaning given thereto in
Section 10.02(e)(v).
(b) Known Contamination-Remediation Costs. As between Buyer and
Sellers, Sellers shall be responsible for all Remediation Costs associated with
Known Contamination and shall be responsible for the physical performance of the
remediation work. Without limiting any rights of the Buyer Indemnified Parties
under Section 10.02(d), any Remediation Costs incurred by Buyer for Known
Contamination shall be for the sole account of Buyer unless a dispute as to
whether the Environmental Contamination was Known Contamination or Unknown
Contamination existed at the time the Remediation Costs were incurred. Buyer
shall, in good faith, cooperate with Sellers in
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allowing Sellers to carry out such remediation obligations, which cooperation
may include the imposition of commercially reasonable restrictions on the future
use of the applicable property; provided that such restrictions do not result in
the cessation or material alteration of Buyer' ongoing operations in a
commercially unreasonable manner. Buyer shall permit Sellers, upon reasonable
advance notice, access to sites with Known Contamination for the purpose of
conducting investigations, remediation and monitoring; provided, however, that
such access may not unreasonably interfere with the ongoing operations of Buyer
or its Affiliates and shall not include access to any records or documents of
Buyer or such Affiliates that are (i) proprietary in nature or (ii) covered by
the attorney-client privilege or work-product doctrine. Except for any Legal
Requirements to the contrary or to the extent reasonably necessary to protect
Buyer's interest in a dispute with either Seller, Buyer shall not conduct ASTM
Phase II investigations at sites with Known Contamination unless such actions
are related to a release by Buyer. Except for any Legal Requirements to the
contrary, Buyer shall allow Sellers to initiate contact with federal, state or
local agencies regarding Known Contamination, and shall not attend meetings
between federal, state or local agencies, except that Buyer shall have the right
to attend any such meetings as an observer. Seller shall forward to Buyer any
reports from Governmental Entities of such meetings. Should Buyer become aware
of a material release by Buyer at or within 250 yards of any site with Known
Contamination or that is reasonably likely (in the good faith determination of
Buyer) to have an impact on a site with Known Contamination, Buyer shall provide
Sellers, within 10 working days of the release, Buyer' internal leak report and
such further information related to the release as reasonably requested by
Seller, except to the extent such information constitutes written or oral
communications that are subject to the attorney-client privilege or documents
that are covered by the work product doctrine. Sellers shall be permitted to
discharge their obligations under this Section 10.02(b) through the use of
consultants or contractors. Where, as between Sellers and a third party, a third
party is required to assume responsibility for Known Contamination, Sellers
shall be permitted to discharge their obligations for such Known Contamination
through that third party, its consultants or contractors; provided, however,
that Sellers shall remain primarily responsible for making sure that the
necessary work/remediation is done. Notwithstanding anything to the contrary
contained in this Agreement, Sellers agree to protect, indemnify, defend and
hold harmless the Buyer Indemnified Parties from and against any and all Claims
or Damages suffered or incurred by the Buyer Indemnified Parties in connection
with any personal injuries, including death, or property damage caused by or
incurred in connection with the performance by Sellers, third parties acting on
their behalf or their respective employees, agents, representatives, consultants
or contractors of any investigation, remediation or monitoring activities with
respect to any actual or potential Known Contamination, EVEN IF SAME IS
ATTRIBUTABLE TO THE NEGLIGENCE, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE
BUYER INDEMNIFIED PARTIES.
(c) Known Contamination-Agreements of Sellers With Prior Owners. To the
extent that Sellers have pre-Closing environmental obligations to Shell Pipe
Line Corporation ("Shell") or any other third party in connection with any
portion of the Assets, these matters shall remain the obligation of Sellers (as
between Sellers and Buyer), but this sentence shall not limit Buyer's or
Sellers' rights to indemnity/defense pursuant to this Agreement, and Buyer
shall, in good faith, cooperate with Sellers in allowing Sellers to carry out
such obligations; provided that Sellers do not cause Buyer to suffer any
commercially unreasonable disruptions in the process; provided further, that
Buyer and Sellers expressly agree to the following with respect to that portion
of the Assets consisting of the pipeline system (the "Shell Pipeline System")
purchased by Koch Pipelines, Inc. (n/k/a Koch Pipeline Company, L.P.) from Shell
pursuant to that certain Purchase and Sale
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Agreement dated June 4, 1992, as amended by the amendment agreement dated
September 3, 1992 (the "Shell Agreement"):
(i) Buyer shall operate the Shell Pipeline System as a common
carrier as long as the law requires.
(ii) Buyer shall permit Shell, upon reasonable notice, access
to the following locations, to the extent that they are a part of the
Assets (the "Shell Locations"), for purposes of conducting ASTM Phase
II investigations, constructing and operating remediation equipment and
performing monitoring requirements: Boyd Station; Hamlin Station; E.
Hamlin Gathering; Haskell Station; John Lane Gathering; Midway Station;
Pardue Gathering; Ray Station; Ryan Station; Westbrook Station;
Healdton Station; Baylor Station; W11 19 Haskell County; W11 6
Stonewall County; Pauls Valley, Oklahoma Lease; Bomarton, Texas
Easement.
(iii) Buyer shall not charge Shell a fee for access to the
Shell Locations.
(iv) Seller shall use all reasonable efforts to cause Shell to
minimize disruption to Buyer's equipment and ongoing operations in
connection with Shell's activities at the Shell Locations, but shall
not be required to compensate Buyer for such disruptions unless (A)
Seller has not used all reasonable efforts to prevent such disruptions
or (B) Shell has in fact conducted itself in such a way so as to not
minimize disruptions.
(v) Except for any Legal Requirements to the contrary, Buyer
shall not participate in Phase II investigations at the Shell Locations
unless (A) such actions are related to a release by Buyer or Seller or
(B) reports from such investigations will be submitted to a state or
federal agency.
(vi) Except for any Legal Requirements to the contrary, Buyer
shall allow Shell to initiate contact with federal or state agencies
regarding contamination existing on or before October 1, 1992, at the
Shell Locations, and shall not attend meetings between federal or state
agencies and Shell regarding such contamination. Sellers shall forward
to Buyer any reports of such meetings provided to Sellers by Shell.
(vii) Should Buyer have a release from the Shell Pipeline
System at or within one-half mile of one of the Shell Locations, Buyer
shall provide, within 10 working days of the release, to Sellers, with
a copy to Shell (at an address to be supplied by Sellers within a
reasonable time after Closing), Buyer's internal leak report and such
further information related to the release as reasonably requested by
Shell.
In addition, subject to the terms above, Buyer recognizes that if any releases
are discovered after Closing that relate to a Shell obligation under the Shell
Agreement, then Shell may have the right to perform such remediation under the
terms of the Shell Agreement.
(d) Known Contamination-Indemnity. Each Seller agrees, severally, and
not jointly, to indemnify, defend, hold harmless and release the Buyer
Indemnified Parties from and against all Claims made by third parties (including
Governmental Entities) arising out of or resulting from
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Known Contamination, without regard to the sole, partial or concurrent
negligence, gross negligence or strict liability (but not the willful and wanton
misconduct) of the Buyer Indemnified Parties; provided, however, that the
indemnity obligations of each Seller under this Section 10.02(d) shall not be
construed as relieving Buyer from any of its indemnity obligations under Section
7.04(b).
(e) Unknown Contamination-Remediation. With respect to remediation of
Unknown Contamination, Sellers and Buyer agree as follows:
(i) Upon Buyer's discovery of contamination that Buyer asserts
is Unknown Contamination, Buyer shall provide a written notice to
Sellers, which notice shall identify the alleged Unknown Contamination
with reasonable specificity and particularity, including the specific
location of such contamination and the extent of such contamination to
the extent then known by Buyer.
(ii) Upon receipt by Sellers of such a notice from Buyer,
Buyer and Sellers, without waiving their respective rights hereunder,
agree to meet and attempt in good faith to reach a mutual agreement as
to whether the discovered contamination is, or is not, Unknown
Contamination.
(iii) To the extent that it is determined that the discovered
contamination is Unknown Contamination, the Parties will, without
waiving their respective rights hereunder, have further discussions in
good faith in an attempt to agree upon a reasonable estimate of the
required remediation costs for such Unknown Contamination and to select
an environmental consultant that the Parties would jointly retain for
such remediation.
(iv) If Buyer and Sellers are unable to jointly agree upon a
consultant, (A) if the estimated cost to remediate such Unknown
Contamination does not exceed $250,000 and the aggregate of actual and
estimated Remediation Costs to be assumed by Buyer does not exceed
$10,000,000, Buyer shall select the environmental consultant with the
consent of the applicable Seller, which consent shall not be
unreasonably withheld and (B) in all other cases, Sellers shall select
the environmental consultant with the consent of Buyer, which consent
shall not be unreasonably withheld.
(v) Upon the selection of a consultant with respect to any
Unknown Contamination, such consultant will prepare a remediation plan
(the "Remediation Plan") for such Unknown Contamination that, in its
final form: (A) is mutually reasonably acceptable to the Parties
following good-faith discussions; (B) is in accordance with all
applicable Legal Requirements; (C) contains a comprehensive description
of the remediation activities that would be performed to remediate the
property to the extent required by applicable Legal Requirements (and
if a site could be remediated using several different methods and/or
sets of activities, the Remediation Plan will list and describe each
remediation scenario separately); (D) may contain commercially
reasonable restrictions on the future use of the applicable property,
provided such restrictions do not require the cessation or material
alteration of Buyer's operations relating to the Assets in a
commercially unreasonable manner; and (E) contains an estimate of the
total cost of the remediation under each remediation scenario.
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(vi) If a Remediation Plan contains more than one remediation
scenario, the Parties will have good-faith discussions concerning which
remediation scenario to select. If the Parties are unable to agree upon
a particular remediation scenario, and Buyer desires to select a
remediation scenario that has a higher estimated cost than the
remediation scenario that Sellers wish to select, Sellers' total
reimbursement obligation to Buyer hereunder with respect to such
remediation shall be calculated based on the amount of the estimated
cost of the remediation scenario that Sellers desire to select, rather
than the actual cost, provided that such remediation scenario desired
by Sellers satisfies the parameters set forth in Section
10.02(e)(v)(B)-(E) above.
(vii) The Parties agree that Buyer will be responsible for the
physical performance of any remediation work contemplated by a
Remediation Plan and the payment of any costs associated therewith,
subject to Sellers' reimbursement obligations hereunder. Sellers shall,
within 30 days following receipt of an invoice therefor from Buyer,
reimburse Buyer for all Remediation Costs incurred by or on behalf of
the Buyer Indemnified Parties that are attributable to Unknown
Contamination; provided, however, that Buyer shall be responsible for
the first $250,000 of Remediation Costs that are attributable to a
given Unknown Contamination Event; provided, further, that such
$250,000 limitation shall not apply from and after the point at which
the Buyer Indemnified Parties have incurred Remediation Costs in
respect of Unknown Contamination equal to an aggregate of $10,000,000.
(viii) In connection with the remediation of any Unknown
Contamination, Sellers and Buyer shall jointly handle and control all
interactions with Governmental Entities relating to such remediation;
it being agreed that the Parties shall take actions and use strategies
that are mutually agreed upon following good-faith negotiations. Each
Party shall have the right to review and comment on proposed work plans
prior to finalization and implementation, attend meetings with
governmental agencies regarding such remedial action and have a
representative present during the performance of any such remedial
action. No changes will be made in the scope of the activities
undertaken pursuant to a Remediation Plan except upon the mutual
agreement of the Parties following good-faith negotiations.
(ix) In situations where Buyer has purchased, with funds
provided or reimbursed by Sellers, remediation equipment relating to
the remediation of Unknown Contamination, such equipment shall be owned
by Buyer; provided, however, that when such equipment is no longer
needed to remediate such Unknown Contamination, Buyer will either
return such equipment to Sellers at no cost or, if Buyer so elects, pay
Sellers, without unreasonable delay, the reasonable then-current market
value of such equipment.
(x) Buyer shall retain its records relating to the remediation
of Unknown Contamination until such time as the Parties mutually and
reasonably agree that any such records may be discarded. The Parties
will make reasonable, good faith efforts to resolve any disputes
concerning the obligations of Sellers with respect to Unknown
Contamination and any of the matters addressed in this Section 10.02,
and each Party shall allow the other Party reasonable access to any
relevant, non-privileged documents and records relating to such
matters.
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(xi) Subject to the terms hereof, no investigation by Buyer at
or prior to Closing shall relieve Sellers from their obligations with
respect to Unknown Contamination.
(f) Unknown Contamination-Indemnity. Subject to the terms of this
Section 10.02, each Seller agrees, severally, and not jointly, to indemnify,
defend, hold harmless and release the Buyer Indemnified Parties from and against
all Claims made by third parties (including Governmental Entities) for harm
suffered by such third parties before the Effective Time and arising out of or
resulting from Unknown Contamination, without regard to the sole, partial or
concurrent negligence, gross negligence or strict liability (but not the willful
and wanton misconduct) of the Buyer Indemnified Parties; provided, however, that
the indemnity obligations of each Seller under this Section 10.02(f) shall not
be construed as relieving Buyer from any of its indemnity obligations under
Section 7.04(b). Buyer agrees to indemnify, defend, hold harmless and release
the Seller Indemnified Parties from and against all Claims made by third parties
(including Governmental Entities) for harm suffered by such third parties after
the Effective Time and arising out of or resulting from Unknown Contamination,
without regard to the sole, partial or concurrent negligence, gross negligence
or strict liability (but not the willful and wanton misconduct) of the Seller
Indemnified Parties; provided, however, that the indemnity obligations of Buyer
under this Section 10.02(f) shall not be construed as relieving Sellers from any
of their indemnity obligations under Section 10.02(b).
10.03 COOPERATION AND PRESERVATION OF BOOKS AND RECORDS. Buyer and
Sellers shall provide such assistance to each other as the other party may
reasonably request in connection with the preparation of any tax return required
to be filed in respect of the Buyer and Sellers, any audit or other examination
by a taxing authority, any judicial or administrative proceeding relating to
liability for federal, foreign, state or local Taxes, or any claim for refund in
respect of such taxes. Buyer and Sellers shall retain, and upon request provide,
any records or information which may be reasonably relevant to such return,
audit, examination, proceeding, or claim. Such assistance shall include, but is
not limited to, (i) making employees or counsel available at and for reasonable
times to provide additional information and explanation of any material to be
provided hereunder and (ii) subject to the right of each party to refrain from
disclosing or making available any proprietary information, any written or oral
communications that are subject to the attorney client privilege and any
documents that constitute attorney work product, furnishing access to, and
permitting the copying of any records, returns, schedules, documents, work
papers or other relevant materials which might reasonably be expected to be of
use in connection with such return, audit, examination, proceeding, or claim.
Buyer and Sellers recognize that the parties and their respective
affiliates may need access, from time to time, after the Closing Date, to
certain accounting and tax records and information held by Buyer or Sellers;
therefore, the Buyer and Sellers agree to (i) use commercially reasonable
efforts to properly retain and maintain such records until the 30th day
following the last date on which the period to which such records relate is
subject to audit, and (ii) subject to the right of each party to refrain from
disclosing or making available any proprietary information, any written or oral
communications that are subject to the attorney client privilege and any
documents that constitute attorney work product allow the requesting party and
its respective agents and other representatives, at times and dates mutually
acceptable to the parties, to inspect, review, and make copies of such records
as the requesting party may deem necessary or appropriate from time to time,
such activities to be conducted during normal business hours and at the
requesting party's expense.
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10.04 RECEIPTS AND CREDITS. Subject to the terms hereof (including,
without limitation, the indemnification provisions hereof), all monies,
proceeds, receipts, credits and income attributable to the Assets (as determined
in accordance with generally accepted accounting principles) (a) for all periods
of time from and after the Closing Date, shall be the sole property and
entitlement of Buyer, and, to the extent received by either Seller or one of its
Affiliates, shall be promptly accounted for and transmitted by such Seller to
Buyer and (b) for all periods of time prior to the Closing Date, shall be the
sole property and entitlement of the applicable Seller and, to the extent
received by Buyer, shall be promptly accounted for and transmitted by Buyer to
such Seller. In addition, subject to the terms hereof (including, without
limitation, the indemnification provisions hereof), all invoices, costs,
expenses, disbursements and payables attributable to the Assets (as determined
in accordance with generally accepted accounting principles), (i) for all
periods of time from and after the Closing Date, shall be the sole obligation of
Buyer, and Buyer shall promptly pay, or if paid by Sellers, promptly reimburse
Sellers for same and (ii) for all periods of time prior to the Closing Date,
shall be the sole obligation of Sellers, and Sellers shall promptly pay, or if
paid by Buyer, promptly reimburse Buyer for same.
10.05 APPORTIONMENT OF AD VALOREM AND PROPERTY TAXES. All ad valorem
taxes, real property taxes, personal property taxes and similar obligations
("Property Taxes") attributable to the Assets with respect to the tax period in
which the Closing Date occurs shall be apportioned as of the Closing Date
between the applicable Seller and Buyer based on the Sellers' most recent
property tax information. The Property Taxes so apportioned are referred to
herein as the "Estimated Property Taxes."
(a) If Closing occurs prior to January 1, 1999, Buyer shall
pay its Estimated Property Taxes to Sellers at Closing. Sellers shall
pay or cause to be paid, when due, to the taxing authorities all
Property Taxes relating to the tax period during which the Closing Date
occurs. By June 1, 1999, Sellers shall send to Buyer a statement that
apportions the Property Taxes as of the Closing Date between the
applicable Seller and Buyer based on actual invoiced and paid Property
Taxes ("Actual Property Taxes"). This statement shall be accompanied by
proof of Sellers' actual payment of such Property Taxes for the tax
period during which Closing occurs. By July 1, 1999, the difference
between the Estimated Property Taxes and the Actual Taxes shall be
settled between Buyer and Sellers by payment.
(b) If Closing occurs on or after January 1, 1999, Buyer shall
pay or cause to be paid, when due, to the taxing authorities all
Property Taxes relating to the tax period during which the Closing Date
occurs. By June 1, 1999, Sellers shall send to Buyer a statement that
apportions the Property Taxes as of the Closing Date between the
applicable Seller and Buyer based upon Property Taxes actually invoiced
and paid to the taxing authorities by Sellers for the 1998 tax year.
This statement shall be accompanied by proof of Seller's actual payment
of such Property Taxes for the 1998 tax year. By July 1, 1999, Buyer
and Sellers shall settle the pro-rated amount by payment. No further
prorations of Property Taxes shall be made for the 1999 tax year.
10.06 TRANSFER TAXES. Buyer shall be responsible for and agrees to pay
(or remit to Seller for payment if required by applicable Legal Requirements)
all Transfer Taxes, if any, required to be paid in connection with the sale of
the Assets pursuant to this Agreement.
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10.07 EMPLOYMENT AND BENEFIT MATTERS. (a) Neither EOTT nor Buyer is
assuming any employment, remuneration or employee benefit obligations of either
Seller for any current or former officers, directors, employees, contractors or
consultants who are or were employed or otherwise compensated in connection with
activities involving or with respect to the management and operation of the Koch
Pipeline Property or the Koch Oil Property.
(b) Each Seller shall, on a confidential basis and no later than
September 17, 1998, provide to EOTT a schedule (the "Employee Schedule")
identifying those employees of each Seller who are assigned to perform work
primarily on the Koch Pipeline Property and on the Koch Oil Property affected by
this Agreement ("System Employees") Sellers shall deliver their Employee
Schedule of System Employees on a confidential basis to the Vice President,
Human Resources of EOTT showing the name, job position, work location, home
address, current salary or rate of pay, hire date and three year average of
incentive and productivity payments for each System Employee. Since September
10, 1998, Sellers and their Affiliates have not reassigned or made new offers of
employment to any of the System Employees and from and after the date hereof,
Sellers shall not, and shall cause their Affiliates not to, reassign any such
employees or make any such offers of employment without first giving EOTT an
opportunity to interview such employees and make appropriate offers to such
employees. In addition, Sellers agree to use commercially reasonable efforts to
support EOTT's efforts to hire any System Employees. Except to the extent
otherwise prohibited by Legal Requirements, Sellers shall endeavor in good
faith, to provide EOTT prior to October 15, 1998 with payroll and benefit data
necessary to assist EOTT in payroll and benefit administration for System
Employees from Closing Date forward.
(c) EOTT may, but is not required to, offer employment to any of the
System Employees listed on the Employee Schedule. Any such offers of employment
shall be made on or before the Closing Date. EOTT agrees that any offers of
employment shall be made in accordance with this Section 10.07. Offers of
employment to a System Employee shall be at a level of base compensation or rate
of pay (excluding overtime, commissions and incentive pay) consistent with
EOTT's salary practices for jobs of similar responsibilities, and shall be
substantially equivalent to that currently earned by such System Employee.
(d) All employment offers, if any, to System Employees will be subject
to the closing of the transactions contemplated by this Agreement and such
pre-employment screening requirements as EOTT in its discretion may determine to
be appropriate. An individual who accepts such an offer of employment from EOTT
and who is not actively at work as of the Effective Time shall remain employed
by the applicable Seller at such Seller's expense and under such Seller's
benefit plans until he or she is allowed to commence active employment with EOTT
or is terminated by such Seller. At least five days before the Closing Date or
within five days following acceptance, whichever is sooner, EOTT shall provide
each Seller with a written list of those System Employees who have accepted
offers of employment from EOTT effective as of the Closing Date.
(e) Individuals listed on the Employee Schedule who accept such offers
of employment and who become employed by EOTT are referred to as "New
Employees," or individually as a "New Employee". Upon commencement of employment
by a New Employee with EOTT, the New Employee's participation in all employee
benefit plans (within the meaning of Section 3(3) of ERISA) and other benefit
and compensation arrangements or practices sponsored by Sellers or any
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of Sellers' Affiliates ("Sellers' Plans") will cease, except as otherwise
required by law, and all liability associated with Sellers' Plans, including,
but not limited to, funding, claims for benefits, fines, penalties and taxes,
will remain the liability of Sellers and Sellers' Affiliates. Sellers will
protect, defend and indemnify the Buyer Indemnified Parties from and against any
claims, actions, suits, proceedings, and demands made by any New Employee, or by
any other employee of either Seller to whom EOTT offered employment, for
severance pay from EOTT or for any other claims or liabilities arising out of
the employment relationship with such Seller prior to the Effective Time. EOTT
will protect, defend, and indemnify each Seller from claims, actions, suits,
proceedings, and demands made by any New Employees, or by any other employee of
EOTT, for any claims or liabilities arising out of the employment relationship
with EOTT or the termination of employment with EOTT, to the extent any such
termination occurs after the Effective Time.
(f) Upon commencement of employment by EOTT of the New Employees, the
New Employees will be eligible for participation in all employee benefit plans
(within the meaning of section 3(3) of ERISA) and other benefit and compensation
arrangements or practices for which similarly situated employees of EOTT are
eligible ("EOTT's Plans"), in accordance with the terms of EOTT's Plans,
provided that New Employees will receive credit under the EOTT's Plans for their
period of employment with Sellers ("Past Service"), to the extent that such Past
Service was recognized under similar plans sponsored by Sellers, in determining
(i) eligibility for participation in the pension and welfare benefit plans,
including, but not limited to, short term disability, severance and vacation
plans, (ii) the duration and amount of short term disability and severance
benefits, and (iii) vesting under any such pension and welfare benefit plans.
Notwithstanding the foregoing, credit for Past Service shall not be given or
taken into account in determining the level of employer contributions or accrued
benefits under any of EOTT's Plans that is an employee pension benefit plan or
post-retirement medical plans. Each New Employee shall have no less vacation
benefit under EOTT's vacation policy than he or she had under Sellers' vacation
policy. Upon termination of employment with a Seller, such Seller will pay each
New Employee for his or her accrued and unused vacation days.
(g) As between each Seller and EOTT, each Seller shall be responsible
for all workers compensation claims arising out of any injuries and diseases
which occur prior to the Effective Time, as to the New Employees, and EOTT shall
be responsible for all workers compensation injuries and diseases, which occur
after the Effective Time as to the New Employees.
(h) Each Seller shall be responsible for the health care claims,
whether reported or unreported, of its System Employees that are not employed by
EOTT as of the Closing Date who receive continuation of health care coverage, as
required by COBRA under affected medical plans sponsored by a Seller or a
Seller's Affiliate. EOTT shall be responsible for providing health care
continuation coverage, if any, as required by COBRA to any of the New Employees
who are employed by EOTT as of or subsequent to the Closing Date and who cease
employment with EOTT for any reason thereafter.
(i) No preexisting condition, exclusion, or limitation shall be
applicable with respect to the participation and coverage of any New Employee or
dependent in any of EOTT's Plans which is a medical plan provided that such New
Employee and his or her covered dependent(s) were not excluded immediately prior
to the Closing Date under a Seller provided medical plan due to a preexisting
condition limitation, and provided, further, that to the extent such New
Employee and his
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or her covered dependent(s) are not otherwise excluded due to a preexisting
condition, such New Employee and his or her covered dependents enroll in such
plan of EOTT within 30 days of the New Employee commencing employment with EOTT.
Additionally, any New Employee or covered dependent expenses applied toward any
lifetime limitations or toward any deductibles in the calendar year in which the
Closing occurs and any calendar year out-of-pocket limitations under Sellers'
medical and dental plans in the year in which the Closing occurs shall be
recognized under EOTT's medical and dental benefit plans and applied
respectively toward any deductibles or out-of-pocket limits thereunder. Sellers
shall provide EOTT with a true and complete listing of all amounts so expended
and such other information as EOTT may require in order to properly administer
the provisions of this paragraph.
(j) Except as disclosed on Schedule 10.07, since the Pricing Date,
Sellers have not taken, and prior to Closing Sellers shall not take, any action
that would increase the base compensation or benefits under any plan, policy,
practice or program of any System Employee, except for raises or other increases
in compensation given in the ordinary course of business.
(k) The representations, provisions, warranties and undertakings
contained in this Section 10.07 shall be binding solely on the parties to this
Agreement, and no other Persons shall have any third party beneficiary or other
right hereunder.
10.08 AGREEMENT REGARDING PHYSICAL INVENTORY AND MINIMUM INVENTORY
REQUIREMENTS. A physical inventory of the crude oil and condensate contained in
the Assets shall be conducted and verified by a mutually agreed independent
inspector on the Closing Date in accordance with the procedures, and subject to
the terms and conditions, set forth in Schedule 10.08. Buyer and Sellers also
agree as set forth on Schedule 10.08 regarding minimum inventory requirements as
of the Closing Date.
10.09 IMBALANCES. With respect to any contract imbalances that exist as
of the Effective Time and relate to the Koch Oil Operations, Koch Oil shall
retain full responsibility therefor and rights with respect thereto; it being
the intent of the Parties that Koch Oil shall be obligated to make up or
otherwise settle any contract imbalances that are owed to a counterparty and
entitled to receive the benefit of any contract imbalances that are owed to Koch
Oil. With respect to any shipper imbalances that exist as of the Effective Time
and relate to the ownership and operation of the Koch Pipeline Property, Koch
Pipeline shall retain full responsibility therefor and rights with respect
thereto; it being the intent of the Parties that Koch Pipeline shall be
obligated to make up any losses or shortages due to a shipper and entitled to
receive the benefit of any overages that exist as of the Effective Time.
10.10 DISCLAIMERS. Buyer acknowledges that, except as expressly set
forth herein, Sellers have not made, AND SELLERS HEREBY EXPRESSLY DISCLAIM AND
NEGATE, ANY REPRESENTATION OR WARRANTY, EXPRESSED, IMPLIED, AT COMMON LAW, BY
STATUTE, OR OTHERWISE RELATING TO (i) THE CONDITION OF THE ASSETS (INCLUDING
WITHOUT LIMITATION, ANY IMPLIED OR EXPRESSED WARRANTY OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE, OR OF CONFORMITY TO MODELS OR SAMPLES OF
MATERIALS, OR ENVIRONMENTAL CONDITION), (ii) THE STATUS OF SELLERS' TITLE TO THE
ASSETS, AND (iii) ANY INFORMATION, DATA OR OTHER MATERIALS (WRITTEN OR ORAL)
FURNISHED TO BUYER BY OR ON BEHALF
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OF SELLERS; IT BEING AGREED BY BUYER THAT BUYER IS, WITHOUT LIMITING ANY RIGHTS
OF BUYER HEREUNDER, ACQUIRING THE ASSETS ON AN "AS-IS, WHERE-IS" BASIS, WITH ALL
FAULTS, BOTH PATENT AND LATENT, AND REGARDLESS OF HOW SUCH FAULTS WERE CAUSED OR
CREATED (BY SELLERS' NEGLIGENCE OR OTHERWISE). SUBJECT ONLY TO THE PROVISIONS OF
THIS AGREEMENT TO THE CONTRARY AND SELLERS' OBLIGATIONS ABOVE, BUYER SHALL
ASSUME, FROM THE EFFECTIVE TIME FORWARD, ALL RESPONSIBILITIES RELATING TO THE
PHYSICAL CONDITION OF THE KOCH OIL PROPERTY AND THE KOCH PIPELINE PROPERTY AND
THE COMPLIANCE OF SUCH PROPERTY WITH THE TERMS OF THE KOCH OIL EASEMENTS, KOCH
PIPELINE EASEMENTS, KOCH OIL LEASES, AND KOCH PIPELINE LEASES AND ANY APPLICABLE
GOVERNMENTAL REQUIREMENTS.
WITHOUT IN ANY WAY LIMITING ITS RIGHTS HEREUNDER, BUYER RECOGNIZES AND
ACKNOWLEDGES THAT THE KOCH OIL PROPERTY AND THE KOCH PIPELINE PROPERTY HAS BEEN
USED, AMONG OTHER THINGS, FOR THE TRANSPORTATION AND STORAGE OF CRUDE OIL AND/OR
OTHER PETROLEUM-RELATED MATERIALS. WITHOUT IN ANY WAY LIMITING ITS RIGHTS
HEREUNDER, BUYER FURTHER RECOGNIZES THAT THERE MAY HAVE BEEN SPILLS OR RELEASES
OF SUCH SUBSTANCES OR OTHER SUBSTANCES IN THE PAST AT OR ON THE KOCH OIL
PROPERTY OR THE KOCH PIPELINE PROPERTY OR IN CONNECTION WITH THE OPERATIONS ON
SUCH PROPERTY CAUSING SURFACE AND/OR SUBSURFACE CONTAMINATION.
10.11 USE OF KOCH'S NAME. As soon as practical after Closing (but in no
event later than the 180th day thereafter), Buyer shall remove or cause to be
removed from the Assets the name "Koch" and all variations and derivatives
thereof and logos relating thereto.
10.12 REGISTRATION RIGHTS OF SELLERS. (a) If (i) either Seller or any
Affiliate of such Seller (the "Holder") holds Common Units that it desires to
sell and (ii) Rule 144 of the Securities Act (or any successor rule or
regulation to Rule 144) or another exemption from registration is not available
to enable such Holder to dispose of the number of Common Units it desires to
sell at the time it desires to do so without registration under the Securities
Act, then upon the request of such Holder, EEP shall file with the SEC as
promptly as practical after receiving such request, and use reasonable efforts
to cause to become effective (as promptly as practical) and remain effective
until the earlier of one year following its effective date and the first date on
which the Holder is entitled to sell such Common Units pursuant to paragraph (k)
of Rule 144 (taking into account the actions contemplated by Section 10.12(e)
below), a shelf registration statement under the Securities Act registering the
offering and sale of the number of Common Units specified by the Holder in (a)
market sales on the New York Stock Exchange at prevailing market prices and (b)
underwritten public offerings, and EEP shall file such amendments and
supplements to such registration statement and any prospectus included therein
as may be necessary to permit such sales from time to time during such period;
provided, however, that EEP shall not be required to file prospectus supplements
in order to effect more than two underwritten offerings pursuant to this Section
10.12(a); and provided further, that if the General Partner determines in its
good faith judgment that a postponement for up to four months of the filing or
effectiveness of the requested registration or the sales pursuant to an
effective registration would be in the best interests of EEP and its Partners
due to a pending transaction, investigation or other event, the filing or
effectiveness of such registration statement or any sales
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<PAGE> 50
pursuant thereto may be deferred for up to four months, but not thereafter. In
connection with any registration pursuant to the immediately preceding sentence,
EEP shall promptly prepare and file such documents as may be necessary to
register or qualify the securities subject to such registration under the
securities laws of such states as the Holder shall reasonably request; provided,
however, that no such qualification shall be required in any jurisdiction where,
as a result thereof, EEP would become subject to general service of process or
to taxation or qualification to do business as a foreign corporation or
partnership doing business in such jurisdiction, and do any and all other acts
and things that may reasonably be necessary or advisable to enable the Holder to
consummate a public sale of such Common Units in such states. Except as set
forth in Section 10.12(c), all reasonable costs and expenses of any such
registration and offering (other than the underwriting discounts and
commissions) shall be paid by EEP, without reimbursement by the Holder.
Notwithstanding anything to the contrary in this Agreement, EEP may defer the
filing of a requested registration of Common Units until the earlier of the
following: (A) 180 days after the closing of an underwritten public offering by
EEP of Common Units and (B) the date fifteen months after the Closing Date.
(b) If EEP shall at any time propose to file a registration statement
under the Securities Act for an offering of Common Units for cash on behalf of
EEP (other than an offering relating solely to an employee benefit plan or an
offering registered on Form S-4 or any similar form) or a Person holding
"demand" registration rights, EEP shall deliver written notice of such fact to
the Holder at least 15 days prior to the date it desires to file such
registration statement. Upon receipt of such notice, the Holder shall have a
period of 10 days thereafter to notify EEP that it desires to include Common
Units in such registration statement. Upon receipt of any such request from the
Holder, EEP shall use all reasonable efforts to include such number or amount of
Common Units held by the Holder in such registration statement as the Holder
shall request; provided, however, that EEP shall not be obligated to include any
Common Units held by the Holder in such registration statement until the earlier
of the following: (i) 180 days after the closing of the first underwritten
public offering by EEP of Common Units following the Closing Date and (ii) the
date fifteen months after the Closing Date. If the proposed offering pursuant to
this Section 10.12(b) shall be an underwritten offering, then, in the event that
the managing underwriter of such offering advises EEP and the Holder in writing
that in its good faith opinion the inclusion of all or some of the Holder's
Common Units would adversely and materially affect the success of the offering,
subject to the terms of the immediately succeeding sentence, except for an
offering pursuant to Section 10.12(e) below, EEP shall include in such offering
only that number or amount, if any, of Common Units held by the Holder which, in
the opinion of the managing underwriter, will not so adversely and materially
affect the offering. Except for the registration rights provided in Section
10.12(e) below in which event Holder shall be the last one to be cut-back, in
the event any other Person holding "piggy-back" registration rights desires to
include Common Units held by it in such offering pursuant to an exercise of such
"piggy-back" registration rights and some or all of the Common Units that the
Holder desires to include are not included as provided in the previous sentence,
the number of Common Units that the Holder and such other Person are not
permitted to include shall be reduced proportionately, based on the number that
each requested to be included. Except as set forth in Section 10.12(c) and in
Section 10.12(e), all costs and expenses of any such registration and offering
(other than the underwriting discounts and commissions applicable to Holder's
and any other Person's pro rata share) shall be paid by EEP, without
reimbursement by the Holder. It is understood and agreed that any exercise by
the Holder of its "piggy-back" registration rights
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<PAGE> 51
pursuant to this Section 10.12(b) shall not be construed as an exercise by the
Holder of a "demand" registration right pursuant to Section 10.12(a) above or
Section 10.12(e) below.
(c) If underwriters are engaged in connection with any registration
referred to in this Section 10.12, EEP shall provide indemnification,
representations, covenants, opinions and other assurances to the underwriters in
form and substance reasonably satisfactory to such underwriters. Further, in
addition to and not in limitation of EEP's obligation under Section 10.01(b),
EEP shall, to the fullest extent permitted by law, indemnify and hold harmless
the Holder, its officers, directors and each Person who controls the Holder
(within the meaning of the Securities Act) and any agent thereof (collectively,
"Indemnified Persons") against any losses, claims, demands, actions, causes of
action, assessments, damages, liabilities (joint or several), costs and expenses
(including, without limitation, interest, penalties and reasonable attorneys'
fees and disbursements), imposed upon or incurred by the Indemnified Persons,
directly or indirectly, under the Securities Act or otherwise (hereinafter
referred to in this Section 10.12(c) as a `claim' and in the plural as
`claims'), based upon, arising out of, or resulting from any untrue statement or
alleged untrue statement of any material fact contained in any registration
statement under which any Common Units were registered under the Securities Act
or any state securities or Blue Sky laws, in any preliminary prospectus (if used
prior to the effective date of such registration statement), or in any summary
or final prospectus or in any amendment or supplement thereto (if used during
the period EEP is required to keep the registration statement current), or
arising out of, based upon or resulting from the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements made therein not misleading; provided, however, that EEP shall
not be liable to any Indemnified Person to the extent that any such claim arises
out of, is based upon or results from an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
such preliminary, summary or final prospectus or such amendment or supplement,
in reliance upon and in conformity with written information furnished to EEP by
or on behalf of such Indemnified Person specifically for use in the preparation
thereof.
(d) Any request to register Common Units pursuant to this Section 10.12
shall (i) specify the Common Units intended to be offered and sold by the Person
making the request, (ii) express such Person's present intent to offer such
Common Units for distribution, (iii) describe the nature or method of the
proposed offer and sale of Common Units, and (iv) contain the undertaking of
such Person to provide all such information and materials and take all action as
may be required in order to permit EEP to comply with all applicable
requirements in connection with the registration of such Common Units. In
connection with any registration statement filed by EEP that includes Common
Units held by the Holder, EEP agrees to use commercially reasonable efforts to
furnish the Holder with as many copies of the applicable prospectus as the
Holder may reasonably request.
(e) In addition to the foregoing, EEP will, in connection with any sale
by the Holder of Common Units, provide reasonable information and will ensure
that executive officers of EEP participate (at EEP's reasonable expense) in a
"road show" (as such term is ordinarily used in connection with registered
distributions of securities) in the event that:
(i) the Holder so requests prior to the fifth anniversary
of the Closing Date, and
(ii) the Holder has a bona fide expectation of selling
Common Units having a fair market value of at least
$5 million.
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In the event EEP is required to take any actions pursuant to this Section
10.12(e) and a nationally recognized securities law firm (mutually agreed to by
EEP and Holder) determines in a written opinion delivered to EEP and Holder that
such actions require an effective registration statement, EEP shall use its
commercially reasonable efforts to cause to become effective a registration
statement as contemplated by Section 10.12(a) above. All reasonable costs and
expenses of any such registration under this Section 10.12(e) shall be paid by
Holder (other than the underwriting discounts and commissions applicable to any
other Person). Notwithstanding the foregoing, in no event shall EEP be obligated
(a) to take any actions pursuant to this Section 10.12(e) if EEP has filed
prospectus supplements pursuant to Section 10.12(a), with respect to two
underwritten offerings that have been closed, (b) to take any actions pursuant
to this Section 10.12(e) in connection with more than one sale by the Holder if
EEP has filed a prospectus supplement pursuant to Section 10.12(a) with respect
to one underwritten offering that has been closed, or (c) to take any actions
pursuant to this Section 10.12(e) in connection with more than two sales by the
Holder if EEP has filed no prospectus supplements in order to effect
underwritten offerings pursuant to Section 10.12(a).
10.13 POST-CLOSING ASSIGNMENT OF TELECOMMUNICATION RIGHTS. Buyer agrees
from time to time to assign to Seller the partial, non-exclusive right to
install, own and operate conduits, wires, cables, equipment and such other
devices as may be necessary or useful in connection with the transmission and/or
carriage of telephone, telegraph, television or other communication signals
(collectively, "Telecom Devices") in the areas covered by the Easements that
constitute a part of the Pipeline System, other than the gathering lines from a
production facility or in-station lines located within a plant facility (the
"Subject Easements"); provided that Buyer only shall be obligated to assign such
rights to Seller to the extent (a) Seller delivers a written request therefor to
Buyer prior to the 21st anniversary of the Closing Date, and (b) the applicable
underlying Subject Easements permit (i) Buyer to install, own and operate
Telecom Devices in the areas covered by such Subject Easements, (ii) Buyer to
assign to third parties the right to install, own and operate Telecom Devices in
the areas covered by such Subject Easements, and (iii) Buyer and third parties
concurrently and separately to install, own and operate Telecom Devices in the
areas covered by such Subject Easements. Each such assignment of rights by Buyer
pursuant to this Section 10.13 (w) shall be subject in all respects to the terms
and provisions of the applicable underlying Subject Easements and shall provide
that Seller agrees to be bound by the terms and provisions of the applicable
underlying Subject Easements, (x) shall be made without representation or
warranty by Buyer of any kind, including, without limitation, any representation
or warranty as to title to the applicable underlying Subject Easements, (y)
shall be made without the requirement of payment to Buyer of any additional
consideration therefor, it being agreed that the consideration for each such
assignment shall be the mutual covenants of the parties set forth herein, and
(z) shall provide that the rights granted thereunder only may be exercised by
Seller to the extent that the exercise of such rights does not unreasonably
interfere with the ownership, operation or maintenance by Buyer or third parties
of the Koch Pipeline Property, the Koch Oil Property, Telecom Devices or other
assets and properties located within the areas covered by the applicable
underlying Subject Easements, it being agreed that the precise location of any
such Telecom Devices to be installed by Seller shall be determined by Buyer in
its good faith discretion. To the extent that Buyer is not obligated to assign
to Seller the rights described herein pursuant to the terms of this Section
10.13 and Seller procures rights-of-way covering all or any portion of the area
covered by any such Subject Easement (A) Buyer agrees to consent to the
installation, ownership and operation of Telecom Devices by Seller pursuant to
the terms of such rights-of-way in the area covered by such Subject Easement to
the extent and only to
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the extent that such installation, ownership and operation of Telecom Devices by
Seller does not unreasonably interfere with the ownership, operation or
maintenance by Buyer or third parties of the Koch Pipeline Property, the Koch
Oil Property, Telecom Devices or other assets and properties located within the
area covered by such Subject Easement, it being agreed that the precise location
of any such Telecom Devices to be installed by Seller shall be determined by
Buyer in its good faith discretion and (B) Buyer and Seller agree to execute and
deliver a mutually agreeable Encroachment Agreement consistent with the terms
and provisions of this Section 10.13 containing the consent of Buyer described
in clause (A) immediately preceding and setting forth the terms and conditions
pursuant to which Seller and Buyer, if applicable, shall be entitled to install,
own and operate Telecom Devices in the area covered by such rights-of-way. Buyer
agrees to provide notice of Buyer's agreements set forth in this Section 10.13
to any prospective purchaser of all or any part of the Koch Pipeline Property or
Koch Oil Property affected thereby. Seller shall provide Buyer with reasonable
notice in writing prior to the installation of any Telecom Devices pursuant to
the provisions of this Section 10.13. Notwithstanding any provision of this
Section 10.13 to the contrary, (1) Seller shall not have the right to exercise
any of the rights assigned to it under this Section 10.13 to the extent that the
exercise of such rights would unreasonably interfere with the ownership,
operation or maintenance by Buyer or third parties of the Koch Pipeline
Property, the Koch Oil Property, Telecom Devices or other assets and properties
located within the area covered by such Subject Easement, (2) in no event shall
Buyer be required to keep in effect any rights under any Subject Easement
permitting Buyer to install, own and operate Telecom Devices in the area covered
by such Subject Easement or to assign to third parties the right to install, own
and operate Telecom Devices in the area covered by such Subject Easement, and
(3) Seller shall indemnify, defend, hold harmless and release the Buyer
Indemnified Parties from and against all Claims and Damages suffered or incurred
by the Buyer Indemnified Parties that arise out of, result from or are payable
as a result of the exercise by Seller of the rights granted to Seller pursuant
to this Section 10.13.
10.14 COOPERATION REGARDING LITIGATION. Following Closing, Buyer shall
permit Sellers and their Affiliates reasonable access to the Records at
reasonable times and shall permit Sellers to interview, depose and present for
deposition or trial any New Employee for the purpose of defending against or
prosecuting Claims asserted by or against Sellers or their Affiliates, excepting
Claims by or against Buyer or its Affiliates. Sellers or their Affiliates shall
reimburse Buyer for Buyer's reasonable expenses associated with producing New
Employees for interview, deposition or trial.
10.15 AGREEMENT REGARDING CHASE PIPELINE. Until the first to occur of
the 10th anniversary of the Closing Date or the date on which the applicable
Affiliate of Koch Pipeline sells its interest in the Chase Transportation
Company ("Chase Pipeline"), Koch Pipeline agrees to use commercially reasonable
efforts to cause Chase Pipeline to maintain its existing crude oil pipelines in
crude service. In addition, if the applicable Affiliate of Koch Pipeline sells
its interest in the Chase Pipeline prior to the 10th anniversary of the Closing
Date, Koch Pipeline agrees to use commercially reasonable efforts to obtain a
covenant from the purchaser of such interest to cause Chase Pipeline to maintain
its existing crude oil pipelines in crude service until the first to occur of
the 10th anniversary of the Closing Date or the date on which Buyer or its
applicable designee has access to an alternate route with available capacity for
transportation by Buyer of up to 25,000 barrels per day of crude oil volumes
originating in Kansas and Colorado and being shipped to Cushing, Oklahoma. In
connection with any sale by the applicable Affiliate of Koch Pipeline of its
interest in Chase Pipeline, Koch Pipeline agrees to notify Buyer of such pending
transaction and
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provide Buyer a copy of the contractual language intended to satisfy Koch
Pipeline's obligations under this Section 10.15, in each case at least ten days
prior to such sale.
ARTICLE 11
MISCELLANEOUS
11.01 GOVERNING LAW. This Agreement and all instruments executed in
accordance with it shall be governed by and interpreted in accordance with the
laws of the State of Texas, without regard to conflict of law rules that would
direct application of the laws of another jurisdiction.
11.02 ENTIRE AGREEMENT. This Agreement (including the documents,
schedules, attachments, exhibits, annexes and instruments referred to herein)
constitutes the entire agreement between the Parties and supersedes all prior
agreements, documents or other instruments with respect to the matters covered
hereby. The Parties make, and have made, no oral agreements or undertakings
pertaining to the subject matter of this Agreement, except for any that are no
longer in effect. In the event of any irreconcilable conflict between the terms
of this Agreement and any conveyancing documents contemplated hereby, the terms
of this Agreement shall be controlling.
11.03 WAIVER. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provisions hereof
(whether or not similar), nor shall such waiver constitute a continuing waiver
unless otherwise expressly provided.
11.04 CAPTIONS. The captions in this Agreement are for convenience only
and shall not be considered a part of or affect the construction or
interpretation of any provision of this Agreement.
11.05 ASSIGNMENT. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the Parties and their respective
successors and permitted assigns, but except as provided below neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any Party without the prior written consent of the other Parties.
Buyer may assign in whole or in part this Agreement and its rights and
obligations arising hereunder to any Affiliate of Buyer in connection with the
sale of all or any part of the Assets, or the right to purchase same, to such
Affiliate or to any Affiliate of Buyer designated by Buyer to receive any of the
Assets to be transferred hereunder; provided, however, that, without the prior
consent of Seller, no such assignment shall relieve Buyer from any obligations
under this Agreement. Koch Oil may assign in whole or in part this Agreement and
its rights and obligations arising hereunder to any Affiliate of Koch Oil;
provided, however, that, without the prior consent of Buyer, no such assignment
shall relieve Koch Oil from any obligations under this Agreement. Koch Pipeline
may assign in whole or in part this Agreement and its rights arising hereunder
to any Affiliate of Koch Pipeline; provided, however, that, without the prior
consent of Buyer, no such assignment shall relieve Koch Pipeline from any
obligations under this Agreement. Koch Pipeline's rights under Section 10.13
shall be freely assignable.
11.06 NOTICES. Any notice provided or permitted to be given under this
Agreement shall be in writing, and may be served by personal delivery or by
depositing same in the mail, addressed to the Party to be notified, postage
prepaid, and registered or certified with a return receipt requested. Notice
deposited in the mail in the manner hereinabove described shall be deemed to
have been
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given and received on the date of the delivery as shown on the return receipt.
Notice served in any other manner shall be deemed to have been given and
received only if and when actually received by the addressee (except that notice
given by telecopier shall be deemed given and received upon receipt only if
received during normal business hours and if received other than during normal
business hours shall be deemed received as of the opening of business on the
next Business Day). For purposes of notice, the addresses of the parties shall
be as follows:
<TABLE>
<S> <C>
For Koch Pipeline: Koch Pipeline Company, L.P.
4111 East 37th Street North
Wichita, Kansas 67220
Attn: President
Telecopy No.: (316) 828-6097
With a courtesy copy to the same address, Attn: Legal Department.
For Koch Oil: Koch Oil Company
4111 East 37th Street North
Wichita, Kansas 67220
Attn: President
Telecopy No.: (316) 828-8245
With a courtesy copy to the same address, Attn: Legal Department.
For EOTT: EOTT Energy Operating Limited Partnership
c/o EOTT Energy Corp.
1330 Post Oak Blvd., Suite 2700
Houston, Texas 77056
Attn: Stephen W. Duffy, Vice President and General Counsel
Telecopy No.: (713) 993-5813
For EEP: EOTT Energy Partners, L.P.
c/o EOTT Energy Corp.
1330 Post Oak Blvd., Suite 2700
Houston, Texas 77056
Attn: Stephen W. Duffy, Vice President and General Counsel
Telecopy No.: (713) 993-5813
With a courtesy copy to the same address, Attn: Gary Luce
</TABLE>
Each party shall have the right, upon giving 10 days' prior notice to the other
in the manner hereinabove provided, to change its address for purposes of
notice.
11.07 EXPENSES. Each party shall be solely responsible for all expenses
incurred by it in connection with this transaction (including, without
limitation, fees and expenses of its own counsel and consultants).
11.08 SEVERABILITY. If a minor or immaterial provision of this
Agreement (i.e., one that does not affect the essential nature of, or
consideration for, the arrangement among the parties reflected hereby) is
declared by a court of competent jurisdiction to be invalid or unenforceable,
such declaration shall not affect the validity or enforceability of the
remaining provisions of this
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Agreement, which shall continue in full force and effect. In such event,
however, the parties shall negotiate in good faith to replace such invalid or
unenforceable provision with a valid and enforceable provision that places each
Party in substantially the same position it would have been in had such original
provision been valid and enforceable.
11.09 AMENDMENT. This Agreement (including the documents, schedules,
attachments, exhibits, annexes and instruments referred to herein) may not be
amended except by an instrument in writing signed by each of the Parties.
11.10 FURTHER ACTIONS. Each Party shall execute and deliver such other
certificates, agreements and other documents and take such other actions as may
reasonably be requested by the other parties in order to consummate or implement
the transactions contemplated by this Agreement. In addition, Sellers will
provide an audited historical statement, as of December 31, 1997, of the net
property, plant and equipment and working inventory comprising a part of the
Assets as they existed as of the date of this Agreement, and provide reasonable
assistance if necessary in order for Buyer to satisfy applicable public company
reporting requirements. Sellers agree to cause the Initial Holder to vote all of
its Common Units in favor of the Proposals, as defined in the Support Agreement.
11.11 THIRD-PARTY BENEFICIARIES. Except as expressly set forth in
Section 10.01 (with respect to Buyer Indemnified Parties or the Seller
Indemnified Parties other than Sellers or Buyer), nothing in this Agreement is
intended to create any third-Party beneficiary rights respecting any person or
entity, or to confer upon any person, other than the parties and their
respective successors and permitted assigns, any rights, remedies or obligations
under or by reason of this Agreement, and the parties specifically negate any
such intention.
11.12 INJUNCTIVE RELIEF; CUMULATIVE REMEDIES. In the event of a breach
or threatened breach by any Party of the provisions of this Agreement, the other
Parties shall, in addition to all other rights or remedies available at law or
in equity, be entitled to an injunction to prevent irreparable injury. Except as
expressly provided herein, any party shall have the right to pursue any other
remedies available for such breach or threatened breach, including specific
performance or the recovery of damages.
11.13 COUNTERPARTS; EXHIBITS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. All Attachments,
Schedules and Exhibits attached hereto are hereby made a part of this Agreement
and incorporated herein by this reference.
11.14 PUBLICITY. Prior to making any public announcement with respect
to the transactions contemplated hereby, each Party agrees to consult with the
other Parties and to use reasonable efforts to agree upon the text of a proposed
joint announcement or obtain the other Party or Parties approval of the text of
such announcement (which approval shall not be unreasonably withheld); provided,
however, that any Party may make such disclosures or statements as it reasonably
believes may be required by applicable Legal Requirements, including any rules
or regulations of any stock exchange.
11.15 GOOD FAITH. The Parties agree to act reasonably and in good faith
in connection with their dealings with each other under this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first set forth above.
SELLERS:
KOCH PIPELINE COMPANY, L.P.
By:
----------------------------------------
A.L. Botterweck, President
KOCH OIL COMPANY,
a division of KOCH INDUSTRIES, INC.
By:
----------------------------------------
James B. Urban, Vice President
EOTT:
EOTT ENERGY OPERATING LIMITED PARTNERSHIP
By: EOTT Energy Corp.
Its General Partner
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
EEP:
EOTT ENERGY PARTNERS, L.P.
By: EOTT Energy Corp.
Its General Partner
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
52
<PAGE> 58
ATTACHMENT I
DEFINED TERMS
"Actual Property Taxes" shall have the meaning given such term in
Section 10.05(a).
"ARCO Consents" shall have the meaning given such term in Section
7.05(f).
"ARCO Properties" shall have the meaning given such term in Section
7.05(f).
"Affiliate" shall mean, with respect to a specified Person, any other
Person controlling, controlled by or under common control with that first
Person. As used in this definition, the term "control" includes (a) with respect
to any Person having voting shares or the equivalent and elected directors,
managers or Persons performing similar functions, the ownership of or power to
vote, directly or indirectly, shares or the equivalent representing 50% or more
of the power to vote in the election of directors, managers or Persons
performing similar functions, (b) ownership of 50% or more of the equity or
equivalent interest in any Person and (c) the ability to direct the business and
affairs of any Person by acting as a general partner, manager or otherwise.
"Agreement" shall have the meaning given such term in the introductory
paragraph hereof.
"Ancillary Agreement" shall have the meaning given such term in Section
6.07(b).
"APIs" shall have the meaning given such term in the EEP Partnership
Agreement.
"Assets" shall mean the Koch Pipeline Property and/or the Koch Oil
Property, as the context may require.
"Audit Committee Approvals" shall have the meaning given such term in
Section 9.01(g).
"Board Approvals" shall have the meaning given such term in Section
9.01(h).
"Business Day" shall mean any day except a Saturday, Sunday or other
day on which commercial banks in New York, New York, or Houston, Texas, are
required or authorized by law to be closed.
"Buyer" shall have the meaning given such term in the introductory
paragraph hereof.
"Buyer Indemnified Parties" shall have the meaning given such term in
Section 10.01(a).
"Cash Consideration" shall have the meaning given such term in Section
3.01(a).
"Claim Notice" shall have the meaning given such term in Section
10.01(d).
"Claims" shall mean any and all claims, notices, actions, suits,
injunctions, citations, directives, summons, investigations, or other demands or
proceedings, whether in the nature of judicial or pre-judicial proceedings,
arbitration or mediation proceedings, made or brought against a
<PAGE> 59
Person for recovery of Damages, personal injury, emotional injury, redress of
alleged wrongs, or prosecution or enforcement of alleged obligations, or
otherwise purporting to hold such Person responsible for any matter.
"Closing" shall have the meaning given such term in Section 4.01.
"Closing Date" shall have the meaning given such term in Section 4.01.
"COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act
of 1985.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
any rules and regulations promulgated thereunder.
"Common Units" shall have the meaning given such term in the EEP
Partnership Agreement.
"Contracts" shall mean the Koch Pipeline Contracts and/or the Koch Oil
Contracts, as the context may require.
"Creditor's Rights" shall have the meaning given such term in Section
5.02(a).
"Damages" shall mean any and all damages (including punitive damages),
losses, costs (including, without limitation, costs to apply for and obtain
Permits), liabilities, expenses (including, without limitation, expenses of
investigation, defense and settlement of any Claim, including reasonable fees
and disbursements of counsel, court costs, and consultants' and experts' fees),
debts, accounts, liens, judgments, penalties and fines, in each case of whatever
kind or nature, contingent or otherwise, matured or unmatured, known or unknown,
foreseeable or unforeseeable; provided, however, that the term "Damages" shall
not include any consequential or indirect damages suffered by a Buyer
Indemnified Party or a Seller Indemnified Party or punitive damages payable to a
Buyer Indemnified Party or a Seller Indemnified Party.
"Easement Gap" shall have the meaning given such term in Section
7.05(b).
"Easements" shall mean the Koch Pipeline Easements and/or the Koch Oil
Easements, as the context may require.
"EEP" shall have the meaning given such term in the introductory
paragraph hereof.
"EEP Organizational Documents" shall have the meaning given such term
in Section 6.07(a).
"EEP Partnership Agreement" shall mean that certain Amended and
Restated Agreement of Limited Partnership of EOTT Energy Partners, L.P., dated
as of March 25, 1994, as amended by that certain Amendment No.1 to Amended and
Restated Agreement of Limited Partnership of EOTT Energy Partners, L.P. dated as
of August 8, 1995, as further amended by that certain Amendment No.2 to Amended
and Restated Agreement of Limited Partnership of EOTT Energy Partners, L.P.
dated as of July 16, 1996, as further amended by that certain Amendment No.3 to
Amended and Restated Agreement of Limited Partnership of EOTT Energy Partners,
L.P. dated as of February 13, 1997.
<PAGE> 60
"Effective Time" shall have the meaning given such term in Section
2.01(a).
"Employee Schedule" shall have the meaning given such term in Section
10.07(b).
"Encumbrances" shall mean any lien, mortgage, deed of trust, pledge,
security interest, conditional sales arrangement, defect in title, option,
preferential purchase right, right of first refusal or other encumbrance or
title imperfection.
"Environmental Legal Requirements" shall mean any and all Legal
Requirements relating to the protection or conservation of human health or
safety (whether of the Employees, members of the public, the public at large, or
otherwise) or the environment, including, without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended, the
Superfund Amendments and Reauthorization Act of 1986, as amended, the Resource
Conservation and Recovery Act of 1976, as amended, the Clean Air Act, as
amended, the Federal Water Pollution Control Act, as amended, The Oil Pollution
Act of 1990, as amended, the Safe Drinking Water Act, as amended, the Hazardous
Materials Transportation Act, as amended, the Toxic Substances Control Act, as
amended, and other environmental conservation or protection laws.
"Environmental Permits" shall mean any and all permits, licenses,
approvals, exemptions or authorizations, and any amendments, modifications,
terminations, renewals or updates thereof required under Environmental Legal
Requirements in connection with the ownership or operation of the Assets.
"EOTT" shall have the meaning given such term in the introductory
paragraph hereof.
"EOTT's Plans" shall have the meaning given such term in Section
10.07(f).
"Equity Consideration" shall have the meaning given such term in
Section 3.01(b).
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Estimated Property Taxes" shall have the meaning given such term in
Section 10.05.
"Exchange Act" shall have the meaning given such term in Section 6.06.
"Excluded Assets" shall have the meaning given such term in Section
2.01(d).
"Excluded Third-Party Claims" shall have the meaning given such term in
Section 10.01(a)(v).
"Fee Acreage" shall mean the Koch Pipeline Fee Acreage and/or the Koch
Oil Fee Acreage, as the context may require.
<PAGE> 61
"General Partner" shall mean EOTT Energy Corp., a Delaware corporation,
in its capacity as the general partner of EOTT and/or EEP, as the context may
require.
"Governmental Entity" shall mean any court, governmental department,
commission, council, board, bureau, agency or other judicial, administrative,
regulatory, legislative or other instrumentality of the United States of America
or any foreign country, or any state, county, municipality or local governmental
body or political subdivision or any such other foreign country.
"Hazardous Materials" shall mean (a) any hazardous materials, hazardous
wastes, solid wastes, hazardous substances, and toxic substances as those or
similar terms are defined under any Environmental Legal Requirements; (b) any
medical, infectious, or special wastes as those or similar terms are defined
under any Environmental Legal Requirements; (c) any asbestos, whether friable or
non-friable; (d) any polychlorinated biphenyls ("PCBs"), or PCB-containing
materials; (e) radon gas; (f) any petroleum, petroleum hydrocarbons, petroleum
products, crude oil and any components, fractions or derivatives thereof, any
oil or gas exploration or production waste, and any natural gas, synthetic gas
and any mixtures thereof; and (g) any substance that, whether by its nature or
its use, is subject to regulation under any Environmental Law or with respect to
which any Environmental Law or Governmental Authority requires environmental
investigation, monitoring or remediation.
"Holder" shall have the meaning given such term in Section 10.12(a).
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Improvements" shall mean the Koch Pipeline Improvements and/or the
Koch Oil Improvements, as the context may require.
"Indemnified Party" shall have the meaning given such term in Section
10.01(d).
"Indemnified Persons" shall have the meaning given such term in Section
10.12(c).
"Indemnifying Party" shall have the meaning given such term in Section
10.01(d).
"Initial Holder" shall have the meaning given such term in Section
3.01.
"knowledge" and any variations thereof or words to the same effect
shall mean, with respect to Sellers, (a) in all instances other than those
provided for in clause (b) immediately following, the actual knowledge of the
officers, directors, managers, supervisors, and key operational personnel of
Sellers that have responsibility for the matter in question or that are
reasonably likely to have pertinent information regarding the matter in question
and (b) in the case of the knowledge of Sellers as used in the Sections
identified below, the current actual knowledge of the applicable individuals
designated below, which individuals shall not have any specific or additional
duty to review documents or records or interview other persons in order to gain
any new actual knowledge or to refresh memories of their past knowledge:
<PAGE> 62
<TABLE>
<CAPTION>
SECTION APPLICABLE CONTROL GROUP
<S> <C>
5.05 Allen Olson, Shane Pierce, Tony Botterweck and Brad Urban
5.06(b) Phil Wright, Sherry Jackson and Priscilla Norton
5.06(d) Phil Wright, Sherry Jackson and Priscilla Norton
5.09(a) Perry Barone, Wes Christensen, John Early, Thomas McCaleb and Ed McMullen
5.09(b) Perry Barone, Wes Christensen, John Early, Thomas McCaleb and Ed McMullen
5.18 Shane Pierce and James Smith
10.02(a)(ii) Sidney H. Johnson
</TABLE>
"Known Contamination" shall have the meaning given such term in Section
10.02(a)(ii).
"Koch Oil" shall have the meaning given such term in the introductory
paragraph hereof.
"Koch Oil Contracts" shall have the meaning given such term in Section
2.01(c)(vii).
"Koch Oil Easements" shall have the meaning given such term in Section
2.01(c)(iv).
"Koch Oil Fee Acreage" shall have the meaning given such term in
Section 2.01(c)(i).
"Koch Oil Improvements" shall have the meaning given such term in
Section 2.01(c)(iii).
"Koch Oil Leases" shall have the meaning given such term in Section
2.01(c)(ii).
"Koch Oil Operations" shall have the meaning given such term in Section
2(c).
"Koch Oil Permits" shall have the meaning given such term in Section
2.01(c)(ix).
"Koch Oil Property" shall have the meaning given such term in Section
2.01(c).
"Koch Oil Real Property" shall have the meaning given such term in
Section 2.01(c)(iv).
"Koch Oil Records" shall have the meaning given such term in Section
2.01(c)(x).
"Koch Oil Tangible Personal Property" shall have the meaning given such
term in Section 2.01(c)(v).
"Koch Pipeline" shall have the meaning given such term in the
introductory paragraph hereof.
"Koch Pipeline Contracts" shall have the meaning given such term in
Section 2.01(b)(vii).
"Koch Pipeline Easements" shall have the meaning given such term in
Section 2.01(b)(iv).
"Koch Pipeline Fee Acreage" shall have the meaning given such term in
Section 2.01(b)(i).
<PAGE> 63
"Koch Pipeline Improvements" shall have the meaning given such term in
Section 2.01(b)(iii).
"Koch Pipeline Leases" shall have the meaning given such term in
Section 2.01(b)(ii).
"Koch Pipeline Permits" shall have the meaning given such term in
Section 2.01(b)(ix).
"Koch Pipeline Property" shall have the meaning given such term in
Section 2.01(b).
"Koch Pipeline Real Property" shall have the meaning given such term in
Section 2.01(b)(iv).
"Koch Pipeline Records" shall have the meaning given such term in
Section 2.01(b)(x).
"Koch Pipeline Tangible Personal Property" shall have the meaning given
such term in Section 2.01(b)(v).
"Leased Land" shall mean the Koch Pipeline Leased Lands and/or the Koch
Oil Leased Land, as the context may require.
"Legal Requirements" shall mean (a) any and all laws, statutes, codes,
rules, regulations, ordinances, judgments, orders, writs, decrees, requirements
or determinations of any Governmental Entity, (b) to the extent not covered by
clause (a) immediately above, any and all requirements of permits, licenses,
certificates, authorizations, concessions, franchises or other approvals granted
by any Governmental Entity, and (c) any and all duties arising under applicable
common law, it being understood that the term "Environmental Legal Requirements"
is included within the scope of the term "Legal Requirements."
"Limited Partner" shall have the meaning given such term in the EEP
Partnership Agreement.
"Material Contracts" shall have the meaning given such term in Section
5.05.
"Millennial Dates" shall have the meaning given such term in Section
5.18.
"National Securities Exchange" means an exchange registered with the
SEC under Section 6(a) of the Exchange Act.
"New Employee(s)" shall have the meaning given such term in Section
10.07(e).
"Notice Period" shall have the meaning given such term in Section
10.01(d).
"NYSE" shall have the meaning given such term in Section 6.06.
"Party(ies)" shall have the meaning given such term in the introductory
paragraph hereof.
"Past Service" shall have the meaning given such term in Section
10.07(f).
<PAGE> 64
"Permits" shall mean the Koch Pipeline Permits and/or the Koch Oil
Permits, as the context may require.
"Permitted Encumbrances" shall mean the following matters:
(i) All federal, state or local laws, rules, orders,
ordinances or regulations that govern or apply to the ownership,
operation or transfer of such property;
(ii) Any lien for Taxes that are not yet due and payable;
(iii) Materialmen's, mechanic's, repairmen's, employees',
contractors', tax and other similar liens or charges arising in the
ordinary course of business for obligations that are not delinquent or
that will be paid and discharged in the ordinary course of business or,
if delinquent, that are being contested in good faith by appropriate
action;
(iv) Preferential rights to purchase and required third-party
consents to assignments and similar agreements with respect to which
waivers or consents are obtained from the appropriate parties;
(v) All rights reserved to or vested in any governmental,
statutorial or public authority to control or regulate any of the real
property interests constituting a part of the Assets; and
(vi) Any matters that are waived in writing by Buyer or
otherwise released or satisfied by Sellers on or prior to the Closing
Date.
"Person" shall mean an individual, a corporation, a partnership, a
limited liability company, an association, a trust, or any other entity or
organization, including, without limitation, any Governmental Entity.
"Pipeline Systems" shall have the meaning given such term in Section
2.01(b).
"Pricing Date" shall have the meaning given such term in Section 5.04.
"Property Taxes" shall have the meaning given such term in Section
10.05.
"Public Documents" shall have the meaning given such term in Section
6.06.
"Real Property" shall mean the Koch Pipeline Real Property and/or the
Koch Oil Real Property, as the context may require.
"Records" shall mean the Koch Pipeline Records and/or the Koch Oil
Records, as the context may require.
"Remediation Costs" shall have the meaning give such term in Section
10.02(a)(iv).
<PAGE> 65
"Remediation Plan" shall have the meaning given such term in Section
10.02(e)(v).
"Reports" shall have the meaning given such term in Section 5.11(d).
"SEC" shall have the meaning given such term in Section 6.06.
"Securities Act" shall have the meaning given such term in Section
6.06.
"Seller(s)" shall have the meaning given such term in the introductory
paragraph hereof.
"Seller Indemnified Parties" shall have the meaning given such term in
Section 10.01(b).
"Sellers' Plans" shall have the meaning given such term in Section
10.07(e).
"Shell" shall have the meaning given such term in Section 10.02(c).
"Shell Agreement" shall have the meaning given such term in Section
10.02(c).
"Shell Location" shall have the meaning given such term in Section
10.02(c)(ii).
"Shell Pipeline System" shall have the meaning given such term in
Section 10.02(c).
"Subject Easements" shall have the meaning given such term in Section
10.13.
"Subordinated Units" shall have the meaning given such term in the EEP
Partnership Agreement.
"Support Agreement" shall mean that certain Support Agreement dated
September 21, 1998, among Enron Corp., EEP and EOTT.
"Surface Leases" shall mean the Koch Pipeline Leases and/or the Koch
Oil Leases, as the context may require.
"System Employees" shall have the meaning given such term in Section
10.07(b)
"Tangible Personal Property" shall mean the Koch Pipeline Tangible
Personal Property and/or the Koch Oil Tangible Personal Property, as the context
may require.
"Taxes" shall mean any and all federal, state, local, foreign and other
net income, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, leased, service, service use, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property, windfall
profits, customs, duties or other taxes, fees, assessments or charges of any
kind whatsoever, together with any interest and any and all penalties, additions
to tax, or additional amounts with respect thereto; provided, however, that the
term "Taxes" shall not include Transfer Taxes.
"Telecom Devices" shall have the meaning given such term in Section
10.13.
<PAGE> 66
"Title Costs" shall mean all reasonable external costs, liabilities and
expenses (including reasonable fees paid to outside professionals or service
providers, judgments and settlements) incurred by the Buyer Indemnified Parties
as a result of or in connection with Unobtained Consents, Easement Gaps or the
breach of Title Warranties, which costs, liabilities and expenses must have been
incurred in a commercially reasonable manner in the course of:
(a) rerouting pipelines or purchasing replacement pipe,
equipment, rights-of-way, easements or similar agreements, permits,
licenses, fees, or leases;
(b) paying grantors in exchange for the granting of consents
to or approvals of assignment of any Assets (or portions thereof) in
situations where a need for such consent/approval is determined to
exist by Buyer in good faith, or rerouting pipeline or purchasing
replacement pipe, equipment, rights-of-way, easements or similar
agreements, permits, licenses, fees or leases in situations where (i)
such consent/approval cannot be reasonably obtained after the use of
reasonable efforts to obtain same for a reasonable amount of time and
(ii) no "use agreement" is reasonably acceptable to Buyer; and/or
(c) defending against trespass or related claims, or paying
related judgments or settlements.
"Title Warranties" shall have the meaning given such term in Section
7.05(c).
"Transfer Taxes" shall mean any sales, use, excise, stock, stamp,
document, filing, recording, authorization and similar taxes, fees and charges
levied by a Governmental Entity.
"Unitholder Approvals" shall have the meaning given such term in
Section 9.01(g).
"Unknown Contamination" shall have the meaning give such term in
Section 10.02(a)(i).
"Unknown Contamination Event" shall have the meaning give such term in
Section 10.02(a)(iii).
"Unobtained Consents" shall have the meaning given such term in Section
7.05(d).
"West Texas Transaction" shall mean the transaction among Sellers and
EOTT that was consummated on July 1, 1998 pursuant to the terms of that certain
Purchase and Sale Agreement of the same date among such parties.
"Year 2000 Issues" shall have the meaning given such term in Section
5.18.
<PAGE> 67
SCHEDULE 3.02
Purchase Price Allocation
Class I 0
Class II 0
Class III Entire Value
Class IV 0
Class V 0
<PAGE> 68
FIRST AMENDMENT TO
PURCHASE AND SALE AGREEMENT
THIS FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT (the "Amendment") is
entered into by and among Koch Pipeline Company, L.P. ("KPL"), Koch Oil
Company, a division of Koch Industries, Inc. ("KOC"), EOTT Energy Partners, L.P.
("EOTT PARTNERS") and EOTT Energy Operating Limited Partnership ("EOTT
OPERATING"), dated as of this 1st day of December, 1998.
WHEREAS, KPL, KOC, EOTT PARTNERS and EOTT OPERATING have entered into that
certain Purchase and Sale Agreement dated as of September 21, 1998 (the
"Agreement").
WHEREAS, KPL, KOC, EOTT PARTNERS and EOTT OPERATING desire to amend the
Agreement as provided herein.
NOW, THEREFORE, for and in consideration of the foregoing and the mutual
covenants and obligations set forth herein, KPL, KOC, EOTT PARTNERS and EOTT
OPERATING do hereby covenant and agree as follows:
1. DEFINED TERMS. Terms defined in the Agreement are used herein with
the same meanings.
2. REPLACEMENT OF CERTAIN EXHIBITS AND SCHEDULES. The following exhibits
and schedules that were attached to the Agreement are hereby deleted and
replaced by the respective exhibits and schedules attached hereto:
EXHIBIT A KOCH PIPELINE PROPERTY
Part I - Narrative Description of Pipeline Assets
Part II - Map of Pipeline Systems
Part III - Koch Pipeline Fee Acreage
Part IV - Koch Pipeline Leases
Part V - Koch Pipeline Easements
Part VI - Certain Koch Pipeline Tangible Personal Property
Part VII - Certain Koch Pipeline Contracts
Part VIII - Certain Intellectual Property Rights and Software
EXHIBIT B KOCH OIL PROPERTY
Part I - Narrative Description of Koch Oil Properties
Part II - Map of Koch Oil Pipelines
Part III - Koch Oil Fee Acreage
Part IV - Koch Oil Leases
Part V - Koch Oil Easements
Part VI - Certain Koch Oil Tangible Personal Property
Part VII - Certain Koch Oil Contracts
Part VIII - Certain Intellectual Property Rights and Software
EXHIBIT C EXCLUDED ASSETS
SCHEDULE 2.01(c) -- KOCH OIL OPERATIONS AREAS
SCHEDULE 5.03 -- APPROVALS AND NOTICES
SCHEDULE 5.05 -- MATERIAL CONTRACTS
SCHEDULE 5.10 -- LITIGATION
SCHEDULE 5.11 -- ENVIRONMENTAL AND HEALTH MATTERS
SCHEDULE 10.08 -- PHYSICAL INVENTORY
1
<PAGE> 69
3. AMENDMENT OF SECTION 3.01. Section 3.01 of the Agreement is hereby
deleted in its entirety and replaced with the following:
"3.01 CONSIDERATION AT CLOSING. Subject to the terms and conditions of
this Agreement, as consideration for the sale by Sellers of the Assets to
Buyer, Sellers shall receive the following consideration at Closing from
Buyer:
(a) subject to adjustment pursuant to Section 7.07, an aggregate cash
payment equal to $184,000,000 (the "Cash Consideration"); and
(b) one or more certificates representing, in the aggregate, 2,000,000
Common Units and 2,000,000 Subordinated Units in EEP (the "Equity
Consideration").
Koch Oil shall be entitled to the Cash Consideration to the extent
consideration is allocated, pursuant to Section 3.02 of this Agreement, to
assets transferred by Koch Oil to Buyer. Koch Pipeline shall be entitled to
all of the Equity Consideration as well as any Cash Consideration to which
Koch Oil is not entitled. Payment of the Cash Consideration by Buyer to
Sellers at Closing shall be made by wire transfer of immediately available
funds to a single account designated by Koch Oil and Koch Pipeline, which
designation shall be made not later than two Business Days prior to the
Closing Date. The Equity Consideration shall be paid at Closing by the
delivery to Koch Pipeline of one or more certificates evidencing the Equity
Consideration (in its capacity as the initial holder of the Equity
Consideration, Koch Pipeline shall be referred to herein as the "Initial
Holder")."
4. AMENDMENT OF SECTION 6.09. Section 6.09 of the Agreement is hereby
amended to read as follows:
"6.09 VALIDITY OF SECURITIES. The 1,996,000 Common Units and the
2,000,000 Subordinated Units to be issued to the designee of Sellers
hereunder at Closing will, upon their issuance, be duly authorized, validly
issued, fully paid and nonassessable, and the 4,000 Common Units to be
transferred to the designee of Sellers hereunder at Closing have been duly
authorized and are validly issued, fully paid and nonassessable and will,
upon their transfer, be transferred free and clear of all liens, claims and
encumbrances."
5. AGREEMENT REGARDING VARIOUS MATTERS. The parties hereto do hereby
agree that in exchange for the agreements of KPL set forth in section 6 below
and Sellers' agreement to transfer certain field PC software rights to Buyer,
Buyer agrees to assume full responsibility for (a) all repair costs
attributable to the collapse of the internal floating roof on a 55,000 bbl. Tank
at the Horton Station, (b) all repair costs attributable to the leak which
developed in the side wall of tank #88150 at Fryburg Station, North Dakota, (c)
those matters listed on Attachment I attached hereto, and (d) all obligations of
Seller under that certain letter of understanding dated August 31, 1998 with the
U.S. Forest Service regarding the North Dakota right-of-way.
6. AMENDMENT OF EEP PARTNERSHIP AGREEMENT. KPL, as the Initial Holder of
the Equity Consideration, hereby consents to the amendment of the EEP
Partnership Agreement to provide that the Initial Holder shall only be entitled
to receive a distribution pursuant to section 5.4 of the EEP Partnership
Agreement in regard to the fourth quarter of 1998 which is equal to two-thirds
of the distribution that the Initial Holder would, but for such amendment,
otherwise be entitled to receive pursuant to such section.
2
<PAGE> 70
7. RATIFICATION OF AGREEMENT. Except as expressly provided herein to the
contrary, the terms, covenants, and conditions of the Agreement shall remain in
full force and effect without modification or amendment, and the parties hereto
ratify and reaffirm the same in its entirety.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first written above.
KOCH PIPELINE COMPANY, L.P. KOCH OIL COMPANY,
a division of Koch Industries, Inc.
By: /s/ A.L. BOTTERWECK By: /s/ JAMES B. URBAN
---------------------------------- ----------------------------------
A.L. Botterweck, President James B. Urban, Vice President
EOTT ENERGY PARTNERS, L.P. EOTT ENERGY OPERATING
LIMITED PARTNERSHIP
By: EOTT Energy Corp. By: EOTT Energy Corp.
Its General Partner Its General Partner
By: /s/ STEPHEN W. DUFFY By: /s/ STEPHEN W. DUFFY
---------------------------------- ----------------------------------
Stephen W. Duffy Stephen W. Duffy
Vice President and General Counsel Vice President and General Counsel
3
<PAGE> 71
ATTACHMENT I
1. There are 18 crude trailers not DOT certified that requires replacing. 67
crude trailers are more than ten years old.
2. There are a significant number of vehicles that have excessive mileage. 15
tractors have excessive miles, and 25% of the pickups/sedans (45).
3. LACT Units will need to be installed to measure crude oil movements from
Assets being acquired by EOTT Energy Operating Limited Partnership into
Assets being acquired by EOTT Energy Pipeline Limited Partnership.
4. Reroute a line in North Texas at a cost of approx. $75,000.
5. There is a highway reroute in Oklahoma that will cost approximately
$100,000.
6. All the pipeline maintenance equipment was sold two years back.
Requirements for Backhoe, pipeline mechanic trucks, welding rigs and
inventory pipe and meter equipment were identified.
4
