AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 19, 2002
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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TEPPCO PARTNERS, L.P. DELAWARE 76-0291058
TE PRODUCTS PIPELINE COMPANY, LIMITED
PARTNERSHIP DELAWARE 76-0329620
TCTM, L.P. DELAWARE 76-0595522
TEPPCO MIDSTREAM COMPANIES, L.P. DELAWARE 76-0692243
JONAH GAS GATHERING COMPANY WYOMING 83-0317360
(Exact name of registrant as specified (State or other jurisdiction of
in its charter) incorporation or organization) (I.R.S. Employer Identification No.)
2929 ALLEN PARKWAY
P.O. BOX 2521
HOUSTON, TEXAS 77252-2521
(713) 759-3636
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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JAMES C. RUTH
2929 ALLEN PARKWAY
P.O. BOX 2521
HOUSTON, TEXAS 77252-2521
(713) 759-3636
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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COPIES TO:
FULBRIGHT & JAWORSKI L.L.P.
1301 MCKINNEY, SUITE 5100
HOUSTON, TX 77010
(713) 651-5151
ATTENTION: JOHN A. WATSON
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after this registration statement becomes effective, as determined by
market conditions.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) OFFERING PRICE(2) REGISTRATION FEE
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Limited Partnership Units............................. -- -- --
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Debt Securities(3).................................... -- -- --
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Guarantees of Debt Securities(4)...................... -- -- --
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Total................................................. $1,000,000,000 $92,000
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(1) An indeterminate principal amount or number of limited partner units, debt
securities and guarantees of debt securities may be issued form time to time
at indeterminate prices, with an aggregate offering price not to exceed
$1,000,000,000.
(2) Estimated solely for the purpose of calculating the registration fee, which
is calculated in accordance with Rule 457(o) of the rules and regulations
under the Securities Act of 1933, as amended. Rule 457(o) permits the
registration fee to be calculated on the basis of the maximum offering price
of all of the securities listed and, therefore, the table does not specify
by each class information as to the amount to be registered or the proposed
maximum offering price per security.
(3) If any debt securities are issued at an original issue discount, then the
offering price of those debt securities shall be in an amount that will
result in an aggregate initial offering price not to exceed $1,000,000,000,
less the dollar amount of any registered securities previously issued.
(4) TE Products Pipeline Company, Limited Partnership, TCTM, L.P., TEPPCO
Midstream Companies, L.P. and Jonah Gas Gathering Co. will fully,
irrevocably and unconditionally guarantee on an unsecured basis the debt
securities of TEPPCO Partners, L.P. Pursuant to Rule 457(n) under the
Securities Act of 1933, as amended, no separate fee is payable with respect
to the guarantees of the debt securities being registered.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(a), MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT THAT CONTAINS THIS
PROSPECTUS AND THAT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS
NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR
SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED APRIL 19, 2002
PROSPECTUS
TEPPCO PARTNERS, L.P.
LIMITED PARTNERSHIP UNITS
DEBT SECURITIES
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GUARANTEES OF DEBT SECURITIES OF TEPPCO PARTNERS, L.P. BY:
TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP
TCTM, L.P.
TEPPCO MIDSTREAM COMPANIES, L.P.
JONAH GAS GATHERING COMPANY
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We, TEPPCO Partners, L.P., may from time to time offer and sell limited
partnership units and debt securities that may be fully and unconditionally
guaranteed by our subsidiaries, TE Products Pipeline Company, Limited
Partnership, TCTM, L.P., TEPPCO Midstream Companies, L.P. and Jonah Gas
Gathering Company. This prospectus describes the general terms of these
securities and the general manner in which we will offer the securities. The
specific terms of any securities we offer will be included in a supplement to
this prospectus. The prospectus supplement will also describe the specific
manner in which we will offer the securities.
The New York Stock Exchange has listed our limited partnership units under
the symbol "TPP."
Our address is 2929 Allen Parkway, P.O. Box 2521, Houston, Texas
77252-2521, and our telephone number is (713) 759-3636.
YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE 1 OF THIS
PROSPECTUS BEFORE YOU MAKE AN INVESTMENT IN OUR SECURITIES.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is , 2002
TABLE OF CONTENTS
About this prospectus....................................... ii
About TEPPCO Partners....................................... ii
The subsidiary guarantors................................... ii
Risk factors................................................ 1
Risks relating to our business............................ 1
Risks relating to our partnership structure............... 5
Tax risks to unitholders.................................. 7
Where you can find more information......................... 10
Forward-looking statements and associated risks............. 11
TEPPCO Partners............................................. 12
Use of proceeds............................................. 13
Ratio of earnings to fixed charges.......................... 13
Description of debt securities.............................. 13
General................................................... 13
Covenants................................................. 15
Events of default, remedies and notice.................... 16
Amendments and waivers.................................... 18
Defeasance................................................ 19
No personal liability of general partner.................. 20
Subordination............................................. 20
Book entry, delivery and form............................. 22
The trustee............................................... 23
Governing law............................................. 23
Cash distributions.......................................... 23
General................................................... 23
Quarterly distributions of available cash................. 24
Adjustment of the target distributions.................... 25
Distributions of cash upon liquidation.................... 26
Defined terms............................................. 27
Tax considerations.......................................... 29
Partnership status........................................ 30
Partner status............................................ 32
Tax consequences of unit ownership........................ 32
Treatment of operations................................... 37
Disposition of Limited Partner units...................... 38
Uniformity of units....................................... 40
Tax-exempt entities, regulated investment companies and
foreign investors...................................... 41
Administrative matters.................................... 42
State, local and other tax considerations................. 44
Investment in units by employee benefit plans............... 45
Plan of distribution........................................ 47
Legal....................................................... 48
Experts..................................................... 48
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS, ANY
PROSPECTUS SUPPLEMENT AND THE DOCUMENTS WE HAVE INCORPORATED BY REFERENCE. WE
HAVE NOT AUTHORIZED ANYONE ELSE TO GIVE YOU DIFFERENT INFORMATION. WE ARE NOT
OFFERING THESE SECURITIES IN ANY STATE WHERE THEY DO NOT PERMIT THE OFFER. WE
WILL DISCLOSE ANY MATERIAL CHANGES IN OUR AFFAIRS IN AN AMENDMENT TO THIS
PROSPECTUS, A PROSPECTUS SUPPLEMENT OR A FUTURE FILING WITH THE SECURITIES AND
EXCHANGE COMMISSION INCORPORATED BY REFERENCE IN THIS PROSPECTUS.
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ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we have filed with
the Securities and Exchange Commission using a "shelf" registration process.
Under this shelf registration process, we may sell up to $1 billion in principal
amount of the limited partnership units or debt securities, or a combination of
both described in this prospectus in one or more offerings. This prospectus
generally describes us and the limited partnership units and debt securities.
Each time we sell limited partnership units or debt securities with this
prospectus, we will provide a prospectus supplement that will contain specific
information about the terms of that offering. The prospectus supplement may also
add to, update or change information in this prospectus. The information in this
prospectus is accurate as of April 19, 2002. You should carefully read both this
prospectus and any prospectus supplement and the additional information
described under the heading "Where You Can Find More Information."
ABOUT TEPPCO PARTNERS
We are one of the largest publicly traded limited partnerships engaged in
the transportation of refined products, liquefied petroleum gases and
petrochemicals, the transportation and marketing of crude oil and natural gas
liquids and the gathering of natural gas. Texas Eastern Products Pipeline
Company, LLC (formerly Texas Eastern Products Pipeline Company and referred to
in this prospectus as TEPPCO LLC) serves as our general partner and is an
indirect wholly owned subsidiary of Duke Energy Field Services, LLC, which is
owned 70% by Duke Energy Corporation and 30% by Phillips Petroleum Company.
Please see the organization chart on page 12 for a more detailed description of
our organizational structure.
As used in this prospectus, "we," "us," "our" and "TEPPCO Partners" mean
TEPPCO Partners, L.P. and, where the context requires, include our subsidiary
operating partnerships.
THE SUBSIDIARY GUARANTORS
TE Products Pipeline Company, Limited Partnership, TCTM, L.P., TEPPCO
Midstream Companies, L.P. and Jonah Gas Gathering Company are our only
"significant subsidiaries" as defined by the rules and regulations of the SEC,
as of the date of this prospectus. The general partner of TE Products, TCTM and
TEPPCO Midstream is TEPPCO GP, Inc., which is wholly owned by us. TEPPCO GP owns
a .001% general partner interest in each of TE Products, TCTM and TEPPCO
Midstream. Jonah is a Wyoming general partnership. TEPPCO Midstream owns a
99.999% general partner interest in Jonah and TEPPCO GP owns a 0.001% general
partner interest and serves as its managing general partner. We sometimes refer
to TE Products, TCTM, TEPPCO Midstream and Jonah in this prospectus as the
"Subsidiary Guarantors." The Subsidiary Guarantors may jointly and severally and
unconditionally guarantee our payment obligations under any series of debt
securities offered by this prospectus, as set forth in a related prospectus
supplement.
ii
RISK FACTORS
Before you invest in our securities, you should be aware that there are
risks associated with such an investment. You should consider carefully these
risk factors together with all of the other information included in this
prospectus, any prospectus supplement and the documents we have incorporated by
reference into this document before purchasing our securities.
If any of the following risks actually occur, our business, financial
condition or results of operations could be materially adversely affected. In
that event, we may be unable to make distributions to our unitholders or pay
interest on, or the principal of, any debt securities, the trading price of our
limited partnership units could decline or you may lose all of your investment.
RISKS RELATING TO OUR BUSINESS
POTENTIAL FUTURE ACQUISITIONS AND EXPANSIONS, IF ANY, MAY AFFECT OUR BUSINESS BY
SUBSTANTIALLY INCREASING THE LEVEL OF OUR INDEBTEDNESS AND CONTINGENT
LIABILITIES AND INCREASING OUR RISKS OF BEING UNABLE TO EFFECTIVELY INTEGRATE
THESE NEW OPERATIONS.
From time to time, we evaluate and acquire assets and businesses that we
believe complement our existing assets and businesses. Acquisitions may require
substantial capital or the incurrence of substantial indebtedness. If we
consummate any future acquisitions, our capitalization and results of operations
may change significantly, and you will not have the opportunity to evaluate the
economic, financial and other relevant information that we will consider in
determining the application of these funds and other resources.
Acquisitions and business expansions involve numerous risks, including
difficulties in the assimilation of the assets and operations of the acquired
businesses, inefficiencies and difficulties that arise because of unfamiliarity
with new assets and the businesses associated with them and new geographic areas
and the diversion of management's attention from other business concerns.
Further, unexpected costs and challenges may arise whenever businesses with
different operations or management are combined, and we may experience
unanticipated delays in realizing the benefits of an acquisition. Following an
acquisition, we may discover previously unknown liabilities associated with the
acquired business for which we have no recourse under applicable indemnification
provisions.
EXPANDING OUR NATURAL GAS GATHERING BUSINESS BY CONSTRUCTING NEW PIPELINES AND
COMPRESSION FACILITIES SUBJECTS US TO CONSTRUCTION RISKS AND RISKS THAT NATURAL
GAS SUPPLIES WILL NOT BE AVAILABLE UPON COMPLETION OF THE NEW PIPELINES.
We may expand the capacity of our existing natural gas gathering system
through the construction of additional facilities. The construction of gathering
facilities requires the expenditure of significant amounts of capital, which may
exceed our estimates. Generally, we may have only limited natural gas supplies
committed to these facilities prior to their construction. Moreover, we may
construct facilities to capture anticipated future growth in production in a
region in which anticipated production growth does not materialize. As a result,
there is the risk that new facilities may not be able to attract enough natural
gas to achieve our expected investment return, which could adversely affect our
financial position or results of operations.
OUR TARIFF RATES ARE SUBJECT TO REVIEW AND POSSIBLE ADJUSTMENT BY FEDERAL
REGULATORS.
The Federal Energy Regulatory Commission, or the FERC, pursuant to the
Interstate Commerce Act, regulates the tariff rates for our interstate common
carrier pipeline operations. To be lawful under that Act, tariff rates must be
just and reasonable and not unduly discriminatory. Shippers may protest, and the
FERC may investigate, the lawfulness of new or changed tariff rates. The FERC
can suspend those tariff rates for up to seven months. It can also require
refunds of amounts collected under rates ultimately found unlawful. The FERC may
also challenge tariff rates that have become final and effective. Because of the
complexity of rate making, the lawfulness of any rate is never assured.
1
The FERC uses prescribed rate methodologies for approving regulated tariff
rates for transporting crude oil and refined products. These methodologies may
limit our ability to set rates based on our actual costs or may delay the use of
rates reflecting increased costs. Changes in the FERC's approved methodology for
approving rates could adversely affect us. Adverse decisions by the FERC in
approving our regulated rates could adversely affect our cash flow. Additional
challenges to our tariff rates could be filed with the FERC.
While the FERC does not directly regulate our natural gas gathering
operations, federal regulation, directly or indirectly, influences the parties
that gather natural gas on our Jonah gas gathering system. As an intrastate
natural gas gathering system and not an interstate transmission pipeline, the
Jonah system generally is exempt from FERC regulation under the Natural Gas Act
of 1938. Nonetheless, FERC regulation still significantly affects our natural
gas gathering business. In recent years, FERC has pursued pro-competition
policies in its regulation of interstate natural gas pipelines. However, if the
FERC does not continue this approach as it considers proposals by natural gas
pipelines to allow negotiated rates not limited by rate ceilings, pipeline rate
case proposals and revisions to rules and policies that may affect our shippers'
rights of access to interstate natural gas transportation capacity, it could
have an adverse effect on the rates we are able to charge in the future.
OUR PARTNERSHIP STATUS MAY BE A DISADVANTAGE TO US IN CALCULATING COST OF
SERVICE FOR RATE-MAKING PURPOSES.
In a 1995 decision involving an unrelated oil pipeline limited partnership,
the FERC partially disallowed the inclusion of income taxes in that
partnership's cost of service. In another FERC proceeding involving a different
oil pipeline limited partnership, the FERC held that the oil pipeline limited
partnership may not claim an income tax allowance for income attributable to
non-corporate limited partners, both individuals and other entities. Because
corporations are taxpaying entities, income taxes are generally allowed to be
included as a corporate cost-of-service. While we currently do not use the
cost-of-service methodology to support our rates, these decisions might
adversely affect us should we elect in the future to use the cost-of-service
methodology or should we be required to use that methodology to defend our rates
if challenged by our customers. This could put the Partnership at a competitive
disadvantage.
COMPETITION COULD ADVERSELY AFFECT OUR OPERATING RESULTS.
Our refined products and liquefied petroleum gases, or LPGs, transportation
business competes with other pipelines in the areas where we deliver products.
We also compete with trucks, barges and railroads in some of the areas we serve.
Competitive pressures may adversely affect our tariff rates or volumes shipped.
The crude oil gathering and marketing business is characterized by thin margins
and intense competition for supplies of crude oil at the wellhead. A decline in
domestic crude oil production has intensified competition among gatherers and
marketers. Our crude oil transportation business competes with common carriers
and proprietary pipelines owned and operated by major oil companies, large
independent pipeline companies and other companies in the areas where our
pipeline systems deliver crude oil and natural gas liquids.
New supplies of natural gas are necessary to offset natural declines in
production from wells connected to our gathering system and to increase
throughput volume, and we encounter competition in obtaining contracts to gather
natural gas supplies. Competition in natural gas gathering is based in large
part on reputation, efficiency, reliability, gathering system capacity and price
arrangements. Our key competitors in the gas gathering segment include
independent gas gatherers and major integrated energy companies. Alternate
gathering facilities are available to producers we serve, and those producers
may also elect to construct proprietary gas gathering systems. If the production
delivered to our gathering system declines, our revenues from such operations
will decline.
2
OUR CRUDE OIL MARKETING BUSINESS REQUIRES EXTENSIVE CREDIT RISK MANAGEMENT WHICH
MAY NOT BE ADEQUATE TO PROTECT AGAINST CUSTOMER NONPAYMENT LIKE THAT EXPERIENCED
AS A RESULT OF THE RECENT BANKRUPTCY BY ENRON CORP.
Risks of nonpayment and nonperformance by customers are a major
consideration in our businesses. Our credit procedures and policies may not be
adequate to eliminate customer credit risk. Due to the recent bankruptcy of
Enron Corp. and certain of its subsidiaries, our collection of transportation
fees of approximately $4.3 million, or approximately $0.09 per limited partner
and Class B Units, is doubtful.
OUR CRUDE OIL MARKETING BUSINESS INVOLVES RISKS RELATING TO PRODUCT PRICES.
Our crude oil operations subject us to pricing risks as we buy and sell
crude oil for delivery on our crude oil pipelines or enter into future delivery
obligations with respect to futures contracts on the New York Mercantile
Exchange. These pricing and basis risks cannot be completely hedged or
eliminated. These are the risks that price relationships between delivery
points, classes of products or delivery periods will change from time to time.
REDUCED DEMAND COULD AFFECT SHIPMENTS ON THE PIPELINES.
Our products pipeline business depends in large part on the demand for
refined petroleum products in the markets served by our pipelines. Reductions in
that demand adversely affect our pipeline business. Market demand varies based
upon the different end uses of the refined products we ship. Demand for
gasoline, which has in recent years accounted for approximately one-half of our
refined products transportation revenues, depends upon price, prevailing
economic conditions and demographic changes in the markets we serve. Weather
conditions, government policy and crop prices affect the demand for refined
products used in agricultural operations. Demand for jet fuel, which has in
recent years accounted for almost one-quarter of our refined products revenues,
depends on prevailing economic conditions and military usage. Propane deliveries
are generally sensitive to the weather and meaningful year-to-year variances
have occurred and will likely continue to occur.
OUR GATHERING SYSTEM PROFITS AND CASH FLOW DEPEND ON THE VOLUMES OF NATURAL GAS
PRODUCED FROM THE FIELDS SERVED BY OUR GATHERING SYSTEMS AND ARE SUBJECT TO
FACTORS BEYOND OUR CONTROL.
Regional production levels drive the volume of natural gas gathered on our
system. We cannot influence or control the operation or development of the gas
fields we serve. Production levels may be affected by:
- the absolute price of, volatility in the price of, and market demand for
natural gas;
- changes in laws and regulations, particularly with regard to taxes,
denial of reduced well density spacing, safety and protection of the
environment;
- the depletion rates of existing wells;
- adverse weather and other natural phenomena;
- the availability of drilling and service rigs; and
- industry changes, including the effect of consolidations or divestitures.
3
Any declines in the volumes of natural gas delivered for gathering on our
system will adversely affect our revenues and could, if sustained or pronounced,
materially adversely affect our financial position or results of operation.
OUR OPERATIONS ARE SUBJECT TO GOVERNMENTAL LAWS AND REGULATIONS RELATING TO THE
PROTECTION OF THE ENVIRONMENT WHICH MAY EXPOSE US TO SIGNIFICANT COSTS AND
LIABILITIES.
The risk of substantial environmental costs and liabilities is inherent in
pipeline and terminaling operations and we may incur substantial environmental
costs and liabilities. Our operations are subject to federal, state and local
laws and regulations relating to protection of the environment. We currently own
or lease, and have owned or leased, many properties that have been used for many
years to terminal or store crude oil, petroleum products or other chemicals.
Owners, tenants or users of these properties have disposed of or released
hydrocarbons or solid wastes on or under them. Additionally, some sites we
operate are located near current or former refining and terminaling operations.
There is a risk that contamination has migrated from those sites to ours.
Increasingly strict environmental laws, regulations and enforcement policies and
claims for damages and other similar developments could result in substantial
costs and liabilities.
Many of our operations and activities are subject to significant federal
and state environmental laws and regulations. These include, for example, the
federal Clean Air Act and analogous state laws, which impose obligations related
to air emissions and the Federal Water Pollution Control Act, commonly referred
to as the Clean Water Act, and analogous state laws, which regulate discharge of
wastewaters from our facilities to state and federal waters. In addition, our
operations are also subject to the federal Comprehensive Environmental Response,
Compensation, and liability Act, also known as CERCLA or the Superfund law, the
Resource Conservation and Recovery Act, also known as RCRA, and analogous state
laws in connection with the cleanup of hazardous substances that may have been
released at properties currently or previously owned or operated by us or
locations to which we have sent wastes for disposal. Various governmental
authorities including the U.S. Environmental Protection Agency have the power to
enforce compliance with these regulations and the permits issued under them, and
violators are subject to administrative, civil and criminal penalties, including
civil fines, injunctions or both. Liability may be incurred without regard to
fault under CERCLA, RCRA, and analogous state laws for the remediation of
contaminated areas. Private parties, including the owners of properties through
which our pipeline systems pass, may also have the right to pursue legal actions
to enforce compliance as well as to seek damages for non-compliance with
environmental laws and regulations or for personal injury or property damage.
There is inherent risk of the incurrence of environmental costs and liabilities
in our business due to our handling of the products we gather or transport, air
emissions related to our operations, historical industry operations, waste
disposal practices and the prior use of flow meters containing mercury, some of
which may be material. In addition, the possibility exists that stricter laws,
regulations or enforcement policies could significantly increase our compliance
costs and the cost of any remediation that may become necessary, some of which
may be material. Our insurance may not cover all environmental risks and costs
or may not provide sufficient coverage in the event an environmental claim is
made against us. Our business may be adversely affected by increased costs due
to stricter pollution control requirements or liabilities resulting from
non-compliance with required operating or other regulatory permits. New
environmental regulations might adversely affect our products and activities,
including processing, storage and transportation, as well as waste management
and air emissions. Federal and state agencies also could impose additional
safety requirements, any of which could affect our profitability.
TERRORIST ATTACKS AIMED AT OUR FACILITIES COULD ADVERSELY AFFECT OUR BUSINESS.
On September 11, 2001, the United States was the target of terrorist
attacks of unprecedented scale. Since the September 11 attacks, the United
States government has issued warnings that energy assets, specifically our
nation's pipeline infrastructure, may be the future target of terrorist
organizations. These developments have subjected our operations to increased
risks. Any future terrorist attack on our facilities,
4
those of our customers and, in some cases, those of other pipelines, could have
a material adverse effect on our business.
OUR BUSINESS INVOLVES MANY HAZARDS AND OPERATIONAL RISKS, SOME OF WHICH MAY NOT
BE COVERED BY INSURANCE.
Our operations are subject to the many hazards inherent in the
transportation of refined petroleum products, liquefied petroleum gases and
petrochemicals, the transportation of crude oil and the gathering, compressing,
treating and processing of natural gas and natural gas liquids and in the
storage of residue gas, including ruptures, leaks and fires. These risks could
result in substantial losses due to personal injury or loss of life, severe
damage to and destruction of property and equipment and pollution or other
environmental damage and may result in curtailment or suspension of our related
operations. We are not fully insured against all risks incident to our business.
Most significantly, we are not insured against the loss of revenues caused by
interruption of business in the event of a loss of, or damage to, our
facilities. If a significant accident or event occurs that is not fully insured,
it could adversely affect our financial position or results of operations.
THE PARTNERSHIP COULD BE ADVERSELY AFFECTED IF THIRD PARTIES ARE SUCCESSFUL IN
ASSERTING RIGHTS TO ACQUIRE THE JONAH GAS GATHERING SYSTEM FROM THE PARTNERSHIP.
A producer on the Jonah gas gathering system has notified Alberta Energy
Company, Ltd. that it has a right to acquire all or a portion of the assets
comprising the Jonah gas gathering system. The producer asserts that it is
entitled to match any offers to acquire the assets comprising all or a portion
of the Jonah gas gathering system and that it is entitled to full details of the
sale of the system to our partnership. It is not clear whether this asserted
right covers all or some portion of the Jonah system. On September 30, 2001,
subsidiaries of our partnership paid subsidiaries of Alberta Energy
approximately $360 million for the outstanding partnership interests in Jonah
Gas Gathering Company, which owns and operates the Jonah gas gathering system.
We spent an additional $19 million for expansion of the Jonah system. If the
producer is successful in asserting this alleged right, we could be adversely
affected by the divestiture of the Jonah gas gathering system and resultant loss
of expected incremental cash flow from our investment or as a result of making
payments in excess of any indemnity payments from Alberta Energy to the producer
in settlement of these claims.
RISKS RELATING TO OUR PARTNERSHIP STRUCTURE
WE ARE A HOLDING COMPANY AND DEPEND ENTIRELY ON OUR OPERATING SUBSIDIARIES'
DISTRIBUTIONS TO SERVICE OUR DEBT OBLIGATIONS.
We are a holding company with no material operations. If we cannot receive
cash distributions from our operating subsidiaries, we will not be able to meet
our debt service obligations. Our operating subsidiaries may from time to time
incur additional indebtedness under agreements that contain restrictions which
could further limit each operating subsidiary's ability to make distributions to
us.
The debt securities issued by the parent partnership and the guarantees
issued by the Subsidiary Guarantors will be structurally subordinated to the
claims of the creditors of our operating subsidiaries who are not guarantors of
the debt securities. Holders of the debt securities will not be creditors of our
operating partnerships that have not guaranteed the debt securities. The claims
to the assets of non-guarantor operating subsidiaries derive from our own
partnership interests in those operating subsidiaries. Claims of our
non-guarantor operating subsidiaries' creditors will generally have priority as
to the assets of those operating subsidiaries over our own partnership interest
claims and will therefore have priority over the holders of our debt, including
the debt securities. Our non-guarantor operating subsidiaries' creditors may
include:
- general creditors,
- trade creditors,
- secured creditors,
5
- taxing authorities, and
- creditors holding guarantees.
While our non-guarantor operating subsidiaries currently have no
indebtedness for borrowed money, such subsidiaries are not restricted from
incurring indebtedness and may do so in the future. Any debt securities offered
pursuant to this prospectus and the applicable prospectus supplement will be
structurally subordinated to any such indebtedness.
WE MAY SELL ADDITIONAL LIMITED PARTNERSHIP INTERESTS, DILUTING EXISTING
INTERESTS OF UNITHOLDERS.
Our partnership agreement allows us to issue additional limited partnership
units and other equity securities without unitholder approval. These additional
securities may be issued to raise cash or acquire additional assets or for other
partnership purposes. There is no limit on the total number of limited
partnership units and other equity securities we may issue. When we issue
additional limited partnership units or other equity securities, the
proportionate partnership interest of our existing unitholders will decrease.
The issuance could negatively affect the amount of cash distributed to
unitholders and the market price of limited partnership units. Issuance of
additional limited partnership units will also diminish the relative voting
strength of the previously outstanding limited partnership units.
OUR GENERAL PARTNER AND ITS AFFILIATES MAY HAVE CONFLICTS WITH OUR PARTNERSHIP.
The directors and officers of our general partner and its affiliates have
duties to manage the general partner in a manner that is beneficial to its
stockholders. At the same time, the general partner has duties to manage us in a
manner that is beneficial to us. Therefore, the general partner's duties to us
may conflict with the duties of its officers and directors to its stockholders.
Such conflicts may include, among others, the following:
- decisions of our general partner regarding the amount and timing of cash
expenditures, borrowings and issuances of additional limited partnership
units or other securities can affect the amount of incentive compensation
payments we make to our general partner;
- under our partnership agreement we reimburse the general partner for the
costs of managing and operating us; and
- under our partnership agreement, it is not a breach of our general
partner's fiduciary duties for affiliates of our general partner to
engage in activities that compete with us.
We may acquire additional businesses or properties directly or indirectly
for the issuance of additional units. At our current level of cash
distributions, our general partner receives as incentive distributions
approximately 50% of any incremental increase in our distributions. As a result,
acquisitions funded though the issuance of units have in the past and may in the
future benefit our general partner more than our unitholders.
UNITHOLDERS HAVE LIMITED VOTING RIGHTS AND CONTROL OF MANAGEMENT.
Our general partner manages and controls our activities and the activities
of our operating partnerships. Unitholders have no right to elect the general
partner or the directors of the general partner on an annual or other ongoing
basis. However, if the general partner resigns or is removed, its successor may
be elected by holders of a majority of the limited partnership units.
Unitholders may remove the general partner only by a vote of the holders of at
least 66 2/3% of the limited partnership units and only after receiving state
regulatory approvals required for the transfer of control of a public utility.
As a result, unitholders will have limited influence on matters affecting our
operations, and third parties may find it difficult to gain control of us or
influence our actions.
6
OUR PARTNERSHIP AGREEMENT LIMITS THE LIABILITY OF OUR GENERAL PARTNER.
Our general partner owes duties of loyalty and care to the unitholders.
Provisions of our partnership agreement and the partnership agreements for each
of the operating partnerships, however, contain language limiting the liability
of the general partner to the unitholders for actions or omissions taken in good
faith. In addition, the partnership agreements grant broad rights of
indemnification to the general partner and its directors, officers, employees
and affiliates for acts taken in good faith in a manner believed to be in or not
opposed to our best interests.
TAX RISKS TO UNITHOLDERS
You should read "Tax Considerations," beginning on page 29, for a more
complete discussion of the following federal income tax risks related to owning
and disposing of limited partnership units.
THE IRS COULD TREAT US AS A CORPORATION FOR TAX PURPOSES, WHICH WOULD
SUBSTANTIALLY REDUCE THE CASH AVAILABLE FOR DISTRIBUTION TO YOU.
The anticipated after-tax benefit of an investment in the limited
partnership units depends largely on our being treated as a partnership for
federal income tax purposes.
If we were classified as a corporation for federal income tax purposes, we
would pay federal income tax on our income at the corporate tax rate, which is
currently a maximum of 35%. Distributions to you would generally be taxed again
to you as corporate distributions, and no income, gains, losses or deductions
would flow through to you. Because a tax would be imposed upon us as a
corporation, the cash available for distribution to you would be substantially
reduced. Treatment of us as a corporation would result in a material reduction
in the after-tax return to the unitholders, likely causing a substantial
reduction in the value of the limited partnership units. Current law may change
so as to cause us to be taxed as a corporation for federal income tax purposes
or otherwise subject us to entity-level taxation. Our partnership agreement
provides that, if a law is enacted or existing law is modified or interpreted in
a manner that subjects us to taxation as a corporation or otherwise subjects us
to entity-level taxation for federal, state or local income tax purposes, then
the minimum quarterly distribution and the target distribution levels will be
decreased to reflect that impact on us.
A SUCCESSFUL IRS CONTEST OF THE FEDERAL INCOME TAX POSITIONS WE TAKE MAY
ADVERSELY IMPACT THE MARKET FOR LIMITED PARTNERSHIP UNITS.
We have not requested a ruling from the IRS with respect to any matter
affecting us. The IRS may adopt positions that differ from the conclusions of
our counsel expressed in this prospectus or from the positions we take. It may
be necessary to resort to administrative or court proceedings to sustain our
counsel's conclusions or the positions we take. A court may not concur with our
counsel's conclusions or the positions we take. Any contest with the IRS may
materially and adversely impact the market for limited partnership units and the
price at which they trade. In addition, the costs of any contest with the IRS,
principally legal, accounting and related fees, will be borne by us and directly
or indirectly by the unitholders and the general partner.
YOU MAY BE REQUIRED TO PAY TAXES EVEN IF YOU DO NOT RECEIVE ANY CASH
DISTRIBUTIONS.
You will be required to pay federal income taxes and, in some cases, state
and local income taxes on your share of our taxable income even if you do not
receive any cash distributions from us. You may not receive cash distributions
from us equal to your share of our taxable income or even equal to the actual
tax liability that results from your share of our taxable income.
7
TAX GAIN OR LOSS ON DISPOSITION OF LIMITED PARTNERSHIP UNITS COULD BE DIFFERENT
THAN EXPECTED.
If you sell your limited partnership units, you will recognize gain or loss
equal to the difference between the amount realized and your tax basis in those
limited partnership units. Prior distributions in excess of the total net
taxable income you were allocated for a limited partnership unit, which
decreased your tax basis in that limited partnership unit, will, in effect,
become taxable income to you if the limited partnership unit is sold at a price
greater than your tax basis in that limited partnership unit, even if the price
you receive is less than your original cost. A substantial portion of the amount
realized, whether or not representing gain, may be ordinary income to you.
Should the IRS successfully contest some positions we take, you could recognize
more gain on the sale of units than would be the case under those positions,
without the benefit of decreased income in prior years. Also, if you sell your
units, you may incur a tax liability in excess of the amount of cash you receive
from the sale.
IF YOU ARE A TAX-EXEMPT ENTITY, REGULATED INVESTMENT COMPANY OR MUTUAL FUND OR
YOU ARE NOT AN INDIVIDUAL RESIDING IN THE UNITED STATES, YOU MAY HAVE ADVERSE
TAX CONSEQUENCES FROM OWNING LIMITED PARTNERSHIP UNITS.
Investment in limited partnership units by tax-exempt entities, regulated
investment companies or mutual funds and foreign persons raises issues unique to
them. For example, virtually all of our income allocated to organizations exempt
from federal income tax, including individual retirement accounts and other
retirement plans, will be unrelated business taxable income and will be taxable
to them. Very little of our income will be qualifying income to a regulated
investment company or mutual fund. Distributions to foreign persons will be
reduced by withholding taxes at the highest effective rate applicable to
individuals and foreign persons will be required to file federal income tax
returns and pay tax on their share of our taxable income.
WE HAVE REGISTERED AS A TAX SHELTER. THIS MAY INCREASE THE RISK OF AN IRS AUDIT
OF US OR A UNITHOLDER.
We have registered with the IRS as a "tax shelter." The IRS requires that
some types of entities, including some partnerships, register as "tax shelters"
in response to the perception that they claim tax benefits that the IRS may
believe to be unwarranted. As a result, we may be audited by the IRS and tax
adjustments could be made. Any unitholder owning less than a 1% profits interest
in us has very limited rights to participate in the income tax audit process.
Further, any adjustments in our tax returns will lead to adjustments in our
unitholders' tax returns and may lead to audits of unitholders' tax returns and
adjustments of items unrelated to us. You will bear the cost of any expense
incurred in connection with an examination of your personal tax return.
WE WILL TREAT EACH PURCHASER OF UNITS AFTER THE INITIAL SALE OF ANY UNITS
PURSUANT TO THIS PROSPECTUS AS HAVING THE SAME TAX BENEFITS WITHOUT REGARD TO
THE UNITS PURCHASED. THE IRS MAY CHALLENGE THIS TREATMENT, WHICH COULD ADVERSELY
AFFECT THE VALUE OF THE UNITS.
Because we cannot match transferors and transferees of limited partnership
units, we will adopt depreciation and amortization positions that do not conform
with all aspects of final Treasury Regulations. A successful IRS challenge to
those positions could adversely affect the amount of tax benefits available to
you. It also could affect the timing of these tax benefits or the amount of gain
from your sale of limited partnership units and could have a negative impact on
the value of the limited partnership units or result in audit adjustments to
your tax returns. Please read "Tax Considerations -- Uniformity of Units" for a
further discussion of the effect of the depreciation and amortization positions
we adopt.
8
YOU WILL LIKELY BE SUBJECT TO STATE AND LOCAL TAXES IN STATES WHERE YOU DO NOT
LIVE AS A RESULT OF AN INVESTMENT IN THE UNITS.
In addition to federal income taxes, you will likely be subject to other
taxes, including state and local taxes, unincorporated business taxes and
estate, inheritance or intangible taxes that are imposed by the various
jurisdictions in which we do business or own property and in which you do not
reside. You may be required to file state and local income tax returns and pay
state and local income taxes in many or all of the jurisdictions in which we do
business. Please read "Tax Considerations -- State, Local and Other Tax
Considerations" for a discussion of the jurisdictions in which we do business or
own property and the jurisdictions in which you will likely be required to file
tax returns. Further, you may be subject to penalties for failure to comply with
those requirements. It is your responsibility to file all United States federal,
state and local tax returns. Our counsel has not rendered an opinion on the
state or local tax consequences of an investment in the limited partnership
units.
9
WHERE YOU CAN FIND MORE INFORMATION
TEPPCO Partners, L.P. and TE Products Pipeline Company, Limited Partnership
file annual, quarterly and other reports and other information with the SEC. You
may read and copy any document we file at the SEC's public reference room at 450
Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-732-0330 for further information on their public reference room. Our SEC
filings are also available at the SEC's web site at http://www.sec.gov. You can
also obtain information about us at the offices of the New York Stock Exchange,
20 Broad Street, New York, New York 10005.
The SEC allows TEPPCO Partners and TE Products to "incorporate by
reference" the information they have filed with the SEC. This means that TEPPCO
Partners and TE Products can disclose important information to you without
actually including the specific information in this prospectus by referring you
to those documents. The information incorporated by reference is an important
part of this prospectus. Information that TEPPCO Partners and TE Products file
later with the SEC will automatically update and may replace information in this
prospectus and information previously filed with the SEC. The documents listed
below and any future filings made with the SEC under Sections 13(a), 13(c), 14,
or 15(d) of the Securities Exchange Act of 1934 are incorporated by reference in
this prospectus until the termination of this offering.
TEPPCO PARTNERS, L.P. (FILE NO. 1-10403)
- Annual Report on Form 10-K for the fiscal year ended December 31, 2001.
- Current Report on Form 8-K filed January 14, 2002.
- Current Report on Form 8-K filed January 28, 2002.
- Current Report on Form 8-K filed February 8, 2002.
- Current Report on Form 8-K filed February 20, 2002.
- Current Report on Form 8-K filed March 12, 2002.
- Current Report on Form 8-K filed March 20, 2002.
- Current Report on Form 8-K filed April 16, 2002.
- The description of the limited partnership units contained in the
Registration Statement on Form 8-A (Registration No. 001 10403),
initially filed December 6, 1989, and any subsequent amendment thereto
filed for the purpose of updating such description.
TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP (FILE NO. 1-13603)
- Annual Report on Form 10-K for the fiscal year ended December 31, 2001.
- Current Report on Form 8-K filed February 20, 2002.
- Current Report on Form 8-K filed April 16, 2002.
You may request a copy of any document incorporated by reference in this
prospectus, at no cost, by writing or calling us at the following address:
Investor Relations Department
TEPPCO Partners, L.P.
TE Products Pipeline Company, Limited Partnership
2929 Allen Parkway
P.O. Box 2521
Houston, Texas 77252-2521
(713) 759-3636
10
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
This prospectus, any accompanying prospectus supplement and the documents
we have incorporated by reference contain forward-looking statements. The words
"believe," "expect," "estimate" and "anticipate" and similar expressions
identify forward-looking statements. Forward-looking statements include those
that address activities, events or developments that we expect or anticipate
will or may occur in the future. These include the following:
- the amount and nature of future capital expenditures,
- business strategy and measures to carry out strategy,
- competitive strengths,
- goals and plans,
- expansion and growth of our business and operations,
- references to intentions as to future matters and
- other similar matters.
A forward-looking statement may include a statement of the assumptions or
bases underlying the forward-looking statement. We believe we have chosen these
assumptions or bases in good faith and that they are reasonable. However, we
caution you that assumed facts or bases almost always vary from actual results,
and the differences between assumed facts or bases and actual results can be
material, depending on the circumstances. When considering forward-looking
statements, you should keep in mind the risk factors set forth under the caption
"Risk Factors" and other cautionary statements in this prospectus, any
prospectus supplement and the documents we have incorporated by reference. We
will not update these statements unless the securities laws require us to do so.
11
TEPPCO PARTNERS
We are a publicly traded Delaware limited partnership engaged in the
transportation of refined products, liquefied petroleum gases and
petrochemicals, the transportation and marketing of crude oil and natural gas
liquids and the gathering of natural gas. The following chart shows our
organization and ownership structure as of the date of this prospectus before
giving effect to this offering. Except in the following chart, the ownership
percentages referred to in this prospectus reflect the approximate effective
ownership interest in us and our subsidiary companies on a combined basis.
Please read "The Subsidiary Guarantors" on page ii for a more detailed
description of our ownership of the Subsidiary Guarantors.
(GRAPH)
---------------------- ----------------------
Duke Energy Phillips Petroleum
Corporation Company
---------------------- ----------------------
| | |
| 69.7% | | 30.3%
| | |
| ---------------------------
| Duke Energy Field
| Services, LLC
| ---------------------------
| |
| | 100%
| |
| ---------------------------
| Texas Eastern Products
| Pipeline Company, LLC
| ---------------------------
| |
13.6% LP | | 2% GP
| |
| --------------------------- 84.4% LP ---------------------
|________ TEPPCO Partners, L.P. _____________ Public Unitholders
--------------------------- ---------------------
| |
100% | |
| |
---------------------- |
TEPPCO GP, Inc. | 99.999%
---------------------- |
| |
0.001% | |
| |
---------------------------
Operating Partnerships
---------------------------
GP = General Partner Interest
LP = Limited Partner Interest
12
USE OF PROCEEDS
Except as otherwise provided in the applicable prospectus supplement, we
will use the net proceeds we receive from the sale of the securities to pay all
or a portion of indebtedness outstanding at the time and to acquire properties
as suitable opportunities arise.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for each of the periods indicated is
as follows:
TWELVE MONTHS ENDED DECEMBER 31,
-------------------------------------
1997 1998 1999 2000 2001
----- ----- ----- ----- -----
Ratio of Earnings to Fixed Charges............. 2.70x 2.72x 3.06x 2.10x 2.79x
For purposes of calculating the ratio of earnings to fixed charges:
- "fixed charges" represent interest expense (including amounts
capitalized), amortization of debt costs and the portion of rental
expense representing the interest factor; and
- "earnings" represent the aggregate of income from continuing operations
(before adjustment for minority interest, extraordinary loss and equity
earnings), fixed charges and distributions from equity investment, less
capitalized interest.
DESCRIPTION OF DEBT SECURITIES
We will issue our debt securities under an Indenture dated February 20,
2002, as supplemented, among us, as issuer, First Union National Bank, as
trustee, and the Subsidiary Guarantors. The debt securities will be governed by
the provisions of the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended. We, the trustee and
the Subsidiary Guarantors may enter into additional supplements to the Indenture
from time to time. If we decide to issue subordinated debt securities, we will
issue them under a separate Indenture containing subordination provisions.
This description is a summary of the material provisions of the debt
securities and the Indentures. We urge you to read the Indenture and the form of
Subordinated Indenture filed as exhibits to the registration statement of which
this prospectus is a part because those Indentures, and not this description,
govern your rights as a holder of debt securities. References in this prospectus
to an "Indenture" refer to the particular Indenture under which we issue a
series of debt securities.
GENERAL
THE DEBT SECURITIES
Any series of debt securities that we issue:
- will be our general obligations;
- will be general obligations of the Subsidiary Guarantors if they are
guaranteed by the Subsidiary Guarantors; and
- may be subordinated to our senior indebtedness and that of the Subsidiary
Guarantors.
The Indenture does not limit the total amount of debt securities that we
may issue. We may issue debt securities under the Indenture from time to time in
separate series, up to the aggregate amount authorized for each such series.
13
We will prepare a prospectus supplement and either an indenture supplement
or a resolution of our Board of Directors and accompanying officers' certificate
relating to any series of debt securities that we offer, which will include
specific terms relating to some or all of the following:
- the form and title of the debt securities;
- the total principal amount of the debt securities;
- the date or dates on which the debt securities may be issued;
- the portion of the principal amount which will be payable if the maturity
of the debt securities is accelerated;
- any right we may have to defer payments of interest by extending the
dates payments are due and whether interest on those deferred amounts
will be payable;
- the dates on which the principal and premium, if any, of the debt
securities will be payable;
- the interest rate which the debt securities will bear and the interest
payment dates for the debt securities;
- any optional redemption provisions;
- any sinking fund or other provisions that would obligate us to repurchase
or otherwise redeem the debt securities;
- whether the debt securities are entitled to the benefits of any
guarantees by the Subsidiary Guarantors;
- whether the debt securities may be issued in amounts other than $1,000
each or multiples thereof;
- any changes to or additional Events of Default or covenants;
- the subordination, if any, of the debt securities and any changes to the
subordination provisions of the Indenture; and
- any other terms of the debt securities.
THIS DESCRIPTION OF DEBT SECURITIES WILL BE DEEMED MODIFIED, AMENDED OR
SUPPLEMENTED BY ANY DESCRIPTION OF ANY SERIES OF DEBT SECURITIES SET FORTH IN A
PROSPECTUS SUPPLEMENT RELATED TO THAT SERIES.
The prospectus supplement will also describe any material United States
federal income tax consequences or other special considerations regarding the
applicable series of debt securities, including those relating to:
- debt securities with respect to which payments of principal, premium or
interest are determined with reference to an index or formula, including
changes in prices of particular securities, currencies or commodities;
- debt securities with respect to which principal, premium or interest is
payable in a foreign or composite currency;
- debt securities that are issued at a discount below their stated
principal amount, bearing no interest or interest at a rate that at the
time of issuance is below market rates; and
- variable rate debt securities that are exchangeable for fixed rate debt
securities.
At our option, we may make interest payments by check mailed to the
registered holders of debt securities or, if so stated in the applicable
prospectus supplement, at the option of a holder by wire transfer to an account
designated by the holder.
Unless otherwise provided in the applicable prospectus supplement, fully
registered securities may be transferred or exchanged at the office of the
trustee at which its corporate trust business is principally
14
administered in the United States, subject to the limitations provided in the
Indenture, without the payment of any service charge, other than any applicable
tax or governmental charge.
Any funds we pay to a paying agent for the payment of amounts due on any
debt securities that remain unclaimed for two years will be returned to us, and
the holders of the debt securities must look only to us for payment after that
time.
THE SUBSIDIARY GUARANTEES
Our payment obligations under any series of debt securities may be jointly
and severally, fully and unconditionally guaranteed by the Subsidiary
Guarantors. If a series of debt securities are so guaranteed, the Subsidiary
Guarantors will execute a notation of guarantee as further evidence of their
guarantee. The applicable prospectus supplement will describe the terms of any
guarantee by the Subsidiary Guarantors.
The obligations of each Subsidiary Guarantor under its guarantee will be
limited to the maximum amount that will not result in the obligations of the
Subsidiary Guarantor under the guarantee constituting a fraudulent conveyance or
fraudulent transfer under federal or state law, after giving effect to:
- all other contingent and fixed liabilities of the Subsidiary Guarantor;
and
- any collections from or payments made by or on behalf of any other
Subsidiary Guarantors in respect of the obligations of the Subsidiary
Guarantor under its guarantee.
The guarantee of any Subsidiary Guarantor may be released under certain
circumstances. If no default has occurred and is continuing under the Indenture,
and to the extent not otherwise prohibited by the Indenture, a Subsidiary
Guarantor will be unconditionally released and discharged from the guarantee:
- automatically upon any sale, exchange or transfer, to any person that is
not our affiliate, of all of our direct or indirect limited partnership
or other equity interests in the Subsidiary Guarantor;
- automatically upon the merger of the Subsidiary Guarantor into us or any
other Subsidiary Guarantor or the liquidation and dissolution of the
Subsidiary Guarantor; or
- following delivery of a written notice by us to the trustee, upon the
release of all guarantees by the Subsidiary Guarantor of any debt of ours
for borrowed money (or a guarantee of such debt), except for any series
of debt securities.
If a series of debt securities is guaranteed by the Subsidiary Guarantors
and is designated as subordinate to our Senior Indebtedness, then the guarantees
by the Subsidiary Guarantors will be subordinated to the Senior Indebtedness of
the Subsidiary Guarantors to substantially the same extent as the series is
subordinated to our Senior Indebtedness. See "-- Subordination."
COVENANTS
REPORTS
The Indenture contains the following covenant for the benefit of the
holders of all series of debt securities:
So long as any debt securities are outstanding, we will:
- for as long as we are required to file information with the SEC pursuant
to the Exchange Act, file with the trustee, within 15 days after we are
required to file with the SEC, copies of the annual report and of the
information, documents and other reports which we are required to file
with the SEC pursuant to the Exchange Act;
- if we are not required to file information with the SEC pursuant to the
Exchange Act, file with the trustee, within 15 days after we would have
been required to file with the SEC, financial statements and a
Management's Discussion and Analysis of Financial Condition and Results
of Operations,
15
both comparable to what we would have been required to file with the SEC
had we been subject to the reporting requirements of the Exchange Act;
and
- if we are required to furnish annual or quarterly reports to our
unitholders pursuant to the Exchange Act, file with the trustee any
annual report or other reports sent to our unitholders generally.
A series of debt securities may contain additional financial and other
covenants applicable to us and our subsidiaries. The applicable prospectus
supplement will contain a description of any such covenants that are added to
the Indenture specifically for the benefit of holders of a particular series.
EVENTS OF DEFAULT, REMEDIES AND NOTICE
EVENTS OF DEFAULT
Each of the following events will be an "Event of Default" under the
Indenture with respect to a series of debt securities:
- default in any payment of interest on any debt securities of that series
when due that continues for 30 days;
- default in the payment of principal of or premium, if any, on any debt
securities of that series when due at its stated maturity, upon
redemption, upon required repurchase or otherwise;
- default in the payment of any sinking fund payment on any debt securities
of that series when due;
- failure by us or, if the series of debt securities is guaranteed by the
Subsidiary Guarantors, by a Subsidiary Guarantor, to comply for 60 days
after notice with the other agreements contained in the Indenture, any
supplement to the Indenture or any board resolution authorizing the
issuance of that series;
- certain events of bankruptcy, insolvency or reorganization of us or, if
the series of debt securities is guaranteed by the Subsidiary Guarantors,
of the Subsidiary Guarantors; or
- if the series of debt securities is guaranteed by the Subsidiary
Guarantors:
- any of the guarantees by the Subsidiary Guarantors ceases to be in full
force and effect, except as otherwise provided in the Indenture;
- any of the guarantees by the Subsidiary Guarantors is declared null and
void in a judicial proceeding; or
- any Subsidiary Guarantor denies or disaffirms its obligations under the
Indenture or its guarantee.
EXERCISE OF REMEDIES
If an Event of Default, other than an Event of Default described in the
fifth bullet point above, occurs and is continuing, the trustee or the holders
of at least 25% in principal amount of the outstanding debt securities of that
series may declare the entire principal of, premium, if any, and accrued and
unpaid interest, if any, on all the debt securities of that series to be due and
payable immediately.
A default under the fourth bullet point above will not constitute an Event
of Default until the trustee or the holders of 25% in principal amount of the
outstanding debt securities of that series notify us and, if the series of debt
securities is guaranteed by the Subsidiary Guarantors, the Subsidiary
Guarantors, of the default and such default is not cured within 60 days after
receipt of notice.
If an Event of Default described in the fifth bullet point above occurs and
is continuing, the principal of, premium, if any, and accrued and unpaid
interest on all outstanding debt securities of all series will become
immediately due and payable without any declaration of acceleration or other act
on the part of the trustee or any holders.
16
The holders of a majority in principal amount of the outstanding debt
securities of a series may:
- waive all past defaults, except with respect to nonpayment of principal,
premium or interest; and
- rescind any declaration of acceleration by the trustee or the holders
with respect to the debt securities of that series,
but only if:
- rescinding the declaration of acceleration would not conflict with any
judgment or decree of a court of competent jurisdiction; and
- all existing Events of Default have been cured or waived, other than the
nonpayment of principal, premium or interest on the debt securities of
that series that have become due solely by the declaration of
acceleration.
If an Event of Default occurs and is continuing, the trustee will be under
no obligation, except as otherwise provided in the Indenture, to exercise any of
the rights or powers under the Indenture at the request or direction of any of
the holders unless such holders have offered to the trustee reasonable indemnity
or security against any costs, liability or expense. No holder may pursue any
remedy with respect to the Indenture or the debt securities of any series,
except to enforce the right to receive payment of principal, premium or interest
when due, unless:
- such holder has previously given the trustee notice that an Event of
Default with respect to that series is continuing;
- holders of at least 25% in principal amount of the outstanding debt
securities of that series have requested that the trustee pursue the
remedy;
- such holders have offered the trustee reasonable indemnity or security
against any cost, liability or expense;
- the trustee has not complied with such request within 60 days after the
receipt of the request and the offer of indemnity or security; and
- the holders of a majority in principal amount of the outstanding debt
securities of that series have not given the trustee a direction that, in
the opinion of the trustee, is inconsistent with such request within such
60-day period.
The holders of a majority in principal amount of the outstanding debt
securities of a series have the right, subject to certain restrictions, to
direct the time, method and place of conducting any proceeding for any remedy
available to the trustee or of exercising any right or power conferred on the
trustee with respect to that series of debt securities. The trustee, however,
may refuse to follow any direction that:
- conflicts with law;
- is inconsistent with any provision of the Indenture;
- the trustee determines is unduly prejudicial to the rights of any other
holder;
- would involve the trustee in personal liability.
NOTICE OF EVENT OF DEFAULT
Within 30 days after the occurrence of an Event of Default, we are required
to give written notice to the trustee and indicate the status of the default and
what action we are taking or propose to take to cure the default. In addition,
we are required to deliver to the trustee, within 120 days after the end of each
fiscal year, a compliance certificate indicating that we have complied with all
covenants contained in the Indenture or whether any default or Event of Default
has occurred during the previous year.
If an Event of Default occurs and is continuing and is known to the
trustee, the trustee must mail to each holder a notice of the Event of Default
by the later of 90 days after the Event of Default occurs or
17
30 days after the trustee knows of the Event of Default. Except in the case of a
default in the payment of principal, premium or interest with respect to any
debt securities, the trustee may withhold such notice, but only if and so long
as the board of directors, the executive committee or a committee of directors
or responsible officers of the trustee in good faith determines that withholding
such notice is in the interests of the holders.
AMENDMENTS AND WAIVERS
We may amend the Indenture without the consent of any holder of debt
securities to:
- cure any ambiguity, omission, defect or inconsistency;
- convey, transfer, assign, mortgage or pledge any property to or with the
trustee;
- provide for the assumption by a successor of our obligations under the
Indenture;
- add Subsidiary Guarantors with respect to the debt securities;
- change or eliminate any restriction on the payment of principal of, or
premium, if any, on, any debt securities;
- secure the debt securities;
- add covenants for the benefit of the holders or surrender any right or
power conferred upon us or any Subsidiary Guarantor;
- make any change that does not adversely affect the rights of any holder;
- add or appoint a successor or separate trustee; or
- comply with any requirement of the Securities and Exchange Commission in
connection with the qualification of the Indenture under the Trust
Indenture Act.
In addition, we may amend the Indenture if the holders of a majority in
principal amount of all debt securities of each series that would be affected
then outstanding under the Indenture consent to it. We may not, however, without
the consent of each holder of outstanding debt securities of each series that
would be affected, amend the Indenture to:
- reduce the percentage in principal amount of debt securities of any
series whose holders must consent to an amendment;
- reduce the rate of or extend the time for payment of interest on any debt
securities;
- reduce the principal of or extend the stated maturity of any debt
securities;
- reduce the premium payable upon the redemption of any debt securities or
change the time at which any debt securities may or shall be redeemed;
- make any debt securities payable in other than U.S. dollars;
- impair the right of any holder to receive payment of premium, principal
or interest with respect to such holder's debt securities on or after the
applicable due date;
- impair the right of any holder to institute suit for the enforcement of
any payment with respect to such holder's debt securities;
- release any security that has been granted in respect of the debt
securities;
- make any change in the amendment provisions which require each holder's
consent;
- make any change in the waiver provisions; or
- release a Subsidiary Guarantor or modify such Subsidiary Guarantor's
guarantee in any manner adverse to the holders.
18
The consent of the holders is not necessary under the Indenture to approve
the particular form of any proposed amendment. It is sufficient if such consent
approves the substance of the proposed amendment. After an amendment under the
Indenture becomes effective, we are required to mail to all holders a notice
briefly describing the amendment. The failure to give, or any defect in, such
notice, however, will not impair or affect the validity of the amendment.
The holders of a majority in aggregate principal amount of the outstanding
debt securities of each affected series, on behalf of all such holders, and
subject to certain rights of the trustee, may waive:
- compliance by us or a Subsidiary Guarantor with certain restrictive
provisions of the Indenture; and
- any past default under the Indenture, subject to certain rights of the
trustee under the Indenture;
except that such majority of holders may not waive a default:
- in the payment of principal, premium or interest; or
- in respect of a provision that under the Indenture cannot be amended
without the consent of all holders of the series of debt securities that
is affected.
DEFEASANCE
At any time, we may terminate, with respect to debt securities of a
particular series all our obligations under such series of debt securities and
the Indenture, which we call a "legal defeasance." If we decide to make a legal
defeasance, however, we may not terminate our obligations:
- relating to the defeasance trust;
- to register the transfer or exchange of the debt securities;
- to replace mutilated, destroyed, lost or stolen debt securities; or
- to maintain a registrar and paying agent in respect of the debt
securities.
IF WE EXERCISE OUR LEGAL DEFEASANCE OPTION, ANY SUBSIDIARY GUARANTEE WILL
TERMINATE WITH RESPECT TO THAT SERIES OF DEBT SECURITIES.
At any time we may also effect a "covenant defeasance," which means we have
elected terminate our obligations under:
- covenants applicable to a series of debt securities and described in the
prospectus supplement applicable to such series, other than as described
in such prospectus supplement;
- the bankruptcy provisions with respect to the Subsidiary Guarantors, if
any; and
- the guarantee provision described under "Events of Default" above with
respect to a series of debt securities.
We may exercise our legal defeasance option notwithstanding our prior
exercise of our covenant defeasance option. If we exercise our legal defeasance
option, payment of the affected series of debt securities may not be accelerated
because of an Event of Default with respect to that series. If we exercise our
covenant defeasance option, payment of the affected series of debt securities
may not be accelerated because of an Event of Default specified in the fourth,
fifth (with respect only to a Subsidiary Guarantor (if any)) or sixth bullet
points under "-- Events of Default" above or an Event of Default that is added
specifically for such series and described in a prospectus supplement.
In order to exercise either defeasance option, we must:
- irrevocably deposit in trust with the trustee money or certain U.S.
government obligations for the payment of principal, premium, if any, and
interest on the series of debt securities to redemption or maturity, as
the case may be;
19
- comply with certain other conditions, including that no default has
occurred and is continuing after the deposit in trust; and
- deliver to the trustee of an opinion of counsel to the effect that
holders of the series of debt securities will not recognize income, gain
or loss for federal income tax purposes as a result of such defeasance
and will be subject to federal income tax on the same amount and in the
same manner and at the same times as would have been the case if such
deposit and defeasance had not; occurred. In the case of legal defeasance
only, such opinion of counsel must be based on a ruling of the Internal
Revenue Service or other change in applicable federal income tax law.
NO PERSONAL LIABILITY OF GENERAL PARTNER
Texas Eastern Products Pipeline Company, LLC, our general partner, and its
directors, officers, employees, incorporators and stockholders, as such, will
not be liable for:
- any of our obligations or the obligations of the Subsidiary Guarantors
under the debt securities, the Indentures or the guarantees; or
- any claim based on, in respect of, or by reason of, such obligations or
their creation.
By accepting a debt security, each holder will be deemed to have waived and
released all such liability. This waiver and release are part of the
consideration for our issuance of the debt securities. This waiver may not be
effective, however, to waive liabilities under the federal securities laws and
it is the view of the Securities and Exchange Commission that such a waiver is
against public policy.
SUBORDINATION
Debt securities of a series may be subordinated to our "Senior
Indebtedness," which we define generally to include all notes or other evidences
of indebtedness for money, including guarantees, borrowed by us or, if
applicable to any series of outstanding debt securities, the Subsidiary
Guarantors, that are not expressly subordinate or junior in right of payment to
any of our or any Subsidiary Guarantor's other indebtedness. Subordinated debt
securities will be subordinate in right of payment, to the extent and in the
manner set forth in the Indenture and the prospectus supplement relating to such
series, to the prior payment of all of our indebtedness and that of any
Subsidiary Guarantor that is designated as "Senior Indebtedness" with respect to
the series.
The holders of Senior Indebtedness of ours or, if applicable, a Subsidiary
Guarantor, will receive payment in full of the Senior Indebtedness before
holders of subordinated debt securities will receive any payment of principal,
premium or interest with respect to the subordinated debt securities:
- upon any payment or distribution of our assets or, if applicable to any
series of outstanding debt securities, the Subsidiary Guarantors' assets,
to creditors;
- upon a total or partial liquidation or dissolution of us or, if
applicable to any series of outstanding debt securities, the Subsidiary
Guarantors; or
- in a bankruptcy, receivership or similar proceeding relating to us or, if
applicable to any series of outstanding debt securities, to the
Subsidiary Guarantors.
Until the Senior Indebtedness is paid in full, any distribution to which
holders of subordinated debt securities would otherwise be entitled will be made
to the holders of Senior Indebtedness, except that such holders may receive
units representing limited partner interests and any debt securities that are
subordinated to Senior Indebtedness to at least the same extent as the
subordinated debt securities.
20
If we do not pay any principal, premium or interest with respect to Senior
Indebtedness within any applicable grace period (including at maturity), or any
other default on Senior Indebtedness occurs and the maturity of the Senior
Indebtedness is accelerated in accordance with its terms, we may not:
- make any payments of principal, premium, if any, or interest with respect
to subordinated debt securities;
- make any deposit for the purpose of defeasance of the subordinated debt
securities; or
- repurchase, redeem or otherwise retire any subordinated debt securities,
except that in the case of subordinated debt securities that provide for
a mandatory sinking fund, we may deliver subordinated debt securities to
the trustee in satisfaction of our sinking fund obligation,
unless, in either case,
- the default has been cured or waived and the declaration of acceleration
has been rescinded;
- the Senior Indebtedness has been paid in full in cash; or
- we and the trustee receive written notice approving the payment from the
representatives of each issue of "Designated Senior Indebtedness."
Generally, "Designated Senior Indebtedness" will include:
- indebtedness for borrowed money under a bank credit agreement, called
"Bank Indebtedness";
- any specified issue of Senior Indebtedness of at least $100 million; and
- any other indebtedness for borrowed money that we may designate.
During the continuance of any default, other than a default described in
the immediately preceding paragraph, that may cause the maturity of any Senior
Indebtedness to be accelerated immediately without further notice, other than
any notice required to effect such acceleration, or the expiration of any
applicable grace periods, we may not pay the subordinated debt securities for a
period called the "Payment Blockage Period." A Payment Blockage Period will
commence on the receipt by us and the trustee of written notice of the default,
called a "Blockage Notice," from the representative of any Designated Senior
Indebtedness specifying an election to effect a Payment Blockage Period.
The Payment Blockage Period may be terminated before its expiration:
- by written notice from the person or persons who gave the Blockage
Notice;
- by repayment in full in cash of the Senior Indebtedness with respect to
which the Blockage Notice was given; or
- if the default giving rise to the Payment Blockage Period is no longer
continuing.
UNLESS THE HOLDERS OF SENIOR INDEBTEDNESS SHALL HAVE ACCELERATED THE MATURITY OF
THE SENIOR INDEBTEDNESS, WE MAY RESUME PAYMENTS ON THE SUBORDINATED DEBT
SECURITIES AFTER THE EXPIRATION OF THE PAYMENT BLOCKAGE PERIOD.
Generally, not more than one Blockage Notice may be given in any period of
360 consecutive days unless the first Blockage Notice within the 360-day period
is given by holders of Designated Senior Indebtedness, other than Bank
Indebtedness, in which case the representative of the Bank Indebtedness may give
another Blockage Notice within the period. The total number of days during which
any one or more Payment Blockage Periods are in effect, however, may not exceed
an aggregate of 179 days during any period of 360 consecutive days.
After all Senior Indebtedness is paid in full and until the subordinated
debt securities are paid in full, holders of the subordinated debt securities
shall be subrogated to the rights of holders of Senior Indebtedness to receive
distributions applicable to Senior Indebtedness.
21
As a result of the subordination provisions described above, in the event
of insolvency, the holders of Senior Indebtedness, as well as certain of our
general creditors, may recover more, ratably, than the holders of the
subordinated debt securities.
BOOK ENTRY, DELIVERY AND FORM
We may issue debt securities of a series in the form of one or more global
certificates deposited with a depositary. We expect that The Depository Trust
Company, New York, New York, or "DTC," will act as depositary. If we issue debt
securities of a series in book-entry form, we will issue one or more global
certificates that will be deposited with DTC and will not issue physical
certificates to each holder. A global security may not be transferred unless it
is exchanged in whole or in part for a certificated security, except that DTC,
its nominees and their successors may transfer a global security as a whole to
one another.
DTC will keep a computerized record of its participants, such as a broker,
whose clients have purchased the debt securities. The participants will then
keep records of their clients who purchased the debt securities. Beneficial
interests in global securities will be shown on, and transfers of beneficial
interests in global securities will be made only through, records maintained by
DTC and its participants.
DTC advises us that it is:
- a limited-purpose trust company organized under the New York Banking Law;
- a "banking organization" within the meaning of the New York Banking Law;
- a member of the United States Federal Reserve System;
- a "clearing corporation" within the meaning of the New York Uniform
Commercial Code; and
- a "clearing agency" registered under the provisions of Section 17A of the
Securities Exchange Act of 1934.
DTC IS OWNED BY A NUMBER OF ITS PARTICIPANTS AND BY THE NEW YORK STOCK EXCHANGE,
INC., THE AMERICAN STOCK EXCHANGE, INC. AND THE NATIONAL ASSOCIATION OF
SECURITIES DEALERS, INC. THE RULES THAT APPLY TO DTC AND ITS PARTICIPANTS ARE ON
FILE WITH THE SECURITIES AND EXCHANGE COMMISSION.
DTC holds securities that its participants deposit with DTC. DTC also
records the settlement among participants of securities transactions, such as
transfers and pledges, in deposited securities through computerized records for
participants' accounts. This eliminates the need to exchange certificates.
Participants include securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations.
We will wire principal, premium, if any, and interest payments due on the
global securities to DTC's nominee. We, the trustee and any paying agent will
treat DTC's nominee as the owner of the global securities for all purposes.
Accordingly, we, the trustee and any paying agent will have no direct
responsibility or liability to pay amounts due on the global securities to
owners of beneficial interests in the global securities.
It is DTC's current practice, upon receipt of any payment of principal,
premium, if any, or interest, to credit participants' accounts on the payment
date according to their respective holdings of beneficial interests in the
global securities as shown on DTC's records. In addition, it is DTC's current
practice to assign any consenting or voting rights to participants, whose
accounts are credited with debt securities on a record date, by using an omnibus
proxy.
Payments by participants to owners of beneficial interests in the global
securities, as well as voting by participants, will be governed by the customary
practices between the participants and the owners of beneficial interests, as is
the case with debt securities held for the account of customers registered in
"street name." Payments to holders of beneficial interests are the
responsibility of the participants and not of DTC, the trustee or us.
22
Beneficial interests in global securities will be exchangeable for
certificated securities with the same terms in authorized denominations only if:
- DTC notifies us that it is unwilling or unable to continue as depositary
or if DTC ceases to be a clearing agency registered under applicable law
and a successor depositary is not appointed by us within 90 days; or
- we determine not to require all of the debt securities of a series to be
represented by a global security and notify the trustee of our decision.
THE TRUSTEE
We may appoint a separate trustee for any series of debt securities. We use
the term "trustee" to refer to the trustee appointed with respect to any such
series of debt securities. We may maintain banking and other commercial
relationships with the trustee and its affiliates in the ordinary course of
business, and the trustee may own debt securities.
GOVERNING LAW
The Indenture and the debt securities will be governed by, and construed in
accordance with, the laws of the State of New York.
CASH DISTRIBUTIONS
GENERAL
We hold all of our assets and conduct all of our operations through our
subsidiaries. Our subsidiaries will generate all of our Cash from Operations.
The distribution of that cash from our subsidiaries to us is expected to be our
principal source of Available Cash, as described below, from which we will make
distributions. Available Cash means generally, with respect to any calendar
quarter, the sum of all of our cash receipts plus net reductions to cash
reserves less the sum of all of our cash disbursements and net additions to cash
reserves. Cash from Operations, which is determined on a cumulative basis,
generally means all cash generated by our operations, after deducting related
cash expenditures, reserves and other items specified in our partnership
agreement. It also includes the $20 million cash balance we had on the date of
our initial public offering in 1990. The full definitions of Available Cash and
Cash from Operations are set forth in "-- Defined Terms."
Our subsidiary partnerships must, under their partnership agreements,
distribute 100% of their available cash. Available cash is defined in the
subsidiary partnership agreements in substantially the same manner as it is in
our partnership agreement. Our limited liability company subsidiaries have
adopted a dividend policy under which all available cash is to be distributed.
Accordingly, the following paragraphs describing distributions to unitholders
and the general partner, and the percentage interests in our distributions, are
stated on the basis of cash available for distribution by us and our
subsidiaries on a combined basis.
We will make distributions to unitholders and the general partner with
respect to each calendar quarter in an amount equal to 100% of our Available
Cash for the quarter, except in connection with our dissolution and liquidation.
Distributions of our Available Cash will be made 98% to unitholders and 2% to
the general partner, subject to the payment of incentive distributions to the
general partner, if specified target levels of cash distributions to the
unitholders are achieved. The general partner's incentive distributions are
described below under "-- Quarterly Distributions of Available
Cash -- Distributions of Cash from Operations."
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The following table sets forth the amount of distributions of Available
Cash constituting Cash from Operations effected with respect to the units for
the quarters in the periods shown.
AMOUNT
RECORD DATE PAYMENT DATE PER UNIT
- ----------- ---------------- --------
January 29, 1999......................................... February 5, 1999 0.450
April 30, 1999........................................... May 7, 1999 0.450
July 30, 1999............................................ August 6, 1999 0.475
October 29, 1999......................................... November 5, 1999 0.475
January 31, 2000......................................... February 4, 2000 0.475
April 28, 2000........................................... May 5, 2000 0.500
July 31, 2000............................................ August 4, 2000 0.500
October 31, 2000......................................... November 3, 2000 0.525
January 31, 2001......................................... February 2, 2001 0.525
April 30, 2001........................................... May 4, 2001 0.525
July 31, 2001............................................ August 6, 2001 0.525
October 31, 2001......................................... November 5, 2001 0.575
January 31, 2002......................................... February 8, 2002 0.575
Cash distributions are characterized as either distributions of Cash from
Operations or Cash from Interim Capital Transactions. This distinction is
important because it affects the amount of cash that is distributed to the
unitholders relative to the general partner. See "-- Quarterly Distributions of
Available Cash -- Distributions of Cash from Operations" and "-- Quarterly
Distributions of Available Cash -- Distributions of Cash from Interim Capital
Transactions" below. We will ordinarily generate Cash from Interim Capital
Transactions from:
- borrowings and sales of debt securities other than for working capital
purposes;
- sales of equity interests; and
- sales or other dispositions of our assets.
All Available Cash that we distribute on any date from any source will be
treated as if it were a distribution of Cash from Operations until the sum of
all Available Cash distributed as Cash from Operations to the unitholders and to
the general partner equals the aggregate amount of all Cash from Operations that
we generated since we commenced operations through the end of the prior calendar
quarter.
Any remaining Available Cash distributed on that date will be treated as if
it were a distribution of Cash from Interim Capital Transactions, except as
otherwise set forth below under the caption "-- Quarterly Distributions of
Available Cash -- Distributions of Cash from Interim Capital Transactions."
A more complete description of how we will distribute cash before we
commence to dissolve or liquidate is set forth below under "-- Quarterly
Distributions of Available Cash." Distributions of cash in connection with our
dissolution and liquidation will be made as described below under
"-- Distributions of Cash Upon Liquidation."
QUARTERLY DISTRIBUTIONS OF AVAILABLE CASH
DISTRIBUTIONS OF CASH FROM OPERATIONS
Our distributions of Available Cash that constitutes Cash from Operations
in respect of any calendar quarter will be made in the following priorities:
- first, 98% to all unitholders pro rata and 2% to the general partner
until all unitholders have received distributions of $0.275 per unit for
such calendar quarter (the "First Target Distribution");
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- second, 85% to all unitholders pro rata and 15% to the general partner
until all unitholders have received distributions of $0.325 per unit for
such calendar quarter (the "Second Target Distribution");
- third, 75% to all unitholders pro rata and 25% to the general partner
until all unitholders have received distributions of $0.450 per unit for
such calendar quarter (the "Third Target Distribution" and, together with
the First Target Distribution and Second Target Distribution, the "Target
Distributions"); and
- thereafter, 50% to all unitholders pro rata and 50% to the general
partner.
The following table illustrates the percentage allocation of distributions
of Available Cash that constitute Cash from Operations among the unitholders and
the general partner up to the various target distribution levels.
MARGINAL PERCENTAGE
INTEREST IN
DISTRIBUTIONS
---------------------
GENERAL
QUARTERLY AMOUNT: UNITHOLDERS PARTNER
- ----------------- ----------- -------
up to $0.275................................................ 98% 2%
$0.276 to $0.325............................................ 85% 15%
$0.326 to $0.450............................................ 75% 25%
Thereafter.................................................. 50% 50%
The Target Distributions are each subject to adjustment as described below
under "-- Adjustment of the Target Distributions."
DISTRIBUTIONS OF CASH FROM INTERIM CAPITAL TRANSACTIONS
Distributions of Available Cash that constitute Cash from Interim Capital
Transactions will be distributed 99% to all unitholders pro rata and 1% to the
general partner until a hypothetical holder of a unit acquired in our initial
public offering has received, with respect to that unit, distributions of
Available Cash constituting Cash from Interim Capital Transactions in an amount
per unit equal to $20.00. Thereafter, all Available Cash will be distributed as
if it were Cash from Operations. We have not distributed any Available Cash that
constitutes Cash from Interim Capital Transactions.
ADJUSTMENT OF THE TARGET DISTRIBUTIONS
The Target Distributions will be proportionately adjusted in the event of
any combination or subdivision of units. In addition, if a distribution is made
of Available Cash constituting Cash from Interim Capital Transactions, the
Target Distributions will also be adjusted proportionately downward to equal the
product resulting from multiplying each of them by a fraction, of which the
numerator shall be the Unrecovered Capital immediately after giving effect to
such distribution and the denominator shall be the Unrecovered Capital
immediately before such distribution. For these purposes, "Unrecovered Capital"
means, at any time, an amount equal to the excess of (1) $10.00 over (2) the sum
of all distributions theretofore made in respect of a hypothetical unit offered
in our initial public offering out of Available Cash constituting Cash from
Interim Capital Transactions and all distributions in connection with our
liquidation.
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The Target Distributions also may be adjusted if legislation is enacted
that causes us to be taxable as a corporation or to be treated as an association
taxable as a corporation for federal income tax purposes. In that event, the
Target Distributions for each quarter thereafter would be reduced to an amount
equal to the product of each of the Target Distributions multiplied by 1 minus
the sum of:
- the maximum marginal federal corporate income tax rate, plus
- any increase that results from such legislation in the effective overall
state and local income tax rate applicable to us for the taxable year in
which such quarter occurs after taking into account the benefit of any
deduction allowable for federal income tax purposes with respect to the
payment of state and local income taxes.
DISTRIBUTIONS OF CASH UPON LIQUIDATION
We will dissolve on December 31, 2084, unless we are dissolved at an
earlier date pursuant to the terms of our partnership agreement. The proceeds of
our liquidation shall be applied first in accordance with the provisions of our
partnership agreement and applicable law to pay our creditors in the order of
priority provided by law. Thereafter, any remaining proceeds will be distributed
to unitholders and the general partner as set forth below. Upon our liquidation,
unitholders are entitled to share with the general partner in the remainder of
our assets. Their sharing will be in proportion to their capital account
balances, after giving effect to the following allocations of any gain or loss
realized from sales or other dispositions of assets following commencement of
our liquidation. Gain or loss will include any unrealized gain or loss
attributable to assets distributed in kind. Any such gain will be allocated as
follows:
- first, to each partner having a deficit balance in his capital account in
the proportion that the deficit balance bears to the total deficit
balances in the capital accounts of all partners until each partner has
been allocated gain equal to that deficit balance;
- second, 100% to the partners in accordance with their percentage
interests until the capital account in respect of each unit then
outstanding is equal to the Unrecovered Capital attributable to that
unit.
- third, 100% to the partners in accordance with their percentage interests
until the per-unit capital account in respect of each unit is equal to
the sum of
- the Unrecovered Capital attributable to that unit, plus
- any cumulative arrearages in the payment of the Minimum Quarterly
Distribution in respect of that unit for any quarter after December 31,
1994;
- fourth, 85% to all unitholders pro rata and 15% to the general partner
until the capital account of each outstanding unit is equal to the sum of
- the Unrecovered Capital with respect to that unit, plus
- any cumulative arrearages in the payment of the Minimum Quarterly
Distribution in respect of that unit for any quarter after December 31,
1994, plus
- the excess of:
(a) the First Target Distribution over the Minimum Quarterly
Distribution for each quarter of our existence, less
(b) the amount of any distributions of Cash from Operations in excess
of the Minimum Quarterly Distribution which were distributed 85% to the
unitholders pro rata and 15% to the general partner for each quarter of our
existence ((a) less (b) being the "Target Amount");
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- fifth, 75% to all unitholders pro rata and 25% to the general partner,
until the capital account of each outstanding unit is equal to the sum of
- the Unrecovered Capital with respect to that unit, plus
- the Target Amount, plus
- the excess of:
(a) the Second Target Distribution over the First Target Distribution
for each quarter of our existence, less
(b) the amount of any distributions of Cash from Operations in excess
of the First Target Distribution which were distributed 75% to the
unitholders pro rata and 25% to the general partner for each quarter of our
existence ((a) less (b) being the "Second Target Amount");
- thereafter, any then-remaining gain would be allocated 50% to all
unitholders pro rata and 50% to the general partner.
For these purposes, "Unrecovered Capital" means, at any time with respect
to any units,
- $10, less
- the sum of:
- any distributions of Available Cash constituting Cash from Interim
Capital Transactions, and
- any distributions of cash and the fair value of any assets distributed
in kind in connection with our dissolution and liquidation theretofore
made in respect of a unit that was sold in the initial offering of the
units.
Any loss realized from sales or other dispositions of assets following
commencement of our dissolution and liquidation, including any unrealized gain
or loss attributable to assets distributed in kind, will be allocated to the
general partner and the unitholders: first, in proportion to the positive
balances in the partners' capital accounts until all balances are reduced to
zero; and second, to the general partner.
DEFINED TERMS
"Available Cash" means, with respect to any calendar quarter, the sum of:
- all our cash receipts during that quarter from all sources, including
distributions of cash received from subsidiaries, plus
- any reduction in reserves established in prior quarters,
- less the sum of:
- all our cash disbursements during that quarter, including, disbursements
for taxes on us as an entity, debt service and capital expenditures,
- any reserves established in that quarter in such amounts as the general
partner shall determine to be necessary or appropriate in its reasonable
discretion
(a) to provide for the proper conduct of our business, including
reserves for future rate refunds or capital expenditures, or
(b) to provide funds for distributions with respect to any of the next
four calendar quarters, and
- any other reserves established in that quarter in such amounts as the
general partner determines in its reasonable discretion to be necessary
because the distribution of such amounts would be prohibited by
applicable law or by any loan agreement, security agreement, mortgage,
debt instrument or other agreement or obligation to which we are a party
or by which we are bound or our assets are subject.
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Taxes that we pay on behalf of, or amounts withheld with respect to, less
than all of the unitholders shall not be considered cash disbursements by us
that reduce "Available Cash" but will be deemed a distribution of Available Cash
to those partners. Alternatively, in the discretion of our general partner,
those taxes that pertain to all partners may be considered to be cash
disbursements which reduce Available Cash and which will not be deemed to be a
distribution of Available Cash to the partners. Notwithstanding the foregoing,
"Available Cash" will not include any cash receipts or reductions in reserves or
take into account any disbursements made or reserves established after
commencement of our dissolution and liquidation.
"Cash from Interim Capital Transactions" means all cash distributed other
than Cash from Operations.
"Cash from Operations" means, at any date but before the commencement of
our dissolution and liquidation, on a cumulative basis,
- $20 million plus
- all our cash receipts during the period since the commencement of our
operations through that date, excluding any cash proceeds from any
Interim Capital Transactions or Termination Capital Transactions,
less the sum of:
(a) all our cash operating expenditures during that period including,
without limitation, taxes imposed on us as an entity,
(b) all our cash debt service payments during that period other than:
- payments or prepayments of principal and premium required by reason of
loan agreements or by lenders in connection with sales or other
dispositions of assets all cash distributed other than Cash from
Operations, and
- payments or prepayments of principal and premium made in connection
with refinancings or refundings of indebtedness, provided that any
payment or prepayment or principal, whether or not then due, shall be
determined at the election and in the discretion of the general
partner, to be refunded or refinanced by any indebtedness incurred or
to be incurred by us simultaneously with or within 180 days before or
after that payment or prepayment to the extent of the principal amount
of such indebtedness so incurred,
(c) all our cash capital expenditures during that period other than:
- cash capital expenditures made to increase the throughput or
deliverable capacity or terminaling capacity of our assets, taken as a
whole, from the throughput or deliverable capacity or terminaling
capacity existing immediately before those capital expenditures and
- cash expenditures made in payment of transaction expenses relating to
Interim Capital Transactions,
(d) an amount equal to the incremental revenues collected pursuant to
a rate increase that are subject to possible refund,
(e) any reserves outstanding as of that date that the general partner
determines in its reasonable discretion to be necessary or appropriate to
provide for the future cash payment of items of the type referred to in (a)
through (c) above, and
(f) any reserves that the general partner determines to be necessary
or appropriate in its reasonable discretion to provide funds for
distributions with respect to any one or more of the next four calendar
quarters, all as determined on a consolidated basis and after elimination
of intercompany items and the general partner's interest in our
subsidiaries.
"Interim Capital Transactions" means our
28
- borrowings and sales of debt securities other than for working capital
purposes and other than for items purchased on open account in the
ordinary course of business,
- sales of partnership interests, and
- sales or other voluntary or involuntary dispositions of any assets other
than:
- sales or other dispositions of inventory in the ordinary course of
business,
- sales or other dispositions of other current assets including
receivables and accounts or
- sales or other dispositions of assets as a part of normal retirements or
replacements,
in each case before the commencement of our dissolution and liquidation.
TAX CONSIDERATIONS
This section was prepared by Fulbright & Jaworski L.L.P., our tax counsel,
and addresses all material United States federal income tax consequences to
prospective unitholders who are individual citizens or residents of the United
States, and unless otherwise noted, this section is our tax counsel's opinion
with respect to the matters set forth except for statements of fact and the
representations and estimates of the results of future operations included in
this discussion which are the expression of our general partner and as to which
no opinion is expressed. Our tax counsel bases its opinions on its
interpretation of the Internal Revenue Code of 1986, as amended (the "Code"),
and existing and proposed Treasury Regulations issued thereunder, judicial
decisions, administrative rulings, the facts set forth in this prospectus and
factual representations made by the general partner. Our tax counsel's opinions
are subject to both the accuracy of such facts and the continued applicability
of such legislative, administrative and judicial authorities, all of which
authorities are subject to changes and interpretations that may or may not be
retroactively applied.
It is impractical to comment on all aspects of federal, state, local and
foreign laws that may affect the tax consequences of the transactions
contemplated by the sale of units made by this prospectus and of an investment
in such units. Moreover, this discussion focuses on unitholders who are
individual citizens or residents of the United States and has only limited
application to taxpayers such as corporations, estates, nonresident aliens or
other unitholders subject to specialized tax treatment, such as tax-exempt
entities, foreign persons, regulated investment companies and insurance
companies. Accordingly, we encourage each prospective unitholder to consult, and
rely on, his own tax advisor in analyzing the federal, state, local and foreign
tax consequences peculiar to him with respect to the ownership and disposition
of units.
We have not requested a ruling from the Internal Revenue Service (the
"IRS") with respect to our classification as a partnership for federal income
tax purposes or any other matter affecting us. An opinion of counsel represents
only that counsel's best legal judgment and does not bind the IRS or the courts.
Accordingly, the IRS may adopt positions that differ from our tax counsel's
conclusions expressed herein. We may need to resort to administrative or court
proceedings to sustain some or all of our tax counsel's conclusions, and some or
all of these conclusions ultimately may not be sustained. Any contest of this
sort with the IRS may materially and adversely impact the market for the units
and the prices at which units trade. In addition the costs of any contest with
the IRS will be borne directly or indirectly by the unitholders and the general
partner. Furthermore, neither we nor our tax counsel can assure you that the tax
consequences of investing in units will not be significantly modified by future
legislation, administrative changes or court decisions, which may or may not be
retroactively applied.
For the reasons described below, our tax counsel has not rendered an
opinion with respect to the following specific federal income tax issues:
- the treatment of a unitholder whose common units are loaned to a short
seller to cover a short sale of common units (please read "-- Tax
Consequences of Unit Ownership -- Treatment of Short Sales and
Constructive Sales of Appreciated Financial Positions");
29
- whether our monthly convention for allocating taxable income and losses
is permitted by existing Treasury Regulations (please read
"-- Disposition of Limited Partner Units -- Allocations Between
Transferors and Transferees");
- whether our method for depreciating Section 743 adjustments is
sustainable (please read "-- Tax Consequences of Unit
Ownership -- Section 754 Election"); and
- whether assignees of units who are entitled to execute and deliver
transfer applications, but who fail to execute and deliver transfer
applications, are our partners (please read "-- Partner Status").
PARTNERSHIP STATUS
A partnership is not a taxable entity and incurs no federal income tax
liability. Instead, each partner of a partnership is required to take into
account in computing his federal income tax liability his allocable share of the
partnership's items of income, gain, loss and deduction, regardless of whether
cash distributions are made to him by the partnership. Distributions by a
partnership to a partner are generally not taxable unless the amount of cash
distributed is in excess of the partner's adjusted basis in his partnership
interest.
Our tax counsel is of the opinion that under present law, and subject to
the conditions and qualifications set forth below, both we and each of our
subsidiary partnerships are and will continue to be classified as a partnership
for federal income tax purposes. Our tax counsel's opinion as to our
classification as a partnership and that of each of our subsidiary partnerships
is based principally on tax counsel's interpretation of the factors set forth in
Treasury Regulations under Sections 7701 and 7704 of the Code, its
interpretation of Section 7704 of the Code and upon representations made by our
general partner.
The Treasury Regulations under Section 7701 pertaining to the
classification of entities such as us as partnerships or associations taxable as
corporations for federal income tax purposes were significantly revised
effective January 1, 1997. Pursuant to these revised Treasury Regulations, known
as the "check-the-box" regulations, entities organized as limited partnerships
under domestic partnership statutes are treated as partnerships for federal
income tax purposes unless they elect to be treated as associations taxable as
corporations. For taxable years beginning after January 1, 1997, domestic
limited partnerships that were in existence prior to January 1, 1997 are deemed
to have elected to continue their classification under the Treasury Regulations
in force prior to January 1, 1997, unless they formally elect another
classification. Neither we nor our subsidiary partnerships have filed an
election to be treated as an association taxable as a corporation under the
"check-the-box" regulations, and our tax counsel has rendered its opinion that
we and our subsidiary partnerships were classified as partnerships on December
31, 1996 under the prior Treasury Regulations.
Notwithstanding the "check-the-box" regulations under Section 7701 of the
Code, Section 7704 of the Code provides that publicly traded partnerships shall,
as a general rule, be taxed as corporations despite the fact that they are not
classified as corporations under Section 7701 of the Code. Section 7704 of the
Code provides an exception to this general rule for a publicly traded
partnership if 90% or more of its gross income for every taxable year consists
of "qualifying income" (the "Qualifying Income Exception"). For purposes of this
exception, "qualifying income" includes income and gains derived from the
exploration, development, mining or production, processing, refining,
transportation (including pipelines) or marketing of any mineral or natural
resource. Other types of "qualifying income" include interest, dividends, real
property rents, gains from the sale of real property, including real property
held by one considered to be a "dealer" in such property, and gains from the
sale or other disposition of capital assets held for the production of income
that otherwise constitutes "qualifying income". We have represented that 90% or
more of our gross income, as determined for purposes of the Qualifying Income
Exception, has been and will be derived from fees and charges for transporting
natural gas, refined petroleum products, natural gas liquids, carbon dioxide and
other hydrocarbons through our pipelines, dividends, and interest. We estimate
that less than 10% of our income is not qualifying income; however, this
estimate could change from time to time.
30
In rendering its opinion as to periods before 1997 that we and our
subsidiary partnerships were each classified as a partnership for federal income
tax purposes, our tax counsel has relied on the following factual
representations that the general partner made about us and our subsidiary
partnerships:
- As to us and each of our subsidiary partnerships, the general partner at
all times while acting as general partner had a net worth of at least
$5.0 million computed by excluding any net worth attributable to its
interest in, and accounts and notes receivable from, or payable to, us or
any limited partnership in which it is a general partner.
- Each such partnership operated and will continue to operate in accordance
with applicable state partnership statutes, the partnership agreements
and the statements and representations made in this prospectus.
- Except as otherwise required by Section 704(c) of the Code, the general
partner of each partnership had at least a 1% interest in each material
item of income, gain, loss, deduction and credit of its respective
partnership.
- For each taxable year, 90% or more of our gross income was from sources
that, in our counsel's opinion, generated "qualified income" within the
meaning of Section 7704 of the Code.
- Our general partner and the general partner of each of our subsidiary
partnerships acted independently of the limited partners of such
partnerships.
Our tax counsel has rendered its opinion as to taxable years beginning
after 1996 relying on the accuracy of the second and fourth representations
listed above together with the further representation by the general partner
that neither we nor any of our subsidiary partnerships has or will elect to be
treated as an association taxable as a corporation pursuant to the
"check-the-box" regulations.
Our tax counsel's opinion as to the classification of us and our subsidiary
partnerships as partnerships for federal income tax purposes is also based on
the assumption that if the general partner ceases to be a general partner, any
successor general partner will make and satisfy such representations. In this
regard, if the general partner were to withdraw as a general partner at a time
when there is no successor general partner, or if the successor general partner
could not satisfy the above representations, then the IRS might attempt to
classify us or a subsidiary partnership as an association taxable as a
corporation.
If we fail to meet the Qualifying Income Exception to the general rule of
Section 7704 of the Code, other than a failure which is determined by the IRS to
be inadvertent and which is cured within a reasonable time after discovery, we
will be treated as if we had transferred all of our assets, subject to
liabilities, to a newly formed corporation on the first day of the year in which
we fail to meet the Qualifying Income Exception in return for stock in such
corporation, and then distributed such stock to the unitholders in liquidation
of their units. This contribution and liquidation should be tax-free to the
unitholders and us so long as we, at that time, do not have liabilities in
excess of the tax basis of our assets. Thereafter, we would be classified as an
association taxable as a corporation for federal income tax purposes.
If we were taxable as a corporation in any year, our items of income, gain,
loss, deduction, and credit would be reflected only on our tax return rather
than being passed through to our unitholders, and our net income would be taxed
at corporate rates. In addition, any distribution made to a unitholder would be
treated as either:
- dividend income to the extent of our current or accumulated earnings and
profits;
- in the absence of earnings and profits, as a nontaxable return of capital
to the extent of the unitholder's tax basis in his units; or
- taxable capital gain, after the unitholder's tax basis in his units is
reduced to zero.
31
Accordingly, our classification as an association taxable as a corporation
would result in a material reduction in a unitholder's cash flow and after-tax
return, and thus, would likely result in a substantial reduction in the value of
a unitholder's units.
PARTNER STATUS
Unitholders who have become our limited partners pursuant to the provisions
of our partnership agreement will be treated as our partners for federal income
tax purposes. Moreover, the IRS has ruled that assignees of limited partnership
interests who have not been admitted to a partnership as limited partners, but
who have the capacity to exercise substantial dominion and control over the
assigned partnership interests, will be treated as partners for federal income
tax purposes. On the basis of this ruling, except as otherwise described herein,
(1) assignees who have executed and delivered transfer applications, and are
awaiting admission as limited partners, and (2) unitholders whose units are held
in street name or by another nominee will be treated as our partners for federal
income tax purposes. As there is no direct authority addressing assignees of
units who are entitled to execute and deliver transfer applications, but who
fail to execute and deliver transfer applications, the tax status of such
unitholders is unclear and our tax counsel expresses no opinion with respect to
the status of such assignees. Such unitholders should consult their own tax
advisors with respect to their status as partners for federal income tax
purposes. A purchaser or other transferee of units who does not execute and
deliver a transfer application may not receive federal income tax information or
reports furnished to record holders of units unless the units are held in a
nominee or street name account and the nominee or broker executes and delivers a
transfer application with respect to such units.
A beneficial owner of units whose units have been transferred to a short
seller to complete a short sale would appear to lose his status as a partner
with respect to such units for federal income tax purposes. These holders should
consult with their own tax advisors with respect to their status as partners for
federal income tax purposes. Please read "-- Tax Consequences of Unit
Ownership -- Treatment of Short Sales and Constructive Sales of Appreciated
Financial Positions".
Our items of income, gain, deduction, loss, and credit would not appear to
be reportable by a unitholder who is not a partner for federal income tax
purposes, and any cash distributions received by a unitholder who is not a
partner for federal income tax purposes would therefore be fully taxable as
ordinary income. These unitholders should consult their own tax advisors with
respect to their status as our partner.
TAX CONSEQUENCES OF UNIT OWNERSHIP
FLOW-THROUGH OF TAXABLE INCOME
We will not pay any federal income tax. Our items of income, gain, loss,
deduction and credit will consist of our allocable share of the income, gains,
losses, deductions and credits of our subsidiary partnerships and dividends from
our corporate subsidiaries. Each unitholder will be required to take into
account his allocable share of our items of income, gain, loss, deduction, and
credit for our taxable year ending within his taxable year without regard to
whether we make any cash distributions to him. Consequently, a unitholder may be
allocated income from us although he has not received a cash distribution from
us.
TREATMENT OF DISTRIBUTIONS
Our distributions generally will not be taxable to a unitholder for federal
income tax purposes to the extent of his tax basis in his units immediately
before the distribution. Cash distributions in excess of such tax basis
generally will be considered to be gain from the sale or exchange of the units,
taxable in accordance with the rules described under "-- Disposition of Limited
Partner Units". Any reduction in a unitholder's share of our nonrecourse
liabilities included in his tax basis in his units will be treated as a
distribution of cash to such unitholder. Please read "-- Tax Consequences of
Unit Ownership -- Tax Basis of Units". If a unitholder's percentage interest
decreases because we offer additional units, then such
32
unitholder's share of nonrecourse liabilities will decrease, and this will
result in a corresponding deemed distribution of cash. To the extent our
distributions cause a unitholder's "at risk" amount to be less than zero at the
end of any taxable year, he must recapture any losses deducted in previous
years. Please read "-- Tax Consequences of Unit Ownership -- Limitations on
Deductibility of Losses".
A non-pro rata distribution of money or property may result in ordinary
income to a unitholder, regardless of his tax basis in his units, if such
distribution reduces the unitholder's share of our "unrealized receivables,"
including depreciation recapture, and/or "inventory items" (as both are defined
in Section 751 of the Code) (collectively, "Section 751 Assets"). To that
extent, the unitholder will be treated as having received his proportionate
share of the Section 751 Assets and having exchanged such assets with us in
return for the non-pro rata portion of the actual distribution made to him. This
latter deemed exchange will generally result in the unitholder's realization of
ordinary income under Section 751(b) of the Code. Such income will equal the
excess of (1) the non-pro rata portion of such distribution over (2) the
unitholder's tax basis for the share of such Section 751 Assets deemed
relinquished in the exchange.
RATIO OF TAXABLE INCOME TO DISTRIBUTIONS
We estimate that a purchaser of units in this offering who owns those units
from the date of closing of this offering through , will be
allocated an amount of federal taxable income for that period that will be less
than % of the cash distributed with respect to that period. We anticipate
that after the taxable year ending , , the ratio of
allocable taxable income to cash distributions to the unitholders will increase.
These estimates are based upon the assumption that gross income from operations
will approximate the amount required to make the minimum quarterly distribution
on all units and other assumptions with respect to capital expenditures, cash
flow and anticipated cash distributions. These estimates and assumptions are
subject to, among other things, numerous business, economic, regulatory,
competitive and political uncertainties beyond our control. Further, the
estimates are based on current tax law and tax reporting positions that we will
adopt and with which the IRS could disagree. Accordingly, we cannot assure you
that these estimates will prove to be correct. The actual percentage of
distributions that will constitute taxable income could be higher or lower, and
any differences could be material and could materially affect the value of the
units.
TAX BASIS OF UNITS
A unitholder's tax basis in his units initially will be equal to the amount
paid for the units plus his share of our liabilities that are without recourse
to any partner ("nonrecourse liabilities"), if any. A unitholder's share of our
nonrecourse liabilities will generally be based on his share of our profits.
Please read "-- Disposition of Limited Partner Units -- Gain or Loss in
General". A unitholder's basis will be increased by the unitholder's share of
our income and by any increase in the unitholder's share of our nonrecourse
liabilities. A unitholder's basis in his units will be decreased, but not below
zero, by his share of our distributions, his share of decreases in our
nonrecourse liabilities, his share of our losses and his share of our
nondeductible expenditures that are not required to be capitalized.
LIMITATIONS ON DEDUCTIBILITY OF LOSSES
A unitholder may not deduct from taxable income his share of our losses, if
any, to the extent that such losses exceed the lesser of (1) the adjusted tax
basis of his units at the end of our taxable year in which the loss occurs and
(2) in the case of an individual unitholder, a shareholder of a corporate
unitholder that is an "S" corporation and a corporate unitholder if 50% or more
of the value of the corporation's stock is owned directly or indirectly by five
or fewer individuals, the amount for which the unitholder is considered "at
risk" at the end of that year. In general, a unitholder will initially be "at
risk" to the extent of the purchase price of his units. A unitholder's "at risk"
amount increases or decreases as his tax basis in his units increases or
decreases, except that our nonrecourse liabilities, or increases or decreases in
such liabilities, are not included in a unitholder's "at risk" amount. A
unitholder must recapture losses deducted in previous years to the extent that
distributions cause his "at risk" amount to be
33
less than zero at the end of any taxable year. Losses disallowed to a unitholder
or recaptured as a result of these limitations can be carried forward and will
be allowable to the unitholder to the extent that his tax basis or "at risk"
amount, whichever was the limiting factor, is increased in a subsequent year.
Upon a taxable disposition of a unit, any gain recognized by a unitholder can be
offset by losses that were previously suspended by the "at risk" limitation, but
may not be offset by losses suspended by the basis limitation. Any excess loss
above that gain previously suspended by the "at risk" or basis limitation is no
longer utilizable.
In addition to the foregoing limitations, the passive loss limitations
generally provide that individuals, estates, trusts and closely held
corporations and personal service corporations can deduct losses from passive
activities, which are generally activities in which the taxpayer does not
materially participate, only to the extent of the taxpayer's income from those
passive activities. The passive loss limitations are applied separately with
respect to each publicly traded partnership. Consequently, any passive losses
that we generate will only be available to offset future income that we generate
and will not be available to offset income from other passive activities or
investments, including other publicly traded partnerships, or salary or active
business income. The passive activity loss rules are applied after other
applicable limitations on deductions, such as the "at risk" and basis limitation
rules discussed above. Suspended passive losses that are not used to offset a
unitholder's allocable share of our income may be deducted in full when the
unitholder disposes of his entire investment in us to an unrelated party in a
fully taxable transaction.
LIMITATIONS ON INTEREST DEDUCTIONS
The deductibility of a non-corporate taxpayer's "investment interest
expense" is generally limited to the amount of such taxpayer's "net investment
income". The IRS has announced that Treasury Regulations will be issued that
characterize "net passive income" from a publicly traded partnership as
"investment income" for purposes of the limitations on the deductibility of
"investment interest expense," and until such Treasury Regulations are issued,
"net passive income" from publicly traded partnerships shall be treated as
"investment income". In addition, a unitholder's share of our portfolio income
will be treated as "investment income". "Investment interest expense" includes:
- interest on indebtedness properly allocable to property held for
investment;
- a partnership's interest expense attributed to portfolio income; and
- the portion of interest expense incurred to purchase or carry an interest
in a passive activity to the extent attributable to portfolio income.
The computation of a unitholder's "investment interest expense" will take
into account interest on any margin account borrowing or other loan incurred to
purchase or carry a unit. "Net investment income" includes gross income from
property held for investment and amounts treated as portfolio income pursuant to
the passive loss rules less deductible expense, other than interest, directly
connected with the production of investment income, but generally does not
include gains attributable to the disposition of property held for investment.
ALLOCATION OF INCOME, GAIN, LOSS AND DEDUCTION
In general, if we have a net profit, items of income, gain, loss and
deduction will be allocated among the general partner and the unitholders in
accordance with their respective percentage interests in us. If we have a net
loss, items of income, gain, loss and deduction will generally be allocated (1)
first, to the general partner and the unitholders in accordance with their
respective percentage interests in us to the extent of their positive capital
accounts, and (2) second, to the general partner.
Notwithstanding the above, as required by Section 704(c) of the Code,
specified items of income, gain, loss and deduction will be allocated to account
for the difference between the tax basis and fair market value of property
contributed to us by the general partner and its affiliates ("Contributed
Property") and our property that has been revalued and reflected in the
partners' capital accounts upon the issuance of units prior to this offering
("Adjusted Property"). In addition, items of recapture income will
34
be allocated to the extent possible to the partner allocated the deduction
giving rise to the treatment of such gain as recapture income. Although we
expect that these allocations of recapture income will be respected under
Treasury Regulations, if they are not respected, the amount of the income or
gain allocated to a unitholder will not change, but instead a change in the
character of the income allocated to a unitholder would result. Finally,
although we do not expect that our operations will result in the creation of
negative capital accounts, if negative capital accounts nevertheless result,
items of our income and gain will be allocated in an amount and manner
sufficient to eliminate the negative balance as quickly as possible.
An allocation of our items of income, gain, loss, deduction, and credit,
other than an allocation required by the Code to eliminate the difference
between a unitholder's "book" capital account, credited with the fair market
value of Contributed Property, and "tax" capital account, credited with the tax
basis of Contributed Property, referred to in this discussion as the "Book-Tax
Disparity," will generally be given effect for federal income tax purposes in
determining a unitholder's distributive share of an item of income, gain, loss
or deduction only if the allocation has "substantial economic effect" under the
Treasury Regulations. In any other case, a unitholder's distributive share of an
item will be determined on the basis of the unitholder's interest in us, which
will be determined by taking into account all the facts and circumstances,
including the unitholder's relative contributions to us, the interests of all
the unitholders in profits and losses, the interest of all the unitholders in
cash flow and other nonliquidating distributions and rights of all the
unitholders to distributions of capital upon liquidation.
Under the Code, partners in a partnership cannot be allocated more
depreciation, gain or loss than the total amount of any such item recognized by
that partnership in a particular taxable period (the "ceiling limitation"). This
"ceiling limitation" is not expected to have significant application to
allocations with respect to Contributed Property, and thus, is not expected to
prevent our unitholders from receiving allocations of depreciation, gain or loss
from such properties equal to that which they would have received had such
properties actually had a basis equal to fair market value at the outset.
However, to the extent the ceiling limitation is or becomes applicable, our
partnership agreement requires that certain items of income and deduction be
allocated in a way designed to effectively "cure" this problem and eliminate the
impact of the ceiling limitation. Such allocations will not have substantial
economic effect because they will not be reflected in the capital accounts of
our unitholders.
The legislative history of Section 704(c) of the Code states that Congress
anticipated that Treasury Regulations would permit partners to agree to a more
rapid elimination of Book-Tax Disparities than required provided there is no tax
avoidance potential. Further, under Final Treasury Regulations under Section
704(c) of the Code, allocations similar to our curative allocations would be
allowed. However, since the Final Treasury Regulations are not applicable to us,
Counsel is unable to opine on the validity of our curative allocations.
SECTION 754 ELECTION
We and our subsidiary partnerships have each made the election permitted by
Section 754 of the Code, which is irrevocable without the consent of the IRS.
Such election will generally permit us to adjust a unit purchaser's tax basis in
our properties ("inside basis") pursuant to Section 743(b) of the Code. The
Section 754 election only applies to a person who purchases units from a
unitholder, and the Section 743(b) adjustment belongs solely to such purchaser.
Thus, for purposes of determining income, gains, losses and deductions, the
purchaser will have a special basis for those of our properties that are
adjusted under Section 743(b) of the Code.
Generally, the amount of the Section 743(b) adjustment is the difference
between a partner's tax basis in his partnership interest and the partner's
proportionate share of the common basis of the partnership's properties
attributable to such partnership interest. Therefore, the calculations and
adjustments in connection with determining the amount of the Section 743(b)
adjustment depend on, among other things, the date on which a transfer occurs
and the price at which the transfer occurs. To help reduce the complexity of
those calculations and the resulting administrative cost to us, we will apply
35
the following method to determine the Section 743(b) adjustment for transfers of
units made after this offering: the price paid by a transferee for his units
will be deemed to be the lowest quoted trading price for the units during the
calendar month in which the transfer was deemed to occur, without regard to the
actual price paid. The application of such convention yields a less favorable
tax result, as compared to adjustments based on actual price, to a transferee
who paid more than the "convention price" for his units.
It is possible that the IRS could successfully assert that our method for
determining the Section 743(b) adjustment amount does not meet the requirements
of the Code or the applicable Treasury Regulations and require us to use a
different method. Should the IRS require us to use a different method and
should, in our opinion, the expense of compliance exceed the benefit of the
Section 754 election, we may seek permission from the IRS to revoke our Section
754 election. Such a revocation may increase the ratio of a unitholder's
allocable share of taxable income to cash distributions and, therefore, could
adversely affect the value of a unitholder's units.
The allocation of the Section 743(b) adjustment among our assets is complex
and will be made on the basis of assumptions as to the value of our assets and
other matters. We cannot assure you that the allocations we make will not be
successfully challenged by the IRS and that the deductions resulting from such
allocations will not be reduced or disallowed altogether. For example, the IRS
could seek to reallocate some or all of any Section 743(b) adjustment allocated
by us to our tangible assets to intangible assets instead, such as goodwill,
which, as an intangible asset, is generally amortizable over a longer period of
time and under a less accelerated method than our tangible assets. Should the
IRS require a different allocation of the Section 743(b) adjustment be made, and
should, in our opinion, the expense of compliance exceed the benefit of the
election, we may seek permission from the IRS to revoke our Section 754
election. If permission is granted, a subsequent purchaser of units may be
allocated more income than he would have been allocated had the election not
been revoked, and therefore, such revocation could adversely affect the value of
a unitholder's units.
Treasury Regulations under Sections 743 and 197 of the Code generally
require, unless the remedial allocation method is adopted, that the Section
743(b) adjustment attributable to recovery property to be depreciated as if the
total amount of such adjustment were attributable to newly-purchased recovery
property placed in service when the unit transfer occurs. The remedial
allocation method can be adopted only with respect to property contributed to a
partnership on or after December 21, 1993, and a significant part of our assets
were acquired by contribution to us before that date. Under Treasury Regulation
Section 1.167(c)-1(a)(6), a Section 743(b) adjustment attributable to property
subject to depreciation under Section 167 of the Code rather than cost-recovery
deductions under Section 168 generally is required to be depreciated using
either the straight-line method or the 150 percent declining-balance method. We
utilize the 150 percent declining-balance method on such property. The
depreciation and amortization methods and useful lives associated with the
Section 743(b) adjustment, therefore, may differ from the methods and useful
lives generally used to depreciate the common basis in such properties. This
difference could adversely affect the continued uniformity of the intrinsic tax
characteristics of our units. To avoid such a lack of uniformity, we have
adopted an accounting convention under Section 743(b) to preserve the uniformity
of units despite its inconsistency with these Treasury Regulations. Please read
"-- Uniformity of Units".
Although our tax counsel is unable to opine as to the validity of such an
approach because there is no clear authority on this issue, we depreciate the
portion of a Section 743(b) adjustment attributable to unrealized appreciation
in the value of Contributed Property, to the extent of any unamortized Book-Tax
Disparity, using a rate of depreciation or amortization derived from the
depreciation or amortization method and useful life applied to the common basis
of such property, despite its inconsistency with the Treasury Regulations
described above. To the extent a Section 743(b) adjustment is attributable to
appreciation in value in excess of the unamortized Book-Tax Disparity, we will
apply the rules described in the Treasury Regulations. If we determine that this
position cannot reasonably be taken, we may take a depreciation or amortization
position under which all purchasers acquiring units in the same month would
receive depreciation or amortization, whether attributable to common basis or a
Section 743(b) adjustment, based upon the same applicable rate as if they had
purchased a direct interest in our assets.
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This kind of aggregate approach may result in lower annual depreciation or
amortization deductions than would otherwise be allowable to some unitholders.
Please read "-- Uniformity of Units".
A Section 754 election is advantageous if the transferee's tax basis in his
units is higher than the units' share of the aggregate tax basis of our assets
immediately prior to the transfer. In that case, as a result of the election,
the transferee would have, among other items, a greater amount of depreciation
and depletion deductions and his share of any gain or loss on a sale of our
assets would be less. Conversely, a Section 754 election is disadvantageous if
the transferee's tax basis in his units is lower than those units' share of the
aggregate tax basis of our assets immediately prior to the transfer. Thus, the
fair market value of the units may be affected either favorably or unfavorably
by the election.
TREATMENT OF SHORT SALES AND CONSTRUCTIVE SALES OF APPRECIATED FINANCIAL
POSITIONS
Taxpayers are required to recognize gain but not loss on constructive sales
of appreciated financial positions, which would include a constructive sale of
units. Constructive sales include short sales of the same or substantially
identical property, entering into a notional principal contract on the same or
substantially identical property, and entering into a futures or forward
contract to deliver the same or substantially identical property. Thus, gain
would be triggered if a unitholder entered into a contract to sell his or her
units for a fixed price on a future date. If a constructive sale occurs, the
taxpayer must recognize gain as if the appreciated financial position were sold,
assigned or otherwise terminated at its fair market value on the date of the
constructive sale. Adjustments for the gain recognized on the constructive sale
are made in the amount of any gain or loss later realized by the taxpayer with
respect to the position.
It would appear that a unitholder whose units are loaned to a "short
seller" to cover a short sale of units would be considered as having transferred
beneficial ownership of such units and would no longer be a partner with respect
to such units during the period of such loan. As a result, during such period,
any of our items of income, gain, loss, and deductions with respect to such
units would appear not to be reportable by such unitholder, any cash
distributions the unitholder receives with respect to such units would be fully
taxable and all of such distributions would appear to be treated as ordinary
income. The IRS also may contend that a loan of units to a "short seller"
constitutes a taxable exchange, and if such a contention were successfully made,
the lending unitholder may be required to recognize gain or loss.
Our tax counsel has not rendered an opinion regarding the treatment of a
unitholder whose units are loaned to a short seller to cover a short sale of
units. Unitholders desiring to assure their status as partners should modify any
applicable brokerage account agreements to prohibit their brokers from borrowing
their units. The IRS announced that it is actively studying issues relating to
the tax treatment of short sales of partnership interests. Please read
"-- Disposition of Limited Partner Units -- Gain or Loss in General".
ALTERNATIVE MINIMUM TAX
Each unitholder will be required to take into account his share of any
items of our income, gain, loss and deduction for purposes of the alternative
minimum tax. A portion of our depreciation deductions may be treated as an item
of tax preference for this purpose. A unitholder's alternative minimum taxable
income derived from us may be higher than his share of our net income because we
may use more accelerated methods of depreciation for purposes of computing
federal taxable income or loss. Each prospective unitholder should consult with
his tax advisors as to the impact of an investment in units on his liability for
the alternative minimum tax.
TREATMENT OF OPERATIONS
ACCOUNTING METHOD AND TAXABLE YEAR
We use the year ending December 31 as our taxable year and the accrual
method of accounting for federal income tax purposes. Each unitholder will be
required to include in income his share of our income, gain, loss and deduction
for our taxable year ending within or with his taxable year. In addition, a
unitholder who has a taxable year ending on a date other than December 31 and
who disposes of all of his
37
units following the close of our taxable year but before the close of his
taxable year must include his share of our items of income, gain, loss and
deduction in income for his taxable year, with the result that he will be
required to include in income for his taxable year his share of more than one
year of our items of income, gain, loss and deduction. Please read
"-- Disposition of Limited Partner Units -- Allocations Between Transferors and
Transferees".
INITIAL TAX BASIS, DEPRECIATION AND AMORTIZATION
The tax basis of our assets will be used for purposes of computing
depreciation and cost recovery deductions and, ultimately, gain or loss on the
disposition of these assets. The federal income tax burden associated with the
difference between the fair market value of our assets and their tax basis
immediately prior to this offering will be borne by the general partner and its
affiliates and unitholders acquiring units prior to this offering. Please read
"-- Tax Consequences of Unit Ownership -- Allocation of Income, Gain, Loss and
Deduction".
To the extent allowable, we may elect to use the depreciation and cost
recovery methods that will result in the largest deductions being taken in the
early years after assets are placed in service. We are not entitled to any
amortization deductions with respect to any goodwill conveyed to us on
formation. Property we subsequently acquire or construct may be depreciated
using accelerated methods permitted by the Code.
If we dispose of depreciable property by sale, foreclosure or otherwise,
all or a portion of any gain, determined by reference to the amount of
depreciation previously deducted and the nature of the property, may be subject
to the recapture rules and taxed as ordinary income rather than capital gain.
Similarly, a unitholder who has taken cost recovery or depreciation deductions
with respect to property we own will likely be required to recapture some or all
of those deductions as ordinary income upon a sale of his units. Please read
"-- Tax Consequences of Unit Ownership -- Allocation of Income, Gain, Loss and
Deduction" and "-- Disposition of Limited Partner Units -- Gain or Loss in
General".
The costs incurred in selling our units (called "syndication expenses")
must be capitalized and cannot be deducted currently, ratably or upon our
termination. There are uncertainties regarding the classification of costs as
organization expenses, which may be amortized by us, and as syndication
expenses, which may not be amortized by us. The underwriting discounts and
commissions we incur will be treated as a syndication expenses.
ESTIMATES OF RELATIVE FAIR MARKET VALUES AND BASIS OF PROPERTIES
The federal income tax consequences of the acquisition, ownership and
disposition of units will depend in part on estimates by us as to the relative
fair market values and determinations of the initial tax bases of our assets.
Although we may consult from time to time with professional appraisers regarding
valuation matters, we will make many of the relative fair market value estimates
ourselves. These estimates and determinations of basis may be subject to
challenge and will not be binding on the IRS or the courts. If the estimates of
fair market value or determinations of basis were found to be incorrect, the
character and amount of items of income, gain, loss and deduction previously
reported by unitholders might change, and unitholders might be required to amend
their previously filed tax returns for prior years and incur interest and
penalties with respect to those adjustments. Please read "-- Treatment of
Operations -- Initial Tax Basis, Depreciation and Amortization".
DISPOSITION OF LIMITED PARTNER UNITS
GAIN OR LOSS IN GENERAL
If a unit is sold or otherwise disposed of, the determination of gain or
loss from the sale or other disposition will be based on the difference between
the amount realized and the unitholder's tax basis for such unit. A unitholder's
"amount realized" will be measured by the sum of the cash or the fair market
value of other property received plus the portion of our nonrecourse liabilities
allocated to the units sold.
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To the extent that the amount realized exceeds the unitholder's basis for the
units disposed of, the unitholder will recognize gain. Because the amount
realized includes the portion of our nonrecourse liabilities allocated to the
units sold, the tax liability resulting from such gain could exceed the amount
of cash received upon the disposition of such units. Please read "-- Tax
Consequences of Unit Ownership -- Tax Basis of Units".
Except as noted below, gain or loss recognized by a unitholder, other than
a "dealer" in units, on the sale or exchange of a unit held for more than one
year will generally be taxable as capital gain or loss. A portion of this gain
or loss, however, will be separately computed and taxed as ordinary income or
loss under Section 751 of the Code to the extent attributable to assets giving
rise to depreciation recapture or other "unrealized receivables" or to
"inventory items" we own. Ordinary income attributable to unrealized
receivables, inventory items and depreciation recapture may exceed net taxable
gain realized upon the sale of a unit and may be recognized even if there is a
net taxable loss realized on the sale of a unit. Thus, a unitholder may
recognize both ordinary income and a capital loss upon a sale of units. Net
capital loss may offset capital gains and no more than $3,000 of ordinary
income, in the case of individuals, and may only be used to offset capital gain
in the case of corporations.
The IRS has ruled that a partner who acquires interests in a partnership in
separate transactions must combine those interests and maintain a single
adjusted tax basis for all those interests. Upon a sale or other disposition of
less than all of those interests, a portion of that tax basis must be allocated
to the interests sold using an "equitable apportionment" method. Although the
ruling is unclear as to how the holding period of these interests is determined
once they are combined, the Treasury Regulations allow a selling unitholder who
can identify units transferred with an ascertainable holding period to elect to
use the actual holding period of the units transferred. Thus, according to the
ruling, a unitholder will be unable to select high or low basis units to sell as
would be the case with corporate stock, but, according to the Treasury
Regulations, may designate specific units sold for purposes of determining the
holding period of units transferred. A unitholder electing to use the actual
holding period of units transferred must consistently use that identification
method for all subsequent sales or exchanges of units. A unitholder considering
the purchase of additional units or a sale of units purchased in separate
transactions should consult his tax advisor as to the possible consequences of
this ruling and application of the Treasury Regulations.
Specific provisions of the Code affect the taxation of some financial
products and securities, including partnership interests, by treating a taxpayer
as having sold an "appreciated" partnership interest, one in which gain would be
recognized if it were sold, assigned or terminated at its fair market value, if
the taxpayer or related persons enter(s) into:
- a short sale;
- an offsetting notional principal contract; or
- a futures or forward contract with respect to the partnership interest or
substantially identical property.
Moreover, if a taxpayer has previously entered into a short sale, an
offsetting notional principal contract or a futures or forward contract with
respect to the partnership interest, the taxpayer will be treated as having sold
that position if the taxpayer or a related person then acquires the partnership
interest or substantially identical property. The Secretary of the Treasury is
also authorized to issue Treasury Regulations that treat a taxpayer that enters
into transactions or positions that have substantially the same effect as the
preceding transactions as having constructively sold the financial position.
ALLOCATIONS BETWEEN TRANSFERORS AND TRANSFEREES
In general, our taxable income and losses are determined annually and are
prorated on a monthly basis and subsequently apportioned among the unitholders
in proportion to the number of units owned by them as of the opening of the NYSE
on the first business day of the month. However, gain or loss realized on a sale
or other disposition of our assets other than in the ordinary course of business
is
39
allocated among the unitholders of record as of the opening of the NYSE on the
first business day of the month in which such gain or loss is recognized. As a
result of this monthly allocation, a unitholder transferring units in the open
market may be allocated items of income, gain, loss and deduction realized after
the date of transfer.
The use of the monthly conventions discussed above may not be permitted by
existing Treasury Regulations and, accordingly, our tax counsel is unable to
opine on the validity of the method of allocating income and deductions between
the transferors and transferees of units. If the IRS treats transfers of units
as occurring throughout each month and a monthly convention is not allowed by
the Treasury Regulations, the IRS may contend that our taxable income or losses
must be reallocated among the unitholders. If any such contention were
sustained, the tax liabilities of some unitholders would be adjusted to the
possible detriment of other unitholders. The general partner is authorized to
revise our method of allocation (1) between transferors and transferees and (2)
as among unitholders whose interests otherwise vary during a taxable period, to
comply with any future Treasury Regulations.
A unitholder who owns units at any time during a quarter and who disposes
of such units prior to the record date set for a cash distribution with respect
to such quarter will be allocated items of our income, gain, loss and deduction
attributable to such quarter but will not be entitled to receive that cash
distribution.
NOTIFICATION REQUIREMENTS
A unitholder who sells or exchanges units is required to notify us in
writing of that sale or exchange within 30 days after the sale or exchange. We
are required to notify the IRS of that transaction and to furnish specified
information to the transferor and transferee. However, these reporting
requirements do not apply to a sale by an individual who is a citizen of the
United States and who effects the sale or exchange through a broker.
Additionally, a transferor and a transferee of a unit will be required to
furnish statements to the IRS, filed with their income tax returns for the
taxable year in which the sale or exchange occurred, that describe the amount of
the consideration received for the unit that is allocated to our goodwill or
going concern value. Failure to satisfy these reporting obligations may lead to
the imposition of substantial penalties.
CONSTRUCTIVE TERMINATION
We will be considered to have been terminated for federal income tax
purposes if there is a sale or exchange of 50% or more of our units within a
twelve-month period, and our constructive termination would cause a termination
of each of our subsidiary partnerships. A constructive termination results in
the closing of our taxable year for all unitholders. In the case of a unitholder
reporting on a taxable year other than a fiscal year ending December 31, the
closing of our taxable year may result in more than twelve-months of our taxable
income or loss being includable in his taxable income for the year of
termination. We would be required to make new tax elections after a termination,
including a new election under Section 754 of the Code, and a termination would
result in a deferral of our deductions for depreciation. A termination could
also result in penalties if we were unable to determine that the termination had
occurred. Moreover, a termination might either accelerate the application of, or
subject us to, any tax legislation enacted before the termination.
UNIFORMITY OF UNITS
Because we cannot match transferors and transferees of units, we must
maintain uniformity of the economic and tax characteristics of the units to a
purchaser of these units. Without uniformity in the intrinsic tax
characteristics of units sold pursuant to this offering and units we issue
before or after this offering, our compliance with several federal income tax
requirements, both statutory and regulatory, could be substantially diminished,
and non-uniformity of our units could have a negative impact on the ability of a
unitholder to dispose of his units. A lack of uniformity can result from a
literal application of Treasury Regulation section 1.167(c)-1(a)(6) and Treasury
Regulations under Sections 197 and 743 of the Code
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and from the application of the "ceiling limitation" on our ability to make
allocations to eliminate Book-Tax Disparities attributable to Contributed
Property and Adjusted Property.
We depreciate and amortize the portion of a Section 743(b) adjustment
attributable to unrealized appreciation in the value of Contributed Property and
Adjusted Property, to the extent of any unamortized Book-Tax Disparity, using a
rate of depreciation or amortization derived from the depreciation or
amortization method and useful life applied to the common basis of such property
or treat that portion as nonamortizable, to the extent attributable to property
the common basis of which is not amortizable, despite its inconsistency with the
Treasury Regulations. Please read "-- Tax Consequences of Unit
Ownership -- Section 754 Election".
If we determine that our adopted depreciation and amortization conventions
cannot reasonably be taken, we may adopt a depreciation and amortization
position under which all purchasers acquiring units in the same month would
receive depreciation and amortization deductions, whether attributable to a
common basis or Section 743(b) adjustment, based upon the same applicable rate
as if they had purchased a direct interest in our property. If this latter
position is adopted, it may result in lower annual depreciation and amortization
deductions than would otherwise be allowable to some unitholders and risk the
loss of depreciation and amortization deductions not taken in the year that
these deductions are otherwise allowable. This position will not be adopted if
we determine that the loss of depreciation and amortization deductions will have
a material adverse effect on the unitholders. If we choose not to utilize this
aggregate method, we may use any other reasonable depreciation and amortization
method to preserve the uniformity of the intrinsic economic and tax
characteristics of any units that would not have a material adverse effect on
the unitholders. The IRS may challenge any method of depreciating the Section
743(b) adjustment described in this paragraph. If this challenge were sustained,
the uniformity of units might be affected, and the gain from the sale of units
might be increased without the benefit of additional deductions. Please read
"-- Disposition of Limited Partner Units -- Gain or Loss in General".
TAX-EXEMPT ENTITIES, REGULATED INVESTMENT COMPANIES AND FOREIGN INVESTORS
Ownership of units by employee benefit plans, other tax exempt
organizations, nonresident aliens, foreign corporations, other foreign persons
and regulated investment companies may raise issues unique to such persons and,
as described below, may have substantial adverse tax consequences.
Employee benefit plans and most other organizations exempt from federal
income tax, including individual retirement accounts and other retirement plans,
are subject to federal income tax on unrelated business taxable income.
Virtually all of the taxable income such an organization derives from the
ownership of a unit will be unrelated business taxable income and thus will be
taxable to such a unitholder.
Regulated investment companies are required to derive 90% or more of their
gross income from interest, dividends, gains from the sale of stocks, securities
or foreign currency or other qualifying income. We do not anticipate that any
significant amount of our gross income will be qualifying income for regulated
investment companies purposes.
Nonresident aliens and foreign corporations, trusts or estates that acquire
units will be considered to be engaged in business in the United States on
account of ownership of such units and as a consequence will be required to file
federal tax returns in respect of their distributive shares of our income,
gains, losses and deductions and pay federal income tax at regular rates, net of
credits including withholding, on such income. Generally, a partnership is
required to pay a withholding tax on the portion of the partnership's income
that is effectively connected with the conduct of a United States trade or
business and that is allocable to the foreign partners, regardless of whether
any actual distributions have been made to such partners. However, under rules
applicable to publicly traded partnerships, we will withhold on actual cash
distributions made quarterly to foreign unitholders at the highest effective
rate applicable to individuals. Each foreign unitholder must obtain a taxpayer
identification number from the IRS and submit that number to our transfer agent
on a Form W-8 in order to obtain credit for the taxes withheld. A change in
applicable law may require us to change these procedures.
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Because a foreign corporation that owns units will be treated as engaged in
a United States trade or business, such a unitholder may be subject to United
States branch profits tax at a rate of 30%, in addition to regular federal
income tax, on its allocable share of our earnings and profits, as adjusted for
changes in the foreign corporation's "U.S. net equity," that are effectively
connected with the conduct of a United States trade or business. Such a tax may
be reduced or eliminated by an income tax treaty between the United States and
the country with respect to which the foreign corporate unitholder is a
"qualified resident". In addition, such a unitholder is subject to special
information reporting requirements under Section 6038C of the Code.
The IRS has ruled that a foreign partner who sells or otherwise disposes of
a partnership interest will be subject to federal income tax on gain realized on
the disposition of such partnership interest to the extent that such gain is
effectively connected with a United States trade or business of the foreign
partner. We do not expect that any material portion of any gain from the sale of
a unit will avoid United States taxation. Moreover, a gain of a foreign
unitholder will be subject to United States income tax if that foreign
unitholder has held more than 5% in value of the units during the five-year
period ending on the date of the disposition or if the units are not regularly
traded on an established securities market at the time of the disposition.
ADMINISTRATIVE MATTERS
ENTITY-LEVEL COLLECTIONS
If we are required or elect under applicable law to pay any federal, state
or local income tax on behalf of any unitholder, former unitholder or the
general partner, we are authorized to pay those taxes from our funds. That
payment, if made, will be treated as a distribution of cash to the partner on
whose behalf the payment was made. If the payment is made on behalf of a person
whose identity cannot be determined, we are authorized to treat the payment as a
distribution to all current unitholders. We are authorized to amend the
partnership agreement in the manner necessary to maintain uniformity of
intrinsic tax characteristics of units and to adjust later distributions, so
that after giving effect to these distributions, the priority and
characterization of distributions otherwise applicable under the partnership
agreement is maintained as nearly as is practicable. Payments by us as described
above could give rise to an overpayment of tax on behalf of an individual
partner in which event the partner would be required to file a claim in order to
obtain a credit or refund.
INCOME TAX INFORMATION RETURNS AND AUDIT PROCEDURES
We will use all reasonable efforts to furnish unitholders with tax
information within 75 days after the close of each taxable year. Specifically,
we intend to furnish to each unitholder a Schedule K-1 which sets forth his
allocable share of our items of income, gain, loss, deduction, and credit. In
preparing such information, we will necessarily use various accounting and
reporting conventions to determine each unitholder's allocable share of such
items. Neither we nor our tax counsel can assure you that any such conventions
will yield a result that conforms to the requirements of the Code, Treasury
Regulations thereunder or administrative pronouncements of the IRS. We cannot
assure prospective unitholders that the IRS will not contend that such
accounting and reporting conventions are impermissible. Contesting any such
allegations could result in substantial expense to us. In addition, if the IRS
were to prevail, unitholders may incur substantial liabilities for taxes and
interest.
Our federal income tax information returns may be audited by the IRS. The
Code contains partnership audit procedures that significantly simplify the
manner in which IRS audit adjustments of partnership items are resolved.
Adjustments, if any, resulting from such an audit may require each unitholder to
file an amended tax return, which may result in an audit of the unitholder's
return. Any audit of a unitholder's return could result in adjustments to items
not related to our returns as well as those related to our returns.
Partnerships generally are treated as separate entities for purposes of
federal tax audits, judicial review of administrative adjustments by the IRS and
tax settlement proceedings. The tax treatment of partnership
42
items of income, gain, loss, deduction and credit and the imposition of
penalties and other additions to unitholders' tax liability are determined at
the partnership level in a unified partnership proceeding rather than in
separate proceedings with the partners. The Code provides for one partner to be
designated as the "Tax Matters Partner" for these purposes. Our partnership
agreement appoints the general partner as our Tax Matters Partner.
The Tax Matters Partner is entitled to make elections for us and our
unitholders and can extend the statute of limitations for assessment of tax
deficiencies against unitholders with respect to our taxable items. In
connection with adjustments to our tax returns proposed by the IRS, the Tax
Matters Partner may bind any unitholder with less than a 1% profits interest in
us to a settlement with the IRS unless the unitholder elects, by filing a
statement with the IRS, not to give such authority to the Tax Matters Partner.
The Tax Matters Partner may seek judicial review to which all the unitholders
are bound. If the Tax Matters Partner fails to seek judicial review, such review
may be sought by any unitholder having at least a 1% profit interest in us and
by unitholders having, in the aggregate, at least a 5% profits interest. Only
one judicial proceeding will go forward, however, and each unitholder with an
interest in the outcome may participate.
The unitholders will generally be required to treat their allocable shares
of our taxable items on their federal income tax returns in a manner consistent
with the treatment of the items on our information return. In general, that
consistency requirement is waived if the unitholder files a statement with the
IRS identifying the inconsistency. Failure to satisfy the consistency
requirement, if not waived, will result in an adjustment to conform the
treatment of the item by the unitholder to the treatment on our return. Even if
the consistency requirement is waived, adjustments to the unitholder's tax
liability with respect to our items may result from an audit of our or the
unitholder's tax return. Intentional or negligent disregard of the consistency
requirement may subject a unitholder to substantial penalties.
NOMINEE REPORTING
Persons who hold our units as a nominee for another person are required to
furnish to us:
(a) the name, address and taxpayer identification number of the
beneficial owners and the nominee;
(b) whether the beneficial owner is:
(1) a person that is not a United States person as defined in
Section 7701(a)(30) of the Code,
(2) a foreign government, an international organization or any
wholly owned agency or instrumentality of either of the foregoing, or
(3) a tax-exempt entity;
(c) the amount and description of units held, acquired or transferred
for the beneficial owners; and
(d) information including the dates of acquisitions and transfers,
means of acquisitions and transfers, and acquisition cost for purchases, as
well as the amount of net proceeds from sales.
Brokers and financial institutions are required to furnish additional
information, including whether they are a United States person and information
on units they acquire, hold or transfer for their own account. A penalty of $50
per failure, up to a maximum of $100,000 per calendar year, is imposed for
failure to report such information to us. The nominee is required to supply the
beneficial owner of the units with the information furnished to us.
REGISTRATION AS A TAX SHELTER
The Code requires that "tax shelters" be registered with the Secretary of
the Treasury. The temporary Treasury Regulations interpreting the tax shelter
registration provisions of the Code are extremely broad.
43
Our general partner, as our principal organizer, has registered us as a tax
shelter with the IRS in the absence of assurance that we are not subject to tax
shelter registration and in light of the substantial penalties which might be
imposed if registration is required and not undertaken. We have received tax
shelter registration number 90036000017 from the IRS. ISSUANCE OF THE
REGISTRATION NUMBER DOES NOT INDICATE THAT AN INVESTMENT IN UNITS OR THE CLAIMED
TAX BENEFITS HAVE BEEN REVIEWED, EXAMINED OR APPROVED BY THE IRS. We must
furnish our registration number to our unitholders, and a unitholder who sells
or otherwise transfers a unit in a subsequent transaction must furnish the
registration number to the transferee. The penalty for failure of the transferor
of a unit to furnish such registration number to the transferee is $100 for each
such failure. The unitholder must disclose our tax shelter registration number
on Form 8271 to be attached to the tax return on which any deduction, loss,
credit or other benefit generated by us is claimed or income from us is
included. A unitholder who fails to disclose the tax shelter registration number
on his return, without reasonable cause for such failure, will be subject to a
$250 penalty for each such failure. Any penalties discussed herein are not
deductible for federal income tax purposes.
ACCURACY-RELATED PENALTIES
An additional tax equal to 20% of the amount of any portion of an
underpayment of tax that is attributable to one or more specified causes,
including negligence or disregard of rules or regulations, substantial
understatements of income tax and substantial valuation misstatements, is
imposed by the Code. No penalty will be imposed, however, for any portion of an
underpayment if it is shown that there was a reasonable cause for that portion
and that the taxpayer acted in good faith regarding that portion.
A substantial understatement of income tax in any taxable year exists if
the amount of the understatement exceeds the greater of 10% of the tax required
to be shown on the return for the taxable year or $5,000 ($10,000 for most
corporations). The amount of any understatement subject to penalty generally is
reduced if any portion is attributable to a position adopted on the return (i)
for which there is, or was, "substantial authority," or (ii) as to which there
is a reasonable basis and the pertinent facts of that position are disclosed on
the return. More stringent rules apply to "tax shelters," a term that in this
context does not appear to include us. If any item of income, gain, loss,
deduction or credit included in the distributive shares of unitholders might
result in that kind of an "understatement" of income for which no "substantial
authority" exists, we must disclose the pertinent facts on our return. In
addition, we will make a reasonable effort to furnish sufficient information for
unitholders to make adequate disclosure on their returns to avoid liability for
this penalty.
A substantial valuation misstatement exists if the value of any property,
or the adjusted basis of any property, claimed on a tax return is 200% or more
of the amount determined to be the correct amount of the valuation or adjusted
basis. No penalty is imposed unless the portion of the underpayment attributable
to a substantial valuation misstatement exceeds $5,000 ($10,000 for most
corporations). If the valuation claimed on a return is 400% or more than the
correct valuation, the penalty imposed increases to 40%.
STATE, LOCAL AND OTHER TAX CONSIDERATIONS
Unitholders may be subject to state and local income taxes, unincorporated
business taxes, and estate, inheritance or intangible taxes that may be imposed
by the various jurisdictions in which the unitholders reside or in which we or
our subsidiary partnerships do business or own property. Although an analysis of
those various taxes is not presented here, each prospective unitholder should
consider the potential impact of such taxes on his investment in units. Our
operating subsidiaries own property and do business in Alabama, Arkansas,
Colorado, Illinois, Indiana, Kansas, Kentucky, Louisiana, Missouri, Montana,
Nebraska, New Mexico, New York, North Dakota, Ohio, Oklahoma, Pennsylvania,
Rhode Island, South Dakota, Texas, Utah and Wyoming. A unitholder will likely be
required to file state income tax returns in such states, other than South
Dakota, Texas and Wyoming, and may be subject to penalties for failure to comply
with such requirements. In addition, an obligation to file tax returns or to pay
taxes may arise in other states. Moreover, in some states, tax losses may not
produce a tax benefit in the year incurred and also may not be available to
offset income in subsequent taxable years. This could occur, for example, if
44
the unitholder has no income from sources within that state. We are authorized
but not required to pay any state or local income tax on behalf of all the
unitholders even though such payment may be greater than the amount that would
have been required to be paid if such payment had been made directly by a
particular partner or assignee; provided, however, that such tax payment shall
be in the same amount with respect to each unit and, in the general partner's
sole discretion, payment of such tax on behalf of all the unitholders or
assignees is in the best interests of the unitholders or the assignees as a
whole. Any amount so paid on behalf of all unitholders or assignees shall be
deducted as a cash operating expenditure of us in calculating "Cash from
Operations".
It is the responsibility of each prospective unitholder to investigate the
legal and tax consequences, under the laws of pertinent states or localities, of
his investment in units. Accordingly, each prospective unitholder should
consult, and must depend on, his own tax advisors with regard to state and local
tax matters. Further, it is the responsibility of each unitholder to file all
state and local, as well as federal, tax returns that may be required of such
unitholder.
INVESTMENT IN UNITS BY EMPLOYEE BENEFIT PLANS
An investment in units by an employee benefit plan is subject to additional
considerations because the investments of such plans are subject to the
fiduciary responsibility and prohibited transaction provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and restrictions
imposed by Section 4975 of the Code. As used herein, the term "employee benefit
plan" includes, but is not limited to, qualified pension, profit-sharing and
stock bonus plans, Keogh plans, Simplified Employee Pension Plans, and tax
deferred annuities or Individual Retirement Accounts established or maintained
by an employer or employee organization. Among other things, consideration
should be given to:
- whether such investment is prudent under Section 404(a)(1)(B) of ERISA;
- whether in making such investment such plan will satisfy the
diversification requirement of Section 404(a)(1)(C) of ERISA;
- the fact that such investment could result in recognition of UBTI by such
plan even if there is no net income;
- the effect of an imposition of income taxes on the potential investment
return for an otherwise tax-exempt investor; and
- whether, as a result of the investment, the plan will be required to file
an exempt organization business income tax return with the IRS.
Please read "-- Tax-Exempt Entities, Regulated Investment Companies and
Foreign Investors". The person with investment discretion with respect to the
assets of an employee benefit plan should determine whether an investment in us
is authorized by the appropriate governing instrument and is a proper investment
for such plan.
In addition, a fiduciary of an employee benefit plan should consider
whether such plan will, by investing in units, be deemed to own an undivided
interest in our assets. If so, the general partner also would be a fiduciary of
such plan, and we would be subject to the regulatory restrictions of ERISA,
including its prohibited transaction rules, as well as the prohibited
transaction rules of the Code.
Section 406 of ERISA and Section 4975 of the Code prohibit an employee
benefit plan from engaging in transactions involving "plan assets" with parties
that are "parties in interest" under ERISA or "disqualified persons" under the
Code with respect to the plan. These provisions also apply to Individual
Retirement Accounts which are not considered part of an employee benefit plan.
The Department of Labor issued final regulations on November 13, 1986, that
provide guidance with respect to whether the assets of an entity in which
employee benefit plans acquire equity interests would be deemed "plan assets".
45
Pursuant to these regulations, an entity's assets would not be considered to be
"plan assets" if, among other things:
(1) the equity interests acquired by employee benefit plans are publicly
offered securities, i.e., the equity interests are widely held by 100 or
more investors independent of the issuer and each other, freely
transferable and registered under the federal securities laws;
(2) the entity is an "operating company," i.e., it is primarily engaged in the
production or sale of a product or service other than the investment of
capital either directly or through a majority-owned subsidiary or
subsidiaries; or
(3) there is no significant investment by benefit plan investors, which is
defined to mean that less than 25% of the value of each class of equity
interest is held by employee benefit plans (as defined in Section 3(3) of
ERISA), whether or not they are subject to the provisions of Title I of
ERISA, plans described in Section 4975(e)(1) of the Code, and any entities
whose underlying assets include plan assets by reason of a plan's
investments in the entity.
Our assets would not be considered "plan assets" under these regulations
because it is expected that the investment will satisfy the requirements in (1)
above, and also may satisfy requirements (2) and (3) above.
Plan fiduciaries contemplating a purchase of units should consult with
their own counsel concerning the consequences under ERISA and the Code in light
of the serious penalties imposed on persons who engage in prohibited
transactions or other violations.
46
PLAN OF DISTRIBUTION
We may sell securities to one or more underwriters for public offering and
sale, or we may sell the securities to investors directly or through agents. The
applicable prospectus supplement will name any underwriter or agent involved in
the offer and sale of the securities.
Underwriters may offer and sell the securities at fixed prices, which may
be changed, at prices related to the prevailing market prices at the time of
sale or at negotiated prices. We also may authorize underwriters acting as our
agents to offer and sell the securities upon the terms and conditions as are set
forth in the applicable prospectus supplement. In connection with the sale of
securities, underwriters may be deemed to have received compensation from us in
the form of underwriting discounts or commissions and also may receive
commissions from purchasers of the securities for whom they may act as agent.
Underwriters may sell the securities to or though dealers. Dealers may receive
compensation in the form of discounts, concessions or commissions from the
underwriters and/or commissions from the purchasers for whom they may act as
agent.
The applicable prospectus supplement will disclose any underwriting
compensation we pay to underwriters or agents in connection with the offering of
the securities, and any discounts, concessions or commissions allowed by
underwriters to participating dealers. Underwriters, dealers and agents
participating in the distribution of the securities may be deemed to be
underwriters, and any discounts and commissions they receive and any profit they
realize on resale of the securities may be deemed to be underwriting discounts
and commissions under the Securities Act. Underwriters, dealers and agents may
be entitled, under agreements entered into with us, to indemnification against,
or contribution toward, certain civil liabilities, including liabilities under
the Securities Act.
If a prospectus supplement so indicates, we will authorize agents,
underwriters or dealers to solicit offers by certain institutional investors to
purchase the securities to which such prospectus supplement relates, providing
for payment and delivery on a future date specified in such prospectus
supplement. There may be limitations on the minimum amount that may be purchased
by any such institutional investor or on the number of the securities that may
be sold pursuant to such arrangements. Institutional investors include
commercial and savings banks, insurance companies, pension funds, investment
companies, educational and charitable institutions and such other institutions
as we may approve. The obligations of the purchasers pursuant to such delayed
delivery and payment arrangements will not be subject to any conditions except
that (i) the purchase by an institution of the securities shall not be
prohibited under the applicable laws of any jurisdiction in the United States
and (ii) if the securities are being sold to underwriters, we shall have sold to
such underwriters the total number of such securities less the number thereof
covered by such arrangements. Underwriters will not have any responsibility in
respect of the validity of such arrangements or our performance or such
institutional investors thereunder.
If a prospectus supplement so indicates, the underwriters engaged in an
offering of securities may purchase and sell securities in the open market.
These transactions may include short sales, stabilizing transactions and
purchases to cover positions created by short sales. Short sales involve the
sale by the underwriters of a greater number of securities than they are
required to purchase in the offering. "Covered" short sales are sales made in an
amount not greater than the underwriters' option to purchase additional
securities from us in the offering. The underwriters may close out any covered
short position by either exercising their option to purchase additional
securities or purchasing securities in the open market. In determining the
source of securities to close out the covered short position, the underwriters
will consider, among other things, the price of securities available for
purchase in the open market as compared to the price at which they may purchase
securities through the overallotment option. "Naked" short sales are any sales
in excess of such option. The underwriters must close out any naked short
position by purchasing securities in the open market. A naked short position is
more likely to be created if the underwriters are concerned that there may be
downward pressure on the price of the securities in the open market after
pricing that could adversely affect investors who purchase in the offering.
Stabilizing transactions consist of various bids for or purchases of securities
made by the underwriters in the open market prior to the completion of the
offering.
47
The underwriters may also impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives of the underwriters have
repurchased securities sold by or for the account of such underwriter in
stabilizing or short covering transactions.
Purchases to cover a short position and stabilizing transactions may have
the effect of preventing or retarding a decline in the market price of the
securities, and together with the imposition of the penalty bid, may stabilize,
maintain or otherwise affect the market price of the securities. As a result,
the price of the securities may be higher than the price that otherwise might
exist in the open market. If these activities are commenced, they may be
discontinued at any time. These transactions may be effected on the NYSE, in the
over-the-counter market or otherwise.
Certain of the underwriters and their affiliates may be customers of,
engage in transactions with and perform services for us in the ordinary course
of business.
LEGAL
Certain legal matters in connection with the securities will be passed upon
by Fulbright & Jaworski L.L.P., Houston, Texas, as our counsel. Any underwriter
will be advised about other issues relating to any offering by their own legal
counsel.
EXPERTS
The consolidated financial statements of TEPPCO Partners, L.P. and
subsidiaries as of December 31, 2001 and 2000 and for each of the years in the
three-year period ended December 31, 2001, the consolidated financial statements
of TE Products Pipeline Company, Limited Partnership and subsidiaries as of
December 31, 2001 and 2000 and for each of the years in the three-year period
ended December 31, 2001, and the consolidated balance sheet of Texas Eastern
Products Pipeline Company, LLC and subsidiary as of December 31, 2001 (included
in TEPPCO Partners, L.P.'s Current Report on Form 8-K filed on April 16, 2002),
have been incorporated by reference herein in reliance upon the reports of KPMG
LLP, independent accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
The audit report covering the December 31, 2001 consolidated financial
statements of TEPPCO Partners, L.P. refers to a change in the method of
accounting for derivative financial instruments and hedging activities on
January 1, 2001, and, effective July 1, 2001, adoption of the provisions of
Statement of Financial Accounting Standards ("SFAS") NO. 141, Business
Combinations, and certain provisions of SFAS No. 142, Goodwill and Other
Intangible Assets.
The financial statements of Jonah Gas Gathering Company as of December 31,
2000 and for the periods June 1, 2000 to December 31, 2000 and January 1, 2000
to May 31, 2000 (Predecessor) incorporated in this prospectus by reference to
the audited historical financial statements included in pages 5 through 14 of
TEPPCO Partners, L.P.'s Current Report 8-K/A filed November 9, 2001 have been so
incorporated in reliance on the reports of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
48
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following sets forth the estimated expenses and costs (other than
underwriting discounts and commissions) expected to be incurred in connection
with the issuance and distribution of the securities registered hereby:
Securities and Exchange Commission registration fee......... $ 92,000
Printing and engraving costs................................ 40,000
Legal fees and expenses..................................... 100,000
Accounting fees and expenses................................ 50,000
Miscellaneous............................................... 10,000
--------
Total....................................................... $292,000
========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Subject to any terms, conditions or restrictions set forth in the
partnership agreements, Section 17-108 of the Delaware Revised Limited
Partnership Act empowers a Delaware limited partnership to indemnify and hold
harmless a partner or other persons from and against all claims and demands
whatsoever. Each of the partnership agreements of TEPPCO Partners, L.P. (the
"Partnership") and the co-registrants (other than Jonah Gas Gathering Company
("Jonah")) provides that such partnership will, to the fullest extent permitted
by law, indemnify and advance expenses to their general partner, any Departing
Partner (as defined therein), any person who is or was an affiliate of their
general partner or any Departing Partner, any person who is or was an officer,
director, employee, partner, agent or trustee of their general partner or any
Departing Partner or any affiliate of their general partner or any Departing
Partner, or any person who is or was serving at the request of their general
partner or any affiliate of their general partner or any Departing Partner or
any affiliate of any Departing Partner as an officer, director, employee,
partner, agent or trustee of another person ("Indemnitees") from and against any
and all losses, claims, damages, liabilities (joint or several), expenses
(including legal fees and expenses), judgments, fines, settlements and other
amounts arising from any and all claims, demands, actions, suits or proceedings,
civil, criminal, administrative or investigative, in which any Indemnitee may be
involved, or is threatened to be involved, as a party or otherwise, by reason of
its status as their general partner, Departing Partner or an affiliate of
either, an officer, director, employee, partner, agent or trustee of such
general partner, any Departing Partner or affiliate of either or a person
serving at the request of their partnership in another entity in a similar
capacity, provided that in each case the Indemnitee acted in good faith and in a
manner which such Indemnitee reasonably believed to be in or not opposed to the
best interests of such partnership. This indemnification would under certain
circumstances include indemnification for liabilities under the Securities Act.
In addition, each Indemnitee would automatically be entitled to the advancement
of expenses in connection with the foregoing indemnification. Any
indemnification under these provisions will be only out of the assets of such
partnership.
The partnership agreement of Jonah provides that the partnership shall
indemnify its managing general partner and each of its other partners, and their
respective directors, officers, agents and employees ("Jonah Indemnitees"), for
all costs, losses, liabilities, and damages paid or accrued by such parties in
connection with the business of the partnership except insofar as such items are
the result of the Jonah Indemnitee's gross negligence, bad faith or ultra vires
acts.
The Partnership is authorized to purchase (or to reimburse its general
partner for the costs of) insurance against liabilities asserted against and
expenses incurred by the persons described in the first paragraph above in
connection with the Partnership's activities, whether or not the Partnership
would have the power to indemnify such person against such liabilities under the
provisions described in the first paragraph above. The general partner of the
Partnership has purchased insurance, the cost of which is
II-1
reimbursed by the Partnership, covering its officers and directors against
liabilities asserted and expenses incurred in connection with their activities
as officers and directors of the general partner or any of its direct or
indirect subsidiaries including TEPPCO GP, Inc., the general partner of the
subsidiary guarantors (other than Jonah) and the managing general partner of
Jonah.
Any underwriting agreement entered into in connection with the sale of the
securities offered pursuant to this registration statement will provide for
indemnification of officers and directors of the general partner, including
liabilities under the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
*1.1 -- Form of Underwriting Agreement.
4.1 -- Third Amended and Restated Agreement of Limited Partnership
of TEPPCO Partners, L.P., dated September 21, 2001
(Incorporated by reference to Exhibit 3.7 of TEPPCO Partners
L.P.'s Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 2001).
4.2 -- Indenture dated as of February 20, 2002, among TEPPCO
Partners, L.P., as Issuer, TE Products Pipeline Company,
Limited Partnership, TCTM, L.P., TEPPCO Midstream Companies,
L.P. and Jonah Gas Gathering Company, as Subsidiary
Guarantors, and First Union National Bank, NA, as Trustee
(Incorporated by reference to Exhibit 99.2 of TEPPCO
Partners, L.P.'s Current Report on Form 8-K filed with the
Commission on February 20, 2002).
4.3 -- Form of Subordinated Indenture.
5.1 -- Opinion of Fulbright & Jaworski L.L.P.
8.1 -- Opinion of Fulbright & Jaworski L.L.P. regarding tax
matters.
12.1 -- Statement of Computation of Ratio of Earnings to Fixed
Charges (Incorporated by reference to Exhibit 12.1 of TEPPCO
Partners, L.P.'s Annual Report on Form 10-K for the year
ended December 31, 2001).
23.1 -- Consent of KPMG LLP.
23.2 -- Consent of PricewaterhouseCoopers LLP (Denver).
23.3 -- Consent of Counsel (the consent of Fulbright & Jaworski
L.L.P. to the use of their opinion filed as Exhibit 5.1 to
the Registration Statement and the reference to their firm
in this Registration Statement is contained in such opinion)
23.4 -- Consent of Counsel (the consent of Fulbright & Jaworski
L.L.P. to the use of their opinion filed as Exhibit 8.1 to
the Registration Statement and the reference to their firm
in this Registration Statement is contained in such
opinion).
24.1 -- Powers of Attorney (included on Page II-6 of this
Registration Statement).
25.1 -- Form T-1 Statement of Eligibility and Qualification
(Incorporated by reference to Exhibit 25.1 of TEPPCO
Partners, L.P.'s Registration Statement on Form S-3,
Registration No. 333-74286, filed with the Commission on
November 30, 2001).
- ---------------
* To be filed by amendment or as an exhibit to a current report on Form 8-K of
the registrant.
(b) Financial Statement Schedules
Not applicable.
II-2
ITEM 17. UNDERTAKINGS
1. The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
i. To include any prospectus required by Section 10(a)(3) of the
Securities Act;
ii. To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement; notwithstanding the foregoing, any
increase or decrease in the volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
iii. To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in this Registration
Statement;
provided, however, that paragraphs i and ii above do not apply if the
information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the
Registrant pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference in the Registration
Statement.
(b) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
2. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in this Registration Statement shall be deemed to be a
new registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
3. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the provisions described in Item 15 above, or otherwise,
the Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer, or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
SIGNATURE
Pursuant to the requirements of the Securities Act of 1933, each of the
Registrants certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Houston, State of Texas, on the 19th day of
April, 2002.
TEPPCO PARTNERS, L.P.
By: TEXAS EASTERN PRODUCTS PIPELINE
COMPANY, LLC, AS GENERAL PARTNER
By: /s/ CHARLES H. LEONARD
------------------------------------
Charles H. Leonard,
Senior Vice President, Chief
Financial
Officer and Treasurer
GUARANTOR REGISTRANTS
(majority owned subsidiaries of the
above Registrant):
TE PRODUCTS PIPELINE COMPANY,
LIMITED PARTNERSHIP
By: TEPPCO GP, INC.,
AS GENERAL PARTNER
By: /s/ CHARLES H. LEONARD
------------------------------------
Charles H. Leonard,
Senior Vice President, Chief
Financial
Officer and Treasurer
TCTM, L.P.
By: TEPPCO GP, INC.,
AS GENERAL PARTNER
By: /s/ CHARLES H. LEONARD
------------------------------------
Charles H. Leonard,
Senior Vice President, Chief
Financial
Officer and Treasurer
II-4
TEPPCO MIDSTREAM COMPANIES, L.P.
By: TEPPCO GP, INC.,
AS GENERAL PARTNER
By: /s/ CHARLES H. LEONARD
------------------------------------
Charles H. Leonard,
Senior Vice President, Chief
Financial
Officer and Treasurer
JONAH GAS GATHERING COMPANY
By: TEPPCO GP, INC.,
AS MANAGING GENERAL PARTNER
By: /s/ CHARLES H. LEONARD
------------------------------------
Charles H. Leonard,
Senior Vice President, Chief
Financial
Officer and Treasurer
II-5
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints Charles H. Leonard and James C. Ruth, and
each of them, either one of whom may act without joinder of the other, his true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all pre- and post-effective amendments to (i) this
registration statement and (ii) a second registration statement on Form S-3 with
respect to additional limited partnership units or debt securities pursuant to
Rule 462 under the Securities Act, and to file the same, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, and each of them, or the
substitute or substitutes of any or all of them, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on the 19th day of April, 2002.
SIGNATURE POSITION
--------- --------
/s/ WILLIAM L. THACKER Chairman of the Board and Chief Executive Officer of
- ----------------------------------------------------- Texas Eastern Products Pipeline Company, LLC and of
William L. Thacker TEPPCO GP, Inc.**
/s/ BARRY R. PEARL President and Chief Operating Officer of Texas
- ----------------------------------------------------- Eastern Products Pipeline Company, LLC and of TEPPCO
Barry R. Pearl GP, Inc.**
/s/ CHARLES H. LEONARD Senior Vice President, Chief Financial Officer and
- ----------------------------------------------------- Treasurer of Texas Eastern Products Pipeline Company,
Charles H. Leonard LLC and of TEPPCO GP, Inc.** (Principal Accounting
and Financial Officer)
/s/ JIM W. MOGG Vice Chairman of the Board and Director of Texas
- ----------------------------------------------------- Eastern Products Pipeline Company, LLC
Jim W. Mogg
/s/ MILTON CARROLL Director of Texas Eastern Products Pipeline Company,
- ----------------------------------------------------- LLC
Milton Carroll
/s/ CARL D. CLAY Director of Texas Eastern Products Pipeline Company,
- ----------------------------------------------------- LLC
Carl D. Clay
/s/ DERRILL CODY Director of Texas Eastern Products Pipeline Company,
- ----------------------------------------------------- LLC Derrill Cody
Derrill Cody
/s/ JOHN P. DESBARRES Director of Texas Eastern Products Pipeline Company,
- ----------------------------------------------------- LLC
John P. DesBarres
/s/ FRED J. FOWLER Director of Texas Eastern Products Pipeline Company,
- ----------------------------------------------------- LLC
Fred J. Fowler
/s/ MARK A. BORER Director of Texas Eastern Products Pipeline Company,
- ----------------------------------------------------- LLC
Mark A. Borer
II-6
SIGNATURE POSITION
--------- --------
/s/ WILLIAM W. SLAUGHTER Director of Texas Eastern Products Pipeline Company,
- ----------------------------------------------------- LLC
William W. Slaughter
- ---------------
** Also as a director of TEPPCO GP, Inc., the general partner of each of TE
Products Pipeline Company, Limited Partnership, TCTM, L.P. and TEPPCO
Midstream Companies, L.P. and the managing general partner of Jonah Gas
Gathering Company.
II-7
EXHIBIT INDEX
*1.1 -- Form of Underwriting Agreement.
4.1 -- Third Amended and Restated Agreement of Limited Partnership
of TEPPCO Partners, L.P., dated September 21, 2001
(Incorporated by reference to Exhibit 3.7 of TEPPCO Partners
L.P.'s Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 2001).
4.2 -- Indenture dated as of February 20, 2002, among TEPPCO
Partners, L.P., as Issuer, TE Products Pipeline Company,
Limited Partnership, TCTM, L.P., TEPPCO Midstream Companies,
L.P. and Jonah Gas Gathering Company, as Subsidiary
Guarantors, and First Union National Bank, NA, as Trustee
(Incorporated by reference to Exhibit 99.2 of TEPPCO
Partners, L.P.'s Current Report on Form 8-K filed with the
Commission on February 20, 2002).
4.3 -- Form of Subordinated Indenture.
5.1 -- Opinion of Fulbright & Jaworski L.L.P.
8.1 -- Opinion of Fulbright & Jaworski L.L.P. regarding tax
matters.
12.1 -- Statement of Computation of Ratio of Earnings to Fixed
Charges (Incorporated by reference to Exhibit 12.1 of TEPPCO
Partners, L.P.'s Annual Report on Form 10-K for the year
ended December 31, 2001).
23.1 -- Consent of KPMG LLP.
23.2 -- Consent of PricewaterhouseCoopers LLP (Denver).
23.3 -- Consent of Counsel (the consent of Fulbright & Jaworski
L.L.P. to the use of their opinion filed as Exhibit 5.1 to
the Registration Statement and the reference to their firm
in this Registration Statement is contained in such opinion)
23.4 -- Consent of Counsel (the consent of Fulbright & Jaworski
L.L.P. to the use of their opinion filed as Exhibit 8.1 to
the Registration Statement and the reference to their firm
in this Registration Statement is contained in such
opinion).
24.1 -- Powers of Attorney (included on Page II-6 of this
Registration Statement).
25.1 -- Form T-1 Statement of Eligibility and Qualification
(Incorporated by reference to Exhibit 25.1 of TEPPCO
Partners, L.P.'s Registration Statement on Form S-3,
Registration No. 333-74286, filed with the Commission on
November 30, 2001).
- ---------------
* To be filed by amendment or as an exhibit to a current report on Form 8-K of
the registrant.
EXHIBIT 4.3
[FORM OF SUBORDINATED INDENTURE]
================================================================================
TEPPCO PARTNERS, L.P.
AS ISSUER,
TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP,
TCTM, L.P.,
TEPPCO MIDSTREAM COMPANIES, L.P.
AND
JONAH GAS GATHERING COMPANY
AS SUBSIDIARY GUARANTORS,
AND
FIRST UNION NATIONAL BANK,
A NATIONAL BANKING ASSOCIATION,
AS TRUSTEE
INDENTURE
DATED AS OF ____________
DEBT SECURITIES
================================================================================
CROSS-REFERENCE TABLE
TIA SECTION INDENTURE SECTION
310 (a)......................................................................... 7.10
(b)......................................................................... 7.10
(c)......................................................................... N.A.
311 (a)......................................................................... 7.11
(b)......................................................................... 7.11
(c)......................................................................... N.A.
312 (a)......................................................................... 5.01
(b)......................................................................... 5.02
(c)......................................................................... 5.02
313 (a)......................................................................... 5.03
(b)......................................................................... 5.03
(c)......................................................................... 13.03
(d)......................................................................... 5.03
314 (a)......................................................................... 4.05
(b)......................................................................... N.A.
(c)(1)...................................................................... 13.05
(c)(2)...................................................................... 13.05
(c)(3)...................................................................... N.A.
(d)......................................................................... N.A.
(e)......................................................................... 13.05
(f)......................................................................... N.A.
315 (a)......................................................................... 7.01
(b)......................................................................... 6.07 & 13.03
(c)......................................................................... 7.01
(d)......................................................................... 7.01
(e)......................................................................... 6.08
316 (a) (last sentence)......................................................... 1.01
(a)(1)(A)................................................................... 6.06
(a)(1)(B)................................................................... 6.06
(a)(2)...................................................................... 9.01(d)
(b)......................................................................... 6.04
(c)......................................................................... 5.04
317 (a)(1)...................................................................... 6.02
(a)(2)...................................................................... 6.02
(b)......................................................................... 4.04
318 (a)......................................................................... 13.07
N.A. means Not Applicable
NOTE: This Cross-Reference table shall not, for any purpose, be deemed part of
this Indenture.
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TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions.................................................................................1
Section 1.02. Other Definitions...........................................................................7
Section 1.03. Incorporation by Reference of Trust Indenture Act...........................................7
Section 1.04. Rules of Construction.......................................................................7
ARTICLE II
DEBT SECURITIES
Section 2.01. Forms Generally.............................................................................8
Section 2.02. Form of Trustee's Certificate of Authentication.............................................8
Section 2.03. Principal Amount; Issuable in Series........................................................9
Section 2.04. Execution of Debt Securities...............................................................11
Section 2.05. Authentication and Delivery of Debt Securities.............................................12
Section 2.06. Denomination of Debt Securities............................................................13
Section 2.07. Registration of Transfer and Exchange......................................................13
Section 2.08. Temporary Debt Securities..................................................................14
Section 2.09. Mutilated, Destroyed, Lost or Stolen Debt Securities.......................................15
Section 2.10. Cancellation of Surrendered Debt Securities................................................16
Section 2.11. Provisions of the Indenture and Debt Securities for the Sole Benefit of the
Parties and the Holders....................................................................16
Section 2.12. Payment of Interest; Interest Rights Preserved.............................................16
Section 2.13. Securities Denominated in Dollars..........................................................17
Section 2.14. Wire Transfers.............................................................................17
Section 2.15. Securities Issuable in the Form of a Global Security.......................................17
Section 2.16. Medium Term Securities.....................................................................20
Section 2.17. Defaulted Interest.........................................................................20
Section 2.18. CUSIP Numbers..............................................................................21
ARTICLE III
REDEMPTION OF DEBT SECURITIES
Section 3.01. Applicability of Article...................................................................21
Section 3.02. Notice of Redemption; Selection of Debt Securities.........................................21
Section 3.03. Payment of Debt Securities Called for Redemption...........................................23
Section 3.04. Mandatory and Optional Sinking Funds.......................................................23
Section 3.05. Redemption of Debt Securities for Sinking Fund.............................................24
ARTICLE IV
PARTICULAR COVENANTS OF THE PARTNERSHIP
Section 4.01. Payment of Principal of, and Premium, If Any, and Interest on, Debt Securities.............25
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Section 4.02. Maintenance of Offices or Agencies for Registration of Transfer, Exchange and
Payment of Debt Securities.................................................................26
Section 4.03. Appointment to Fill a Vacancy in the Office of Trustee.....................................26
Section 4.04. Duties of Paying Agents, etc...............................................................26
Section 4.05. SEC Reports; Financial Statements..........................................................27
Section 4.06. Compliance Certificate.....................................................................28
Section 4.07. Further Instruments and Acts...............................................................28
Section 4.08. Existence..................................................................................28
Section 4.09. Maintenance of Properties..................................................................29
Section 4.10. Payment of Taxes and Other Claims..........................................................29
Section 4.11. Waiver of Certain Covenants................................................................29
ARTICLE V
HOLDERS' LISTS AND REPORTS BY THE TRUSTEE
Section 5.01. Partnership to Furnish Trustee Information as to Names and Addresses of Holders;
Preservation of Information................................................................29
Section 5.02. Communications to Holders..................................................................30
Section 5.03. Reports by Trustee.........................................................................30
Section 5.04. Record Dates for Action by Holders.........................................................30
ARTICLE VI
REMEDIES OF THE TRUSTEE AND HOLDERS IN EVENT OF DEFAULT
Section 6.01. Events of Default..........................................................................31
Section 6.02. Collection of Debt by Trustee, etc.........................................................33
Section 6.03. Application of Moneys Collected by Trustee.................................................34
Section 6.04. Limitation on Suits by Holders.............................................................35
Section 6.05. Remedies Cumulative; Delay or Omission in Exercise of Rights Not a Waiver of
Default....................................................................................35
Section 6.06. Rights of Holders of Majority in Principal Amount of Debt Securities to Direct
Trustee and to Waive Default...............................................................36
Section 6.07. Trustee to Give Notice of Defaults Known to It, but May Withhold Such Notice in
Certain Circumstances......................................................................36
Section 6.08. Requirement of an Undertaking To Pay Costs in Certain Suits under the Indenture or
Against the Trustee........................................................................37
ARTICLE VII
CONCERNING THE TRUSTEE
Section 7.01. Certain Duties and Responsibilities........................................................37
Section 7.02. Certain Rights of Trustee..................................................................38
Section 7.03. Trustee Not Liable for Recitals in Indenture or in Debt Securities.........................39
Section 7.04. Trustee, Paying Agent or Registrar May Own Debt Securities.................................40
Section 7.05. Moneys Received by Trustee to Be Held in Trust.............................................40
Section 7.06. Compensation and Reimbursement.............................................................40
Section 7.07. Right of Trustee to Rely on an Officers' Certificate Where No Other Evidence
Specifically Prescribed....................................................................40
Section 7.08. Separate Trustee; Replacement of Trustee...................................................41
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Section 7.09. Successor Trustee by Merger................................................................42
Section 7.10. Eligibility; Disqualification..............................................................42
Section 7.11. Preferential Collection of Claims Against Partnership......................................42
Section 7.12. Compliance with Tax Laws...................................................................43
ARTICLE VIII
CONCERNING THE HOLDERS
Section 8.01. Evidence of Action by Holders..............................................................43
Section 8.02. Proof of Execution of Instruments and of Holding of Debt Securities........................43
Section 8.03. Who May Be Deemed Owner of Debt Securities.................................................43
Section 8.04. Instruments Executed by Holders Bind Future Holders........................................44
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.01. Purposes for Which Supplemental Indenture May Be Entered into Without Consent of
Holders....................................................................................44
Section 9.02. Modification of Indenture with Consent of Holders of Debt Securities.......................46
Section 9.03. Effect of Supplemental Indentures..........................................................47
Section 9.04. Debt Securities May Bear Notation of Changes by Supplemental Indentures....................48
ARTICLE X
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
Section 10.01. Consolidations and Mergers of the Partnership..............................................48
Section 10.02. Rights and Duties of Successor Partnership.................................................48
ARTICLE XI
SATISFACTION AND DISCHARGE OF
INDENTURE; DEFEASANCE; UNCLAIMED MONEYS
Section 11.01. Applicability of Article...................................................................49
Section 11.02. Satisfaction and Discharge of Indenture; Defeasance........................................49
Section 11.03. Conditions of Defeasance...................................................................50
Section 11.04. Application of Trust Money.................................................................51
Section 11.05. Repayment to Partnership...................................................................51
Section 11.06. Indemnity for U.S. Government Obligations..................................................52
Section 11.07. Reinstatement..............................................................................52
ARTICLE XII
SUBORDINATION OF DEBT SECURITIES AND GUARANTEE
Section 12.01. Applicability of Article; Agreement To Subordinate.........................................52
Section 12.02. Liquidation, Dissolution, Bankruptcy.......................................................52
Section 12.03. Default on Senior Indebtedness.............................................................53
Section 12.04. Acceleration of Payment of Debt Securities.................................................54
Section 12.05. When Distribution Must Be Paid Over........................................................54
Section 12.06. Subrogation................................................................................54
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Section 12.07. Relative Rights............................................................................54
Section 12.08. Subordination May Not Be Impaired by Partnership...........................................55
Section 12.09. Rights of Trustee and Paying Agent.........................................................55
Section 12.10. Distribution or Notice to Representative...................................................55
Section 12.11. Article XII Not to Prevent Defaults or Limit Right to Accelerate...........................55
Section 12.12. Trust Moneys Not Subordinated..............................................................55
Section 12.13. Trustee Entitled to Rely...................................................................55
Section 12.14. Trustee to Effectuate Subordination........................................................56
Section 12.15. Trustee Not Fiduciary for Holders of Senior Indebtedness...................................56
Section 12.16. Reliance by Holders of Senior Indebtedness on Subordination Provisions.....................56
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.01. Successors and Assigns of Partnership Bound by Indenture...................................56
Section 13.02. Acts of Board, Committee or Officer of Successor Partnership Valid.........................57
Section 13.03. Required Notices or Demands................................................................57
Section 13.04. Indenture and Debt Securities to Be Construed in Accordance with the Laws of the
State of New York..........................................................................58
Section 13.05. Officers' Certificate and Opinion of Counsel to Be Furnished upon Application or
Demand by the Partnership..................................................................58
Section 13.06. Payments Due on Legal Holidays.............................................................58
Section 13.07. Provisions Required by TIA to Control......................................................59
Section 13.08. Computation of Interest on Debt Securities.................................................59
Section 13.09. Rules by Trustee, Paying Agent and Registrar...............................................59
Section 13.10. No Recourse Against Others.................................................................59
Section 13.11. Severability...............................................................................59
Section 13.12. Effect of Headings.........................................................................59
Section 13.13. Indenture May Be Executed in Counterparts..................................................59
ARTICLE XIV
GUARANTEE
Section 14.01. Unconditional Guarantee....................................................................59
Section 14.02. Execution and Delivery of Guarantee........................................................61
Section 14.03. Limitation on Subsidiary Guarantors' Liability.............................................62
Section 14.04. Release of Subsidiary Guarantors from Guarantee............................................62
Section 14.05. Subsidiary Guarantor Contribution..........................................................63
Notation of Guarantee Annex A
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INDENTURE dated as of ___________, among TEPPCO Partners, L.P., a
Delaware limited partnership (the "Partnership"), TE Products Pipeline Company,
Limited Partnership ("TE Products"), a Delaware limited partnership, TCTM, L.P.,
a Delaware limited partnership ("TCTM"), TEPPCO Midstream Companies, L.P., a
Delaware limited partnership ("TEPPCO Midstream"), Jonah Gas Gathering Company,
a Wyoming general partnership ("Jonah" and together with TE Products, TCTM and
TEPPCO Midstream, the "Subsidiary Guarantors"), and First Union National Bank, a
national banking association, as trustee (the "Trustee").
RECITALS OF THE PARTNERSHIP AND THE SUBSIDIARY GUARANTORS
The Partnership and Subsidiary Guarantors have duly authorized the
execution and delivery of this Indenture to provide for the issuance from time
to time of the Partnership's debentures, notes, bonds or other evidences of
indebtedness to be issued in one or more series unlimited as to principal amount
(herein called the "Debt Securities"), and the Guarantee by each of the
Subsidiary Guarantors of the Debt Securities, as in this Indenture provided.
The Partnership and the Subsidiary Guarantors are members of the same
consolidated group of companies. The Subsidiary Guarantors will derive direct
and indirect economic benefit from the issuance of the Debt Securities.
Accordingly, each Subsidiary Guarantor has duly authorized the execution and
delivery of this Indenture to provide for its full, unconditional and joint and
several guarantee of the Debt Securities to the extent provided in or pursuant
to this Indenture.
All things necessary to make this Indenture a valid agreement of the
Partnership, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH
That in order to declare the terms and conditions upon which the Debt
Securities are authenticated, issued and delivered, and in consideration of the
premises, and of the purchase and acceptance of the Debt Securities by the
holders thereof, the Partnership and the Trustee covenant and agree with each
other, for the benefit of the respective Holders from time to time of the Debt
Securities or any series thereof, as follows:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing. The Trustee may request and may conclusively rely upon an Officers'
Certificate to determine whether any Person is an Affiliate of any specified
Person.
"Agent" means any Registrar or paying agent.
"Bankruptcy Law" means title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
"Board of Directors" means the Board of Directors of the General
Partner or any authorized committee of the Board of Directors of the General
Partner or any directors and/or officers of the General Partner to whom such
Board of Directors or such committee shall have duly delegated its authority to
act hereunder. If the Partnership shall change its form of entity to other than
a limited partnership, the references to the Board of Directors of the General
Partner shall mean the Board of Directors (or other comparable governing body)
of the Partnership.
"Business Day" means any day other than a Legal Holiday.
"capital stock" of any Person means and includes any and all shares,
rights to purchase, warrants or options (whether or not currently exercisable),
participation or other equivalents of or interests in (however designated) the
equity (which includes, but is not limited to, common stock, preferred stock and
partnership and joint venture interests) of such Person (excluding any debt
securities that are convertible into, or exchangeable for, such equity).
"Custodian" means any receiver, trustee, assignee, liquidation or
similar official under any Bankruptcy Law.
"Debt" of any Person at any date means any obligation created or
assumed by such Person for the repayment of borrowed money and any guarantee
therefor.
"Debt Security" or "Debt Securities" has the meaning stated in the
first recital of this Indenture and more particularly means any debt security or
debt securities, as the case may be of any series authenticated and delivered
under this Indenture.
"Default" means any event, act or condition that is, or after notice or
the passage of time or both would be, an Event of Default.
"Depositary" means, unless otherwise specified by the Partnership
pursuant to either Section 2.03 or 2.15, with respect to Debt Securities of any
series issuable or issued in whole or in part in the form of one or more Global
Securities, The Depository Trust Company, New York, New York, or any successor
thereto registered as a clearing agency under the Exchange Act or other
applicable statute or regulations.
"Designated Senior Indebtedness" means (i) any Senior Indebtedness of
the Partnership which, at the date of determination, has an aggregate principal
amount outstanding of, or under which, at the date of determination, the holders
thereof are committed to lend up to, at least $100 million and (ii) any other
Senior Indebtedness designated, as provided in Section 2.03, in respect of any
series of Debt Securities.
"Dollar" or "$" means such currency of the United States as at the time
of payment is legal tender for the payment of public and private debts.
2
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and any successor statute.
"Floating Rate Security" means a Debt Security that provides for the
payment of interest at a variable rate determined periodically by reference to
an interest rate index specified pursuant to Section 2.03.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, as in effect on the date on which the Debt
Securities of the applicable series are issued.
"General Partner" means Texas Eastern Products Pipeline Company, LLC, a
Delaware limited liability company, and its successors as general partner of the
Partnership.
"Global Security" means with respect to any series of Debt Securities
issued hereunder, a Debt Security which is executed by the Partnership and
authenticated and delivered by the Trustee to the Depositary or pursuant to the
Depositary's instruction, all in accordance with this Indenture and any
Indentures supplemental hereto, or resolution of the Board of Directors and set
forth in an Officers' Certificate, which shall be registered in the name of the
Depositary or its nominee and which shall represent, and shall be denominated in
an amount equal to the aggregate principal amount of, all the Outstanding Debt
Securities of such series or any portion thereof, in either case having the same
terms, including, without limitation, the same original issue date, date or
dates on which principal is due and interest rate or method of determining
interest.
"guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Debt or other obligation of any
other Person and any obligation, direct or indirect, contingent or otherwise, of
such Person (a) to purchase or pay (or advance or supply funds for the purchase
or payment of) such Debt or other obligation of such other Person (whether
arising by virtue of partnership arrangements, or by agreement to keep-well, to
purchase assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (b) entered into for purposes of
assuring in any other manner the obligee of such Debt or other obligation of the
payment thereof or to protect such obligee against loss in respect thereof (in
whole or in part); provided, however, that the term "guarantee" shall not
include endorsements for collection or deposit in the ordinary course of
business. The term "guarantee" used as a verb has a corresponding meaning.
"Holder," "Holder of Debt Securities" or other similar terms means, a
Person in whose name a Debt Security is registered in the Debt Security Register
(as defined in Section 2.07(a)).
"Indenture" means this instrument as originally executed, or, if
amended or supplemented as herein provided, as so amended or supplemented and
shall include the form and terms of particular series of Debt Securities as
contemplated hereunder, whether or not a supplemental Indenture is entered into
with respect thereto.
3
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of Houston, Texas, City of New York, New York or at a
Place of Payment are authorized by law, regulation or executive order to remain
closed. If a payment date is a Legal Holiday at a place of payment, payment may
be made at that place on the next succeeding day that is not a Legal Holiday,
and no interest shall accrue for the intervening period.
"Lien" means, with respect to any asset, any mortgage, lien, security
interest, pledge, charge or other encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under applicable
law.
"Officer" means, with respect to a Person, the Chairman of the Board,
the President, any Vice President, the Treasurer, any Assistant Treasurer,
Controller, Secretary, Assistant Secretary or any Assistant Vice President of
such Person.
"Officers' Certificate" means a certificate signed by two Officers of
the General Partner, one of whom must be the General Partner's chief executive
officer, chief financial officer or chief accounting officer (or if the
Partnership shall change its form of entity to other than a limited partnership,
by Persons, officers, members, agents and others holding positions comparable to
those of the foregoing nature, as applicable).
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Partnership or the Trustee.
"Original Issue Discount Debt Security" means any Debt Security which
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration of the maturity thereof pursuant to
Section 6.01.
"Outstanding," when used with respect to any series of Debt Securities,
means, as of the date of determination, all Debt Securities of that series
theretofore authenticated and delivered under this Indenture, except:
(a) Debt Securities of that series theretofore canceled by the
Trustee or delivered to the Trustee for cancellation;
(b) Debt Securities of that series for whose payment or redemption
money in the necessary amount has been theretofore deposited
with the Trustee or any paying agent (other than the
Partnership) in trust or set aside and segregated in trust by
the Partnership (if the Partnership shall act as its own
paying agent) for the Holders of such Debt Securities;
provided, that, if such Debt Securities are to be redeemed,
notice of such redemption has been duly given pursuant to this
Indenture or provision therefor satisfactory to the Trustee
has been made; and
(c) Debt Securities of that series which have been paid pursuant
to Section 2.09 or in exchange for or in lieu of which other
Debt Securities have been authenticated and delivered pursuant
to this Indenture, other than any such Debt Securities in
respect of which there shall have been presented to the
Trustee proof satisfactory to it that such Debt Securities are
held by a bona fide purchaser in whose hands such Debt
Securities are valid obligations of the Partnership;
4
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Debt Securities of any series have given any
request, demand, authorization, direction, notice, consent or waiver hereunder,
Debt Securities owned by the Partnership or any other obligor upon the Debt
Securities or any Affiliate of the Partnership or of such other obligor shall be
disregarded and deemed not to be Outstanding, except that, in determining
whether the Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Debt Securities which
an officer of the Trustee actually knows to be so owned shall be so disregarded.
Debt Securities so owned which have been pledged in good faith may be regarded
as Outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Debt Securities and that the
pledgee is not the Partnership or any other obligor upon the Debt Securities or
an Affiliate of the Partnership or of such other obligor. In determining whether
the Holders of the requisite principal amount of Outstanding Debt Securities
have given any request, demand, authorization, direction, notice, consent or
waiver hereunder, the principal amount of an Original Issue Discount Debt
Security that shall be deemed to be Outstanding for such purposes shall be the
amount of the principal thereof that would be due and payable as of the date of
such determination upon a declaration of acceleration of the maturity thereof
pursuant to Section 6.01.
"Partnership" means the Person named as the "Partnership" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Partnership" shall mean such successor Person.
"Partnership Request" and "Partnership Order" means, respectively, a
written request or order signed in the name of the Partnership by the Chairman
of the Board, the President or a Vice President of the General Partner, and by
the Treasurer, an Assistant Treasurer, the Controller, an Assistant Controller,
the Secretary or an Assistant Secretary of the General Partner, and delivered to
the Trustee, or if the Partnership shall change its form of entity to other than
a limited partnership, by Persons or officers, members, agents and others
holding positions comparable to those of the foregoing nature, as applicable.
"Person" means any individual, corporation, partnership, joint venture,
limited liability company, incorporated or unincorporated association,
joint-stock company, trust, unincorporated organization or government or other
agency or political subdivision thereof or other entity of any kind.
"Redemption Date," when used with respect to any Debt Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Representative" means the trustee, agent or representative (if any)
for an issue of Senior Debt.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and any
successor statute.
"Senior Indebtedness," unless otherwise provided with respect to the
Debt Securities of a series as contemplated by Section 2.03, means (1) all Debt
of the Subsidiary Guarantors or the
5
Partnership, whether currently outstanding or hereafter issued, unless, by the
terms of the instrument creating or evidencing such Debt, it is provided that
such Debt is not superior in right of payment to the Debt Securities, in the
case of the Partnership, or the Guarantee, in the case of the Subsidiary
Guarantors, or to other Debt which is pari passu with or subordinated to the
Debt Securities, in the case of the Partnership, or the Guarantee, in the case
of the Subsidiary Guarantors, and (2) any modifications, refunding, deferrals,
renewals, or extensions of any such Debt or securities, notes or other evidence
of Debt issued in exchange for such Debt; provided that in no event shall
"Senior Indebtedness" include (a) Debt evidenced by the Debt Securities or any
Guarantee, (b) Debt of any of the Subsidiary Guarantors or the Partnership owed
or owing to any Subsidiary of the Partnership, (c) Debt of any of the Subsidiary
Guarantors owed or owing to the Partnership, (d) Debt to trade creditors, (e)
any liability for taxes owed or owing by the Subsidiary Guarantors or the
Partnership or (f) Debt of any Subsidiary Guarantor in the event there is no
series of Debt Securities Outstanding that is entitled to the benefits of a
Guarantee.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the payment of principal
of such security is due and payable, including pursuant to any mandatory
redemption provision (but excluding any provision providing for the repurchase
of such security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).
"Subsidiary" means:
(1) any corporation, association or other business entity of which
more than 50% of the total voting power of shares of equity
interests entitled, without regard to the occurrence of any
contingency, to vote in the election of directors, managers,
trustees or equivalent Persons thereof is at the time owned or
controlled, directly or indirectly, by such Person or one or
more of the other Subsidiaries of such Person or combination
thereof; or
(2) in the case of a partnership, more than 50% of the partners'
equity interests, considering all partners' equity interests
as a single class is at the time owned or controlled, directly
or indirectly, by such Person or one or more of the other
Subsidiaries of such Person or combination thereof.
"Subsidiary Guarantors" means the Person or Persons named as the
"Subsidiary Guarantors" in the first paragraph of this instrument until a
successor Person or Persons shall have become such pursuant to the applicable
provisions of this Indenture, and thereafter "Subsidiary Guarantors" shall mean
such successor Person or Persons, and any other Subsidiary of the Partnership
who may execute this Indenture, or a supplement thereto, for the purpose of
providing a Guarantee of Debt Securities pursuant to this Indenture.
"TIA" means the Trust Indenture Act of 1939, as amended (15 U.S.C.
Section 77aaa-77bbbb), as in effect on the date of this Indenture as originally
executed and, to the extent required by law, as amended.
6
"Trustee" initially means First Union National Bank and any other
Person or Persons appointed as such from time to time pursuant to Section 7.08,
and, subject to the provisions of Article VII, includes its or their successors
and assigns. If at any time there is more than one such Person, "Trustee" as
used with respect to the Debt Securities of any series shall mean the Trustee
with respect to the Debt Securities of that series.
"Trust Officer" means any officer or assistant officer of the Trustee
assigned by the Trustee to administer its corporate trust matters.
"United States" means the United States of America (including the
States and the District of Columbia), its territories, its possessions and other
areas subject to its jurisdiction.
"U.S. Government Obligations" means direct obligations of the United
States of America, obligations on which the payment of principal and interest is
fully guaranteed by the United States of America or obligations or guarantees
for the payment of which the full faith and credit of the United States of
America is pledged.
"Yield to Maturity" means the yield to maturity, calculated at the time
of issuance of a series of Debt Securities, or, if applicable, at the most
recent redetermination of interest on such series and calculated in accordance
with accepted financial practice.
Section 1.02. Other Definitions.
TERM DEFINED IN SECTION
---- ------------------
"Debt Security Register"......................................... 2.07
"Defaulted Interest"............................................. 2.17
"Designated Currency"............................................ 2.18
"Determination Notice"........................................... 3.02
"Event of Default"............................................... 6.01
"Funding Guarantor".............................................. 14.05
"Guarantee"...................................................... 14.01
"Place of Payment"............................................... 2.03
"Registrar"...................................................... 2.07
"Subordinated Debt Securities"................................... 12.01
"Successor Partnership".......................................... 10.01
Section 1.03. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.
All terms used in this Indenture that are defined by the TIA, defined
by TIA reference to another statute or defined by SEC rule under the TIA have
the meanings so assigned to them.
Section 1.04. Rules of Construction. Unless the context otherwise
requires:
(a) a term has the meaning assigned to it;
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(b) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(c) "or" is not exclusive;
(d) words in the singular include the plural, and in the plural include
the singular;
(e) provisions apply to successive events and transactions;
(f) if the applicable series of Debt Securities are subordinated
pursuant to Article XII, unsecured Debt shall not be deemed to be subordinate or
junior to secured Debt merely by virtue of its nature as unsecured Debt; and
(g) the principal amount of any noninterest bearing or other discount
security at any date shall be the principal amount thereof that would be shown
on a balance sheet of the issuer dated such date prepared in accordance with
GAAP.
ARTICLE II
DEBT SECURITIES
Section 2.01. Forms Generally. The Debt Securities of each series shall
be in substantially the form established without the approval of any Holder by
or pursuant to a resolution of the Board of Directors or in one or more
Indentures supplemental hereto, in each case with such appropriate insertions,
omissions, substitutions and other variations as are required or permitted by
this Indenture, and may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as the
Partnership may deem appropriate (and, if not contained in a supplemental
Indenture entered into in accordance with Article IX, as are not prohibited by
the provisions of this Indenture) or as may be required or appropriate to comply
with any law or with any rules made pursuant thereto or with any rules of any
securities exchange on which such series of Debt Securities may be listed, or to
conform to general usage, or as may, consistently herewith, be determined by the
officers executing such Debt Securities as evidenced by their execution of the
Debt Securities.
The definitive Debt Securities of each series shall be printed,
lithographed or engraved on steel engraved borders or may be produced in any
other manner, all as determined by the officers executing such Debt Securities,
as evidenced by their execution of such Debt.
Section 2.02. Form of Trustee's Certificate of Authentication. The
Trustee's certificate of authentication on all Debt Securities authenticated by
the Trustee shall be in substantially the following form:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Debt Securities of the series designated therein
referred to in the within-mentioned Indenture.
FIRST UNION NATIONAL BANK,
As Trustee
By:
------------------------------------
Authorized Signature
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Section 2.03. Principal Amount; Issuable in Series. The aggregate
principal amount of Debt Securities which may be issued, executed,
authenticated, delivered and outstanding under this Indenture is unlimited.
The Debt Securities may be issued in one or more series in fully
registered form. There shall be established, without the approval of any
Holders, in or pursuant to a resolution of the Board of Directors and set forth
in an Officers' Certificate, or established in one or more Indentures
supplemental hereto, prior to the issuance of Debt Securities of any series any
or all of the following:
(a) the title of the Debt Securities of the series (which shall
distinguish the Debt Securities of the series from all other Debt Securities);
(b) any limit upon the aggregate principal amount of the Debt
Securities of the series which may be authenticated and delivered under this
Indenture (except for Debt Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other Debt
Securities of the series pursuant to this Article II);
(c) the date or dates on which the principal and premium, if any, of
the Debt Securities of the series are payable;
(d) the rate or rates (which may be fixed or variable) at which the
Debt Securities of the series shall bear interest, if any, or the method of
determining such rate or rates, the date or dates from which such interest shall
accrue, the interest payment dates on which such interest shall be payable, or
the method by which such date will be determined, in the case of Registered
Securities, the record dates for the determination of Holders thereof to whom
such interest is payable; and the basis upon which interest will be calculated
if other than that of a 360-day year of twelve thirty-day months;
(e) the place or places, if any, in addition to or instead of the
corporate trust office of the Trustee, where the principal of, and premium, if
any, and interest on, Debt Securities of the series shall be payable ("Place of
Payment");
(f) the price or prices at which, the period or periods within which
and the terms and conditions upon which Debt Securities of the series may be
redeemed, in whole or in part, at the option of the Partnership or otherwise;
(g) whether Debt Securities of the series are entitled to the benefits
of any Guarantee of any Subsidiary Guarantors pursuant to this Indenture;
(h) the obligation, if any, of the Partnership to redeem, purchase or
repay Debt Securities of the series pursuant to any sinking fund or analogous
provisions or at the option of a Holder thereof, and the price or prices at
which and the period or periods within which and the
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terms and conditions upon which Debt Securities of the series shall be redeemed,
purchased or repaid, in whole or in part, pursuant to such obligations;
(i) the terms, if any, upon which the Debt Securities of the series may
be convertible into or exchanged for capital stock (which may be represented by
depositary shares), other Debt Securities or warrants for capital stock or Debt
or other securities of any kind of the Partnership or any other obligor and the
terms and conditions upon which such conversion or exchange shall be effected,
including the initial conversion or exchange price or rate, the conversion or
exchange period and any other provision in addition to or in lieu of those
described herein;
(j) if other than denominations of $1,000 and any integral multiple
thereof, the denominations in which Debt Securities of the series shall be
issuable;
(k) if the amount of principal of or any premium or interest on Debt
Securities of the series may be determined with reference to an index or
pursuant to a formula, the manner in which such amounts will be determined;
(l) if the principal amount payable at the Stated Maturity of Debt
Securities of the series will not be determinable as of any one or more dates
prior to such Stated Maturity, the amount which will be deemed to be such
principal amount as of any such date for any purpose, including the principal
amount thereof which will be due and payable upon any maturity other than the
Stated Maturity or which will be deemed to be Outstanding as of any such date
(or, in any such case, the manner in which such deemed principal amount is to be
determined);
(m) any changes or additions to Article XI, including the addition of
additional covenants that may be subject to the covenant defeasance option
pursuant to Section 11.02(b);
(n) if other than the principal amount thereof, the portion of the
principal amount of Debt Securities of the series which shall be payable upon
declaration of acceleration of the maturity thereof pursuant to Section 6.01 or
provable in bankruptcy pursuant to Section 6.02;
(o) the terms, if any, of the transfer, mortgage, pledge or assignment
as security for the Debt Securities of the series of any properties, assets,
moneys, proceeds, securities or other collateral, including whether certain
provisions of the TIA are applicable and any corresponding changes to provisions
of this Indenture as currently in effect;
(p) any addition to or change in the Events of Default with respect to
the Debt Securities of the series and any change in the right of the Trustee or
the Holders to declare the principal of, and premium and interest on, such Debt
Securities due and payable;
(q) if the Debt Securities of the series shall be issued in whole or in
part in the form of a Global Security or Securities, the terms and conditions,
if any, upon which such Global Security or Securities may be exchanged in whole
or in part for other individual Debt Securities in definitive registered form;
and the Depositary for such Global Security or Securities and the form of any
legend or legends to be borne by any such Global Security or Securities in
addition to or in lieu of the legend referred to in Section 2.15(a);
(r) any trustees, authenticating or paying agents, transfer agents or
registrars;
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(s) the applicability of, and any addition to or change in the
covenants and definitions currently set forth in this Indenture or in the terms
currently set forth in Article X, including conditioning any merger, conveyance,
transfer or lease permitted by Article X upon the satisfaction of an Debt
coverage standard by the Partnership and Successor Partnership (as defined in
Article X);
(t) the subordination, if any, of the Debt Securities of the series
pursuant to Article XII and any changes or additions to Article XII or
designation of any Designated Senior Indebtedness;
(u) with regard to Debt Securities of the series that do not bear
interest, the dates for certain required reports to the Trustee; and
(v) any other terms of the Debt Securities of the series (which terms
shall not be prohibited by the provisions of this Indenture).
All Debt Securities of any one series appertaining thereto shall be
substantially identical except as to denomination and except as may otherwise be
provided in or pursuant to such resolution of the Board of Directors and as set
forth in such Officers' Certificate or in any such Indenture supplemental
hereto.
Section 2.04. Execution of Debt Securities. The Debt Securities shall
be signed on behalf of the Partnership by the Chairman of the Board, the
President or a Vice President of the General Partner and, if the seal of the
General Partner is reproduced thereon, it shall be attested by its Secretary, an
Assistant Secretary, a Treasurer or an Assistant Treasurer. Such signatures upon
the Debt Securities may be the manual or facsimile signatures of the present or
any future such authorized officers and may be imprinted or otherwise reproduced
on the Debt Securities. The seal of the General Partner, if any, may be in the
form of a facsimile thereof and may be impressed, affixed, imprinted or
otherwise reproduced on the Debt Securities.
Only such Debt Securities as shall bear thereon a certificate of
authentication substantially in the form hereinbefore recited, signed manually
by the Trustee, shall be entitled to the benefits of this Indenture or be valid
or obligatory for any purpose. Such certificate by the Trustee upon any Debt
Security executed by the General Partner on behalf of the Partnership shall be
conclusive evidence that the Debt Security so authenticated has been duly
authenticated and delivered hereunder.
In case any officer of the General Partner who shall have signed any of
the Debt Securities shall cease to be such officer before the Debt Securities so
signed shall have been authenticated and delivered by the Trustee, or disposed
of by the Partnership, such Debt Securities nevertheless may be authenticated
and delivered or disposed of as though the Person who signed such Debt
Securities had not ceased to be such officer of the General Partner; and any
Debt Security may be signed on behalf of the General Partner by such Persons as,
at the actual date of the execution of such Debt Security, shall be the proper
officers of the General Partner, although at the date of such Debt Security or
of the execution of this Indenture any such Person was not such officer.
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Section 2.05. Authentication and Delivery of Debt Securities. At any
time and from time to time after the execution and delivery of this Indenture,
the Partnership may deliver Debt Securities of any series executed by the
Partnership to the Trustee for authentication, and the Trustee shall thereupon
authenticate and deliver said Debt Securities to or upon a Partnership Order. In
authenticating such Debt Securities, and accepting the additional
responsibilities under this Indenture in relation to such Debt Securities, the
Trustee shall be entitled to receive, and (subject to Section 7.01) shall be
fully protected in relying upon:
(a) a copy of any resolution or resolutions of the Board of Directors,
certified by the Secretary or Assistant Secretary of the Partnership,
authorizing the terms of issuance of any series of Debt Securities;
(b) an executed supplemental Indenture, if any;
(c) an Officers' Certificate; and
(d) an Opinion of Counsel prepared in accordance with Section 13.05
which shall also state:
(i) that the form of such Debt Securities has been established
by or pursuant to a resolution of the Board of Directors or by a
supplemental Indenture as permitted by Section 2.01 in conformity with
the provisions of this Indenture;
(ii) that the terms of such Debt Securities have been
established by or pursuant to a resolution of the Board of Directors or
by a supplemental Indenture as permitted by Section 2.03 in conformity
with the provisions of this Indenture;
(iii) that such Debt Securities, when authenticated and
delivered by the Trustee and issued by the Partnership in the manner
and subject to any conditions specified in such Opinion of Counsel,
will constitute valid and legally binding obligations of the
Partnership, enforceable in accordance with their terms except as the
enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting the enforcement of creditors' rights generally
and rights of acceleration and the availability of equitable remedies
may be limited by equitable principles of general applicability;
(iv) that the Partnership has the partnership power to issue
such Debt Securities and has duly taken all necessary partnership
action with respect to such issuance;
(v) that the issuance of such Debt Securities will not
contravene the organizational documents of the Partnership or result in
any material violation of any of the terms or provisions of any law or
regulation or of any material indenture, mortgage or other agreement
known to such counsel by which the Partnership is bound;
(vi) that authentication and delivery of such Debt Securities
and the execution and delivery of any supplemental Indenture will not
violate the terms of this Indenture; and
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(vii) such other matters as the Trustee may reasonably
request.
Such Opinion of Counsel need express no opinion as to whether a court
in the United States would render a money judgment in a currency other than that
of the United States.
The Trustee shall have the right to decline to authenticate and deliver
any Debt Securities under this Section 2.05 if the Trustee, being advised by
counsel, determines that such action may not lawfully be taken or if the Trustee
in good faith by its board of directors or trustees, executive committee or a
trust committee of directors, trustees or vice presidents (or any combination
thereof) shall determine that such action would expose the Trustee to personal
liability to existing Holders.
The Trustee may appoint an authenticating agent reasonably acceptable
to the Partnership to authenticate Debt Securities of any series. Unless limited
by the terms of such appointment, an authenticating agent may authenticate Debt
Securities whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as any Registrar, paying agent or agent
for service of notices and demands.
Unless otherwise provided in the form of Debt Security for any series,
each Debt Security shall be dated the date of its authentication.
Section 2.06. Denomination of Debt Securities. Unless otherwise
provided in the form of Debt Security for any series, the Debt Securities of
each series shall be issuable only as fully registered Debt Securities in such
Dollar denominations as shall be specified or contemplated by Section 2.03. In
the absence of any such specification with respect to the Debt Securities of any
series, the Debt Securities of such series shall be issuable in denominations of
$1,000 and any integral multiple thereof.
Section 2.07. Registration of Transfer and Exchange.
(a) The Partnership shall keep or cause to be kept a register for each
series of Debt Securities issued hereunder (hereinafter collectively referred to
as the "Debt Security Register"), in which, subject to such reasonable
regulations as it may prescribe, the Partnership shall provide for the
registration of all Debt Securities and the transfer of Debt Securities as in
this Article II provided. At all reasonable times the Debt Security Register
shall be open for inspection by the Trustee. Subject to Section 2.15, upon due
presentment for registration of transfer of any Debt Security at any office or
agency to be maintained by the Partnership in accordance with the provisions of
Section 4.02, the Partnership shall execute and the Trustee shall authenticate
and deliver in the name of the transferee or transferees a new Debt Security or
Debt Securities of authorized denominations for a like aggregate principal
amount. In no event may Debt Securities be issued as, exchanged for, bearer
securities.
Unless and until otherwise determined by the Partnership by resolution
of the Board of Directors, the register of the Partnership for the purpose of
registration, exchange or registration of transfer of the Debt Securities shall
be kept at the principal corporate trust office of the Trustee and, for this
purpose, the Trustee shall be designated "Registrar."
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Debt Securities of any series (other than a Global Security, except as
set forth below) may be exchanged for a like aggregate principal amount of Debt
Securities of the same series of other authorized denominations. Subject to
Section 2.15, Debt Securities to be exchanged shall be surrendered at the office
or agency to be maintained by the Partnership as provided in Section 4.02, and
the Partnership shall execute and the Trustee shall authenticate and deliver in
exchange therefor the Debt Security or Debt Securities which the Holder making
the exchange shall be entitled to receive.
(b) All Debt Securities presented or surrendered for registration of
transfer, exchange or payment shall (if so required by the Partnership, the
Trustee or the Registrar) be duly endorsed or be accompanied by a written
instrument or instruments of transfer, in form satisfactory to the Partnership,
the Trustee and the Registrar, duly executed by the Holder or his attorney duly
authorized in writing.
All Debt Securities issued in exchange for or upon transfer of Debt
Securities shall be the valid obligations of the Partnership, evidencing the
same debt, and entitled to the same benefits under this Indenture as the Debt
Securities surrendered for such exchange or transfer.
No service charge shall be made for any exchange or registration of
transfer of Debt Securities (except as provided by Section 2.09), but the
Partnership may require payment of a sum sufficient to cover any tax, fee,
assessment or other governmental charge that may be imposed in relation thereto,
other than those expressly provided in this Indenture to be made at the
Partnership's own expense or without expense or without charge to the Holders.
The Partnership shall not be required (i) to issue, register the
transfer of or exchange any Debt Securities for a period of 15 days next
preceding any mailing of notice of redemption of Debt Securities of such series
or (ii) to register the transfer of or exchange any Debt Securities selected,
called or being called for redemption.
Prior to the due presentation for registration of transfer of any Debt
Security, the Partnership, the Trustee, any paying agent or any Registrar may
deem and treat the Person in whose name a Debt Security is registered as the
absolute owner of such Debt Security for the purpose of receiving payment of
principal of, and premium, if any, and interest on, such Debt Security and for
all other purposes whatsoever, whether or not such Debt Security is overdue, and
none of the Partnership, the Subsidiary Guarantors, the Trustee, any paying
agent or Registrar shall be affected by notice to the contrary.
None of the Partnership, the Subsidiary Guarantors, the Trustee, any
agent of the Trustee, any paying agent or any Registrar will have any
responsibility or liability for any aspect of the records relating to, or
payments made on account of, beneficial ownership interests of a Global Security
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
Section 2.08. Temporary Debt Securities. Pending the preparation of
definitive Debt Securities of any series, the Partnership may execute and the
Trustee shall authenticate and deliver temporary Debt Securities (printed,
lithographed, photocopied, typewritten or otherwise produced) of any authorized
denomination, and substantially in the form of the definitive Debt
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Securities in lieu of which they are issued, in registered form with such
omissions, insertions and variations as may be appropriate for temporary Debt
Securities, all as may be determined by the Partnership with the concurrence of
the Trustee. Temporary Debt Securities may contain such reference to any
provisions of this Indenture as may be appropriate. Every temporary Debt
Security shall be executed by the Partnership and be authenticated by the
Trustee upon the same conditions and in substantially the same manner, and with
like effect, as the definitive Debt Securities.
If temporary Debt Securities of any series are issued, the Partnership
will cause definitive Debt Securities of such series to be prepared without
unreasonable delay. After the preparation of definitive Debt Securities of such
series, the temporary Debt Securities of such series shall be exchangeable for
definitive Debt Securities of such series upon surrender of the temporary Debt
Securities of such series at the office or agency of the Partnership at a Place
of Payment for such series, without charge to the Holder thereof, except as
provided in Section 2.07 in connection with a transfer. Upon surrender for
cancellation of any one or more temporary Debt Securities of any series, the
Partnership shall execute and the Trustee shall authenticate and deliver in
exchange therefor a like principal amount of definitive Debt Securities of the
same series of authorized denominations and of like tenor. Until so exchanged,
temporary Debt Securities of any series shall in all respects be entitled to the
same benefits under this Indenture as definitive Debt Securities of such series.
Upon any exchange of a portion of a temporary Global Security for a
definitive Global Security or for the individual Debt Securities represented
thereby pursuant to Section 2.07 or this Section 2.08, the temporary Global
Security shall be endorsed by the Trustee to reflect the reduction of the
principal amount evidenced thereby, whereupon the principal amount of such
temporary Global Security shall be reduced for all purposes by the amount to be
exchanged and endorsed.
Section 2.09. Mutilated, Destroyed, Lost or Stolen Debt Securities. If
(a) any mutilated Debt Security is surrendered to the Trustee at its corporate
trust office or (b) the Partnership and the Trustee receive evidence to their
satisfaction of the destruction, loss or theft of any Debt Security, and there
is delivered to the Partnership and the Trustee such security or indemnity as
may be required by them to save each of them and any paying agent harmless, and
neither the Partnership nor the Trustee receives notice that such Debt Security
has been acquired by a bona fide purchaser, then the Partnership shall execute
and, upon a Partnership Order, the Trustee shall authenticate and deliver, in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen Debt
Security, a new Debt Security of the same series of like tenor, form, terms and
principal amount, bearing a number not contemporaneously Outstanding. Upon the
issuance of any substituted Debt Security, the Partnership may require the
payment of a sum sufficient to cover any tax, fee, assessment or other
governmental charge that may be imposed in relation thereto and any other
expenses connected therewith. In case any Debt which has matured or is about to
mature or which has been called for redemption shall become mutilated or be
destroyed, lost or stolen, the Partnership may, instead of issuing a substituted
Debt Security, pay or authorize the payment of the same (without surrender
thereof except in the case of a mutilated Debt Security) if the applicant for
such payment shall furnish the Partnership and the Trustee with such security or
indemnity as either may require to save it harmless from all risk, however
remote, and, in case of destruction, loss or theft, evidence to the satisfaction
of the
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Partnership and the Trustee of the destruction, loss or theft of such Debt
Security and of the ownership thereof.
Every substituted Debt Security of any series issued pursuant to the
provisions of this Section 2.09 by virtue of the fact that any Debt Security is
destroyed, lost or stolen shall constitute an original additional contractual
obligation of the Partnership, whether or not the destroyed, lost or stolen Debt
Security shall be found at any time, and shall be entitled to all the benefits
of this Indenture equally and proportionately with any and all other Debt
Securities of that series duly issued hereunder. All Debt Securities shall be
held and owned upon the express condition that the foregoing provisions are
exclusive with respect to the replacement or payment of mutilated, destroyed,
lost or stolen Debt Securities, and shall preclude any and all other rights or
remedies, notwithstanding any law or statute existing or hereafter enacted to
the contrary with respect to the replacement or payment of negotiable
instruments or other securities without their surrender.
Section 2.10. Cancellation of Surrendered Debt Securities. All Debt
Securities surrendered for payment, redemption, registration of transfer or
exchange shall, if surrendered to the Partnership or any paying agent or a
Registrar, be delivered to the Trustee for cancellation by it, or if surrendered
to the Trustee, shall be canceled by it, and no Debt Securities shall be issued
in lieu thereof except as expressly permitted by any of the provisions of this
Indenture. All canceled Debt Securities held by the Trustee shall be destroyed
(subject to the record retention requirements of the Exchange Act) and
certification of their destruction delivered to the Partnership, unless
otherwise directed. On request of the Partnership, the Trustee shall deliver to
the Partnership canceled Debt Securities held by the Trustee. If the Partnership
shall acquire any of the Debt Securities, however, such acquisition shall not
operate as a redemption or satisfaction of the Debt represented thereby unless
and until the same are delivered or surrendered to the Trustee for cancellation.
The Partnership may not issue new Debt Securities to replace Debt Securities it
has redeemed, paid or delivered to the Trustee for cancellation.
Section 2.11. Provisions of the Indenture and Debt Securities for the
Sole Benefit of the Parties and the Holders. Nothing in this Indenture or in the
Debt, expressed or implied, shall give or be construed to give to any Person,
other than the parties hereto, the Holders or any Registrar or paying agent, any
legal or equitable right, remedy or claim under or in respect of this Indenture,
or under any covenant, condition or provision herein contained; all its
covenants, conditions and provisions being for the sole benefit of the parties
hereto, the Holders and any Registrar and paying agents.
Section 2.12. Payment of Interest; Interest Rights Preserved.
(a) Interest on any Debt Security that is payable and is punctually
paid or duly provided for on any interest payment date shall be paid to the
Person in whose name such Debt Security is registered at the close of business
on the regular record date for such interest notwithstanding the cancellation of
such Debt Security upon any transfer or exchange subsequent to the regular
record date. Payment of interest on Debt Securities shall be made at the
corporate trust office of the Trustee (except as otherwise specified pursuant to
Section 2.03), or at the option of the Partnership, by check mailed to the
address of the Person entitled thereto as such address shall appear in the Debt
Security Register or, if provided pursuant to Section 2.03 and in
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accordance with arrangements satisfactory to the Trustee, at the option of the
Registered Holder by wire transfer to an account designated by the Registered
Holder.
(b) Subject to the foregoing provisions of this Section 2.12 and
Section 2.17, each Debt Security of a particular series delivered under this
Indenture upon registration of transfer of or in exchange for or in lieu of any
other Debt Security of the same series shall carry the rights to interest
accrued and unpaid, and to accrue, which were carried by such other Debt
Security.
Section 2.13. Securities Denominated in Dollars. Except as otherwise
specified pursuant to Section 2.03 for Debt Securities of any series, payment of
the principal of, and premium, if any, and interest on, Debt Securities of such
series will be made in Dollars.
Section 2.14. Wire Transfers. Notwithstanding any other provision to
the contrary in this Indenture, the Partnership may make any payment of moneys
required to be deposited with the Trustee on account of principal of, or
premium, if any, or interest on, the Debt Securities (whether pursuant to
optional or mandatory redemption payments, interest payments or otherwise) by
wire transfer in immediately available funds to an account designated by the
Trustee before 11:00 a.m., New York City time, on the date such moneys are to be
paid to the Holders of the Debt Securities in accordance with the terms hereof.
Section 2.15. Securities Issuable in the Form of a Global Security.
(a) If the Partnership shall establish pursuant to Sections 2.01 and
2.03 that the Debt Securities of a particular series are to be issued in whole
or in part in the form of one or more Global Securities, then the Partnership
shall execute and the Trustee or its agent shall, in accordance with Section
2.05, authenticate and deliver, such Global Security or Securities, which shall
represent, and shall be denominated in an amount equal to the aggregate
principal amount of, the Outstanding Debt Securities of such series to be
represented by such Global Security or Securities, or such portion thereof as
the Partnership shall specify in an Officers' Certificate, shall be registered
in the name of the Depositary for such Global Security or Securities or its
nominee, shall be delivered by the Trustee or its agent to the Depositary or
pursuant to the Depositary's instruction and shall bear a legend substantially
to the following effect:
"UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITARY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO
THE PARTNERSHIP OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR
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THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN THE INDENTURE REFERRED TO HEREIN",
or such other legend as may then be required by the Depositary for such Global
Security or Securities.
(b) Notwithstanding any other provision of this Section 2.15 or of
Section 2.07 to the contrary, and subject to the provisions of paragraph (c)
below, unless the terms of a Global Security expressly permit such Global
Security to be exchanged in whole or in part for definitive Debt Securities in
registered form, a Global Security may be transferred, in whole but not in part
and in the manner provided in Section 2.07, only by the Depositary to a nominee
of the Depositary for such Global Security, or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary, or by the Depositary or a
nominee of the Depositary to a successor Depositary or a nominee of such
successor for such Global Security selected or approved by the Partnership, or
to a nominee of such successor Depositary.
(c) (i) If at any time the Depositary for a Global Security or
Securities notifies the Partnership that it is unwilling or unable to
continue as Depositary for such Global Security or Securities or if at
any time the Depositary for the Debt Securities for such series shall
no longer be eligible or in good standing under the Exchange Act or
other applicable statute, rule or regulation, the Partnership shall
appoint a successor Depositary with respect to such Global Security or
Securities. If a successor Depositary for such Global Security or
Securities is not appointed by the Partnership within 90 days after the
Partnership receives such notice or becomes aware of such
ineligibility, the Partnership shall execute, and the Trustee or its
agent, upon receipt of a Partnership Order for the authentication and
delivery of such individual Debt Securities of such series in exchange
for such Global Security, will authenticate and deliver, individual
Debt Securities of such series of like tenor and terms in definitive
form in an aggregate principal amount equal to the principal amount of
the Global Security in exchange for such Global Security or Securities.
(ii) The Partnership may at any time and in its sole discretion
determine that the Debt Securities of any series or portion thereof
issued or issuable in the form of one or more Global Securities shall
no longer be represented by such Global Security or Securities. In such
event the Partnership will execute, and the Trustee, upon receipt of a
Partnership Order for the authentication and delivery of individual
Debt Securities of such series in exchange in whole or in part for such
Global Security, will authenticate and deliver individual Debt
Securities of such series of like tenor and terms in definitive form in
an aggregate principal amount equal to the principal amount of such
series or portion thereof in exchange for such Global Security or
Securities.
(iii) If specified by the Partnership pursuant to Sections 2.01 and
2.03 with respect to Debt Securities issued or issuable in the form of
a Global Security, the Depositary for such Global Security may
surrender such Global Security in exchange in whole or in part for
individual Debt Securities of such series of like tenor and terms in
definitive form on
18
such terms as are acceptable to the Partnership, the Trustee and such
Depositary. Thereupon the Partnership shall execute, and the Trustee or
its agent upon receipt of a Partnership Order for the authentication
and delivery of definitive Debt Securities of such series shall
authenticate and deliver, without service charge, to each Person
specified by such Depositary a new Debt Security or Securities of the
same series of like tenor and terms and of any authorized denomination
as requested by such Person in aggregate principal amount equal to and
in exchange for such Person's beneficial interest in the Global
Security; and to such Depositary a new Global Security of like tenor
and terms and in an authorized denomination equal to the difference, if
any, between the principal amount of the surrendered Global Security
and the aggregate principal amount of Debt Securities delivered to
Holders thereof.
(iv) In any exchange provided for in any of the preceding three
paragraphs, the Partnership will execute and the Trustee or its agent
will authenticate and deliver individual Debt Securities. Upon the
exchange of the entire principal amount of a Global Security for
individual Debt Securities, such Global Security shall be canceled by
the Trustee or its agent. Except as provided in the preceding
paragraph, Debt Securities issued in exchange for a Global Security
pursuant to this Section 2.15 shall be registered in such names and in
such authorized denominations as the Depositary for such Global
Security, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Trustee or the Registrar.
The Trustee or the Registrar shall deliver such Debt Securities to the
Persons in whose names such Debt Securities are so registered.
(v) Payments in respect of the principal of and interest on any Debt
Securities registered in the name of the Depositary or its nominee will
be payable to the Depositary or such nominee in its capacity as the
registered owner of such Global Security. The Partnership and the
Trustee may treat the Person in whose name the Debt Securities,
including the Global Security, are registered as the owner thereof for
the purpose of receiving such payments and for any and all other
purposes whatsoever. None of the Partnership, the Trustee, any
Registrar, the paying agent or any agent of the Partnership or the
Trustee will have any responsibility or liability for any aspect of the
records relating to or payments made on account of the beneficial
ownership interests of the Global Security by the Depositary or its
nominee or any of the Depositary's direct or indirect participants, or
for maintaining, supervising or reviewing any records of the
Depositary, its nominee or any of its direct or indirect participants
relating to the beneficial ownership interests of the Global Security,
the payments to the beneficial owners of the Global Security of amounts
paid to the Depositary or its nominee, or any other matter relating to
the actions and practices of the Depositary, its nominee or any of its
direct or indirect participants. None of the Partnership, the Trustee
or any such agent will be liable for any delay by the Depositary, its
nominee, or any of its direct or indirect participants in identifying
the beneficial owners of the Debt Securities, and the Partnership and
the Trustee may conclusively rely on, and will be protected in relying
on, instructions from the Depositary or its nominee for all purposes
(including with respect to the registration and delivery, and the
respective principal amounts, of the Debt Securities to be issued).
19
Section 2.16. Medium Term Securities. Notwithstanding any contrary
provision herein, if all Debt Securities of a series are not to be originally
issued at one time, it shall not be necessary for the Partnership to deliver to
the Trustee an Officers' Certificate, resolutions of the Board of Directors,
supplemental Indenture, Opinion of Counsel or written order or any other
document otherwise required pursuant to Section 2.01, 2.03, 2.05 or 13.05 at or
prior to the time of authentication of each Debt Security of such series if such
documents are delivered to the Trustee or its agent at or prior to the
authentication upon original issuance of the first such Debt Security of such
series to be issued; provided, that any subsequent request by the Partnership to
the Trustee to authenticate Debt Securities of such series upon original
issuance shall constitute a representation and warranty by the Partnership that,
as of the date of such request, the statements made in the Officers' Certificate
delivered pursuant to Section 2.05 or 13.05 shall be true and correct as if made
on such date and that the Opinion of Counsel delivered at or prior to such time
of authentication of an original issuance of Debt Securities shall specifically
state that it shall relate to all subsequent issuances of Debt Securities of
such series that are identical to the Debt Securities issued in the first
issuance of Debt Securities of such series.
A Partnership Order delivered by the Partnership to the Trustee in the
circumstances set forth in the preceding paragraph, may provide that Debt
Securities which are the subject thereof will be authenticated and delivered by
the Trustee or its agent on original issue from time to time upon the telephonic
or written order of Persons designated in such written order (any such
telephonic instructions to be promptly confirmed in writing by such Person) and
that such Persons are authorized to determine, consistent with the Officers'
Certificate, supplemental Indenture or resolution of the Board of Directors
relating to such written order, such terms and conditions of such Debt
Securities as are specified in such Officers' Certificate, supplemental
Indenture or such resolution.
Section 2.17. Defaulted Interest. Any interest on any Debt Security of
a particular series which is payable, but is not punctually paid or duly
provided for, on the dates and in the manner provided in the Debt Securities of
such series and in this Indenture (herein called "Defaulted Interest") shall
forthwith cease to be payable to the Registered Holder thereof on the relevant
record date by virtue of having been such Registered Holder, and such Defaulted
Interest may be paid by the Partnership, at its election in each case, as
provided in clause (i) or (ii) below:
(i) The Partnership may elect to make payment of any Defaulted
Interest to the Persons in whose names the Registered Securities of
such series are registered at the close of business on a special record
date for the payment of such Defaulted Interest, which shall be fixed
in the following manner. The Partnership shall notify the Trustee in
writing of the amount of Defaulted Interest proposed to be paid on each
such Registered Security of such series and the date of the proposed
payment, and at the same time the Partnership shall deposit with the
Trustee an amount of money equal to the aggregate amount proposed to be
paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the
proposed payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as in this
clause provided. Thereupon the Trustee shall fix a special record date
for the payment of such Defaulted Interest which shall be not more than
15 days and not less than 10 days prior to the date of the proposed
payment
20
and not less than 10 days after the receipt by the Trustee of the
notice of the proposed payment. The Trustee shall promptly notify the
Partnership of such special record date and, in the name and at the
expense of the Partnership, shall cause notice of the proposed payment
of such Defaulted Interest and the special record date therefor to be
mailed, first class postage pre-paid, to each Holder thereof at its
address as it appears in the Security Register, not less than 10 days
prior to such special record date. Notice of the proposed payment of
such Defaulted Interest and the special record date therefor having
been so mailed, such Defaulted Interest shall be paid to the Persons in
whose names the Registered Securities of such series are registered at
the close of business on such special record date.
(ii) The Partnership may make payment of any Defaulted
Interest on the Debt Securities of such series in any other lawful
manner not inconsistent with the requirements of any securities
exchange on which the Debt Securities of such series may be listed, and
upon such notice as may be required by such exchange, if, after notice
given by the Partnership to the Trustee of the proposed payment
pursuant to this clause, such manner of payment shall be deemed
practicable by the Trustee.
Section 2.18. CUSIP Numbers. The Partnership in issuing the Securities
may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee
shall use "CUSIP" numbers in notices of redemption as a convenience to Holders;
provided that any such notice may state that no representation is made as to the
accuracy of such numbers either as printed on the Securities or as contained in
any notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such redemption shall
not be affected by any defect in or omission of such numbers. The Partnership
will promptly notify the Trustee in writing of any change in the "CUSIP"
numbers.
ARTICLE III
REDEMPTION OF DEBT SECURITIES
Section 3.01. Applicability of Article. The provisions of this Article
shall be applicable to the Debt Securities of any series which are redeemable
before their Stated Maturity except as otherwise specified as contemplated by
Section 2.03 for Debt Securities of such series.
Section 3.02. Notice of Redemption; Selection of Debt Securities. In
case the Partnership shall desire to exercise the right to redeem all or, as the
case may be, any part of the Debt Securities of any series in accordance with
their terms, by resolution of the Board of Directors or a supplemental
Indenture, the Partnership shall fix a date for redemption and shall give notice
of such redemption at least 30 and not more than 60 days prior to the date fixed
for redemption to the Holders of Debt Securities of such series so to be
redeemed as a whole or in part, in the manner provided in Section 13.03. The
notice if given in the manner herein provided shall be conclusively presumed to
have been duly given, whether or not the Holder receives such notice. In any
case, failure to give such notice or any defect in the notice to the Holder of
any Debt Security of a series designated for redemption as a whole or in part
shall not affect the validity of the proceedings for the redemption of any other
Debt Security of such series.
21
Each such notice of redemption shall specify the date fixed for
redemption, the redemption price at which Debt Securities of such series are to
be redeemed (or the method of calculating such redemption price), the Place or
Places of Payment that payment will be made upon presentation and surrender of
such Debt Securities, that any interest accrued to the date fixed for redemption
will be paid as specified in said notice, that the redemption is for a sinking
fund payment (if applicable), that, unless otherwise specified in such notice,
that, if the Partnership defaults in making such redemption payment or if the
Debt Securities of that series are subordinated pursuant to the terms of Article
XII, the paying agent is prohibited from making such payment pursuant to the
terms of this Indenture, that on and after said date any interest thereon or on
the portions thereof to be redeemed will cease to accrue, that in the case of
Original Issue Discount Securities original issue discount accrued after the
date fixed for redemption will cease to accrue, the terms of the Debt Securities
of that series pursuant to which the Debt Securities of that series are being
redeemed and that no representation is made as to the correctness or accuracy of
the CUSIP number, if any, listed in such notice or printed on the Debt
Securities of that series. If less than all the Debt Securities of a series are
to be redeemed the notice of redemption shall specify the CUSIP numbers of the
Debt Securities of that series to be redeemed. In case any Debt Security of a
series is to be redeemed in part only, the notice of redemption shall state the
portion of the principal amount thereof to be redeemed and shall state that on
and after the date fixed for redemption, upon surrender of such Debt Security, a
new Debt Security or Debt Securities of that series in principal amount equal to
the unredeemed portion thereof, will be issued.
At least 45 days but not more than 60 days before the redemption date
unless the Trustee consents to a shorter period, the Partnership shall give
written notice to the Trustee of the redemption date, the principal amount of
Debt Securities to be redeemed and the series and terms of the Debt Securities
pursuant to which such redemption will occur. Such notice shall be accompanied
by an Officers' Certificate and an Opinion of Counsel from the Partnership to
the effect that such redemption will comply with the conditions herein. If fewer
than all the Debt Securities of a series are to be redeemed, the record date
relating to such redemption shall be selected by the Partnership and given in
writing to the Trustee, which record date shall be not less than 15 days after
the date of notice to the Trustee.
By 11 a.m., New York City time, on the redemption date for any Debt
Securities, the Partnership shall deposit with the Trustee or with a paying
agent (or, if the Partnership is acting as its own paying agent, segregate and
hold in trust) an amount of money in Dollars (except as provided pursuant to
Section 2.03) sufficient to pay the redemption price of such Debt Securities or
any portions thereof that are to be redeemed on that date.
If less than all the Debt Securities of like tenor and terms of a
series are to be redeemed (other than pursuant to mandatory sinking fund
redemptions) the Trustee shall select, on a pro rata basis, by lot or by such
other method as in its sole discretion it shall deem appropriate and fair, the
Debt Securities of that series or portions thereof (in multiples of $1,000) to
be redeemed. In any case where more than one Debt Security of such series is
registered in the same name, the Trustee in its discretion may treat the
aggregate principal amount so registered as if it were represented by one Debt
Security of such series. The Trustee shall promptly notify the Partnership in
writing of the Debt Securities selected for redemption and, in the case of any
Debt Securities selected for partial redemption, the principal amount thereof to
be redeemed. If any
22
Debt Security called for redemption shall not be so paid upon surrender thereof
on such redemption date, the principal, premium, if any, and interest shall bear
interest until paid from the redemption date at the rate borne by the Debt
Securities of that series. If less than all the Debt Securities of unlike tenor
and terms of a series are to be redeemed, the particular Debt Securities to be
redeemed shall be selected by the Partnership. Provisions of this Indenture that
apply to Debt Securities called for redemption also apply to portions of Debt
Securities called for redemption.
Section 3.03. Payment of Debt Securities Called for Redemption. If
notice of redemption has been given as provided in Section 3.03, the Debt
Securities or portions of Debt Securities of the series with respect to which
such notice has been given shall become due and payable on the date and at the
Place or Places of Payment stated in such notice at the applicable redemption
price, together with any interest accrued to the date fixed for redemption, and
on and after said date (unless the Partnership shall default in the payment of
such Debt Securities at the applicable redemption price, together with any
interest accrued to said date) any interest on the Debt Securities or portions
of Debt Securities of any series so called for redemption shall cease to accrue,
any original issue discount in the case of Original Issue Discount Securities
shall cease to accrue. On presentation and surrender of such Debt Securities at
the Place or Places of Payment in said notice specified, the said Debt
Securities or the specified portions thereof shall be paid and redeemed by the
Partnership at the applicable redemption price, together with any interest
accrued thereon to the date fixed for redemption.
Any Debt Security that is to be redeemed only in part shall be
surrendered at the corporate trust office or such other office or agency of the
Partnership as is specified pursuant to Section 2.03 with, if the Partnership,
the Registrar or the Trustee so requires, due endorsement by, or a written
instrument of transfer in form satisfactory to the Partnership, the Registrar
and the Trustee duly executed by, the Holder thereof or his attorney duly
authorized in writing, and the Partnership shall execute, and the Trustee shall
authenticate and deliver to the Holder of such Debt Security without service
charge, a new Debt Security or Debt Securities of the same series, of like tenor
and form, of any authorized denomination as requested by such Holder in
aggregate principal amount equal to and in exchange for the unredeemed portion
of the principal of the Debt Security so surrendered; except that if a Global
Security is so surrendered, the Partnership shall execute, and the Trustee shall
authenticate and deliver to the Depositary for such Global Security, without
service charge, a new Global Security in a denomination equal to and in exchange
for the unredeemed portion of the principal of the Global Security so
surrendered. In the case of a Debt Security providing appropriate space for such
notation, at the option of the Holder thereof, the Trustee, in lieu of
delivering a new Debt Security or Debt Securities as aforesaid, may make a
notation on such Debt Security of the payment of the redeemed portion thereof.
Section 3.04. Mandatory and Optional Sinking Funds. The minimum amount
of any sinking fund payment provided for by the terms of Debt Securities of any
series, resolution of the Board of Directors or a supplemental Indenture is
herein referred to as a "mandatory sinking fund payment", and any payment in
excess of such minimum amount provided for by the terms of Debt Securities of
any series, resolution of the Board of Directors or a supplemental Indenture is
herein referred to as an "optional sinking fund payment."
23
In lieu of making all or any part of any mandatory sinking fund payment
with respect to any Debt Securities of a series in cash, the Partnership may at
its option (a) deliver to the Trustee Debt Securities of that series theretofore
purchased or otherwise acquired by the Partnership or (b) receive credit for the
principal amount of Debt Securities of that series which have been redeemed
either at the election of the Partnership pursuant to the terms of such Debt
Securities or through the application of permitted optional sinking fund
payments pursuant to the terms of such Debt Securities, resolution or
supplemental Indenture; provided, that such Debt Securities have not been
previously so credited. Such Debt Securities shall be received and credited for
such purpose by the Trustee at the redemption price specified in such Debt
Securities, resolution or supplemental Indenture for redemption through
operation of the sinking fund and the amount of such mandatory sinking fund
payment shall be reduced accordingly.
Section 3.05. Redemption of Debt Securities for Sinking Fund. Not less
than 60 days prior to each sinking fund payment date for any series of Debt
Securities, the Partnership will deliver to the Trustee an Officers' Certificate
specifying the amount of the next ensuing sinking fund payment for that series
pursuant to the terms of that series, any resolution or supplemental Indenture,
the portion thereof, if any, which is to be satisfied by payment of cash and the
portion thereof, if any, which is to be satisfied by delivering and crediting
Debt Securities of that series pursuant to this Section 3.05 (which Debt
Securities, if not previously redeemed, will accompany such certificate) and
whether the Partnership intends to exercise its right to make any permitted
optional sinking fund payment with respect to such series. Such certificate
shall also state that no Event of Default has occurred and is continuing with
respect to such series. Such certificate shall be irrevocable and upon its
delivery the Partnership shall be obligated to make the cash payment or payments
therein referred to, if any, by 11 a.m., New York City time, on the next
succeeding sinking fund payment date. Failure of the Partnership to deliver such
certificate (or to deliver the Debt Securities specified in this paragraph)
shall not constitute a Default, but such failure shall require that the sinking
fund payment due on the next succeeding sinking fund payment date for that
series shall be paid entirely in cash and shall be sufficient to redeem the
principal amount of such Debt Securities subject to a mandatory sinking fund
payment without the option to deliver or credit Debt Securities as provided in
this Section 3.05 and without the right to make any optional sinking fund
payment, if any, with respect to such series.
Any sinking fund payment or payments (mandatory or optional) made in
cash plus any unused balance of any preceding sinking fund payments made in cash
which shall equal or exceed $100,000 (or a lesser sum if the Partnership shall
so request) with respect to the Debt Securities of any particular series shall
be applied by the Trustee on the sinking fund payment date on which such payment
is made (or, if such payment is made before a sinking fund payment date, on the
sinking fund payment date following the date of such payment) to the redemption
of such Debt Securities at the Redemption Price specified in such Debt
Securities, resolution or supplemental Indenture for operation of the sinking
fund together with any accrued interest to the date fixed for redemption. Any
sinking fund moneys not so applied or allocated by the Trustee to the redemption
of Debt Securities shall be added to the next cash sinking fund payment received
by the Trustee for such series and, together with such payment, shall be applied
in accordance with the provisions of this Section 3.05. Any and all sinking fund
moneys with respect to the Debt Securities of any particular series held by the
Trustee on the last sinking fund payment date with respect to Debt Securities of
such series and not held for the payment or
24
redemption of particular Debt Securities shall be applied by the Trustee,
together with other moneys, if necessary, to be deposited sufficient for the
purpose, to the payment of the principal of the Debt Securities of that series
at its Stated Maturity.
The Trustee shall select the Debt Securities to be redeemed upon such
sinking fund payment date in the manner specified in the last paragraph of
Section 3.02 and the Partnership shall cause notice of the redemption thereof to
be given in the manner provided in Section 3.02 except that the notice of
redemption shall also state that the Debt Securities are being redeemed by
operation of the sinking fund. Such notice having been duly given, the
redemption of such Debt Securities shall be made upon the terms and in the
manner stated in Section 3.03.
At least one business day before each sinking fund payment date, the
Partnership shall pay to the Trustee (or, if the Partnership is acting as its
own paying agent, the Partnership shall segregate and hold in trust) in cash a
sum equal to any interest accrued to the date fixed for redemption of Debt
Securities or portions thereof to be redeemed on such sinking fund payment date
pursuant to this Section 3.05.
The Trustee shall not redeem any Debt Securities of a series with
sinking fund moneys or mail any notice of redemption of such Debt Securities by
operation of the sinking fund for such series during the continuance of a
Default in payment of interest on such Debt Securities or of any Event of
Default (other than an Event of Default occurring as a consequence of this
paragraph) with respect to such Debt Securities, except that if the notice of
redemption of any such Debt Securities shall theretofore have been mailed in
accordance with the provisions hereof, the Trustee shall redeem such Debt
Securities if cash sufficient for that purpose shall be deposited with the
Trustee for that purpose in accordance with the terms of this Article III.
Except as aforesaid, any moneys in the sinking fund for such series at the time
when any such Default or Event of Default shall occur and any moneys thereafter
paid into such sinking fund shall, during the continuance of such Default or
Event of Default, be held as security for the payment of such Debt Securities;
provided, however, that in case such Event of Default or Default shall have been
cured or waived as provided herein, such moneys shall thereafter be applied on
the next sinking fund payment date for such Debt Securities on which such moneys
may be applied pursuant to the provisions of this Section 3.05.
ARTICLE IV
PARTICULAR COVENANTS OF THE PARTNERSHIP
Section 4.01. Payment of Principal of, and Premium, If Any, and
Interest on, Debt Securities. The Partnership, for the benefit of each series of
Debt Securities, will duly and punctually pay or cause to be paid the principal
of, and premium, if any, and interest on, each of the Debt Securities at the
place, at the respective times and in the manner provided herein, in the Debt
Securities. Each installment of interest on the Debt Securities may at the
Partnership's option be paid by mailing checks for such interest payable to the
Person entitled thereto pursuant to Section 2.07(a) to the address of such
Person as it appears on the Debt Security Register.
Principal, premium and interest of Debt Securities of any series shall
be considered paid on the date due if, by 11 a.m., New York City time, on such
date the Trustee or any paying agent holds in accordance with this Indenture
money sufficient to pay in Dollars all principal, premium
25
and interest then due and, in the case of Debt Securities subordinated pursuant
to the terms of Article XII, the Trustee or such paying agent, as the case may
be, is not prohibited from paying such money to the Holders on that date
pursuant to the terms of this Indenture.
The Partnership shall pay interest on overdue principal at the rate
specified therefor in the Debt Securities and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
Section 4.02. Maintenance of Offices or Agencies for Registration of
Transfer, Exchange and Payment of Debt Securities. The Partnership will maintain
in each Place of Payment for any series of Debt Securities an office or agency
where Debt Securities of such series may be presented or surrendered for
payment, where Debt Securities of such series may be surrendered for transfer or
exchange and where notices and demands to or upon the Partnership in respect of
the Debt Securities of such series and this Indenture may be served. The
Partnership will give prompt written notice to the Trustee of the location, and
any change in the location, of such office or agency. If at any time the
Partnership shall fail to maintain any such required office or agency or shall
fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the office of the
Trustee where its corporate trust business is principally administered in the
United States, and the Partnership hereby appoints the Trustee as its agent to
receive all presentations, surrenders, notices and demands.
The Partnership may also from time to time designate different or
additional offices or agencies to be maintained for such purposes (in or outside
of such Place of Payment), and may from time to time rescind any such
designation; provided, however, that no such designation or rescission shall in
any manner relieve the Partnership of its obligations described in the preceding
paragraph. The Partnership will give prompt written notice to the Trustee of any
such additional designation or rescission of designation and any change in the
location of any such different or additional office or agency.
Section 4.03. Appointment to Fill a Vacancy in the Office of Trustee.
The Partnership, whenever necessary to avoid or fill a vacancy in the office of
Trustee, will appoint, in the manner provided in Section 7.08, a Trustee, so
that there shall at all times be a Trustee hereunder with respect to each series
of Debt Securities.
Section 4.04. Duties of Paying Agents, etc. The Partnership shall cause
each paying agent, if any, other than the Trustee, to execute and deliver to the
Trustee an instrument in which such agent shall agree with the Trustee, subject
to the provisions of this Section 4.04,
(i) that it will hold all sums held by it as such agent for
the payment of the principal of, and premium, if any, or interest on,
the Debt Securities of any series (whether such sums have been paid to
it by the Partnership or by any other obligor on the Debt Securities of
such series) in trust for the benefit of the Holders of the Debt
Securities of such series;
(ii) that it will give the Trustee notice of any failure by
the Partnership (or by any other obligor on the Debt Securities of such
series) to make any payment of the
26
principal of, and premium, if any, or interest on, the Debt Securities
of such series when the same shall be due and payable; and
(iii) that it will at any time during the continuance of an
Event of Default, upon the written request of the Trustee, forthwith
pay to the Trustee all sums so held by it as such agent.
(b) If the Partnership shall act as its own paying agent, it will, on
or before each due date of the principal of, and premium, if any, or interest
on, the Debt Securities of any series, set aside, segregate and hold in trust
for the benefit of the Holders of the Debt Securities of such series a sum
sufficient to pay such principal, premium, if any, or interest so becoming due.
The Partnership will promptly notify the Trustee of any failure by the
Partnership to take such action or the failure by any other obligor on such Debt
Securities to make any payment of the principal of, and premium, if any, or
interest on, such Debt Securities when the same shall be due and payable.
(c) Anything in this Section 4.04 to the contrary notwithstanding, the
Partnership may, at any time, for the purpose of obtaining a satisfaction and
discharge of this Indenture, or for any other reason, pay or cause to be paid to
the Trustee all sums held in trust by it or any paying agent, as required by
this Section 4.04, such sums to be held by the Trustee upon the same trusts as
those upon which such sums were held by the Partnership or such paying agent.
(d) Whenever the Partnership shall have one or more paying agents with
respect to any series of Debt Securities, it will, prior to each due date of the
principal of, and premium, if any, or interest on, any Debt Securities of such
series, deposit with any such paying agent a sum sufficient to pay the
principal, premium or interest so becoming due, such sum to be held in trust for
the benefit of the Persons entitled thereto, and (unless any such paying agent
is the Trustee) the Partnership will promptly notify the Trustee of its action
or failure so to act.
(e) Anything in this Section 4.04 to the contrary notwithstanding, the
agreement to hold sums in trust as provided in this Section 4.04 is subject to
the provisions of Section 11.05.
Section 4.05. SEC Reports; Financial Statements.
(a) The Partnership shall, so long as any of the Debt Securities are
outstanding, file with the Trustee, within 15 days after it files the same with
the SEC, copies of the annual reports and the information, documents and other
reports (or copies of such portions of any of the foregoing as the SEC may by
rules and regulations prescribe) that the Partnership is required to file with
the SEC pursuant to Section 13 or 15(d) of the Exchange Act. If the Partnership
is not subject to the requirements of such Section 13 or 15(d), the Partnership
shall file with the Trustee, within 15 days after it would have been required to
file the same with the SEC, financial statements, including any notes thereto
(and with respect to annual reports, an auditors' report by a firm of
established national reputation), and a "Management's Discussion and Analysis of
Financial Condition and Results of Operations," both comparable to that which
the Partnership would have been required to include in such annual reports,
information, documents or other reports if the Partnership had been subject to
the requirements of such Section 13 or 15(d). The Partnership shall also comply
with the provisions of TIA Section 314(a).
27
(b) If the Partnership is required to furnish annual or quarterly
reports to its stockholders pursuant to the Exchange Act, the Partnership shall,
so long as any of the Debt Securities are outstanding, cause any annual report
furnished to its stockholders generally and any quarterly or other financial
reports furnished by it to its stockholders generally to be filed with the
Trustee and mailed to the Holders in the manner and to the extent provided in
Section 5.03.
(c) The Partnership shall provide the Trustee with a sufficient number
of copies of all reports and other documents and information that the Trustee
may be required to deliver to Holders under this Section.
Section 4.06. Compliance Certificate.
(a) The Partnership shall, so long as any of the Debt Securities are
outstanding, deliver to the Trustee, within 120 days after the end of each
fiscal year of the Partnership, an Officers' Certificate stating that a review
of the activities of the Partnership and its Subsidiaries during the preceding
fiscal year has been made under the supervision of the signing Officers of the
Partnership with a view to determining whether the Partnership has kept,
observed, performed and fulfilled its obligations under this Indenture, and
further stating, as to each such Officer signing such certificate, that to the
best of his knowledge the Partnership has kept, observed, performed and
fulfilled each and every covenant contained in this Indenture and is not in
default in the performance or observance of any of the terms, provisions and
conditions hereof, without regard to any grace period or requirement of notice
required by this Indenture (or, if a Default or Event of Default shall have
occurred, describing all such Defaults or Events of Default of which such
Officer may have knowledge and what action the Partnership, is taking or
proposes to take with respect thereto) and that to the best of his knowledge no
event has occurred and remains in existence by reason of which payments on
account of the principal of, or premium, if any, or interest, if any, on the
Debt Securities are prohibited or, if such event has occurred, a description of
the event and what action the Partnership is taking or proposes to take with
respect thereto.
(b) The Partnership shall, so long as any of the Debt Securities are
outstanding, deliver to the Trustee within 30 days after the occurrence of any
Default or Event of Default under this Indenture, an Officers' Certificate
specifying such Default or Event of Default, the status thereof and what action
the Partnership is taking or proposes to take with respect thereto.
Section 4.07. Further Instruments and Acts. The Partnership will, upon
request of the Trustee, execute and deliver such further instruments and do such
further acts as may reasonably be necessary or proper to carry out more
effectually the purposes of this Indenture.
Section 4.08. Existence. Except as permitted by Article X hereof, the
Partnership shall do or cause to be done all things necessary to preserve and
keep in full force and effect its existence and all rights (charter and
statutory) and franchises of the Partnership, provided that the Partnership
shall not be required to preserve any such right or franchise, if the Board of
Directors shall determine that the preservation thereof is no longer desirable
in the conduct of the business of the Partnership.
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Section 4.09. Maintenance of Properties. The Partnership shall cause
all properties owned by the Partnership or any of its Subsidiaries or used or
held for use in the conduct of its business or the business of any such
Subsidiary to be maintained and kept in good condition, repair and working order
(reasonable wear and tear excepted) and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Partnership
may be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided that nothing in
this Section shall prevent the Partnership from discontinuing the operation or
maintenance of any of such properties if such discontinuance is, in the judgment
of the Partnership, desirable in the conduct of its business or the business of
any such Subsidiary and not disadvantageous in any material respect to the
Holders.
Section 4.10. Payment of Taxes and Other Claims. The Partnership shall
pay or discharge or cause to be paid or discharged, before the same shall become
delinquent, (i) all taxes, assessments and governmental charges levied or
imposed upon the Partnership or any of its Subsidiaries or upon the income,
profits or property of the Partnership or any of its Subsidiaries, and (ii) all
lawful claims for labor, materials and supplies which, if unpaid, might by law
become a Lien upon the property of the Partnership or any of its Subsidiaries;
provided that the Partnership shall not be required to pay or discharge or cause
to be paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings.
Section 4.11. Waiver of Certain Covenants. The Partnership and the
Subsidiary Guarantors may, with respect to the Debt Securities of any series,
omit in any particular instance to comply with any term, provision or condition
set forth in this Article IV (except Sections 4.01 through 4.08) if, before or
after the time for such compliance, the Holders of at least a majority in
principal amount of the Outstanding Debt Securities of each series affected,
waive such compliance in such instance with such term, provision or condition,
but no such waiver shall extend to or affect such term, provision or condition
except to the extent so expressly waived, and, until such waiver shall become
effective, the obligations of the Partnership and the Subsidiary Guarantors and
the duties of the Trustee in respect of any such term, provision or condition
shall remain in full force and effect.
ARTICLE V
HOLDERS' LISTS AND REPORTS BY THE TRUSTEE
Section 5.01. Partnership to Furnish Trustee Information as to Names
and Addresses of Holders; Preservation of Information. The Partnership covenants
and agrees that it will furnish or cause to be furnished to the Trustee with
respect to the Debt Securities of each series:
(a) not more than 10 days after each record date with respect to the
payment of interest, if any, a list, in such form as the Trustee may reasonably
require, of the names and addresses of the Holders as of such record date, and
(b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Partnership of any such request, a list of
similar form and contents as of a date not more than 15 days prior to the time
such list is furnished;
29
provided, however, that so long as the Trustee shall be the Registrar, such
lists shall not be required to be furnished.
The Trustee shall preserve, in as current a form as is reasonably
practicable, all information as to the names and addresses of the Holders (i)
contained in the most recent list furnished to it as provided in this Section
5.01 or (ii) received by it in the capacity of paying agent or Registrar (if so
acting) hereunder.
The Trustee may destroy any list furnished to it as provided in this
Section 5.01 upon receipt of a new list so furnished.
Section 5.02. Communications to Holders. Holders may communicate
pursuant to Section 312(b) of the TIA with other Holders with respect to their
rights under this Indenture or the Debt Securities. The Partnership, the
Trustee, the Registrar and anyone else shall have the protection of Section
312(c) of the TIA.
Section 5.03. Reports by Trustee. Within 60 days after each January 31,
beginning with the first January 31 following the date of this Indenture, and in
any event on or before April 1 in each year, the Trustee shall mail to Holders a
brief report dated as of such January 31 that complies with TIA Section 313(a);
provided, however, that if no event described in TIA Section 313(a) has
occurred within the twelve months preceding the reporting date, no report need
be transmitted. The Trustee also shall comply with TIA Section 313(b).
Reports pursuant to this Section 5.03 shall be transmitted by mail:
(a) to all Holders, as the names and addresses of such Holders appear
in the Debt Security Register; and
(b) except in the cases of reports under Section 313(b)(2) of the TIA,
to each Holder of a Debt Security of any series whose name and address appear in
the information preserved at the time by the Trustee in accordance with Section
5.01.
A copy of each report at the time of its mailing to Holders shall be
filed with the Securities and Exchange Commission and each stock exchange (if
any) on which the Debt Securities of any series are listed. The Partnership
agrees to notify promptly the Trustee whenever the Debt Securities of any series
become listed on any stock exchange and of any delisting thereof.
Section 5.04. Record Dates for Action by Holders. If the Partnership
shall solicit from the holders of Debt Securities of any series any action
(including the making of any demand or request, the giving of any direction,
notice, consent or waiver or the taking of any other action), the Partnership
may, at its option, by resolution of the Board of Directors, fix in advance a
record date for the determination of Holders of Debt Securities entitled to take
such action, but the Partnership shall have no obligation to do so. Any such
record date shall be fixed at the Partnership's discretion. If such a record
date is fixed, such action may be sought or given before or after the record
date, but only the Holders of Debt Securities of record at the close of business
on such record date shall be deemed to be Holders of Debt Securities for the
purpose of determining whether Holders of the requisite proportion of Debt
Securities of such series
30
Outstanding have authorized or agreed or consented to such action, and for that
purpose the Debt Securities of such series Outstanding shall be computed as of
such record date.
ARTICLE VI
REMEDIES OF THE TRUSTEE AND HOLDERS IN EVENT OF DEFAULT
Section 6.01. Events of Default. If any one or more of the following
shall have occurred and be continuing with respect to Debt Securities of any
series (each of the following, an "Event of Default"):
(a) default in the payment of any installment of interest upon any Debt
Securities of that series as and when the same shall become due and payable,
whether or not such payment shall be prohibited by Article XII, if applicable,
and continuance of such default for a period of 30 days; or
(b) default in the payment of the principal of or premium, if any, on
any Debt Securities of that series as and when the same shall become due and
payable, whether at maturity, upon redemption, by declaration, upon required
repurchase or otherwise, whether or not such payment shall be prohibited by
Article XII, if applicable; or
(c) default in the payment of any sinking fund payment with respect to
any Debt Securities of that series as and when the same shall become due and
payable; or
(d) failure on the part of the Partnership, or if any series of Debt
Securities Outstanding under this Indenture is entitled to the benefits of a
Guarantee, any of the Subsidiary Guarantors, duly to observe or perform any
other of the covenants or agreements on the part of the Partnership, or if
applicable, any of the Subsidiary Guarantors, in the Debt Securities of that
series, in any resolution of the Board of Directors authorizing the issuance of
that series of Debt Securities, in this Indenture with respect to such series or
in any supplemental Indenture with respect to such series (other than a covenant
a default in the performance of which is elsewhere in this Section specifically
dealt with), continuing for a period of 60 days after the date on which written
notice specifying such failure and requiring the Partnership, or if applicable,
the Subsidiary Guarantor, to remedy the same shall have been given, by
registered or certified mail, to the Partnership, or if applicable, the
Subsidiary Guarantor, by the Trustee or to the Partnership, or if applicable,
the Subsidiary Guarantor, and the Trustee by the Holders of at least 25% in
aggregate principal amount of the Debt Securities of that series at the time
Outstanding; or
(e) the Partnership, or if any series of Debt Securities Outstanding
under this Indenture is entitled to the benefits of a Guarantee, any of the
Subsidiary Guarantors, pursuant to or within the meaning of any Bankruptcy Law,
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it
in an involuntary case,
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(iii) consents to the appointment of a Custodian of it or for
all or substantially all of its property; or
(iv) makes a general assignment for the benefit of its
creditors;
(f) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(i) is for relief against the Partnership, or if any series of
Debt Securities Outstanding under this Indenture is entitled to the
benefits of a Guarantee, any of the Subsidiary Guarantors, as debtor in
an involuntary case,
(ii) appoints a Custodian of the Partnership, or if any series
of Debt Securities Outstanding under this Indenture is entitled to the
benefits of a Guarantee, any of the Subsidiary Guarantors, or a
Custodian for all or substantially all of the property of the
Partnership, or if applicable, any of the Subsidiary Guarantors, or
(iii) orders the liquidation of the Partnership, or if any
series of Debt Securities Outstanding under this Indenture is entitled
to the benefits of a Guarantee, any of the Subsidiary Guarantors,
and the order or decree remains unstayed and in effect for 60 days;
(g) if any series of Debt Securities Outstanding under this Indenture
is entitled to the benefits of a Guarantee, the Guarantee of any of the
Subsidiary Guarantors ceases to be in full force and effect with respect to Debt
Securities of that series (except as otherwise provided in this Indenture) or is
declared null and void in a judicial proceeding or the Subsidiary Guarantors
deny or disaffirm their obligations under the Indenture or such Guarantee; or
(h) any other Event of Default provided with respect to Debt Securities
of that series;
then and in each and every case that an Event of Default described in clause
(a), (b), (c), (d), (g), or (h) with respect to Debt Securities of that series
at the time Outstanding occurs and is continuing, unless the principal of,
premium, if any, and interest on all the Debt Securities of that series shall
have already become due and payable, either the Trustee or the Holders of not
less than 25% in aggregate principal amount of the Debt Securities of that
series then Outstanding hereunder, by notice in writing to the Partnership (and
to the Trustee if given by Holders), may declare the principal of (or, if the
Debt Securities of that series are Original Issue Discount Debt Securities, such
portion of the principal amount as may be specified in the terms of that
series), premium, if any, and interest on all the Debt Securities of that series
to be due and payable immediately, and upon any such declaration the same shall
become and shall be immediately due and payable, anything in this Indenture or
in the Debt Securities of that series contained to the contrary notwithstanding.
If an Event of Default described in clause (e) or (f) occurs, then and in each
and every such case, unless the principal of and interest on all the Debt
Securities shall have become due and payable, the principal of (or, if any Debt
Securities are Original Issue Discount Debt Securities, such portion of the
principal amount as may be specified in the terms thereto), premium, if any, and
interest on all the Debt Securities then Outstanding hereunder shall ipso facto
become and be immediately due and payable without any declaration or other act
on the
32
part of the Trustee or any Holders, anything in this Indenture or in the Debt
Securities contained to the contrary notwithstanding.
The Holders of a majority in aggregate principal amount of the Debt
Securities of a particular series by written notice to the Trustee may waive all
past Defaults (except with respect to the nonpayment of principal, premium, if
any, or interest) and rescind an acceleration and its consequences if the
rescission would not conflict with any judgment or decree of a court of
competent jurisdiction already rendered and if all existing Events of Default
have been cured or waived except nonpayment of principal, premium, if any, or
interest that has become due solely because of acceleration. Upon any such
rescission, the parties hereto shall be restored respectively to their several
positions and rights hereunder, and all rights, remedies and powers of the
parties hereto shall continue as though no such proceeding had been taken.
Section 6.02. Collection of Debt by Trustee, etc. If an Event of
Default occurs and is continuing, the Trustee, in its own name and as trustee of
an express trust, shall be entitled and empowered to institute any action or
proceedings at law or in equity for the collection of the sums so due and unpaid
or enforce the performance of any provision of the Debt Securities of the
affected series or this Indenture, and may prosecute any such action or
proceedings to judgment or final decree, and may enforce any such judgment or
final decree against the Subsidiary Guarantors or the Partnership or any other
obligor upon the Debt Securities of such series (and collect in the manner
provided by law out of the property of the Subsidiary Guarantors or the
Partnership or any other obligor upon the Debt Securities of such series
wherever situated the moneys adjudged or decreed to be payable).
In case there shall be pending proceedings for the bankruptcy or for
the reorganization of the Subsidiary Guarantors or the Partnership or any other
obligor upon the Debt Securities of any series under Title 11 of the United
States Code or any other Federal or State bankruptcy, insolvency or similar law,
or in case a receiver, trustee or other similar official shall have been
appointed for its property, or in case of any other similar judicial proceedings
relative to the Subsidiary Guarantors or the Partnership or any other obligor
upon the Debt Securities of any series, its creditors or its property, the
Trustee, irrespective of whether the principal of Debt Securities of any series
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand
pursuant to the provisions of this Section 6.02, shall be entitled and
empowered, by intervention in such proceedings or otherwise, to file and prove a
claim or claims for the whole amount of principal, premium, if any, and interest
(or, if the Debt Securities of such series are Original Issue Discount Debt
Securities, such portion of the principal amount as may be specified in the
terms of such series) owing and unpaid in respect of the Debt Securities of such
series, and to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee (including any claim for
reasonable compensation to the Trustee, its agents, attorneys and counsel, and
for reimbursement of all expenses and liabilities incurred, and all advances
made, by the Trustee except as a result of its negligence or bad faith) and of
the Holders thereof allowed in any such judicial proceedings relative to the
Subsidiary Guarantors or the Partnership, or any other obligor upon the Debt
Securities of such series, its creditors or its property, and to collect and
receive any moneys or other property payable or deliverable on any such claims,
and to distribute all amounts received with respect to the claims of such
Holders and of the Trustee on their behalf, and any receiver, assignee or
trustee in bankruptcy or reorganization is hereby
33
authorized by each of such Holders to make payments to the Trustee, and, in the
event that the Trustee shall consent to the making of payments directly to such
Holders, to pay to the Trustee such amount as shall be sufficient to cover
reasonable compensation to the Trustee, its agents, attorneys and counsel, and
all other reasonable expenses and liabilities incurred, and all advances made,
by the Trustee except as a result of its negligence or bad faith.
All rights of action and of asserting claims under this Indenture, or
under any of the Debt Securities of any series, may be enforced by the Trustee
without the possession of any such Debt Securities, or the production thereof in
any trial or other proceedings relative thereto, and any such action or
proceedings instituted by the Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment (except for any
amounts payable to the Trustee pursuant to Section 7.06) shall be for the
ratable benefit of the Holders of all the Debt Securities in respect of which
such action was taken.
In case of an Event of Default hereunder the Trustee may in its
discretion proceed to protect and enforce the rights vested in it by this
Indenture by such appropriate judicial proceedings as the Trustee shall deem
most effectual to protect and enforce any of such rights, either at law or in
equity or in bankruptcy or otherwise, whether for the specific enforcement of
any covenant or agreement contained in this Indenture or in aid of the exercise
of any power granted in this Indenture, or to enforce any other legal or
equitable right vested in the Trustee by this Indenture or by law.
Section 6.03. Application of Moneys Collected by Trustee. Any moneys or
other property collected by the Trustee pursuant to Section 6.02 with respect to
Debt Securities of any series shall be applied, after giving effect to the
provisions of Article XII, if applicable, in the order following, at the date or
dates fixed by the Trustee for the distribution of such moneys or other
property, upon presentation of the several Debt Securities of such series in
respect of which moneys or other property have been collected, and the notation
thereon of the payment, if only partially paid, and upon surrender thereof if
fully paid:
FIRST: To the payment of all money due the Trustee pursuant to Section
7.06;
SECOND: In case the principal of the Outstanding Debt Securities in
respect of which such moneys have been collected shall not have become due, to
the payment of interest on the Debt Securities of such series in the order of
the maturity of the installments of such interest, with interest (to the extent
that such interest has been collected by the Trustee) upon the overdue
installments of interest at the rate or Yield to Maturity (in the case of
Original Issue Discount Debt Securities) borne by the Debt Securities of such
series, such payments to be made ratably to the Persons entitled thereto,
without discrimination or preference;
THIRD: In case the principal of the Outstanding Debt Securities in
respect of which such moneys have been collected shall have become due, by
declaration or otherwise, to the payment of the whole amount then owing and
unpaid upon the Debt Securities of such series for principal and premium, if
any, and interest, with interest on the overdue principal and premium, if any,
and (to the extent that such interest has been collected by the Trustee) upon
overdue installments of interest at the rate or Yield to Maturity (in the case
of Original Issue Discount Debt Securities) borne by the Debt Securities of such
series; and, in case such moneys shall be insufficient to pay
34
in full the whole amount so due and unpaid upon the Debt Securities of such
series, then to the payment of such principal and premium, if any, and interest,
without preference or priority of principal and premium, if any, over interest,
or of interest over principal and premium, if any, or of any installment of
interest over any other installment of interest, or of any Debt Security of such
series over any Debt Security of such series, ratably to the aggregate of such
principal and premium, if any, and interest; and
FOURTH: The remainder, if any, shall be paid to the Subsidiary
Guarantors or the Partnership, as applicable, its successors or assigns, or to
whomsoever may be lawfully entitled to receive the same, or as a court of
competent jurisdiction may direct.
The Trustee may fix a record date and payment date for any payment to
Holders pursuant to this Section 6.03. At least 15 days before such record date,
the Partnership shall mail to each Holder and the Trustee a notice that states
the record date, the payment date and amount to be paid.
Section 6.04. Limitation on Suits by Holders. No Holder of any Debt
Security of any series shall have any right by virtue or by availing of any
provision of this Indenture to institute any action or proceeding at law or in
equity or in bankruptcy or otherwise, upon or under or with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless such Holder previously shall have given to the Trustee
written notice of an Event of Default with respect to Debt Securities of that
same series and of the continuance thereof and unless the Holders of not less
than 25% in aggregate principal amount of the Outstanding Debt Securities of
that series shall have made written request upon the Trustee to institute such
action or proceedings in respect of such Event of Default in its own name as
Trustee hereunder and shall have offered to the Trustee such reasonable
indemnity or security as it may require against the costs, expenses and
liabilities to be incurred therein or thereby, and the Trustee, for 60 days
after its receipt of such notice, request and offer of indemnity or security
shall have failed to institute any such action or proceedings and no direction
inconsistent with such written request shall have been given to the Trustee
pursuant to Section 6.06; it being understood and intended, and being expressly
covenanted by the Holder of every Debt Security with every other Holder and the
Trustee, that no one or more Holders shall have any right in any manner whatever
by virtue or by availing of any provision of this Indenture to affect, disturb
or prejudice the rights of any Holders, or to obtain or seek to obtain priority
over or preference to any other such Holder, or to enforce any right under this
Indenture, except in the manner herein provided and for the equal, ratable and
common benefit of all such Holders. For the protection and enforcement of the
provisions of this Section 6.04, each and every Holder and the Trustee shall be
entitled to such relief as can be given either at law or in equity.
Notwithstanding any other provision in this Indenture, however, the
right of any Holder of any Debt Security to receive payment of the principal of,
and premium, if any, and (subject to Section 2.12) interest on, such Debt
Security, on or after the respective due dates expressed in such Debt Security,
and to institute suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of such
Holder.
Section 6.05. Remedies Cumulative; Delay or Omission in Exercise of
Rights Not a Waiver of Default. All powers and remedies given by this Article VI
to the Trustee or to the
35
Holders shall, to the extent permitted by law, be deemed cumulative and not
exclusive of any thereof or of any other powers and remedies available to the
Trustee or the Holders, by judicial proceedings or otherwise, to enforce the
performance or observance of the covenants and agreements contained in this
Indenture, and no delay or omission of the Trustee or of any Holder to exercise
any right or power accruing upon any Default occurring and continuing as
aforesaid, shall impair any such right or power, or shall be construed to be a
waiver of any such Default or an acquiescence therein; and, subject to the
provisions of Section 6.04, every power and remedy given by this Article VI or
by law to the Trustee or to the Holders may be exercised from time to time, and
as often as shall be deemed expedient, by the Trustee or by the Holders.
Section 6.06. Rights of Holders of Majority in Principal Amount of Debt
Securities to Direct Trustee and to Waive Default. The Holders of a majority in
aggregate principal amount of the Debt Securities of any series at the time
Outstanding shall have the right to direct the time, method, and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee, with respect to the Debt Securities
of such series; provided, however, that such direction shall not be otherwise
than in accordance with law and the provisions of this Indenture, and that
subject to the provisions of Section 7.01, the Trustee shall have the right to
decline to follow any such direction if the Trustee being advised by counsel
shall determine that the action so directed may not lawfully be taken, or if the
Trustee shall by a responsible officer or officers determine that the action so
directed would involve it in personal liability or would be unjustly prejudicial
to Holders of Debt Securities of such series not taking part in such direction;
and provided, further, however, that nothing in this Indenture contained shall
impair the right of the Trustee to take any action deemed proper by the Trustee
and which is not inconsistent with such direction by such Holders. Prior to the
acceleration of the maturity of the Debt Securities of any series, as provided
in Section 6.01, the Holders of a majority in aggregate principal amount of the
Debt Securities of that series at the time Outstanding may on behalf of the
Holders of all the Debt Securities of that series waive any past Default or
Event of Default and its consequences for that series specified in the terms
thereof as contemplated by Section 2.03, except a Default in the payment of the
principal of, and premium, if any, or interest on, any of the Debt Securities
and a Default in respect of a provision that under Section 9.02 cannot be
amended without the consent of each Holder affected thereby. In case of any such
waiver, such Default shall cease to exist, any Event of Default arising
therefrom shall be deemed to have been cured for every purpose of this
Indenture, and the Subsidiary Guarantors, the Partnership, the Trustee and the
Holders of the Debt Securities of that series shall be restored to their former
positions and rights hereunder, respectively; but no such waiver shall extend to
any subsequent or other Default or impair any right consequent thereon.
Section 6.07. Trustee to Give Notice of Defaults Known to It, but May
Withhold Such Notice in Certain Circumstances. The Trustee shall, within 90 days
after the occurrence of a Default known to it, or if later, within 30 days after
the Trustee obtains actual knowledge of the Default, with respect to a series of
Debt Securities give to the Holders thereof, in the manner provided in Section
13.03, notice of all Defaults with respect to such series known to the Trustee,
unless such Defaults shall have been cured or waived before the giving of such
notice; provided, that, except in the case of Default in the payment of the
principal of, or premium, if any, or interest on, any of the Debt Securities of
such series or in the making of any sinking fund payment with respect to the
Debt Securities of such series, the Trustee shall be protected in withholding
such notice if and so long as the board of directors, the executive committee or
a
36
committee of directors or responsible officers of the Trustee in good faith
determine that the withholding of such notice is in the interests of the Holders
thereof.
Section 6.08. Requirement of an Undertaking To Pay Costs in Certain
Suits under the Indenture or Against the Trustee. All parties to this Indenture
agree, and each Holder of any Debt Security by his acceptance thereof shall be
deemed to have agreed, that any court may in its discretion require, in any suit
for the enforcement of any right or remedy under this Indenture, or in any suit
against the Trustee for any action taken or omitted by it as Trustee, the filing
by any party litigant in such suit of an undertaking to pay the costs of such
suit in the manner and to the extent provided in the TIA, and that such court
may in its discretion assess reasonable costs, including reasonable attorneys'
fees and expenses, against any party litigant in such suit, having due regard to
the merits and good faith of the claims or defenses made by such party litigant;
but the provisions of this Section 6.08 shall not apply to any suit instituted
by the Trustee, to any suit instituted by any Holder, or group of Holders,
holding in the aggregate more than 25 percent in principal amount of the
Outstanding Debt Securities of that series or to any suit instituted by any
Holder for the enforcement of the payment of the principal of, or premium, if
any, or interest on, any Debt Security on or after the due date for such payment
expressed in such Debt Security.
ARTICLE VII
CONCERNING THE TRUSTEE
Section 7.01. Certain Duties and Responsibilities. The Trustee, prior
to the occurrence of an Event of Default and after the curing or waiving of all
Events of Default which may have occurred, undertakes to perform such duties and
only such duties as are specifically set forth in this Indenture. In case an
Event of Default has occurred (which has not been cured or waived), the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in their exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that:
(a) this paragraph shall not be construed to limit the effect of the
first paragraph of this Section 7.01;
(b) prior to the occurrence of an Event of Default with respect to the
Debt Securities of a series and after the curing or waiving of all Events of
Default with respect to such series which may have occurred:
(i) the duties and obligations of the Trustee with respect to
Debt Securities of any series shall be determined solely by the express
provisions of this Indenture, and the Trustee shall not be liable
except for the performance of such duties and obligations with respect
to such series as are specifically set forth in this Indenture, and no
implied covenants or obligations with respect to such series shall be
read into this Indenture against the Trustee; and
37
(ii) in the absence of bad faith on the part of the Trustee,
the Trustee may conclusively rely, as to the truth of the statements
and the correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Trustee and conforming to the
requirements of this Indenture; but in the case of any such
certificates or opinions which by any provision hereof are specifically
required to be furnished to the Trustee, the Trustee shall be under a
duty to examine the same to determine whether or not they conform to
the requirements of this Indenture; but the Trustee shall examine the
evidence furnished to it pursuant to Sections 4.05 and 4.06 to
determine whether or not such evidence conforms to the requirement of
this Indenture;
(iii) the Trustee shall not be liable for an error of judgment
made in good faith by a responsible officer, unless it shall be proved
that the Trustee was negligent in ascertaining the pertinent facts; and
(iv) the Trustee shall not be liable with respect to any
action taken or omitted to be taken by it with respect to Debt
Securities of any series in good faith in accordance with the direction
of the Holders of not less than a majority in aggregate principal
amount of the Outstanding Debt Securities of that series relating to
the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred
upon the Trustee, under this Indenture with respect to Debt Securities
of such series.
None of the provisions of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any personal financial liability
in the performance of any of its duties hereunder, or in the exercise of any of
its rights or powers, if there shall be reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
Whether or not therein expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this Section.
Section 7.02. Certain Rights of Trustee. Except as otherwise provided
in Section 7.01:
(a) the Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, debenture, note or
other paper or document (whether in its original or facsimile form) believed by
it to be genuine and to have been signed or presented by the proper party or
parties;
(b) any request, direction, order or demand of the Partnership
mentioned herein shall be sufficiently evidenced by a Partnership Order (unless
other evidence in respect thereof be herein specifically prescribed); and any
resolution of the Board of Directors may be evidenced to the Trustee by a copy
thereof certified by the Secretary or an Assistant Secretary of the Partnership;
38
(c) the Trustee may consult with counsel, and the advice of such
counsel or any Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken or suffered or omitted by it hereunder
in good faith and in accordance with such advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders of Debt Securities of any series pursuant to the
provisions of this Indenture, unless such Holders shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby;
(e) the Trustee shall not be liable for any action taken or omitted by
it in good faith and reasonably believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Indenture;
(f) prior to the occurrence of an Event of Default and after the curing
of all Events of Default which may have occurred, the Trustee shall not be bound
to make any investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request, direction,
consent, order, approval or other paper or document, unless requested in writing
to do so by the Holders of a majority in aggregate principal amount of the then
Outstanding Debt Securities of a series affected by such matter; provided,
however, that if the payment within a reasonable time to the Trustee of the
costs, expenses or liabilities likely to be incurred by it in the making of such
investigation is not, in the opinion of the Trustee, reasonably assured to the
Trustee by the security afforded to it by the terms of this Indenture, the
Trustee may require reasonable indemnity against such costs, expenses or
liabilities as a condition to so proceeding. The reasonable expense of every
such investigation shall be paid by the Partnership or, if paid by the Trustee,
shall be repaid by the Partnership upon demand;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed by it with due care
hereunder; and
(h) if any property other than cash shall at any time be subject to a
Lien in favor of the Holders, the Trustee, if and to the extent authorized by a
receivership or bankruptcy court of competent jurisdiction or by the
supplemental instrument subjecting such property to such lien, shall be entitled
to make advances for the purpose of preserving such property or of discharging
tax Liens or other prior Liens or encumbrances thereon.
Section 7.03. Trustee Not Liable for Recitals in Indenture or in Debt
Securities. The recitals contained herein, in the Debt Securities (except the
Trustee's certificate of authentication) shall be taken as the statements of the
Partnership, and the Trustee assumes no responsibility for the correctness of
the same. The Trustee makes no representations as to the validity or sufficiency
of this Indenture or of the Debt Securities of any series, except that the
Trustee represents that it is duly authorized to execute and deliver this
Indenture, authenticate the Debt Securities and perform its obligations
hereunder, and that the statements made by it or to be made by it in a Statement
of Eligibility and Qualification on Form T-1 supplied to the
39
Partnership are true and accurate. The Trustee shall not be accountable for the
use or application by the Partnership of any of the Debt Securities or of the
proceeds thereof.
Section 7.04. Trustee, Paying Agent or Registrar May Own Debt
Securities. The Trustee or any paying agent or Registrar, in its individual or
any other capacity, may become the owner or pledgee of Debt Securities and
subject to the provisions of the TIA relating to conflicts of interest and
preferential claims may otherwise deal with the Partnership with the same rights
it would have if it were not Trustee, paying agent or Registrar.
Section 7.05. Moneys Received by Trustee to Be Held in Trust. Subject
to the provisions of Section 11.05, all moneys received by the Trustee shall,
until used or applied as herein provided, be held in trust for the purposes for
which they were received, but need not be segregated from other funds except to
the extent required by law. The Trustee shall be under no liability for interest
on any moneys received by it hereunder. So long as no Event of Default shall
have occurred and be continuing, all interest allowed on any such moneys shall
be paid from time to time to the Partnership upon a Partnership Order.
Section 7.06. Compensation and Reimbursement. The Partnership covenants
and agrees to pay in Dollars to the Trustee from time to time, and the Trustee
shall be entitled to, reasonable compensation for all services rendered by it
hereunder (which shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust), and, except as otherwise
expressly provided herein, the Partnership will pay or reimburse in Dollars the
Trustee upon its request for all reasonable expenses, disbursements and advances
incurred or made by the Trustee in accordance with any of the provisions of this
Indenture (including the reasonable compensation and the expenses and
disbursements of its agents, attorneys and counsel and of all Persons not
regularly in its employ), including without limitation, Section 6.02, except any
such expense, disbursement or advances as may arise from its negligence or bad
faith. The Partnership also covenants to indemnify in Dollars the Trustee for,
and to hold it harmless against, any loss, liability or expense incurred without
negligence, willful misconduct or bad faith on the part of the Trustee, arising
out of or in connection with the acceptance or administration of this trust or
trusts hereunder, including the reasonable costs and expenses of defending
itself against any claim of liability in connection with the exercise or
performance of any of its powers or duties hereunder. The obligations of the
Partnership under this Section 7.06 to compensate and indemnify the Trustee and
to pay or reimburse the Trustee for expenses, disbursements and advances shall
constitute additional Debt hereunder and shall survive the satisfaction and
discharge of this Indenture. The Partnership and the Holders agree that such
additional Debt shall be secured by a Lien prior to that of the Debt Securities
upon all property and funds held or collected by the Trustee, as such, except
funds held in trust for the payment of principal of, and premium, if any, or
interest on, particular Debt Securities.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(g) or (h) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any bankruptcy, insolvency, reorganization or other similar
law.
Section 7.07. Right of Trustee to Rely on an Officers' Certificate
Where No Other Evidence Specifically Prescribed. Except as otherwise provided in
Section 7.01, whenever in the
40
administration of the provisions of this Indenture the Trustee shall deem it
necessary or desirable that a matter be proved or established prior to taking or
suffering or omitting any action hereunder, such matter (unless other evidence
in respect thereof be herein specifically prescribed) may, in the absence of
negligence or bad faith on the part of the Trustee, be deemed to be conclusively
proved and established by an Officers' Certificate delivered to the Trustee and
such certificate, in the absence of negligence or bad faith on the part of the
Trustee, shall be full warrant to the Trustee for any action taken, suffered or
omitted by it under the provisions of this Indenture upon the faith thereof.
Section 7.08. Separate Trustee; Replacement of Trustee. The Partnership
may, but need not, appoint a separate Trustee for any one or more series of Debt
Securities. The Trustee may resign with respect to one or more or all series of
Debt Securities at any time by giving notice to the Partnership. The Holders of
a majority in principal amount of the Debt Securities of a particular series may
remove the Trustee for such series and only such series by so notifying the
Trustee and may appoint a successor Trustee. The Partnership shall remove the
Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged bankrupt or insolvent;
(c) a receiver or other public officer takes charge of the Trustee or
its property; or
(d) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns, is removed by the Partnership or by the Holders of a
majority in principal amount of the Debt Securities of a particular series and
such Holders do not reasonably promptly appoint a successor Trustee, or if a
vacancy exists in the office of Trustee for any reason (the Trustee in such
event being referred to herein as the retiring Trustee), the Partnership shall
promptly appoint a successor Trustee. No resignation or removal of the Trustee
and no appointment of a successor Trustee shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of this Section 7.08.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Partnership. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of Debt Securities of each applicable series. The retiring
Trustee shall promptly transfer all property held by it as Trustee to the
successor Trustee, subject to the Lien provided for in Section 7.06.
If a successor Trustee does not take office within 60 days after the
retiring Trustee gives notice of resignation or is removed, the retiring Trustee
or the Holders of 25% in principal amount of the Debt Securities of any
applicable series may petition any court of competent jurisdiction for the
appointment of a successor Trustee for the Debt Securities of such series.
If the Trustee fails to comply with Section 7.10, any Holder of Debt
Securities of any applicable series may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee for the Debt Securities of such series.
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Notwithstanding the replacement of the Trustee pursuant to this Section
7.08, the Partnership's obligations under Section 7.06 shall continue for the
benefit of the retiring Trustee.
In the case of the appointment hereunder of a separate or successor
trustee with respect to the Debt Securities of one or more series, the
Partnership, any retiring Trustee and each successor or separate Trustee with
respect to the Debt Securities of any applicable series shall execute and
deliver an Indenture supplemental hereto (i) which shall contain such provisions
as shall be deemed necessary or desirable to confirm that all the rights,
powers, trusts and duties of any retiring Trustee with respect to the Debt
Securities of any series as to which any such retiring Trustee is not retiring
shall continue to be vested in such retiring Trustee and (ii) that shall add to
or change any of the provisions of this Indenture as shall be necessary to
provide for or facilitate the administration of the trusts hereunder by more
than one trustee, it being understood that nothing herein or in such
supplemental Indenture shall constitute such Trustees co-trustees of the same
trust and that each such separate, retiring or successor Trustee shall be
Trustee of a trust or trusts hereunder separate and apart from any trust or
trusts hereunder administered by any other such Trustee.
Section 7.09. Successor Trustee by Merger. If the Trustee consolidates
with, merges or converts into, or transfers all or substantially all its
corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation or banking
association without any further act shall be the successor Trustee.
In case at the time such successor or successors by merger, conversion
or consolidation to the Trustee shall succeed to the trusts created by this
Indenture any of the Debt Securities shall have been authenticated but not
delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Debt Securities so
authenticated; and in case at that time any of the Debt Securities shall not
have been authenticated, any successor to the Trustee may authenticate such Debt
Securities either in the name of any predecessor hereunder or in the name of the
successor to the Trustee; and in all such cases such certificates shall have the
full force which it is anywhere in the Debt Securities or in this Indenture
provided that the certificate of the Trustee shall have.
Section 7.10. Eligibility; Disqualification. The Trustee shall at all
times satisfy the requirements of Section 310(a) of the TIA. The Trustee shall
have a combined capital and surplus of at least $50,000,000 as set forth in its
most recent published annual report of condition. No obligor upon the Debt
Securities of a particular series or Person directly or indirectly controlling,
controlled by or under common control with such obligor shall serve as Trustee
upon the Debt Securities of such series. The Trustee shall comply with Section
310(b) of the TIA; provided, however, that there shall be excluded from the
operation of Section 310(b)(1) of the TIA this Indenture or any indenture or
indentures under which other securities or certificates of interest or
participation in other securities of the Partnership are outstanding if the
requirements for such exclusion set forth in Section 310(b)(1) of the TIA are
met.
Section 7.11. Preferential Collection of Claims Against Partnership.
The Trustee shall comply with Section 311(a) of the TIA, excluding any creditor
relationship listed in
42
Section 311(b) of the TIA. A Trustee who has resigned or been removed shall be
subject to Section 311(a) of the TIA to the extent indicated therein.
Section 7.12. Compliance with Tax Laws. The Trustee hereby agrees to
comply with all U.S. Federal income tax information reporting and withholding
requirements applicable to it with respect to payments of premium (if any) and
interest on the Debt Securities, whether acting as Trustee, Security Registrar,
paying agent or otherwise with respect to the Debt Securities.
ARTICLE VIII
CONCERNING THE HOLDERS
Section 8.01. Evidence of Action by Holders. Whenever in this Indenture
it is provided that the Holders of a specified percentage in aggregate principal
amount of the Debt Securities of any or all series may take action (including
the making of any demand or request, the giving of any direction, notice,
consent or waiver or the taking of any other action) the fact that at the time
of taking any such action the Holders of such specified percentage have joined
therein may be evidenced by any instrument or any number of instruments of
similar tenor executed by Holders in Person or by agent or proxy appointed in
writing, by the record of the Holders voting in favor thereof at any meeting of
Holders duly called and held in accordance with the provisions of Section 5.02
or by a combination of such instrument or instruments and any such record of
such a meeting of Holders.
Section 8.02. Proof of Execution of Instruments and of Holding of Debt
Securities. Subject to the provisions of Sections 7.01, 7.02 and 13.11, proof of
the execution of any instrument by a Holder or his agent or proxy shall be
sufficient if made in accordance with such reasonable rules and regulations as
may be prescribed by the Trustee or in such manner as shall be satisfactory to
the Trustee. The ownership of Debt Securities of any series shall be proved by
the Debt Security Register or by a certificate of the Registrar for such series.
The Trustee may require such additional proof of any matter referred to in this
Section 8.02 as it shall deem necessary.
Section 8.03. Who May Be Deemed Owner of Debt Securities. Prior to due
presentment for registration of transfer of any Debt Security, the Partnership,
the Trustee, any paying agent and any Registrar may deem and treat the Person in
whose name any Debt Security shall be registered upon the books of the
Partnership as the absolute owner of such Debt Security (whether or not such
Debt Security shall be overdue and notwithstanding any notation of ownership or
other writing thereon) for the purpose of receiving payment of or on account of
the principal of and premium, if any, and (subject to Section 2.03) interest on
such Debt Security and for all other purposes, and neither the Partnership nor
the Trustee nor any paying agent nor any Registrar shall be affected by any
notice to the contrary; and all such payments so made to any such Holder for the
time being, or upon his order, shall be valid and, to the extent of the sum or
sums so paid, effectual to satisfy and discharge the liability for moneys
payable upon any such Debt Security.
None of the Partnership, the Trustee, any paying agent or the Registrar
will have any responsibility or liability for any aspect of the records relating
to or payments made on account
43
of beneficial ownership interests in a Global Security or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
Section 8.04. Instruments Executed by Holders Bind Future Holders. At
any time prior to (but not after) the evidencing to the Trustee, as provided in
Section 8.01, of the taking of any action by the Holders of the percentage in
aggregate principal amount of the Debt Securities of any series specified in
this Indenture in connection with such action and subject to the following
paragraph, any Holder of a Debt Security which is shown by the evidence to be
included in the Debt Securities the Holders of which have consented to such
action may, by filing written notice with the Trustee at its corporate trust
office and upon proof of holding as provided in Section 8.02, revoke such action
so far as concerns such Debt Security. Except as aforesaid any such action taken
by the Holder of any Debt Security shall be conclusive and binding upon such
Holder and upon all future Holders and owners of such Debt Security and of any
Debt Security issued upon transfer thereof or in exchange or substitution
therefor, irrespective of whether or not any notation in regard thereto is made
upon such Debt Security or such other Debt Securities. Any action taken by the
Holders of the percentage in aggregate principal amount of the Debt Securities
of any series specified in this Indenture in connection with such action shall
be conclusively binding upon the Partnership, the Trustee and the Holders of all
the Debt Securities of such series.
The Partnership may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders of Debt Securities entitled to give
their consent or take any other action required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who were Holders of Debt
Securities at such record date (or their duly designated proxies), and only
those Persons, shall be entitled to give such consent or to revoke any consent
previously given or to take any such action, whether or not such Persons
continue to be Holders of Debt Securities after such record date. No such
consent shall be valid or effective for more than 120 days after such record
date unless the consent of the Holders of the percentage in aggregate principal
amount of the Debt Securities of such series specified in this Indenture shall
have been received within such 120-day period.
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.01. Purposes for Which Supplemental Indenture May Be Entered
into Without Consent of Holders. The Partnership and the Subsidiary Guarantors,
when authorized by resolutions of the Board of Directors, and the Trustee may
from time to time and at any time, without the consent of Holders, enter into an
Indenture or Indentures supplemental hereto (which shall conform to the
provisions of the TIA as in force at the date of the execution thereof) for one
or more of the following purposes:
(a) to evidence the succession pursuant to Article X of another Person
to the Partnership, or successive successions, and the assumption by the
Successor Partnership (as defined in Section 10.01) of the covenants, agreements
and obligations of the Partnership in this Indenture and in the Debt Securities;
44
(b) to surrender any right or power herein conferred upon the
Partnership or the Subsidiary Guarantors, to add to the covenants of the
Partnership or the Subsidiary Guarantors such further covenants, restrictions,
conditions or provisions for the protection of the Holders of all or any series
of Debt Securities (and if such covenants are to be for the benefit of less than
all series of Debt Securities, stating that such covenants are expressly being
included solely for the benefit of such series) as the Board of Directors shall
consider to be for the protection of the Holders of such Debt Securities, and to
make the occurrence, or the occurrence and continuance, of a Default in any of
such additional covenants, restrictions, conditions or provisions a Default or
an Event of Default permitting the enforcement of all or any of the several
remedies provided in this Indenture; provided, that in respect of any such
additional covenant, restriction, condition or provision such supplemental
Indenture may provide for a particular period of grace after Default (which
period may be shorter or longer than that allowed in the case of other Defaults)
or may provide for an immediate enforcement upon such Default or may limit the
remedies available to the Trustee upon such Default or may limit the right of
the Holders of a majority in aggregate principal amount of any or all series of
Debt Securities to waive such default;
(c) to cure any ambiguity or omission or to correct or supplement any
provision contained herein, in any supplemental Indenture or in any Debt
Securities of any series that may be defective or inconsistent with any other
provision contained herein, in any supplemental Indenture or in the Debt
Securities of such series; to convey, transfer, assign, mortgage or pledge any
property to or with the Trustee, or to make such other provisions in regard to
matters or questions arising under this Indenture as shall not adversely affect
the interests of any Holders of Debt Securities of any series;
(d) to modify or amend this Indenture in such a manner as to permit the
qualification of this Indenture or any Indenture supplemental hereto under the
TIA as then in effect, except that nothing herein contained shall permit or
authorize the inclusion in any Indenture supplemental hereto of the provisions
referred to in Section 316(a)(2) of the TIA;
(e) to add to or change any of the provisions of this Indenture to
change or eliminate any restrictions on the payment of principal of, or premium,
if any, on, Debt Securities; provided, that any such action shall not adversely
affect the interests of the Holders of Debt Securities of any series in any
material respect or permit or facilitate the issuance of Debt Securities of any
series in uncertificated form;
(f) to comply with Article XIV
(g) in the case of any Debt Securities subordinated pursuant to Article
XII, to make any change in Article XII that would limit or terminate the
benefits available to any holder of Senior Indebtedness (or Representatives
therefor) under Article XII;
(h) to add Subsidiary Guarantors with respect to any or all of the Debt
Securities or to secure any or all of the Debt Securities;
(i) to make any change that does not adversely affect the rights of any
Holder;
(j) to add to, change or eliminate any of the provisions of this
Indenture in respect of one or more series of Debt Securities; provided,
however, that any such addition, change or
45
elimination not otherwise permitted under this Section 9.01 shall neither apply
to any Debt Security of any series created prior to the execution of such
supplemental Indenture and entitled to the benefit of such provision nor modify
the rights of the Holder of any such Debt Security with respect to such
provision or shall become effective only when there is no such Debt Security
Outstanding;
(k) to evidence and provide for the acceptance of appointment hereunder
by a successor or separate Trustee with respect to the Debt Securities of one or
more series and to add to or change any of the provisions of this Indenture as
shall be necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee; and
(l) to establish the form or terms of Debt Securities of any series as
permitted by Sections 2.01 and 2.03.
The Trustee is hereby authorized to join with the Partnership and the
Subsidiary Guarantors in the execution of any such supplemental Indenture, to
make any further appropriate agreements and stipulations which may be therein
contained and to accept the conveyance, transfer, assignment, mortgage or pledge
of any property thereunder, but the Trustee shall not be obligated to enter into
any such supplemental Indenture which affects the Trustee's own rights, duties
or immunities under this Indenture or otherwise.
Any supplemental Indenture authorized by the provisions of this Section
9.01 may be executed by the Partnership, the Subsidiary Guarantors and the
Trustee without the consent of the Holders of any of the Debt Securities at the
time Outstanding, notwithstanding any of the provisions of Section 9.02.
In the case of Debt Securities subordinated pursuant to Article XII, an
amendment under this Section 9.01 may not make any change that adversely affects
the rights under Article XII of any holder of Senior Indebtedness then
outstanding unless the holders of such Senior Indebtedness (or any group or
Representative thereof authorized to give a consent) consent to such change.
Section 9.02. Modification of Indenture with Consent of Holders of Debt
Securities. Without notice to any Holder but with the consent (evidenced as
provided in Section 8.01) of the Holders of not less than a majority in
aggregate principal amount of the Outstanding Debt Securities of each series
affected by such supplemental Indenture (including consents obtained in
connection with a tender offer or exchange offer for any such series of Debt
Securities), the Partnership and the Subsidiary Guarantors, when authorized by
resolutions of the Board of Directors, and the Trustee may from time to time and
at any time enter into an Indenture or Indentures supplemental hereto (which
shall conform to the provisions of the TIA as in force at the date of execution
thereof) for the purpose of adding any provisions to or changing in any manner
or eliminating any of the provisions of this Indenture or of any supplemental
Indenture or of modifying in any manner the rights of the Holders of the Debt
Securities of such series; provided, that no such supplemental Indenture,
without the consent of the Holders of each Debt Security so affected, shall:
reduce the percentage in principal amount of Debt Securities of any series whose
Holders must consent to an amendment; reduce the rate of or extend the time for
payment of interest on any Debt Security; reduce the principal of or extend the
Stated Maturity
46
of any Debt Security; reduce the premium payable upon the redemption of any Debt
Security or change the time at which any Debt Security may or shall be redeemed
in accordance with Article III; make any Debt Security payable in currency other
than the Dollar; impair the right of any Holder to receive payment of premium,
if any, principal of and interest on such Holder's Debt Securities on or after
the due dates therefor or to institute suit for the enforcement of any payment
on or with respect to such Holder's Debt Securities; in the case of any Debt
Security subordinated pursuant to Article XII, make any change in Article XII
that adversely affects the rights of any Holder under Article XII; release any
security that may have been granted in respect of the Debt Securities; make any
change in Section 6.06 or this Section 9.02; or, except as provided in Section
14.04, release the Subsidiary Guarantors or modify the Guarantee in any manner
adverse to the Holders.
A supplemental Indenture which changes or eliminates any covenant or
other provision of this Indenture which has been expressly included solely for
the benefit of one or more particular series of Debt Securities or which
modifies the rights of the Holders of Debt Securities of such series with
respect to such covenant or other provision, shall be deemed not to affect the
rights under this Indenture of the Holders of Debt Securities of any other
series.
Upon the request of the Partnership and the Subsidiary Guarantors,
accompanied by a copy of resolutions of the Board of Directors authorizing the
execution of any such supplemental Indenture, and upon the filing with the
Trustee of evidence of the consent of Holders as aforesaid, the Trustee shall
join with the Partnership in the execution of such supplemental Indenture unless
such supplemental Indenture affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise, in which case the Trustee may in
its discretion but shall not be obligated to enter into such supplemental
Indenture.
It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed supplemental
Indenture, but it shall be sufficient if such consent shall approve the
substance thereof.
In the case of any Debt Securities subordinated pursuant to Article
XII, an amendment under this Section 9.02 may not make any change that adversely
affects the rights under Article XII of any holder of Senior Indebtedness then
outstanding unless the holders of such Senior Indebtedness (or any group or
Representative thereof authorized to give a consent) consent to such change.
After an amendment under this Section 9.02 becomes effective, the
Partnership shall mail to Holders of Debt Securities of each series affected
thereby a notice briefly describing such amendment. The failure to give such
notice to all such Holders, or any defect therein, shall not impair or affect
the validity of an amendment under this Section 9.02.
Section 9.03. Effect of Supplemental Indentures. Upon the execution of
any supplemental Indenture pursuant to the provisions of this Article IX, this
Indenture shall be and be deemed to be modified and amended in accordance
therewith and the respective rights, limitations of rights, obligations, duties
and immunities under this Indenture of the Trustee, the Partnership, the
Subsidiary Guarantors and the Holders shall thereafter be determined, exercised
and enforced hereunder subject in all respects to such modifications and
amendments, and all the
47
terms and conditions of any such supplemental Indenture shall be and be deemed
to be part of the terms and conditions of this Indenture for any and all
purposes.
The Trustee, subject to the provisions of Sections 7.01 and 7.02, may
receive an Officers' Certificate and an Opinion of Counsel as conclusive
evidence that any such supplemental Indenture complies with the provisions of
this Article IX.
Section 9.04. Debt Securities May Bear Notation of Changes by
Supplemental Indentures. Debt Securities of any series authenticated and
delivered after the execution of any supplemental Indenture pursuant to the
provisions of this Article IX may, and shall if required by the Trustee, bear a
notation in form approved by the Trustee as to any matter provided for in such
supplemental Indenture. New Debt Securities of any series so modified as to
conform, in the opinion of the Trustee and the Board of Directors, to any
modification of this Indenture contained in any such supplemental Indenture may
be prepared and executed by the Partnership, authenticated by the Trustee and
delivered in exchange for the Debt Securities of such series then Outstanding.
Failure to make the appropriate notation or to issue a new Debt Security of such
series shall not affect the validity of such amendment.
ARTICLE X
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
Section 10.01. Consolidations and Mergers of the Partnership. The
Partnership shall not consolidate or amalgamate with or merge with or into any
Person, or sell, convey, transfer, lease or otherwise dispose of all or
substantially all its assets to any Person, whether in a single transaction or a
series of related transactions, except (1) in accordance with the provisions of
its partnership agreement, and (2) unless: (a) either (i) the Partnership shall
be the continuing Person in the case of a merger or (ii) the resulting,
surviving or transferee Person if other than the Partnership (the "Successor
Partnership"), shall be a partnership, limited liability company or corporation
organized and existing under the laws of the United States, any State thereof or
the District of Columbia and the Successor Partnership shall expressly assume,
by an Indenture supplemental hereto, executed and delivered to the Trustee, in
form satisfactory to the Trustee, all the obligations of the Partnership under
this Indenture and the Debt Securities according to their tenor; (b) immediately
after giving effect to such transaction (and treating any Debt which becomes an
obligation of the Successor Partnership or any Subsidiary of the Partnership as
a result of such transaction as having been incurred by the Successor
Partnership or such Subsidiary at the time of such transaction), no Default or
Event of Default would occur or be continuing; (c) if the Partnership is not the
continuing Person, then each Subsidiary Guarantor, unless it has become the
Successor Partnership, shall confirm that its Guarantee shall continue to apply
to the obligations under the Debt Securities and this Indenture; and (d) the
Partnership shall have delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that such consolidation, merger or disposition
and such supplemental Indenture (if any) comply with this Indenture.
Section 10.02. Rights and Duties of Successor Partnership. In case of
any consolidation, amalgamation or merger, or disposition of all or
substantially all of the assets of the Partnership in accordance with Section
10.01, the Successor Partnership shall succeed to and be substituted for the
Partnership with the same effect as if it had been named herein as the
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respective party to this Indenture, and the predecessor entity shall be released
from all liabilities and obligations under the Indenture and the Debt
Securities, except that no such release will occur in the case of a lease of all
or substantially all of its assets. The Successor Partnership thereupon may
cause to be signed, and may issue either in its own name or in the name of the
Partnership, any or all the Debt Securities issuable hereunder which theretofore
shall not have been signed by the Partnership and delivered to the Trustee; and,
upon the order of the Successor Partnership, instead of the Partnership, and
subject to all the terms, conditions and limitations in this Indenture
prescribed, the Trustee shall authenticate and shall deliver any Debt Securities
which previously shall have been signed and delivered by the officers of the
Partnership to the Trustee for authentication, and any Debt Securities which the
Successor Partnership thereafter shall cause to be signed and delivered to the
Trustee for that purpose. All the Debt Securities so issued shall in all
respects have the same legal rank and benefit under this Indenture as the Debt
Securities theretofore or thereafter issued in accordance with the terms of this
Indenture as though all such Debt Securities had been issued at the date of the
execution hereof.
In case of any such consolidation, amalgamation, merger, sale or
disposition such changes in phraseology and form (but not in substance) may be
made in the Debt Securities thereafter to be issued as may be appropriate.
ARTICLE XI
SATISFACTION AND DISCHARGE OF
INDENTURE; DEFEASANCE; UNCLAIMED MONEYS
Section 11.01. Applicability of Article. The provisions of this Article
XI relating to defeasance of Debt Securities shall be applicable to each series
of Debt Securities except as otherwise specified pursuant to Section 2.03 for
Debt Securities of such series.
Section 11.02. Satisfaction and Discharge of Indenture; Defeasance.
(a) If at any time the Partnership shall have delivered to the Trustee
for cancellation all Debt Securities of any series theretofore authenticated and
delivered (other than any Debt Securities of such series which shall have been
destroyed, lost or stolen and which shall have been replaced or paid as provided
in Section 2.09 and Debt Securities for whose payment money has theretofore been
deposited in trust and thereafter repaid to the Partnership as provided in
Section 11.05) or all Debt Securities of such series not theretofore delivered
to the Trustee for cancellation shall have become due and payable, or are by
their terms to become due and payable within one year or are to be called for
redemption within one year under arrangements satisfactory to the Trustee for
the giving of notice of redemption, and the Partnership shall deposit with the
Trustee as trust funds the entire amount in cash sufficient to pay at maturity
or upon redemption all Debt Securities of such series not theretofore delivered
to the Trustee for cancellation, including principal and premium, if any, and
interest due or to become due on such date of maturity or redemption date, as
the case may be, and if in either case the Partnership shall also pay or cause
to be paid all other sums payable hereunder by the Partnership, then this
Indenture shall cease to be of further effect (except as to any surviving rights
of registration of transfer or exchange of such Debt Securities herein expressly
provided for) with respect to the Debt Securities of such series, and the
Trustee, on demand of the Partnership accompanied by an
49
Officers' Certificate and an Opinion of Counsel and at the cost and expense of
the Partnership, shall execute proper instruments acknowledging satisfaction of
and discharging this Indenture.
(b) Subject to Sections 11.02(c), 11.03 and 11.07, the Partnership at
any time may terminate, with respect to Debt Securities of a particular series,
all its obligations under the Debt Securities of such series and this Indenture
with respect to the Debt Securities of such series ("legal defeasance option")
or the operation of Sections 6.01(d), (g) and (h) and, as they relate to the
Subsidiary Guarantors only, Sections 6.01(e) and (f) ("covenant defeasance
option"). If the Partnership exercises its legal defeasance option, the
Guarantee will terminate with respect to that series of Debt Securities. The
Partnership may exercise its legal defeasance option notwithstanding its prior
exercise of its covenant defeasance option.
If the Partnership exercises its legal defeasance option, payment of
the Debt Securities of the defeased series may not be accelerated because of an
Event of Default. If the Partnership exercises its covenant defeasance option,
payment of the Debt Securities of the defeased series may not be accelerated
because of an Event of Default specified in Sections 6.01(d), (g) and (h) and,
with respect to the Subsidiary Guarantors only, Sections 6.01(e) and (f) (except
to the extent covenants or agreements referenced in such Sections remain
applicable).
Upon satisfaction of the conditions set forth herein and upon request
of the Partnership, the Trustee shall acknowledge in writing the discharge of
those obligations that the Partnership terminates.
(c) Notwithstanding clauses (a) and (b) above, the Partnership's
obligations in Sections 2.07, 2.09, 4.02, 4.04, 5.01, 7.06, 7.10, 11.05, 11.06
and 11.07 shall survive until the Debt Securities of the defeased series have
been paid in full. Thereafter, the Partnership's obligations in Sections 7.06,
11.05 and 11.06 shall survive.
Section 11.03. Conditions of Defeasance. The Partnership may exercise
its legal defeasance option or its covenant defeasance option with respect to
Debt Securities of a particular series only if:
(a) the Partnership irrevocably deposits in trust with the Trustee
money or U.S. Government Obligations for the payment of principal of, and
premium, if any, and interest on, the Debt Securities of such series to maturity
or redemption, as the case may be;
(b) the Partnership delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing their opinion
that the payments of principal and interest when due and without reinvestment on
the deposited U.S. Government Obligations plus any deposited money without
investment will provide cash at such times and in such amounts as will be
sufficient to pay the principal, premium and interest when due on all the Debt
Securities of such series to maturity or redemption, as the case may be;
(c) 91 days pass after the deposit is made and during the 91-day period
no Default specified in Section 6.01(e) or (f) with respect to the Partnership
occurs which is continuing at the end of the period;
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(d) no Default has occurred and is continuing on the date of such
deposit and after giving effect thereto;
(e) the deposit does not constitute a default under any other agreement
binding on the Partnership and, if the Debt Securities of such series are
subordinated pursuant to Article XII, is not prohibited by Article XII;
(f) the Partnership delivers to the Trustee an Opinion of Counsel to
the effect that the trust resulting from the deposit does not constitute, or is
qualified as, a regulated investment company under the Investment Company Act of
1940;
(g) in the event of the legal defeasance option, the Partnership shall
have delivered to the Trustee an Opinion of Counsel stating that the Partnership
has received from the Internal Revenue Service a ruling, or since the date of
this Indenture there has been a change in the applicable Federal income tax law,
in either case of the effect that, and based thereon such Opinion of Counsel
shall confirm that, the Holders of Debt Securities of such series will not
recognize income, gain or loss for Federal income tax purposes as a result of
such defeasance and will be subject to Federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if such
defeasance had not occurred;
(h) in the event of the covenant defeasance option, the Partnership
shall have delivered to the Trustee an Opinion of Counsel to the effect that the
Holders of Debt Securities of such series will not recognize income, gain or
loss for Federal income tax purposes as a result of such covenant defeasance and
will be subject to Federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such covenant defeasance
had not occurred; and
(i) the Partnership delivers to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent to the
defeasance and discharge of the Debt Securities of such series as contemplated
by this Article XI have been complied with.
Before or after a deposit, the Partnership may make arrangements
satisfactory to the Trustee for the redemption of Debt Securities of such series
at a future date in accordance with Article III.
Section 11.04. Application of Trust Money. The Trustee shall hold in
trust money or U.S. Government Obligations deposited with it pursuant to this
Article XI. It shall apply the deposited money and the money from U.S.
Government Obligations through any paying agent and in accordance with this
Indenture to the payment of principal of, and premium, if any, and interest on,
the Debt Securities of the defeased series. In the event the Debt Securities of
the defeased series are subordinated pursuant to Article XII, money and
securities so held in trust are not subject to Article XII.
Section 11.05. Repayment to Partnership. The Trustee and any paying
agent shall promptly turn over to the Partnership upon request any excess money
or securities held by them at any time.
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Subject to any applicable abandoned property law, the Trustee and any
paying agent shall pay to the Partnership upon request any money held by them
for the payment of principal, premium or interest that remains unclaimed for two
years, and, thereafter, Holders entitled to such money must look to the
Partnership for payment as general creditors.
Section 11.06. Indemnity for U.S. Government Obligations. The
Partnership shall pay and shall indemnify the Trustee and the Holders against
any tax, fee or other charge imposed on or assessed against deposited U.S.
Government Obligations or the principal and interest received on such U.S.
Government Obligations.
Section 11.07. Reinstatement. If the Trustee or any paying agent is
unable to apply any money or U.S. Government Obligations in accordance with this
Article XI by reason of any legal proceeding or by reason of any order or
judgment of any court or government authority enjoining, restraining or
otherwise prohibiting such application, the Partnership's obligations under this
Indenture and the Debt Securities of the defeased series shall be revived and
reinstated as though no deposit had occurred pursuant to this Article XI until
such time as the Trustee or any paying agent is permitted to apply all such
money or U.S. Government Obligations in accordance with this Article XI.
ARTICLE XII
SUBORDINATION OF DEBT SECURITIES AND GUARANTEE
Section 12.01. Applicability of Article; Agreement To Subordinate. The
provisions of this Article XII shall only be applicable to the Debt Securities
of any series (Debt Securities of such series referred to in this Article XII as
"Subordinated Debt Securities") designated, pursuant to Section 2.03, as
subordinated to Senior Indebtedness and any related Guarantee of such
Subordinated Debt Securities. Each Holder by accepting a Subordinated Debt
Security agrees that the Debt evidenced by such Subordinated Debt Security and
any related Guarantee of such Subordinated Debt Security is subordinated in
right of payment, to the extent and in the manner provided in this Article XII,
to the prior payment of all Senior Indebtedness and that the subordination is
for the benefit of and enforceable by the holders of Senior Indebtedness. All
provisions of this Article XII shall be subject to Section 12.12.
Section 12.02. Liquidation, Dissolution, Bankruptcy. Upon any payment
or distribution of the assets of the Partnership or the Subsidiary Guarantors,
as the case may be, to creditors upon a total or partial liquidation or a total
or partial dissolution of the Partnership or the Subsidiary Guarantors, as the
case may be, or in a bankruptcy, reorganization, insolvency, receivership or
similar proceeding relating to the Partnership or the Subsidiary Guarantors, as
the case may be, or their respective property:
(a) holders of Senior Indebtedness of the Partnership or any Subsidiary
Guarantor, as the case may be, shall be entitled to receive payment in full in
cash of such Senior Indebtedness of such Person (including interest (if any),
accruing on or after the commencement of a proceeding in bankruptcy, whether or
not allowed as a claim against the Partnership or the Subsidiary Guarantors, as
the case may be, in such bankruptcy proceeding) before Holders of Subordinated
Debt Securities and any related Guarantee shall be entitled to receive any
payment
52
of principal of, or premium, if any, or interest on, the Subordinated Debt
Securities from the Partnership, or any payment in respect of the Guarantee from
the Subsidiary Guarantors; and
(b) until the Senior Indebtedness of the Partnership or any Subsidiary
Guarantor, as the case may be, is paid in full, any distribution to which
Holders of Subordinated Debt Securities and any related Guarantee would be
entitled but for this Article XII shall be made to holders of Senior
Indebtedness of the Partnership or the Subsidiary Guarantors, as the case may
be, as their interests may appear, except that such Holders may receive shares
of stock and any debt securities that are subordinated to Senior Indebtedness of
the Partnership or the Subsidiary Guarantors, as the case may be, to at least
the same extent as the Subordinated Debt Securities of the Partnership or the
related Guarantee of any Subsidiary Guarantor, respectively.
Section 12.03. Default on Senior Indebtedness. The Partnership and the
Subsidiary Guarantors may not pay the principal of, or premium, if any, or
interest on, the Subordinated Debt Securities or any related Guarantee or make
any deposit pursuant to Article XI and may not repurchase, redeem or otherwise
retire (except, in the case of Subordinated Debt Securities that provide for a
mandatory sinking fund pursuant to Section 3.05, by the delivery of Subordinated
Debt Securities by the Partnership to the Trustee pursuant to the first
paragraph of Section 3.06) any Subordinated Debt Securities (collectively, "pay
the Subordinated Debt Securities") if any principal, premium or interest in
respect of Senior Indebtedness of such Person is not paid within any applicable
grace period (including at maturity) or any other default on Senior Indebtedness
of such Person occurs and the maturity of such Senior Indebtedness is
accelerated in accordance with its terms unless, in either case, the default has
been cured or waived and any such acceleration has been rescinded or such Senior
Indebtedness has been paid in full in cash; provided, however, that the
Partnership and the Subsidiary Guarantors may make payments on the Subordinated
Debt Securities or any related Guarantee without regard to the foregoing if the
Partnership and the Trustee receive written notice approving such payment from
the Representative of each issue of Designated Senior Indebtedness. During the
continuance of any default with respect to any Designated Senior Indebtedness
pursuant to which the maturity thereof may be accelerated immediately without
further notice (except such notice as may be required to effect such
acceleration) or the expiration of any applicable grace periods, the Partnership
and the Subsidiary Guarantors may not make payments on the Subordinated Debt
Securities or any related Guarantee for a period (a "Payment Blockage Period")
commencing upon the receipt by the Partnership and the Trustee (and if such
Designated Senior Indebtedness is Debt of a Subsidiary Guarantor, the Subsidiary
Guarantor)of written notice of such default from the Representative of any
Designated Senior Indebtedness specifying an election to effect a Payment
Blockage Period (a "Blockage Notice") and ending 179 days thereafter (or earlier
if such Payment Blockage Period is terminated by written notice to the Trustee
and the Partnership (and if such Designated Senior Indebtedness is Debt of a
Subsidiary Guarantor, the Subsidiary Guarantor) from the Person or Persons who
gave such Blockage Notice, by repayment in full in cash of such Designated
Senior Indebtedness or because the default giving rise to such Blockage Notice
is no longer continuing). Notwithstanding the provisions described in the
immediately preceding sentence (but subject to the provisions contained in the
first sentence of this Section 12.03), unless the holders of such Designated
Senior Indebtedness or the Representative of such holders shall have accelerated
the maturity of such Designated Senior Indebtedness, the Partnership and the
Subsidiary Guarantors may resume payments on the Subordinated Debt Securities
and related Guarantees after such Payment Blockage Period. Not more than one
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Blockage Notice may be given in any consecutive 360-day period, irrespective of
the number of defaults with respect to any number of issues of Designated Senior
Indebtedness during such period, unless otherwise specified pursuant to Section
2.03 for the Subordinated Debt Securities of a series; provided, however, that
in no event may the total number of days during which any Payment Blockage
Period or Periods is in effect exceed 179 days in the aggregate during any 360
consecutive day period. For purposes of this Section 12.03, no default or event
of default which existed or was continuing on the date of the commencement of
any Payment Blockage Period with respect to the Designated Senior Indebtedness
initiating such Payment Blockage Period shall be, or be made, the basis of the
commencement of a subsequent Payment Blockage Period by the Representative of
such Designated Senior Indebtedness, whether or not within a period of 360
consecutive days, unless such default or event of default shall have been cured
or waived for a period of not less than 90 consecutive days.
Section 12.04. Acceleration of Payment of Debt Securities. If payment
of the Subordinated Debt Securities is accelerated because of an Event of
Default, the Partnership shall promptly notify the holders of the Designated
Senior Indebtedness (or their Representatives) of the acceleration.
Section 12.05. When Distribution Must Be Paid Over. If a distribution
is made to Holders of Subordinated Debt Securities or a related Guarantee that
because of this Article XII should not have been made to them, the Holders who
receive such distribution shall hold it in trust for holders of Senior
Indebtedness and pay it over to them as their interests may appear.
Section 12.06. Subrogation. After all Senior Indebtedness is paid in
full and until the Subordinated Debt Securities are paid in full, Holders
thereof shall be subrogated to the rights of holders of Senior Indebtedness to
receive distributions applicable to Senior Indebtedness. A distribution made
under this Article XII to holders of Senior Indebtedness which otherwise would
have been made to Holders of Subordinated Debt Securities is not, as between the
Partnership or the Subsidiary Guarantors, as the case may be, and such Holders,
a payment by the Partnership or the Subsidiary Guarantors, as the case may be,
on Senior Indebtedness.
Section 12.07. Relative Rights. This Article XII defines the relative
rights of Holders of Subordinated Debt Securities and holders of Senior
Indebtedness. Nothing in this Indenture shall:
(a) impair, as between the Partnership or the Subsidiary Guarantors, as
the case may be, and Holders of either Subordinated Debt Securities or Debt
Securities, the obligation of the Partnership or the Subsidiary Guarantors, as
the case may be, which is absolute and unconditional, to pay principal of, and
premium, if any, and interest on, the Subordinated Debt Securities and the Debt
Securities in accordance with their terms; or
(b) prevent the Trustee or any Holder of either Subordinated Debt
Securities or Debt Securities from exercising its respective available remedies
upon a Default, subject to the rights of holders of Senior Indebtedness to
receive distributions otherwise payable to Holders of Subordinated Debt
Securities.
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Section 12.08. Subordination May Not Be Impaired by Partnership. No
right of any holder of Senior Indebtedness to enforce the subordination of the
Debt evidenced by the Subordinated Debt Securities and the Guarantee in respect
thereof shall be impaired by any act or failure to act by the Partnership or the
Subsidiary Guarantors or by its failure to comply with this Indenture.
Section 12.09. Rights of Trustee and Paying Agent. Notwithstanding
Section 12.03, the Trustee or any paying agent may continue to make payments on
Subordinated Debt Securities and shall not be charged with knowledge of the
existence of facts that would prohibit the making of any such payments unless,
not less than two Business Days prior to the date of such payment, a responsible
officer of the Trustee receives notice satisfactory to it that payments may not
be made under this Article XII. The Partnership, the Registrar, any paying
agent, a Representative or a holder of Senior Indebtedness may give the notice;
provided, however, that, if an issue of Senior Indebtedness has a
Representative, only the Representative may give the notice on behalf of the
Holders of the Senior Indebtedness of that issue.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness with the same rights it would have if it were not Trustee. The
Registrar and any paying agent may do the same with like rights. The Trustee
shall be entitled to all the rights set forth in this Article XII with respect
to any Senior Indebtedness which may at any time be held by it, to the same
extent as any other holder of Senior Indebtedness; and nothing in Article VII
shall deprive the Trustee of any of its rights as such holder. Nothing in this
Article XII shall apply to claims of, or payments to, the Trustee under or
pursuant to Section 7.06.
Section 12.10. Distribution or Notice to Representative. Whenever a
distribution is to be made or a notice given to holders of Senior Indebtedness,
the distribution may be made and the notice given to their Representative (if
any).
Section 12.11. Article XII Not to Prevent Defaults or Limit Right to
Accelerate. The failure to make a payment pursuant to the Subordinated Debt
Securities, whether directly or pursuant to the Guarantee, by reason of any
provision in this Article XII shall not be construed as preventing the
occurrence of a Default. Nothing in this Article XII shall have any effect on
the right of the Holders or the Trustee to accelerate the maturity of either the
Subordinated Debt Securities or the Debt Securities, as the case may be.
Section 12.12. Trust Moneys Not Subordinated. Notwithstanding anything
contained herein to the contrary, payments from money or the proceeds of U.S.
Government Obligations held in trust under Article XI by the Trustee for the
payment of principal of, and premium, if any, and interest on, the Subordinated
Debt Securities or the Debt Securities shall not be subordinated to the prior
payment of any Senior Indebtedness or subject to the restrictions set forth in
this Article XII, and none of the Holders thereof shall be obligated to pay over
any such amount to the Partnership, the Subsidiary Guarantors or any holder of
Senior Indebtedness of the Partnership or the Subsidiary Guarantors or any other
creditor of the Partnership or the Guarantor.
Section 12.13. Trustee Entitled to Rely. Upon any payment or
distribution pursuant to this Article XII, the Trustee and the Holders shall be
entitled to rely upon any order or decree
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of a court of competent jurisdiction in which any proceedings of the nature
referred to in Section 12.02 are pending, upon a certificate of the liquidating
trustee or agent or other Person making such payment or distribution to the
Trustee or to such Holders or upon the Representatives for the holders of Senior
Indebtedness for the purpose of ascertaining the Persons entitled to participate
in such payment or distribution, the holders of the Senior Indebtedness and
other Debt of the Partnership or the Subsidiary Guarantors, the amount thereof
or payable thereon, the amount or amounts paid or distributed thereon and all
other facts pertinent thereto or to this Article XII. In the event that the
Trustee determines, in good faith, that evidence is required with respect to the
right of any Person as a holder of Senior Indebtedness to participate in any
payment or distribution pursuant to this Article XII, the Trustee may request
such Person to furnish evidence to the reasonable satisfaction of the Trustee as
to the amount of Senior Indebtedness held by such Person, the extent to which
such Person is entitled to participate in such payment or distribution and other
facts pertinent to the rights of such Person under this Article XII, and, if
such evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment. The provisions of Sections 7.01 and 7.02 shall be applicable to all
actions or omissions of actions by the Trustee pursuant to this Article XII.
Section 12.14. Trustee to Effectuate Subordination. Each Holder by
accepting a Subordinated Debt Security authorizes and directs the Trustee on his
behalf to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination between the Holders of Subordinated Debt Securities
and the holders of Senior Indebtedness as provided in this Article XII and
appoints the Trustee as attorney-in-fact for any and all such purposes.
Section 12.15. Trustee Not Fiduciary for Holders of Senior
Indebtedness. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness and shall not be liable to any such holders if it
shall mistakenly pay over or distribute to Holders of Subordinated Debt
Securities or the Partnership or the Subsidiary Guarantors or any other Person,
money or assets to which any holders of Senior Indebtedness shall be entitled by
virtue of this Article XII or otherwise.
Section 12.16. Reliance by Holders of Senior Indebtedness on
Subordination Provisions. Each Holder by accepting a Subordinated Debt Security
acknowledges and agrees that the foregoing subordination provisions are, and are
intended to be, an inducement and a consideration to each holder of any Senior
Indebtedness, whether such Senior Indebtedness was created or acquired before or
after the issuance of the Subordinated Debt Securities, to acquire and continue
to hold, or to continue to hold, such Senior Indebtedness and such holder of
Senior Indebtedness shall be deemed conclusively to have relied on such
subordination provisions in acquiring and continuing to hold, or in continuing
to hold, such Senior Indebtedness.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.01. Successors and Assigns of Partnership Bound by
Indenture. All the covenants, stipulations, promises and agreements in this
Indenture contained by or in behalf of the Partnership, the Subsidiary
Guarantors or the Trustee shall bind their respective successors and assigns,
whether so expressed or not.
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Section 13.02. Acts of Board, Committee or Officer of Successor
Partnership Valid. Any act or proceeding by any provision of this Indenture
authorized or required to be done or performed by any board, committee or
officer of the Partnership or the Subsidiary Guarantors shall and may be done
and performed with like force and effect by the like board, committee or officer
of any Successor Partnership.
Section 13.03. Required Notices or Demands. Any notice or communication
by the Partnership, the Subsidiary Guarantors or the Trustee to the others is
duly given if in writing and delivered in Person or mailed by registered or
certified mail (return receipt requested), telecopier or overnight air courier
guaranteeing next day delivery, to the other's address:
If to the Partnership or the Subsidiary Guarantors:
TEPPCO Partners, L.P.
TE Products Pipeline Company, Limited Partnership
TCTM, L.P.
TEPPCO Midstream Companies, L.P.
Jonah Gas Gathering Company
2929 Allen Parkway
Houston, Texas 77252
Attention: Chief Financial Officer
Telecopy No. 713-759-3636
If to the Trustee:
First Union National Bank
5847 San Felipe, Suite 1050
Houston, Texas 77057
Attn: Corporate Trust Department
Telecopy: 713-278-4329
The Partnership, the Subsidiary Guarantors or the Trustee by notice to
the others may designate additional or different addresses for subsequent
notices or communications.
All notices and communications shall be deemed to have been duly given:
at the time delivered by hand, if personally delivered; five Business Days after
being deposited in the mail, postage prepaid, if mailed; on the first Business
Day on or after being sent, if telecopied and the sender receives confirmation
of successful transmission; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
Any notice required or permitted to a Holder by the Partnership, the
Subsidiary Guarantors or the Trustee pursuant to the provisions of this
Indenture shall be deemed to be properly mailed by being deposited postage
prepaid in a post office letter box in the United States addressed to such
Holder at the address of such Holder as shown on the Debt Security Register. Any
report pursuant to Section 313 of the TIA shall be transmitted in compliance
with subsection (c) therein.
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Notwithstanding the foregoing, any notice to Holders of Floating Rate
Debt Securities regarding the determination of a periodic rate of interest, if
such notice is required pursuant to Section 2.03, shall be sufficiently given if
given in the manner specified pursuant to Section 2.03.
In the event of suspension of regular mail service or by reason of any
other cause it shall be impracticable to give notice by mail, then such
notification as shall be given with the approval of the Trustee shall constitute
sufficient notice for every purpose hereunder.
In the event it shall be impracticable to give notice by publication,
then such notification as shall be given with the approval of the Trustee shall
constitute sufficient notice for every purpose hereunder.
Failure to mail a notice or communication to a Holder or any defect in
it or any defect in any notice by publication as to a Holder shall not affect
the sufficiency of such notice with respect to other Holders. If a notice or
communication is mailed or published in the manner provided above, it is
conclusively presumed duly given.
Section 13.04. Indenture and Debt Securities to Be Construed in
Accordance with the Laws of the State of New York. THIS INDENTURE, EACH DEBT
SECURITY AND THE GUARANTEE SHALL BE DEEMED TO BE NEW YORK CONTRACTS, AND FOR ALL
PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF SAID
STATE.
Section 13.05. Officers' Certificate and Opinion of Counsel to Be
Furnished upon Application or Demand by the Partnership. Upon any application or
demand by the Partnership to the Trustee to take any action under any of the
provisions of this Indenture, the Partnership shall furnish to the Trustee an
Officers' Certificate stating that all conditions precedent provided for in this
Indenture relating to the proposed action have been complied with and an Opinion
of Counsel stating that, in the opinion of such counsel, all such conditions
precedent have been complied with, except that in the case of any such
application or demand as to which the furnishing of such document is
specifically required by any provision of this Indenture relating to such
particular application or demand, no additional certificate or opinion need be
furnished.
Each certificate or opinion provided for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or covenant
provided for in this Indenture shall include (a) a statement that the Person
making such certificate or opinion has read such covenant or condition, (b) a
brief statement as to the nature and scope of the examination or investigation
upon which the statements or opinions contained in such certificate or opinion
are based, (c) a statement that, in the opinion of such Person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with and (d) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been complied with.
Section 13.06. Payments Due on Legal Holidays. In any case where the
date of maturity of interest on or principal of and premium, if any, on the Debt
Securities of a series or the date fixed for redemption or repayment of any Debt
Security or the making of any sinking
58
fund payment shall not be a business day at any Place of Payment for the Debt
Securities of such series, then payment of interest or principal and premium, if
any, or the making of such sinking fund payment need not be made on such date at
such Place of Payment, but may be made on the next succeeding business day at
such Place of Payment with the same force and effect as if made on the date of
maturity or the date fixed for redemption, and no interest shall accrue for the
period after such date. If a record date is not a business day, the record date
shall not be affected.
Section 13.07. Provisions Required by TIA to Control. If and to the
extent that any provision of this Indenture limits, qualifies or conflicts with
another provision included in this Indenture which is required to be included in
this Indenture by any of Sections 310 to 318, inclusive, of the TIA, such
required provision shall control.
Section 13.08. Computation of Interest on Debt Securities. Interest, if
any, on the Debt Securities shall be computed on the basis of a 360-day year of
twelve 30-day months, except as may otherwise be provided pursuant to Section
2.03.
Section 13.09. Rules by Trustee, Paying Agent and Registrar. The
Trustee may make reasonable rules for action by or a meeting of Holders. The
Registrar and any paying agent may make reasonable rules for their functions.
Section 13.10. No Recourse Against Others. The General Partner and its
directors, officers, employees, incorporators and stockholders, as such, shall
have no liability for any obligations of the Subsidiary Guarantors or the
Partnership under the Debt Securities, the Indenture or the Guarantee or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. By accepting a Debt Security, each Holder shall waive and release all
such liability. The waiver and release shall be part of the consideration for
the issue of the Debt Securities.
Section 13.11. Severability. In case any provision in this Indenture or
the Debt Securities shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
Section 13.12. Effect of Headings. The article and section headings
herein and in the Table of Contents are for convenience only and shall not
affect the construction hereof.
Section 13.13. Indenture May Be Executed in Counterparts. This
Indenture may be executed in any number of counterparts, each of which shall be
an original; but such counterparts shall together constitute but one and the
same instrument.
ARTICLE XIV
GUARANTEE
Section 14.01. Unconditional Guarantee.
(a) Notwithstanding any provision of this Article XIV to the contrary,
the provisions of this Article XIV shall be applicable only to, and inure solely
to the benefit of, the Debt Securities of any series designated, pursuant to
Section 2.03, as entitled to the benefits of the Guarantee of each of the
Subsidiary Guarantors.
59
(b) For value received, each of the Subsidiary Guarantors hereby fully,
unconditionally and absolutely guarantees (the "Guarantee") to the Holders and
to the Trustee the due and punctual payment of the principal of, and premium, if
any, and interest on the Debt Securities and all other amounts due and payable
under this Indenture and the Debt Securities by the Partnership, when and as
such principal, premium, if any, and interest shall become due and payable,
whether at the stated maturity or by declaration of acceleration, call for
redemption or otherwise, according to the terms of the Debt Securities and this
Indenture, subject to (i) the limitations set forth in Section 14.03 and (ii) in
the case of the Guarantee of the Subordinated Debt Securities, to the
subordination provisions contained in Article XII.
(c) Failing payment when due of any amount guaranteed pursuant to the
Guarantee, for whatever reason, each of the Subsidiary Guarantors will be
jointly and severally obligated to pay the same immediately, subject, in the
case of the Guarantee of the Subordinated Debt Securities, to the subordination
provisions contained in Article XII. The Guarantee hereunder (other than the
Guarantee of Subordinated Debt Securities) is intended to be a general,
unsecured, senior obligation of each of the Subsidiary Guarantors and will rank
pari passu in right of payment with all Debt of such Subsidiary Guarantor that
is not, by its terms, expressly subordinated in right of payment to the
Guarantee. Each of the Subsidiary Guarantors hereby agrees that its obligations
hereunder, shall be full, unconditional and absolute, irrespective of the
validity, regularity or enforceability of the Debt Securities, the Guarantee
(including the Guarantee of any other Subsidiary Guarantor) or this Indenture,
the absence of any action to enforce the same, any waiver or consent by any
Holder of the Debt Securities with respect to any provisions hereof or thereof,
the recovery of any judgment against the Partnership or any other Subsidiary
Guarantor, or any action to enforce the same or any other circumstances which
might otherwise constitute a legal or equitable discharge or defense of the
Subsidiary Guarantors. Each of the Subsidiary Guarantors hereby agrees that in
the event of a default in payment of the principal of, or premium, if any, or
interest on the Debt Securities, whether at the stated maturity or by
declaration of acceleration, call for redemption or otherwise, legal proceedings
may be instituted by the Trustee on behalf of the Holders or, subject to Section
6.04, by the Holders, on the terms and conditions set forth in this Indenture,
directly against such Subsidiary Guarantor to enforce the Guarantee without
first proceeding against the Partnership or any other Subsidiary Guarantor.
(d) The obligations of each of the Subsidiary Guarantors under this
Article XIV shall be as aforesaid full, unconditional and absolute and shall not
be impaired, modified, released or limited by any occurrence or condition
whatsoever, including, without limitation, (A) any compromise, settlement,
release, waiver, renewal, extension, indulgence or modification of, or any
change in, any of the obligations and liabilities of the Partnership or any of
the Subsidiary Guarantors contained in the Debt Securities or this Indenture,
(B) any impairment, modification, release or limitation of the liability of the
Partnership, any of the Subsidiary Guarantors or either of their estates in
bankruptcy, or any remedy for the enforcement thereof, resulting from the
operation of any present or future provision of any applicable Bankruptcy Law,
as amended, or other statute or from the decision of any court, (C) the
assertion or exercise by the Partnership, any of the Subsidiary Guarantors or
the Trustee of any rights or remedies under the Debt Securities or this
Indenture or their delay in or failure to assert or exercise any such rights or
remedies, (D) the assignment or the purported assignment of any property as
security for the Debt Securities, including all or any part of the rights of the
Partnership or any of the Subsidiary
60
Guarantors under this Indenture, (E) the extension of the time for payment by
the Partnership or any of the Subsidiary Guarantors of any payments or other
sums or any part thereof owing or payable under any of the terms and provisions
of the Debt Securities or this Indenture or of the time for performance by the
Partnership or any of the Subsidiary Guarantors of any other obligations under
or arising out of any such terms and provisions or the extension or the renewal
of any thereof, (F) the modification or amendment (whether material or
otherwise) of any duty, agreement or obligation of the Partnership or any of the
Subsidiary Guarantors set forth in this Indenture, (G) the voluntary or
involuntary liquidation, dissolution, sale or other disposition of all or
substantially all of the assets, marshaling of assets and liabilities,
receivership, insolvency, bankruptcy, assignment for the benefit of creditors,
reorganization, arrangement, composition or readjustment of, or other similar
proceeding affecting, the Partnership or any of the Subsidiary Guarantors or any
of their respective assets, or the disaffirmance of the Debt Securities, the
Guarantee or this Indenture in any such proceeding, (H) the release or discharge
of the Partnership or any of the Subsidiary Guarantors from the performance or
observance of any agreement, covenant, term or condition contained in any of
such instruments by operation of law, (I) the unenforceability of the Debt
Securities, the Guarantee or this Indenture or (J) any other circumstances which
might otherwise constitute a legal or equitable discharge of a surety or
guarantor.
(e) Each of the Subsidiary Guarantors hereby (A) waives diligence,
presentment, demand of payment, filing of claims with a court in the event of
the merger, insolvency or bankruptcy of the Partnership or any of the Subsidiary
Guarantors, and all demands whatsoever, (B) acknowledges that any agreement,
instrument or document evidencing the Guarantee may be transferred and that the
benefit of its obligations hereunder shall extend to each holder of any
agreement, instrument or document evidencing the Guarantee without notice to it
and (C) covenants that the Guarantee will not be discharged except by complete
performance of the Guarantee. Each of the Subsidiary Guarantors further agrees
that if at any time all or any part of any payment theretofore applied by any
Person to the Guarantee is, or must be, rescinded or returned for any reason
whatsoever, including without limitation, the insolvency, bankruptcy or
reorganization of the Partnership or any of the Subsidiary Guarantors, the
Guarantee shall, to the extent that such payment is or must be rescinded or
returned, be deemed to have continued in existence notwithstanding such
application, and the Guarantee shall continue to be effective or be reinstated,
as the case may be, as though such application had not been made.
(f) Each of the Subsidiary Guarantors shall be subrogated to all rights
of the Holders and the Trustee against the Partnership in respect of any amounts
paid by such Subsidiary Guarantor pursuant to the provisions of this Indenture,
provided, however, that such Subsidiary Guarantor, shall not be entitled to
enforce or to receive any payments arising out of, or based upon, such right of
subrogation until all of the Debt Securities and the Guarantee shall have been
paid in full or discharged.
Section 14.02. Execution and Delivery of Guarantee. To further evidence
the Guarantee set forth in Section 14.01, each of the Subsidiary Guarantors
hereby agrees that a notation relating to such Guarantee, substantially in the
form attached hereto as Annex A, shall be endorsed on each Debt Security
entitled to the benefits of the Guarantee authenticated and delivered by the
Trustee and executed by either manual or facsimile signature of an officer of
such Subsidiary Guarantor, or in the case of a Subsidiary Guarantor that is a
limited partnership,
61
an officer of the general partner of each Subsidiary Guarantor. Each of the
Subsidiary Guarantors hereby agrees that the Guarantee set forth in Section
14.01 shall remain in full force and effect notwithstanding any failure to
endorse on each Debt Security a notation relating to the Guarantee. If any
officer of the Subsidiary Guarantor, or in the case of a Subsidiary Guarantor
that is a limited partnership, any officer of the general partner of the
Subsidiary Guarantor, whose signature is on this Indenture or a Debt Security no
longer holds that office at the time the Trustee authenticates such Debt
Security or at any time thereafter, the Guarantee of such Debt Security shall be
valid nevertheless. The delivery of any Debt Security by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of the Guarantee
set forth in this Indenture on behalf of the Subsidiary Guarantors.
The Trustee hereby accepts the trusts in this Indenture upon the terms
and conditions herein set forth.
Section 14.03. Limitation on Subsidiary Guarantors' Liability.
(a) Each Subsidiary Guarantor and by its acceptance hereof each Holder
of a Debt Security entitled to the benefits of the Guarantee hereby confirms
that it is the intention of all such parties that the guarantee by such
Subsidiary Guarantor pursuant to its Guarantee not constitute a fraudulent
transfer or conveyance for purposes of any Federal or state law. To effectuate
the foregoing intention, the Holders of a Debt Security entitled to the benefits
of the Guarantee and the Subsidiary Guarantors hereby irrevocably agree that the
obligations of each Subsidiary Guarantor under its Guarantee shall be limited to
the maximum amount as will, after giving effect to all other contingent and
fixed liabilities of such Subsidiary Guarantor and to any collections from or
payments made by or on behalf of any other Subsidiary Guarantor in respect of
the obligations of such other Subsidiary Guarantor under its Guarantee, result
in the obligations of such Subsidiary Guarantor under the Guarantee not
constituting a fraudulent conveyance or fraudulent transfer under Federal or
state law.
Section 14.04. Release of Subsidiary Guarantors from Guarantee.
(a) Notwithstanding any other provisions of this Indenture, the
Guarantee of any Subsidiary Guarantor may be released upon the terms and subject
to the conditions set forth in this Section 14.04. Provided that no Default
shall have occurred and shall be continuing under this Indenture, any Guarantee
incurred by a Subsidiary Guarantor pursuant to this Article XIV shall be
unconditionally released and discharged (i) automatically upon (A) any sale,
exchange or transfer, whether by way of merger or otherwise, to any Person that
is not an Affiliate of the Partnership, of all of the Partnership's direct or
indirect limited partnership or other equity interests in such Subsidiary
Guarantor (provided such sale, exchange or transfer is not prohibited by this
Indenture) or (B) the merger of such Subsidiary Guarantor into the Partnership
or any other Subsidiary Guarantor or the liquidation and dissolution of such
Subsidiary Guarantor (in each case to the extent not prohibited by this
Indenture) or (ii) following delivery of a written notice of such release or
discharge by the Partnership to the Trustee, upon the release or discharge of
all guarantees by such Subsidiary Guarantor of any Debt of the Partnership other
than obligations arising under this Indenture and any Debt Securities issued
hereunder, except a discharge or release by or as a result of payment under such
guarantees.
62
(b) The Trustee shall deliver an appropriate instrument evidencing any
release of a Subsidiary Guarantor from the Guarantee upon receipt of a written
request of the Partnership accompanied by an Officers' Certificate and an
Opinion of Counsel the Subsidiary Guarantor is entitled to such release in
accordance with the provisions of this Indenture. Any Subsidiary Guarantor not
so released remains liable for the full amount of principal of (and premium, if
any, on) and interest on the Debt Securities entitled to the benefits of such
Guarantee as provided in this Indenture, subject to the limitations of Section
14.03.
Section 14.05. Subsidiary Guarantor Contribution. In order to provide
for just and equitable contribution among the Subsidiary Guarantors, the
Subsidiary Guarantors shall agree, inter se, that in the event any payment or
distribution is made by any Subsidiary Guarantor (a "Funding Guarantor") under
its Guarantee, such Funding Guarantor shall be entitled to a contribution from
each other Subsidiary Guarantor (if any) in a pro rata amount based on the net
assets of each Subsidiary Guarantor (including the Funding Guarantor) for all
payments, damages and expenses incurred by that Funding Guarantor in discharging
the Partnership's obligations with respect to the Debt Securities or any other
Subsidiary Guarantor's obligations with respect to its Guarantee.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
63
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the day and year first above written.
TEPPCO PARTNERS, L.P.
By: Texas Eastern Products Pipeline Company,
LLC
Its General Partner
By:
---------------------------------------
Charles H. Leonard
Senior Vice President, Chief Financial
Officer and Treasurer
TE PRODUCTS PIPELINE COMPANY, LIMITED
PARTNERSHIP
By: TEPPCO GP, Inc.
Its General Partner
By:
---------------------------------------
Charles H. Leonard
Senior Vice President, Chief Financial
Officer and Treasurer
TCTM, L.P.
By: TEPPCO GP, Inc.
Its General Partner
By:
---------------------------------------
Charles H. Leonard
Senior Vice President, Chief Financial
Officer and Treasurer
TEPPCO MIDSTREAM COMPANIES, L.P.
By: TEPPCO GP, Inc.
Its General Partner
By:
---------------------------------------
Charles H. Leonard
Senior Vice President, Chief Financial
Officer and Treasurer
64
JONAH GAS GATHERING COMPANY
By: TEPPCO GP, Inc.
Its Managing General Partner
By:
---------------------------------------
Charles H. Leonard
Senior Vice President, Chief Financial
Officer and Treasurer
FIRST UNION NATIONAL BANK, as Trustee
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
65
ANNEX A
NOTATION OF GUARANTEE
Each of the Subsidiary Guarantors (which term includes any successor
Person under the Indenture), has fully, unconditionally and absolutely
guaranteed, to the extent set forth in the Indenture and subject to the
provisions in the Indenture, the due and punctual payment of the principal of,
and premium, if any, and interest on the Debt Securities and all other amounts
due and payable under the Indenture and the Debt Securities by the Partnership.
The obligations of the Subsidiary Guarantors to the Holders of Debt
Securities and to the Trustee pursuant to the Guarantee and the Indenture are
expressly set forth in Article XIV of the Indenture and reference is hereby made
to the Indenture for the precise terms of the Guarantee.
TE PRODUCTS PIPELINE COMPANY, LIMITED
PARTNERSHIP
By: TEPPCO GP, Inc.
Its General Partner
By:
---------------------------------------
Charles H. Leonard
Senior Vice President, Chief Financial
Officer and Treasurer
TCTM, L.P.
By: TEPPCO GP, Inc.
Its General Partner
By:
---------------------------------------
Charles H. Leonard
Senior Vice President, Chief Financial
Officer and Treasurer
TEPPCO MIDSTREAM COMPANIES, L.P.
By: TEPPCO GP, Inc.
Its General Partner
By:
---------------------------------------
Charles H. Leonard
Senior Vice President, Chief Financial
Officer and Treasurer
A-1
JONAH GAS GATHERING COMPANY
By: TEPPCO GP, Inc.
Its Managing General Partner
By:
---------------------------------------
Charles H. Leonard
Senior Vice President, Chief Financial
Officer and Treasurer
A-2
EXHIBIT 5.1
FULBRIGHT & JAWORSKI L.L.P.
1301 MCKINNEY, SUITE 5100
HOUSTON, TEXAS 77010
(713) 651-5151
April 19, 2002
TEPPCO Partners, L.P.
TE Products Pipeline Company, Limited Partnership
TCTM, L.P. TEPPCO
Midstream Companies, L.P.
Jonah Gas Gathering Company
2929 Allen Parkway
P.O. Box 2521
Houston, Texas 77252-2521
Dear Sirs:
We have acted as counsel to TEPPCO Partners, L.P., a Delaware limited
partnership (the "Partnership"), in connection with its filing with the
Securities and Exchange Commission (the "Commission") of a Registration
Statement on Form S-3 (the "Registration Statement") under the Securities Act of
1933, as amended (the "Securities Act"), of (i) units representing limited
partner interests in the Partnership (the "Units"), (ii) unsecured debt
securities, in one or more series, consisting of notes, debentures or other
evidences of indebtedness (the "Debt Securities") and (iii) guarantees (the
"Guarantees") of such Debt Securities by TE Products Pipeline Company, Limited
Partnership, a Delaware limited partnership ("TE Products"), TCTM, L.P., a
Delaware limited partnership ("TCTM"), TEPPCO Midstream Companies, L.P., a
Delaware limited partnership ("TEPPCO Midstream"), and Jonah Gas Gathering
Company, a Wyoming general partnership ("Jonah" and, together with TE Products,
TCTM and TEPPCO Midstream, the "Operating Partnerships"). The Units, Debt
Securities and Guarantees are collectively referred to herein as the
"Securities". We have also participated in the preparation of the Prospectus
(the "Prospectus") contained in the Registration Statement to which this opinion
is an exhibit. Capitalized terms not defined herein shall have the meanings
ascribed to them in the Prospectus.
As the basis for the opinion hereinafter expressed, we have examined
such statutes, regulations, partnership and corporate records and documents,
certificates of corporate and public officials, and other instruments as we have
deemed necessary or advisable for the purposes of this opinion. In such
examination we have assumed the authenticity of all documents submitted to us as
originals and the conformity with the original documents of all documents
submitted to us as copies.
In rendering the opinions set forth below, we have examined and relied
upon (i) the Registration Statement, including the Prospectus; (ii) the Third
Amended and Restated Agreement of Limited Partnership of the Partnership, dated
as of September 21, 2001; (iii) the Second Amended and Restated Agreement of
Limited Partnership of TE Products, dated as of September 21, 2001;
(iv) the Amended and Restated Agreement of Limited Partnership of TCTM, dated as
of September 21, 2001; (v) the Agreement of Limited Partnership of TEPPCO
Midstream, dated as of September 24, 2001, (vi) the Agreement of Partnership of
Jonah dated as of June 20, 1996; (vii) the Senior Indenture and form of
Subordinated Indenture filed as exhibits to the Registration Statement and
(viii) such certificates, statutes and other instruments and documents as we
consider appropriate for purposes of the opinions hereafter expressed.
In connection with this opinion, we have assumed that (i) the
Registration Statement, and any amendments thereto (including post-effective
amendments), will have become effective; (ii) a Prospectus Supplement will have
been prepared and filed with the Commission describing the Securities offered
thereby; (iii) all Securities will be issued and sold in compliance with
applicable federal and state securities laws and in the manner stated in the
Registration Statement and the appropriate Prospectus Supplement; (iv) a
definitive purchase, underwriting or similar agreement with respect to any
Securities offered will have been duly authorized and validly executed and
delivered by the Partnership and the other parties thereto; and (v) any
Securities issuable upon conversion, exchange or exercise of any Security being
offered will be duly authorized, created and, if appropriate, reserved for
issuance upon such conversion, exchange or exercise.
Based upon and subject to the foregoing, we are of the opinion that:
1. With respect to the Units, when (i) the Partnership has taken
all necessary action to approve the issuance of such Units,
the terms of the offering and related matters and (ii) the
Units have been issued and delivered in accordance with terms
of the applicable definitive purchase, underwriting or similar
agreement approved by the Partnership upon payment of the
consideration therefor provided for therein, then the Units
will be validly issued, fully paid and non-assessable.
2. With respect to the Debt Securities and the Guarantees, when
(i) the Indenture has been duly qualified under the Trust
Indenture Act of 1939, as amended; (ii) the Partnership and
the Operating Partnerships have taken all necessary action to
approve the issuance and terms of such Debt Securities and
Guarantees, the terms of the offering thereof and related
matters; and (iii) such Debt Securities and Guarantees have
been duly executed, authenticated, issued and delivered in
accordance with the provisions of the Indenture and the
applicable definitive purchase, underwriting or similar
agreement approved by the Partnership and the Operating
Partnerships upon payment of the consideration therefor
provided for therein, such Debt Securities and Guarantees will
be legally issued and will constitute valid and legally
binding obligations of the Partnership and the Operating
Partnerships, respectively, enforceable against the
Partnership and the Operating Partnerships in accordance with
their terms, except as such enforcement is subject to any
applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance or other law relating to or affecting creditors'
rights generally and general principles of equity.
We have assumed, without independent verification, that the
certificates for the Units will conform to the specimens thereof examined by us
and will have been duly countersigned by a transfer agent and duly registered by
a registrar of the Units.
The opinions expressed herein are limited to the federal laws of the
United States of America, the laws of the State of New York, the laws of the
State of Texas and the Revised Uniform Limited Partnership Act of the State of
Delaware and the Constitution of the State of Delaware, each as interpreted by
the courts of the State of Delaware, and we are expressing no opinion as to the
effect of the laws of any other jurisdiction.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the caption "Legal" in
the Prospectus.
Very truly yours,
/s/ Fulbright & Jaworski L.L.P.
EXHIBIT 8.1
FULBRIGHT & JAWORSKI L.L.P.
1301 MCKINNEY ST., SUITE 5100
HOUSTON, TEXAS 77010
PHONE: (713) 651-5151
FAX: (713) 651-5246
April 19, 2002
TEPPCO Partners, L.P.
TE Products Pipeline Company, Limited Partnership
TCTM, L.P. TEPPCO
Midstream Companies, L.P.
Jonah Gas Gathering Company
2929 Allen Parkway
P.O. Box 2521
Houston, Texas 77252-2521
Dear Sirs:
We have acted as special counsel for TEPPCO Partners, L.P., a Delaware
limited partnership (the "Partnership"), with respect to certain legal matters
in connection with the registration by the Partnership under the Securities Act
of 1933, as amended (the "Securities Act"), of the offer and sale by the
Partnership from time to time, pursuant to Rule 415 under the Securities Act, of
(i) units representing limited partner interests in the Partnership (the
"Units"), (ii) unsecured debt securities, in one or more series, consisting of
notes, debentures or other evidences of indebtedness (the "Debt Securities") and
(iii) guarantees (the "Guarantees") of such Debt Securities by TE Products
Pipeline Company, Limited Partnership, a Delaware limited partnership, TCTM,
L.P., a Delaware limited partnership and Jonah Gas Gathering Company, a Wyoming
general partnership. We have also participated in the preparation of the
Prospectus (the "Prospectus") contained in the Partnership's Registration
Statement on Form S-3 (the "Registration Statement") to which this opinion is an
exhibit.
In connection therewith, we have participated in the preparation of the
discussion set forth under the caption "Tax Considerations" (the "Discussion")
in the Registration Statement. The Discussion, subject to the qualifications
stated therein, constitutes our opinion as to the material United States federal
income tax consequences for purchasers of Units offered by the Prospectus.
We consent to the reference to our firm under the caption "Tax
Considerations" in the Prospectus and to the filing of this confirmation and
consent as an exhibit to the Registration Statement.
Very truly yours,
/s/ Fulbright & Jaworski L.L.P.
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
To the Partners of
TEPPCO Partners, L.P.
We consent to the use of our reports on TEPPCO Partners, L.P., TE Products
Pipeline Company Limited Partnership and Texas Eastern Products Pipeline
Company, LLC incorporated herein by reference and to the reference to our firm
under the heading "Experts" in the prospectus included as part of this
registration statement.
The audit report covering the December 31, 2001 consolidated financial
statements of TEPPCO Partners, L.P. refers to a change in the method of
accounting for derivative financial instruments and hedging activities on
January 1, 2001, and, effective July 1, 2001, adoption of the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 141, Business
Combinations, and certain provisions of SFAS No. 142, Goodwill and Other
Intangible Assets.
/s/ KPMG LLP
Houston, Texas
April 19, 2002
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of TEPPCO Partners, L.P. of our report dated October 31,
2001 relating to the financial statements of Jonah Gas Gathering Company as of
December 31, 2000 and for the periods June 1 to December 31, 2000 and January 1
to May 31, 2000 (Predecessor), which appears in the Current Report on Form 8-K/A
of TEPPCO Partners, L.P. filed November 9, 2001. We also consent to the
reference to us under the headings "Experts" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
Denver, Colorado
April 19, 2002
